Details

Written by: Lewis Taub, CPA

Published: 27 September 2016

Shareholders of an S Corporation that has a loss from operations are often concerned with whether or not they have basis in the stock and debt in order to use this loss on their tax returns. A critical issue that is often not considered is whether shareholders have a sufficient amount at risk with regard to the loans made to the S Corporation. Both the basis rules and the at-risk rules must be met in order for a shareholder to deduct business losses from an S Corporation. This article will address certain key elements of the at-risk rules which are contained in Section 465 of the Code.

Section 465(c)(3) states that for tax years beginning after December 31, 1978, the rules of the section apply to each activity engaged in by a taxpayer in carrying on a trade or business. Therefore, the rules apply to any S Corporation shareholder engaged in a trade or business. Often practitioners presume that the at-risk rules apply only to partnerships and therefore do not give the application of the rules to S Corporations sufficient consideration.

Contribution of Cash or Other Property

Sec. 465 states that a taxpayer is at-risk in an activity for the amount of money and the adjusted basis of other property contributed to the activity (Section 465(b)(1)(A)). If a shareholder contributes property that is subject to a debt, the amount at-risk depends upon whether the shareholder is personally liable for the repayment of the debt. If the shareholder is personally liable, the amount at risk is increased by the full amount of the property’s adjusted basis. However, if the shareholder is not personally liable, the amount at risk is increased by the adjusted basis of the property contributed and decreased by the nonrecourse debt (Prop. Regs. Sec. 1.465-23(a)).

What About Loans From The Shareholder to the S Corporation?

A very significant difference often arises between a shareholder’s basis and at-risk amount with regard to loans made by a shareholder to an S Corporation. Section 1366 and 1367(b) provide that a shareholder’s basis is increased by loans made to the S Corporation. However, under the at-risk rules of Sec. 465, these loans might not increase the shareholder’s atrisk amount. Section 465(b)(2) states that an S Corporation shareholder is atrisk only with respect to amounts borrowed for use in the corporation to the extent that the shareholder:

A) is personally liable for the repayment of such amounts; or (B) has pledged property, other than property used in such activity, as security for such borrowed amount (to the extent of the fair market value of the taxpayer’s interest in such property).

Under item (A) above, if a shareholder of an S Corporation borrows money from a bank and lends those funds to the S Corporation, the terms of the note between the bank and the shareholder will determine the shareholder’s liability.

Item (B) applies when a shareholder borrows money from an unrelated party, uses as collateral property of an S Corporation as security, and lends the funds to the S Corporation. This loan from the shareholder to the S Corporation gives the shareholder basis in debt but does not increase his or her at-risk amount. Both tests must be met in order for the shareholder to be able to deduct the loss on their personal return.

Company assets are often security for a loan the shareholder takes out in order to loan funds to the S Corporation. The shareholder’s guarantee of a loan made directly from the bank to the S Corporation would not create basis. As a result, the back-to-back loan described above is often used to create basis. However, practitioners often neglect to consider the atrisk issue. In order to avoid the claws of Sec. 465, collateral other than assets used by the activity must be utilized. It must be noted that if the shareholder pledged S Corporation stock as collateral, the shareholder would again not be at-risk.

Exception for Qualified Non-recourse Financing

There is an exception to the at-risk issue discussed in the case of qualified nonrecourse financing under Section. 465(b) (6). A shareholder is at risk with regard to qualified nonrecourse financing that is:

• Borrowed with respect to the activity of holding real property;

• Borrowed from a qualified person;

• Financing for which no person is personally liable for repayment; and

• Not convertible debt.

Borrowing from Persons Having an Interest in the Activity

This is another very significant trap for S Corporation shareholders. Under Section 465(b)(3) a shareholder is not at risk with regard to amounts borrowed from any person who has an interest in the activity or from a person who is related to a person with such an interest. Regs. Sec. 1.465-8, provides that even if an S corporation shareholder is personally liable for repayment of a loan for use in the S corporation, the shareholder will not be considered at risk if the money is borrowed from a person who has a capital interest in the S corporation. A fellow shareholder of the S corporation is considered to have a capital interest in the entity.

Section 465(b)(3) also states that a shareholder is not at risk with regard to money borrowed from an individual who has an interest in the net profits of the entity. Therefore a shareholder would not be at-risk for money borrowed from an employee of the S corporation whose annual bonus was fixed as a percentage of the corporation’s net profits.

