Court Opinion

ID: 8915959
Source: CourtListenerOpinion
Date Created: 2022-11-27 05:02:52.406875+00
Date Added: 2024-06-11T17:08:59.276054
License: Public Domain

CUDAHY, Circuit Judge,
with whom join, dissenting from denial of . rehearing en banc:
CUMMINGS, Chief Judge and WOOD, Cir- ' cuit Judge
As the author of Foglesong v. Commissioner of Internal Revenue, 621 F.2d 865 (7th Cir. 1980) (Foglesong I), which strongly suggested the vulnerability under section 482 of Mr. Foglesong’s compensation arrangements, I regret that the court has seen fit to deny rehearing in this section 482 case (Foglesong II). From the present perspective, I am afraid that either Foglesong I .(reversing the Tax Court on assignment of income principles under section 61) or Foglesong II (reversing the Tax Court on section 482), or both, were incorrectly decided. The Commissioner still may have strings to his bow (e.g., the assignment of income doctrine, I.R.C. sections 531-37 pertaining to undue accumulation of earnings and the doctrine of constructive receipt, see 621 F.2d at 872-73). Essentially, however, I believe it is almost unconscionable that the taxpayer here has been able to successfully withstand in this court two challenges (under, respectively, section 61 and section 482) to his tax avoidance arrangements.
This case might have gone the way of the quite analogous case of Rubin v. Commissioner, 429 F.2d 650 (2d Cir. 1970), where Judge Friendly rejected a section 61 challenge by the Commissioner, but invited a test under section 482. The Second Circuit, in Rubin v. Commissioner, 460 F.2d 1216 (2d Cir. 1972), later- affirmed the Tax Court’s determination in favor of the Commissioner with respect to the section 482 challenge. The Second Circuit there specifically rejected the argument on which the panel has reversed the Tax Court in Foglesong II. •And the Second Circuit failed even to mention the circumstance on which the panel majority here seeks to distinguish the second Rubin case.
I think our reversals of the Tax Court on Foglesong’s appeals probably condone a serious abuse of the tax laws and may be precedent for dangerous attacks on the integrity of the revenue system.
I, therefore, respectfully dissent from the denial of rehearing en banc.