Four (count ’em, four) T. C. Memo.s today, but two are consolidateds (mother and son used car dealers). Not a lot new here, so I’ll be brief.

Hani G. Ataya, T. C. Memo. 2025-55, filed 6/4/25, is consolidated with Mom Inaam Ataya; Mom was a real estate broker “and holds a bachelor’s degree in information systems. She previously worked for California’s Employment Development Department, which oversees collection of payroll taxes in the state.” T. C. Memo. 2025-55, at pp. 2-3. Hani never finished college, but had years of running used car businesses, buying at auction and reselling. Mom and Hani ran the C Corp used car operation. After stiping out the unreported dividends and unjustified deductions, the issue is good faith reliance on experts to defeat the 6662(a) and (b)(1) accuracy and negligence chops.

Judge Kashi (“My or the High”) Way isn’t buying the Atayas’ tale of CA seizing whatever part of their records they hadn’t lost, which seizure took place when the Atayas shut down the C Corp. “First, the deficiencies in these cases have been settled under Rule 91(e). Petitioners cannot now, after trial, circumvent the conclusive admissions in their jointly filed Stipulation of Settled Issues. Additionally, petitioners have not had entered into evidence or otherwise adequately shown that their corporate records were seized by California. While the Court accepts the stipulation that the bulk of [C Corp]’s records have been lost, the Court cannot find that California has interfered with their ability to litigate these cases.” T. C. Memo. 2025-55, at p. 8. (Citation omitted). Besides, Hani was an experienced businessman and Mom had been exposed to taxes. There’s no evidence of the qualifications of the attorney and bookkeepers they used or upon what advice they relied.

Judge Travis A. (“Tag”) Greaves doesn’t show the Section 6673 yellow card several times without consequences. Michael Austin French and Dawn Michelle French, T. C. Memo. 2025-57, filed 6/4/25, repeatedly asserted frivolous arguments both in pretrial proceedings and at trial, despite warnings from IRS counsel and Judge Tag Greaves.

“Given the public policy interest in deterring abuse and waste of judicial resources, the Court is given considerable latitude in determining whether to impose a penalty under section 6673 and in what amount. As we have found, petitioners’ arguments are frivolous and have been consistently rejected by courts. Throughout the pretrial proceedings, petitioners repeatedly asserted these arguments in various filings, motions, and hearings despite warnings that they risked a section 6673 penalty. This Court specifically warned petitioners of the possible imposition of a section 6673 penalty at the motion hearing… and at the start of the … trial session. Respondent also put petitioners on notice and cautioned them that their behavior could warrant a penalty imposed by this Court. Nevertheless, they repeated the same frivolous arguments and continued to advance them at trial, wasting the Court’s and respondent’s time and other resources. As a result, we will require petitioners to pay a section 6673 penalty of $1,000. We warn petitioners that they risk a much more severe penalty if they advance frivolous positions in any future appearance before this Court.” T. C. Memo. 2025-57, at pp. 6-7. (Citations omitted).

The one story which evokes some sympathy is Joanne A. Horsham, T. C. Memo. 2025-56, filed 6/4/25. Joanne gets two different stories from IRS about the NFTLs she got for the three (count ’em, three) years’ worth of reported but unpaid taxes. The SO at Appeals told her that, although her IA was accepted, NFTLs would be filed for all years; Joanne says she doesn’t remember that. Especially since another IRS employee (at a call center; how she got through must be quite a tale) told her that since her unpaid balance was then below $50K, there would be no liens, although the liens had already been filed. The explanation may be found in a footnote from Judge Albert G. (“Scholar Al”) Lauber: “In her Response to the [IRS summary J] Motion petitioner urges that ‘the left hand of the IRS did not know what the right hand was doing.’ The communication problem may have arisen because the Form 668(Y)(c) was prepared on… the same day that petitioner submitted her IA. The SO noted in her case activity record that the call site employee with whom petitioner spoke “could not see [the NFTL request] at that time” because that employee “does not have access to the system that the offer examiner works on.”” T. C. Memo. 2025-56, at p. 7, footnote 3.

