Page 4 - Tax Controversy Corner: Can Taxpayers Rely on Informal Guidance in Attempting to Comply with the TCJA?

Tax CoNTroversY CorNer

have held that the Irs is bound to follow in court Internal revenue Code and other statu- (2007); A. Sadberry, 87 TCM 982, Dec. 55,547(M),
proceedings and may be treated as concessions tory provisions; proposed, temporary TC Memo. 2004-40.
by the Commissioner. See, e.g., G.A. Rauenhorst, and final regulations construing such 17 reg. §1.6662-3(b)(3).
119 TC 157, 171, Dec. 54,899 (2002). statutes; revenue rulings and revenue 18 Miller, 114 TC 184, 194–195, Dec. 53,811 (2000).
10 Lynn & Gerson, Quasi–Estoppel and Abuse of procedures; tax treaties and regulations 19 See, e.g., Guarino, TC sum. op. 2016-2 (rejecting
Discretion as Applied Against the United States thereunder, and Treasury Department taxpayers’ claim of reliance on publication,
in Federal Tax Controversies, 19 Tax L. rev. 487, and other official explanations of such stating that “nothing in the Irs Publication
495 (1964). treaties; court cases; congressional 551 provides authority” for the taxpayer’s
11 For non-corporate taxpayers, a substantial intent as reflected in committee reports, deduction); Campbell, TC sum. op. 2008-154
understatement of income tax exists in any joint explanatory statements of manag- (Tax Court rejected taxpayer’s claim of reliance
tax year if the amount of the understatement ers included in conference committee on an Irs publications on residential rental
exceeds the greater of 10% of the tax required reports, and floor statements made prior property expenses because “even assuming
to be shown on the return or $5,000, or 5% of to enactment by one of a bill’s managers; that reliance on Irs publications could shield
the tax required to be shown on the return if the General explanations of tax legislation petitioner form the imposition of the section
understatement relates to an adjustment under prepared by the Joint Committee on 6662 penalty, the publications he cites do not
Code sec. 199a. Code sec. 6662(d)(1). Taxation (the Blue Book); private letter support the propositions for which he cites
12 Code secs. 6662(d)(2); 6664(c)(1); E.G. Higbee, 116 rulings and technical advice memoranda them.”); Sadberry, TC Memo. 2004-40, at *6
TC 438, 446, Dec. 54,356 (2001). issued after october 31, 1976; actions on (explaining that “[a] more complete reason-
13 R.K. Howard109 TCM 1193, Dec. 60,245(M), TC decisions and general counsel memo- ing of the applicable instructions undercuts
Memo. 2015-38, at *20. randa issued after March 12, 1981 (as petitioners’ arguments”).
14 Id., at 20–21. well as general counsel memoranda 20 Treasury regulations provide: “The determina-
15 reg. §1.6662-4(d)(3)(iii). The full list of authorities published in pre–1955 volumes of the tion of whether a taxpayer acted with reason-
is as follows: Cumulative Bulletin); Internal revenue able cause and in good faith is made on a
service information or press releases; case-by-case basis, taking into account all per-
except in cases described in paragraph and notices, announcements and other tinent facts and circumstances … Circumstances
(d)(3)(iv) of this section concerning administrative pronouncements pub- that may indicate reasonable cause and good
written determinations, only the fol- lished by the service in the Internal faith include an honest misunderstanding of
lowing are authority for purposes of revenue Bulletin … . fact or law that is reasonable in light of all
determining whether there is substan- of the facts and circumstances, including the
tial authority for the tax treatment of 16 Casa de la Jolla Park, Inc., 94 TC 384, 396, Dec. experience, knowledge, and education of the
an item: applicable provisions of the 46,450 (1990); T. Weiss, 129 TC 175, 177, Dec. 57,206 taxpayer.” reg. §1.6664-4(b)(1).

This article is reprinted with the publisher’s permission from the Journal of Passthrough entities, a bi-monthly
journal published by Wolters Kluwer. Copying or distribution without the publisher’s permission is prohibited.
To subscribe to the Journal of Passthrough entities or other Wolters Kluwer Journals please call 1-800-344-3734
or visit taxna.wolterskluwer.com. all views expressed in the articles and columns are those of the author and not
necessarily those of Wolters Kluwer or any other person. © CCH Incorporated. all rights reserved.

74 JOURNAL OF PASSTHROUGH ENTITIES SEPTEMBER–OCTOBER 2019