IRS Releases Its 2015 Dirty Dozen Frivolous Arguments

[The Observer]

Always a perennial favorite here on Quatloos.

[operabuff]

Here's a link to the news release listing the dirty dozen:
http://www.irs.gov/uac/Newsroom/IRS-Com ... s-for-2015

They apparently issued a news release for each of the twelve schemes - the links are in the document I've linked to above. Observer's link is to one of these 12 news releases.

[LPC]

Note that frivolous arguments are lumped together as one item, and #12 at that.

This is quite a comedown from the days when frivolous arguments made up 3 or 4 of the warnings. Hell, one year Petey's CtC scam (misuse of Form 4852) was #6.

No wonder he's depressed.

Meanwhile, the IRS has also updated it's "truth about frivolous arguments page, with some new citations to 2014 decisions, as follows:

• Jones v. Commissioner, T.C. Memo. 2014-101, 107 T.C.M. (CCH) 1495 (2014) (discussed here)
• Hill v. Commissioner, T.C. Memo. 2014-134, 108 T.C.M. (CCH) 12 (2014) (zero return; discussed here)
• Shirley v. Commissioner, T.C. Memo. 2014-10, 107 T.C.M. (CCH) 1057 (2014) (discussed here)
• Jacobsen v. Commissioner, 551 Fed.Appx. 950 (10th Cir. 2014) (discussed here)
• Waltner v. Commissioner, T.C. Memo. 2014-35, 107 T.C.M. (CCH) 1189 (2014) (discussed here)
• Nevius v. Tomlinson, 113 A.F.T.R.2d 2014-1872 (W.D. Miss. 2014) (state citizenship; 4th Amendment)
• Salzer v. Commissioner, T.C. Memo. 2014-188, 108 T.C.M. (CCH) 284 (September 15, 2014)
• O’Brien v. Green, 114 A.F.T.R.2d (RIA) 2014-5613 (E.D. Va. 2014) (4th Amendment)
• Lund v. Chase Bank, 114 A.F.T.R.2d (RIA) 2014-5613 (D. Or. 2014)
• Rader v. Commissioner, 143 T.C. No. 19 (2014) (5th Amendment)
• United States v. Edlefsen, 114 A.F.T.R.2d (RIA) 2014-6105 (D. Or. 2014)
• United States v. Moleski, Crim. No. 12–811 (FLW), 2014 WL 197907 (D. N.J. Jan. 13, 2014) (13th Amendment)
• Best v. Commissioner, T.C. Memo. 2014-72, 107 T.C.M. (CCH) 1376 (2014) (Form 23C not required to prove tax liability)
• May v. Commissioner, T.C. Memo. 2014-194, 108 T.C.M. (CCH) 324 (2014) (Form 23C not required)
• Kuretski v. Commissioner, 755 F.3d 929 (D.C. Cir. 2014) (Tax Court constitutional)
• Graffia v. Commissioner, 114 A.F.T.R.2d (RIA) 2014-6415 (7th Cir. 2014) (Tax Court sanctions upheld)
• Young v. Commissioner, 551 Fed.Appx. 229 (5th Cir. 2014) (Tax Court sanctions upheld)
• Duggan v. Commissioner, T.C. Memo. 2014-17, 107 T.C.M. (CCH) 1099 (2014) (discussed here)
• Heger v. United States, 114 Fed.Cl. 204 (2014)

[Famspear]

.....Meanwhile, the IRS has also updated it's "truth about frivolous arguments page, with some new citations to 2014 decisions, as follows:

[ . . . ]

[*]Kuretski v. Commissioner, 755 F.3d 929 (D.C. Cir. 2014) (Tax Court constitutional)....

I believe the Internal Revenue Service is incorrect on this one. The Court of Appeals rejected the IRS assertion that the taxpayers' argument was frivolous:

Just as the Supreme Court in Freytag elected to consider a belated constitutional challenge to the validity of a Tax Court proceeding, id., we do so here. In Freytag, as here, the petitioners raised a nonfrivolous constitutional challenge to the validity of a Tax Court proceeding after the Tax Court's initial decision, and the petitioners' claim implicated the federal judiciary's strong interest in maintaining the separation of powers. The IRS, apparently attempting to suggest that the Kuretskis' separation-of-powers claim is "frivolous," characterizes the Kuretskis' argument as "of a type that has been repeatedly rejected." Resp't Br. 40 (citing Nash Miami Motors, Inc. v. Comm'r, 358 F.2d 636 (5th Cir.1966); Burns, Stix Friedman & Co., 57 T.C. 392; and Parker v. Comm'r, 724 F.2d 469 (5th Cir.1984)). None of the decisions on which the IRS relies, however, considered the removal power argument raised by the Kuretskis. Nor does this case involve "sandbagging" concerns of the sort that the Supreme Court noted in Stern v. Marshall, ___ U.S. ___, 131 S.Ct. 2594, 2608, 180 L.Ed.2d 475 (2011)....

