Another Bullshit SCE Case the Shelter’s Experts Not Credible (11/4/26)

In Morgan Run Partners, LLC v. Commissioner, T.C. Memo. 2026-112 (11/3/26), TC 8669-20 at # 274; TN here, and GS here [to come], Judge Lauber calls out another bullshit tax shelter of the syndicated conservation easement (“SCE”) genre. Judge Lauber must again shovel through the same typical bullshit of this type of shelter. Judge Lauber offers a brief description at the beginning (*2):

          Petitioner has not carried its burden of proving that rezoning of the Subject Property to an industrial category was “reasonably probable.” Construction of a 780,000-square-foot distribution facility was therefore not a legally permissible use. Petitioner likewise failed to convince us that construction of a distribution facility was physically possible on the site or that it was financially feasible. For these reasons, the industrial use petitioner posited was not the HBU of the Subject Property.

          We agree with respondent’s expert Ray Kinney that the HBU of the Subject Property, before the granting of the easement, was “investment property held for speculative development of medium to low-density residential lots.” Employing the comparable sales method, he determined a “before value” of $7,000 per acre, or $1.63 million (rounded) for the Subject Property. We find Mr. Kinney’s valuation reasonable, particularly because the prior owners of the Subject Property conveyed it to Morgan Run in November 2016—roughly a month before the easement was granted—for slightly more than $1.2 million. That transaction was an arm’s-length sale that valued the Subject Property at roughly $5,200 per acre.

          Accepting Mr. Kinney’s “before value” of $1.63 million, and subtracting from that figure an “after value” of $465,000, we conclude that the FMV of the conservation easement was $1,165,000. That valuation conclusion dictates that we sustain the imposition of a 40% penalty under section 6662(h)1 for a “gross valuation misstatement,” as determined by the Internal Revenue Service (IRS or respondent).

Those wanting to waste their time reading the whole opinion can certainly do so.

Fun fact: I wasted my time reviewing the opinion (that is different from a close reading). Here are some quick comments I have:

1. Valuation is all about credibility. As I have noted many times in discussing these bullshit SCE shelters, the valuations the shelters offer are often not credible or close to being credible. In this opinion, Judge Lauber calls out the shelter’s experts on several occasions. See e.g., *22 (on proffered expert Douglas Kenny who also testified in other cases, “The Court has never found his testimony about the ‘before value’ of property to be credible.”); *23 (on proffered expert James “Chris” Clanton, “This Court has never found his testimony about the ‘before value’ of property to be credible.”); and (on proffered expert Thomas Spears (*24-*25, *27-*28 and *38-*42 (too much to quote).

2nd Installment of ChatGPT Weekly Tax Procedure Case Watch (11/1/26; 11/4/26)

JAT Introduction: This is the second weekly installment of the ChatGPT weekly searches on cases of interest on Federal Tax Procedure. The results are emailed to me each Friday, and I post the results on this blog when I can get to them.

Federal Tax Procedure Case Watch

October 30, 2026 | Decisions issued October 24–30, 2026

I found two new Tax Court opinions worth considering, with one substantially stronger candidate for your blog. Neither appears in the currently accessible October entries of your Federal Tax Procedure blog. I also checked your October 23 report and your subsequent comments to avoid repeating earlier recommendations.

federaltaxprocedure.blogspot.com

1. Bialer v. Commissioner — Whistleblower awards, IRS discretion, and the administrative record

Highest priority

T.C. Memo. 2026-110 (Oct. 29, 2026), Judge Gustafson. Docket No. 6983-19W.

The Tax Court granted summary judgment for the Commissioner, sustaining the IRS Whistleblower Office's denial of an award under § 7623(b). The taxpayer had provided information concerning dividend-withholding-tax avoidance transactions, but the IRS examination proceeded on information obtained independently from another whistleblower and a Senate investigation.

The court also rejected the taxpayer's argument that an IRS operating division had made an earlier reviewable award determination and declined to supplement the administrative record with additional internal IRS materials.

Current Federal Tax Developments

Why I think this deserves your attention

The most interesting question is not whether this particular whistleblower should have received an award. It is the relationship among three distinct propositions: the Whistleblower Office alone makes reviewable award determinations; IRS operating divisions exercise discretion over examinations; and the Tax Court ordinarily reviews the award determination on the administrative record.