Anyway, if Joanne keeps paying on the IA, she’ll be down below $25K by year-end, so the liens may go away even if she can’t prove how they hurt her.

Local radioheads and sports fans in and around this Minor Outlying Island off the Coast of North America will hardly need me to remind them of that signature halloo, which echoed around these parts for nigh on twenty years.

But Marc Lore and Carolyn Lore, Docket No. 8259-23, filed 6/3/25, reject that call and raise a squawk when IRS tries to introduce a videotape from CNBC’s Wall Street morning report thus entitled. Marc and Doug McMillon did an interview thereon, wherein they discussed the transaction at issue. IRS wants to show Marc’s and Doug’s state-of-mind.

Marc’s trusty attorneys yell hearsay. Judge Courtney D. (“CD”) Jones clears the objections shortly.

Admission against interest, FRE 801(d)(2). Anything you say will be taken down and used…but you know the rest. When the mike is thrust before you, the urge to gab is your worst enemy.

The tape was edited, hence inaccurate. Rule of completeness: “… although the rule of completeness allows the opposing party to introduce the remainder of a document or video without additional foundation, the rule does not prohibit the admission of incomplete documents. Thus, even if the video footage is edited, the rule of completeness is inapplicable at this stage of the proceedings and would not prohibit introduction of an edited video clip.” Order, at p. 2. (Citations omitted). In short, IRS can put in the edited tape, and Marc can put in the whole one.

Finally, the tape will show Doug McMillon’s state of mind, not the truth of what he or Marc said. FRE 803(3) lets proponent show intent, plan or motive.

As Doug McMillon (a/k/a Doug McBillion) is President and CEO of Walmart, this must be quite a deal. Seems the deficiencies for the two years at issue come to $15,656,849 and $6,946,309 respectively. Plus chops, of course.

Judge Goeke dismisses the attempt to boost the valuation of an abandoned granite quarry by speculating on its future business operations by an owner with no expertise and no track record in Beaverdam Creek Holdings, LLC, Beaverdam Creek Investors, LLC, Tax Matters Partner, T. C. Memo. 2025-53, filed 6/2/25. There are enough sales of abandoned and active granite quarries in the Elberton Granite area batholith so that comparable sales indicate that the Beaverdamers overvalued the “before” while stipulating to a minimal “after” enough to earn a Section 6662(h) 40% overvaluation chop.

The problem with discounted cash flow (DCF) is that it values the worth of a business rather than the land whereon the business stands. Even if the land has valuable stuff beneath, it still takes equipment, people, capital, and knowhow to realize the same. The Beaverdamers had none thereof. And this was a classical Dixieland Boondockery.

The Beaverdamers bought the land from a little old lady who had to sell to pay off her late sister’s mortgage (she was ex’r). But little old lady had local lawyer. Judge Goeke says neither of them was a fool, T. C. Memo. 2025-53, at p. 62. And at close of  play, he finds the number paid them wasn’t so far off the FMV.

And the Beaverdamers’ numbers were incredible.

“BC Investors erroneously equated the (overstated) value of a hypothetical business to the fair market value of the easement property. Respondent advocated use of the comparable sales method, but his experts could have included more information regarding quarry/granite features in their comparable sales data. Considering the evidence, we value the easement property on the basis of our own examination of the record. We rely on the comparable sales method and [little old lady]’s effective sale of the easement property for $225,052 during 2017, as support for our conclusion that the before value of the easement property was $300,000.” T. C. Memo. 2025-53, at pp. 56-57.

If taking GA for granite rocks your socks, Judge Goeke’s decision is a must-read.

Judge Courtney (“CD”) Jones goes round about to toss a motion for reconsideration (Rule 162) in Pamela Moretti, Petitioner, and John C. Moretti, Intervenor, Docket No. 5983024, filed 6/2/25.

Judge CD Jones discusses Rule 162 (discretion, but. no guidelines) and FRCP 60 (a showing of unusual circumstances or substantial error, such as mistake, inadvertence, surprise, excusable neglect, newly discovered evidence, fraud, or other reason justifying relief). Pam’s motion to vacate the stiped decision flunks all Judge CD Jones’ tests, applied with somber reasoning and copious citation of precedent.

