Tax Protesting and 6673 Penalties: Designated Orders 9/2/19 to 9/6/19

There was one sole designated order for the week I monitored the Tax Court in September. It deals with a tax protestor who is a frequent flier with the Tax Court. How did he fare? Find out below. Following that, we provide a survey of section 6673 penalty cases in the Tax Court.

Tax Protesting
Docket No. 17872-18L, Alexander H. Hyatt v. C.I.R., Order and Decision available here.

The petition filed concerns a notice of determination sustaining a proposed levy to collect on unpaid tax liability for 2012. The IRS filed a motion for summary judgment with a declaration in support. The Court ordered Mr. Hyatt to file a response to the motion on the same day. In the Court’s order, they cautioned Mr. Hyatt that his frivolous arguments raised in the petition could be subject to the imposition of a section 6673 penalty of up to $25,000.

Previously, Mr. Hyatt had filed a petition with the Tax Court concerning the notice of deficiency of $39,414 on the 2012 tax year. He filed an imperfect petition and the Court ordered him to file an amended petition and pay the filing fee. Since he failed to do that, the petition was dismissed for lack of jurisdiction.


In response to a notice of intent to levy the unpaid 2012 tax liability, Mr. Hyatt filed for a collection due process hearing. However, his arguments were that no contract exists between the parties, the tax was fraudulently assessed, he objects to the United States financial system, objects to his status as a citizen of the United States, objects to the Social Security system, and desires to rescind his signature on all IRS Forms 1040 he filed because he believes he is no longer legally required to file such forms.

In the collection due process hearing, the settlement officer verified that all procedural and administrative requirements were met. Mr. Hyatt could not challenge the underlying tax liability because of his previous failed petition to the Tax Court. He informed the settlement officer he was not seeking a collection alternative. The settlement officer determined that the proposed levy was appropriate and the IRS issued the notice of determination.

With the current petition, Mr. Hyatt asserts there is no legal authority (statutory, regulatory, or otherwise) that authorizes the notice of deficiency, the IRS fraudulently manipulated its internal systems, and no regulation imposes a tax liability on wages. He also made the other arguments listed above. He did not respond to the IRS motion for summary judgment.

As an aside, I recommend reading (or skimming) the IRS statements regarding tax protesters. The official title is “The Truth About Frivolous Tax Arguments”, available starting here, or in a 73-page PDF here. It is fascinating reading into the world of tax protests. Truly, this group has come up with creative arguments regarding why the federal tax system does not apply to them and why they should not pay their share of taxes.

The official IRS position is that these are frivolous tax arguments. Accordingly, those frivolous tax arguments can lead to hefty penalties. By the way, that sentence is what is known as foreshadowing.

Back to the Tax Court – the Court analyzes the collection due process hearing. Looking at the facts above concerning the settlement officer’s actions, the Court finds there was no abuse of discretion for sustaining the proposed levy.

The Court reviewed Mr. Hyatt’s arguments and concludes they are frivolous and without any basis in law or fact. As a result, the Court determines that summary judgment is appropriate and grants the IRS motion.

Finally, the Court reviews the authority to impose a penalty not exceeding $25,000 under IRC section 6673(a)(1). Now, until this point, I was thinking that this was an average tax protestor case and it would not necessarily be worth reporting on.

However, Mr. Hyatt is a repeat offender at the Tax Court. You can see how each judge leaves hints for the next judge regarding future treatment of such an offender:

• In docket # 7221-07L, the Tax Court imposed a $5,000 penalty – Judge Kroupa first states, “Petitioner deserves a penalty under section 6673(a)(1), and that penalty should be substantial, if it is to have the desired deterrent effect.” Later, “We are also convinced that petitioner is aware of the warnings this Court has given to taxpayers who provide the type of arguments petitioner provided in this case yet petitioner persisted and wasted this Court’s limited time and resources.” After applying the penalty – “In addition, we take this opportunity to admonish petitioner that the Court will consider imposing a larger penalty if petitioner returns to the Court and advances similar arguments in the future.”

• In docket # 26157-08, a $7,500 penalty – From the bench opinion transcript of the hearing (where Mr. Hyatt did not appear) with Special Trial Judge Armen: “The record in this case convinces us that petitioner was not interested in disputing the merits of the deficiency in income tax determined by respondent in the notice of deficiency. Rather, the record demonstrates that petitioner regards this case as a vehicle to protest the tax laws of this country and espouse his own misguided views. We are also convinced that petitioner instituted and maintained this proceeding primarily, if not exclusively, for purposes of delay. Having to deal with this matter wasted the Court’s time, as well as respondent’s. Moveover, taxpayers with genuine controversies may have been delayed. Many years ago, Supreme Court Justice Oliver Wendell Holmes said: ‘Taxes are what we pay for civilized society.’ Petitioner undoubtedly feels himself to be entitled to every benefit that civilized society has to offer; unfortunately, he feels no obligation to pay his fair share. [Regarding the previous penalty,] Petitioner remains undeterred.”

• In docket # 8771-08L, a $10,000 penalty – Mr. Hyatt is before Special Trial Judge Armen again, this time appearing with the same Respondent’s counsel from the last case. Judge Armen reuses a good amount of the language above in another bench opinion transcript. “In view of the foregoing, and as Petitioner remains undeterred, he deserves a significant penalty under section 6673(a). Accordingly, we shall grant that part of Respondent’s motion requesting a sanction and impose a penalty on Petitioner in the amount of $10,000.”

• In docket # 22711-09L, a maximum penalty of $25,000 – This time, it is a bench opinion transcript from a trial before Judge Halpern. “We are convinced that Petitioner has no legitimate grounds for challenging the notice. Rather, Petitioner’s arguments in this case and Petitioner’s previous appearances before this Court demonstrate that Petitioner regards this case as a vehicle to protest the tax laws of this country and espouse his own misguided views. Based on well-established law, Petitioner’s position is frivolous and groundless. We are also convinced that Petitioner instituted and maintained this proceeding primarily, if not exclusively, for purposes of delay. Having to deal with this matter wasted the Court’s tie, as well as Respondent’s.” Regarding the prior penalties – “Petitioner has not been deterred, and we think it appropriate to penalize him to the maximum extent possible. We therefore shall impose on him a 6673(a)(1) penalty of $25,000.”

In this case, the Court states that Mr. Hyatt has not been deterred from maintaining frivolous positions. He advanced frivolous arguments that serve no purpose other than to protest the tax system and delay the collection of his owed taxes, wasting resources of the Court and the IRS. Because of those reasons, the Court again imposed the maximum penalty of $25,000.

Takeaway: See a pattern? Tax protesting is not profitable in Tax Court. I do not advise it. Find better creative outlets than upsetting the Tax Court.

We may never know how many fees the IRS collects from Mr. Hyatt. Keith mentioned that it would be an interesting CDP case in Tax Court regarding the collection of 6673 fines.

§ 6673 Penalty Tax Court Cases

  • 2011: 13 cases
    • Carluzzo—1 case
    • Cohen – 1 case
    • Colvin – 1 case
    • Gale – 1 case
    • Gustafson – 1 case
    • Holmes – 1 case
    • Marvel – 1 case
    • Morrison – 2 cases
    • Ruwe – 1 case
    • Thornton – 1 case
    • Wells – 2 cases
  • 2012: 20 cases
    • Carluzzo – 1 case
    • Cohen – 1 case
    • Gale – 1 case
    • Gustafson—3 case
    • Halpern – 2 cases
    • Marvel – 3 cases
    • Morrison – 3 cases
    • Panuthos – 1 case
    • Ruwe – 1 case
    • Thornton—3 cases
    • Vazquez – 1 case
  • 2013: 17 cases
    • Buch – 2 cases
    • Carluzzo—3 cases
    • Cohen – 1 case
    • Goeke – 1 case
    • Gustafson—1 case
    • Halpern – 1 case
    • Lauber – 1 case
    • Marvel—3 cases
    • Ruwe – 2 cases
    • Thornton – 1 case
    • Wells – 1 case
  • 2014: 15 cases
    • Buch – 2 cases
    • Colvin – 1 case
    • Foley – 1 case
    • Gerber – 1 case
    • Goeke – 1 case
    • Guy—1 case
    • Halpern – 3 cases
    • Holmes – 1 case
    • Marvel—3 cases
    • Morrison – 1 case
    • Nega – 1 case
  • 2015: 18 cases
    • Buch—1 case
    • Carluzzo—3 cases
    • Cohen – 2 cases
    • Gustafson – 2 cases
    • Guy – 1 case
    • Halpern – 1 case
    • Holmes—1 case
    • Lauber – 3 cases
    • Marvel – 1 case
    • Pugh—2 cases
    • Ruwe – 1 case
  • 2016: 18 cases
    • Buch – 1 case
    • Carluzzo – 2 cases
    • Cohen – 1 case
    • Gustafson – 2 cases
    • Halpern – 1 case
    • Holmes – 1 case
    • Lauber – 3 cases
    • Marvel – 1 case
    • Morrison—2 cases
    • Nega—1 case
    • Pugh – 2 cases
    • Thornton – 1 case
  • 2017: 13 cases
    • Buch – 1 case
    • Cohen – 1 case
    • Foley – 1 case
    • Halpern—1 case
    • Lauber – 2 cases
    • Marvel – 1 case
    • Morrison—1 case
    • Nega—2 cases
    • Pugh – 1 case
    • Thornton – 1 case
    • Vazquez – 1 case
  • 2018: 13 cases
    • Buch – 3 cases
    • Guy—3cases
    • Halpern – 2 cases
    • Leyden – 1 case
    • Marvel – 1 case
    • Panuthos—1 case
    • Pugh—1 case
    • Ruwe – 1 case
  • 2019: 21 cases
    • Carluzzo – 3 cases
    • Colvin – 1 case
    • Foley—2 cases
    • Gale—1 case
    • Guy – 1 case
    • Halpern – 2 cases
    • Lauber – 2 cases
    • Marvel – 2 cases
    • Panuthos – 1 case
    • Paris—1 case
    • Pugh—4 cases
    • Thornton – 1 case
  • TOTAL: 148 cases w/ penalties imposed by 24 judges from January 1, 2011 – December 31, 2019

