It’s been years since I stood in the bonechilling cold of a stone cellar in a small Hudson Valley town, as the cellarmaster drained a quarter-glass from a barrelthief and handed it to me. “Might need another year,” we agreed. Turned out it did, and the result was good.

I remembered the same feeling as I read Judge Christian A. (“Speedy”) Weiler’s 46 (count ’em, 46) page giant slalom through the anfractuosities and permutations of Otay Project LP, Oriole Management LLC, Tax Matters Partner, T.C. Memo. 2026-21, filed 2/23/26.

For backstory, check out my blogposts “The Best Discovery,” 11/1/21, and “Innocents, Take Notice,” 10/7/24. Watching a Tax Court case develop is like tasting that raw red liquid in an ice-cold cave and trying to divine what it will become; it’s more instinct than ratiocination.

Anyway, the Section 743(b) basis adjustment, intended to defer indefinitely three-quarters-of-a-billion-with-a-b profit deferred by Section 460 completed contract method accounting fails the economic substance test, despite petitioner’s objection that express statutory language o’ercrows said test. 9 Cir, whence Otay is Golsenized, says no. Where the parties, ostensibly splitting up their real estate empire, continue to hold construction obligations, their split-up is a sham.

“Respondent also correctly points us to the public bond and construction obligations which OPLP retained as evidence that Al and Jim did not intend to actually separate all business operations. Accordingly, we conclude that the transactions at issue were a tax-driven sham since these transactions primarily resulted in mere tax benefits. In other words, when considering the nontax reasons for the transactions at issue, any third-party investor would not benefit from the restructuring and distributions from OPLP.” T. C. Memo. 2026-21, at p. 41.

Multiple consultations with high-priced accountants and multiple tax lawyers, other than promoters, save Al and Jim from gross overvaluation and negligence chops.

Btw, the Winter Olympic Committee should consider the diagram at p.16 for the next giant slalom competition.