That’s my view of Judge Travis A. (“Tag”) Greaves when it comes to deciding what’s a trust and what’s a foreign trust for Federal tax purposes. Judge Tag Greaves has a lot to say, all of it to the point, in Raju J. Mukhi, Docket No. 4329-22L, filed 5/30/25.

Raj’s trusty attorneys, whom I’ll call the Boxers and who show the fighting spirit of their namesakes, claim the offshore trust, yclept Sukhmani Gurkukh Nivas Foundation, which IRS alleges Raj ran, is a sham. Hence questions of fact, wherewith to stymie IRS’ motion for partial summary J that same is a foreign grantor trust and that the Section 6677 nonreportage chops were correctly computed.

Word to IRS: remember lawyers can’t add, and judges don’t like to. I don’t suggest asking a judge to do arithmetic or even enunciate mathematical principles.

Anyway, Judge Tag Greaves explains in subatomic detail why deciding what is a trust, and what is a foreign trust, for tax purposes are both fact-intensive.

“The four elements of a trust for federal tax purposes are (1) a grantor, (2) a trustee that takes title to property for the purpose of protecting or conserving it, (3) property, and (4) designated beneficiaries. See Treas. Reg. § 301.7701-4(a). Generally, we review the organizing documents to make these determinations.” Order, at p. 2. (Citation omitted.)

Except no one has put in, or sdtiped, the organizing documents into evidence. And even if the organizing documents were bulletproof, they’re meaningless if their effects on the parties’ actions don’t move the needle.

“In deciding whether to disregard a trust for federal income tax purposes, the Court considers four factors: (1) whether the taxpayer’s relationship to the property transferred to the trust materially changed after the trust’s creation; (2) whether the trust has an independent trustee; (3) whether an economic interest passed to other trust beneficiaries; and (4) whether the taxpayer feels bound by the restrictions imposed by the trust agreement or the law of trusts. In the event that a taxpayer seeks to disavow the form of the transaction, that taxpayer is held to an additional burden to show that the form of the transaction was not chosen for the purpose of obtaining tax benefits that are inconsistent with those the taxpayer seeks through disregarding that form.” Order, at pp. 2-3. (Citations omitted).

OK, but even if it is a trust, is if foreign?

“If a trust exists for federal income tax purposes, a taxpayer will only have a reporting obligation under section 6048 if the trust is a foreign trust and the taxpayer is the grantor or transferor of the trust. See § 6048(a)(3)(A) and (4). A foreign trust is ‘any trust other than a trust’ that is a ‘United States person’ (i.e., a domestic trust). See § 7701(a)(30)(E) and (31)(B); Treas. Reg. § 301.7701-7(a)(2). A trust is domestic if (1) ‘[a] court within the United States is able to exercise primary supervision over the administration of the trust’ and (2) ‘[o]ne or more United States persons have the authority to control all substantial decisions of the trust’. Treas. Reg. § 301.7701-7(a)(1). Failure to satisfy either test will result in the trust’s being deemed a foreign trust for federal tax purposes. See id. subpara. (2).

“Finally, a person may be deemed the grantor of a trust under the grantor trust rules of sections 671 through 679. See § 6048(b)(1). Section 679(a) provides that any United States person who directly or indirectly transfers property to a foreign trust shall be treated as the owner for his taxable year of the portion of the trust attributable to that property if for the year there is a United States beneficiary of any portion of the trust.” Order, at p. 3.

Here IRS is playing with few cards, some bank records and a couple trustee resolutions (hi, Judge Holmes). Not enough to tell if the trust is or what the trust is. As for disavowing the trust form of ownership, insufficient before-and-after evidence. Does disavowal move the tax needle? If not, who cares?

Hence no need for Judge Tag Greaves to do the numbers. Did I mention that lawyers can’t add and judges don’t like to?

The Boxers are ahead on points this round.

The latest hotflash from Vic’s Place: “DAWSON will be offline for maintenance beginning at 4PM Eastern on Saturday, May 31st until the morning of Sunday June 1st.” 

Though Rule 25(a)(1)(C) excludes this downtime from the filing cutoffs, get those buzzer-beaters ready and send ’em up.

