Ferroglobe USA, Inc., and Subsidiaries, Docket No.6259-25, filed 7/24/26, is another Section 41 increased research activities credit case. Here IRS applies the standard counterattack, the Section 41(b)(2)(A)(i) “wages paid or incurred to an employee for qualified services performed by such employee.” IRS says “show which employee, what services, and how much”; the magic phrase is “how much for qualified services.”

The Ferroglobers, like all or almost all employers, never had employees keep timesheets on what they were doing specifically, hence only had gross wages. Hence they replied to IRS’ interrogs (after sidestepping Branerton) with “no timesheets.” Judge Ingenuity Buch holds that to be a Rule 71(b) “not reasonably ascertainable” response. So the Ferroglobers can’t introduce post event, ballpark estimates of who did what and were paid how much for what on the trial.

“According to petitioner, its own records would not allow it to dissect the wages as requested. Therefore, if the Court would prohibit it from introducing at trial any evidence showing such a dissection, it would not be a burden on petitioner. Thus, we will grant the Commissioner’s Motion in that, if petitioner attempts to introduce at trial information showing that this response was incomplete or evasive, we will exclude such information. Petitioner should have no quarrel with this because according to petitioner, it did not maintain records from which to ascertain this information.” Order, at p. 3.

But the Ferroglobers did have some employee wage records, by job title.

“…petitioner’s own response belies, at least in part, its contention that it ‘did not maintain timekeeping records showing exactly which employee worked on each project nor the amount of time those employees spent performing services on each project. Petitioner states that it maintained records by job title. Petitioner further states that some job titles only had one employee. But nowhere in the information provided to the Court did petitioner identify those job titles for which there was only one employee. Providing this information would be at least partially responsive to the Commissioner’s interrogatory. We will order petitioner to supplement its response.” Order, at p. 3.

Taishoff says, is IRS sure it wants that information? BoP is on the Ferroglobers. Anything that proves amount of wages paid for qualified work only substantiates the amount of the credit, or at least opens a Cohan door. Isn’t it better to let the denial of substantiation stand?

Maybe IRS should call time out.

Well, practitioner, you’ve come to the right place, because Judge Travis A. (“Tag”) Greaves can give you one prêt à porter if you intone or inscribe the magic language indited by Amy Sanders, Esq., Senior Vice President, General Counsel, and Secretary of Avient Corporation and Subsidiaries, Docket No. 2890-25, filed 7/23/26.

And to save y’all the trouble of looking it up and typing, here it is to cut-and-paste at no extra charge.

“Ms. Sanders avers that petitioner maintains stringent protections for confidential information and has undertaken significant efforts to prevent the disclosure of competitive information, trade secrets, and proprietary information. The declaration further states that records relating to the activities of petitioner’s Board of Directors are strictly confidential and are subject to multiple layers of safeguards to prevent disclosure. Finally, the declaration explains that disclosure of petitioner’s board materials, strategic business information, merger and acquisition analyses, financial and market analyses, trade secrets, third-party agreements, and confidential human resources data would provide competitors with a competitive advantage and would cause irreparable harm to petitioner.” Order, at p. 1. 

Judge Tag Greaves, ever mindful of his Senate confirmation promise to “make every effort to balance the need to help these taxpayers understand the court’s rules and procedures with my duty to remain independent and impartial,” gives Amy and the Avients the green light.

“After careful review of the declaration submitted in support of petitioner’s motion, we conclude that petitioner has established good cause for protecting the categories of information identified in the proposed discovery protective order. Petitioner has established through competent declaration testimony that disclosure of its proprietary information could result in competitive and economic harm.” Order, at p. 2. Good job, Amy.

There follows seven (count ’em, seven) pages of a total Rule 103 blitz.

Hallemeier. It was a great thing to be a man.  There was something immense about it. R.U.R., Act Three

I got an email this morning from a former colleague, an attorney at one of the big-league tax controversy litigation firms. He announced the start of an online subscription service, to which he offered me access at no charge. This service electronically scans each day’s Tax Court grist, separating wheat from cliché, and delivering a digest thereof.

All I need do is distill same, and the day’s blogpost(s) are done, untouched by human hands, much less by human mind.

