On remand for re-calculation of 4 errors in deficiency amounts, concerning years 2003, 2004, 2005, and 2006, the Tax Court entered final revised decisions based on the Commissioner’s twice-revised Rule 155 computations.
During the Larkins’ appeal, the Commissioner acknowledged four errors affecting the amounts of the deficiencies, additions to tax, and penalties. The court of appeals granted respondent’s request for “a limited remand to correct those errors and recalculate the Larkins’ assessments and penalties,” but otherwise affirmed. Rule 155 establishes a procedural mechanism under which the court may withhold entry of a decision for the sole purpose of permitting the parties to submit computations of the correct deficiencies, liabilities, or overpayments resulting from the Court’s opinion resolving the issues in a case.
On this limited remand, the Larkins made new arguments including that they had never received NODs for 2003, and that the assessed penalties and interest should not have been part of their tax liability. They also insisted there was insufficient evidence of supervisory approval for penalties included and submitted a chart of each tax year’s “appropriate base liability.” The Commissioner provided Forms 3623 and supplemental calculations and forms, which per the court resulted in “sufficient information, in conjunction with his representations that he will abate any overassessments, to allow us to enter decisions correcting the “discrete errors” that had to be corrected. It therefore accepted the figures
According to the court, in the Rule 155 context, “[t]he starting point for the computation is the statutory notice of deficiency from which the parties compute the redetermined deficiency based upon matters agreed by the parties or ruled upon by the Court.” Rule 155 does not afford an opportunity to raise new issues that the court has not previously addressed. The tax courts may treat a matter as a new issue for purposes of Rule 155 “even if it has computational aspects.” Citing Vento v. Commissioner, 152 T.C. at 9 and no. 6 (quoting Molasky v. Commissioner, 91 T.C. 683, 686 (1988), aff’d on this issue, 897 F.2d 334 (8th Cir. 1990)).
Because the taxpayers’ objections to respondent’s revised computations had no merit (at least in the limited scope of Rule 155), and because the court felt satisfied with the Commissioner’s representations, decision was entered in accordance with the adjustments proposed in the government’s revised computations. Based on the final outcome in these taxpayers’ dispute, Rule 155 does not appear to be taxpayer friendly. It would benefit any similarly situated taxpayer to have a body of proposed calculations of their own ready, in the event the amounts need re-computation or further support on remand. Aspirational and easier said than done. This also highlights the importance of seeking knowledgeable tax counsel regarding your possible legal arguments at the outset because taxpayers will not be given a second chance at the computation phase.
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