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Summary Opinions for 1/31/2014

Posted on Feb. 3, 2014

It is a bit light this week (and not as entertaining, but very informative).  Here is this week’s summary of procedure items we found interesting.

  • In unsurprising news of the week, the Service has reported that non-taxable gifts in 2012 quadrupled compared to 2010 and 2011.  Those were the three years where the gift tax exemption amount was over $5MM, and there was the potential for it to fall back to $1MM in 2013.  I wonder what the difference was from 2008 or 2009 to 2012.  I would guess a bit over a four times multiplier.
  • Jack Townsend’s Federal Tax Procedure blog has good coverage of a revised opinion in Kaplan v. United States.  In the initial opinion, the Court dismissed the claim for lack of jurisdiction, holding that there was not proof of full payment of one employee’s employment taxes, which was required under Flora.  The employer had estimated that $100 was sufficient for one employee for one quarter.  There was a bit of a hubbub surrounding the decision, as it did not seem fair.  Jack’s post reprints a portion of the revised opinion, which lays out the issue well.  This seems like a better result.  There is a chance that we will provide a larger post on this, more fully discussing the issue and the implications later this week.
  • Sticking with Mr. Townsend, but this time from his Federal Tax Crimes blog, a post on the IRS documents calculating the statute of limitations for U.S. taxpayers within the scope of the IRS John Doe Summons for UBS records.  The IRS documents look to Section 7609(e)(2) for the suspension.  Jack highlights that this applies to both civil and criminal proceedings.
  • Newsweek is in on coverage regarding tax whistleblowers; mostly a news article with a few interesting statistics.  If this is a topic you are interested in, you should listen to panel one of the Villanova Shachovy symposium, which can be found here.  Great panel, especially Dean Zerbe, who is a practitioner in this area.  He gave great insight, and was very entertaining. Some of his strategic pointers in handling a case would apply to other whistleblower programs, and we’ve incorporated a few of his minor comments into other (non-IRS) whistleblower cases we are handling.
  • I found U.S. v. Evseroff, 00-cv-06029, out of the Southern District of NY interesting.  This case has been kicking around for a long time, but of interest was that the Service erroneously removed its liens on Mr. Evseroff’s property, and told his accountant the liens were removed.  The Service realized its error, and reinstated its liens.  Mr. Evseroff argued that the Service had not properly reinstated the liens, and was not entitled to collect from him.  The Court found that Section 6325(f) allows the Service to reinstate its lien if the Secretary determines the release “was issued erroneously or improvidently” (that is the only use of the term “improvidently” I could find in the Code).  The Court also held that the reinstated lien has the “same effect” as the original lien.  This was a quote from a prior case, which I did not read, but I found that language somewhat confusing, as “same effect” initially made me think same priority.  Had the collection period run, this would have been a more interesting case, because the Service may have been precluded from rerecording.  It also would have been more interesting if Mr. Evseroff had secured other debt with the property prior to the IRS reinstating its lien, or prior to the lien being released.
  • Rev. Proc. 2014-15 was issued updating the circumstances in which adequate disclosure has occurred on a return.  The IRS link to the Rev. Proc. is not working, but this link to KPMG has a link to the IRB page.  The changes are fairly minor. Rev. Proc. 2012-51 is still the main guidance on adequate disclosure for Section 6662(d), the substantial understatement accuracy related penalty.
  • Bergmann v. Comm’r involved an appeal of a decision by the Tax Court holding that a taxpayers’  amended return for 2001 was not a qualified amended return (QAR) under Treasury Regulation § 1.6664-2(c)(3)(ii). Those rules allow a return that qualifies as a QAR to be the relevant return in determining whether accuracy related penalties apply. The taxpayers had timely filed their original tax return, claiming ordinary and long-term capital losses for two loss generating shelter transactions. After the original return was filed, IRS served two summonses on KPMG for its role in promoting loss-generating shelter transactions reported on the original return. After KPMG gave the IRS a list of shelter participants (including the taxpayer Bergmanns), the taxpayers filed an amended return for 2001 removing all the previously-claimed losses and reporting and paying over $200,000 in taxes. The 9th Circuit affirmed the Tax Court and held that under Regulation § 1.6664-2(c)(3)(ii) the IRS summonses to KPMG prior to the filing of an amended return was an event terminating the Bergmanns’ ability to file a QAR.  The Miller & Chevalier Tax Appellate Blog has more on this case.
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