this is a case that has in three issues i think that need to be considered in order to resolve the issue the question whether the tax court properly ruled that mr egerton law firm the law offices of john h eggers and were responsible for an excise tax under section four nine seven nine a the internal revenue revenue code the issues that we the way we have framed them in our reply brief or three whether there commissioner should be rewarded for sandbagging by the way they change their position claiming they made a mistake about the controlling law after the opinion had been written under circumstances where they not only change the section on which they rely on a statute of limitations but where they also change the note on your sandbagging point you know the it seems to me the key check there is you know just want to get it right and you know this is a question about how you know very important part of the code works and if the tax court of all courts thinks they got it wrong the first time for whatever reason bad arguments mistaken arguments but that's the check on sandbagging right because the next court is still deciding what they think the right interpretation is and that interpretation is reviewable here well so i mean i  this i've been doing this for a lot of years to suggest after you fully briefed an issue after you've argued the issue with regional council and you've made points about not only what the right section is that's why there's three issues that they changed first of all what was the right section second of all what was the right form after indicating the form fifty five hundred words in appropriate form they decided that was an appropriate form and the change in the notice standard under colony which is the united states today there are just three hard given it's being presented to the three have this problem if you will listen to the first argument we had the exact same problem where the lawyers are thinking the way to think about it is one way the judges are thinking about it perhaps at least one of them another way this just happens all the time was complicated i understand the first case now you have an intervening event from an outside party the united states supreme court would says that the rule is different than anybody thought it to be exactly because they're they're all looking at the same there's no intervening rule here this is a situation where no move or change in the law there's nothing that comes down other than them deciding they lost changed they didn't just change their position judge if they had said oh my golly after flat out telling you sixty five on one doesn't apply not that it might apply were not sure but it doesn't apply if they had just said that that might have been interesting and that could have been something that we deal with but they also said only said section fifty five hundred i mean form fifty five hundred tax court thought it had made a mistake it was an induced mistake it made a mistake because the tax court said we relied on what they said i mean i can just tell you that's not how judges think about it don't listen to their arguments were interested in what you say but we think we've got this responsibility to figure out what the law means and when we think we've got it wrong we'd like to have the discretion to fix it i believe that your so your honors i i find this kind of behavior if i came back tomorrow after i mean after you issued the opinion in this case at all by the way fingers crossed i didn't really not want to he said when i said this i want you to spend a lot of time thinking about this whole new argument i've thought a i think the system would say that's not a good way to operate and there changing the decision in this case for god in this particular taxpayer might be one one possible way than to look at it the other way would be to to to wonder if they were  engaging in duplicitous of bad behavior as you seem to imply by saying that suggesting perhaps they might be changing their position because they they thought they were losing what they did i again i go back to this colony versus united states they say that's the controlling supreme court decision on whether how you whether there's notice they say form fifty five hundred or form thirty fifty three thirty eleven twenty those forms all work because they give notice will get into it and by the way sixty five only one can't apply not doesn't not can't just flat out can't and then the judge says ok sixty i'm going to go to forty nine the special limitations period i'm going to look at these forms i'm going to determine this notice and then somebody comes in said only made a mistake this is determined by filing a different form the sort of fifty three fifty or whatever and that's the only form and that's the only one right then event i'm your judges i'm not i i don't i find it shocking quite candidly but let's i only have a limited amount of time here let me and i wish you and regional council that you spoke with were a then after they lose they have a whole new set of counsel from somewhere else and said only made a mistake we the government made a mistake that's what they said we in their briefs they say that we made a mistake anyway  you like to make it now i want a second i want to go to the what i think the core issue by the way i not only want to make it now i think that that's where it should have of course now doing the same thing they did no no no i have never changed my position on this at  i didn't think of the former lead but i've never changed my position on the substance we took the position that there was no allocation there was no ownership of synthetic equity and therefore the limitations period there precedent for doing that for letting the tax court say listen we made a mistake here's the new rule but we're not going to apply is there do they have that authority i believe your honor the thirty's that i've cited in my brief judicial is stop all are in cases where courts seek knowledge that a mistake was made but that to reward somebody for effectively changing their position and doing things like that shouldn't be tolerated in the judicial system and therefore they can be a stop from taking their position as to that party to that party now i think by the way that now let's go to to the to the let's assume that we get past this i think the way i would look at that if i were the court is look at the statute of limitations question second because you may avoid the statutory interpretation problem if you look at the statute of limitations issue there is a there they sixty five or one before and we talked about this in our brief as an example that page forty one says you have to have a return on which interest been made about the tax if you take their current theory their current theory that ownership by itself