In Uncategorized on 07/07/2020 at 16:14

A silt-stir after Judge Holmes’ heart issues forth from the wordprocessor of Judge Albert G (“Scholar Al”) Lauber as a designated hitter, Jesus R. Oropeza, Docket No. 15309-15, filed 7/7/20.

It was chop time, and the RA sent JR “…a Letter 5153 and attached Form 4549-A, Income Tax Discrepancy Adjustments, commonly referred to as a ‘revenue agent report’ (RAR). The RAR asserted a 20% accuracy-related penalty under I.R.C. § 6662(a) ‘attributable to one or more of the following’: (1) negligence or disregard of rules or regulations; (2) substantial understatement of income tax; (3) substantial valuation misstatement; and (4) transaction lacking economic substance. See I.R.C. §6662(b)(1), (2), (3), (6). The RAR has a space for an increased 40% penalty under I.R.C. § 6662(h), (i), and (j), but states that the ‘underpayment to which 40% Section 6662 penalty applies’ is zero’.” Order, at p. 1.

What’s missing from this picture? My ultra-sophisticated readers, locked down but not locked out, will cry with one voice “Boss Hoss! Clay!”

IRS tries to rescue the miscue two weeks thereafter with a Boss-Hossed CPAF asserting 20% substantial understatement and nothing else.

Four (count ’em, four) months later, RA and supervisor approach an attorney from OCC with a memo recommending a hike from 20% to 40%, due to nondisclosed noneconomic substance transaction per Section 6662(b)(6). Alternatively, the 20% chop should be negligence or substantial understatement. Said memo is signed off by Boss Hoss and OCC attorney.

The SNOD incorporating same follows five (count ’em, five) days later.

Cue my readers.

Judge Scholar Al, classical scholar that he is, enwraps RA, supervisor and OCC attorney like the son and grandsons of Acoetes. In this race, giving Judge Scholar Al an allowance for the snakes, Athena fades in the stretch. For those who didn’t attend a high-priced college, Google “Laocoön.”

“In light of these facts, the Court would find it helpful to receive additional briefing from the parties. We ask that they assume, for the purpose of argument, that the IRS did not secure timely supervisory approval for the penalty or penalties asserted in the RAR, and then address two questions: (1) Should the RAR be regarded as asserting all four types of 20% penalty, including the 20% penalty for engaging in a noneconomic substance transaction under section 6662(b)(6)? and (2) If the section 6662(b)(6) penalty was asserted in the RAR but not timely approved, can respondent urge that he secured timely approval for a ‘40% section 6662(b)(6) penalty’ under section 6662(i), even though the latter subsection operates only to increase the rate on the base-level section 6662(b)(6) penalty, which by hypothesis was not timely approved?” Order, at p. 2.

Oh, where is Scholar John Schmittdiel, the star of my blogpost “Tax Court Admission Exam,” 9/6/13, now that we need him?



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