Court Opinion

ID: 4474504
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:10:58.788233+00
Date Added: 2024-06-11T12:25:40.862179
License: Public Domain

Foley, J., dissenting: Petitioner’s valid return, which should be the basis for calculating the section 6654 penalty, is disregarded by the majority and “not [considered] * * * to be a ‘return’ for purposes of section 6654(d)(1)(B)(i).” Majority op. pp. 324-325. There is no authority for the majority’s holding, and it is contrary to the unambiguous terms of the statute. Section 6654 provides for an addition to tax if the taxpayer fails to make the “required annual payment”. Sec. 6654(a) and (b). The “required annual payment” is: the lesser of— (i) 90 percent of the tax shown on the return for the taxable year (or, if no return is filed, 90 percent of the tax for such year), or (ii) 100 percent of the tax shown on the return of the individual for the preceding taxable year. [Sec. 6654(d)(1)(B)(i) and (ii); emphasis added.] The majority recognizes that these are “mechanical rules”, yet, presumably acknowledging that the terms of the statute are satisfied, states that “the issue [is] * * * whether petitioner may rely on having satisfied the requirement of section 6654(d)(1)(A) and (B)”. Majority op. p. 323. The statute is unambiguous, and the taxpayer may certainly “rely” on having met its terms. The statute does not refer to a return filed prior to an Internal Revenue Service audit or a return filed prior to the issuance of a notice of deficiency. A valid return will suffice — without regard to when it is filed. We need not, however, adhere to a literal application of a statute if such adherence produces an outcome that is “demonstrably at odds” with clearly expressed congressional intent to the contrary, Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571 (1982), Peaden v. Commissioner, 113 T.C. 116, 122 (1999), or results in an outcome so absurd “as to shock the general moral or common sense”, Tele-Communications, Inc. v. Commissioner, 95 T.C. 495, 507 (1990). The majority does not set forth a convincing case that either of these exceptions to the plain language doctrine is applicable. Instead, the majority disregards petitioner’s valid return “to avoid a conflict and interpret sections 6213, 6654 and 6665 in a way that makes sense.” Majority op. p. 328. The purported conflict (i.e., regarding respondent’s ability to assess the penalty while we have jurisdiction) has already been addressed and resolved by Powerstein v. Commissioner, 99 T.C. 466, 472-473 (1992). In Powerstein, the taxpayers filed amended returns subsequent to filing their petition, and we held that after we obtain jurisdiction respondent may be enjoined, pursuant to section 6213(a), from making an assessment. See Naftel v. Commissioner, 85 T.C. 527, 529-530 (1985) (stating that after we obtain jurisdiction we do not lose it). The majority states that Schwarzkopf v. Commissioner, 246 F.2d 731 (3d Cir. 1957), and Rev. Rul. 2003-23, 2003-8 I.R.B. 511, do not “address circumstances in which the taxpayer’s original return was filed after a notice of deficiency had been issued.” Majority op. p. 324. I agree. These authorities, however, support the proposition that we should follow the statute and let the chips fall where they may. Schwarzkopf v. Commissioner, supra at 734-735 (stating that a taxpayer may rely on the tax shown on a return from the preceding year even when the return is held to have fraudulently understated income); Rev. Rul. 2003-23, 2003-8 I.R.B. 511 (stating that a taxpayer may rely on the tax shown on an untimely return for purposes of determining estimated tax payments). In a further attempt to justify its holding, the majority expresses concern that taxpayers “would be able to negate the addition to tax simply by filing a return for that year that showed a tax liability less than the quarterly estimated payments actually made or, if none had been made, that showed a zero tax liability.” Majority op. p. 325. As Judge Vasquez’s concurring opinion emphasizes, longstanding precedent authorizes us to find that a return is invalid if the taxpayer does not make an honest and reasonable attempt to satisfy the requirements of the tax law. Zellerbach Paper Co. v. Helvering, 293 U.S. 172, 180 (1934); Florsheim Bros. Drygoods Co. v. United States, 280 U.S. 453, 462 (1930); Beard v. Commissioner, 82 T.C. 766, 777 (1984), affd. 793 F.2d 139 (6th Cir. 1986). Thus, if the majority found that petitioner’s return was filed with the intent to avoid the estimated tax penalty, it could conclude that the return is invalid. Yet the majority does not make such a finding. Undeterred by an unambiguous statute and a valid return, and citing Evans Cooperage Co. v. United States, 712 F.2d 199, 204 (5th Cir. 1983), a readily distinguishable case, the majority summarily reasons that its “decision is consistent with the ‘objective of the safe harbor provision’”. Majority op. p. 326. In Evans Cooperage, the taxpayer contended that the calculation of the estimated tax penalty should be based on its amended return, rather than its timely filed original return. The court held that the phrase “return of the corporation for the preceding taxable year”, in section 6655(d)(1), refers to the timely filed return for that year and not any subsequently filed amended return. Id. at 204. We are not faced, however, with a question of which return should be taken into account because petitioner did not file an amended return. We simply must determine whether to accept or disregard petitioner’s valid return. The majority acknowledges that petitioner’s case is the “exact opposite of that referred to in Evans Cooperage”. Majority op. p. 326 (emphasis added). I agree. In Evans Cooperage, the court required the taxpayer to use its original return to calculate the penalty. The majority, on the other hand, states that petitioner “waived his right” relating to the only return he filed and is prohibited from using such return to calculate the penalty. Majority op. p. 326. If Evans Cooperage is to be cited for anything, it should be cited for the proposition that the Court is obligated to follow the statute. Indeed, in response to one of petitioner’s contentions, the court stated: It may be inequitable * * * to assess a penalty for underpayment of estimated tax, that is based upon the originally mistaken figure of income for the year, rather than upon the actual income for the year as ultimately determined. However, Congress unambiguously has provided otherwise, and the provision, if indeed inequitable, is for Congress to amend, not the courts. [Evans Cooperage Co. v. United States, supra at 205; fn. ref. omitted; emphasis added.] Similarly, we are required to follow statutory mandates and address rather than “disregard”, salient' facts. If there is a perceived problem with the statute, Congress must address the matter. Laro and Marvel JJ., agree with this dissenting opinion.