No, not the Colbert-Paramount kerfuffle; this is not a political blog. Rather, this concerns the lawsuit between the children of the late Betty and the Estate of the late Stanley Fulton, arising out of the 1977 divorce settlement between Betty and Stan. The parties settled out for $472 million, which the Estate deducted on the 706.

IRS disallows the deduction. The ex’rs claim the settlement is legit. The latest round of Estate of Stanley E. Fulton, Deceased, Michael B. Fulton and Elizabeth Fulton Jones, Co-Executors, Docket No. 7200-22, filed 7/24/25 features client-attorney privilege.

Judge Adam B. (“Sport”) Landy sorts out communications relating to tax reporting, as to which privilege is waived via reasonable reliance defense. There is a squad of white shoes with whom the ex’rs consulted. The communications regarding settlement of the lawsuit remains protected, but tax reporting is not.

“We agree with petitioners that the waiver of attorney-client privilege only extends to the documents relating to the advice they received regarding the deductibility of the settlement payments on Form 706. Because petitioners have asserted a reasonable reliance defense, any information regarding their return position is not only relevant, but it is also vital to respondent’s burden with respect to the accuracy-related penalty. To the contrary, the settlement negotiations themselves, and the probate and trust proceedings, stemmed from different parties litigating in another forum applying non-tax procedural and substantive law. Therefore, any advice petitioners received in the those matters, even if from the same attorneys, is separate and distinct from that advice they received regarding the deductibility of the creditors’ claim. Consequently, the Court determines that insufficient evidence exists to show that respondent would be prejudiced by the protection of those documents. While the advice regarding the probate proceeding, trust proceeding, and settlement of the creditors’ claims may be relevant, we determine that the advice is not so vital to prejudice respondent. Accordingly, respondent’s Motion is denied with respect to those documents.” Order, at p. 5.

Likewise, communications between and among various attorneys may be protected from waiver by the common interest doctrine.

“‘The common interest doctrine permits parties whose legal interests coincide to share privileged materials with one another in order to more effectively prosecute or defend their claims.” Hunton & Williams v. U.S. Dep’t of Just., 590 F.3d 272, 277 (4th Cir. 2010); see also United States v. Austin, 416 F.3d 1016, 1021 (9th Cir. 2005). This privilege ‘protects not only the confidentiality of communications passing from a party to his or her attorney but also from one party to the attorney for another party.” United States v. Austin, 416 F.3d at 1021; see also In re Grand Jury Subpoenas, 902 F.2d 244, 249 (4th Cir. 1990) (‘[P]ersons who share a common interest in litigation should be able to communicate with their respective attorneys and with each other to more effectively prosecute or defend their claims.”). The common interest doctrine does not require a formal written arrangement or active litigation.” Order, at p. 4. Waiver must be agreed by all parties; no one party can give up the privilege.

IRS gets some stuff, but a lot is protected. For now, at least.