Tax Court Rejects Bullshit SCE Valuations; Applies Penalties; and Rejects Hail Mary Arguments in Footnotes (11/10/26)

Yet another. Riddle Aggregates, LLC v. Commissioner, T.C. Memo. 2026-117 (11/10/26), T.C. No. 31104-21 at # 315, TN here, and GS here [to come].

The Court goes with the IRS valuation expert, mimicking baseball arbitration. Since the shelter’s lawyers abandoned the reasonable valuation field, leaving the IRS with the only reasonable valuations, naturally the Court went with the IRS. (This differs from baseball arbitration where the arbitrator accepts the most reasonable valuation; here the shelter offered only bullshit valuations.)

I don’t think readers will benefit from my digging into and regurgitating the opinion; nor do I think they will be enlightened on tax procedure by reading the opinion on their own. It is the same old bullshit, although Judge Kerrigan skillfully shows she can dig into the bullshit to see if there is a pony underneath (there is not). And she does it in 34 pages which, from my nonempirical memory, is less than most judges spend on this genre of bullshit case.

I think the two last footnotes—11 and 12—in the opinion are worth copying and pasting (my experience is that in otherwise unexceptional (or even exceptional) cases there are some jewels in the footnotes, including here addressing some of the shelter's "hail Mary" ruses:

n11 Petitioner also raised the argument that the Supreme Court’s decision in Trump v. Slaughter, 146 S. Ct. 2283 (2026), undermines this Court’s earlier decision in Riddle Aggregates, LLC v. Commissioner (Riddle I), No. 31104-21, 165 T.C. (Dec. 15, 2025), denying petitioner’s Motion for Partial Summary Judgment that the Seventh Amendment to the U.S. Constitution guarantees a jury trial before respondent can assess penalties. Petitioner argues that after Slaughter failure to adjudicate penalties in accordance with the president’s political goals could be valid grounds for the removal of a Tax Court judge. The Supreme Court did not address the removal of a Tax Court Judge. Slaughter, 146 S. Ct. at 2306 (“Nor do we determine the fate of officials not before us. . . . [T]he permissibility of tenure protections for the judges of non-Article III courts, such as the Tax Court and the Court of Federal Claims, is not presented or briefed in this case and poses a different set of questions.” (citation modified)). Accordingly, Slaughter does not affect our analysis in Riddle I.

n12 Petitioner raised the argument that Treasury Regulation § 1.6662-5(a) is invalid. While the provision addresses the issue in dispute, respondent relies upon the statute to support his position. We reached our conclusion by relying upon the statutory text.

Article Correction for the 51-49 Rule of Constitutional and Statutory Interpretation; Loper Bright and Interpreting Out Ambiguity (11/9/26; 11/10/26)

I write this blog to add nuance, dialing back a key claim I made in my article Loper Bright Flip Flops on Chevron Deference: A Tax Lawyer's Perspective, 79 Tax Law. 323 (2026), here. In broad strokes, I questioned whether Loper Bright’s claims about the state of the law at the enactment of the APA in 1946, noting particularly the role of a famous tax case, Dobson v. Commissioner, 320 U.S. 489 (1943) that Loper Bright ignores and the statutory text interpreted in Dobson. I do not change that discussion. More importantly for this blog, I questioned Loper Bright’s claims that

(i) Chevron required courts to defer to an agency interpretation over an interpretation that they determined to be the best interpretation; and

(ii) through rigorous interpretation, courts can interpret out interpretive ambiguity (aka interpretive equipoise) where a court could not determine with sufficient confidence which of two competing interpretations was the best interpretation.

I do not change (i) in any respect.

I add considerable nuance to (ii).

3rd Installment of ChatGPT Weekly Tax Procedure Case Watch (11/7/26)

I copy and paste below the ChatGPT Plus offering for this week (posted yesterday, 11/6/26) which can be viewed here. I have decided that, for each recommendation, I state under the category JAT Action my decision as to what to do about the recommendation. Also, I have decided to make changes or additions I think are appropriate to the ChatGPT content. I present those actions, changes, and additions with redline.

Federal Tax Procedure Case Watch

November 6, 2026 | Decisions issued October 31–November 6, 2026

This week's strongest recommendation is Kings Road Property, LLC v. Commissioner, 167 T.C. No. 14 (Nov. 2, 2026). It presents an unusually good opportunity to examine the Tax Court's treatment of jurisdictional deadlines, equitable tolling, statutory interpretation, and the Commissioner's efforts to obtain reconsideration.

A second worthwhile candidate, Pinckney v. Commissioner, concerns the relationship between civil tax examinations, criminal investigations, and civil fraud penalties.

1. Kings Road Property, LLC v. Commissioner — Equitable tolling, statutory interpretation, and reconsideration [JAT Link to GS here]

Highest priority

167 T.C. No. 14 (Nov. 2, 2026), Judge Buch.

Read the November 2 opinion

The Tax Court denied the Commissioner's motion to reconsider its September 21, 2026 opinion holding that the petition deadline under § 6234(a), governing BBA partnership proceedings, is nonjurisdictional and potentially subject to equitable tolling.

The Commissioner argued that the decision conflicted with North Wall Holdings, LLC v. Commissioner, 165 T.C. 143 (2025), which treated the former TEFRA partnership petition deadline as jurisdictional and not subject to equitable tolling. Judge Buch explained that the Court had already considered and rejected that argument, including in Big Apple Tompkins Realty LLC v. Commissioner, 167 T.C. No. 7 (2026). The Court also declined to entertain new theories offered on reconsideration.

