Qualified Offer Delivery: “Addressed To” vs “Delivered To” – Houston Tax Attorneys

You’ve done everything right in working with the IRS and the IRS still got it wrong. You’ve exhausted your administrative remedies and you have to hire a tax attorney. Now you are incurring costs just to correct the IRS error.

The attorney has you make a proper qualified offer under Section 7430(g) to recover attorneys fees. You send the offer to the IRS during the qualified offer period with all the required language. You send it by certified mail tracking that shows that it was delivered to the IRS. Then the government claims it never received your qualified offer. Or worse, they argue you sent it to the wrong address because you used a P.O. Box listed on the IRS notice instead of a street address. Can the IRS defeat your qualified offer based on where you addressed the envelope rather than where it was actually delivered?

The case of Greenwald v. United States, Civil Action 2:23-cv-4100 (S.D. Ohio Oct. 23, 2025), addresses this exact question. The court gets into the distinction between addressing a qualified offer and delivering it–the difference between recovering substantial attorney’s fees and losing them entirely based on technical mailing issues.

Facts & Procedural History

The taxpayer filed her 2020 Form 1040 reporting adjusted gross income of $11,324 and zero tax liability. She claimed a total refund of $8,196. This consisted of a $5,920 earned income tax credit, a $2,050 additional child tax credit, and $226 in federal tax withholdings. The IRS refunded only the $226 in withholdings. It denied the earned income and child tax credits.

In June 2022, the taxpayer filed a refund claim seeking $7,970 (the same credits minus the already-refunded withholding). The IRS denied this claim on April 18, 2023. The taxpayer appealed on May 22, 2023. A few days later, on May 24, 2023, she sent what she designated as a qualified offer under Section 7430(g) of the tax code. This offer proposed to settle her liability at zero with an overpayment of $7,970.

The IRS denied her appeal on June 14, 2024. The taxpayer then filed a complaint in the United States District Court for the Southern District of Ohio on December 13, 2023, seeking recovery of the $7,970 plus statutory interest. After discovery and an unsuccessful mediation, the parties filed a stipulation for dismissal on April 15, 2025. On May 6, 2025, the IRS issued a Notice of Adjustment paying the taxpayer the full $7,970 plus $2,185.81 in statutory interest. The notice stated the payment was made “in accordance with the concession of the government” in the case.

The taxpayer then moved for attorney’s fees under Section…

The taxpayer then moved for attorney’s fees under Section 7430. She sought a minimum of $37,505 in fees. The government opposed on multiple grounds. One key objection: the taxpayer had not properly delivered the qualified offer to the correct address.

Section 7430: The Statutory Framework for Fee Recovery

Section 7430 of the tax code allows a “prevailing party” to recover reasonable attorney’s fees and costs from the United States in tax litigation. This provision serves an important purpose. It levels the playing field between taxpayers and the government. Without it, many taxpayers would lack the resources to vindicate their rights against the IRS.

We’ve previously written about Section 7430 and getting the IRS to pay for your tax attorney. The statute imposes several requirements. The taxpayer must be a “prevailing party.” The taxpayer must have exhausted available administrative remedies before commencing the civil proceeding. The fees and costs must be reasonable. No other party can be obligated to pay them.

Section 7430 limits the hourly rate to a statutory maximum adjusted annually for inflation. For 2023, 2024, and 2025, these maximum rates were $230, $240, and $250 per hour respectively. The statute also limits recovery to fees incurred after the earlier of the date the IRS sends a notice of deficiency or the date of a notice of determination from the IRS Office of Appeals.

The definition of “prevailing party” lies at the heart of most disputes over attorney’s fees. Section 7430 provides two distinct paths to prevailing party status. Understanding both paths matters for any taxpayer considering litigation against the IRS.

The Traditional Path: When the IRS Position Lacks Substantial Justification

The traditional route to prevailing party status requires the taxpayer to show two things. First, the taxpayer must have “substantially prevailed with respect to the amount in controversy” or “substantially prevailed with respect to the most significant issue or set of issues presented.” Second, the position of the United States must not have been “substantially justified.”

