I’m a fan of sandwiches. So was Eaton Corporation and Subsidiaries, 164 T. C. 4, filed 2/24/25, but it costs them a bunch foreign tax credits (hi, Judge Holmes). Eaton sandwiched a domestic partnership between two coalitions of CFCs.

IRS “does not dispute that petitioner would be allowed deemed-paid FTCs arising from its section 951(a) inclusions with respect to the upper tier CFC partners, limited to the amount of foreign income taxes that they themselves paid or accrued. But respondent contends that the interposition of the partnership renders petitioner ineligible for deemed-paid credits for foreign income taxes paid by the lower tier CFCs.” 164 T. C. 4, at p. 2.

There’s no fight about foreign income taxes paid by the upper-tier CFCs. See my blogpost “When Judge Gustafson Dissents,” 2/25/19*.

“Here, petitioner, the only domestic corporation in view, had no section 951(a) inclusions with respect to the subpart F income and section 956 amounts generated by the lower tier CFCs. Instead, EW LLC—a domestic partnership, not a domestic corporation—had the section 951(a) inclusions with respect to the lower tier CFCs. And EW LLC’s section 951(a) inclusions were not included in the gross income of a domestic corporation. Rather, EW LLC was the United States shareholder required under section 951(a)(1) to include in gross income its pro rata share of the subpart F income generated by the lower tier CFCs. The upper tier CFC partners, which are foreign corporations, included their distributive shares of EW LLC’s section 951(a) inclusions with respect to the lower tier CFCs in their gross income pursuant to sections 61(a)(13) and 702(c). Eaton I, 152 T.C. at 54. In short, neither any CFC partner nor EW LLC was a domestic corporation. Therefore, the ‘hopscotch’ mechanism under section 960 is not triggered, because the statutory predicate in section 960(a) was not satisfied.” 164 T. C. 4, at pp. 9-10.

As for the undesirable result of double taxation, “any double taxation will be temporary, because petitioner will be entitled to the FTCs it seeks as soon as the earnings of the lower tier CFCs are distributed up to petitioner through the chain of ownership.” 164 T. C. 4, at p.10.

So Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan sums up.

“To summarize, no credit for taxes paid by the lower tier CFCs is available to petitioner under either of the two Code sections that allow for deemed-paid credits. There is no credit under section 902 because there was no dividend distribution, and there is no credit under section 960 because the section 951(a) inclusions with respect to the lower tier CFCs were not taken into gross income by a domestic corporation. Because petitioner cannot show that it is entitled to be deemed to have paid foreign income tax, it is not entitled to a credit on account of the same under section 901(a).” 164 T. C. 4, at pp. 10-11.

* https://taishofflaw.com/2019/02/25/when-judge-davidson-dissents/

The election returns are in. Judge Patrick J. (“Scholar Pat”) Urda has been elected Ch J of United States Tax Court for a two-year term commencing June 1, 2025.

He will succeed Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan.

Here’s the official word: https://ustaxcourt.gov/resources/press/02212025.pdf

OK, it’s obligatory, not that river in Egypt. Judge Christian N. (“Speedy”) Weiler has an essay in one paragraph on the effect of denial in Locust Creek LLC, Locust Creek Investors LLC, Tax Matters Partner, Docket No.13011-20, filed 2/21/25.

There’s a brief jumpball over informal discovery, but Judge Speedy Weiler blows off the Locusts’ objection: time for informality is over, since the Locusts’ responses were subpar. The Locusts must pony up the documents IRS requested.

IRS also wants Judge Speedy Weiler to review a bunch responses to interrogatories (hi, Judge Holmes), but that’s where denial comes in.

“Rule 90(e) provides that, in some circumstances, the Court ‘may order . . . that the matter is admitted’. When the answering party engages in circumlocution, or admits in one phrase and retracts in the next, or makes invalid objections, then deemed admission may be called for. But admission should not be deemed when, as if [sic] most often the case here, the response is a flat denial. When the answering party ‘Denies [period]’, a motion to review cannot become an occasion for the Court to make a pretrial adjudication of a factual dispute. The potential sanctions (see Rule 90(g), 104(c), (d)) for an unequivocal but unwarranted denial–which sanctions might include in an appropriate instance ‘the reasonable expenses, including counsel’s fees, caused by the failure’ to admit (Rule 104(c)(4))–can be imposed only after the denial has been shown to be unwarranted.” Order, at p. 1.

The Locusts did respond; that IRS is unhappy with the response isn’t enough to reject it.

“Having reviewed the Requests, petitioner’s Responses thereto–and while finding some responses appear to be less than forthcoming–we cannot say they violate the spirit of Rule 90. Accordingly, we find it is appropriate to deny respondent’s Motion to Review.” Id., as my expensive colleagues would say.

The backstory for Joint Star Properties, LLC, Joint Star Properties Investments, LLC, Tax Matters Partner, Docket No. 30289-21, filed 2/20/25, is found in my blogpost “Amen, Judge Pugh,” 2/23/24.* While there is no deliberative privilege to shield the IRS groupchat anent Boss Hossery for syndicated conservation easements, neither is the want of privilege an excuse for unlimited fishing expeditions.

