When FBAR’s in Play

That’s Judge Nega’s advice to Alberto Aroeste & Estela Aroeste, Docket No. 13024-20, filed 5/13/22. Al & Estela filed separate but equal petitions contesting three (count ’em, three) years’ worth of deficiencies, and those stay in. But Al attached to his petition “… (1) a letter dated…in which the Commissioner notified him of the imposition of penalties under section 6038(b) for failure to file Forms 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, for [non-deficiency years]; and (2) a letter… in which the Commissioner notified him of the imposition of penalties under section 6677 for failure to file Forms 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, and Forms 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner, for [two non-deficiency years and three deficiency years].” Order, at pp. 1-2.

IRS ripostes with no deficiency jurisdiction for FBARs, no chops assessed, and no NODs for NITLs or NFTLs for any thereof.

Estela’s separate petition claims IRS gave her non-willful FBAR chops, which she protested and her protest is still pending. IRS moves to toss the FBAR stuff for want of jurisdiction.

Al’s and Estela’s trusty attorneys claim Estela’s FBAR references are merely background, and she isn’t seeking relief therefor in Tax Court. Though IRS wants to toss the referenced per Rule 52, Judge Nega won’t go that far, yet.

But Al’s deficiencies apparently arise from the same facts as the FBAR chops.

Judge Nega says pore l’il ol’ Tax Court has no Subtitle F jurisdiction, only Subtitles A and B, and not even all of Subtitles A and B.

“Mr. Aroeste nevertheless asks this Court to issue a decision with respect to all items included in the notice of deficiency, which he argues includes whether he should be liable for the penalties under sections 6038(b) and 6677, because based on the doctrine of collateral estoppel, both the income tax deficiency and the penalties are dependent upon the very same legal issues. Mr. Aroeste further argues that, based on the doctrine of collateral estoppel, the Court’s determination as to the applicability of the penalties under sections 6038(b) and 6677 is required to prevent redundant litigation, to achieve economy of judicial time, and to fulfill the need for certainty in legal relations. We disagree. Collateral estoppel precludes parties (and their privies) from relitigating issues actually and necessarily litigated and decided in a final prior judgment by a court of competent jurisdiction. Because there has been no final prior judgment by a court of competent jurisdiction rendered with respect to the issues in this case, the doctrine of collateral estoppel is inapplicable.” Order, at p. 4 (Citations omitted).

So at close of play, Al’s FBAR stuff is tossed, but Estela’s are in, for now, for whatever they’re worth.

And Al’s and Estela’s trusty attorneys at Procopio get a Taishoff “Good Try, Second Class.”