No Marxism, either Karl nor Groucho, rather Judge Elizabeth A. (“Tex”) Copeland’s unwrapping of a cost-of-goods-sold reduction to gross revenue of a pioneering VoIPer emerging from Chapter XI. The VoIPer claimed it was providing “information services,” not long distance telephony, so lowballed AT&T and Verizon when tying into their longlines. This came unglued when Big Telecom woke up to the con, hence the Ch XI-induced selloff of its assets to Andre Temnorod and Brianna Temnorod, et al., T. C. Memo. 2025-127, filed 12/8/25.

Andre and the als expensed the lot as COGS, but IRS said “nyet.” Judge Tex Copeland agrees.

“Addressing cost of goods sold first, it is clear from the record that the [VoIPer] was in the business of providing telecommunication services to customers, and not in the business of creating or selling any material products. And as noted above, cost of goods sold is linked to mining, manufacturing, or merchandising products and not applicable in services industries. Thus, we cannot make the leap that petitioners seem to request, that [VoIPer] is entitled to a reduction in gross income for cost of goods sold.” T. C. Memo. 2025-127, at p.; 18. (Citation omitted).

But maybe so might could be that the payments to Big Telecom were Section 162 business, to settle out the lawsuits for the “information services” shortchanging.

Except.

The Asset Purchase Agreement on which the Bankruptcy Court signed off included not only the assets, but assumption of liabilities and waiver of unsecured claims. All this extra baggage means a sale of capital assets. And that invokes Danielson. And who might Danielson be, you ask. See my blogpost RTFC, 3/9/16. You’re stuck with what your contract says.

Gotta give Andre and the als a Taishoff “Good Try, Third Class.”