142 T.C. 308
Tax Ct.2014Background
- Petitioners challenged jurisdiction in TEFRA-era partnership items proceedings arising from Regency Plaza Associates of New Jersey’s 1996–1997 years.
- Regency Plaza followed TEFRA procedures with a 754 basis election, later foreclosed and liquidated; partnership returns were filed by the partnership but tax matters were litigated in the Tax Court.
- After TEFRA FPAA adjustments, the IRS issued a notice of deficiency to Greenwalds for 1997, based on Regency Plaza’s 1996–1997 data and Schedule K-1s.
- The parties jointly proceeded to trial in the Tax Court; Greenwalds sought to introduce additional evidence but ultimately proceeded under Rule 122.
- The issue is whether outside basis is a partnership item or an affected item requiring partner-level determinations, giving the Tax Court jurisdiction to redetermine deficiencies.
- The court ultimately held that outside basis is an affected item requiring partner-level determinations, granting jurisdiction to redetermine the deficiencies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether outside basis is a partnership item or an affected item requiring partner-level determinations | Greenwalds: outside basis is a partnership item | Commissioner: outside basis is an affected item needing partner-level determinations | Outside basis requires partner-level determinations; Tax Court has jurisdiction |
Key Cases Cited
- Tigers Eye Trading, LLC v. Commissioner, 138 T.C. 67 (2012) (outside basis as partnership item when partnership is a sham)
- United States v. Woods, 134 S. Ct. 557 (2013) (partnerships deemed non-existent; outside basis treated as partnership item)
- Desmet v. Commissioner, 581 F.3d 297 (6th Cir. 2009) (TEFRA single proceeding; potential conflict over partner-level determinations)
- Bemont Invs., LLC v. United States, 679 F.3d 339 (5th Cir. 2012) (basis misstatement and lack of substance linked; relevance to partnership items)