I declined. “As for subscription services, I am retired and don’t mind looking through orders and opinions. And writing my own commentary. I am sure AI will render me, and you, obsolete and redundant, but while I can, I will continue my own way. Thanks anyway.”

See supra as doubtless data centers say.

When we hear our equivalent, the reflex takes over; one hand grabbing for the steel pot, the other trying to one-hand one’s way into the flopping flak jacket, the mind trying to remember where we put that extra box of 7.62 FMJ ball. “You are the third lawyer I’ve consulted, and the other two are morons.” Get ready for a big-time firefight, and the enemy isn’t the only one shooting at you.

Judge Cary Douglas (“C-Doug”) Pugh tosses Michael V. Kervin’s and Stacie L. Kervin’s three (count ’em, three) conjoined cases (Docket Nos. 22378-22, 10249-23, and 482-24) for want of prosecution.

Judges Travis A. (“Tag”) Greaves and Benjamin A. (“Trey”) Guider III both folded when confronted by plaintive tales of illness, natural disasters, and requests for yet further continuances.

Finally, Judge C-Doug Pugh has had it. IRS asked for an OSC, and Judge C-Doug Pugh granted it, telling Mike and Stacie to show specific documents they would put in on the trial to substantiate income and deductions.

” Petitioners’ response… failed to do any of this. Rather, it stated that petitioners needed additional time to respond. And it stated that as a show of good faith and concrete progress petitioners had hired a new tax preparation firm to review and correct their 2018 and 2019 returns (if necessary) and prepare returns for 2020 through 2025. Petitioners also cited their newly hired tax preparation firm as a basis for their… Motion for Continuance… which we denied…. Hiring a tax professional may be an important step in bringing petitioners into compliance with their federal tax obligations but it does not address the issues in the pending cases—namely, what evidence they would offer at trial to support their claimed income and deductions. Their repeated nonresponses affirm the Court’s conclusion that they do not intend to provide any evidence of their income and deductions but rather seek only to delay the inevitable.” Order, at pp. 1-2.

Judges, counsel, and preparers, it’s all the same story. When you’re the third, look out.

When a preparer becomes a blower, confidentiality is a must. Ch J Patrick J. (Scholar Pat”) does a looking-backward to order sealing of a bunch documents (hi, Judge Holmes) in the file.

Unfortunately, this is another of the first-public, then-anonymous cases.

“In Whistleblower 12568-16W v. Commissioner, 148 T.C. 103 (2017), the Court granted the whistleblower’s motion to proceed anonymously “until and unless the Court determines differently.” Id. at 108. In granting the whistleblower’s motion to proceed anonymously provisionally, the Court indicated that it had balanced the competing interests of the whistleblower and the public, which required it to balance the societal interests of protecting the identity of a confidential informant with the public’s right to know who is using the public’s courts. See id. at 104-105; see also Whistleblower 14106-10W v. Commissioner, 137 T.C. at 205. However, the Court noted that the balance of a whistleblower’s need for anonymity and the public’s interest in open judicial proceedings may change as a case progresses. See Whistleblower 12568-16W v. Commissioner, 148 T.C. at 105. The Court stated: ‘[W]e cannot say that, at some future time in this action, we may not revisit the balancing between alleged harm to petitioner and the societal interest in knowing petitioner’s identity and determine that anonymity is no longer justified.” Id. at 107-108.'” Order, at p. 2.

Another understatement : “…petitioner is employed in the field of providing tax services and advice to clients, if petitioner’s identity as a whistleblower becomes publicly known, petitioner would suffer serious economic harm. Accordingly, we conclude that petitioner has made a sufficient showing in support of the Court’s granting petitioner’s motion in that petitioner may proceed anonymously.” Order, at p. 2.

The key, practitioner, is to move when you petition. Of course, pro ses like the one here are on their own.

I’m not giving name or docket number for obvious reasons. The blower’s name is on the document. I have suggested to Ch J Scholar Pat that a better system is needed. With the practitioner’s name online today, anonymity may come too late.

No,  not a political diatribe, not here anyway; if you’re seeking one from me, look elsewhere. This is about a common conveyancing issue, and it comes out in an innocent spousery. STJ Diana L. (“Sidewalks of New York”) Leyden has this one, probably because she knows about NY sit-down title closings, even though this is most likely a CA escrow remote-control.

