On May 20, 2020, the Internal Revenue Service (IRS) announced that Andy Keyso has been named Chief of the IRS Independent Office of Appeals. He replaces Donna Hansberry, who retired in December 2019.

Mr. Keyso is a long time veteran of the IRS, with more than 25 years of service. During his career, he has held numerous positions within the IRS, including serving as the IRS Chief of Staff, 18 years in various positions in the IRS Office of Chief Counsel, including as Associate Chief Counsel of the Income Tax and Accounting Division. Mr. Keyso also served as Special Counsel to the Chief Counsel and as an attorney in the Procedure and Administration Division. Before coming to Washington, DC, Mr. Keyso worked in the field as a revenue agent in the former Newark, New Jersey District, where he later served as a technical advisor to the Chief, Examination Division. Since July 2017, Mr. Keyso has been the Deputy Chief of Appeals and acting Appeals Chief.


Continue Reading Andy Keyso To Head IRS Appeals

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

In Taylor Lohmeyer Law Firm P.L.L.C. v. United States, No. 19-50506, the United States Court of Appeals for the Fifth Circuit held that a Texas-based estate and tax-planning law firm (Firm) could not invoke the attorney-client privilege against an Internal Revenue Service (IRS) summons seeking the identity of its clients.

According to an IRS revenue agent’s declaration submitted in support of the summons, the Firm became a target for IRS investigation following an audit of one of its clients, an individual who had used the Firm’s services to establish and operate various foreign accounts and entities, through which the individual had funneled millions of dollars of unreported income. The IRS issued a John Doe summons to the Firm seeking, amongst other things, the identities of other clients for whom it had established foreign accounts or entities.


Continue Reading Fifth Circuit Rules that Law Firm Clients’ Identities Are Not Privileged

The United States Court of Appeals for the Tenth Circuit’s recent opinion in Standing Akimbo, LLC v. United States, No. 19-1049 (10th Cir. April 7, 2020), reminds us of the Internal Revenue Service’s (IRS) ability to obtain the information it needs to examine taxpayers’ returns using its powerful summons tool.

In May 2017, the IRS began auditing Standing Akimbo, LLC (Standing Akimbo), a Colorado limited liability company operating as a medical-marijuana dispensary. The audit focused on whether Standing Akimbo improperly claimed business deductions that were prohibited under Internal Revenue Code (IRC) section 280E. Generally, IRC section 280E provides that no deduction or credit is allowed for any amount paid or incurred in the carrying of a business if such business trafficks in controlled substances that are prohibited by Federal law. While legal under Colorado law, marijuana is still classified as a controlled substance under Federal law, and specifically the Controlled Substances Act. As a pass-through entity, any adjustments to Standing Akimbo’s returns would affect its owners’ (Taxpayers) individual tax returns.


Continue Reading IRS Flexes Its Administrative Summons Power in Recent Tax Case

The United States Supreme Court has picked up the pace this week, already issuing eight regular opinions and four opinions relating to orders as of today. We discuss the tax-related items here.

In Rodriguez v. FDIC, the question was how to decide which member of a consolidated group of corporations is entitled to a

Laura L. Gavioli, PC, recently wrote an article for Law360 on a US Court of Appeals for the District of Columbia Circuit’s decision that may provide an equitable avenue for hearing of late-filed petitions in US Tax Court. The Law360 article, “Myers May Make It Easier to Find Equitable Relief in Tax Court,” can be

Last week, the US Supreme Court ruled that North Carolina may not tax a trust’s income when the trust’s only contact with the state is the in-state residence of discretionary beneficiaries. The Due Process Clause requires a minimum connection between a state and the person it seeks to tax. The mere residency of the discretionary

When you do not pay your taxes, the Internal Revenue Service (IRS) has the power to file a “lien” on your property under Internal Revenue Code section 6321. The lien attaches “upon all property and rights to property, whether real or personal, belonging to such person.” Practically, this means that the IRS is giving notice that you owe it money and its debt gets priority to most debts that occur after the lien notice is filed. Historically, the lien law has been interpreted strictly and “foot faults” can invalidate the lien. A recent case, however, provides that if the federal tax lien uses the incorrect name, the lien may still be established and enforceable.

The taxpayer and his wife purchased their home as joint tenants in 1975. The taxpayer became the sole owner of the property after his wife passed away. In July 2007, the taxpayer filed federal income tax returns for tax years 2000 to 2004. Based on those returns, the IRS assessed taxes, penalties and interest, which remained outstanding at the time of his death in July 2009. On August 9, 2010, the government recorded a notice of federal tax lien (the Tax Lien Notice) against the taxpayer with the appropriate recorder of deeds in an amount equal to the previously assessed amounts. The Tax Lien Notice omitted the second “l” in the taxpayer’s first name, and failed to include a legal description or permanent index number for the property. The Tax Lien Notice did identify the correct address.
Continue Reading Seventh Circuit Upholds Lien Notice despite Incorrect Name

Most tax professionals are aware of the common-law “mailbox rule,” which provides that proof of proper mailing creates a rebuttable presumption that the document was physically delivered to the addressee. Internal Revenue Code (Code) section 7502 was enacted to codify the mailbox rule for tax purposes. Thus, for documents received after the applicable deadline, the document will be deemed to have been delivered on the date the document is postmarked. To protect taxpayers against a failure of delivery, Code section 7502 also provides that when a document is sent by registered mail, the registration serves as prima facie evidence that the document was delivered, and the date of registration is treated as the postmark date. In other words, if the Internal Revenue Service (IRS) claims not to have received a document, the presumption arises that such document was delivered so long as the taxpayer produces the registration.

Continue Reading Ninth Circuit Allows IRS to Overrule Common-Law Mailbox Rule