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

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):

          The preceding discussion makes clear that petitioner’s position on the merits of these cases was extremely weak. Perhaps for that reason, he devotes a significant portion of his Posttrial Brief to attacks on the IRS and the Court. He accuses the IRS of waging a “campaign against deductions” claimed for easement contributions. This campaign supposedly entailed “a carte blanche disallowance of the taxpayer’s deduction in full . . . with no explanation of [the] reason through the entire process including . . . trial.” Rather than make “an objective valuation of the case,” the IRS purportedly “doubled down . . . thereby undermining congressional intent.”

          This is rhetoric divorced from facts. The IRS has indeed challenged abusive SCE transactions of the sort involved here, where wealthy investors in essence purchase tax deductions premised on absurd overvaluations of property. The Commissioner’s examinations of these schemes could be dubbed “a campaign” only in the sense that the examinations were an inevitable and appropriate response to literally thousands of abusive transactions following the same cookie-cutter pattern. The Commissioner’s track record in this Court—he has handily prevailed in dozens of recent cases—shows that his positions have been justified. And contrary to petitioner’s assertion that the IRS supplied “no explanation of [the] reason through the entire process including . . . trial,” the IRS and its experts comprehensively elaborated the multiple reasons why the deductions claimed in these cases were unjustifiable. Although petitioner pretends to be the victim, the real victims in cases like these are the U.S. Treasury and the countless honest taxpayers who voluntarily pay the tax due on their hard-earned income.

          Petitioner likewise attacks the Court, asserting that he was denied a fair trial by the manner in which the Court conducted the proceedings. Petitioner devotes an entire section of his Posttrial Brief to this argument, and his counsel indicated at trial that he would urge this position on appeal. We are generally reluctant to comment on the behavior of lawyers who appear in our Court. Given the nature of petitioner’s arguments, however, we have no alternative but to do so here.

          The attorney who tried these cases for petitioners, S. Fenn Little, has four decades of experience litigating criminal defense and personal injury cases. He now also litigates conservation easement cases. At the start of trial he stated: “This is my second Tax Court trial in my entire life.” It appeared to the Court that Mr. Little was not fully accustomed to Tax Court practice, particularly to the norms governing expert testimony. This problem generated many of the colloquies of which petitioner complains.

And the details get worse after this introduction.

This reminds me of a case I was involved with while with DOJ Tax Appellate. The case I handled was Kaestner v. Schmidt, 473 F.2d 1294 (9th Cir. 1973), GS here. The taxpayer was Kaestner; Schmidt was the IRS District Director. (There was some intrigue around that case, but I forego that because not relevant to this blog.) As it turns out, Kaestner’s ex-husband was the taxpayer in Brown v. Commissioner, 418 F. 2d 574 (9^th Cir. 1969), here (handled by other attorneys in DOJ Tax Appellate), a very short opinion with the key paragraphs:

Brown tried his own case in the tax court. He there handled the case about as badly as the three judges of this panel would have handled a neurosurgical operation. The tax court entered a decision against him, finding a considerable deficiency and fraud with its usual fifty per cent penalty.

On appeal, too late, he has hired very competent counsel. But stuck in the mud with the trial record, counsel simply cannot pull the doctor out.

Finally, my editorial comment: I am amazed that the Tax Court continues to devote so much time and effort to these bullshit valuation cases. See 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; 9/10/25), here.