Attorney-at-Law

INSIDE, OUTSIDE – REDIVIVUS

In Uncategorized on 04/03/2017 at 15:16

Once again, we find on the broken-linked Orders page at The Glasshouse at 400 Second Street, NW, an order that echoes C. L. Edson’s celebrated parody: “Made he mittens, Mudjekewis/ He, to keep the warm side inside/ Put the skin side inside/ He, to keep the cold side outside/ Put the stout side outside/ Then he turned them inside outside.”

But even in death the poor taxpayer is not out of the Woods.

Read now the sad tale of Estate of James P. Keeter, Deceased, Garry L. Holton, Jr., and Thomas W.  Schaefer, Co-Executors and Julie L. Keeter, Docket No. 6771-16, filed 4/3/17.

The co-ex’rs want to restrain or refund. That is, restrain IRS from assessing and collecting, or returning what they assessed and collected. This is yet another TEFRA silt-stirrer.

Ch J L Paige (“Iron Fist”) Marvel gives us cites to all the cases.

“Outside basis may be an affected item required to be properly determined in a partner level deficiency proceeding. Thompson v. Commissioner, 729 F.3d 869, 873 (8th Cir. 2013); Jade Trading, LLC ex rel. Ervin v. United States, 598 F.3d 1372, 1380 (Fed. Cir. 2010); Petaluma FX Partners, LLC v. Commissioner, 591 F.3d 649, 655 (D.C. Cir. 2010); Greenwald v. Commissioner, 142 T.C. 308, 314-317 (2014); see I.R.C. secs. 6213(a), 6230(a)(2) (A)(I). Cf. United States v. Woods, 571 U.S. __ , 134 S.Ct. 557 (2013); see also Thompson v. Commissioner, T.C. Memo. 2014-154, at *2 n. 4, affd 821 F.3d 1008 (8th Cir. 2016).” Order, at p. 1.

I’ve blogged all of these save Jade Trading, but I doubt that case adds much.

This case really echoes that of Hubert Oxford, III & Cynthia Oxford, whom you doubtless remember. What, you don’t? Then check out my blogpost “Inside, Outside – Part Deux,” 6/21/16.

Everybody knows that Woods v. US settled the penalty issue when a phony partnership gets blown up. Outside basis zero, penalty merely computational, no SNOD needed or partner-level proceeding necessary.

But what about the deficiency?

Ch J Iron Fist copies from Hube & Cyn’s case.

“As to whether partner-level adjustment of outside basis incident to a deficiency determination should also be merely computational, Woods provides no direct answer. In dicta, however, the Court addresses the amici’s suggestion that its decision will permit the Internal Revenue Service to directly assess a penalty on a tax underpayment that cannot itself be assessed without deficiency procedures. See id. Noting that ‘an underpayment attributable to an affected item [such as outside basis] is exempt’ from deficiency procedures where partner-level determinations are unnecessary, the Court observes that ‘it is not readily apparent why additional partner-level determinations would be required before adjusting outside basis in a sham partnership.” Id.

“In the sham partnership at issue here, the Court of Appeals concluded that such additional determinations were required, and we proceed in accordance with that mandate.” Order, at p. 2.

So, co-ex’rs and IRS, “…set forth and discuss fully their/his position as to (1) whether additional partner-level determinations of outside basis are required in this case, (2) if so, what specifically are those additional partner-level determinations of outside basis, and (3) to what extent, if any, this Court has jurisdiction in this partner-level proceeding over petitioner’s income tax deficiencies….”Order, at p. 2.

Then they turned them inside outside.

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