Polish Lottery Winner’s Son Sues Over Penalties For Failing To Report Foreign Gifts

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The other day I read in Tax Notes the complaint in Wrzesinski v US. I usually do not write about cases at this stage but it is a head scratcher.

Wrzesinski involves a refund suit for a hefty penalty under Section 6039F for failing to file Form 3520, the Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.

Krzysztof Wrzesinski emigrated to the US from Poland in 2005 at the age of 19. About five years later his mom, who still lived in Poland, won the Polish lottery. She took the proceeds and made gifts to Krzysztof of $830,000 over the course of 2010 and 2011.


According to the complaint, prior to receiving the gift, Krzysztof consulted an accountant who told him he did not need to file any forms with his tax returns and that the gift proceeds were exempt from gross income. 

Fast-forward about 8 years and Krzysztof, now a Philly cop, wants to make a gift to his godson. Searching the internet about consequences of that re-gift, he discovers that when he received the gift from his mom, he was supposed to file a Form 3520 to report the foreign sourced gifts.  In 2018, he contacts a Philly tax attorney for assistance with filing the forms and uses the “Delinquent International Information Return Submission Procedures.” As per those procedures, he explained in the submission his earlier reliance on an advisor and claimed that he had reasonable cause for failing to file the forms for both years. 

About a year later IRS assesses penalties anyway; $87,500.00 and $120,000.00 for 2010 and 2011. He files a protest, hoping to get the matter to Appeals. The protest gets lost in the system, and he gets TAS to intervene to get the matter before Appeals. 

About another year later Appeals abated $70,000 of the $87,000 penalty assessed for 2010 and $96,000 of the $120,000 penalty assessed for  2011. The Appeals write up indicated: “Case resolution based on ‘Hazards of Litigation’”; the remaining $41,500 in penalties was sustained.

Krzysztof paid the balance, and filed refund claims for both years. In denying one of the years’ claims the denial referred to the claim as “frivolous.”

Assuming the facts are as they are alleged (and they were properly before Appeals), and the taxpayer’s accountant was competent, I am struggling to see why Appeals did not fully concede.  The IRS had another chance to make this right when it considered the refund claim. Under Boyle and subsequent cases, reliance on an advisor that is premised on a mistake of law relating to the need to file a return at all differs from a nondelegable  duty as to when a taxpayer needs to file a return. And Appeals abated 80% of the penalty initially, an indication that it knew its position is shaky.

According to the IRS “[p]enalties exist to encourage voluntary compliance by supporting the standards of behavior required by the Internal Revenue Code.” I struggle to see how leaving thousands of dollars of penalties on the books for what seems like a good faith mistake based on what an advisor told makes any sense. Luckily for Wrzesinski, he was able to fully pay the balance of the penalties; otherwise Flora would have prevented him from bringing a refund suit. Of course, there is always the option of pursuing the initial advisor for malpractice, but that has costs.

Avatar photo About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.


  1. Also scratching my head. I have frequently seen the IRS abate 1065 Information Return late filings. The same should ostensibly be true with this informational return. I wonder if this initial accountant’s advice was reduced to a letter or email to the client. Based upon this result, it does appear that the IRS prefers that a similarly situated taxpayer should seek relief from an accountant’s malpractice carrier instead.

    At least TAS was able to resurrect the lost Appeal so that it could be reviewed in Appeals.

  2. Robert Kantowitz says

    This is precisely the kind of thing that sometimes goes viral and engenders disgust with the IRS on the part of the citizenry at large and ferocious opposition to the kind of funding that Congress has just provided so that the IRS can feel free to torment the little taxpayer. If they’re already conceding 80%, obviously based on the proposition that they have a miniscule chance of sustaining the penalty, they should be conceding the entire amount and not holding on to 20% just because they can and just because somebody in the bowels of the building figures that the taxpayer will walk away from it.

    • Robert Kantowitz says

      And, further, the use of the word “frivolous” to describe the 20% shows an unparalleled arrogance on the part of the IRS. Where is the adult supervision? If someone gets this in front of a member of Congress, I would not want to be the branch chief responsible for that.

  3. Appeals position in this case is typical. In most of my cases, Appeals tries to ‘split the baby’ even when the taxpayer clearly has a winning position. They are loath to give up 100% of assessed tax/penalty. I know they have no personal incentive for doing so, but psychology seems to play a role in their decision making. They appear to view a full concession as a ‘loss’ even when doing so is fair and equitable, and more importantly, warranted under law. And who wants to lose?

  4. So that’s why IRS doesn’t have resources to answer the phone.
    I can’t resist asking. How many Appeals officers does it take to abate a penalty?

  5. Lavar Taylor says


    When (prospective) clients are made aware of cases like this one, and of cases where a trip to Appeals resulted in no reduction at all in the assessed penalty notwithstanding the dubious factual and legal basis for imposing a penalty, it incentivizes them to never file delinquent Forms 3520 at all. It is no secret that the IRS’s administration of the foreign compliance penalty regime needs significant improvement. Thanks for focusing on this.

  6. Dennis Brager says

    The only good news is that the IRS is abating the 3520 penalties for late filed 2019 and 2020 years. The bad news is that unless they are filed by September 30, 2022 taxpayers are back to arguing reasonable cause.

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