forty x filed by each man with respect to their two thousand and four tax years the refunds are running as from two different perspectives from the point of view of tax partnership procedure there erroneous because the refunds request on the forms ten forty x are inconsistent with the tax treatment reported on the original return filed by the partnership the odyssey partnership in which both men were partners from the other point of view on the merits point of view the reasons are erroneous because the original partnership reporting was correct the partnership reported a large sum of money as ordinary income it received that income pursuant cut to contacts that characterize it as a service income for services rendered and that should probably properly be reported as ordinary income as a result the case  focused on the i r s his response to if amended form ten sixty five that the odyssey partnership filed in an attempt to change its tax five clearly states that that form eight zero eight to a drought of the instructions clearly states that the form eight zero eight two is the proper form for this purpose is it your position that the instructions in form ten sixty five and eight eighty t but they don't require anything of the read struction it's legally required legally required the regulation requires that it be filed on the proper form the instructions say that the proper form is the  ok do you believe that the code or the regulations require a certain procedure for amending a partnership item on the partnership return for example do you believe that it says if you want to him into partnership item you must use an a are the tough statutes include proceedings for include provisions explaining how a partnership or an individual partner can permissive is there but are they permissive in an additional way does it require you to use an a and does the code or the or do the regulations require you to use an a r to accomplish this amending of the partnership or are you free to not use the area are you need to use an a and if you need to make an administrative adjustment request in order to get an administrative adjustment of the partnership item can you help me where tell me where i get requires that as opposed to says that if you do that you may use  statute says that the reporting on the partnership return controls unless there is an administrative adjustment then there are procedures for getting administrative adjustments now i understand the point you're making about the permissive language i think that's because the at no one is ever required to request an administrative adjustment the if people were permitted to request administrative adjustments outside of the procedures used by that tetra give specific times during which if the administrative adjustment house request has to be filed within a certain period of time and things like that if people were lied to go around those provisions that are included if the people don't follow these procedures but i'm asking you is there any specific requirement to follow these procedures that makes the following of these procedures mandatory in neither the code or the regulations about the partnership types treatment can only be adjusted by an administrative adjustment the i r s can only make an administrative adjustment after initiating a partnership proceeding can't get an administrative adjustment unless there's either a partnership proceeding or you request it it would not be in the interest of most taxpayers most of the time if the and if the i r s could just go around does that regulation require a partnership to far file in a are to change the characterization of a partnership item or does that mean regulation merely apply once an l r is filed that requires the partnership to file an a on order to obtain an adjustment unless there's a that in that indeed in sixteen see a far three zero one point six two to seventy well i think it the district what's your understanding of how the district court ruled that the district court either said the district court to be saying sort of intention of the argument but not necessarily completely than a or isn't necessary if you substantially comply and i don't think that's not really debatable right with the case law that we've got right and that but it sort of also suggests substantial compliance implies that a is needed or some is that a fair statement requires something that is in substantial compliance and what did you understand the district court to say did say substantial compliance was met that it's a substantial compliance not needed because a to they do they shed light on this threshold question as to whether or not there's a mandate to file and they are in the first place the answer can be we should read them because you haven't thought of it if question whether the documents filed which were not the forms it's a relate to were answered substantial compliance with those requirements was in this record was the argument made below that you don't need to comply at all or was that was it accepted a united states has the right to sue on the various rethought and these reasons are running us because they were inconsistent with the partnership reporting and because they are  because they were originally part of a reporting was the correct partnership part of the dischord seemed a little just upset atmospherically when i read the hearing saying it seemed to him that your argument was heads we win tails you lose and connected to that would be but correct me if i'm wrong that even if you prevail all the partners in odyssey cannot anymore be treated similarly that it's correct and moreover their assertion is that now they are prejudiced because they can't refile because the statute of limitations would you speak to that issue i've don't believe the prejudice they're alleging is that we're not able to reach the merits of the issue here well but you're in agreement on that jurisdictional point they're saying that if you do prevail on the procedural question they can't now give the information that you claim they didn't give before right is not what they're saying like let's say they want to explain why they could have given that information in the original return but you accepted it so they would have thought why should we i mean they gave the k one in your examiner said this looks good here's your refund you know i mean the original return filed in two thousand and five the one that reported this is ordinary income there's no reason they couldn't have made this claim originally on battery time but they didn't think they did it gains so then they come back and they say no it should have been treated differently the examiner says yes but you got out now the argument from the i r s is well that's a nullity there's really no pro tunc and they're saying well if you win on that argument can we now give the information to