Ray Cohen, a faithful reader and a CPA in Paramus, New Jersey, asks the following question of other readers and invites them to send comments to the post to help him work through the answer. Keith
When the original signature of the immediate supervisor is missing, the IRS attempts to get around this by using an affidavit of the immediate supervisor. Attempts have been made to defeat the affidavit by calling it hearsay. Unfortunately, the court have not accepted this argument. SEC v Chenery Corp (Chenery II) 332 U.S.194 (1947) might be the answer. Does anybody think so?
Section 6751(b)(1) states that “[n]o penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination….”
According to Notice CC-2018-006 from the Office of Chief Counsel, supervisory approval is required when the IRS “files an answer or amended answer asserting penalties. In Graev v Commissioner III, it states that “IRC Sec. ‘6751(b)(1) requires written approval of the initial penalty determination no later than the date the IRS issues the notice of deficiency ((or files an answer or amended answer)asserting such penalty’, id. At 221.
While the Federal Rules of evidence permit the use of affidavits, the IRS rules and chief counsel require original signatures in asserting a penalty.
SEC v Chenery Corp (Chenery II)332 U.S.194 (1947) states “ That rule is to the effect that a reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency. If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis. To do so would propel the court into the domain which Congress has set aside exclusively for the administrative agency.“
