Shelby County, AL, is just awash with limestone, and highrollers looking for write-offs hastened to join in. Only instead of quarrying, they bought into SCEs. Judge Albert G. (“Scholar Al”) has a full-dress T. C. deconstructing valuation.

The bottom line is that no one pays the entire worth of a going business for a place to put it, when they still have to pay start-up and development costs to get it going.

Ranch Springs, LLC, Ranch Springs Investors, LLC, Tax Matters Partner, 164 T. C. 6, filed 3/31/25, boils down to two propositions.

“No rational buyer with knowledge of all relevant facts would pay, for one asset needed to operate a business, the entire future value of the business.” 164 T. C. 6, at p. 3.

“At the end of the day, petitioner’s position appears to rest on its assertion that the ‘willing buyer/willing seller’ test, which governs the valuation of property for charitable contribution purposes generally, does not apply when the donated property is a conservation easement. Petitioner cites no judicial precedent or other authority to support this novel proposition. There is none.” 164 T. C. 6, at pp. 62-63.

Once again, we have the classic Dixieland Boondockery. “The value Ranch Springs claimed for the easement on its [year at issue] return was $25,814,000. We have determined that the value of the easement on the valuation date was only $335,500. The claimed value thus exceeded the correct value by $25,478,500 or 7,694%. The valuation misstatement was thus ‘gross.’” 164 T. C. 6, at p. 65.

Whether Congress or the Supremes take the laboring oar is immaterial; it’s time to settle at the top level the question of equitable tolling in deficiency cases. Afsoun Naderi, Docket No. 19045-24, filed 3/28/25 is a month late with his petition, claiming his “late filing resulted from a non-willful clerical mistake and not deliberate noncompliance with the law.” Order, at p. 2.

Taishoff says it sounds a wee bit thin for equitable tolling, but that’s for the Court to decide, if Culp o’ercrows Hallmark Research Collective and Organic Cannabis Found. So far only Tax Court and 3 Cir have spoken, and the Supremes have ducked..

The Supremes having given us Boechler, P. C., the onlie begetter of this silt-stir, perhaps they should bring some discipline here.

Meantime, Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan once again tells the story.

“In support of his argument, petitioner cites the decision of the U.S. Supreme Court in Boechler, P.C. v. Commissioner, 596 U.S. 199 (2022), and that of the U.S. Court of Appeals for the Third Circuit in Culp v. Commissioner, 75 F.4th 196, 205 (3d Cir. 2023), cert. denied, 144 S.Ct. 2685 (2024). Petitioner’s reliance on Boechler is misplaced. Boechler was a collection due process case involving our jurisdiction under I.R.C. section 6330(d)(1). However, this is a deficiency case, and our jurisdiction in such cases is governed by I.R.C. section 6213(a). See Hallmark Rsch. Collective, 159 T.C. at 165–66 (concluding that the Supreme Court’s reasoning in Boechler does not apply to the 90–day period of section 6213(a)). Although the Third Circuit reached a different conclusion in Culp, 75 F.4th at 205 (holding that the deficiency deadline under section 6213(a) is nonjurisdictional), this case is presumably appealable to the U.S. Court of Appeals for the Ninth Circuit, see I.R.C. § 7482(b)(1). As noted above, the Ninth Circuit has held that the deficiency deadline is jurisdictional. See Organic Cannabis Found., LLC, 962 F.3d at 1092. Furthermore, in Sanders, 161 T.C. at 119, this Court thoroughly examined the Culp decision and held that we will continue treating the deficiency deadline as jurisdictional in cases appealable outside the Third Circuit. Accordingly, petitioner is not entitled to equitable tolling in this case.” Order, at p. 2.

Absoun’s claims of selective enforcement and governmental retaliation “cannot be considered at this stage of this litigation.” Order, at p. 2. Presumably Absoun can try these in a refund suit.

I rely on my readers to keep my reportage accurate; where I stray, I invite my readers to use the “comment” function that WordPress obligingly inserts at the foot of each of my blogposts. I read them all. Just skip down below the advertisements.

Please do not contact me by email; I cannot assure compliance with the rules that constrain me. Both the IRS and the EU data and privacy protection rules require me to maintain online security far above my means and above those employed even by the most senior defense and intelligence officials of our government.

All that said, I count three (count ’em, three) separate warnings from ex-Ch J Maurice B. (“Mighty Mo”) Foley to Theya Kanagaratnam, Docket No. 15922-23, filed 3/27/25 (that date marks my Year 58 in the NYS Bar; still crazy after all these years). The warnings involved Theya’s “wages-aren’t-taxable-income” frivolities, asserted at motion and trial stages.

