IRS Still Lacks Authority to Assess Foreign Reporting Penalty

The US Tax Court reaffirmed in a 15-1 ruling on Monday that the IRS lacks the authority to assess penalties against a taxpayer for failing to report foreign business ownership.

The decision came less than sixth months after the US Court of Appeals for the D.C. Circuit reached the opposite conclusion about foreign business reporting in Farhy v. Commissioner, backing the IRS’s authority to make such penalty assessments.

The IRS had asked the Tax Court to reconsider its decision in Mukhi v. Commissioner, which cited Farhy, in light of the reversal. Mukhi can be appealed to the ...