I’ve blogged about this before, but it’s been a while, so a refresher might could be in order. Restitution does not determine tax liability; what the defendant in the criminal case must pay the government (the nominal victim) is the government’s estimate. The actual liability might be more or less, and that needs a trial.

Plea bargains in tax cases invariably provide that nothing in it limits petitioner’s civil liability, “including but not limited to remedies regarding . . . taxation.” Likewise, plea bargains have no claim preclusive effect as to the exact amount of any deficiency, so Tax Court will not grant summary J on the amount of the deficiency.

You can find all this, and more, in Thomas S. Miller, T. C. Memo. 2025-41, filed 5/5/25. All IRS gets is partial summary J that petitioner owes Section 6651(f) fraudulent failure to file chops for two (count ’em, two) of the six years at issue, on whatever deficiencies are finally determined.

I won’t name the firm or the attorneys, but this is certainly a strange tale. It’s nothing to do with the clients, Yaroslav Kirik & Galina Kirik, Docket No. 5898-23L, filed 5/5/25, at least not initially.

Yar & Gal petition a CDP NOD. The petition is signed by trusty attorney, a principal of the firm, whom I’ll call Harry. Eight (count ’em, eight) months later, two attorneys from that firm enter appearances and stip to the CDP administrative record. Trial date was set, but a scant 26 days before the scheduled date the two attorneys move to withdraw.

The problem is that Harry, who signed the petition, died ten months before scheduled trial date. STJ Jennifer E. (“Publius”) Siegel takes up the tale.

“We granted the motion, believing that petitioners remained represented by counsel. As it turns out, they were not; unbeknownst to the Court, [Harry] had passed away….” Order, at p.1. (Footnote omitted, but see infra, as my expensive colleagues would say.).

“No one—not petitioners, not petitioners’ counsel, not the law firm…, not respondent’s counsel—had informed the Court that [Harry] passed away. DAWSON, the Court’s case management system, received no service errors when making electronic service to [Harry]’s e-mail address. [Harry] remained listed as petitioners’ counsel of record until he was withdrawn by the Court on April 1, 2025.” Order, at p. 1, footnote 1.

Note that Entry of Appearance, Form 7, requires the practitioner to give her/his office address, but nowhere to give her/his firm affiliation, if any. As far as DAWSON is concerned, every practitioner is a single-shingle, although s/he may be a partner or associate in a thousand-attorney multinational.

In the meantime, Yar & Gal go off-radar, IRS moves for summary J and to toss for nonappearance at trial. STJ Publius Siegel tosses Yar & Gal, but advises them to move to vacate and respond to IRS’ summary J.

I’ve argued for law firm EoAs for years. Had there been a single EoA for the firm, withdrawal of any individual attorney would not effect a change in representation, but a withdrawal of the firm would terminate all representation.

Lest I be misunderstood, I am not suggesting that the responsibility for informing the Court, and obtaining required Court approval, of practitioner personnel changes should be altered in any way. There was clearly law office failure here, and responsibility therefor should remain where it belongs.

Edited to add, 5/5/25: My indefatigable correspondent, Bob Kamman, Esq., noted Yar’s & Gal’s previous appearance in this my blog, which I missed. Guess I’m getting old. See my blogpost “Are You Surprised?” 10/17/19. Yar & Gal are quite a pair.

Overbroad and overly general discovery requests are styled “fishing expeditions” by lawyers and judges, but in Capitol Places II Owner, LLC, Historic Preservation Fund 2014 LLC, A Partner Other Than the Tax Matters Partner, Docket No. 16536-23, filed 5/2/25, Ch J-elect Patrick J. (“Scholar Pat”) Urda quashes a subpoena that’s a trawling expedition.

Petitioners want all documents relating to 2022 purchase of property unrelated to the case at issue; (2) any and all appraisals thereof; (3) any and all documents reflecting the development and construction costs thereof prior to its sale; (4) financial statements and operating documents for the property before the sale; and (5) all correspondence, emails, memoranda, and communications relating to the negotiation and purchase of the property, determination of sale price, and communications with brokers or agents regarding the sale.

