Judge Laro’s seemingly unending seminar in advanced Tax Court discovery law and practice looks at the reverse of my earlier blogposts.

This CLE course is the Guidant LLC, f.k.a. Guidant Corporation, and Subsidiaries, Docket No. 5989-11, filed 5/5/16, discovery joust, taking up nine (count ‘em, nine) pages on the Tax Court Docket Search, with no end in sight.

And I’m sure the Tax Court discovery junkies (both of ‘em) are hanging on every word.

IRS wants to depose Dr. John, formerly Boss Vascular Intervenor at Guidant Corp in its pre-LLC iteration.

Dr. John’s current employer, the outfit to which Guidant sold the Intervention squad, objects.

Not for nuthin’, here’s what’s on the table. “These consolidated cases involve proposed adjustments under section 482 for the taxable years 2001 through 2007 totaling over $3 billion, alternative adjustments under sections 367(a) and 367(d), adjustments pertaining to the sale of certain business units to [A], an accuracy-related penalty for substantial understatement of tax under section 6662(b)(2), and other adjustments.” Order, at p. 2. (Name omitted.)

Hey, my fellow counsellors-at-law, if you’re gonna fight about discovery, make sure you get paid.

Even though it’s not A’s party, A is definitely crying if it wants to. Note the Guidant dust-up involves correct valuation of onshore vs offshore assets in the sale of the Vascular Intervenors, and other stuff. Maybe so if Guidant’s valuation goes down, so does A’s, and then A has beaucoup to cry about.

Dr. John’s present boss claims as follows: “One, respondent previously received sufficient information from petitioners and non-party [A]. Two, respondent has interviewed enough former and current employees of Guidant and non-party [A]. Three, non-party [A] agreed to make [Dr. John] available for a three-hour informal interview, which the Commissioner refused.” Order, at p. 3. (Names omitted.)

IRS’ counsel sat down with A’s and asked for an informal, transcribed chat with Dr. John. A’s counsel responded with an offer of a three-hour, untranscribed chat.

No good, says Judge Laro. “We think that the time constraints petitioners and non-party witness imposed on respondent with respect to the informal interview were unreasonable. It is therefore not surprising that respondent now wants to revisit the same witness under the formal framework of a deposition. Had [Dr. John] been available to respondent on a less restricted basis, it is possible that this deposition request could have been avoided.” Order, at p. 5. (Name omitted.)

True, IRS grilled other former Guidant types. But there may be other information that the lower-down exes didn’t have. There’s tons of paper and multifarious transactions. In fact, in another order in this case of even date herewith (as my already-booked-their-winter-cruises colleagues would say), the parties are scuffling over something called “Hybrid Mfg in Clonmel.”

My spies tell me that the town of Clonmel (“honey vale” in old Gaelic) is noted in Irish history for its resistance to the  Cromwellian army which sacked both Drogheda and Wexford. It is in the former barony of Iffa and East Offa. Great place for Vascular Intervenors if they could beat Ollie Cromwell.

Besides, a fireside chat isn’t the same as an examination under oath, with a demi-brigade of lawyers glaring at the witness.

Anyway, Guidant has one more arrow in its cliché, but it too goes astray.

“Further, petitioners argue that denial of the deposition would not prejudice the respondent, suggesting in their response that petitioner’s access to [Dr. John] is neither greater or less than respondent’s. The Court will not block the deposition of a witness by one party on the basis that the opposing party may or may not have greater, lesser or equal access to the same witness.

“The information sought is reasonably calculated to lead to the discovery of admissible evidence and/or is relevant. See Tax Court Rule 70(b).” Order, at p. 5. (Name omitted.)

Judge Laro meant that petitioner’s access to Dr. John “is neither greater nor less than respondent’s.”

IRS tried a similar gambit with James (“Little Jim”) Haber; see my blogpost “Getting Shifty,” 9/20/13.

So Dr. John must sit and talk. Under oath.

