In Uncategorized on 03/03/2022 at 15:33

No arguing, Gina C. Lewis, 158 T. C. 3, filed 3/3/22, is an innocent spouse. When IRS hit her with the deficiencies, Gina sent them a letter designated as a Section 7430(g) qualified offer, conceding said deficiencies in full, but reserving the right to claim innocent spousery. IRS ignored the offer and hit Gina with a SNOD. Gina petitioned the SNOD and claimed innocent spousery in her petition, but never gave IRS Form 8857. When IRS and her loved-once Tim the intervenor stiped out the deficiencies thereafter, IRS conceded that Gina was an innocent, and moved for entry of decision, which Gina rejects as an end-run around her claim for admins and legals.

IRS concedes Gina meets the net worth cutoff, and she substantially prevailed as to amount and most significant issue.

Even though Gina loses, I give her trusty attorney a Taishoff “Good Try, First Class.” See 158 T. C. 3, at pp. 3-4 for the qualified offer letter. Nice piece of drafting.

Now Gina never submitted Form 8857 or anything else while the deficiency case was pending, either at exam or to CCISO, when IRS referred her case there. This may have been a justified gamble; “The qualified offer provision may not apply, however, where the ‘judgment [is] issued pursuant to a settlement.’ § 7430(c)(4)(E)(ii)(I).” 158 T. C. 3, at p. 6 (footnote omitted, but it says Gina rejected the offer of entry of decision to avoid the “judgment pursuant to settlement” counter-gambit.)

Judge Pugh disqualifies the offer, because it does not specify the amount offered. As Gina reserves the right to raise innocent spousery on a CDP. “… her offer flunks the requirement in section 7430(g)(1)(B) that the qualified offer ‘specif[y] the offered amount of the taxpayer’s liability.’ An offer that reserves the right to claim relief under section 6015 does not ‘specif[y] the offered amount of the taxpayer’s liability’ because the amount of liability offered depends on potential—and reserved—application of section 6015 and cannot be determined until availability of section 6015 relief is considered (or reservation of the right to claim it is withdrawn).

“Applying the regulations to petitioner’s offer illustrates the problem. Petitioner offered to concede ‘100% of the tax and 100% of the penalties’ for [years at issue], subject to a reserved right to claim relief from joint and several liability under section 6015. Respondent’s acceptance of that offer would not ‘fully resolve the taxpayer’s liability, and only that liability . . . for the type or types of tax and the taxable year or years at issue in the proceeding’—that is, petitioner’s federal income tax liabilities for [years at issue]—because her tax liabilities might be (and were) reduced to zero after consideration of her reserved right to claim relief from joint and several liability under section 6015(c). See Treas. Reg. § 301.7430-7(c)(3).” 158 T. C. 3, at pp. 9-10.

Now before my ultra-hip readers cry out as one “What about Regulation § 301.7430-7(e) (example 4), which discusses whether a taxpayer may reduce the amount the taxpayer will pay pursuant to a qualified offer after the offer is accepted by the Commissioner by applying net operating loss carryovers?”

Well, in the NOL case, the liability amount is fixed. Adjustments not at issue in the case at Bar may serve to offset payment. But Gina reserves the right to unfix the liability amount in advance, and that’s a bridge too far.

Taishoff says the bottom line is that judges love settlements. Settlements clear dockets and of course conserve scarce judicial resources (translation: “save judges work”). Anything that encourages settlements is good. Making IRS pay for settlements discourages settlements. That is bad.

Unhappily for trusty attorney, those who sail too close to the wind often end with wet underoos.


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