Reply to IRS penalty- Settle or proceed to litigation?

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[quote=Anonymous][quote=Anonymous]
OP here. Sorry I was silent for a bit... had to fix dinner, feed the family, clean the kitchen and pack lunches for tomorrow.

Re: The amount of the gift was $137k.. which would have been a non-taxable event had I just filed it on time. Should have been simple. Sigh!

Re: [i]I remain concerned that your attorney told you that you had to pay the assessment before challenging in court (not true for Tax Court, but true for Court of Claims or for Federal District Court) and remain concerned that no one told you how the assessment was calculated.[/i]

I didn't jot it down in my notes but I seem to recall "court of claims" being mentioned. 
I was told how it was assessed: penalty is the greater of $10,000 or 35% of the gross value received. $36,825 is the penalty. The remainder is the interest.

I really appreciate the thoughts put in this thread.

I wanted to think about how I am perceived by the IRS and the Office of Appeals.
The Office of Appeals Officer really zeroed in on me during the discussion and asked me a bunch of questions, after my Tax Attorney said that I will not be speaking and that in fact, their clients don't usually even attend hearings.  I've been keeping my timeline/documentation because I've had to do so much of it between the letters written by the CPA and when I hired this Tax Attorney- but I didn't have any of my notes in front of me during the 15-minute teleconference. I got a really bad vibe after that call.

[/quote]

If this was a gift, then the assessment may not fall under the "$10,000 or 35% of the gross value received". Ask about GIFTS from foreigners: late filing assessment formula may be 5% per month of the gross amount of the gift up to a maximum of 25%.

If the amount of your gift was $147,300, the penalty would be $36,825 which is 25% of $147,300.

The formula that you were given 35% of $137,000 would result in a penalty of $47,950 without adding in any interest.

Therefore, my best guess is that you were assessed at 25% of $137,000 which equals $34,250. Then interest was added to the penalty amount in order to arrive at $40,000.

The penalty formula is straightforward. There is no issue as to whether or not you missed the filing date.

The penalty of $20,000 is almost 15% of the amount of the gift ($137,000). Based on the facts shared, the $20,000 figure seems reasonable.

Was this a GIFT ? An inheritance ? Or a distribution from a FOREIGN TRUST ?[/quote]

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