Judge Cary Douglas (“C-Doug”) Pugh echoes the words of Judge Paris in Walker Church Greene 819, LLC, 830 Oconee, LLC, Tax Matters Partner, T. C. Memo. 2026-11, filed 2/3/26. Once again, a bunch partners (hi, Judge Holmes) try to jump in on the eve of settlement, after three (count ’em, three) years of doing nothing (see T.C. Memo. 2026-11, at p. 8). The big difference seems to be that the bunch own 62.27% of Walker; the other cases (see my blogpost “So Ya Wanna Participate?” 9/17/25) involved partners owning much smaller interests.

Mox nix, says Judge Pugh.

“This distinction does not change our conclusion. First, the Objecting Partners had three years to participate as of right or by Court leave and failed to do so. Moreover, the Objecting Partners do not explain what prompted their Motions for Leave beyond vague generalities. Thus, even if they ‘acted promptly upon discovery that the TMP was not protecting their interests,’ they did not provide the necessary facts to allow us to evaluate their assertion that the TMP was not protecting their interests. We will not infer a substantial showing simply because the Objecting Partners represent a majority of the partnership interests and disagree with the settlement terms. More is required beyond conclusory statements.” T. C. Memo. 2026-11, at p. 7. (Emphasis by the Court.)

Again, no showing that the TMP breached fiduciary duty, nor that OPs were ready and able to litigate. Each partner has a separate interest, but they haven’t represented they’d all be united in strategy and result, even though all have the same counsel.

Taishoff says conflict of interest, anyone?

I am sure the nine (count ’em, nine) trusty attorneys for Palmwood Holdings, LLC, Palmwood Investments, LLC, Partnership Representative, Docket No. 17489-23, filed 2/3/26, will echo the words sung by the late great Johnny Cash, first set forth hereinabove at the head hereof (as such high-priced attorneys would say) after hearing the admonition of Ch J Patrick J. (“Scholar Pat”) Urda set forth at p. 5 of the aforesaid Order.

It’s the usual IRS motion for Boss Hossery summary J, with a twist. IRS tries a double-pump, first going for summary J per Section 6662(c), (d), (e), and (h), the usual 20-40 accuracy-negligence-over/undervalue mix. Trusty attorneys fold that one, but IRS’ answer adds the Section 6663 75% fraud chop.

Trusty attorneys raise doubts as to who decided what when, and accuracy of supe signoff. But these echo arguments rejected in an order in an earlier unrelated case (which I did not blog). Ch J Scholar Pat reminds trusty attorneys that these arguments are routinely blown away in Tax Court. And he blows these away, too.

Now for the admonition.

“Having dispatched Investments’ argument as a legal matter, we pause to remind Investments’ counsel that accusing officers of the Court of untruthfulness is a very serious accusation and requires strong support. In this case, the accusation (‘Investments has reason to believe that [the Commissioner’s] assertion regarding the initial determination is not true.’) was leveled in an ill-conceived attempt to obtain discovery on a point that our precedent has repeatedly shown to be irrelevant. Worse yet, the purported smoking gun supporting this accusation—an email from three years prior involving a different taxpayer, a different property, and different

IRS personnel—has nary a connection to this case. Counsel who engage in such tactics risk losing their credibility with, and the patience of, the Court.” Order, at p. 5.

A source informs me that one of said trusty attorneys actually reads this my blog.

Taishoff says that the line between zealous advocacy and “such tactics” can be a fine one. While the “zealous advocacy” of the old Code of Professional Responsibility has been superseded by “competent representation” in ABA Model Rule 1.1, an attorney must make any honestly colorable argument, unless vetoed by the client. 

All attorneys walk the line.

Judge Goeke raises that question in Kenneth Son & Josephine N. Son, Docket No. 25814-22L, filed 2/2/26. This is a routine IRS summary J motion from a CDP NOD, to which the Sons objected but didn’t respond.

But the record is incomplete, and therein lies the question: before IRS can blow off an OIC, how much must the taxpayer default?

“The OIC is not in the administrative record. However, respondent described it as requiring petitioners to make estimated tax payments, timely file their returns, and make estimated tax payments for the 5 years following the IRS’s acceptance of the OIC, which are standard terms of OICs (5-year compliance requirement). See Form 656, Offer in Compromise.” Order, at p. 1.

