In Uncategorized on 08/25/2022 at 20:40

Not in Judge Emin (“Eminent”) Toro’s view. I had recently suggested to Andrew Wickham & Keisha Wickham, and incidentally to Judge Morrison, that a closing agreement might solve their problem; see my blogpost “The Supreme Silt-Stir Can-Kick,” 8/23/22. I mistakenly cited to Section 7122 as affording a way out of the silt-stir created by Boechler; I should have cited to Section 7121, but the principle is the same.

That is, untiI I read Cory H. Smith, 159 T. C. 3, filed 8/25/22. Maybe the Section 7121 closing agreement doesn’t close after all, although it does in Cory’s case. Cory entered into a Section 7121 closer, wherein he waived taking foreign earned income credits for three (count ’em, three) tax years. Then he filed returns claiming the credits he had solemnly forsworn.

Cory claims that the Director, Treaty Administration, at LB&I, had no authority to sign the agreement for IRS. He also claims malfeasance or material misrepresentation by IRS.

Cory worked at Pine Gap, an Australian outback location (not a steakhouse) watching satellites spying on whomever. There was a deal between the US and Australia, whereby Americans who wanted to avoid Australian tax would have to waive Section 911 relief, and Cory did, like everyone else at Pine Gap. Judge Eminent tells us a lot more about the US-Australia back-and-forth. But the key is that the US person needn’t sign the waiver, in which case he would be taxed as an Australian.

It takes a dictionary chaw and invocation of the rule against superfluity, that a statute be construed so that no word or phrase is superfluous, to establish that the DTA at LB&I had authority to sign the Section 7121. And this is a transnational deal; if Cory’s 7121 is invalid, so are all the other ones signed by skyspies at Pine Gap, and Australia has a right to rely on the deal it struck with the US.

Corey claims sending a blank Section 7121 form to his employer violated Section 6103. But there was no agreement at that point. And blank forms aren’t agreements subject to Section 6103(b)(2). And once Corey signed the agreement, he provided his information to IRS; IRS didn’t give his information to anyone else.

As for misrepresentation, that requires fact, and the best that Corey’s trusty attorney can come up with is a stretched version of law. And as for duress, Corey had two unpleasant alternatives, but that isn’t duress.

Read Judge Eminent’s prose. Corey’s trusty attorney tried hard, but when you have an international tax deal, which if set aside would cause chaos for hundreds of taxpayers, the result is obvious.

Takeaway- Breaking a Section 7121 agreement takes a lot of doing.


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