854 F. Supp. 2d 1301
N.D. Ga.2011Background
- Plaintiff is a tax preparer who sold the Shelter, deemed abusive by the IRS, triggering penalties and suspension.
- The Shelter was tied to AdaCon’s Program marketed to businesses, with a claimed $5,000 disabled access tax credit.
- Plaintiff sold the Shelter from 2002–2004 and earned $101,459 in commissions.
- The IRS issued a Notice of Penalty Charge for promoting an abusive tax shelter on Sept. 10, 2007, after which Plaintiff paid 15% and filed a refund claim.
- In 2009, the IRS denied the refund claim and suspended Plaintiff from the e-file program for two years, with the suspension starting April 16, 2009; Plaintiff filed suit on May 20, 2011,
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has jurisdiction over the action | Plaintiff seeks relief under 28 U.S.C. § 1346(a)(1) and argues divisible penalties allow suit | Defendant argues lack of jurisdiction due to timing under § 6703(c) and full-payment rule | Court has jurisdiction; divisible-penalty rule applied to permit suit |
| Whether § 6703(c) provides a jurisdictional hook | § 6703(c) allows suit after paying 15% | If 30-day/six-month condition not met, § 6703(c) does not apply | § 6703(c) does not provide jurisdiction because Plaintiff did not sue within the required window |
| Whether paying a divisible portion of the penalty suffices to invoke jurisdiction | Partial payment on a single sale suffices to trigger jurisdiction | IRS calculation method (annual vs per-sale) challenges divisibility | Partial payment on a single sale suffices; penalty is divisible per sale under § 6700(a) |
Key Cases Cited
- Flora v. United States, 362 U.S. 145 (U.S. 1960) (full-payment rule and divisibility recognized for penalties)
- Gates v. United States, 874 F.2d 584 (8th Cir. 1989) (divisible penalties under per-transaction theory)
- Noske v. United States, 911 F.2d 133 (8th Cir. 1990) (divisibility of § 6700 penalties acknowledged under per-transaction approach)
- Dalton v. United States, 800 F.2d 1316 (4th Cir. 1986) (recognizes divisibility under § 6703/6700 framework)