Those propositions may be sound individually, but their interaction raises an important question: Can evidence of internal IRS examination decisions be relevant to whether the agency proceeded on a whistleblower's information even though those examination decisions are themselves unreviewable?

The distinction between reviewing an IRS decision and considering evidence about that decision seems worth exploring. A court might lack authority to order an examination yet still need to examine how an investigation developed to determine statutory causation.

A second possible issue is whether the statute's requirement that the IRS proceed based on supplied information is properly understood as a conventional causation inquiry or as something narrower.

Suggested title: Tax Court Denies Whistleblower Award—When Does Unreviewable IRS Examination Discretion Become Relevant to a Reviewable Award Decision? (10/30/26)

Official Tax Court opinion search (search Bialer, T.C. Memo. 2026-110); Detailed October 30 case discussion.

JAT Action: I was aware of the Bialer opinion and had determine that there is not enough in the opinion that is not already included in my Federal Tax Procedure editions. See Student edition, pp. 743-744; pp.; Practitioner edition pp. 1113-1115 discussing various facets of the “collected proceeds” base to which the award percentage applies for § 7623(b) awards. The bottom line key concept is that, if there are no collected proceeds, there is no award; and anything in the process from filing the Form 211 with the WBO through actual collections is mostly nonreviewable. Once the Tax Court can conclude that there are collected proceeds related to the Form 211 information, then the only thing left is quantify the collected proceeds and determine whether the IRS properly exercised its discretion in the percentage applied to the collected proceeds. In any given case (such as Bialer) there will be nuanced facts, but that is basically it.

Added 11/4/26 3:15 pm: On 11/4/26, the Tax Court issued a corrected opinion in Bialer. T.C. Memo. 2026-110 (Corrected) (keeping the same opinion number date as the original 10/29/26 but giving the corrected copy a separate docket entry TC No. 6983-19W at # 193 dated 11/4/26). I have not yet determined whether any changes made were sufficient for me to rethink the decision not to blog on Bialer.

By the way, I generally read daily the Tax Notes “Court Documents” feature here. That feature is sponsored by Deloitte and has been a major source for my blog and book writing. There are other Tax Notes features that contribute to my staying current:

• Proposed Regulations here;
• Treasury Decisions (Final Regulations) here;
• IRS Guidance here;
• IRS Private Letter Rulings and Advice here;
• Legislative Documents here; and
• Other Documents here.

Thanks to Tax Notes and Deloitte for making these resources available to the tax community and general public.

2. Consolidated Sportsmen of Lycoming County v. Commissioner — Statutory interpretation and the measurement of activities

First ChatGPT Plus Weekly Recommendations for Blogging (10/23/26)

I thought that I would provide in regular blog entries the ChatGPT Plus weekly recommendations that I discuss in Starting Regular Use of AI to Assist in Writing Federal Tax Procedure Blog Entries (Federal Tax Procedure Blog 10/20/26), here. (I use ChatGPT Plus, but will regularly shorthand that the ChatGPT.) Today was the first installment. I will regularly provide links to the ChatGPT responses which for this week’s installment are here, but perhaps for a few weeks will copy and paste the responses. I note in red my action, if any, with the recommendations. 

Federal Tax Procedure Case Watch

October 23, 2026 | Review period: October 16–23, 2026

My leading recommendation is a follow-up on United States v. Sagoo. A new Fifth Circuit order bears directly on your earlier discussion of FBAR penalties, the Seventh Amendment, and SEC v. Jarkesy. I also found an interesting administrative-law issue in a new Tax Court opinion you have already discussed, plus two developments worth considering outside the strict new-opinion category.

1. Highest priority: United States v. Sagoo — FBAR penalties and jury-trial rights

No. 25-11271 (5th Cir. Oct. 22, 2026) — order vacating and remanding.

The Fifth Circuit has ordered further consideration of a district court decision holding that the IRS violated a taxpayer's Seventh Amendment rights by administratively assessing approximately $1 million in FBAR penalties without a prior jury trial.