in it about who owns this in the if you look at the form that they say should work the form fifty three thirty which is that to thirty eight in the appendix that form asks one question section four nine seven nine a tax on certain prohibited allocations aesop securities it doesn't have an entry about ownership it asks whether there is a prohibited allocation and now we go to the next asked what is your tax on a prohibited allocation we said we didn't make a prohibited allocation you this tax isn't relevant to a prohibit is only relevant to a privet allocation we filed the form fifty that's particularly where what they did that was deceitful in my judgment and or at least sandbagging is if you want to if you look at the case that we say in the scenary ply brief and our basic throughout the day in the tax court said the case is controlled the notice is controlled by the united states supreme court's decision in colony and all colony requires is that you have sufficient notice to decide whether to conduct an audit and what happened in this case is they conducted an audit based on the fifty five hundred they came in they said you file the fifty five hundred you indicated that you have ownership of these stocks you have a value fourth hundred thousand dollars and we want to do an audit that's how it happened they had more than enough information as their own doing of the audit would indicate j n r little are those that well that was the way this thing go originally got started before it was the original and to d and then they changed the name it was it was always just a small business and frequently the case i get a big deal just curious oh i i think they had a gift shop or something but there were a lot of times you get an existing corporation and then you change its name and change its business mode so that's what happened no question your your client had one hundred percent oh there's no question it's reflected in everything not to get confused about this the little harvest was as a step there was never an issue about this as the stipulation indicates that occurred way before this issue and then when they formed this aesop and to do they use that and they merged it and they created a new entity but at all relevant times all the minute if you're going to take an ok i'll take a minute and if i want to emphasize i now want to go to the merits because i think on the merits there's there is one piece of evidence that the tax court and the government relies on which is this after the fact conclusory legislative history thing that says there's a special allocation rule our position is that that legislative history doesn't work can't work it doesn't letting focus on the tax then what is the no allocation here phrase doing what worked as it did and thank you that's all i wanted to say if you look at the to see it increases the amount of the tax that's section is not a tax in section it is a it says the amount should be increased by what you have been in an allocation of imposition of a tax section no no it isn't the tax day imposition of tax yes that's that this is eat nobody the reason it is the flush language in the flush language says you get taxed on two things allocation or ownership of synthetic equity and then what the to see says and oh by the way if you've had a prohibited allocation your tax the amount on which the tax is calculated includes not only the prohibited allocation but the that wouldn't make any sense economically from congress perspective that would allow someone who had the very type of aesop ownership structure with an escort that they were trying to prohibit just leave it in place make no changes make no allocations and then when you finally allocated at retirement thirty years later you pay them but you would have sheltered all of this from tax all the time you've assumed the fact that they would like you to assume which is wrong it's just that congress wanted to eliminate these remember we got a favorable determination letter that we were entitled to continue congress wanted to slow them down and prevent them from making further allocations congress did not outlaw these plans congress specifically that's why if you look in the record there's a favorable determination letter says you're entitled to continue doing what you're doing basically i mean that's what you've complied with the provision congress didn't outlaw these plans if they good morning may it please the court i'm francesca google any counsel for the commissioner of internal revenue this is not a case about deceit or sandbagging like to address first this issue about the tax court's grant of reconsideration on the statute of limitations and this was simply a case of the i r s attorneys making a mistake in the way they framed the law there was not a true inconsistent position taken by the commissioner in this case the taxpayer pled the statute of limitations as an affirmative defense and always bore the burden of proving that the statute of limitations was closed the commissioners position from the beginning and it's in the exam report which is part of the record and it's in the commissioner's answer was that the statute of limitations was still open because no excise tax return had been filed at that point in our answer at the commissioner had not raised specific code sections for framing that factual argument but that was always the factual underpinnings of the statute of limitations issue the failure to file an excise tax excise tax was based on ultimately what the tax court found to be a mis understanding i've been quit for i think i don't know any income tax i still have to file a return my kids you know they make very little money in their summer jobs it's not enough to trigger income tax they stop the violence and if they don't file it that's their choice but they can't you can't say the limitations in a return a self supporting system you have to have documents that's cracked in this court address this very issue in the macdonald case which we cited in our brief that case involved a an excise tax where both the there were two there was the person i think that had for some kind of club an excise taxes due on that the club was supposed to file the return the court acknowledged that both parties involved there had good faith no one thought an excise tax return was due so the return actually the club had filed an excise tax return reporting different types of excise taxes but left the particular entry that was an issue in that case blank this court acknowledged the good faith saying that anybody who's involved in one of these plans has to ever return the statue of limitations is open that might appear to be an unfair rule that is clearly the rule under sixty five a one both in the income tax context and in the excise tax context no no my question was are they required