Hand Out a Taishoff “Good Try”
Especially do I wish, because the recipient would be a colleague who has enlivened discussions at the meetings of an American Bar Association – New York State Bar Association Joint Subcommittee of which I am a member.
But I can’t. My colleague really went for the green off the tee, and it would have been great if he made the shot, but it lands in a bunker.
Here’s the story, featuring Andy Beer, last seen in my blogpost “The Front,” 3/12/15. Andy, Harvard BA and MBA, was a monger of dubious (to be polite) tax dodges.
IRS wants to slug Andy with the Section 6707 dodger chops. My colleague and his firm, summoned to represent a brigade of Andy’s dodge ‘em cars, in this case Endeavor Partners Fund, LLC, Delta Currency Trading, LLC, Tax Matters Partner, et al., 2016 T. C. Memo. 12, filed 1/20/16, gets the short end of the stick from Judge Lauber.
My colleague and firm (hereinafter “the guys”) want IRS to hold off on Andy while they duke it out on the LLCs, because the TMPs for the LLCs might win on their accuracy chops fight with IRS. If IRS nails Andy, they claim, the LLCs are deprived of their chance of winning thereon.
IRS says “same facts, but different statutory provisions, and Tax Court can’t interfere on a Section 6707 chop.”
Oh yes we can, says Judge Lauber, but only in a CDP where petitioner didn’t get a chance to contest liability. And we’re nowhere near there yet with Andy.
“Congress has provided this Court with jurisdiction to review assessable penalties in a collection due process (CDP) context. See Gardner v. Commissioner, 145 T.C. __, __ (slip op. at 21) (Aug. 26, 2015) (‘[S]ection 6330(d)(1) provides this Court with jurisdiction to review an appeal from the Commissioner’s determination to proceed with collection activity regardless of the type of underlying tax involved.’). If Mr. Beer receives a notice of determination with respect to the section 6707 penalties and the IRS seeks to collect those liabilities by lien or levy, he may challenge that collection action under section 6330(d). If he has not had a prior opportunity to contest the penalties and properly raises them at the CDP hearing, he may seek review in this Court under section 6330(d)(1) of his underlying liability for the penalties.” 2016 T. C. Memo. 12, at pp. 7-8, Footnote 4.
As for Gardner, see my blogpost “The End of an Affair,” 8/26/15.
The 6707 dodge-monger chop is an assessable penalty. No need for a SNOD; IRS need only demand.
Once again claiming that the “small court” has only microscopic jurisdiction, Judge Lauber can’t get into a Section 6707 dust-up at this stage.
The guys claim Tax Court needs to protect its jurisdiction to rule on the accuracy chops for the LLCs. But they have no authority for their position, and the Anti-Injunction Act, Section 7421, stymies their attempt to stop IRS. Tax Court can enjoin certain IRS actions as respects partnerships, but this isn’t one of them.
The guys claim there are common questions of law and fact in Andy’s chops and the FPAAs that the LLCs have to deal with.
Judge Lauber says, that isn’t my problem.
“There may well be issues of fact or law that are common to these cases and to the ongoing IRS investigation of Mr. Beer. But if that is true, it has absolutely no effect on this Court’s ability to ‘make a binding ruling’ in the cases over which it has jurisdiction. Indeed, it often happens that a factual or legal issue raised in a case before us is also involved in a pending IRS proceeding, e.g., in an audit of the same taxpayer or a related taxpayer for a different tax period. The remedy in such circumstances is not to have this Court enjoin the pending IRS proceeding. Rather, if the outcome of the Tax Court proceeding is inconsistent with the outcome of the pending IRS proceeding, the taxpayer’s remedy is to appeal and bring the relevant facts and law to the attention of the reviewing court(s).” 2016 T. C. Memo. 12, at pp. 10-11.
And the guys’ final stop-loss, asking for a Section 7482 interlocutory appeal, is a complete non-starter.
“Because Mr. Beer’s potential liability for section 6707 penalties is not an issue in these cases, there is no ‘controlling question of law’ with respect to them. There is no reasonable ground, much less a ‘substantial ground,’ for difference of opinion concerning this Court’s lack of authority to enjoin an independent and ongoing IRS investigation of Mr. Beer. And an immediate appeal from our order denying the requested injunction would not advance in any way, much less ‘materially advance,’ the ultimate termination of this litigation. The trial for these consolidated cases has been completed; the record is closed; posttrial briefing is in process; and an opinion will be issued in due course.” 2016 T. C. Memo. 12, at pp. 12-13.
I don’t think the guys will be overjoyed when that opinion gets published. Sorry, guys.