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Discussion:Settle (down)

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Discussion Forum Index --> Advanced Tax Questions --> Settle (down)


Discussion Forum Index --> Tax Questions --> Settle (down)

Ckenefick (talk|edits) said:

11 March 2014
I ran into a lawyer friend at the Accounting Hall of Fame today, where I was listening to a speech. He handles a few tax cases, but not many. He comes running up to me, all excited, because he knows how much I love taxes. I said, "Settle down, settle down, your nearly hyperventilating..."

Minutes later, he settles down and proceeds to tell me about this tax case he's got in the works. He says the taxpayer is in the right, 100%, but you know how it is at the IRS...you try to get it resolved and it drags on and on, no response, etc...so, the guy ended up filing a petition with the Tax Court. The case got kicked back to Appeals, who nearly immediately apologized and said they'd concede the entire case.

But here's the rub, the attorney's client is so pissed off about the matter, the client doesn't want to settle the case. He wants it to go before a judge, where all the facts will be published, just so the whole world can see what he went through.

So, I asked, "Can you really do this? The other side gives in, but you say say 'no,' it's too late, you pissed me off, we'll let a judge decide it."

Attorney said, "Sure, why not."

I said, "I don't know. Is that really what's best for your client? And, will the facts really be presented, or will the judge's ruling just say something like 'respondent concedes?' But honestly, I have no idea, maybe someone on TA knows...let me check..."

(I should also note that the attorney claims there is some part of the case that might set a favorable precedent for taxpayers at large..)

Coddington (talk|edits) said:

11 March 2014
I don't know off the top of my head, but, after concessions, it doesn't sound like the taxpayer has standing unless the tp is going after attorney's fees.

Terry Oraha (talk|edits) said:

11 March 2014
They conceded on everything, so any chance they can amend the return and ask for more from the IRS, sooner or later they're going to have to cut him off, then your attorney can crucify them in court. Gees you would think attorneys know this already, who am I telling?

Tenletters (talk|edits) said:

11 March 2014
What is the term ... "hazards of litigation"? Does that not come into play?

MWPXYZ (talk|edits) said:

11 March 2014
Doesn't an agreement still have to be filed with the Tax Court, signed by both parties, to avoid "a day in court"?

But, won't the Tax Court "summary" merely report on contentious issues?

And, would such an action be considered frivolous by the Tax Court? I ask, because you seem to be focused on taxpayer/preparer frivolity lately.

Ckenefick (talk|edits) said:

11 March 2014
Doesn't an agreement still have to be filed with the Tax Court, signed by both parties, to avoid "a day in court"?

I suppose that depends. If there's no agreement, b/c OP taxpayer doesn't want one, yet IRS says it concedes all issues, I wonder if Judge could refuse to hear the case.

But, won't the Tax Court "summary" merely report on contentious issues?

No.

And, would such an action be considered frivolous by the Tax Court?

I hope not. Doesn't seem all that unreasonable to me. Attorney takes case at lowest level. People at lowest level say, "no." Attorney goes to appeals, to exhaust administrative remedies, appeals says, "no." And now the IRS wants to play ball, now that they're staring a loss in the face...

Kevinh5 (talk|edits) said:

11 March 2014
Possible $25,000 penalty for wasting the Court's time because this can be settled before court.

The parties must stipulate to the fullest extent possible. This case will be fully stipulated, there is no disagreement, judgment in favor of petitioner.

Smokeytax (talk|edits) said:

11 March 2014
"Accounting Hall of Fame"? Where's that. Can we set up a fund to put up a statue of Riley there?

Taxalmancer (talk|edits) said:

March 11, 2014
We haven't from Riley in a dog's age. I wonder how he's doing?

Ckenefick (talk|edits) said:

11 March 2014
Riley passed away a while ago, unfortunately.

K5 is citing 6673:

§ 6673 Sanctions and costs awarded by courts.

6673(a)(a) Tax court proceedings.

6673(a)(1)(1) Procedures instituted primarily for delay, etc.

Whenever it appears to the Tax Court that—

6673(a)(1)(A)(A) proceedings before it have been instituted or maintained by the taxpayer primarily for delay,

6673(a)(1)(B)(B) the taxpayer's position in such proceeding is frivolous or groundless, or

6673(a)(1)(C)(C) the taxpayer unreasonably failed to pursue available administrative remedies,

the Tax Court, in its decision, may require the taxpayer to pay to the United States a penalty not in excess of $25,000

Here's my take:

Part A - No. Intent isn't to delay. People delay when they're gonna lose...and then gonna have to pay the tax. Intent is to put this case on record and to set precedent.

Part B - No. Argument isn't frivolous. If argument was frivolous, IRS would not have conceded.

Part C - No. All administrative remedies have been pursued, as indicated in the OP.

So, I don't think this up-to-$25,000 sanction would be applicable, at all. But, what might be applicable is the last thing K5 said. That is, there really is no disagreement any longer...so judge might simply not allow the case to be heard in his or her court. I understand that, but as I think about it, it seems patently unfair.

MWPXYZ (talk|edits) said:

11 March 2014
"I should also note that the attorney claims there is some part of the case that might set a favorable precedent for taxpayers at large..)"

