Rogers v. Illinois Department of Revenue, 2017 IL App (1st) 151449

Background

John and Frances Rogers reported a $495,000 2002 loss on their federal and Illinois returns that flowed from Wacker-Madison, LLC through Abingdon Trading, LLC (an LLC taxed as a partnership) to the Rogers.
The IRS audited Wacker-Madison and determined the $495,000 loss was incorrect; John signed IRS Form 870-LT (a partnership settlement) on June 17, 2008 on behalf of Abingdon, agreeing to adjustments to partnership items.
The IRS later sought collection; the Department of Revenue issued a state notice of deficiency in 2014 asserting the Rogers failed to notify the Department within 120 days after the federal change was "agreed to or finally determined" under 35 ILCS 5/506(b).
The Rogers argued John was not a true partner in Abingdon (received no cash distributions) and that the IRS adjustment was not final while collection due process and Tax Court matters were pending.
The Illinois Independent Tax Tribunal granted summary judgment to the Department, finding John’s signing of the Form 870-LT bound the Rogers as indirect partners; the appellate court affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Rogers were required under 35 ILCS 5/506(b) to notify the Department within 120 days because the federal change was "agreed to"	Rogers: John’s Form 870-LT on Abingdon’s behalf did not bind the Rogers because he was only an indirect, non‑receiving member and Abingdon stood between him and Wacker-Madison	Dept.: Form 870-LT expressly bound Abingdon and pass‑thru/indirect partners; John’s signature on behalf of Abingdon constituted agreement	Held: John’s signature on Form 870-LT bound Abingdon and, as an indirect partner, bound the Rogers; they had to notify the Department
Whether material factual issues existed about John’s partner status or Abingdon’s partnership status preventing summary judgment	Rogers: Fact questions exist (no distributions, no partnership agreement evidence)	Dept.: Rogers conceded status of Abingdon as an LLC taxed as a partnership and that John held an interest; no evidence to rebut distributive‑share taxation	Held: No genuine issue of material fact; partnership tax principles require inclusion of distributive share regardless of cash distributions
Whether the IRS adjustment was not final due to pending collection due process / Tax Court proceedings	Rogers: Adjustment not final pending administrative/Tax Court review; transcript is hearsay	Dept.: Proceedings reflect assessment finality; Form 870‑LT waived deficiency notice rights and rendered settlement final	Held: Court relied on Form 870‑LT terms and statutory scheme to treat the adjustment as agreed/final for reporting purposes (court did not need to resolve finality once "agreed to" established)
Whether the Tribunal erred in granting summary judgment	Rogers: Tribunal prematurely decided issues; summary judgment inappropriate	Dept.: Law and documents (Form 870‑LT, IRS notices, transcripts) support summary judgment	Held: Summary judgment affirmed — Department entitled to judgment as a matter of law

Key Cases Cited

Bruns v. City of Centralia, 2014 IL 116998 (summary judgment standard under Illinois law)
State Bank of Cherry v. CGB Enterprises, Inc., 2013 IL 113836 (appellate review of summary judgment is de novo)
Carter v. SSC Odion Operating Co., 237 Ill. 2d 30 (2010) (statutory interpretation reviewed de novo)
Peoria & Pekin Union Ry. Co. v. Department of Revenue, 301 Ill. App. 3d 736 (1998) (requirement to report federal alterations even if no additional tax shown)
United States v. Basye, 410 U.S. 441 (1973) (partnership is conduit; partners taxed on distributive share regardless of distributions)
Randolph Products Co. v. Manning, 176 F.2d 190 (3d Cir. 1949) (partnership is tax‑computing unit, not a taxable entity)
Cole v. Commissioner, 637 F.3d 767 (7th Cir. 2011) (partners taxable on distributive share irrespective of actual distribution)