I echo the words of Billy Grammer’s 1959 smash hit when I see the third (count ’em, third) appearance of Dennis M. Curtin, Docket No. 32212-15, filed 7/23/25, in this my blog. Dennis is a Virgin Islander holdover from the days of Congress’ unguided largesse to our Insolvent Islands in the Sun, with its bifurcated tax arrangement between Virgin Islands Bureau of Internal Revenue and the IRS.

Trial is fast approaching after a mere ten (count ’em, ten) years since petition (practically a Tax Court newbie), when IRS seeks to amend its answer to raise “a new issue for years 2001 through 2004.” Order, at p. 1.

The “new issue”?

“[Denny’s wholly-owned VI LLC] did not file an entity classification election, and accordingly is treated as a corporation separate from its owner under Treas. Reg. 301.7701-2(b)(2) (because it was a foreign entity with a single member with limited liability). For years 2001 through 2004, the Commissioner argues that Mr. Curtin was not a bona fide resident of the USVI and did not satisfy his income tax obligations by paying all income tax to the USVI. Accordingly, the Commissioner argues that if he is successful on either issue, then Mr. Curtin was required to file a Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, for [Denny’s wholly-owned VI LLC] for each year. The Commissioner alleges that, because Mr. Curtin has never filed a Form 5471 for [Denny’s wholly-owned VI LLC], the assessment period for the income tax return remained open under section 6501(c) as in effect for years 2001 through 2004.” Order, at p. 2.

IRS further claims no prejudice to Denny, because his years-at-issue records are “meticulous”, and IRS would be prejudiced if Denny wins on SOL.

Judge Ronald L. (“Ingenuity”) Buch isn’t buying.

“The Commissioner does not provide a reason for raising this argument this late in the proceedings. The Commissioner argues that had Mr. Curtin properly reported his interest in [Denny’s wholly-owned VI LLC], then the Commissioner would have been able to timely issue the notice of deficiency with respect to these years. However, the Commissioner does not provide a reason for why he is raising this defense a mere five weeks before trial. The Commissioner was aware of the existence of [Denny’s wholly-owned VI LLC] when he issued the first notice of deficiency in these consolidated cases on September 15, 2015. Accordingly, the Commissioner has had nearly ten years to investigate this entity to raise this issue.

“Additionally, allowing this issue to be added at this late date would prejudice Mr. Curtin. Discovery is closed. And even if no discovery would be required, addressing this issue would require petitioner to scour his records during the remaining few weeks before trial. Allowing the Commissioner to raise a new issue after discovery has been closed for over a year and on the eve of trial would prejudice Mr. Curtin.” Order, at p. 3.

Of course SOL must be pled and proven. It’s an affirmative defense.

Taishoff says I don’t see why Denny has to “scour his records” to see if he filed Form 5471 for any of four (count ’em, four) years at issue; Form 5471 gets attached to whichever of personal, partnership, or corporate tax return you filed, or amended return if you forgot to file Form 5471 with the original return. The returns for relevant years have to be front-and-center among Denny’s “meticulous records” in his trusty attorneys’ trial notebook.

Btw, I got the Form 5471 question wrong on the SEE for Enrolled Agent.

That said, Judge Ingenuity Buch got it right. It took IRS ten years to figure this out. That I got the question wrong doesn’t excuse them. The glacial pace of Tax Court practice encourages such dilatory behavior. They “laid around and played around this ol’ town too long/Summer’s almost gone and winter’s comin’ on.”

Time to travel on.