The Sons’ OIC covers six (count ’em, six) years. The IRM is explicit as to what steps must be taken to invalidate an OIC. See Order, at p. 3. “Termination of an OIC for noncompliance is authorized but not automatic.”  

Judge Goeke finds IRS skipped a few. One such is the basis for the headline first written hereinabove at the head hereof, as expensive lawyers would say. “As an exception to the potential default rules, the IRM provides that a failure to pay amounts owed that are less than a certain dollar amount (which is redacted in the IRM) (threshold amount) is not treated as a breach. IRM pt. 5.19.7.14.4.1 (July 9, 2020). Thus, it appears that the IRM in effect for the 5-year compliance period provided than a minor breach (i.e., nonpayment below the threshold amount) does not cause a potential default.” Order, at p. 3.

So here’s a checklist for the upcoming trial.

“The administrative record does not establish the following facts: (1) the terms of the OIC; (2) the IRS sent a potential default letter, (3) the IRS sent a formal default letter, (4) petitioners ‘habitually failed to make [ ] required estimated tax deposits’ before the IRS terminated their OIC, and (5) it was appropriate for the IRS to terminate the OIC for unpaid balances of less than $1,000 and $500, for 2020 and 2021, respectively.” Order, at p. 3.

The following graces the Tax Court website 2/1/26.

“In the event of a federal government shutdown at midnight Friday, January 30, 2026, the United States Tax Court will open for business on Monday, February 2, 2026. Please check this website often for updates on Tax Court operating status and trial information.

“If you have questions about a scheduled trial session during any government shutdown, please call 202-521-0700 during normal business hours (8 a.m. to 4:30 p.m. Eastern time).”

I must be wearying my readers with seemingly-endless dissections of consented dismissals of CDP NODs “without prejudice.”

Except.

The story goes on in Tax Court. Jerhi Curry, Docket No. 3819-24L, filed 1/30/26, tries both a Motion to Withdraw and a Motion to Dismiss, and a week later comes up with a Motion to Dismiss, citing Wagner and noting IRS doesn’t object.

No attorney or USTCP appearing for Jerhi is listed on the docket search, but somebody got it right.

Howbeit, Judge Alina I. (“AIM”) Marshall is down with this. She tosses the petition “without prejudice.” But interestingly, she cites to Dunn, T. C. Memo. 2026-2.

I wonder if Judge AIM Marshall gave Jerhi the same allocution Judge Goeke gave the petitioner in Dunn. For that, see my blogpost “Wagner Boechlerized,” 1/7/26. 

In both State and Federal courts, when a motion or application is denied, or a case dismissed, “without prejudice,” that means the movant, applicant, or petitioner can try again later. If they try in good faith, the fact they were turned down before won’t count against them. OTOH, if the motion or application is denied, or the case dismissed, “with prejudice,” it means “fuggedaboutit, you’re finished.”

Yes, I know Boechler made the Section 6330 thirty-day cutoff a claims processing limit, not a jurisdictional barrier. But a petitioner is still entitled to only one Tax Court review of a CDP. And even a claims processing limit has some preclusive effect. Even if the equitable tolling two-step highjump is not the only means of escaping the thirty-day cutoff, what are the other paths back to The Glasshouse in the Freezing City?

As Judge Goeke suggested in Dunn, dismissal “without prejudice” is largely symbolic.

So why even mention it? As Oscar Hammerstein II remarked, “Is a puzzlement.”

As I approach 84 (count ’em, 84, and I have, trust me) years of age, I announce my retirement from the practice of law. ABA Model Rule 1.16(a)(2) requires one to step down when one can no longer physically or mentally represent a client. I feel fine, but I don’t need stress.

Now our NY Rule 22NYCRR§118.1(g) provides for retirement by attorneys. But I could find none on the United States Tax Court website, so I emailed the Clerk’s Office requesting enlightenment.

I received the following reply. “Thank you for contacting Dawson Support. The Court does not have a retired or inactive status and currently has no notice requirement for those retiring from the practice of law.  If you do not plan on practicing before the Court, you may choose to resign from the bar of the Court by completing the attached form and emailing it to the Court’s Admissions Section at Admissions@ustaxcourt.gov.  If you prefer to keep active admission status, ensure your contact information and email address in DAWSON are updated and that your “employer” is set to “Private.” Please be aware that there is no status for the Tax Court that allows you to provide pro bono representation without admission to another bar.” 

