That’s what Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan decides is what counts when Section 6702(a) frivolity chops are on the menu in Srbislav B. Stanojevich, 160 T. C. 7, filed 4/10/23.

Srbi ‘s 1041’s for his “grantor-type” trust for each of the four (count ’em, four) years at issue reported interest income, but claimed “…federal income tax withheld in an amount equal to the amount of the interest/total taxable income reported on the return, that [trust]’s ‘[t]otal tax’ for the year was zero, and that [trust] was entitled to receive an overpayment equal to the amount of the withheld tax. The returns included as attachments various Forms 1099 that petitioner had prepared and that reported payments to and from [trust]. Some of the Forms 1099 also reported the amounts of withheld federal income tax that the returns reported were withheld federal income tax.” 160 T. C. 7, at p. 3.

Srbi claims the frivolity chops don’t involve him, because the returns weren’t his, but rather the trust’s. Apparently disregarded entity doesn’t play a role, because the statutory language places the burden on the “person files what purports to be a return of a tax imposed by this title,” Section 6702(a). And Reg. Section 1.6012-3(a)(1) requires the fiduciary of a trust to file Form 1041.

Ch J TBS goes through the indicia of frivolity in 160 T. C. 7, at pp. 6-8, and Srbi tags all the bases.

“We now need to determine whether a taxpayer may be assessed a section 6702(a) penalty for filing a frivolous return that is not his personal return. We read section 6702(a) to answer that question in the affirmative. We read nothing in section 6702 that conditions the applicability of section 6702(a) on a person’s filing of his or her personal income tax return. In fact section 6012(b)(4) points to our contrary reading through its mandate that the return of a trust ‘shall be made by the fiduciary thereof,’ or in other words, by its trustee. See also §7701(a)(6) (defining the term ‘fiduciary’ as a ‘trustee . . . or any person acting in any fiduciary capacity for any person’).” 160 T. C. 7, at p. 9.

Judge David Gustafson also displays the human touch in Keith Barclay Nelson & Christine Alicia Kourtides, Docket No. 231439-21L, filed 4/10/23.

“The CDP process is one of the remedies Congress has created to assure that tax collection is reasonable and humane–but in the end,  the IRS is required to collect the taxes that are due. The liabilities at issue in this case arose and should have been paid beginning as early as April 2017–nearly six years ago. Petitioners have enjoyed six years of the IRS’s forbearance, and at some point the IRS must use the means at its disposal (i.e., levy) to collect those taxes.” Order, at p. 3.

But he does suggest that Keith & Christine can try a Rule 161 reconsideration, or try for an IA with IRS. Truly reasonable and humane.