The trade press and blogosphere commented extensively on the Tax Cuts and Jobs Act of 2017. The increased personal exemptions and enhanced standard deduction were welcomed, but fewer spotlights were shone on the suspension of the employee unreimbursed business expense deduction and the Section 212 expenses for production of income deduction.

While these latter impacted far fewer taxpayers, in the case of Adrienne Mennemeyer, T. C. Memo. 2025-80, filed 7/28/25, the suspension of the Section 212 deduction was potentially ruinous. Adrienne settled a wrongful termination and defamation case in 2018, wound up with a $1.5 million settlement, but had a 33% attorneys’ fee.

There’s the usual joust about Section 104 physical injury, but Adrienne has no documented medicals, and her fact witnesses’ testimony was less than stellar. Judge Courtney D. (“CD”) Jones tosses it all.

Adrienne’s post-employment business venture fares little better. Her accountant boyfriend just copied whatever numbers Adrienne gave him. Section 274 knocks out her Chevvy Suburban purchase and expenses, and she hasn’t enough paper to get Cohan treatment above what IRS ultimately allows on everything else.

But however devastating leaving out half of the net recovery on her 1040, plus her unreported business income and disallowed deductions, getting taxed on her attorneys’ fees would have been a crusher.

Except.

Adrienne’s trusty attorney raised the Section 62 deduction for attorneys’ fees in civil rights and discrimination cases as an alternative argument.

“Respondent did not address Ms. Mennemeyer’s alternative position and therefore has waived the argument. See Rose v. Commissioner, T.C. Memo. 2019-73, at *35–36. Moreover, we find that Ms. Mennemeyer’s claims against PNC fall within the broad category set forth in section 62(e)(18)(ii). Specifically, Ms. Mennemeyer’s claims against PNC related to her employment relationship with PNC and her claim for lost wages. Accordingly, the parties shall consider section 62(a)(20) when they recalculate the deficiency under Rule 155. See Dern v. Commissioner, T.C. Memo. 2022-90, at *3 n.3 (noting that the Commissioner conceded that the taxpayer was entitled to deduct attorney’s fees and court costs in connection with claim against former employer).” T. C. Memo. 2025-80, at p. 12.

For the Rose story, see my blogpost “A Little Tin Box,” 6/13/19; for Dern, see my blogpost “Hurt But No Foul,” 8/30/22.

While you can’t count on IRS blowing this one again, definitely raise Section 62 wherever you see a glimmer of hope. And maybe the Big Beautiful Whatever will solve the problem.

The problem I first noted back in 2023 has not abated; see my blogpost “Endangered Species,” 9/6/23.

Judge Courtney D. (“CD”) Jones, noting the age of Railroad Valley Mining Company, LLC, RVMC Partners, LLC, Tax Matters Partner, Docket No. 13683-20, filed 7/28/25, directed the parties to file a stip of agreed facts a couple weeks ago (hi, Judge Holmes).

Now she wants them to talk about a trial date sometime in the fall of 2026.

“As to location, the Court understands that petitioner requested Atlanta, Georgia as its place of trial (Doc. 3). However, there are several hundred, potential multi-week trials, in which petitioners in other cases have requested the same place of trial.” Order, at p. 1.

The Dixieland Boondockery tsunami will overwhelm The Big Peach Federal courthouse, so Judge CD Jones wants IRS and the Railroaders to take the show on the road.

“…the Court will order the parties to confer on an alternative place of trial, or failing an agreement, then two alternative places of trial for each side. (The Court has permanent courtrooms in the following cities that, among others, could be viable alternative trial locations: Washington, D.C., Jacksonville, FL, Tampa, FL, New Orleans, LA, Winston-Salem, NC, Columbia, SC, and Nashville, TN.)” Order, at p. 1.

Atlanta, GA’s Federal courtrooms are an endangered species still.

And that highlights yet again the need for Tax Court to move these cases, both physically and temporally. I commend Judge CD Jones for putting feet to the cliché.

Ch J Patrick J. (“Scholar Pat”) Urda brings some discipline to the discovery process in Capitol Places II Owner, LLC, Historic Preservation Fund 2014 LLC, A Partner Other Than The Tax Matters Partner, Docket No. 16536-23, filed 7/25/25.

