No, you don’t have to suffer to prove you have a profit motive. But it helps if you worked hard and got hurt. Just ask Sydney L. Gutierrez-Chapin, star of Frank L. Chapin, Deceased, and Sydney L. Gutierrez-Chapin, et al., T. C. Memo. 2026-76, filed 8/27/26. The late Frank (that’s Frank CPA) and Sydney had a tangled trail over the six (count ’em, six) years at issue, so I’m not going to summarize all the ground Judge Vasquez covers.

But two (count ’em, two) points in his opinion are worth a look.

The late Frank and Sydney both grew up on farms and tended animals. At home in ID, they were quarter horse and Appaloosa breeders, ropers and racers. My colleague Peter Reilly CPA knows this story well. 

But here’s the kicker (and I mean kicker): “As with cattle, in the spring, petitioners monitored the horses ready to foal around the clock, including four to five times at night, and moved the horses with foals to separate areas. Petitioners have overseen the births of over 100 colts.

“Other responsibilities on the ranch included cutting, baling, and stacking hay. In addition to the field work, petitioners repaired the fencing and various buildings on the land. The physical labor needed to maintain the ranch took a considerable toll on petitioners. Additionally, both petitioners sustained injuries at different times from falling off or being kicked by horses.” T. C. Memo. 2026-76, at p, 8. 

And notwithstanding personal bankruptcy, the late Frank and Sydney stayed in the barn and in the saddle. True, the late Frank and Sydney were a trifle casual with their paperwork and stayed the course when others would’ve bailed. IRS folded some deductions if Judge Vasquez found the late Frank and Sydney had a profit motive.

Judge Vasquez says pain equals gain. “Section 183 does not require that taxpayers operate their ventures with perfect business acumen. Petitioners’ persistence in the face of hardship may reflect unusual business judgment, but it does not belie an honest profit motive, which we find petitioners to have established.” T. C. Memo. 2026-76, at p. 23.

Remember, the late Frank was a CPA. So how about bookkeeping?

“Respondent contends that petitioners are liable for the section 6662 penalties because they failed to keep, maintain, and produce organized records relating to their business income, expenses, net operating and capital losses, and Schedule F activity, resulting in their need to reconstruct numerous documents. Mr. Chapin prepared their 2009, 2010, 2011, and 2012 returns using working trial balances, balance sheets, and profit and loss statements. All income was recorded, regardless of the account in which it was deposited, including any cash received, and Mr. Chapin allocated expenses among personal expenses, expenses incurred in the accounting practice, and expenses incurred in their farming activity. He then reconciled each account every month. Petitioners kept their receipts, including those for personal expenses and organized them in ledger categories. To the extent that petitioners failed to effectively present that evidence at trial, we believe that petitioners’ age and the passage of time were significant contributing factors. Accordingly, we find that petitioners are not liable for accuracy-related penalties on the underpayments relating to respondent’s adjustments to income and disallowances of Schedules C and E deductions not subject to section 274(d).” T. C. Memo. 2026-78, at pp. 30-31.

Unhappily, Sydney “fell woefully short of the stringent requirements of Section 274(d)” and loses those deductions. 

Once again I advert to that 2018 success for my daughters’ childhood friend, as The Great Chieftain of the Jersey Boys tries to exit a couple cases (hi, Judge Holmes). But there’s another attorney on the case, and untangling isn’t so easy.

Judge Rose E. (“Cracklin'”) Jenkins judge-‘splains in Open MRI and Imaging Rochelle Park, Inc., Docket No. 5433-22, filed 8/26/26.

“…counsel for petitioner Frank Agostino filed a Motion to Withdraw as Counsel (Doc. 43). In the motion, Mr. Agostino notes that although CH ‘also remains listed on the docket as counsel for Petitioner,’ he ‘on information and belief, is no longer in contact with Petitioner.’ Accordingly, Mr. Agostino states that ‘Petitioner would not continue to be represented by counsel in fact’ after his withdrawal.” Order, at p. 1. (Name omitted).

Of course, both petitioner and respondent object to the motion.

Judge Jenkins sets up a schedule for CH to make his position known. Meantime, serve the petitioner with all papers.

Btw, trial on in less than 90 days.

