In Uncategorized on 01/19/2018 at 16:59

The unpleasant memory lingers on, as we have two undesignated TEFRA orders that should have been designated.

I’m back in the office post-flu, but I don’t need to hunt through 150 orders for the good stuff.

First up, Ellen L. Palm-Leis, Docket No. 166-17, filed 1/19/18, an important date for pre-TEFRA reasons.

Ellen wants to assert SOL on her Section 6662(a) accuracy chops for affected items, but that’s an affirmative defense that should have been raised at the FPAA. Ch J L Paige (“Iron Fist”) Marvel also finds IRS mailed the NBAP and FPAA notices to the right address by the right means, even though Ellen claims her mail was stolen.

So no Tax Court jurisdiction, and Ellen is out.

Next is Fourth Ship, LLC, Francis A. Martin, III, Tax Matters Partner, et al., Docket No. 20418-15, filed 1/19/18. Judge Nega has this one, and it’s a blown-up Son-of-Boss sham options-trading partnership. The issue is jurisdiction, and the leading case is the miller-and-the-tugboat, American Milling. For the scoop, see my blogpost “Jumping Through the Mill,” 9/28/15,

The Fourth Shippers, heirs to the SF Chronicle fortune, want to shut down the mill, but Judge Nega says “Nega-tory.” (Sorry, guys.)

“We consider American Milling, LP Unlimited v. Commissioner, T.C. Memo. 2015-192, to be instructive to our analysis. There, the tax matters partners argued that the adjustments in the FPAA of an upper-tier partnership (American Milling) were computational adjustments that did not require a partner-level determination. Respondent argued that the adjustments were both partnership items of the upper-tier partnership and affected items flowing from the FPAA of the lower-tier partnership (American Boat). The Court agreed with respondent that the Court had jurisdiction over the case, noting the section 6231(a)(6) definition of the term ‘computational adjustments’ and finding that the FPAA for the upper-tier partnership determined adjustments to the upper-tier partnership’s partnership items. The Court noted that the court in the lower-tier partnership proceeding did not determine the upper-tier partnership’s basis in the lower-tier partnership. The Court further noted that determining the bases of the distributed assets and the resulting depreciation deductions and capital losses claimed by the upper-tier partnership required the Court to make specific factual findings at the upper-tier partnership’s level relating to the correct basis in the assets. Here, in the district court proceeding, the district court determined, among other things, that First Ship’s basis was artificially inflated by the short option premiums and must be reduced by that amount. The district court did not specifically determine the amount of First Ship’s basis, the bases of the assets the proceeds of which were distributed by 2000-A to the subject partnerships, or the amount of the subject partnerships’ claimed capital losses on the termination of [pseudo-partnership] 2000-A.” Order, at pp. 8-9 (Footnote omitted).

Despite various gyrations, the Fourth Shippers are stuck with American Milling, and Judge Nega gives IRS summary J at no extra charge.

Can’t hardly wait to see how the new post-TEFRA partnership regime works out.


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