The connection? Two men with horse problems. We now know about Medina Spirit and the fly in the ointment. And  now IRS Com’r Chuck loses, because his horse is scratched.

Stanley Battat and Zmira Battat, 2021 T. C. Memo. 57, filed 5/11/21, are back, and doing a lot better than they did at their last outing. See my blogpost “Necessity Knows No Law,” 2/6/17, for that one.

But IRS founders on the famous Boss Hoss, as Stan’s & Zmira’s trusty attorneys find the Revenue Agent’s Report, a/k/a RAR, a/k/a Form 4549, Income Tax Examination Changes (Unagreed and Excepted Agreed), plus the transmittal Letter 4121, were bestowed on Stan and Zmira before the RA got the Section 6751(b) immediate supervisor Boss Hoss sign-off.

Judge Colvin has the “somber reasoning and copious citation of precedent” handy.

“‘[The] term [“determination”] has an established meaning in the tax context and denotes a communication with a high degree of concreteness and formality’, Belair Woods, LLC v. Commissioner, 154 T.C. 1, 15 (2020), and denotes a ‘consequential moment’ of IRS action, Chai v. Commissioner, 851 F.3d 190, 220-221 (2d Cir. 2017), aff’g in part, rev’g in part T.C. Memo. 2015-42. The RAR states that it shows the “corrected” amount of petitioners’ tax and penalty liability. The RAR also includes a signature box for petitioners to consent to the assessment of those tax and penalty amounts.

“Providing the opportunity to consent to assessment of tax and penalty is a ‘consequential moment’ to a taxpayer and the Commissioner. See Beland v.Commissioner, 156 T.C. at __(slip op. at 10); Belair Woods v. Commissioner, 154 T.C. at 15. A signed, completed RAR sent with a Letter 4121 provides the requisite definiteness and formality to constitute an ‘initial determination’ for purposes of section 6751(b)(1). See Beland v. Commissioner, 156 T.C. at__ (slip op. at 13); Oropeza v. Commissioner, 155 T.C. at __ (slip op. at 17). The RAR includes the EA’s initial determination and, because no supervisor approval was provided before the RAR was issued to petitioners, the penalty did not meet the requirements of section 6751(b).” 2021 T. C. Memo. 57, at pp. 5-6. Note here “EA” means Examination Agent, not Enrolled Agent.

I need not add that I have blogged all the cases cited.

And as the Section 6662 chop proposed was $345K, the Boss Hoss was an expensive scratch for Chuck & Co.