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Tax Court

Tax Court proceedings will begin when a Tax Court Petition is filed. After a period that can last over one year, the case is docketed for trial. Once the case is docketed for trial, the matter is passed to IRS Appeals once again for what is referred to as a “docketed appeal.” During this process, the taxpayer and the IRS make one last attempt to come to an agreement before trial. If these attempts fail, the case is passed to the IRS Office of Chief Counsel whose job it is to represent the government during trial. The taxpayer and the assigned Chief Counsel attorney can come to an agreement before trial to avoid the necessity of trial, and will generally do so if the Chief Counsel attorney feels the government’s case is not strong. Once a case is docketed with the Tax Court, if the parties come to agreement, any settlement is memorialized by a (stipulated) decision document. In addition, the parties may execute a closing agreement per section 7121 as to other years or taxpayers.

If the parties cannot agree, the matter will go to trial. At this point, it is absolutely vital to have retained an experienced tax attorney. An accountant cannot represent you in Tax Court, and there are many procedural rules that are far beyond the scope of this information that an experienced tax lawyer will understand how to negotiate.

Before commencing formal discovery, Tax Ct. R. 70(a) requires the parties to attempt to attain the objectives of discovery through informal consultation or communication. Such informal discussions are, in part, intended to facilitate the stipulation process required by Tax Ct. R. 91. A common means by which the government initiates the informal discovery process is the “Branerton Letter.” A party failing to comply with the discovery rules or with a discovery order of the court is subject to sanctions. The failure to comply is not excused on the grounds that the proposed discovery is objectionable, unless an objection was timely interposed or a protective order sought. Typically, the failure to comply with discovery will precipitate a Motion to Compel Discovery by the proponent of such discovery that, if upheld, will likely be followed by the court’s issuance of a discovery order directing compliance.

The date specified on the pretrial notice as the trial date is usually a Monday. Though it may appear otherwise, the trial normally does not occur at that time. Rather, the time mentioned signals what is referred to as the “calendar call.” The parties are required to be present at calendar call to inform the judge of the current status of the case. If trial is required, the judge will want to know when the best time is to hear the case during the week or two that the judge is “sitting” in the designated city. Factors the judge will consider are the availability of the parties and witnesses, and whether the taxpayer will incur additional costs if the case is not heard until later in the session. Preference is given to out of town taxpayers so that their inconvenience is minimized.

After the case has been presented and the post-trial briefs, if required, have been filed, the judge reviews all the evidence and drafts an opinion. This may take months or even years. The opinion is then forwarded to the Chief Judge. The Chief Judge has 30 days to either accept it or refer it to the entire court for review. The losing side has two separate post-trial motions that it can file with the Tax Court; requesting another hearing or reconsideration of the opinion. These are rarely filed and even less often granted.

Inasmuch as all cases tried in the Tax Court are bench trials, neither the taxpayer nor the government is likely to learn of the outcome of the case until after the conclusion of the trial. The trial judge typically renders opinions many months after the completion of the trial and briefing. After the amount of the deficiency, liability, or overpayment has been calculated and submitted to the court, a decision is entered. The decision must specify a fixed dollar amount of the deficiency, liability, or overpayment. The date of entry of the decision is important in terms of fixing the time at which the appeal period begins to run.

Venue for appellate review of a Tax Court decision, in the case of an individual taxpayer, is in the judicial circuit where the taxpayer resides. In the case of a corporate taxpayer, venue is in the circuit in which the taxpayer has its principal place of business or principal office at the time of filing the petition. I.R.C. § 7482. If a corporate taxpayer has no principal place of business or office in the United States, venue lies in the circuit in which the corporation filed its tax return. Unless a Notice of Appeal is filed within 90 days after the entry of a Tax Court decision, the decision becomes final on day 90 after such entry.