Attorney-at-Law

“BACKWARD, TURN BACKWARD, O TIME IN THY FLIGHT” – REDIVIVUS

In Uncategorized on 01/02/2018 at 22:56

Once again the immortal words of Elizabeth Akers Atkins are sung at 400 Second Street, NW, but IRS’ plaintive rendition doesn’t help, as Mehrdad Rafizadeh, 150 T. C. 1, filed 1/2/18, avoids a chop from Section 6038(D) for years prior to the effective date of that amendment.

And no, I didn’t know what that was either. But Judge Pugh enlightens us. The 2010 Hiring Incentives to Restore Employment (the HIRE Act, another cutesy acronym covering many things not encompassed in the statute said acronym allegedly covered) amended Section 6038 to require reporting of certain offshore financial assets. And amended Section 6501 to extend the 6SOL to that nonreporting, but only if reporting was required. Which Mehrd argues it wasn’t..

Mehrd had four (count ‘em, four) years of nonreporting returns, only one of which would have been swept up by the ordinary reading of the amendment. Except that year’s assets were under the $5K threshold for reporting.

IRS hit him with a John Doe subpoena at the critical moment, extending the SOL for six months. IRS says this lets in the 6SOL for the three remaining years, as the 3SOL had already run.

Except the language of the statute imports the effective date of the statute into the reporting requirement.

“The notice of deficiency before us is timely only if the six-year period of limitations in section 6501(e)(1)(A)(ii) applies. Petitioner argues that the effective date of section 6038D precludes application of that six-year period of limitations. Specifically petitioner argues that the defining phrase in section 6501(e)(1)(A)(ii) (‘assets with respect to which information is required to be reported under section 6038D’) also limits application of the six-year limitations statute to assets for which there was a reporting requirement under section 6038D (or there would be a requirement but for specified exceptions) at the time the income was omitted.” 150 T. C. 1, at p. 7.

Congress said it. Tax Court must apply each and every word in its ordinary meaning unless an absurd result would follow.

“We must give effect to all of the words in the key phrase before us—‘assets with respect to which information is required to be reported under section 6038D’.” 150 T. C. 1, at p. 7.

Congress could have imported the definition of the reportable assets directly, with no need to speak of those assets being required to be reported. Congress did that with other reportable transactions, but in those the requirement to report predated the extension of the 6SOL.

Here it didn’t. Mehrd gets a bye.

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