Cases by Judge

  • Judge Buch – 10 cases
    • Polk v. Commissioner – Docket No. 7946-12L (2013)
      • $1,000 penalty
    • Byers v. Commissioner – Docket No. 15841-11 (2013)
      • $5,000 penalty
    • Waltner v. Commissioner – Docket No. 21953-12L (2014)
      • $2,500 penalty
    • Sykes v. Commissioner – Docket No. 20594-13 (2014)
      • $5,000 penalty
    • Briggs v. Commissioner – Docket No. 11940-12 (2015)
      • $500 penalty
    • Blair v. Commissioner – Docket No. 17636-14 (2016)
      • $10,000 penalty (via opinion)
    • Jagos v. Commissioner – Docket No. 476-16 (2017)
      • $1,000 penalty
    • Norris v. Commissioner – Docket Nos. 6997-15, 7032-15, 7033-15 (2018)
      • $5,000 penalty
    • Ebanks v. Commissioner – Docket No. 15605-14 (2018)
      • $5,000 penalty
    • Meintz v. Commissioner – Docket No. 25321-16 (2018)
      • $1,000 penalty
  • Judge Carluzzo – 13 cases
    • Toussaint v. Commissioner – Docket No. 18914-10S (2011)
      • $1,000 penalty
    • Herriman v. Commissioner – Docket No. 25048-11 (2012)
      • $2,500 penalty
    • Osterbur v. Commissioner – Docket No. 11108-12 L (2013)
      • $1,000 penalty
    • Mills v. Commissioner – Docket No. 20500-11 (2013)
      • $5,000 penalty
    • Reyes v. Commissioner – Docket No. 5881-13L (2013)
      • $2,500 penalty
    • Nelson v. Commissioner – Docket No. 26547-12 (2015)
      • $10,000 penalty
    • Ramalho v. Commissioner – Docket No. 24511-15 (2015)
      • $7,500 penalty
    • McGhan v. Commissioner – Docket No. 10989-14 (2015)
      • $6,000 penalty
    • Boysen v. Commissioner – Docket No. 24330-15 (2016)
      • $2,500 penalty
    • Leyshon v. Commissioner – Docket No. 24310-15 (2016)
      • $2,500 penalty
    • Nitschke v. Commissioner – Docket No. 11246-18 (2019)
      • $2,500 penalty
    • Fujita v. Commissioner – Docket No. 296-19 (2019)
      • $1,500 penalty
    • Brown v. Commissioner – Docket No. 12646-19 (2019)
      • $500 penalty
  • Judge Cohen – 7 cases
    • Hewko v. Commissioner – Docket No. 13274-10L (2011)
      • $10,000 penalty
    • Reno v. Commissioner – Docket No. 4147-11 (2012)
      • $10,000 penalty
    • Spahr v. Commissioner – Docket No. 25095-11L (2013)
      • $10,000 penalty
    • Banister v. Commissioner – Docket No. 30500-12 (2015)
      • $25,000 penalty
    • Bennett v. Commissioner – Docket No. 15929-10 (2015)
      • $25,000 penalty
    • Foryan v. Commissioner – Docket No. 848-15 (2016)
      • $10,000 penalty
    • Ferguson v. Commissioner – Docket No. 11004-16 (2017)
      • $5,000 penalty
  • Judge Colvin – 3 cases
    • Ramalho v. Commissioner– Docket No. 10927-11 (2011)
      • $5,000 penalty
    • Sykes v. Commissioner – Docket No. 9793-13 (2014)
      • $25,000 penalty
    • Worsham v. Commissioner – Docket No. 26210-16 (2019)
      • $3,000 penalty (via opinion)
  • Judge Foley – 4 cases
    • Winterroth v. Commissioner – Docket No. 13833-12 (2014)
      • $10,000 penalty (via opinion)
    • Blair v. Commissioner – Docket No. 21728-14 (2017)
      • $5,000 penalty
    • Ramer & Ramer v. Commissioner – Docket No. 22587-18 (2019)
      • $10,000 penalty
    • Nabaya v. Commissioner – Docket No. 7207-19 (2019)
      • $1,000 penalty
  • Judge Gale – 3 cases
    • Klein v. Commissioner – Docket No. 1382-10 (2011)
      • $1,000 penalty
    • Wolfe v. Commissioner – Docket No. 6915-02 (2012)
      • $5,000 penalty
    • Hyatt v. Commissioner – Docket No. 17872-18L (2019)
      • $25,000 penalty
  • Judge Gerber – 1 case
    • Duggan v. Commissioner – Docket No. 3771-12 (2014)
      • $5,000 penalty
  • Judge Goeke – 2 cases
    • Riezinger-Von Reitz v. Commissioner – Docket No. 1984-12 (2013)
      • $15,000 penalty
    • Gieser v. Commissioner – Docket No. 9863-13 (2014)
      • $5,000 penalty
  • Judge Gustafson – 9 cases
    • Wnuck v. Commissioner – Docket No. 26068-09 (2011)
      • $5,000 penalty (via opinion)
    • Smalley v. Commissioner – Docket No. 13625-11 (2012)
      • $2,500 penalty
    • Skarbinski v. Commissioner – Docket No. 18189-11 (2012)
      • $1,000 penalty
    • Ali v. Commissioner – Docket No. 11866-11 (2012)
      • $2,228 penalty
    • Roe v. Commissioner – Docket No. 19423-12 (2013)
      • $40,000 penalty (two of $20,000 for each petitioner)
    • Ramalho v. Commissioner – Docket Nos. 18058-14L, 18987-14 (2015)
      • $10,000 ($5,000 for each case)
    • Leyshon v. Commissioner – Docket No. 20983-13 (2015)
      • $2,000 penalty (via opinion)
    • Scott v. Commissioner – Docket No. 26717-14 (2016)
      • $6,000 penalty
    • Gattie v. Commissioner – Docket No. 7077-15 (2016)
      • $12,500 penalty
  • Judge Guy – 6 cases
    • Leyva v. Commissioner – Docket No. 3223-13 (2014)
      • $15,000 penalty
    • Sykes v. Commissioner – Docket No. 24394-15 (2015)
      • $15,000 penalty
    • Chapman v. Commissioner – Docket No. 3007-18 (2018)
      • $3,000 penalty
    • Ryskamp v. Commissioner – Docket No. 3899-18 (2018)
      • $1,000 penalty
    • Marvin v. Commissioner – Docket No. 23092-17 L (2018)
      • $500 penalty
    • Walquist v. Commissioner – Docket No. 12890-19S (2019)
      • $5,000 penalty
  • Judge Halpern – 13 cases
    • Roye v. Commissioner – Docket No. 9913-10 (2012)
      • $15,000 penalty
    • Winslow v. Commissioner – Docket No. 18177-11 (2012)
      • $2,500 penalty
    • Gieser v. Commissioner – Docket No. 10961-12L (2013)
      • $5,000 penalty
    • Rader v. Commissioner – Docket No. 11409-11, 11476-11, 27722-11 (2014)
      • $10,000 penalty (via opinion)
    • Jones v. Commissioner – Docket No. 29579-09, 23503-10 (2014)
      • $50,000 penalty ($25,000 each)
    • Davis v. Commissioner – Docket No. 2257-13 (2014)
      • $2,500 penalty
    • Wesley v. Commissioner – Docket No. 6560-14L (2015)
      • $7,500 penalty
    • Best v. Commissioner – Docket No. 26662-10L (2016)
      • $5,000 penalty
      • $19,837.50 penalty against petitioners’ counsel
    • Gardner v. Commissioner – Docket No. 22795-16 L (2017)
      • $25,000 penalty
    • Lange v. Commissioner – Docket No. 11492-17L (2018)
      • $2,500 penalty
    • Walker v. Commissioner – Docket Nos. 16108-14L, 9435-15L (2018)
      • $10,000 penalty ($5,000 for each case)
    • Harris v. Commissioner – Docket No. 3596-18L (2019)
      • $15,000 penalty
    • Smith v. Commissioner – Docket No. 6105-16 (2019)
      • $2,500 penalty (via opinion)
  • Judge Holmes – 4 cases
    • Macdougall v. Commissioner – Docket No. 1754-11 (2011)
      • $500 penalty
    • Gieser v. Commissioner – Docket No. 1697-13 (2014)
      • $5,000 penalty
    • Klingenberg v. Commissioner – Docket No. 17632-13L (2015)
      • $10,000 penalty
    • Wright v. Commissioner – Docket No. 18508-14 (2016)
      • $100 penalty
  • Judge Lauber – 11 cases
    • Golub v. Commissioner – Docket No. 8431-12L (2013)
      • $10,000 penalty (note: opinion originally assessed $15k but order reduced to $10k)
    • Balice v. Commissioner – Docket No. 22235-13 (2015)
      • $25,000 penalty
    • Kanofsky v. Commissioner – Docket No. 21821-13L (2015)
      • $20,000 penalty
    • Patton v. Commissioner – Docket No. 16365-12L (2015)
      • $3,500 penalty
    • May v. Commissioner – Docket No. 14545-12L (2016)
      • $500 penalty
      • $7,188 penalty for petitioners’ counsel
    • Briggs v. Commissioner – Docket No. 3845-14 (2016)
      • $3,000 penalty
    • Bruhwiler v. Commissioner – Docket No. 26467-14 (2016)
      • $3,500 penalty
    • Gardner v. Commissioner – Docket No. 11669-16L (2017)
      • $10,000 penalty
    • Murray v. Commissioner – Docket No. 23464-15 (2017)
      • $1,500 penalty
    • Wesley v. Commissioner – Docket No. 18174-17L (2019)
      • $10,000 penalty
    • Walquist v. Commissioner – Docket No. 25257-17 (2019)
      • $12,500 penalty
  • Judge Leyden – 1 case
    • Herndon v. Commissioner – Docket No. 21071-17L (2018)
      • $1,000 penalty
  • Judge Marvel – 15 cases
    • Holmes v. Commissioner – Docket Nos. 10381-09, 14995-09, 17840-09 (2011)
      • $75,000 ($25,000 for each case, via opinion)
    • Barash v. Commissioner – Docket Nos. 25606-10, 11176-11 (2012)
      • $5,000 penalty ($2,500 for each case)
    • Southwell v. Commissioner – Docket No. 21117-11 (2012)
      • $3,000 penalty
    • Nelson v. Commissioner – Docket No. 21102-10 (2012)
      • $2,000 penalty (via opinion)
    • Hill v. Commissioner – Docket No. 15452-10 L (2013)
      • $5,000 penalty
    • Hill v. Commissioner – Docket Nos. 221-10 ,15501-10 (2013)
      • $20,000 penalty ($10,000 for each case, via opinion)
    • Hill v. Commissioner – Docket No. 1465-12 (2013)
      • $10,000 penalty (via opinion)
    • Bigley v. Commissioner – Docket Nos. 17747-12 L, 17529-12L, 17600-12L (2014)
      • $10,000 penalty imposed
    • Jutkowitz v. Commissioner – Docket No. 9897-13 (2014)
      • $10,000 penalty
    • Taylor v. Commissioner – Docket No. 10253-13 (2014)
      • $10,000 penalty
    • Mangan v. Commissioner – Docket No. 19000-13 (2014)
      • $5,600 penalty for petitioners’ counsel
    • Norris v. Commissioner – Docket No. 7682-14L (2015)
      • $1,000 penalty
    • Foryan v. Commissioner – Docket No. 14909-14 (2016)
      • $10,000 penalty
    • Waltner v. Commissioner – Docket No. 1729-13 (2017)
      • $10,000 penalty
      • $15,500 penalty for petitioners’ counsel
    • Schneider v. Commissioner – Docket No. 10660-17L (2018)
      • $15,000 penalty
    • Eldridge v. Commissioner – Docket No. 14744-18 (2019)
      • $3,000 penalty
    • Gilmore v. Commissioner – Docket No. 6341-18 (2019)
      • $5,000 penalty
  • Judge Morrison – 9 cases
    • Burchfield v. Commissioner – Docket No. 16676-09 (2011)
      • $5,000 penalty (via opinion)
    • Covington v. Commissioner – Docket No. 17624-09L (2011)
      • $5,000 penalty (via opinion)
    • Fleming v. Commissioner – Docket No. 14357-10L (2012)
      • $1,500 penalty
    • Buchanan v. Commissioner – Docket No. 11735-11L (2012)
      • $5,000 penalty
    • Alderman v. Commissioner – Docket No. 28696-10 (2012)
      • $4,000 penalty
    • Streiffert v. Commissioner – Docket No. 24162-10L (2014)
      • $15,000 penalty
    • Lovely v. Commissioner – Docket No. 6570-15 L (2016)
      • $1,000 penalty
    • Schneider v. Commissioner – Docket Nos. 17566-14, 29122-14 (2016)
      • $5,000 penalty ($2,500 each)
    • Amnesty National v. Commissioner – Docket No. 13961-15 L (2017)
      • $200 penalty
  • Judge Nega – 4 cases
    • Bowers v. Commissioner – Docket No. 10137-13 (2014)
      • $2,500 penalty
    • Berglund v. Commissioner – Docket No. 20782-15 L (2016)
      • $2,500 penalty
    • McBride v. Commissioner – Docket No. 15477-15 (2017)
      • $3,000 penalty
    • Byers v. Commissioner – Docket No. 24354-14L (2017)
      • $10,000 penalty (via opinion)
  • Judge Panuthos – 3 cases
    • Steele v. Commissioner – Docket No. 17903-11 (2012)
      • $2,000 penalty
    • Rader v. Commissioner – Docket No. 12507-17 L (2018)
      • $5,000 penalty
    • Ryskamp v. Commissioner – Docket No. 6595-19 (2019)
      • $2,000 penalty
  • Judge Paris – 1 case
    • Schneider v. Commissioner – Docket No. 15652-17 (2019)
      • $5,849 penalty
  • Judge Pugh – 10 cases
    • Myers v. Commissioner – Docket No. 30321-13L (2015)
      • $5,000 penalty
    • Foryan v. Commissioner – Docket No. 10732-13 (2015)
      • $1,000 penalty
    • Stanley v. Commissioner – Docket No. 7238-13L (2016)
      • $10,000 penalty
    • Nitschke v. Commissioner – Docket No. 23164-14 (2016)
      • $10,000 penalty
    • Fleming v. Commissioner – Docket No. 4925-12L (2017)
      • $5,000 penalty
    • MacDonald v. Commissioner – Docket Nos. 5503-16, 17660-16. (2018)
      • $20,000 penalty imposed ($10,000 each)
    • Sykes v. Commissioner – Docket No. 19706-17 L (2019)
      • $25,000 penalty
    • Staples v. Commissioner – Docket No. 24524-15 (2019)
      • $1,000 penalty
    • Gonsoulin v. Commissioner – Docket No. 18395-17L (2019)
      • $5,000 penalty
    • Wells v. Commissioner – Docket No. 22852-17 (2019)
      • $10,000 penalty (via opinion)
  • Judge Ruwe – 6 cases
    • Byrd v. Commissioner – Docket No. 12885-09L (2011)
      • 2,000 penalty (via opinion)
    • Garber v. Commissioner – Docket No. 2863-11 (2012)
      • $1,000 penalty
    • Snow v. Commissioner – Docket No. 24783-09 (2013)
      • $8,000 penalty
    • Zook v. Commissioner – Docket No. 9773-12L (2013)
      • $2,000 penalty (via opinion)
    • Kanofsky v. Commissioner – Docket No. 22008-13L (2015)
      • $20,000 penalty
    • Williams v. Commissioner – Docket No. 30487-15 (2018)
      • $2,000 penalty
  • Judge Thornton – 8 cases
    • Pappert v. Commissioner – Docket No. 18010-10 (2011)
      • $3,000 penalty
    • McGhan v. Commissioner – Docket No. 22880-11 (2012)
      • $25,000 penalty imposed
    • Jackson v. Commissioner – Docket No. 17268-08L (2012)
      • $15,000 penalty (via opinion)
    • Parker v. Commissioner – Docket No. 3743-10 (2012)
      • $3,000 penalty (via opinion)
    • Curtis v. Commissioner – Docket No. 5657-10 (2013)
      • $25,000 penalty
    • Kanofsky v. Commissioner – Docket Nos. 18182-15, 18162-15, 18163-15 (2016)
      • $24,000 penalty ($8,000 each)
    • Ertelt v. Commissioner – Docket No. 10739-14L (2017)
      • $1,000 penalty
    • Combs v. Commissioner – Docket No. 22748-14 (2019)
      • $2,500 penalty
  • Judge Vazquez – 2 cases
    • Caton v. Commissioner – Docket No. 5071-10 (2012)
      • $5,000 penalty
    • Williams v. Commissioner – Docket No. 13829-15L (2017)
      • $5,000 penalty
  • Judge Wells – 3 cases
    • Mooney v. Commissioner – Docket No. 8128-09 (2011)
      • $2,000 penalty (via opinion)
    • Barry v. Commissioner – Docket No. 4754-07L, 25882-08L, 5026-07L (2011)
      • $40,000 penalty ($20k & then $10k each, respectively)
    • Campbell v. Commissioner – Docket No. 13687-11L (2013)
      • $10,000 penalty

