AI Isn't Always Right. Especially For Taxes

Clinco v. Commissioner, T.C. Memo. 2026-16, warns taxpayers to not rely on AI.

An attorney stipulated that an IRS audit was not valid without a wet signature. Three of the four court cases he cited didn’t exist.

His client also an attorney lost all 3 points in his case. The Judge ruled a wet signature was not required on a notice of deficiency. The Judge concluded the taxpayer underreported restaurant sales by $2 million from credit card transactions and also concluded you can’t claim rental property depreciation without proving the cost basis of the property.

“The persuasiveness of Clinco’s argument collapses like an overmixed soufflé when one looks at the citations used to prop it up. Mr. Wagner, Clinco’s attorney, cites four cases in support. Three appear to be hallucinations generated by a large language model AI.”