good morning good morning good morning may it please the court my name is charles hodges and i represent the taxpayer partner mr katz in this partnership level tax proceeding and i'd like to reserve  must be reversed and that is this a judge in a partnership level tax case has no jurisdiction to determine the tax treatment of individual partner's income and expenses that are reported on the one ten forty s that are completely unrelated to the partnership these are your home mortgage interest was the statute of limitations and the ability of the i r s to from your perspective you audit and make claims with respect to your client's tax return in years that you claim were closed is that the problem of your complaint there is your honor and that's a great question but the only way that mr katz a statue of limitations is open is if the partnership level judge is able to determine his the tax treatment well he can look into the issue of whether or not your client allegedly had understated income by twenty five percent kidney no your honor there was absolutely sixty two twenty six f of the internal revenue code is the code provision that is the jurisdictional it is the provision the congress set in congress specifically said a judge of the partnership well proceeding has jurisdiction to do one thing determine partner shi legislative history and there is no case that is presidential none that say to the contrary that say that a tax court that a tax partnership level judge can decide a non partner she's higher saying that we should rely on the negative pregnant right and that he has no jurisdiction also in the sense that congress gave the the partnership level court no jurisdiction to determine non partnership i take most of these partnerships can have twenty thousand or this one is limited to twenty thirty fifty one hundred partners and essentially what judge marvel's order is saying is in that case that you completely forget about all the deficiency procedures you know if you if you've been involved in someone's enforcement actions basically what i'm says iris exam is out now what will happen is your home mortgage interest deduction and all these individual items that are on those one hundred ten forties are now subject to scrutiny not by the iris exam you don't get notice is of deficiency instead what you get is iris lawyers requesting discovery to now audit you or even worse  that the statue of limitations was gone for the partnership then the ira's lawyers revived looked over the notes of the examiners and revive the issue with the hopes that the statue of limitations could be the first your perspective is your client was  on his individual return that was closed the partnership gets audited that extended from their perspective they make a claim against your client for the years that you believe are closed your point is they can't do that it just doesn't because other if you do that you're going to get into the individual items such as the home mortgage deduction that is absolutely correct on that and again i guess i'm troubled by any authority for that tour there was it to two tier system so i guess it is because i non partnership item can never be determined the tax treatment of your home mortgage interest can never be determined at the partnership level it's such a bedrock of what we're talking about that it's never been in dispute i judge has never tried to do what judge marvel did here the judges never tried to determine the tax treatment  sixty two twenty six the one yes your honor which is i understand your argument in the language of that is the one b actually says th to partnership level determination proceeding  your client cooper disappeared for purposes of asserting that the period of limitations for assessing any tax liability tax attributable to partnership bite him as expired with respect to such person and the court having jurisdiction of such action job jurisdiction to consider such assertion yes your honor so why does  to accept that they value they would accept that because no there is they consider and so therefore they take what he says is true that is all they can do under that that is what they can do  basis for that do they have a notice of deficiency outstanding challenging it if no no they would not be able to do what they did here was say we'd like to commit we've now like to have discovery on that your honor in this partnership level perceiving and see if maybe this now ten section determined congress said in sixty two twenty six f sixty fifteen eat with innocent spouses and on and on and on is in our brief when the congress says determined in the internal revenue code that is they can determine the tax treatment there is nothing in the code actually are a number of cases that have considered now in partnership items in determining whether the f pis timely now the case is to know how to rise under sixty two twenty sixty one which allows a partner raise a partner specific defense but there are many cases in which when an afterthought is issued the partnership itself raises the question of whether the eff pis timely and some of those cases are cited in a footnote to our in our brief bakersfield energy united states vs home concrete there are at least twenty cases involving the son of boss tax shelter where there was a timeliness issue involving a six year stanched of limitations and some of those cases such as us vs home concrete involve a non partnership item bakersfield energy involved a partnership item but us vs home concrete the supreme court concrete before we go further on that line of thought i'd want to be sure on the statute of limitations issue do i understand correctly the service takes the position that the individual was extended year because  twenty percent twenty percent or more so in the case