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Keywords

liabilityappealhearingsummary judgmentdue process

liabilityhearingsummary judgmentdue process

Related Cases

Banister v. United States, 715 Fed.Appx. 638, 120 A.F.T.R.2d 2017-6700, 2017-2 USTC P 50,428

Facts

Joseph R. Banister filed a complaint against the government seeking to recover six penalties assessed against him for aiding and abetting the understatement of tax liability. The penalties were based on documents he prepared in connection with collection due process hearings. Banister argued that the documents did not refer to tax liability and that he lacked the necessary mental state for the penalties to apply. The United States District Court for the District of Nevada granted summary judgment in favor of the government, leading to Banister's appeal.

Banister argues that two of the penalized documents could not result in an understatement because they did not say anything about his clients’ tax liability, but he is mistaken as a matter of law.

Issue

Did the documents prepared by Banister in connection with collection due process hearings preclude the imposition of penalties for aiding and abetting understatement of tax liability under 26 U.S.C. § 6701?

Banister argues that two of the penalties could not be imposed under § 6701 because the penalized documents were prepared in connection with collection due process hearings (“CDP hearings”). He also argues that two of the penalties could not be imposed given that, in his view, the penalized documents did not say anything about tax liability.

Rule

The court applied the principle that a document can result in an understatement of tax liability if it conveys an understatement through its arguments or evidence, regardless of whether it explicitly states the tax liability.

In everyday language, “understate” means “to represent as less than is the case.” Understate , Merriam-Webster's Dictionary , https://www.merriam-webster.com/dictionary/understate (last visited Nov. 27, 2017).

Analysis

The court analyzed Banister's arguments and determined that the documents he prepared did indeed result in an understatement of tax liability. It clarified that the definition of 'understate' encompasses representing an amount as less than is the case, and that the documents prepared by Banister, despite being related to CDP hearings, could still lead to an understatement. The court also noted that Banister's claims of lacking the necessary mental state were unfounded given his background and the nature of the documents.

Given Banister's background as a former tax collector, the research he admitted to conducting, and his own correspondence with the IRS—not to mention the manifest unreasonableness of his beliefs—no reasonable jury could find that Banister lacked actual knowledge that his theories were contrary to law within the meaning of Cheek.

Conclusion

The Court of Appeals affirmed the summary judgment in favor of the government, concluding that Banister's arguments were without merit and that the penalties were appropriately assessed.

Accordingly, the government was entitled to summary judgment with respect to all six penalties assessed against Banister.

Who won?

The government prevailed in the case because the court found that the penalties were justified based on the documents prepared by Banister, which resulted in an understatement of tax liability.

The government was entitled to summary judgment with respect to all six penalties assessed against Banister.

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