LAWS.com

Why this is particularly suitable for your blog

There are three potentially interesting issues, although the November 2 opinion does not itself reopen the merits of the original jurisdictional holding.

First, the distinction between TEFRA and BBA petition deadlines. The Tax Court acknowledges that the statutory language is nearly identical but reaches different conclusions because of differences in the statutory and administrative schemes. This presents a methodological question: How much weight should statutory context and administrative complexity receive when Congress uses substantially the same language?

Second, jurisdictionality and equitable tolling are separate questions. The opinion notes that a deadline can be nonjurisdictional yet not subject to equitable tolling, citing Kyick Holdings, LLC v. Commissioner, 188 F.4th 39 (1st Cir. 2026). This distinction is worth developing because the Supreme Court's clear-statement approach to jurisdictionality does not necessarily settle the availability of equitable tolling. [JAT Comment: I would say this differently and can summarize the categories as: Time limits in the IRC are of three types: (i) jurisdictional meaning that, since jurisdictional, the time limits in this category must be strictly met (meaning also no equitable tolling); (ii) time limits that are not jurisdiction but proper interpretation shows that the text means that the time limits are to be strictly met (meaning also no equitable tolling); and (iii) other time limits that do not require strict compliance and thus may be subject to equitable tolling.]

Third, the Commissioner's administrative-burden argument. The government warned that the Tax Court's interpretation would impose significant administrative burdens. That raises a question especially consistent with your recent work: Are administrative consequences legitimate evidence of statutory meaning, or are they policy considerations that cannot displace the best interpretation of the enacted statute? [JAT Comment: I am not sure that the opinion addresses this issue. I suppose that, at the extreme, any process issue raises the question in unanticipated cases of whether some glitch in the result of process produces a result that seems to fly into the anticipated application of the text. That may be something like the absurdity doctrine which requires courts to interpret statutory text to avoid absurd results. That is a big issue in statutory interpretation, but I don’t think this opinion is a good reason to launch into that discussion in a separate blog entry.]

Suggested title

Tax Court Refuses to Reconsider Equitable Tolling of BBA Partnership Petition Deadline—Does Administrative Complexity Determine Jurisdiction? (11/6/26) [JAT Comment: I use the parenthesis with date to show the date of blog posting, not the date of the opinion that I blog about.]

Recommendation: A full analytical post, but one that examines the November decision together with North Wall, Big Apple, and the September Kings Road opinion. The interesting subject is the doctrinal disagreement, not simply the denial of reconsideration.

JAT Action: I was aware of this second T.C. opinion in Kings Road and just did not think there was enough there to develop into a blog entry. Indeed, I read it, perhaps superficially, as saying nothing more than it had said in the first T.C. opinion in Kings Road, along with a reminder to the IRS not to file motions for reconsideration of previously rejected arguments. In that context, I was baffled as to why this was a T.C. opinion rather than a T.C. Memo opinion or even just an Order; the only “Held” in the syllabus is something already held in a T.C.  opinion from 1998. The Court had already held in the first Kings Road opinion that the result under BBA was different from the result under TEFRA. So, I just did not think there was enough there to blog. But I may be wrong simply because I do not understand why it is a T.C. opinion.

2. Pinckney v. Commissioner — Civil examinations, criminal investigations, and civil fraud [JAT Link to GS here.]

High potential, subject to closer review

T.C. Memo. 2026-113 (Nov. 4, 2026), Judge Morrison.

Opinion record on CourtListener

The Tax Court sustained substantial deficiencies and § 6663 civil fraud penalties arising from a tax preparer's underreported income and improper deductions. The case involved an IRS civil examination, a subsequent criminal investigation, a criminal conspiracy guilty plea, and extensive reconstruction of income from bank records.

LAWS.com News+1

Why it may be worth discussing

The interesting question is not whether the taxpayer's conduct was fraudulent. The record appears to provide substantial evidence of that.

Rather, I would focus on the intersection of civil and criminal tax enforcement.

The opinion reportedly contains an extended account of the transition from a civil examination to criminal proceedings. That invites examination of when a civil investigation becomes sufficiently criminal in character to implicate procedural safeguards and what effect, if any, the transition should have on the use of evidence subsequently offered in a civil deficiency case. [JAT Comment: I don’t think the opinion presents that issue, so that it would be a stretch to launch a blog entry discussing it.]

A second question concerns the clear-and-convincing standard for civil fraud. Where the Commissioner relies on bank-deposit reconstruction and evidence developed in criminal proceedings, how should the court distinguish proof of an underpayment from proof that some portion of that underpayment was attributable to fraud?

These are possible analytical directions, not assertions that Judge Morrison incorrectly applied the law.

Suggested title

Civil Tax Examination Leads to Criminal Prosecution and Civil Fraud Penalties—Some Procedural Questions Raised by Pinckney (11/6/26)

Recommendation: Worth reading closely before deciding whether to write. It may offer an interesting procedural discussion, but only if the court's account of the investigation reveals more than routine application of established principles.

JAT Action: Again, I was aware of Pinckney and just did not think there was enough in it to warrant a separate blog entry. I think readers of this blog will already understand the difference between a civil examination that follows a criminal conviction with restitution-based assessments (RBAs) after § 6201(a)(4) was enacted. ChatGPT’s discussion of the issues seems a bit muddled.

3. Glass Warehouse, LLC v. Commissioner — Corporate penalties and the burden of production [JAT Link to GS here]

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