of home concrete and in many of many of those other cases involving the six year statute the item in question was a non partnership  and overstated basis and none of the courts said we don't have jurisdiction to determine to determine this because it's a non partnership item now the jurisdictional issue was never specifically raised in those cases but every court has an obligation to satisfy itself of its own jurisdiction i gather the service takes the position that there's just no question that the tax court had the right to look at the individual returned because of the impact in this case because of the impact of the partnership distribution right well that's correct basically i'm chaotic with the only person that would be affected by the aftermath so if he if we if the courts if  the i r s could not make an assessment against him basically you have there's no point you have a moot case there is simply nothing to do so that's you know under the case or controversy requirement of the united sixty two two hundred sixty one argument would consider means do you agree with counsel that that's all that section allows is the partnership receiving judge to consider the taxpayer's assertion that the statute hasn't run is limited to the record that  tax on time his liability and there's been no notice of deficiency well under fire as as and assess the fish and see that and  why would it be able to litigate that issue under the rubric of consider when the record is you know the record on the faces that  the assessment period regardless of whether noticed a deficiency was issued so in this case after it was issued prior to the expiration of the six year period of limitations and under that the majority opinion and this review tax court case one hundred fourteen t c five thirty three that would make it timely now the taxpayer relies on that concurring opinion of helping to basically disagree with what the majority said just but you know basically that is the majority rule and the miniature which the majority rule is well founded in reason that's the ta deals with sixty two twenty six but the reasoning of woods would you explain in what way woods should influence our thinking here from your perspective  i'm just now coming to let me just quote a little bit refresh your recollection in woods the court said for having courts in partnership level proceedings from considering the playability of penalties that require a pardon a liberal increase would be inconsistent with the nature of the apply capability to determination the terror for requires now is not this action yes but as i understood your position the government's position was that the the the reasoning approach is one that should be applied to sixty two twenty six well that's very interesting basically penalties are a partner a partner level issue penalties are applied at the partner level and congress in one nine hundred ninety seven i believe amended the code to allow the applicability of penalties to be determined at the partnership love all even though penalties are basically imposed at the partner level cases for example if a statute of limitations of six years because of a substantial omission of gross thing come there are cases that hold that the i r out can make an assessment with respect to an item that wasn't understated on the gross return in other words once the six year statute of limitations holds the statute of limitations open it is open for the it's open for all purposes not just for the understated item and similarly with respect there is a fraudulent return and there's an unlimited statute then the statute you know is open for every item on return not just a fraudulent lee under reported item and i think the same sort of the tax court applied the same sort of reasoning here and likewise you know the court said we're not really determining a partnership we're simply you know determining whether whether the app you know whether this action is timely and whether it could have fact the tax consequences if anybody and in fact when the taxpayer entered into a stipulation and entered into a stipulation thing for purposes of this case only i stipulated that i omitted one hundred ninety eight thousand dollars from gross income so if to say that the tax court term and anything in this case you know  stipulate that we omitted you know more than twenty five percent of our gross income so that basically precludes a non partnership item from really being determined in a partnership level proceeding but  and how it was enacted and keep in mind teff are a was in acted because i arrest asked congress for it and there it discusses the difference between partnership items and non partnership items and how they're litigated to hit the questions that were raised i've seen this repeatedly judge marvel as well as the i r s well sixty two twenty six d one which was raised earlier would be meaningless if you couldn't determine  of these non partnership items but unfortunately statutory construction can and tell us that if congress said in sixty two twenty six d one court you can consider this is certain and in sixty two twenty six f it says you can determine we have to the judge marble said those terms are interchangeable no statutory construction principle says that they are interchangeable it's the exact opposite we have to give them meaning and also that this is court of limited jurisdiction so we do not expanded beyond what congress has terms of been as to your woods that was a great question your honor because that's exactly that's it exactly because in woods the reason why they were able to get there is because congress amended sixty to twenty six f and said we will allow penalties to be litigated at the partnership level so congress whenever they believe that a non partnership item should