In the third of a three-part series, Damien Martin and Tony Nitti of EY discuss their top tax cases from 2024, focusing on two C corp cases: Ju et al v. United States and Stead v. Commissioner.
Tax Notes Talk is a podcast produced by Tax Notes. This transcript has been edited for clarity.
David D. Stewart: Welcome to the podcast. I’m David Stewart, editor in chief of Tax Notes Today International. This week: top 2024 tax cases, part 3.
We’re back this week with the last part of our 2024 tax cases series. Damien Martin and Tony Nitti, both practitioners at EY, will finish out their list in this episode. If you haven’t heard parts 1 and 2, be sure to check out the links in the show notes. As with the other two episodes, this one will be available to watch on YouTube.
All right, let’s go to that discussion.
Damien Martin: All right. Maybe with that, let’s leave the world of S corps, near and dear to your heart, and we’re going to go to C corp area, into another area that’s near and dear to your heart: section 1202 qualified small business stock. Which, I’ll tell you, Tony, I’ve heard this from others, too — they say, “Tony’s an S corp guy and he’s a 1202 guy.” Those two things seemingly don’t go together, but that is you, Mr. Nitti.
Tony Nitti: That was another pun! Was it a pun? Am I finding puns where there weren’t?
Damien Martin: I don’t know, I don’t know.
Tony Nitti: Was that a Ju pun about our case that we’re talking about?
Damien Martin: But, no. We have a federal claims court decision in Ju et al. v. United States. It came out last March. It really looked at these finer points of 1202. Yeah. What happened here? And again, what are these nuances that we need to be paying attention to?
Tony Nitti: First thing’s first: This case is a blessing to anybody who works in 1202 because what it tells us is that the days of the Wild West of clients just being able to potentially say, “Trust me, it’s QSBS” — clearly, we have some burdens of proof, so that’s what I really enjoyed about this.
Let’s not bury the lede. Section 1202, what does it do? It is a very powerful provision. It says that a noncorporate shareholder can exclude from their federal taxable income up to 100 percent of the gain from the sale of qualified small business stock that has been held for more than five years. Now, there’s limitations of the greater of $10 million or 10 times your basis, but we’re not talking deferral here, Tenacious D; we’re talking exclusion. You sell out of your company, you pocket gain, you don’t pay tax. You go retire somewhere, you move on with your life, and it never comes home to roost. It’s really powerful.
It has been one of the most fascinating things in my career to watch the evolution of 1202 where seven, eight years ago, nobody had even heard about it. Now every PE firm, everyone’s planning into 1202. They’re being proactive; they want to make sure they get these benefits on the back end. Unbelievably powerful.
However, this case right here — every decision in 1202 is a landmark decision because there are no 1202 cases. This is now the second case in 32 years under 1202. We’ve got maybe 11 private letter rulings, and we’ve got one case under a companion provision, 1045. But when a case comes out under 1202, we stop and we pay attention, because we just don’t see these.
What I love about this case, as I alluded to before, is once the public realized, once the corporate rate dropped to 21 percent, that, “Hey, we could be a C corp. We can benefit not only from the 21 percent rate, but this exclusion.” Because as we’ll see, to be QSBS, it is strictly the domain of a C corp. You have to be a C. What we have is an era where people just thought, “Hey, to be QSBS means I’ve got to hold stock in a C corp for five years, and then I’m good to go.” This case really confirms for us that you better have your ducks in a row.
As somebody who puts ducks in a row for a living for people under 1202, I write opinion letters, I do memos, things like that. This is nice to know, because yes, sometimes people say, “Oh, I’m pretty good. I’m comfortable.” It’s like, man, I know all of the requirements that it takes for stocks to be QSBS, and there’s a lot here, and we should probably prove out some math. This case, we get to put it in our pocket now and say, “If you don’t want to believe me, believe the court, because look at what they told us here.”
