The authority for doing assessment comes from:
26 U.S.C. §6065, all assessment documents MUST be signed UNDER
PENALTY OF PERJURY. The title of the section says "returns",
26 U.S.C. 7806(b) says the title means nothing. The body
of the section doesn't even mention returns.
The Assessment Statute Expiration Date (ASED)
is 3 years after
a return is filed. Beyond that point, no assessment may be
executed on an overdue tax. The return is considered "filed"
on April 15 of the year after the year for which. If the return
is filed after the due date, then the ASED clock starts when it
was actually "filed". See
26 C.F.R. §301.6501(b)-1 for details on when a return is considered
IRS Form 23C Assessment Certificate:
Substitute for Returns (SFR):
A cumulative list of assessments for a "taxpayer"
appears on the Summary Record of Assessments (RACS Report 006).
Click here for
This is a computer generated report from
the IRS' Revenue Accounting System, or RACS.
Each assessment listed on this report has
an associated Document Locator Number (DLN) which you can request
through the Freedom Of Information Act (FOIA)
A liability must
exist in statute (not just regulation) in order to authorize an
assessment officer to create a
23C Assessment Certificate.
IRS Hoax section 5.4.4.
We are all "nontaxpayers"
under Subtitle A unless we volunteer to be "taxpayers" by completing
and submitting a return, which amounts to assessing ourselves with
a liability. This is the foundation
of what it means to have a tax system based on "voluntary
self assessment" (see Flora v. United States,
362 U.S. 145 (1959) and section 5.6.1 of the
IRS Hoax). At the point when we volunteer to assess ourselves
and submit a return, we must pay the tax indicated on that return
26 C.F.R. §1.6151-1 and become "liable". That regulation
says "shall ... be paid".
26 C.F.R. §1.6151-1 Time and place for paying tax shown on returns
(b)(2) Where tax is shown on the return. In any case in which
a taxpayer files a return on Form 1040A pursuant to paragraph (a)(7)
of Sec. 1.6012-1 and shows the amount of tax on the return,
the unpaid balance of the
tax shall, without assessment or notice and demand, be paid
not later than the date fixed for filing the return.
We the people enjoy an especial status as a
"nontaxpayer" until such time as we take on the mantle of an artificial
entity and by implication of the special privilege we engage in
and the special license required we may surrender our sovereign
status and become a "taxpayer"....but this event cannot take place
without full knowledge and willful participation by the individual.
For cases dealing with the term "nontaxpayer" see:
v. Rasmussen, 281 F. 236, 238 (1922);
- Rothensis v. Ullman, 110 F.2d. 590(1940);
- Raffaele v. Granger, 196 F.2d. 620 (1952);
- Bullock v. Latham, 306 F.2d. 45 (1962);
- Economy Plumbing & Heating v. United States, 470 F.2d. 585
- South Carolina v. Ragan,
465 U.S. 367 (1984).
Government Can't Lawfully Assess Human Beings with an Income Tax Liability
Without Their Consent, Form #05.011(OFFSITE LINK)-
SEDM Forms page
IRS Form 23C Assessment Certificate
Revenue Code, 26 U.S.C. Subtitle F, Chapter 63: Assessment
Curley v. U.S., 791 F.Supp. 52, 54 (E.D.N.Y. 1992):
“It is well settled that the IRS's tax assessments are presumed to be correct and it is the taxpayer who must rebut this presumption.”
[Curley v. U.S., 791 F.Supp. 52, 54 (E.D.N.Y. 1992)]
People v. Lee C. (In re Estate of Lee C.), 18 Cal.App.5th 1072, 642 (Cal. Ct. App. 2017):
“It is an abuse of discretion to misinterpret or misapply the law.”
[People v. Lee C. (In re Estate of Lee C.), 18 Cal.App.5th 1072, 642 (Cal. Ct. App. 2017)]
U.S. v. Conaway, 11 F.3d. 40, 43 (5th Cir. 1993):
Conaway next contends that the government's proof of his actual income was insufficient because it included no evidence about his yearly net worth. A successful prosecution under 26 U.S.C. § 7201 requires proof of willfulness, the existence of a tax deficiency, and an affirmative act of evasion or attempted evasion of the tax. Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 (1965); United States v. Chesson, 933 F.2d 298, 303-04 (5th Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 583, 116 L.Ed.2d 608 (1991). To prove a tax deficiency the government must establish that the taxpayer had unreported income and that such income was taxable. See Chesson, 933 F.2d at 306. Proving taxable income often requires indirect methods of proof sufficiently reliable to overcome the doubts inherent in the use of circumstantial evidence. See United States v. Boulet, 577 F.2d 1165, 1167-68 & 1167 n. 3 (5th Cir.1978), cert. denied, 439 U.S. 1114, 99 S.Ct. 1017, 59 L.Ed.2d 72 (1979).
[U.S. v. Conaway, 11 F.3d. 40, 43 (5th Cir. 1993)]
In re Smith, 72 Idaho 8, 15 (Idaho 1951):
“Conclusions of law cannot take the place of findings of fact.”
[In re Smith, 72 Idaho 8, 15 (Idaho 1951)]
United States v. Hiett, 581 F.2d 1199 (5th Cir. 1978):
"To establish a tax deficiency, the government must show first that the taxpayer had unreported income, and second, that the income was taxable. The government has several customary ways of overcoming the first hurdle. Here it used the net worth method of reconstructing income. Appellant does not contest the government's calculations under that method."
