The U.S. Tax Court today denied the taxpayers’ motion for summary judgment concerning whether an IRS penalty assessment complied with the approval provisions as set forth under section 6751(b)(1).
The case is: Thompson v. Commissioner, 155 T.C. No. 5 (August 31, 2020). Read the Tax Court’s opinion [PDF 67 KB]
The IRS revenue agent sent letters to the taxpayers offering to settle their tax liabilities with respect to an “abusive transaction.” The terms of the settlement offers required the taxpayers to agree to pay section 6662 accuracy-related penalties at a reduced rate on any underpayment of tax that might later be calculated as to the transaction. The taxpayers did not accept these offers.
The revenue agent later determined income tax deficiencies for 2003 through 2007 plus penalties under sections 6662(h) and 6662A at the statutory rates. The revenue agent obtained written approval from his acting immediate supervisor for assertion of these penalties before the IRS sent a notice of deficiency to the taxpayers.
The taxpayers filed a petition with the Tax Court and then filed a motion for summary judgment claiming that the IRS had failed to comply with the rules under section 6751(b)(1)—that no penalty is to be assessed “… unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination.”
The Tax Court today denied the taxpayers’ motion for summary judgment finding that:
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