Presumptions and Tax Return Preparer Fraud

Just because the IRS has the legal authority to act, argues Professor Camp, does not mean that it should. The Tax Court's decision in Allen v. Commissioner, where the court agreed to let the IRS use old language for a new purpose, is a good illustration. Allen involved the question of whether the section 650l(c)(1) fraud exception to the normal three-year assessment limitation period in section 6501(a) was triggered, as a matter of law, by the intent of a tax return preparer to create and submit a fraudulent return, even when the taxpayer had no intent to evade tax. The Tax Court said yes, thereby turning on its head the usual presumption that a taxpayer has not committed fraud unless the IRS proves otherwise. The thesis for this article is that the Tax Court's opinion in Allen was built more on a foundation of tax policy than tax law. To the extent it was a sympathetic response to an IRS tax administration problem, Professor Camp believes the sympathy is misplaced. Congress has spoken to the problem of tax return preparer fraud and has expressed different policy choices than the Allen court. Accordingly, he argues that the Tax Court should have declined to read section 650l(c) as broadly as it did.