We dirt lawyers get as much friends-and-family as anyone else in the profession: “We need a simple deed for a gift.” Grab a boilerplate form, get the names, copy-and-paste a metes-and-bounds, fill in the online-fillable transfer tax docs, and send it to the County Clerk. OK for almost all.

But when the tax lawyers who don’t do conveyancing tell their clients to have the local dirt guy do it, or try to DIY, you get stuff like William P. Wells and Ruth E. Wells, Docket No. 13104-24, filed 5/29/25 (to end Palindrome Week).

Judge Christian N. (“Speedy”) Weiler has this charitable gift deduction case, which, mirabile dictù, is neither façade nor conservation, but a straight-out fee simple.

Bill and Ruth get partial summary J for qualified appraisal, even though said appraiser left his TIN off the written appraisal and the Form 8283; substantial compliance saves.

But the CWA is dubious, and thereby hangs the cliché.

CWA is strict-rules, no substantial compliance. But CWA need not be in any particular form, and documents can be read together to comply. What Bill and Ruth have is (1) the Form 8283, (2) Bill’s letter to the 501(c)(3) identifying the property, stating the appraised worth, and enclosing the quitclaim deed, (3) the handwritten reply from 501(c)(3) thanking Bill and Ruth for the gift and acknowledging the appraised worth, and (4) the deed.

Of course the acknowledgment letter is a nonstarter as it flunks most of the Section 170(f)(8)(B) tests. But how about the deed?

“Looking to the Quitclaim Deed, we acknowledge the language is favorable to petitioners, since it provides consideration of only ‘ten dollars’ and lacks language such as ‘other good and valuable consideration.’ The Quitclaim Deed, however, also references a special warranty deed, or deed of gift, which contains the legal description of the property transferred and states the transfer was made in ‘consideration of the sum of ten dollars, cash paid in hand, and other good and valuable consideration.’ We find this language to be internally inconsistent. We also acknowledge how the Quitclaim Deed is merely that, a document conveying title and signed by petitioner.

“Both parties have filed a motion for partial summary judgment on petitioners’ compliance with the CWA requirements found under section 170(f)(8)(B); which usually causes us to conclude the issue ripe for summary adjudication. After looking to the documents collectively, however, we find the issue of petitioners’ CWA statutory compliance to be a mixed question of law and fact, distinguishable from the foregoing cases. Accordingly, we will decline ruling on the issue until trial and deny the parties respective cross-motions.” Order, at p. 7.

Obviously Judge Speedy Weiler never did any conveyancing either, because I’ll wager that special covenant and warranty deed was referenced to show that what Bill and Ruth conveyed to 501(c)(3) was “being and intended to be the same premises as in SCW Deed dated X from A to B and recorded etc.” It’s standard practice to show that what grantor is conveying now is what grantor got then.

But Judge Speedy Weiler got it right, in that the grantee never signed the Quitclaim Deed. That surely is better practice, even though it’s at least arguable that the acknowledgment letter did serve. See my blogpost “No In Deed,” 3/23/16, wherein I have more to say on this topic, discussing a case cited in Judge Speedy Weiler’s order.

And especially see my blogpost “Yes In Deed,” 7/16/12, wherein I give this warning: “Note to dirt lawyers: Please don’t use boilerplate printed real estate forms for making a conservation easement. The old ‘ten dollars and other good and valuable consideration’ bargain and sale deed form, available at dime-store prices, might be good enough for a routine single-family house sale, but not for a big-time transaction with heavy-duty tax deductions on the table. Read the IRC; draft your language with great care. Have both grantor and grantee sign the deed. Use a proper integration clause. And remember Schrimsher, where somebody’s lawyer used a dime-store form and blew up their client.”

For backstory, see my blogpost “As Such,” 11/28/23. For the outcome of the trial foretold therein, Judge Buch tells the story in Soroban Capital Partners LP, Soroban Capital Partners GP LLC, Tax Matters Partner, T. C. Memo. 2025-52, filed 5/28/25.

