Opinion
9028-18
02-16-2022
JONATHAN C. BLOCH, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
COURTNEY D. JONES, JUDGE.
This case was submitted fully stipulated under Rule 122 and the Court ordered seriatim briefing (docket entry nos. 9, 11). Because respondent's principal ground for denying petitioner's claimed deduction under section 163(h)(3) is that the mortgage in question was unrecorded, the parties' briefs understandably focus heavily on the substantive validity of section 1.163-10T(o)(1)(iii) of the Temporary Treasury Regulations under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). After careful consideration of the parties' briefs to date, the Court finds that additional briefing is necessary.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulatory references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Substantive Validity of Paragraph (o)(1) in Section 1.163-10T(o)
Petitioner argues that the term "secured" in section 163(h)(3)(B)(i)(II) is unambiguous under Chevron and, as a result, the Court may not defer to section 1.63T(o) of the Temporary Treasury Regulations. Petitioner's Seriatim Opening Brief at 9-12. In other words, petitioner's position appears to be that the entirety of paragraph (o)(1) is substantively invalid because the statutory term is unambiguous. Petitioner's Seriatim Opening Brief at 12.
Though respondent argues that the statutory term is ambiguous, and that subparagraph (o)(1)(iii) is substantively valid under Chevron, he does not address whether paragraph (o)(1) would be invalid in its entirety if the Court determines that the statutory term is unambiguous.
Petitioner argues that the Court may not defer to paragraph "1.163-10T(o)" because the statute is unambiguous. Petitioner's Seriatim Opening Brief at 12. Paragraph 1.163-10T(o) includes paragraphs (o)(1) - (5). We will limit our inquiry to paragraph (o)(1) as the parties did not discuss on brief any other paragraph.
Respondent's Interpretation of Subparagraph (o)(1)(ii)
Petitioner appears to challenge respondent's interpretation of subparagraph (o)(1)(ii). Petitioner's Seriatim Reply Brief at 22.
Respondent argues that the unrecorded mortgage fails to satisfy the requirement of subparagraph (o)(1)(ii) under his interpretation of that subparagraph but has not had an opportunity to argue on brief that the Court should defer to his interpretation.
Additional Briefing
The Court held a conference call with the parties on February 16, 2022 to discuss additional briefing. During the call, the Court noted the complexity of the issues to be briefed and reminded petitioner of the availability of pro bono counsel through taxpayer clinics. As discussed during the call, the Court will order additional briefing so that the parties can address the following issues:
• Whether paragraph (o)(1) would be substantively invalidated in its entirety, if the Court determines that the meaning of "secured" in section 163(h)(3)(B)(i)(II) is unambiguous under step one of Chevron.
• If respondent does not believe that the entirety of paragraph (o)(1) would be invalidated in the circumstance described above, respondent shall identify any portions of paragraph (o)(1) that respondent believes are severable from subparagraph (o)(1)(iii).
• If respondent believes that subparagraph (o)(1)(ii) is severable from subparagraph (o)(1)(iii), he shall address whether the Court should defer to his interpretation of subparagraph (o)(1)(ii) under Kisor v. Wilkie, 139 S.Ct. 2400 (2019), and any other relevant authorities.
Respondent shall pay particular attention to that aspect of his interpretation of subparagraph (o)(1)(ii) comparing the priority of an unrecorded mortgage to a recorded mortgage under Massachusetts law, given the lack of a recording requirement in subparagraph (o)(1)(ii). Respondent shall also pay particular attention to the language of the regulation that refers to the "jurisdiction in which the property is situated" (but does not specify that such "jurisdiction" is a state as opposed to a city,
county, or other subdivision).
In consideration of the foregoing, it is
ORDERED that petitioner shall file a status report, on or before March 18, 2022, advising the Court of his consideration of, and any corresponding effort he has made to obtain, pro bono counsel. If counsel admitted to practice before this Court enters an appearance on or before March 18, 2022 in this case, the Court will treat such filing as petitioner's status report. It is further
ORDERED that respondent shall file a sur-reply brief, addressing the issues identified above, on or before May 17, 2022. It is further
ORDERED that petitioner may file a sur-sur-reply brief on or before July 18, 2022.