So what this really drives into, D, is, fine, we get to exclude gain from QSBS held for more than five years. Part of it is just low-hanging fruit about the hold period, but part of it is, what does it mean to be QSBS? It’s not an easy determination, buddy. What makes it frustrating is this is a shareholder-level exclusion. Ju, our guy here, excluded at the shareholder level, but the magic all happens mostly at the corporate level. The corporation has to be in the right type of business — you can’t be accounting, health, law, actual science, consulting, brokerage, those types of things. You have to be in a qualified business. You’ve got to have your assets deployed in that qualified business. There’s just — most of the tests are going to happen at the corporate level, and yet you have this disconnect where the exclusion is claimed, so it makes it really tricky.
Ju was an attorney — not an attorney, I’m sorry. He was a professor at a university. In 2003 he had developed some interesting ideas that turned into patents. He had an agreement, as all those professors did, with his university that said, “Any patented concept here is owned by the university, not by you.” What the university would do, though, is say, “If we end up licensing out your patents, we’re going to give you —” I don’t remember, D, if it was 30 or 35 percent. But, “We’re going to give you a percentage of whatever we get in exchange for the patent.” He followed through what he needed to do.
The university took ownership of these patents in 2003. They licensed them to somebody where the university got paid in both cash and stock. They gave him some cash, and they gave him some stock — I’m sorry, they did not give him some stock yet; the idea was that the stock gets held back until he leaves the university’s employ. That was the whole idea. But there was, I believe, about 17,000 or 18,000 shares that were issued in his name in 2003, even though that ends up being up for debate a little bit later on in the conversation.
That’s the deal he strikes. Things go along that way until about 2015. In 2015 he gets annoyed with the university, has a dispute, and they end up reaching a settlement agreement. In that settlement agreement, it instructs the other party who had issued about 18,000 shares to Ju, it instructs that other party to now issue another 54,000 shares of stock in 2015. The shares are retitled. In fact, both tranches of shares were retitled in 2015. This corporation, call it Corporation X, they issue another 18,000 shares that were meant to reflect those shares issued in 2003 in 2015, and then they issued these new 54,000 shares in 2015 as well.
He gets these shares. Some appear to have been really issued in his name in 2003, even though they were reissued in 2015. But clearly, 54,000 shares were issued in 2015. Then he sells them in 2016. So we have a problem, D, because it looks like he acquired these shares in 2015 and he’s selling them a year later. One of the only things that’s not complicated about section 1202 is you’ve got to hold these shares for five years. How are we selling shares we got in 2015 in 2016 and claiming the exclusion for QSBS?
Ju, as you can imagine, said, “Well, come on; there’s a little bit more going on here. This transaction happened in 2003, and all the shares were being held by the university, but they were being held as a matter of law for me. I had the rights to those shares in my individual capacity.” It’s really important that Ju be treated not only as having owned the shares since 2003 from a holding period perspective, D, but he had to have been the one who originally was issued the shares from the corporation, because we have a host of tests that have to be met on the day that you acquire shares in order for those shares to ever be QSBS.
One we talked about: It’s got to be stock in a C corporation. Two, it’s got to be post-August 9, 1993. We never see that be a problem anymore. Three — this is the one we’re focused on here — shares have to be issued at original issuance directly to you in exchange for cash, services, or property. If the shares were issued to the university in the university’s name, and then the university passed them on however they do — as compensation, for example, to Ju — he would not satisfy this original issuance requirement. Even if we ignore the holding period situation for a moment, if those shares were not always in Ju’s name and he was the true owner of them, if they passed through the university, it’s not going to do him any good.
As we like to say in the 1202 space, once somebody has QSBS, don’t transfer them anywhere unless we tell you it’s OK, because shares can’t move around freely and retain their QSBS status. I think a frequent problem we run into, and you might even see, is someone who owns what might be QSBS in their individual capacity and they drop it into a family limited partnership and think that that’s fine. It’s not fine. That partnership did not acquire the shares at original issuance; we just killed the QSBS qualifications.
Damien Martin: Yeah.