Summary

Basis is not enough! Separate considerations must be taken into account to determine the at-risk amount of S corporation shareholders. Section 465 contains many traps that will limit or even prevent S corporation shareholders from deducting their pro-rata share of the company’s losses on their current year tax returns. Practitioners must be fully cognizant of the Section 465 rules in order to properly plan for the impact of the S corporation’s year-end results.

Lewis Taub is a Managing Director in the New York City office of CBIZ MHM, LLC and an active contributor to the S Corporation Technical Resource Committee of the AICPA. Lewis has been an Adjunct Professor at Fordham University’s Graduate School of Business.

Details

Written by: Steven V. Melnik, CPA, LLM

Published: 22 September 2016

Tax scandals have plagued the United States in the last decade. Taxpayers and organizations have been victims of tax scams both by tax resolution firms as well as the IRS. In order to avoid being a victim of either, it is important tax payers understand their rights and what representatives and the IRS can and cannot do. Knowing and understanding them will set up safeguards to prevent being enveloped in a tax resolution scandal.

In the last decade, major tax resolution firms have been sued by taxpayers and state authorities for allegedly misrepresenting their ability to resolve IRS tax debt, and for some, this resulted in the company going out of business.

J.K. Harris & Co. was founded by CPA John K. Harris in 1997 and became the largest tax resolution firm in the United States. This firm has been sued several times by taxpayers. In fact, in 2007, it settled a class action suit filed in the South Carolina Circuit for approximately $6.2 million. Then in 2008, J.K. Harris also settled a suit with several Attorneys General of 18 different states for approximately $1.5 million.

Roni Lynn Deutch, a Professional Tax Corporation, was founded in 1991 by Tax Attorney Roni Lynn Deutch, LLM. In 2007, the New York City Department of Consumer Affairs brought suit against Deutch in which the firm settled by agreeing to pay $200,000 restitution to consumers and $100,000 in fines to the City of New York. Then in 2010, then California Attorney General Jerry Brown, and now Governor of California, filed suit against Deutch in California Superior Court in the County of Sacramento for $33.9 million in civil penalties and restitution to taxpayers, and a permanent injunction. Deutch then publicly announced that her firm would be closing in May of 2011.

TaxMasters Inc. was founded by CPA Patrick Cox in Houston, Texas. In 2010, it was sued by the Texas Attorney General on behalf of over 1,000 taxpayers. The Attorney General of Minnesota filed suit against TaxMasters for allegedly misleading Minnesota residents about its ability to reduce their tax debt and for making unrealistic promises.

Each of these firms had an “F” rating with the Better Business Bureau. Each was high-profiled within the media. Each did extensive promotional advertising. And each bamboozled many thousands of taxpayers.

Identifying and Selecting Competent Tax Resolution Professionals

It is important to remember that if something sounds too good to be true, it usually is. Prior to determining eligibility for a settlement, the firm must ask questions about income, expenses and assets. If these questions are not asked, the only eligibility would be for a Streamlined Installment Agreement assuming the taxpayer owes $50,000 or less.

Selecting a reputable tax professional can save from more than the stress of dealing with the IRS; it can save time and money. Below are tips for selecting a reputable tax professional:

1. Investigate the reputation of the tax resolution professional. If the tax resolution professional/company has derogatory remarks about it or has been sued before by taxpayers and has lost, this is an indication of a tax scam. A reputable tax resolution professional/company will have great rapport with clients as well as other tax resolution professionals/ companies. A starting point in your research may be the Internet, or the Better Business Bureau. On the Internet, do a Google search with the company’s name followed with: “complaint,” “con,” “lawsuit,” “problems,” “scam,” “fraud.” Read everything. It’s consumer beware.

2. Do not believe a tax resolution professional who makes promises or guarantees. The only thing a tax resolution professional/company can guarantee is that they will do their best or put forth the best effort on the case. Tax resolution professionals and companies cannot promise or guarantee an outcome because the final determination is made by the IRS. They cannot guarantee the taxpayer will qualify to settle debt for less, or that they can stop IRS collections.

3. Do not believe the success rates reported by tax resolution professionals without conducting independent research. Be fully aware that the success of one case does not guarantee the success of another. Reputable tax resolution professionals will not disclose their success rate or indicate that their success on another case guarantees the success on a new case.

4. Do not pay unreasonable fees. Most tax resolution professionals will charge a flat fee for their services. Typically, the cost may vary with the service. All fees should be reasonable. One way to tell if the fees are, in fact, reasonable is by researching how much other tax professionals charge for the same service. Discuss the case with other tax professionals prior to choosing one.

