Attorney-at-Law

YOU WIN BUT YOU LOSE

In Uncategorized on 11/16/2018 at 00:24

The late James P. Keeter is back in Tax Court, although, as he is the late James P., it’s his ex’rs and spouse Julie, sub. nom. (as my expensive clients would say) Estate of James P. Keeter, Deceased, Garry L. Holton, Jr., and Thomas W. Schaefer, Co-Executors, and Julie Keeter, 2018 T. C. Memo.191, filed 11/14/18.

Now how many of my long-time readers remember the late James P. and his bogus partnership? Well, if you don’t, see my blogposts “Inside, Outside – Redivivus,” 4/3/17, and “Best of Luck,” 5/5/17.

Now it turns out that the late James P. wins his motion to restrain collection. But Julie and the ex’rs can put the Salon le Mesnil back in the cooler, because Judge Goeke finds their motion to get back the $19.2 million IRS got out of them is premature.

And Tax Court does have jurisdiction, because the SNODs IRS issued and the late James’ ex’rs and Julie petitioned, do have non-computational affected items, namely, viz. and to wit, the basis and gain (if any) on the securities and foreign currency distributed to the late James P. (before he became the late James P.) and Julie.

Now the ex’rs and Julie claim the partnership was a sham, so no partnership-level TEFRA tohubohu is needed, and there was a case in USDCNDCA four years ago that said so. IRS says maybe didn’t decide the sham part, just no economic substance.

Judge Goeke: “We do not address the parties’ position that the partnership-level case effectively determined that the partnership was a sham. We do not need to determine for purposes of petitioners’ motion whether the case so held as we hold that even if the partnership was a sham, a partner-level determination is required relating to the assets that [phony] formally distributed to the Keeters.” 2018 T. C. Memo. 191, at p. 11, footnote 4.

If the partnership is disregarded for whatever reason, it’s as if the partners were doing it all individually their own selves. Thus the late James P. and Julie acquired said securities and foreign currency directly, and sold same ditto. So we go to Section 1012(a), cost basis.

The SNODs challenged the late James P.’s and Julie’s basis therein and the gain or loss on the sale thereof. They petitioned.

Section 6213(a) lets Tax Court enjoin assessment and collection while the proceeding is pending. So Judge Goeke can do that.

But until the basis question is resolved, there’s no refund to order. And if I may editorialize, there may not be any when the question is resolved.

So go try the basis and gain-or-loss issues.

 

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