This second requirement often determines whether fees will be awarded. We examined this issue in a prior case involving a mistaken IRS audit of a non-resident, where the IRS position was not substantially justified and the taxpayer recovered fees under the traditional path.

Here, the analysis produced a different result. The government conceded that the taxpayer substantially prevailed in this case. She obtained 100% of the refund sought in her complaint. The dispute centered on the second prong: whether the IRS position was substantially justified.

The taxpayer’s refund claim turned on whether she was entitled to the earned income tax credit under Section 32 and the child tax credit under Section 24 for tax year 2020. Both credits require that the children qualify as “qualifying children” under Section 152(c). This definition includes a residency requirement. The children must have the same principal place of abode as the taxpayer for more than half of the taxable year.

The IRS denied the credits because the taxpayer “failed t…

The IRS denied the credits because the taxpayer “failed to substantiate that [she] was the custodial parent of both children and that they resided with [her] for more than 6 months in the tax year.” The taxpayer submitted documentation showing that her two children were removed from her custody on August 1, 2020, by an Ohio court. She also submitted a lease agreement with a move-in date of December 23, 2020, listing her children as residents.

The court examined this evidence

The court examined this evidence. The documentation showed the children lived with the taxpayer immediately before their removal on August 1, 2020. It did not demonstrate they lived with her for more than six months in 2020. The August removal meant at most they lived with her for seven months. The December lease showed at most eight days of residence in 2020.

The taxpayer could have submitted other documentation. Medical records, school records, statements from employers or religious organizations, or other lease agreements might have established the children’s residence. She did not provide these documents to the IRS during the administrative process or during discovery in the litigation.

The court concluded the IRS was substantially justified in denying the refund based on insufficient substantiation. This meant the taxpayer could not qualify as a prevailing party under the traditional path of Section 7430(c)(4)(A)-(B).

This finding distinguishes Greenwald from many fee cases where the IRS position was unreasonable. The IRS had a legitimate basis for its denial under the traditional path.

The Alternative Path: The Qualified Offer Rule Changes Everything

Section 7430(c)(4)(E) provides an entirely different route to prevailing party status. This is the qualified offer rule.

As noted above, we have addressed the qualified offer in detail in a prior article. Under this provision, a party shall be treated as a prevailing party if “the liability of the taxpayer pursuant to the judgment in the proceeding (determined without regard to interest) is equal to or less than the liability of the taxpayer which would have been so determined if the United States had accepted a qualified offer of the party.”

This rule means that a taxpayer can make a formal settlement offer to the IRS. If the IRS rejects the offer (or simply ignores it) and the taxpayer ultimately achieves a better result than the offer proposed, the taxpayer becomes a prevailing party. This happens even if the IRS position was substantially justified.

The qualified offer rule has limitations. It does not apply if the taxpayer already qualifies as a prevailing party under the traditional path. Section 7430(c)(4)(E)(iv) states the qualified offer rule “shall not apply to a party which is a prevailing party under any other provision” of Section 7430(c)(4). Courts must first determine whether a taxpayer qualifies under the traditional substantially-justified standard before considering the qualified offer rule.

Here, the court found the IRS position was substantially justified. The taxpayer therefore did not qualify as a prevailing party under the traditional path. This opened the door to the qualified offer rule.

The Greenwald case demonstrates why the qualified offer m…

The Greenwald case demonstrates why the qualified offer matters even when the IRS has a reasonable position. The taxpayer still recovered her full refund. She still obtained attorney’s fees. The qualified offer shifted the risk to the government regardless of whether their substantiation concerns were legitimate.

What Makes an Offer “Qualified”?

Section 7430(g) defines a “qualified offer” with precision. The offer must be in writing. It must be made by the taxpayer to the United States during the qualified offer period. It must specify the offered amount of the taxpayer’s liability. It must be designated at the time it is made as a qualified offer for purposes of this section. It must remain open during a specified period.