Dates matter, so let’s schedule them. PTSO set 4/7/25 as last day for exchange and lodging of rebuttal reports. The Capitolists’ expert rebuttal witness R (name omitted) already testified to rebut IRS’ expert’s report at partial trial session 5/8/25. The Capitolists move for leave to file R’s supplemental rebuttal report 7/23/25, which IRS opposes 7/25/25 (improperly filed, says Judge Scholar Pat, but spoiler alert, the supplemental report isn’t going in anyway).  Further trial scheduled for 7/28/25.

The Capitolists claim R’s report will rebut an IRS fact witness and opine about legal permissibility of the use of, or changes to the façade of, that “three-story classical revival masonry building designed by James Urquhart, an architect prominent in early 20th-century Columbia.” See my blogpost “Historically Insignificant,” 1/2/25, for more.

Judge Scholar Pat isn’t having this.

 “…the rebuttal expert report relates to the upcoming testimony of a fact witness, M…. Ms. M has yet to testify so we struggle to see what there is to rebut. Instead, this appears to be an attempted end-run around our Rules. To the extent that the report relates to legal permissibility, Fund seeks to offer expert testimony that it could have offered in its case in chief. It failed to do so and we will not endorse the twin fictions that this is proper rebuttal or acceptable under our Rules.” Order, at p. 2. See Rule 143(g)(2) for the 30-day cutoff on experts’ reports.

So stand down R, right?

No, says Judge Scholar Pat. R can talk, not report.

“Although Ms. R testified in rebuttal to Mr. F’s [IRS’ expert] report, this testimony took place before Mr. F himself testified. We will permit testimony by Ms. R for the limited purpose of rebutting trial testimony by Mr. F that was not directly covered in his report. We will not permit cumulative testimony or testimony on points contained in Mr. F’s report (which Ms. R had the opportunity to rebut previously). Likewise, Ms. R may testify in rebuttal to Ms. M.” Order, at p. 2. (Names omitted).

“Win Your Case By Discovery Bamboozlery” seems to be a hot CLE topic.

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.

I echo the words of Billy Grammer’s 1959 smash hit when I see the third (count ’em, third) appearance of Dennis M. Curtin, Docket No. 32212-15, filed 7/23/25, in this my blog. Dennis is a Virgin Islander holdover from the days of Congress’ unguided largesse to our Insolvent Islands in the Sun, with its bifurcated tax arrangement between Virgin Islands Bureau of Internal Revenue and the IRS.

Trial is fast approaching after a mere ten (count ’em, ten) years since petition (practically a Tax Court newbie), when IRS seeks to amend its answer to raise “a new issue for years 2001 through 2004.” Order, at p. 1.

The “new issue”?

“[Denny’s wholly-owned VI LLC] did not file an entity classification election, and accordingly is treated as a corporation separate from its owner under Treas. Reg. 301.7701-2(b)(2) (because it was a foreign entity with a single member with limited liability). For years 2001 through 2004, the Commissioner argues that Mr. Curtin was not a bona fide resident of the USVI and did not satisfy his income tax obligations by paying all income tax to the USVI. Accordingly, the Commissioner argues that if he is successful on either issue, then Mr. Curtin was required to file a Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, for [Denny’s wholly-owned VI LLC] for each year. The Commissioner alleges that, because Mr. Curtin has never filed a Form 5471 for [Denny’s wholly-owned VI LLC], the assessment period for the income tax return remained open under section 6501(c) as in effect for years 2001 through 2004.” Order, at p. 2.

IRS further claims no prejudice to Denny, because his years-at-issue records are “meticulous”, and IRS would be prejudiced if Denny wins on SOL.

Judge Ronald L. (“Ingenuity”) Buch isn’t buying.

“The Commissioner does not provide a reason for raising this argument this late in the proceedings. The Commissioner argues that had Mr. Curtin properly reported his interest in [Denny’s wholly-owned VI LLC], then the Commissioner would have been able to timely issue the notice of deficiency with respect to these years. However, the Commissioner does not provide a reason for why he is raising this defense a mere five weeks before trial. The Commissioner was aware of the existence of [Denny’s wholly-owned VI LLC] when he issued the first notice of deficiency in these consolidated cases on September 15, 2015. Accordingly, the Commissioner has had nearly ten years to investigate this entity to raise this issue.

