Good Review of Points Previously Covered in Class (9/28/15)

Lua v. United States, 2015 U.S. Claims LEXIS 1235 (9/25/15), here, offers a good review of concepts we have studied in this case.

In Lua, upon completion of the audit, the unsophisticated taxpayers who did not have a representative signed a Form 4549 Income Tax Examination Changes.  This form has language "waiving their right to a notice of deficiency."  Section 6213(a), here, prohibits the IRS from assessing prior to issuing a notice of deficiency in income tax cases.  Section 6213(d) provides that a taxpayer may waive the right to receive a notice of deficiency, thus allowing an assessment without the notice of deficiency.  This waiver is often done on the Form 870, Waiver of Restrictions on Assessment, but also from the language quoted above, may be done on the Form 4549.  See Student Edition pp. 145-146 & 334-335.

Shortly after signing the waiver, the taxpayers engaged a tax professional.  The tax professional requested audit reconsideration in a telephone call to the agent and a day later confirmed the request in a letter to the group manager.

On November 26, 2007, the IRS assessed the deficiencies, but granted the request for audit reconsideration.  As a result of the audit reconsideration, the IRS ultimately reduced the amount of the deficiencies, but by that time the taxpayers had filed amended returns and, apparently protectively, payments substantially in excess of the amounts ultimately determined to be due.  It is a little fuzzy to me precisely what happened after the assessment, but it may not be critical for the points discussed below.  What appears to be in issue in this refund litigation is the amount paid up to the amount that was not abated in audit reconsideration -- in other words the amount determined due after audit reconsideration

1. Did the taxpayers waive the right to a notice of deficiency.

Yes.  The taxpayers did sign the Form 4549 which waives the notice of deficiency in clear language.  In this regard, the Court indicated in footnote 12 that the waiver had not been improperly induced.

2.  Did the taxpayers withdraw the waiver of the notice of deficiency.

No.  The taxpayers asked for audit reconsideration which is a separate procedure.  Audit reconsideration is addressed in the text.  See Student edition p. 452.