In Uncategorized on 06/28/2018 at 17:53

The silt stir that Judge Mark V Holmes foresaw has again buried IRS, as two Class A, top-fuel phonies escape the chops, notwithstanding that the deficiencies rain on like a river, and IRS’ claim for chops like a never-failing stream.

Here’s Endeavor Partners Fund, LLC, Delta Currency Trading, LLC, Tax Matters Partner, et al., 2018 T. C. Memo. 96, filed 6/28/18, with Judge Albert G (“Scholar Al”) Lauber trouncing a colleague (now or formerly a member of that Bar Association taxation subcommittee a/k/a Charlie’s Pizza Party).

The currency options trades rigged by Deutsche Bank and Andy Beer (with Jason Chai as soloist) are an old story, and one I’ve blogged for years. I’ll spare you the cross-references.

Suffice it to say that there’s no economic substance or business purpose except tax-dodging in any of the seven (count ‘em, seven) cases consolidated here. By rigging the exchange rates in advance, any exchange-rate risk is off the radar, and the deals Bialystok on schedule, yielding large recognized offsetting losses with non-recognition gains. Essentially, Deutsche Bank got interest on a one-week loan, and Andy & Co. picked up some vigorish. The customers paid no tax.

But IRS confesses they have no Section 6751(b) Boss Hoss sign-offs for the heavy-duty chops they wish to affix to Andy & Co with fetters of bronze. So Andy & Co. walk on the chops, despite a rather desperate goal-line stand by IRS, that earns them a Taishoff “Oh Please!”

“Respondent contends that he satisfied the requirements of section 6751(b) by amending his answers to reassert the accuracy-related penalties and by securing supervisory approval for those amendments.  We are unable to accept this argument.  Section 6751(b) requires written supervisory approval for the ‘initial determination’ of a penalty assessment.  In the instant cases the ‘initial determination’ of the accuracy-related penalties was made before the date on which those penalties were included in the FPAAs.  Because the requisite supervisory approval was not secured at that time, the IRS did not comply with the statutory requirement.

“Allowing respondent to cure an admitted violation of section 6751(b) by reasserting penalties in an amended pleading would frustrate Congress’ purpose in enacting this statute.  See S. Rept. No. 105-174, at 65 (1998), 1998-3 C.B. 537 (expressing Congress’ belief ‘that penalties should only be imposed where appropriate and not as a bargaining chip’); Chai, 851 F.3d at 219 (noting that Congress intended to ‘prevent IRS agents from threatening unjustified penalties to encourage taxpayers to settle’).  The accuracy-related penalties determined by the IRS therefore are not sustained.” 2018 T. C. 96, at pp. 65-66.

Well, OK, one cross-reference; see my blogpost “Chai, Chai, V’Kayom,” 4/18/17, wherein I blogged the Chai case with a trilingual pun.

Next is L. Donald Guess, 2018 T. C. Memo. 97, filed 6/28/18. And His Honor Big Julie, a/k/a His Honor Big Julie Judge Julian I Jacobs, hereinafter sometimes referred to as HHBJJJIJ, finds Graev difficulty when IRS tries to chop L. Donald for a phony charitable contribution to his private charitable foundation, notwithstanding that L. Donald took a double fall in USDCCDCA for two years’ worth of Section 7206(1) fraudulent returns. And 9 Cir affirmed same.

If no fraud, then SOL lets L. Donald walk on the SNOD, but collateral estoppel or res judicata keeps him in.

Notwithstanding the foregoing, IRS is again chopfallen (sorry guys).

HHBJJJIJ: “Even though we have made a finding of fraud for purposes of determining whether the period of limitations on assessment and collection remains open, that does not necessarily mean that it is appropriate to impose the section 6663 fraud penalty.  Respondent still has the burden of production with respect to the section 6663 fraud penalty.  See Sec. 7491(c).  Respondent’s burden of production under section 7491(c) includes establishing compliance with the supervisory approval requirements of section 6751(b). To meet his burden of production with respect to the section 6663 fraud penalty, respondent must show there was written supervisory approval of the initial penalty determination.  Respondent has failed to make this showing.  Consequently, respondent has not met his burden of production.” 2018 T. C. Memo. at pp. 24-25. (Citations omitted, but Graev is right in there.)

Judge Holmes got it right. Stir that silt.

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