I replied as follows: “I am not resigning. Attorneys resign when they have been charged with disciplinary violations that they cannot or will not contest. I am not charged with any disciplinary violations in any Court or administrative agency. To sign this instrument is equivalent on its face to pleading nolo contendere or accepting a plea bargain. I will retain my certificate of admission, though I will not practice law nor hold myself out as an attorney at law. As we have an aging population, I urge the Court to adopt an appropriate Rule for attorneys retiring from practice.”

Btw, don’t worry, guys, my blog, like Celine Dion’s heart, will go on. I’m not retiring as a journalist, hazardous as that profession is just now.

Back three years ago I didn’t say then-Judge Patrick J. (“Scholar Pat”) Urda was envious of the lifestyle of the late Richard J. Spizzirri and his bevy of ladies and multiple dwellings, but he does seem just a shade wistful as he slams the Glasshouse door on the late Rich’s ex’r. The ex’r wants to reopen the record to put in the estate’s additional (deductible) accounting, admins, and legal fees after 11 Cir blew up their appeal from Judge Urda’s T. C. Memo.

See my blogpost “Living the Dream,” 2/28/23 for Judge Scholar Pat’s take on the late Rich’s saga.

The timeline is key here. 11 Cir affirms, but holds the mandate (that’s formally sending back the case to Tax Court to enter decision and clean up anything 11 Cir told them to do). Meantime, the ex’r moves to remand to Tax Court and stay further appellate proceedings to put in for the aforesaid costs and fees. 11 Cir says no, without opinion, and remands. 

So ex’r now moves in Tax Court to reopen the record to put on same before Tax Court enters the decision.

Nope, says Judge Scholar Pat. While Rule 156 provides for reopener to deal with this stuff, 11 Cir has slammed that door. Yes, the ex’r moved two (count ’em, two) days before the Section 7481 finality clock ran out, so Tax Court has jurisdiction.

“The Estate here asked the Eleventh Circuit for a remand to this Court for redetermination of additional administrative expenses incurred after trial, which is the same relief that it now seeks from us. The Eleventh Circuit denied this motion and then issued a formal mandate. ‘When the [Eleventh] Circuit denied [the Estate’s] appellate motion, [the Estate’s] claim for [expenses]—in connection both with appellate and trial-level proceedings—was litigated to completion, and the law of the case doctrine precludes our reconsidering [the Estate’s] claim’ in its motion. Mazzei, T.C. Memo. 2022-43, at *8–9; see also Pollei, 94 T.C. at 608 (‘If petitioners had not requested the Court of Appeals for relief on the . . . issue at the trial level, it would then appear that the matter would be within our authority for consideration and decision.’).” Order, at pp. 2-3.

For the Mazzei story, see my blogpost “I Got It Right – Part Deux,” 5/2/22.

Euripides. Haste to sustain the assault!

Dionysus. Great gods, what a number of assaults!

I’ve quoted these lines from Aristophanes’ 405 B. C. smash hit The Frogs before, in another case where a Section 7345 passport grab was used as a basis for attacking a SND or NOD. In many cases IRS reverses the certification of seriously delinquent tax debt, so petitioner is nonsuited for want of any other or further relief Tax Court can give.

Judge Nega tells us today that Lloyd Thomas Spencer, Docket No. 6078-25P, filed 1/29/26 is out because his IAs for his four (count ’em, four) NITLs had all terminated (Order, at p. 4), and his OIC was bounced.

“To the extent that petitioner is seeking to challenge the denial of his proposed OIC made as part of his CDP hearing, such a challenge would be impermissible. Where a taxpayer has requested or there is a CDP hearing pending, the related tax liabilities are also excepted pending completion of the CDP hearing process. See § 7345(b)(2)(B)(i); Gayou v. Commissioner, T.C. Memo. 2023-61, at *6–7. But, petitioner only requested a CDP hearing with respect to the taxable period ending March 31, 2016. No CDP hearing was requested with respect to any other taxable period at issue. Further, Appeals has completed that CDP hearing and a Notice of Determination was issued sustaining the collection action and rejecting the proposed OIC. Petitioner then sought judicial review in this Court of that determination and entered into a stipulated decision upholding it. We will not upset that decision, and even so, this iteration of petitioner’s challenge would not provide a proper opportunity. See, e.g., Gayou v. Commissioner, T.C. Memo. 2023-61, at *7 (rejecting similar arguments as ‘wholly inapplicable’ to Passport Notice cases and finding completion of the CDP hearing ‘forecloses the potential application of the statutory exclusion’).” Order, at p. 4. (Footnote omitted).

