Judge Wherry, again unwhimsical (but see my blogpost “A Whimsical Judge”, 3/6/12), has a lesson for IRS lawyers (but not only IRS lawyers) in Peter Kuretski and Kathleen Kuretski, T. C. Memo. 2012-262, filed 9/11/12.

The tax itself is uncontested, and the levy is sustained based on lack of hardship and the lack of meeting of the minds between AO and taxpayer’s rep on a full-pay installment agreement. Liability was more than the Section 6159(c)(1), (4) limit of $10K and payout more than three years, so no automatic installment agreement, thus IRS has discretion and on the facts here discretion wasn’t abused.

Now for the lawyer issue. IRS wanted the 6654(a) underpayment of withholding addition to tax. As we all know, the rule is 90% of current year’s tax as shown on return (or 90% of tax due if no return filed), or 100% of tax shown on previous year’s return (unless previous year was less than twelve months or no return filed).

But IRS introduces nothing to show what the prior year’s return, if any, showed as tax due, if anything. IRS counsel could have proffered the Form 1040 itself, or Form 3050 Lack of Record, or Form 4340, Certificate of Assessments, Payments, and Other Specified Matters. Instead, “The parties submitted a stipulated exhibit, Form 656, Offer in Compromise, in which petitioners stated that they sought to compromise tax liabilities for the 2006, 2007, and 2008 taxable years. This exhibit suggests that petitioners had a tax liability for the 2006 year but sheds no light on whether it was an income tax liability. In any event, this cursory statement is insufficient for us to determine the tax shown on the return for the 2006 taxable year.” T. C. Memo. 2012-262, at p. 16, footnote 4.

So no addition.

Takeaway- Determine each element of your prima facie case for each claim or defense. Determine what evidence you need to prove or establish each thereof. Obtain, collect and collate your evidence. Offer it.