World Business News

A round up of the latest news for those doing business internationally

The Supreme Court makes fighting IRS even harder

Zone(s): USA ¦ Sector(s): Taxation, Law
[19 June 2014, Financial Advisor] By Noah Feldman/Bloomberg, From the USA:  What do you dread more than a summons from the IRS? The tax authority is the closest thing to Dostoevsky’s Grand Inquisitor that our democracy allows. And now the U.S. Supreme Court made the Internal Revenue Service just a little bit stronger, overturning an appeals court opinion that would have allowed you to examine the IRS agents who summon you to find out if they have improper motives.

The court established a reasonable-sounding rule: You can question the agents only if you can point to specific circumstances plausibly raising the inference of bad faith. In reality, however, it’ll be hard to pass this bar unless the courts share the scepticism of the IRS that is natural to most taxpayers.  The case, United States v. Clarke, grew out of an investigation of a partnership called Dynamo Holdings that had unusually high interest deduction claims. The investigation dragged on for several years. The IRS repeatedly asked the target to extend the three-year statute of limitations for assessing tax liability, which it agreed to do three times, presumably in the hopes of resolving the case in its favour. When the fourth request came around, Dynamo Holdings said no. The IRS then issued summonses to four people associated with the partnership. When they didn’t comply, the IRS enforced the summonses through court orders.

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