Not Joseph Spiezio’s and Louise Spiezio’s, says Judge Christian N. (“Speedy”) Weiler, in the eponymous  T. C. Memo. 2024-64, filed 6/3/24. Joe’s LLC elected Sub S treatment, and later merged with another. While this was happening, Joe’s LLC acquired another outfit. That outfit was embroiled in a dispute with a multi-employer pension fund, which ended up in USDCSDNY. When the dust cleared, Joe’s LLC (of whose membership interests he was 100% owner) was hit with about $3.9 million in liabilities to the pension fund along with other players. Joe’s LLC alone was hit with $325K in addition, but Joe was not held individually liable. Subsequently, the pension fund went after Joe and others, but not his LLC, for unpaid liabilities in excess of $3 million; this they settled out for $2.8 million, and Joe personally signed confession of judgment for that.

Of course, Joe promptly filed Ch 11, and merged his LLC as aforementioned. The Bankruptcy Court let Joe and the merged entity off the pension fund hook for $2.3 million, which the merged entity raised by selling its assets and paying the $2.3 million out of proceeds.

Whether or not Joe’s LLC is disregarded for tax purposes, it still has an independent existence for everything else. Joe never claims NOL for the pension fund payout until he amends his returns for years at issue to carry back $3 million (or something, T. C. Memo. 2024-64, at p. 2).

IRS claims all-events test not satisfied in year for which NOL claimed, that the merged entity paid and not Joe or his now-non-existent LLC, and that Joe is estopped to argue that he was personally on the pension fund hook, as he argued otherwise in USDC and Bankruptcy Court.

Judge Speedy Weiler finds the survivor of the merger existed pre-merger and made all the payments. Whether Joe’s LLC was a disregarded or not, it paid nothing, and Joe’s confession of judgment means nothing because Joe paid nothing.

And even if Joe were entitled to an NOL, the payment giving rise thereto was established on the trial to have been after the year where a pension find payment could have been deducted. See Section 404(a)(6).

IRS has Boss Hossery buttoned up, but Joe claims good faith. IRS says Joe’s preparer was a disbarred attorney; so what, says Judge Speedy Weiler. That doesn’t make the preparer incompetent, and IRS didn’t prove he was. But Joe and Louise “are not permitted to ignore their obligation to ensure that their tax returns accurately reflected their income for the 2015 and 2016 tax years. Considering Mr. Spiezio’s legal education and business experience, coupled with the Spiezios’ knowledge of the prior IRS audits disallowing their earlier NOL carryforward, we cannot conclude that they relied on their tax preparer in good faith and that the incorrect returns resulted solely from their adviser’s own errors.” T. C. Memo. 2024-64, at p. 11. Joe was a St. John’s (Queens County) graduate and a graduate of City University of New York law school, and ran a couple businesses (hi, Judge Holmes).