Kelly v. Comm’r, No. 13353-21L, T.C. Memo 2022-73 | July 13, 2022 | Lauber |

Short Summary:  At issue in this collection due process (CDP) case is the propriety of the IRS’s collection actions and their refusal to grant the taxpayer’s leniency requests and requests for acceptance of a partial payment installment agreement.  Ultimately, the IRS mostly prevailed.

Key Issues:

• Whether the taxpayer was eligible for “first time abatement” of penalties.
• Whether the taxpayer established “reasonable cause” for his failure-to-file and failure-to-pay additions to tax that would warrant waiver.
• Did the IRS err in rejecting the taxpayer’s proposed installment agreement?

Facts and Primary Holdings: 

• The taxpayer in this case is a securities broker in New York City, where he resided when he petitioned the Tax Court. During 2013–2015 he earned between $1 million and $2 million annually. But he did not file timely Federal income tax returns reporting this income.
• On December 22, 2017, the taxpayer filed a delinquent return for 2013 reporting adjusted gross income (AGI) of $1,919,000 and tax of $689,923. He did not enclose full payment with his return. The IRS duly assessed the reported tax and additions to tax under sections 6651(a)(1) (failure to file timely) and (2) (failure to pay) and 6654 (failure to pay estimated tax), plus interest.
• On December 26, 2017, the taxpayer filed a delinquent return for 2014 reporting AGI of $1,496,287 and tax of $514,875. He made no payments toward his 2014 liability. The IRS duly assessed the reported tax and additions to tax under sections 6651(a)(1) and (2) and 6654, plus interest.
• On January 17, 2018, the taxpayer filed a delinquent return for 2015 reporting AGI of $1,205,400 and tax of $403,096. He made no payments toward his 2015 liability. The IRS duly assessed the reported tax and additions to tax under section 6651(a)(1) and (2), plus interest.

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