“Petitioner raises several frivolous contentions that, in essence, challenge the taxability of her wages. The Court admonished petitioner several times. Despite these warnings, petitioner continued to file documents that presented frivolous contentions. Petitioner does not contest receiving the unreported wages paid to her from her employer. Petitioner’s contentions on whether those wages are taxable are “contrary to established law and unsupported by a reasoned, colorable argument for change in the law.” See Wnuck, 136 T.C. at 513 n.14 (quoting Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir.1986)). Accordingly, petitioner is liable for a section 6673(a) penalty.” Order, at p. 3.

So ex-Ch J Mighty Mo lays a $5K Section 6673 chop on Theya. By my arithmetic, that works out to $1666.67 per ignored frivolity warning.

For latecomers, the Scott Wnuck story can be found in my blogpost “One’ll Get You Five,” 5/31/11.

I’ve told this story before, but it needs repeating in the case of Eric J. Geppert & Mary L. Geppert, Docket No. 946-20L, filed 3/26/25. No dispute as to tax owed. Judge Alina I. (“AIM”) Marshall remands to Appeals because the SO’s analysis, prepared in August, 2019, failed to take into account the anticipated end to certain insurance payments to Eric in 2020, and possible termination of his employment due to corporate restructuring.

Why it has taken more than five (count ’em, five) years to begin to ascertain the occurrence of events that certainly happened (or did not happen) within fewer than five years of the flawed analysis eludes me. A subpoena to insurers and employer would have yielded a response that might have elicited answers. Interest has been accruing on the tax debt. Has this delay improved the chances of collection of any or all of the tax admittedly due (to say nothing of interest)?

Take a quick peek at the order and the docket, and draw whatever conclusions you will. Or better yet, read my blogposts “When Lawyers Get Involved,” 1/20/22,  and “They Should Read My Blog,” 6/7/23.

There’s the old story of the two sailors on a life raft in World War II, after their ship had been torpedoed. One says to the other, “Could have saved ourselves a lot of trouble if we’d jumped overboard the first night out.”

That’s Ch J-elect Patrick J. (“Scholar Pat”) Urda’s advice to David Nwafor, T. C. Memo. 2025-27, filed 3/26/25. But if Dave nevertheless and notwithstanding the foregoing chooses to do so, let him not take a “returns and allowances” deduction for his self-deducted reduction in his bills for engineering services, especially when he never credited or refunded the self-deductions to his clients.

“To stay competitive, Mr. Nwafor applied a flat discount to [Dave’s box-checked LLC]’s prices for ‘engineering service[s]’ at the beginning of both [years at issue]. Specifically, [Dave’s box-checked LLC] lowered its prices (from those Mr. Nwafor ostensibly first contemplated for each year) by 11% in [Year On] and 6.5% in [Year Two]. These price adjustments were internal, and [Dave’s box-checked LLC]’s customers were unaware that they were being charged a lower rate.”  T. C. Memo. 2025-27, at p. 3.

Ch J-elect Scholar Pat is not amused.

“Mr. Nwafor is not entitled to reduce [Dave’s box-checked LLC]’s gross sales by either the general discounts or the customer-specific allowances claimed. As to the former, Mr. Nwafor testified that he applied ‘discounts’ at the beginning of the year when setting the rate for [Dave’s box-checked LLC]’s services for the year. As we understand it, he decided upon prices that seemed attractive, even if they were less than what he believed [Dave’s box-checked LLC]’s work to be truly worth. The discounts thus were already incorporated in the lower sale prices charged just as if [Dave’s box-checked LLC] had charged the higher rate and then applied, for each customer, returns and allowances. No netting thus is required.

“Mr. Nwafor likewise fails to show that he is entitled to reduce [Dave’s box-checked LLC]’s gross sales by customer-specific discounts. Mr. Nwafor did not testify as to the amounts of any such discounts and did not offer any substantiation whatsoever. And our review of the total amounts of returns and allowances, combined with Mr. Nwafor’s testimony regarding the generalized discounts, leaves us with considerable doubt whether any customer-specific discounts were reported.” T. C. Memo. 2025-27, at p. 10.

A business can net returns and allowances when it has been paid (or accrued) list price, but has had to credit or refund all or part thereof in same year. But Dave’s returns and allowances existed only in his mind.

Dave also tried to deduct the value of his labor in devising a computer program to aid his engineering. That’s the old protester “basis in own labor” dodge. Of course, if Dave picked up the worth of his labor as income, then the “paid or accrued expense” leg of Section 162 would save the deduction. Except he didn’t.

The rest is the usual expenses unsubstantiated or paid in wrong year.

