Hermine Dinger claims ADD isn’t a US government agency, and even settled a deficiency case with IRS (for different years) while getting paid by ADD, but that doesn’t help, in 2015 T. C. Memo. 145, filed 8/6/15.

ADD is nothing to do with attention deficits here; it’s the Aufsichts und Dienstleistungsdirektion. And that should evoke a first-class “Mein! Was ist das?”

Well, I’ll enlighten you, even as I was enlightened by Judge Dawson. The Aufsichts und Dienstleistungsdirektion translates to Pay Office Foreign Forces, and “‘is a German authority of the Ministry of Internal Affairs and Sports’ that administered the payroll relating to civilian employees of the U.S. Army under The Agreement Between the Parties to the North Atlantic Treaty Organization Regarding the Status of Their Forces (NATO SOFA), June 19, 1951, 4 U.S.T. 1792.” 2015 T. C. Memo. 145, at p. 4.

Hermine worked as a receptionist at the U. S. Army Dental Clinic at Friedberg, Germany, of which country she was a citizen, although, being married to a U. S. citizen, she made the Section 6013(g)(1) election to be treated as a U. S. resident.

Judge Dawson explains: “The ADD disbursed wages to petitioner. The U.S. Army provided the funds ADD disbursed to petitioner in a salary statement that stated: ‘This is not an activity of the German civil service. Payment will be made by the home country and subject to recovery’.” 2015 T. C. Memo. 145, at p. 4.

Hermine claimed the foreign earned income exclusion. IRS said she got paid by the U. S. Army Dental Clinic, and therefore Section 911(b)(1)(B)(ii) says she can’t exclude that income.

Judge Dawson spends some computer time establishing that the U. S. Army Dental Clinic is an agency of the United States. Tough call, Judge.

And all ADD did was act as payroll administrator. Hermine was directed by, hired by, and could be fired by, the U. S. Army.

Hermine claims the earlier settlement estops IRS from challenging her exclusion. But there was no finding of facts or stipulation of facts, and no briefing or trial.

“The decision document… only effected a settlement of that case. There was no stipulation of facts in support of the settlement. There was no trial or briefing on the merits of the foreign earned income issue, and there was no decision on the merits.” 2015 T. C. Memo. 145, at p. 11.

You need all that for collateral estoppel. The issue must be litigated and decided. And for Hermine’s settlement, it wasn’t.