Ex-Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan and her colleagues are far too well-bred to use such language as first hereinabove appears at the head hereof (as my expensive ex-colleagues would say), but that is the gist of Siemens Medical Solutions USA, Inc. and Consolidated Subsidiaries, 167 T. C. 5, filed 7/15/26.

Ex-C h J TBS follows Varian (see my blogpost “We Don’t Need No Stinkin’ Distributions,” 8/26/24) in dumping Reg. Section 1.245A-5T.  The multiple mismatches in TCJA affecting Sections 245A, 951A, and 965 (Mandatory Repatriation Tax) were Congress’ attempt to territorialize and deuniversalize CFC taxation and level the playing field for onshore-owned offshores.

IRS’ regulatory attempt to cut the freebie in half founders on Loper Bright.

“Section 245A allows a 100% deduction for qualifying distributions after December 31, 2017. Treasury’s adopted regulation disallows 50% of the deduction for distributions that Treasury admits satisfy the plain terms of the statute, using criteria that appear nowhere in the statute. This creates a contradiction, and the statute must prevail.” 167 T. C. 5, at pp. 15-16.

And every Tax Court Judge (except Judge Rose E. (“Cracklin’) Jenkins, who took no part) says “amen!”

That’s ex-Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan’s message to Piton Holdings,  LLC, David L. Hall, Partnership Representative, 167 T. C. 4, filed 7/15/26. Ex-Ch J TBS gets there after 45 (count ’em, 45) pages of deconstruction of another discounted cash flow Dixieland Boondockery; this one is a limestone quarry, but it’s the same old story. A Jarkesy attack founders, so the Piton Holders try the disclosure exception pursuant to section 6662(d)(2)(B), stretching same to apply to the substantial or gross valuation misstatements. 

IRS says Reg. Section § 1.6662-5(a) says no disclosure exception applicable to those. Piton Holders says reg is invalid.

“A plain reading of section 6662 reflects that provisions in subsections (c) through (g), (j), and (k) do not apply to all section 6662 penalties. Rather, those provisions apply only to the specific penalty that the subsection in which they are found pertains to. The adequate disclosure exception is found in section 6662(d)(2)(B)(ii), and no text extends that exception to any other section 6662 penalty. The adequate disclosure exception therefore applies only to the substantial understatement penalty under section 6662(d).” 167 T. C. 4, at p. 50. 

“The plain wording of section 6662(d) makes it clear that the adequate disclosure exception does not apply to the section 6662(e) substantial valuation misstatement penalty nor to the section 6662(h) gross valuation misstatement penalty. Accordingly, the disclosure exception pursuant to section 6662(d)(2)(B) does not apply and therefore, petitioner is liable for the gross valuation misstatement penalty under section 6662(h).” 167 T. C. 4, at p.52. (Footnote omitted, but it cites Hughes, as to which see my blogpost “The Unrecognized Alien,” 5/11/15).

The late radio-tv icon of my youth, Arthur Gordon Linkletter, really should have done a Tax Court blog. Cases such as Eva M. Zaczek, Docket No. 4667-25S, filed 7/15/26, would furnish daily grist for his mill.

Eva confronts STJ Jennifer E. (“Publius”) Siegel with a single issue to decide, the parties having stiped out everything else. What is “the mathematical calculation of the number that correctly belonged in box 11(d) of petitioner’s 2022 Form 8962, Premium Tax Credit (PTC)”? Order, at p. 1.

Referring to the instructions for said form, STJ Publius Siegel says the number should be zero. Eva said the result should be a positive number. Notwithstanding Eva’s objection, IRS concedes that the correct deficiency should be $900, not the $2418 stated in the SND.

But when IRS’ counsel tenders a stiped decision to Eva, she refuses to sign, claiming her deficiency should be $1763, almost double what IRS claims.

Before shaking your head, reader, consider that “(T)he deficiency stemmed, in part, from transcription errors made by the Internal Revenue Service when processing petitioner’s handwritten tax return for that year. Other portions of the deficiency stemmed from petitioner’s calculation of certain items reported on her return.” Order, at p.1. Apparently Eva eschews electrons, as she neither files electronically nor uses the PDF online fillable forms on http://www.irs.gov.

Moreover, Eva provides many pages of calculations showing how she disagrees with IRS’ numbers, proving she owes more than IRS ultimately claims. So she may, but deficiency does not equal balance due. Section 6211 has the calculation of deficiency, but neither any estimateds paid or certain credits figure in. Tax Court can only recompute deficiencies.