For the Gayou story, see my blogpost “Another Modest Proposal,” 5/16/23. 

Hang on, Dionysus, more to come, I don’t doubt.

That’s what ex-Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan says Aventis, Inc. and Subsidiaries, 166 T. C. 1, filed 1/28/26 was trying to do with their financial asset securitization investment trust. Aventis issued some preferred stock, which an offshore sub bought and parked in the FASIT. Aventis also issued a couple notes (hi, Judge Holmes), one to an advisor to Aventis (representing ownership in the FASIT, per Section 860L(b)(2)) and another to a third-party bank. Both the stock and the notes were supposed to represent regular interest.

The advisor “as holder of the ownership interest in the FASIT, reported the income that [Aventis] received on the FASIT assets, and, relying on I.R.C. § 860H(c)(1), deducted amounts representing the expenses of the FASIT and the dividends paid to [offshore sub].” 166 T. C. 1, at p. 1.

Clear? Thought not.

Although this unguided Congressional largesse was repealed long before years at issue, there was a grandfather clause that kept this one alive.

The FASIT converted the stock dividends to interest, hence deductible. The deal was a mismatch between taxation of the offshore (equity, not debt, hence not taxable) and onshore (debt, hence deductible interest).

The deal was refinanced, with the third-party bank taking over the advisor’s role, and the deal finally ended after years at issue.

IRS disregarded the FASIT and handed all the gains back to Aventis, less fees paid to advisor. Aventis petitions.

The case goes off on debt-vs-equity, with an overlay of son-of-FDAP: was the interest readily determinable under FASIT rules? Was a fixed amount payable to the investor at maturity?  If not ab initio, grandfathering doesn’t help. It’s a duel of the experts.

And of course the parties modified the terms, which also knocks out grandfathering. And their substantial compliance argument founders on the express terms of the statutes.

FASITs were meant to spread risk and make business (nonmortgage) borrowing easier. They wound up making gimmicks like this available.

No, not those famous ones some of us have heard from childish lips around the festive board year after year.

This lot is what Judge Morrison poses to IRS and the trusty attorneys for Gerda Khouw, Donor, et al., Docket No. 11217-20, filed 1/27/26, There must be a lot als (hi, Judge Holmes), because here’s Judge Morrison’s preliminary take on the fact pattern.

“Under the 2014 Northern Trust master note, dated as of December 23, 2014, Northern Trust made $122,534,567 of advances that were used to pay the premiums on policies owned by the Tan Horse Trust. The Tan Horse Trust is an irrevocable life-insurance trust (ILIT). Under the provisions of the 2014 Northern Trust master note, the borrower (Gerda Khouw and the Survivor’s Trust, collectively) promised that the advances would be used to pay the premiums on the policies through the following chain of payments: (1) the borrower would contribute the advances to the Geona Trust, (2) the Geona Trust would contribute the amounts to GK Capital in exchange for a 99.98% limited partner interest in GK Capital, and (3) GK Capital would lend the amounts to the Tan Horse Trust to enable the Tan Horse Trust to make the premium payments.” Order, at p. 1. (References to stips omitted).

The parties are invited to correct, comment, agree, disagree. And of course there is a pledge agreement and collateral-assignment agreement back to Northern Trust. As Northern Trust’s website claims it has $1.8 trillion-with-a-T under management, this $122 million deal (and another $126 million mirror image a couple years later) is pocket change. 

Except to the parties, of course.

So let the parties dish on whether this is a split-dollar life insurance arrangement (see my blogpost “The Split,” 8/29/12 for some deep background). And if it is, what difference does that make?

If you’re the type who likes to get granular, go into the weeds, go nerd, or whatever the latest buzzwords might be, check out Order, at pp. 4-5. Judge Morrison overhauls statute and regs, and comes up with the aforesaid four questions. 

But if ever there was a case where the judge was telling the parties “You really don’t want me to decide this case, guys, so settle, OK?” this is that case. See Order, at pp. 5-6.