Academic journal article Journal of Accountancy

Partner-Level Defense Rule Held Valid

Academic journal article Journal of Accountancy

Partner-Level Defense Rule Held Valid

Article excerpt

The Tax Court upheld the validity of temporary regulations requiring a partner to raise partner-level defenses to penalties in separate litigation after resolution of unified partnership proceedings.

Andrew Filipowski created New Millennium Trading LLC m 1999 to generate a deductible loss through the use of foreign currency options. In 2005, the IRS determined that the partnership and the transactions were shams. It denied the deductions and assessed penalties under section 6662. Filipowski raised partner-level defenses against the penalties during the partnership-level litigation, and the IRS objected to their consideration.

Treas. Reg. [section] 301.6221-1T, in subsections (c) and (d), states that partner-level defenses may be raised only in separate litigation for refund following payment by the partner of the tax and penalty due. The taxpayer argued that these regulations were invalid because they denied the Tax Court the authority to hear penalty cases and because they were an invalid and unreasonable interpretation of section 6221. However, the Tax Court found that Congress amended the law in 1997 to provide that a partner, in the court's words, "may raise partner-level defenses only in a refund action filed after the close of partnership-level proceedings." Therefore, the regulations did not deny the Tax Court any authority granted to it by Congress, the court said. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.