In Uncategorized on 11/02/2018 at 15:47

IRS’ back-up SNOD was allegedly an affected items SNOD (a TEFRA leftover), in case the original SNOD for unpaid SE was void because the matter was concluded in a related case. So IRS claimed it dodged the single-SNOD Section 6212(c)(1) rule. Tax Court agreed they had no jurisdiction over the original SNOD.

Except 2 Cir disagreed, said Tax Court did have jurisdiction over the original SNOD and IRS’ amended answer for a higher deficiency, and sent the case back to Tax Court.

A stipulated decision followed.

Today the petitioner is the celebrated Jason Chai, Docket No. 28152-14, filed 11/2/18, a renowned success story for The Jersey Boys.

I’ve blogged Jason’s argosy since 2015. See my blogposts “The Silt We Stir,” 2/13/15; “The Front,” 3/12/15; “Tell Me More,” 4/17/15; “The Jersey Bounce – Part Deux,” 3/22/17; and “Chai, Chai, V’Kayom,” 4/18/17;

Now the Jersey Boys and Jason want summary J tossing the affected items SNOD based on res judicata (that’s claim preclusion, to you lawyers not yet eligible for Medicare).

Ex-Ch J L Paige (“Iron Fist”) Marvel gets this end to the voyage.

“The U.S. Court of Appeals for the Second Circuit, which would review an appeal from this case, has already held that both the increased deficiency in Chai I and the payment underlying the increased deficiency are not affected items. Chai, 851 F.3d at 206-207. The second notice of deficiency, which respondent contends is an affected items notice of deficiency, asserts the same increased deficiency and deals with the same adjustments as those involved in Chai I. The Court of Appeal’s [sic; I think you meant Court of Appeals’, Judge] opinion in Chai, which established the law of this case by holding that the adjustments in question and the resulting tax liability are not affected items, controls the analysis. (Citation omitted).

“Because this notice of deficiency is not an affected items notice of deficiency within the meaning of section 6230, the exception to the general rule barring a second notice of deficiency is not applicable. At the time the second notice was issued, respondent had already issued a notice of deficiency for tax year …, and petitioner had filed a timely petition with respect to that notice. The notice underlying this case, therefore, was invalid at the time of issuance. Sec. 6212(c). Without a valid notice of deficiency, this Court lacks jurisdiction and must dismiss.” Order, at p. 4.

The Jersey Boys want claim preclusion, but that’s an affirmative defense that a court can rule on only if it has jurisdiction to begin with. No valid SNOD, no jurisdiction.

Happily, the Protecting Americans from Tax Hikes Act of 2015 (“PATH act”) also protects us from future affected items SNODs.


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