Except.

Petitioners served a subpoena for these goodies on a nonparty, in a case involving different property, different parties, in a transaction that took place ” nearly 8 years (and one worldwide pandemic with considerable knock-on economic effects) after Cap Places II’s easement donation.” Order, at p. 4.

So Ch J-elect Scholar Pat quashes the trawl.

“We see little relevant information to be derived from the documents relating to the 2022 purchase, including appraisals. As to historic documents regarding the development and the operations before [third party] purchased the property, we see no indication why these documents should be requested (if at all) from [third [party], which did not own or operate the property, rather than the seller, which did.” Order, at p. 4.

The JL Minerals order (nonprecedential, btw) involved how a highly-restricted industry with very few players valued mining sites, and was restricted to helping the Court understand the process. Developing student housing, the issue here, has many players, and whose methodology is no secret.

But third party doesn’t get legals, despite Rule 147(d) allowing same if subpoena is unduly burdensome.

“In determining whether the financial burden is unreasonable, we consider, inter alia, whether the expenses incurred in producing the records are reasonably incident to the party’s normal business, and ‘whether the subpoena is vague or overbroad or impossible to perform.’

“After considering the facts in this case, we will deny [third party]’s request for attorney’s fees. Although we will quash 2014 Fund’s subpoena, 2014 Fund’s actions to date were not unreasonable and the compliance costs to [third party] are not excessive given the nature of its business.” Order, at p. 5. (Citation omitted).

Only yesterday I blogged a failed attempt at out of time participation in a Dixieland Boondockery (see my blogpost “The Perpetuity Punt – Part Deux,” 5/1/25). Of course, copycatting follows apace, as that Boondockery was one of 34 (count ’em, 34, and Judge Goeke has) consolidated Ornstein-Schuler mass productions.

Looks like a new cottage industry has arisen, representing disgruntled micro-minority participants looking to renegotiate the settlement IRS has offered. Here, Putatives own 2.24% of the deal, Canary Aggregates, LLC, Ornstein-Schuler, LLC, Tax Matters Partner, Docket No. 31765-21, filed 5/2/25, at p. 3. (Happy Palindrome Day). Same lead counsel for the two Putative Participants, same arguments, same result, virtually the same opinion.

I’m not inclined to rehash here, nor will I blog the sure-to-follow cases, here and in other blown-up Boondockeries. The only winners in these phony dodges look to be the lawyers.

Judge Goeke wisely tells any wannabe Putatives: “When a person owns a minority interest in an entity, there is often a chance that they will be forced to acquiesce to the will of the majority. Such is the case in this instance.” Order, at p. 6. TMPs have to deliver the greatest good for the greatest number.

Remember Beverly Bernice Bang? What no? How fleeting is fame. See my blogpost “Bang – A Warning to Tax Matters Partners and Their Advisors,” 1/5/11.

Yes, it’s another busted Dixieland Boondockery, and perpetuity is on the table, but it’s not about defeasance of the easement. A group of Putative Participants, indirect holders of a hair less than 6% interest in Chimney Rock Holdings, LLC, Ornstein-Schuler, LLC, Tax Matters Partner, T. C. Memo. 2025-39, filed 5/1/25, claim that now-extinct Section 6226(c)(2) lets them participate even as everyone else is ready to accept IRS’ final settlement offer.

Y’all will recall the Notice 2017-10 kerfuffle and IRS’ settlement letters to petitioning Boondockers. Turns out the TMP’s principals are allegedly under investigation, but they get an offer anyway on the road to trial. The Putatives claim that taints the settlement, but Judge Goeke doesn’t think so.

Judge Goeke sustains Rule 245, which did allow the Putatives to come in, but imposes a 90-day time limit and even allows a motion to come in “out of time” if good cause shown (poor man’s equitable tolling?). These dudes waited two years after petition filed, and can’t show good cause.

