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; 7/17/25)

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 # 195). 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:

• against the taxpayers whose “position in such proceeding is frivolous or groundless.”
• against for “any attorney or other person admitted to practice before the Tax Court [who] multiplied the proceedings in any case unreasonably and vexatiously” personal liability for “ the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” Similarly, costs awarded for such positions taken on appeal.
• Similarly against the U.S. for such behavior by IRS attorneys,

I link here the relevant pages of the Order. (Caveat, at least as of the time I downloaded the Tax Court’s pdf of the full Order on Monday, the transcript after the one-page formal Order produced only gibberish on a copy and paste and did not permit searching in the pdf; I accordingly printed to a flat pdf file with image only and OCR’d the new file so that copy and pasting and searching can be done.; I have also done the same for the full Order and attached transcript here.) [Added 7/17/25 1:00pm: The Tax Court has filed a corrected pdf to make it searchable with text that can be copied and pasted; the corrected pdf which may be obtained from the docket entries linked in the first paragraph, at docket entry # 195.]

This is such an important issue that I encourage readers to read at least the excerpted part which is just a few pages at the end of the Transcript.

I will summarize simply by quoting Judge Buch at the conclusion of the 6673 discussion:

          We mention all this because this is one of eleven cases before this Court in which True North Resources is the partnership representative pursuing the litigation. And we provide this warning, that continuing to pursue similarly incredible, nonsensical, and, quite frankly, smelly arguments may result in sanctions on petitioner or its counsel.

Judge Buch is calling a spade a spade in his more polite and refined terms than I use. I am reminded of another context where Vinny (of My Cousin Vinny) called out the prosecutors’ argument by simply saying (video here): "Everything that guy just said is bullshit;" hey, it worked for Vinny, at least in the end of trial after he had established credibility with the judge and the jury. Good lesson for litigators. (My Cousin Vinny is chock full of good lessons for litigators.) One thing I need to learn from Vinny is to be polite when calling out bullshit--at least say "Thank you" after dong so.

So, I forego further rant here; everything I could rant about is implicit in the foregoing. Blame goes to the taxpayer, the taxpayers' counsel, and the witnesses, lay and expert, who were not credible.

I disagree with one point Judge Buch makes in calling out the bullshit. He says Transcript p. 62 (pdf page 60):

          Many of the people who sat through this two-week trial were not harmed by doing so. The Court, the attorneys, and the expert witnesses are all paid for being there. Petitioner was there by its own choosing.

          But both the unrelated fact witnesses and the tax system in general were harmed by this trial. The witnesses were inconvenienced. They were not involved in the transactions in any way. They missed days of work and had to travel into Atlanta for trial so that petitioner could pursue an argument deemed by courts to be "not credible" and "nonsense." More broadly, taxpayers footed the bill for the resources necessary to conduct this trial.

Judge Buch is an outstanding judge, but I think he is underinclusive in naming the persons harmed by this wholly unnecessary trial. The Court and its staff at pre-trial trial machinations (note there were 195 docket entries) and the IRS attorneys, although paid, were inconvenienced by having to do the pre-trial and trial work necessary for Judge Buch to render his decision calling out the bullshit. That means that taxpayers generally were burdened with the costs of those people. Hell, the opinion reading public, including me, was burdened by having to read the lengthy Order and attached transcript.

More importantly, as to the paid persons, simply because they were paid does not mean that they were not inconvenienced. For example, Judge Buch had to sit through the bullshit trial when he could have done something more productive as a judge or personally. In this regard, I have fired clients who wasted my time, regardless of the fees I could have earned. (I warned clients that if they wasted my time, I would charge them for the time wasted and then fire them rather than waste any more time with them, regardless of what they might have to pay for any more time wasted; there is value to me in being productive and efficient, value having nothing to do with someone will to pay me to be unproductive and inefficient.)

Finally, there is one more potentially culpable party involved. The charities involved in receiving grossly overvalued property. Did the charities know the scam and participate anyway? Should they have known. The charities had to sign Form 8283, Noncash Charitable Contributions (Rev. December 2023), here, in Part V, where, in part here relevant, the charity certifies (emphasis supplied by me):

This charitable organization acknowledges that it is a qualified organization under section 170(c) and that it received the donated property as described in Section B, Part I, above on the following date * * * *.

Section B of Part One shows (in relevant part at par. 3):

(c) Appraised fair market value

* * * *

(i) Amount claimed as a deduction (see instructions) 

Further, Section A requires (which the charity does not certify, but unless the charity signed blank or partially blank Forms excluding the Section A information would likely have seen as part of its minimum due diligence):

(h) Fair market value (see instructions)

* * * * 

(i) Method used to determine the fair market value

Did the person signing for the charity (or the person authorizing or directing the person to sign) not know the claimed amount was bullshit or not smell a rat signing without the information required?

So, I am at the end. The blogs and links I promised at the beginning are:

• Further Lesson on Importance of Credibility for Clients and Expert Witnesses (Federal Tax Procedure Blog 5/14/24), here.
• Yet Another Bullshit Tax Shelter Bites the Dust (Federal Tax Procedure Blog 2/26/13), here.
• Failure of Taxpayers' Proof of Value Loses Case (Federal Tax Procedure Blog 10/8/14), here.