Jurisdiction is just a fancy word for “power.” In a speech later published as The Path of The Law, the sainted Justice Holmes said: “in societies like ours the command of the public force is entrusted to the judges in certain cases, and the whole power of the state will be put forth, if necessary, to carry out their judgments and decrees.” To Holmes, and others, courts are an instrumentality of government power. The Tax Court is one such court.
In the tax arena, §6214 gives the Tax Court the power “to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency...” And the whole force of the state---via the IRS---will be put forth, if necessary, to carry out its judgment regarding the correct amount of a deficiency.
Last week’s decision in U.S. Auto Sales, Inc. v. Commissioner, 153 T.C. No. 5 (Oct. 28, 2019), teaches a lesson in how the Tax Court takes a pragmatic approach to exercising its power to “redetermine...the deficiency.” In that case, the IRS sent the taxpayer an erroneous NOD. The error was in the taxpayer’s favor, to the tune of over $6 million. The taxpayer filed a petition, ostensibly asking the Tax Court to wield it’s power to “redetermine...the deficiency.” Un uh. The IRS moved to dismiss the case for lack of jurisdiction because, it claimed, the erroneous NOD was also invalid. Accordingly, there was no deficiency over which the Tax Court could exercise its power of review.
The Tax Court held that the NOD was invalid and so the Court could not exercise its power. But the vote was 9-6, spread over five different written opinions. My take-away is that what splits the majority and dissenting positions are different practical judgments about what parts of an NOD the Court should consider when deciding whether its jurisdiction has been properly invoked. NOD's serve different purposes and different parts of an NOD package contribute to those different purposes. Details below the fold.
November 4, 2019 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure, Tax Scholarship | Permalink
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