5. Make sure the tax resolution professional is responsive. A reputable tax resolution professional/company will understand client communication is the most important responsibility in representing taxpayers, its clients. Tax payers a right to know what is going on with their case, and have the right to contact the tax professional to ask any questions concerning their case.

If the tax resolution professional fails to respond to your calls within a reasonable time (usually 24 to 48 hours), consider hiring one who is able to do so. Allow the tax resolution professional a reasonable time to respond to requests.

6. Read the Retainer Agreement thoroughly. All tax resolution professionals should have a retainer agreement or contract to sign prior to retaining their services. The contract should explain what service/services are being provided, and what the taxpayer is paying for. Do not sign an agreement without reading and understanding every clause. Ask questions for any items that raise a concern. If there isn’t a retainer agreement or contract, this is a strong indication that it may be a scam.

IRS Tax Scandal of 2013

In general, the IRS handles cases professionally and follows the guidelines, policies and procedures of the Internal Revenue Manual (IRM). In 2013, however, a scandal erupted involving the IRS and its treatment of various 501(c)4 tax exempt organizations.

Donations given to 501(c)4 organizations are usually not tax deductible and donors are kept anonymous unless the donations are $5,000 or more. If they exceed $14,000, they may be subject to the gift tax.

While these organizations are prohibited from donating to the campaigns of political candidates, they are able to participate in lobbying and campaigning. The IRS experienced a rapid increase in applications for 501(c)4 status. Applications nearly doubled after the January 2010 Supreme Court decision that loosened campaign-finance rules.

It has been alleged that employees of the IRS inappropriately targeted conservative 501(c)4 organizations by applying more scrutiny than to those supporting liberal causes, and it deviated from the policies and procedures dictated by the Internal Revenue Manual (IRM). Tea Party groups investigated by the IRS reported the IRS made unusually extensive demands, such as asking them to provide social-media posts, books that members had read, and whether any members of the group planned to run for public office in the future.

In some cases, the questioning took almost three years, which prevented some groups from participating in the 2010 and 2012 elections. General Russell George, Treasury Inspector, investigated the scandal in order to determine whether the IRS has correctly applied the law to these 501(c)4 groups, or whether political influence was a contributing factor of the inappropriate targeting of conservative 501(c)4 groups.

The acting IRS Commissioner, Steven Miller, was fired by President Obama. Miller alleged that the targeting of conservative groups was the result of mismanagement, and not due to partisan politics. In the first hearing, Miller acknowledged that he was aware of the investigation for almost a year. He refused to release the names of the IRS employees that targeted the conservative groups, and Republicans learned that Deputy Treasury Secretary, Neal Wolin, was aware for almost a year that a government watchdog was looking into inappropriate targeting by the IRS.

If You Suspect Foul Play … What Should You Do?

The recent IRS scandal of 2013 was not the first time the IRS has been involved in a scandal. It has been accused of corruption ever since the institution of the income tax in order to raise funds for the Civil War. The IRS also faced similar scrutiny during the hearings of the 1990s that led to the Tax Reform and Restructuring Act of 1998, which changed the rules on how IRS employees identified themselves and conducted audits. It is important to understand the Internal Revenue Manual1 so you may be aware of what information the IRS employees are entitled to ask for and under what circumstances. It provides the procedures and guidelines for which IRS employees must act or conduct various tasks.

The IRS cannot arbitrarily select certain taxpayers or organizations for review. It must apply the same standard to all, a standard which would be outlined in the IRM.

Taxpayers have rights as outlined in the Taxpayer Bill of Rights.2 So take some time to read the Taxpayer Bill of Rights and know when those rights are violated by an IRS employee. Generally, the IRS may request any information that is related to the tax matter at hand. However, it must provide you with a reason for why the information is being requested and what it is to be used for.

Generally, the IRS cannot:

• Discriminate against taxpayers or organizations because of your color, race, sex, religion, national origin, disability, or age, or political party affiliation.

• Disclose your information to unauthorized third parties—your information should be kept private and confidential by the IRS.

• Be unprofessional—IRS must provide professional and courteous service.

There may be times when you encounter an IRS agent that is overzealous in their collection efforts, goes beyond the scope of their authority, or does not follow the Internal Revenue Manual. When this occurs, you should first contact the manager of the IRS employee. If you are unable to resolve the issue with the manager, you may then contact the Taxpayer Advocate Service (TAS) for assistance. If the TAS is not able to assist in the matter, you may then consider writing a letter to the IRS director for your area or the center where the return was filed. You also have the right to appeal the IRS decision, or file suit against the IRS in a court of law.

