In Zhang v. IRS, (N.D. Cal. No.3:24-cv-08210 Order Granting Partial Motion to Dismiss dtd.5/4/26), CL here and GS here, the Court held that the IRS had authority to assess the § 6039F penalty for failing to file Form 3520 reporting foreign gifts. The Court’s analysis is similar to the D.C. Circuit holding in Farhy v. Commissioner (Farhy II), 100 F.4th 223 (D.C. Cir. 2024) that the IRS had authority to assess the § 6038(b) penalty. In doing so, the Court rejected the Tax Court’s contrary holdings in Farhy v. Commissioner (Farhy I), 160 T.C. 399 (2023) and Mukhi v. Commissioner, 163 T.C. ___, No. 8 (11/18/24) (reviewed opinion confirming Farhy I).
Interestingly, the Court does not mention Safdieh v. Commissioner, 169 F. 4th 102 (2d Cir. 2/27/26), which agreed with the D.C. Circuit holding in Farhy II. I discuss Safdieh in Second Circuit Rejects Tax Court's Farhy Holding That IRS Can't Assess and Collect the § 6038(b) Penalty (Federal Tax Procedure Blog 2/27/26), here.
The Court also rejected Zhang’s APA and Eighth Amendment arguments.
I have written on the issue before in discussing Farhy and other cases. The prior postings sorted by date are here. I see no need to write further in this blog on that issue.
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