In Uncategorized on 11/22/2013 at 16:20

Just when my intrepid band of readers thought they had finished the slog through The Great Uncoupling of understatement and deficiency, more particularly bounded and described in my blogpost “The Rebate Debate – Part Deux”, 11/18/13, comes now Judge Gale, who upsets a stipulated decision document because of the fallout from Rand v. Com’r., 141 T. C. 12, filed 11/18/13.

You can read all about it in Rivka Faecher, Docket No. 16049-12, filed 11/22/13.

Riv, like Yitz and Shul in the Rand case, got aggressive with the Additional Child Tax Credit (also known as a rebate) for a couple of years, and folded when IRS called her out.

So she and IRS stipulated to entry of decision (that’s what most lawyers would call a “judgment”, stating who owes who what), with understatement penalties computed pre-Rand, that is, with understatements based on the rebates taking Riv’s deficiencies below zero, so the 20% chop was applied to the negative numbers.

Judge Gale says no, it’s true y’all did your numbers pre-Rand, but post-Rand they don’t fly, and the understatements and penalties associated therewith should all be zero.

So he tells IRS: “Because the stipulated decision was executed by the parties before the Court issued its opinion in Rand, the Court is concerned that imposition of penalties in this case may not be appropriate. If the understatements for the years in issue were computed in accordance with Rand, they–and the resulting accuracy-related penalties–would all be $0.” Order, at p. 2.

Under Section 7491(c), IRS has the burden of coming forward with evidence to support the imposition of the penalty.

So IRS can either concede the understatement penalties and treat the stipulated decision document as settling everything else, or else can show cause why IRS has come forward with evidence sufficient to impose the penalties (notwithstanding they just lost the Rand case).

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