Endnotes
1. IRS.gov/irm/index.html

2. IRS.gov/pub/irs-pdf/p1.pdf

This is an excerpt from Tax Relief and Resolution by Steven Melnick, CPA. Melnick is a licensed attorney, LLM in Taxation. He is also a professor of tax law, and a Chairman of Continuing Education Programs for Tax Professionals at the City University of New York.

Details

Written by: T. Steel Rose, CPA, ACS Editor

Published: 22 September 2016

Tax resolution is a fascinating way to expand your firm as long as you don’t overpromise expected results. CPAs are in a unique position along with attorneys and EAs. As CPA Dan Henn describes it, “Tax resolution is when they [taxpayers] haven’t filed or owe a lot or both.” There is a greater need for adequate client representation before the IRS because of the proliferation of correspondence audits and horror stories about dealing with an understaffed IRS.

“We deal with other issues first, file the unfiled returns, pay or get on payment plan, and then ask for penalty abatement,” Henn said. “Say, a client owes over $100,000 from 2006. After filing the financials, he may owe $300 a month, but will only owe for a maximum of 10 years from the date of the return. Then it is uncollectable.”

Gaining first-time penalty abatement (FTA) is determined by your client’s qualification. You need three good years. You write a letter asking for the abatement. It is a case-by-case basis. Some agents approve, some don’t. You need a really good excuse. There are reasons the IRS will allow due to reasonable cause, medical, gambling, bad advice.

“Another client may owe $250,000 from 2004 with no money to pay,” Henn said. “He may be put into ‘currently uncollectable status,’ which the IRS is supposed to check every year but doesn’t always.

“With a partial pay agreement they are supposed to review every two years, but may not, due to the staffing burden at the IRS. [Taxpayer] must file at least the last six years, unless a substitute for return is filed for them by the IRS. The clock starts ticking after you file the return and the liability is assessed. This establishes the clock ticking over the ten years. You could be audited and get a whole new clock based on the liability of the audit. The ‘substitute for return’ prepared by the IRS is almost never accurate. The clock on your ability to amend and the IRS ability to audit is three years.”

You file Form 433 and provide the income and expenses of the taxpayer. You then determine the value of assets and liabilities or judgments against the taxpayer. Software helps prepare these by providing a survey of the taxpayer’s financials and saves time by populating the form.

“It takes patience,” Henn said. “Even the practitioner hotline can keep you on the phone two hours and torture you with a polite disconnect. You can file an amendment. If agent is not cooperative then you can escalate to the manager. If no satisfaction can be found there then you can file an appeal. “It is rarely useful [for the taxpayer] to talk with the agent. Taxpayers get nervous and become chatty-Cathys. Then, the IRS asks more questions, and person becomes irritable and that doesn’t help his case.”

An Offer in compromise (OIC) is not the primary way to get satisfaction in tax resolution. Part of the engagement is to determine reasonable collection potential (RCP) which determines taxpayers’ ability to make a payment. “They [the IRS] give you a financial rectal exam,” Henn said. “They verify what you say is true from court records and could drive by your house to see the house and cars you drive. Once they establish liability then the IRS can come after you.” If a client can pay it all, and it’s guaranteed to be under $10,000, it can be done online without help and without financial statements. “If say you owe $50,000 and only have $15,000 you may be an offer in compromise candidate,” Henn said. You must stay compliant for five years going forward paying all taxes and filing all returns.

If you are close to the end of the statute of limitations, you may be better off waiting rather filing an OIC. “As an advisor you must ask everything, even ask if client is inheriting money,” Henn said. “The IRS is entitled to 80% of any asset you own, including your house and inheritance. The IRS would take the inheritance in a Vanguard account.” Therefore, an OIC may be the better alternative. “For the OIC the IRS must do their due diligence,” Henn said. “You submit an OIC, they review for documentation, ask for more and then give it to someone who does the analysis.”

“The IRS checks the Department of Motor Vehicles for cars you own and the county [courthouse] for real estate property owned,” Henn said. They may check patents and lawsuits determined in your favor.” It will generally take a year to two. If the IRS denies the OIC, the statute of limitations begins ticking again. The time did not deduct when the OIC was filed.