The remand follows the Supreme Court's June 4, 2026 decision in FCC v. AT&T, Inc., 608 U.S. ___ (2026). That decision distinguished SEC v. Jarkesy, 603 U.S. 109 (2024), and upheld an administrative penalty procedure under which the government must obtain a judicial determination in a de novo proceeding before compelling payment.

The Fifth Circuit's October 22 action is a remand order, not a precedential merits opinion resolving the FBAR issue. I have verified the reported disposition but have not independently obtained the order's full text.

Why this is particularly appropriate for your blog

You discussed the district court decision in your September 24, 2025 entry, updated June 7, 2026. Indeed, you anticipated the essential issue. After examining FCC v. AT&T, you concluded that the decision appeared to support the government's position because the FBAR assessment procedure, like the FCC procedure, permits a subsequent de novo judicial determination with a jury.

That makes the Fifth Circuit's action an opportunity to revisit your prediction.

The most interesting question is whether an IRS assessment has legal consequences that distinguish it from the FCC forfeiture order considered by the Supreme Court.

For example, does the government's administrative assessment of an FBAR penalty constitute an adjudication of liability, or is it merely a preliminary step toward a judicial determination? The distinction may depend on the legal consequences of the assessment before a court enters judgment.

Suggested title:

Fifth Circuit Remands FBAR Jury Trial Case in Light of FCC v. AT&T—Did the Supreme Court Already Resolve the Issue? (10/23/26)

Recommendation: High priority. I would consider a short update to your existing entry, with a separate post if the remand presents additional issues worth developing.

Sources: Fifth Circuit appeal docket; Supreme Court opinion in FCC v. AT&T.

JAT Action: I amended the prior blog on Sagoo to note the remand. District Court Holds the FBAR Willful Penalty Requires Opportunity for Pre-Assessment Jury Trial (Federal Tax Procedure Blog 9/24/25; 10/23/26), here.

2. Potential follow-up: Del Monte, LLC v. Commissioner — Golsen and invalid Treasury regulations

The Tax Court Rejects Another Bullshit SCE's Valuation Claim and Imposes Gross Valuation Misstatement Penalty (10/22/26; 10/24/26)

Today, the Tax Court (Chief Judge Urda) decided another Syndicated Conservation Easement (“SCE”) of the bullshit genre rejecting the gross overvaluation claim and applying the gross overvaluation penalty. Lontrac Enterprises, LLC v. Commissioner, T.C. Memo. 2026-108 (T.C. No. 272-18 at # 343; GS here. The Court sums the case up in the introduction which I copy and paste (Slip Op. 1-2; omitting the footnote; bold face supplied by JAT):

In a situation resembling the movie Groundhog Day, we once again consider a syndicated conservation easement transaction featuring the same old moves: Investors paid into a partnership for the promise of tax benefits exceeding three times each dollar invested; the partnership granted a conservation easement to a land trust and claimed a cartoonish charitable contribution deduction under section 170;1 and the promoters of the easement strategy pocketed millions of dollars in fees. This case stands apart only for the sheer audacity of the numbers involved—the partnership here claimed a deduction of $74.5 million for an easement (i.e., a restriction on use) on property that had been sitting on the market for years, failing to find a buyer willing to pay $2.9 million. The stratospheric number was based on the claim that the property was suddenly very valuable as a mine although the rocks underlying the purported mining strategy were visible to the naked eye and the area was well mapped by the U.S. Geological Survey (USGS). Of course, the idea of mining was chimerical, simply a way to get at a wholly unmerited tax deduction.

          The Internal Revenue Service (IRS) disallowed the deduction and asserted a 40% penalty for gross valuation misstatement under section 6662(h). For the reasons explained below, we find that the value of the easement was $500,000, and the deduction is limited to that amount. We further find that the value of the easement was grossly overstated such that the 40% penalty applies.

That is pretty much the broad overview of the opinion with details ad nauseum supporting these conclusions. Here are a few more points from the opinion that I thought worthy of calling to readers attention; in the discussion below, I refer to the plaintiff as the "Shelter"):

1. The Shelter raised the standard burden of proof arguments under § 7491 hoping to impose the burden of persuasion on the IRS and prevail as to any fact issue in which the Court is in equipoise under the preponderance of the evidence standard. The Court gave (Slip Op. 14-15) a standard (but not the only possible response) that the Court was not in equipoise (evidentiary tie) and therefore decided the relevant facts by a preponderance of the evidence. (See, however, ¶ 4 below.)

