Office of Tax Appeals

Texas Company’s Appeal Is Going, Going, Gone!

The Appeal of LBD Corporation involved a small, closely held corporation located in Texas that sold corporate assets in California via a California-based auction house. The company argued that it had reasonable cause for failing to timely pay the tax due – namely, the company reasonably relied on the erroneous advice of the Loa Angeles auction house, which in turn consulted with a California tax professional.

No sale, ruled the Office Tax Appeals.

“Appellant’s reliance on the advice of the auction house does constitute reasonable cause as there is no evidence that the auction house was a tax professional or had competency in tax law,” the OTA opined. “Although appellant asserts that the auction house consulted a tax professional before offering the advice, there is no evidence that the auction house did in fact consult a tax professional or that the tax professional was competent in California tax law and that the tax professional’s advice is based on the taxpayer’s full disclosure of the relevant facts and documents. OTA finds that an ordinarily intelligent and prudent businessperson would not rely on advice from an unknown third party to determine whether they owed tax.”