Thursday, May 17, 2012

Offer in compromise - dissipated assets

In an "offer in compromise" case, one of the issues was whether there were "dissipated assets."  Taxpayer argued that Appeals erred in including his day trading losses as dissipated assets because doing so in effect “requires all taxpayers to liquidate all assets upon initial assessment of taxes to avoid potentially “dissipating” an asset via decline in asset value prior to payment. Under such a rule, a taxpayer would be required to sell her house immediately upon assessment of a tax liability for fear of a drop in its value.” The Commissioner points out, a mere drop in value of an existing asset would not count as dissipated because it would not have been “transferred” or “spent.” The court found day trading to be more speculative than, e.g., buying or refinancing a home, and therefore finding the former and not the latter to qualify as “disregard” for one's tax liability.

TUCKER v. COMM., Cite as 109 AFTR 2d 2012-1856, 04/20/2012 , Code Sec(s) 6330; 6320; 7804

Case Information:

[pg. 2012-1856]
Code Sec(s):       6330; 6320; 7804
Court Name:      U.S. Court of Appeals, Dist. of Columbia Circuit,
Docket No.:        No. 11-1191,
Date Decided:   04/20/2012.
Prior History:      Tax Courts, (2010) 135 TC 114 and (2011) TC Memo 2011-67, RIA TC Memo ¶2011-067 (opinions by Gustafson, J.), affirmed.
Tax Year(s):        Years 2000, 2001, 2002.
Disposition:        Decision against Taxpayer.

 Collection due process—review of administrative determination—hearings; appeals officers; duly appointed officers; IRS personnel—constitutional claims. Tax Court properly determined that IRS appeals officers, settlement officers, and team managers (collectively, appeals employees) involved in CDP hearings weren't U.S. officers who had to be appointed under Appointments Clause: appeals employees didn't exercise sufficiently significant authority to rise to officer-level status for Appointments Clause purposes. Although appeals employees did have authority to review/ compromise significant matters such as individual's tax liability, degree of discretion in exercising such authority was well below level necessary to qualify as even inferior officer under Appointments Clause. Notably, in reaching their decisions, which took place in informal proceedings without adversarial procedures, appeals employees were subject to significant supervision, prior IRS rulings, detailed guidelines, and consultation requirements such as having to seek advice from Chief Counsel Office or Associate Chief Counsel on novel or complex issues and obtaining approval from General Counsel regar2. Collection due process—review of administrative determination—offer-in-compromise—dissipation of assets— IRS discretion. Tax Court properly rejected day trader's claim that IRS's failure in CDP proceedings to accept his OIC was abuse of discretion: although settlement officer miscalculated value of dissipated assets that were includable in taxpayer's RCP, Court correctly determined that such error was harmless because corrected RCP was still more than taxpayer's outstanding tax debt. Taxpayer's objection that Court, by recomputing/correcting RCP, “improperly reworked” officer's analysis was off base since Court didn't alter officer's underlying reasoning or conclusion regarding dissipated amount being more than taxpayer's outstanding liability. Alternate argument that including day trading losses in dissipated assets in 1st place would effectively require taxpayers to liquidate all assets at time of initial assessment was also off base.ding certain monetary compromises. (212) 588-1113

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