Form 5471
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DC Circuit: Tax Court was Wrong; IRS has the Authority To Assess Form 5471 Penalties

ByJustin Hughes

Summary On Friday, May 3, 2024, the U.S. Circuit Court for the D.C. Circuit overturned the Tax Court’s decision in Farhy v. Commissioner, ___ F.4th ___ (D.C. Cir. 5/3/24) (link to opinion) and held that the IRS has authority under § 6038(b) to assess Form 5471 penalties.   The Tax Court previously held that the…

Tax Court Rejects Taxpayer’s Reasonable Cause Argument Regarding Automatic Penalties from Failure to File Forms 5471
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Tax Court Rejects Taxpayer’s Reasonable Cause Argument Regarding Automatic Penalties from Failure to File Forms 5471

ByJustin Hughes

Flume v. Commissioner (here) revolved around one noteworthy issue: did the taxpayer’s reliance on the advice of his tax return preparer spare the taxpayer from $110,000 in penalties for the taxpayer’s failure to report foreign investments on Form 5471? The taxpayer argued that he relied on the expertise of his tax return preparer to guide…