What Is a Rule 155 Tax Court Proceeding?

A Rule 155 proceeding is a procedural step in the United States Tax Court used to calculate the final tax deficiency or overpayment after the court rules on the legal issues of a case. The process begins when the Tax Court issues an opinion that resolves legal arguments but does not specify the exact dollar amount owed. The court withholds a final decision to allow both the taxpayer and the Internal Revenue Service (IRS) to perform the necessary calculations based on the ruling. This ensures the final judgment accurately reflects the court’s findings.

Purpose and Scope of a Rule 155 Proceeding

The purpose of a Rule 155 proceeding is to apply the Tax Court’s legal conclusions to determine the final tax liability. The court rules on legal principles, such as whether an income source is taxable, and this process provides a formal method for the parties to perform the resulting calculations.

The scope of this proceeding is limited. Under Tax Court Rule 155(c), no new issues can be introduced. A new issue is any legal argument or claim for a deduction or credit that was not raised during the initial trial. For example, a taxpayer whose case focused on travel expense deductions could not use this proceeding to claim a new charitable contribution deduction.

The focus must remain on computational matters arising from the court’s opinion. This includes recalculating tax due after a disallowed deduction or adjusting items affected by a change in income, such as limitations on medical expenses. The process is for executing the court’s decision, not for seeking a new one.

Preparing the Tax Computation

To prepare the required tax computation, a taxpayer or their representative must gather several documents. These documents provide the legal basis and financial data needed for an accurate calculation.

• The official written opinion from the Tax Court, which contains the legal conclusions that direct the recalculation.
• The original statutory notice of deficiency from the IRS, often called a “90-day letter,” which details the initial adjustments that started the case.
• The taxpayer’s original tax returns for the years in question, which serve as the framework for applying the court-ordered adjustments.
• Any underlying financial records impacted by the decision, such as receipts for a disallowed expense or statements for a revalued asset.

Navigating the Rule 155 Process

After the Tax Court issues its opinion, it orders the parties to submit a computation for the final decision. The taxpayer and the IRS are expected to communicate and agree on a single calculation that reflects the court’s ruling. The court allows 90 days for this collaborative process, during which the parties exchange their interpretations of the opinion.

If both parties agree on the final numbers, they jointly file a “Stipulation of Agreed Computation” with the court. This document includes a proposed decision stating the final deficiency or overpayment. After review and approval, the court enters it as the final decision, concluding the case.

Disagreement between the taxpayer and the IRS triggers a more formal process. If consensus is not reached, one party will file its proposed computation with the court. The opposing party is then given a timeframe to file an objection along with their own alternative computation, detailing the differences.

Upon receiving conflicting computations, the court may schedule a hearing to resolve the computational differences. Each side presents arguments defending their calculation method. The court then makes a final determination on the correct amount and enters a legally binding order specifying the taxpayer’s ultimate tax liability or refund.