AI (artificial intelligence) tools like ChatGPT, Grok, Claude, and Perplexity are all the rage today, and people are using them for all types of tasks, including legal research.

But beware: AI frequently gives wrong answers—euphemistically called “hallucinations” by AI developers. Hallucinations are particularly common when you ask AI tools tax questions.

The Duped Lawyer

One hapless lawyer found this out when he attempted to defend a client in Tax Court from a nearly $2.3 million IRS notice of deficiency for failure to report restaurant business income. The attorney saw that the notice contained only the name of a technical services territory manager followed by initials.

The attorney apparently asked an AI tool (it’s unknown which one) whether a “wet” (manual) signature by an IRS employee is needed for an IRS notice of deficiency to be valid. If so, his client ... Log in to view full article.