Tax Court Rejects a Bullshit Tax Shelter False Valuation Claim with Warning of Sanctions for Taxpayers, their Counsel, and Expert Witness Proffering the Bullshit (7/16/25; 7/18/25)

I write today on a “dictated” oral decision at the conclusion of trial in Veribest Vesta, LLC, True North Resources, LLC, v. Commissioner (T.C. Dkt # 9158-23; docket entries here at docket # 199). Bottom line, the taxpayer’s (only because they got caught) claim went “True South.”

Note on Tax Court Orders: Orders can be relatively short dealing with routine procedural matters or may be longer when they serve the same function as T.C.M. opinions. Juge Buch’s opinion is the latter sort where he enters as an a one-page order attaching his lengthy findings of fact and conclusions dictated into the record at the close of the lengthy trial. This Order serves as the report (same as T.C. and T.C.M. opinions) required by § 7459(a), here. One difference between an Order and the other Tax Court opinions is that the Order does not list counsel. Readers can identify counsel for the parties by clicking the docket entries link above and clicking at the box on upper right for a printed docket sheet.

Veribest involved a standard plain vanilla bullshit Syndicated Conservation Easement shelter, with many Tax Court opinions and Circuit Court affirmances in other similar cases preceding Veribest in essence calling out the bullshit. Some cases have been decided on other grounds, but there was always a common problem of false hyper-inflated valuations of the easements; often (I can’t say always) the valuations claimed were many, many times the real cost of the whole property (including the easement) reasonably close to the date the easement was carved out and “donated” to a willing “charity.” There could be several procedural footfaults for claiming deductions, but false overvaluations have been a common feature of many bullshit tax shelters since the days of Jackie Fine Arts and Barrister. Old timers will remember those shelters from the 1970s and 1980s.

In the SCE cases that have barraged the Tax Court dockets with much wasted resources involving many lawyers making lots of money, one feature has been the taxpayers (through their lawyers making lots of money) proffering expert witnesses who lack credibility. I include at the end of this blog some earlier blog offerings in bullshit tax shelters (including one-off rather than syndicated) with valuations that were not credible.

Today, I want to note Judge Buch’s warning of the potential for Section 6673 penalties. Section 6673, here, is titled “Sanctions and costs awarded by courts.” The Section permits the Tax Court to award costs:

Is Consistency the Hobgoblin of Small Minds for Chief Justice Roberts? Herein of Loper Bright and Chevron (7/10/25)

I was just today pointed to Perttu v. Richards, 605 U.S. ___ (6/18/25), SC here, I was interested because, although not a case about Chevron or Loper Bright (citing neither Chevron or Loper Bright or using the word deference in either Chief Justice Roberts’ Opinion of the Court or Justice Barrett’s dissent), Chief Justice Roberts says this (Slip Op. 6, of the Opinion and p. 10 of the pdf (because the Syllabus precedes the Opinion, here):

That usual practice matters for interpreting the statute because “Congress is understood to legislate against a background of common-law adjudicatory principles . . . with an expectation that the principle[s] will apply except ‘when a statutory purpose to the contrary is evident.’”

I am interested in the quote because I am authoring an article on Loper Bright also authored by Chief Justice Roberts. I think it is commonly understood that Chevron deference had achieved the status of a common law adjudicatory principle by the time Loper Bright was decided. So, how could Chief Justice Roberts say with a straight face (or maybe a straight computer keyboard) that the Court should honor common law adjudicatory principles in Richards but not in Loper Bright? Congress was certainly legislating with Chevron as a background common law principle (as Justice Kagan notes in her Loper Bright dissent at pp. 463-464 here and Chief Justice Roberts ignores in his Opinion of the Court in Loper Bright)? (This is my reason for referring to the "small minds" aphorism in the title to this blog.)

If anyone has thoughts on this conundrum, please let me know either by comment to this article or by email to jack@tjtaxlaw.com. If appropriate and the commenter gives permission, I will acknowledge the credit in the article.

* Note that the Loper Bright page numbers and links are to the Preliminary Print (as opposed to the Slip Op.) which has “preliminary” page numbers that may change before the final U.S. volume. And, of course, the Richards quote is from the Slip Opinion not yet incorporated in a Preliminary Print. 

