In Uncategorized on 12/18/2018 at 16:30

Who Cares?

Whether she’s a partner (direct or indirect), or not, Judge Holmes is on the case. And so Ann S. Carrino, et al., Docket No. 27376-09, filed 12/18/18, doesn’t get a new SNOD, and IRS doesn’t get to fight over whether Ann is a direct or indirect partner in her ex’s LLC.

Even before doing the Rule 155 beancount, both Ann and IRS filed Rule 161 reconsideration. And Judge Holmes shoots them both down.

IRS wants Judge Holmes to make clear that all he decided was that Ann S. wasn’t a direct partner; IRS wants to fight about Ann being an indirect partner. But Tax Court has no jurisdiction under TEFRA to decide which partner is direct or indirect. Based on her ex’s late filed amended return, all Ann is, is a holder of a community-property interest under CA law. She won, and so the FPAA that conferred jurisdiction on Tax Court is wrong when it claims she was a partner.

Ann says, OK, that means that the SNOD I got was invalid, so I get a new one (and maybe SOL has run).

Not quite, says Judge Holmes.

“Ms. Carrino argues in her individual case that, because we have jurisdiction in the partnership case, respondent had no right to issue her a notice of deficiency that asserted she had failed to report her share of community-property income. She asserts that ‘Whether the Court’s determination that [she] was not a partner in CR LP makes it an affected item or an item which has become a nonpartnership item . . . [she] is entitled to a superseding deficiency notice from the Commissioner if the taxability of her community property interest in 2003 in CR LLC remains an issue with [her ex].” This assertion, in turn, seems to flow from her view that her community-property interest in her ex’s partnership interest becomes an ‘affected item’ under TEFRA with her victory in the partnership case.

“But this is not true. The central holding in the individual case was that none of this mattered — under California’s community-property rules, she is treated as receiving income in 2003 regardless of whether she was a partner in her husband’s partnership. This means that the notice of deficiency was determining an adjustment to a nonpartnership item. Once she filed a timely petition challenging that valid notice of deficiency we had jurisdiction to redetermine that determination.” Order, at p. 2.

Vintage Holmes.


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