Judge Morrison has a lengthy designated hitter today, John W. Harris & Delilah E. Harris, Docket No. 24032-11, filed 11/5/14, which serves as a lesson to the busy practitioner: check the file before signing the stipulation.

Everything you said or wrote will be used against you.

IRS got the bank statement analysis wrong, and concedes they confused John’s attorney escrow account with his operating account. Thus, a quarter-million worth of deficiencies goes away.

And John and Del admit their passive real estate losses get suspended, so that deduction goes away.

The trouble comes when Al, John’s and Del’s attorney, gets confused about $72K of unreported income that Del got from the C Corp she and John control. Al seems to think that the non-employee compensation Del got somehow gets “washed” by the deduction the C Corp gets for paying that compensation.

According to Judge Morrison, Al is “an experienced tax attorney in private practice.” Order, at p. 2. Representing taxpayers in Tax Court is generally “private practice”, Judge; clearly John and Del don’t qualify for low-income tax clinic.

Well, experienced or not, Al does copy his clients on all correspondence, and signs off on the stipulation agreeing that the $72K is unreported income.

But the decision document embodying same doesn’t get signed, John and Del dump Al, and John and Del claim in Tax Court that the stipulation should be set aside based on mutual mistake.

No, says Judge Morrison, it wasn’t mutual. The only party who didn’t understand was y’all (I’m writing in the Magnolia City, remember).

Al said more than once, in writing, that the $72K was unreported income, and John and Del saw the letters. And the final stipulation, that they also saw before it was signed, said nothing about a “wash”.

Judge Morrison holds an evidentiary hearing. IRS’s counsel testifies about the “wash” statement. John and Del claim IRS’s counsel said it, and Al testifies he did, but IRS’s counsel says he didn’t.

Judge Morrison believes IRS’s counsel. Al is “prone to misunderstandings.” Order, at p. 14. Like how a deduction for compensation paid by a C Corp somehow obliterates the obligation of the payee to report same as income.

Howbeit, per Rule 91(b), counsel can sign stipulations, and when John and Del claim they’re not bound because they didn’t themselves sign, Judge Morrison gives them the bad news. They saw the correspondence and the stipulation, and Al was their agent. “His actions and mistakes are attributable to them.” Order, at p. 14.

I think Al already got The Phone Call.

Takeaway–Never rely on your memory. Before signing anything important, check the file.