On August 5, 2020, the Tax Court issued a Memorandum Opinion in the case of Schroeder v. Commissioner (T.C. Memo. 2020-117). The primary issue before the court in Schroeder was whether payments that petitioner-husband made to his petitioner-ex-wife and his divorce lawyer had the effect of increasing the basis in an LLC indirectly owned by petitioner-husband. Background to Schroeder v. Commissioner Petitioner-husband (PH) founded the partnership DCA, LLC in 2003. In 2008, PH assigned his 70% membership interest in DCA, LLC to SRM, LLC, an S corporation of which he was the sole shareholder. PH was married for 20 years to petitioner-ex-wife (PEW) for 20 years prior to filing for divorce in 2008 (5 months after transferring his interest in DCA, LLC to SRM, LLC). An appraisal performed in 2007 valued DCA, LLC at $30m, and so PH’s indirect 70% interest in DCA, LLC was assumed to be $21m. The…