Interesting Tax Developments In June 2026 – Part One – I Hate Crypto

 

Here begins my attempt to get in the June summary during the first week of July, which will be a tremendous improvement of May.  You will note that I am posting this on July 16 and it is not complete. Still I am improving.  As the great Dave Ramsey says – baby steps.

Contemporary Written Acknowledgement

William P Wells (TCM 2026-49) is a good example of Reilly’s Fourth Law of Tax Planning – Execution isn’t everything but it’s a lot. The underlying transaction struck me as kind of sketchy which is why the IRS may have picked on it.  French Camp Academy (FCA), founded in 1885, a Christian boarding school, had taken over another school, Chamberlain-Hunt Academy (CHA)  in 1998.  They ran it for a while investing a lot, but then decided to let it go.  They tried to sell the property but found no takers other than Chamberlain LLC which was owned 50% by Wells and 50% by a former FCA board member. They bought the property for $200,000 in 2013 and CHA ran there till the end of 2014.  Wells was one of the three board members when the school closed.

On December 30, 2016, Chamberlain LLC donated the property to CHA.  The valuation was $4,420,000.  That puts the syndicated conservation easement deals to shame as they typically gave investors deductions four to five times their out of pocket.  That was not, however, the issue.  Judge Weller explicitly did not rule on valuation.

Mr. Wells had his accountant prepare the acknowledgement letter to be signed  by Mr. Montgomery. The accountant then asked for a bit of a revision in the letter. All in there were four documents the for the judge to ponder: “the Donation Letter, the Quitclaim Deed, the Acknowledgment Letter, and the Form 8283”.  Only the Donation Letter and Form 8283 were signed by Mr. Wells. At the end of the day, there was no language about goods and services being provided in exchange for the donation.  There was no accuracy penalty because of the reliance on the tax preparer.

Ed Zollars has a somewhat longer discussion of the opinion on Current Federal Tax Developments.

IRS Gearing Up To Fight Kwong Claims

Actions on decisions have never been that common, but they have become less common in recent years.  The first one this year, AOD 2026-1, issued on May 29, 2026 has me reading between the lines. When a court rules against the IRS and AOD can indicate that the IRS acquiesces and will follow the opinion in the future or that it will be stubborn about it or maybe something in between. This was a sort of in between.  It concerned Mohamed K. Abdo and Fardowsa J. Farah v. Commissioner, 162 T.C. 148 (April 2, 2024).  The Headnote in CCH sums it up pretty well.

“IRS acquiesced only to the Tax Court’s holding in Abdo, Mohamed, (2024) 162 TC 148, that COVID-19 disaster declarations created mandatory 60-day postponement period from 1/20/2020 to 3/20/2020. IRS didn’t acquiesce to: 1) the opinion’s reasoning; 2) the invalidation of relevant portions of Reg § 301.7508A-1(g)(1)  and Reg § 301.7508A-1(g)(2) ; or 3) any interpretation that would result in further postponement beyond the 60 days provided by the Court in Abdo.”

Abdo is one of the precedents that is supporting the blizzard of Forms 843 that are being unleashed on the IRS claiming interest and penalty overpayments thanks to COVID suspensions that the IRS was being too chintzy about.  Even more on point is a later Court of Claims opinion – Terry W. Kwong ve USA No. 23-267 November 25, 2025.  I covered the issue in The Kwong Tsunami: Why Form 843 Claims Could Soon Flood Your Practice on Think Outside The Tax Box.

At any rate I take this AOD as a warning shot that IRS is not going to roll over on this issue.  So don’t count on your Kwong refund.  As I write this there are still a couple of days before the July 10 deadline. IRS has issued last minute special instructions and will be allowing electronic filing. Of course, as I post this, that ship has sailed.

Skimming Does Not Mix Well With Sophisticated EMR System

I did a pretty deep dive in the Aryanpure Tax Court opinion. It is about skimming in spite of an electronic medical record system tracking all cash receipts. The piece will hopefully run in Think Outside The Tax Box at a time to be determined.

