Here’s the opinion I anticipated last year (see my blogpost “The “Goofy” Silt-Stir, 11/5/24), Gary M. Schwarz and Marlee Schwarz, T. C. Memo. 2025-122, filed 11/24/25. The Supremes’ disciplinary sortie in Loper Bright Entrs. caused Gary’s and Marlee’s trusty attorneys to reargue T. C. Memo. 2024-55, filed 5/13/24 (see my blogpost “The Buck Stops Here,” 5/13/24).

Said trusty attorneys, the National Foreign Trade Council, Inc., and the Chamber of Commerce of the United States of America all want Judge Goeke to invalidate (or maybe sustain) Reg. Sections 1.183-1(d)(1) and 1.183-2(b) as not being the best interpretation of Section 183 or having been promulgated in violation of the notice-and-comment provisions of the Administrative Procedures Act.

Tough luck, chaps, Judge Goeke says he don’t need no stinkin’ regulations (although he says so in much more polite terms). Section 183 limits Section 162 business deductions in nonbusiness contexts. Here the issue is offsetting real property appreciation gains with massive money-losing ecotourism (farming) operations.

Once again, Judge Goeke is in the weeds of TX real estate in Starr and Zapata counties, sorting out the value of cloudy waters in lakes and ponds, and dismembering the experts’ valuation opinions. He gives us exhaustive tables, and somber reasoning and copious citation of precedent going back a century, to figure out what an activity for profit means.  And what activities should be conjoined. Gary’s and Marlee’s ecotourism isn’t real estate. Real estate made serious money; ecotourism took heavy-duty losses. “No competent real estate activity would have conducted staggeringly unprofitable ecotourism for such nominal benefits.” T. C. Memo. 2025-122, at p. 35.

So those expecting the goofy regulation to collapse under the Supremes’ disciplinary scourge will have to remain unsatisfied.

Judge Rose E. (“Cracklin'”) Jenkins answers that by saying it doesn’t matter in Anthony J. Eidem, Docket No. 15479-24L, filed 10/24/25, incidentally wiping out a predecessor order which remanded Anthony back to Appeals for reconsideration of abating adds-ons, after IRS showed it had already remitted a bunch, leaving only $73 thereof outstanding. Order, at p. 2, footnote 2.

It seems the AO’s notes didn’t show separate consideration of Anthony’s claims about abating the late file and late pay add-ons, only abating interest. On that score, that Anthony was in jail and in CNC didn’t entitle him to abatement of interest on his self-reporteds doesn’t mean his add-on claims shouldn’t have been considered, although that’s harmless error.

“However, given that all of the additions to tax under section 6651(a)(1) and (2) had been abated and that there is nothing to indicate that petitioner was entitled to a waiver of the additions to tax under section 6654 for [Year One and Year Two], the AO’s apparent failure to appropriately consider abatement is harmless error.” Order, at p. 9. (Citation omitted).

There were four (count ’em, four) years at issue, all self-reported and unpaid. IRS filed a NFTL when it put Anthony in CNC, as for the back two years Anthony was in and out of jail and claimed he had neither income nor assets. Anthony had also gotten first-time abatement before.

All Anthony has for abatement of interest is incarceration, and that’s not reasonable cause for nonpayment.

“… incarceration alone does not give rise to reasonable cause, see Llorente v. Commissioner, 74 T.C. 260, 268–269 (1980), aff’d in part and rev’d in part on another issue 649 F.2d 152 (2d Cir. 1981), even if the taxpayer was incarcerated at the time the return was due, which, as respondent notes, is not clear was true for petitioner for all of the years at issue.” Order, at p. 8.

An early lesson all lawyers should learn, even before they are licensed, is to protect the record. Briefly, the contrapositive of the old Yellow Pages (for those of you not card-carrying Medicare members, that was a book with actual yellow paper pages listing businesses and professional service providers) advertising slogan “If it’s out there, it’s in here.” If it’s not in here (in the record), it’s not out there (for judicial review).

