In Uncategorized on 06/06/2019 at 15:56

Maria Shenorah McCree, 2019 T. C. Memo. 67, filed 6/6/19, definitely spent money from her TX Employee Retirement System withdrawal for qualified higher education expenses. And though Maria Shenorah is on the sunny side of 59-1/2, she still gets the benefit of exemption from the 10% addition/tax/whatever to the extent such expenses were incurred, net of scholarships and grants. And Judge Vasquez assists in her higher education.

Maria Shenorah claimed rollover for the whole withdrawal, although she didn’t. She put the withdrawal in a regular bank account, and that triggers tax. And though IRS, notwithstanding the Letter 4464C Questionable Refund 3rd Party Notification she got, gave her the refund she claimed, IRS is not estopped to issue a SNOD when they caught their error.

Maria Shenorah’s claim she shouldn’t have to suffer for IRS’ mistake is a loser. She owes tax, plus the 10% whatever, on what isn’t qualified higher education expense (see Section 529(e)(3)).

Maria Shenorah never got the SNOD, so she’s entitled to trial de novo on her liability.

But a trial de novo is still a trial, and Maria Shenorah comes up short on her liability and on abuse of discretion.

Judge Vasquez: “Petitioner has not advanced any evidence that SO T abused his discretion in sustaining the proposed levy action against petitioner for her … income tax liability.  Petitioner’s briefs and trial testimony did not identify any defects in SO T’s verification process.  At trial petitioner argued that she should not be required to pay her … income tax liability because respondent should have verified that she did not roll over the proceeds from her ERS distribution when respondent’s IVO reviewed her … tax return.  She further alleged that respondent misallocated funds by issuing a refund to her before determining a deficiency for the … tax year.  This Court has already rejected petitioner’s arguments by holding that (1) the IVO’s review and verification of petitioner’s 2010 tax return does not constitute an audit or examination and (2) respondent is not precluded from determining a deficiency after issuing a refund.” 2019 T. C. Memo., 65, at p. 19. (Name omitted).

Maria Shenorah had been up to Tax Court two years ago, when IRS tried for summary J from a NOD off a CDP. IRS got a win on the IVO and the SNOD-after-refund, but Maria Shenorah got a trial de novo. I didn’t blog that opinion, although maybe I should have. Here it is.

But since Maria Shenorah gets allowed more qualified higher education expense to offset the 10% gig than IRS allowed in the 2017 CDP, she’ll need to do a Rule 155 beancount.


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