Judge Christian N. (“Speedy”) Weiler belies his cognomen as he puts the brakes on Brank Cove Capital, LLC, Gene Larson, Tax Matters Partner, Docket No. 12074-20, filed 6/17/25. After the trial, which is virtually a petitioner’s laydown, just as IRS was lining up the 40% substantial overvaluation chop, petitioner’s trusty attorneys trotted out the Seventh and Eighth Amendment jury trial and excessive fines argument.

“Petitioner also cites to a case pending before then United States Court of Appeals for the Eleventh Circuit dealing with this issue. As previously noted, the Court also has a case pending in which the same or similar issue has been raised. At the suggestion of petitioner, we are inclined to await entering a decision in this case and allow the parties to submit post-trial briefing on this legal issue—should they choose to do so. Accordingly, we will not enter a Decision at this time.” Order, at p. 1.

So let the parties file some status reports.

AbbVie Inc. and Subsidiaries, 164 T. C. 10, filed 6/17/25, undertook to merge with an offshore in a stock-for-stock swap with a new subsidiary. The offshore, Shire, undertook to effect the merger. Problem was, both sides had shareholders, unrelated to themselves and to each other, who had to agree.  So all they could agree to in a Co-operation Agreement was to convince the shareholders to agree.

Problem was, Treasury issued Notice 2014-52, 2014-42 I.R.B. 7, casting serious shade on the tax impact of the proposed deal. Whereupon, AbbVie’s Board chickened out, pulled its recommendation to its shareholders, and agreed that the Co-operation Agreement required AbbVie to pay $1.635 billion-with-a-b to Shire as a Break Fee. 164 T. C. 10, at p. 7. See 164 T. C. 10 at p. 8 for the Termination Agreement that followed.

AbbVie took an ordinary loss, claiming contract abandonment. IRS said Section 1234A made the loss capital, in that it was the abandonment “with respect to property which is (or on acquisition would be) a capital asset in the hands of the taxpayer.”

Judge Emin (“Eminent”) Toro says this isn’t a capital asset, because property isn’t involved. The deal involves stock that neither AbbVie nor Shire owns or controls. There’s a bunch rights and obligations (hi, Judge Holmes) that AbbVie abandoned, but none of them involves property, because neither AbbVie nor Shire owns the stock.

There’s a major dictionary chaw, as is obligatory. But the story is simple: it’s not property.

And the Ice Thin

When Billy Long’s myrmidons are radar-locked and the dragnets deployed, the practitioner, dragged in at the last red-hot minute, is thrust on her/his mettle. The faint-hearted need not apply. So enter no less than The Great Chieftain of the Jersey Boys, to whom the above set forth conditions provide opportunity, not dread.

Back in April, IRS issued a trial subpoena duce tecum to nonparty whom I’ll call GC. Two (count ’em, two) days before return date, a principal of GC, whom I’ll call Richie, files through trusty attorney a motion to quash.

The sun is bright and staring; the transparent ice shows beads of moisture. Judge Albert G. (“Scholar Al”) Lauber is in no mood for last-minute derailments.

“In his Motion [Richie] erroneously states that trial starts June 16 and represents that his condition makes travel and ‘prolonged oral responses’ difficult. In fact, the trial of this case does not start until October 20, 2025, as noted in the subpoena. The upcoming hearing on June 18 will not require substantive testimony from [Richie]. Rather, it will be a brief zoom.gov proceeding focusing on the documents specified in the subpoena, and [Richie] or his counsel may attend remotely.” Order, at p. 1.

As the midnight telehucksters say, “But wait! There’s more!”

“[Richie] also argues that the subpoena is ‘overly broad’ and ‘imposes an undue burden.’ But the subpoena was issued on April 23, and he had almost two months to move to narrow or quash the subpoena on that ground. It is unreasonable to move to quash on this ground two days before the hearing. We will accordingly deny the Motion.” Order, at p. 1.

The Order is Ivey Branch Holdings, LLC, Ivey Branch Investors, Tax Matters Partner, Docket No. 19189-19, filed 6/17/25, docket item 196.

Wet feet included at no extra charge.