Judge Rose E. (“Cracklin'”) Jenkins has a prime example in Halal Farms USA, Inc., Docket No. 2601-21L, filed 11/21/25. You can read the history for yourself at pp. 2-6. Judge Jenkins must unscramble Appeals apparent unawareness of the difference between a C Corp and a Sub S, while trying to deal with the 2009 amendment that blocks the passthrough of Subtitle C employment taxes.

IRS moves for summary J, here a Hail Mary so forlorn that “hopeless” doesn’t begin to describe it.

Here’s a sample.

“…the administrative record’s complete dearth of notes from Appeals from any point in its consideration of petitioner’s issues is not only notable in light of the suggestion in the RO’s notes that Appeals case activity records exist. It also makes it impossible for this Court to understand Appeals’ reasoning and actions with respect to a number of issues. In particular, the lack of tax assessed with respect to petitioner and the RO’s notes about petitioner being an ‘S corp’ and filing an ‘1120S’ suggest that there could be merit to petitioner’s position that it was an S corporation, within the meaning of section 1361, required to file a Form 1120–S, U.S. Income Tax Return for an S Corporation, instead of a Form 1120…. There is no indication of consideration of this issue in the purported attachment to the purported notice of determination, and no notes to otherwise reflect what issues Appeals did consider, leaving this Court to draw inferences in the light most favorable to petitioner to conclude that there was no such consideration.” Order, at p. 8.

And unlike the vast majority of CDP cases where petitioners try to wildcard in liability issues where they blew the prior opportunity to contest, here the Halals did timely raise the issues but there’s nothing in the record to show what Appeals did or didn’t do therewith.

So of course there’s a remand for Appeals to try to get the record straight.

Taishoff says that if this is all IRS has, they had best settle.

I am not jumping on Appeals or IRS here; their errors could well have counterparts on the other side. Rather, I am using this order as a lesson to practitioners on both sides of the scrimmage: protect the record. Make sure it tells your whole side of the story.

It’s common in Tax Court litigation: IRS moves to toss, and petitioner stands mute, despite the Judge’s or STJ’s invitation to bukh. And the result is usually less than optimal for the mutant.

But the exception proves the cliché, and Ala Abufarie, Docket No. 17943-22, filed 11/20/25, probably does as well by saying nothing as by writing his/her autobiography in response to IRS’ motion to toss for want of prosecution.

Judge Morrison rewards Ala’s reticence, taking IRS’ concessions into account as he does the arithmetic on the two (count ’em, two) years at issue, sending off Ala with a deficiency, an add-on, and a chop, but less than what the SND claimed.

Without knowing the facts, of course, I can’t say Ala did better keeping still, but it sure looks that way.

The ancient grunts’ wisdom plays out again for Tom Prescott, T. C. Memo. 2025-121, filed 11/19/25.  Tom was a whistleblower who was third to jump on Target A, but, relying on a phonecall and meeting with an attorney in the Tax Division at DOJ, claims Reg. Section 301.7623-4(c)(4) tiebreaker rule should get him a piece of the reward, all of which was awarded to WB-1 and WB-2.

Except.

WB-1 and WB-2 got there long before Tom blew, Tom’s gen on the other participants in the dodge was useless (see T. C. Memo. 2025-121 at p. 2, footnote 2), DOJ doesn’t have to dish on grand jury proceedings (one of Target A’s cronies went down, leading to Target A entering into a DPA and disgorging) so no deposition of DOJ attorney.

Tom’s claim that maybe so might could be DOJ relied on some of Tom’s stuff founders on the record rule, Van Bemmelen, and the regs.

“The WBO’s conclusion is supported by the governing regulation. There is no indication here that CI ‘initiate[d] a new action, expand[ed] the scope of an ongoing action, or continue[d] to pursue an ongoing action, that the IRS would not have initiated, expanded the scope of, or continued to pursue, but for the information provided.’ See Treas. Reg. § 301.7623-2(b)(1). The regulation makes clear that a whistleblower’s information does not ‘substantially contribute[] to an action’ where the IRS simply ‘analyzes the information provided or investigates a matter raised by the information,’ when that matter was already on the IRS’s radar screen. Id. As far as the record reveals, that is an apt description of what occurred here.” T. C. Memo. 2025-121, at p. 14.

