In Uncategorized on 08/31/2020 at 16:04

There are two varieties of settlement today. First is a full-dress T. C., wherein Judge Travis A. (“Tag”) Greaves discusses whether an interim Boss Hoss is the real deal when a RA offers Douglas M. Thompson and Lisa Mae Thompson, 155 T. C. 5, filed 8/31/20 a settlement of Doug’s and Lisa Mae’s distressed asset trust abusive shelter chops at the Announcement 2005-80 10% discount. Watch that 10% discount; it’ll show up again.

The RA sends a letter offering the 2005-80 settlement, but the letter does not “…identify a tax period or tax form to which it related, provide an underpayment amount, or request petitioners’ consent to assessment and collection.” 155. T. C. 5, at p. 5. A SNOD does all that.

Doug and Lisa Mae refuse, so the RA sends another letter two (count ’em, two) years later, offering a 15% chop, but if not, the RA will develop the case and lay the full boat (whatever that may be) on Doug and Lisa Mae. Doug and Lisa Mae decline. Again, this letter doesn’t identify period, form, amount of tax due, or request consent to assessment and collection. But the SNOD that follows this rejection does all the above. With full boat chops.

Doug and Lisa Mae petition, saying no Boss Hoss for either letter, and the sign-off for the SNOD came from the RA’s acting immediate supervisor, not a proper Boss Hoss.

Judge Tag says no Boss Hoss necessary for either letter, because nothing had been determined.

“Rather than determining that petitioners are liable for penalties of specific dollar amounts, subject to review by Appeals or the Tax Court, each letter offers to settle penalties arising from the DAT transaction on certain terms, including substatutory penalty rates, which are based not on an audit but on Announcement 2005-80. When petitioners failed to accept the offers, RA D still had work to do–the [second] letter explicitly says the IRS had not completed its examination or fully developed the facts of petitioners’ case. Furthermore, the [second] letter warns that declining the settlement offer would result in ‘applicable penalties,’ without stating which penalties, if any, might end up being ‘applicable to petitioners’ facts. An offer letter like the ones at issue does not require supervisory approval because it is not a ‘determination’ at all, but a preliminary proposal of the revenue agent within an ongoing examination.” 155 T. C. 5, at p. 10. (Name omitted; emphasis by the Court).

Taishoff says the whole aim of Section 6751(b) is to prevent Exam from bludgeoning taxpayers into settlements with threats of penalties. And what is more threatening than unnamed penalties for an unknown amount? When the bludgeoning takes place is nothing to the point. If IRS could bludgeon before even sending a 30-day letter, why bother? “Bludgeon early, bludgeon often” is what the statute is supposed to prevent.

As for Judge Tag’s dismissing legislative intent, (“As in Belair Woods, we will not let petitioner’s legislative history argument animate our decision,” 155 T. C. 5, at p. 11), CCAs can go there, even if Tax Court can’t. Remember Chai and Graev.

The acting Boss Hoss is good enough. She was RA D’s immediate supervisor when the SNOD went out. No Regno di Giorno problems.

The rule of lenity doesn’t help, because Section 6751 isn’t so vague that the Court can do no more than make a mere guess what Congress meant.

Next, I must once again acknowledge my debt to my colleague and delightful luncheon companion Peter Reilly, CPA. He kindly put me wise to IR-2020-196, 8/31/20, wherein the Coalholders become the Coalfolders, grabbing the settlement IRS offers, allowing them to deduct the $32.5 million they paid for this metziah (please pardon the arcane technical terminology) and getting only a 10% chop. The promoters, of course, go down big. Conservationists, read and heed.

Oh, if you missed the Coalholders’ tale, see my blogpost “Watch This, Guys  – Hold My Coal,” 6/15/20.”

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