Tony Nitti: Ju had to come in — if he was going to have a fighting chance, he was going to have to argue not only were the shares issued in 2003, but they were issued directly to him, and the university was just holding them as a conduit, if you will. But the court just looked at that and said, “There’s no evidence that you owned the benefits and burdens of those shares of stock from 2003 to 2015. Whether we want to look at it as the shares were newly issued to you in 2015 from the university, or whether they were just issued directly to you in 2015, you’re either going to fail the original issuance test because they passed through the university, or the holding period test because they were newly issued to you in 2015.” Either way, those 54,000 shares are not going to work out.
But then, the court had to acknowledge that it certainly appears like there’s a genuine dispute here that the original 18,000 shares were issued to you in 2003 directly — the piece that he got upfront in this whole situation. No reason they can’t be QSBS, because we got them back in 2003. That’s more than five years ago. They were originally listed in your name. We’re at peace with both the original issuance requirement and we are at peace with this five-year holding period. The issue is there’s other requirements that have to be satisfied.
Damien Martin: Yeah.
Tony Nitti: The one that causes us a lot of trouble in this space is that, at the time you acquire stock in a corporation that you hope to be QSBS, we have to take a snapshot of the corporation’s history from the moment of formation through the moment immediately after the stock was issued. At no point during that time span could the corporation have had a tax basis of its assets in excess of $50 million. If there’s a series B raise and assets go to $51 million, and then they spend a bunch of it, and someone else comes in when the assets are below $50 [million] again, it doesn’t matter — once you tick over $50 million, you are tainted forever. We always have to keep track of this $50 million test and make sure that we’re getting in at a time when the assets have never been above $50 [million] and aren’t above $50 million immediately after we get our stock.
They said to Ju — and this is the part that everybody out there listening should take note of — is they said, “Fine. You want to be able to argue that your 2003 shares were acquired at original issuance, and they probably were, and that they had a five-year holding period, and they certainly did — now you need to prove to us the assets had been less than $50 million before you acquired the stock and when you acquired the stock.” This is what I think a lot of people claiming QSBS benefits are not prepared to do, D. Because what they were able to do in this case was get their hands on financials from 2009 to 2011. It showed total assets of $2 million.
Then the appeal became one of logic: “Hey, if the assets were only $2 million in 2009, and I acquired my shares in 2003, what’s the likelihood it was above $50 million in 2003?” The single biggest takeaway from this case is that the Tax Court — it wasn’t the Tax Court. Who was this? This was court of claims? I can’t remember.
Damien Martin: Yeah, exactly. Yeah, court of claims.
Tony Nitti: Court of claims said, “We’re not going to take your word for this; the burden of proof is on you.” The IRS even came in and argued and said, “You’re giving us financials from 2009 and ’10 and ’11. What happened in ’09, ’10, and ’11? We had a financial crisis. Who knows? Maybe all the assets bottomed out. You need to establish for us that back in 2003, all the way back to formation, the assets of this company were less than $50 million if you want QSBS status.”
That should be the takeaway for everybody, is that you need your ducks in a row. You need to do the math. You need to be able to prove to an agent that, “Hey, here are the assets from the moment of formation through the moment immediately after I acquired my stock, and I can show you that they were less than $50 million.” Because it is not the Wild West anymore: The IRS has caught on, as taxpayers have, to what it means to have QSBS and the benefits that flow from it. They are going to make us earn it.
If we have learned nothing else in our time in the tax law, Damien, it’s that exclusion provisions are going to be interpreted narrowly. We are seeing this here in the Ju case. It’s funny; it’s a case that, at first blush, you’re like, “Ah, it’s about holding period. It’s not all that meaningful.” But then, when you look at this $50 million test and what they were not willing to do for the taxpayer, you’re like, “This is meaningful.” This tells us that the burden of proof is on us to satisfy the standard that we have QSBS in our hands.
Damien Martin: Yeah. Well, to hearken back to your point earlier about where this exclusion — and again, you get a wholesale exclusion, you’ve got to pay attention. You also know there’s going to be some hoops and some finer points to get through. But who’s taking this exclusion? Well, it’s the taxpayer.
