Procedural Issues
Tax Opinions / Memorandum Opinions / Procedural Issues

Chang v. Commissioner
T.C. Memo. 2020-19

On January 29, 2020, the Tax Court issued a Memorandum Opinion in the case of Chang v. Commissioner (T.C. Memo. 2020-19). The issues presented in Chang v. Commissioner were (1) whether petitioners timely mailed requests for CDP hearings; and if so (2) whether the Tax Court had jurisdiction to review the subsequent decision letters issued by the IRS. Equivalent Hearing in Chang v. Commissioner Where a person does not timely request a Collection Due Process (CDP) hearing with respect to a determination, the IRS may instead hold an “equivalent hearing.” See Treas. Reg. § 301.6320-1(i)(1) (notice of federal tax lien); Treas. Reg. § 301.6330-1(i)(1) (notice of intent to levy). If an equivalent hearing is held and the IRS issues a decision letter, that letter does not constitute a notice of determination under § 6330(d)(1), and the Tax Court generally does not have jurisdiction to hear a challenge to the IRS’s…

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January 29, 2020
Procedural Issues
Tax Opinions / Memorandum Opinions / Procedural Issues

Northside Carting Inc. v. Commissioner
T.C. Memo. 2020-18

On January 23, 2020, the Tax Court issued a Memorandum Opinion in the case of Northside Carting Inc. v. Commissioner (T.C. Memo. 2020-18). The primary issue presented in Northside Carting Inc. v. Commissioner was whether the IRS abused its discretion by rejecting collection alternatives (an installment agreement) raised in an equivalent hearing. Background to Northside Carting Inc. v. Commissioner The petitioner’s business is garbage and has been garbage since 1996. At the time the petition was filed, the company had approximately 50 garbagemen on its payroll. The trouble was, although the petitioner filed its Forms 941 (quarterly Federal employment tax return), it did not, technically, pay the taxes that it reported. If we’re splitting hairs, it paid some of the taxes due, but not enough to satisfy Uncle Sam, who commenced a collection action in 2016. With due deference to Judge Lauber, this case could have (and should have) been decided…

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January 23, 2020
Penalties Under the Code
Tax Opinions / Memorandum Opinions / Penalties Under the Code

Isaacson v. Commissioner
T.C. Memo. 2020-17

On January 23, 2020, the Tax Court issued a Memorandum Opinion in the case of Isaacson v. Commissioner (T.C. Memo. 2020-17). The issues presented in Isaacson v. Commissioner were whether the petitioner (1) failed to report taxable income for tax year 2007, and (2) if so, was the petitioner, therefore, liable for the civil fraud penalty under IRC § 6663. Background to Isaacson v. Commissioner The petitioner, a trial attorney, who specialized in (among other areas) tax fraud litigation, secured a $12.75m settlement for four victims of abuse by Catholic clergy when they were children. He “earned” a 60% contingency fee for his services in 2007. This, apparently, was legal in California. Notwithstanding this boon, the petitioner got greedy, invested the money (intended for his firm’s trust fund account) in risky securities at UBS (Switzerland), and cried foul when the market dropped out in 2008, and he lost much of…

1 Comment
January 23, 2020
Business Related Issues
Tax Opinions / Business Related Issues / Memorandum Opinions / Procedural Issues

Manroe v. Commissioner
T.C. Memo. 2020-16

On January 22, 2020, the Tax Court issued a Memorandum Opinion in the case of Manroe v. Commissioner (T.C. Memo. 2020-16). The issue presented in Manroe v. Commissioner was whether the Tax Court had jurisdiction over the partners to redetermine the penalties at issue in a partner-level proceeding. Background to Manroe v. Commissioner The case stems from a tax shelter transaction, in which the petitioners ultimately conceded that the partnership at issue was a sham, lacked economic purpose, and was formed solely for tax avoidance purposes. So, that’s the starting point. The Tax Court sustained the 40% accuracy-related penalty for gross valuation misstatement under IRC § 6662(h). Subsequently the IRS issued statutory notices of deficiency (SNODs) to the petitioners determining deficiencies and accuracy-related penalties. Petitioners timely filed a petition for redetermination, in which the petitioners asserted that the IRS had made premature assessments of the deficiencies. Jurisdiction The Tax Court’s…

