District Court Holds Indicatively While Case on Appeal That Remand of FBAR Willful Penalty to IRS Did Not Vacate the Timely Assessments (2/27/24)

  In United States v. Kerr (D. AZ Dkt O. 2:19-CV-05432 Order dtd 2/23/24), TN here and CL here, the district court ruled indicatively clarifying the intended effect of the district court termination of the case after remand to the IRS of willful FBAR penalties for certain years. The intended effect was not to vacate those penalties but to provide a procedure to reconsider and modify the amount of the penalties for future district court judgment. In other words, the remand did not require a new assessment of FBAR willful penalties (for which the assessment statute of limitations had run). Rather, any IRS action would adjust the previously timely assessed FBAR penalties. After this indicative ruling, the appeal of the case can proceed in the Ninth Circuit.

Links to items related to this blog are:

• FRCP 62,1, titled Indicative Ruling on a Motion for Relief That is Barred by a Pending Appeal, here,
• FRAP 12.1, Remand After an Indicative Ruling by the District Court on a Motion for Relief That Is Barred by a Pending Appeal, here,
• Kerr docket entries for this civil case (FBAR penalty enforcement case): CL, here.
• Ninth Circuit Order staying Ninth Circuit proceedings pending the district court’s indicative ruling, here.

Prior blogs involving Mr. Kerr are (reverse chronological order):

District Court Muddles an FBAR Willful Penalty Case (3/22/20; 3/24/20)

I made a key revision on 3/24/20 at 4:00pm as indicated in red below to state with cites to the statute that the willful FBAR willful penalty limits (greater of $100,000 or 50% of unreported accounts) is a maximum penalty, thus giving the IRS authority to assert lesser FBAR penalty amounts than those maximums.  That reading of the willful penalty was implicit in the  rest of the discussion; I just thought it should be made explicit.  The changed language is marked in red below.

In United States v. Schwarzbaum (S.D. Fla. Dkt. 18-cv-81147, Order dated 3/20/20), here, in an FBAR collection suit, the court:

1. Held that Schwarzbaum was not liable for the FBAR willful penalty for 2006 but held open the possibility that the nonwillful penalty might apply. 

2. Held that Schwarzbaum was liable for the FBAR willful penalty for 2007, 2008 and 2009, but held that the IRS’s method of determining the penalty was arbitrary and capricious because it was not based on the June 30 values in the unreported offshore account, but the Court held that the parties were to confer to “in an effort to resolve the outstanding amount owed.”

The CourtListener docket for the case is here.

JAT Comments:

1.  I will not review the facts leading to the holding but will instead only deal with the legal issues in the opinion that I think are worthy of comment.