Friday, June 16, 2017

Tax Court Denies Claim in Offshore Account Case with Very Unusual Facts Because the Information Did Not Produce Collected Proceeds (6/16/17)

In Awad v. Commissioner, T.C. Memo 2017-108, here, a whistleblower case, the following is the key time line:

Date
Event
11/18/2008
Awad files WB claim (Form 211) identifying husband and wife (TH and TW, respectively) and their three adult children as owners of undisclosed foreign bank account.
2/?/2009
WBO assigns to LB&I
LB&I Agent reviews returns and decides to accept as filed based on insufficient information
8/?/2009
TH dies.
1/?/2010
TW and children file "voluntary disclosures pertaining to a previously undisclosed account at the same foreign bank" Awad had disclosed.to WBO
??/??/2010
SB/SE opens exam incident to voluntary disclosure
7/?/2010
LB&I returns the case to WBO (although a year after LB&I made decision not to pursue)
9/?/2010
WBO discovers SB/SE exam and forwards information to SB/SE for possible use in examination
??/??/2010
SB/SE Agent interviews Awad by telephone; Awad provides additional information
??/??/2010
SB/SE advises WBO that the information did not assist in the audit
8/??/2011
IRS enters closing agreement on the voluntary disclosure requiring tax, penalties (including MOP) in excess of $2M for TW and estate
9/??/2013
WBO learns of estate tax exam for TPH and refers information to SB/SE Estate and Gift Tax
1/28/2014
WBO denies award.


There are some significant, scantily explained, time lapses in the foregoing, but they are not relevant to the outcome because the examining agents involved in LB&I and SB/SE all attested that the Form 211 information did not contribute to the ultimate outcome -- the acceptance of the TH Estate and TW's voluntary disclosure.  After all, for collection, the information does have to contribute to collected proceeds to permit a WB award.

The thing that is curious to me is that there were no procedures to flag the matter when the WBO first assigned it to LB&I so that, after that date, the taxpayers could not qualify for voluntary disclosure.  It is true that the procedure assumes disqualification only after the IRS has flagged the taxpayer for audit.  (I have had one client thus disqualified even though the IRS had never notified him of the audit.)  I understand that LB&I had not yet decided to audit, but it seems to me that there should be some way to disqualify once WBO decides the information has sufficient gravitas to refer to Examination, at least while it is in that status.  Just my view.

No comments:

Post a Comment

Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.