IRS, generous as always, prepared SFRs for two years when, they allege, Robert W. Schlegel, 2016 T. C. Memo. 90, filed 5/4/16, didn’t bother to file returns, much less pay tax asserted to be due. IRS also claims that, again at no extra charge, they mailed SNODs to RW’s last known address, which RW doesn’t dispute was his last known address, but says he never got the SNODs and wants to contest liability in a face-to-face CDP.

Which he could do, says Judge Pugh, if indeed he never had a chance to dispute before. And IRS’s proofs of mailing have some holes.

Though IRS has a PS3877 proof of mailing form, RW claims it doesn’t reach the standard for presumption of regularity. It doesn’t state the number of items tendered by IRS to USPS, nor is it signed or initialed by the IRS employees who issued the SNODs.

RW got it right. The PS3877 doesn’t raise the presumption. But IRS has more.

“While not sufficient to create a presumption of official regularity, the incomplete certified mailing list serves as evidence that the notices of deficiency were mailed to petitioner. The certified mailing list bears a U.S. Postal Service date stamp and signature. Also, both entries show petitioner’s name, his address, and the certified mail article number of the corresponding notice of deficiency. Petitioner has not argued that the address on the certified mailing list was not his last known address, and the address on the certified mailing list is the same address that petitioner reported on his administrative hearing request and on his petition filed with this Court.

“Furthermore, Appeals did not rely solely on the certified mailing list to verify that the notices of deficiency had been mailed to petitioner. Appeals also reviewed the copies of the notices of deficiency for the years at issue, and each notice of deficiency bears the same mailing date, mailing address, and certified mail article number as the corresponding entry on the certified mailing list. In addition, SO X reviewed the tracking information for each piece of mail corresponding to the certified mail article numbers on the notices of deficiency and verified that those articles of mail were reported as being delivered.” 2016 T. C. Memo. 90, at pp. 11-12. (Citations and name omitted).

Besides, RW had a chance to submit his own 1040s to rebut the statements on the SFRs. SO X sent RW a letter, which he did receive, asking for the usual Form 433-A, and asking RW to send in the 1040s for what he claims he owes.

RW never did, so IRS was right to decline the face-to-face CDP, as RW had no other argument and declined the 1040 gambit.

Takeaway– Before declining the 1040 gambit, think twice.

And Off to Court I Go

Thus I butcher Frank Churchill’s and Larry Morey’s 1937 classic. But Gary I. Terry, 2016 T. C. 88, filed 5/3/16, gets no joy either from Appeals or from Tax Court. Gary’s problem is he owes GSA (the United States General Services Administration), not IRS.

GSA claims Gary overcharged the fisc. “The GSA’s claim for restitution arose out of petitioner’s involvement with SCAT, Inc., his wholly owned corporation. Petitioner’s involvement with this entity has been well documented, and he has pursued numerous lawsuits seeking redress against (among others) the GSA, the Small Business Administration, various Department of Justice attorneys, various bankruptcy trustees, and at least one Federal judge. See, e.g., Terry v. SBA, 699 F. Supp. 2d 49, 50-52 (D.D.C. 2010) (noting petitioner’s various unsuccessful attempts to relitigate his GSA debt); Terry v. Sparrow, 328 B.R. 450, 453-454 (Bankr. M.D.N.C. 2005) (describing factual background of petitioner’s debt).” 2016 T. C. Memo. 88, at p. 2, footnote 2.

Gary got nowhere with the foregoing, so now, when IRS grabs his income tax refund and goes after some more income tax he reports, he tries Appeals and then Tax Court.

Gary tries to relitigate yet again his strife with GSA. Appeals offers him an installment agreement. He never replies. Instead, he petitions.

“Section 6402(d)(1)(A) provides that, ‘[u]pon receiving notice from any Federal agency that a named person owes a past-due legally enforceable debt * * * the Secretary shall * * * reduce the amount of any overpayment payable to such person by the amount of such debt.’ The duty imposed upon the Commissioner by this statute is mandatory and overrides any request by the taxpayer that the over-payment be credited or refunded. Because the Secretary ‘is legally required’ to make this offset, he cannot review the validity of an agency debt of which he has been properly notified. Section 6402(g) further provides that ‘[n]o court of the United States shall have jurisdiction * * * to restrain or review a reduction authorized’ by section 6402(d). To the extent petitioner has any claim for recovery, therefore, he must make that claim to the GSA.” 2016 T. C. Memo. 88, at pp. 7-8. (Citations omitted).