And the meeting with the DOJ attorney? “The fact that petitioner’s information appeared sufficiently relevant to trigger a meeting does not establish that his information in fact assisted DOJ in any way, much less that it ‘substantially contributed’ to the recovery of proceeds from Target A. A whistleblower does not ‘substantially contribute’ to an action simply by virtue of submitting his information to an investigating agent. Treas. Reg. § 301.7623-2(b)(1).” T. C. Memo. 2025-121, at p. 15.

I know I’m beating this theme to death (pun intended), but family lawyers should listen. Even if the Big Beautiful Whatever permanently did away with Sections 71 and 215 (and in this case maybe it didn’t, although Judge Alina I. (“AIM”) Marshall ultimately finds that they’re out; see John DiTullio, T. C. Memo. 2025-120, filed 11/18/25, at p. 4, footnote 5), y’all may have pre-TCJA and pre-BBW hangovers.

JD got hurt on the job and eventually got disability. In the meantime, he shed loved-once, but tried to be fair. Their shared lawyer, with more than 30 (count ’em, 30) years’ experience, was supposed to draft and oversee execution of a QDRO splitting up the retroactive benefits JD finally got from his employer, State of NJ, post-divorce.

Except shared attorney didn’t, because loved-once didn’t pay her share of his fee. Judge AIM  Marshall names said attorney; I won’t, because I’ve been there.

So JD got another lawyer to prepare a Consent Decree.

My long-time readers have already done the Psalm 22:7 number (King James variation).

Of course, none of the documents say that JD’s obligation to stump up the benefits for loved-once ends with her death.

JT’s now-trusty attorneys from the Villanova Wildcats LITC get a Taishoff “Good Try,” as they try to slide in the NJ Public Employees Retirement System regs concerning QDROs, which state that all such in pension and disability cases cease with payee ex-spouse’s death.

Judge AIM Marshall won’t wear it.

“…we must consider whether the payment obligation would terminate by operation of New Jersey State law. Respondent states that New Jersey State law is ambiguous as to the termination of payments upon a payee’s death when there is no unambiguous termination provision in the divorce instrument. Petitioner counters that the payment obligation would have terminated under New Jersey State law because the reference to a ‘QDRO’ in paragraph 6 of the [divorce judgment] incorporated the PERS regulation which provides that withholdings under a matrimonial order will cease upon the death of a payee spouse. Petitioner’s reliance on the PERS regulations is misplaced because a predicate for their application was that the parties would prepare and execute a QDRO. We do not think that simply referring to a QDRO in paragraph 6 of the [divorce judgment] automatically incorporated the PERS regulations and the termination rule that petitioner relies on.” T. C. Memo. 2025-120, at p. 8.

And the rest of NJ law is silent.

JD’s now-trusty attorneys do get IRS to drop the chops.

Judge Mark V. (“Vittorio Emanuele”) Holmes shoots the Section 6015 giant slalom without a single tangle in the partitive genitive gates in Jodell Sample, T. C. Memo. 2025-118, filed 11/17/25. Jodell still lived with hubby dentist Joe although legally separated (from which separation she walked away with “one of their shared cars, their main residence in Minnesota, a second home in Montana, and [hubby dentist Joe]’s entire section 401(k) account,” 2025 T. C. Memo. 2025-118, at p. 3).

Nonetheless, Jodell, a high school grad who ran hubby Joe’s dentist’s office while claiming to know nothing of their tax posture even after an IRS agent visited, ducks joint-and-several for three (count ’em, three) years at issue, while going under for the remaining four (count ’em, four), the dividing line between knowing and not knowing being the open years after IRS agent’s visit.

The economic dividing line is the usual sumptuary scan.

“Sample doesn’t live a life of luxury, traversing the world on expensive vacations, sporting couture in sophisticated sports cars. See Rev. Proc. 2013-34, § 4.03(2)(e). Because we do not see the typical hallmarks of significant benefit, we will not find that Sample had more than normal support from her unpaid tax liability.” T. C. Memo. 2025-118, at p. 19. (Citations omitted). If you’re going for innocent spousery, the old rule KISS (Keep it Simple, Stupid) controls.

