Trustee Is on the Hook for Frivolous Trust Tax Return Penalties

A man who filed frivolous income tax returns in his capacity as a trustee is liable for penalties, the US Tax Court ruled Monday.

The Internal Revenue Service imposed $5,000 in penalties under tax code Section 6702(a) against Srbislav Stanojevich based on 2009-12 returns he filed on behalf of Source Financial Trust. The court noted in its opinion that the returns, which claimed that taxes aren’t imposed on the trust’s taxable income, were based on positions the IRS had previously deemed frivolous.

“We find that if a return reflects a position that the IRS has identified as ‘frivolous’ for purpose ...