Has the Internal Revenue Service's Challenge of Semi-Naked Lapsing Powers Become Frivolous?
15 Widener L.J. 299
Posted: 15 Jun 2016
Date Written: 2006
Litigants and lawyers are subject to sanctions under Rule 11 of the Federal Rules of Civil Procedure for asserting frivolous claims and defenses. Likewise, lawyers may be disciplined under Rule 3.1 of the Model Rules of Professional Conduct for asserting frivolous claims and defenses. Both rules define frivolous claims and defenses as those not "warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law." A claim contrary to "long-standing, unequivocal, dispositive precedent" is frivolous despite the claimant's subjective belief as to its validity. This Article will examine a tax dispute that exemplifies the IRS's ostensible impunity for asserting frivolous claims. In this dispute, the IRS repeatedly has raised an irrelevant, unsuccessful claim in the same court without any sanctions or discipline. The dispute at issue in this Article is whether semi-naked lapsing powers qualify for the federal gift tax annual exclusion. The courts have invariably determined such powers do so qualify, but the IRS continues to challenge such powers with an argument the courts have rejected as wholly irrelevant.
Keywords: Federal Rules of Civil Procedure, Rule 11, frivolous claims and defenses, Internal Revenue Service
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