William M. Scott, T. C. Memo. 2026-104, filed 10/1/26, claims a Section 7623(b) blow award because he tipped off IRS that a private prison company’s tax-exempt bonds were bogus. IRS checked out the bonds, concluded they weren’t properly tax-exempt, and settled.

Company paid nothing but called in the bonds and issued replacements that were taxable. IRS agreed not to look for back taxes for the eleven (count ’em, eleven) years the dubious bonds had paid out. The Ogden Sunseteers bounced William’s claim, saying the collected nothing. William says IRS will collect a bundle going forward, wants discovery, and claims Ogden’s bounce constitutes a new issue shifting BoP.

Nope, says Judge Benjamin A. (“Trey”) Guider, III, only much more elegantly.

The “new” explanation only fleshes out the expressed rationale. The bondholders got the tax break; the Target was the prison company, which got none. Collecting from the Bondholders going forward would require monitoring a large, shifting population for many years, some of whom might be tax-exempt or have offsets like NOLs themselves, obviously infeasible.

Shands and Lissack say merely pointing out a Target isn’t enough, even if IRS collects. Blower must home in on the specific grounds whereunder IRS collects. And Targets who straighten up and fly right before IRS takes enforcement action don’t entitle blowers to an award. 

Going against the Bondholders isn’t a “related action” within the meaning of Reg. Section 301.7623-2(c)(1)(ii) and (iii); “Even assuming an IRS Operating Division were to investigate and discover the identity of the Bondholders and determine the taxes they have paid or will pay, the identities of the Bondholders would not be found without the Operating Division’s having to independently obtain additional information beyond that provided by petitioner.” T. C. Memo. 2026-104, at p. 16. Taishoff says that assumes the deal between IRS and Bondholders exonerating previous years doesn’t include the Bondholders as third-party beneficiaries to that extent.

Mr. Scott wants to see the trust indenture for the new bonds because IRS mentioned it. Not enough, says Judge Try Guider. The Administrative Record need include only what IRS relied upon, not something mentioned for its mere existence and no more. 

No payout for Mr. Scott as the company slipped its surly bonds.

Allen Shay, T. C. Memo. 2026-103, filed 9/30/26, moved $24K from “Other Income” on his year-at-issue return to Sched E Rents Received on his 1040X, claiming a RA told him to do it. So when IRS claims a deficiency of $24K unreported income, Allen says he’s being taxed twice.

Except.

IRS proves to Judge Cathy (“NCY =. No Cognomen Yet”) Fung’s satisfaction that there’s 24K unreported per bank deposits analysis. See table at p. 4.

“Petitioner stipulated that his taxable income was $187,301. Respondent’s bank deposits analysis showed that petitioner’s taxable deposits were $212,401, which is $25,100 more than petitioner’s stipulated taxable income. Respondent conceded $1,100 in taxable income and now requires petitioner to include the remaining $24,000 in taxable income. This $24,000 reflects the amount that petitioner reported as ‘Other income’ on Line 21 of his original return and subsequently omitted from his amended return. In conducting his bank deposits analysis, respondent considered all known nontaxable sources of income, specifically deposits from petitioner’s Ameritrade and Bank of America accounts. Therefore, it is petitioner’s burden to prove respondent’s bank deposits analysis was unfair or inaccurate. See Price, 335 F.2d at 677 (‘If taxpayer felt that the Government’s [bank deposit method] was unfair or inaccurate, the burden was on him to show such unfairness or inaccuracy.’). Petitioner did not prove respondent’s reconstruction was in error and therefore did not carry his burden.” T. C. Memo. 2026-103, at p. 10.

Here’s the real problem.

” The Court recognizes that the similarity in numbers may be confusing. Simply stated, petitioner contends that the disputed $24,000 results from his moving approximately $24,000 of Property C rental income from Line 21 of his original return to Schedule E on his amended return as $24,420. Respondent conducted a bank deposits analysis, showing $25,100 of unreported income. And, after conceding $1,100, respondent correctly determined that petitioner still failed to report $24,000 of income. The similarity in amounts does not establish that they are the same income. Accordingly, we hold petitioner is liable for tax on $24,000 of income….” T. C. Memo. 2026-103, at p. 13.

No, not Jesse Mitchell III and Darrilyn W. Mitchell, T. C. Memo. 2026-102, filed 9/30/26. And ex-Ch J Kathleen (“TBS- The Big Shillelagh”) Kerrigan is far too well-bred to say what Alfonso Bedoya did say in the 1948 John Huston classic “We ain’t got no badges.” The most-quoted version conflates two separate lines.

But it turns out IRS ain’t got no badges. Of fraud, that is, so 3SOL puts paid to Jesse’s SND.

Jesse fell into the clutches of a dodgeflogger who peddled phony deductions, but escaped. His return for year at issue did have some dodgy deductions, but he concealed nothing, filed returns, didn’t have a pattern of understating income or overstating deductions, he made no inconsistent explanations, he and his preparer testified honestly opn the trial, didn’t deal in cash, and didn’t conceal assets. The only neutral badge is the phony deductions taken at the advice of the dodgeflogger, but “(P)etitioner relied upon the advice of others. He testified that he was ‘impressed by [flogger].’ Petitioner probably should have known the [flogger’s] Marketing Plan was too good to be true. From his testimony we conclude that petitioner did not have scienter and that his actions were not sinister.” T. C. Memo. 2026-102, at pp. 17-18.

True, Jesse did get an A in the income tax course he took at Ole Miss Law School. But his practice was plaintiffs’ PI, and he never prepared returns or gave tax advice. Taishoff says I’ve seen enough plaintiffs’ PI lawyers get Section 104 wrong, to say nothing of the rest of the IRC and Regs. Even one as famous as F. Lee Bailey. An A in a law school course years ago doesn’t qualify an attorney to discuss taxes. I was lucky to get a hook minoo sixty-plus years ago and swore at the time I’d never do taxes. Look at me now.