It is a professional opinion on whether to file for partial pay installment agreement on Form 433, OIC (433 OIC) or currently uncollectable status. The IRS has a wizard online. The IRS does not abate interest, but can be included in an OIC. When you pay you are reducing the principal. It all may go away after 10 years of currently uncollectable status.

“If a business goes bankrupt, the trust fund penalty for unpaid payroll taxes will be assessed to the owner of the firm, which may come later before the ten years can start,” Henn said. “The IRS says they want people in the system and does want to not put people out of business but it does happen.”

Liens and levies are the tools of the IRS as Henn describes it. “When they garnish they may take two-thirds of a paycheck,” Henn said. “They request you sell the personal property usually on the uncooperative. They no longer make you sell your primary residence and keep two cars. You can’t be forced out of your house in most cases.”

When asked about how he got into tax resolution and what he likes about it, Henn reminisced about the people. “I look for the best in people,” Henn said.” I help people with an issue; they are shameful, fearful and angry. It’s like bankruptcy; you help good people in a situation out of problems, even though it was bad money management.”

“So you can sleep better at night,” Henn said. I like it. It’s like taking the boa constrictor off of them so they can breathe again. It helps them start again.”

Publishing CPA Magazine since 2002, T. Steel Rose began his career with Price Waterhouse leading to the start of Rose & Cash, CPAs. He was a VP for Solomon Software, now owned by Microsoft, and launched CPA Software News in 1991.

Details

Written by: Kathleen M. Lach

Published: 22 September 2016

We are vary familiar with the ability of the IRS to take aggressive collection action against an individual or business with unpaid tax balances. Most commonly, it will levy a bank account or receivable, or garnish wages. Recently, however, we have experienced more aggressive actions by IRS collectors in their efforts to secure payment on tax debts. We would like to briefly discuss two lesser-known actions which may be imposed by the IRS to take a client’s assets, of which you should be aware.

The Nominee Lien

Under IRC §6321, “If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.” A federal tax lien may only attach to property in which a delinquent taxpayer has rights.

To determine whether a taxpayer has rights to property under the federal tax lien statute, courts must look to state law.1 The federal tax lien statute does not create property rights, but may attach consequences to those rights.2 The consequences in most cases are the rights to equity interests up to the amount of the lien or balance due against the property.

Under a “nominee” theory, the nominee must hold legal title to property for the benefit of someone else. The facts and circumstances of each case are carefully reviewed to determine if a nominee situation exists, including: (1) a close personal relationship between the nominee and the transferor; (2) the nominee paid little or no consideration for the property; (3) the parties placed the property in the name of the nominee in anticipation of collection activity; (4) the parties did not record the conveyance; and (5) the transferor continues to exercise dominion and control over property.3 The IRS is looking closely at real property (most commonly) held by a relative of a tax debtor to determine if it can assert a nominee claim.

One mechanism carefully scrutinized in these situations is the use of a quitclaim deed. The effect of a quitclaim deed is governed by state law, but in many states, a quitclaim deed has the effect of conveying to the grantee all the then existing legal or equitable rights of the grantor in the property described.4 The IRS has challenged such quitclaim transfers under its theory of nominee liens. The Internal Revenue Manual states: “A nominee situation generally involves a fraudulent conveyance or transfer of a taxpayer’s property to avoid legal obligations.”5 There must be adequate consideration (or payment) for any transfer to overcome such a challenge, or the IRS may proceed to collect against a third party’s assets. In such a case, the third party does not have the same rights as a taxpayer to due process under the Internal Revenue Code. The third party must take the costly action of suing the government in federal court to protect his or her property.

For example, real estate was transferred to a spouse by quitclaim deed. The spouse/transferee handled all expenses for the home, except the mortgage. She also handled a significant portion of family expenses. Some years later, the spouse/transferor incurred tax debts. The IRS imposed a nominee lien upon the transferee, whose only recourse was to sue to quiet title in federal court.

Adding a nuance to its arsenal, the IRS has attempted to bolster its nominee lien theory by adding a novel “lien tracing” component based on a very narrow finding in one case, Municipal Trust and Savings Bank v. U.S.6 The facts in that case involved an Estate taxpayer and a complex series of land transfers. Estate property was distributed when tax debts were due and owing, thus the U.S. was able to recover funds from the distributed assets. The limited case law in connection with the government’s lien tracing theory deals mainly with nominee situations, or fraudulent transfers to avoid tax debts. Although lien tracing seems like a stretch to reach assets, a cautious approach is warranted in these types of situations.

