I cannot count how many times I’ve used the ancient jibe that lawyers can’t add. But ex-Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan has found one who can in Jeffery Dieffenbach, T. C. Memo. 2026-67, filed 8/13/26. Although his trial tactics may not be the best, Mr. Dieffenbach was either employed, or served as an independent contractor, as a bookkeeper, and was duly compensated as such, during at least some of the five (count ’em, five) years at issue.

Unfortunately, Mr. Dieffenbach did not file tax returns for those years. Mr. Dieffenbach was a licensed attorney in CT, T. C. 2026-67, at p. 2.

This is his second time around in Tax Court. I did not chronicle the first, as it was a toss for no jurisdiction. Hence his res judicata argument fails, as do his allegations of Exam irregularities (Greenberg’s Express). His Section 7605 multi-examinations argument founders, as replacing a retiring examiner with a new one doesn’t create a second exam. Both examiners had the same supe, and both duly Boss Hossed Mr. Dieffenbach.

That’s the plight of Aladar Deutsch and Sylvia G. Deutsch, T. C. Memo. 2026-66, filed 8/12/26. Al’s buddy Mr. Visel, who had previously put Al into losing investments, had a Mexican deal with some alleged Dubai heavy-hitters. Al bit to the tune north of $1.25 million.

Of course this was a classic advance-fee scheme of the kind you get at least five (count ’em, five) e-mails every day (weekends included) from Krystalina Georgieva at the World Bank, cancerous millionaire widows, Qaddafi’s relatives, Chinese moguls on the run, et hoc genus omne. They’ll all give you millions if you send them a couple grand “for fees.” Ya, right, ya betcha.

I won’t go through the details here; Al and Syl have suffered enough. Judge Tamara Ashford has to do it, so you can read the details in her opinion.

Why IRS didn’t fold eludes me. Judge Ashford’s extensive review of State (TX) law (larceny by trick or device) is overkill. Identifying the thief, charging him/her/them criminally, and pursuing such as are identifiable, are essential elements of establishing Section 165 theft loss. But here the thief is offshore and smart; Al’s and Syl’s trusty attorneys (both onshore and offshore) and their investigative team cannot nail him, nor can they establish to Judge Ashford’s satisfaction that buddy Visel was in on the fraud. He might have been just another one deceived.

Hence, what Al paid the pseudonymous thief is deductible, but the money he fronted buddy Visel to hang out in London pursuing the deal is not. Buddy Visel does show his true colors when Al asks him to cough up; he replies with “an expletive-laden response” refusing. T. C. 2026-66, at p. 11. 

Trusty onshore attorneys engage in an extensive joust with IRS about reopening the record, at pp. 21-24. Needless to say, it’s that Boss Hoss sign-off again. And since the petition stays assessment, and apparently both RA and supe were still in place and going strong when the explanatory paperwork was proffered, Boss Hossery is sustained.

Except. 

Al and Syl reasonably relied on their trusty CPA when they deducted buddy Visel’s London jaunt and whatever else they took, so no Section 6662(a) chops once the Rule 155 beancount establishes their final bill.

No, not a new Texas poker sensation to separate you from your money. This is Judge Cary Douglas (“C-Doug”) Pugh’s advice to Gerald A. Beacom and Jean A. Beacom, GT. C. Memo. 2026-65, filed 8/11/26. The kerfuffle concerns an AMIT carryforward Gerald was taking that stretched back to 1999 or maybe sometime through 2005, he couldn’t recollect exactly; “(understandably, given the passage of time)” says Judge C-Doug Pugh. T. C. Memo. 2025-65, at p. 2.

But that doesn’t help Gerald, even though he says he lost his old records in a flood.