“While the standard for relevance in discovery generally is broad, it is not unlimited. We are particularly careful to require a showing of relevance where the discovery sought may involve sensitive information pertaining to unrelated third parties. In this case, the Requests do just that, seeking information regarding third parties in all conservation easement cases.” Order, at p. 3. (Citation omitted).

Check out Order at p. 2. The groupchat is indiscreet, but hardly reaches the level of a determination sufficient to trigger Boss Hossery, especially given the judicially imposed restraints on its use to avoid chops. The behind-the-scenes bludgeoning that Section 6751(b) was enacted to prevent never gets to Tax Court; and for all I can see, never gets anywhere else, either.

• https://taishofflaw.com/2024/02/23/amen-judge-pugh/

Robert Donlan, Jr., and Kegan Donlan, 164 T. C. 3, filed 2/19/25, present a real head-scratcher or perhaps headshaker, despite having properly used the Tax Court robopetitioner to create and file their timely petition.

IRS moves to dismiss, claiming the electronic signature mechanism embedded in the robopetitioning software does not provide a valid signature.

Now we do have some shall I say “idiosyncratic” pronouncements from the Executive Branch of our government lately, so perhaps this motion should evoke no surprise. Judge Ronald L. (“Ingenuity”) Buch certainly deals with the motion with somber reasoning and appropriate citation to Rules 34 and 23(a)(3).

“Like other courts, the Tax Court has specific rules allowing for electronic signatures. Rule 34, which governs petitions, states in paragraph (e): ‘For the signature requirement of petitions filed electronically, see Rule 23(a)(3) and the Court’s electronic filing instructions on the Court’s website.’ In turn, Rule 23(a)(3) states: ‘A person’s name on a signature block on a paper that the person authorized to be filed electronically, and that is so filed, constitutes the person’s signature.’ Our analysis could end here.” 164 T. C. 3, at p. 4. (Footnote omitted, but it cites FRCP and FRAP electronicity, as well as Section  6061(b)(1) and  Internal Revenue Manual 10.10.1 (Aug. 12, 2024) (“IRS Electronic Signature (e-Signature) Program”)).

But Judge Ingenuity Buch cites to the instructions for robopetitioning electronic signatures as well.

Of course the petition is valid, so motion denied. The Donlans were directed by Judge Buch not to bother replying to this motion.

I wish I too had been spared from the need to comment thereon, but my sense of duty to my readers compels me.

That’s how long I’ve been following the saga of Scott A. Blum and Audrey R. Blum, T. C. Memo. 2025-18, filed 2/18/25. I’ve paid good money for whiskey younger than this case. But Judge Goeke is shooting down the last-ditch efforts of the latest of Scott’s trusty attorneys to avoid the massive whack resulting from the collapse of Scott’s attempts at shelter.

This one involves whether the FPAA was sent to the right address. Spoiler alert- Judge Goeke finds it was.

You can read the 48 (count ’em, 48) pages of Judge Goeke’s trudge through history.

I tried, but failed.

If you’re short of eye-glaze, try this: “DSIF’s BMFOLV transcript shows that the IRS audited DSIF’s return for the 1999 taxable year and that the IRS removed the records relating to the audit from its active business master file (BMF) to its recoverable retention register (RRR) in 2014. The IRS moves taxpayer records for older, inactive tax periods to the RRR, but the records can be restored to active status if they are needed. See IRM 4.4.23.8.1 (Aug. 7, 2013). The files in the RRR are less accessible but can be returned to active status in the BMF if they are needed. The 2014 removal of DSIF’s files to the RRR coincides with the district court’s 2014 order granting summary judgment to the Government in the 63 SIFs case. There is no indication or evidence that removal of DSIF’s files to the RRR means that petitioners settled their tax liability attributable to the BLIPS tax shelter. It makes sense to us that the IRS moved DSIF’s records to the RRR when the 63 SIFs case ended because partnership-level records are not generally required to make affected item adjustments at the partner level.” T. C. Memo. 2025-18, at p. 42.

The Section 6662(h) 40% chop is a partnership item, so Judge Goeke has no jurisdiction to decide Scott’s trusty attorneys’ bœuf thereover. Whatever flaws are alleged in IRS’ paperwork is not for Tax Court to decide. See Section § 6230(a)(2)(A)(i).

I don’t know if Judge Rose E. (“Cracklin'”) Jenkins is as big a fan of Blake Shelton’s 2001 smash hit as I am, but when AO R (name omitted) threw to the wrong base (COIC) when Richard L. Brown and Camille C. Brown, T. C. Memo. 2025-17, filed 2/18/25, invoked OIC-ETA (should go to Austin ETA-NEH Group), Judge Jenkins let AO R send the file to Austin, who bounced the OIC.

That’s OK. Petitioners waffled about economic hardship, disclaiming it and then claiming it.

