In Uncategorized on 09/28/2015 at 23:10

I won’t discuss Donald Trump’s tax plans, as the trade press and the media generally have got that under control. Today’s blogpost is the story of the multiplex (or maybe not) FPAAs that rained upon David Jump, head honcho of American Milling LP, Un Limited Tax Matters Partner, in 2015 T. C. Memo. 192, filed 9/28/15.

This late post is due to my imminent departure for Europe tomorrow night, but, as my daughters shouted loudly years ago, fear not! I’ll be blogging from the Old World whenever I can.

Anyway, Jump played the old son-of-BOSS gambit, marrying some tugboats to a bunch of LPs making uncovered short sales of US Treasuries. They played the old exploded Section 752 gambit, using gains to build basis while not recognizing offsetting obligations to cover the shorts.

IRS descends.

Jump went to USDCSDIL, put up the Section 6226(e)(1) minimum deposit, and one of his LPs (the tugboat one) got hammered after a three-day bench trial, but got off on the 20% accuracy chop.

The point here is whether the hammering in District Court required IRS to assess Jump directly without a further FPAA. IRS did a further FPAA against Milling.

Jump claims that’s two FPAAs, and Section 6223(f) prevents two. Jump claims the Milling FPAA copies the tugboat FPAA, and cites the Wise Guys for that one.

Remember the Wise Guys? No? Well, see my blogpost “Wise Guys?” 4/22/13.

The Wise Guys’ second FPAA was a mistake, and not a duplicate of the first.

Same here, but no mistake, just not a duplicate.

Judge Marvel puts Jump wise. “Petitioner mischaracterizes our analysis in Wise Guys. We invalidated the second FPAA in Wise Guys because it was issued to the same partnership for the same taxable year and there was no showing of fraud, malfeasance, or misrepresentation of fact. The similarity of the content of the two FPAAs was not essential to our holding in Wise Guys. Instead, it simply aided our finding that the second FPAA was “more [likely] the result of a mistake or a lack of communication on the part of * * * [respondent] than of fraud, malfeasance, or a misrepresentation of a material fact.” Wise Guys Holdings, LLC v. Commissioner, 140 T.C. at 199-200. Here, by contrast, respondent issued the Milling FPAA to the TMP of American Milling–not to the TMP of American Boat [the tugboaters]–for years distinct from those at issue in the American Boat FPAA. Wise Guys is distinguishable because it involved a second FPAA issued to the same taxpayer for the same tax year.” 2015 T. C. Memo. 192, at p. 14.

Besides, the two FPAAs aren’t duplicates. They touch different items with different numbers for different entities. And some of the tax years were different.

And even if the partnerships were a sham, they filed 1065s, and that means FPAAs.

Good try for Jump’s lawyers.


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