In an order in Puglisi v. Commissioner (T.C. Dkt Nos. 4796-20, 4799-20, 4826-20, 13487-20, 13488-20, 13489-20 Order served 10/29/21), here, the Tax Court (Judge Gustafson) permitted the IRS to concede the deficiency adjustments related to the taxpayers' microcaptive insurance and thus move to decision in the case. Readers know that the IRS believes – strongly believes—that many forms of microcaptive insurance are abusive. Many microcaptive deficiency cases are pending, and, of course, the Supreme Court recently held in CIC Svcs., LLC v. IRS, 593 U.S. ___, 141 S.Ct. 1582 (2021) that the material advisor reporting requirement imposed by IRS Notice for abusive microcaptives could be subject to pre-enforcement review. As to CIC, see Supreme Court Holds in CIC Services that IRS Micro-Captive Notice May Be Contested Pre-Enforcement (5/17/21; 5/18/21), here.
In the Puglisi Order, the IRS conceded all of the adjustments related to the microcaptive insurance. Typically, if the IRS concedes, the taxpayer may be more than willing to accept the concession and move on, perhaps trying to recover attorney fees and costs under §7430. In this case, the taxpayers apparently are unable to recover under § 7430 "' because of the technical limitations of I.R.C. section 7430.'” (Slip Op. 6.) Here, the taxpayers do not want to move on but want to litigate the merits of the issues the IRS conceded. What is going on that requires an order of 17 pages?
The taxpayer speculates, as recounted in the Order, that (Slip Op 8-9):
Respondent has now concluded that he wants to abandon the tax deficiencies asserted in his notices of deficiency, apparently because he recognizes that Petitioners' cases are not the litigation vehicles that he wants to use to present his theories to this Court. But while Respondent is willing to abandon the asserted deficiencies, he is not willing to concede the inaccuracy of his determinations underlying the adjustments * * *. [The motions for entry of decision make a] strategic attempt to “concede” the overall amounts at issue, in order to avoid an adverse ruling on the specific determinations in the notices of deficiency * * *.
Judge Gustafson addressed the IRS’s litigating strategy later (Slip Op. 16-17):
