Folk wisdom tells us not to do this, but IRS did. They promoted RA C (name omitted) while she was auditing Sand Investment Co., LLC, Inland Capital Management, LLC, Tax Matters Partner, 157 T. C. 11, filed 11/23/21*. In consequence whereof, she moved from Team One to Team Two, hence from the command of Manager One to that of Manager Two.

Judge Lauber takes up the story.

“But because the Sand examination was ongoing, the IRS authorized RA C to continue her work with Team 1 until that examination concluded. Although Manager Two became responsible for approving RA C’s timesheets, leave requests, and other routine administrative matters, Manager One remained the case and issue manager of the Sand examination and continued to oversee all of RA C’s work on that examination.” 157 T. C. 11, at p. 5 (Names omitted).

At this juncture, my ultra-sophisticated readers will have shouted “Conservation easement, GA boonies, Section 6662(h) overvaluation/understatement chops!” And they will be almost 100% right, except these boonies are in Jasper County, SC.

Also at this juncture I must give a Taishoff “Good try, First Class, with Chaighoul skull-and-bones,” to Sand’s trusty attorneys at Chamberlain Hrdlicka.

RA C whanged Sand with Section 6662A and section 6662(a), (b)(1), (2), and (3), (d), (e), and (h) chops. 157 T. C. 11, at p. 6.

“Her recommendations to this effect were set forth in a ‘Penalties Lead Sheet.’ Manager One digitally signed this document on November 20, 2018, as the ‘Case/Issue Manager.’ RA C concurrently prepared a Supplemental Civil Penalty Approval Form, which states that she ‘made the initial determination to assert * * * penalties.’ RA C signed that form on November 20, 2018, and Manager One digitally signed it the same day as the “Case & Issue Supervisor.” RA C also sent a copy of her penalty approval form to Manager Two, who signed on November 23 as the ‘Immediate Supervisor.'” 157 T. C. 11, at p. 6. (Names omitted).

Again, my ultra-sophisticates have already yelled “But between November 20 and November 23, RA C tipped off Sands!”

Right again, champs.

IRS claims the first notification was the FPAA more than sixty (count ’em, sixty) days later, but of course Sands’ trusty attorneys say “no, mailed is communicated, and sending the 5701 and 1807 even if only a couple days (hi, Judge Holmes) before RA C’s new immediate supervisor, Manager Two, signed off, is leg-before-wicket and you’re out.” Of course, like lbw, Boss Hossery has produced much controversy.

Trust Judge Albert G (“Scholar Al”) Lauber. Boss Hossery turns on the magic Section 6751(b) words “immediate supervisor.”

“Congress did not define the term ‘immediate supervisor,’ and that term elsewhere appears only once in the Code. See sec. 7521(c). The IRS itself does not appear to employ the term ‘immediate supervisor’ uniformly in its personnel practices. See, e.g., IRM pt. 4.46.4.11.2(3) (Dec. 13, 2018) (referring to an examiner’s ‘issue manager’” as the immediate supervisor); id. pt. 20.1.4.1.3(3) (Feb. 9, 2018) (referring to an examiner’s ‘team manager’ as the immediate supervisor); id. pt. 4.19.10.4.5.3(3) (Dec. 9, 2020) (referring to an examiner’s ‘immediate manager’). In this respect as in others, section 6751(b) is not a paragon of statutory draftsmanship.” 157 T. C. 11, at pp. 9-10. (Citation omitted).

So in dealing with this one-off language, let’s use ordinary meanings. Congress wanted the Boss Hoss sign-off to cool off overzealous grunts, who would use the threat of astronomical chops to bludgeon settlements out of timorous taxpayers, despite IRS’ case being none too strong and the taxpayer’s case being better than somewhat.

“Given this legislative purpose, an agent’s ‘immediate supervisor’ is most logically viewed as the person who supervises the agent’s substantive work on an examination. That person (after the agent) presumably has the greatest familiarity with the facts and legal issues presented by the case. That person is thus in the best position to supply the approval that Congress believed desirable.” 157 T. C. 11, at p. 11. (Footnote omitted, but read it; it says assertion of penalties in litigation is “(S)omewhat different (though analogous) considerations may apply.” 157 T. C.11, at p. 11, footnote 5. (Citations omitted, but get them).

And RA C got both her old Boss Hoss and his successor to sign off, even though Manager Two only approved her time sheets and leave requests. “Because of the ever-changing landscape created by evolving judicial interpretations of this ambiguous statute, RA C evidently took a belt-and-suspenders approach. We decline to penalize her for doing more than the statute required.” 157 T. C. 11, at p. 14.

Judge Holmes’ disciple. Remember my blogpost “Stir, Baby, Stir – That Silt,” 12/20/17.

Takeaway- Boss Hossery can get tricky. And not only at exam, but in the answer, amendments, and motions. What about Section 6673s? Be alert to spot the angles.

I want to mention by name the Sands’ trusty attorneys. Hale E. Sheppard, Esq.,  Jeffrey S. Luechtefeld, Esq., John W. Hackney, Esq., Brent N. Bartlett, Esq., Samuel H. Grier, Esq., and Cassandra S. Bradford, Esq. I wish I could hold an awards ceremony, and pin their decorations on their battledress. Good try, tough loss, guys.

*Sand Invesdtment Co 157 T C 11 11 23 21