"The government, however, does not satisfy its burden of proving a tax deficiency simply by showing that the taxpayer had unreported income for the year in question. In addition, the government must prove that the unreported income was taxable income. This is the aspect of the government's case which appellant contests. Under the Supreme Court's decisions, the government can satisfy this burden in either of two ways. It can show that there is a likely taxable source of the unreported income, Holland v. United States, 348 U.S. 121, 138, 75 S.Ct. 127, 99 L.Ed. 150 (1954), or it can negate all possible nontaxable sources of that income. United States v. Massei, 355 U.S. 595, 78 S.Ct. 495, 2 L.Ed.2d 517 (1958). Since the government concedes that it did not establish a likely taxable source of appellant's unreported income, the issue narrows to whether the government negated all possible nontaxable sources within the meaning of Massei. If it did, the income must have come from a taxable source."
[United States v. Hiett, 581 F.2d 1199 (5th Cir. 1978)]
U.S. v. Byock, Civil Action No. 02-2790 (SRC), at *4 (D.N.J. May 11, 2004):
“A determination of tax liability by the IRS is afforded a presumption of correctness, allowing the United States to establish a prima facie case of liability merely by offering into evidence a certified copy of the IRS assessment.”
[U.S. v. Byock, Civil Action No. 02-2790 (SRC), at *4 (D.N.J. May 11, 2004)]
[EDITORIAL: This is why failure to produced a signed summary record of assessment in court is a huge problem---it means IRS has failed to make even a prima facie case for liability!]
McKay v. U.S., 957 F.2d 689, 692 n.1 (9th Cir. 1992)
"We recognize that the IRS must make an initial factual showing establishing unreported income before the presumption of correctness attaches to an assessment based on such income. See Spatafore v. United States,752 F.2d 415, 418 (9th Cir. 1985). However, there was no factual failing in this area because appellant conceded the amounts of unreported income charged in the assessment at trial. As applied to appellant's claims for deductions and offsets, the district court's application of the burden of proof was correct."
[McKay v. U.S., 957 F.2d 689, 692 n.1 (9th Cir. 1992)]
Shanshan Shao v. Beta Pharma, Inc., 3:14-cv-01177(CSH), at *27 (D. Conn. May 4, 2017)
“The court need not credit legal conclusions or mere conclusory statements purporting to be factual.”
[Shanshan Shao v. Beta Pharma, Inc., 3:14-cv-01177(CSH), at *27 (D. Conn. May 4, 2017)]
[EDITORIAL: Example: the state got a declaration from a payroll person at a person'semployer in which this declarant repeatedly referred to the compensation paid to them as "taxable wages" as if this was merely a factual statement.]
Morton v. Ruiz, 415 U.S. 199, 94 S.Ct. 1055, 39 L.Ed.2d 270 (1974):
“Where the rights
of individuals are affected, it is incumbent upon agencies to follow
their own procedures. This is so even where the internal procedures
[in the Internal Revenue Manual and 26 CFR, Part 601] are possibly more
rigorous than otherwise would be required. Service v. Dulles,
354 U.S. 363, 388 (1957); Vitarelli v. Seaton,
359 U.S. 535, 539 -540 (1959). The BIA, by its Manual, has declared
that all directives that "inform the public of privileges and benefits
available" and of "eligibility requirements" are among those to be published.
The requirement that, in order to receive general assistance, an Indian
must reside directly "on" a reservation is clearly an important substantive
policy that fits within this class of directives. Before the BIA may
extinguish the entitlement of these otherwise eligible beneficiaries,
it must comply, at a minimum, with its own internal procedures.”
[Morton v. Ruiz,
415 U.S. 199, 94 S.Ct. 1055, 39 L.Ed.2d 270 (1974)]
Helvering v. Taylor, 239 U.S. 507 (1935):-arbitrary assessment without supporting evidence is not entitled to "the presumption of correctness"
The commissioner does not contend that, in cases where Circuit Courts of Appeals properly reverse determinations of the board, they are without power to remand for further hearing in the nature of a new trial. His contention is that in this case the burden on the taxpayer was not only to prove that the commissioner's determination is erroneous but to show the correct amount of the tax. In substance he says that, because of the taxpayer's failure to establish facts on which a fair apportionment may be made, the board's redetermination at the commissioner's erroneous figure was valid, and there being no error of law, should have been sustained by the court. And he maintains that, in the absence of error on the part of the board, the court was without power to remand for further hearing.
He cites Revenue Act of 1926, § 274 (e), 44 Stat. 56:
"The Board shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, 513*513 notice of which has been mailed to the taxpayer, and to determine whether any penalty, additional amount or addition to the tax should be assessed, if claim therefor is asserted by the Commissioner at or before the hearing or a rehearing. "The purpose of that provision is to define the jurisdiction granted to the board; it does not prescribe any rule of evidence or burden of proof. Plainly it does not support the commissioner's contention that the taxpayer, even though he has shown the determination to be arbitrary and excessive, must nevertheless pay the added tax because he has not also shown that he owes nothing or the correct amount, if any, that legally may be laid upon him.
He also cites Revenue Act of 1928, §§ 51 (a) and 54 (a), 45 Stat. 807, 808. Neither gives any support to his contention. The first requires the taxpayer to make under oath a return stating specifically the amount of his gross income and the amounts of deductions and credits allowed. The other requires the taxpayer to keep such records, render under oath such statements, make such returns, and comply with such rules and regulations as the commissioner may prescribe. These requirements give no support to the commissioner's contention. They tend rather to suggest that taxpayer's returns are correct and may not arbitrarily be set at naught.
