Alex Cheng-Yi Lee focuses his practice on US and international tax matters. He also has a strong background in material science and engineering. Read Alex Cheng-Yi Lee's full bio.

On April 24, 2020, the US Court of Appeals for the Eighth Circuit published its opinion in Wells Fargo & Co. v. United States, No. 17-3578, affirming a district court’s holdings that the taxpayer was not entitled to certain foreign tax credits and was liable for the negligence penalty for claiming the credits. Much has been written about the substantive issue, which we will not discuss here. Instead, we focus on the Eighth Circuit’s divided analysis relating to the reasonable basis defense to the negligence penalty.

In Wells Fargo, the taxpayer relied solely on the reasonable basis defense to the government’s assertion of penalties. Under Internal Revenue Code (IRC) section 6662(b)(1), a taxpayer is liable for penalty of 20% of an underpayment of its taxes attributable to its “negligence.” Various defenses are potentially applicable to the negligence penalty, which we recently discussed in detail here. One such defense is if the taxpayer can show it had a “reasonable basis” for its position. Under Treas. Reg. § 1.6662-3(b), this defense applies if the taxpayer’s return position was “reasonably based on” certain authorities specified in the regulations.


Continue Reading Eighth Circuit Applies Subjective Standard to Reasonable Basis Penalty Defense

On April 14, 2020, the Internal Revenue Service (IRS) issued informal guidance in the form of frequently asked questions (the “FAQs”), urging taxpayers to strengthen their transfer pricing documentation required under Internal Revenue Code (IRC) section 6662(e) and Treasury Regulations § 1.6662-6. IRC section 6662 provides several types of accuracy-related penalties on underpayments

On July 8, 2016, Judge Buch of the US Tax Court (Tax Court) granted the Internal Revenue Services (IRS) motion to compel depositions of six individuals in Dynamo Holdings Ltd. P’ship v. Commissioner.  That case involves the question of whether certain transfers between related entities are disguised gifts or loans.  The IRS has been

On June 24, 2016, the Internal Revenue Service (IRS) issued a memorandum (AP-08-0616-0003, available here) to the IRS Appeals Division (Appeals) providing new, uniform procedures for requesting assistance from the Examination Division (Exam) in docketed Tax Court cases. The guidance implements standard procedures that would treat petitioners similarly. Currently, when petitioners provide new information