FRCP 24 (intervention) gets a good airing. And USCFC has set a 45-day limit in TEFRA cases.  There’s also a time limit for Rule 248 settlements for nonparticipants, who have to make a showing they can continue the litigation on their lonesomes if they choose to opt out.

“Putative Participants have stated that they are ‘ready, willing, and able to litigate this case’ if necessary. Beyond this general statement, there has been little showing that Putative Participants are actually prepared to do so, and they appear to be more interested in negotiating with respondent (who has clearly stated that the proposed settlement terms will not change and/or that the settlement offer will be revoked if not accepted). Furthermore, Putative Participants have made no showing that they alone could or would shoulder the potential costs of trying the case. Thus, the partners owning 94% of Chimney Rock would face the possibility of being dragged into a trial they apparently do not want, while also potentially paying additional legal fees as a result. Under the circumstances, we must consider the possible financial implications to the partners owning 94% of Chimney Rock.” T. C. Memo.  2025-39, at p. 13. (Footnote omitted).

And while all participants have to give up all tax breaks except for actual out-of-pockets, they only get a 10% chop, rather than the 40%. Given what’s happened in other cases (Judge Goeke lists them at p. 13, and I’ve blogged them all), the Putatives could do worse.

In short, no perpetual right to participate or intervene.

Or Maybe Not

As I pointed out a month ago, Judge Christian N. (“Speedy”) Weiler likes it live. See my blogpost “Live From Honolulu,” 4/2/25. Nothing out of court goes into evidence for the truth thereof except the cross-examined trial testimony of the dead and disabled and explicit FRE-sanctioned stuff. So the trusty attorneys for Bank Cove Capital, LLC, Gene Larson, Tax Matters Partner, Docket No. 12074-20, filed 5/1/25, get a Taishoff “Good Try, Second Class” but the expert opinion of the appraiser what brung them to the dance doesn’t get in, at least on a motion in limine.

Said appraiser, hereinafter designated as “Dubyuh” (name omitted to protect the innocent), beat the rap in USDCNDGA four years back, but goes in mortal dread that DOJ will seek an indictment in another jurisdiction. Hence if put on the stand for cross on the trial, he will take the Fifth. So let in his statement “for all purposes including the ‘Truth of the matter asserted.’” Order, at p. 1. It’s a FRE 803 business record, they claim.

That’s a thrashing bashing great negatory, good buddy, says Judge Speedy Weiler, although a lot more elegantly after a review of caselaw.

“While we accept petitioner’s contention that the appraisal in question was prepared as part of petitioner’s tax return and in compliance of its statutory tax reporting obligation; we do not accept petitioner’s contention that the appraisal becomes a component part of its tax return, and therefore is a business record itself.” Order, at p. 5.

 IRS moves to preclude, but that doesn’t fly, either. If Dubyuh chooses to testify, he’ll be treated as a percipient witness, not one retained specially to provide an expert opinion, and IRS can cross-examine him. Then Judge Speedy Weiler can see what his story is.

Once again, the immortal words of Colonel John Henry (“Wiggy”) Wigmore: “Cross-examination is beyond any doubt the greatest legal engine ever invented for the discovery of truth.”

Fallout continues from the demolished two-stage structure that was TEFRA. Whether IRS properly mailed the FPAA to a notice partner, when said partner was an indirect partner, is yet another chapter in the Scott Blum saga.

Scott is trying to get Judge Goeke to reconsider his decision, which tagged Scott with a massive whack from a collapsed tax shelter. The basic story can be found in my blogpost “Thirteen Years,” 2/18/25.

I’ll repeat what I said then: “I’ve paid good money for whiskey younger than this case.”

Once again, Rule 161 reconsideration is a broken reed.

“The U.S. Court of Appeals for the Tenth Circuit, to which this case is appealable unless stipulated to the contrary, has identified the following grounds for granting of a motion of reconsideration: (1) an intervening change in the controlling law, (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent manifest injustice.” Order, at p. 1.