Innocent Spouse, Abuse of Discretion, and Remand: Designated Orders 8/5/19 to 8/9/19

My August week of designated orders brought four orders in different areas. The topic range includes innocent spouse (with the question of application under the Taxpayer First Act), collection due process and remands. One of the remands has an abuse of discretion issue.

Taxpayer First Act and Innocent Spouse
Docket No. 12498-16, Beverly Robinson v. C.I.R., Order available here.
In her first designated order, Judge Copeland brings up how the Taxpayer First Act affects a pending innocent spouse case. Carlton Smith blogged about this issue in Procedurally Taxing previously here. Carlton’s article discusses the implications of the Taxpayer First Act section concerning innocent spouse cases, specifically IRC section 6015(f) cases.


This order concerns a case that already went to trial on February 5, 2018. The parties filed a joint stipulation of facts and a joint first supplemental stipulation of facts. The petitioner moved to admit Exhibit 58-P and it was admitted into evidence. Each party called witnesses in support of their arguments. The entire administrative record was not presented or received into evidence. The trial was before Judge Chiechi, who has since retired. The case was reassigned to Judge Copeland. After trial, on July 1, 2019, the Taxpayer First Act was signed into law. The relevant portion to this case is below.

Section 1203(a)(1) of the Taxpayer First Act of 2019 (TFA) amended IRC section 6015(e) to add a new paragraph (7):

(7) STANDARD AND SCOPE OF REVIEW. — Any review of a determination made under this section shall be reviewed de novo by the Tax Court and shall be based upon —
(A) the administrative record established at the time of the determination, and
(B) any additional newly discovered or previously unavailable evidence.

TFA section 1203(b) states those sections apply to “petitions or requests filed or pending on or after the date of the enactment of this Act.”

Judge Copeland issued this order, stating that the parties shall file a response to the order addressing the effect of sections 1203(a) and (b) of the TFA on this case.