Starting Regular Use of AI to Assist in Writing Federal Tax Procedure Blog Entries (10/20/26)

As readers of this blog know, I have on rare occasions consulted an AI tool with respect to some issues I have blogged. I tended to dip my toe in and then stay out for a while. I have decided to start dipping my toe in more frequently and deeper.

I have been inspired now by Robert Wright’s The God Test: Artificial Intelligence and Our Coming Cosmic Reckoning, Amazon here, I have started reading the book and am impressed so far. Fittingly, I asked an AI tool, Microsoft Copilot the following:

Please point me to the best reviews of Robert Wright's The God Test: Artificial Intelligence and Our Coming Cosmic Reckoning and summarize the key points of the reviews.

Readers of this blog entry can read Copilot’s response here.

I have been a Robert Wright fan for a long time—since reading his book titled The Evolution of God , Amazon here, when it came out in 2009. (As an aside, shortly after it came out, I taught a 4-week Sunday School class at South Main Baptist Church, Houston, TX on this book.) Judging from these two book-end titles, one can infer that he thinks a lot about God and, from the content of The God Test, about the continuity of evolution.

Suffice it to say that I now am convinced that I need to use AI more to understand its possibilities and its limitations. So, what better way to start the process than to ask an AI tool to assist me. I used ChatGPT Plus (“ChatGPT”) for this effort. I started with the following prompt:

Tax Court Decides 2 Bullshit SCE Tax Shelter Cases and, in One, Judge Lauber Calls Out Petitioner's Counsel's Theatrics (10/19/26; 10/23/26)

The Tax Court decided two syndicated conservation easement (“SCE”) cases today (presented in order of most pages):

• Del Monte, LLC v. Commissioner, T.C. Memo. 2026-107 (67 pages; Docket ## 3411-21 at 381 & 6084-21 at #372, GS here [to come] authored by Judge Urda).
• Watson Lake Investments, LLC v. Commissioner, T.C. Memo. 2026-106 (53 pages; Docket ## 13696-20 at 165 & 24239-22 at 132; GS here [to come], authored by Judge Lauber).

Both of these are standard fare bullshit SCE gross overvaluation cases. I could just let it go at that because readers will already infer correctly that the partnerships presented bullshit valuations on the returns and with so-called expert testimony at trial.

But Judge Lauber’s opinion in Watson Lake deserves a special mention. First, Judge Lauber calls out one of the petitioner’s (Watson Lake’s) reliance on an obviously forged letter. (See Slip Op. 11 & 31-32.). Second and more importantly, Judge Lauber addresses in some detail the petitioners’ counsel’s theatrics (also properly characterized as bullshit in the extreme) to avoid the foregone conclusion that his knowledge of the case should have told him his clients would and should lose.

On counsel’s bullshit arguments, Judge Lauber first handily rejects the constitutional claims. (Slip Op. 43-44.) Nothing worthy of comment.

On counsel’s bullshit theatrics (Slip Op. 44-53), Judge Lauber provides the detail ad nauseum to show many footfaults (a euphemism in this context) by petitioner’s counsel. I copy and paste Judge Lauber’s introduction (Slip Op. 44-45):

ChatGPT and Loper Bright Misread Chevron Footnote 11 to Have Permitted Chevron Deference Over an Opposing Best Interpretation (10/7/26; 10/8/26)

Yesterday, I posted on Loper Bright’s Cryptic Statement of Statutory Stare Decisis for Chevron Precedents – And Giving Chevron a Bad Rap (Procedurally Taxing Blog 10/6/26), here. After I posted, I asked ChatGPT Plus (hereafter just ChatGPT) the following:

This is a blog entry that I wrote today. Please re-write it to make it tighter and cite appropriate authority. [I copied and pasted the blog entry]

Yesterday evening I posted at the bottom of the blog a link to a pdf of the ChatGPT comments and re-write along with some of my comments to ChatGPT’s response. I also offer that pdf link here and the ChatGPT link is here (omitting my comments). I think one of ChatGPT’s critiques of my blog should be elevated to a separate blog because it is so important. Here is the key critique having to do with Chevron footnote 11 (note ChatGPT is speaking in the first person).