Jeopardy and Termination Assessments

Another extraordinary power of the IRS whereby it may take an individual’s property or money, based on suspicion and assumptions, is its ability to make “termination”7 and “jeopardy” assessments. If the IRS chooses to take this action, and it withstands any appeal, the tax is immediately due and payable.8 These procedures can be used to freeze bank accounts, take funds from the taxpayer, and file liens against a taxpayer’s property. All of these procedures may irreparably damage a taxpayer, as we have seen.

For example, a bank may note suspicious activity in an account, as evidenced by large deposits from overseas. Such activity may be investigated by internal bank specialists, who may then report the activity to the FBI or Homeland Security, and the IRS. If the IRS deems any of the activity suspicious, it may freeze the account, assert all deposits are income to a taxpayer, assess tax, and levy the account immediately. Even if an individual claims a business purpose for the deposits, the IRS may take this action if it meets a very low standard of “reasonableness.”

The code provision that allows this action9 focuses on the reasonableness of the IRS assessment. The standards to be employed by the reviewing court in determining whether the government has met its burden of proof, and that the making of a termination assessment is reasonable are:

1. Whether taxpayer is or appears to be planning to quickly depart from United States to conceal himself.

2. Whether taxpayer is or appears to be designing to place his property beyond the reach of the government either by removing it from the United States or by concealing it, or by transferring it to another person, or by dissipating it.

3. Whether taxpayer’s financial solvency appears to be imperiled.

Further, under IRC §7429, a court must consider whether the amount of assessed tax was appropriate, under the circumstances. The method for calculating the tax must not be irrational, arbitrary and completely unsupported. The government need only establish that the taxpayer’s circumstances appear to be jeopardizing collection of a tax, not that they definitely do so.10

Straying from the Federal Rules of Evidence, a challenge in court is a “summary” proceeding, and the court may consider hearsay.11 In broadening the reach of this statute, a federal judge determined “Plaintiff also argues that the IRS, in making the jeopardy assessment, considered evidence that could be inadmissible hearsay at trial and that therefore no value should have been given to that evidence. We find no merit in this argument. In reaching administrative decisions the government can consider hearsay evidence.”12

The reality in these cases is the IRS has a very low burden to meet in order to have a termination assessment sustained. It only has to be a “reasonable suspicion.” There are cases, however, when the “suspicions” are false, and even when the IRS knows they are false, a court may let the assessment and collection stand, and force a taxpayer to challenge the assessment in a refund or Tax Court proceeding, another costly endeavor, by which time a taxpayer may be out of resources to fight the government.

In Summary

The IRS has powerful tools at its disposal as it seeks to collect taxes. Tax professionals should be aware of these tactics, and resources to defend third parties and unsuspecting individuals when faced with such actions.

1. U.S. v. Towne, 406 F. Supp.2d 928, 932 (N.D. Ill., 2005)

2. Id.

3. IRM 5.17.2.5.7.2 (03-27-2012)

4. In re Blair, 330 B.R. 206, 211 (Bankr.N.D.Ill. 2005)

5. IRM 5.17.2.5.7.2 (03-27-2012)

6. 114 F.3d 99, 101 (7th Cir. 1997)

7. IRC §6851

8. Laing v. U.S., 1976-1 C.B. 388, 423 U.S. 161, 96 S. Ct. 473, 46 L. Ed. 2d 416, 76-1 U.S. Tax Cas. (CCH) P 9164, 37 A.F.T.R.2d 76-530 (1976).

9. IRC §7429

10. Cantillo v. Coleman, 559 F. Supp. 205, 83-1 U.S. Tax Cas. (CCH) P 9268, 51 A.F.T.R.2d 83-684 (D.N.J. 1983); Hecht v. U.S., 609 F. Supp. 264, 88-1 U.S. Tax Cas. (CCH) P 9160, 56 A.F.T.R.2d 85-5580 (S.D. N.Y. 1985).

11. Balaguer v. US, 656 F.Sup. 383 (United States District Court, D. Puerto Rico, 1987)

12. 5 U.S.C. § 556(d); Richardson v. Perales, 402 U.S. 389, 407–08, 91 S.Ct. 1420, 1430, 28 L.Ed.2d 842 (1971); Sears v. Department of the Navy, 680 F.2d 863, 866 (1st Cir.1982)

Kathleen M. Lach is a Partner in the Tax and Litigation Departments of Arnstein & Lehr LLP. She represents clients before a variety of different tax authorities, including the Internal Revenue Service, the Illinois Department of Revenue, and the Illinois Department of Employment Security.