And Jodell didn’t put in additional information, despite chances to do so.

I note her trusty attorney has appeared in this my blog before, and he definitely knows his way around. If he’s not holding cards, he doesn’t play. And he did play a stormer in the factors game, getting 12 (count ’em, 12) favorables against only three (count ’em, three) negatives, with the remaining twenty (count ’em, twenty) being neutral. See Judge Holmes’ table, T. C. Memo. 2025-118, at p. 20.

A good review of the innocent spousery analysis.

Don’t miss David B. Fugler and Cindy D. Fugler, T. C. Sum. Op. 2025-10, filed 11/17/25. Dave’s a lawyer, but unlike the Golden Gopher alum who represented Jodell, he’ll play a busted hand with the best. He wants innocent spousery for both himself and his wife.

Ex-CSTJ Lewis (“Ya Gotta Love That Name”) Carluzzo is not amused.

“Aside from petitioners’ failure to show that any of the factors that are taken into account in deciding whether a spouse is entitled to section 6015(f) relief apply to petitioner, it would seem to offend common sense to allow both spouses section 6015 relief with respect to the same income tax liability. As we have previously noted, section 6015 relief is generally available to only one spouse for a single tax year… and in this case it is not petitioner.” T. C. Sum. Op. 2025-10, at pp. 7-8. (Citation omitted).

Neil R. Clement & Meredith M. Clement, Docket No. 22590-18, filed 11/17/25, take a double hit, as IRS hauls back the Section 31 wage withholding they claim for year at issue to offset an outyear’s unpaid liability, leaving them with an enhanced deficiency.  And even if they could apply to year at issue the Section 31 wage withholding, the Section 6211(b)(1) computation of a deficiency specifically excludes any Section 31 credit. 

Anyway, Section 6512(b)(4) ousts Tax Court of jurisdiction over IRS haulbacks of overpayments.

Hence Ch j Patrick J. (“Scholar Pat”) Urda leaves Neil & Meredith high and dry for the outyear but awash for year at issue: enhanced deficiency and no Section 31 credit.

IRS, however, fumbles in the backfield when they fail to plead, whether in answer or amendment, proper disallowance of a mortgage insurance premium deduction. IRS conceded a reduction in the deficiency, but that led to an arithmetic jumble that Ch J Scholar Pat can only state is “less than meets the eye,” a rounding error. Neil & Meredith prevail on the deduction. See Order, at p. 4, footnote 4.

Five (count ’em, five) years post-petition and two (count ’em, two) years of faithful quarterly status reports which apparently show minimal progress towards resolution of Timothy Sod, LLC, Timothy Investors, LLC, Tax Matters Partner, Docket No. 12584-20, filed 11/14/25, Judge Christian N. (“Speedy”) Weiler confirms the pledge he made to Congress at his confirmation hearing “to decide all matters in an impartial manner, by applying the facts before me to the relevant provisions of the tax code and by also looking to controlling precedent.”

So he offers his aid to IRS counsel and to the Sods (a rather unfortunate moniker, obviously chosen by one happily unacquainted with coarse UK colloquialisms).

“The Court has identified these cases as possible conservation easement cases or syndicated conservation easement cases, and the Court is inclined to assist with the potential resolution of some or all issues in the case without the need for a trial.” Order, at p. 1.

Realizing that some words of the late President Reagan have lately become politically inflammatory internationally, I hesitate to quote any in this nonpolitical blog, but I respectfully suggest that counsels for both sides weigh each word of their responses to Judge Speedy Weiler’s following directive.

The parties shall meet and file a joint status report stating “(1) whether the parties have met and conferred, either in person or by telephone, to discuss the issues in dispute or alternatively whether this case remains under the IRS Independent Office of Appeals’ jurisdiction (Appeals); (2) should this case not remain with Appeals, the parties are to also address and inform the Court of the following: a. the specific issues in dispute, b. the efforts that the parties have undertaken or plan to undertake to settle this matter, c. whether this case is related to or analogous to one or more cases pending before this Court (or the United States Court of Appeals) and is therefore a good candidate for an agreement to abide or consolidation, and d. whether either party plans to file any pretrial or dispositive motion(s) and, if so, the nature of such motion(s).” Order, at p. 1.