Taishoff says what I don’t understand is that, if this is a stipulation, why not apply straight contract rules. Stipulations can be set aside only as a contract would be set aside. Of course, setting aside decisions invokes an even stricter standard. All Pam has is unilateral mistake, which is a nonstarter even under contract law.

“In the Motion, Ms. Moretti argues that “this Court erred as a matter of fact and as a matter of law” by entering the PSD [Proposed Stipulated Decision] submitted by the parties because the Court failed to consider ‘Petitioner’s claim for allocation of the existing credit balance of $138,877.12.’ Notably, Ms. Moretti continues to be represented by the same attorney who signed the Settlement Stipulation and PSD on her behalf.” Order, at p. 1.

I point out Pam’s trusty attorney, whom I’ll call YY, comes from a LITC. If Pam is truly broke, she may have no real choice of counsel. That said, “any purported mistake falls squarely at the feet of Ms. Moretti, not the Court.” Order, at p. 2.

YY may get The Phone Call. No good deed…but you know the rest.

That’s my view of Judge Travis A. (“Tag”) Greaves when it comes to deciding what’s a trust and what’s a foreign trust for Federal tax purposes. Judge Tag Greaves has a lot to say, all of it to the point, in Raju J. Mukhi, Docket No. 4329-22L, filed 5/30/25.

Raj’s trusty attorneys, whom I’ll call the Boxers and who show the fighting spirit of their namesakes, claim the offshore trust, yclept Sukhmani Gurkukh Nivas Foundation, which IRS alleges Raj ran, is a sham. Hence questions of fact, wherewith to stymie IRS’ motion for partial summary J that same is a foreign grantor trust and that the Section 6677 nonreportage chops were correctly computed.

Word to IRS: remember lawyers can’t add, and judges don’t like to. I don’t suggest asking a judge to do arithmetic or even enunciate mathematical principles.

Anyway, Judge Tag Greaves explains in subatomic detail why deciding what is a trust, and what is a foreign trust, for tax purposes are both fact-intensive.

“The four elements of a trust for federal tax purposes are (1) a grantor, (2) a trustee that takes title to property for the purpose of protecting or conserving it, (3) property, and (4) designated beneficiaries. See Treas. Reg. § 301.7701-4(a). Generally, we review the organizing documents to make these determinations.” Order, at p. 2. (Citation omitted.)

Except no one has put in, or sdtiped, the organizing documents into evidence. And even if the organizing documents were bulletproof, they’re meaningless if their effects on the parties’ actions don’t move the needle.

“In deciding whether to disregard a trust for federal income tax purposes, the Court considers four factors: (1) whether the taxpayer’s relationship to the property transferred to the trust materially changed after the trust’s creation; (2) whether the trust has an independent trustee; (3) whether an economic interest passed to other trust beneficiaries; and (4) whether the taxpayer feels bound by the restrictions imposed by the trust agreement or the law of trusts. In the event that a taxpayer seeks to disavow the form of the transaction, that taxpayer is held to an additional burden to show that the form of the transaction was not chosen for the purpose of obtaining tax benefits that are inconsistent with those the taxpayer seeks through disregarding that form.” Order, at pp. 2-3. (Citations omitted).

OK, but even if it is a trust, is if foreign?

“If a trust exists for federal income tax purposes, a taxpayer will only have a reporting obligation under section 6048 if the trust is a foreign trust and the taxpayer is the grantor or transferor of the trust. See § 6048(a)(3)(A) and (4). A foreign trust is ‘any trust other than a trust’ that is a ‘United States person’ (i.e., a domestic trust). See § 7701(a)(30)(E) and (31)(B); Treas. Reg. § 301.7701-7(a)(2). A trust is domestic if (1) ‘[a] court within the United States is able to exercise primary supervision over the administration of the trust’ and (2) ‘[o]ne or more United States persons have the authority to control all substantial decisions of the trust’. Treas. Reg. § 301.7701-7(a)(1). Failure to satisfy either test will result in the trust’s being deemed a foreign trust for federal tax purposes. See id. subpara. (2).

