Tax Court In Brief | Warner Enters., Inc. v. Comm'r | TEFRA And Partner's Belated Objection To Penalty Determination

• Published date: 26 August 2022
• Subject Matter: Tax, Compliance, Income Tax, Tax Authorities
• Law Firm: Freeman Law
• Author: Freeman Law

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Tax Litigation: The Week of August 22nd, 2022, through August 26th, 2022

Warner Enterprises, Inc. v. Comm'r, T.C. Memo. 2022-85 | August 22, 2022 | Buch, J. | Dkt. No. 17163-19L.

Short Summary: This collection case addresses issues presented on motion for summary judgment by the IRS, mainly asserting that taxpayer Warner Enterprises, Inc. (Warner) was precluded from challenging the IRS's compliance with statutory collection procedures in a final partnership proceeding. Warner was a partner in AD Investment 2000 Fund, LLC (the Partnership). The IRS issued a Notice of Final Partnership Administrative Adjustment for the Partnership's 2000 tax year; partnership-level determinations, including penalties. Those determinations were litigated in the Tax Court, and no partner raised the issue of whether the IRS had complied with the requirement to obtain supervisory approval of a penalty. See AD Inv. 2000 Fund LLC v. Commissioner, T.C. Memo. 2016-226, vacating and superseding T.C. Memo. 2015-223. So, the IRS assessed and began collection of the tax and penalties that resulted from the partnership-level proceeding. Warner received a notice of federal tax lien filing and a notice of intent to levy from which it requested a collection hearing with the IRS Office of Appeals. Warner contested its liability, alleging that it had not received an affected items notice of deficiency. Warner also alleged that the IRS had not complied with the supervisory approval requirement and requested proof of compliance. But, the settlement officer did not provide any documents showing approval. The IRS mailed Warner a notice of determination sustaining the lien filing and proposed levy. Warner timely petitioned the Tax Court alleging that the IRS erred by precluding Warner from raising noncompliance with assessment procedures as an issue.

Key Issues:

Whether the IRS showed, as a matter of law, that the settlement officer was not required to prove compliance with assessment determination and supervisory-approval matters because the Tax Court had already conclusively determined the applicability of penalties?

Primary Holdings:

Yes, the IRS proved its...