The timing matters. The qualified offer period begins on the date the first letter of proposed deficiency allowing for administrative review is sent. It ends 30 days before the trial date. The offer must remain open until the earliest of: the date the offer is rejected, the date trial begins, or the 90th day after the offer is made.

The taxpayer’s May 24, 2023 letter satisfied these requirements. It was in writing. It was sent during the qualified offer period (after the notice of deficiency and before trial). It specified the offered amount of liability as zero with an overpayment of $7,970. It was explicitly designated as a qualified offer under Section 7430(g). It stated it would remain open “until the earliest of (a) the date the offer is rejected, (b) the date the trial begins, or (c) the 90th day after the offer is made.”

The government did not dispute these elements. The fight centered instead on whether the taxpayer properly delivered the offer to the correct address.

The Delivery Question: Addressed vs. Delivered

The regulations at Section 301.7430-7(c)(2)(i) of the regulations specify where a taxpayer must deliver a qualified offer. The offer must go to “the office or personnel within the Internal Revenue Service, Office of Appeals, Office of Chief Counsel… or Department of Justice that has jurisdiction over the tax matter at issue.”

If the taxpayer doesn’t know which office has jurisdiction (and the case hasn’t reached federal court yet), the taxpayer may deliver the offer “to the office that sent the taxpayer the first letter of proposed deficiency, which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals.”

In this case, the taxpayer could not have known which appeals officer would be assigned to her case on May 24, 2023. An appeals officer was not assigned until December 18, 2023. She therefore had to deliver her qualified offer to the office that sent the first letter of proposed deficiency. That office was located at 310 Lowell St., Stop 854, Andover, MA 01810-9045.

Here’s where things got interesting. The taxpayer addressed her qualified offer to “Department of the Treasury, Internal Revenue Service, PO Box 9045, Andover, MA 01810-9045.” This was a P.O. Box address rather than the street address specified in the notice of deficiency. The government argued this meant the offer was sent to the wrong location.

The government also claimed it had no record of receiving…

The government also claimed it had no record of receiving the qualified offer. The government stated that if a qualified offer had been received, “the IRS would record receipt of the qualified offer in its case records. Those records would also include notes regarding the office’s evaluation of the qualified offer and a copy of the response provided to the taxpayer submitting the offer.” No such records existed.

The taxpayer pointed to United States Postal Service trac…

The taxpayer pointed to United States Postal Service tracking information. This showed the letter was delivered on May 27, 2023. The signature of the recipient indicated the mailing was received by “IRS, 310 Lowell.” The taxpayer also pointed to a July 5, 2023 letter from the IRS referencing “[taxpayer’s] inquiry of May 26, 2023” and stating “[w]e’ll contact you again within 90 days.” The taxpayer denied making any inquiry dated May 26, 2023. She argued this was a typo and the letter actually responded to her May 24, 2023 qualified offer.

The court sided with the taxpayer on the delivery issue. This is the key holding for purposes of qualified offer practice. Although the qualified offer was addressed to P.O. Box 9045 instead of 310 Lowell Street, both addresses shared the same ZIP+4 code. The USPS tracking records showed the letter was delivered to “IRS, 310 Lowell.”

The court emphasized that the regulation requires a qualified offer be “delivered” to the appropriate address. It does not require that the offer be “addressed” to any particular location. It does not require that the IRS be able to locate the offer in its files or produce records evaluating it.

This distinction between “addressed” and “delivered” matters

This distinction between “addressed” and “delivered” matters. The regulation focuses on whether the offer reached the right location. The IRS’s internal record-keeping failures do not defeat a properly delivered qualified offer. The court refused to allow the government to benefit from its own failure to properly process and document correspondence that tracking records confirmed was delivered to the correct IRS office.

The taxpayer’s use of certified mail with tracking saved …

The taxpayer’s use of certified mail with tracking saved the day. Without the USPS tracking showing delivery to “IRS, 310 Lowell,” the government’s claim that it never received the offer might have prevailed. The tracking record provided objective evidence that the qualified offer reached the appropriate IRS location regardless of how the envelope was addressed.