show we were a that says it's ministerial and that's billups and barnett but i'm just saying what about this and could you answer whether or not they would now still they would be too late they tried that they could sell when the i was to issue response to some but not all of the partners they could have brought a suit under sixty two twenty eight another part of tougher to make the i r s open a proceeding regarding the brother to come into court and challenge on the merits their attempted administrative adjustment has been filing new form that's what i'm giving you the information that's correct on the other hand they also in this case the district court looked at the merits of the issue so it's it was procedure for amending a partnership return is there any other provision in the internal revenue code that would allow the partner to amanda's return to  forty x explains that they were inconsistent with the original partnership return and why those would have constituted partner level administrative adjustment requests and but other than following the partnership returns are informational but talks so partnerships do file amended forms time sixty five montage partnerships partnerships that are not governed by  out there's no other person that might be and vote either either a partnership should be attempting to change a partnership either be attempting to change partnership level treatment or in his individual case if he's in conflict with the partnership do it in his and outside of those two cases there's there's no administrative thing that could be adjusted that wanted to have the same treatment the first set of people add and now they're because of the government's dilatory actions they're going to be treated differently well but they will be treated the same as rigorous who did not get may please the court for so i'm thinking of how i can add to the discussion here one issue that wasn't touched on and of course if there's a direction you all want to move me in please do so is the partnership i had an issue and that is that in order for the government to prevail in an erroneous refund suit they have to prove it the burden is on them that odyssey did not affect the change in reporting their twenty million dollars of income from ordinary income to capital gains and to establish this element it requires this court or the lower court to decide whether or not a partner to decide a partnership i had an in a partner level proceeding which cha prohibits and just to just to hone in on the point that we're dealing with a partnership i had in here the leading case in this area as we enter and good davis was was on that panel on the tax payer their claims that the refund that he was entitled to a refund after paying a partner level assessment based on a flow through item from a partnership in the grounds for a refund was a partnership statute had expired and so the court wiener decided that that partnership statute question was a partnership item focused on three features the first one is that it dealt with facts specific to the partnership now that's even more so here then was the case in winner for before we get to issue two can we focus on issue one and in here's your the procedural posture are you act recommending that we affirm because your clients gave sufficient information to be there are at least three independent ground what's your primary ground for affirming is that the reasoning of the district court is that any of the three i just listed what's your favorite ground yeah so i don't know that we have a favorite but we think the partnership i had an issue would preclude the necessity i guess any one of the issues would preclude the necessity of the other issues but if this is a partnership item then it would be appropriate i think not to reach the substantial compliance issue because that issue does involve piercing through and looking at what has to core did say substantial compliance per correct your that was its holding correct so so the district court did not reach the partnership item issue and it was also that he also decide the case before regus so i didn't have the bell is that correct as i looked at the record you he was given rigorous it was brief to him and then he waited three years before making his ruling is that wrong you say he didn't have the benefit of that's the case i think i stand corrected ok in my view if this is a partnership i had and it would be appropriate not to delve into what what filings remain at the partnership level what did the irish do at the partnership level if you weren't disputing sort of the philips burnette buying of authority that if the if the i r s commendably quickly refunds money accepting whatever the taxpayer says the loss quite clear that they can come back and correct it if it turns out that wrong you are challenging that line of authority are you so we're not challenging that the i r s was in the statute of limitations can come back on substantive grounds within two years and that was barely met here  substantive grounds and say you are not entitled to the refund because of the underlying merits of the case but that's different than saying regardless of whether the taxpayers claim was was absolutely  taxpayer was indisputably entitle to the refund we can still come back and say there was a foot fault in in the paperwork that was filed and now it's too late to come back and correct putting aside the indisputably correct because that does get into jurisdictional questions at you one that below whether or not this should be ordinary or capital gains maybe my focus is the football their claim is that you've got to use and they are and that requires an eighty two form then if you have benefit of regus i read that to say well you can also substantially comply and that's what i thought the district court said here so i'm asking you is that a correct description of the distiller told ng and is that the ruling that you're urging to us that is one of several turn arounds that we're doing to the court for an end but i agree that the the district court decided that there was substantial compliance and there was substantial compliance with one of the way one what was different about the information that your clients gave them the information mr reagan skate that wasn't substantial compliance according to judge ellison well the the issues over some of the issues overlap but they're not same issues so so the three issues that we've presented to the court are substantial compliance on the form ten sixty five that was not at issue regus involved a form ten forty x it was a partner level farland it was not a partnership level filing and then the court in ri gets the this court in regus let's assume there's not even when they are in eighty eighty two what's the information you gave them just to record cite as to why you wanted to change the characterization