Judge, maybe the last-quoted sentence should read “To the extent petitioner has any claim for recovery therefor, he must make that claim to the GSA.”

Of course Gary can sue GSA in USCFC or USDC, but it seems he did that, again with no joy.

It’s a rare event, truly, but sometimes the caption of a case says it all. Here’s Judge Cohen dealing with Alderwood Pest Control, LLC, Docket No. 31150-14L, filed 5/3/16.

IRS wants a remand to Appeals, and Judge Cohen likes the idea, as that might settle a lot of what Alderwood wants, because Judge Cohen hasn’t the jurisdiction to do it. But Alderwood opposes remand and has filed a “Motion to Order Refund.”

That’s a complete nonstarter.

But wait, as the late-night telehucksters say, there’s more.

Judge Cohen: “Petitioner persists in sending to the Court correspondence and motions asking for relief beyond the jurisdiction of the Court in this case.” Order, at p. 1.

Of course, Judge Cohen must rule on the “Motion to Order Refund,” as well as IRS’s motion to remand.

So let the parties show up, and give Judge Cohen an earful.

But.

“…the Court does not expect to resolve any matters at that time other than whether the notice of determination on which this case is based is erroneous and whether any error can be cured during a remand. Meanwhile, petitioner is advised to seek competent representation by a person admitted to practice before this Court and to cease and desist from inundating the Court with inappropriate communications.” Order, at p. 1.

Yup.

Judge Gale extends the mantle of equity to Joseph Patrick Boyle, 2016 T. C. Memo. 87, filed 5/2/16. And JP has a sad tale to tell.

All he wants is to be excused nonfiling and nonpaying for one year, and some abatement of interest on the tax he admittedly owes.

JP was a cartridge seller and a cartridge refiller, the kind that you print with, not the kind you shoot with.

He left the bookkeeping, bill paying and checkwriting to spouse Patricia J. Patricia J. may have had a gambling problem; for the year at issue, she had their MFJ return prepared and had PJ sign, as was their custom for many years. All the income was PJ’s.

Except.

Patricia J. never filed the return or sent in a check to pay the tax due shown thereon. PJ discovered this fact years later, sent in the return, but didn’t pay the tax.

IRS only notified PJ about this omission after he sent in the return.

PJ admits he owes. But between the time the return was due and the time PJ discovered it hadn’t been filed, Patricia J., to whom he entrusted his financial affairs, had died “as a result of breast, spine, and liver cancer.” 2016 T. C. Memo. 87, at p. 4.

PJ only wanted penalties and interest removed, and an installment agreement to pay his back taxes.

IRS just gave PJ innocent spousery on account of Patricia J.’s gambling activities, claiming that Section 6015(f) equitable innocent spousery is available only for underpayments, not taxes or interest. And the income is all JP’s, not Patricia J.’s.

Judge Gale blows that off: “We have rejected respondent’s position and held that we have jurisdiction under section 6015(e)(1) to review the Commissioner’s denial of equitable relief under section 6015(f) from additions to tax and interest.  See Kollar v. Commissioner, 131 T.C. 191, 196-197 (2008); see also Cheshire v. Commissioner, 115 T.C. 183 (2000), aff’d, 282 F.3d 326 (5th Cir. 2002); Knorr v. Commissioner, T.C. Memo. 2004-212; Demirjian v. Commissioner, T.C. Memo. 2004-22; Rowe v. Commissioner, T.C. Memo. 2001-325. We therefore consider petitioner’s claim that he is entitled to relief under section 6015(f) from the interest and additions to tax….” 2016 T. C. Memo. 87, at pp. 8-9.

The cases are here for your next memo of law.

“However, petitioner is not seeking relief from the underpayment; he is seeking relief from the additions to tax and interest triggered by Mrs. Boyle’s failure to timely file and pay after deceiving petitioner in that regard.  In these circumstances, treating the attribution condition as an absolute bar to relief runs counter to our mandate under section 6015(e)(1)(A) ‘to determine the appropriate relief available’ to petitioner.” 2016 T. C. Memo. 87, at p. 10.

