Not quite, says Judge Christian N. (“Speedy”) Weiler, SIH Partners LLLP, Explorer Partner Corp., Tax Matters Partner, 167 T. C. 8, filed 8/6/26, could make $2.4 million on their portfolio swap with their Firm Hedge against downside markets and a bunch Swiss equities (hi, Judge Holmes). These dudes are macro highrollers. Judge Speedy Weiler tracks their machinations through Section 246 and regs stock marketry with Morgan Stanley, to try to get a reduced 15% tax rate out of the Swiss taxing authorities, 15% US Qualified Dividend treatment, and a heavy-duty foreign tax credit.

Turns out SIHP beats IRS’ form-over-substance argument. The deal survives Section 246(c)(4)(C) diminished risk of loss, due to IRS’ experts’ less than stellar testimony. Techies, see 167 T. C. 8, at pp. 20-25. And SIHP dodges the Reg. Section 1.246-5(c)(1)(iii) substantial overlap test. The Hedge and the Swiss aren’t substantially similar or related property. So far.

Now I’ve no doubt my jaggedly-sophisticated readers are yelling with one voice “Hang on, Squire, what about Reg. Section 1.246-5(c)(1)(vi), the Anti-Abuse Reg?”

No fear, chaps, Judge Speedy Weiler is all over that one.

“The Anti-Abuse Rule comprises three elements: (i) the taxpayer has eliminated his economic risk of his stock holdings by holding a position that ‘virtually track[s]’ its stock holdings, (ii) that position is held ‘as part of a plan a principal purpose of which is to obtain tax savings,’ and (iii) the tax savings obtained by the taxpayer are ‘significantly in excess of the expected pre-tax economic profits’ of holding the position.” 167 T. C. 8, at p. 30. (Footnote omitted, but it says all three are essential, and “significantly in excess” is a quantifying aspect; just saving tax doesn’t invoke the Rule). And virtual tracking doesn’t slow SIHP down either. “… the Virtual Tracking Test acts as a check to determine whether there is any hidden (or virtual) overlap between the entirety of a position, or the entirety of stocks reflected in the position, and a taxpayer’s stock holdings, or a portion of the taxpayer’s stock holdings and other positions of the taxpayer.” 167 T. C. 8, at p. 32. But SIHP’s expert’s attempt to hold that to a strict numerical formula craters; Judge Speedy Weiler finds “…the regulation to be broad in application and determine Treasury intended for it to serve as a catch-all for potential abuse. If petitioner’s arguments were correct, the Anti- Abuse Rule would seem to never apply in circumstances where a taxpayer has passed the Substantial Overlap Test. The preamble to the final regulations makes it clear that this is not the case. If the Anti-Abuse Rule applies, a position that reflects the value of two or more stocks (including a portfolio) is treated as SSRP even if those stocks and the taxpayer’s stock holdings do not substantially overlap. See T.D. 8590, 1995-1 C.B. at 16. Considering SIHP also held short positions in the Swiss Equities under the Transaction, we determine these two positions are reasonably expected to virtually track under the Anti- Abuse Rule. See Treas. Reg. § 1.246-5(c)(1)(vi)(A).” 167 T. C. 8, at p. 32.

 But that profit is what ultimately torpedoes SIH. After an extensive mix-and-match of dueling experts, Judge Speedy Weiler delivers the bad news.

“Having determined that the expected pretax profit ranges between $0 and $2.4 million, while the corresponding estimated tax savings are some $25 million, we determine that the value of the tax savings is significantly in excess of the expected pre-tax economic profits. See Treas. Reg. § 1.246-5(c)(1)(vi)(B). We therefore determine the Anti-Abuse Rule of Treasury Regulation § 1.246-5(c)(1) is applicable to the Transaction and that, on the basis of the evidence presented, the Transaction fails to comply with the Anti-Abuse Rule. We hold that SIHP’s position in the Swiss Equities is SSRP.” 167 T. C. 8, at p. 40. Hence no US 15% QDI tax, and the foreign tax credit founders on Section 910(a) and (k)(1) because the Swiss stuff is SSRP.

Note: A “Bialystok” is a deal that creates a tax loss with minuscule or no economic effect, named after the hero of “The Producers.”