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issued in 1981) was not intended to Therefore, the district court determined The lenses were to be used in a new
be permanent and that it was in fact that the Sec. 2032A election could not system that would generate electricity
superseded first by Rev. Proc. 92-85, be disregarded on the grounds that the by heating a liquid to generate steam
which provided standards for granting estate tax return was filed late. and drive a turbine. Nine years after
extensions of time to make elections. ■ Parks, No. 21-cv-12676 (E.D. Olsen’s initial investment, of the 19
The government also noted that Regs. Mich. 11/18/22) towers that had been planned to be
Sec. 301.9100-2, which was imple- built to hold the lenses, only one tower
mented in 1997, grants a 12-month — Mani Gupta, CPA, is a senior tax was completed with lenses installed.
extension to make a regulatory election manager in Cranford, N.J., and David R. Olsen initially bought the
and argued that it supersedes Rev. Proc. Silversmith, CPA, CFP, CFE, is a senior lenses from International Automated
92-85 and Temp. Regs. Sec. 22.0(b). tax manager in Hauppauge, N.Y., both Systems (IAS) in 2009 and later from
The government further argued that with PKF O’Connor Davies LLP. RaPower3 LLC (2011–2014), both
even if the court ruled that Temp. owned by Johnson, making a down
Regs. Sec. 22.0(b) was not completely payment of 30% of the lens price
superseded by Regs. Sec. 301.9100-2, with the remaining amount due in
the temporary regulation could not be installments five years after the system
interpreted to give an estate an in- began producing revenue. Through his
definite amount of time to make a Sec. own company, PFO Solar LLC, Olsen
2032A election. then leased the lenses to LTB, another
The estate argued that Temp. Regs. company owned by Johnson, who
Sec. 22.0(b) has never been superseded would, Olsen was told, place the lenses
and remains in effect. Thus, it con- in service and operate them. Once
tended, the estate’s special-use valuation the system began producing revenue,
election on its late-filed Form 706 PFO Solar would receive $150 in
return was valid because the Sec. 2032A income per year from LTB for each
election was included with the estate’s of the lenses. However, during PFO
first-filed tax return, even though that Solar’s lease arrangement with LTB,
tax return was filed late. The estate also the system never earned any income
asserted that the instructions to the Tax benefits denied for or produced any commercially viable
lack of profit motive
Form 706 estate tax return specifically amount of electricity.
stated that the Sec. 2032A election can Even though the lease arrangement
be made on a late-filed return if it is the The Tenth Circuit upholds did not earn income, Olsen, through
first return filed. the Tax Court’s denial of PFO Solar, claimed depreciation
Holding: The court found that depreciation and tax credits for deductions (Sec. 167(a)) and solar
the government failed to demonstrate a taxpayer’s investment in energy credits (Sec. 48(a)(3)) for tax
that Temp. Regs. Sec. 22.0(b) has been a solar energy tax shelter. years 2009 through 2014, which offset
superseded by Regs. Sec. 301.9100-2 his ordinary wage income and led to
By John McKinley, CPA, CGMA, J.D.,
because the government failed to cite almost no tax liability on his individual
LL.M., and Matthew Geiszler, Ph.D.
any authority or support for its argu- income tax returns for those years. The
ment, and the court could not find any The Tenth Circuit upheld a Tax Court amounts claimed for these benefits
authority that Temp. Regs. Sec. 22.0(b) decision that a taxpayer did not have a were based on the full purchase price
had been superseded. The court found profit motive in his purchase and leases of the lenses and not the 30% down
that Temp. Regs. Sec. 22.0 remains in of solar lenses intended to generate payment that was actually paid.
force. The court also noted that Regs. electricity and sustained the IRS’s The IRS issued a notice of de-
Sec. 301.9100-2 provides that the exten- disallowance of deductions for depre- ficiency to Olsen disallowing the
sion “is available regardless of whether ciation under Sec. 167 and credits for depreciation deductions and solar
the taxpayer timely filed its return.” solar energy under Sec. 48. energy credits claimed for tax years
The court’s finding was also bolstered Facts: Preston Olsen, the taxpayer, 2010 through 2014. Olsen petitioned
by the estate’s argument regarding the entered a lens-sale-and-leaseback the Tax Court, which noted that
instructions for the 2003 Form 706. arrangement with Neldon Johnson. Olsen’s was one of more than 200

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