0 Comments
January 22, 2020
Penalties Under the Code
Tax Opinions / Full Tax Court Opinions / Penalties Under the Code

Chadwick v. Commissioner
154 T.C. No. 5

On January 21, 2020, the Tax Court issued its opinion in Chadwick v. Commissioner (154 T.C. No. 5). The issue presented in Chadwick v. Commissioner was whether the penalty assessable pursuant to IRC § 6672(a) (the Trust Fund Recovery Penalty or TFRP) was subject to the requirement that written supervisory approval be secured at the initial determination of such assessment pursuant to IRC § 6751(b)(1). The IRC § 6672(a) Trust Fund Recovery Penalty is…Wait for It…a Penalty No penalty under the Code may be assessed unless the initial determination of that assessment is personally approved (in writing) by the immediate supervisor of the individual/agent making such determination (or someone higher on the IRS food chain). IRC § 6751(b)(1). The IRS argued that the approval requirements of IRC § 6751(b)(1) do not apply to the TFRP because IRC § 6672, in substance, imposes a tax rather than a penalty. For my…

4 Comments
January 21, 2020
Income Tax Issues
Tax Opinions / Income Tax Issues / Memorandum Opinions / Procedural Issues

Onyeani v. Commissioner
T.C. Memo. 2020-15

On January 16, 2020, the Tax Court issued a Memorandum Opinion in the case of Onyeani v. Commissioner (T.C. Memo. 2020-15). The issue presented in Onyeani v. Commissioner was whether the IRS appropriately issued a termination assessment against the petitioner and determined that his illegal income was taxable. Note on Onyeani v. Commissioner Hello, dear reader, I am Ogorji Timothy Wilson Onyeani, a Nigerian doctor, who has come upon a sum of money in the oil and gas business, purchasing 5 million barrels of Nigerian light crude (worth over $250m!) to be discharged in Yangshan Port, Shanghai, China. I was given your name by a mutual friend, Mr. Smith, and offering [sic] you the opportunity to invest in this project. Please wire funds to Bank of America account No. x9724 in advance fees to secure your money. Questions directed to ogorgi@not-a-nigerian-prince-so-this-isn’t-a-scam.com. This is how I imagine the petitioner’s solicitation for…

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January 16, 2020
Penalties Under the Code
Tax Opinions / Full Tax Court Opinions / Penalties Under the Code

Laidlaw’s Harley Davidson Sales Inc. v. Commissioner
154 T.C. No. 4

On January 16, 2020, the Tax Court issued its opinion in Laidlaw’s Harley Davidson Sales Inc. v. Commissioner (154 T.C. No. 4). The issue presented in Laidlaw’s Harley Davidson Sales Inc. v. Commissioner was whether the written supervisory approval requirement of IRC § 6751(b)(1) applied to the assessable penalty imposed by IRC § 6707A (failure to disclose a reportable transaction). 30-Day Letter Triggered IRC § 6751(b)(1) Supervisory Approval Requirement in Laidlaw’s Harley Davidson Sales Inc. v. Commissioner The petitioner in Laidlaw’s Harley Davidson received a 30-day letter, which notified the petitioner of the IRS’s proposed penalties for failure to disclose a reportable transaction on its Form 1120 under IRC § 6707A. Importantly, the 30-day letter explained that, in the event that the petitioner wished to oppose the penalty, it was entitled to request a conference with Appeals. Thus, the letter indicated that the IRS’s Examination Division had concluded its work in the matter.…

3 Comments
January 16, 2020