He also cites Rule 30 adopted by the board: "The burden of proof shall be upon the petitioner, except as otherwise provided by statute and except that in respect of any new matter pleaded in his answer, it shall be upon the respondent." But there is nothing in it to suggest intention to require the taxpayer to prove not only that a deficiency assessment laid upon him was arbitrary and wrong but also to show the correct amount. Moreover, the board held the evidence not sufficient to show the 514*514 apportionment erroneous and on that ground alone sustained the assessment. Necessarily the board did not come to the question that is here presented as to burden of proof. The fact that the commissioner's determination of a deficiency was arbitrarily made may reasonably be deemed sufficient to require the board to set it aside. Cf. Bruce & Human Drug Co., 1 B.T.A. 342. Acorn Refining Co., 2 B.T.A. 253. Index Notion Co., 3 B.T.A. 90.
The commissioner cites United States v. Rindskopf, 105 U.S. 418; United States v. Anderson, 269 U.S. 422, 443; Reinecke v. Spalding, 280 U.S. 227, 232-233. The first of these may be put aside without discussion as having no bearing upon the point here in controversy. The other two were adequately distinguished by the Circuit Court of Appeals. Each was an action to recover taxes paid. Obviously the burden was on the plaintiff, in order to establish a basis for judgment in his favor, specifically to show not merely that the assessment was erroneous but also the amount to which he was entitled. For like reason the burden is upon the taxpayer to establish the amount of a deduction claimed. Burnet v. Houston, 283 U.S. 223, 227. Helvering v. Independent Life Ins. Co., 292 U.S. 371, 381. New Colonial Co. v. Helvering, 292 U.S. 435, 440.
We find nothing in the statutes, the rules of the board or our decisions that gives any support to the idea that the commissioner's determination, shown to be without rational foundation and excessive, will be enforced unless the taxpayer proves he owes nothing or, if liable at all, shows the correct amount. While decisions of the lower courts may not be harmonious, our attention has not 515*515 been called to any that persuasively supports the rule for which the commissioner here contends.
Unquestionably the burden of proof is on the taxpayer to show that the commissioner's determination is invalid. Lucas v. Structural Steel Co., 281 U.S. 264, 271. Wickwire v. Reinecke, 275 U.S. 101, 105. Welch v. Helvering, 290 U.S. 111, 115. Frequently, if not quite generally, evidence adequate to overthrow the commissioner's finding is also sufficient to show the correct amount, if any, that is due. See, e.g., Darcy v. Commissioner, 66 F. (2d) 581, 585. But, where as in this case the taxpayer's evidence shows the commissioner's determination to be arbitrary and excessive, it may not reasonably be held that he is bound to pay a tax that confessedly he does not owe, unless his evidence was sufficient also to establish the correct amount that lawfully might be charged against him. On the facts shown by the taxpayer in this case, the board should have held the apportionment arbitrary and the commissioner's determination invalid. Then, upon 516*516 appropriate application that further hearing be had, it should have heard evidence to show whether a fair apportionment might be made and, if so, the correct amount of the tax. The rule for which the commissioner here contends is not consonant with the great remedial purposes of the legislation creating the Board of Tax Appeals. The Circuit Court of Appeals rightly reversed and remanded the case for further proceedings in accordance with its opinion.
[Helvering v. Taylor, 239 U.S. 507 (1935)]
[EDITORIAL: The Justia Headnotes or syllabus says of the above the following. These headnotes do not appear on any other site, though:
"2. Where a taxpayer shows before the Board of Tax Appeals that a tax is arbitrarily assessed and excessive, his relief from payment of it is not conditional upon his showing also the correct amount of tax or that none was assessable. Section 274(e), Revenue Act of 1926, and §§ 51(a) and 54(a), Revenue Act of 1928, considered. P. 293 U. S. 512."
United States v. Janis, 428 U.S. 433 (1976):-arbitrary assessment without supporting evidence is not entitled to "the presumption of correctness"
Certainly, proof that an assessment is utterly without foundation is proof that it is arbitrary and erroneous. For purposes of this case, we need not go so far as to accept the Government's argument that the exclusion of the evidence in issue here is insufficient to require judgment for the respondent or even to shift the burden to the Government. We are willing to assume that if the District Court was correct in ruling that the evidence seized by the Los Angeles police may not be used in formulating the assessment (on which both the levy and the counterclaim were based), then the District Court was also correct in granting judgment for Janis in both 443*443 aspects of the present suit. This assumption takes us, then, to the primary issue.
[. . .]
*455 Respondent argues, however, that the application of the exclusionary rule to civil proceedings long has been recognized in the federal courts. He cites a number of cases. But respondent does not critically distinguish between those cases in which the officer committing the unconstitutional search or seizure was an agent of the sovereign that sought to use the evidence, on the one hand, and those cases, such as the present one, on the other hand, where the officer has no responsibility or duty to, or agreement with, the sovereign seeking to use the evidence.
456*456 The seminal cases that apply the exclusionary rule to a civil proceeding involve "intrasovereign" violations, a situation we need not consider here. In some cases the courts have refused to create an exclusionary rule for either intersovereign or intrasovereign violations in proceedings other than strictly criminal prosecutions. See United States ex rel. Sperling v. Fitzpatrick, 426 F. 2d 1161 (CA2 1970) (intrasovereign/parole revocation); United States v. Schipani, 435 F. 2d 26 (CA2 1970), cert. denied, 401 U. S. 983 (1971) (intersovereign/sentencing). And in Compton v. United States, 334 F. 2d 212, 215-216 (1964), a case remarkably like this one, the Fourth Circuit held that the presumption of correctness given a tax assessment was not affected by the fact that the assessment was based upon evidence unconstitutionally seized by state criminal law enforcement officers. Only one case cited by the respondent squarely holds that there must be an exclusionary rule barring use in a civil proceeding by one sovereign of material seized in violation of the Fourth Amendment by an officer of another sovereign. In Suarez v. Commissioner, 58 T. C. 792 457*457 (1972) (reviewed by the court, with two judges dissenting), the Tax Court determined that the exclusionary rule should be applied in a situation similar to the one that confronts us here. The court concluded that
"any competing consideration based upon the need for effective enforcement of civil tax liabilities (compare Elkins v. United States . . .) must give way to the higher goal of protection of the individual and the necessity for preserving confidence in, rather than encouraging contempt for, the processes of Government." Id., at 805.