That’s the latest Dixieland Boondockery deal in Judge Albert G. (“Scholar Al”) Lauber’s division. I don’t undertake to blog, much less evaluate, every dodge settlement; there are far too many and the cottage industry has too many players. But practitioners should have some notion of the going rate, however attenuated, to help them decide whether to hold or fold.

Howbeit, Sand Investment Co., LLC, Inland Capital Management, LLC, Tax Matters Partner, Docket No. 7307-19, filed 8/25/26, got a Sched K, line 13(d) other deduction of $15 million; their charitable contributions (50%) were cut from $80 million to $50K. There were a basis adjustment and other assets revalued. And they got a 10% gross valuation misstatement chop under I.R.C. § 6662(h). No other chops.

Good deal? I report, you decide.

That’s Judge Ronald L. (“Ingenuity”) Buch’s word to practitioners when a new coruscation from the Supremes or the CCA swims into your ken. Thus he admonishes Intermountain Electronics, Inc., Docket No. 11019-19, filed 8/24/26, when they try to insert a Loper Bight challenge to some Reg. or other in their reply brief.

The Intermountain’s trusty attorneys had three (count ’em, three) months after the Supremes issued Loper Bright to mention it in their post-trial brief, but didn’t.

Now in extenuation of Judge Ingenuity Buch’s toss, the trial transcript runs thousands of pages, not to mention exhibits, the latter figuring in my blogpost “Don’t Stick It to the Rock,” 5/30/24, along with the 35 (count ’em, 35) stipulations of agreed facts. Might overlook a wee detail like the Supremes overruling a 40-year-old precedent.

Except.

Judge Ingenuity Buch doesn’t.

“As a general rule, issues raised for the first time in a reply brief are untimely, and we will not consider them. Ashkouri v. Commissioner, T.C. Memo. 2019-95, *23 n.9 (citing Considine v. Commissioner, 74 T.C. 955, 969-70 (1980)). Although it is true that Loper Bright was not decided until after the conclusion of trial in this case, Intermountain had sufficient time to address it in its Seriatim Opening Brief. Loper Bright was handed down only two days after trial end and more than three months before Intermountain filed its opening brief. Intermountain had ample time to raise its arguments with respect to Loper Bright but didn’t. The issue was not timely raised or preserved, and we will not consider it.” Order, at p. 1.

For Ashkouri, see my blogpost “Casual Isn’t Critical,” 7/30/19.

Taishoff covers Tax Court.

It’s the best, and probably the most quoted, aphorism of Dr. Samuel Johnson. “Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.”

Judge Courtney D. (“CD”) Jones echoes Dr. Sam’s observation, as she takes ZMZ Global, Inc., Docket No. 15380-22, filed 8/21/26, off the 180-day status report track, where it’s been since Valentine’s Day a year ago.

The latest billet doux from ZMZ announces they and IRS reached a basis for settlement in May, are working on a stiped decision, and hope to file same “shortly.” Order, at p. 1.

Judges love settlements, and Judge CD Jones is no exception.

“The Court appreciates petitioner’s report and is encouraged by the parties’ apparent progress toward resolution of this case.” Order, at p. 1.

Except.

“Petitioner requests that the Court retain jurisdiction and require status reports every 180 days if the decision document is not filed.” Idem.

Do I hear a waltz? More to the point, maybe so might could be Judge CD Jones hears a waltz.

“…the Court concludes that continuation of the 180-day status report track is not warranted under the circumstances; specifically, petitioner represents that a decision document is expected to be filed shortly. Accordingly, the Court will remove this case from the 180-day status report track and direct the parties to file either a proposed stipulated decision or a further report within 60 days.” Order, at p. 1.

Brian J. Laborde, T. C. Memo. 2026-74, filed 8/20/26, had three (count ’em, three) mailing addresses during the four (count ’em, four) years this case concerns. IRS hit Brian with a couple TFRP Letters 1153 for those years, and Brian doesn’t contest those. Nor does he contest the NFTL that followed.

He does contest the NITLs, saying those weren’t sent to his last known address. And the AO at Appeals who gave the Section 6330(c)(1) verification that all procedures were followed was a trifle conclusory, never stating how reached the conclusion that NITLs were mailed to last known address.