At first, I thought the judge wanted the parties to do research on the TFA and how its innocent spouse provision applied in general to their case so I would have directed them to Carlton’s article. However, I reread the order and realized just what she meant concerning the TFA’s application to their case.

The case was pending on the date the TFA was enacted. Now, normally the Tax Court would review the innocent spouse determination de novo based upon (A) and (B) listed above. However, the administrative record was not introduced or received into evidence, which is part of subsection (A) above. What to do in this case? Let the parties make their arguments about the matter. Thus, the judge ordered the parties to submit their responses on or before September 4, 2019.

As a follow-up – on August 30, the IRS filed an unopposed motion for an extension of time. That motion was granted to give the IRS an extension of time to October 4.

Takeaway: Applying the Taxpayer First Act will open up several questions for years to come. Since the Taxpayer First Act specifically discusses Tax Court review of innocent spouse cases, this may be a prominent issue moving forward in designated orders. They should still read Carlton’s article.

More Innocent Spouse
Docket No. 10341-18, Jeffrey C. Elliott v. C.I.R., Order available here.
Pamela Elliott filed a motion for leave to file a notice of intervention in this innocent spouse case. Normally, she could have intervened as a matter of right. However, she filed the motion after the 60-day window during which she could intervene and requests leave to do so at this late time. Her reasoning is that “she was not represented by counsel and did not understand her procedural rights,” adding that the “interests of justice favor allowing her request.”

The Court reviews factors regarding Ms. Elliott’s motion for leave to file a notice of intervention. The first factor is the length of time she knew or should have known of her interest. Ms. Elliott waited a year so that factor weighs against her. The second factor is the prejudice the parties may suffer by her failure to intervene earlier. Mr. Elliott did not provide proof of additional fees he would suffer, the docket in this case has been inactive, and the parties have sufficient time to prepare for an October 2019 trial so it is determined that the parties will not suffer prejudice from her failure to intervene earlier so that factor weighed in her favor. The third factor is the prejudice she will suffer from a denial of her motion. Because she will be affected by the decision on innocent spouse relief, she would suffer prejudice by not being able to participate in the trial and that factor weighs in favor of granting the motion. The fourth and final factor is any unusual factors weighing in favor of finding timeliness. There are no issues affecting timeliness, but the parties are involved in another Tax Court proceeding (2957-19) involving similar issues. On balance, the factors allow for Ms. Elliott to be granted the relief she sought.

The Court grants her motion for leave to file a notice of intervention, ordering to amend the caption and serve her with the proper notice and pretrial order so she may prepare for trial.

Takeaway: It is not recommended to file documents after a deadline has passed. However, factors may allow for the Court to grant an individual the relief sought.

Abuse of Discretion for Installment Agreement Notice
Docket No. 2018-17L, Don R. Means v. C.I.R., Order here.
The petitioner is a retired airline pilot who claimed deductions based on participation in tax shelter programs. Audits of those schemes resulted in the IRS disallowing the deductions and deficiencies for 7 tax years. The Tax Court entered final judgments in 2013 regarding the aggregated assessed tax and associated accrued interest to be, respectively, $102,765 and $76,498. Mr. Means entered into a $500 monthly installment agreement in February 2014. The IRS terminated the agreement in May 2016. In July 2016, the IRS issued a Notice of Intent to Levy. Mr. Means filed a Form 12153 to request a Collection Due Process hearing. In the form and also by request to the settlement officer, Mr. Means requested an explanation of the termination of the installment agreement.

Termination of an installment agreement must be preceded by a 30-day notice that provides an explanation to the taxpayer. There were inconsistencies in the administrative record so it was unclear that the notice requirement under IRC section 6159(b)(5) was met or that such notice was provided to Mr. Means (though there is an indication that Mr. Means, his ex-wife, or both, failed to provide the IRS updated financial information, which led to the termination).

The Court cannot agree with the settlement officer’s determination that legal and administrative procedures were met. Therefore, the conclusion is that the determination sustaining the proposed levy was an abuse of discretion. The Court remands the case to Appeals for a supplemental hearing. On remand, if Mr. Means did not have proper notice, he should either be allowed to continue the installment agreement or receive the proper notice due, with the right to appeal.

Takeaway: Consistent procedure is necessary for the IRS so that a taxpayer receives proper due process. If the administrative record is inconsistent about notices, it is more likely for the Court to decide there was abuse of discretion.

Collection Due Process, Remand, and Summary Judgment
Docket No. 25904-16SL, Chinyere Egbe & Sheila Daniels Egbe v. C.I.R., Order and Decision available here.
To begin, petitioners received an IRS notice of deficiency for tax years 2012 and 2013. They did not petition the Tax Court based on that notice.

Next, the IRS issued to the petitioners a Final Notice of Intent to Levy and Notice of Your Right to Hearing for the 2013 tax year. The petitioners submitted a form 12153 to request a collection due process (CDP) hearing.

The settlement officer assigned to the case worked with the petitioners and their representative. The officer granted them an extension of time and did not receive any requested financial documents. However, he told their representative that they qualified for a streamlined installment agreement of $275 per month. The representative agreed to get back with the settlement officer after discussing with the petitioners. The petitioners made two payments before realizing the agreement was not in effect and then terminated their relationship with the representative because of not communicating acceptance of the installment agreement to the IRS.

The IRS issued a notice of determination to the petitioners not to grant relief from the proposed levy action. The petitioners filed a timely petition to the Tax Court concerning the notice of determination, also checking the box for a notice of determination concerning innocent spouse relief (which did not apply) and indicating the notice was for tax years 2012 and 2013 (when it was only for 2013).

The IRS filed a motion for summary judgment, which the Court denied. The Tax Court remanded the case to IRS Appeals for a further administrative hearing so the IRS could provide petitioners a supplemental CDP hearing. The Court dismissed tax year 2012 and the innocent spouse claim from the case.

The same settlement officer held a further CDP hearing. He informed the petitioners they could not challenge the liability for tax year 2013 because they received a valid notice of deficiency and that they had accrued an additional liability. The settlement officer proposed an increased installment agreement and they accepted, signing form 433D.

The IRS issued to the petitioners a supplemental notice of determination related to tax year 2013, determining that the proposed levy is not sustained because they agreed to a $600 per month installment agreement.

Following the supplemental notice of determination, both parties were to file status reports but only the IRS filed one. The Court scheduled the case for trial on the September 23, 2019, docket for New York, New York. The IRS filed a motion for summary judgment, with the settlement officer’s statement in support. The petitioners filed their objection to the motion for summary judgment.

In the Court’s analysis, the petitioners did not show there was a genuine issue for trial. Since the petitioners were in an installment agreement, the IRS did not sustain the proposed levy. The Court granted the motion for summary judgment because there was no genuine issue of material fact and removed the case from the September calendar.

Takeaway: To some degree, I think the petitioners had bad representation, but I think the biggest problem was a lack of understanding of IRS and Tax Court procedure. What are some indicators? They did not petition the Tax Court regarding the liabilities for 2012 and 2013 from the notice of deficiency. They (or their representative) did not respond or communicate with the settlement officer for the CDP hearing. They did not fill out their Tax Court petition correctly based on the original notice of determination.

I find that clients do not understand the difference between the various notices that provide them access to the Tax Court. Generally, the notice of deficiency allows them to contest the liability while a notice of determination concerning collection action is about abuse of discretion in a CDP hearing. It is critical to know what lane you are in to argue correctly and find success in the Tax Court.

Abuse of Discretion, Tax Protesters Penalized, and More: Designated Orders 7/8/19 to 7/12/19

This week of designated orders consisted of five orders on a variety of topics. One of them Keith Fogg already discussed so I will not focus on that case in depth. The other cases focus on abuse of discretion in a collection due process case, tax protesters being penalized, a whistleblower petitioner’s choice, and a ruling on requests for production of documents.

Docket No. 25751-15L, Joseph Thomas Lander & Kimberly W. Lander v. C.I.R., Order available here.
Keith Fogg wrote about this case’s proposed order here. I just want to add that I do not think the results seem very fair. The petitioners did not receive notice of their tax liability because the notices of deficiency were not sent to their address. Still, that counts against them. Also, the petitioners are unable to challenge the underlying tax liability because a postassessment conference with Appeals counts as an opportunity to dispute the liability. While the law is against them on these issues, the convoluted history of their tax proceedings combines to look like the petitioners are not receiving fair treatment.

Abuse of Discretion for Collection Alternatives
Docket No. 17999-18SL, Milton W. Asher, Jr. v. C.I.R., Order available here.
Mr. Asher has tax liabilities for 2013 and 2014. Following a notice of intent to levy, he filed for a collection due process hearing. After receiving the hearing’s results, he petitioned the Tax Court. The IRS filed a motion for summary judgment and Mr. Asher filed his response to the IRS motion.
First, the Court looks at the history of the administrative hearing for collection due process. There, the settlement officer wanted Mr. Asher to file his 2017 tax return and show proof that estimated tax payments were paid in full for 2018. The officer also stated that past due estimated payments could be part of an installment agreement, but would not be acceptable for an offer in compromise.
Mr. Asher and his counsel did not submit any proof of checks regarding payments being improperly applied by the IRS or for an abatement of penalties.
In looking at the 2017 tax return, Mr. Asher had filed an extension and ultimately filed the tax return 2 months before the October 15 deadline. The estimated payments resulted in an overpayment that the IRS applied to reduce his 2014 liability.
For the 2018 tax return, there were three estimated tax payments made that resulted in a credit balance.
Beginning the Court’s analysis, Mr. Asher did not submit proof regarding the payments being improperly applied or abatement of penalties so those issues were barred in the Tax Court case.
However, Mr. Asher was in filing compliance for 2017 since the tax return was under extension and Mr. Asher filed the return 2 months before the October 15 deadline. Also, at the time of the hearing Mr. Asher only had one estimated tax payment in arrears. In fact, due to the variable nature of his income, it is not clear an estimated tax payment was due on April 15, 2018. The Court states it was an abuse of discretion for the settlement officer to limit his access to collection alternatives when he was compliant regarding the 2017 and 2018 tax years.
The Court granted the IRS motion for summary judgment with regard to the existence and amount of the liabilities for the 2 tax years in question, specifically additional tax penalties, the ability to raise issues regarding alleged payments made for the 2 tax years, or raise any further issues beyond what is next described.
The Court denied the IRS motion for summary judgment to allow collection alternatives for Mr. Asher. He may be allowed either an offer in compromise (based solely on inability to pay, not doubt as to liability) or an installment agreement.
The Court says the parties may wish to consider whether to move for a remand so that a different settlement officer is assigned to Mr. Asher regarding those listed collection alternatives.
Takeaway: Here is an example of an abuse of discretion in a collection due process case, though the scope is quite limited. The settlement officer’s limiting of the collection alternatives was misdirected so Mr. Asher gets to look into an offer in compromise or installment agreement.

