1. On May 1, Year 5, the IRS mailed Patrice a notice of deficiency for her Year 2 tax year based on the unreported bonus. Patrice petitioned the Tax Court, and on June 1, Year 6, the Tax Court’s decision in Patrice’s favor became final. The decision was made on the ground that the bonus should have been income for Patrice’s Year 1 tax year. The statute of limitations on assessment for Year 1 expired in Year 5.
A. What recourse does the IRS have?
B. If the IRS has an option under Part A, what action would it have to take, and by what deadline?
2. On April 20, Year4, Sheila received a notice of deficiency from the IRS with respect to her Year 1 taxable year. The notice was dated December 1, Year 3. It had been mailed to her prior address, where her former roommate still resides. Sheila filed her Year 2 and Year 3 returns after moving to her cut current address, and that address was on those returns. Sheila also has a forwarding order in with the post office, but they delivereed the notice to her old address anyway. Her former roomate apparently received the envelope but did not open it. She finally put it in te mail to Sheila with some other documents; Sheila received it yesterday and brought it to you to ask what to do. She is concerned because the notice reflects an asserted deficiency of $50,000, which she cannot afford to pay in full. What do you advise ?
3.On May 31, Year 3, the IRS mailed Gloria a notice of deficiency with respect to her Year 1 tax year. Gloria had filed her Year 1 return on April 1, Year 2. The IRS erroneously did not send the notice of deficiency to Gloria’s last know address. It was ultimately forwarded to Gloria, and she received it on August 15, Year 3. Subsequently, an IRS employee who was working on Gloria’s case realized that the notice had not been sent to Gloria’s last know address. April 20, Year4, the IRS mailed a duplicate copy of the notice to Gloria’s last know address. She received it on April 25, Year 4. On June 1, Year 4. Gloria petitioned the tax Court. In her petition, Gloria moved to dismiss the case for lack of jurisdiction on the ground that no notice of deficiency was mailed to her within the time period required by the statute of limitations on assessment.
A. Is the Year 3 notice of deficiency invalid?
B. Would your answer to Part A differ if Gloria had portioned the tax Court on August 20, Year 3 instead of June 1, Year 4?
C. Assume that the Year 3 notice of deficiency was invalid.
i. Is the notice of deficiency that the IRS mailed in YEar 4 invalid as a “second notice” under Code section 6212 (c)?
ii. Assume that the notice of deficiency mailed to Gloria in Year 4 is not a prohibited second notice and does not suffer from any other infirmities. Under what circumstances, if any, would the notice be timely?
4. While preparing for a Collection Due Process hearing on behalf of a client, you come across a Field Service Advice memorandum that contains an interpretation of Treasury Regulation section(NNN) NNN-NNNN1(c)(3), which permits the IRS to compromise a tax liability if to do so would promote effective tax administration. The Office of Chief Counsel’s interpretation in the FSA is favorable to your client’s case. How might you use the FSA when negotiating with the Appeals Officer during the CDP hearing?