No appeal was taken.
We disagree with the broad implications of this statement of the Tax Court for two reasons. To the extent that the court did not focus on the deterrent purpose of the exclusionary rule, the law has since been clarified. See United States v. Calandra, 414 U. S. 338 (1974); United States v. Peltier, 422 U. S. 531 (1975). Moreover, the court did not distinguish between intersovereign and intrasovereign uses of unconstitutionally seized material. Working, as we must, with the absence of convincing empirical data, common sense dictates that 458*458 the deterrent effect of the exclusion of relevant evidence is highly attenuated when the "punishment" imposed upon the offending criminal enforcement officer is the removal of that evidence from a civil suit by or against a different sovereign. In Elkins the Court indicated that the assumed interest of criminal law enforcement officers in the criminal proceedings of another sovereign counterbalanced this attenuation sufficiently to justify an exclusionary rule. Here, however, the attenuation is further augmented by the fact that the proceeding is one to enforce only the civil law of the other sovereign.
[United States v. Janis, 428 U.S. 433 (1976)]
Portillo v. Commissioner, 922 F.2d. 1138 (1991):-arbitrary assessment without supporting evidence is not entitled to "the presumption of correctness"
We do agree with Portillo, however, that the notice of deficiency was arbitrary and erroneous because the I.R.S. failed to substantiate in any way its claim that Portillo received unreported income.
[. . .]
Portillo argues that if this court should find that the Commissioner did in 1133*1133 fact make a substantive determination, the ensuing notice of deficiency was nevertheless arbitrary and erroneous. In addressing this argument, we begin with the well settled principle that the government's deficiency assessment is generally afforded a presumption of correctness. See United States v. Janis, 428 U.S. 433, 441, 96 S.Ct. 3021, 3025, 49 L.Ed.2d 1046 (1976); Helvering v. Taylor, 293 U.S. 507, 515, 55 S.Ct. 287, 290, 79 L.Ed. 623 (1935). This presumption is a procedural device that places the burden of producing evidence to rebut the presumption on the taxpayer. See Janis, 428 U.S. at 441, 96 S.Ct. at 3025; Anastasato v. Commissioner, 794 F.2d 884, 886 (3d Cir.1986). In essence, the taxpayer's burden of proof and the presumption of correctness are for the most part merely opposite sides of a single coin; they combine to require the taxpayer to prove by a preponderance of the evidence that the Commissioner's determination was erroneous. Carson v. United States, 560 F.2d 693, 695-96 (5th Cir.1977); see also Janis, 428 U.S. at 440, 96 S.Ct. at 3025; Bar L Ranch, Inc. v. Phinney, 426 F.2d 995, 998 (5th Cir.1970).
In a Tax Court deficiency proceeding, like this one, once the taxpayer has established that the assessment is arbitrary and erroneous, the burden shifts to the government to prove the correct amount of any taxes owed. In a refund suit, on the other hand, the taxpayer bears the burden of proving both the excessiveness of the assessment and the correct amount of any refund to which he is entitled. Carson, 560 F.2d at 696; see also Janis, 428 U.S. at 440, 96 S.Ct. at 3025.
The presumption of correctness generally prohibits a court from looking behind the Commissioner's determination even though it may be based on hearsay or other evidence inadmissible at trial. See Clapp v. Commissioner, 875 F.2d 1396, 1402-03 (9th Cir.1989); Zuhone v. Commissioner, 883 F.2d 1317, 1326 (7th Cir.1989); Dellacroce v. Commissioner, 83 T.C. 269, 280 (1984). Justification for the presumption of correctness lies in the government's strong need to accomplish swift collection of revenues and in the need to encourage taxpayer recordkeeping. Carson, 560 F.2d at 696. The need for tax collection does not serve to excuse the government, however, from providing some factual foundation for its assessments. Id. "The tax collector's presumption of correctness has a herculean muscularity of Goliathlike reach, but we strike an Achilles' heel when we find no muscles, no tendons, no ligaments of fact." Id.
In this case we find that the notice of deficiency lacks any "ligaments of fact." As the Supreme Court has held, the presumption of correctness does not apply when the government's assessment falls within a narrow but important category of a "`naked' assessment without any foundation whatsoever...." Janis, 428 U.S. at 442, 96 S.Ct. at 3026. Several courts, including this one, have noted that a court need not give effect to the presumption of correctness in a case involving unreported income if the Commissioner cannot present some predicate evidence supporting its determination. Carson, 560 F.2d at 696; Anastasato, 794 F.2d at 887; Weimerskirch v. Commissioner, 596 F.2d 358, 360 (9th Cir.1979); Pizzarello v. United States, 408 F.2d 579 (2d Cir.), cert. denied, 396 U.S. 986, 90 S.Ct. 481, 24 L.Ed.2d 450 (1969). Although a number of these cases involved unreported illegal income, given the obvious difficulties in proving the nonreceipt of income, we agree with the Third Circuit that this principle should apply whether the unreported income was allegedly obtained legally or illegally. See Anastasato, 794 F.2d at 887.