I would revise the final argument about Chevron. Chevron itself, especially footnote 11, expressly contemplated upholding an agency interpretation even when it was not the interpretation the court independently would have selected. Your stronger empirical point is that this theoretical feature of Chevron should not be confused with proof that courts actually and frequently rejected what they regarded as the best interpretation in favor of an inferior agency interpretation. Barnett and Walker do not establish that proposition.

Back to JAT speaking for myself in the first person:

1. The key point I [JAT] was making was that Chevron required ambiguity where a court could determine only that competing interpretations were in the zone of ambiguity of the statutory text but could not determine which interpretation is best. So, with that point (which really when carefully considered covers the rest of my analysis), here is the rest:

2. ChatGPT Plus rightly points out that Chevron footnote 11 said: “The court need not conclude that the agency construction was the only one it permissibly could have adopted to uphold the construction, or even the reading the court would have reached if the question initially had arisen in a judicial proceeding.” (467 U.S., at 843 n. 11.) My problem is that, in the Chevron text to which that footnote applies, the Court says and I repeat the text and footnote to contextualize (I bold-face key words)

Loper Bright’s Cryptic Statement of Statutory Stare Decisis for Chevron Precedents – And Giving Chevron a Bad Rap (10/6/26)

I have just reviewed Eli Nachmany, Deference Undisturbed, 101 Notre Dame L. Rev. 985 (2026), on SSRN here. The author focuses on the rather cryptic discussion of statutory stare decisis in the Opinion of the Court (C.J. Roberts) in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 , 412 (2024), here [Preliminary Print]:

By doing so [leaving deference behind in Loper Bright], we do not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful—including the Clean Air Act holding of Chevron itself—are still subject to statutory stare decisis despite our change in interpretive methodology.

The actual holding of Loper Bright was that, going forward, courts must interpret statutes in agency interpretation cases de novo rather than deferring to agency interpretations as Chevron (and, really, Chevron predecessors dating to before the APA) allegedly allowed. Loper Bright's cryptic discussion of statutory stare decisis is dictum rather than a holding and seems to be something textualists often claim to avoid—permitting consequences of the interpretation to affect the interpretation of the text that, under their claimed textual preference looks only to the text, the whole text, and nothing but the text. (As Justice Kagan famously noted, textualists find a way to avoid text when they choose to, using the Major Questions Doctrine, for example, as a “get out of text free” card. West Virginia v. EPA, 597 U.S. 697, 779 (2022) (Kagan, J., dissenting).)

No one can doubt the disruption to a host of precedential statutory interpretations that would occur if Chevron deference could be litigated anew based on Loper Bright. As Nachmany discusses in the article (p. 1010), that cryptic statement was to stem the tide of the disruptive possibility.

Of course, the statement in Loper Bright is cryptic, offering nothing that helps courts in the future decide which precedents are entitled to statutory stare decisis and which are not. Perhaps it may be like pornography: courts will know it when they see it. See Jacobellis v. Ohio, 378 U.S. 184, 197 n. 2  (1964) (J. Stewart, concurring).

I discuss statutory stare decisis in my article. John A. Townsend, Loper Bright Flip Flops on Chevron Deference: A Tax Lawyer's Perspective, 79 Tax Law. 323, 391-397 (2026), SSRN here. In this posting, I offer some discussion that is in more cryptic in my article but inspired now by Nachmany’s article.

The issue that concerns me is to identify the holding of the opinion a court would use for precedent. I do not address the issue of what levels of precedent Loper Bright means its statement to apply (e.g., Supreme Court, Circuit Courts, or trial courts). At a minimum, everyone should recognize that Supreme Court adoption of agency interpretations under Chevron are precedential opinions for all judges to which the cryptic statement in Loper Bright might apply.

One thing that is certain is that the Loper Bright cryptic statement requires that the precedent in question have applied Chevron deference. I illustrate with two examples.