Trisha D. Anderson, T. C. Sum. Op. 2026-6, filed 7/22/26, wants Section 6015(c) innocent spousery from the $108K deficiency handed to her ex. He alone was on both mortgages on the marital residence, but both were in title. As part of their pre-divorce alignments, they sold same, and the RESPA (or TIL) showed mortgage payoffs with checks to the two (count ’em two) lenders. Trisha claims she never knew about lender 2.

IRS gave ex the SND when he didn’t produce proof that he had actually paid the interest.

Trisha says she’s flat broke, has no bank accounts and can’t work because of illness.

IRS denied Trisha’s innocent spouse request, saying she had actual knowledge of the. nonpayment of interest. STJ Di grants Trisha’s request.

“The evidence before the Court indicates\ that, as petitioner said, the mortgage interest claimed on the…[year at issue] tax return was in fact paid when the house was sold by petitioner and Mr. Anderson… as identified on the Seller’s Final Settlement Statement. In fact, contrary to respondent’s argument that petitioner had actual knowledge that the item giving rise to the deficiency was unpaid, on the basis of the record before the Court, the Court finds that petitioner had actual knowledge that the mortgage interest totaling $108,407.83 was paid to the two mortgage companies that held mortgages on the house held by The Anderson Family Trust.” T. C. Sum. Op. 2026-6, at p. 7. (Emphasis by the Court).

IRS has BoP on actual knowledge, and STJ Di says they haven’t met it, a wee understatement.

CA community property plays no part per Section 6015(c). Only ex had income and only he was personally on the mortgages. While Trisha took title subject to, and therefore could have paid interest, she had no money and couldn’t.

Taishoff says how come the lenders put mortgages on a CA property titled in husband and wife with a note executed by husband only? STJ Di says only that Trisha and ex acquired the property in 2003, and by 2016 the mortgages were there, T. C. Memo. 2026-6, at p. 3. Unless both mortgages were there pre-acquisition, somebody messed up.

More to the point, however, ex probably couldn’t find the settlement statement, showing interest was part of the mortgage payoff at closing, and paid out of purchase price from the purchaser. Though the interest was paid by purchaser as part of the purchase price, it was paid for benefit of seller as an obligation of seller. It’s as if the seller paid purchaser and the purchaser paid lenders. Payment by third party of an obligation of taxpayer is income to taxpayer, although that payment may in turn be deductible by taxpayer.

A Taishoff “Good Job, First Class” to Trisha’s trusty attorneys, Chris and Rich, doubtless pro bono.

I’d already reported on Doc Krueger, when Judge Albert G. (“Scholar Al”) Lauber gave the bad news to David J. Matto and Krista M. Matto, T. C. Memo. 2026-60, filed 7/21/26. David J. is also a dentist (hereinafter “Doc Dave”). 

Doc Dave did pay the extra tax three (count ’em, three) years later, but got charged interest for the underpayment he corrected with his 1040-X. His Sub Ss paid wages during the COVID lockdown and qualified for the ERC, which he got three years later. But that means the deduction for the wages paid that qualified him for the ERC had to go, lest he should double-dip, hence the 1040-X for 2020.

Doc Dave’s bœuf is that, while he only got the benefit in 2023, he’s being charged interest for payments he made in good faith in 2020. Appeals denied his abatement of interest claim, so he petitions.

Judge Scholar Al is far too erudite and well-bred to reply “Bummer, dude, that’s how the cookie crumbles.”

You owe tax from when it is due. That the amount is later corrected does not mean the tax wasn’t due. “Petitioners’ Form 1040–X correctly reported an increased amount of tax due for tax year 2020. Underpayment interest began to accrue automatically on May 18, 2021, the day after the due date for their 2020 return. See § 6601(a); Notice 2021-21, 2021-15 I.R.B. 986. Applicable IRS guidance confirmed that point. See Notice 2021-49, 2021-34 I.R.B. 316; see also Notice 2021-20, 2021-11 I.R.B. 922. In their Response to the Motion, petitioners concede that they ‘were required under then-applicable guidance to amend their prior-year [i.e., their 2020] return’ and ‘that the interest accrued as a matter of mathematical operation under I.R.C. §§ 6151(a) and 6601(a).’ An IRS officer does not abuse his discretion when he follows published IRS guidance.” T. C. Memo. 2025-60, at p. 6.