Judge Buch dissects the private placement memo and investor due diligence questionnaire for this hedge fund, and finds that the three (count ’em, three) Principals of Soroban were, during years at issue “essential to the operation of the business. Soroban explained to its investors that, if all three Principals were unavailable, the funds would liquidate. Materials provided to investors explain that in the event Mr. M were incapacitated, Messrs. K and F would manage the funds. However, in the event all three Principals were ‘temporarily or permanently absent from overseeing the investment of the assets of the Funds, the Analysts and COO/CFO would manage the liquidation of the Funds.’ But for the three Principals, Soroban would not exist.” T. C. Memo. 2025-52, at p. 13. (Names omitted).

Federal tax law controls, not our broad-spectrum NY  Revised Limited Partnership Act, which, standing the usual law school definition of limited partner on its head, would let the Principals slide under the Section 1402(a)(13) tag. For the Feds, their distributions are SE, not investor returns on capital.

And Too Far Away

When IRS tries the Luke 5:4-8 number on the current CEO of the 501(c)(3) in Ogeechee Plantation Property, LLC, Ogeechee Plantation Manager, LLC, Tax Matters Partner, Docket No. 6585-21, filed 5/27/25 (Happy Palindrome Week!), Judge Mark V. (“Vittorio Emanuele”) Holmes echoes the words of an even higher authority than United States Tax Court, and tells them to go away.

It’s a duces tecum (because current CEO wasn’t CEO when the conservation easement was signed). IRS wants only the documents and an affidavit showing chain of custody.

“The problem is that the documents requested – as part of a trial subpoena for cases set to be tried only about a month after the subpoena was served – are ‘any and all documents relating to conservation easements owned, managed, or supervised by [501(c)(3)] that reflect [any of several types of broadly defined information].’” Order, at p. 1. And IRS wants the stuff for seven (count ’em, seven) years.

“We would be hard-pressed to enforce this kind of ‘any and all’ request to a party months before trial when the easements at issue here were granted in December 2017 and December 2018. This is a fishing expedition seeking not just a few nibbles on carefully baited hooks but entire nets’ full of information. We determine it to be overbroad and burdensome on a third party and will grant the motion to quash.” Order, at p. 1. (Emphasis by the Court).

Likewise Judge Holmes will let the former CEO, who was in command at the time of the easement grant, but who now lives hundreds of miles from trial venue and must care for a small child, to testify remotely. On-the-stand testimony is what Rule 143(b) mandates, but there are exceptions. Whatever would we do without exceptions?

“We don’t doubt the importance of Ms. Q’s testimony – it is at least arguable that the description of the properties on which the easements were placed somehow changed after the time of the donation. But it’s also true that neither party is alleging that Ms. Q or her former employer did the changing. This makes her an important witness, and maybe even a background-facts witness, but not one whose testimony the Court would expect to take very long or be marked by any great deal of the tense cross-examination that makes live testimony so compelling. We think the expected duration of her testimony (based on the Court’s own experience with donee testimony in many other conservation-easement cases) is not long. Forcing her to abandon her parental responsibilities is under the circumstances a good cause and compelling.” Order, at p. 2. (Name omitted).

Tax Court is closed.

History is never closed. Remember always.

Like the heroine in Dorothy Fields’ 1936 evergreen, Raju J. Mukhi, Docket No. 4329-22L, filed 5/23/25, isn’t having a fine romance. His out-of-time Rule 161 reconsideration motion gets filed, but Judge Travis A. (“Tag”) Greaves isn’t buying 11 Cir’s rationale that the Section 6677 nonreporting of foreign trusts chops visited on Raju are fines, hence subject to Eighth Amendment Excessive Fines bar.

Even if they are fines, they’re not excessive.

For the backstory, see my blogpost “FBAR = FUBAR,” 4/8/24.

Tax Court has been here before, and Judge Tag Greaves has the stare decisis story.

