In Uncategorized on 02/23/2017 at 14:42

We all know that Woods v. Com’r, 571 U. S.___, 134 S. Ct. 557 (2013) settled the silt from Tiger Eye and Petaluma about zero outside basis in sham partnerships and immediate computational assessment of the 40% understatement chop.

Well, today John K. Luke & Maureen O. Luke, Docket No. 32208-15, filed 2/23/17, are trying to duck the deficiency and the chop arising from their participation in LVI Investors, LLC, which cratered back in 2014. A stipulated decision was entered by then-Ch J Michael B (“Iron Mike”) Thornton nailing LVI.

I didn’t blog it because it didn’t say much. The original blowup dates back to my pre-blog days of 2009.

Howbeit, LVI was a sham, son-of-BOSS variation.

John & Maureen want to fight the deficiency, and IRS has nothing to say about that. So John & Maureen get a stay of assessment on the deficiency.

The fight about whether a deficiency arising from a blow-up sham partnership is assessable or requires a SNOD may be settled, but apparently in John’s & Maureen’s case, IRS went for belt-and-suspenders-and-Crazy-Glue and slipped them a SNOD just to be safe.

But IRS says Tax Court has no jurisdiction over the penalty.

Judge Goeke agrees. The penalty is another story.

“The following quotation from Thompson v. Commissioner, T.C. Memo. 2014-154, at *3, aptly describes the law as it applies to this case:

‘Our final decision in the partnership-level proceeding applied the gross valuation misstatement penalty. The penalty may be directly assessed as a computational adjustment, notwithstanding any need for [*9] partner-level determinations. Petitioners may raise partner-level defenses, if any, only in a postpayment refund suit. See sec. 6230(c)(1)(C); sec. 301.6221-1(c), Proced. & Admin. Regs.’

“Any question as to the validity of this analysis has been settled by United States v. Woods, 571 U.S. __, 134 S.Ct. 557 (2013).” Order, at pp. 1-2.

So now all the silt is settled.

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