In Uncategorized on 08/24/2013 at 23:04

The subtitle of my blogpost “Give It Your Best Number”, 4/9/12, should serve as a warning to taxpayers who get hit with a deficiency; even before the SNOD, prepare to settle.

John V. Black, Docket No. 2260-12, filed 8/23/13 is an object lesson.

CSTJ Panuthos administers the lesson. First, the background: “…respondent [IRS] filed a Motion for Leave To File Amendment to Answer, lodging the corresponding Amendment to Answer. Respondent’s motion states that the notice of deficiency that forms the basis of this case was prepared using information returns provided by third parties. Thereafter, respondent performed a bank deposit analysis and determined that… petitioner received additional unreported taxable income from his business activity, which was not reported by third parties and therefore was not included in the original notice of deficiency. Respondent’s Amendment to Answer seeks an increased deficiency of $11,683 and additions to tax resulting from this alleged additional unreported income.” Order, at p. 1.

Sound familiar? See my blogpost “Pay The Man”, 7/31/12.

John objects to IRS’ proposed Amendment: “…petitioner alleges that he wants to settle his case and allowing respondent to amend his answer will result in ‘added costs, hassles and delay.’” Order, at p. 1.

But Rule 41, like FRCP Rule 51, is in favor of amendments.

CSTJ Panuthos: “Whether to permit such an amendment is a matter within the sound discretion of the Court. The touchstone in evaluating whether to allow an amendment is the existence of unfair surprise or prejudice to the nonmoving party. Such surprise or prejudice, in turn, rests largely on evidentiary and other considerations bearing on the nonmovant’s opportunity to respond. For instance, this and other courts may take into account whether the nonmovant would be prevented from presenting evidence that might have been introduced if the matter had been raised earlier and whether the movant delayed unduly in raising the matter.” Order, at p. 2. (Citations omitted).

In short, as we’ve seen before, the question is whether the Amendment is an ambush.

Not here, says CSTJ Panuthos: “Petitioner’s generalized allegations of hassles and delays lack persuasive specifics or value. Furthermore, we cannot find any undue delay, bad faith or dilatory motive on the part of respondent when the existence of this alleged additional unreported income was not known to respondent until respondent obtained petitioner’s bank records… in preparation for trial.”  Order, at p. 2.

Finally, CSTJ Panuthos understands what John wants, but “(W)hile we understand petitioner’s desire to settle this case based on the notice of deficiency as issued, Tax Court precedent is clear that ‘[w]e acquire jurisdiction when a taxpayer files with the Court and that jurisdiction extends to the entire subject matter of the correct tax for the taxable year.’” Order, at p.2. (Citation omitted).

Or in simple terms, once you file a petition, everything in every tax year in your petition is up for grabs.

So IRS gets its Amendment, to which John must respond.

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