The court also gave weight to the July 5, 2023 letter from the IRS acknowledging receipt of correspondence from the taxpayer dated close in time to the qualified offer. While this evidence alone might not have been sufficient, it corroborated the tracking information showing the IRS received something from the taxpayer around the time the qualified offer was sent.

The Takeaway

This case establishes an important principle for qualified offer practice: delivery trumps addressing. Taxpayers who send qualified offers to an IRS office using a slightly incorrect address can still satisfy the regulatory requirement if they can prove the offer was actually delivered to the appropriate office. This holding protects taxpayers from losing attorney’s fees based on technical addressing errors when the qualified offer nonetheless reached the right location.

This shows why taxpayers should always use certified mail or another tracking service when sending a qualified offer. It also shows that such an offer should be sent early in the process, preferably right after the notice of deficiency is issued. This provides a clear address to mail it to consistent with the holding in this case. It may also mean that the government will not check in the offer, as it didn’t in this case.

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Stephan Dorsey

Stephan is the sports journalist for the Maple Grove Report.

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Convert Interest Income to Capital Gains on Sales by Omitting Interest? – Houston Tax Attorneys

Business transactions can be structured in any number of ways. Those who are tax savvy can structure their transactions to minimize and even avoid paying taxes.

There are tax provisions that specifically allow for tax savings. To achieve the tax savings, one only has to structure the transaction to meet the requirements of the statute. Then there are also unintended consequences of various tax laws and rules that can allow for tax savings. With the later, they also require structuring transactions to comply with the tax laws. The difference is that the latter options typically involve a fact pattern that is not contemplated by the tax law–a gap in the law, if you will–or a reading or combination of the tax law given unique circumstances that leads to a favorable tax outcome.

The IRS and Congress often react to taxpayers whose transactions produce tax savings that are not per se intended or expressly apparent. It is usually the IRS that raises the issue, the issue ends up in court, and then Congress acts to either affirm or reject the court decision. When Congress acts, it enacts statutes.

In this article we’ll consider Section 483 of the tax code. This provision was added by Congress to limit taxpayer’s ability to have interest, which is taxed at ordinary tax rates, to qualify for lower capital gains tax rates. The law enacted by Congress provides several “outs” that allow for this treatment and includes language that is not all that clear that might allow other “outs.” The Third Circuit’s decision in Trust Under the Trust of Charles G. Berwind Trust v. Commissioner, No. 24-2360 (3d Cir. Oct. 30, 2025), provides an opportunity consider this issue.

Facts & Procedural History

This case involves one of several trusts established to hold interests in a closely held coal mining business. Only two trusts remained as shareholders. Over time, the trust consolidated their ownership and transferred interests to related entities.

The trust held a minority ownership interest in a subsidiary that owned a pharmaceutical coatings company. Beginning in the 1990s, the of the trusts sought to acquire the other trusts ownership stake in the subsidiary. After the owning trust rejected multiple purchase offers, the situation escalated.

In 1999, the business and a newly formed parent company executed a short-form merger under Pennsylvania law. This type of merger allowed a parent corporation owning at least 80% of a subsidiary to merge without a vote by minority shareholders. The merger agreement provided that the the owning trust’s common stock would be “converted into the right to receive a subordinated promissory note” valued at $82,820,000, due in 2001, with 10% interest.

The owning trust filed a lawsuit in 1999 challenging the merger. The lawsuit included claims that the merger violated Pennsylvania law and the subsidiary’s articles of incorporation. It also included a demand for statutory appraisal under Pennsylvania’s dissenters’ rights provisions. The parties engaged in litigation for nearly three years.

In 2002, the parties reached a settlement. The settlement agreement required the owing trust to deliver its subsidiary stock certificates and dismiss the lawsuit. In exchange, the subsidiary agreed to pay the owningn trust $191 million. The payment was made in 2002.

