If you don’t know what either of those financial shellgames is, consider yourself lucky. If you want to know, Judge Morrison will Judge-‘splain them to you in Kirk Stevens & Shannon Stevens, T. C. Memo. 2025-45, filed 5/15/25.

If you already know, you might read the fifty (count ’em, fifty) pages of Judge Morrison’s words and figures. I lost him at around page 3, but I found that even he got confused around page 23.

“Pomerantz (one of petitioners’ experts) further calculated that by Date.14 (January 1, 2018), the accrued interest and principal on the 2016 note would have been compounded over eight quarters and would be $142,467,412.14 This loan-balance amount, Pomerantz explained, is ‘identical’ to $160,679,613 minus $18,032,207, or $142,647,406. Indeed, the two amounts differ by a trivial $6.” T. C. Memo. 2025-45, at  p. 23. No Judge, by my arithmetic it comes to a less-than-trivial $180,000, unless 467 was mistranscribed as 647.

Does nobody proofread these opinions?

But after all the mathematical gyrations, the case goes off on the promissory notes offset with the Bermuda options yielding a zero result, hence no economic effect, hence not true indebtedness entitling Kirk & Shannon to OID interest deductions offsetting the big gain they got when they sold their business.

As for chops, IRS is in a muddle deciding between 20% and 40%, but sort it out at 20%, especially when the tax attorney whose high-priced opinion Kirk & Shannon bought for $40K disavowed same.

I’m going to quote the following from Judge Morrison’s opinion, and contrary to my usual practice, I’m naming names and dates. Gopman is a tax attorney who specialized in trusts and estates. Rubinger is the tax attorney who gave the opinion. SLS is Kirk’s & Shannon’s business, which they sold. Shannon is a long-time accountant who ran her own tax prep business.

“Bill McDermott, a certified public accountant, began preparing SLS’s tax return for the tax year 2014. McDermott had a copy of Rubinger’s tax opinion letter. On or before August 21, 2015, McDermott suggested to Shannon Stevens that it was advisable for taxpayers to disclose ‘certain tax shelter’ transactions to the IRS and asked her whether she thought such a disclosure was warranted with respect to the deductions for interest accruing on the 2014 note. On August 21, 2015, Shannon Stevens asked Gopman about McDermott’s inquiry. Gopman in turn sought Rubinger’s views. Rubinger explained to Gopman that he would advise against claiming the interest deductions at all. Rubinger asked Gopman not to reveal this advice to petitioners. Gopman refused. He explained to Rubinger: ‘We cannot keep the advice between you and me though as we have to advise them [i.e., petitioners] the right way.’ Gopman made petitioners aware that Rubinger advised against claiming the interest deductions.” T. C. Memo. 2025-45, at p. 14.

Gopman gets a Taishoff “Good Job.” I expect Rubinger got The Phone Call.

Late Boss Hossery gets rescued by Laidlaw’s Harley Davidson after some adroit testimony from IRS exam personnel.