Kelly M. Strieby bought into Solar Farm, a box-checked LL run by Charles (“Good-Time Charlie”) Kirkland. IRS wants to introduce the plea Charlie took in USDCWDWA in January, 2023, that got him nine (count ’em, nine) years hard. Kelly’s trusty attorney says unfair prejudice, but Judge Rose E. (“Cracklin'”) Jenkins says probative value outweighs prejudice, as no jury to mislead, and maybe she won’t give too much weight to IRS’ press releases.

The Solar Farm deal was a first-class roundy-round. Charlie claimed Section 48 credits that he sold to highrollers, except the highrollers had to give back to Charlie whatever credits exceeded their taxable income. Problem was, Kelly didn’t materially participate, so Section 469(d)(2) relegates the write-offs Charlie sold him to offset passive income, except Kelly didn’t have any.

Kelly’s trusty attorney, whom I’ll call John L. and to whom I’ll give a Taishoff “Good Try, third class” claims Section 48 credits aren’t part of the Section 469 passivities.

“…respondent argues that section 469 precludes Petitioners from claiming credits determined under section 48 with respect to Solar Farm. Petitioners counter that section 469 does not apply with respect to section 48 credits. According to Petitioners, because the definition of passive activity credit references credits allowable under subpart B or subpart D of part IV of subchapter A, see § 469(d)(2), the fact that section 48 appears in subpart E of part IV of subchapter A means that section 48 credits are not subject to section 469. However…, the energy credit determined under section 48 is a component of the investment credit under section 46, which is itself a component of the general business credit under section 38. Section 48 sets forth rules for determining the energy credit, but, contrary to Petitioners’ argument, does not itself allow any credit. Rather, the amount determined under section 48 and included in the amounts under section 46, and thus section 38, is allowable only under section 38. Because section 38 is in subpart D of part IV of subchapter A, the section 48 energy credit is a credit allowable under that subpart, and, accordingly, potentially, a passive activity credit. See § 469(d)(2)(A)(i).” T. C. Memo. 2025-28, at pp. 8-9.

For background, see my blogpost “Sittin’ in the Mornin’ Sun,” 4/10/12.”

John L. tries Rev. Rul. 2010-16, 2010-26 I.R.B. 769, but that only applies to Section 45D.

“…the focus in the Revenue Ruling is driven by the particular provisions of section 45D, which determines a credit for a taxpayer’s qualified equity investment in a qualified community development entity (CDE). Because the section 45D credit relates to an investment in a CDE, an entity which might itself be engaged in a trade or business, Revenue Ruling 2010-16 indicates that the trade or business of the CDE is irrelevant. It further explains that the inquiry under section 469 relates to whether the taxpayer investing in the CDE does so in connection with a trade or business.” T. C. Memo. 2025-28, at p, 10.

Solar Farm’s premise is that it is an activity engaged in sale of solar products. Kelly didn’t participate in that. Investment is passive, and so are the tax credits he bought from Good-Time Charlie.

And there are chops, the 20% five-and-dime variety.

The case is Kelly M. Strieby and Jan E. Sharon-Strieby, T. C. Memo. 2025-28, filed 4/3/25.

IRS wants to include testimony from the trial of Albert S. N. Hee from USDCDHI, when Al took a 46-month fall. “Hee used his company to pay approximately $2.9 million of his personal expenses,” alleged DOJ.

But Judge Christian N. (“Speedy”) Weiler likes it live.

“Federal Courts strong preference for live, in-person testimony has a long pedigree.” Order, at p. 2. And Judge Speedy Weiler has the somber reasoning and copious citation of precedent to back that up.

Likewise Al’s nearest and dearest, alleged partakers of his largesse (at our expense), weren’t parties to the litigation that sent Al down, and they’re available to testify on the trial in Tax Court. Likewise, it’s unclear whether any are authorized to bind Al’s corporation and thereby bind Al.

Only one motion in limine succeeds to let in prior trial testimony, as one witness is dead and the other seriously ill, hence both unavailable.

For the rest, go try the case. Object to whatever you don’t like.

Btw, the case is Albert S.N. Hee & Wendy R. Hee, et al., Docket No. 24068-22, filed 4/2/25.

Whether it was Ben Franklin or some earlier sage who first said it, the sad tale of Jon M. Beachey, Docket No. 20625-23, filed 4/1/25, is no April Fool’s joke.

Jon’s ex-wife died, and it fell to him to pay for her funeral. He took a $15K IRA draw in year at issue and rolled all but $1K thereof into a new IRA the following year, well beyond the 60-day safe harbor. Jon didn’t report the draw, claiming it was a loan he repaid.

Judge Nega is sympathetic (who wouldn’t be?), but the IRC is immutable and unforgiving.

