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Post details: Six-Month Limitation Period to Request Refund of Enhanced Interest Imposed at Tax-Motivated Transaction Rate Inapplicable; IRS Notice Inadequate and Misleading (McGann, FedCl)
10/10/07
Six-Month Limitation Period to Request Refund of Enhanced Interest Imposed at Tax-Motivated Transaction Rate Inapplicable; IRS Notice Inadequate and Misleading (McGann, FedCl)
CCH (cch.taxgroup.com) reports:
The enhanced interest imposed by the IRS under Code Sec. 6621(c) on a couple involved in a limited partnership was not a partnership item that could be treated as a computational adjustment. The Tax Court's dismissal of the partnership proceeding for failure to prosecute could not be read as a determination that the partnership engaged in a tax-motivated transaction that would cause the enhanced interest to become a computational adjustment on the partner's returns. Therefore, the couple's claim for refund of the interest was not barred by the six-month limitation period under Code Sec. 6230.
The taxpayers argued that the enhanced interest was not a tax liability and, therefore, was not a computational adjustment to which the Code Sec. 6230
six-month limitations period for claiming a refund could apply. However, the interest was held to be a "tax" as that term is used in the Internal Revenue Code. Although the rate of interest was governed by Code Sec. 6621, the interest itself was imposed by Code Sec. 6601.
Moreover, neither the Form 4549A, Income Tax Examination Changes, nor the notice issued to the couple showing the balance due provided adequate notice that the IRS was imposing interest at the enhanced rate. The form indicated that no enhanced interest was being imposed and the notice listed only the standard underpayment interest rates. Thus, the communications were not sufficient to trigger the six-month limitations period.
T.H. McGann, FedCl, 2007-2USTC ¶50,703
Other References:
Code Sec. 6230
CCH Reference - 2007FED ¶37,769.025
Code Sec. 6601
CCH Reference - 2007FED ¶39,415.323
Code Sec. 6621
CCH Reference - 2007FED ¶39,455.605
Tax Research Consultant
CCH Reference - TRC PENALTY: 9,052
CCH Reference - TRC IRS: 27,154
CCH Reference - TRC IRS: 36,052.05
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