As we all know, that’s not waivable, even if not raised by Brian’s trusty rep on paper (or electrons) or at the CDP. Statute says Appeals shall verify.

Judge Adam B. (“Sport”) Landy traces Brian’s peripatetic wanderings all over The Big Easy, seeing where he says he lived and when and what he put on his tax returns and any other clear and concise notifications he gave IRS.

But the AO did none thereof, so this case gets remand for Determination Number Four.

Takeaway- Practitioner, add to your Form 12153 and your petition boilerplate failure to comply with Section 6330(c)(1) verification.

He’s only been twice on this my blog heretofore, so I must apologize to Percy Squire, T. C. Memo. 2026-71, filed 8/19/26; btw, his firm, Percy Squire Co LLC, T. C. Memo. 2026-72, of even date herewith, shares the attention of Judge Tamara Ashford. Seems Percy and Co have a fifteen (count ’em, fifteen) year record in USTC, and Judge Ashford has ’em all. T. C. Memo. 2026-71, at p. 2, footnote 2. 

Turns out one of Percy’s cases I did blog eventually netted him a $5K Section 6673 frivolity chop, though I didn’t blog that outcome. See my blogpost “Tales of Suspense,” 1/3/20.

Percy is a wee bit casual about filing and paying his own income tax, and his firm’s FICA/FUTA/ITW. 

This time Percy stashed assets in an irrevocable trust, which ran his businesses and was behind on tax payments, soi his OIC was suspended until they caught up.

“We agree with respondent that petitioner has instituted these proceedings primarily for delay and has taken positions that are frivolous or groundless. As previously noted, see supra note 2, petitioner is no stranger to this Court; his Petition here is the seventh petition he has filed with the Court in the last approximately 15 years. In several of these prior actions (all of which are lien and/or levy actions) he has been warned not to file an offer-in-compromise solely to delay collection and that for an offer-in-compromise to be granted he must be current in his estimated tax payments. In one such prior case, he was sanctioned $5,000 pursuant to section 6673. Furthermore, in the instant proceedings petitioner has continued to press arguments that are irrelevant and to rely on documents that are not part of the stipulated record.

“The Court’s prior warnings and sanction appear to have left petitioner undeterred, despite his being an attorney admitted to practice before this Court. Accordingly, we will grant respondent’s Motion to Impose a Penalty and impose a penalty of $10,000 against petitioner pursuant to section 6673. Petitioner should realize that if in the future he continues to persist in litigation for the primary purpose of delaying the collection of his federal tax liabilities (on either his own behalf or Percy Squire Co.’s), then he will be communicating to the Court that a $10,000 penalty is insufficient to affect his behavior and that the Court should instead consider imposing a much larger penalty, up to the maximum of $25,000.” T. C. Memo. 2026-71, at p. 12. (Citation and footnote omitted).

Btw, Percy says ” I was unjustly suspended from the practice of law from 2011 through 2015.” T. C. 2026-71, at p. 4. This was in OH, before he was admitted to USTC. I’ll let you judge on that.

That phrase is “Stipulate, Don’t Capitulate”‘s little brother.  It means whatever document is thus referred to is included in whatever document you’re reading. And if you never got the document thus incorporated, you’re still signing on to it.

For James H. Ballengee and A.C. Heyde, T. C. Memo. 2026-73, filed 8/19/26, it means they’re stuck with their concessions to the FPAA, which negated deductibility of  their partnership NOLs because the debt giving rise thereto was nonrecourse and hence giving them insufficient inside basis to permit passthrough of NOL carryforwards.

Now before you TEFRA-canny ultra-sophisticates yell as if with a single voice  “old Section 6235(a)(1) partner-level factual affected item!” and inquire why no SND, Judge Adam B. (“Sport”) Landy will tell you.

James and A. C. signed individually, and James signed as manager of their box-checked LLC, Forms 870-LT, agreeing to all IRS’ slices-and-dices for two (count ’em ,two) of the years at issue (IRS folded the third). “Form 870–LT contained only the names of the partnerships, the names of petitioners, the years at issue, and a statement in the remarks: ‘See attached 870–LT Continuation Page.’” T. C. Memo. 2026-73, at p. 4.