“Section 408 includes exceptions for rollover distributions, transfers incident to divorce, and distributions for charitable purposes. Sec. 408(d)(3), (6),(8). There is no exception for petitioner’s circumstances. See Adams v. Commissioner, T.C. Memo. 2015-162 at *8 (“There is no exception for distributions used to defray ordinary living expenses following the loss of a job or other misfortune.”)

“In fact, there is no exception whatsoever for loans taken from IRAs. Patrick v. Commissioner, T.C. Memo. 1998-30 n.8, aff’d without published op., 181 F.3d 103 (6th Cir. 1999). If such a loan were made, the IRA will lose its exemption and all assets would be deemed distributed. Id.; Sec. 408(e)(1) and (2).” Transcript, at pp. 5-6.

And of course Jon blew the rollover exception. And was under age 59-1/2 in year at issue.

Death and taxes are inevitable and painful.

Shelby County, AL, is just awash with limestone, and highrollers looking for write-offs hastened to join in. Only instead of quarrying, they bought into SCEs. Judge Albert G. (“Scholar Al”) has a full-dress T. C. deconstructing valuation.

The bottom line is that no one pays the entire worth of a going business for a place to put it, when they still have to pay start-up and development costs to get it going.

Ranch Springs, LLC, Ranch Springs Investors, LLC, Tax Matters Partner, 164 T. C. 6, filed 3/31/25, boils down to two propositions.

“No rational buyer with knowledge of all relevant facts would pay, for one asset needed to operate a business, the entire future value of the business.” 164 T. C. 6, at p. 3.

“At the end of the day, petitioner’s position appears to rest on its assertion that the ‘willing buyer/willing seller’ test, which governs the valuation of property for charitable contribution purposes generally, does not apply when the donated property is a conservation easement. Petitioner cites no judicial precedent or other authority to support this novel proposition. There is none.” 164 T. C. 6, at pp. 62-63.

Once again, we have the classic Dixieland Boondockery. “The value Ranch Springs claimed for the easement on its [year at issue] return was $25,814,000. We have determined that the value of the easement on the valuation date was only $335,500. The claimed value thus exceeded the correct value by $25,478,500 or 7,694%. The valuation misstatement was thus ‘gross.’” 164 T. C. 6, at p. 65.

Whether Congress or the Supremes take the laboring oar is immaterial; it’s time to settle at the top level the question of equitable tolling in deficiency cases. Afsoun Naderi, Docket No. 19045-24, filed 3/28/25 is a month late with his petition, claiming his “late filing resulted from a non-willful clerical mistake and not deliberate noncompliance with the law.” Order, at p. 2.

Taishoff says it sounds a wee bit thin for equitable tolling, but that’s for the Court to decide, if Culp o’ercrows Hallmark Research Collective and Organic Cannabis Found. So far only Tax Court and 3 Cir have spoken, and the Supremes have ducked..

The Supremes having given us Boechler, P. C., the onlie begetter of this silt-stir, perhaps they should bring some discipline here.

Meantime, Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan once again tells the story.

“In support of his argument, petitioner cites the decision of the U.S. Supreme Court in Boechler, P.C. v. Commissioner, 596 U.S. 199 (2022), and that of the U.S. Court of Appeals for the Third Circuit in Culp v. Commissioner, 75 F.4th 196, 205 (3d Cir. 2023), cert. denied, 144 S.Ct. 2685 (2024). Petitioner’s reliance on Boechler is misplaced. Boechler was a collection due process case involving our jurisdiction under I.R.C. section 6330(d)(1). However, this is a deficiency case, and our jurisdiction in such cases is governed by I.R.C. section 6213(a). See Hallmark Rsch. Collective, 159 T.C. at 165–66 (concluding that the Supreme Court’s reasoning in Boechler does not apply to the 90–day period of section 6213(a)). Although the Third Circuit reached a different conclusion in Culp, 75 F.4th at 205 (holding that the deficiency deadline under section 6213(a) is nonjurisdictional), this case is presumably appealable to the U.S. Court of Appeals for the Ninth Circuit, see I.R.C. § 7482(b)(1). As noted above, the Ninth Circuit has held that the deficiency deadline is jurisdictional. See Organic Cannabis Found., LLC, 962 F.3d at 1092. Furthermore, in Sanders, 161 T.C. at 119, this Court thoroughly examined the Culp decision and held that we will continue treating the deficiency deadline as jurisdictional in cases appealable outside the Third Circuit. Accordingly, petitioner is not entitled to equitable tolling in this case.” Order, at p. 2.

Absoun’s claims of selective enforcement and governmental retaliation “cannot be considered at this stage of this litigation.” Order, at p. 2. Presumably Absoun can try these in a refund suit.

