Dixon super claim dismissed by US court
A US court has rejected claims from one of Australia’s well-known SMSF advisers that his superannuation fund should be exempt from taxation under US law, which may have significant implications for Australian and US citizens working across both countries.
In September last year, SMSF Adviser reported that Evans Dixon’s former chief executive had been in dispute with the US Internal Revenue Service (IRS) following alleged underpayment of taxes from income he received as part of his role with the group’s US subsidiary.
Mr Dixon had resigned as chief executive of the merged Evans Dixon Group in June 2019 following significant losses in one of its US property funds.
The IRS was seeking to draw Mr Dixon’s Australian superannuation fund into the case, if he was not able to substantiate claims that the super is exempt from US taxation under the US-Australian income tax treaty.
Marsha Laine Dungog, a director at Andersen US Private Client Services (International), had said at the time that while the treatment of super under Australia’s tax treaty with the US had been a grey area for a number of years, this was the first known case where the IRS had challenged a US taxpayer to substantiate claims that their super should be exempt from US taxes as foreign social security.
The decision from the US Court of Federal Claims
But according to US Tax Court documents filed on 21 February 2020, Judge Richard A. Hertling dismissed Mr Dixon’s claim saying the court lacks jurisdiction over Mr Dixon’s complaint because he did not sign, and thus did not duly file, his 2013 and 2014 amended returns.
The court also said it dismissed Mr Dixon’s case because he did not sign his own refund claims and did not submit a valid power of attorney or other notice of representation, with his returns signed by his John Castro, referred to in the decision as Mr Dixon’s “tax representative”.
“Mr Dixon’s refund claims did not comply with the IRS’ requirements that every tax return be signed under penalties of perjury by either the taxpayer or his agent, authorised by a power of attorney, and any such power-of-attorney form be submitted with the refund claim to which it applies,” Judge Hertling said in the decision.
“Because compliance with the IRS’ regulatory filing requirements is jurisdictional, the court lacks subject-matter jurisdiction over Mr Dixon’s claims.”
Mr Dixon also argued that regulation by the IRS was inapplicable because it allows anyone to sign a tax return under penalties of perjury.
He also argued that the regulation was invalid because the statutes under which the regulation was enforced are unambiguous, so no regulations were needed, and that the statutes allowed Mr Castro to sign the returns.
Further, he argued that the court had jurisdiction because the IRS waived its ability to object to his failure to comply with the regulation requiring that he sign his amended returns by opening an audit of the 2014 amended return and communicating with Mr Castro during the course of that audit.
The court rejected Mr Dixon’s argument of the IRS’ inapplicability and invalidity as “meritless”. It also rejected Mr Dixon’s waiver argument, saying it lacked jurisdiction to consider his claims.
“Because Mr Dixon neither personally signed nor submitted a valid power of attorney for his preparer to sign his 2013 and 2014 amended returns, this court lacks jurisdiction over his claim. Therefore, the plaintiff’s complaint must be dismissed,” Judge Hertling said.
“The court will issue an order in accordance with this decision.”
Adrian Flores is the deputy editor of SMSF Adviser. Before that, he was the features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.
You can email Adrian at [email protected].