Tony Nitti: Yeah.
Damien Martin: At that individual tax return. As the guy that signs individual tax returns, you do, you feel like maybe you’re the bad guy sometimes and say, “Well, do we know? How much documentation do we have?” This is really — I think it’s, again, an important lesson in being careful about that, but it’s also helpful. Because, again, not to say in a fearmonger way of “let’s talk about all the bad things that can happen,” again, I look at it as the constructive, “Well, let’s make sure we do” — to use your term — “have our ducks in a row.” Because I’ve got to get comfortable, just like you do, as the guy signing your return that we qualify, so that we can lock up and make sure we really have your exclusion nailed down.
Tony Nitti: Yeah. Like I said, that’s why tax advisers should look at this case as a blessing, because you can get put in some really tough situations. Because shareholders will say, “Hey, I’ve got friends who are the other shareholders, and they claimed the exclusion.” Or, “I sold some of this stock two years ago, and my preparer then claimed the exclusion. Why are you giving me a problem with it?” Then you say, “Hey, we need that visibility into the corporation’s books.” They say, “I’m not going to get that visibility. I don’t have that transparency.” These are challenges that we live in. They’re not wrong, when a shareholder client says, “I can’t prove the assets were under $50 million.” Without some buy-in from the corporation, you’re really stuck between a rock and a hard place. These are all the things that make 1202 challenging.
But what I would tell people — shareholders, I’m not even talking to tax advisers — is if you’re selling and you think you have QSBS, there’s going to be more of you. There’s going to be other people who are selling in that same company, so somebody needs to explain to the corporation that, just from an investor relation perspective, it may be worth getting this study done so that everybody can have some degree of certainty as to what they’re actually selling and whether it’s QSBS.
Damien Martin: That’s right, that’s right. All right. Well, let’s get to our sixth case here, our final case. We’re going to head back over to the Tax Court. This is Stead v. Commissioner. It’s a bench opinion, actually. It deals with a doctrine of constructive receipt. I’m teeing this up a little, a related concept there earlier. I’m going to put a little quote — because Judge Holmes always has some good quotes — and say that “this one’s a little bit of a puzzle,” we’ll say.
I’ve got to go there and say let’s put the pieces together, Tony. Put the pieces together for us on this whole constructive receipt doctrine and what we had here instead.
Tony Nitti: You’re nothing if not reliable with the puns, buddy. First thing’s first: I read a lot of court cases; obviously I love this stuff. I have no idea what a bench opinion is.
Damien Martin: It’s funny, Tony. I was looking into it. What is it? What is a bench opinion? I actually went back and looked — there’s a guide for practitioners for the Tax Court. It’s basically, if it’s an oral opinion delivered by the judge in the trial, during the trial session, essentially.
Tony Nitti: Got it.
Damien Martin: Then they do — again, looking back to it, I can tell you since March 1 of ’08, the transcription gets logged into DAWSON, and then you can access it and view it there. Hence, that’s where we’re looking at here. That is your Tax Court tidbit of the day. It’s an oral opinion.
Tony Nitti: Well, I knew it was something different because there’s actual handwritten edits in here. I knew it was something different. I do want to throw a thank-you to my former student at the University of Denver Grad Tax, Nathan Sosner, because he’s the one who turned me on to this one. The reason I really liked this one is not this case, but a case it cites that we’ll talk about.
Damien Martin: Yeah.
Tony Nitti: Discusses a real-world issue that was presented to me this year. I love solving real-world issues. I love when you find a case directly on point. You couldn’t find a case more directly on point for the issue I was dealing with than what the Hooper case and this discussion, what it covers.
