Image by Grok

Here I am seeing if I can finish July, before August is over. No promises. Here is my defense for my less than up to minute coverage. I get to stew a bit more or maybe marinate or some other cooking metaphor which I hope might make my analysis better. I also get to cite the coverage of the more up to the minute guys like the lightning fast Lew Taishoff.

Dixieland Boondockery

In Savannah Shoals LLC, Eleventh Circuit has once again sustained a substantial Tax Court reduction of a conservation easement deduction. $23 million claimed versus $480,000 allowed. The court made quick work of objections to the use the Tax Court made of the IRS expert. It further ruled that the Tax Court was not required to use a four-factor test in determining highest and best use.

“The court concluded, after an extended analysis, that a “quarry was not financially feasible” because it was “highly unlikely that the market would have supported profitability conclusions.” While Savannah Shoals may disagree with the tax court’s factual findings (which disagreement we will consider below), the court’s methodology and reliance on market demand was consistent with the appropriate legal standard.”

Taxpayers also raised concerns about Tax Court not performing its own quantitative analysis. There were also some errors made by an IRS expert and that another expert had failed to meaningfully consider a quarry use. None of these objections went anywhere.

“In short, we are not “left with the definite and firm conviction that a mistake has been committed,” so we will not disturb the tax court’s factual findings or its resulting conclusion regarding the Property’s highest and best use.”

We should be hearing a lot more from the Eleventh Circuit on these cases in the coming months.

Ed Zollars covered the opinion on Current Tax Developments.

“The Eleventh Circuit’s affirmation of the Tax Court’s judgment highlights several immutable realities of conservation easement litigation. First, taxpayers bear the burden of proving their entitlement to and the amount of any claimed charitable deduction. Second, claiming an “exorbitantly high, baseless value for the unencumbered easement property” by projecting speculative commercial uses that lack market demand will not survive judicial scrutiny.”

Possible All Time Biggest Leaker’s Sentence Confirmed

Charles Littlejohn, the IRS consultant who leaked President Trump’s return along with many others had his five year sentence upheld by the DC Circuit.

No comment.

Who Dealt This Mess?

Linda M Lewis TCM 2026-58 gave me a bit of a headache. Linda’s dad Bruce McDougall was the beneficiary of a QTIP from her late mom. The family decided that they wanted to rearrange things a bit. Incidental to that LInda and her sibling, Peter McDougall, released their beneficial interest in the QTIP. In Bruce D. McDougall et al 163 TC No. 5, Judge Toro ruled that the releases of the beneficial interest were taxable gifts by LInda and Peter. Bruce sold the assets he received to a new trust in exchange for a promissory note. Here was the holding in the earlier case.

“In view of the foregoing, petitioners’ Motion for Summary Judgment will be granted to the extent it asks us to conclude that Bruce did not make any gifts as a result of the transactions at issue. But that Motion will be denied to the extent it asks us to conclude that Linda and Peter did not make any gifts as a result of the transactions at issue either.
Relatedly, the Commissioner’s Motion for Partial Summary Judgment will be granted to the extent that it asks us to conclude that Linda and Peter made gifts as a result of the transactions at issue. But that Motion will be denied to the extent it asks us to conclude that Bruce made gifts as a result of the transactions at issue.”

The recent decision is about the value of the gifts that Linda and Peter made. It was $35,141,321 each which strikes me as pretty disastrous. Remember the gift is going up a generation. How that relates to whatever they achieved with the promissory notes is beyond me. I also have to admit to being lost in the valuation discussion.

Ed Zollars does a deep dive on the valuation at Current Federal Tax Developments. Lew Taishoff has Up Macdougall Alley with one of his characteristic opening lines.

“No, Judge James S. (“Big Jim”) Halpern is not taking us on a walking tour of Greenwich Village.”

That sent me on a ancient pop culture hunt turning up something by Jack Kerouac and something by Tom Paxton. Actually I think what was in the back of my mind was a different Tom Paxton song that refers to Bleeker St. I think Mr. Taishoff was probably just making a geographic reference. Nonetheless, I could not resist sharing my rabbit holes with you.

Limited Jurisdiction Of Tax Court

The Fourth Circuit did not have a lot to say in its opinion on Leslie Terner’s appeal from the Tax Court. What Leslie had from the Tax Court was a dismissal of her petition for lack of jurisdiction. The story behind the story is included in her opening brief submitted by attorney Walter T. Charlton. The basics of it are an overpayment of tax she made somehow being credited to her husband. Somehow other years got involved. Ms. Terner was disabled during this period. The petition, filed in 2023, covered years 2015 through 2018. According to the complaint there are timely filed refund claims.

I had some difficulty following the legal argument in the brief. My stubborn mind keeps asking – Why didn’t you take this to district court or the Court of Claims? I asked my buddy Grok for a critique. Here is the round-up:

“In short, the brief demonstrates considerable effort and a genuine sense of grievance, but it does not meet the standard of focused appellate advocacy required to overturn a Tax Court jurisdictional ruling in the Fourth Circuit.”

It appears that there has yet to be any notice of this opinion, making it a YTMP exclusive, at least as I write this. I asked Lew Taishoff what he thought of it. He responded:

“Mr Reilly, Counsel s making Constitutional arguments to a Court that has no jurisdiction to hear them. I hope he isn’t charging Ms. Terner a fee for this.”

More Is Coming

I have a few more July items to share. I will do my best to have them to you before August is done.

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July Developments – Part II – Including A YTMP Exclusive