It’s another taxpayer win over the goofy regulation (Reg. Section 1.183-2(b)) for Kenward F. Kolar, Jr., T. C. Memo. 2026-15, filed 2/9/26, although it’s closer than most. Of the 9 I(count ’em, 9) factors therein, Ken got 4 (count ’em, 4), IRS got 3 (count ’em, 3), with 2 (count ’em, 2) stuck in neutral.

Ken was a multi-generational TX rancher, but the ranch was in bad shape when he got it, and he had to work long and hard to try to get profitable cattlebreeding. Judge Kashi (“My or the High”) Way doesn’t let Ken conjoin his oil royalty income with the ranch, finding them too dissimilar, as is land appreciation, forcing Ken to pay tax on the oil royalties without the offsetting ranching deductions. But his wife’s separate bank account for the business and her careful recordkeeping make IRS concede the amounts of Ken’s deductions on the trial. Ken concedes the 6651(a)(1) and (2) late file and pay, and 6654 no estimated add-ons.

Ken’s a good witness on the trial. 

But I want to point out again that a separate bank account and good bookkeeping are keys. It’s the first thing Judge Way mentions that bear on the goofy regulation.

“During this period, Mrs. Kolar served as the bookkeeper for the Kolar ranch and kept records that the couple would report to their certified public accountant. The Kolar ranch had a checking account for ranch operations that was separate from the account used by Mr. and Mrs. Kolar for their household expenses. Mrs. Kolar had a multistep recordkeeping process. She maintained a check register along with a ‘category’ book for recording daily income and expenses. She also had a ‘weekly book’ which she would prepare and use to go over the numbers with Mr. Kolar. She then prepared a monthly Excel spreadsheet and a final yearend spreadsheet documenting Kolar ranch income and expenses.” T. C. Memo. 2026-15, at p. 4.

I note IRS claims that Ken got personal pleasure in teaching his son how to be a cowboy. Judge Way blows that away.

“Respondent also argues that Mr. Kolar’s son participates in ranching activity and that Mr. Kolar derives pleasure from being able to bond with his son in this way. We do not find this argument compelling. Mr. Kolar’s son was two years old during the year at issue, so it is unlikely that he participated in ranching activity in any meaningful way during that year. Moreover, we do not view training one’s children to farm and ranch in the hope that they will one day take over the family business as inconsistent with a profit motive. Indeed, it is often the case that family members, including older minor children, participate in the running of profitable small businesses. Viewed in this light, Mr. Kolar’s decision to have his son participate in ranching activities supports a profit motive.” T. C. Memo. 2026-15, at pp. 15-16.

Perhaps the young man, like Johnny Mercer’s “old cowhand from the Rio Grande,” learned to ride ‘fore he learned to stand.

No, not more Jarkesy motions. This blogpost concerns the buckshot pretrial motions in limine with which the parties bestrew the judge’s path immediately prior to trial, like those lovely flowerchildren preceding the bride at fancy weddings. Only this process is much less attractive to eye and ear. I’ll come to Jarkesy shortly.

Judge Christian N. (“Speedy”) Weiler is the recipient (or should I say victim?) of eleven (count ’em, eleven) such motions in Habitat Green Investments, LLC, MM Bulldawg Manager, LLC, Tax Matters Partner, et al., Docket No. 14433-17, filed 2/6//26. I’ve been blogging this vintage Dixieland Boondockery since 2020.  I’ve paid good money for rum younger than this case.

Now all y’all can read the eight (count ’em, eight) pages of Judge Speedy Weiler’s well-wrought prose your own selves. Perhaps you’ll then come to the same conclusion I did. If not, favor me with an explanatory comment. In either case, spoiler alert.

Judge Speedy Weiler denies six (count ’em, six) motions with prejudice, four (count ’em, four) without prejudice, plus one split-decision (can testify as to fact but not opinion, and Judge Speedy Weiler will sort it out on the trial).      

This is where Jarkesy comes in. Until the Supremes say otherwise (or the CCAs play mix-and-match), there are no jury trials in Tax Court. Hence no juries to be misled by “those whose beard and paunch are great of size” pontificating at length, unchecked by fact. The judge’s daily grist is sorting out such as these, and Judge Speedy Weiler wants his whack at them.

My good friend Peter Reilly, CPA, will want to add James D. Sullivan and Colleen M. Sullivan, T. C. Memo. 2026-13, filed 2/5/26, to his collection of successful Section 183 taxpayer wins.

True, Colleen’s mulching operation fails for want of documentation and for evidence that she abandoned the business when her mulching machine proved unsafe.

“With respect to Leaf-Cutter, Ms. Sullivan’s mulching business, we readily find that the Sullivans have failed to carry their burden of establishing that the activity was engaged in for profit. The Sullivans testified that the business was both established and terminated because of safety concerns….” T. C. Memo. 2026-13, at p. 14.

But their real estate development business and JD’s software operation survive.

JD had plenty of software development experience, spent his own money developing it (even dipping into his retirement money), kept a separate bank account, studied literature on the area he was working, cut expenses when revenue didn’t come in, and hired experts. Though the work satisfied his intellectual curiosity, his testimonial candor carried the day.

He and Colleen also had plenty of real estate development experience. They built and rehabbed homes in MN and MT  and MA, mostly with their own labor, and sold them. They lived in a tent for years in ME while trying to build a housing development and a new personal residence, showering at the YMCA until they got the water put in.

Judge Courtney D. (“CD”) Jones gigs them for poor bookkeeping, allocating too many expenses to the housing development and not enough to the lot where they intended to build their personal residence, but she Cohans that out.

Interestingly, IRS never challenged the amounts of their claimed deductions, only the profit motive. So they mostly win the software and real estate developing, and only get mulcted for mulch.