Therefore, before we will give the Commissioner the benefit of the presumption of correctness, he must engage in one final foray for truth in order to provide the court with some indicia that the taxpayer received unreported income. The Commissioner would merely need to attempt to 1134*1134 substantiate the charge of unreported income by some other means, such as by showing the taxpayer's net worth, bank deposits, cash expenditures, or source and application of funds. See Weimerskirch, 596 F.2d at 362. In these types of unreported income cases, the Commissioner would not be able to choose to rely solely upon the naked assertion that the taxpayer received a certain amount of unreported income for the tax period in question.
In this case the Commissioner's determination that Portillo had received unreported income of $24,505 from Navarro was arbitrary. The Commissioner's determination was based solely on a Form 1099 Navarro sent to the I.R.S. indicating that he paid Portillo $24,505 more than Portillo had reported on his return. The Commissioner merely matched Navarro's Form 1099 with Portillo's Form 1040 and arbitrarily decided to attribute veracity to Navarro and assume that Portillo's Form 1040 was false. Navarro, however, was not able to document $21,380 of cash payments he allegedly made to Portillo. In a situation like this, the Commissioner had some duty to investigate Navarro's bald assertion of payment and determine if Navarro's position was supported by his books, receipts, or other records.
In addition, the Commissioner failed to substantiate by any other means, such as analyzing Portillo's cash expenditures or his source and application of funds, his charge that Portillo received unreported income. Instead, the Commissioner merely chose to rely upon the presumption of correctness. We hold in situations like this involving unreported income, the presumption of correctness does not apply to the notice of deficiency.
In summary, we find that the Tax Court had jurisdiction to consider this case because the Commissioner did issue a valid deficiency notice. However, since the Commissioner failed to substantiate his charge that Portillo received cash payments from Navarro, the deficiency determination is clearly arbitrary and erroneous. Therefore, the judgment below regarding unreported income must be reversed.
[Portillo v. Commissioner, 922 F.2d. 1138 (1991)]
Portillo v. C.I.R., 988 F.2d. 27 (1993):
The government argues that its position was reasonable in light of the facts of this case. The contention is that it was reasonable to attribute veracity to Mr. Navarro rather than Mr. Portillo. The government makes this argument despite the ruling in Portillo that this was an arbitrary and erroneous basis for a notice of deficiency. Whether Navarro made a more 29*29 credible witness than Portillo is not the issue. A cursory reading of Portillo makes it clear that one person's word, i.e. "a naked assertion," is not sufficient support for a notice of deficiency.
"In these types of unreported income cases, the Commissioner ... [cannot] choose to rely solely upon the naked assertion that the taxpayer received a certain amount of unreported income for the tax period in question." Portillo, 932 F.2d at 1134. A naked assessment without any foundation is arbitrary and erroneous. United States v. Janis, 428 U.S. 433, 442, 96 S.Ct. 3021, 3026, 49 L.Ed.2d 1046 (1976). The previous panel of this Court held that the deficiency notice "lacked any ligaments of fact" and was "clearly erroneous" as a matter of law. Portillo, 932 F.2d 1128, at page 1133 (5th Cir.1991). There can be no clearer indication from this Court that the government's position in relying on such an unsupported notice of deficiency was not justified. The facts of this case dictate that the denial of litigation costs was an abuse of discretion.
The government contends that the reversal of the initial Tax Court decision created a new rule. This "new rule" argument is supposed to lend credence to the reasonableness of the government's position in relying on the "old rule."
In asserting that a new rule was pronounced in this case, the government turns its back on United States v. Janis, 428 U.S. 433, 96 S.Ct. 3021, 49 L.Ed.2d 1046 (1976). Janis holds that where "the assessment is shown to be naked and without any foundation," it is not entitled to the presumption of correctness ordinarily conferred upon a notice of tax deficiency. The inception of this holding is found in Helvering v. Taylor, 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623, a case which was decided in 1935!
The unsubstantiated and unreliable 1099 Form submitted to the IRS by Navarro was insufficient to form a rational foundation for the tax assessment against the Portillos. This was made abundantly clear by the opinion rendered in the initial appeal. The Court found that the notice of deficiency lacked "any ligaments of fact" and that the assessment was "arbitrary and erroneous." Portillo, supra.
[Portillo v. C.I.R., 988 F.2d. 27 (1993)]
[EDITORIAL: The Portillo Court knew a 1099 is accompanied by a 1096---it is nonetheless arbitrary to choose one sworn statement (the 1099 accompanied by 1096) over another (the return filed by the taxpayer). That is the principle stated by the Portillo court
So you can see, without a return or other sworn statement to counter the 1099 or W-2 information, the IRS would have the right to rely on that 3rd party information; that would not be an arbitrary assessment.]
§6201: Assessment Authority
26 U.S. Code § 6201.Assessment authority
(d)Required reasonable verification of information returns
In any court proceeding, if a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return filed with the Secretary under subpart B or C of part III of subchapter A of chapter 61 by a third party and the taxpayer has fully cooperated with the Secretary (including providing, within a reasonable period of time, access to and inspection of all witnesses, information, and documents within the control of the taxpayer as reasonably requested by the Secretary), the Secretary shall have the burden of producing reasonable and probative information concerning such deficiency in addition to such information return.
§7491: Burden of Proof
26 U.S. Code § 7491 Burden of Proof
Notwithstanding any other provision of this title, the Secretary shall have the burden of production in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by this title.
§6501: Limitations on Assessment and Collection
§6501: Limitations on Assessment and Collection
26 U.S.C.A. §6501: Limitations on
Assessment and Collection
26 C.F.R. §301.6501(a)-1:
Period of Limitations Upon Assessment and Collection
Title 26: Internal Revenue
PART 301—PROCEDURE AND ADMINISTRATION
Limitations on Assessment and Collection
Period of limitations upon assessment and collection.
