Friday, February 28, 2020

District Court Sustains FBAR Civil Willful Penalty (2/28/20)

In United States v. Ott (E.D. Mich. Dkt. 2:18-cv-12174 2/26/20), here, the district court sustained the IRS assertion of willful FBAR penalties.  The CourtListener docket entries are here:

In material part, the court held:

1. The preponderance of the evidence standard applied to the FBAR willful civil penalty.

2. The definition of willfulness includes recklessness and willful blindness.  (Note the caption for that holding is: “Willfulness Definition for Civil Tax Liability.”)

3. FBAR willfulness can be shown by inference from the facts.

None of this is particularly new, and follows a line of cases over the past few years.

One point of interest is that the IRS asserted tax and civil fraud penalties under § 6663 for 2006, 2007 and 2008.  (See the Tax Court Docket Entries here.)  The taxpayer petitioned the Tax Court and the case was settled for penalties and the accuracy related penalty in § 6662.  See the decision document here (Dkt 45).  Of course, the IRS' burden to prove civil fraud for the civil fraud penalty is the clear and convincing standard, whereas, the trend in cases is that proving willfulness for the FBAR civil willful penalty is preponderance and the definition of willfulness may be looser than civil fraud.  So, the two outcomes are not inconsistent on their face.

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