So Judge Gale considers. True, all the income is JP’s, but the attribution of income bar is not inflexible. Patricia J. deceived JP, and he had no reason to question her assertion. By Judge Gale, that’s analogous to fraud.

Most factors are neutral, but the fraud and the relatively small amount of the penalties and interest JP is seeking to remove don’t give him a big bonus.

And as for future compliance after the year at issue, PJ faced a cascade of unpaid taxes shortly after Patricia J. died and he had to struggle with cleaning up the mess. He tried in good faith, says Judge Gale.

“All of the Rev. Proc. 2013-34, sec. 4.03 equitable factors are neutral here except petitioner’s lack of a significant benefit and knowledge or reason to know of the understatement.  And the latter factor weighs very heavily in petitioner’s favor.  Petitioner is not seeking relief from the income tax itself, which is attributable entirely to his income.  He seeks relief from the failure to file and pay additions to tax.  Petitioner did not know and had no reason to know the facts that gave rise to those liabilities; to the contrary, he was misled by his spouse’s actions and therefore reasonably believed that his return had been filed and his tax paid.  We accordingly conclude that it would be inequitable to hold him liable for the unpaid section 6651(a)(1) and (2) additions to tax….” 2016 T. C. Memo. 87, at p. 21.

As for interest, Judge Gale lets PJ off for the time between when the return was due and when he found out it hadn’t been filed. But after that, PJ owes interest.

Pardon my French, but this is the last act of the Alterman saga, which tale has already enlivened one meeting of the Bloomberg BNA Tax Advisory Committee and will doubtless spawn much comment in the trade press and blogosphere.

And it’s a full-dress T. C., Bryan S. Alterman Trust U/A/D May 9, 2000, Bryan S. Alterman, Trustee, Transferee, 146 T. C. 14, filed 5/2/16.

Both the Altermen and I are embarrassed by the riches in this case, them for money and me for blogfodder, virtue being its own reward.

The Altermen are trying for legals and admins, after their big win over IRS. See my blogpost “It’s Not Fraud,” 12/1/15.

But the Altermen have one last obstacle: the $2 million tanktrap. You only get legals and admins if your net worth is less than $2 million.

Though IRS argues “substantially prevailed,” as usual (echoing the remarks of a much more exalted author about an earlier tax collector who, notwithstanding unspecified but obviously substantial sins, “went down justified”), and “the costs are too dam’ high,” another boilerplate defense, Judge Buch and the rest of the bench don’t need to go into either.

The key is when the Alterman trust hit the magic $2 million figure.

The Altermen argue “…without support that its net worth should be determined as of one of three possible dates:  (1) the date the petition was filed…; (2) the administrative proceeding date when the Commissioner issued the notice of liability…; or (3) the last day of the taxable year when the Commissioner issued petitioner the notice of liability…..” 146 T. C. 14, at pp. 5-6.

But their premise is faulty. The Altermen claim no tax year was involved, and therefore the special rule in Section 7430(c)(4)(D)(i)(II) doesn’t apply.

Judge Buch says there was such a year.

“The statute is clear, and it requires the net worth of the trust ‘shall be determined as of the last day of the taxable year involved in the proceeding’.  Sec. 7430(c)(4)(D)(i)(II).  The notice of liability and its accompanying documents all identify December 31, 2003, as the end of the taxable year involved in the proceeding.  The notice of liability is explicit that the liability is ‘for the taxable year ended December 31, 2003’.  The accompanying waiver of restrictions on assessment identifies the ‘Tax year ended’ as December 31, 2003.  The notice of liability statement states that it is for the ‘Tax Liability for the taxable year ended December 31, 2003’.  The statute requires that we look to the net worth of the trust as of the last day of the taxable year involved in the proceeding.  And there is no support for the argument that there is no taxable year involved in the proceeding.” 141 T. C. 14, at pp. 6-7.

