In Uncategorized on 12/18/2018 at 15:59

We think of the Section 6663 75% chop in the singular, the famous ten (count ‘em, ten) badges of fraud, applied to a phony return. But as the insomniac telehucksters like to yell to jolt us awake, “But wait! There’s more!”

And more is the Section 6651(f) 75% add-on “if any failure to file a return is fraudulent.” Or maybe it’s a chop of a different color.

IRS misses the boat and gets its motion to amend its answer to conform to the proof shot down, because they never previously mentioned Section 6651(f) to Roger H. Durand II, Docket No. 16273-17, filed 12/18/18.

That’s the Rev. Durand to you, but the Rev. is apparently a non-filer for nine (count ‘em, nine) years, and has run up a half-million bucks of deficiencies the while. So IRS wants the 75% Section 6663 chop, or at least the 20% understatement chop, for each. The Rev. Durand did file for the nine years in two tranches, the first for the four oldest years and the second for the balance, long after they were due.

The Rev. Durand and IRS went to trial, but nobody said palabra una about Section 6651(f).

Two weeks after both sides rested, the record was closed, and Judge David Gustafson had settled down to thirteen hundred pages or so of light reading, IRS awoke and moved to amend its answer to conform with Section 6651(f). The Rev. Durand revved up and opposed.

Hence today’s designated hitter.

“These are two distinct 75% penalties–one for filing a fraudulent return, sec. 6663, and the other for fraudulently failing to file a return, sec. 6651(f). The Commissioner minimizes this distinction when he complains that Rev. Durand’s opposition ‘opaquely mentions “different time frames that are relevant to § 6651(f) compared to § 6663” without explaining what “different time frames” he means. (Doc. 61 at 2.) However, we think Rev. Durand is correct in noting these “different time frames”.” Order, at pp. 2-3.

Remember, Section 6663(a) covers a filed return that intentionally and willfully misstates material facts. So the fraud is committed at the filing date of the return. But Section 6651(f) covers the non-filing of a return with intent to conceal material facts (that the concealer has taxable income and that tax is due thereon) at the date when a return disclosing same would be due.

So if IRS wants to hang Rev. Durand, the magic date is when each of the non-filed years’ returns were due, but not filed. But those years are long before the years when the belated returns were filed, and whatever were the Rev. Durand’s motivations when he filed, that’s nothing to the point of what they were years before.

“The section 6651(f) penalty that the Commissioner now seeks to plead is different from the section 6663 penalty that the Commissioner did plead, and some of the facts that would be critical under section 6651(f) are different from the facts that would be relevant under section 6663. Rev. Durand did not have occasion to prepare and present proof as to those facts critical to the section 6651(f) penalty that the Commissioner now seeks to add after the trial has been concluded.” Order, at pp. 3-4.

Nothing like the transparency of the Internal Revenue Code.

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