It’s a tried-and-true failure, but Steven J. Schwartz, T. C. Memo. 2025-64, filed 6/16/25, tries it on again. Steve (that’s Doc Steve) wants his unpaid 1040-ES for a couple years (hi, Judge Holmes) folded into his IA.

As the Appeals officer noted, Dr. Schwartz was not in compliance with his estimated tax obligations for 2022 or 2023, part of a pattern of significant underwithholding of tax stretching back to at least 2017. Dr. Schwartz does not assert that he was in compliance with his estimated tax obligations. He instead offers a strained and tendentious reading of the Internal Revenue Manual that would require the Appeals officer to grant Dr. Schwartz an installment agreement that included the delinquent estimated tax payments.” T. C. Memo. 2025-64, at p. 7.

Ch J Patrick J. (“Scholar Pat”) Urda isn’t having any.

“We have repeatedly rejected the argument Dr. Schwartz urges here.” T. C. Memo. 2025-64, at p. 7.

There follows somber reasoning and copious citation of precedent. Yes, the AO could have let Doc Schwartz fold his unpaids in, but committed no abuse of discretion in not doing so.

The touchstone for jurisdictional basis, the key to the key to the Glasshouse door, is the mailing of the SND or NOD. This has been catechized to us all again and again. The USPS Form PS3877, describing item mailed, to whom and to where, and stamped and signed by USPS employee, thus far closes the case. In a deficiency case, game over, right?

Maybe not, say the trusty attorneys for D. Brent Scarbrough & Tina M. Scarbrough, Docket No. 9516-24, filed 6/13/25.

By my calculation, DB & Tina are 269 days late with their petition. They claim they didn’t get the SNDs (two for each as two years at issue) until a week before they petitioned. IRS replies “so what, we mailed ’em, you’re in 11 Cir, no equitable tolling.”

But trusty attorneys (whom I’ll call The Wigs) cite a couple cases (hi, Judge Holmes) that call this time-honored mantra into question.

“…petitioners insist that respondent has not met his obligation under section 6212 because alleged internal errors at the USPS resulted in non-delivery of the Notices, and respondent had knowledge of such and did not remedy the issue. Relying on Estate of McKaig v. Commissioner, 51 T.C. 331 (1968) (holding the notice insufficient when the USPS informed IRS that the notice of deficiency had not been delivered and taxpayer’s last known address was in question), petitioners argue that respondent had knowledge that delivery was not completed for at least three of the four Notices, and consequently, petitioners are entitled to equitable tolling from when they received the 2020 Notice on June 3, 2024. Notwithstanding, petitioners conceded that the certified mailing lists, attached to respondent’s motion, are properly completed and authentic.” Order, at pp. 2-3.

As usual, it’s in the footnotes.

The Wigs noted that USPS online tracking shows only one of the four (count ’em, four) SNDs were actually delivered, so IRS should have known something was up. Order, at p. 2, footnote 2.

“A properly completed PS Form 3877 (or certified mailing list) is direct evidence of both the fact and date of mailing and, in the absence of contrary evidence, is sufficient to establish proper mailing of the notices. The parties concede that the certified mailing lists for the years at issue attached to respondent’s Motion are properly completed and bear sufficient indicia of authenticity. Finding no evidence to the contrary, we accept the foregoing documents as presumptive proof of its contents.” Order, at p. 4, footnote 3.

For their efforts, The Wigs get from Taishoff a “Good Try, Third Class.” From Judge Adam B. (“Sport”) Landy, they get a toss of the petition. No jurisdiction.

Section 6015(c) apportioned relief generally (love that word!) requires successful requestor to recognize his/her own items, even while requiring non-requestor to retain their own.

IRS does seem to allow a cutoff in Manuela C. Smith, Petitioner and Ulysesus A. Hodge III, Intervenor, T. C. Sum. Op. 2025-6, filed 6/12/2025. Manuela and Uly were separated and lived apart during year at issue. Although Manuela assembled the documents for the paid preparer of their 1040 MFJ, Uly never gave her the 1099-MISC for his SE nor the 1099-C for his written-off debt.

They always had separate bank accounts, never any joint account.

On the hearing, Uly asserted that Manuela must have known he had other income, as she “had access to his bank account; as he put it, she could not have been ‘completely oblivious’ to it.” T. C. Sum. Op. 2025-6, at p. 5.

