Over Tiered Partnerships

Judge Joseph Nega notes the demise of TEFRA in a footnote, but if ever the Bard got it right, TEFRA proves that “the evil men do lives after them.” Just ask Phillips Family, LP, David Phillips, Tax Matters Partner, Docket No. 20369-22, filed 7/3/23.

The Philippians got not an epistle, but two (count ’em, two) FPAAs, dealing with their distributive shares from a partnership in which the Philippians were a partner. I needn’t remind my readers that these tiered partnerships (or box-checked LLCs) were the delivery system of choice for the dodgefloggers like Rogers and Haber. I’m not saying the Philippians are dodgers because I don’t know, and Judge Nega doesn’t go into details.

All Judge Nega has to do is grant IRS’ motion to dismiss for want of jurisdiction.

“If the partnership items of a lower-tier partnership—that is, a partnership in which the partnership that received the notice of FPAA owns an interest—are included in the FPAA of the partnership before us, we are without jurisdiction to determine those lower-tier partnership items.” Order, at p. 2. (Citations omitted).

The Philippians’ trusty attorney folds.

Oh, the footnote? “TEFRA was repealed by the Bipartisan Budget Act of 2015, Pub. L. No. 114-74, §1101(a), 129 Stat. 584, 625.” Order, at p. 2, footnote 3.

It will be interesting to see how a case like this plays out under the new regime. As both partnership items and partner items are to be dealt with in a one-size-fits-all proceeding, will tiers still bar partners in upper-tier partnerships from contesting lower-tier items?