And IRS made neither ministerial (nondiscretionary) or managerial (personnel assignment) miscues. So Section 6404(e) precludes relief.

I gotta give it to Charles Dickens: he gets it right yet again. David Fred Krueger, Docket No. 26107-21L, filed 7/22/26 certainly tells a tale of hard times. Btw, that’s Doctor Krueger, the dentist. 

Doc Krueger bought his dental practice in 2007. He says he was walloped by The Black ’08, such that he couldn’t pay his taxes for seven (count ’em, seven) years thereafter, although he did self-report. See Order at p. 1, footnote 2. Two unpaid years remain at issue, plus reasonable cause for late payment add-ons.

Taking unpaid years first, the CA request was supported by “an unsigned, undated, and illegible Form 433–A with insufficient supporting documentation.” Order, at p. 3. Judge Ashford kicks that to the curb, Order, at p. 10, although Doc Krueger can try again administratively.

But as to the Section 6651(a)(2) add-ons, there is the question whether de novo or abuse is the standard of review. For whatever reason, I didn’t blog the cases Judge Ashford cites, Order, at p. 8, so get them for your memo of law files. Aliquando bonus dormitat Homerus. Spoiler alert: De novo wins, but it doesn’t help Doc Krueger.

“SO L rejected petitioner’s request for abatement of the section 6651(a)(2) additions to tax with respect to the years at issue on the grounds that petitioner’s needing to use all available funds for five consecutive years (i.e., from 2011 to 2015) to try to save his failing dental practice did ‘not me[e]t the criteria for reasonable cause abatement.’ Her conclusion was well founded. Petitioner provided no information to SO L (as well as to SO K) that satisfied the reasonable cause standards for any of the additions to tax. Instead, he made only vague or conclusory assertions that the local economy did not recover from the ‘catastrophic’ 2008 financial crisis by 2015, resulting in him experiencing a ‘sharp decline in business revenue’ and ‘significant financial hardship’ from which he could not recover. He also merely alluded to making ‘reasonable efforts to conserve funds to pay taxes,’ but also acknowledged that ‘[he] was unable to do so.’ Petitioner carries a heavy burden of proving that his failure to pay taxes for the years at issue was due to reasonable cause and not due to willful neglect. Petitioner’s assertions and allusions regarding financial difficulties were manifestly insufficient for SO L to gauge petitioner’s financial situation and petitioner’s exercise of ordinary business care and prudence with respect to his obligations to pay taxes for the years at issue. Indeed, petitioner has not explained how his failure to satisfy (or even attempt to satisfy) his tax payment obligations for the years at issue were the direct result of economic conditions in 2008, conditions that were roughly five and seven years before the years at issue. Accordingly, we agree with SO L that it was ‘unreasonable’ for petitioner to think that he exercised ordinary business care and prudence, thus establishing reasonable cause for his failure to pay the taxes for the years at issue and justifying abatement of the section 6651(a)(2) additions to tax for the years at issue.” Order, at p.9. (Citations, names, and footnote omitted but see infra, as the expensive lawyers say).

“We note that one of petitioner’s own statements to SO L (as well as to SO K) was that the dental practice showed net profits during the years at issue.” Order, at p. 9, footnote 8.

That’s how IRS answered all but eight (count ’em, eight) of the 128 (count ’em…don’t bother, Judge James S. (“Big Jim”) Halpern already did it for ya) admissions sought by the trusty attorneys for Beveled Edge Insurance Company, Inc., et al., T. C. Memo. 2026-57, filed 7/20/26, in their Third Request for Admissions. 

To clear things up, it’s well known that I loved requests for admissions in my practicing law days. It was cheap discovery. But 128 on the third go-round? As Groucho Marx said, “I love my cigar, but I take it out once in a while.” And my watchword has been: “Any lawyer who can’t find an ambiguity should find another way to make a living.” But there’s good-faith deep-diving analyzing and defusing IEDs and knuckleballs, and then there’s obstructionist semantic snivel-drivel.

