With a Side of Four

That’s the pot-au-feu served up by the trusty attorney for Carver Mountain Reserve, LLC, Carver Mountain Reserve IP, LLC, Tax Matters Partner, et al., Docket Nos. 15761-24, 15778-24, and 15802-24, a tripartite entry filed 5/8/26. Said trusty attorney, whom I’ll call Sammy, sends Judge Christian N. (“Speedy”) Weiler to what we used to call the “law books,” an archaic research vehicle now superseded by the Interweb.

Sammy claims IRS’ war on these syndicated conservation easements violates the Fifth, Seventh, Eighth, and Fourteenth Amendments, and cites a case implicating the Fourth Amendment and the APA as well.   

Judge Speedy Weiler brings out a carafe of somber reasoning and copious citation of precedent, bubbling with blown-up arguments. Constitutional topers should drink up the three (count ’em, three) pages thereof.

But Sammy claims it’s really that the FPAAs were issued outside 3SOL, hence barred. So Judge Speedy Weiler holds up ruling on Sammy’s summary J motion on that point until IRS answers. And IRS should stick to the 3SOL issue in its answer.

Ex-Ch J Kathleen (“TBS= The Big Shillelagh”) Kerrigan follows S. T. Coleridge’s lead in Siemens USA Holdings, Inc., & Consolidated Subsidiaries, Docket No. 3898-24, filed 5/7/26.

IRS wants to depose three (count ’em, three) current or former employees of Siemens & Subs “to learn more about specific transactions of petitioner.” Order, at p. 1. Siemens objects, but offers to let the three talk informally to IRS.

IRS wants a written transcript, and ex-Ch J TBS Kerrigan agreed back in January that hearing from these technicians would be helpful in sussing out this case. But nonconsensual depositions must clear the Rule 74(c)(1)(B) barrier: the information cannot be obtained any other way.

But what IRS wants, and what ex-Ch J TBS Kerrigan finds helpful, is within the knowledge all three proposed witnesses.

Hence the invocation of Coleridge’s sailor.

“The Court encourages respondent to select one of the employees for a transcribed interview and petitioner to allow this interview to occur.” Order, at p. 1.

Hope the witness chosen wasn’t planning on getting to a wedding.

I’ve commented often enough before now on the seemingly random imposition of Section 6673 chops for frivolity. Now I’m coming to the point of invoking the activist judges on the United States Supreme Court bench, who nowise shy from a bench-emptying intervention.

Louis-Umberto Giannini & Dawn-Michelle Frey, Docket No. 16803-25, filed 5/6/26, have been around the cliché a couple times (hi, Judge Holmes). Ch J Patrick J. (“Scholar P{at”) Urda catalogues their prior Tax Court frivoling. A brief docket search shows Lou-U and Dawn got a $1K chop on each of their prior forays.

For more, see my blogposts “Scholar Pat on Frivolites,” 6/23/22, and “A Section 6673 Template,” 7/24/23.

Despite their track record of stale Title B employment tax based arguments, Ch J Scholar Pat devotes five (count ’em, five) pages of his order to a lengthy exposition of the bases of Tax Court jurisdiction, of which Lou-U and Dawn have none.

So Ch J Scholar Pat hits Lou-U and Dawn with a third $1K Section 6673 chop, which is all IRS requested. Obviously Ch J Scholar Pat cannot give more, since that would ambush petitioners.

Why IRS deems such a waste of scarce administrative and judicial resources merits only a $1K chop, which has twice failed to deter Lou-U and Dawn, eludes me. I eagerly await the twice-tagged litigant who challenges a $5K or better chop recommendation from IRS as arbitrary and capricious, when Lou-U and Dawn only got $1K. Sic ’em, Supremes!

Terrell Joseph, T. C. Memo. 2026-38, filed 5/5/26, filed for CDP and CAP, and also a couple OICs (hi, Judge Holmes).  Take a look at Judge Rose E. (“Cracklin'”) Jenkins’ summary of the series of errors on both sides (and thank you, Judge, for summarizing; I could never unscrambled this frittata on my own).

