Attorney-at-Law

“I MUST MAKE AMENDS” – PART DEUX

In Uncategorized on 05/30/2019 at 16:55

Judge Goeke has inherited the ongoing never-ending story of John E. Rogers and Frances L. Rogers, et al., 2019 T. C. Memo. 61, filed 5/30/19. Now the story appears to be nearing its end, as we have to do today with the never-ending penalties which IRS wishes to bestow on Mr. and Mrs. Rogers.

Tax Court already blew off the Rogers’ phony deals; see my blogpost “Will It Never End?” 4/17/18, wherein I was reduced to silence by Judge Goeke’s 134-page deconstruction of the Rogers’ neighborhood. But the 20% chops (accuracy and negligence) remained.

Frances wanted innocent spousery, but this went down, as more particularly bounded and described in my blogpost “When All Else Fails – Redivivus,” 7/3/17, and Frances paid. But there were penalties assessed at partnership level, and on brief this time Frances claims Section 6751(b) Boss Hossery, which IRS doesn’t have. So Frances wants out from that set of chops.

No dice, says Judge Goeke.

“However, Mrs. Rogers now seeks to raise section 6751(b) noncompliance against penalties determined in a partnership-level case.  We lack jurisdiction to consider penalties in a partner-level case that were determined at the partnership level.  The Commissioner’s noncompliance with section 6751(b) is a partnership-level defense.  Parties in a partnership-level case may raise noncompliance with section 6751(b) as a defense.  However, a partner may not raise section 6751(b) noncompliance as a defense at the partner level for penalties previously determined at the partnership level.  Under section 6230, partner-level defenses are ‘those that are personal to the partner or are dependent upon the partner’s separate return and cannot be determined at the partnership level.’  Sec. 301.6221-1(d), Proced. & Admin. Regs.  The tax treatment of partnership items and the applicability of any penalty, addition to tax, or additional amount that relates to an adjustment to a partnership item is determined at the partnership level.  Secs. 6221, 6226(f).  Accordingly, Mrs. Rogers is not entitled to a refund of penalties paid with respect to the partnership item adjustments.” 2019 T. C. Memo. 61, at pp. 22-23 (Citations and footnote omitted).

But the footnote is very interesting, because it states (in pertinent part, as my expensive colleagues say), “Sec. 6015 assumes that there is an existing joint tax liability; it does not consider whether the underlying joint tax liability exists.  The requesting spouse cannot seek review of preassessment procedures. Id.  Accordingly, it is unclear whether we would have jurisdiction under sec. 6015(e) to consider sec. 6751(b) compliance.” 2019 T. C. Memo. 61, at p. 23, footnote 8. Will the Graev never close?

Now IRS has eight (count ‘em, eight) lawyers on this case at present, and the number of RAs, SOs, and various supervisors would make up a full-strength infantry platoon, so Judge Goeke has to mix-and-match the Boss Hosses, and sift the lot.

The point of my headline (and my readers will doubtless say “There is a point? How quaint.”) is that a penalty to do with COGS on one of the Rogers’ real estate deals was brought in by IRS’ various counsel.

“The record also establishes section 6751(b) compliance for the section 6662 penalty on …COGS adjustment and the section 6662A penalty for the …adjustment initially determined by respondent’s trial attorneys.  Respondent asserted the penalty attributable to the COGS adjustment for the first time in the amendment to the answer.  Both Attorneys C and P worked on the amendment, but the record does not identify which attorney made the initial determination.  Petitioners did not address this lack of clarity on brief.  AAC C approved the penalty in writing by initialing and dating a draft of the amendment to the answer.  AAC C was both attorneys’ supervisor. Accordingly, we find that respondent satisfied his burden of production for section 6751(b) compliance regardless of which attorney initially determined the penalty.

“AAC C also approved Attorney C’s initial determination of the section 6662A penalty through her emails to the IRS Technical Services Unit.  Section 6751(b) does not require written supervisory approval in any particular form. Moreover, it does not explicitly require a signature; it requires the penalty be ‘personally approved (in writing)’.  Sec. 6751(b)(1); see Graev III, 149 T.C. at 488-489 & n.3 (a supervisor’s initials were sufficient writing).  Accordingly, we find that AAC C’s emails satisfied respondent’s burden of production of section 6751(b) compliance.” 2019 T. C. Memo. 61, at pp.24-25 (Citations omitted).

So beware the amended answer, practitioner. Just be prepared for an off-the-cuff Boss Hoss sign-off.

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