I rely on my readers to keep my reportage accurate; where I stray, I invite my readers to use the “comment” function that WordPress obligingly inserts at the foot of each of my blogposts. I read them all. Just skip down below the advertisements.

Please do not contact me by email; I cannot assure compliance with the rules that constrain me. Both the IRS and the EU data and privacy protection rules require me to maintain online security far above my means and above those employed even by the most senior defense and intelligence officials of our government.

All that said, I count three (count ’em, three) separate warnings from ex-Ch J Maurice B. (“Mighty Mo”) Foley to Theya Kanagaratnam, Docket No. 15922-23, filed 3/27/25 (that date marks my Year 58 in the NYS Bar; still crazy after all these years). The warnings involved Theya’s “wages-aren’t-taxable-income” frivolities, asserted at motion and trial stages.

“Petitioner raises several frivolous contentions that, in essence, challenge the taxability of her wages. The Court admonished petitioner several times. Despite these warnings, petitioner continued to file documents that presented frivolous contentions. Petitioner does not contest receiving the unreported wages paid to her from her employer. Petitioner’s contentions on whether those wages are taxable are “contrary to established law and unsupported by a reasoned, colorable argument for change in the law.” See Wnuck, 136 T.C. at 513 n.14 (quoting Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir.1986)). Accordingly, petitioner is liable for a section 6673(a) penalty.” Order, at p. 3.

So ex-Ch J Mighty Mo lays a $5K Section 6673 chop on Theya. By my arithmetic, that works out to $1666.67 per ignored frivolity warning.

For latecomers, the Scott Wnuck story can be found in my blogpost “One’ll Get You Five,” 5/31/11.

I’ve told this story before, but it needs repeating in the case of Eric J. Geppert & Mary L. Geppert, Docket No. 946-20L, filed 3/26/25. No dispute as to tax owed. Judge Alina I. (“AIM”) Marshall remands to Appeals because the SO’s analysis, prepared in August, 2019, failed to take into account the anticipated end to certain insurance payments to Eric in 2020, and possible termination of his employment due to corporate restructuring.

Why it has taken more than five (count ’em, five) years to begin to ascertain the occurrence of events that certainly happened (or did not happen) within fewer than five years of the flawed analysis eludes me. A subpoena to insurers and employer would have yielded a response that might have elicited answers. Interest has been accruing on the tax debt. Has this delay improved the chances of collection of any or all of the tax admittedly due (to say nothing of interest)?

Take a quick peek at the order and the docket, and draw whatever conclusions you will. Or better yet, read my blogposts “When Lawyers Get Involved,” 1/20/22,  and “They Should Read My Blog,” 6/7/23.

There’s the old story of the two sailors on a life raft in World War II, after their ship had been torpedoed. One says to the other, “Could have saved ourselves a lot of trouble if we’d jumped overboard the first night out.”

That’s Ch J-elect Patrick J. (“Scholar Pat”) Urda’s advice to David Nwafor, T. C. Memo. 2025-27, filed 3/26/25. But if Dave nevertheless and notwithstanding the foregoing chooses to do so, let him not take a “returns and allowances” deduction for his self-deducted reduction in his bills for engineering services, especially when he never credited or refunded the self-deductions to his clients.

“To stay competitive, Mr. Nwafor applied a flat discount to [Dave’s box-checked LLC]’s prices for ‘engineering service[s]’ at the beginning of both [years at issue]. Specifically, [Dave’s box-checked LLC] lowered its prices (from those Mr. Nwafor ostensibly first contemplated for each year) by 11% in [Year On] and 6.5% in [Year Two]. These price adjustments were internal, and [Dave’s box-checked LLC]’s customers were unaware that they were being charged a lower rate.”  T. C. Memo. 2025-27, at p. 3.

Ch J-elect Scholar Pat is not amused.

“Mr. Nwafor is not entitled to reduce [Dave’s box-checked LLC]’s gross sales by either the general discounts or the customer-specific allowances claimed. As to the former, Mr. Nwafor testified that he applied ‘discounts’ at the beginning of the year when setting the rate for [Dave’s box-checked LLC]’s services for the year. As we understand it, he decided upon prices that seemed attractive, even if they were less than what he believed [Dave’s box-checked LLC]’s work to be truly worth. The discounts thus were already incorporated in the lower sale prices charged just as if [Dave’s box-checked LLC] had charged the higher rate and then applied, for each customer, returns and allowances. No netting thus is required.

“Mr. Nwafor likewise fails to show that he is entitled to reduce [Dave’s box-checked LLC]’s gross sales by customer-specific discounts. Mr. Nwafor did not testify as to the amounts of any such discounts and did not offer any substantiation whatsoever. And our review of the total amounts of returns and allowances, combined with Mr. Nwafor’s testimony regarding the generalized discounts, leaves us with considerable doubt whether any customer-specific discounts were reported.” T. C. Memo. 2025-27, at p. 10.

