Tax Disputes and Judicial Estoppel: Consequences of Taxpayers Talking Out of Both Sides of Their Mouth

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Tax Disputes and Judicial Estoppel: Consequences of Taxpayers Talking Out of Both Sides of Their Mouth

October 05, 2026

TAX NOTES FEDERAL

When a transaction comes under scrutiny, several proceedings might arise.  Taxpayers might battle against the IRS in Tax Court, arguing that additional taxes and penalties should not be imposed.  Another possibility is that taxpayers, upset with those who recommended the transaction, file actions in District Court seeking financial damages.  Problems can arise when these occur at the same time, particularly when taxpayers fail to realize that what they claim in one proceeding might negatively affect the other. 

This article explores the substantiation rules for charitable donations, concept of judicial estoppel, two recent proceedings involving bargain sales where allegations in one nearly triggered large tax liabilities in the other, and the threats of judicial estoppel in another context.

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Hale E. Sheppard

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Atlanta, United States

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