738 F.3d 415
D.C. Cir.2013Background
- In 1999, the Gaughfs formed four entities (Gaughf Enterprises, Balazs Ventures, Gaughf Properties, Bodacious) and filed SS-4 forms identifying the Gaughfs as principals.
- Gaughf Properties, L.P. liquidated in December 1999, with Bodacious, Inc. receiving 99.6% of assets and Balazs Ventures 0.4%.
- The Gaughfs funded currency options through Bodacious, Inc. and Gaughf Enterprises, LLC, with a net $45,000 premium difference constituting proceeds in 1999–2000.
- The Gaughfs filed joint 1999 returns reporting a large basis and a $119,919 long-term loss attributed to Bodacious, Inc., while Gaughf Properties reported a $45,000 loss on the options.
- The IRS began an audit in 2003–2004; the FPAA was issued March 30, 2007, asserting the partnership was a sham and disregarded for tax purposes.
- The IRS extended the assessment period by signing Form 872-1 agreements in 2006, extending to April 16, 2007.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 6229(e)’s unidentified partner exception applies | Gaughf maintains the period stayed open due to unidentified partner status. | IRS contends the exception applies once the partnership return fails to identify indirect partners and inconsistent treatment is not timely notified. | Yes; the period remained open under 6229(e). |
| Whether inconsistent treatment triggered 6229(e)(2)(B) and requires Form 8082 | Gaughf argues no Form 8082 was filed because there was no inconsistency. | IRS argues there was inconsistent treatment between partnership and individual returns. | Yes; the treatment was inconsistent, triggering 6229(e). |
| Whether information furnished to the Secretary other than on 1999 return satisfies 6229(e)(1) | SS-4s and discs furnished to IRS should count as furnishing. | Regulation requires furnishing at the center with the return, not just possession. | No; the information was not furnished as required, but regulation valid. |
| Rule-of-law validity of the regulation 301.6223(c)-1T and Chevron deference | Regulation broad and improper; deference inappropriate. | regulation is a permissible construction under Chevron and valid. | Regulation upheld; Chevron deference applied. |
Key Cases Cited
- United States v. Woods, 134 S. Ct. 557 (2013) (outside basis and partnership items framework)
- Mayo Foundation for Med. Educ. & Research v. United States, 131 S. Ct. 704 (2011) (agency deference in rulemaking; Chevron step 2)
- Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (agency deference when statute is silent or ambiguous)
- Walthall v. United States, 131 F.3d 1289 (9th Cir. 1997) (IRS not obligated to search records for information not furnished)
- Petaluma FX Partners, LLC v. Comm’r, 591 F.3d 649 (D.C. Cir. 2010) (review of partnership-item determinations and timing)