The IRS satisfied the supervisory approval requirement while asserting multiple penalties in connection with a limited liability company (LLC), even though the initial determination of all those penalties was not made at the same time or by the same individual. Since each penalty at issue was initially determined and then approved in writing by a supervisor before being communicated to the LLC, the IRS satisfied the supervisory approval requirement.
The IRS initially sent a 60-day letter to the LLC proposing adjustments to the LLC’s partnership return. The IRS also attached Form 5701, Notice of Proposed Adjustment, signed by an IRS agent and Forms 886A, Explanation of Items, justifying two penalties. Subsequently, while the case was under consideration in Appeals, an appeals officer concluded that additional alternative penalties should be imposed and prepared a Form 5402-c, Appeals Transmittal and Case Memo, to which he attached a proposed Final Partnership Administrative Adjustment (FPAA).
Determination and Approval
In each of the four penalties at issue, the penalty was initially determined by an individual who obtained his supervisor’s written approval before the penalty determination was communicated to the LLC. Moreover, the statutory law does not require supervisory approval to be made on a particular form; the statutory law was satisfied by approval made on Form 5701 or Form 5402-c, with the subordinate’s initial determination of penalty attached.
Related decision at Palmolive Building Investors, LLC, 149 TC No. 18, Dec. 61,041.
Palmolive Building Investors, LLC, 152 TC —, No. 4, Dec. 61,416
Code Sec. 6751
CCH Reference – 2019FED ¶40,295.10
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CCH Reference – TRC PENALTY: 3,350