Frieda Korobkin Leonard Korobkin Leonard Korobkin Professional Corporation v. United States

The Korobkins were allegedly involved in several abusive tax shelter transactions, and were assessed over $300,000 in penalties under I.R.C. § 6700. People who disagree with a penalty assessment can contest it by (1) paying 15% of the assessment and filing an administrative refund claim within 30 days of notice of the penalty, (2) waiting until the IRS denies the claim or until 6 months elapse (whichever is earlier), and (3) filing suit in district court within 30 days after that. I.R.C. §§ 6703(c)(l)-(2). The Korobkins did steps (1) and (2), but waited too long on (3). The district court dismissed their claim, because once a plaintiff misses the six-month-plus-30-day deadline, the district court lacks jurisdiction over the refund suit unless the taxpayer pays the entire penalty first. Flora v. United States, 362 U.S. 145, 177 , 80 S.Ct. 630, 647 , 4 L.Ed.2d 623 (1960); Steele v. United States, 280 F.2d 89 (8th Cir.1960) (acknowledging the rule’s applicability to penalty assessments).

There’s a narrow exception to this jurisdictional rule for “divisible” assessments— taxes or penalties that are seen as merely the sum of several independent assessments triggered by separate…