The 870-LT Continuation Page said: “The accompanying Form 886–A, Explanation of Partnership Items and Partnership-Level Adjustments, is hereby incorporated by references.” Idem.

James and A. C. claim they never got the Form 886-A, which set forth the aforementioned slices-and-dices, and would have consulted their trusty CPAs, who handled the audit from which arose said Form 886-A, if they had. So James and A. C. claimed IRS misrepresented a material fact.

“Regardless of whether petitioners’ assertion that Form 886–A was not attached to Form 870–LT when they received and signed it is true, they have not shown that this was a deliberate or intentional attempt by the Commissioner to misrepresent any terms of the closing agreement. In addition, petitioners’ contention that there was a mutual mistake is insufficient to set aside the closing agreement because mutual mistake is not an enumerated ground for invalidating a closing agreement under section 7121(b). We determine that there is no misrepresentation of material fact and that petitioners executed a valid Form 870–LT waiver.” T. C. Memo. 2026-73, at p.13.

Form 870-LT is a complete waiver and closing agreement.

Now lest anyone think James and A. C. were innocents caught in an IRS squeeze play, Judge Sport Landy has some background.

“Petitioner James H. Ballengee received a bachelor of science in accounting from Louisiana State University; and although he is not currently licensed, he practiced as a certified public accountant (CPA) for five years at KPMG. After leaving KPMG, Mr. Ballengee founded and sold multiple companies in the oil and gas industry. Because of the nature of his work, Mr. Ballengee reviewed legal documents and frequently consulted with professionals, such as lawyers or CPAs, before executing said documents, as needed.” T. C. Memo. 2026-73, at p. 2.

Neither Hamlet’s immortal lament nor the protest of Andrew Tabaka, Chris Tabaka, Next Friend, T. C. Memo. 2026-70, filed 8/18/26, move Judge Albert G. (“Scholar Al”) Lauber. Chris pointed out that IRS had failed to credit the late Andrew with two (count ’em, two) payments made against the deficiency to which the late Andrew stiped out before he became the late Andrew. IRS had later corrected same, but still claimed interest from due date of return to paid in full. The case had gone to litigation prep before it settled out.

Judge Scholar Al applies ministerial and managerial, the Section 6404(e)(1) standbys, and finds IRS committed neither miscue.

“In short, the time that elapsed between April 16, 2018 (when the IRS first contacted petitioner in writing about the deficiency), and August 6, 2019 (when the Court issued the [stiped] Decision), was less than 16 months, including a trip to Appeals. Compared with the mine run of cases in this Court, petitioner’s case was resolved quite expeditiously. In any event, “[t]he mere passage of time in the litigation phase of a tax dispute does not establish error or delay” under section 6404(e).” T. C. Memo. 2026-70, at p. 6. (Citation omitted).

The only thing that took time was IRS getting information from third-party payors to substantiate the 1099-Rs at issue. Once the back-ups came in, the case settled. 

Suleiman Sami, T. C. Memo. 2026-69, filed 8/18/26, claims he is one such, but despite his two (count ’em, two) accounting degrees he cannot keep enough records to cause Judge Elizabeth A. (“Tex”) Copeland to allow a bunch deductions (hi, Judge Holmes). COGS for his ticket scalping business fail, but he does get Cohan treatment for the two (count ’em, two) passenger vehicles he runs in his unlicensed rideshare operation because he kept all the trip slips and his credit card and EZpass statements provide some basis for expenses.

As for influencing, he shows no income for years at issue, although Judge Tex Copeland shows how influencers make money (T. C. Memo. 2026-69, at pp. 4-5). Sami’s costly appearances at celebrity events, which he puts up on his social media, don’t qualify as business. Dropping a pass from Tom Brady and missing a serve from John McEnroe are just too much fun, even if you put them on your page. When he claims what he pays to attend big-ticket charity events are contributions, that founders on “no goods or services.”

Long before there were “influencers,” I missed three (count ’em, three) serves from Ray Ruffles, who won the Wimbledon mixed doubles that year; can’t say it was fun.

Sami did all his own Exam and pre-trial, but brought in The Jersey Boys and friends to try the case. Wise move.