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[quote=Anonymous][quote=Anonymous]OP here.  Thank you so much for continuing to provide your thoughts. I want to discuss this all with my Tax Attorney but at $600/hour, I need to be very specific with my questions.

To answer/discuss some questions:

1) [i]Was this a GIFT? An inheritance? Or a distribution from a FOREIGN TRUST?  [/i]

This was NOT a distribution from a foreign trust. This was an inheritance, given as a gift of money.

2) [i]In general, the typical abatement standards do not apply in a situation in which one fails to timely file a 3520 tax form. An argument can be made under a "reasonable cause" standard if seeking to be excused from the penalty. What constitutes "reasonable cause" for failure to timely file a 3520 is unclear[/i].

My Tax Attorney was confident that the abatement applies to a 3520, although further research showed that the IRS considers this a gray area- that's why my attorney wants to argue it in court and also present the "honest mistake theory."  This is my very first ever tax filing mistake.  My job requires continuous evaluation and financial disclosures. I will not make it as a money launderer.

3) [i]I read most of the sftaxcounsel.com blog referenced above. As I suspected, either your CPA or your tax attorney reacted too quickly in sending a protest letter to the IRS which killed your right to challenge the assessed penalty in Tax Court. If my reading is correct, then your choice is to pay the $40,000 and challenge in Court of Claims or in Federal District Court or to pay the reduced amount of $20,000.[/i]

Answer- - No need to say "not giving legal advice here"... because I find it so crazy that even after I hired a CPA and a Tax Attorney that the process I went through doesn't seem completely correct.  Yes, those are my 2 choices right now- 40k or 20k.

[i]4) It's family money that was taxed in another country and you rightfully don't owe any taxes in the US. Hope it works out for you.[/i]

Yes, it has already been taxed in another country... and it's just so sad to even get to that point of getting cash- there was so much drama that occurred 5 generations above me. Plus my sibling got scammed by a land developer. Just can't make this stuff up.

And now to collect what I need to ask my Tax Attorney:

1) 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%. (that 35% was literally pasted from the email I got from my Attorney when I asked for the calculation)

2) Did we already miss all opportunities for Tax Court where I don't have to pay up front?

3) What room for negotiation do we have with the Office of Appeals? As I noted from the IRS website: [quote]However, at its discretion, Appeals may reconsider its prior decision if evidence becomes available that indicates further consideration is warranted.[/quote]

Would further reconsideration include... I hired professionals who didn't process my case in the best way possible?  Can you provide them with my timeline documentation, along with the documentation from my CPA. Can we review the process of what I went through to see if things were done correctly?

Anything else I should be asking? [/quote]

Yes, I think that your advisors reacted too quickly which resulted in denying you a chance to go to Tax Court (tax court would not have jurisdiction due to your advisors' actions in this matter).

You probably cannot win an argument alleging incompetency on the part of your CPA or Tax Attorney because their actions did result in a 50% reduction of the assessed penalty. Plus, there is no guarantee that a Tax Court judge would rule in your favor.

There isn't much to contest in this type of situation as the penalty is automatically applied (5% per month of the gross amount of the gift up to a maximum of 25%) for a late filing. Based on your posts, you want to argue that a reasonable person would not be aware of the need to file such a form as the recipient of a gift from a foreign national. This would constitute too broad of an exception that would effectively nullify the rule requiring reporting and could lead to opening the door for others to make a type of "selective enforcement" defense claim.

You are not a litigant who will receive sympathy as the penalty is only about 15% or less of a cash gift received.

Attorneys can make all types of arguments for you, but you need to be aware of the odds--which will just be guesstimates. My guesstimate is that you will not receive any further reduction of the penalty absent a clear mistake in calculating the penalty by the IRS--but there does not appear--based on your posts--to be any mistake that would reduce the amount to $20,000 or less.

Had you been incapacitated due to a serious health issue such as being in a coma or suffering a serious stroke, then you might have a reasonable excuse for not filing in a timely manner.

Again, this is not intended to be legal advice as I am not qualified to do so and because you currently have representation in this matter. My points are just suggestions to discuss with your lawyer.[/quote]

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