“Additionally, allowing this issue to be added at this late date would prejudice Mr. Curtin. Discovery is closed. And even if no discovery would be required, addressing this issue would require petitioner to scour his records during the remaining few weeks before trial. Allowing the Commissioner to raise a new issue after discovery has been closed for over a year and on the eve of trial would prejudice Mr. Curtin.” Order, at p. 3.

Of course SOL must be pled and proven. It’s an affirmative defense.

Taishoff says I don’t see why Denny has to “scour his records” to see if he filed Form 5471 for any of four (count ’em, four) years at issue; Form 5471 gets attached to whichever of personal, partnership, or corporate tax return you filed, or amended return if you forgot to file Form 5471 with the original return. The returns for relevant years have to be front-and-center among Denny’s “meticulous records” in his trusty attorneys’ trial notebook.

Btw, I got the Form 5471 question wrong on the SEE for Enrolled Agent.

That said, Judge Ingenuity Buch got it right. It took IRS ten years to figure this out. That I got the question wrong doesn’t excuse them. The glacial pace of Tax Court practice encourages such dilatory behavior. They “laid around and played around this ol’ town too long/Summer’s almost gone and winter’s comin’ on.”

Time to travel on.

Not the 2008 Eugene Marten novel thus entitled, this is my comment on the unending silt-stir engendered by the sloppy drafting of Section 6751(b) and the unintelligent judicial gloss that renders this defective legislation an impediment rather than a remedy.

In River Moss Property, LLC, River Moss Management, LLC, Partnership Representative, T. C. Memo. 2025-79, filed 7/22/25, IRS employs nine (count ’em, nine) attorneys. Why this run-of-the-mill partial summary J motion needs a T. C. Memo. and nine IRS counsel, when the River Mosses only interpose what Judge Rose E. (“Cracklin’) Jenkins calls unconvincing objections and requests for discovery that will not lead to essential information.

Given this case is Golsenized to 11 Cir, whose view is that as long as supe can supervise when signoff occurs, Section 6751(b) is satisfied.

I note that among the baseball team IRS has assigned to this case, three (count ’em, three) of those attorneys are part of the team who first gave notice of the chops to the Moss Rivers.  Cf. T.C. Memo. 2025-79, at p. 1 with p. 3. “Senior Counsel Richard J. Hassebrock recommended assertion of that penalty by including it in the Answer. Mr. Hassebrock’s immediate supervisors, Associate Area Counsel Louis H. Hill and Strategic Litigation Counsel Alexandra E. Nicholaides, approved the civil fraud penalty in writing.”

Fortunately IRS gets partial summary J, lest the aforesaid three attorneys be confronted with ABA Model Rule of Professional Conduct 3.7(a), which is engrafted into Tax Court practice by Rule 201(a).

 But such proceedings are a waste of time.

Only seven (count ’em, seven) small-claimer T. C. Sum. Op.s as we near the end of month seven of 2025. In contrast, CSTJ Zachary S. (“High-Rise”) Fried has issued thIs date 96 (count ’em, 96) SPTOs for small-claimers. How many ya think CSTJ High-Rise Fried will actually try?

STJ Jennifer E. (“Publius”) Sigel has John Henry Besaw, T. C. Sum. Op. 2025-7, filed 7/21/25, a simple Section 170 noncash, definitely not Dixieland Boondockery.

John Henry “…stated that it was his understanding that the elements required by law for noncash charitable contribution deductions were to include the name and address of the donee organization and the description of donated property, not anything about the value of the donated items. He contends that is why he did not include the values of the donated items on his [year-at-issue] tax return. Petitioner did not testify, and the Court does not find that it was impractical to obtain receipts for the donated items that included descriptions of the items donated.

“Although the Court believes petitioner donated items to charitable organizations in [year-at-issue], the record before the Court shows that petitioner did not satisfy the substantiation requirements of section 170(a)(1) and Treasury Regulation § 1.170A-13. Regardless of whether petitioner met the requirements for deducting charitable contributions of $250 or more, or for deducting charitable contributions of property valued in excess of $500, none of the receipts he provided from the charitable organizations for his donations included any descriptions of the donated items; therefore, petitioner is not  entitled to deduct noncashcharitable contributions for tax year 2019. See I.R.C. § 170; Treas. Reg. § 1.170A-13(b)(1).” T. C. Sum. Op. 7, at pp. 5-6.