Tax Protesters Penalized
Docket No. 11368-18L, William Michael Calpino, Jr. & Kelly Jo Calpino v. C.I.R., Order and Decision available here.
The petitioners had 3 previous Tax Court cases. Each time, the petitioners made tax protester arguments. The first time, the Court imposed a $1,000 penalty under section 6673. In the other two cases, the Court denied the IRS motion for sanctions but warned the petitioners that the Court has the ability to impose a penalty that does not exceed $25,000 under section 6673(a)(1) for making similar arguments.
Following the deficiencies in those two Tax Court cases, the IRS mailed to petitioners the final notices of intent to levy and their ability to request a Collection Due Process hearing. The petitioners requested such a hearing. They did not propose collection alternatives, but made further tax protester arguments.
When the settlement officer tried to schedule a phone conference, requested financial information for a collection alternative, and requested that the petitioners file their 2015 tax return, the response was a letter refusing to provide financial information and making further frivolous arguments.
From the notice of determination, the petitioners filed the current case with the Tax Court with (guess what?) more tax protester arguments. They also filed a frivolous motion to dismiss for lack of jurisdiction and motion for summary judgment similar to those denied in their first Tax Court case that led to the $1,000 penalty.
The IRS had filed a motion for summary judgment, motion to permit levy and motion to impose a penalty. The Tax Court granted all 3 motions. Based on the history for the petitioners with the Tax Court (such as making frivolous arguments when warned not to do so), the Court imposed the maximum penalty of $25,000.
Takeaway: The Tax Court only has so much patience with tax protesters and arguments the IRS terms as frivolous (for some interesting reading from the IRS on frivolous tax arguments, look here). The deficiencies at issue were about $16,000 for 2012 and 2013. I think it is ironic that making those arguments gained them no ground and more than doubled their liability for those years based on that maximum penalty they received.

Whistleblower Petitioner’s Choice
Docket No. 23105-18W, Jaroslaw Janusz Waszczuk v. C.I.R., Order available here.
The IRS filed a motion for protective order in a whistleblower case that the Tax Court assures is substantively identical to other protective orders filed in other whistleblower cases.
The Court is trying to inform petitioner about the commonality of the IRS motion because the petitioner filed a 136-page opposition to the IRS motion, stating it is “frivolous, meritless, and groundless”. Petitioner’s argument is that granting the motion would interfere with his current litigation in California courts or complaints with various state and federal law enforcement agencies. The Court suggests that the petitioner is using the whistleblower proceeding as collateral to and useful to unearth material for use in the other litigation and complaints.
The Court spells out plainly that the petitioner can either choose to withdraw his opposition to the motion or not withdraw the opposition, which will be denied. In choosing to withdraw his opposition, the petitioner will also have to certify that he will abide by court order prohibiting him from using the information furnished to him by the IRS outside the whistleblower case or face criminal felony punishment. The petitioner is assured that without the disclosure of the section 6103 information to him as a whistleblower, his whistleblower claim for reward shows little chance of success (though it is not a guarantee of success, either).
The Court goes on to say a lengthy response is not required and would be inappropriate. If that is what the petitioner does, it will be treated as unwillingness to withdraw the opposition. If petitioner tries to condition, qualify, or limit the withdrawal and compliance, that will also be treated as unwillingness to withdraw the opposition.
Takeaway: Hmm. Do what the judge says and withdraw the opposition or likely lose the case. Seems like an easy choice to me – pick # 1!

Privileges and Waivers
Docket Nos. 20940-16 and 20941-16 (consolidated), Tribune Media Company f.k.a. Tribune Company & Affiliates, et al., v. C.I.R., Order available here.
These cases have gone through several rounds of motions and are in the discovery phase before trial. This current order concerns IRS requests for production of documents. Tribune argued that the scope of one request should be limited and that everything has been produced for the second.
Regarding the discovery arguments, the Court discusses the limitations of relevancy and privileged information relating to the IRS requests. Specifically, Tribune objects to the production of documents in the first request based on the attorney-client privilege, the work product doctrine and the tax practitioner privilege under section 7525. However, those privileges were waived.
The Court reviews the scope of the waiver and generally sides with Tribune. For the first request, the Court agrees with 2 of the 3 limitations that Tribune asks for. On the second request, the Court takes Tribune at their word that they have complied with the document request.
Takeaway: If you are interested in learning more about privilege and waiver in discovery, reading this order would shed more light on that subject.

Shades of Graev and Whistleblower Awards: Designated Orders 6/10/19 to 6/14/19

While we come to another week for designated orders, this week only had a set of three released on the same day.  Two of the designated orders are based on bench opinions from Judge Carluzzo while another order comes from Judge Gustafson.  I will begin with Judge Carluzzo’s bench opinions, which touch on Graev regarding supervisor approval.  At the end, Judge Gustafson’s order delves into IRS approvals of a different sort, this time for whistleblower awards.

Taxpayer Substantations and Supervisor Approval for More Graev Considerations

Docket No. 13675-18S, Michael Hanna & Christina Hanna v. C.I.R., Order available here.

The first order does not stand out at the beginning as Mr. Hanna testified regarding his medical expenses and employee business expenses.  He provided no other proof regarding his medical expenses, vehicle expense deduction, or purchases of tools and supplies.  Since there was no substantiation, the judge sustained those denied deductions.


Docket No. 11648-18S, David L. McCrea & Denise McCrea v. C.I.R., Order available here.

The second order also does not seem terribly noteworthy.  Ms. McCrea ran a business as a wholesale seller of herbal medical products.  At first, the McCreas disagreed with an IRS assessment of their beginning inventory and purchases, but came to accept the IRS adjustments. 

The McCreas still disagreed with the IRS regarding their ending inventory.  The McCreas want the value to be the amount on their Schedule C for 2014.  The IRS, however, provided a different exhibit received by the IRS revenue agent during the course of examination.  The document is a physical inventory, which the petitioners claim is taken at the end of each year.  The results are provided each year on a document to their return preparer, who claimed he used the document to prepare their tax return, but did not supply the document to the IRS.  In fact, it seems a mystery for the petitioners who provided the document to the IRS.  Even though the parties’ exhibits are similar, there are items omitted from the Schedule C document that are on the IRS exhibit.  The difference between the two values is $21,112.

Judge Carluzzo finds a compromise.  The ending value on the Schedule C shall be supplemented with the items on the IRS exhibit that are not shown on the Schedule C.  The result needs to be calculated and will either match the Schedule C or a lesser amount.

The likely reason both orders were designated by Judge Carluzzo comes from an examination in both cases of 6662(a) penalties.  The evidence in each case showed that a supervisor approved imposition of a penalty on a date that preceded the issuance of the notice of deficiency.  The petitioners for each case were first formally advised regarding the imposition of the penalty on a date that preceded issuance of the notes.  As a result, the IRS imposition of the section 6662(a) penalties were rejected.

Takeaway:  Judge Carluzzo is reviewing 6662(a) penalties and will reject those penalties if they do not line up correctly in the timeline.

Whistleblower Claim Remanded to Whistleblower Office for Further Consideration

Docket No. 13513-16W, Loys Vallee v. C.I.R., Order available here.

In a whistleblower case, one of the main questions under IRC section 7623(b) is “whether the IRS collected proceeds as the result of an administrative or judicial action using the whistleblower’s information.”

Petitioner Loys Vallee provided information to the Whistleblower Office, but he was denied a claim by the IRS for a whistleblower award.  At issue before the Tax Court is the completeness of the administrative record.  Mr. Vallee filed a motion to compel production of documents in 2017 that led to what the IRS contends is the complete administrative record in 2018.  The parties filed their responses concerning the completeness of the record and it is now before the judge to make a decision.

The debate concerns the number of individuals who received the information and whether they forwarded that information to other IRS employees.  Partially, this debate is supported by the fact that not all the declarations stated that they did not forward Mr. Vallee’s filed information to any other group or person than those stated in the declaration.  Mr. Vallee provides his own list of individuals who had access to the information he provided.

Mr. Vallee makes statements concerning Corporation D, Related A, and Related B in his submissions to the Court.  Corporate D and Related A consolidated and he argued the consolidation allowed Corporate D to use Related A’s accumulated tax credits to satisfy its own tax liability in a method known as refund netting.  The Tax Court notes that Mr. Vallee did not use the term refund netting in his Form 211 or the lengthy attachments so cannot advance a new claim or try to cure deficiencies in previous claims.