“Finally, a person may be deemed the grantor of a trust under the grantor trust rules of sections 671 through 679. See § 6048(b)(1). Section 679(a) provides that any United States person who directly or indirectly transfers property to a foreign trust shall be treated as the owner for his taxable year of the portion of the trust attributable to that property if for the year there is a United States beneficiary of any portion of the trust.” Order, at p. 3.

Here IRS is playing with few cards, some bank records and a couple trustee resolutions (hi, Judge Holmes). Not enough to tell if the trust is or what the trust is. As for disavowing the trust form of ownership, insufficient before-and-after evidence. Does disavowal move the tax needle? If not, who cares?

Hence no need for Judge Tag Greaves to do the numbers. Did I mention that lawyers can’t add and judges don’t like to?

The Boxers are ahead on points this round.

The latest hotflash from Vic’s Place: “DAWSON will be offline for maintenance beginning at 4PM Eastern on Saturday, May 31st until the morning of Sunday June 1st.” 

Though Rule 25(a)(1)(C) excludes this downtime from the filing cutoffs, get those buzzer-beaters ready and send ’em up.

We dirt lawyers get as much friends-and-family as anyone else in the profession: “We need a simple deed for a gift.” Grab a boilerplate form, get the names, copy-and-paste a metes-and-bounds, fill in the online-fillable transfer tax docs, and send it to the County Clerk. OK for almost all.

But when the tax lawyers who don’t do conveyancing tell their clients to have the local dirt guy do it, or try to DIY, you get stuff like William P. Wells and Ruth E. Wells, Docket No. 13104-24, filed 5/29/25 (to end Palindrome Week).

Judge Christian N. (“Speedy”) Weiler has this charitable gift deduction case, which, mirabile dictù, is neither façade nor conservation, but a straight-out fee simple.

Bill and Ruth get partial summary J for qualified appraisal, even though said appraiser left his TIN off the written appraisal and the Form 8283; substantial compliance saves.

But the CWA is dubious, and thereby hangs the cliché.

CWA is strict-rules, no substantial compliance. But CWA need not be in any particular form, and documents can be read together to comply. What Bill and Ruth have is (1) the Form 8283, (2) Bill’s letter to the 501(c)(3) identifying the property, stating the appraised worth, and enclosing the quitclaim deed, (3) the handwritten reply from 501(c)(3) thanking Bill and Ruth for the gift and acknowledging the appraised worth, and (4) the deed.

Of course the acknowledgment letter is a nonstarter as it flunks most of the Section 170(f)(8)(B) tests. But how about the deed?

“Looking to the Quitclaim Deed, we acknowledge the language is favorable to petitioners, since it provides consideration of only ‘ten dollars’ and lacks language such as ‘other good and valuable consideration.’ The Quitclaim Deed, however, also references a special warranty deed, or deed of gift, which contains the legal description of the property transferred and states the transfer was made in ‘consideration of the sum of ten dollars, cash paid in hand, and other good and valuable consideration.’ We find this language to be internally inconsistent. We also acknowledge how the Quitclaim Deed is merely that, a document conveying title and signed by petitioner.

“Both parties have filed a motion for partial summary judgment on petitioners’ compliance with the CWA requirements found under section 170(f)(8)(B); which usually causes us to conclude the issue ripe for summary adjudication. After looking to the documents collectively, however, we find the issue of petitioners’ CWA statutory compliance to be a mixed question of law and fact, distinguishable from the foregoing cases. Accordingly, we will decline ruling on the issue until trial and deny the parties respective cross-motions.” Order, at p. 7.

Obviously Judge Speedy Weiler never did any conveyancing either, because I’ll wager that special covenant and warranty deed was referenced to show that what Bill and Ruth conveyed to 501(c)(3) was “being and intended to be the same premises as in SCW Deed dated X from A to B and recorded etc.” It’s standard practice to show that what grantor is conveying now is what grantor got then.

But Judge Speedy Weiler got it right, in that the grantee never signed the Quitclaim Deed. That surely is better practice, even though it’s at least arguable that the acknowledgment letter did serve. See my blogpost “No In Deed,” 3/23/16, wherein I have more to say on this topic, discussing a case cited in Judge Speedy Weiler’s order.

