Tax Court In Brief | Goddard v. Comm'r | Collection Due Process, Penalties For Failure To Register A Tax Shelter

• Published date: 26 September 2022
• Subject Matter: Tax, Tax Authorities
• Law Firm: Freeman Law
• Author: Freeman Law

The Tax Court in Brief - September 19th - September 22nd, 2022

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.

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Tax Litigation: The Week of September 19th, 2022, through September 22nd, 2022

• Vorreyer v. Comm'r / Thoma v Comm'r / Dowson v. Comm'r, T.C. Memo 2022-97| September 21 2022 | Greaves, Judge | Dkt. Nos. (Consolidated) 27314-16 27846-16, 2634-19, 2636-19, 2666-19, 2670-19

Goddard v. Comm'r; Lee, Goddard, & Duffy, LLP v. Comm'r, T.C. Memo 2022-96| September 19, 2022 | Copeland, Judge | Dkt. No. 22334-17L, 23743-18L

Summary: This 32-page opinion, at its core, regards IRS Collection Process. Factually, the case regards tax liabilities accruing for years 1999 and 2000 and that pre-dated the American Jobs Creation Act of 2004 (AJCA). The tax liabilities in issue revolve around the since-repealed penalty provisions of section 6707 of the Internal Revenue Code. Thus, the opinion's future relevance in regard to the repealed section 6707 is questionable, but the opinion's long factual summary is telling as to the application of IRS Collection Due Process.

A factual summary that triggered the underlying tax liability is as follows: In 2004 the IRS began investigating Lee, Goddard, & Duffy, LLP (LGD) and William Goddard for promoter penalties under pre-AJCA sections 6707 and 6708 arising from abusive "short option strategy" (SOS) tax shelters and Custom Adjustable Rate Debt Strategy (CARDS) tax shelters. The IRS linked investors to these petitioners, as a person and an entity, involved in preparing those tax shelters. The IRS concluded that petitioners had worked with KPMG to promote SOS tax shelters first offered for sale in 1999 and CARDS tax shelters first offered for sale in 2000. KPMG was deemed the principal organizer under Temporary Treasury Regulation ' 301.6111-1T, and KPMG failed to register the tax shelters. Because Goddard and LGD assisted in the implementation, they were also required to register those alleged tax shelters under pre-AJCA section 6111, but they did not. See Form 8264, Application for Registration of a Tax Shelter.

After completion of a summons enforcement action, the IRS, in about May 2014, developed a pre-AJCA section 6707 penalty case against Goddard and LGD. The initiation of the case involved Form 5701, Notice of Proposed Adjustment; Form 886-A, Explanation of Items; a penalty computation; Publication 5 - Your Appeal Rights and How to Prepare a...