Example 1. The prior opinion noised about Chevron but when read fairly applied the agency interpretation as the best interpretation rather than deferring to it over an opposing best interpretation. This is a Chevron Step One case. Sometimes teasing out from the prior opinions the real basis for the holding can be difficult, but courts having the claimed facility for statutory interpretation should have some skills for interpreting potentially precedential opinions. (In this context the prior opinion is the law requiring interpretation.) As I discuss in my article, many opinions, perhaps a majority, that some view as Chevron cases really are not when analyzed closely because they found the agency interpretation the best. (See discussion in the article at 339-341, particularly at nn. 62-63.) Also, I have previously reported on significant data sets of Courts of Appeals “Chevron” holdings identified by others and found that clear Chevron holdings were rare and some likely approved best agency interpretations even though they noised about Chevron. Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (Federal Tax Procedure Blog 2/9/23), here; and Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here. (Focus in each blog on Category 5.) This type of precedent should clearly qualify for statutory stare decisis as to the holdings that (i) the statute is not ambiguous and (ii) the agency interpretation is the best interpretation. These cases are not Chevron cases.

Adventures in AI and Federal Tax Procedure on § 7434 (10/3/26)

Today, I was reviewing a recent decision from the Seventh Circuit: Jacoby v. Idlewild Country Club, No. 25-1608 (7th Cir. Oct. 2, 2026) (nonprecedential disposition), CA7 here and TN here, and added it to a footnote in the § 7434 discussion in my working draft for the 2027 edition (to be published in early August 2027). Since I am trying to develop some skills in AI (even though I have not mastered my own intelligence, if any), I decided to use the § 7434 discussion with revisions to date to test what AI has to offer. I used ChatGPT Plus (a paid version). The results offered may be viewed here. I then took the version as ChatGPT rewrote it, pasted it into WordPerfect (my word processor of choice because I am an old lawyer who has not learned MS tricks), and then refined ChatGPT Plus’s offering. So, the files relevant to this exercise are:

1. The version submitted to ChatGPT Plus from the working draft for 2026. Here. This version has 4,750 words (per WP word count). The red font text indicate revisions in the working draft from the 2026 editions.
2. The version ChatGPT Plus offered (with the proposed footnotes as endnotes). Here. This version has 6,079 words (per WP word count).
3. My changes to the ChatGPT Plus that I have not decided whether to replace in the 2027 edition. Here. This version has 6,757 words (per WP word count).

I think each version has the same information as presented in the original from the 2027 working draft (¶ 1).

I would appreciate those having the interest to give me feedback as to which versions are better and more specifically if the two revised versions (¶ 2 and 3 above) are better in the sense of how they better convey the information in the original version (¶ 1) and are worth the additional words to convey the information.

Tax Court Issues a Precedential Opinion (T.C.) Holding that Form 872-T Does Not Revoke a Proper Form 872 Consent to Extend the Statute of Limitations; Well, Duh! (9/30/26; 10/6/26)

The Tax Court today issued a regular opinion in Fine v. Commissioner, 167 T.C. ___, No. 13 (2026) (T.C. # 24390-21 at #43 and GS here. The issue was, to use tax jargon, whether a taxpayer can use Form 872-T to terminate a Form 872 consent to extend the statute of limitations. OK, to be more precise, Form 872 is a Consent to Extend the Time to Assess Tax; Form 872-T is Notice of Termination of Special Consent to Extend the Time to Assess Tax. (Bold-face supplied by JAT.) On its face the name alone should tip one-off that it may not apply to Form 872, because Form 872 is not nominated a “Special” Consent. Reading Form 872-T, one can quickly determine that it applies to the Form 872-A, nominated Special Consent to Extend the Time to Assess Tax (bold-face supplied by JAT).

I dare say that only the most unaware tax practitioner would have known that a Form 872-T cannot revoke the date certain in a Form 872. But apparently such an unaware tax practitioner was the Fines' lawyer (both with respect to deploying / filing the Form 872-T (5 times) and making the argument in the Tax Court case (see Slip Op. 4 n. 5 identifying the person submitting the form as “individual is also counsel of record for petitioners in this case.”).

So, why would the Tax Court use a regular precedential opinion to state a truism known to all minimally competent tax lawyers? In my mind, this opinion should have been issued as an order and not even elevated to T.C. Memo. status. (But they are Tax Court Judges, and I am not.)

 For readers’ further consideration, I offer the following: