also just as a point of to like seriousness today i'd like to point out that these partnerships that are involved here were the syndication partnerships for lone wolf mcquade which ultimately was used as the basis for th running t v series walker texas ranger and cinema eighty four was the marketing partnership for terminator which was really all there was arnold schwarzenegger's movie that led to the multiple remakes of multiple sequels plus  series and return of the living dead and hollowing two which have become cold classic horror films so it's kind of interesting to note that not only do these movies seem to have an ongoing life so do the tax issues related to  think this should really be a simple case the government acknowledges that the will settle rule that in the cesspool laid without issue will required statutory notice if what is required is an illegal assessment and it is void i civilians under section sixty two thirty one for a computation in the judgment which gets us to the definition of has been so heavily briefed and argued the definition itself is simple so as the term computation adjustment means the change in the tax another it does not there is a change required that if i may i'd like to address that systematically i think a very clear understanding and meaning to that is the following if a porter's treatment of a partnership is inconsistent with the treatment on the partnership return or as that item is adjusted in a proper seating then the government may make as a constitutional adjustment the tax assessment that brings the tax payers treatment the partner's treatment into compliance with the proper treatment at the partnership level now what that means is there has to be a change to the treatment by the partner in every case well that's what it used the be a change in the treatment by the partner i think some confusion comes about as to what treatment we're referring to we're talking about the treatment by the partnership on the partnership return or the treatment by the partner was the treatment by the parker that always there has to be a change to to produce a fucking tell usual adjustment now that change may be necessary to bring it into compliance with the return as filed or that change may be out of the debt of the partnership in order for a partner to be at risk he has to assume part of that debt that is a personal level assumption agreement what was agreed in these closing agreements is that the personal assumption by partner of part of that it would not go into is at risk computation that is a purely partner level agreement the be made to reflect a change in the non partnership item element now you can make a hypothetical calculation that's true but that doesn't mean that that is that if the definition of a co step further down in this the next section next subsection in sixty two for he provides that where the assessment is to a an affected item requiring partner level determinations a notice of deficiency is always required let me use a hypothetical here to give you a comparison where that comes in it applies by definition to this case but is not necessary to this case because we really don't start me as defined if instead the agreement had been the partnership over stated its debt then you would have an adjustment of the partnership level and there would be a correction at the absolutely correct i think the definition of computation would just want to avoid ever having to look at the second photo but even if it were originated in a partnership and could be defined as a computation with just  school then presumably that determination with then be transferred to the individual partners would be the form in which that would be transferred with that be transferred as a four sixty five all the amount at risk is limited the amount of deductions that labor take to write so if the deductions allowable are less than is amount at risk it's not a change in isn't it risk is a moderate risk continue to be used in future years against other deductions et that's a complex question or i have to take that apart for a limited part as a general rule the amount of partnership that does not increases and that it risks that can only be achieved for a limited partner as we have here by individual it assuming personal liability for portion of that debt which is why that assumption agreement is a purely individual part matter there may be some partners in these partnerships that never assumed any of the debt but it does  it does your honor but that is not a partnership but that's not something that's allocated at the partnership level and a very gross example of that version of the fact that if you have a partner who didn't subscribe to the partnership originally and make a capital contribution but perhaps came in and walk a persian interest and paid him twice what he had of he had purchased his amount or risk would be his method of the purchase of the partnership interest which can no way be determined at the partnership while the at risk of milk is an independent calculation made by each partner at the port or level pure and simple as a said there are some changes like a change in the actual amount of debt per little determination as opposed to partnership a full partnership out of requires a partnership level determination although that can be made at either the partnership level or by remote with an individual absolutely there can be as as well this whole case this case starts out with the agreement that there are no changes at the partnership level the ever changing numerated in their closing agreement both those in favor of the tax payer and those against the taxpayer or changes to matters that are purely partner level specific they are not changes to partnership items they are partner level determinations regarding his individual specific factors and those include not only the agreement to limit isn't met at risk and disregard the assumptions it also in the closing agreement goes on and agrees that he shall be entitle in computing is liability to determination of offsets for certain refund claims and subsequent years that he has preserved the right to raise an innocent spouse defense which although neither of these partners did it would have been theoretically available to the estate of mrs bush it preserves the right to have the liability recalculated taking into account any potential carry backs or carrier which from other years and inherently by because of the use of deficiency is required it also preserves the right to raise any other kind of issues that would reduce the use of that tax liability for example i've actually for example and ira contribution medical expense conduction etc that would reduce his tax liability now he has no right to automatically bring those issues again if the assessment is government is not required to allow a taxpayer against liability to set off for a later year over payment however if it is done it is extremely beneficial to the taxpayer because it reduces interest compensation from that point for and even if even if the later refund claim is separately paid for example and the tax assessment is made the tax is paid you pay interest on that tax assessment and liability to the date of assessment pay you get no tax deduction for that you got a refund claim starting two years later three years later that accrues interest for a decade the government pays