to file the return of legal requirement for the filing of those circumstances obviously i mean you only file a return when you believe you owe a tax now if the iris determines later that you owed a tax and you didn't file or turn based on your good faith belief that you didn't owe it but it turns out that you owe it congress is very clear that the iris can still come in assess the tax notwithstanding your good faith belief that you didn't owe a tax and therefore didn't f sorry i guess they don't understand it well i think i'm asking the same question is our tax returns an income tax returns the same in the sense that there's no obligation to file we either but if you have a tax you're in trouble in other words do the income tax if you have any income do you just always have to file an income tax return there's i think you judge a claim might be contrast in excise taxes with income taxes maybe there's a difference there is that true i guess there's a there's a slight difference i mean most everyone in the country has to file an income tax return in the sense that the threshold the income threshold for not filing is very low so almost everyone ends up having to file one there's no similar rule about excess taxes right excise taxes are imposed on transactions or events so unless that taxable transaction or event has taken place they're not filed on the basis of like a calendar quarter or an annual basis the income taxes filed making his point clase trying to make i think trying to make the point wow it's kind of funny with this excise tax think there's no obligation to file it in any way you don't think you were honest on the other returns as it turns out there was an obligation to file the return because they did oh the tax that goes to the merits question of whether they owe the tax the fact that they didn't believe they had over the tax would they have been legally required to file or return that return for excise tax if they did not owe the tax the nay would not have been required to file a return that's all i was asking ok but that doesn't really answer any of the questions in this case because in this case as it turns out they did know the tax they didn't file a return which no the only thing that caused the government to change its position after initially losing the case was realizing that they had made the wrong legal argument the law is very clear that the provision the first and this is the wrong legal argument i'm just trying to get that pin down is that the one about the statute that only extended it correct and that's the specific versus the general problem correct and the notice the notice provision is only under that special extended provision of forty nine seventy nine a the when you look at sixty five a one the key issue there is whether return was filed the i r s having some notice of a non allocation year because of some other return that was filed a return that was not an excise tax return that does not qualify as the filing crystal clear that it is a return that triggers the running of the limitations period and as this court held in the handling case there's a four part test for whether or at the sufficient return has been filed and the key piece here is that whatever document purports to be a return needs to contain sufficient information for the i r s to calculate the tax liability in this case no such return no such document was filed that enabled the iris to do that therefore there was not a return that qualified as a return for sixty five a one taxpayers have made arguments in the income tax context for years that the i r s had other facts other knowledge notice of a liability and that that should have triggered the running of the limitations period under sixty five a one uniformly reject that what is the status of this provision that he's relying on i wasn't sure it helped him but it's sixty five or one before so i'll let you tell me what do you think's going on there sure that that provision sort of a red herring in this case sixty five sixty five zero one before what the work that that provision really is doing is just clarifying that in the excise tax context the filing of an excise tax return will begin the limitations period with respect to any one of the taxes reported on the return if you look at an excise tax return it's very different from an income tax return because it's basically a laundry list of all the different excise taxes that could be on that return and it asks for just an up or down answer what is your liability for this tax so you can put a number or you can put a zero if you did sixty five or one before under that provision could you just do a return that said zero if you filed an excise tax return that listed as zero for this tax that would begin the running of the limitations period but if you do that same return on an income tax return it doesn't start the clock because that's perceived as not you know really giving them information am i right about that to me on a taxpayer files an income tax return that just reports all zeroes yes actually i'm not i know that there is case law out there on whether or not that begins the limitations period i don't recall exactly what the answer is ok so you're not sure then because i was thinking that that was the point of this provision that the point of this provision was to let you do zero entry and have the limitations period star that's not necessarily so with income tax returns and the limitations period and that may be that may be the reason behind that particular provision i know that is how the provision operates in excise tax context if you file an excise tax return that list is zero for you know look at the right statute sixty five or one to the right one but having clarified it say no we actually think in this situation it would be fair to apply that decision to flee to this taxpayer to have that authority tax court the standard for granting or denying reconsideration is abuse of discretion and presumably the tax court could have within its discretion could have acted within its discretion to deny the government's motion for reconsideration and acknowledge that there was a legal mistake made but it could have determined that the government waived it at that point and let the wind frankly what would have been a windfall in this case stand because the taxpayer did know the tax and the statue of limitations was in fact open in this case the tax court exercised its discretion to grant reconsideration but presumably it could have denied it and acknowledged that the law doesn't really operate this way but we're going to hold the government to its initial incorrect position you know that one could look at the possibility opposed to two different cases do you have any position noma i think that i'm sure in this awful argument could be made within a same