Pretty darn simple set of facts again, buddy. You’ve got a C corporation. We have a sole shareholder in the C corporation. By all accounts, Judge Holmes liked the guy, thought he was very reliable and thought he cared very much about his business. Business was on hard times. Because it was on hard times, this sole shareholder of this corporation, he wanted to make sure that his creditors were paid first. That makes you a good guy. His employees were paid second — that makes you even better. Then he was paid last as the shareholder. He was drawing upon a life insurance policy he had just to keep this thing funded. Times were tough. I don’t remember the exact facts. He was an optometrist.
Damien Martin: Yeah, he was an optometrist with a long career.
Tony Nitti: He had 50 locations, he was down to one or two.
Long story short, he wants everyone else paid before himself, so he does something that I don’t know that I have ever seen before. I don’t know if you have. But he has the corporation cut checks to him and his wife for services, and he does all the right things. He actually takes out the federal tax withholding as if he’s going to cash the check and recognize income. But a good portion of the checks he doesn’t actually sign. He can’t actually go out there and do anything with them, even though as the shareholder he’d be the one signing them. He doesn’t actually sign them. Then the majority of the checks he cuts to himself and his wife, even the ones that are signed, he never cashes.
He does, interestingly, take a deduction for these amounts at the corporate level, which Holmes has glossed over because the corporation was generating such big losses that it was just adding, right? It was just adding to the net operating loss and wasn’t going to move the needle on anything. But he was in an interesting place. Unless I read this wrong, buddy — and you can tell me — what Holmes was doing is saying, “I have to look at whether Stead paid tax on too much income at the individual level because he was actually paying tax as if he had cashed all of these checks. I’ve got to figure out, did we[“he”?] pay tax on too much?” He didn’t cash any of them, some of them weren’t even signed, but he was picking up all this income. “Do I actually have a situation where he is paying tax on income that he did not receive?”
Do I have that wrong, buddy? That’s what it felt like to me.
Damien Martin: Yeah, yeah. No. Which is, again, not what you typically see. And your point, I can’t say that I’ve seen that one.
Tony Nitti: Look at this: “I’m left to decide whether Dr. Stead overstated his and his wife’s income on their joint return to the extent that they declared income they never actually received.” Yeah. We’re trying to figure out did he pay too much tax?
Damien Martin: Right.
Tony Nitti: Go figure. What we have here is just a matter of looking at the construction of the statute here. Section 451 is going to help us determine when we have taxable income as a cash-method taxpayer. As an individual, we are going to be a cash-method taxpayer. Section 451 is going to just say that you have income when cash is received. But then, of course, we’re going to have to expand that idea, because there’s always abusive transactions. So we go to the regs under 451-1, and it’s going to say it’s not just when income is actually received. We also have to recognize it if it’s constructively received. Great. What does that mean?
Well, we keep reading down the page and we get to 1.451-2(a). It says income is constructively received when it’s reduced to that taxpayer’s undisputed possession — when it’s set apart for them, where they can draw upon it at any time. The way I’ve always been taught this is what that means is someone offers you income, you can’t turn your back on it. You can’t turn your back on income that is being offered to you.
Damien Martin: Right.
Tony Nitti: However, the law has evolved to say that income is not constructively received if this income that is being offered to you, if you will, is subject to substantial limitations or restrictions.
We have to figure out here in this case — this is a tricky one, D. He is the sole shareholder of the corporation. The corporation had some funds; it’s not that it was truly insolvent. But by cutting checks to himself, some of which were signed, some of which weren’t, but that he never actually cashed — he paid the tax, so we’re not asking, did he not pay enough income [tax] It’s, did he pay too much income tax Was some of that income never actually or constructively received?
As you said, Holmes said, “This is a little bit of a puzzle.” In a situation like this, where somebody is in control of a corporation and they’ve got checks in their hands, how do we decide if it’s constructively received? Maybe the best analysis is to say clearly it’s available to him as the owner of the corporation, but is it subject to enough restrictions where he hasn’t constructively received that income?
