The Tax Court in Brief – March 28th – April 1st, 2022
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.
Tax Litigation: The Week of March 28, 2022, through April 1, 2022
- Addis v. Comm’r, T.C. Memo. 2022-24 | March 28, 2022 |Urda, J. | Dkt. No. 12140-20L
- Golditch v. Comm’r, T.C. Memo. 2022-26 | March 29, 2022 |Lauber, J. | Dkt. No. 7726-20L
- Villanueva v. Comm’r, T.C. Memo. 2022-27 | March 31, 2022 |Goeke, J. | Dkt. No. 19781-18
- Bats Global Markets Holdings, Inc. v. Comm’r, 158 T.C. No. 5 | March 31, 2022 |Kerrigan, J. | Dkt. No. 1068-17
Porter v. Comm’r, T.C. Memo. 2022-25 | March 28, 2022 |Greaves, J. | Dkt. No. 3544-21
Short Summary: Taxpayer, Jeremy Porter (“Porter”) claimed abatement of interest on his 2011 and 2012 federal income tax deficiencies that were determined on May 13, 2014. The deficiency case languished in the litigation phase, and ultimately the IRS and Porter settled the case by a stipulated decision entered May 29, 2019. Porter then filed Forms 843, Claim for Refund and Request for Abatement, seeking abatement of interest that accrued on the deficiencies. Porter alleged that the underlying case would have settled on the same terms and much sooner but for IRS delay in responding to settlement communications from Porter and by continuances granted at the IRS’s request. The reviewing agent found that Porter also caused delays and that Porter agreed to the continuances. Thus, the abatement was denied. Porter petitioned the Tax Court to review that denial.
- Porter failed to establish that the IRS abused the discretion in denying Porter’s claim for abatement of interest. Delays in the underlying litigation were attributable to Porter, and the IRS identified these reasons in denying the claimed abatement. Thus, the IRS did not abuse its discretion in denying the claimed abatement of interest.
Key Points of Law:
- The Tax Court reviews a denial of interest abatement for abuse of discretion, which occurs only if the IRS bases its denial on an erroneous view of the law or on a clearly erroneous assessment of the evidence. The Tax Court can uphold the determination only on the grounds the IRS invoked in denying the abatement, and the IRS must clearly set forth these grounds so the Court does not have to guess how the IRS arrived at its decision. See SEC v. Chenery Corp., 332 U.S. 194, 196–97 (1947); Kasper v. Comm’r, 150 T.C. 8, 23 n.17 (2018).
- Interest on a federal income tax deficiency begins to accrue on the tax return due date and continues to accrue, compounding daily, until payment is made. See 26 U.S.C. §§ 6151(a), 6601(a), 6622(a). Section 6621(a)(2) imposes interest at the federal short-term rate, determined under subsection 6621(b), plus three percentage points.
- The IRS may abate the assessment of interest on any payment of tax to the extent that any unreasonable error or delay in payment is attributable to an IRS officer or employee being erroneous or dilatory in performing a ministerial or managerial act. See 26 U.S.C. § 6404(e)(1). Such an error or delay is taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer. See Lee v. Comm’r, 113 T.C. 145, 148–49 (1999).
- On the issue of abatement of interest, a taxpayer is not permitted to shift the burden of proof to the IRS pursuant to section 7491. Section 7491(a) allows the court to shift the burden of proof only with respect to a factual issue relevant to ascertaining the taxpayer’s liability for tax imposed by subtitle A or B of the Code. Interest is imposed under section 6601, which is not part of subtitle A or B.
- The Tax Court cannot abate interest assessment on equitable grounds because the Tax Court is a court of law, not equity. Stovall v. Commissioner, 101 T.C. 140, 149–50 (1993).
Insights: A taxpayer may be entitled to an abatement of interest if, through the underlying proceeding, unreasonable error or delay in payment is attributable to the IRS being erroneous or dilatory in performing a ministerial or managerial act. However, such an error or delay is taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer. Attribution can occur where, for example, the taxpayer fails to timely deliver records requested by the IRS or where the taxpayer agrees to continuances in the litigation phase of a deficiency matter. The taxpayer should evaluate whether or not an agreement to a continuance will later affect the taxpayer’s right to seek an abatement of interest that will accrue because of the continuance. A reservation of rights and other strategy might be employed to ensure that an acquiescence to a continuance does not disadvantage the taxpayer later.