Twenty-Two Strategic Investment Funds v. United States
2017 U.S. App. LEXIS 10108
| 9th Cir. | 2017Background
- Gonzales invested in a BLIPS tax-shelter through his single-member LLC, Birch Ventures, which invested in the Logan Strategic Investment Fund; Presidio was Logan’s tax matters partner.
- The IRS audited BLIPS-related returns; it issued a Final Partnership Administrative Adjustment (FPAA) to Logan after concluding the transactions lacked economic substance.
- Logan’s 2000 partnership return was filed April 16, 2001; the normal three-year assessment period would have expired April 16, 2004.
- Gonzales personally signed two consents extending the assessment period (Dec. 2, 2003 and Oct. 20, 2004), together extending the period to June 30, 2005; the FPAA was issued April 28, 2005, within the extended period.
- Gonzales argued the consents were invalid because (1) his tax advisor, Steve Smith, had a conflict of interest (he promoted BLIPS and prepared Gonzales’s return), and (2) he signed under duress from IRS agent Paul Doerr.
- The district court granted summary judgment to the United States; the Ninth Circuit reviewed de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a third party advisor’s alleged conflict of interest invalidates a taxpayer’s personal consent to extend the partnership-assessment statute of limitations | Gonzales: Smith’s role in selling BLIPS and preparing his return created a disabling conflict that tainted Gonzales’s later consents | United States: A third party’s alleged conflict, without evidence of government misconduct or that the third party influenced the taxpayer’s consent, does not invalidate a consent signed by the taxpayer | Court: Consent valid; no evidence Smith caused or tainted Gonzales’s consents |
| Whether Gonzales signed the consents under duress by IRS agent Doerr | Gonzales: Meetings and a summons visit by Doerr caused fear of legal jeopardy and coerced signature | United States: Agent actions were legally authorized investigatory steps; fear of lawful action does not constitute duress | Court: No duress; fears of lawful IRS action and routine summons service do not vitiate consent |
Key Cases Cited
- United States v. Stein, 495 F. Supp. 2d 390 (S.D.N.Y. 2007) (context of BLIPS investigations and criminal prosecutions)
- Transpac Drilling Venture 1982-12 v. Comm’r, 147 F.3d 221 (2d Cir. 1998) (discusses disabling conflicts for tax matters partners under criminal investigation)
- Phillips v. Comm’r, 272 F.3d 1172 (9th Cir. 2001) (tax matters partner under investigation does not automatically lose authority; distinguishes Transpac)