Opinion
27535-15L
08-05-2022
PERRY COHAN & FARZANEH COHAN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber Judge
This case involves (among other things) adjustments arising from petitioners' participation in the Sterling Benefit Plan, a welfare benefit plan. These adjustments resemble those at issue in Machacek v. Commissioner, docket No. 12701-11. We issued an opinion in Machacek on March 28, 2016, holding that the taxpayers' participation in this Plan constituted a compensatory "split-dollar" life insurance arrangement under Treasury Regulation § 1.61-22(b) and that the benefits the taxpayers thus enjoyed were taxable to them as ordinary income. See T.C. Memo. 2016-55. On October 12, 2018, the U.S. Court of Appeals for the Sixth Circuit reversed our decision. It held that the economic benefits at issue were taxable to the taxpayers as distributions under I.R.C. § 301, even though the taxpayers received the benefits in their capacity as employees, because they were also shareholders in the S corporation. See 906 F.3d 429 (6th Cir. 2018).
On July 26, 2019, while a petition for panel rehearing was pending at the Sixth Circuit, the parties in the above-captioned case filed a Joint Motion to Stay Proceedings. By Order served July 29, 2019, at docket entry #51, we granted that Motion in order to await the Sixth Circuit's final decision in Machacek. Eighteen months later, on December 17, 2020, the Sixth Circuit denied the petition for rehearing and issued its mandate.
On April 12, 2021, this Court issued a reviewed opinion in De Los Santos v. Commissioner, 156 T.C. 120 (2021), which involved a similar welfare benefit plan. In De Los Santos we decided not to follow, in cases appealable to other U.S. Courts of Appeals, the Sixth Circuit's reasoning and result in Machacek. On May 24, 2021, the Internal Revenue Service issued Internal Revenue Bulletin No. 2021-21, in which it formally announced it would not acquiesce to the Sixth Circuit's decision in Machacek.
On August 2, 2022, the parties filed a joint status report in which they express the view that "it would be more efficient if the proceedings in this case remain stayed until the legal split between Machacek . . . and De Los Santos . . . has been resolved."
We do not agree. In De Los Santos, this Court decided-in a unanimous, Court-reviewed opinion-how it will address split-dollar life insurance cases appealable to circuits other than the Sixth. This case, absent stipulation to the contrary, is appealable to the Ninth Circuit. See I.R.C. § 7482(b)(1); Golsen v. Commissioner, 54 T.C. 742 (1970), aff 'd, 445 F.2d 985 (10th Cir. 1971). Because the "legal split" between the Sixth Circuit and this Court will have no practical impact on the trial-level proceedings in this case, we see no need to continue the stay.
On July 1, 2021, respondent filed a status report informing the Court that petitioner Perry Cohan died on April 25, 2021. The parties are reminded of the need to file a Motion to Substitute Party and Change Caption. See Tax Court Rule 63(a).
In consideration of the foregoing, it is
ORDERED that the stay of proceedings in this case is lifted. It is further
ORDERED that, on or before September 2, 2022, the parties shall file a joint status report expressing their views about the most expeditious manner of moving this case toward resolution.