The Altermen concede that, as at 12/31/03, the trust had $2 million-plus. No need to check justification or reasonableness of claimed costs. Game over.

But why pick that year?

“One can easily posit a rationale for this rule.  Oftentimes, a trust’s assets can easily be depleted, thus enabling a trust to manipulate whether it meets the net worth requirements by the time a notice is issued at the end of a protracted proceeding.  By looking retrospectively to the taxable year involved in the proceeding, the statute limits or eliminates gamesmanship that might be used to fit within the net worth requirements.” 141 T. C. 14, at pp. 6-7. Footnote 3.

In fairness to the Altermen, Judge Buch admits “There is no evidence of any such gamesmanship in this case.” Id.

The Altermen were good guys who did their homework but were thoroughly swindled by some bad dudes.

In the immediately-preceding blogpost of even date herewith (as my Grey-Goose Gibson guzzling colleagues say), I expressed bemusement at Judge Holmes’ designation of his order concerning the Mescalero Apache Tribe’s excursus into informal-vs-formal discovery.

To remove any hint of suspense, the reason for my befuddlement was his much more interesting order, which he did not designate, Henry J. Metz & Christie M. Metz, et al., Docket No. 10346-10, filed 4/29/16.

This arises out of the Rule 155 beancount following the unhorsing of the Metzes last March, in 2015 T. C. Memo. 84, filed 3/23/15, which I didn’t blog at the time. It was another hobbyhorse case, and I’ve blogged half-a-dozen of the big-losses, no-income, big-time other income, horse-loving taxpayer cases. Section 183 trumps Section 162 every time.

So it’s just numbers, right? TurboTax should clean that up in a Silicon Valley Minute, no?

No. “By the time they submitted competing computations — perhaps 50 pages from the Commissioner and several hundred pages of a First through Eleventh Supplement to Computation from the Metzes — the Court knew it needed help.” Order, at p. 1.

And Judge Holmes is the Judge to hand out help.

Getting the battling megillah-ists on the horn, Judge Holmes finds “…the key issue keeping them from finally getting the case into the barn is the effect of the Metzes’ ownership of the real estate used by Mrs. Metz’s corporation, SMF, Inc., on her basis in that corporation. Both parties agree that with some help by the Court on this issue, they should be able to agree on the rest.” Order, at p. 1.

The Metzes had a Sub S called SMF. SMF owned some FL land. This SMF sold, and the Metzes put the proceeds in their own account, not SMF’s. They used part of the proceeds to pay down some debt (styled Metzes’ debt, but whether corporate or individual not stated). With the balance, the Metzes bought a couple parcels land (hi, Judge Holmes) in CA, which weren’t titled in SMF but in the Metzes their own selves as to one, and to Mrs. Metz as to the other. SMF used the CA parcels for its horsing around.

“There is, however, nothing in the record even remotely suggesting that SMF had to pay rent to use these properties for its operations. Nor is there anything in the record suggesting that the Metzes in any way restricted SMF’s use of the property for its operations.” Order, at p. 2.

The fight is over what basis SMF has in the CA parcels, and therefore what basis Mrs. Metz has in her Sub S stock.

IRS says none, as SMF never bought anything. The Metzes say IRS gave up on that, referring to the SMF parcels in more than one Stipulation of Agreed Facts, and never saying the Metzes parcels or any such thing. And the Metzes say even Judge Holmes referred to the couple parcels as belonging to SMF, saying “the Metzes bought two properties for SMF in the Santa Ynez Valley”, 2015 T. C. Memo. 54, at p. 22.

Judge Holmes doesn’t buy it.

“Neither works to undermine the actual stipulation as to who owned the real estate. It’s common enough in English to use the possessive to signify location or use and not ownership. The Court might say, for instance, that ‘the McNuggets were especially tasty at the Alexandria McDonald’s’ without implying in any way that the restaurant owned, leased, or squatted on the real estate it used. And referring to the Metzes’ having bought properties for SMF or referring to SMF’s California operation identifies their location or use — it isn’t a finding of fact contrary to the stipulation about the title of those properties.” Order, at p. 2.