" He wants it to go before a judge, where all the facts will be published, just so the whole world can see what he went through. "

I would think a posting of the matter here, and a couple other tax sites. would be more efficient than trying a Tax Court case. Does the client want to pay for the lawyer's work; or is the lawyer "working" for free?

He could also write a book; and make a profit. Call it "Breaking the Code", or something like that.

Ckenefick (talk|edits) said:

11 March 2014
I would think a posting of the matter here, and a couple other tax sites. would be more efficient than trying a Tax Court case.

Maybe he'll do that too...

But don't you also agree that posting it here, although nice, doesn't create any precedent?

Doesn't it make you wonder why, in some areas of the law, you read cases (or case summaries) and it seems that the IRS wins them all. Or, all of the cited cases (assuming there is more than one) just have bad facts? Or, the only case on the issue has bad facts?

Why is that? Certainly, there must be other situations where the IRS hasn't won, or wouldn't win. And certainly, there must be some situations that do not involve bad facts. So, I ask, where are these other "situations," and all of their juicy details...and why don't we know about them?

Ckenefick (talk|edits) said:

11 March 2014
...and, maybe more importantly, what prevents us from creating one...one that will actually be published?

MWPXYZ (talk|edits) said:

11 March 2014
$$

Ckenefick (talk|edits) said:

11 March 2014
Maybe attorney will go pro bono or at a discount. Maybe not. Either way, OP facts indicated that client is angered over the matter and refuses to settle at this point. So, aside from the money issue, which isn't an issue in Attorney's case, is there anything that prevents him from doing this?

Kevinh5 (talk|edits) said:

11 March 2014
Well, I think we have to ask whether the taxpayer received a NOD.

Ckenefick (talk|edits) said:

11 March 2014
I'm pretty sure he would have.

Nilodop (talk|edits) said:

13 March 2014
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=163432

and

http://www.leagle.com/decision/198242878ztc350_1403.xml/SMITH%20v.%20COMMISSIONER

Pretty exceptional!

I cannot tell a lie. I received "hints" from the OP that enabled me to find this most enlightening (roughly 50-pages long) treatise and the key case in the area. Never too late to be educated.

Ckenefick (talk|edits) said:

13 March 2014
Excellent, excellent work Lenny! I couldn't have done better myself!

Here's a direct pdf version of the treatise:

http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1548&context=facpub

Start at pdf Page 247...and read through Page 256. It's quick reading, since about 1/2 of each page is footnotes.

Smith was a silver straddles case (a tax shelter, really) where taxpayer conceded. IRS, however, would not accept the concession. IRS moved forward with the case...and the judge allowed it. Obviously, it was a move to create precedent...so every taxpayer who had engaged in this transaction would be sunk in the water the minute the case came out.

Thereafter, two more, but unrelated, cases involved one party throwing in the towel. In these cases, however, it was the taxpayer that refused to accept the concession of the IRS...and the court allowed it. The primary reason being that the IRS, as a "repeat player" in the Tax Court, has the ability to manipulate precedent pretty significantly. They'll settle cases they would other lose...then they take those cases to court that they will win. And, guess which ones end up setting Precedent?

Nilodop (talk|edits) said:

13 March 2014
I read "Smith" but not the others. An interesting point is that there is no acknowledgment in the opinion that the case was essentially settled, in that the taxpayer was willing to pay the full deficiency, interest, etc., but IRS wanted a decision on record. Reason taxpayer was willing to pay up - Merrill Lynch (shelter promoter) offered taxpayer twice the amount of the deficiency in return for their settling, so as to avoid getting an adverse decision on the record as precedent.

Ckenefick (talk|edits) said:

13 March 2014
Indeed. And, in the judge's defense in Smith, I don't think he liked the Third Party (Merrill Lynch) interfering in the case. Not so sure, however, why that is so wrong.

It is a great question though: Should courts be to settle disputes only or not? In one way, even if the dispute is already settled, the court's decision, if the court allows the current case to proceed, will likely settle future disputes on the same issue, before they get to court, by virtue of the current decision setting precedent.

And, in the other cases in the Treatise, I'm thinking that the rationale for allowing the taxpayer's to reject the IRS' concession was sound. After all, the IRS really controls the Tax Court by virtue of being a "repeated player." And as a consequence, controls the precedent. This is why novel arguments are so important. They are what set the law if accepted in a court of law. Sure, the taxpayer files the petition with the Tax Court, but functionally, the taxpayer is the defendant (a point made in that Treatise).

Yet, I do think for the judge to allow a petitioner to reject an IRS concession has to involve a case that might have widespread application. If it's just the typical "do you have documentation or not," that issue has been beat like a dead horse and nothing new will come out of it for a group (or large group) of similarly situated taxpayers.

Ckenefick (talk|edits) said:

13 March 2014
Not sure if anyone read the history of how the Brown vs. Board of Education case came about, but it was very strategic and fascinating.

Nilodop (talk|edits) said:

13 March 2014
And there is risk in not settling. Never 100% certain how a case will come out. (If there were, it wouldn't be much of a case). But pretty close to 100%.

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