I can't fathom what appellants were trying to do in this case. Their appeal seems utterly irrational -- a matter that involves merely a financial dispute (here, a tax deficiency), not a lot of money (in the tens of thousands), and no probability of success in the appeal whatsoever.
I just don't see how anyone could possibly think it's worth spending time and effort and attorney's fees on an appeal that challenges a totally rational IRS regulation that says you can't use passive losses to offset money you pay yourself; moreover, a regulation that's already been upheld -- uniformly, no less -- by every federal appellate court that has considered the matter.
It just doesn't make sense to me. Rational sense, anyway.