--from Kuretski v. Commissioner, 755 F.3d 929, at 937 (D.C. Cir. 2014).

The taxpayer lost the argument, but the argument is not legally frivolous. The Kuretski case was addressed here:

viewtopic.php?f=49&t=10344&start=100

EDIT: The taxpayers filed a petition for writ of certiorari with the U.S. Supreme Court; case number 14-622. The government has not yet filed a response; the deadline for the response is February 27, 2015.

[grixit]

And if the court misses the deadline the defendants will claim they won.

[operabuff]

.....Meanwhile, the IRS has also updated it's "truth about frivolous arguments page, with some new citations to 2014 decisions, as follows:

[ . . . ]

[*]Kuretski v. Commissioner, 755 F.3d 929 (D.C. Cir. 2014) (Tax Court constitutional)....

I believe the Internal Revenue Service is incorrect on this one. The Court of Appeals rejected the IRS assertion that the taxpayers' argument was frivolous:

You probably would have done better to read what the IRS said.
http://www.irs.gov/Tax-Professionals/Th ... c350157935

Not every case cited in "The Truth" involves a finding that the taxpayer's argument was frivolous. Kuretski is cited as a relevant case to a discussion about the common tax protester argument that the Tax Court lacks authority to decide cases. The IRS does not say that the argument in Kuretski is frivolous. In my humble opinion, the IRS is correct to say that it's a relevant case. If more taxpayers make this same argument unsuccessfully it will soon become a frivolous argument.

I see that Carlton Smith is among the taxpayers' attorneys on appeal - I wonder whether the argument originated as his idea. He didn't represent the taxpayers before the tax court. The taxpayers first made the argument in motion for reconsideration of the tax court's original opinion. The Tax Court denied the motion without reaching the merits of the argument, saying that it was too late to raise this new argument.

A couple of years ago Carlton argued that the Appointments clause of the constitution requires that the appeals officers who hear collection due process cases be presidential appointees, and since they are not appointed by the president they lack the requisite authority to hear the cases. He lost that argument too. Tucker v. Commissioner, 135 T.C. 114, 155 (2010), aff’d, 676 F.3d 1129 (2012), cert. denied, 133 S.Ct. 646 (2012).

Carlton is a nice guy with a quixotic streak.

[Famspear]

You probably would have done better to read what the IRS said.

No, but I'm going with what the Court said about what the Court perceived to be the Commissioner's position:

The IRS, apparently attempting to suggest that the Kuretskis' separation-of-powers claim is "frivolous," characterizes the Kuretskis' argument as "of a type that has been repeatedly rejected."

True, I haven't read the Commissioner's brief in the case. Perhaps the Commissioner did not make that argument. Perhaps the Court of Appeals mis-interpreted the Commissioner. However, the Court of Appeals did hear the Commissioner, and the Court itself concluded that the Commissioner was "apparently attempting to suggest" that the argument was "frivolous" -- and the Court specifically rejected that idea, by using the term "nonfrivolous" to describe the taxpayer's argument.

[Famspear]

OK, I pulled the 98 page government brief in Kuretski at the Court of Appeals. Here is the relevant language:

Although the courts may disregard such considerations in order to reach arguments based on “nonfrivolous constitutional grounds,” Glidden at 536, doing so is discretionary. To be sure, in Freytag v. Commissioner, upon which taxpayers rely (Br. 22), the Supreme Court reached a belatedly raised Appointments Clause challenge to the ability of Special Trial Judges to sit when appointed by the Tax Court’s Chief Judge. 501 U.S. 868, 879 (1991).[footnote omitted] In contrast, here, the separation-of-powers challenge taxpayers are belatedly attempting to raise is of a type that has been repeatedly rejected......

Nowhere in the brief does it appear to me that the government expressly asserted that any of the taxpayer's arguments are "frivolous."

