Attorney-at-Law

WHAT PRICE GLORY?

In Uncategorized on 06/07/2017 at 18:03

No. not the 1924 Stallings-Anderson Broadway hit. In place of Sergeant Quint and Captain Flagg battling one another and Kaiser Bill, we have Ian D. Smith, 148 T. C. 21, filed 6/7/17, battling the Ogden Sunseteers.

ID turned up and handed over the skinny on a barter dodge that, when blown, netted the fisc $20 million. Collected. In hand paid.

All heart, the OS claim that less than $2 million of the swag came from info directly provided by ID, and the rest from the Bould Revenoors who swooped down on the barterers and emerged with the boodle. So ID is in the 10% class, less sequester.

The magic language for Judge Gerber to unpack is “amount in dispute.” Is that only what turned up when IRS’s sleuths followed only ID’s lead, or what they eventually unearthed after ID turned them on to the villains?

Section 7623(b)(5) provides the $2 million threshold for applying the 15% to 30% bonus. Below that, the blower only can get 10%. In either case, of course, the 7.3% sequester taketh away whatever the blower gets.

All ID’s direct stuff got was $198K, based upon $1.77 million of employment tax chicanery. The remaining $19 million of income tax money IRS got by themselves.

Need I point out that if ID didn’t turn IRS’s sleuths on to the perps, IRS would have gotten, you should pardon the expression, bortscht?

Well, Judge Gerber, with a case of first impression, comes down for ID.

“We are unable to accept respondent’s contention that the subsection (b)(1) determination of the size or percentage of an award applies only to those portions that were directly or indirectly attributable to the whistleblower’s information or that respondent’s definition of ‘amounts in dispute’ should be employed to determine whether the $2 million threshold of subsection (b)(5)(B) has been met.  The application of respondent’s position in this case would lead to anomalous results.  Petitioner’s whistleblower claim caused the initiation of an examination that resulted in the collection of almost $20 million of tax and penalties, almost $2 million of which was directly or indirectly attributable to petitioner’s information. In spite of those results, under respondent’s position the provisions of section 7623(b) would not be applicable in this case.” 148 T. C. 21, at pp. 15-16.

If this subject intrigues you (and it did intrigue me), see my blogpost “The $200,000 Misunderstanding,” 11/20/14, the Rob Lippolis story. And today Rob is back, with IRS again failing the summary J highjump, in Robert Lippolis, 2017 T. C. Memo. 104, filed 6/7/17. When I said in my aforementioned blogpost that IRS will have to plead and prove what was “in dispute,” I got it right.

ID does even better than Rob.

“Accordingly, it does not follow that the limiting standards of section 7623(b)(1) and (2) providing for a percentage to be applied to the portion of  ‘collected proceeds’ to which the whistleblower’s information ‘substantially contributed’ would also apply in determining whether the initial $2 million threshold has been met.  Conceptually, section 7623(b)(5) is a threshold to ensure that the less discretionary mandate of subsection (b)(1) is applied to taxpayers with a certain minimum amount of annual income or with a significant amount of tax liability.  In effect, respondent has backed into the subsection (b)(1) and (2) limitations to interpret the subsection (b)(5) threshold.” 148 T. C. 21, at pp. 22-23.

The threshold is reached. All that remains is to determine how much ID’s info helped. But he’s in the 15%-30% zone.

 

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