“Petitioners defend their lack of documentation by claiming that IRS guidance requires taxpayers to retain prior year returns for a maximum of seven years. Internal Revenue Serv., Publication 17: Your Federal Income Tax 17–18 (Dec. 16, 2021), https://www.irs.gov/pub/irs-prior/p17–2021.pdf (prescribing various periods for retaining records, including seven years for losses from worthless securities and bad debt deductions); see § 6511(b). They misread that guidance. It requires taxpayers to retain documentation supporting the items reported on a return for seven years. Petitioners should have maintained records supporting their claimed AMT credit for seven years from the date of the return on which they applied the credit, not seven years from the date of the return when they first paid the AMT. That is, petitioners were required to retain, as evidence of their eligibility for the AMT credit in tax year 2021, records (such as their prior returns) documenting the source of the AMT credit (and its prior utilization, if any) for seven years from 2021, not seven years from 1999 or 2000.” T. C. Memo. 2026-65, at p. 6. The flood took place years before 2021 (year at issue).

Oh, Boss Hoss, what sins are committed in thy name! Judge Rose E. (“Cracklin'”) Jenkins finds that what we thought was “settled law” was undone as the Boss Hoss leaves the stable after 2 Cir picked the issue preclusion lock.

And where better to encounter this latest resurgence of The Jersey Boys’ Greatest Hit, the Chai-Graev double, than in Annamalai Annamalai & Parvathi Sivanadiyan, Docket No. 2398-23L, filed 8/11/26, the latest episode in this eleven (count ’em, eleven) year blogfeast?

Ever since Warner Ent., Inc., we thought issue preclusion barred any Boss Hossery defense to a chop where liability had been litigated, deficiency and chops assessed, and decision was final. See my blogpost “How Now?” 8/22/22.

Seemed to touch all the bases: same parties and privies (that’s nonparties bound by participating parties), could have been raised and litigated at trial or in motion papers, no supervening change in law.

Except.

Boss Hossery has separate statutory requirements which an AO at Appeals has to fulfill at a CDP, whatever happened on a trial or summary J. So said 2 Cir in Besicorp. v. Com’r, No. 23-296 (6/29/26). 

“Most salient here, the Appeals Officer must also ‘obtain verification from the Secretary [of the Treasury] that the requirements of any applicable law or administrative procedure have been met.’ Id. § 6330(c)(1). Only after satisfyingthese requirements and considering the arguments and evidence presented by the Service and the taxpayer may the Appeals Officer issue a ‘Notice of Determination’ upholding or rejecting the lien or proposed levy.” Besicorp, at p. 9. Whatever the parties pled or proved at trial or motion, the AO must find Boss Hossery de novo. 

Judge Cracklin’ Jenkins finds the record (this is obviously a CDP review) fails to show that Boss Hossery was raised or considered either in the order and decision or at the CDP from whose NOD Annamalai petitions. All the AO did when she found no Section 6761(b) sign-off in the file was get a memo from counsel that the order and decision precluded Boss Hossery. And in her and counsel’s defense, pre-Besicorp that was the law.

OK, so how now, this latest silt-stir?

“Given the state of the Administrative Record and the absence of any argument by respondent about the verification requirement, this Court does not conclude that the Second AO did not abuse her discretion in sustaining the levy with respect to the section 6663 penalty for the 2007 tax year despite not verifying compliance with section 6751(b). Unlike the Second Circuit…, however, this Court does not conclude that the Second AO’s failure to verify approval permits a conclusion that no approval was obtained. Accordingly, the Court will remand this case to Appeals for further review to determine whether the verification requirement can be met with respect to the 2007 tax year. If Appeals is not able to verify approval of the 2007 section 6663 penalty, respondent may fully address the import of that failure at that juncture.” Order, at p. 21. (Citation omitted).

This is Remand No. 2 in this case.

I can but again quote myself when I blogged Senior Judge Mark V. (“Vittorio Emanuele) Holmes’ dissent in my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17.

“Oh brother, says Judge Holmes, you tried to bring peace, but like a much more exalted Authority you have brought not peace, but a sword. Section 6751(b) is a statutory one-off, a hapax legomenon as that classicist Judge Lauber and that Master of Tohubohu Judge Holmes put it. It’s intended to keep lower-level RAs and Examination types from bludgeoning settlements out of terrified taxpayers by threatening chops.

“But it doesn’t work.”

