Mark L. Fussell, T. C. Memo. 2025-131, filed 12/18/25, filed 1040X for three (count ’em, three) tax years, for which IRS gave him a CP21, allowing him a refund for Year One only. Mark alleged that his $420K loss was due to bad loans to his “tightly held” C Corp.

Mark says he thought the CP21 encompassed all three years, but IRS audited Years Two and Three, and Mark and IRS stiped them out as no-tax-no-refund before his tax was due for Year at Issue. Mark didn’t file Year at Issue, claiming audit, but thst’s a nonstarter.

Judge Rose E. (“Cracklin'”) Jenkins finds the claimed loans are unsubstantiated: no documents, no showing of payments made, no showing of Section 165(g)(2) securities compliance. Even if substantiated, any NOL carryback or carryforward is long used up, as no Section 172(b)(3) carryforward election was made.

And of course, the add-ons for nonfiling, nonpaying, and nonpayment of 1040-es are sustained.

Takeaway: You can stip out a year, but each year stands on its own. Be prepared to fight every succeeding year as if the year of the stip never happened.