Just the other day Genesis 2:24 featured in this my blog; see my blogpost “‘One Flesh,” Two Parties,” 3/18/25. And here it is again, Gina Jaha, T. C. Memo. 2025-26, filed 3/25/25, although the main event is hubby Bob Anderson’s trust-and-controlled-corporation cash siphon, which you can read for yourself.

Gina and Bob hadn’t filed for six (count ’em, six) years, of which five are at issue via SFRs. The SND resulting therefrom treated Bob and Gina as MFS. At Exam, their trusty CPA (more about him later) tendered the RA 1040 MFJs for three of said years at issue, but the RA never filed them with the Service Center.

Bob and Gina petition their MFS status, claiming they should be MFJ.

Judge Tamara W. Ashford: “Married taxpayers generally may elect to file a joint return for a taxable year although their right to do so may be limited after either spouse has filed a separate return. See §6013(a) and (b). After the filing of a separate return, a joint filing status election is generally prohibited if either spouse has timely filed a petition for redetermination of a deficiency. § 6013(b)(2)(B). Nevertheless, where, as here, the return electing separate filing status is an SFR filed by the IRS, the taxpayer may still elect joint filing status by filing a joint return with his or her spouse before the case is submitted for decision.” T. C. Memo. 2025-26, at p. 7.

Except.

“A return is deemed filed only if it has been submitted in the manner specified by regulation, or if it is at least eventually received by the appropriate person or office. Individual income tax returns generally must be filed with an assigned person in the taxpayer’s local IRS office or with a designated service center. Treas. Reg. § 1.6091-2(a)(1), (c), (d). Submitting a return to an IRS employee who has not been assigned to receive it, such as a revenue agent or respondent’s counsel, is generally insufficient.

“The record fails to establish that petitioners properly elected joint filing status. No party contends that petitioners filed their returns for the years at issue in the manner specified by regulation, that any of the IRS’s employees forwarded them to the appropriate person or office for filing, or that the IRS actually filed any of the returns.” T. C. Memo. 2025-26, at p. 8. (Citation omitted).

Bob’s and Gina’s trusty CPA may have been here before; see my blogpost “An Accurate Prediction,” 3/13/24.

Judge Nega assumes the mantle of Judge Robert (“TNP = Take No Prisoners”)* Goeke in Genie R. Jones, et al., T. C. Memo. 2025-25, filed 3/25/25. It’s another microcaptive insurance pool case, with the usual dodges (sketchy actuarial analysis, shoddily-drafted policies, nonexistent underwriting, circular flow of premium money, made-as-instructed premiums). Topping it off is an unsecured loan to principal of the insured, which doesn’t get paid back until years after due date and after principal has sold the insured but kept the microcaptive alive.

There’s fifty (count ’em, fifty) pages wherein Judge Nega massacres the captive; all the usual suspects are cited (Rent-A-Center, Syzygy, Keating, Avrahami, Caylor Land, Reserve Mech.). Even the headline first above set forth at the head hereof (as my expensive colleagues would say) gets used. T. C. Memo. 2025-25, at p. 31, footnote 18.

But it’s a footnote that takes this case out of the “much of a muchness” class. IRS wants nondisclosed want-of-economic-substance enhanced chop.

“The Court has yet to decide whether the transactions in a microcaptive case lacked economic substance within the meaning of section 7701(o)(1). Nor has the Court addressed whether a taxpayer ‘adequately disclosed’ a microcaptive transaction. In the recent microcaptive cases where these questions were unavoidable, the Court deferred ruling on the matter to request and duly consider additional briefing on the applicability of section 7701(o). See Patel v. Commissioner, T.C. Memo. 2024-34, at *3 n.5; see also Royalty Mgmt. Ins. Co. v. Commissioner, T.C. Memo. 2024-87, at *54. We will, therefore, address respondent’s penalty determinations in a separate opinion.” T. C. Memo. 2025-25, at p. 5, footnote 4 (carryover from p. 4).

I hope that gets a full-dress T. C. because the statutory reconstruction of the economic substance doctrine is a puzzlement.

* https://taishofflaw.com/2018/12/27/not-so-judge-robert-tnp-goeke/

Judge Ronald L. (“Ingenuity”) Buch holds in an off-the-bencher that William McGarvin, Docket No. 14615-22, filed 3/25/25, loses whether he is in default for nonappearance or on the merits.

But IRS doesn’t get decision in the amount of the SND because IRS can’t add.

