Federal Tax Update

Attorney-CPA, The, Oct 2004 by De Jong, David S

In Janis v. Commissioner. T.C. Memo 2004-117, the Tax Court determined that the basis of inherited property is the value after discounts and not prior to these reductions.

In Sorenson v. H&R Block. Inc.. 94AFTR2d 20045177, the First Circuit Court of Appeals agreed with a Massachusetts Federal District Court that Block breached contract law and fair trade practices by advising the IRS prior to the audit that the taxpayer had committed fraud but that damages were limited to the $630 cost of the return; the Court denied a larger recovery both on grounds that a tax preparer had no fiduciary obligation to a client under state law and on grounds that a taxpayer has primary responsibility for the accuracy of his return.

In Hunter v. Commissioner. TC Memo 2004-81, the Tax Court determined that 1RS is put on notice of a change in address by a new taxpayer address shown on a Form 2848 (Power of Attorney); the Court indicated that Form 8822 (Change of Address) is not the only way of providing "clear and concise notice" to the 1RS of a change.

In opkv v. United States. 94 AFTR 2d 2004-5157, a Pennsylvania Federal District Court indicated that the U.S. Supreme Court decision in Craft allowing an 1RS lien to attach to tenants by the entireties property for the liability of one spouse applies not only in states with entireties protection created by statute but also in states where this husband-wife protection is based upon common law; it accepted the 1RS position that the interest of each spouse should be valued equally; in In Re Gallivan. 94 AFTR2d 2004-5275, a Missouri Bankruptcy Court also agreed that tenants by the entireties property gets 50-50 treatment.

In Robinette v. Commissioner, 123 TC No. 5, a divided Tax Court determined that IRS could not revoke an Offer in Compromise based on an alleged late filed return for a subsequent year when the accountant testified that the return was timely mailed between 11 p.m. and midnight on October 15 where IRS had no record of receipt.

In Internal Revenue Service v. Holmes, 93 AFTR2d 2004-1648, a Georgia Federal District Court agreed with the Bankruptcy Court in finding that 1RS must consider a debtor's Offer in Compromise while in bankruptcy; a Virginia Federal District Court had previously reached the same conclusion.

In Poindexter v. Commissioner. 122 TC No. 15, the Tax Court determined that a taxpayer at a collection due process hearing may challenge the accuracy of an amount reported on the taxpayer's own return.

In Pavne v. United States. 93 AFTR 2d 2004-1286, an Illinois Bankruptcy Court accepted the presumption that a return was filed for a "missing" year when returns for a number of years both before and after that year were professionally prepared and filed together, allowing discharge of all years in bankruptcy despite a pre-filing assessment by 1RS for the year in issue (going against the weight of authority holding that a post-assessment filing either is automatically not a "return" or under the facts is not an "honest and reasonable attempt to satisfy the requirements of the tax law)."