The language could reasonably be interpreted to the effect that the government was simply trying to assert that the taxpayer's argument had no legal merit and that the government's position was well-settled law -- without actually intending to imply that the government believed the taxpayer's argument was frivolous.

So, I concede that the Court of Appeals may have mis-interpreted what the government was saying and, to that extent, I stand corrected.

[Famspear]

....Not every case cited in "The Truth" involves a finding that the taxpayer's argument was frivolous. Kuretski is cited as a relevant case to a discussion about the common tax protester argument that the Tax Court lacks authority to decide cases. The IRS does not say that the argument in Kuretski is frivolous. In my humble opinion, the IRS is correct to say that it's a relevant case. If more taxpayers make this same argument unsuccessfully it will soon become a frivolous argument....

Since there may have been some confusion about what I was driving at, I want to clarify that I understand that "The Truth" list typically includes some cases that do involve a court's conclusion that a taxpayer's argument was frivolous, and other cases that do not include such a conclusion. I also understand what I think should be obvious: that the IRS is not saying, in "The List" itself that Kuretski's argument was frivolous.

I was instead addressing the Commissioner's apparent position while litigating the Kuretski case itself -- as perceived by the Court of Appeals at the time the case was decided -- as described by the Court in the text of the Court's opinion. If the Court was correct to infer that the Commissioner had taken the position that the taxpayer's argument was frivolous, then by definition the Court concluded that the Commissioner was wrong. The Court clearly treated the taxpayer's argument as non-frivolous (but still without merit).

The Court may have inferred correctly. However, after reading the government's brief, I concluded that a reasonable argument could also be made that the government had not intended to go so far as to imply that the taxpayer's argument was frivolous. That's why I corrected myself.

[.]

The last few posts by operabuff and Famspear are great legal esoterica. Thanks for bothering.

Of course, few, if any TPs will draw any useful conclusions from them. Not unexpected, considering the usual apparently-null TP capacity to appreciate nuance in anything, never mind an obscure ancillary legal issue related to the Dirty Dozen.

And so it goes. If TPs weren't total screw-ups -- only some of whom take hints like 100K of sanctions or a few years in prison -- this board wouldn't be any fun at all.

[operabuff]

An interesting question is when an argument crosses the line into being a frivolous one. I'd say that the argument the taxpayers made in Kuretski was a long shot at best. If the DC Circuit had held for the Kuretskis then pretty much all Tax Court proceedings would be invalid since the Commissioner is a party to all proceedings and all Tax Court judges are subject to removal. (At least that would be the way I'd read section 7443(f) - maybe you could interpret it as applying only to regular judges and not to senior judges or STJs.) I don't see anything about the argument that would have limited it to the particular facts presented by the Kuretskis. A favorable holding by the circuit court on the removal argument would therefore have a broad application. The DC Circuit would be very reluctant to put the Tax Court out of business. So it seems extremely unlikely that the Kuretskis could have prevailed.

Presumably if the Kuretskis or others repeat the argument unsuccessfully a number of times, it will come to be treated as frivolous.

[Famspear]

Regarding the 2015 update from the IRS on frivolous arguments:

Note that frivolous arguments are lumped together as one item, and #12 at that.

This is quite a comedown from the days when frivolous arguments made up 3 or 4 of the warnings. Hell, one year Petey's CtC scam (misuse of Form 4852) was #6.

No wonder he's depressed....

Perhaps Preposterous, Pontificating, Prevaricating Peter can find solace in the possibility that the January 2007 revision of the instructions for Form 4852 just might have been made in response to the Fabulous Felon's scam. That revision included the addition of specific warnings about penalties for misuse of Form 4852. The current version of the IRS instructions (in the September 2014 revision) reads (in part) as follows:

The IRS will challenge the claims of individuals who attempt to avoid or evade their federal tax liability by using Form 4852 in a manner other than as prescribed. Potential penalties for the improper use of Form 4852 include:

*Accuracy-related penalties equal to 20 percent of the amount of taxes that should have been paid,

*Civil fraud penalties equal to 75 percent of the amount of taxes that should have been paid, and

*A $5,000 civil penalty for filing a frivolous return or submitting a specified frivolous submission as described by section 6702.

Yes, the Haughty Hendrickson has a lot to be proud of.

[Famspear]

On Monday, May 18, 2015, the U.S. Supreme Court denied the taxpayers' petition for writ of certiorari in the Kuretski case, discussed above (case number 14-622 at the Supreme Court).