In
Crites v. Commissioner, T.C. Memo. 2012-267,
here, the Tax Court held that the frivolous return penalty in Section 6702,
here, was timely. Section 6702 penalizes a "frivolous return" and a "specified frivolous submission." In
Crites, the frivolous return penalty applied. The taxpayer's original return was filed more than 3 years before the penalty assessment. The amended return which was penalized was filed less than a year before the penalty was assessed. The holding on the statute of limitations is:
Section 6501(a) does place limits on assessments. With certain limited exceptions not relevant here, the Commissioner must assess a tax liability within three years after a return is filed. Sec. 6501(a). Crites argues that because penalties are generally included within the definition of "tax", see sec. 6665(a)(2), section 6501(a) prevents the Commissioner from assessing a penalty against her under section 6702(a) more than three years from the time she filed her original return.
We disagree. As the Commissioner observes, penalties under section 6702 do not have a readily observable statute of limitations. The section penalizes not just frivolous "returns"—and even here Congress was careful to penalize not just returns but "what purports to be a return"—but frivolous "submissions". It would be odd if penalties keyed to "submissions" had somehow to be tied to the limitations period for tax that is supposed to be shown on a "return".
But let us assume—and here we are expressly assuming without deciding—that Crites is right that the filing date of her "return" is the key date. She had two returns, and the one that the Commissioner wants to punish her for is the amended return that she sent the IRS in October 2008. He assessed the penalty in July 2009, well within three years of her submitting it. Crites of course would prefer that we hold that the clock for penalizing her under section 6702 began to run when she filed her original return, but she cites no authority for her implicit proposition that a statute of limitations can start running before a cause of action accrues or, in a case like hers, before a taxpayer even files a sanctionable submission.