(a) The amount of any
tax imposed by the Code (other than a tax collected by means of stamps)
shall be assessed within 3 years after the return was filed. For rules
applicable in cases where the return is filed prior to the due date
thereof, see section 6501(b). In the case of taxes payable by stamp,
assessment shall be made at any time after the tax became due and before
the expiration of 3 years after the date on which any part of the tax
was paid. For exceptions and additional rules, see subsections (b) to
(g) of section 6501, and for cross references to other provisions relating
to limitations on assessment and collection, see sections 6501(h) and
(b) No proceeding in
court without assessment for the collection of any tax shall be begun
after the expiration of the applicable period for the assessment of
26 C.F.R. §601.104(c )(1):
Sec. 601.104 Collection
(c) Enforcement procedure--
Taxes shown to be due on returns, deficiencies
in taxes, additional or delinquent taxes to be assessed, and penalties,
interest, and additions to taxes, are recorded by the district director
or the director of the appropriate service center as "assessments."
Under the law an assessment is prima facie correct for all purposes.
Generally, the taxpayer bears the burden of disproving the correctness
of an assessment. Upon assessment, the district director
is required to effect collection of any amounts which remain due and
unpaid. Generally, payment within 10 days from the date of the notice
and demand for payment is requested; however, payment may be required
in a shorter period if collection of the tax is considered to be in
jeopardy. When collection of income tax is in jeopardy, the taxpayer's
taxable period may be terminated under section 6851 of the Code and
assessment of the tax made expeditiously under section 6201 of the Code.
[32 FR 15990, Nov.
22, 1967, as amended at 32 FR 20645, Dec. 21, 1967; 33 FR 17234, Nov.
21, 1968; 34 FR 6424, Apr. 12, 1969; 35 FR 7112, May 6, 1970; 36 FR
7584, Apr. 22, 1971; 38 FR 4956,Feb. 23,1973; 45 FR 7251, Feb. 1, 1980;
49 FR 36499, Sept. 18, 1984; 49 FR 40809, Oct. 18, 1984; T.D. 8685,
61 FR 58004-58009, Nov. 12, 1996.]
26 C.F.R. §301.6203-1: Method of Assessment:
Title 26: Internal Revenue
PART 301—PROCEDURE AND ADMINISTRATION
Method of assessment.
The district director and the director of the regional service center
shall appoint one or more assessment officers. The district director
shall also appoint assessment officers in a Service Center servicing
his district. The assessment shall be
made by an assessment officer signing the summary record of assessment.
The summary record, through supporting records, shall provide identification
of the taxpayer, the character of the liability assessed, the taxable
period, if applicable, and the amount of the assessment. The amount
of the assessment shall, in the case of tax shown on a return by the
taxpayer, be the amount so shown, and in all other cases the amount
of the assessment shall be the amount shown on the supporting list or
record. The date of the assessment is the date the summary record is
signed by an assessment officer.
If the taxpayer requests a copy of the
record of assessment, he shall be furnished a copy of the pertinent
parts of the assessment which set forth the name of the taxpayer, the
date of assessment, the character of the liability assessed, the taxable
period, if applicable, and the amounts assessed.
A History of the Certified Assessed Tax
in the United States Supreme Court Reports-by Dr. Ed
Rivera, Attorney at Law
v. United States, 384 F.2d 863 (1967):
“It appears that the requirement
of the applicable Treasury Regulation—that an assessment officer
sign the assessment certificate [form 23C]—is consistent with the
literally mechanical procedure for recording of liability.
The recordation is to be accomplished through “machine operations”,
but the actual and final assessment step, that step which establishes
a prima facie case of taxpayer liability, can be taken only with
the approval of a responsible officer of the Internal Revenue Service.
What is important in any case is that assessment is not automatic
upon recordation; it requires the action of an assessment officer.
That action, as defined explicitly in the Treasury Regulations,
is the signing of the certificate.”
“As the district court said in United States v. Lehigh, W.D.Ark.1961,
201 F.Supp. 224, 234, this is both true and immaterial:
“Any procedural defense is in a sense “technical.” The procedures
set forth in the Internal Revenue Code were prescribed for the protection
of both the Government and the taxpayer. Neglect to comply
with those procedures may7 entail consequences which the neglecting
party must be prepared to face, whether such party be the taxpayer
or the Government.
“Certainly the courts have not hesitated to enforce strictly
the Code requirement that a taxpayer’s returns must be signed to
be effective. Thus, unsigned returns, even with remittances,
have been viewed as nullities from the standpoint of imposition
of penalties and of commencement of the running of the statute of
limitations. It has availed the taxpayer little that his failure
to sign was inadvertent.”
“Finally, where state taxation is involved compliance with a
statutory provision requiring an assessment list to be signed by
the assessors is usually considered essential to the validity of
further proceedings.” 84 C.J.S. Taxation §473 (1954).
“Since the assessment certificate in this case was not signed by
the proper official, as prescribed by the applicable Treasury Regulation,
within the statutory period after the filing of the estate tax return,
this suit for collection of any deficiency is barred by the statute
Hein v. Freedom From
Religion Foundation, Inc. 127 S.Ct. 2553, 2563 (U.S.,2007)
"Of course, a taxpayer has standing to challenge the collection
of a specific tax assessment as unconstitutional; being forced
to pay such a tax causes a real and immediate economic injury to
the individual taxpayer. See, e.g., Follett v. Town of McCormick,
321 U.S. 573, 64 S.Ct. 717, 88 L.Ed. 938 (1944) (invalidating tax
on preaching on First Amendment grounds). "
[Hein v. Freedom From Religion Foundation, Inc. 127 S.Ct.