The Court reviews the information from the IRS and notes there is an issue with what they provided.  The IRS states that the four individuals they cite that received the information followed the protocol of the Internal Revenue Manual (IRM) and kept the petitioner’s information confidential.  They have provided a declaration for one individual named and state there was no need to follow up with the other three individuals since her form provides feedback about the division.  Judge Gustafson disagrees, stating that while the actions discussed indicate the individuals followed IRM provisions, the IRS needs to provide affidavits or declarations concerning the other three individuals.  The declaration in question provided cannot cover personal knowledge about the actions of the other three individuals.

The judge says that there are still two unanswered questions regarding Mr. Vallee’s entitlement to a whistleblower award.  Who received the Form 211 information and what did they do with it?  Was that information used in an examination that resulted in the collection of proceeds?  Even though Mr. Vallee argues against remand, the judge shows that it is proper in a whistleblower award determination for remand regarding an insufficient administrative record.

Ultimately, the case is remanded to the Whistleblower Office for further consideration of those two questions and development of the administrative record.  The Whistleblower Office is to issue a supplemental determination with an explanation of the determination regarding the two questions.  They are to certify additions to the administrative record and that what has been provided constitutes the entire administrative record.  The judge ends by requiring the parties to provide (joint or separate) timetables for further administrative proceedings.

Takeaway:  There have been several looks at whistleblower claims in designated order blog posts in Procedurally Taxing.  While I do not know how much the IRS approves whistleblower claims, we get to review the denials.  From this vantage point, it seems like the IRS will fight the claims as much as possible.  The IRS basically attacks the claims on either of two fronts: (1) no action was taken by the IRS against anyone mentioned in the information provided or (2) any actions taken by the IRS concerning the individuals or businesses mentioned in the information provided by the whistleblower was based on other information and not based on the information provided by the whistleblower.

Mr. Vallee is fighting in Tax Court concerning the completeness of the administrative record and Judge Gustafson supports that fight by requiring the IRS to update who received that information and what actions they took.  Ultimately, the answer to be settled is whether the IRS took action against the businesses in question based on Mr. Vallee’s submission, settling whether he truly has a whistleblower claim.

Collection Due Process and Webber v. C.I.R.

I am part of the Collection Due Process (CDP) Summit Initiative that Carolyn Lee wrote about in a recent post to Procedurally Taxing.  The initiative consists of a group of tax practitioners and others working with the IRS to discuss CDP issues toward the goal of eventual improvements for the IRS and taxpayers.  The genesis of that initiative comes from a panel I was on as part of the American Bar Association May Meeting this year in Washington, D.C.  Among others, that panel included Carolyn, Keith Fogg, and Judge David Gustafson of the U.S. Tax Court.  More information is available here.

Recently, when I read a particular order submitted by Judge Gustafson during a week Samantha Galvin was monitoring Tax Court designated orders, I requested to submit a separate piece focusing on that order. Since I knew Judge Gustafson had an interest in CDP issues and since he spends a good portion of the order’s focus on CDP procedure, I wanted to provide some analysis of its significance.

The designated order in Scott Allan Webber v. C.I.R., here, has facts that on their face can be simply summarized (a CDP request mailed by a taxpayer to the wrong address led to an IRS motion to dismiss in Tax Court), but what makes the order so interesting instead are procedural issues and Judge Gustafson’s analysis.


Procedural Issues

The procedural history for Mr. Webber begins with his 2013 income tax liability.  After the IRS assessed a liability which he did not pay, the IRS mailed to Mr. Webber a Notice LT11, the CDP Notice.  That notice is a notice of intent to levy and notice of right to a hearing.  Judge Gustafson describes the LT11 as performing double duty, because it also serves as a demand for payment by its conspicuous language and larger type.

At the top of page 1 for Mr. Webber’s LT11, the return address showing where the IRS mailed the notice from was a post office box in Philadelphia, Pennsylvania.  At the bottom of page 1, with payment information, there was listed a post office box for the IRS in Kansas City, Missouri.  The bottom of page 2 also provides the post office box for the Philadelphia address on the reverse side of the Kansas City address.  To summarize:  two addresses for Philadelphia on pages 1 and 2 with an address for Kansas City on page 1, but on the reverse side of the Philadelphia address on the second page.

Mr. Webber filled out Form 12153 to request a CDP hearing.  He filled out his paperwork correctly until it came to how he placed the paperwork in the envelope (with the address showing through the cellophane) on where to mail his form to the IRS.  He placed the Kansas City address facing out in the envelope as though he was making payment rather than requesting a CDP hearing, mailing it to the incorrect address for making a CDP request rather than to the Philadelphia address to which the IRS wanted a CDP request to go.

He mailed his Form 12153 on February 22, 2018, for the CDP hearing which had a request deadline of March 4, 2018.  March 4 was a Sunday so timely arrival would have been on or before Monday, March 5.  The request was received by the IRS in Kansas City on Thursday, March 1.  Five calendar days (three business days) later, the Kansas City location faxed the CDP hearing request to the Philadelphia location on Tuesday, March 6.  Effectively, the CDP hearing request arrived at the correct location one day after the deadline.

IRS Appeals treated the CDP hearing request as untimely so did not grant a CDP hearing, but an equivalent hearing.  The CDP hearing is subject to judicial review by the Tax Court, but an equivalent hearing is not.  A CDP hearing produces a Notice of Determination that supports Tax Court jurisdiction.  Mr. Webber received a Decision Letter dated June 13 based on his Equivalent Hearing.  Mr. Webber timely mailed a Tax Court petition even though he received the equivalent hearing’s form. The case stating the Tax Court can review an equivalent decision letter as if it were a notice of determination is Craig v. Commissioner, 14649-01L, here.

On May 22, 2019, the IRS filed a motion to dismiss for lack of jurisdiction.  In the motion, the IRS stance is that the hearing request was timely mailed, but sent to the wrong address.  Receipt to the correct address a day late means the taxpayer is not entitled to a CDP hearing.

Judge Gustafson’s Analysis

Judge Gustafson’s order requested a supplemental memorandum from the IRS regarding their motion to dismiss regarding two issues:

1. The addressing of the CDP hearing request

Judge Gustafson cites Question and Answer C6 of Treasury Regulation § 301.6630-1(c)(2), which states the written request for a CDP hearing must be sent to the IRS office and address as directed on the CDP notice.  He points out that there were not one, but two addresses on the CDP notice.

From there, Judge Gustafson mentions how he almost mailed a bill payment to an incorrect address in a similar fashion.  “That is to say, we sympathize with a taxpayer who is confused by the design of Notice LT11.”  He also notes that the IRS has to deal with complex paperwork for the nation and “it is entirely reasonable for the IRS to request a given type of document to be submitted to a given location.”

Judge Gustafson summarizes his position regarding the address issues with Notice LT11 best in this paragraph:

However, where the IRS intends to require that a CDP hearing request be sent to a particular address, and where it takes the position that a CDP hearing request sent to a different address is invalid and ineffectual, and where it argues that the use of the wrong address ultimately deprives the Tax Court of jurisdiction over the case–in such a circumstance, we wonder whether an occasion for confusion is predictably and unfairly created by (a) combining the CDP notice with a gratuitous demand for payment, (b) providing multiple address slips back to back with multiple addresses , (c) putting the wrong address slip on the front page of the notice, and (d) failing to label the CDP address slip with any indication that it is the CDP address slip. It would seem reasonable for the IRS either to insist that a CDP hearing request must be sent to a specific address or to decide to make use of its mailing of a CDP notice for the additional purpose of soliciting payments to be mailed to a different address–but probably not both.

2. The timeliness of the CDP hearing request

Looking at Internal Revenue Code §§ 6330 (a)(3)(B) and (a)(2), Judge Gustafson notes that a taxpayer has the right to request a CDP hearing within the period of “30 days before the day of the first levy” while other statutory language cited by the IRS refers to the “30-day period commencing the day after the date of the CDP notice.”

The judge states he would benefit from the IRS filing the supplement to the motion and would also like them to state how they reconcile the statutory language above with the position taken in the motion to dismiss.  Additionally, the judge requested to know when (if ever) the IRS made a “first levy” with respect to Mr. Webber’s liability, and the IRS position whether treating a CDP hearing request as untimely in such a circumstance constitutes an abuse of discretion by Appeals. 

Taylor v. C.I.R.

First of all, I would like to take a detour into another Tax Court order that I found when researching CDP for the panel presentation I mentioned above.  I came across Rodney A. Taylor v. C.I.R., order here, which is an order by Judge Carluzzo.  In the order, we have a similar CDP situation.  Here, the Tax Court petitioner timely mailed the CDP hearing request to the IRS, but sent it to the wrong address.  By inference, it made it to the correct address after the deadline.

The order is two paragraphs long so I could quote it in its entirety, but I will focus on this: 

because respondent has not demonstrated sufficient prejudice resulting from the manner that the request was mailed to insist upon strict compliance with the Treasury Regulations relied upon in support of his motion, we find that petitioner’s request for an administrative hearing was timely made.

The decision letter was treated as an equivalent of a notice of determination to allow for Tax Court jurisdiction.  Judge Carluzzo ordered that the IRS motion to dismiss for lack of jurisdiction is denied.

Judge Carluzzo gets to his result in a direct fashion.  While he lacks Judge Gustafson’s analysis in this order, he makes the point that the IRS should show how they suffered prejudice by receiving a CDP hearing request at the wrong address within the IRS bureaucracy or he will deny their motion to dismiss for lack of jurisdiction.


After the entry of the order requesting that the IRS provide responses regarding its motion to dismiss, Keith Fogg, through the Legal Services Center of Harvard Law School, entered his appearance for Scott Allan Webber.  He did not want to comment on current litigation, but shared with me documents filed in the case.

The IRS filed a motion to withdraw the motion to dismiss for lack of jurisdiction.  The body of the motion is 2 pages and cites Judge Gustafson’s order, where he ordered them to supplement the motion to dismiss for lack of jurisdiction “unless [the Commissioner] withdraws his motion to dismiss.”  Basically, the IRS takes door number two and quietly exits the stage.  There is no explanation of IRS reasoning regarding either of the motions.