“Petitioner certainly did not facilitate the consideration of his case by Appeals by (1) being imprecise about the basis for his dispute of his underlying liabilities on his Form 12153, (2) making off-base complaints about the IRS’s collection actions leading up to the CDP hearing requests, (3) submitting multiple nonprocessable OICs, and (4) ultimately submitting an OIC with an amount untethered from his ability to pay. However, he did (1) suggest to the Second AO that he had not timely received the SNOD that purportedly provided him a prior opportunity to dispute his underlying liabilities for the 2014 through 2016 tax years, (2) provide a full complement of supplemental information, including relevant documentation requested by the Second AO, and (3) consistently maintain understandable disputes of his underlying liabilities and the accounting for his real property in the RCP computation. And although some of petitioner’s disputes were groundless, the administrative record suggests that the Second AO may have disregarded multiple provisions of the IRM and thereby failed to properly (1) determine whether petitioner was entitled to dispute his underlying liabilities, (2) verify that the requirements of any applicable law or administrative procedure were met with respect to the assessments, (3) determine petitioner’s RCP, and (4) evaluate petitioner’s request for an IA. Accordingly, this Court cannot conclude that Appeals did not abuse its discretion. Therefore, this Court will remand the case to Appeals for a supplemental administrative hearing in accordance with this Opinion and for the issuance of a supplemental notice.” T. C. Memo. 2026-38. at p. 26.

Looks like Terrell got his trusty attorney involved to clean up this mess. Nice work sorting this out.

Though I haven’t been in one in ten years and more, I’m sure every casino on land and sea still has a blackjack table and a couple rows slots (hi, Judge Holmes). And somewhere, every working day, Tax Court will have a syndicated conservation easement case and a microcaptive insurance case. So it is today.

A coupled entry, Kimberly Road Fulton 25, LLC, Kimberly Road Manager, LLC, Tax Matters Partner, and South Fulton Parkway 58, LLC, South Fulton 58 Manager, LC, Tax Matters Partner, T. C. Memo. 2026-36, filed 5/4/26, have Judge Mark V. (“Vittorio. Emanele”) Holmes reaching for his “IRS’ Dubious Arguments” checklist, as IRS has to win on an actual valuation trial with expert witnesses.

Forget business purpose, Congress wanted conservation. Donative intent doesn’t matter, as the only quid pro quo was tax breaks, and the 501(c)(3) that got the easement hadn’t any tax breaks to give. Unqualified appraisal? True, this was petitioners’ appraiser’s first rodeo, but he had credentials, and talking to his clients doesn’t mean collusion. And the 8283 checked the boxes. That one expert didn’t sign either the expert’s report or the 8283 doesn’t matter, as neither side called her as a witness, so whatever she did wasn’t at issue. And what petitioners gave was scenic enough, public enough, preservationist enough, and endangered or threatened species protective enough to make the Section 170 cut. That the Baseline Documentation Report was, in IRS’ expert’s opinion, “the worst BDR he had ever seen,” it did include, as the regulation suggests, a boundary survey, a map, photos of the property, its title and development histories, vantage points in which to view the property, descriptions of the hardwood forest, and a certification of accuracy, T. C. Memo. 2026-36, at p. 23, so it slides in under the tag. IRS’ buzzer-beater attempt to claim the property was inventory, because a promoter was a professional flipper, fails because new issue requiring fresh proof and the trial had already happened when IRS raises this. And the non-disclosure of a listed transaction chop enhancement went south with Green Valley.

Of course, the telephone-number appraisal gets shredded.

For the backstory on Curtis K. Kadau and Lori A. Kadau, Deceased, Curtis K. Kadau, Personal Representative, T. C. Memo. 2026-37, filed 5/4/26, see my blogpost “Microcaptivity  Enhanced,” 7/31/25. Now Judge Christian N. (“Speedy”) Weiler must deal with the 40% substantial overstatement chop and the Section 7701(o) codification (obfuscation) of economic substance.

To begin with, economic substance is relevant and this deal had none. It was the usual cash stash roundy-round. Unlike Kimberly and Fulton, supra, as my third well-brand-Gibson journalist colleagues would say, here the understatement is for nondisclosure, not listed transaction, so Green Valley plays no part.

