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Chow v. Commissioner (T.C. Memo. 2021-106)

On September 1, 2021, the Tax Court issued a Memorandum Opinion in the case of Chow v. Commissioner (T.C. Memo. 2021-106). The primary issue presented in Chow was whether the IRS’s Whistleblower Office (WBO) abused its discretion when it denied the petitioners’ claim on the basis that the information that they provided was bullshit (rather, “not credible”).

Held: No. You people are crazy.

Background to Chow v. Commissioner

Mr. and Mrs. Wai-Cheung Wilson Chow rented a home in California from an individual (target taxpayer or target). The Chows claim that the target boasted about owning several other rental properties that she rented to tenants on a cash-only basis to avoid paying taxes on the income.

Chow v. Commissioner

In April 2018, after moving out of the target’s property, the Chows filed Form 211 (Application for Award for Original Information) with the IRS. On the Form 211, the Chows alleged that the target taxpayer and her business under-reported income by collecting rent and security deposits in cash to avoid paying taxes on her rental income and to avoid having banking records of the payments. The Chows claimed that the target had been operating this scheme for quite some time.

The Chows attached information to the Form 211 to support their claims. This information included a list of “possible aliases” used by the target taxpayer, a list of 50 addresses “possibly associated” with the target, and the identity of a “possible relative” of the target and that person’s associated addresses. The Chows obtained most of this information from internet research. From this research, the Chows surmised that the target hides her property ownership from the IRS by purchasing properties in cash and registering them under various names, trusts, and companies.

Shenanigans.

The “Review” of the “Claim”

Chow Dont BelieveAfter reviewing these records, the WBO recommended rejecting the Chows’ claim because the allegations were “not credible.” As the basis for this recommendation, the classifier stated that the target’s tax filings indicated income from only one rental property and the IRS’s database revealed that the target owned only one property. The WBO concluded that the claim provided “no specific or credible information” regarding Federal tax noncompliance.

The Chows are Full of It

Judge Buch was not having any of the Chow’s horse-feathers.

The first sentence of the “Analysis” section is actually a conclusion:

The Commissioner did not abuse his discretion by rejecting the Chows’ claim.

In so finding, the Tax Court observed that the Whistleblower Office rejected the claim because it analyzed IRS databases related to the target and found that the information provided by the Chows could not be corroborated. Stated differently, it was a bunch of malarkey. The target had one property instead of several, and the target’s tax filings indicated that she submitted tax forms reporting the single property.

Chow SimpleThe Chows argued that the IRS incorrectly rejected their claim because the WBO performed a “simple evaluation” and did not conduct a “proper investigation before making the final decision.” The IRS, however, and to its credit, actually did research the fundamental allegations of the claim and discerned that the claim “lacked the requisite credibility to pursue” (was a load of hooey).

The IRS is not obligated to perform a deeper evaluation of a whistleblower’s claims before issuing a rejection—especially when the lack of merits of the claim are clear on the most cursory of examinations. Moreover, the Tax Court cannot direct the IRS to commence or continue an audit. Lacey v. Commissioner, 153 T.C. 146, 166 (2019).

(T.C. Memo. 2021-106) Chow v. Commissioner

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