Page 478 - JoFA_2022

Easements had highest
However, due to the IRS’s erroneous he did not file timely returns for those
average donation amount
concession rooted in a misunderstanding years reporting this income.
of the terms of art between a “depository He filed a delinquent return for in tax year 2019
bank” and a “drawee bank,” the court 2013 on Dec. 22, 2017, reporting an
held that only the total value of the adjusted gross income of $1,919,000
seven checks not deposited by the date and tax of $689,923. He did not include Charitable contributions of easements
were by far the largest asset by average
of death ($366,000) was includible in payment for the full amount owed with
amount per donation at over $1 million,
the decedent’s estate. his return. more than 10 times the average gift of
■ Estate of DeMuth, T.C. Memo. On Dec. 26, 2017, he filed a delin-
corporate stock.

2022-72 quent return for 2014, reporting tax of
$514,875, and on Jan. 17, 2018, he filed
Easements ......................................$1,051,532
— David R. Silversmith, CPA, CFP, a delinquent return for 2015, reporting
CFE, is a senior tax manager in tax of $403,096. He made no payments Land..................................................... $552,977
Hauppauge, N.Y.; Mani Gupta, CPA, is toward his tax liability for either year. Real estate ......................................... $417,982
a senior tax manager in Cranford, N.J.; For each of the years at issue, the IRS Other investments ......................... $151,963
and Bhakti Shah, CPA, J.D., is a partner imposed penalties under Secs. 6651(a)(1)
Corporate stock ..................................$97,503
in Cranford, N.J., all with PKF O’Connor and (2) for failure to file and pay tax
Davies LLP. timely and/or Sec. 6654 for failure to pay Mutual funds .......................................$47,229
estimated tax, plus interest. All other property ..............................$72,458
The IRS issued a levy notice on
Sept. 4, 2019, in an effort to collect the Source: “Individual Noncash Charitable Contributions,
Tax Year 2019,” IRS Statistics of Income Bulletin
liabilities, which by then exceeded $2.5 (Summer 2022), Figure A.
million. One week later, the IRS issued
a notice informing Kelly that it had filed
two notices of federal tax lien (NFTLs).
Kelly timely requested a Collection receiving a first-time abatement, the
Due Process hearing for the levy notice settlement officer (SO) ruled, and the
and the NFTL filings. During the Tax Court agreed. The IRS had also
hearing, he asked for an installment assessed the same penalties for 2012,
agreement, withdrawal of the NFTLs, immediately before the first year at
Collection Due Process and abatement of the penalty additions issue, the court noted.
case favors IRS to tax for all three years, either under the Kelly had also argued he had reason-
IRS’s first-time abatement policy or for able cause for his failure to file and pay
The Tax Court upholds the IRS’s reasonable cause. his taxes on time. He claimed his wife’s
denial of a taxpayer’s requests for The IRS rejected all these requests spending habits contributed to financial
first-time abatement of penalties, and issued Kelly a notice of determina- problems beginning in 2007. She filed
an installment agreement, and tion sustaining the collection actions. for divorce in 2015, which he said
withdrawal of NFTL filings. He timely petitioned the Tax Court caused “financial hardship, emotional
to review the determination, and in problems, and depression.” The SO
By Hannah Pitstick Tax Court, the IRS moved for sum- rejected this abatement request, citing
mary judgment. the petitioner’s history of noncompli-
In a case involving a request to abate three issues Kelly raised in his CDP ance and consistently high income over
Issues: The Tax Court reviewed the
IMAGE BY ILLUSTRATOR DE LA MONDE/GETTY IMAGES judgment, allowing the remaining issues determination was an abuse of discre- proving reasonable cause, but because a
the previous several years. The court
penalties, the Tax Court partially
hearing to determine whether the IRS’s
granted the IRS’s motion for summary
stated Kelly faced an “uphill battle” in
reasonable-cause defense “usually entails
to go to trial to determine whether a
tion. Abuse of discretion exists when a
question of fact ill-suited to summary
determination is arbitrary, capricious, or
taxpayer’s failure to timely file returns
adjudication,” the court could not decide
and pay taxes owed was due to reason-
without sound basis in fact or law.
To qualify for a first-time abate-
the issue on summary judgment.
able cause.
Facts: Thomas E. Kelly was a
ment of penalties, a taxpayer must
Similarly, Kelly was not qualified for
securities broker residing in New York
a partial payment installment agreement
have had no penalties for the preced-
City who made $1 million to $2 million
liabilities. The court noted that Sec. 6159
noncompliance disqualified him from
annually during 2013–2015. However,
November 2022 | 33
journalofaccountancy.com ing three years. Kelly’s history of (PPIA) due to his current unpaid tax