Tax Court in Brief | Lewis v. Commissioner | Qualified Offers

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The Tax Court in Brief – February 28th- March 4th, 2022

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Tax Litigation:  The Week of February 28, 2022, through March 4, 2022

Lewis v. Comm’r, 158 T.C. No. 3 | March 1, 2022 | Pugh, J. | Dkt. No. 12930-18

Short Summary: This case regards joint and several tax liability, qualified offers to settle tax liability, and the ability for a taxpayer to recover litigation costs. Petitioner and her husband filed joint federal income tax returns. The IRS audited and proposed adjustments and penalties. Petitioner sent what she believed was a “qualified offer” pursuant to 26 U.S.C. (“Code”) § 7430(g), in which she reserved any rights she may have in any collection proceeding, including innocent spouse relief, statute of limitations, and other. The offer lapsed. Later, the IRS ultimately consented to Petitioner receiving, as an innocent spouse under Section 6015(c), full relief from joint and several liability with her husband. Petitioner filed a motion for litigation costs under Code Section 7430.

Issue: Was Petitioner is a “prevailing party” within the meaning of Code Section 7430 when (1) Petitioner made an offer to settle her tax liability, coupled with a reservation of rights as to innocent spouse under Section 6015(c), and (2) the IRS ultimately conceded that Petitioner was entitled to relief as an innocent spouse under Section 6015(c)?  

Primary Holdings:

Key Points of Law:

Insights: When making what is intended to be a “qualified offer” pursuant to 26 U.S.C. § 7430(g), the offeree is wise to closely consider whether conditions attached to the offer will destroy the “qualified” nature of the offer. Without a properly qualified offer, the offeree may be prohibited from pursuing the benefits afforded by Section 7430, such as the possibility to recover litigation and administrative proceeding costs, should the offeree, at the end of the day, prove to be the “prevailing party” for these purposes.


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