Jarnagin v. United States, 134 Fed. Cl. 368

Larry (U.S./Canadian dual citizen) and Linda Jarnagin maintained a Canadian bank account (CIBC) from 1986 with multi-million dollar year-end balances during 2006–2009, but did not file FBARs for those years.
They filed joint U.S. Forms 1040 for 2006–2009; Schedule B (Part III) asked whether they had foreign accounts, and their preparers checked “No.”
The Jarnagins used bookkeepers and U.S. accountants (different preparers over time) and supplied financial statements showing a CIBC account, but they did not directly inform or provide account statements to their U.S. preparers; the taxpayers also did not review the returns before signing.
The IRS assessed non-willful FBAR penalties ($10,000 per person per year) for 2006–2009; the Jarnagins paid $40,000 each and sought refunds, asserting the failures were due to reasonable cause.
The case was brought in the U.S. Court of Federal Claims as an illegal-exaction suit seeking refund of the FBAR penalties; cross-motions for summary judgment were decided on the record and oral argument.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Jarnagins are entitled to the §5321(a)(5)(B)(ii) "reasonable cause" exception to FBAR penalties for 2006–2009	Jarnagin(s) contend they hired competent CPAs, that the accountants knew of the CIBC account from provided financial statements, and that they reasonably relied on those professionals	Government contends taxpayers failed to exercise ordinary business care and prudence: they did not read or verify returns, did not provide statements or request FBAR advice, and cannot shift nondelegable duty to advisers	Court held: No reasonable cause — as a matter of law the Jarnagins failed to exercise ordinary business care and prudence; summary judgment for the government

Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (threshold jurisdictional requirement)
Arbaugh v. Y & H Corp., 546 U.S. 500 (courts must ensure subject-matter jurisdiction independently)
Boyle v. United States, 469 U.S. 241 (taxpayer cannot excuse untimely filing by relying on agent; reasonable reliance requires affirmative advice on tax law)
Bragdon v. Abbott, 524 U.S. 624 (use of established term carries implication Congress intended prior constructions)
United States v. Sturman, 951 F.2d 1466 (a person with foreign accounts is expected to read and note foreign-account questions on tax forms)
Norman v. United States, 429 F.3d 1081 (illegal-exaction claims under Tucker Act)
Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burdens)