“The Tax Court adheres to the doctrine of stare decisis and thus affords precedential weight to our prior reviewed and division opinions. See Analog Devices, Inc. & Subs. v. Commissioner, 147 T.C. 429, 443 (2016). Because of our nationwide jurisdiction, the Court takes seriously its obligation to facilitate uniformity in the tax law. See Bankers Union Life Ins. Co. v. Commissioner, 62 T.C. 661, 675 (1974). When one of our decisions is reversed by an appellate court, the Court will ‘thoroughly reconsider the problem in the light of the reasoning of the reversing appellate court and, if convinced thereby, . . . follow the higher court.’ Lawrence v. Commissioner, 27 T.C. 713, 716–17 (1957), rev’d per curiam on other grounds, 258 F.2d 562 (9th Cir. 1958). But if the Court remains convinced that our original decision was right, the proper course is to ‘follow [our] own honest beliefs until the Supreme Court decides the point’ and thus continue to apply our own precedent. Id. Our decision in Golsen v. Commissioner, 54 T.C. 742 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971), created ‘a narrow exception” to this approach. Lardas v. Commissioner, 99 T.C. 490, 494 (1992). In a given case, when a squarely on point decision of the appellate court to which an appeal would lie contradicts our own precedent, we will follow the appellate court’s decision. See Golsen, 54 T.C. at 757. To do otherwise would be ‘futile and wasteful’ given the inevitable reversal from the appellate court. See Lardas, 99 T.C.at 494–95.” Order, at p. 2.

Raju is Golsenized to 8 Cir, which hasn’t spoken, and the 11 Cir case which birthed Raju’s change-in-law argument for late filing wasn’t a reversal of a Tax Court decision. That might have given Raju a leg up, but even 11 Cir didn’t find the chops excessive on the facts.

I do give Raju’s trusty attorneys a Taishoff “Good Try, Second Class.” A good chip from a bunker.

Judge Emin (“Eminent”) Toro is far too well-bred to address James M. Root and Valerie K. Root, T. C. Memo. 2025-51, filed 5/22/25, in such terms, but his findings of fact and opinion come to much the same thing.

Jim and Val wanted to build and operate a multi-purpose natural resource lodge which could provide exclusive upmarket lodging for paying guests. Jim and Val owned and operated a nationally-known fruit packing and processing operation they sold two years after they say they started the hospitality gig.

I’ll spare you the sad tale of the condemned construction project and the litigation that followed. Jim and Val paid $4 million in fees to recover $3 million. The property wasn’t zoned for commercial use.  Nobody could live there. Jim and Val didn’t have advertising, employees, or hospitality software, but they did have various times they claimed they started the hospitality gig, over a fifteen-year span.

Lest I be misunderstood, I understand a good deal of this is the work of Jim’s & Val’s trusty attorneys, trying to salvage an already-sunken ship. Jim and Val got took.

At the end, Judge Eminent has much somber reasoning and copious citation of precedent to the effect that to be a business, you have to be in shape to perform the activities the business demands. Just buying a site isn’t enough; even starting construction isn’t enough. At least you have to advertise and seek renters. And running freebies doesn’t get it.

Nor does getting a license to operate. There has to be activity.

“To summarize, although the Roots hosted some events on their property between 1995 and 2009, none of them included overnight stays at the lodge. Even when the Roots donated an overnight stay at their lodge, the guests ultimately stayed on another location on the property. Hosting on the property was occasional and isolated and insufficient to demonstrate the operation of a guest lodge.” T. C. Memo. 2025-51, at p. 16.

In short, for an NOL, you need a business and a loss.

Transfer pricing Section 482 geeks have been breathlessly awaiting Judge Cary Douglas Pugh’s exegeses of Temp. Reg. § 1.482-7T(a)(2), (b)(1)(ii), (c)(1), Reg. § 1.482-1(e), and Reg. §§ 1.482-7T(g)(4) and (i)(6). Here  they are at last, Facebook, Inc. & Subsidiaries, 164 T.C. 9, filed 5/22/25.

Spoiler alert: IRS wins, except, as we say in the computer world, GIGO (garbage in equals garbage out).

IRS’ experts used wrong inputs in figuring income method valuations for present value of arms’-length Platform Contribution Transactions. Facebook (parent) divided the world between USA and Canada (parent kept it) and rest of the world (given to wholly-owned Irish subsidiary). Parent handed Irish all its IP and hardware. They made cost sharing and technology development agreements, but had to value the present worth of what they gave the Irish, so the Irish could pay parent back over time (IRS has no problem with the payback schedule). The payback, of course, is US-taxable to parent.

