there's a statute section sixty seven fifty one requires the secretary of treasury of the commissioner to follow certain procedures this is a recent development started perhaps the end of two thousand and seventeen in which the courts have been enforc the mandatory i mean acquirement for assertion of penalty that the revenue agent initiate the penalty that the penalty initiation elements of the case so not a recipe if you don't do that under section sixty seven fifty one the way i read it you're not entitle to assess a penalty well part of the united way element the fact that the statute says no penalty shall be assessed while that argument is that that no statutory requirement can be stipulated away which is absurd i don't faced with a partnership under defra separate us stiction is limited partnership issues not not partner one month of start up a business at the end of two thousand and three this case deals with two thousand and four and two thousand and five but and went to work were superior trading is quite relevant in my mind is because it's an opinion is distinguishing is that this time around there's a trust right there in place whereas there was not before you just have this you just had the partnership ok your honor we can we can deal with that is that is that that is that  important distinction ok and why is it important in your judgment has the two thousand four statute which one did the parking structure which was founded in purposes is the local currency price plus times the exchange rate so that everything is measured in dollars and  shams in the trust the investor put money into a main trust very name then should rule put assets into that trust namely  level but the partner's financial interests are substantially implicated are they not well the you're absolutely correct it's a tax and penalties are determined at the partnership level and it was made open to all interested know i don't i just don't see the conflict because everybody was represented by counsel that would be you know you don't every investor in this transaction who helped with the case trying t from anyone anyone who might represented i got a waiver of conflict of interest so that i was conscious of the not i couldn't get a waiver from folks who didn't want to have me involved in their affairs and they had their own lawyers several people intervene so i mean we're in a situation here where sugarloaf had no money and i volunteered to take on this responsibility and to do it correctly good morning your honor said my name is a list from the united states department of justice tax division on behalf of the commissioner on internal revenue do you have a few on the conflict of interest question your honor i do not have a view on the conflict of interest question and i believe i may have some clarification to that that would be helpful thank you york this case involves multiple consolidated cases in the tax court the commissioner of internal revenue issued after final partnership administrative adjustments to the loaf which is the overarching partnership through which most of this transaction transpired as well as multiple partnerships which were the entities that were sold to mr rogers investors through which the investor sought to realize the losses that were generated from the transfer of the brazilian retailers receivables there were also notices of to be issued in respect of the trust transactions which were issued for example to the rogers and to a few other individual investors are those transaction these generalized purposes of determining the overarching propriety of the structure as well as the taking of the section one sixty six adoptions alternately by the us based tax payers honor i'm not sure that it would be appropriate for me as government counsel to speak to the propriety of mr rogers representing the entity versus also representing himself  but as i sit here listening to the court's questioning i am trying to process in my mind when the court speaks about the investors these are individual u s taxpayers who purchased the lower tier partnerships and it is my understanding that in the tax court they in fact did each have their own attorneys representing them in the the proceedings that they initiated in tax court so so nothing that happens on court was asking that big now become part of the only thing that's at issue in this case the the sugarloaf tax return adjustments the point that mr rogers made regarding the jurisdiction over the rogers proceeding in the tax court i think is also not probably a question that's present in this appeal whether the tax court was properly exercising jurisdiction over the rogers personal dispute with the commissioners is not an issue in not simply stipulate that the penalties should apply or simply stipulate that they will not argue about the penalties but the stipulation is very wise the parties stipulate that the commission are properly up teams approval for the penalties and that is exactly what mr rogers is now i don't i don't use parul any and all that the commissioner probably obtained approval for the penalties under our c section six six six two for two thousand and four and two thousand and five now the rest hold for whether it's a twenty percent penalty or a forty percent penalty so i would submit that six to eight is where the penalty arises and certainly that stipulation is sufficient to me to say that the commissioner of st proper approval for that penalty now there's another issue here which is the question whether the commissioner bore the burden of production with respect to the penalty approvals and in this case which is a partnership proceeding the statute on which mr rogers your lies does not pertain to realize primarily on internal revenue code section seventy four ninety one speak which places the burden on the commissioner proceeding with respect to the liability of any individual for any penalty it is a proceeding regarding the ability of penalty to act the partnership level and so the statute on which mr rogers realized to place the burden of production on the commissioner with respect to the penalty approval issue doesn't pertain in this proceeding and so i think taking those two things apart  nevertheless that would not be a basis for invalidating the tax courts upholding of the penalties here because the commissioner didn't bear the burden in this proceeding of of coming forward in the way that it would have in the case of far too late in the process and when it did the parties stipulated the su away and so i think that that resolved that that issue now getting more to the substance the lower level entities doesn't really matter here in the two thousand and three time period which was the period trading case and in early two thousand and four the brazilian receivables were purportedly passed through and bulls as a partnership contribution into warwick but rather that they had sold those receivables and that is exactly the same conclusion that the tax court true in this case with respect to sugar loaf and so with the excuse that invalidate d the structure in the superior trading case are the same issues that invalidate the structure here whether or not the lower tier entities were partnerships or the lower tier acted or trusts those problems exist in this case on all forces so what you're saying the fact that the two cases have different mechanisms to distribute the losses to be the holders of the partnership interest makes no difference at all when you don't have a bona fide partnership to begin with resealable were transferred from sugarloaf down into the trust those transactions were not contributions to the trust assets they with sales were disguised sales of those receivables and so they would fail at that level as well but none of that is before the court today the only questions are whether sugarloaf itself was a valid partnership for federal income tax purposes it wasn't or alternatively whether it was of our partnership whether these brazilian retailers contributed assets for which the bases should be carried into the partnership or whether they sold those assets too slow in which case the basis should only be a cost figure and if the tax court found here there's no