OK, pro ses are often naive, deer-in-the-headlights types, so prone to wander off.

Not Eva.

STJ Publius Siegel finds she is “an accountant with a college degree in that field.” Order, at p. 1.

So Judge Benjamin J. (“Trey”) Guider, III concludes in James Wendelin Eiler and Kathryn Ann Eiler, 167 T. C. 3, filed 7/14/26.

JW and Kate sued the CRAs under the FCRA and got a statutory damages settlement (about $4K). Their lawyers got $60K, to all of which they were entitled under the retainer agreement (see 167 T. C. 3, at pp. 3-4).

Consumer law practitioners, read and heed.

And note well this jolly clause: “The service agreements acknowledged that the Eilers understood that the attorneys might recover tens of thousands of dollars, if not more, in fees and costs even if the Eilers did not obtain any financial recovery, and that even in that situation the Eilers might face increased tax liability.” 167 T. C. 3, at p. 4.

Truer words were never spoke.

The CRA settlors gave JW and Kate 1099-MISCs for the whole boat. The benevolent attorneys gave them 1099-MISCs showing only the four grand net. JW and Kate reported only the latter. Everyone agrees that JW and Kate only got the four grand.

Judge Trey Guider says the settlement agreements don’t say what part of the payout is statutory, compensatory, exemplary, or fees and disbursements. JW and Kate claim that this is not the ordinary contingent fee deal, which the courts treat as an anticipatory assignment of income. All the service agreement says is that if they don’t win, thje lawyers get nothing.  So maybe this is not your father’s contingency agreement, where the lawyers get a fixed percentage of the payout, says Judge Trey Guider, but it is contingent nonetheless.

The fee-shifting provisions of the FCRA, 15USC§§1681(n) and 1681(o), require a successful action and legal fees fixed by the court. Here there was a settlement, no successful action, and no fees fixed by the court.

And 9 Cir, to which JW and Kate are Golsenized, has already held that even with fee-shifting compliance, the lawyers’ take is still taxable to the clients. And presumably to the lawyers also.

Though this is a “perverse result,” as JW and Kate bemoan (167 T. C. 3, at p. 9), 9 Cir couldn’t fix it, so pore l’il ol’ Tax Court is helpless.

I award JW’s and Kate’s trusty attorneys a Taishoff “Good Try, Second Class” for citing Section 62(a)(20), the deductibility of legal fees in civil rights cases, which I myself tried once.

But JW and Kate try to stretch the term “civil rights” too far.

“Popular usage of the phrase ‘civil rights’ evokes concepts like equal protection, due process, and voting rights—not fairness and accuracy in credit reporting. The former concepts represent the ‘ordinary’ and ‘most natural’ meanings of the phrase ‘civil rights,’ and they are akin to the very rights Congress sought to protect in the consumer credit arena beginning almost exactly four years after passage of the FCRA. In 1974 Congress enacted the Equal Credit Opportunity Act in part to prohibit discrimination on the basis of sex or marital status in credit transactions.” 167 T. C. 3, at pp. 13-14.  If Congress wanted FCRA to deal with discrimination, they could easily have said so.

Right of privacy isn’t what JW and Kate sued about, so that civil rights argument also fails.

For the timeline showing how Estate of Gladys Marie Randall, Deceased, Michele Collins, Independent Administrator, Docket No. 8271-24L, filed 7/13/26, slides under the time-out dismissal tag, see Order at p. 3. Michelle mailed her motion-within-a-motion (Motion for Leave to File Out of Time Motion to Vacate (Embodying Motion to Vacate)) within the Section 7481(a)(1) 90-day appeal timeframe, and IRS doesn’t object to filing the out of time vacation request part, but wants to fight over actually vacating the dismissal.

Clear? Thought not.

Judge Courtney D (“CD”) Jones doesn’t mention Rule 54(b)’s separate-checks, one request per motion, directive. Probably figured “no hurt, no foul, nobody looking anyway.”

So leave granted.

But before Michelle orders that magnum of ’09 La Grande Dame (which is a shame, as I’d love to help her drink some), Judge CD Jones calls off the party. The late Gladys Marie (before she became the late Gladys Marie) failed to allege equitable tolling when IRS moved to toss for late petitioning. Obviously the late Gladys Marie lived in one of the Boechlerized CCAs.