Tax Court Applies Statutory Stare Decisis for Chevron Cases (7/3/25)

In Moxon Corporation v. Commissioner, 165 T.C. ___, No. 2 (2025), TC here dkt # 59 and GS [to come], the Court held that (from the headnote):

          Held: The I.R.C. § 6662(h) penalties at issue are not subject to deficiency procedures pursuant to I.R.C. § 6230(a)(2)(A)(i).

          Held, further, the fact that the relevant deficiencies were improperly assessed does not affect R’s assessments regarding, and ability to collect, the I.R.C. § 6662(h) penalties.

 (I use the headnote because I think it fairly summarizes the opinion and introduces the subject I want to discuss—statutory stare decisis.)

In respect to the second holding above, the Tax Court invoked statutory stare decisis to apply a prior precedent relying on Chevron deference, saying rather cryptically (see Slip Op. 12-13):

          In addition the Supreme Court cautioned that by overruling Chevron it did not “call into question prior cases that relied on the Chevron framework. The holdings of those cases . . . are still subject to statutory stare decisis despite [the Supreme Court’s] change in interpretive methodology.” Loper Bright, 144 S. Ct. at 2273. Regardless  of the extent to which the holding in Thompson [Thompson v. Commissioner, 137 T.C. 220, 239  (2011)] relies on the standard of review set forth in Chevron, that holding is entitled to stare decisis.

          We again hold that penalties determined in a partnership-level proceeding are not subject to deficiency procedures pursuant to section 6230(a)(2)(A)(i). Rather, such penalties are assessable by the Commissioner. Taxpayers may raise any partner-level defenses to the penalties in a refund action or in a CDP case. § 6230(c)(1)(C), (4); McNeill, 148 T.C. at 489.

           Moxon arrived after I had already made substantial changes to the statutory stare decisis discussion in working draft for the 2025 Federal Tax Procedure (Practitioner and Student Editions). I have further revised that discussion to include Moxon. For readers who may have an interest in the issue, I include below a copy and paste of the text of the revisions without footnotes as of today and link here the revisions (red-lined) with footnotes (note that the footnotes, page numbers and cross-references will change in the final, although as I note below the final will be significantly shortened).

Tax Court Invalidates Regulation on CPAR/BBA Partnership FPA Limitations Period and Holds Partnership Adequately Disclosed to Avoid Limitations Extension (7/3/24)

In JM Assets, LP v. Commissioner, 165 T.C. ___ No. 1 (7/2/25) (reviewed opinion with no dissents), TC here dkt #46 and GS here [to come], the Court invalidated a regulation that, if valid, would have extended the period for a final partnership adjustment under the CPAR/BBA beyond the statutory period of 330 days. The FPA is the final action imposing the imputed tax at the partnership level under CPAR/BBA.

 The Court offers the following “latest possible dates” for a valid FPA (Slip Op. 12-13):

(1) three years after the date on which the partnership return was filed, I.R.C. § 6235(a)(1)(A); (2) three years after the due date of the return, I.R.C. § 6235(a)(1)(B); (3) three years after the date on which the partnership filed an administrative adjustment request under section 6227, I.R.C. § 6235(a)(1)(C); (4) in the case of a proposed partnership adjustment under section 6231(a)(2), the date that is 330 days (plus any extension under 6225(c)(7)) after the date of such a notice, I.R.C. § 6235(a)(3); or (5) in the case of a modification request made pursuant to section 6225(c), 270 days (plus any extension under 6225(c)(7)) after the date on which everything required to be submitted to the Secretary pursuant to such section is so submitted, I.R.C. § 6235(a)(2).

JM Assets involved (5) relating to modification requests.

I don’t think there is anything surprising in that interpretation of the statutory text under Loper Bright’s de novo interpretation standard. I should note that the IRS argued unsuccessfully for delegated interpretive authority for the regulation of the type Loper Bright approved.

I think the more interesting part of JM Assets is its conclusion that the FPA period was not extended by § 6235(c)(2) which provides that for an extension for the FPA if there is a substantial omission of income as defined by § 6501(e)(1)(A). That part of opinion deals with the general tax extension in the latter section. I discuss the general tax extension in my Federal Tax Procedure (Practitioner Edition pp. 198-199; Student Edition pp. 138-139).