AbbVie Inc. and Subsidiaries, 164 T. C. 10, filed 6/17/25, undertook to merge with an offshore in a stock-for-stock swap with a new subsidiary. The offshore, Shire, undertook to effect the merger. Problem was, both sides had shareholders, unrelated to themselves and to each other, who had to agree.  So all they could agree to in a Co-operation Agreement was to convince the shareholders to agree.

Problem was, Treasury issued Notice 2014-52, 2014-42 I.R.B. 7, casting serious shade on the tax impact of the proposed deal. Whereupon, AbbVie’s Board chickened out, pulled its recommendation to its shareholders, and agreed that the Co-operation Agreement required AbbVie to pay $1.635 billion-with-a-b to Shire as a Break Fee. 164 T. C. 10, at p. 7. See 164 T. C. 10 at p. 8 for the Termination Agreement that followed.

AbbVie took an ordinary loss, claiming contract abandonment. IRS said Section 1234A made the loss capital, in that it was the abandonment “with respect to property which is (or on acquisition would be) a capital asset in the hands of the taxpayer.”

Judge Emin (“Eminent”) Toro says this isn’t a capital asset, because property isn’t involved. The deal involves stock that neither AbbVie nor Shire owns or controls. There’s a bunch rights and obligations (hi, Judge Holmes) that AbbVie abandoned, but none of them involves property, because neither AbbVie nor Shire owns the stock.

There’s a major dictionary chaw, as is obligatory. But the story is simple: it’s not property.