“Ms. Randall died… prior to the last day by which she was required to show cause why this case should not be dismissed for failure to state a claim on which relief can be granted…. and Ms. Collins had not yet been substituted as party petitioner. This fact tends to support the Court granting the Motion to Vacate. However, in the time since, Ms. Collins, in her capacity as the Independent Administrator of Ms. Randall’s Estate, has failed to comply with the Court’s Orders.

“In relevant part…, the Court ordered Ms. Collins to file the supplement to the Motion for Leave Embodying Motion to Vacate, specifying why respondent’s Motion to Dismiss should not be granted and providing information related to Ms. Randall’s health condition. Ms. Collins failed to file the response ordered by the Court. Likewise, Ms. Collins failed to file the Notice of Change of Address required by that same Order. Accordingly, in the light of petitioner’s failures to comply with the Court’s orders to provide information and supporting documentation, we will deny the Motion to Vacate.” Order, at p. 4.

Editorial comment: Taishoff says the Petitioners’ Bar that sang hosannas and popped the cans of store-brand lager (not for me, thank you) when the Supremes unloaded Boechler, P. C. didn’t read the fine print. Even Myer, the humble whistleblower begetter of Tax Court equitable tolling tohubohu (see my blogpost “For Whom the Equitable Tolls,” 4/10/20), was ultimately called out for want of diligence. And Antawn Jamal Sanders, whose filing was eleven (count ’em, eleven) seconds late, was timed out despite the efforts of the Fogg-bound Harvard LITC, because DAWSON’s creek flowed unvexed while Antawn’s computer froze him out.

 I’m still waiting for the first successful equitable tolling case.

Edited to add, 7/13/26: Maybe my wish will be granted sooner than I thought. Judge Goeke has decided to rule on equitable tolling in Scott M. Balotin & Ellen M. Balotin, Docket No. 3146-236L, filed 7/13/26.

“The Court will have jurisdiction to review the Notice of Determination only if petitioners can establish that the facts and circumstances of the late filing warrant equitable tolling of the deadline. We believe that it will advance resolution of this case to resolve whether equitable tolling applies. Accordingly, the parties will be ordered to file memoranda whether equitable tolling applies and we will extend the time for petitioners to file a Response to respondent’s Motion for Reconsideration as set forth in our Order… and direct petitioners to file a memorandum and supporting Declarations asserting facts relating to the reasons that they filed the Petition late and that equitable tolling applies.” Order, at p. 2.

And although I lamented that the Balotins’ last Tax Court excursion was a pro se exercise in futility (see my blogpost “The Eighty Percent,” 2/4/26), now they’ve got the FL Gators LITC leading the rush.

Judge Ronald L. (“Ingenuity”) Buch furnishes us with a timely order in Jeffrey A. Hartman, Docket No. 3517-25, filed 7/10/26.

Jeffrey has two (count ’em two) cases, but this one has Jeffrey claiming additional gigwork income and deductions not shown in the SND. And he furnished particulars thereof to IRS counsel. 

Whereupon, respondent “filed a Motion for Leave to File Second Amendment to First Amendment to Answer (doc. no. 39, which we will retitle), in which he sought to amend his answer to assert an additional deficiency. Mr. Hartman objects. Because Mr. Hartman will not be prejudiced by the proposed amendment, we will grant the Commissioner’s Motion.” Order, at p.1.

The retitiling is that the Second Amendment to First Amendment becomes the Second Amendment tout court. 

“There is no unfair disadvantage to Mr. Hartman. The Commissioner will bear the burden as to any new matters or increases to the deficiency. And Mr. Hartman already raised and has the burden to establish his expenses.” Order, at p. 2.

Of course, as Jeffrey has already handed IRS particulars of his income unreflected in the SND, IRS gets the Matthew 11:30 treatment.

If you remember either, you have to remember both, and to do that you’d need to be a card-carrying member of Medicare. But in their time, the age of the studio star system, everyone who was anyone in American movies read their columns before anything else. They were the Queens of Gossip, malicious and malign.

Believe me, I have no intention of joining that journalistic genre. So when I pass along overlooked or obscure happenings at The Glasshouse in the City All About Algae, I’m after truly newsworthy items.

So here’s a hot tip: we’re getting closer to a major opinion.

Judge Courtney D. (“CD”) Jones is lining up exhibits and briefings in Marc Lore and Carolyn Lore, Docket No. 8259-23, filed 7/9/26. You remember Marc’s famous Squawkbox moment with Walmart Pres and CEO Doug McMillon (a/k/a Doug McBillion). What, no? Then see my blogpost “Let’s Go to The Videotape,” 6/3/25.