case but i'm not sure that this is the kind of case that really involves separate stages i think that case would be more a case of maybe a tour a case where you have a liability stage and then a damages stage and perhaps the government's made some argument that allowed it to prevail at the liability stage and then wants to change positions at the damages stage for looking at whether there's been a manifest error of law and that's pretty clear under rule fifty nine which is the federal rule of civil procedure that doesn't apply specifically in the tax court but the tax court has sort of adopted the same principles and the initial allocation occurred in one thousand nine hundred nine when the escort first set up the aesop at that time this type of ownership structure was permitted congress changed the law in two thousand and one and gave preexisting aesop's such as the one here three years to phase in the change in this case the taxpayer did complete the change in time to avoid plan disqualification but it did not complete the change in time to avoid the excise tax and actually run it want to respond to something that i heard in the opening argument about the by opposing counsel has claimed that the i r s issued a favorable determination letter saying that the plan complied with the tax law if you look at that determination letter it specifically carves out it says we are not making a determination whether the plan complies with the new law which had not yet taken effect for this aesop and in fact the taxpayer knew it had to make the change it did make the change it just made it too late of the cars there are many as far as i know this is the only case of this type so in the limitations period what about this way of thinking about it so you say hey listen we've got this rule sixty five i want it says the clock doesn't start until you file a return let me grant you that but you have all these other cases the talk about well if there's enough information so is it possible that the way this really works is yes the norm the normal rule is no return no clock starting but you can have situations which it seems like these cases are contemplating where the i r s does have enough information from another return to start the clock i realized those are facts of facts and circumstances situation but you seem to be suggesting thinking there's just one way to stop the clock and overturn no start but in that body of case law suggest there are two ways to start the clock well are you referring to the posing counsel mention that case had that was under a different part of sixty five a one it was sixty five or one i don't remember the exact subsection maybe efore there's a particular statute that deals with a substantial omission of income from return and when a taxpayer has omitted i think it's like a twenty five percent threshold of over twenty five percent you know in a mission of income than the i r s rather than having three years to begin its audit has six years it's an extended statute however that that statute specifically says that the extra three years will not apply if the taxpayer has adequately disclosed to the income elsewhere your point is under the statute and in the you really think there are no exceptions for sixty five or one excise tax correct the the exceptions that go to notice and whether the iras had information all of those exceptions fall under some code section some place that congress has allowed there to be an exception in this context there's no exception when hampshire case five thirty two us which says that it applies not only in separate proceedings but in similar phases of the same proceeding the point being that you can't let the judge make a mistake induce him to make a mistake and then say you made a mistake and you want to start all over that's the judicial or stop all as regards to these i think here's where the confusion comes under and i there was a return filed there were two returns filed the question this is why you have to look at what fifty three thirty six asks it ask for a prohibited allocation the form fifty five hundred which the taxpayer filed ask you to tell you how much you own that is the relevant return for purposes of deciding if you're going to impose a tax from totally following you but what i think i'm hearing you say is that the limitation period is triggered by filing returns and there is this all turns on your reading of the underlying tax statute that if you are wrong about how the tax statute works then it seems to me you're wrong about the start date i think if you go back i just i disagree with you but i but only in part i think if you look at colonies for example or you look at quick estate which is that the the tax courts following of colonie they recognize that you can make you can file multiple returns affecting the same thing one of the cases involved in the state tax return where there should have been an income tax return would you have it she spews very clear she said listen each one of those cases relate to a provision in sixty five zero one where when it comes to that type term you can have an extended period or strong period depending on this or that factor and that that's not true for access talk that's all she said i don't know if she's right but just respond to what she said i don't believe she's right and here's why i think if you look at the question and that's why we referred for example to sixty five or one b four and i don't i'm not trying to be of ac because i can't to my mind remember now which each of these cases where there's a ton of these cases that say as long as the i r s has sufficient notice that there may be a tax an issue that constrictor the statue of limitations even though the taxpayer may have mistakenly filed the wrong form i fall in the state tax return rather than another return but this is for purposes of this section defining the return for a specified period on which an intrigue has been made and in tree has been made with respect to a tax a tax imposed by this the entry is that i own one hundred percent of the shares of this aesop that is what they say is the tax creating event ok if you look at the fifty three hundred no in tree is required because even they admit she says no it's the only one that applies even they admit there was no prohibited allocation that was never the right return so my last question is if back to the reconsideration everything it happened in reverse the the tax court ruling a bend in your favor and after the fact that the department realized it made a mistake it files a motion of the tax court and says we goofed we looked at the wrong statute we should not have won the taxpayer should have won would that have been ok i don't know but it would but i don't know the answer to the question but i do know this that the problem is simply that