Taxable Talk

The Tax Court today once again had to look at the case of Raymond Wright. Back in 2002 Mr. Wright’s case had been reviewed by the Tax Court; the case was then appealed to the Second Circuit and remanded back to the Tax Court. Back in 2003 Mr. Wright thought he paid off his tax debt when he sent the IRS $15,550; the payoff amount came from the IRS.

The Appeals Court asked the Tax Court to review:

“(a)Whether petitioner’s 1993 tax refund was sent to him by the Internal Revenue Service (IRS) in 1994; (b) if not, whether petitioner timely received notice from the IRS that his refund had not been applied to his 1987 and 1989 tax deficiencies; (c) if not, whether petitioner’s current tax liability should be consequently adjusted by, inter alia, an abatement of interest pursuant to section 6404(e); and (d) in any case, whether the current interest abatement that petitioner had already received was correct in the light of (1) the IRS’s failure to give petitioner the appropriate withholding credits for 1987 and 1989, and (2) his June 21, 1994, payment of $6,681.22.”

The Tax Court then goes into detail about the actions of the two parties. It’s difficult to fight the government. As I’ve commented on before, the burden of proof in Tax Court is generally with the petitioner, not the IRS. Indeed, Mr. Wright was representing himself.

Yet throughout the discussion of the case, the IRS comes off as inept, deceiving, and potentially, evading the Court. Some examples from the opinion: “On December 6, 2005, despite the Court’s statement in the November 7, 2005, order that we would not be inclined to grant any continuances in this case, respondent filed a motion for continuance of trial.” “The extended proceedings of this case recounted supra have brought to light the numerous misstatements and errors made by respondent through the handling of petitioner’s 1987 and 1989 tax years.” And:

“During the appeal and remand, respondent and respondent’s witnesses recounted numerous errors regarding the handling of petitioner’s 1987 and 1989 tax years–and oftentimes neither respondent nor the witness could account for how those errors occurred. As recently as his August 28, 2006, status report, respondent essentially admitted that the IRS made mistakes regarding the computation of petitioner’s interest, including, but not limited to, quoting petitioner an incorrect payoff figure and sending petitioner an allegedly “erroneous” refund on account of respondent’s erroneous calculations and a keystroke error by an IRS employee.”

There’s plenty more in this opinion that damning towards the IRS. Suffice to say,

“Petitioner’s testimony (at both trials) was credible. He consistently testified and averred that he did not receive his 1993 refund. Respondent contended, however, that petitioner received his 1993 refund in 1995. The documentary and testimonial evidence respondent offered was contradictory, contained numerous errors, and lacked credibility. Furthermore, this contention is a concession by respondent that petitioner was correct and that respondent did not send the 1993 refund to petitioner in 1994.

There’s much, much more in this opinion. Most of the time when I read a Tax Court case, the petitioner comes off as someone who has deliberately evaded the law. In this case it appears that it’s the IRS that has had problems with the truth.

Case: Wright v. Commissioner, T.C. Memo 2006-273