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Swanberg v. Commissioner (T.C. Memo. 2020-123)

On August 25, 2020, the Tax Court issued a Memorandum Opinion in the case of Swanberg v. Commissioner (T.C. Memo. 2020-123). The primary issue before the court in Swanberg was whether the IRS abused its discretion in failing to consider the petitioner’s prior year credits in determining liability for the year under examination.

Availability of Credit

If your client’s primary argument to avoid liability in year at issue is to claim that the IRS failed to apply prior year’s credits, it is incumbent to check first that your client actually has said credits.  Of course, when a taxpayer appears pro se, all bets are off.

The petitioner filed his 2013 Form 1040 but failed to pay the tax shown as due. The IRS assessed the liability and issued a Notice of Intent to Levy and Notice of Your Right to a Hearing. Timely requested a CDP hearing. Although he asserted that the proposed levy was premature, he did not challenge the underlying liability is recorded on the 2013 return. Appeals examined the petitioner’s account transcripts from 2000 through 2013, and the transcript showed that adjustments have been made and that no available credit existed.

Review Limited to Year at Issue

The petitioner requested an installment agreement, which Appeals expressed a willingness to consider; however, the petitioner and Appeals could not agree on a monthly payment amount. Again, the petitioner argued that the IRS had made errors in computing its tax for prior years, and again Appeals reminded him that it could only consider liability disputes regarding 2013.

The jurisdiction of the Tax Court generally does not permit it to consider matters regarding non-determination years; however, the Tax Court may consider facts and issues from other years to the extent that they are relevant in evaluating a claim that an unpaid tax has been paid. Freije v. Commissioner, 125 T.C. 14, 27 (2005). An available credit from another year is a fact that may affect the taxpayer’s correct liability for the year before the Court. Weber v. Commissioner, 138 T.C. 348, 371-372 (2012). However, a credit must actually exist in order to constitute an “available credit.” A mere claim for a credit “is not an ‘available credit,’” and such a claim “need not be resolved before the IRS can proceed with collection of the liability at issue.” Id. at 372; see also Del-Co W. v. Commissioner, T.C. Memo. 2015-142.

Bright Line Rule

The Tax Court may consider whether a credit available from another tax year should be applied to the taxpayer’s liability for the year before the Tax Court only if the other credit “indisputably exists.” Del-Co W, T.C. Memo. 2015-142.

(T.C. Memo. 2020-123) Swanberg v. Commissioner

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