The Harvard clinic filed a response in support of the IRS motion to withdraw.  Basically, their stance is that the 30-day statutory period to request a CDP hearing is a nonjurisdictional claims-processing rule subject to equitable tolling and waiver, which they claim are present in Mr. Webber’s case.  I am not going to steal the clinic’s thunder regarding its arguments for equitable tolling and waiver as it will take further space to summarize those pages.  I will note that he does disclose adverse legal authority in the Tax Court as Judge Nega granted IRS motions to dismiss in two cases involving the same taxpayer (Nunez v. Commissioner, 2925-17L here and 2946-17L here).  I found the response to be well drafted and note that the response was prepared with assistance by law students Michael Waalkes and Silvia Perdochova.

Judge Gustafson granted the IRS motion to withdraw by a court stamp that states “granted” on the motion.  While it would have been nice if there was an opinion from Judge Gustafson on the jurisdictional issues, it was not to be.  Though the Tax Court has the Webber case scheduled for trial on September 16, the jurisdictional portion is no longer at issue.


It is difficult to draw conclusions from this case regarding positions from the IRS and the Tax Court.  The IRS did not say much and the Tax Court says less.  From the Tax Court, I noted that some past orders look to be taxpayer-friendly while others seem to favor the IRS.  From the IRS in this case, the motion to dismiss took the stance that a day late is not good enough and then backtracked for unstated reasons following Judge Gustafson’s order requesting further explanation.

Overall, my takeaway from the filings in this case are that there are problems with the CDP process affecting everyone involved.  Judge Gustafson pointed out several issues with the LT11.  It is framed like a billing statement, not a notice for informing taxpayers of their rights.  It is confusing for taxpayers on where to mail Form 12153 to request a CDP hearing due to multiple addresses listed on the notice.  Perhaps a centralized address would be better.  If a taxpayer makes a mistake and timely mails the form to the wrong address within the IRS organization, what should be the result?  What should be made of the different 30-day standards Judge Gustafson cites regarding timeliness?  In the clinic’s response, it makes several arguments that the 30-day statutory period is a nonjurisdictional claims-processing rule subject to equitable tolling and waiver.  I do not know that this case brought answers, but it certainly brought several questions regarding CDP.

I am proud to be part of a CDP Summit initiative that is working to bring improvements to the CDP process.  I am glad that we are sparking conversations with various IRS departments, private practitioners, LITC directors, Tax Court judges, and others to develop processes that bring benefit to the tax system and everyone involved.  Hopefully we can learn lessons from Webber to improve the CDP process for taxpayers in the future.

Reflections on the impact of Nina Olson by William Schmidt

William is the director of the tax clinic at Kansas Legal Services. His bio is below because he is one of the designated order authors. The scholarship that William references is one of the many ways that the ABA Tax Section assists Low Income Tax Clinics and the clinicians who work there. Keith

I was a student intern at an LITC during law school but then there were several years in private practice where I juggled tax research with work in other areas of law during the rest of the year. When I started working full-time for the Kansas Legal Services LITC in 2016, I made a point of diving in to the LITC world. I received a scholarship to the American Bar Association Tax Section Fall Meeting in Boston. As part of the scholarship, I had to attend the Pro Bono & Tax Clinics Committee meeting on Saturday morning. On the slate was an address by the National Taxpayer Advocate, Nina Olson, at 8:30 so the scholarship recipients were told not to show up late.

When the address started, I was taken in by Nina’s manner — bold, outspoken and highly intelligent. She was one to speak her mind and she launched into a recount of that year’s taxpayer forums she held across the country. During that conference’s session, Nina updated us on her recent interactions and what the status was on various efforts to make improvements for taxpayers, especially low income taxpayers.

I made a point of introducing myself to Nina at that conference and she was polite, welcoming me in to the LITC world. I also made a point of introducing myself to Keith Fogg at that conference, offering to get involved in his writing projects. I wonder what became of that little suggestion.

I learned Nina was a frequent participant at ABA Tax Section conferences and LITC conferences. She sometimes chided those of us in the LITC, but that is because she has high standards and holds everyone working with taxpayers to those standards.

By now, I have come in contact with the reports to Congress, the blogs, the videos, and other various communications from Nina and the Taxpayer Advocate Service. Nina has been a zealous advocate for taxpayers, winning battles in support of taxpayer rights.

I am unable to recount all of Nina’s accomplishments since I do not share that history. I can say, though, that without her involvement there would not be an LITC program that could have taught me about tax controversies and eventually provided me this career path and the various opportunities I now have.

She has inspired me to work harder for low income taxpayers. I became part of an initiative this year that is working to bring improvements to collection due process. That initiative could impact taxpayers, the IRS, and the U.S. Tax Court to help everyone involved. I think Nina has been a direct example of how to fight for taxpayer improvements because they benefit us all.

I do not want anyone to think that tributes like this mean it is the end of the road. Nina has promised that she will continue to advocate for taxpayers. She also agreed to be interviewed on my podcast in the future. I expect she will keep those promises and I know she will say something worth hearing.

Designated Orders: Another Graev Issue and More Petitioners Refusing to Sign a Decision (5/13/19 to 5/17/19)

This week had only three designated orders. The subjects include further Graev analysis, an issue again before Judge Buch where petitioners signed a stipulation but refuse to sign the decision, and a short order concerning odd behavior by petitioners.

Graev Issues Affect Rich and Famous Petitioners
Docket No. 17514-15, Hisham N. Ashkouri & Ann C. Draper v. C.I.R., Order available here.

Caleb Smith previously blogged on this case, noting the celebrity nature of the petitioners here. Without digging too deep into the nature of the case, I will say that it is another notice of deficiency Tax Case falling under Graev analysis concerning IRS supervisory approval for section 6662 penalties.
In this case, the IRS seeks to introduce evidence of supervisory approval into the record. The petitioners argue that Appeals amended the tax liability by offering to reduce the deficiencies by 50% of what was previously stated. They argue that offer amounts to a fundamental change and it supersedes the prior 30-day letter.


The Court’s analysis is that it is not a fundamental redetermination of the tax liabilities, but a simple offer reducing the proposed adjustment in half. The Court determination is that the evidence the IRS seeks to introduce concerning supervisory approval is not cumulative or impeaching, is material to the penalty issues, and has potential to change the Tax Court decision concerning the penalties by establishing IRS compliance (the evidence concerning one of the supervisors would not have been sufficient and would have been late but opening the record would include the second supervisor’s statement, which will bolster the record).

The Court’s order is to reopen the record and, because petitioners have no grounds for exclusion, the declarations by both supervisors with accompanying attachments will be received into evidence. Also, it is found as a fact that the penalties determined in the notice of deficiency were proposed, then approved by the immediate supervisor.

Takeaway: Being rich and famous may mean raising better arguments than low income taxpayers, but that doesn’t mean you will automatically win in a Graev/Chai ghoul case.

Déjà Vu – Judge Buch Set Aside Another Signed Stipulation?
Docket No. 5629-17, Thomas L. Kitts & Amanda M. Kitts v. C.I.R., Order and Decision available here.

In a bit of a repeat of my April posting on designated orders, Judge Buch is again in the position where petitioners have signed a stipulation with the IRS but do not want to sign the decision. Will Judge Buch come to the same decision here?

The parties were scheduled for a trial December 10, 2018, but signed and submitted a stipulation of settled issues. The case was not called and the Court gave the parties until February 8, 2019, to submit a decision based on the stipulation.

In December, the IRS mailed to the Kitts a proposed decision with accompanying computations. The Kitts did not sign the decision. In February, their accountant sent to the IRS a letter stating they did not agree with the decision because they felt they received misrepresented information in the stipulation mainly because they did not have income tax computations at that time.

After the IRS received the letter, the parties held a conference call with the Court. The IRS agreed to correct a computational error in the proposed decision. The IRS later filed a motion asking for entry of a decision under Rule 50 pursuant to the stipulation and in accordance with the corrected proposed decision. The Kitts filed a motion to be relieved of the stipulation with claims of IRS misrepresentation.

Within the analysis, the judge states the Court uses broad discretion to permit relief from a stipulation only when necessary to prevent manifest injustice. While damaging relief upon a false or untrue representation of a party is ground for relief from a stipulation, the Kitts did not provide basis to support their claim of misrepresentation. They may have misunderstood the tax effect of their stipulation but their unilateral mistake (if there is one) is not grounds to set aside the stipulation. The Court is unlikely to grant relief from a stipulation entered into through considerable negotiation. Here, the parties freely and fairly signed the stipulation after both parties were aware of what was at issue.

The Kitts contend the IRS did not follow their internal rules for Rule 155 computations or the Department of Justice Tax Division Settlement Reference Manual regarding timely supplying Rule 155 computations. The judge states these contentions are irrelevant and not binding on the IRS.
The parties had opportunity to negotiate or go to trial, choosing to stipulate to resolve all issues. The judge determines that manifest injustice will not result from enforcement of the stipulation and orders that the IRS motion for entry of decision is granted.

Takeaway: Again, it will be difficult to avoid signing a decision after signing a stipulation in Tax Court. The burden to prove manifest injustice will result by signing a decision is high so petitioners should expect to sign the decision after signing a stipulation.

Short Take
Docket No. 19951-18SL, William B. Recarde & Dorothy A. Recarde v. C.I.R., Order of Dismissal available here.

The petitioners filed their “Petitioners’ Withdrawal of Case.” Judge Carluzzo reads it as their request for the case to be dismissed, so he orders that their case is dismissed and that their motion to compel is moot.

