Sisters Could Not Raise New Arguments in Rule 155 Proceeding (Vento, TC)

Three sisters could not raise new arguments in a Rule 155 proceeding. Therefore, the court rejected their tax computations and adopted the IRS’s instead.

Prior Opinion

In a prior opinion, the court held that the sisters could not take foreign tax credits for their payments to the VIBIR because:

  1. they were not bona fide residents of the U.S. Virgin Islands,
  2. they were not required to pay taxes to the VIBIR, and
  3. they did not have any foreign or V.I. income subject to U.S. income tax.

Also, the court ordered them to submit tax computations under Rule 155. See, R. Vento, 147 TC 198, Dec. 60,688.

Note.The sisters submitted only the FTC issue for decision. They told the court that all other issues were resolved. Thus, the FTC issue was the only issue the parties addressed and that the court decided.

New Arguments Raised

In their computations, the sisters took the position that their VIBIR payments were deductible as state or local taxes. However, they had never advanced this position at any prior point in the litigation.

The sisters asked for leave to amend their petitions to add this new argument. They also filed a motion to reopen the record to submit evidence supporting their new arguments.

New Arguments Rejected

The court uses Rule 155 proceedings to determine the correct amount of tax resulting from findings and conclusions it already made. The computation process is not intended to be a “do over” for either party to raise issues not previously addressed. Thus, the sisters should have calculated their taxes based on the court’s rejection of their claimed foreign tax credits. Instead, they calculated the tax by deducting their VIBIR payments as state or local taxes. This deduction raised a new issue that was not previously addressed by the parties or decided by the court. Therefore, it was not proper.

Supplementing R. Vento, 147 TC 198, Dec. 60,688.

R. Vento, 152 T.C. No. 1, Dec. 61,401


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All stories by: CCHTaxGroup