Last week, I discussed the case of Mr. Kearse, whose three lawyers secured him a CDP win some five years after filing a Tax Court petition. They got the win because of an IRS screw-up. They did not get the underlying assessment invalidated. They did not get a merits determination of the underlying liability. They did not kill future collection. They got delay. I questioned what value that whole process added for either Mr. Kearse or taxpayers in general.
This week I discuss the case of Linda J. Romano-Murphy v. Commissioner, 152 T.C. No. 16 (May 21, 2019) (Judge Morrison). Ms. Romano-Murphy, representing herself, secured a CDP win some 10 years after she first filed her Tax Court petition. She got the win because of an IRS screw up. Unlike Mr. Kearse's team she got the underlying assessment invalidated. Once again, however, I question whether this win created value for either this taxpayer or taxpayers generally.
The case took 10 years because Ms. Romano-Murphy initially lost her Tax Court case on the merits of her liability. She appealed to the 11th Circuit in 2013 on a procedural issue. Three years later that court rendered its opinion that the IRS had screwed up by not following a new rule that the 11th Circuit discovered buried in an implication in the statutory language of §6672, a rule no one else had spotted during the 20 years the statute had been in operation.
The new rule is a procedural one: when the IRS proposes to assess a Trust Fund Recovery Penalty (TFRP) under Section 6672 and the taxpayer timely asks for a hearing with the Office of Appeals, then the IRS may not assess the liability until after Appeals performs its review and issues a document that reflects its final determination.
The 11th Circuit sent the case back to the Tax Court to decide whether the IRS screw-up was harmless error. In a 87-page opinion, the Tax Court said the IRS error was not harmless and held that the assessment was void. It reversed the Appeals CDP determination since the IRS cannot collect a void assessment.
You may think this is great result for Ms. Romano-Murphy. She got the assessment invalidated! I wish I shared that happy outlook. Alas! I think the result is really just a win of delayed assessment and later collection. And I cannot see how the 10-year delay benefits either the taxpayer or tax administration. Details below the fold.
June 3, 2019 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure | Permalink
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