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Summary Opinions for 01/10/2014

Posted on Jan. 13, 2014

Here is the Summary Opinion for last week.  Sorry it is so late, and sorry that many of the cases below do not have links.  I had a lot of trouble finding them on free webpages.  I’m happy to track down hard copies if you would like to see them.  Just let me know.

  • From the Mount Rushmore State (not a great nickname), we have a jeopardy levy case where the IRS essentially didn’t give the taxpayer reasons for its jeopardy assessment and levy, but the Court still upheld the levy because apparently the taxpayer was blatantly ignoring various laws he fully understood, and he already knew why the Service was coming after him.  In Picardi v. US, the District Court for South Dakota held that although the Service provided insufficient notice regarding the reason for the levy, the taxpayer was repeatedly uncooperative, filed false returns, and shifted assets overseas to evade tax. The Court also found he was aware of why the Service was trying to nail him, so therefore he was not prejudiced by the notice insufficiencies.  Here is the Rightsided news blog covering the related criminal case and posting a video from Mr. Picardi arguing his position.  I didn’t listen to the whole interview.
  • A bunch of interesting enforcement news over the last week.  Audits are apparently way down, with less than 1% of taxpayers being audited.  Around 10% for those making over $1MM.  But, identity theft investigations are way up, which is good news.  Accounting Today has a nice interview with Commissioner Koskinen, which outlines the challenges and goals he will be facing (we have a suggestion a few paragraphs down to assist with overcoming these challenges).  In the interview, the Commish indicates he would advocate for a voluntary tax preparer certification if the IRS fails to win its appeal over the return preparer regulations.  Not exactly a line in the sand on preparer regulation.
  • Professor Michael B. Lang of Chapman University School of Law has published an article about the Service’s ability to adequately regulate tax preparation and tax advice.  Abstract is as follows:
    • This article asks whether tax planning advice can ever be effectively regulated by the IRS. The article first explores whether tax advice differs in kind from other forms of legal advice. Secondly, it looks at the clear regulatory distinction between the treatment of return preparation advice and the treatment of tax planning advice, taking into account historical anomalies and asking if the difference in treatment is justified or misguided. The article then reviews and evaluates efforts to regulate planning advice directly, including earlier attempts to address tax shelter opinions in Circular 230, the current covered opinion rules and written advice rules, and the proposed changes in these sections of Circular 230, Less direct approaches such as flagging certain transactions (reportable transactions) with tax shelter potential for particular focus are noted along with their limitations as is the role of oral tax planning advice. Finally, the article discusses how combining more than one approach (such as retaining the accuracy standard of the covered opinion rules, UTP filing requirements, and competency testing) might be useful in regulating the quality of tax planning advice, but concludes that a magic IRS bullet for monitoring and regulating the quality of tax planning advice has yet to be invented. However, the article notes that reducing the ability of taxpayers to rely on the advice of tax advisors to avoid penalties might force taxpayers to hold their advisors to account through malpractice litigation to a degree that the Service will never be able to do.
  • Peter Reilly, who writes for Forbes (and I think is insightful and funny),  has a post on the creating reality TV based on the IRS –my wife’s eyes are already rolling.  Mr. Reilly’s idea was based on an internal IRS email that was released, where Counsel was opining on a taxpayer’s ability to videotape an IRS seizure.  Keith Fogg loved the idea and thought nothing would add credibility to our tax system like reality TV, but said the IRS only seizes sufficient (interesting) property per year to create two episodes.  On a directly related note, The Running Man took place in between 2017 and 2019 –not far off in the future– and I quote from that cinematic gem, “if you want to avoid tax revolts…you sure as hell are not going to do that with reruns of Gilligan’s Island.”  That type of game show could save the Service.
  • From Going Concern (so, some NSFW language and immature humor) some bad accounting pickup lines found on the world’s largest time-suck vortex, Reddit.
  • Sticking with the CPAs, Journal of Accountancy has an article regarding courts providing more protection for accountant-client communications.  The article provides some history of this privilege, and touches on the 2013 Wells Fargo case that we have discussed before, and held that some accountant created workpapers were protected in creating UTPs.
  • Les posted this week on the TAS annual report, and the SOI Bulletin for the fall was also published.  I really like statistics.
  • From the District Court for the Central District of California comes a case that I do not like very much, Aljundi v. United States, where the Court granted the government’s motion to dismiss for lack of jurisdiction.  The Court found it lacked jurisdiction because the taxpayers filed a refund claim after two years under Section 6532, which has a two year statute.  The decision was based on cases extending Brockamp to Section 6532, which the Court believed made the time limit  jurisdictional.  I respectfully disagree that Brockamp requires this to be jurisdictional (it may be a failure to state a claim, or the claim may have been garbage).  We have touched on this jurisdictional/look back point a lot, and we have some additional posts on it coming up soon.  I hope this gets appealed, as the appeal would go up to the 9th Circuit, which had held in Brockamp that equitable tolling did apply.  It would be interesting if the 9th Circuit found that Section 6532 has the same specificity and technical detail as Section 6511 that caused SCOTUS to feel there was no equitable tolling, of it if would read in an implied equitable tolling.   Also interesting to note that Section 6532 doesn’t have a financial disability provision, like Section 6511.
  • Two cases where taxpayers received attorney’s fees and costs!  In both Purciello v. United States, out of the District Court for New Jersey, and Dodson v. United States, out of the District Court for the Central District of Florida, the Courts found that the Service’s position was not substantially justified.  Dodson is interesting, in that the Magistrate goes into a fair amount of detail about each phase of the case, and whether or not costs are appropriate.  For a portion, the Magistrate recommended not providing costs and fees because the taxpayer failed to file the “fees application” under Section 7430(b)(4).  I won’t say much about Purciello now, as it may be the basis for a large post this week.
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