2553, 2563 (U.S.,2007)]
Scanlon, 288 F.2d. 504, 508 (1961):
"A reasonable construction of the taxing statutes does not include
vesting any tax official with absolute power of assessment against
individuals not specified in the states as a person liable for the
tax without an opportunity for judicial review of this status before
the appellation of 'taxpayer' is bestowed upon them and their property
v. Scanlon, 288 F.2d. 504, 508 (1961)]
Long v. Rasmussen,
281 F. 236, 238(1922).
"The revenue laws are a code or system in regulation of tax assessment
and collection. They relate to taxpayers, and not to nontaxpayers.
The latter are without their scope. No procedure is prescribed for
nontaxpayers, and no attempt is made to annul any of their rights
and remedies in due course of law. With them Congress does not assume
to deal, and they are neither of the subject nor of the object of
the revenue laws..."
"The distinction between persons and things within the scope
of the revenue laws and those without is vital."
v. Rasmussen, 281 F. 236, 238(1922)]
Lane County v. Oregon,
74 U.S. 71 (1868)
In his work on the Constitution, the late Mr. Justice Story whose
praise as a jurist is in all civilized lands, speaking of the clause
in the Constitution giving to Congress the power to lay and collect
taxes, says of the theory which would limit the power to the object
of paying the debts that, thus limited, it would be only a power
to provide for the payment of debts then existing. [Footnote
4] And certainly
if a narrow and limited interpretation would thus restrict the word
"debts" in the Constitution, the same sort of interpretation would
in like manner restrict the same word in the act. Such an interpretation
needs only to be mentioned to be rejected. We refer to it only to
show that a right construction must be sought through larger and
less technical views. We may, then, safely decline either to limit
the word "debts" to existing dues, or to extend its meaning so as
to embrace all dues of whatever origin and description.
What, then, is its
true sense? The most obvious, and, as it seems to us, the most rational
answer to this question is that Congress must have had in contemplation
debts originating in contract or demands carried into judgment,
and only debts of this character. This is the commonest
and most natural use of the word. Some strain is felt upon the understanding
when an attempt is made to extend it so as to include taxes imposed
by legislative authority, and there should be no such strain in
the interpretation of a law like this.
We are the more ready
to adopt this view because the greatest of English elementary writers
upon law, when treating of debts in their various descriptions,
gives no hint that taxes come within either, [Footnote
5] while American state
courts of the highest authority have refused to treat liabilities
for taxes as debts in the ordinary sense of that word, for which
actions of debt may be maintained.
The first of these cases was that of Pierce v. City of Boston,
[Footnote 6] 1842, in which the defendant
attempted to set off against a demand of the plaintiff certain taxes
due to the city. The statute allowed mutual debts to be set off,
but the court disallowed the right to set off taxes. This case went,
indeed, upon the construction of the statute of Massachusetts, and
did not turn on the precise point before us, but the language of
the court shows that taxes were not regarded as debts within the
common understanding of the word.
The second case was that of Shaw v. Pickett, [Footnote
7] in which the Supreme Court of Vermont said,
"The assessment of
taxes does not create a debt that can be enforced by suit, or upon
which a promise to pay interest can be implied. It is a proceeding
The next case was that of the City of Camden v. Allen,
[Footnote 8] 1857. That was an action
of debt brought to recover a tax by the municipality to which it
was due. The language of the Supreme Court of New Jersey was still
more explicit: "A tax,
in its essential characteristics," said the court, "is not a debt
nor in the nature of a debt. A tax is an impost levied by authority
of government upon its citizens or subjects for the support of the
state. It is not founded on contract or agreement. It operates
in invitum. A debt is a sum of money due by certain and
express agreement. It originates in and is founded upon contracts
express or implied."
These decisions were all made before the acts of 1862 were passed,
and they may have had some influence upon the choice of the words
used. Be this as it may, we all think that the interpretation which
they sanction is well warranted.
We cannot attribute to the legislature an intent to include taxes
under the term debts without something more than appears in the
acts to show that intention.
The Supreme Court of California, in 1862, had the construction
of these acts under consideration in the case of Perry v. Washburn.
[Footnote 9] The decisions which we
have cited were referred to by Chief Justice Field, now holding
a seat on this bench, and the very question we are now considering,
"What did Congress intend by the act?" was answered in these words:
"Upon this question, we are clear that it only intended by the
terms debts, public and private, such obligations for the payment
of money as are founded upon contract."
In whatever light, therefore, we consider this question, whether
in the light of the conflict between the legislation of Congress
and the taxing power of the states, to which the interpretation,
insisted on in behalf of the County of Lane, would give occasion,
or in the light of the language of the acts themselves, or in the
light of the decisions to which we have referred, we find ourselves
brought to the same conclusion, that the clause making the United
States notes a legal tender for debts has no reference to taxes
imposed by state authority, but relates only to debts in the ordinary
sense of the word, arising out of simple contracts or contracts
by specialty, which include judgments and recognizances. [Footnote
Whether the word "debts," as used in the act, includes obligations
expressly made payable or adjudged to be paid in coin has been argued
in another case. We express at present, no opinion on that question.
