Reference no: EM13969196

Part 1:

1. Although she left her job in Nov of Year 1, Patrice was entitled to a year-end bonus. On Dec 31, her former boss called her to let her know the check was available. Patrice did not pick up the check until Jan 3, Year 2. Her W2 for Year 1 did not include the bonus, so Patrice did not include it in gross income for her Year 1 tax year which she filed the return on April 15, Year 2. In Year 2, she received a @2 in the amount of the bonus, but Patrice decided that she should have included it in her Year 1 gross income because she was "constructively received" it in Year 1. Therefore she did not include it in her Year 2 return, which she filed on April 15, Year 3.

On May 1, Year 5, the IRS mailed Patrice a NOD for her Year 2 tax year based on the unreported bonus. Patrice petitioned the Tax Court, and on June 1, Year 6, the Tax Court's decision in Patrice's favor became final. The decision was made on the ground that the bonus should have been income for Patrice's Year 1 tax year. The statute of limitations on assessment for Year 1 expired in Year 5.

A. What record does the IRS have?

B. If the IRS has an option under Part A, what action would it have to take, and by what deadline?

2. Gail filed her Year 1 return on April 15, Year 2. On march 3, year 5, the IRS asked Gail to agree to extend the SOL. On March 5, year 5, Gail signed a form 872 specifying an extension of the statute until April 15, year 6. Subsequently, Gail signed additional Forms 872, on April 1, Year 6 and May 1, Year 7, each providing an additional 1 year extension. When is the last day that the IRS and send Gail a NOD as a prerequisite to assessing tax with respect to Gail's year 1 tax year?

Part 2:

1. Sabrina Brown, who is single, has just received a NOD from the IRS, and she is not sure how to respond to it. Sabrina would like to know the deadline, if any, for petitioning the US Tax Court, and the likelihood that she will be able to convince the court to dismiss the case on procedural grounds. Following are alternative scenarios:

A. The NOD was erroneously mailed to Sabrina's mother's house in another state. Sabrina has not lived there for several years and has used her own address on her tax returns since she moved out of her mother's house. Her mother received the notice, which was dated and postmarked Jan 3 of the year, on Jan 7. On Feb 1, her mother put the notice in the mail, and, Sabrina received it on Feb 4.

B. The notice was mailed to Sabrina where she currently resides, but instead of reflecting her correct apt number, 204, the address listed is 403. The error resulted in a delivery delay of several days so that although the notice was dated Jan 3, Sabrina received it on Jan 12.

C. The notice was mailed to Sabrina's current residence and her address and SSN were correct. She received the notice, which was mailed on Jan 3, on Jan 6. However, the notice was addressed to "Mr. and Mrs. Gerald and Sabrina Brown" although Sabrina has never been married and does not even know a Gerald Brown. The notice reflects a deficiency of 20k, based on unreported income from a job as a financial consultant. Sabrina informs you that she is an electrical engineer, with no background or skill in finance. She worked full-time for a single employer during the year in question, as reflected in the sole W-2 she attached to her tax return, and did no consulting work.

2. On May 31, Year 3, the IRS mailed Gloria a notice of deficiency with respect to her Year 1 tax year. Gloria had filed her Year 1 return on April 1, Year 2. The IRS erroneously did not send the notice of deficiency to Gloria's last know address. It was ultimately forwarded to Gloria, and she received it on August 15, Year 3. Subsequently, an IRS employee who was working on Gloria's case realized that the notice had not been sent to Gloria's last know address. April 20, Year4, the IRS mailed a duplicate copy of the notice to Gloria's last know address. She received it on April 25, Year 4. On June 1, Year 4. Gloria petitioned the tax Court. In her petition, Gloria moved to dismiss the case for lack of jurisdiction on the ground that no notice of deficiency was mailed to her within the time period required by the statute of limitations on assessment.

A. Is the Year 3 notice of deficiency invalid?

B. Would your answer to Part A differ if Gloria had petitioned the tax Court on August 20, Year 3 instead of June 1, Year 4?

C. Assume that the Year 3 notice of deficiency was invalid.

i. Is the notice of deficiency that the IRS mailed in Year 4 invalid as a "second notice" under Code section 6212 (c)?

ii. Assume that the notice of deficiency mailed to Gloria in Year 4 is not a prohibited second notice and does not suffer from any other infirmities. Under what circumstances, if any, would the notice be timely?

Part 3:

1. Tara Green asks your assistance in claiming a refund from the IRS.  After timely filing her Year 1 Form 1040 by mail in March 1999, she realized that she had forgotten to deduct $6,000 in home mortgage interest, real property taxes of $2,000, and state income taxes of $4,000 she had paid in Year 1.  (She had not itemized her deductions on her original return, but instead took the standard deduction.  She also took her personal exemption of 1).  She has no other deductions or income items.  Tara is single, has no dependents, and had adjusted gross income of $60,000 in Year 1, consisting entirely of salary.  $10,000 had been withheld from Tara's wages for federal income tax purposes, and she had paid the remainder of her tax liability with her return.  She still resides at 125 Main St., Wayne, NJ 07470, where she lived when she filed the return in question.  Her Social Security number is 222-33-4444 and her telephone number is (973) 264-9872.  She did not and does not wish to make a Presidential Election Campaign Fund designation.  Assume that Tara's refund claim will be timely; draft the claim for her.