“Petitioners’ muddling of issues in their arguments before this Court is consistent with their positions in filings before the issuance of the Current NOD. Although the Form 656 indicated that it was being submitted on effective tax administration grounds other than economic hardship, and subsequent correspondence disclaimed economic hardship, Petitioners made some statements about economic hardship on their Form 656 and in an attachment thereto. Accordingly, and consistent with IRM 5.8.11.5.2(1) and (2), the Centralized Offer in Compromise Unit considered Petitioners’ RCP and whether paying their liability would impose an economic hardship on them. AO R appropriately considered the unit’s preliminary determination rejecting Petitioners’ OIC.” T.C. Memo. 2025-17, at p. 12.

As for the flub in not getting Austin involved, “AO R did not originally seek review of Petitioners’ OIC by the ETA-NEH Group, as suggested by the IRM. See IRM 5.8.11.3.2(1), 5.8.11.5.1(8) (Oct. 4, 2019), 8.22.7.4.2(2) (Aug. 26, 2020). However, although failure to do so would not be dispositive, see Eichler v. Commissioner, 143 T.C. 30, 39 (2014) (‘[P]rovisions of the IRM do not carry the force and effect of law or confer rights on taxpayers.’), the fact that she did promptly refer it once her attention was called to that oversight is consistent with her diligence throughout her handling of the case.” T. C. Memo. 2025-17, at pp. 12-13.

Note this case arises from a blown 1031, resulting in a $600K tax liability. Clearly, must have been a big-ticket transaction. Why tax counsel weren’t sooner involved escapes me.

Judge Christian N. (“Speedy”) Weiler has to deal with ambiguous agents and their Matthew 18:18 roleplaying, in Harman Road Property, LLC, Capital Conservation Partners II, LLC, Tax Matters Partner, Docket No. 12304-20, filed 2/18/25. Dixieland Boondockery has birthed endless discovery and evidentiary roundy-rounds, which is why I follow them so closely. Both seasoned practitioner and novice need to review the FRCP and FRE, as Mark Twain and his Mississippi pilots needed to “learn the river” again and again.

There’s the usual limine preliminary bombardment, but Judge Speedy Weiler saves the bulk for trial; they mostly go to relevancy, and that best plays out as the case develops in the courtroom.

Note that an expert can be a fact witness, but to prevent a litigant from trying to submarine by claiming the expert is a fact witness and then eliciting expert testimony, bypassing the Rule 143(g) protections, Judge Weiler invokes FRCP 37, the judicial depth charge which “affords trial courts ‘discretion to decide how best to respond to a litigant’s failure to make a required disclosure under [Federal] Rule [of Civil Procedure] 26.'” Order, at p. 4, footnote 6. (Citation omitted).

There’s a bunch partners and indirect partners, hence party opponents whose out-of-court statements come in, avoiding hearsay per FRE 801(d)(2)(A).

Except.

These partners and indirect partners must have specific authority to bind the partnership(s) of which they are member(s), or the partnership must have adopted those statements as their own.

Judge-‘splaining FRE 801(d)(2)(A) “the rule provides for statements ‘made within the scope of that relationship and while it existed.’ Accordingly, we find respondent is not free to offer any prior written statement made by these individuals as excluded from hearsay, without first establishing the context in which the statement is being made. In other words, we are not willing to treat multiple emails (without first considering the specific documents and context) as all being excepted from hearsay simply because these individuals are potential agents of Harman Road and Green Rock.” Order, at p. 7.

Plenty for aspirants to the non-attorney admission route, and even those autoadmitees, to consider.

Both George and Abe, former Presidents of this great nation who each rated a discrete birthday holiday in February, were smushed together and given the John 3:3 treatment officially in 1971.

Wherefore and whence, therefore and ergo, today is a holiday in The City of the E-mailed Unemployed, and I have nothing to say.

There’s another addition to the “can’t add” category. Lawrence Leroy Henry, Docket No. 24155-18, filed 2/14/25, is doing a Rule 155 computation after Judge Gustafson disposed of his “anyway expenses,” for which see my blogpost thus entitled.*

LL was told to stick to the arithmetic and leave the argument behind. “Consequently, any submission that petitioner makes should not point out errors in the Court’s opinion but only errors in the Commissioner’s computation.” Order, at p. 1.

IRS weighs in, but unhappily, LL tries again.

“The biggest difference between petitioner’s computation and the Commissioner’s is that petitioner argues that he is entitled to more than $1 million of ‘Savvy Bill Pay’ deductions that we expressly disallowed. On a smaller scale, he grants himself amounts of other deductions greater than our opinion held. He grants himself other categories of deductions about which our opinion was silent–and about which his own post-trial brief was silent. His computation is not compliant with Rule 155, does not effectuate our opinion, and is not helpful. We will instead follow the Commissioner’s computation and enter decision in accordance with his proposal.” Order, at p. 2.

* https://taishofflaw.com/2024/08/22/anyway-expenses/