Attorney-at-Law

A CLAIM IS NOT A CREDIT

In Uncategorized on 08/05/2015 at 17:12

Yet another cautionary tale for the tax criminal defense bar today, from Judge Lauber, the Old Cantabrigian classicist. It’s Del-Co Western, a Utah Corporation, 2015 T. C. Memo. 142, filed 8/5/15.

JaNean Del’Andrae, CFO of Del-Co, copped to 7201 nastiness for Del-Co and for herself and spouse.

“In connection with her plea, Del’Andrae agreed to pay restitution of $88,152.50 to the Internal Revenue Service (IRS) on account of Del-Co’s 2004 and 2005 tax liabilities. Of this sum she agreed that $49,845.37 was payable on account of Del-Co’s 2004 tax liability and that $38,307.13 was payable on account of Del-Co’s 2005 tax liability. She also agreed to pay additional restitution, to be determined at sentencing, on account of her 2005 joint income tax liability.” 2015 T. C. Memo. 142, at pp. 2-3.

JaNean coughed up $136,509.50. Of this, $88,152.50 was for Del-Co for 2004 and 2005, and $48,357.00 was for JaNean and spouse (who apparently shall be nameless, as spouse’s name never appears in the memo).

Then Del-Co and IRS stipulated to a decision. Del-Co claimed IRS never properly credited the $136,950.50 payment. When IRS hit Del-Co with a NITL, Del-Co asked for a CDP, but couldn’t prove the payment. IRS did concede that portion of the payment allocable to 2004 for Del-Co, which was all Del-Co petitioned. So IRS claimed no further controversy, and moved to toss Del-Co.

Clear? Thought not.

Del-Co argues that the 2005 portion of the payment JaNean made should also be credited to 2004, because the SOL has run for 2005, even though Section 6501(c) allows IRS to assess tax “at any time” when fraud is involved. But Del-Co claims it isn’t responsible for JaNean’s fraud.

Judge Lauber says that’s a controversy, so he’ll decide. And treat this as summary J, because there are no questions of fact.

“In appropriate circumstances, we may determine in a CDP case whether a credit available from another tax year should be applied to the taxpayer’s liability for the year before the Court (here, 2004). But we can do this only when a credit from another tax year indisputably exists; we do not have jurisdiction under section 6330 to ‘determine an overpayment of an unrelated liability.’ Weber v. Commissioner, 138 T.C. 348, 366 (2012).” 2015 T. C. Memo. 142, at pp. 6-7.

You remember the Weber case, right? Wrong? Then you didn’t read my blogpost “Can’t Fight the Penalty,” 5/7/12.

“Neither the IRS nor any court has determined that Del-Co overpaid its tax for 2005. Indeed, the propositions upon which petitioner relies for its contention that the statute of limitations bars assessment of additional tax against it for 2005 seem highly debatable. In any event, Del-Co does not now have an ‘available credit’ for 2005 that can be taken into account in determining the extent to which its tax liability for 2004 remains unpaid.” 2015 T. C. Memo. 142, at p. 7. (Footnote omitted, but it says that the magic Section 6201(c) “at any time” might apply if Tax Court had jurisdiction to redetermine the 2005 tax liability, which it doesn’t).

So Del-Co has a claim for a credit, but not an available credit. And there’s no obligation for IRS to sort out Del-Co’s claim before levying. And interest abatement isn’t before the Court, because Del-Co didn’t raise that at the CDP.

So IRS can levy.

Takeaway—Defense counsel, when you settle, make sure that IRS is in the loop and acknowledges what each component of the forkover from your client covers. It beats getting a Taishoff “good try, second class,” which I hereby award Del-Co’s attorneys.

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