you that interest you have plenty income tax on it if it is set off as was agreed in this agreement that the government must do the timely filed which claims then you get the benefit of the interest set off and avoid the taxation on that one leg of the interest that is a very very favor agreed to certain specific matters and how those matters will be addressed in reaching the taxpayers tax liability there are other matters with the closure of the room it doesn't address at all such as what is medical expenses might be or it with regard to the extent of the agreement as a set of this agreement never agrees to a specific tax liability it never agrees that these are the only factors that will be taken into account in reaching that tax liability now there's a difference in for example a marathon case of the claims court where you have a form eight sixty six used that agrees to a specific amount of tax liability for the taxpayer and claims court has said in that case you don't have to issue a notice of deficiency and that is logically correct i mean you have an agreement by the taxpayer as to what he owes there is no agreement as to what these tax payers are only how certain matters will be dealt with in computing that sixty five eleven which sets the statute of limitations for filing the refund claim that is mandated by seventy four twenty two a in order to pursue a refund so that you must file a claim in accordance with the statute and regulation period after the statute of limitations expired and as the government's brief makes abundantly clear it is quite apparent i think in the record here the vast majority of these collections if the assessment was invalid occurred after limitations expired because the assessment was nixed in the imitation is period but i will go forward and say that i believe jones b liberty gless makes clear that the intent of the term overpayment in the refund overpayment includes an amount of erroneous lior wrongfully collected and if instead of those which were was required and not issued these males were wrongfully collecting no if someone else were paid in prior to that by the taxpayer with a clear designation of these are intended as an advance payment of the tax to government to keep that there is a whole body of law that developed the has been evolving around what happens if the cash proposed cash  police court prior in one nine hundred eighty two there was a problem with how you would assess liability attributable to a partnership if you disagreed with how the partnership treated a partnership item what would happen is the i would have to go out and seek co action or you know buy notice of deficiency against each of you going to go abroad partners if there are hundreds of partners you have hundreds of different pieces of litigation going on and it was massively inefficient what happened with stafford taffer was designed for the purpose of efficiency of having one form in which you dealt with partnership items and then there's a part of the the results of that determination at the partnership level which is the change in tax liability of a partner that properly reflects the treatment of a partnership probably reflects the treatment under tougher of a partnership item determination under test for includes that there shall be no changes partnership return or in that receive treatment under test for your honor we submit is this is that it's the treatment of partnership items at the partnership level in a unified live here there was no there was no need to but most direct answer is again the one i just gave is that the treatment of a partnership item under tougher is the treatment that the partners treat in a partnership items at the partnership level here to to give some context to that point per the f they respond to those items were issued the settlement agreement determined that there would be no changes to the partnership items and did one other thing allow the i r s to determine the correctly was that through a strictly computational exercise which means by working through the partnership return the partner return and the items that are settled in the settlement agree with your sense of why but there's nothing  trial court in this case had held that that p s the assess the computational adjustment could be assessed directly because it did not require any partner level of the terminations and that is what sixty two thirty eight said the relationship between the original claim in the partnership proceedings and the tax court a claim by the commission and the ultimate resolution in the settlement agreements with respect to the risk amounts that it was is there a correlation between the claims that the commissioner presented in the partnership agreement proceeding the settlement agreements is that these taxpayers entered into a settlement agreements in which they effectively struck a bargain because the f paas would have wiped out pretty much all as far as i can tell from the record all the partnership that and so therefore they are the to whatever extent they claim that on their own or to whatever extent they claim losses on their own individual returns there is bosses would have been wiped out of the partnership level but these particular tax payers and heard into settlement agreements in which they were out to take losses to the extent of the amount they contributed to the partnerships which increased their risk amount as well as to the extent of the partnerships made any income words what you're saying is that these settlement agreements preserve a little bit of what otherwise would have been a complete lack exactly if i were so so where i'm going with the relationship definition has partnership components to it and it has partner level components and very often as has been cited by tax payer in the panel briefing that those partner components often require partner level determination issues that haven't been cited originally appear on the partners return however here what the what the settlement agreements did and what's what's crucial is that it's settled  settled whatever the iris needed to know in terms of how to compute the at risk amounts for these individual partners it said their capital contributions were fifteen fifty thousand dollars in the case of mr bush and hundred fifty thousand dollars in the case there is i do not know of anything that he couldn't challenge as to the liability that was attributable to the partnership as to why ability that's not attributable partnership that has nothing to do with the partnership like for example he took but that is to say that that is an issue that he should be entitled to a notice of deficiency for why ability of a true that is attributable to a partnership defies section sixty two thirty that says that where there is tax liability that in effect says where there is tax liability attributable to a partnership that why ability either isn't either is directly assessed if it can be made by computational adjustment alone or i can't shower those things are effectively conceded you can't then real way to get there is items and so therefore once the partnership level proceeding had ended for these individuals for these partners there were no partner level determination sixty two thirty eight manco was a non tariff for partnership and so therefore there was no exception that existed for computational adjustments as to those partners