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Tax Court

Department of There But for the Grace of God

February 15, 2024 by Kim & Rosado LLP

The IRS has recently experienced some embarrassing setbacks in Tax Court. Most dramatically (and disturbingly) were the facts as narrated in Lakepoint Land II, LLC et al. v. Commissioner, T.C. Memo. 2023-111, in which the court not only found that an IRS manager had “backdated” the penalty approval required by I.R.C. § 6751(b)(1), but also that assigned IRS Counsel “knew or should have known” that representations made regarding the approval were “less than accurate” and “in bad faith.” The court has reserved until after trial what fees and expenses are to be awarded on account of IRS Counsel’s “unreasonable and vexatious misconduct.”

More rain fell on the IRS with R.J. Channels, Inc. v. Commissioner, T.C. Memo. 2023-109, where the court was also troubled by the actions of IRS Counsel. That case involved the common situation of a taxpayer failing to attach to their Tax Court petition a complete copy of the Notice of Deficiency. IRS Counsel is obliged to ensure the integrity of the pleadings by attaching the complete copy to the filed answer. But here, lacking the physical administrative file, IRS Counsel sought essentially to jury-rig the notice from electronic sources, some of which were inaccurate. Describing the reconstructed notice as “slipshod-cut-and-paste,” the court expressed no confidence in the proffered document as representing what was sent to the taxpayer and declared that the conduct of IRS Counsel “falls woefully short of” its expectations for practitioners appearing regularly before the court.

Both these cases may remind us of the old admonition: “It is no less good morals and good law that the Government should turn square corners in dealing with the people than that the people should turn square corners in dealing with their government.” St. Regis Paper Co. v. United States, 368 U.S. 208, 229 (1961) (Black, J., dissenting).

Filed Under: Tax Litigation Tagged With: IRS Litigation, Tax Court, Tax Litigation

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