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A Little Hard Work and A Lot of Perseverance

January 25, 2017 | Written by: Dung Vu, EA
Tax Professional
I was working on a case recently which reminded me that a little hard work and a lot of perseverance always does pay off. Our member had previously been a partner in a law firm, but more recently had disposed of her partnership interest. She was issued a Schedule K-1 showing her partnership basis and a loss, which she documented on her tax return. However, the IRS questioned the loss and responded to this entry on her tax return by mailing her an audit letter. This is where our case began.

After reviewing the case, along with the documents provided by the member, I passed it along to our in-house Education and Research Department to get a second opinion. As a team, we concluded that the member had a strong case to support her tax position. However, after we submitted the taxpayer’s documents and explained the situation, the auditor continued to disagree with our assessment and issued an exam report disallowing the partnership loss. She also stated that, unless we provided her with certain documentation, she would continue to disallow the partnership loss. However, the documents she requested were unrelated to the partnership loss and, for this reason, they did not even exist. While I was disappointed by this response, I knew that our case was well-founded and kept pushing forward.

After multiple conversations and detailed explanations, the auditor continued to disagree with our perspective on the case, so finally I asked to speak to her manager. Initially, she denied my request, but when I kept pushing she gave me her manager’s contact information. I called him and requested a different examiner, but he denied my request. So I gave it another shot and continued working with the original auditor, but we were getting nowhere. After multiple requests, her manager finally agreed to review the case himself. Fortunately for our member, the audit manager immediately understood our position! He requested the auditor call me, stating that the partnership losses should be completely allowed and that a new examination report be issued because the member not only had loss, but at-risk basis, too! The IRS finally reversed its decision and my member was incredibly relieved.

Through my continued determination on my client’s case, combined with my member’s patience, was able to finally correct the IRS’s uncompromising stance. This was an important reminder that all taxpayers are allowed, by law, to exercise their Taxpayer Rights – including the “Right to Quality Service” and the “Right to Challenge the IRS’s Position and Be Heard” while undergoing a tax audit from the IRS.

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