The judgment of the Supreme Court of Oregon must be
[Lane County v. Oregon, 74 U.S. 71 (1868)]
C.I.R. v. Trustees
of L. Inv. Ass'n., 100 F.2d.18 (1939):
"And by statutory definition the term "taxpayer" includes any
person, trust or estate subject to a tax imposed by the revenue
act. ...Since the statutory definition of taxpayer is exclusive,
the federal [and state] courts do not have the power to create nonstatutory
taxpayers for the purpose of applying the provisions of the Revenue
[ C.I.R. v. Trustees of L. Inv. Ass'n., 100 F.2d.18 (1939)]
Internal Revenue Manual (IR.M.), Section 18.104.22.168.1.11:
Request for Record of Assessment and Certain Internal Transcripts
Request for Record of Assessment and Certain Internal Transcripts
- Authority to provide a taxpayer or his/her representative
a copy of the Record of Assessment is provided by IRC section
6203 and in accordance with IRC section 6103 .
- Upon specific request, taxpayers or their representatives
may receive what are normally regarded as internal use transcripts.
These include, but are not limited to, MFTRA-C, TXMOD, ENMOD,
etc. Under the following conditions, and with careful review
and sanitizing, these requests may be honored.
- Request for internal use transcripts should be processed
according to the following guidelines:
Requestor is primary taxpayer
Sanitize items mandated below.
Requester is authorized third party with"full authority"
Sanitize items mandated below.
Requestor is authorized third party for a specific
issue or form or tax period
- Sanitize all the mandated items plus
any items not covered by the authorization.
- Send to Disclosure for review and release.
Requester is secondary taxpayer
- Sanitize all the mandated items below.
- Send to Disclosure for review and release.
- Internal use transcripts must be carefully sanitized
before release. Mandated items to be sanitized include
Transaction Codes (TCs) 596, 91X, 940, 942, DIF and
SERFE scores, and the following entries in the entity
portion of the modules: CRINV (including any following
notations) and all freeze codes.
- Black out items to be sanitized using a grease pencil
or other marker, pen, or pencil which will make the
information unreadable. Care must be taken that the
sanitizing is complete. If necessary to ensure proper
sanitizing, use correction fluid and cover-up tape.
Photocopy the transcript and check that the redacted
information cannot be discerned in any way on the photocopy
(such as by holding the page to a bright light). Send
the photocopy to the requestor and maintain the original
according to local practice.
- Some authorizations are limited to certain returns
or certain years. Others provide "full authority" .
- There is no legal definition for "full authority"
. This is a term of convenience used to denote the type
of authorizations (normally Form 2848, but other formats
could also be valid) commonly signed by taxpayers to
allow disclosure to third parties, such as accounting
firms, of all information relating to normal business
operations of a taxpayer. It includes authorization
to disclose information for multiple tax periods and
multiple forms or types of returns.
- Do not provide account information to persons other than
the taxpayer unless such person is authorized to receive the
tax information as prescribed by IRC section 6103(c) or (e)
See IRM 11.3.3and IRM 11.3.2.
- Use Command Code CFINK or RFINK to verify the identity
of the person, other than the taxpayer, authorized to
receive the information.
- Contact the Disclosure Office or functional disclosure
coordinator if any questions arise regarding releasing
information to a third party.
- The following information can be furnished if requested
by an authorized person:
- A transcript of the type of tax and tax period(s)
- A copy of Form 4340, Certificate of Assessments,
Payments and Other Specified Matters or Form 5204, Record
- Do not furnish the following information:
- Copy of the official NMF Transcripts
- Copies of internal use forms or documents such as
Form 2475, Request for Transcript of Taxpayer Account
- Microfilm printouts
- Forward requests for Non-Master File returns and tax periods
to the NMF function for research as outlined in IRM 22.214.171.124
, Automated Non-Master File, unless you have a login and password
for the Automated Non-Master File terminal.
- If certification is NOT required for a BMF or IMF account:
- See IRM 126.96.36.199.7, TFTRA Transcripts.
- Use Command Code MFTRA, Request Type "X" , for a
specific literal transcript.
- When responding to the taxpayer, use an appropriate letter.
If using Letter 387C, Record of Account, along with the literal
- When the literal transcript displays a debit balance,
use paragraph "K." It is not necessary to recompute
penalty and interest, unless the taxpayer has specifically
requested the information.
- When the literal transcript displays a credit or
full paid balance use paragraph "J" .
Internal Revenue Manual (I.R.M.), Section 4.15.3: Assessment Procedures
Manual (I.R.M.), Section 188.8.131.52 (06-30-1999): Confirming Assessments
After the jeopardy/termination assessment is processed by
the service center, the service center will provide Case Processing
Support with confirmation that the assessment has been made.
The service center will provide Case Processing Support with
a confirmation copy of the MF or NMF assessment.
Master file Assessment — A confirmation copy of Form 3552,
Prompt Assessment Billing Assembly,
or TY–26, Form 17–A Statement
of Tax Due, is mailed to the area office by the service
center after processing. The form must be associated with the
control copy in Case Processing Support .
Non-master file assessment — A confirmation copy of Form
6335, Statement of Tax Due the Internal
Revenue Service, is mailed to the area office by
the service center after processing. The form must be associated
with the control copy in Case Processing Support .
Upon receipt of Form 3552 or Form 6335 in Case Processing
Support, the form will be reviewed to verify that the assessment
has been made. Verify the name, address, TIN, and tax period
on Form 3552 or Form 6335 for consistency with Form 2859.
The statute control examiner will be notified in order to
close the case from the open statute control file.
Upon request, the service center will withhold manual and/or
Verification Errors — If any errors are detected in Form
3552 or Form 6335, immediately contact the service center for
issuance of a corrected bill. If verification of the assessment
is not received, the Case Processing Support Manager, or designated
employee must follow-up with the service center.
Follow-up will be done in sufficient time to prevent barred
Follow-up will be done three weeks from the 23C assessment
date for non-statute assessments.