Not good enough for CSTJ Zachary S. (“High-Rise”) Fried, making his debut as CSTJ. Actual knowledge, not constructive knowledge, is the test. All Uly’s separate income documents were sent to Uly’s separate address.

“Actual knowledge is not to be inferred from evidence that the electing spouse merely had reason to know of the omitted income. See S. Rep. No. 105-174, at 59 (1998), reprinted in 1998-3 C.B. 537, 595 (‘[A]ctual knowledge must be established by the evidence and shall not be inferred based on indications that the electing spouse had a reason to know.’).” T. C. Sum. Op. 2025-6, at p. 5.

But Manuela did have income of her own. CSTJ Fried’s disposition thereof is the reason for the headline first abovewritten at the head hereof (as my expensive colleagues would say). And of course it’s in a footnote.

“During [year at issue] petitioner received wages of $2,850 from ZMF that were not reported on petitioner and intervenor’s joint federal income tax return…. At the beginning of trial, respondent’s counsel indicated that the income was de minimis and was thus not excluded from the relief under section 6015(c) that respondent was conceding. Intervenor does not argue that, because the income was allocable to petitioner, she is not entitled to relief under section 6015(c) relating to the portion of the deficiency for [year at issue] which is attributable to that income. Under the circumstances, we do not consider that question.” T. C. Sum. Op. 2025-6, at p. 5, footnote 3.

Taishoff says, c’mon Judge, that’s piling on. Uly may or may not be a sympathetic character, and maybe his testimony was less than candid (see T. C. Sum. Op. 2025-6, at p. 5; I didn’t see the hearing), but he was pro se, and IRS folded. Sticking him with Manuela’s unreported income, de minimis or not, when he can’t appeal, is a bit much.

I’ve often commented before now on the leisurely (not to say lackadaisical) pace of Tax Court litigation. As Hal David memorably wrote “Weeks turn into years, how quick they pass.”

Edisto Georgia, LLC, Golden Eagle Capital Investments, LLC, Partnership Representative, Docket No. 8478-23, filed 6/12/25, is following that path. Petition filed 5/20/23, noticed for trial 4/8/24, twice continued (that’s “adjourned” for us State Courtiers) and now, with trial date in the October session at Columbia, SC (and do I remember October in Columbia, SC, fifty-eight (count ’em, fifty-eight) years ago!), the parties move to continue once more.

I can find no scheduling order on the Tax Court docket page, so one might assume the parties are Branertoning at speed. Or maybe not.

Of course, as trial venue is laid in Columbia, SC, Judge David Gustafson, a Palmetto State native, deals with this latest can-kick, as immediately set forth hereinbelow (as my expensive colleagues would say).

“The motion explains the parties’ work to date and the reasons the case will not be ready for trial in October 2025. In view of their agreement, we will continue the case. However, they ask for trial to be set to begin in 20 months on February 22, 2027. On the one hand, we appreciate the parties’ willingness for the Court to impose a schedule that will prod them to prepare the case for trial; but on the other hand, the case appears to be in the very earliest stages of development, and in such circumstances, setting a trial for a date so far distant is problematic. Doing so would effectively block the Court from setting any other trial session in Columbia that would overlap with that one; but experience teaches us that when a case not ready for trial is set for trial so distant in time, the likelihood that a trial will actually occur on that schedule is low.” Order, at p. 1.

Judge Gustafson grants the third continuance, but sends the case to the general docket.

Taishoff says in State Court we have administrative judges, who scan trial judges’ dockets with the zeal of Hurricane Hunters, seeking dilatory litigants and pushing the assigned judges to clear their dockets. “Select or settle!” they cry. “Pick a jury and try the case, or compromise and stip out.”

This case may present so tangled a fact trail that discovery requires years: somehow I doubt it.

Tax Court is resetting the June 16, 2025, Los Angeles CA hybrid small claims session from live to Zoom.

The reset is attributed to “the result of ongoing law enforcement activity in and around the Roybal Federal Courthouse in Los Angeles.”

This being a resolutely nonpolitical blog, I will not comment.

