Unprepared TP Goes To Court

[Quixote]

I thought we were talking about specific situations in tax cases regarding rebutting 1099s. What you are bringing up here is an out-of-context quote from an appeal of a bankruptcy court case which doesn't reference a 1099 or a W2.

Even by your standards, that's pretty lame.

That discussion was based on the presumption of correctness which the thread was about except it was related to NoD. You must have missed half the thread. The case is an example of the court gone awry with the concept. The bankruptcy has little to do with what the case in the 9th was about. It shows what I've been saying all along. The courts have given such wide latitude with the concept of the presumption of correctness to the IRS its nearly impossible to prove they violated the law or regulations.

The case has nothing to do with the presumption of correctness of the Commissioner's determination of a deficiency.

ISSUES

A. Whether the bankruptcy court erred in considering the IMF reports as evidence of valid assessments made against Larsen.

B. Given the United States offered no evidence other than the IMF [*4] reports, whether the IMF reports satisfied the United States' burden of proof to demonstrate valid assessments and liens.

C. Whether the United States properly authenticated the IMF reports, thus permitting consideration by the bankruptcy court.

D. Whether the bankruptcy court properly denied Larsen's motion to defer consideration of the United States' motion, thus disallowing pending discovery.

Outside the above issues, Larsen presented no evidence or argument opposing the United States' motion in the bankruptcy court, and Larsen presents no new arguments on appeal. Larsen has thus not attempted to contest the assessed amounts shown on the IMF reports, but simply argues the IMF reports do not evidence valid assessments.

[SteveSy]

In short Larsen knew there wasn't a proper assessment completed.

And you found that information where? Certainly not in the published opinion.

He submitted interrogatories requesting the assessment documents, ...

Not exactly. He requested that IRS 'Identify any and all "assessment" documents and "supporting list or record", "which set forth the name of the taxpayer, the date of the assessment, the character of the liability assessed, the taxable period, if applicable, and the amounts assessed", which were created, as provided for by Treasury Regulation, 26 C.F.R. § 301.6203-1, to formally record plaintiff's alleged tax liability.'

The Bankruptcy Court, the Bankruptcy Appeals Panel of the 9th Circuit and, most important, Larsen himself, decided that the requirements of Treasury Reg 26 C.F.R. § 301.6203-1 were irrelevant. So everyone ignored them and argued about Form 4340 instead.

Only because of case law.

Larsen apparently concedes introduction by the United States of 4340 forms for the disputed years would indeed have evidenced valid assessments.

In re Larsen, 1991 Bankr. LEXIS 699, Page 9.

What a total misrepresentation by surgically quoting. Yes he concedes that...why weren't they produced? You realize what's on a 4340, amounts and date assessed, character of tax, and the jurat? The IMF has nothing on it to bind the IRS its simply computer entries reporting that there is supporting documentation. Without the supporting documentation they're just unverified, unauthenticated entires.

[SteveSy]

I thought we were talking about specific situations in tax cases regarding rebutting 1099s. What you are bringing up here is an out-of-context quote from an appeal of a bankruptcy court case which doesn't reference a 1099 or a W2.

Even by your standards, that's pretty lame.

That discussion was based on the presumption of correctness which the thread was about except it was related to NoD. You must have missed half the thread. The case is an example of the court gone awry with the concept. The bankruptcy has little to do with what the case in the 9th was about. It shows what I've been saying all along. The courts have given such wide latitude with the concept of the presumption of correctness to the IRS its nearly impossible to prove they violated the law or regulations.

The case has nothing to do with the presumption of correctness of the Commissioner's determination of a deficiency.

And? Without valid assessments no tax was due and he was free to keep his retirement.

Outside the above issues, Larsen presented no evidence or argument opposing the United States' motion in the bankruptcy court, and Larsen presents no new arguments on appeal. Larsen has thus not attempted to contest the assessed amounts shown on the IMF reports, but simply argues the IMF reports do not evidence valid assessments.

Why would he need more? If the IRS side stepped the law to seize his retirement then they shouldn't get it.

More importantly all he was requesting was that the court make the IRS comply with the discovery request. If they could support their claims he agreed he owed the tax.

Identify any and all "assessment" documents and "supporting list or record", "which set
forth the name of the taxpayer, the date of the assessment, the character of the liability
assessed, the taxable period, if applicable, and the amounts assessed", which were created,
as provided for by Treasury Regulation, 26 C.F.R. § 301.6203-1, to formally record
plaintiff's alleged tax liability.

- emphasis added.

For all we know he absolutely knew he didn't owe anything and was trying to save his retirement because he knew no supporting documentation existed. It was down to the wire, he was about to lose the rest of his financial life.