The Alexandria McDonald’s? McNuggets, yet? C’mon Judge, even when I was starving after a long day at National Harbor a couple years ago, even I, known as I am as Cheap Lew, didn’t head for the McDonald’s near the Alexandria Days Inn where I was staying. And I know you love good food and fine wine from our dinner at The Washington Inn Duke Club a year ago.

Back to work.

“The Metzes, however, make a subtler argument. Even though they held title to the real property that SMF used, that use was of value to SMF and should increase basis in the SMF stock.” Order, at p. 3.

They want to analogize to the cases where Sub S stockholders guaranteed loans to their Sub S’s and had to make good on the guarantees, or where the shareholders borrowed the money their own selves but plowed it right into the Sub S, which wrote the checks to pay back the loans.

Putting up your own money or assets isn’t enough unless they go into the Sub S, or are foreclosed by a lender to, or creditor of, the Sub S, and personal guarantees only build basis when guarantor performs.

“The Metzes proved neither here. That’s not to say they had no basis — they certainly did, but it was in the real estate, not in Mrs. Metz’s SMF stock. In many situations this wouldn’t make a difference, but it does illustrate again the adage of tax law that taxpayers are ordinarily bound by the form of their transaction and may not argue that its substance triggers different tax consequences.” Order, at p. 3. (Citation omitted).

Judge Holmes expresses the pious hope that this enlightens the parties so they can finish their beancount without another half-ton of paper.

Note to the parties—Aren’cha glad ya asked?

Now you see my confusion, not to say annoyance: I had to plow through 7 pages and about 170 nothing orders to find this gem.

Judges, please designate the good stuff. Ya think blogging Tax Court is a giggle?

Is informal. No strict rules, just play nice. Nobody will stand over you. Just tell your story and play show-and-tell. That’s the Tax Court discovery way.

But if you are callous and obdurate, you will be struck with orders to show cause why you should not answer interrogatories and produce documents, and even appear for depositions. That’s also the Tax Court way.

But informal comes first.

Now here’s a designated hitter that puzzled me, but it will take another blogpost for me to tell you why, so stay tuned.

Mescalero Apache Tribe, Docket No. 28120-14, filed 4/29/16, requires “…some greater-than-average amount of pretrial work. That became clearer when petitioner moved to compel discovery of respondent’s records of third-party information. The Court spoke with them and decided that it was the unusual discovery motion that would benefit from some more research.” Order, at p. 1.

So the Court obliges. And no, this is not that Obliging Jurist Judge David Gustafson, but rather The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Illustrious, Indefatigable, Irrefrangible, Ineluctable, Incontrovertible, and Ineffable (but never Imperious or Impossible) Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes.

Judge Holmes’ ordered research turns up an interesting point.

The Tribe is moving “to compel informal discovery requests.” Order, at p. 1. (Emphasis by the Court).

I think you meant “to compel replies to informal discovery requests, Judge. (Emphasis by me). I think the Mescaleros wanted to get answers, not be asked questions.

But the Mescaleros want to put on the saddle before they put on the blanket. That’s not the way to do it, says Judge Holmes.

“That’s not how the Court’s procedure works. We insist on informal discovery, but if that doesn’t work the next step is formal discovery, not a motion to compel. The one case that petitioner cites in support of its position, Schneider Interests L.P. v. Commissioner, 119 T.C. 151 (2002), holds only that formal discovery may not precede informal discovery. Only if informal discovery fails, we held, may parties ‘resort to the formal discovery provisions of the Tax Court Rules.’ Id. at 156. Our Rule 104 which governs motions to compel discovery presupposes formal discovery.” Order, at p. 1.

So the Mescaleros’ motion to compel is denied without prejudice to renewal if IRS turns callous and obdurate.

Now fast forward to my next blogpost.

I’ve told this story before, but it’s always good to have a refresher. When you want Summary J (and I love Summary J), it’s not enough to have good documents. You have to tie them together with an affidavit (declaration) from someone with personal knowledge.

Now STJ Daniel A (“Yuda”) Guy isn’t above teaching IRS’ counsel that lesson in a designated hitter, no less, Peter Alexander Goodwin, Docket No. 23146-15W, filed 4/28/16.

