The Tax Court in Brief June 29 – July 3, 2020

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The Tax Court in Brief June 29th, 2020 – July 3rd, 2020

Freeman Law’sThe 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 June 29th, through July 3rd, 2020

Duy Duc Nguyen v. Comm’r, T.C. Memo. 2020-97 

June 30, 2020 | Pugh, J. | Dkt. No. 6602-17L

Short SummaryThe taxpayer untimely filed Forms 1040, U.S. Individual Income Tax Return, for his 2006, 2007, and 2008 tax years.  Thereafter, the IRS sent the taxpayer a notice of deficiency to the address he listed on his returns.  In addition to deficiencies, the notice of deficiency asserted accuracy-related penalties.  The taxpayer failed to timely file a petition with the U.S. Tax Court.

Then, the IRS filed a notice of federal tax lien for the tax liabilities.  The taxpayer timely filed a request for a Collection Due Process (CDP) hearing.  In his CDP hearing request, the taxpayer requested a “withdrawal” of the notice of federal tax lien and added the following explanation:  “I do not owe tax.  Please find an explanation below & extra page.”

The IRS Settlement Officer (SO) sent the taxpayer a letter and scheduled the CDP hearing for February 1, 2017.  She also requested the taxpayer submit any additional information he had to support his request for lien withdrawal.

The taxpayer never provided the SO with additional information.  Rather, on the date of the CDP hearing, the taxpayer informed the SO that he had filed amended returns and requested additional time for audit reconsideration.  However, the SO determined that the notice of federal tax lien should be sustained because it was the least intrusive collection method and none of the conditions for withdrawal were present under Section 6323(j).  She later issued the taxpayer a Notice of Determination, and the taxpayer timely filed a petition with the Tax Court.

Key Issue:  Whether (1) the taxpayer may challenge his underlying tax liabilities consisting of the income tax and Section 6662(a) accuracy-related penalty the IRS assessed for each year; (2) the taxpayer owes any of the underlying tax liabilities (if he may challenge them); and (3) the SO abused her discretion in sustaining the notice of federal tax lien filing.

Primary Holdings

Key Points of Law:

InsightThe Nguyen case stands for the position that amended returns, without additional evidence, do not carry any weight in proving that a tax liability that has been already assessed by the IRS should be reduced.  Moreover, this case serves as a cautionary tale to taxpayers who fail to provide the SO with requested information prior to the closing of the CDP case and the issuance of a Notice of Determination.

Bethune v. Comm’r, T.C. Memo. 2020-96

June 30, 2020 | Gustafson, J. | Dkt. No. 10198-17

Short Summary

Petitioner was the noncustodial parent of two children. The custodial parent was their father, C. Petitioner, and C each filed a timely 2014 Federal income tax return claiming the two children as dependents. No Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent”, was attached to Petitioner’s return. In July 2015 Petitioner and C jointly proposed a family court order that stated that the children “will continue to be claimed by Mother/plaintiff (as prior to 2014 tax year)”, and each signed a statement that the statements in the proposed order “are true and accurate”.

The IRS examined Petitioner’s 2014 return. Petitioner provided C’s written statement, but the IRS nonetheless proposed disallowance of the dependency exemption deductions, child tax credit, and head-of-household (“HOH”) filing status. The IRS agent suggested that Petitioner obtain a Form 8332 signed by C for 2014. C signed the form, and Petitioner produced it to the IRS. However, C did not file an amended return disclaiming his previous claim of the children as dependents.

Key Issues:  Whether the Petitioner is entitled to (1) a dependency exemption deduction for two of her children under section 151(c), (2) a child tax credit for those children under section 24(a), and (3) head-of-household (“HOH”) filing status under section 2(b)(1).

Primary Holdings

Key Points of Law:

InsightDivorce and taxes can create traps for the unwary.  Good tax planning in an essential aspect of separations and divorces.


Dennis v. Comm’r, T.C. Memo. 2020-98 

July 1, 2020 | STJ Panuthos, P. | Dkt. No. 398-18L 

Short SummaryPetitioner filed a motion for reasonable litigation or administrative costs pursuant to IRC §7430 following a collection due process hearing.  The Tax Court held that Petitioner was not entitled to either litigation costs or administrative costs.

Key Issue:  Can pro se taxpayers recover reasonable litigation or administrative costs for a collection due process hearing regarding the filing of a notice of a Federal tax lien?

Primary Holdings

Key Points of Law:


InsightThe Dennis case illustrates when a collection due process hearing will be considered an administrative proceeding when attempting to recover administrative costs.  Further, it reinforces the Tax Court’s holding that pro se taxpayers are not entitled to litigation costs.

Minemyer v. Comm’r, T.C. Memo. 2020-99

July 1, 2020 | Kerrigan, K. | Dkt. No. 22182-10

Short SummaryPetitioner contested the IRS’ imposition of the fraud penalty under IRC §6663(a) for his 2001 personal income taxes.  The Tax Court held that the IRS had not met its burden of production for the determination of the IRC §6663(a) fraud penalty, and therefore the Petitioner was not liable for the fraud penalty for 2001.

Key Issue:  Whether the IRS had met its burden of production for the determination of the IRC §663(a) fraud penalty.

Primary Holdings

Key Points of Law:

InsightThe Hewitt case illustrates the need of a taxpayer or his or her representative to investigate and determine if the IRS has followed its procedural requirements under IRC §6751(b)(1) when it imposes the fraud penalty.  There is the possibility that the IRS has not, and the penalty can be removed.

Representation in Tax Audits & Appeals 

Need assistance in managing the audit process? Freeman Law’s team of attorneys and dual-credentialed attorney-CPAs regularly represents taxpayers before the IRS and Texas Comptroller. Our team also provides tax return-related representations and helps taxpayers navigate state tax laws. Our Firm offers value-driven services and provides practical solutions to complex issues. Schedule a consultation or call (214) 984-3000 to discuss our tax representation services.