Carl Smith reminded me that this would be a Collection Due Process (CDP) case as the Tax Court has held that a taxpayer may voluntarily dismiss a CDP or whistleblower award case at any time (so long as it is not prejudicial to the IRS), but not a deficiency or a transferee liability case.

Takeaway: I’m not sure if this is a case of being careful what you wish for or not. Since the petitioners filed to withdraw their case, that is what they got. Be sure that what you file with Tax Court is consistent with what you want.

Designated Orders: Whether to Set Items Aside and Denied Motions for Summary Judgment (4/15/19 to 4/19/19)

This week brought a series of five designated orders. The subjects include Collection Due Process, Notices of Federal Tax Lien, settlements agreements, innocent spouse analysis, and denied motions for summary judgment.

Setting Aside a Notice of Federal Tax Lien?
Docket No. 3402-18 L, Esteban Baeza v. C.I.R., Order & Decision available here.

This case concerns Collection Due Process (CDP) for a notice of federal tax lien for years 2012 to 2015.

Mr. Baeza’s issues for 2012 are quickly dealt with. For 2012, Mr. Baeza filed an amended tax return that took care of his liability and resulted in a tax refund. The lien has been released so the IRS moved that the case be dismissed for that year on grounds of mootness. Mr. Baeza did not object so the Court granted that motion.

For years 2013 to 2015, Mr. Baeza had liabilities for those years and eventually entered into an installment agreement concerning the three years. However, the IRS machinery was already working and days before he entered into the installment agreement, they sent him a Notice of Federal Tax Lien, showing liabilities totaling about $58,000 for the three years. It is presumed he did not have that notice before entering into the installment agreement.


Mr. Baeza’s representative sent a form 12153 to the IRS, requesting a Collection Due Process hearing. The form requested withdrawal of the lien because of the installment agreement. There was no dispute of the liability or proposal of collection alternative (beyond the installment agreement in place). The argument was that the lien was improper due to the pending installment agreement.

IRS Appeals determined that all required legal procedures were followed in filing the notice of federal tax lien. The notice of determination had an attachment explaining why withdrawal was not appropriate.

The IRS filed a motion for summary judgment but Mr. Baeza did not respond. Because it is reasonable the IRS filed a notice of lien in order to protect its ability to collect in the event Mr. Baeza fails to fulfill the terms of the installment agreement and Mr. Baeza also did not provide arguments against that filing, Judge Gustafson granted the motion for summary judgment concerning tax years 2013 to 2015.

Takeaway: The notice of federal tax lien filing is routine for the IRS in collection cases, even when a taxpayer sets up an installment agreement. As the standard of review in Tax Court for these CDP cases is abuse of discretion by the IRS, the petitioner will need to actually make an argument concerning an abusive IRS practice in order to overcome the IRS motion for summary judgment.

Setting Aside a Signed Settlement?
Docket No. 27486-16, Edward Roberson & Connie Roberson v. C.I.R., Order and Decision available here.

The IRS sent the Robersons a notice of deficiency for 2011 and 2012 and Mr. Roberson a notice of deficiency for 2013 and 2014. The Robersons timely petitioned the Tax Court for a redetermination of both notices of deficiency. The IRS eventually amended its answer to assert Schedule C gross receipts for 2014.

The case was calendared for trial and called on November 5, 2018. After the case was called but before trial, the parties submitted a signed stipulation of settlement. The parties agreed in the stipulation that Mr. Robersons’ 2014 Schedule C gross receipts were $108,717 and gross expenses were $30,616. Counsel for both parties signed the stipulation. The Court gave the parties until January 7, 2019, to submit a decision reflecting the stipulation.

In November 2018, the IRS mailed the Robersons a proposed decision reflecting the stipulation for all years at issue. The IRS returned to work on January 28, 2019, (following the government shutdown) and found the Robersons had not signed the decision. They informed the IRS they would not sign the proposed decision.

The IRS filed a motion, asking the Court to enter a decision pursuant to the stipulation of settlement. The Robersons responded to the motion with new calculations adjusting the 2014 Schedule C gross receipts from $108,717 to $68,019 and gross expenses from $30,616 to $55,268, with penalties and interest adjusted accordingly.

Judge Buch analyzed the situation, stating that the claim of an error in the stipulation does not relieve the Robersons from responsibility for signing the stipulation. The Court may modify or set aside a stipulation that is clearly contrary to the facts, but does not set aside a stipulation consistent with the record simply because one party claims the stipulation is erroneous. They may grant relief if a party asserts contractual defenses, but a unilateral mistake of fact in a binding, unambiguous stipulation is not a ground for relief.

In this case, the Robersons did not present contractual defenses. They raised the issue of the error only after entering into the stipulation. Their unilateral mistake (if there is one) is not grounds to set aside a contract. The Court is unlikely to grant relief from a stipulation entered into after considerable negotiation. The Robersons note that the stipulation was following a “take-it-or-leave-it” offer by the IRS. Judge Buch points out the Robersons and their counsel were on notice of the IRS amended answer so all parties signed the stipulation long after being aware of what was at issue and had ability to go to trial. The judge was reluctant to relieve the petitioners from a stipulation after already entering into the stipulation with full knowledge of the relevant facts, so granted the IRS motion for entry of decision.

Takeaway: This case details the difficulties to avoid signing a decision after signing a stipulation. The stipulation will generally bind the parties and the judge detailed the few exceptions. One should expect to sign the decision after signing a stipulation in a Tax Court case.

Innocent Spouse Analysis
Docket No. 5680-18S, Elaine S. Thomas, Petitioner, & Robert Roy Thomas, Intervenor, v. C.I.R., Order (bench decision) available here.

The petitioner and intervenor married in 1987 and divorced in 2016. The parties filed a joint tax return in 2012 and had a liability for that year of $5,551, which the parties stipulate was due to the intervenor.

The petitioner had filed for innocent spouse relief for that year, which was denied by the IRS, and filed a subsequent petition to Tax Court concerning that decision and the intervenor filed to be a party to the Tax Court case.
Judge Carluzzo agrees with much of the analysis and conclusions in the IRS pretrial memorandum and comments on the areas of disagreement. First, the judge finds that petitioner did not know, or have reason to know, that the intervenor would not pay the unpaid liability shown on the return. The judge considers the factor neutral, rather than weighing against relief, as the IRS categorized it.

In the marital separation agreement, both former spouses agreed to split the IRS liability. The judge weighs this factor against granting relief, though the IRS categorized it as neutral.

The judge notes that he arrived at the same score of factors as the IRS – one in favor, one (possibly two) against relief, and the rest neutral – but the analysis is not simply mathematical.

The judge details what influenced him concerning the case. He is particularly influenced by petitioner’s agreement to pay half the 2012 liability. Next, by the decision of the spouses to pay other expenses than the 2012 income tax liability as they had the resources to pay the liability but chose to save or allocate funds for other purposes. Finally, that the liability is mostly, or entirely, due to intervenor.

Giving effect to the marital settlement agreement, the judge sees no reason why it is inequitable to hold the parties liable for their shares of the debt. The decision is then to provide innocent spouse relief to petitioner regarding the excess of one-half of the unpaid 2012 federal income tax liability reported on the 2012 tax return. Essentially, each of the former spouses is liable for one-half of the tax debt, reflecting their marital settlement agreement.

Takeaway: As noted, innocent spouse relief is not a mathematical decision concerning what is in one column or another. The judge will consider the facts and circumstances to determine what will weigh heaviest concerning relief.

Denied IRS Motions for Summary Judgment
1. Docket No. 19146-18 L, Jason E. Shepherd v. C.I.R., Order available here.
In this Collection Due Process case before Tax Court, Petitioner filed for review of a Notice of Federal Tax Lien concerning unpaid employment taxes and trust fund penalties concerning unpaid employment taxes quarterly periods from 9/2010 through 12/2011. The IRS filed a motion for summary judgment and Petitioner opposed the motion by asserting challenges to material facts.

Of note for trust fund penalties is that a Letter 1153 must either be personally served on the responsible person or sent by certified mail to the responsible person’s last known address. In the record on the IRS’s motion there is no copy of a Letter 1153 or any proof that it was either personally served on the petitioner or sent by certified mail to his last known address. Since the record did not prove that the Appeals Officer verified all applicable laws or administrative procedures were met concerning the assessment of the section 6672 penalties, Judge Leyden denied the IRS motion for summary judgment without prejudice.

2. Docket No. 1781-14, John Edward Barrington & Deanna Barrie Barrington v. C.I.R., Order available here.

The petitioners have previously been convicted for tax evasion based on guilty pleas – John Barrington for tax year 2005 and Deanna Barrington for tax years 2003 through 2005. The Court granted in part and denied in part an IRS Motion for Partial Summary Judgment through its order dated June 19, 2015. The order held the IRS was entitled to summary judgment so far as the petitioners fraudulently failed to file tax returns. The order denied the request to the extent the IRS sought to collaterally estop the petitioners from contesting they failed to report certain amounts of income for the years at issue and further collaterally estop John Barrington from contesting he fraudulently failed to file tax returns for tax years 2003 and 2004.

The IRS filed a new Motion for Summary Judgment on February 22, 2019. This motion included several of the same arguments and factual assertions as before, but now includes the argument that John Barrington made “judicial admissions” at a hearing held December 17, 2018 (with those admissions eliminating the need for trial). IRS Counsel cites his statements of “…I’m not arguing the fraud amount” and “…cannot argue the fraud on it, which we’re not.”

Judge Panuthos reviewed the 28 page transcript and did not come to the conclusion that John Barrington made a clear, deliberate and unequivocal factual assertion relating to the issue of fraudulent failing to file federal income tax returns for tax years 2003 and 2004. Since there is a dispute as to material fact, the Court denied the IRS’s motion.

Takeaway: These look to be times the IRS either tried to rush procedure or believed there was no dispute as to material fact and lost regarding motions for summary judgment.