Except, that is, to stall once more a twenty (count ’em, twenty) year old Tax Court case.

I can think of few, if any, tactics that yield so much for so small an investment of time and effort. Before issue is joined, one should have as complete a picture of one’s client’s case as this imperfect world affords, and at least an inkling of the adversary’s likely lines of attack. Under Our Fair State’s Civil Practice Law & Rules, a statutory time limit for such motions is fixed, subject to judicial shortening. Rule 121(b) is broader, of course. Both hinge upon joinder (petition and answer served and filed).

As I’ve often said, summary J gives you discovery of what the judge thinks. It’s well to know if the lion will bite when you stick your little finger in its mouth, rather than your head.

Diversified Solutions Risk Management Inc, et al., Docket No. 16438-23, filed 8/10/26 is an attempt to reargue denied partial summary J, so it looks like wasted motion.

Except.

Judge Rose E. (“Cracklin'”) Jenkins definitively shuts down two (count ’em, two) legal arguments, substantive due process (trying to collect same deficiencies from two commonly owned entities) and separable transaction, but leaves a third (common ownership) untouched because insufficiently explained in the motion. So here’s a blueprint for one’s post-trial memo; what to preserve for appeal and what to stress.

Finally, economic substance and economic reality must be left for trial. With trial coming up in a month, here is where to spend that precious trial prep.

I’ll always be a fan of summary J.

That’s ex-CSTJ Lewis (“Nom d’un nom d’un nom!”) Carluzzo’s characterization of the advice of their “old and sick” tax preparer when he told Ehimwenma E. Aimiuwu and Kehinde F. Aimiuwu, T. C. Sum. Op. 2026-7, filed 8/10/26 to “deduct the corporate expenses [of their C Corp] on the [individual] return because [C Corp.] had no income during [year at issue].” T. C. Sum. Op. 2026-7, at p. 2.

Eh and Ke fold all but a $49K charitable deduction which they want to move to their Sched A from the Sched C they filed.

Except.

“Petitioners now argue that the donation deduction claimed on the Schedule C should have been claimed as an itemized deduction on the Schedule A. However, they have presented no written evidence that satisfies the statutory scheme that permits such deductions. Nor have they presented anything that would support a finding that the donee is described in section 170(c).

“Regardless of how the donation deduction should have been taken into account in the computation of petitioners’ … federal income tax liability, it is their burden to establish their entitlement to it. Offering only petitioner’s testimony on the point, they have failed to do so. Respondent’s disallowance of the donation deduction is sustained.” T. C. Sum. Op. 2026-7. at p. 3.

As Eh was a college professor with several postgraduate degree during year at issue, and Ke was an information technology professional (T. C. Sum. Op. 2026-7, at p. 2), they would have run badly in the Section 6662(a) accuracy chops stakes, but for IRS folding those and the Section 6651(a)(1) add-on. T. C. Sum. Op 7, at p. 1, footnote 2.

Tax Court has issued its latest Rogues’ March, whereof one item is worth mentioning here.

Michael J. Avenatti of Stormy Daniels’ notoriety has been formally disbarred a mere five (count ’em, five) years after his nonreply to the OSC ordering his interim suspension became absolute.

Reminds me of Mark Twain’s story of the Mississippi riverboat that was so slow, when it sank it took the owners five years to hear about it.

The old saw that shoemakers’ children never have shoes may finally meet its match when David E. Du Val & Jane T. Smith, et al., Docket No. 22079-22, filed 8/7/26, comes to trial in October. Dave and Jane, and their fellow tax controversialists Mark Olander and Nancy Farwell-Olander (Olanders, collectively) are or were stockholders in Tax Resources, Inc. (TRI), a C corp that offered tax audit defense services. Order, at p.1.

Swapping their shares in TRI among a couple trusts (hi, Judge Holmes), moving TRI from C to Sub S, running the shares through an ESOP and finally parking them in LLCs, whose membership interests they unload to a 501(c)(3) in advance of a corporate redemption (sound familiar? Judge Cary Douglas (“C-Doug”) Pugh probably sighed as she read the dueling summary J motions) sets up both the reasonable cause defense if this charitable donation mix-and-match craters, and the how-much-control-did Dave-and-Jane-retain which would invoke such cratering. 

