Carlson v. United States

Plaintiff filed suit to determine her liability for $148,000 in penalties assessed by the IRS for aiding and abetting understatement of tax liability in violation of I.R.C. 6701. The court concluded that the Government must prove its case under I.R.C. 6701 by clear and convincing evidence because I.R.C. 6701 requires the Government to prove fraud. The court also concluded that insufficient evidence supported the jury's verdict on the penalties plaintiff challenged on appeal because the Government did not meet its burden of proving that plaintiff actually knew the returns she prepared understated the correct tax. Therefore, the court reversed as to this issue. In this case, the district court's instruction on a preponderance standard likely harmed plaintiff. Accordingly, the court vacated the district court's judgment on all remaining penalties and remanded for a new trial. View "Carlson v. United States" on Justia Law