In Uncategorized on 08/06/2020 at 19:33

I’m sure IRS won’t mourn the passing of TEFRA, either.

Case in point. Even though the partnerships that generated ginormous NOLs for Ritchie N. Stevens and Julie A. Keen Stevens, 2020 T. C. Memo. 118, filed 8/6/20, may be small partnerships for TEFRA purposes, there still have to be partner level determinations. IRS hasn’t done them. The returns Ritch and Julie filed are not oversheltered per Section 6234, except for one year at issue out of the seven (count ’em, seven) years at issue.

Ritch and Julie have BoP that their partnerships are not small, and therefore need FPAAs, and fail to carry the burden. But IRS still has to consider partnership items, even without the FPAA prelude.

IRS’ lumping of all their securities transactions into aggregated sales and aggregated basis is a gift to Ritch and Julie; if IRS did not, they could have hit Ritch and Julie with the entire sales prices as gain, and let Ritch and Julie try to prove basis.

But IRS has problems. Without taking the partnership items into account, their failure to disallow partnership items, coupled with their computations of nonpartnership items, create no deficiencies. IRS can try to scuttle the partnership items and seek to collect the taxes that result from wiping out the losses and NOLs arising therefrom, but SOL may prevent that.

If you want the nitty-gritty from Judge Halpern, and have a craving for 87 (count ’em, 87) pages of his prose, read on.

But I’ve gleaned one point worth stressing from his elaborate deconstruction.

“In Dees v. Commissioner, 148 T.C. at 5, we distilled our prior caselaw into a ‘two-prong approach to the question of the validity of * * * [a] notice of deficiency.’ In the first step of the Dees approach, ‘we look to see whether the notice objectively put a reasonable taxpayer on notice that the Commissioner determined a deficiency in tax for a particular year and amount.’ Id. at 6. A notice that meets that test is valid, without the need for further inquiry. If instead the notice is ‘ambiguous’, we wrote, ‘the party seeking to establish jurisdiction * * * [must] establish that the Commissioner made a determination and that the taxpayer was not misled by the ambiguous notice.” Id.” 2020 T. C. Memo. 118, at pp. 44-45.

OK, so what price all these notices that say “we send you a SNOD” when IRS didn’t, and all the various letters, notices, forms and billets doux IRS unloads that claim a difference between what the return shows and what IRS claims is owing? And when IRS claims no jurisdiction because the document wasn’t a SNOD? I’ve blogged plenty of cases where a document says there’s a difference between return amount and tax due. And a reasonable taxpayer, not an EA, CPA, RRP, or attorney would certainly think they were on notice.

True, I didn’t blog Dees. But I’ll cite it.

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