In Uncategorized on 06/20/2011 at 16:55

Or, No Recovery, No Reward

That’s the lesson in William Prentice Cooper, III, 136 T.C. 30, released 6/20/11. Bill was a Nashville tax lawyer representing a disgruntled trust beneficiary, in the course of which Bill turned up what he claimed was massive estate tax and GST evasion on the part of the trustor. Blowing the whistle, Bill sought Section 7623 bounty.

IRS reviewed Bill’s two Forms 211, and said “no hurt, no foul”. When Bill petitioned Tax Court, IRS claimed he was premature as there had been no “determination”, only letters from IRS saying they could find no violation of tax law. Tax Court said no, Tax Court has jurisdiction and the IRS letters constitute a sufficient “determination” to trigger a review of Bill’s claims.

Bill wanted Tax Court to hold a full-dress trial to see if there had been a violation of law. No, says Tax Court, we’ve not jurisdiction to do that. Besides, Bill fails to meet the threshold tests for 7623 largesse.

Here’s what Judge Kroupa says:  “Generally, an individual who provides information to the Secretary that leads the Secretary to proceed with an administrative or judicial action shall receive an award equal to a percentage of the collected proceeds. Sec. 7623(b)(1). Thus, a whistleblower award is dependent upon both the initiation of an administrative or judicial action and collection of tax proceeds. (emphasis in original)

“Petitioner seeks to litigate whether any Federal estate tax or gift tax is due from the taxpayer. Our jurisdiction in a whistleblower action is different from our jurisdiction to review a deficiency determination. We have jurisdiction in a deficiency action to redetermine whether there is any income, estate or gift tax due. See sec. 6214(a). In a whistleblower action, however, we have jurisdiction only with respect to the Commissioner’s award determination. See sec. 7623(b). Our jurisdiction under section 7623(b) does not contemplate that we redetermine the tax liability of the taxpayer.” 136 T.C. 30, at p.6.

Tax Court cannot second guess the IRS. IRS seems to have processed the applications properly and found no basis to proceed.  No action, no collection, no reward.

  1. […] Cooper (see my blogpost “The Whistleblower Blows It”, 6/20/11), Judge Gale says: “Regarding the form in which the determination was made, as we recently […]


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