Judge Goeke sets up the Glasshouse mixmaster for IRS and Gary M. Schwarz & Marlee Schwarz, Docket No. 12347-20, filed 11/5/24, and gives them the recipe. Y’all will recall Doc Gary and his hunt-for-money operation, which foundered on Reg. Section 1.183-1(d)(1), another of the “goofy” hobby loss shootdowns.

What, no? I guess all this political stuff of late has addled everybody. So go vote (if you haven’t already), come back and read my blogpost “The Buck Stops Here,” 5/13/24.*

Doc Gary, Marlee, and IRS were working on the Rule 155 beancount when the Supremes unloaded Loper Bright Ent. v. Raimondo, 44 S. Ct. 2244, 219 L. Ed. 2d 832 (2024), which knocked over the Chevron station. Doc Gary wants a Rule 161 based on intervening change in controlling law, and gets it.

IRS says the opinion here never mentioned Chevron, and Doc Gary never challenged the Reg. So what, says Judge Goeke; the opinion here relies extensively on the Reg, unlike other cases where petitioners requested Loper-Brightery.

“Considering the parties’ filings, the issues in this case, and the relevant law, we will grant petitioners’ motion and consider whether Treasury Regulations §§1.183-1(d)(1) and 1.183-2(b) are valid. While petitioners’ motion was not filed within 30 days of the service of the Opinion in this case, that was excusable because Loper Bright was released after the 30-day period had expired. Considering the Rule 155 computations that were being worked on by the parties, we find petitioners’ motion to have been filed in a timely manner. Furthermore…, Chevron was clearly implicit controlling law at the time the Opinion was issued. Because Loper Bright overruled Chevron, we believe that reconsideration of the Opinion (in which we extensively relied on Treasury Regulations §§ 1.183-1(d)(1) and 1.183-2(b)) is appropriate.” Order, at p. 2.

So, chaps, since y’all didn’t consider the validity of the “goofy” regulation until now, Judge Goeke has seven (count ’em, seven) points to consider, including without in any way limiting the generality of the foregoing (as my high-priced colleagues would say), Congressional delegation of rulemaking authority in Section 7805(a); the Supremes’ statement in Loper Bright that merely following Chevron in a previous decision is not grounds for overturning that decision; that previous Tax Court opinions have said that the “goofy” regulation merely restated caselaw; and if Judge Goeke invalidates any part of the Reg., how that affects the outcome of the case.

“We are particularly interested in the parties’ arguments regarding the statement in Treasury Regulation § 1.183-1(d)(1) that ‘[w]here land is purchased or held primarily with the intent to profit from increase in its value, and the taxpayer also engages in farming on such land, the farming and the holding of the land will ordinarily be considered a single activity only if the farming activity reduces the net cost of carrying the land for its appreciation in value.’ The parties shall address whether this provision is arbitrary….” Order, at p. 3.

Oh, and if the parties have any other bright ideas, lay ’em on out.

And keep your coruscations to sixty (count ’em, sixty) pages.

Peter Reilly, CPA, please copy.

** https://taishofflaw.com/2024/05/13/the-buck-stops-here/