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Tax Court Rules IRS Has No Authority to Assess or Collect Certain Tax Penalties

by | Apr 17, 2023 | Appeals, IRS, Tax Court |

Earlier this month the Tax Court issued its Opinion in Alon Farhy v. Commissioner of Internal Revenue, 160 T.C. No. 6 (T.C. April 3, 2023), holding that the IRS lacks statutory authority to assess penalties under IRC section 6038(b)(1) or (2) against the petitioner in that case, and that the IRS may not proceed with collection of these penalties via the levy proposed by the IRS.

This ruling will provide great relief to those taxpayers who failed to file IRS Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, an information return required to be filed by certain taxpayers who have authority over foreign assets.  This holding also applies to other foreign information return reporting penalties, including for example, the failure to report foreign gifts on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.

Congratulations to Ed Robbins, Jr., counsel for petitioner!


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