In Uncategorized on 06/21/2016 at 16:27

IRS’ Counsel Flunks

Not a great day for the 1111 Constitution Ave NW squadron this fine day, as they’re only two-for-four in the Opinion stakes. E. U. Amadi does crash on doctored receipts, and Dave Buffano gets tracked-and-confirmed in a CDP sub nomine David P. Buffano; but Dave beats IRS when they can’t prove mailed-to-last-known-address under the name and style of David Buffano tout court, despite a previous remand from Judge Gale. Finally, Charles C. L. Wang escapes a Section 6662 chop because his underpayment is below the five-and-ten limbo stick, and IRS unaccountably fails to assert negligence in brief and at trial.

I’ll take Charles’ story as the text for today’s homily because it’s an object lesson to counsel, both taxpayer and gov’t. It’s all about the details.

Charles C. L. Wang, 2016 T. C. Memo. 123, filed 6/21/16, worked as a real estate flogger for a national chain. He made one deal in the year at issue, got a commission check, filed Schedule C with his 1040, but didn’t file a 1040-SE.

Charles C. L. claims IRS sent him notices that never mentioned SE, and sundry other failings.

Judge Pugh: “Petitioner’s sole objection to the notice of deficiency was that the Internal Revenue Service (IRS) had sent other notices before the final notice of deficiency that did not indicate that he owed self-employment tax.  He also testified that if the first notice had required him to pay the self-employment tax he would have done so.  His protestations regarding the IRS notices and his difficulty in resolving his case before the notice of deficiency was issued are not relevant to our redetermination of his tax liability.  We generally do not look behind the statutory notice of deficiency to examine the Commissioner’s motives or conduct.  Rather, we conduct a de novo review of the record and apply the law to the facts in the record before us.”2016 T. C. Memo. 123, at pp. 3-4 (Citations omitted).

Charles C. L., you owe the SE…every penny of the $1,578.00. But although the SNOD states both negligence and five-and-ten understatement, IRS’ counsel blows it.

“In his pretrial memorandum and at trial, however, counsel for respondent [IRS] argued only that petitioner was liable for a section 6662(a) penalty because of a substantial understatement of income tax and did not advance any arguments in support of the determination that petitioner was liable because of negligence.  We therefore consider respondent to have abandoned his argument as to negligence.  The understatement of income tax, $1,578, does not exceed the greater of 10% of the tax required to be shown on the return or $5,000.  Therefore, respondent has not met his burden of producing evidence that petitioner’s underpayment was attributable to a substantial understatement of income tax.  Consequently, petitioner is not liable for a penalty under section 6662(a).” 2016 T. C. Memo. 123, at p. 6.

I’ve said it before: lawyers can’t add. Or do decimals.


  1. […] Taishoff, GRADE SCHOOL ARITHMETIC. “I’ve said it before: lawyers can’t add. Or do […]


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