From there, they started looking at case law. The first case that they acknowledge and reference was a case that, at the same time that I found this from Nathan, I was dealing with this exact issue. Someone had reached out to me at EY and said, “Hey, we have a client that is a corporation, and the shareholder rents property up to the corporation. They’ve got a lease in place, and the corporation pays rent every single month. The corporation’s got cash, but it wants to use the cash for different purposes this year, so it wants to go four or five or six months without paying any rent to the sole shareholder. Any consequences that we have to be worried about there?”
Yeah. Where my brain went when I saw that is, “Hey, this is potentially a constructive receipt problem.” Because as the shareholder, you’re turning your back on income from a rental perspective; you have this lease that could be enforced, you’re choosing not to. Are you turning your back on it? It turns out, just beautifully, the Stead case references the Hooper case. In Hooper, they have the exact same fact pattern.
What they say is, as a shareholder, if you have a lease in place — and I imagine there’s some people out there that would have this type of fact pattern — if you have a lease in place with a corporation, the corporation needs to pay you rent, and if the corporation has the cash, at least theoretically, to pay that rent, but you just choose not to for a couple of months, very sorry, but you have constructive receipt of income that you never actually got your hands on. Because the way they analogized it — and I liked this — is they said if someone else that wasn’t the shareholder stepped into your legal rights under that lease, you’re going to demand that payment. You’re owed the rent, you’re going to ask for the rent. You’re only doing this because you’re the shareholder, because you have control over whether the rent is paid. Effectively, because of this legal obligation from this rent, you are turning your back on income.
I found the Hooper case to be almost as interesting as Stead, in the sense that, what are we going to more likely encounter in the real world? Definitely situations where someone’s leasing property to a related corporation and they say, “Ah, you know what? Just don’t pay me the rent for the next couple months.” What listeners need to appreciate that is that is turning your back on that income if you have control over that corporation and you have constructive receipt of that income.
Then they get into the more classic cases. One of them was — I think it’s Haack. But Haack was something that I think we all encounter maybe in an accounting class or a tax class. Which is, all right, you cut a check to somebody on December 31, they don’t receive it until January 5. When is it income to them? We have this general rule that once you’ve got that check in your hand, assuming there’s enough cash in the bank account, you’ve got yourself income, regardless of when you decide to cash it. The bigger problem comes in — when is that check going to a related party that controls the corporation? If the corporation is deducting the payment on December 31 and you’re the one who determines control over payment of that check, should you have this idea of constructive receipt?
They reference two cases: this Haack case and this Khan case. As Holmes said, “a little bit of a puzzle” to figure out what they were getting at. But in the Haack case, they said there was constructive receipt because the shareholders had control of the corp. They could have had it all done on December 31 — the check in the hands, the check cashed — and they had previously exercised and exerted their control over the corporation in situations like that. Whereas in the Khan case, same fact pattern: The shareholder had never exercised its right to obtain any type of payment from the corporation outside of its normal policy of actually paying checks the year after it’s deducted by the corp.
The puzzle that Holmes was trying to fit together is when you apply this to the Stead fact pattern with wages, there’s no requirement — he actually says this, I think, in the bench opinion — there’s no requirement for a C corp to pay wages, which is pretty darn interesting. I don’t disagree; it’s just interesting. But what he’s saying is that the corporation didn’t have the same obligation to pay salary to Stead the way that a corporation with an enforceable lease has to pay a shareholder who is owed rent. Maybe if there had been a more formal employment agreement or something like that, or a bonus plan, it would have been a different story. But at the end of the year, there was no formal obligation, legal obligation for the C corp to pay wages just because he had been there and provided some services.
They were asking if someone else stepped in that wasn’t a shareholder, what rights would they have? They said, “Yeah, if you’re a lessor of a lease, you would have rights. If you had this enforceable employment contract, you’d have rights. But in this situation, none of those things were really present. What we’re going to do is just think about what rights would you have? If you’ve got checks in your hands that were signed and there was cash enough to pay them, you would have a legal right to have that check cashed.” That’s what Holmes said. But for all these checks that had been cut to him that were not signed, you would not have a legal right to enforce payment on those because they had not been signed by the other party, even though Stead was that other party.