The parties disagreed about the tax treatment of this payment. The subsidary took the position that the payment was made under the 1999 merger agreement. This meant that Section 483 required a portion of the $191 million to be treated as interest taxable at ordinary income rates. The owning trust took the position that the payment was made under the 2002 settlement agreement. This meant that no portion would be characterized as interest and the entire amount would be taxed as capital gains.

The IRS audited both parties’ income tax returns and issued deficiency notices. The deficiency notice sent to the owing trust determined that approximately $31 million of the settlement payment represented unstated interest income taxable as ordinary income. The owning trust filed a petition in the U.S. Tax Court for redetermination of the deficiency. After a trial in 2016, the tax court ruled for the IRS in December 2023. The owning trust appealed to the Third Circuit.

Interest Under Section 483

Before Congress enacted Section 483 in 1964, taxpayers could structure sales of items that are not inventory to convert ordinary income into capital gains. Here’s how it worked: A seller would agree to sell property for payments over time. The contract would specify the total amount to be paid but would not provide for interest. The deferred payment amount would be larger than if payment were made immediately. This larger amount reflected the time value of money–i.e., baked in interest. But because the contract didn’t explicitly identify “interest,” the entire payment was treated as capital gains to the seller rather than interest.

The tax advantage was substantial. Ordinary income is taxed at higher tax rates than capital gains–as it is today. A seller could effectively receive interest on the deferred payment while having that interest taxed at the lower capital gains rate. This was particularly attractive for sales of appreciated property where the seller already expected capital gains treatment on the base sale price.

Congress enacted Section 483 to eliminate this tax planning strategy. The legislative history explains that Congress “intended primarily to prevent taxpayers from converting ordinary income to capital gain” when “the dollar amount of the deferred payments was larger than it would have been had payment been made immediately.” This ensures that taxpayers don’t avoid income taxes by structuring installment contracts to provide only for payment of principal without charging and collecting interest.

Section 483 Versus Section 7872

Before getting into Section 483 and this case, we should pause to consider Section 7872. Section 483 should not be confused with Section 7872, another interest imputation provision in the tax code.

Section 7872 applies to below-market loans between related parties such as gift loans, employer-employee loans, and corporation-shareholder loans. That provision treats the forgone interest as transferred from lender to borrower and then retransferred back as interest income to the lender. Section 483 does not involve gift loans or shareholder loans–and, importantly, does not involve the sale of property.

The difference matters because taxpayers might try to characterize a deferred payment sale as a loan to avoid Section 483. For example, a seller might claim they sold property for a promissory note at face value and then “loaned” the buyer the funds. This doesn’t work. When the transaction is actually a sale with deferred payments, Section 483 applies regardless of loan-like terminology. If there is no sale and the party is just a lender, then Section 7872 rather than Section 483 applies to impute interest on the transaction.

Section 483 and Imputed Interest

With that distinction, we can address Section 483. Section 483 imputes interest to certain deferred payments for property sales. The statute sets out specific conditions that must all be met before interest imputation applies. All four have to be met for interest to apply.

The first requirement is that there must be a payment “under any contract for the sale or exchange of any property.” This language requires both a contract and a sale of property. We will address this requirement more below.

The second requirement is that the payment must be made “on account of the sale or exchange of property” and must “constitute part or all of the sales price.” Additionally, the payment must be “due more than 6 months after the date of such sale or exchange.”

The third requirement is that “some or all of the payments” under the contract must be “due more than 1 year after the date of the sale or exchange.” This ensures that Section 483 only applies when there is a meaningful deferral period. It also provides an easy out to avoid Section 483.

The fourth requirement is that there must be “total unstated interest” under the contract as measured against rates determined by the IRS. This requires a time-value-of-money present value analysis of the payments over the payment period. The formula compares the stated payments under the contract to what the payments would be if they included interest at the applicable federal rate. The difference represents unstated interest that is recognized as interest taxed as ordinary income rather than capital gains.

What Does the Term “Contract” Mean?

This case gets into the first reqirement from above, i.e., the contract requirement. The issue in the case is what counts as a “contract” in the context of a buy out agreement by a subsidiary and a parent entity that was formed by the subsidary as to the minority shareholder of the subsidary?

