Wednesday, February 26, 2003
James C. and Katherine Wilkins were victims of a black reparations scam and claimed an $80,000 �black investment credit�, which resulted in a refund. Then IRS determined a deficiency. For the purpose of this summary judgement motion, the Tax Court assumed as true the Wilkins� claims that before taking the credit they visited the IRS website and found no warning that the black investment credit was a scam, and that latter an IRS agent told them that they would not need to repay the $80,000 if they provided assistance in prosecuting the promoter of the scam. Tax Court took these allegations as a claim for equitable estoppel.
Tax Court ruled:
* There is no black investment credit or any other form of black reparations currently in the tax code. Of course.
* IRS cannot be equitably estopped because they failed to warm about the scam on their website. This makes sense. IRS made no positive assertion, and it would be impossible for them to keep track of every tax scam out there as they happen.
* IRS cannot be equitably estopped because their agent told the Wilkins� that they would not need to pay back the $80,000, because he was only misstating the law. Tax Court�s case law on this is probably solid, but it really is remarkably unfair. Once again, the IRS has no responsibility for what it tells taxpayers about tax law. The Wilkins� probably should be made to pay back the bulk of this money, but I sure a little probing questioning would reveal amounts spent on reliance of the agents� statements that it would be detrimental for them to pay back. In a Tax Court where real justice was allowed, these amounts would be subtracted from what they would have to pay back.