Does the Farhy Decision Apply to 3520 Penalty Assessments?

Does the Farhy Decision Apply to 3520 Penalty Assessments?

Tax Law
By Anthony DiosdiRecently the United States Tax Court held in Alon Farhy v. Commissioner of Internal Revenue, that the Internal Revenue Service or (“IRS”) lacked the authority to assess certain penalties against taxpayers under Internal Revenue Code Section 6038(b). In Farhy the petitioner was required to file Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, but he did not. The penalty for failure to file, or for delinquent, incomplete, or materially incorrect filing is a reduction of foreign tax credits by 10% and a penalty of $10,000. An additional $10,000 continuation penalty may be assessed for each 30-day period that noncompliance continues up to $50,000 per return. See IRC Section 6038(b) and (c). The IRS assessed penalties against the petitioner under Section 6038(b) of the…
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