Davd and Jane and the Oleanders were managers of said LLCs. So what, reply Dave’s & Jane’s trusty attorneys. Members could amend the op agreement, and even if they didn’t IN (governing State law) reins in overeager managers who stray from straight and narrow.

All hands want summary J. Judge C-Doug Pugh punts.

“The parties’ cross Motions have not convinced us that we can resolve their dispute over control without resolving disputes of material fact. If we construe the facts in the light most favorable to petitioners, then we might conclude they did relinquish sufficient control over the LLC interests. Therefore respondent’s Motion must fail. Conversely, construing the facts in the light most favorable to respondent suggests that petitioners retained too much control over the LLCs’ assets, so petitioners’ Motion must fail. These arguments are best addressed in briefing in the context of a factual record developed at trial. Respondent’s claim that the transaction represented the anticipatory assignment of income similarly requires factual determinations regarding the substance of the transactions and the various steps. See Chrem v. Commissioner, T.C. Memo. 2018-164, at *14–15.” Order, at p. 4. (footnote omitted).

For the backstory on Chrem, see my blogpost “Fair is Foul – Maybe,” 9/26/28.

There’s the usual IRS Section170(f)(8) CWA nitpick, going even to the salutation in the CWA letter. And naturally IRS is all over the appraisal of the stock as being unqualified, but that’s certainly for trial. Judge C-Doug Pugh is too well-bred to give this nonsense a Taishoff “Oh, please!”

IRS’ clichéd Boss Hoss piscine Hoss barrelshoot gets summary J, but that’s all Judge C-Doug Pugh wrote.

Not quite, says Judge Christian N. (“Speedy”) Weiler, SIH Partners LLLP, Explorer Partner Corp., Tax Matters Partner, 167 T. C. 8, filed 8/6/26, could make $2.4 million on their portfolio swap with their Firm Hedge against downside markets and a bunch Swiss equities (hi, Judge Holmes). These dudes are macro highrollers. Judge Speedy Weiler tracks their machinations through Section 246 and regs stock marketry with Morgan Stanley, to try to get a reduced 15% tax rate out of the Swiss taxing authorities, 15% US Qualified Dividend treatment, and a heavy-duty foreign tax credit.

Turns out SIHP beats IRS’ form-over-substance argument. The deal survives Section 246(c)(4)(C) diminished risk of loss, due to IRS’ experts’ less than stellar testimony. Techies, see 167 T. C. 8, at pp. 20-25. And SIHP dodges the Reg. Section 1.246-5(c)(1)(iii) substantial overlap test. The Hedge and the Swiss aren’t substantially similar or related property. So far.

Now I’ve no doubt my jaggedly-sophisticated readers are yelling with one voice “Hang on, Squire, what about Reg. Section 1.246-5(c)(1)(vi), the Anti-Abuse Reg?”

No fear, chaps, Judge Speedy Weiler is all over that one.