The owning trust in this case argued that the 1999 merger agreement was not a “contract” for purposes of Section 483. The trust emphasized that it never consented to the merger. As a minority shareholder, it had no vote on the short-form merger under Pennsylvania law. The owning trust contended that without its assent, there could be no contract for the sale of its property.

The Third Circuit rejected this argument. The merger agreement was executed by the subsidiary and its new parent entity. Both corporations’ boards of directors approved the agreement. The merger became effective when the articles of merger were filed with the Pennsylvania Secretary of State in 1999. At that time, the merger agreement effected the sale of the owning trust’s shares and mandated payment in exchange. Thus, according to the appellate court, this enforceable agreement constituted a contract even though the owning trust didn’t assent to it.

The owning trust relied heavily on the Ninth Circuit’s decision in Tribune Publishing Co. v. United States, 836 F.2d 1176 (9th Cir. 1988). In that case, Tribune sued Boise Cascade over a 1969 merger and settled in 1977. The Ninth Circuit concluded that Section 483 didn’t apply to the 1977 settlement payment. The court stated that “Tribune did not voluntarily contract to exchange its Newsprint stock for Boise Cascade stock plus [the settlement proceeds].”

The Third Circuit distinguished Tribune. The Ninth Circuit was simply saying that the parties in that case didn’t contract in 1969 to exchange stock for Boise Cascade stock in 1969 plus settlement proceeds in 1977. The holding didn’t turn on whether the sale was voluntary. Rather, it addressed which agreement the payment was made under. The payment in Tribune wasn’t under the original merger agreement because that agreement didn’t contemplate the later settlement payment.

What Agreement Applies?

Having determined that the sale occurred in 1999, the court turned to the question of which agreement the $191 million payment was made “under. The IRS contended that the payment was made under the 1999 merger agreement.

The court started its analysis with what the word “under” means. Courts have examined similar uses of “under” in other statutes. When an action is said to be taken “under” a provision of law or legal document, what is generally meant is that the action is “authorized” by that provision or document. The Supreme Court has noted that “under” in the legal context “identifies the provision that served as the basis for the” conduct in question. Applying this definition means requires on to examine which agreement created the obligation to pay. Which agreement served as the basis for the payment? Which agreement authorized the sale that gave rise to the payment obligation?

The owning trust argued that the payment was made under the 2002 settlement agreement because that agreement explicitly mandated the $191 million payment. Adopting this narrow interpretation would allow taxpayers to evade Section 483 simply by creating two contracts. The first contract would sell the property but leave the payment terms undefined. The second contract would define the payment terms without explicitly referencing the sale. In that situation, the payment would technically be under a contract for payment rather than under a contract for sale.

The Third Circuit agreed with the IRS. The merger agreement served as the basis for the payment because it was the instrument that effected the sale and created the parent entity’s obligation to pay for the shares. When the parent filed the articles of merger in 1999, the owning trust’s shares were extinguished. At that moment, the new parent entity incurred its obligation to compensate the owning trust for its shares. The 1999 sale created the payment obligation.

The court said that the 2002 settlement agreement, by contrast, didn’t create the obligation to pay. The settlement agreement explicitly stated that there was an ongoing dispute about when the shares were sold. The agreement took pains to specify that it didn’t constitute an agreement to sell the owning trust’s shares. Pennsylvania law had already resolved that question. The merger gave the agreement full effect in 1999.

The Takeaway

The Third Circuit’s decision in this case shows that economic substance applies for Section 483 rather than how parties label their agreements. Taxpayers cannot avoid the interest imputation rules by using multiple contracts or settlement agreements to obscure when a sale occurred. Corporate mergers effect sales when they become legally effective under state law. Litigation and settlements don’t change the original sale date. This means taxpayers have to structure deferred payment transactions correctly from the start. Any sale where payment is deferred more than a year likely triggers Section 483 unless the contract explicitly provides for interest at market rates. The IRS might scritinize transactions that do not meet this requirement and may look through later agreements to find the contract that authorized the sale.