Parent claims the NPV of the stuff at transfer in 2009 was $6.3 billion; IRS claims $19.945 billion.

You can see why Judge Pugh needs 130 (count ’em, 130) pages to send the parties off for a Rule 155 beancount, and nine (count ’em, nine) pages to set forth the expert witnesses’ CVs at dates of their testimony.

There are 23 (count ’em, 23, and I have) attorneys appearing for Parent, and 17 (count ’em, 17) for IRS. The noise of all those meters ticking must have been deafening.

IRS used a $1.9 billion plug figure (“Other Revenue”) but that flunks the presently-existing test of the regs. And Judge Pugh finds IRS’ expert fudged Acquisition Costs. Another IRS failing is a miscalculated beta (volatility). “We find that Dr. N’s discount rate is not a reliable reflection of the market-correlated risks of participating in the actual CSA because he failed to provide empirical support for his selected percentage premia (2% for its pre-IPO stage and 1% for its early monetization stage).” 164 T. C. 9, at p. 92. (Name omitted).

Judge Pugh almost throws up her hands when reckoning the discount rate, but finally buys something that varies but .02 from Facebook’s. 164 T. C. 9, at p. 100.

Judge, I feel your pain.

Amongst my ultra-sophisticated readers there are no doubt not a few who can answer the nine (count ’em, nine) conundrums posed by Judge David Gustafson to IRS and Consolidated Sportsmen of Lycoming County, Docket No. 18549-23X, filed 5/22/25 (Happy Palindrome Day!), without batting a cliché.

I, unhappily, am a stranger to Section 501(c)(7), never having encountered in the wild a social club “’substantially all of the activities of [a social club] are for [‘pleasure, recreation, and other nonprofitable’ purposes.” Order, at p. 2. The Sports were incorporated in 1931 and got a 501(c)(7) exemption letter in 1981.

But sometime before 2011, the Sports struck oil, and more than 35% of their gross receipts came from nonmember royalties. So IRS retroactively bounces the 501(c)(7) exemption (for which years is not clear; see infra, as my expensive colleagues would say). That 35% number is part of the conundrum barrage, as same appears neither in statute nor regulation but in some kind of legislative history; son of the infamous Primoli memorandum? Judge Gustafson suggests giving this the Loper Bright treatment.

So what about activities? Does that mean members’ activities, or the entity’s? Is inurement to individuals’ benefit an issue? If so, was there any?

The Sports’ 501(c)(7) letter said “If your purposes, character or method of operation change, please let us know so we can consider the effect of the change on your exempt status.” Order, at pp. 3-4. The Sports did put the oil money they got on their 990s each year. Is that “letting us know?” Does the fact that IRS got the 990s and gave the Sports a pass each year have any effect on retroactivity?

More about retroactivity. See Order, at pp. 3-5. Judge Gustafson is on a tear again. He must have been the best cross-examiner the Palmetto State produced since John Calhoun, because his attack on IRS’ somewhat casual process and pleading will have IRS scrambling in its own end. Briefly, if the 990s told the story, what is IRS’ basis for retroactivity? Did they explicate their reasons for bouncing retroactively per Rev. Proc. 2024-5, sec. 12.03, whether in NOD or pretrial brief? If not, is the retroactivity new matter, giving IRS BoP? Note this is a Rule 122 stiped facts, so it’s all gotta be in the supplemental briefs Judge Gustafson orders.

And if what the Sports did wasn’t letting IRS know, let IRS tell Judge Gustafson what would be.

Finally, let both sides throw in anything else on point.

Remember, guys “(T)his order states the facts as they appear, upon first reading of the parties’ papers, to a judge who has much to learn about this case and about the applicable law. This order makes no findings or holdings, and we invite the parties’ corrections of any factual or legal errors, whether explicit or implicit, that they perceive.” Order, at p. 1.

He’s “jest a country lawyer.” Yeah, right, roger that.