“The Anti-Abuse Rule comprises three elements: (i) the taxpayer has eliminated his economic risk of his stock holdings by holding a position that ‘virtually track[s]’ its stock holdings, (ii) that position is held ‘as part of a plan a principal purpose of which is to obtain tax savings,’ and (iii) the tax savings obtained by the taxpayer are ‘significantly in excess of the expected pre-tax economic profits’ of holding the position.” 167 T. C. 8, at p. 30. (Footnote omitted, but it says all three are essential, and “significantly in excess” is a quantifying aspect; just saving tax doesn’t invoke the Rule). And virtual tracking doesn’t slow SIHP down either. “… the Virtual Tracking Test acts as a check to determine whether there is any hidden (or virtual) overlap between the entirety of a position, or the entirety of stocks reflected in the position, and a taxpayer’s stock holdings, or a portion of the taxpayer’s stock holdings and other positions of the taxpayer.” 167 T. C. 8, at p. 32. But SIHP’s expert’s attempt to hold that to a strict numerical formula craters; Judge Speedy Weiler finds “…the regulation to be broad in application and determine Treasury intended for it to serve as a catch-all for potential abuse. If petitioner’s arguments were correct, the Anti- Abuse Rule would seem to never apply in circumstances where a taxpayer has passed the Substantial Overlap Test. The preamble to the final regulations makes it clear that this is not the case. If the Anti-Abuse Rule applies, a position that reflects the value of two or more stocks (including a portfolio) is treated as SSRP even if those stocks and the taxpayer’s stock holdings do not substantially overlap. See T.D. 8590, 1995-1 C.B. at 16. Considering SIHP also held short positions in the Swiss Equities under the Transaction, we determine these two positions are reasonably expected to virtually track under the Anti- Abuse Rule. See Treas. Reg. § 1.246-5(c)(1)(vi)(A).” 167 T. C. 8, at p. 32.

 But that profit is what ultimately torpedoes SIH. After an extensive mix-and-match of dueling experts, Judge Speedy Weiler delivers the bad news.

“Having determined that the expected pretax profit ranges between $0 and $2.4 million, while the corresponding estimated tax savings are some $25 million, we determine that the value of the tax savings is significantly in excess of the expected pre-tax economic profits. See Treas. Reg. § 1.246-5(c)(1)(vi)(B). We therefore determine the Anti-Abuse Rule of Treasury Regulation § 1.246-5(c)(1) is applicable to the Transaction and that, on the basis of the evidence presented, the Transaction fails to comply with the Anti-Abuse Rule. We hold that SIHP’s position in the Swiss Equities is SSRP.” 167 T. C. 8, at p. 40. Hence no US 15% QDI tax, and the foreign tax credit founders on Section 910(a) and (k)(1) because the Swiss stuff is SSRP.

Note: A “Bialystok” is a deal that creates a tax loss with minuscule or no economic effect, named after the hero of “The Producers.”

Or maybe “Don’t Stipulate, Expostulate” better sums up Judge Cary Douglas (“C-Doug”) Pugh’s take on the Rule 91(f) motion for OSC to accept proposed facts and evidence launched by Meta Platforms, Inc. & Subsidiaries, Docket No. 16081-25, filed 8/6/25. Said motion was the preliminary bombardment by Meta & Subs before sending its motion to preclude IRS from making periodic adjustments under section 482 for the years at issue in this case over the top.

IRS followed up on Judge C-Doug Pugh’s opinion a year ago, more particularly bounded and described in my blogpost “Facebook Faceoff – Draw (Sort Of),” 5/22/25, by bringing in some more years, even while the Rule 155 beancount had not yet concluded.

Judge C-Doug Pugh spends a lot of time finding fault with the Meta & Subs’ edited version of facts and documents. “Selective quotes and summaries are not consistent with the spirit of Rule 91.” Order, at p. 2. But in the meantime and without waiting, Meta & Subs moved to preclude, And IRS responds.

True, 9 Cir (where Meta & Subs are Golsenized) requires citations to the admin record to “pinpoint” what the parties contend, but the Court doesn’t need a stip to figure that out if the parties cite to the record in their preclusion motions.

And they did.

“The parties could and indeed did cite [Judge Pugh’s 2025 opinion] and incorporate documents relevant to their respective legal arguments by attaching them as exhibits to their Preclusion Motions. Because the stated purpose of the proposed stipulation was to facilitate judicial consideration of the Preclusion Motions, and the parties have proceeded without one, petitioner’s Motion effectively is moot.” Order, at p. 3.

And of course the parties can try, or agree, to put in the whole record of the case including the 2025 opinion. Judge C-Doug Pugh won’t require it. And they can even agree to put in documents not part of that record or move to include such as they do not agree. But no summaries; let it all hang out.

Thirteen (count ’em, thirteen) lawyers for Meta & Subs, twelve (count ’em, twelve) for IRS, and this is the result. SMH.