Page 673 - TaxAdviser_2022

TAX TRENDS

However, the Tax Court was less
The court, while finding no clear answer to sure about Dollarhide’s 2007 case
the problem of the Ninth Circuit’s ambiguous because it had entered a decision find-
ing a deficiency in that case and there
mandate in the case, concluded that entering was no mention of it in the Ninth
a new decision would not deviate from it. Circuit’s opinion. Therefore, the court
found that it was “extremely unclear”
whether this meant it had the power
to change its prior decision because it
IRS in February 2011 during the audit to a refund of the credits for withhold- was not certain whether the decision
of his 2006 tax year. ing and excess Social Security tax from was affirmed sub silentio by the Ninth
The IRS took the position that 2006. In addition, the court held that Circuit’s failure to mention it. In addi-
although the credits were legitimate, Dollarhide had a $13,000 deficiency tion, it seemed to the court that far too
they could not be taken into account for 2007 and that Dollarhide Enter- much time had passed for it to enter-
in determining the amount owed to or prises, as the IRS had conceded, had tain a motion to vacate its decision and
from Dollarhide under the settlement. no deficiency. enter a new one.
The IRS reasoned that the withhold- Dollarhide appealed all three cases In order to solve this problem, the
ing and the excess Social Security tax to the Ninth Circuit. The Ninth Cir- Tax Court asked the IRS if there was a
should be treated, under Sec. 6513(b), cuit, observing that the settlement be- way that it could administratively abate
as having been paid on the due date of tween Dollarhide and the IRS did not the 2007 deficiency to reach the result
Dollarhide’s 2006 return in April 2007. mention anything about the statute-of- desired by the parties. The IRS was
Consequently, because Dollarhide did limitation issue, found that there was unable to do so, so the court was forced
not report the credits until he submit- no settlement agreement to enforce to decide, in the face of an ambigu-
ted his return in February 2011, four because Dollarhide and the IRS had ous mandate from the Ninth Circuit,
years after they were treated as being not agreed on the question of the whether it could vacate its old decision
paid, he had failed to claim a refund refundability of the withholding cred- and enter a new no-deficiency decision
for the credits within the three-year its for their 2006 tax year. Thus, the as the IRS and Dollarhide wished.
time limit in Sec. 6511(b)(2). Ninth Circuit held that the Tax Court
Dollarhide claimed he never would had abused its discretion in entering The Tax Court’s decision
have agreed to the settlement if he had a judgment on the purported settle- The Tax Court held that it did have the
known the IRS was going to deny the ment of the issue (Dollarhide, 855 Fed. power to vacate its prior decision in the
refund he was expecting based on the Appx. 402 (9th Cir. 2021)). It vacated 2007 case and enter a new decision in
credits. Dollarhide also claimed the the Tax Court’s decision regarding the accord with the parties’ agreement. It
returns would have been filed on time 2006 tax year and remanded the case found that there is no statute, regula-
except that the revenue agent conduct- for further proceedings. However, the tion, or useful precedent that covered
ing Dollarhide’s audit demanded that Ninth Circuit’s opinion did not address this situation. However, the court, while
he submit the returns to her instead of the Tax Court’s decisions regarding finding no clear answer to the problem
mailing them to the IRS. Therefore, Dollarhide’s deficiency for 2007 or of the Ninth Circuit’s ambiguous man-
Dollarhide refused to sign off on a Dollarhide Enterprises’ deficiency. date in the case, concluded that entering
final determination of the amount of After the Ninth Circuit issued its a new decision would not deviate from
the deficiency under the settlement. decision, the IRS and Dollarhide con- the Ninth Circuit’s mandate and that, as
In 2017, the IRS moved for an ferred and agreed to the Tax Court’s a general rule, the Supreme Court has
entry of decision in Tax Court. As the making entry of decisions showing no held that an inferior court has no power
Tax Court explained, “this is … an ex- deficiencies or penalties in the three or authority to deviate from the appel-
tremely common motion in our Court cases, but there would be no refund to late court’s mandate.
that parties use to set up for decision Dollarhide as well. The Tax Court con- In its order, the Tax Court also ad-
disputes about the computation of a cluded that there was no problem with dressed two unsettled issues pertinent
final deficiency once they’ve agreed on doing so for the Dollarhide Enterprises to Dollarhide’s case that it described as
settlement of all the individual issues.” case and Dollarhide’s 2006 individual being of interest to those interested in
The Tax Court, agreeing with the IRS, case, finding that this would be consis- tax procedure. First, it discussed whether
held that Dollarhide was not entitled tent with the Ninth Circuit’s ruling. it could continue its “longstanding

64 December 2022 The Tax Adviser