[OnceSane]

Portillo DID make a difference in how the IRS handled unreported income cases. I was an Appeals Officer at the time. If ALL the Examinating Officer had to assert income on was a 1099 or W-2 without anything else, after Portillo came out, WE DROPPED THE ISSUE. The current IRM reflects this. If the company was out of business, or didn't respond, or we couldn't get checks or bookkeeping entries -- WE DROPPED THE ISSUE

Do your research. I do not believe you will find a single Tax Court case after Portillo where the IRS was successful in asserting income with only a 1099 or W-2

[SteveSy]

Portillo DID make a difference in how the IRS handled unreported income cases. I was an Appeals Officer at the time. If ALL the Examinating Officer had to assert income on was a 1099 or W-2 without anything else, after Portillo came out, WE DROPPED THE ISSUE. The current IRM reflects this. If the company was out of business, or didn't respond, or we couldn't get checks or bookkeeping entries -- WE DROPPED THE ISSUE

Do your research. I do not believe you will find a single Tax Court case after Portillo where the IRS was successful in asserting income with only a 1099 or W-2

Well that's good then....thanks for the info from behind enemy lines.

[Famspear]

Steve: Just a couple of off-topic footnotes, here. I can’t get to a copy of the text of the Larsen case now, but I’ll respond to a couple of things you wrote:

Larsen did not file tax returns for the years in question and the IRS created substitute returns instead and promptly places liens on his retirement account. Larsen files Chapter 7 and tries to discharge his tax debt.

Well, Mr. Larsen may have been confused. Forget about the "valid assessment" problem. If Larsen did not file returns, then the taxes would have been non-dischargeable in the bankruptcy (also, the substitute returns by the IRS would not be treated as "returns" for purposes of the dischargeability issue).

And you wrote:

Without valid assessments no tax was due and he was free to keep his retirement.

Not exactly. Partially correct, maybe, depending on circumstances.

The lack of a valid assessment would mean that there was no tax LIEN. A valid tax covered by a lien (or, more specifically a perfected lien) is a secured claim to the extent of the value of the property securing the lien. A valid tax not so covered is an unsecured claim. But there is no general legal requirement that a federal tax be assessed in order for the tax to be legally due.

Once an individual is in bankruptcy, the claims for the unassessed federal income taxes for the pre-bankruptcy years for which the person did not file returns would be nondischargeable under 11 USC 523(a)(1)(B)(i), and would be payable from the funds in the estate (if funds are available and, of course, subject to the usual complex bankruptcy rules regarding priority, etc.). If the retirement account were excluded from the bankruptcy estate (a distinct possibility), the retirement account would not be used to pay the tax claims through the bankruptcy process using funds of the estate. But once the IRS correctly assessed the tax, issued the post-assessment written "notice and demand," and the tax was not thereafter timely paid, the tax lien would arise.

Again, I can’t meaningfully comment that much more on what did or did not happen in Larsen until (and unless) I read the text of the case.

[SteveSy]

Once an individual is in bankruptcy, the claims for the unassessed federal income taxes for the pre-bankruptcy years for which the person did not file returns would be nondischargeable under 11 USC 523(a)(1)(B)(i), and would be payable from the funds in the estate (if funds are available and, of course, subject to the usual complex bankruptcy rules regarding priority, etc.). If the retirement account were excluded from the bankruptcy estate (a distinct possibility), the retirement account would not be used to pay the tax claims through the bankruptcy process using funds of the estate. But once the IRS correctly assessed the tax, issued the post-assessment written "notice and demand," and the tax was not thereafter timely paid, the tax lien would arise.

Again, I can’t meaningfully comment that much more on what did or did not happen in Larsen until (and unless) I read the text of the case.

I haven't researched such things so I will have to take your word for it. I'm basing my statement on the following:

5/11/90 - Larsen files an adversary complaint to determine the dischargeability of the tax
debt and the validity, extent, or priority of the United States' liens. The complaint sets forth
two causes of action. The first cause of action sought to quiet title in Larsen's personal
property based on invalid liens obtained by the United States. The second cause of action
alleged unauthorized disclosure of income tax information.

The court did not mention it couldn't be discharged anyway. It seems that would have ended the matter in one paragraph.

[Nikki]

The court did not mention it couldn't be discharged anyway. It seems that would have ended the matter in one paragraph.

Judges opinions are often drafted by their clerks who, it appears, are paid by the word.

A one-paragraph opinion is morally repugnant, a waste of thousands of dollars of law school tuition, and doesn't provide an opportunity to enter the annals of jurisprudence.

[.]

The court did not mention it couldn't be discharged anyway

OMG! A court didn't comment on something that couldn't happen. What's next?

The double negative that doesn't matter. Sybil's new specialty.

[iplawyer]

Judges opinions are often drafted by their clerks who, it appears, are paid by the word.

I take strong offense. Clerks are not paid by the word at all. Furhtermore, they could be working at law firms making two to three times what they make working for a judge. Finally, the judge's name is on the opinion, not the clerk's. Some judges write their own opinions and are verbose. It just depends. But trust me, every clerk wants to spend the least amount of time possible writing these stupid opinions so they can get out of the office sooner and enjoy their weeken.

[Imalawman]

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