Procedural Requirements for Imposition of Penalties and Additions to Tax
The Internal Revenue Service Restructuring Act required that each notice imposing a penalty include the name of the penalty, the Code section imposing the penalty, and a computation of the penalty. The Act also requires the specific approval of IRS management to assess all non computer generated penalties unless excepted. This provision does not apply to failure to file penalties, failure to pay penalties, or to penalties for failure to pay estimated tax.
And Chicago tax lawyer Robert E. McKenzie, who has defended rich folks claiming losses on everything from deer farms to race horses to yachts, says the Romneys -–despite the fact that Ann Romney’s statements on what dressage has done for her personally suggests lack of profit motive– likely did all the paperwork right and can assert they thought they’d make a profit, even if they never do. “The way I would argue it is `this horse competed in the Olympics and we’ll breed it and make money off the foal’,’’ says McKenzie. “When you’re that rich you can afford to have talented tax advisers.”
“It’s a great result for my client,” said Robert McKenzie, a partner with Arnstein & Lehr, who represented a taxpayer in the Seventh Circuit Court of Appeals who lost to the government in a separate case.