142 T.C. No. 18
Tax Ct.2014Background
- Petitioners participate in TEFRA partnership-level proceedings concerning Regency Plaza Associates of New Jersey.
- Regency Plaza liquidated; 1996–1997 tax years were determined at partnership level via FPAA.
- Regency Plaza had a section 754 election attached in 1995; outside basis issues implicated.
- IRS issued computational adjustments and a notice of deficiency to Greenwalds for 1997 year, with a spreadsheet using Regency Plaza 1996–1997 data.
- Petitioners argued outside basis is a partnership item to be determined at partnership level; respondent argued outside basis is an affected item requiring partner-level determinations.
- Court’s review centers on whether outside basis is an affected item requiring partner-level determinations, giving the Court jurisdiction to redetermine deficiencies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether outside basis is a partnership item requiring partnership-level determinations. | Greenwalds: outside basis is a partnership item. | Respondent: outside basis is an affected item needing partner-level determinations. | Outside basis is an affected item requiring partner-level determinations; court has jurisdiction. |
| Whether TEFRA allows deficiency procedures for partner-level determinations in these cases. | Greenwalds seek partner-level determinations within TEFRA framework. | Respondent argues jurisdiction under deficiency procedures for partner-level determinations. | Jurisdiction exists to redetermine deficiencies when partner-level determinations are required. |
| Whether Regency Plaza is a bona fide partnership (not a sham) for purposes of these proceedings. | Petitioners rely on partnership existence to constrain outside basis. | Respondent treats Regency Plaza as bona fide for purposes of these proceedings. | TEFRA proceeding treated Regency Plaza as bona fide; outside basis remains an affected item. |
Key Cases Cited
- Tigers Eye Trading, LLC v. Commissioner, 138 T.C. 67 (2012) (outside basis treated as a partnership item when partnership is a sham)
- United States v. Woods, 134 S. Ct. 557 (2013) (outside basis analysis linked to partnership existence; sham not present here)
- New Millennium Trading, L.L.C. v. Commissioner, 131 T.C. 275 (2008) (partnership items resolved in single proceeding; deficiency procedures may be required)
- Desmet v. Commissioner, 581 F.3d 297 (6th Cir. 2009) (confirms TEFRA single proceeding mandate; discusses partner-level determinations)
- Lange v. Commissioner, 1998-161 (Tax Court Memo) (1998) (discussion of costs and partner-level determinations in basis context)
- Bemont Inv., LLC v. United States, 679 F.3d 339 (5th Cir. 2012) (basis misstatement and lack of economic substance intertwined)