Reply to IRS penalty- Settle or proceed to litigation?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Is it the 3250 to disclose a gift from a foreign person? Has there been any case law on this? If you go to litigation, is there a chance the IRS tax counsel will settle for less? Plus you will have your attorney’s fees. Is there a way your attorney can push back at Appeals? I can’t imagine that the Appeals Officer wants to have this go to litigation but who knows. [/quote]

OP here. (I should say that at every response.. I can't figure out how to do multi quotes)

Yes,  this is an FBAR and 3520 situation.

My Tax Attorney says that if we go to litigation, I first have to pay the $40k, but since litigation will force the IRS to have actual attorneys to review the case (rather than just CPAs), there's a 70% chance that I can get the full $40k back. If that happens, then I pay my Tax Attorney $9k for a success fee.

So it's a gamble. I have to front $40k to litigate. I can lose the entire $40k, or I can get everything back and pay $9k to the Tax Attorney.

The Tax Attorney can negotiate at Appeals. That's why I am crowd-sourcing advice here on how/what to negotiate. [/quote]

So it's going to end up costing you $20K (pay now; no hassle) or $18,300 (70% chance of $0 with attorney cost of $9K; 30% chance of losing with associated cost of $40K).  Net probable difference of $1.7K.  Adjust the probability of scenario 2 as you deem appropriate and decide.[/quote]

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