Sounds like Pete’s about to get the “we got no cash so you get no cash” brushoff from the Ogden Sunseteers. But first IRS’ counsel needs to get with the program. She throws in the documents with no affidavit or declaration, just refers to them in her motion.

“As a general rule, documents that are not part of the record must be introduced to the Court, in support of a motion for summary judgment, by way of an authenticating affidavit or declaration made on personal knowledge.” Order, at pp. 1-2. (Citations omitted).

It’s like a cover letter. You list what you’re attaching, whence it came and why it’s reliable (public record, business record, supported by another affidavit that follows). That shows the Judge why s/he can rely on the paper.

“Without a proper affidavit or declaration, neither the factual assertions in the numbered paragraphs nor the attached exhibits are admissible evidence, and they cannot be properly relied on by this Court in considering respondent’s motion.” Order, at p. 2. (Citation omitted).

So even though IRS’ counsel has a memo from a Senior Tax Analyst to Stephen Whitlock, a/k/a The Chief Whistler, among the rest of the stuff she handed STJ Yuda, that doesn’t get it.

STJ Yuda even gives IRS’ counsel a second chance to refurbish her papers.

“… respondent [IRS’ counsel] shall file a Supplement to his motion for summary judgment and attach thereto an affidavit or declaration in support of respondent’s motion as more fully described in this Order.” Order, at p. 3.

Quite a sea change from the way he unloaded on poor ol’ TK in my blogpost “The Slam,” 4/15/16.

Judge Elizabeth Crewson Paris takes a line from the 1967 Dionne Warwick wake-up call, as she again unshipped her driver, the one she used back three years ago, which featured in my blogpost “Valuable Consideration?” 10/3/12.

Once again we’re back again in Platte County, MO, with the golfing conservationists shooting for a $16 million charitable deduction, in RP Golf, LLC, SB Golf, LLC, Tax Matters Partner, 2016 T. C. Memo. 80, filed 4/28/16.

We’re now looking at what the T. C. Memo. summarized in the aforesaid blogpost didn’t cover.

Aside from having subjected land they didn’t own to the conservation easement, the golfers took 100 days to obtain and record written subordination agreements from the two banks that held mortgages (out in MO they call them “deeds of trust,” but same-same) on the lands they did own. The golfers claim the banks orally agreed to subordinate, but don’t remember who they talked to, and anyway the “no oral modifications” language in notes and deeds of trust bunkers that one.

Of course, conservation easements have to be in perpetuity, and senior liens that might defeat them must go away or be subordinated. From Day One; no mulligans on that one.

State law does play a role in determining what interests in land have been conveyed, and here there is a State statute that delineates what is properly a conservation easement (but the golfers flunk this latter test).

The golfers claim State law lets them remedy the out parcel problem.

But they’re bunkered yet again. “Petitioner has argued that, where the grantor did not yet own the land described in a deed, he may rely on chapter 5 of the Missouri title examination standards (MTES) to cure the defect, but not so in this case.  The title exam standard described cannot be relied upon to make a current donation of an easement in property the donor does not yet own.  1 Mo. Prac., Methods of Prac.: Transact. Guide sec. 5.14 (4th ed. 2016).  First, the cure period provided in chapter 5 of the MTES is 10 years from recording.  A cure after donation is inconsistent with the requirements in section 170 that both the easement grant and the conservation purpose protection be perpetual from the time the easement is granted, not at a time 10 years after the grant.

“Second, reliance on chapter 5 of the MTES requires that the Court inquire into actual events after the grant of the easement.  Even if chapter 5 of the MTES can be relied upon to cure a defect in title under State law, chapter 5 of the MTES cure period cannot be used to cure a defective charitable contribution for purposes of Federal income tax law.” 2016 T. C. 80, at p. 20, footnote 14.

And of course your lenders have to subordinate at Day One, in such a manner as binds BFPs and everybody else. Judge Paris cites all the cases on that point, most of which I’ve blogged and I’ll spare you the cross-references; you can easily find them in my archive.

The golfers double-bogeyed that one.