The Tax Court in Brief October 3 – October 9, 2020

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The Tax Court in Brief October 3 – October 9, 2020

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

For a link to our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.

The Week of October 3 – October 9, 2020


Doyle v. Comm’r, T.C. Memo. 2020-139 

October 8, 2020 | Gustafson, J. | Dkt. No. 4865-19W

Short Summary: Mr. Doyle and Mr. Moynihan submitted to the Whistleblower Office of the Internal Revenue Service (“IRS”) two claims on Form 211, Application for Award for Original Information, alleging that several related entities failed to comply with the requirements of I.R.C. 501(c)(3) for tax-exempt organizations. The claims included specific credible documentation.

The Whistleblower Office acknowledged the claims and referred them to the Tax Exempt and Government Entities Division (“TEGE”) and the Criminal Investigation Division (“CI”). CI reportedly determined it would not investigate the claims. The Whistleblower Office issued a preliminary denial letter. The petitioners responded with opposition, stating that it was public knowledge that the IRS was investigating the target entities and that Mr. Doyle and Mr. Moynihan had worked with the FBI/IRS Task Force in the investigation. After consulting with CI, the Whistleblower Office issued a final determination letter denying the claims.

Mr. Doyle and Mr. Moynihan petitioned the Tax Court. The Commissioner moved for summary judgment on the grounds that the IRS (1) did not proceed with an administrative or judicial action against the target entities, and (2) did not collect any proceeds based on the claims. Mr. Doyle and Mr. Moynihan opposed the motion.

Key Issue: Whether the Whistleblower Office abused its discretion in denying the claims of Mr. Doyle and Mr. Moynihan.

Primary Holdings:

Key Points of Law:

Insight: The administrative record ultimately undermined the Commissioner’s argument. Doyle underlines the fact that the Tax Court’s determination of “abuse of discretion” is based on the reasons stated in the final determination letter issued by the Whistleblower Office, not the arguments presented by the Commissioner’s counsel. Additionally, Doyle reinforces the idea that taxpayers, whistleblowers, and petitioners alike should maintain their own detailed records of events, as the administrative record maintained by the IRS may not include all the facts/details.


Spagnoletti v. Comm’r, T.C. Memo. 2020-140

October 8, 2020 | Lauber, J. | Dkt. No. 10204-19L

Short Summary:  The case involved a collection due process (CDP) case in which the petitioner sought review pursuant to section 6330(d)(1) of a determination by the Internal Revenue Service (IRS or respondent) to uphold a notice of intent to levy.

Petitioner, an attorney, filed delinquent Federal income tax returns for 2015 and 2016 and did not pay the full amount of tax shown as due on either return. The IRS assessed the tax shown as due plus additions to tax for failure to timely file, failure to timely pay, and failure to pay estimated tax.

As of May 2018, petitioner’s outstanding liabilities for the two years (including interest) exceeded $1.2 million.

The IRS sent petitioner a Notice of Intent to Levy and Notice of Your Rights to a Hearing (levy notice). Petitioner timely requested a CDP hearing, indicating that he was interested in an installment agreement (IA).

Key Issue: Did the settlement officer abuse her discretion is sustaining the proposed levy?

Primary Holdings:  

Key Points of Law:

Insight: The Spagnoletti case serves as a reminder that the abuse-of-discretion standard is a high hurdle, and that taxpayers are required to take a number of steps in order to preserve their argument/position that the IRS has abused its discretion in the collection due process hearing context to resolve collection issues.


Worthington v. Comm’r, T.C. Memo. 2020-141 

October 8, 2020 | Gustafson, J. | Dkt. No. 9026-19W

Short Summary: Mr. Worthington submitted to the Whistleblower Office of the Internal Revenue Service (“IRS”) a claim on Form 211, Application for Award for Original Information, (later supplemented) alleging that an entity or operation of law enforcement agencies of cooperating counties lacked status as a legal entity and therefore illegally collected millions of dollars from court awards.

The Whistleblower Office acknowledged the claim and assigned it to a “classifier.” The “classifier” recommended a referral of the claim for criminal investigation. Other personnel in the Whistleblower Office performed research on the claim and concluded the claim was “speculative.” As a result, the Whistleblower Office issued a final determination letter, stating that the claim was rejected because the IRS decided not to pursue the information provided in the claim.

Mr. Worthington petitioned the Tax Court. Both Mr. Worthington and the Commissioner moved for summary judgment as to whether the Whistleblower Office abused its discretion in rejecting and denying Mr. Worthington’s claim for award.

Key Issue: Whether the Whistleblower Office abused its discretion in rejecting and denying Mr. Worthington’s claim for award.

Primary Holdings:

Key Points of Law:

Insight: The Worthington case underscores the distinction between a rejection and a denial of a claim for award submitted to the Whistleblower Office. They are two entirely different determinations—threshold versus substance. Moreover, despite a claimant’s insistence, the Tax Court lacks the power to order the IRS to audit a taxpayer.

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