The Tax Court in Brief – March 1-5, 2021

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The Tax Court in Brief March 1-5, 2021

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 March 1 – March 5, 2021


Brian D. Beland and Denae A. Beland

CaseMarch 1, 2021 | Greaves | Dkt. No. 30241-15

Short SummaryThe Tax Court granted the taxpayers’ motion for partial summary judgment, on a finding that the IRS failed to secure timely written supervisory approval under section 6751(b)(1) of a civil fraud penalty under section 6663(a).

The taxpayer’s joint return was examined by the IRS following which the revenue agent had sent them a summons requiring their attendance at an in-person closing conference. The revenue agent provided the taxpayers with a completed, signed Form 4549, Income Tax Examination Changes, reflecting a Code Sec. 6663(a) civil fraud penalty. However, the taxpayers declined to consent to the assessment of the civil fraud penalty or sign Form 872, Consent to Extend the Time to Assess Tax, to extend the limitations period. Thereafter, the revenue agent obtained written approval from her immediate supervisor for the civil fraud penalty and sent the taxpayers a notice of deficiency determining the same.

Key Issue:  Whether petitioners civil fraud penalty was timely approved by the revenue agent’s supervisor?

Primary Holdings

Key Points of Law:


McCrory v. Comm’r, 156 T.C. No. 6 

March 2, 2021 | Negra, J. | Dkt. No. 9659-18W

Short Summary

Petitioner submitted 21 separate Forms 211, Application for Award for Original Information (whistleblower claims), to the Internal Revenue Service (IRS) Whistleblower Office (WBO).

Petitioner alleged in these whistleblower claims that 21 individual taxpayers underreported their tax obligations with respect to litigation settlement awards they received. The information petitioner provided was based entirely on public records. These whistleblower claims are petitioner’s ninth series of whistleblower claims submitted to the WBO.

On April 10, 2018, the WBO mailed petitioner a Preliminary Award Recommendation under Section 7623(a) . Included with that letter were a Summary Report  and a Response to Summary Report form. The letter stated that the WBO “has reached a preliminary award recommendation under * * * [section] 7623(a) ” and enclosed “a Summary Report that explains our preliminary award recommendation in the amount of $962.92.”

The letter informed petitioner that the award “amount is a preliminary recommendation because the determination of tax is not final and is subject to change”, and “if there are any changes * * * the * * * [WBO] will send * * * [petitioner] a revised Preliminary Award Recommendation Letter.” The letter also stated that this “letter begins the whistleblower award administrative proceeding” and explained that petitioner had two options. If she agreed with the award, she was directed by the letter to “[c]heck the appropriate box, sign and date the Response to Summary Report form indicating * * * [her] agreement,” and “return the signed form” to the WBO. The letter advised her that, “[b]y checking the box that you agree with the preliminary award recommendation, you agree to waive any judicial appeal rights with respect to the award determination, including filing a petition with the U.S. Tax Court.”

On May 9, 2018, petitioner filed a petition with this Court requesting “disclosure of the information that would explain IRS decision-making” with respect to the preliminary award recommendation under section 7623(a) .

The WBO suspended further administrative consideration of petitioner’s whistleblower claims when the claims became subject to the instant litigation. On June 20, 2018, respondent filed a motion to dismiss for lack of jurisdiction on the ground that no determination has been issued to petitioner [*3] with respect to her whistleblower claims that would confer jurisdiction on this Court.

Key Issue:

The sole issue for decision is whether the letter respondent sent to petitioner recommending a preliminary award under section 7623(a) constitutes a “determination” within the meaning of section 7623(b)(4).

Primary Holdingshold that the preliminary award recommendation respondent issued to petitioner did not constitute a “determination” within the meaning of section 7623(b)(4) because it was not a “final administrative decision regarding * * * [the] whistleblower claims in accordance with the established procedures.”

Key Points of Law:

Section 7623(b)(4) provides that “[a]ny determination regarding an award under paragraph (1) , (2) , or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter).”

The Court held that a letter denying a whistleblower claim, although not labeled a determination, constituted a “determination” within the meaning of section 7623(b)(4) because it was “a final administrative decision regarding * * * [the] whistleblower claims in accordance with the established procedures.” Cooper v. Commissioner, 135 T.C. at 76 ; see Kasper v. Commissioner, 137 T.C. at 41 . Similarly, the Court held that a letter constituted a “determination” when it contained a statement on the merits of a whistleblower claim, referred for the first time in a letter to the whistleblowers to the fact that a determination had been made on their claim, and did not indicate that further administrative procedures [*4] were available to the whistleblowers.  Comparini v. Commissioner, 143 T.C. 274, 279 (2014).

The Court found that neither the WBO’s issuance of the preliminary award recommendation

under section 7623(b) nor the whistleblower’s acceptance of the award constituted a “determination” because the amount of the award remained “subject to conditions subsequent that could cause the award amount to be reduced.” Id. Accordingly, the Court held that, absent an intervening final determination confirming the amount of the award, the WBO “issue[d] a written notice that embodie[d] * * * [its] determination” when it issued the award check and that this action notified the whistleblower of the “final administrative decision regarding * * * [his] * * * claims in accordance with the established procedures.” Id. at 432 (citing Cooper v. Commissioner, 135 T.C. at 75-76)

InsightWhistleblower procedural issues continue to make their way through the Tax Court.  Pro set whistleblowers often run afoul of procedural foot-faults.  Such whistleblowers may often be better served through the assistance of a knowledgeable tax attorney with experience representing whistleblowers, given the procedural complexities in the area.


Chiarelli v. Comm’r, T.C. Memo. 2021-27

March 3, 2021 | Nega, J. | Dkt. No. 452-16

Short Summary

The IRS determined deficiencies against the taxpayer with respect to 2012, 2013, and 2015, as well as penalties for negligence, disregard of rules or regulations, and/or a substantial understatement of income tax

Petitioner prepared and timely filed Form 1040, U.S. Individual Income Tax Return, for each of the years at issue. On Schedules A, Itemized Deductions, petitioner claimed noncash charitable contribution deductions of $89,110, $93,087, and $77,300 for tax years 2012, 2013, and 2015, respectively. Petitioner attached Form 8283, Noncash Charitable Contributions, to his return for each of the years at issue.

Key Issue:

Primary Holdings

Key Points of Law:

InsightThe Chiarelli case serves as a reminder that the charitable deduction regulations are rather specific and detailed.  Taxpayers must take steps to ensure that they comply with the requirements to utilize a charitable deduction.


Mainstay Bus. Sols. v. Comm’r, 156 T.C. No. 7

March 4, 2021 | Kerrigan, J. | Dkt. No. 6510-18

Short Summary: On August 2, 2017, Mainstay Business Solutions filed a separate Form 843, Claim for Refund and Request for Abatement, for multiple tax periods. The Internal Revenue Service did not abate interest related to the tax periods. On April 4, 2018, Mainstay Business Solutions filed its petition pursuant to Section 6404(h) to review the Internal Revenue Service’s failure to abate interest. Later, on November 6, 2020, Mainstay Business Solutions filed an unopposed motion to withrdraw its petition.

Key Issue: Whether the Court has the discretion to allow the petitioner to withdraw its petition.

Primary Holding:

Key Points of Law:

Insight: Mainstay demonstrates that the Tax Court may allow a petitioner to withdraw its petition regarding interest abatement. This decision follows the Tax Court’s previous rulings involving collection due process petitions, innocent spouse relief petitions, and whistleblower petitions. However, deficiency cases are different. In those cases, a petitioner may not withdraw its petition before the Tax Court renders its decision in the matter.

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