“We have said that adequate disclosure can be made by a taxpayer providing sufficient information on the return to enable the Commissioner to identify the potential controversy involved. However, the ‘mere declaration of a deduction does not entitle taxpayer to a reduced penalty.’ 

“Considering the circumstances before us, we determine that petitioners failed to adequately disclose relevant facts or provide sufficient information on their individual returns, and likewise on [S Corp]’s corporate returns, to enable respondent to identify the fact that premiums paid and deducted were part of a microcaptive arrangement.” T. C. Memo. 2026-37, at p. 10. (Citations omitted but get them.)

Please pass the Worcestershire sauce; I’m about to eat my words. Not fewer than three (count ’em, three) times before now I have proclaimed that I won’t mourn TEFRA. But Judge Juan F. (“The Grist Miller”) Vasquez gives me what I would have sworn that neither oxen nor wain ropes would do…drag me to wanting a return to TEFRA.

4000 Investment Logistics, LLC, Chichukuya Investment Logistics, Inc., Tax Matters Partner, Docket No. 16211-22, filed 5/4/26, petitioned a FPAA for a pre-2018 year. Problem was, the TMP had been decorporatized by the CFTB (the CA corporate police) at the time they filed the petition, and were only been revived 503 (count ’em, 503) days after the FPAA issued, totally blowing all the TEFRA petitioning cutoffs.

Judge Vasquez, ever the obliging jurist in the Judge David Gustafson mould, “invited petitioner to file a supplement to its response addressing whether the Petition could be ratified by another partner and advising the Court of the partner qualified under the statute to be appointed and serve as tax matters partner of 4000 Investment ” Order, at p. 2.

But alas, there was no one, neither found he any, willing to take up the quarrel with IRS.

So the 4000’s petition gets tossed.

Now here’s where I get nostalgic for the old TEFRA method.

The post-BBA 2015 Section 6223(a) provides for a draft by IRS of any partner to serve as partnership rep, nolens volens with no input from the partners unless IRS feels like asking. If the draftee dodges the draft, game over, with no voluntary substitution method. Likewise, if IRS doesn’t designate the substitute partnership rep, theoretically, the partners could designate anyway, but there’s no statutory provision allowing it. And there is no provision for IRS to draft a nonpartner partnership rep, even though Section 6223(a) provides that an originally designated partnership rep needn’t be a partner. Note the statute doesn’t use the term”(or other person”) when speaking of an IRS draftee. Yes, I know, Reg. Section 301.6223-1(f)(5)(ii) says “the IRS may designate any person to be the partnership representative,” and should consult the partners, but the Reg doesn’t bind IRS to do either. In any case, would those provisions survive a Loper Bright challenge?

And finally, if neither the partnership designates a substitute, nor IRS drafts, a partnership rep, Tax Court is ousted of jurisdiction.

The old TEFRA provision, allowing partners other than the TMP to contest on their own, without having to risk being sued by the other partners if their contest isn’t to the liking of these others and binds the partnership, was fairer.

Judge Rose E. (“Cracklin'”) Jenkins is a fan of the Best Evidence Rule, a/k/a Requirement of the Original, FRE 1002. So she sets the following high hurdles for Objectors to subpoenas duces tecum who claim that documents sought may no longer be available in their original format in David J. Feingold, et al., Docket No. 19354-24, filed 5/1/26.

“…if there is a claim that a document is no longer available due to loss or destruction, an affidavit must be provided, signed under penalties of perjury, addressing what records once existed, what the retention policy was, what actions have been taken to search for the responsive documents, when the destruction occurred, who authorized the destruction, who destroyed the records, how the destruction occurred, and, if applicable, why only photocopies are retained but not the original electronic document in its native format.” Order, at p. 3.

What price litigation holds?

This is an edited repost of a blogpost I inadvertently deleted while trying to edit a typo on the Firefox browser; Firefox is incompatible with WordPress, the platform wherein this my blog lives, moves, and has its being, as I found to my chagrin.

Brendan James Trainor, Docket No. 14996-22, filed 4/19/22, conflates liability with deficiency, and trots out some protester jive, but Judge Mark V. (“Vittorio Emanuele”) Holmes, finds “a couple quirks that merit discussion” to spur his ongoing war with the partitive genitive. Order, at p. 1.

