William Prentice Cooper, III v. Commissioner , 136 T.C. 597 ( 2011 )

WILLIAM PRENTICE COOPER, III, PETITIONER v.
COMMISSIONER OF INTERNAL REVENUE,
RESPONDENT
Docket Nos. 24178–09W, 24179–09W. Filed June 20, 2011.
P filed two claims for a whistleblower award with R under
sec. 7623(b)(4), I.R.C., and R sent a letter to P denying the
claims because an award determination could not be made
under sec. 7623(b), I.R.C. We earlier denied R’s motion to dis-
miss for lack of jurisdiction, holding that R’s letter was a
determination conferring jurisdiction on this Court. Cooper v.
Commissioner, 135 T.C. 70 (2010). R subsequently filed an
answer to each petition P filed seeking review of R’s denial of
the whistleblower claims. R attached a memorandum summa-
rizing the facts, legal analysis and legal conclusion for R’s
denials of P’s claims. R moves for summary judgment. P
objects, asking us to undertake a complete re-evaluation of
the facts and take whatever steps are necessary to detect an
underpayment of tax. Held: Our jurisdiction in whistleblower
cases does not include opening an administrative or judicial
action to predetermine the tax liability. P failed to meet the
threshold requirements for a whistleblower award.
Joseph G. Giannola and Robert J. Mauceri, for petitioner.
Holly H. Styles and Alex Shlivko, for respondent.
OPINION
KROUPA, Judge: These cases are before the Court on
respondent’s motions for summary judgment filed pursuant
597
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598 136 UNITED STATES TAX COURT REPORTS (597)
to Rule 121. 1 Respondent contends that he is entitled to
summary judgment as a matter of law because petitioner has
not met the threshold requirements for a whistleblower
award under section 7623(b). We shall grant respondent’s
motions.
Background
The following information is stated for purpose of resolving
the pending motions. At the time of filing the petitions, peti-
tioner resided in Nashville, Tennessee.
Petitioner, an attorney, submitted two Forms 211, Applica-
tion for Award for Original Information (whistleblower
claims), to the Internal Revenue Service (IRS) in 2008 con-
cerning alleged violations of the Code. He alleged in the two
claims that certain parties had failed to pay millions of dol-
lars in estate and generation-skipping transfer tax. Peti-
tioner alleged in one claim that a trust having over $102 mil-
lion in assets was improperly omitted from the gross estate
of Dorothy Dillon Eweson (Ms. Eweson), resulting in a pos-
sible $75 million underpayment in Federal estate tax. He
alleged in the other claim that Ms. Eweson impermissibly
modified two trusts as part of a scheme to avoid the genera-
tion-skipping transfer tax. The trusts at issue had a com-
bined value of over $200 million at the time of Ms. Eweson’s
death in 2005.
Petitioner obtained the information reported in the claims
by representing the guardian of a purported trust bene-
ficiary. He verified the information by examining the public
records and the records of his client. Petitioner submitted
additional supporting information several months after
submitting the claims.
Respondent’s Whistleblower Office (Whistleblower Office)
notified petitioner that it had received the whistleblower
claims. The Whistleblower Office explained that petitioner’s
information would be used to determine whether to further
investigate the alleged violations. The Whistleblower Office
also told petitioner that he would be informed at the conclu-
sion of the review and investigation whether his information
met the criteria for paying an award.
1 All section references are to the Internal Revenue Code (Code), as amended, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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(597) COOPER v. COMMISSIONER 599
The Whistleblower Office reviewed the information peti-
tioner provided in the whistleblower claims. The Whistle-
blower Office forwarded the information to the IRS office with
subject matter jurisdiction over the issues raised. After that
office reviewed the information provided by petitioner,
respondent concluded that no administrative or judicial
action would be taken against the taxpayer.
The Whistleblower Office sent petitioner a letter stating
that respondent had considered petitioner’s whistleblower
claims. It explained that a section 7623(b) award determina-
tion could not be made for either claim because petitioner did
not identify any Federal tax issues upon which the IRS would
take action. The letter further explained that an award was
not warranted for either claim because petitioner’s informa-
tion did not result in the detection of any underpayments of
tax.
Petitioner filed two separate petitions in this Court in
response to respondent’s denials of the whistleblower
claims. 2 Respondent filed answers to the petitions.