And especially see my blogpost “Yes In Deed,” 7/16/12, wherein I give this warning: “Note to dirt lawyers: Please don’t use boilerplate printed real estate forms for making a conservation easement. The old ‘ten dollars and other good and valuable consideration’ bargain and sale deed form, available at dime-store prices, might be good enough for a routine single-family house sale, but not for a big-time transaction with heavy-duty tax deductions on the table. Read the IRC; draft your language with great care. Have both grantor and grantee sign the deed. Use a proper integration clause. And remember Schrimsher, where somebody’s lawyer used a dime-store form and blew up their client.”

For backstory, see my blogpost “As Such,” 11/28/23. For the outcome of the trial foretold therein, Judge Buch tells the story in Soroban Capital Partners LP, Soroban Capital Partners GP LLC, Tax Matters Partner, T. C. Memo. 2025-52, filed 5/28/25.

Judge Buch dissects the private placement memo and investor due diligence questionnaire for this hedge fund, and finds that the three (count ’em, three) Principals of Soroban were, during years at issue “essential to the operation of the business. Soroban explained to its investors that, if all three Principals were unavailable, the funds would liquidate. Materials provided to investors explain that in the event Mr. M were incapacitated, Messrs. K and F would manage the funds. However, in the event all three Principals were ‘temporarily or permanently absent from overseeing the investment of the assets of the Funds, the Analysts and COO/CFO would manage the liquidation of the Funds.’ But for the three Principals, Soroban would not exist.” T. C. Memo. 2025-52, at p. 13. (Names omitted).

Federal tax law controls, not our broad-spectrum NY  Revised Limited Partnership Act, which, standing the usual law school definition of limited partner on its head, would let the Principals slide under the Section 1402(a)(13) tag. For the Feds, their distributions are SE, not investor returns on capital.

And Too Far Away

When IRS tries the Luke 5:4-8 number on the current CEO of the 501(c)(3) in Ogeechee Plantation Property, LLC, Ogeechee Plantation Manager, LLC, Tax Matters Partner, Docket No. 6585-21, filed 5/27/25 (Happy Palindrome Week!), Judge Mark V. (“Vittorio Emanuele”) Holmes echoes the words of an even higher authority than United States Tax Court, and tells them to go away.

It’s a duces tecum (because current CEO wasn’t CEO when the conservation easement was signed). IRS wants only the documents and an affidavit showing chain of custody.

“The problem is that the documents requested – as part of a trial subpoena for cases set to be tried only about a month after the subpoena was served – are ‘any and all documents relating to conservation easements owned, managed, or supervised by [501(c)(3)] that reflect [any of several types of broadly defined information].’” Order, at p. 1. And IRS wants the stuff for seven (count ’em, seven) years.

“We would be hard-pressed to enforce this kind of ‘any and all’ request to a party months before trial when the easements at issue here were granted in December 2017 and December 2018. This is a fishing expedition seeking not just a few nibbles on carefully baited hooks but entire nets’ full of information. We determine it to be overbroad and burdensome on a third party and will grant the motion to quash.” Order, at p. 1. (Emphasis by the Court).

Likewise Judge Holmes will let the former CEO, who was in command at the time of the easement grant, but who now lives hundreds of miles from trial venue and must care for a small child, to testify remotely. On-the-stand testimony is what Rule 143(b) mandates, but there are exceptions. Whatever would we do without exceptions?

“We don’t doubt the importance of Ms. Q’s testimony – it is at least arguable that the description of the properties on which the easements were placed somehow changed after the time of the donation. But it’s also true that neither party is alleging that Ms. Q or her former employer did the changing. This makes her an important witness, and maybe even a background-facts witness, but not one whose testimony the Court would expect to take very long or be marked by any great deal of the tense cross-examination that makes live testimony so compelling. We think the expected duration of her testimony (based on the Court’s own experience with donee testimony in many other conservation-easement cases) is not long. Forcing her to abandon her parental responsibilities is under the circumstances a good cause and compelling.” Order, at p. 2. (Name omitted).

Tax Court is closed.

History is never closed. Remember always.