One, the deficiency doesn’t include any withholding credits. BJ owes less than the deficiency.

Two, BJ’s deficiency arises from unreported income based on third-party reporting, as reflected in an AUR. IRS’ counsel admits in its pretrial memorandum that they need proof of Section 6751(b) Boss Hossery, but says they’ll put in on the trial, which they don’t. There’s no CPAF attached to the SND, nor is there one in the parties’ stip. Order, at p. 3.

There is a saver, but IRS doesn’t pick it up. Judge Holmes sets it forth in a footnote.

“Section 6751(b)(2)(B) creates an exception to the usual requirement that the IRS has to show supervisory approval for a penalty for a penalty that is ‘automatically calculated through electronic means.’ And we’ve held that this exception applies to substantial-understatement penalties determined by the IRS’s computers in an Automated Correspondence Exam or through the Automated Underreporter program. Wahlquist [sic; should be Walquist] v. Commissioner, 152 T.C. 61, 70-71 (2019).” Order, at p. 3, footnote 1.

“We’ve also held that, when the only mention of a penalty under section 6662 is the generic language listing every type of penalty under that section – exactly the language that’s in the notice that the IRS sent to Mr. Trainor – we have to look to any more specific language in the approval form. See Rogers v. Commissioner, 118 T.C.M. 79, 91 (2019).” Order, at pp. 3-4.

For Walquist, see my blogpost “I Sing the Penalty Electronic – Part Deux,” 2/25/19. For Rogers, see my blogpost “I Must Make Amends – Part Deux,” 5/30/19.

No CPAF, no chops. 

Judge Nega cannot tell whether the response of Spencer Olson, Docket No. 16457-24L, filed 4/30/26, to the Section 6662 chop AUR laid upon him before issuance of the SND that gave rise to this CDP was acted upon, as abatement thereof never made it into the account transcript incorporated in the administrative record. 

Judge Nega Judge-‘spains why this matters.

“AUR penalties require supervisory approval to be included in the Notice of Deficiency if the taxpayer responds to a notice of the penalty prior to the issuance of the Notice of Deficiency. SO J appears to have concluded that petitioner made such a response in this case and that no supervisory approval was secured, making the penalty invalidly assessed when it was included in the Notice of Deficiency. See § 6751(b)(1).” Order, at p. 1. (Name omitted).

Moreover, “(A)fter deciding that the penalty must be abated, SO J appears to have completed a Form 3870, Request for Adjustment, on September 5, 2024, requesting that the section 6662 penalty be abated. This request is mentioned in the Notice of Determination issued on September 17, 2024, but nothing in the record makes it clear whether this request was actually processed.” Order, at p. 1. (Name omitted).

So let IRS’ counsel dish whether the chop is off the table, so Judge Nega needn’t deal with it.

Takeaway- Although electronically-assessed chops are Boss Hoss-exempt per Section 6751(b)(2)(B), there is an escape hatch for those who move quickly.

My long-running series on Tax Court depositions continues with Chad Burris & Julie Burris, et al., Docket No. 18712-22, filed 4/29/26. Judge Cary Douglas (“CD”) Pugh gives IRS more time to file document demands, based on Chad’s & Julie’s trusty attorneys slowplaying document production. See my blogpost “Scrapbook 3/27/26 and a Leftover,” 3/27/26.

But with trial 120 (count ’em, 120) days away, IRS says it may want to depose three (count ’em, three) nonparties, depending upon what’s in the aforesaid slowplayed documents.

That’s a bridge too far for Judge CD Pugh.

“Respondent also represents that depositions of three key persons may be needed depending on information respondent obtains through petitioners’ documents, informal communication with petitioners, and the stipulation process. The sudden need for depositions of three key persons comes too late, especially if the information may be obtained from other sources. We are reluctant to require a nonparty to incur the expense that necessarily accompanies a notice of deposition that the nonparty and petitioner might dispute unless and until we conclude that respondent has established that the information may not be obtained by other means.” Order, at p. 2.

Once again, Tax Court depositions are anything but the daily grist that comes to the mill in other courts.