Briefing done by end of November. As I noted back a year ago June, this must be quite a deal. “Seems the deficiencies for the two years at issue come to $15,656,849 and $6,946,309 respectively.”

Yet another Taishoff prediction comes to pass, but it was too obvious for me to claim any credit. Judge Elizabeth A. (“Tex”) Copeland makes the trial of Craig Walcott, Docket No. 21820-22, filed 7/7/26, into a forty-page off-the-bencher.

As I said in May, “I expect we’ll hear more from Craig.”

He does avoid a Section 6673(a) chop, because, despite his frivolity, he does get a better deal than IRS put in the SNDs, getting all his COGS. and a couple bucks more (hi, Judge Holmes) of deductions. His rental realty sale is a break-even, so even though he doesn’t get the loss he claimed, he doesn’t get the gain IRS asserted.

His attempt to sanction IRS’ counsel would make good blogfodder, except the Genius Baristas have this in such format that I cannot copy-and-paste, so I must refer you to Transcript, at pp. 35-36.

For backstory, see my blogposts “Irrepressible,” 5/11/26, and “Doldrums?” 5/22/26.

The search for perfection is ever afoot in Tax Court. Judge Jeffrey S. (“Schwer”) Arbeit finds that Hough Beck & Baird, Inc., 167 T. C.2, filed 7/7/26, fail the test, even though they properly filed and paid the employment tax at issue. 

IRS accepted the return as filed, but erroneously assessed HB&B’s liability as zero, rather than the tax shown on the return. Then IRS refunded the (correctly owed) payment HB&B made with the return. It’s not like HB&B pocketed the refund and said nothing; when their accountant questioned IRS, he was told it was a COVID Employee Retention Credit.

Two (count ’em, two) years later, IRS woke up and sent HB&B a letter requesting repayment. HB&B did nothing, so IRS made a Section 6204(a) supplementary assessment and gave HB&B a NITL at no extra charge.

 HB&B’s trusty attorney says IRS should have brought a Section 7405 erroneous refund civil action. Maybe so might could be SOL has run on that.

No, says Judge Schwer Arbeit, the assessment was not perfect, it was “imperfect or incomplete in any material respect,” just like Section 6204(a) says.

Of course, neither statute nor reg defines “imperfect” or “incomplete.” The only Tax Court case involved a Section 6651(a)(1) timely filing add-on that IRS abated but later discovered taxpayer had no reasonable basis for being late. So IRS put it back, and that was OK. See 167 T. C. 2, at p. 6. There are three (count ’em, three) USCCA cases that go IRS’ way, including a 9 Cir case, whence HB&B are Golsenized.

But there is an outlier, on which IRS and HB&B hang hats. There the parties stiped to assessed amount, which taxpayer paid without requesting a refund. IRS double-posted the payment and refunded the “overpayment.” There was nothing wrong with the assessment, the problem was the double-posted payment.

Here, there was one payment, properly posted, and an incorrect assessment. In the outlier, “the Court held that there was a ‘fundamental difference in character’ between the money the taxpayers received as a result of the Commissioner’s double posting error and the money they originally owed. Here however the money petitioner received as a result of respondent’s mistaken assessment is the same money petitioner originally owed. Petitioner’s employment tax liability has not been extinguished and remains outstanding.” 167 T. C. 2, at p. 8.

You’ll need to go to Google or your favorite search engine to find her, but she gives her name (now sometimes rendered as “Cinnamon”) to one who should’a gotten recognition as part of IRS’ winning team back in March. The opinion is Anthony A. Klein and Barbara N. Klein, T. C. Memo. 2026-29, filed back on 3/30/26. but now corrected as at 7/7/26.

I blogged the case as “Blowing Smoke,” 3/30/26, but you needn’t either reread my blogpost, nor read Judge Elizabeth A. (“Tex”) Copeland’s corrected fourteen (count ’em, fourteen) pages.

Judge Tex Copeland has kindly provided a one-page Order of even date herewith that tells the whole story.

The corrected T. C. Memo. “reflects the following revision on page 1: “Brian J. Sullivan and James H. Wonzy, for respondent.” is substituted with the following: “Keziah Dutchak-Leonard, Brian J. Sullivan, and James H. Wonzy, for respondent.” Order, at p. 1.

Sorry to nitpick, Judge, but I think James H.’s handle is “Wozny,” and not “Wonzy.”

Btw, Keziah, Job’s middle daughter, is a symbol of woman’s equality. See Job 42:14-15. She and her sisters get equal shares in Dad’s estate, rare back then.