Judge Big Jim is far too well-bred to suggest IRS counsel is engaging in any base doings, but he does tell them to hew to Rule 90, admit, deny, coordinate with adversary if you’re unclear what they want, and object to form only if you’ve first answered or exhausted all avenues of relief. And break up compound questions, admitting or denying each branch so far as reasonably possible. And don’t quibble about documents; you can admit to a true copy or an original without admitting that it’s either admissible or that its contents are true.

The Beveler’s trusty attorneys want everything deemed admitted and IRS sanctioned, but that’s not happening.

A quick word to Ch J. Patrick J. (“Scholar Pat”) Urda: I see there’s still a chance to comment on Your Honor’s proposed Rule changes. May I propose an amendment to Rule 33, or even a new rule for motions? Every motion paper must be signed to Rule 33(b) standards. Meritless requests for sanctions should be themselves sanctionable. Even FRCP 11(d) is deficient in this respect.

No, Judge James S. (“Big Jim”) Halpern is not taking us on a walking tour of Greenwich Village. The latest chapter in this promenade (see my blogposts “No Commuter Tax,” 9/17/24, and “A New Day – Redivivus,” 4/25/25, for the backstories) is the valuation of what Linda and Peter gave Papa Bruce when they cut loose Mama Clotilde’s residuary trust, their third appearance in this my blog, Linda Lewis, Donor, T. C. Memo. 2026-58, filed 7/20/26. 

Petitioners’ expert said Papa Bruce would live longer because he was rich. Hence, the Section 7520 life expectancy tables, while a baseline, merited five (count ’em, five) years of extra time for Papa Bruce. Unhappily for petitioners, they don’t do as well as Spain in extra time.

After slicing and dicing IRS’ and petitioners’ experts and dissecting the IRC and regs, Judge Big Jim ascends to such rarefied heights of pure mathematics as to get the parties within a mere $3,249,104 difference by T. C. Memo. 2026-58, at p. 20. 

And all that’s left is Papa Bruce’s life expectancy at communtation.

The Section 7520 tables don’t apply, not because Papa Bruce is rich, but because what Mama Clotilde’s will and trust mean is decided by State law. 

And Mama Clotilde only left Papa Bruce an income interest and a limited power of appointment, not all the goodies she inherited from her daddy. T. C. Memo. 2026-58, at p. 17.

“Respondent claims support for his position from ‘the plain language of section 7520.’ He reminds us that the statute provides that ‘the value of any . . . remainder . . . interest shall be determined’ under the prescribed tables. But respondent quotes the statute selectively. He omits the first five words of the text: ‘For purposes of this title.’ A trustee determining how to divide the assets of the Residuary Trust under section 12.8 of Clotilde’s will upon the trust’s termination would not be making that determination, in the first instance, for purposes of the Code. Instead, the trustee would be determining the beneficiaries’ entitlements to the trust property—a matter of state law.” T. C. Memo. 2026-58, at p. 21.

“We are unpersuaded that, for the purpose of valuing Bruce’s income interest in the Residuary Trust to determine the distribution to which he would have been entitled under section 12.8 of Clotilde’s will upon the termination of the trust … Bruce would have appropriately been treated as five years younger than he actually was. Life expectancy tables, such as those issued by the Social Security Administration, rely on the law of large numbers. The standard tables will inevitably understate the life expectancy of some individuals and overstate that of others. But if the tables are based on an adequate sample size, the inaccuracies in each direction will balance out. The tables will thus provide a reasonable estimate for individuals of a given age. Adjusting the estimates provided by the tables to take into account some, but not all, factors unique to a particular individual would introduce bias and, in our judgment, would be methodologically questionable. Bruce’s income was but one of myriad factors relevant in determining his life expectancy. All else being equal, that one factor might have caused the standard Social Security tables to understate Bruce’s life expectancy. Without considering all factors relevant to Bruce’s life expectancy, however, [petitioners’ expert] could not conclude that all else was equal.” T. C. Memo. 2026-58, at pp. 22-23.

And whatever said expert might have speculated that the gift might have been worth more, IRS’ concession number is substantiated by the record.