Playing Battleship with the IRS: Assessing the Damages

Shawn P. Wolf

Taxpayers scored a big victory with the Tax Court’s recently issued a decision in Alon Farhy v. Commissioner, 160 T.C. No. 6 (April 3, 2023) (“Farhy”).

As a bottom line, the Tax Court in Farhy has distinguished a penalty that the IRS is authorized to issue and a penalty that has been properly assessed. This distinction, is important in relation to the powers of the IRS to collect these penalties. Without a change in the law, or a successful appeal of Farhy, this may impact the IRS’ ability to collect the Form 5471 penalties that it imposes. What may be more important is how Farhy may apply to other penalties (e.g., the penalties for Forms 5472, 8865, 3520, 8938, 926, etc.) and how it may impact the appeal of the imposition of these penalties.

A more detailed discussion can be found here.


XLNC ARCHIVE| 04 May 2023

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