Tax News

CCH (cch.taxgroup.com) reports:

  The IRS was required to pay specified taxpayers' costs and attorney fees associated with remand proceedings attributable to the IRS's misconduct during the "Kersting" tax shelter project litigation. The proceedings for which fees and costs were awarded were directly related to the IRS's sanctionable conduct.

  CCH Comment . The IRS attorneys' unreasonable conduct involved arranging secret settlements with two of the test-case plaintiffs involved in the "Kersting" tax shelter test cases. The effect of these settlements was to pay the test-case plaintiffs' attorney to provide the appearance of independent representation of the test-case plaintiffs in the test-case trial. The Ninth Circuit Court of Appeals held that the IRS's conduct was a fraud upon the court ( Dixon , 2003-1 USTC ¶50,194) and remanded the remaining 27 cases to the Tax Court to settle the remaining cases on the same terms as those secretly settled. The Tax Court recently imposed similar sanctions against the IRS with respect to attorneys who worked in the same proceedings on a contingency fee basis ( Dixon,
Dec. 57,766). The Tax Court plans to address fees incurred by other attorneys involved in the proceedings in a future opinion.

  Related decision sub nom Dixon, CA-9, 2003-1 USTC ¶50,194.

R.F. Hongsermeier, TC Memo. 2009-273, Dec. 58,005(M)

Other References:

 
Code Sec. 6673

  CCH Reference - 2009FED ¶39,790.451

  Tax Research Consultant

  CCH Reference - TRC LITIG: 6,816.15