A business can net returns and allowances when it has been paid (or accrued) list price, but has had to credit or refund all or part thereof in same year. But Dave’s returns and allowances existed only in his mind.

Dave also tried to deduct the value of his labor in devising a computer program to aid his engineering. That’s the old protester “basis in own labor” dodge. Of course, if Dave picked up the worth of his labor as income, then the “paid or accrued expense” leg of Section 162 would save the deduction. Except he didn’t.

The rest is the usual expenses unsubstantiated or paid in wrong year.

Just the other day Genesis 2:24 featured in this my blog; see my blogpost “‘One Flesh,” Two Parties,” 3/18/25. And here it is again, Gina Jaha, T. C. Memo. 2025-26, filed 3/25/25, although the main event is hubby Bob Anderson’s trust-and-controlled-corporation cash siphon, which you can read for yourself.

Gina and Bob hadn’t filed for six (count ’em, six) years, of which five are at issue via SFRs. The SND resulting therefrom treated Bob and Gina as MFS. At Exam, their trusty CPA (more about him later) tendered the RA 1040 MFJs for three of said years at issue, but the RA never filed them with the Service Center.

Bob and Gina petition their MFS status, claiming they should be MFJ.

Judge Tamara W. Ashford: “Married taxpayers generally may elect to file a joint return for a taxable year although their right to do so may be limited after either spouse has filed a separate return. See §6013(a) and (b). After the filing of a separate return, a joint filing status election is generally prohibited if either spouse has timely filed a petition for redetermination of a deficiency. § 6013(b)(2)(B). Nevertheless, where, as here, the return electing separate filing status is an SFR filed by the IRS, the taxpayer may still elect joint filing status by filing a joint return with his or her spouse before the case is submitted for decision.” T. C. Memo. 2025-26, at p. 7.

Except.

“A return is deemed filed only if it has been submitted in the manner specified by regulation, or if it is at least eventually received by the appropriate person or office. Individual income tax returns generally must be filed with an assigned person in the taxpayer’s local IRS office or with a designated service center. Treas. Reg. § 1.6091-2(a)(1), (c), (d). Submitting a return to an IRS employee who has not been assigned to receive it, such as a revenue agent or respondent’s counsel, is generally insufficient.

“The record fails to establish that petitioners properly elected joint filing status. No party contends that petitioners filed their returns for the years at issue in the manner specified by regulation, that any of the IRS’s employees forwarded them to the appropriate person or office for filing, or that the IRS actually filed any of the returns.” T. C. Memo. 2025-26, at p. 8. (Citation omitted).

Bob’s and Gina’s trusty CPA may have been here before; see my blogpost “An Accurate Prediction,” 3/13/24.

Judge Nega assumes the mantle of Judge Robert (“TNP = Take No Prisoners”)* Goeke in Genie R. Jones, et al., T. C. Memo. 2025-25, filed 3/25/25. It’s another microcaptive insurance pool case, with the usual dodges (sketchy actuarial analysis, shoddily-drafted policies, nonexistent underwriting, circular flow of premium money, made-as-instructed premiums). Topping it off is an unsecured loan to principal of the insured, which doesn’t get paid back until years after due date and after principal has sold the insured but kept the microcaptive alive.

There’s fifty (count ’em, fifty) pages wherein Judge Nega massacres the captive; all the usual suspects are cited (Rent-A-Center, Syzygy, Keating, Avrahami, Caylor Land, Reserve Mech.). Even the headline first above set forth at the head hereof (as my expensive colleagues would say) gets used. T. C. Memo. 2025-25, at p. 31, footnote 18.

But it’s a footnote that takes this case out of the “much of a muchness” class. IRS wants nondisclosed want-of-economic-substance enhanced chop.

“The Court has yet to decide whether the transactions in a microcaptive case lacked economic substance within the meaning of section 7701(o)(1). Nor has the Court addressed whether a taxpayer ‘adequately disclosed’ a microcaptive transaction. In the recent microcaptive cases where these questions were unavoidable, the Court deferred ruling on the matter to request and duly consider additional briefing on the applicability of section 7701(o). See Patel v. Commissioner, T.C. Memo. 2024-34, at *3 n.5; see also Royalty Mgmt. Ins. Co. v. Commissioner, T.C. Memo. 2024-87, at *54. We will, therefore, address respondent’s penalty determinations in a separate opinion.” T. C. Memo. 2025-25, at p. 5, footnote 4 (carryover from p. 4).

I hope that gets a full-dress T. C. because the statutory reconstruction of the economic substance doctrine is a puzzlement.

* https://taishofflaw.com/2018/12/27/not-so-judge-robert-tnp-goeke/