When I saw Genie R. Jones, et al., T. C. Memo. 2025-78, filed 7/21/25, my heart took a Wordsworthian leap-up. “Here at last,” I thought, “is the promised exagmination round the factification of Section 7701(o)(1), the true meaning and effect of the codification of economic substance, putting to rest the Intra-Circuit anfractuosities in a unified field theory of economic substance, sham transaction, and adequate disclosure thereof.”

Alas, no; the bright hope I expressed in my blogpost “Take No Prisoners,” 3/25/25, that both economic substance and the adequate disclosure of a microcaptive insurance dodge would get “a full-dress T. C. because the statutory reconstruction of the economic substance doctrine is a puzzlement,” doesn’t happen.

All Judge Nega gives us is that, since the nominal insurance company pool in this case isn’t an insurance company because the policies it writes aren’t insurance, neither Section 831(b) allows it to exclude premiums from income nor Section 832(b)(4) allows deferral of unearned premiums.

IRS wanted a Supplemental Memorandum clarifying these points, as IRS found Judge Nega’s fifty (count ’em, fifty) page massacree of Genie’s microcaptive back in March ambiguous on those points. I must say IRS’ counsel have proven my point yet again: any lawyer who can’t find an ambiguity should find some other way to make a living.

Took four (count ’em, four) months, but they got it.

Now how about Section 7701(o)(1)?

That’s the plight of Cindat Manhattan Hotel Portfolio LLC, Docket No. 12905-20, filed 7/21/25, making their fourth (count ’em, fourth) appearance in this my blog. Depriving me of further blogfodder by settling out, the Cindats have one last shot. Turns out the ultimate tax due is zero, because the year-at-issue deficiency is zeroed out by a NOL carryback. So the Cindats want the stip of settlement and resulting decision to show zero interest for year at issue.

But Judge Elizabeth A. (“Tex”) Copeland says Rule 261(b)(2) reverses the classic Tax Court play-before-you-pay story.

“In general, motions to redetermine interest must include a schedule detailing the computation of what Petitioner contends is the correct amount of interest. Rule 261(b)(1)(B). Petitioner must describe the extent to which it registered its disagreement with the Commissioner, or its rationale for not doing so. Rule 261(b)(1)(C). Petitioner must also attest that it has paid the full amount of the deficiency and interest assessed by the Commissioner before invoking Rule 261, and must include a breakdown of the amount and dates of each such payment. Rule 261(b)(2).” Order, at p. 2.

The Cindats’ situation complicates matters. There’s no question of how much year-at-issue interest is due; but even if the underlying deficiency gets zeroed out, the Rule and the IRC don’t help.

“We likewise note that, even if we were to have jurisdiction at this time over Petitioner’s motion, the parties are bound by the stipulations filed with this Court. See Rule 91(e). Petitioner signed a stipulated decision clearly stating that interest would accrue, and we will not disturb the agreement made in the stipulated decision. And, were that not the case, section 6601(d)(1) expressly provides that a reduction in tax attributable to a net operating loss ‘shall not affect the computation of interest under this section for the period ending with the filing date for the taxable year in which the net operating loss . . . arises.’” Order, at p. 2, footnote 2.

So providing that no interest would be due in the stip of settlement wouldn’t help, the rationale being the Cindats had the use of the year-at-issue underpayment until the events of the subsequent year wiped out the liability.

Though not a patch on the famous Kesting cases, some of which went back to the last millennium, Malka Yerushalmi, Petitioner, and Joseph Yerushalmi, Janet Baldwin, Next Friend, Intervenor, Docket No. 5520-08, filed 7/18/25, bids fair to run a quarter-century in good old Dickensian style.

As I said four (count ’em, four) years ago, “(T)hat 08 is no typo; I’ve drunk good Scotch that’s younger than this case.” See my blogpost “Ex Jersey Semper Aliquid Novi,” 9/8/21.

I do owe Malka a thank you note. Her case has given me plenty blogfodder (hi, Judge Holmes; I see you’re still on this case).

Howbeit, Judge Holmes takes Janet B. off the case as next friend and sends her back as Executrix of the Estate of Joseph Yerushalmi.

Having apparently outlived the late Joe, this case may outlive the rest of us.