Here, Scott has none of the above. The case is Scott A. Blum and Audrey R. Blum, Docket No. 5313-16, filed 4/30/25.

No, not political commentary; I’ve spoken my piece here and will not now inflict more upon my readers. I just want to show how a Big Law alum who moved up to the Tax Court Bench esteems his successors.

Judge Albert G. (“Scholar Al”) Lauber’s bio mentions his prior career as a partner in a whiteshoe firm. No fewer than five (count ’em, five) trusty attorneys from a different firm, with shoes no less dazzling, feature in Computer Sciences Corporation, Docket No. 4823-21, filed 4/29/25.

The trusty attorneys want “analyses prepared by the IRS Independent Office of Appeals [Appeals] regarding the Capital Loss Issue.” Order, at p. 1. It’s a rather hefty issue, as the claimed capital loss is $651 million.

IRS objects on FRE 408 grounds: statements made in the course of settlement negotiations are not discoverable. The trusty attorneys claim the documents are “’relevant to [its] defense against the accuracy-related penalty.’ That is supposedly so because the documents in question ‘appear to discuss authorities and outline analytical constructs’ that ‘may inform the parties’ positions and arguments . . . as to whether the position taken [on petitioner’s tax] return is supported by substantial authority or a reasonable basis.’” Order, at p. 2.

Judge Scholar Al says Appeals is a settlement enabler in thousands of cases, in many of which IRS concedes certain points to avoid litigation. “Appeals created the documents petitioner seeks in the context of settlement negotiations while discharging its duty to evaluate the ‘hazards of litigation’ the IRS might face in court. Evidence implicating settlement discussions is inadmissible.” Order, at p. 2.

But those legal authorities.

Judge Scholar Al nails that one.

“We are confident that petitioner’s able counsel has the capacity to perform the legal research necessary to uncover any relevant authority that may exist.” Order, at p. 2. (Footnote omitted).

No, not a tale of golfing misadventures, Dealers Auto Auction of Southwest LLC, T. C. Memo. 2025-38, filed 4/28/25 claims their software played them false, so they missed filing and providing the payors with 266 (count ’em, 266) Forms 8300 Report of Cash Payments Over $10,000 Received in a Trade or Business.

IRS wants a nonassessible chop of $118K, so no opportunity to contest liability prior to CDP.

IRS has gigged DAAS once before year at issue for nonfilings and nonproviding, so they invested in some software. Their argument is reasonable cause, but as they’re an LLC, Section 7491(c) BoProd doesn’t help (individuals only).

DAAS seems to think the software filed the 8300s with IRS, but it turns out it just printed them, even though the developer claims they subsequently improved the system; exactly how never gets into the record.

While software failure isn’t a cure-all for failed reporting, Judge Ronald L. (“Ingenuity”) Buch doesn’t rule it out. True, accuracy chops are only avoided when petitioner proves a programming fault, but “Treasury Regulation § 301.6724-1(c)(1) does not preclude a finding that a software malfunction could be a failure beyond the filer’s control. The regulation’s only mention of technology-related failures is ‘filing on magnetic media.’ Treas. Reg. §301.6724-1(c)(1)(ii). While magnetic media is not involved here, this regulation makes clear that a technological failure may be sufficient to give rise to reasonable cause. The Commissioner acknowledges in his internal guidance that failures related to software and hardware can be failures beyond the filer’s control for purposes of the reasonable cause defense. See, e.g., Internal Revenue Manual 20.1.7.12.1(24) (Dec. 16, 2022). The Commissioner’s Internal Revenue Manual lists ‘relied upon an internal computer system that encountered major hardware and/or software problems’ amongst failures beyond the filer’s control for purposes of the reasonable cause defense to failure to file an information return. Id.” T. C. Memo. 2025-38, at pp. 8-9.

Given the use of e-filing, the reference to “magnetic media” is quaint.

IRS also argues that the duty to file and provide is nondelegable, but DAAS isn’t claiming they delegated the duty to file and provide. They say they have to file, but the software played them false by misleading them that the software filed.