and that partnership this statute here makes all the difference because it  if i could add to that the underlying logic here which is that congress wanted to provide partners with a one prepayment opportunity in which to litigate their partnership components of affected items and their partner level components of affected liability of a partner which properly affects the treatment under the subchapter being tougher of a partnership item when the i r s is few f oss contesting various partnership items in which these partners participated in those partnership items or in play as it were now when these partners entered into settlement agreements in which they determined that there would be no change to any partnership items that settled the partnership level affect your honor it is our position that certain way what what happened at the part of the partnership items affects at risk amount necessarily like for instance to use the example of an at risk and now you're at risk for the amounts and not these particular partners but in general you're at risk for a partnership that you're personally liable for your at risk for the amounts that you contribute to a partnership you're at risk for the amounts of items yes it is our position your honor that the settlement agreements made the comp the computation of the actress to mouth much simpler but it is important to note that in order to determine the at risk amount you needed the the definition of computational adjustment and how the scheme works in terms of test for at large is that you do not need a change to a partnership item if you look again at the sixty two twenty two  see which contemplates a computational adjustment where there is no change to a partnership item of the partnership level they get there is a change to the tax liability of a partner variant as in is an example and which you do which it states that there should be a computational adjustment in order to in order to coordinate the partnership items treated by the partnership and the partnership items created by the partner now there you can have an example in which the partnership items treated the treatment of a person bottoms by the partnership the iris agrees to that treatment is correct but still there is tax liability of the forest down through  not true your honor that is true but again we're using this sixty two twenty to see that we're not suggesting to be clear that sixty two twenty two c is the type of computational adjustment that occurred here but we're using it as an example that the definition of computational adjustment as used in sixty two twenty two c has occur where there is no change to a partnership item or a partnership level which is how partnership items need to be treated under and no it does not have to be a change or are we suggesting there has to be a partnership item needs to be determined at which point so wait for instance again here where you have an f issue challenging certain partnership items in the context of a tougher perceiving this was a settlement which resulted in these particular partners being dismissed from the partnership proceeding because they no longer have an interest in it and that is what the it would seem to believe that this was that and would have made the intricacies of the definition of a computational adjustment go way back and that it seems to be mine my sense as well just to get to be overarching sort of how sports to work in this context is that you get one prepayment form in which to litigate your liability attributable to a partnership when you've exercised that and then entered into a settlement at which point there is no more issue as to that why ability to debate then test for it is designed so that you don't get a redundant pre payment form a partner level in which you effectively can't win to get anything in it undermines not just as a matter of clarification your honor does this include that that the court does adopt our view that just because an invalid assessment would be made under circumstances that you just described that they are not automatically  would not toll the statute of limitations so that that period would have continued to run now here these particular partners made payments and then subsequently sued for a refund we submit that  again if our computational adjustment argument if the court rules against this is so that the question then becomes whether they made payments within the statute of limitations period for assessments under sixty four  from the record as to whether these partners did but assuming the clearly did not that they made payments outside the statute of limitations period then they would be entitled to a refund of their arm outs and and here i believe that would be  to in our brief which is kind of makes the inverse argument as made by taxpayers here which is that there was a settlement and we issued a notice of the fish and see the government have issued a notice of deficiency and they claim no the government should have made haven't done things properly in this case and we think with the just to just to touch on the sixty to thirteen a issue  that's not provided for in the statute the statute does provide for a refund but a refund in the context of an injunction of action that is clearly stated in the way in which the statute which shows that sixty two thirteen a seventy four twenty two provides for that one of the the basic clearest most enduring reason for that is a few run on to it provides that an overpayment must be shown for a refund be authorised here at least the tax payers and all taxpayers in these situations must bring a queen for a refund and that refund require showing an overpayment never has been the payment here i see that my time has drawn almost to a close and settlements or any definitive that's based on this agreement that at risk is only one element of the taxpayers liability and that is a known partnership by a militant it shouldn't be treated any different than any other known or for ship item element which is why all these other agreed to that everything on their partnership return had to be accepted as reported just just as the tax payers couldn't go in for the challenge and neither could the government as to the impact of this on future litigation you're government's own manuals for their people tell them that if there is a settlement of a non partnership item element of an affected item they need to issue a statutory notice or get a waiver and in this case the government simply didn't do it and in fact we refute the every risk was completely calculated correctly we would have numerous other factors that could be raised in a deficiency proceeding the deficiency proceeding addresses not one small adjustment as part but addresses your entire tax liability and it is it doesn't matter when they could have agreed that the amount at risk is x that still by virtue of  but still is nowhere near an agreement to what the tax liability of the partner might be he might not even have a tax liability  a comparison was made to partial list once of the abduction couldn't have had some effect no it wouldn't partial by allowing by adjusting only the amount risk those deductions were preserved they couldn't be taken in the first year but those deductions are simply suspended and are allowed to be used against later your income so it is completely different like your thank you that co