Madeleine L’Engle’s 1962 young adult classic once again figures at Appeals in a CDP, but unlike Jacob & Marsha Rozbruch, who starred in my blogpost “A Wrinkle in Time,” 2/3/23, wanting Appeals to consider only long-past info and leave out what was found on remand, Manntej Sra & Jasmine Sra, Docket No. 5919-24L, filed 6/10/25 claim Appeals abused discretion by not considering events occurring after CDP concluded and NITL confirmed.

Man & Jas say they sold assets and paid down some of the tax due (which they admit was due) after the CDP, the AO miscalculated the QSV of their principal residence and never gave them a chance to refinance or make an unforced sale. Selling more assets would only give them more tax liability and cause economic hardship.

But Man & Jas were behind on their 1040-ESs at the CDP.

They are Golsenized to 9 Cir, which is strict record-rule territory. What was brought forth at the CDP and made it into the administrative record is “all ye know on earth, and all ye need to know,” as a much greater writer than I put it.

Judge Cary Douglas (“C-Doug”) Pugh has this one.

“But regardless of whether SO B’s calculations were correct petitioners were not eligible for an installment agreement at the time of SO B’s determination because they failed to make the requisite quarterly estimated tax payments as required under section 6654(c)(2). Rejecting their offer was not an abuse of discretion therefore and we need not consider SO B’s calculation of the QSV or petitioners’ other alleged challenges to her review.” Order, at p. 5. (Name omitted).

At a CDP, make sure you’re current and play every card you’ve got. That’s your trial.

Dr. Inga I. Kramarenko, T. C. Memo. 2025-61, filed 6/9/25, is an expert with highly technical skills, including but without in any way in limitation of the foregoing (as my expensive colleagues say) signal transduction in highly specialized cells, T. C. Memo. 2025-61, at p. 5.

Doc Inga, or shall we say post-Doc Inga, because she was a post-doctoral fellow at Medical University of South Carolina, wasn’t “from around here, are ya?” as they say in SC.  Doc Inga was from Russia, here on a J-1 visa as an “Exchange Visitor.” Doc Inga was resident alien because substantially present the magic number of days, and the payout from MUSC was of course effectively connected.

But does Article 18 of Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, Russ.-U.S. (“Treaty”), June 17, 1992, T.I.A.S. No. 93-1216 bail out post-Doc Inga from US income tax?

Since post-Doc Inga case is located in SC, whom else but Judge David Gustafson, son of the Palmetto State, to pronounce the result.

Sorry, post-Doc Inga.

Judge Gustafson begins with the flush language of Article 18: only “payments made ‘with respect to the grant, allowance, or other similar payments’ are exempt from US tax. While post-Doc Inga got paid for her lab stints out of research grants, so were the people who cleaned the floors. But that post-Doc Inga was designated as an “employee” in the bushelbasket of MUSC papers doesn’t make her an employee.

What does is that she got a quid pro quo. True, she got valuable training and mentoring. But she also did work that provided a real benefit to MUSC, which retained whatever results post-Doc Inga got.

“MUSC received the benefit of Dr. Kramarenko’s full-time skilled labor working on specific research projects as a condition of Dr. Kramarenko receiving ordinary compensation in the form of a salary (with regular increases) and various other benefits incidental to employment. In other words MUSC required a substantial quid pro quo from Dr. Kramarenko in the form of her services.” T. C. Memo. 2025-61, at p. 19.

As for good faith to avoid penalties, post-Doc Inga fails that course.

“On the sole basis of her reading of the Treaty and on her conversations with colleagues, and without the advice of a tax professional, Dr. Kramarenko filed income tax returns for years… showing zero taxable income, on the ground that (she concluded) her entire salary from MUSC was excluded from taxation under the Treaty—contrary to the position reflected on the Forms W–2 that MUSC issued to her every year.

“In addition to erroneously omitting her salary income, Dr. Kramarenko made several misrepresentations on her [years at issue] income tax returns, including using a filing status of ‘single nonresident alien’ when she was in fact a married resident alien. Dr. Kramarenko also misrepresented on Forms 8840 attached to her income tax returns that her tax home was Russia and that she had a closer connection to Russia than to the United States, even though at the time she was preparing those returns she had lived with her American husband in their marital home in South Carolina….” T. C. Memo. 2025-61, at pp. 20-21.