And let the parties file a stip of settled issues, dealing with, inter alia (as my expensive colleagues would say) Boss Hossery and the usual Section 170 Dixieland Boondockery stuff.

Moreover, if all y’all (I’m getting ready for next month’s trip to TX) ask nicely, Judge Speedy Weiler will host a pretrial conference, be the same face-to-face or Zoomiegram, as the parties desire.

Apache Corporation and Subsidiaries, 165 T.C.11, filed 11/13/25, have an esoteric question for Judge Emin (“Eminent”) Toro, whose opinion garners some fifteen (count ’em, fifteen) adherents, one concurrence, and a split decision from Judge James S. (“Big Jim”) Halpern.

Seems the Apaches had to bat clean-up in what my Texan relatives call th’awl bidniz, giving the Apaches a Section 172(f)(1) specified liability loss. Rather than the straight two-back-twenty-forward NOL, the lucky (?) holder of a SLL gets a ten-year carryback.

The Apaches also have a regular NOL they want to carry forward, so they filed an election to forego the two-year carryback for the regular NOL per Section 172(b)(3) and Reg. Section 1.1502-21(b)(3).

Except.

The Apaches specifically state they’re waiving nothing as to the SLL and take the ten-year carryback. They also stip with IRS that they’re not claiming the SLL’s sibling product liability loss carryback.

IRS says it’s all or nothing.  Waive two means waive ten.

Negatory, says Judge Eminent Toro.

There are various NOL carrybacks differing from the general 2-back-20-forward, like some individual casualty and disaster losses, or farming losses. But the whole loss gets carried back to the earliest year of the permitted cycle, unless carryback is elected out. SLLs, however, can be elected back into the 2-back-20-forward régime. Section 172(b)(5) also provides that an SLL can be treated as a separate NOL after the regular SOL has been taken into account for the relevant year.

Clear? Thought not.

But Judge Eminent Toro does an adroit dictionary chaw, coming up with separate periods of time for each enumerated NOL. Yes, NOLs are unitary, one per taxpayer, but its components may permit utilization thereof in more than one timeframe.

“Reading section 172(b)(3) as providing a taxpayer with an all or nothing election—relinquish each and every one of the periods set out in section 172(b)(1) or be stuck with all of them—makes little sense given the number of different carryback periods set out in section 172(b)(1). It also makes little sense in view of Congress’s going out of its way to give taxpayers additional choices when it comes to specified liability losses, see I.R.C. § 172(f)(6), eligible losses, see I.R.C. § 172(b)(1)(E)(iv), and farming losses, see I.R.C. § 172(h)(2).10 The Government itself recognized as much when interpreting a prior version of the statute.” 165 T. C.11, at p. 15.

And IRS has treated product liability NOLs separately from the general NOL. No reason to treat clean-ups differently. Likewise, in close calls, taxpayer wins.

As for the partial dissent, whatever the previous incarnation of this statute said, the current version is the law. Summary J for the Apaches.

Judge Ronald L. (:”Ingenuity”) Buch concurs, simply because of the tie-breaker. Where either the split or the all-or-nothing approach is equally plausible, taxpayer wins.

Judge Big Jim Halpern says even if he buys the idea of separate carrybacks for pieces of NOLs (which he doesn’t), he doesn’t buy waiving some and keeping others.

“The relevant policy question is whether a taxpayer with an NOL that includes an SLL should be able to have its cake and eat it, too, by carrying its SLL back ten years while forgoing the carryback of the rest of its NOL and thereby avoiding the displacement of other tax attributes generated in the more recent years. I agree that there may be no compelling reason to require the taxpayer to give up the carryback of its SLL as the price of preserving the tax attributes that would be displaced by the carryback of the rest of the taxpayer’s NOL. But I am also unaware of a strong policy reason to allow selective carryback waivers. The stated reason for the carryback waiver in the first place would be achieved by either a selective or an all-or-nothing waiver election.” 165 T. C.11, at p. 35.

So neither aside should get summary J, and Apache should either carryback two and ten, or carryforward everything for twenty.

Taishoff says, here comes the appeal.