Cases before the U.S. Tax Court are often won or lost by whether evidence is or is not admitted in the record. Lunnon v. Commissioner, No. 15-9007 (10th Cir.), provides an example of how this works in a tax collections case.
Facts & Procedural History
Mr. Lunnon failed to pay employment and unemployment taxes for 2005 to 2008. The IRS prepared substitute returns for these years and attempted to collect the unpaid tax debt. Mr. Lunnon requested a collection due process hearing before the IRS Office of Appeals (Appeals).
Appeals sustained the collections action. Mr. Lunnon asked the U.S. Tax Court to review the IRS’s decision, asserting that IRS had failed to present him with documents supporting its claim against him, and objecting to the admission of new evidence on appeal.
The court remanded the case to Appeals an opportunity to review the documents supporting the IRS’s claim—documents that would become a part of the record upon remand. This included new evidence that was obtained by the IRS during the tax court proceeding. Appeals, the U.S. Tax Court and, on appeal, the Tenth Circuit Court, upheld the IRS’s decision.
Will The U.S Tax Court Consider The Evidence?
The U.S. Tax Court generally considers a collections case de novo where the validity of the underlying tax liability is at issue. In these cases, the parties build a record before the court and the U.S. Tax Court bases its decision on the court record. The court generally does not admit evidence that is introduced late in the proceedings–particularly if admitting the evidence into the record late will unduly prejudice the government or taxpayer.
If only the collection action is being challenged, and not the underlying tax liability, the U.S. Tax Court limits its review to the administrative record to determine whether the IRS abused its discretion.
Here, Mr. Lunnon did not want this “new evidence” in the record. Had Mr. Lunnon objected to remanding the case to Appeals and the court sustained his objection, the IRS’s evidence may have been excluded.
Unfortunately, Mr. Lunnon did not object, so the appeals court concluded that it was proper for the U.S. Tax Court to remand and then make its determination based on the supplemented administrative record. The result was that the U.S. Tax Court was able to consider new evidence that was not initially in the court or administrative record.