There’s no evidence from DAAS of how the software failed. The software instructions say it will print the 8300s, not that it will file them as well.  And the later improvements to the software don’t state that they rectified any failure.

“Even assuming Dealers Auto met its burden to show a failure beyond the filer’s control, the record does not support a finding that Dealers Auto acted reasonably before or after the failure. For example, Dealers Auto did not establish that it was correctly using the software or that data was being entered correctly into the system. While it is not necessary to show that Dealers Auto made every data entry correctly, the record offers the Court no insight as to Dealers Auto’s installation, training, or use of the software.

“Similarly, Dealers Auto did not establish that it took reasonable steps to foster compliance. Dealers Auto argues that it reasonably believed the software was working as intended because it was generating some information returns. But the record shows that Dealers Auto software prepared only 116 Forms 8300 in [year at issue]. The record also shows that Dealers Auto was required to file at least 212 Forms 8300 in [year they were gigged]. That reduction in the number of forms should have placed Dealers Auto on notice that its software was not performing as intended. And Dealers Auto offers no explanation as to why the reduction in the number of forms would have appeared reasonable. Absent any explanation, we are not persuaded that Dealers Auto reasonably relied on its software.” T. C. Memo. 2025-38, at p. 10.

Judge Ingenuity Buch has provided a checklist for proving a software fault defense. Read and heed.

Back last September, when discussing the guided largesse of Bruce MacDougall’s kids Peter and Linda, I said that working out what was worth how much, as between remainder interests and promissory notes, is for another day. See my blogpost “No Commuter Tax,” 9/17/24.

Well, Judge James S. (“Big Jim”) Halpern brings us closer to the answer in Linda M. Lewis, Donor, et al., Docket No. 2459-22, filed 4/25/25.

The latest argy-bargy concerns whether relinquishing the remainder interests Peter and Linda had in Mama Clotilde’s testamentary trust was a gift to Papa Bruce of the assets themselves, or of the right to receive distributions therefrom.

IRS says each donor transferred his or her right to receive outright and free of trust a one-half share of the Residuary Trust assets allocable to the remainder interest, as opposed to a one-half share of the remainder interest itself. Order, at p. 1. Apparently IRS thought (or thinks) the assets themselves are worth more than the right to receive distributions thereof.

Judge Big Jim isn’t so sure. “…if Linda and Peter had not agreed, in a Nonjudicial Agreement entered into with Bruce…, that ‘the entire remaining balance of the Trust shall be  distributed outright and free of trust to Bruce,’ the distribution of trust assets among the beneficiaries would have been governed by section 12.8 of Clotilde’s will. That provision allowed the trustee to make either pro rata or non-pro rata distributions ‘so long as the distributees receive assets of a value equal to the value of their respective interest[s] in the trust at the time of distribution.’

“Therefore, if Linda and Peter had not acquiesced in the distribution all trust assets to Bruce, each would have received a share of trust assets with a value equal to the value of his or her remainder interest in the trust. Linda’s and Peter’s gifts would apparently have the same value whether we viewed the transferred property as rights to distributions or as remainder interests. Either way, the value of the gifts would equal the value of the remainder interests when the trust was terminated.” Order, at pp. 1-2. (Footnote omitted.)

Howbeit, neither side has explained what difference it makes in the value of what Peter and Linda gave Papa Bruce. All the above-cited case last September decided was that there was a taxable gift.  Peter and Linda argue there were various contingencies that would have affected the value of what they got if they hadn’t terminated the trust.

Except they did. So the contingencies don’t affect the worth of what they gave away.

So for the moment, all Judge Big Jim decides is that the worth of what Peter and Linda gave away was the right to receive distributions of what was in the trust at termination thereof.  And the value of Linda’s and Peter’s remainder interests in the Residuary Trust when the trust was terminated definitely has bearing of the value of the gifts they made to their father. Order, at p. 5.

Clear? Thought not.