Attorney-at-Law

JUDGE GUSTAFSON’S CONUNDRUMS

In Uncategorized on 06/02/2015 at 15:03

When it comes to the confluence of Section 6320(b)(2)’s “one CDP per tax year” rule, IRS’s adherence to the letter of the reg, and remand-vs-opinion-as-blunt instrument, Judge David Gustafson is in his element.

See my blogpost “I’m From the Government, And I’m Here to Help”, 8/20/14.

Well, Judge Gustafson dusts off his exegesis from the Barbara Delon & Welbon Delon order, cited in my above-referred-to blogpost, and gives it a new twist in Barbara A. Kupersmit, Docket No. 13428-14L, filed 6/2/15.

IRS’s counsel admits Appeals utterly blew Barb’s CDP. “Respondent’s administrative file does not contain any of the documentation that would have been produced in support of respondent’s determination and assessment of petitioner with the frivolous return penalty for the taxable year …. Notably, respondent’s administrative file is missing a copy of petitioner’s … return that respondent determined was frivolous. Nor does the administrative file contain any correspondence, records, or other documents that respondent’s Settlement Officer should have reviewed as part of the Collection Due Process (CDP) hearing. Respondent’s administrative file also reveals that respondent’s Settlement Officer erroneously determined that petitioner was precluded from challenging the underlying liability at issue in this case during the CDP hearing.” Order, at pp. 1-2.

Looks like a slam-dunk for Barb. IRS moves for remand, so Appeals can get it right. But the case is on the calendar call for 6/15/15, so IRS wants a continuance as well.

Judge Gustafson says he’ll hear argument on those motions at calendar call, but in the meantime he catechizes Barb on her options.

She can go with the remand, fight about her underlying Section 6702 frivolous return liability, and propose collection alternatives.

She can say “no, toss the NITL,” and hope the SOL has run before IRS lobs another NITL at her. But if the SOL hasn’t run, and IRS does lob, the Section 6320(2)(b) one-shot-is-all-you-get rule, which IRS embraces, may prevent Barb from going back to Appeals and to Tax Court.

Of course, Barb could demand CDP 2, claiming same is a supplementary hearing to CDP 1, but no court has held such a thing is permissible. I do not doubt IRS will fight that one.

And Barb may want to fight the Section 6702 chop in Tax Court on the trial date.

Looks like “one the one hand this, on the other hand that” requires Barb to have more hands than an octopus.

But wait, there’s more!

“On the other hand, the asserted liability at issue here–a penalty under section 6702 for filing a frivolous return–is subject to ‘reduction … if the Secretary determines that such a reduction would promote compliance with the administration of the Federal tax laws.’ Sec. 6702(d). The statute thus appears to commit such a reduction to the Secretary’s discretion, and it is not clear whether or how such a reduction could be made subject to trial by the Court in the first instance, without any prior exercise of discretion by the Secretary (presumably acting, in this circumstance, through the Office of Appeals). It may be that the Court could review the initial determination that a frivolous return had been filed but would have to remand if the petitioner intended to seek a ‘reduction’ of that penalty. We are not aware of prior case law addressing this distinction.” Order, at pp. 3-4.

Poor little Tax Court! So many questions, and so few answers.

And if Barb’s head is not doing a 180 by this point, she’s quite a lady.

But Barb is in there pitching. With less than a month to go before trial, she moves to join hubby Harold’s deficiency for a different year (which the Court severed last September) with this case, and sent in “…a subpoena form that is not completely filled out and is missing both the name of the person subject to the subpoena and the ‘return of service’ portion at the bottom of the form.” Order, at p. 4.

Judge Gustafson bounces the form, and tells Barb to check the Tax Court website for the user’s manual for subpoenas.

And of course joinder is a nonstarter–no common questions of law or fact.

So, Barb and IRS, go argue IRS’s motions. But if Judge Gustafson denies them, go to trial.

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