Government Urges Broad Reading of Foreign Interest Penalty Law

The IRS has authority to penalize a taxpayer who failed to report his interests in a foreign-owned business because the language of the tax code permits it, the government said.

Section 6038(b), which permits the IRS to assess penalties for failing to report interests in foreign-owned corporations, is valid because of the “broad, inclusive” grant of authority in tax code Section 6201(a), the IRS said in a brief filed Tuesday in the US Court of Appeals for the D.C. Circuit.

Under Section 6201(a), the Secretary of the Treasury is “authorized and required to make the inquiries, determinations, and ...