Scott Michel Comments on High-Profile Foreign Bank Account Decision

Tax Notes

With the appeals clock running, the U.S. Justice Department offered little insight October 11 into whether it would seek circuit court review of its loss in a high-profile foreign bank account report decision.

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Scott D. Michel of Caplin [&] Drysdale noted that a troubling occurrence for taxpayers looking to certify non-willfulness is inaction following receipt of professional advice in prior years to disclose. This fits the fact pattern in Bedrosian, though in the context of the streamlined filing compliance procedures.

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The district court in Bedrosian also resolved a motion in limine in the government’s favor, granting a motion to exclude IRS procedures, actions, analysis, and viewpoints made at the administrative level concerning taxpayer willfulness. In reaching its decision, the court examined IRS authority outside the FBAR context.

Michel agreed with the decision in the motion, but argued that it still left open another issue. He noted there were cases where the IRS, in asserting willfulness, alleged that a taxpayer lied in an interview.

“The question is, does the same rule apply if the Justice Department puts on the witness stand . . . to establish willfulness, the examining agent?” Michel asked. “Can you then cross-examine that agent, if that agent, for example, expressed doubts about the taxpayer’s willfulness in the administrative file?” He added, “It was one thing for the taxpayer just to get that in to undermine the government’s case. It might be another issue if the government chooses to put the IRS on the stand.”

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Excerpt taken from the article "U.S. DOJ Refuses to Tip Its Hand on Bedrosian Appeal" by Andrew Velarde for Tax Notes.


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