“Mr. McGarvin’s failure to appear and failure to comply with the Court’s orders place him in default. The appropriate remedy is to enter a decision for the Commissioner. However, the Commissioner’s Notice of Deficiency contains a $418 error (treating a $209 capital loss as $209 of capital gain). Accordingly, a decision will be entered under Rule 155, so that the Commissioner may correct this error.” Transcript, at p. 12.

Same result on the merits.

That is, unless you sell books, magazines, or vinyl records; see Section 458. Louis F. Lentine & Kelli M. Lentine, Docket No. 12443-21, filed 3/25/25 sold “Night Stars, a contraption that projects patterns of light against a building (imagine a home decorated for Christmas at night with the projector out in front) that had been very popular during Christmas [previous to year at issue].” Order, at p. 4.

Unhappily, what Night Stars they sold in year at issue to a major retailer was sold on sale-or-return, that is, whatever the retailer couldn’t sell they could return for full credit. The item cratered in year at issue, Lou’s & Kelli’s Sub S had to book the huge sales price in year at issue, and the retailer demanded a huge discount on the bill or they’d send the unsolds back. The joust that followed over how big a discount went into the next year.

Judge Mark V. (“Vittorio Emanuele”) Holmes gives IRS summary J that Lou & Kelli must pay tax on the year at issue invoice price (“all events” test for accrued item), even though they won’t get a tithe thereof when the dust settles in the succeeding year. This notwithstanding that both retailer and Lou & Kelli had accounting software that showed exactly what the return hit would be.

“The key is that an adjustment to [Sub S]’s returns-and-allowances account would not accrue until the parties reached agreement on its size, and that there is no genuine dispute that the parties hadn’t reached agreement on that by the end of [year at issue].” Order, at p. 6. Somber reasoning and copious citation of precedent follows.

But Lou & Kelli stave off summary J on their yacht charter business. They trade up in year at issue and want bonus depreciation for that year. Though new yacht was delivered in mid-December, they didn’t sign a marketing agreement until January. Lou & Kelli did some work in late December and took the yacht out for a cruise that went OK.

IRS says yacht not placed in service before year’s-end. Judge Holmes says it’s a question of fact, after surveying a bunch regs and case law (it is, after all, Judge Holmes). Was the yacht in all respects ready for sea at end of year at issue?

“One can now see through the thinness of the Commissioner’s argument on this motion. It is certainly true that [Lou’s & Kelli’s pass-through LLC] did not use its new yacht in the chartering business until [next year]. But that’s not the right question. The right question is whether the yacht was in its ‘completed form’ for its ‘specifically assigned function.’ When [employee] emailed that ‘We are trying to get all our ducks in a row and get ready for charter’ was he referring to the nautical equivalent of having to rip out some of the interior to install a conference table and video screens, or something more like waiting for the boss to get home from vacation to negotiate and sign a contract?

“That is, at the very least, ambiguous.” Order, at p. 4.

Judge Holmes is a fine lawyer who can easily find an ambiguity.

Btw, the reference to conference tables and video screen is explained in my blogpost “Not Ready for Prime Time,” 3/12/13*, which case Judge Holmes cites.

* https://taishofflaw.com/2013/12/03/not-ready-for-prime-time/

Bear Creek LKB Holdings, LLC, Bear Creek Investors II, LLC, Tax Matters Partner, Docket No. 16378-21, filed 3/24/25, seeking to remove the Boss Hoss from Greenberg’s Express, encounter a most memorable phrase from a great phrasemaker.

The Bear Creeks want all communications, however preserved, between a couple RAs (hi, Judge Holmes) regarding the CPAF, and all thereof with OCC in connection with the CPAF.

Judge Christian N. (“Speedy”) Weiler rejects production of any IRS communications with OCC.

“In respondent’s response to these Requests, he objects since the Requests seek communications protected by attorney-client privilege or deliberative process. The Court agrees and finds respondent’s objection to Requests 2, 3, 4, and 5 to be well founded to the extent the Requests call for the disclosure of privileged communications. We do not see a need to create a privilege log of communication that occurred during the audit between IRS Counsel (and their client) since these communications are plainly covered by privilege. We will sustain respondent’s objections to the extent the Requests seek the disclosure of privileged communications.” Order, at p. 4.

So every communication with OCC, or wherein OCC takes part, is privileged. And that shield holds up even when IRS moves for summary J on Boss Hossery, because all that is required by law is a sign-off, however obtained and for whatever reason (or lack of reason).

Seems like only a couple of days ago taxpayers couldn’t tell their preparers what their lawyers told them without waiving privilege. See my blogpost “Holes in the Blanket,” 3/20/25.*

Was George Orwell right? Are some animals more equal than others?

* https://taishofflaw.com/2025/03/20/holes-in-the-blanket/