135 T.C. No. 25
Tax Ct.2010Background
- Petitioner Rick D. Feller seeks redetermination of penalties for 1992–1997 under secs. 6663, 6664.
- petitioner admitted in criminal plea to filing false returns with fictitious W-2s.
- Notices of deficiency issued Nov. 22, 2006; adjustments credited overstated withholding under 6201(a)(3).
- SFT Health Care entities owned nursing homes; petitioner was president and prepared returns.
- Regulation 1.6664-2(c)(1) and (g) governs how overstated prepayment credits affect underpayments.
- Court held respondent’s fraud penalties supported; issues include statute of limitations and regulation validity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the 6501 period barred for any year? | Feller argues limitations expired and bars assessment. | Respondent shows fraud logs; 6501(c)(1) negates expiration. | No; limitations did not apply for any year due to fraud evidence. |
| Does overstated withholding credits affect underpayments under 6663/6664? | Regs. 1.6664-2(c)(1) are invalid for including credits. | Regs. correctly treat overstated credits as affecting underpayments. | Regulation valid; underpayments fully subject to fraud penalty. |
| Is the regulation 1.6664-2(c)(1) a permissible construction of 6664(a)? | Regulation is invalid; statute unambiguous and regulations exceed authority. | Chevron step 2 permissible construction; regulation reasonable. | Regulation sustained; deference given to Treasury construction. |
Key Cases Cited
- Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (U.S. Supreme Court 1984) (establishes two-step Chevron framework for agency interpretations)
- King v. St. Vincent's Hosp., 502 U.S. 215 (U.S. Supreme Court 1991) (statutory interpretation context and contextual meaning of terms)
- Estate of Gerson v. Commissioner, 507 F.3d 435 (6th Cir. 2007) (affirms deference to agency interpretations under Chevron)
- Estate of Capehart v. Commissioner, 125 T.C. 211 (Tax Court 2005) (definitional interactions of deficiency and underpayment)
- Badaracco v. Commissioner, 464 U.S. 386 (U.S. Supreme Court 1984) (clarifies fraud penalties and underpayment concepts)