In Uncategorized on 09/27/2022 at 19:23

I trust my faithful readers (few in number, mighty in endurance) will entertain no doubt as to the identity of the judge who wrote the above-captioned. The significant questions are (1) can parties agree to settle a deficiency case without agreeing on the numbers and (2) what does it mean to file a return.

The order, written as an order to spare the parties any further agony, is Frank W. Dollarhide & Michelle D. Dollarhide, Docket No. 21366-14, filed 9/27/22. And, of course, the order is nonprecedential and doesn’t definitively answer the questions. But Judge Mark V (“Vittorio Emanuele”) Holmes is good for ten (count ’em, ten) pages.

The Dollarhides petitioned three SNODs, two personal and one for a corporation Frank controlled. The disputes were unreported income, and the parties filed a stip of settled issues six years ago.

“Their settlement did not take the form of an agreed decision for each of the three cases, but instead a ‘stipulation of settled issues.’ This is an exceptionally common way for parties to wind down litigation in the Court. Because tax returns and notices of deficiency can include so many disputed items, settlements often consist of lists of issues in which the parties make mutual concessions or compromises. A taxpayer’s final bill — the amount he has to write a check for — is usually harder to figure out. The calculation often includes a computation of interest, arithmetic adjustments to other items (e.g.  limits on deductibility computed by reference to a percentage of adjusted gross income), and a summing of penalties and additions to tax computed as a percentage of the resulting deficiency, reduced by any allowable credits.” Order, at pp. 2-3. (Footnote omitted, but it says that a deficiency is just the amount the return should have showed, but didn’t, less what it showed; there may be credits, estimateds and withholdings that reduce what the taxpayer actually owes.)

The problem is overpaid FICA and withheld pay. No question they were entitled to them. But when IRS did the numbers, they weren’t included because the Dollarhides didn’t claim them until they filed a return four (count ’em, four) years after they should have filed. Thus, IRS treated those amounts as a claim for a refund, and that blew the three-year lookback in Section 6511(b)(2).

The Dollarhides hollered that they would never have settled if they couldn’t get the overpayment credits, but that’s not fraud; they could have checked out the statute. They appealed, but 9 Cir threw out the settlement claiming no meeting of the minds. The corporation was already off the hook, but what else?

Well, Judge Holmes parses the caselaw and finds there’s short-Circuitry on whether or not a stip of settled issues settles anything if there’s no agreement on the numbers. “It may mean that partial settlements that don’t include a final deficiency amount are now unenforceable in the Seventh and Ninth Circuits despite the usual maxims of contract law that suggest they are. Or it may just be that, under those general rules of contract law, stipulations of settled issues that don’t include a deficiency amount may be unenforceable against unrepresented parties as inherently ‘unjust’ or ‘oppressive’. Order, at p. 8.

I’ll have my own comments at the foot hereof.

Next question: the Dollarhides claim they handed the return showing the credits to the RA at the audit. This took place more than three years after the return was due. The record shows a return within the three-year window, but that seems to be a SFR, which doesn’t count. Anyway, a bunch cases (this is Judge Holmes, remember) say that a return isn’t “filed” unless it gets to the party designated to receive same, and the RA at Exam is not one such. Except good old 9 Cir. just held that if an official authorized to obtain and process a return asks, and the return is handed over, that’s filing.

So Judge Holmes asked if the Dollarhides want a trial on this issue, and Frank “definitely” said no. I can imagine the deleted expletives.

Judge Holmes notes that the 9 Cir case involved a partnership return, but the distinction between a 1065 and a 1040 seems a distinction without a difference.

So Judge Holmes vacates all the previous stuff, and enters decision that the Dollarhides owe nothing.

Taishoff says Oh, what a lovely silt-stir! But this was inevitable. Everybody wants to dispose of the case…parties and judges. Lawyers can’t add, judges love settlements, the average pro se is out of their depths on anything beyond a 1040A, and doing ex post facto tax return prep is the ultimate drag.  So roll on the stip of settled issues. And do the numbers later.


It’s almost fifty years since one of my first law partners (and the only one now living) intoned the immortal words “It’s all about the numbers.” I’ll say it again: it’s all about the numbers.

As the Great Beekeeper would have said “If you have not made certain of the numbers, then you have made certain that you have made certain of nothing.”


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