They’re just saying that, in that situation, if we substituted in a third party for Stead, they wouldn’t have the right to enforce, one, payment of compensation in general, because there is no obligation for a corp to pay comp, but two, any way that you can cash a check that that party had not signed. Where Holmes ultimately landed is, “We’re going to back out of Stead’s income these checks that he had cut himself to himself, withheld upon, deducted at the corporate level, but didn’t actually sign.” It’s a unique fact pattern. I don’t know that we’re going to confront that fact pattern that often.
Are we going to confront the fact pattern of constructive receipt? Absolutely. Are we going to confront a fact pattern like the one we see in Hooper, where a lease arrangement, someone just says, “You know what? Let’s just put a pause on that for a couple months” to a sole shareholder? Yeah, that’s going to happen. Hooper tells us, “We have constructive receipt of that income. We have turned our backs on income that is owed to us by the corporation that we could legally enforce.”
I thought it was interesting enough to fit into our sixth this year because I love when we get real solutions to real problems. The Hooper case really helped me out of a jam.
Damien Martin: Yeah. Yeah. No. I think overall — and I’m going to come back here and ask you the question to pull it all together here, what your closing thoughts are — it just, again, illustrates, A, how much I love doing this with you, Tony. It is always so fun. And just realize how much being a student of the tax law, just how incredibly enjoyable that is. We’ll just say tax fun, if you will.
But it all comes down to, I think, especially in the dynamic environment landscape, if you will, in tax right now, of “these are the things where there are” — we’ve covered a lot of things in these cases. It all comes down to, I think, in this environment, really understanding your fact patterns, the forms, and being intentional about that and planning for that. It takes, in many cases, proactive steps and planning to make sure that you’re minding the details, because there are sometimes things you cannot undo. Either you held it for five years or you didn’t, to your 1202, or those sorts of things. Or things that can maybe break one way or another. Do you really want to leave it to maybe some uncertainty?
I guess there’s my thoughts. Tony, bring this all together for us: What’s your takeaway here for listeners?
Tony Nitti: A couple things. Number one: The tax law never disappoints. No matter how many years you and I do this, D — and hopefully it’s for a long, long time — we’re always going to get good fodder. There’s always just great stuff every year. We’ve been able to do this for so many years without really having to duplicate, just because it’s just great stuff that’s out there. Think about it: We didn’t even discuss Moore or Loper Bright. We said, “Ah, leave the Supreme Court case aside,” and we had some really great stuff to talk about. That’s what’s fun, is knowing that that’s never going to change.
But you just nailed it. The lesson from every tax case you ever read is the same. The lesson is, “How do I avoid ending up in court for the same situation? What do I do to, as you said, follow certain formalities, restructure transactions, be ahead of the game? Understand how to avoid scrutiny because I’ve done the right things?” We’re just talking about different variations on a theme, but we’re trying to explain to people that, yeah, you don’t want any of this. You don’t want to be in front of the court arguing these things.
Look, sometimes people want to go to court. That’s what Moore was all about: “Hey, let’s challenge something that’s being unconstitutional.” But generally speaking, when we talk about these specific issues that are being litigated, people would much prefer to have just avoided the problem in the first place. It’s really fun being able to come on and just talk about how maybe we can avoid some of those things.
As you said, it’s so good to have you back and to do this again with you. I hope we’re doing it for the next 30 years. But I liked this year’s group of cases, I really did. I like being here on Tax Notes, for sure. Hopefully next year we just get another five, six, eight, whatever it may be, great cases to come back and talk about.
Damien Martin: Yeah. Like you said, tax law and tax cases never seem to disappoint. I have no doubt that there will be more. Yeah, just again, a big thank-you to, well, you listening. Always appreciate people tuning in and hope you found something valuable here. Obviously, then again, a big thanks to Tax Notes. We’re glad to be here and couldn’t think of a better place to be having this conversation.
All right. Well, Tony, until next year. Thanks, buddy.
Tony Nitti: Until next year. See you, Damien.
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