Family Limited Partnerships

I have not seen much on family limited partnerships in the last five years or so.  My buddy Grok tells me that it is not a matter of me not paying attention. The FLP technique is one of those things that I don’t think actually should work, but I know it does, except when it doesn’t.  Take a bunch of assets, put them in a partnerships and the whole is now worth 40% less than the sum of the parts.  Regardless, there was a new opinion in June . The fifth circuit sustained a Tax Court decision in the case of Anne Milner Fields that blew up the FLP that her great-nephew and residual beneficiary set up under power of attorney just before her death.  The opinion illustrates two of my laws of tax planning- the Fourth and the Eleventh – Execution isn’t everything, but it’s a lot. – PIgs get fed, hogs get slaughtered.  I will be giving this the full treatment so keep your eyes open here and on Think Outside the Tax Box.

It  happens that the second and sixth articles in my blogging career which started way back in 2009 were about family limited partnerships and the observations in them still hold up.

Making Too Much Out of Moore

Everett Street, an individual not a street, was at the Eleventh Circuit appealing a contrary ruling from the Tax Court,  Judge Fried  of the Tax Court closed the case with an order. on October 7, 2025.

“Petitioner’s claim that income he received during 2018 does not subject him to a federal income tax liability can be rejected without extensive explanation. See Crain v. Commissioner, 737 F.2dm1417, 1417 (5th Cir. 1984). Suffice it to say that petitioner is a taxpayer who is obliged to file a federal income tax return and pay federal income tax on the taxable income he received during 2018. See I.R.C. secs. 1, 61(a); United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981). Furthermore, petitioner’s reliance on the recent Supreme Court case of Moore v. United States, 602 U.S. 572 (2024) for his position that this Court lacks subject matter jurisdiction in this case because the income tax is an unconstitutional non-apportioned direct tax is misplaced. In Moore, the Supreme Court confirmed that the income tax is a constitutional indirect tax. Moore, 602 U.S. at 582–83.”

The Supreme Court Moore opinion has greatly excited alternative tax thinkers with its holding that the income tax is indirect.  This is buttressed by the facts that courts and IRS have been misstating the holding in the 1916 Brushaber opinion.  I explain all that in this piece.  Street laid out the argument in a very thorough brief to the Eleventh Circuit.  He got nowhere:

“Street appealed, raising the same core arguments as he did before the Tax Court: 1) he is not subject to federal income tax because he is “not a person made liable by statute for the payment of the indirect income tax” and 2) the federal income tax violates the Sixteenth Amendment as an unconstitutional, “non-apportioned direct tax.” But as the Tax Court concluded, all his arguments are frivolous. See Stubbs v. Comm’r, 797 F.2d 936, 938 (11th Cir. 1986) (explaining that the arguments that “wages are not taxable income and that not a person required to file a tax return” “are patently frivolous”); Motes v. United States, 785 F.2d 928, 928 (11th Cir. 1986) (deeming frivolous the argument that income tax violates the Sixteenth Amendment).”

Crypto

I really wish cryptocurrencies would just go away, but while they continue, I should pay some attention to the tax issues they generate, so I give you Paschall v Comm TC Memo 2026-46.  The Paschalls received staking rewards in the form of additional Cardano tokens worth $33,354 in 2021 from eToro.  From what I can gather if they still have the silly things, they are worth a lot less now.  The 1099 from eToro was sent to the wrong address so they didn’t report anything. In Tax Court they argued that they shouldn’t have to report anything till they got some actual, honest-to-goodness real money.  Another argument is that staking rewards are self-created property.  Neither of those arguments worked.

The opinion has a pretty good discussion of what these things all mean, but there are probably better ways to spend your time. I noted some speculation on Reddit that they might have done better had they not been pro se.

More Coming

June was a fruitful month in interesting development, so I will have another piece on June developments before July is out.

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