Attorney-at-Law

REJECTION AND DENIAL

In Uncategorized on 03/16/2020 at 16:50

Judge David Gustafson compares and contrasts a whistleblower rejection (failure to satisfy the basic requirements for an award; see 26 C.F.R. sec. 301.7623-1(c)(1), (4)), and denial (a determination that is made after the Ogden Sunseteers engages in some substantive consideration of the claim).

A blower who gets blown out on each count for his two conjoined claims is first-sergeant-turned-bookkeeper Walter Nicklaus Cline, 2020 T. C. Memo. 35, filed 3/16/20.

Again we have a lament for the constricted jurisdiction of pore l’Il ole Tax Court, the poor relation of the Federal judiciary.

“It is not to the Tax Court but to the Secretary of the Treasury that Congress has given the authority to ‘make the inquiries, determinations, and assessments of all taxes’, sec. 6201, and to ‘collect the taxes’, sec. 6301. The Tax Court has no practical means for evaluating the IRS’s audit priorities, its allocation of its audit resources, or its judgments about the likelihood of collecting particular liabilities. Congress has given to the Tax Court not plenary oversight over the IRS but rather circumscribed jurisdiction to review certain actions in certain circumstances. In the award context, Congress has given the Tax Court jurisdiction to review the determinations of the WBO. Consequently, ‘we do not review the IRS’s decision whether to audit a target in response to a whistleblower’s claim and * * * we have no authority to require the IRS to explain a decision not to audit.’ Lacey v. Commissioner, 153 T.C. at __ (slip op. at 30).” 2020 T. C. Memo. 35, at p. 15 (Footnotes omitted, but they just give more examples of Treasury’s broad enforcement and administrative powers.)

For the Lacey story, see my blogpost “The Whistleblower Office – Blown,” 11/25/19.

In the first instance, the Ogden Sunseteers didn’t need no operating branch look-see to toss Walt’s beefs about Target 1, because 3SOL had run on the years wherein Walt claimed the skullduggery occurred, and the skullduggery was non-recurring, so confined to those out years. Remember, Tax Court cannot “‘… review the IRS’s decision whether to audit a target in response to a whistleblower’s claim’. Lacey v. Commissioner, 153 T.C. at __ (slip op. at 30). Even if we did proceed to review the classifiers’ reasoning, they were right that assessment of tax would be barred by the three-year period of limitations of section 6501(a). It is also true, as Mr. Cline insists, that section 6501(c)(1) provides an exception to the three-year bar: ‘In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed * * * at any time”, so that where an audit yields evidence proving fraud, the three- year limit does not apply. However, ‘[i]n any proceeding involving the issue whether the petitioner has been guilty of fraud with intent to evade tax, the burden of proof in respect of such issue shall be upon the Secretary’, sec. 7454(a), ‘and that burden of proof is to be carried by clear and convincing evidence’, Rule 142(b). Especially when it faces the prospect of that heightened burden of proof (such as to prove fraud, or even to prove a substantial omission of an item having a six-year period of limitations under section 6501(e)), the IRS’s decisions about how to allocate its audit resources must take into account the costs of developing ‘clear and convincing’ evidence and its hazards of litigation. We do not review these judgments that Congress has committed to the agency.” 2020 T. C. Memo. 35, at pp. 16-17, footnote 9. Rejection affirmed.

As for Target 2, all Judge Gustafson can say is that the classifiers who eyeballed Walt’s info weren’t completely offbase when they denied Walt an award. “In reviewing the WBO’s rejection of the second claim, we do not substitute our judgment for its judgment but review only for an abuse of discretion. The WBO’s conclusion that the claim was ‘speculative’ does not appear to lack a sound basis in fact and law because the claim stated that Mr. Cline was ‘uncertain’, that ‘we believe’ there was improper bookkeeping, that there were ‘[u]nknown [e]xpenses’, that there was ‘probable fraud’, and that the taxpayer’s manipulations were ‘without rhyme or reason’. (Emphasis added.)” 2020 T. C. Memo. 35, at pp. 18-19. Denial affirmed.

 

 

 

 

 

 

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