Respondent attached an undated memorandum from Norman
Wilson, an IRS estate tax attorney (ETA), as an exhibit to the
answer in docket No. 24179–09W. 3 The memorandum
summarizes the facts, legal analysis and legal conclusion for
respondent’s denials of petitioner’s claims.
Respondent filed the summary judgment motions that are
presently before the Court. Petitioner objects to the motions.
Discussion
We are asked to decide whether summary judgment is
appropriate in this whistleblower matter. Summary judg-
ment is intended to expedite litigation and avoid unnecessary
and expensive trials. See, e.g., FPL Group, Inc. & Subs. v.
Commissioner, 116 T.C. 73, 74 (2001). A motion for summary
judgment will be granted if the pleadings, answers to inter-
rogatories, depositions, admissions, and other acceptable
materials, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that a
2 Respondent filed motions to dismiss for lack of jurisdiction on the grounds that respondent
had not issued award determination notices to petitioner. We determined that the Whistleblower
Office’s letters to petitioner constituted determination notices and denied respondent’s motions
to dismiss. See Cooper v. Commissioner, 135 T.C. 70 (2010).
3 The memorandum was not filed in docket No. 24178–09W.
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600 136 UNITED STATES TAX COURT REPORTS (597)
decision may be rendered as a matter of law. See Rule
121(b); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238
(2002). The moving party has the burden of proving that no
genuine issue of material fact exists and that it is entitled
to judgment as a matter of law. See, e.g., Rauenhorst v.
Commissioner, 119 T.C. 157, 162 (2002). We grant summary
judgment cautiously and sparingly, and only after carefully
ascertaining that the moving party has met all requirements
for summary adjudication. See Associated Press v. United
States, 326 U.S. 1, 6 (1945).
Respondent moves for summary judgment on the grounds
that there remain no genuine issues of material fact for trial.
Petitioner asserts that there are genuine issues of material
fact because respondent failed to properly investigate facts
relevant to petitioner’s whistleblower claims. He argues fur-
ther that respondent failed to apply the correct law in deter-
mining the merits of his claims. Petitioner asks us to direct
respondent to undertake a complete re-evaluation of the facts
in this matter, begin an investigation, open a case file, and
take whatever other steps are necessary to detect an under-
payment of tax.
Generally, an individual who provides information to the
Secretary that leads the Secretary to proceed with an
administrative or judicial action shall receive an award equal
to a percentage of the collected proceeds. Sec. 7623(b)(1).
Thus, a whistleblower award is dependent upon both the
initiation of an administrative or judicial action and collec-
tion of tax proceeds.
Petitioner seeks to litigate whether any Federal estate tax
or gift tax is due from the taxpayer. Our jurisdiction in a
whistleblower action is different from our jurisdiction to
review a deficiency determination. We have jurisdiction in a
deficiency action to redetermine whether there is any income,
estate or gift tax due. See sec. 6214(a). In a whistleblower
action, however, we have jurisdiction only with respect to the
Commissioner’s award determination. See sec. 7623(b). Our
jurisdiction under section 7623(b) does not contemplate that
we redetermine the tax liability of the taxpayer.
Moreover, although Congress authorized the Court to
review the Secretary’s award determination, Congress did
not authorize the Court to direct the Secretary to proceed
with an administrative or judicial action. Congress has
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charged the Secretary with the responsibility of seeking tax
revenue in every possible situation. Secs. 7601 and 7602.
Respondent has explained why he determined that there was
no estate or gift tax due on the facts petitioner presented.
Petitioner may disagree with respondent’s legal conclusions
for why there was no Federal estate or gift tax due. Never-
theless, whistleblower awards are preconditioned on the Sec-
retary’s proceeding with an administrative or judicial action.
Sec. 7623(b)(1). If the Secretary does not proceed, there can
be no whistleblower award.
Finally, respondent properly processed petitioner’s whistle-
blower claims but did not collect any amount of tax, interest
or penalty from the taxpayer based on petitioner’s informa-
tion. Because a whistleblower award is calculated as a
percentage of collected proceeds, if the Commissioner collects
no proceeds there can be no whistleblower award. Sec.
7623(b)(1). We shall grant summary judgment to respondent
in each docket.
Appropriate orders and decisions will be
entered.
f
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