Attorney-at-Law

WISE GUYS?

In Uncategorized on 04/22/2013 at 19:50

Maybe Not

 When you get a SNOD, petition at once; that’s Tax Court 101. If you need to amend, see Rule 41. Leave is to be freely given where justice requires.

As for a FPAA, the best practice is the same. Petition prontito.

Judge Thornton makes the point in Wise Guys Holdings, LLC, Peter J. Forster, Tax Matters Partner, 140 T.C. 8, filed 4/22/13. I’m sorry this case goes off on jurisdictional grounds, as I’d like to hear more about Wise Guys Holdings; they sound like amusing clients.

The facts are simple enough: “R mailed to P, as W’s tax matters partner (TMP), a notice of final partnership administrative adjustment (FPAA) for W’s 2007 taxable year. Approximately nine months later, R (through an office different from the office that mailed the FPAA) mailed to P, as W’s TMP, a second FPAA for W’s 2007 taxable year. The first FPAA and the second FPAA are similar in content but are different in the contact information (and a few other minor items) shown on the face. P filed his petition in response to the second FPAA but after the statutory deadline for challenging the first FPAA had expired.” 140 T.C. 8, at p. 1.

IRS says FPAA One is the real deal, and FAA Two is to be disregarded, as Section 6223(f) bars IRS from a second bite at the partnership apple absent fraud, malfeasance or misrepresentation of a material fact. And IRS doesn’t claim Pete is guilty of any thereof.

Judge Thornton: “The first FPAA and the second FPAA are similar in content but are different in the contact information (and a few other minor items) shown on the face. The second FPAA does not set forth any partnership-level adjustment or determination that is not listed in the first FPAA.

“Petitioner attached the second FPAA to his petition underlying this case.” 140 T.C. 8, at p. 6.

Pete claims he was misled, that IRS wants to deny him and his Wise Guys their day in court on a technicality. “Petitioner counters in his objection to respondent’s motion [to dismiss for want of jurisdiction] that he filed his petition in ‘good faith’ in response to the second FPAA and he cannot be faulted for respondent’s mailing of that document or for relying on that document as ‘presumably valid’. Petitioner adds in his objection to respondent’s motion that the audit underlying this case was an ‘arduous process’, that he has been ‘frustrated throughout this process due to the lack of communication’ with respondent, and that ‘fairness and justice’ dictate that the Court not dismiss this case ‘on a technicality that the second FPAA was not valid because one had already been sent’.” 140 T.C. 8, at pp. 7-8.

No dice, Wise Guys. The second FPAA is a nullity as a matter of law, Tax Court is a court of limited jurisdiction with no equitable powers to give itself jurisdiction where Congress has not, and, most importantly, “(P)etitioner also does not advance any reason he did not timely petition the Court in response to the first FPAA.” 140 T.C. 8, at p. 11.

And FPAA Two is not a “duplicate copy” of FPAA One, which is authorized by Section 301.6223(f)-1(a) of the Regulations, under circumstances like the original being lost.

Tax Matters Partners, read and heed; send in that petition at once. And five-percenters and notice partners (Section 6226(b)(1), check in with the TMP and be ready to roll on Day 91.

Finally, TMPs: remember you are partners first and tax matterers second. See my blogpost “Bang – A Warning to Tax Matters Partners (and their advisors)”, 1/5/11.

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