Prosser v. Commissioner of Internal Revenue, No. 13-4526 (2d Cir. 2015)
Annotate this CasePetitioners sought a redetermination in the Tax Court challenging the Commissioner's determination of tax deficiencies and assessment of penalties against them under section 6662 of the Internal Revenue Code, 26 U.S.C. 1 et seq. The Commissioner determined that petitioners were deficient based on a contribution by the McGehee Family Clinic to a multiple-employer welfare benefit plan. The Commissioner concluded that the Plan was not an "ordinary and necessary" business expense within the meaning of I.R.C. 162(a) and that the Plan was "substantially similar" to the listed tax-avoidance transaction described by the IRS in I.R.S. Notice 95-34. The court held that the Plan is substantially similar to the listed tax-avoidance transactions under Notice 95-34 and, therefore, upheld the Commissioner's assessment of accuracy-related penalties against petitioners under section 6662A. Further, the court held that petitioners had adequate notice of the potential for penalties under section 6662A and that the increased penalty rate under section 6662A(c) is applicable to the Clinic. The court affirmed the judgment of the Tax Court.
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