139 T.C. No. 7
T.C.2012Background
- Gaughf Properties filed FPAA on March 30, 2007, asserting omitted $4,455,000 income from currency options expired in 1999.
- Gaughf Properties, Gaughfs, Bodacious, Balazs Ventures formed in 1999 to implement a complex plan coordinated by Jenkens & Gilchrist and KPMG.
- Currency options were contributed to Gaughf Properties in 1999, with a liquidation of the partnership later that year.
- Gaughffs reported inconsistent treatment of partnership items on their personal return versus Gaughf Properties’ return, affecting basis and Quanta stock transactions.
- 55,0001 The 1999 returns were prepared by KPMG; J&G provided opinions and the DOJ later produced client data through a John Doe summons, guiding IRS inquiry.
- The parties litigated whether the statute of limitations under section 6229(e) remained open on March 30, 2007, and whether estoppel prevented the Secretary from asserting it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 6229(e) period remained open for partnership items on FPAA date | Gaughfs; 6229(e) applies due to unidentified indirect partner | Respondent; period open due to missing indirect partner information | Open period under 6229(e) did not close on FPAA date (6229(e) satisfied) |
| Whether Gaughfs failed to notify inconsistent treatment under 6222(b) | Gaughfs did notify; Form 8082 not filed is irrelevant | Gaughfs failed to notify of inconsistent treatment | 6222(b) not satisfied; inconsistent treatment existed and no proper notice given |
| Whether information identifying indirect partners was furnished under 301.6229(e)-lT | KPMG/JP information satisfied furnishing requirements | No identifying statement properly furnished; information not in compliance | Identifying information not properly furnished; 6229(e) satisfied |
| Whether regulation 301.6229(e)-lT is valid under Chevron | Regulation improperly restricts furnishing | Regulation valid; reasonable construction of statute | Regulation valid; Chevron analysis supports the regulation |
Key Cases Cited
- Costello v. United States Gov’t, 765 F. Supp. 1003 (C.D. Cal. 1991) (applies 6229(e) to indirect partners despite not listing them on partnership return)
- Murphy v. Commissioner, 129 T.C. 82 (Tax Ct. 2007) (regulation interpretation permissible when reasonable)
- McCorkle v. Commissioner, 124 T.C. 56 (Tax Ct. 2005) (estoppel standards against government applied with restraint)
- ATC Petroleum, Inc. v. Sanders, 860 F.2d 1104 (D.C. Cir. 1988) (equitable estoppel against government requires strong showing)