NPR Calendared for Argument

The NPR case (involving penalty application and TEFRA issues in the context of a Son of BOSS transaction: see latest substantive discussion here) has been calendared for argument in New Orleans on December 7th in the East Courtroom.… Read More

Briefing Complete in NPR

As we mentioned in our last post, the only brief remaining to be filed in NPR was the taxpayer’s reply brief.  That brief has now been filed and with it a DOJ motion to strike part of that reply as an inappropriate sur-reply.  The motion concerns a section in the reply in which the taxpayer takes on DOJ for arguing (in its previously filed reply brief ) that the only relevant factor in determining the incidence of the valuation misstatement penalty (between partnership and partner) is whether there are partnership items involved and not where the specific misstatement results in … Read More

NPR Update

It has been a while since we published an update on NPR (please no comments on Supreme Court Justices, schoolchildren, and bloggers taking summers off).  Since our last post discussing the government’s opening brief, the taxpayer filed its brief responding to the government and opening the briefing on their cross-appeal.  The government also filed its response/reply.  All that remains now is the taxpayer’s reply brief on its cross-appeal, currently due on August 15.  There are a slew of technical TEFRA issues that are raised by the parties.  The taxpayer is appealing the district court’s rulings regarding whether a no … Read More

NPR Still Dragging Itself Out of the Minefield

The Government has filed its brief in its Fifth Circuit appeal from the denial of penalties in the NPR Investments case (for prior discussion go here).  There are no surprises.  The Government takes the position that the district court’s reliance on Heasley v. Commissioner, 902 F.2d 380 (5th Cir. 1990) (likely abrogated by Treas. Reg. § 1.6662-5(g) and certainly weakened on these facts by Weiner v. United States, 389 F.3d 152 (5th Cir. 2004)) is misplaced.  Thus, the government argues that the mere fact that the taxpayer’s entire transaction (and not just a valuation or basis item) was … Read More

Response Brief Filed in Castle Harbour Redux

On September 14, 2010, the tax matters partner (“TMP”) for Castle Harbour LLC filed its response brief in TIFD III-E Inc. v. United States, No. 10-70 (2nd Cir.) (brief linked below).  For our prior coverage of this case, see here.  As many readers are no doubt aware, this is the second time this case is before the Second Circuit.

In the response brief , the TMP frames the issues as: (1) whether the district court, upon remand, correctly determined the investment banks were partners under I.R.C. section 704(e)(1), (2) whether the IRS can reallocate income under I.R.C. section … Read More

Schizophrenic Application of Tax Penalties (Part III)

We have been promising a post on the application of the section 6664 reasonable cause and good faith defense to tax penalties as it relates to reliance on tax advisers.  Here it is.  

There has been much activity in this area in the district courts and the Tax Court and not much winnowing or rule setting in the circuits.  This is understandable; the application of the standards is highly factual and is well-placed in the hands of trial judges.  We will analyze here some potential inconsistencies in two recent high-profile section 6664 decisions, Canal Corp. v. Commissioner, (Slip … Read More

Schizophrenic Application of Tax Penalties (Part II)

The last post in this series discussed differences in procedural posture that cause differences in the application of penalties.  Court splits in how the various and sundry penalty provisions in the Code are applied is an even more confusing area.  The two principal confusions are in the areas of TEFRA and valuation misstatements.  We will deal with TEFRA in this post.

Partnerships are not taxpaying entities.  They flow income, losses, deductions, and credits through to their partners who pay the tax.  Nevertheless, since Congress enacted the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, 96 Stat. … Read More

Schizophrenic Application of Tax Penalties (Part I)

Based our recent post on the Sala decision here, we have had several comments inquiring about the varied application of penalties in the “tax shelter” cases.   This is the first in a planned series of responses to those comments that will try to explain, iron out, or at least flag, some of the irregularities. 

When looking at the application of penalties to ”shelter” cases generally, procedural posture matters.  A good example of this is Sala.  Why did the 10th Circuit discussion in Sala omit penalties?  Because it was a refund case in which the taxpayer appears to have filed a … Read More