what explanation did your client give them to say oh it's not ordinary income it's capital gains just the record cite for that if you can describe what did you tell them was the reason you were changing so so the record site so that the so the ten so the ten sixty five on its face explains it and the record site for that is six forty nine is the schedule d has them which has part of the information but the entire return starts at six forty four and in a nutshell what reason that it was supposed that you were saying it should be changed to ordinary company just sure so that the content of that schedule d explains that the reason the partnership is moving from twenty five to twenty million dollars from ordinary income to capital gain is because on april first two thousand and four odyssey had a disposition of a capital asset that it had purchased on march seventh two thousand and three and for which it received twenty million four hundred thirty two thousand three hundred twenty three dollars resulting in long term capital gain because the asset was held for more than one year and was capital in nature isn't that exactly what is it expressly prohibits even looking at that because that is a partner that is a partnership item that is a partnership level issue and so i don't think i don't think regan speaks to it at all  income tax return his form ten forty x and whether or not that would constitute an a r and that did not contain the language that i am now reading that did not contain the schedule d that odyssey's the partnership level schedule d contains and you know and i and on top and top of that isn't applicable because it's not dealing with the individual's part it's dealing with an actual partnership of which that there is no jurisdiction strips jurisdiction under seven four two two a yes so so so rigorous on the partnership item issue i think that's a an issue in common with this case but in turn on the substantial compliance or a our issue it's a different issue because his because the regus case involved ten forty x this case involves a ten sixty five and the ten sixty five is the partnership level  in this case the ten sixty five it did contain the same information that in eighty two would call for me to have it was a power of them at the location it was supposed to be yes so judged they're actually there so there are three express requirements in the regulations one is that it's filed in the correct office it was it met those express requirements about the detail and the details so i just i just recommit narrative of the information contained on schedule d  that is i think we think easily sufficient to meet that detail requirement i mean just to put it into context most most tax return items there are just numbers on a return so for example if odyssey had an ink had increased there a deduction for renting drilling equipment that would have just showed up in the in one number under runs on the return no other explanation because this involve schedule d the schedule d already has built in more of an explanation the most return items would would so in the wrens kate you know in the case of increase rents somewhere on the return there would have to be some more detail whether it's on an eighty  two or somewhat some attachment but when you have a schedule d item like this and one is reported in detail the way it was you already have a sufficient explanation that was the gist w compliance correct if if you didn't have to substantially comply because aid for radiated to isn't required and is required what would be where would we look to know what is required is this is and is that an argument you're making that is something less than that so your honor i don't think the court needs to reach the issue but a an amended partnership return should satisfy to amend the partnership position so once they accepted the amended return that was that's it correct or not in the stop a theory that's just enough correct correct and we think and we think the summary judgment evidence is in despite the speed on this point we have missed mislaying is deposition testimony and there were there were a number of virus people involved the i r s if they had countervailing summary judgment evidence they could it was perhaps not an affidavit from one of them they on and then this it's my fault that i'm we started off down that probably because i ask questions under this this way we've got to gotten on this well you don't even think we should rule in that way right now i think we should rule that it was compliant or do you think we should what ruling i think judge davis asked you this several times how would you want us to rule what is your your best position that you think is  so your honor i really think there are some there there are alternative strong arguments and out and but i'm just suggesting if if i were the decision maker i would start with the partnership i had an issue i think it's i finding as to what happened we can't even make a finding on substantial compliance because this is a partnership item under wiener under regus that we like jurisdiction and i thought about it i'm not sure if it's a jurisdictional argument or not or let me ask you this so regardless of how little information the partnership amended return have at this and as we stand in this case we can even look at that to see if it complied with let's say that if the partnership amended return did not have the information call far by the statute and by a regulation you send nevertheless and this partnership return case i started to talk to this to explain to describe the way this involved of the partnership the statute of limitations it was a part of the level proceeding and the court said basically relied on three things one it deals with facts specific to the partnership a just as we do here to the determination effect of the partnership as a whole that's the same here we're talking about a conversion of capital gain to capital gain which would affect the whole partnership and it would affect the amount timing or character of income and that's exactly what we're talking about we're talking about changing the character from ordinary income to capital gain so we enter supports that this is a partnership item and then regus followed reckon if the in reading the opinion this is expressed as the adjustment theory in the case it's the for size issue we're talking about it's whether or not determining if odyssey converted the twenty million dollars from ordinary income to capital gains whether that's a partnership item the government argued in in regus that it is a partnership item they prevailed and that poured regus out procedur lly the posture is flipped now and the government's on the opposite side of the issue and now they're arguing they all make this argument to judge hughes but he just overlook this poor out theory that if they keep the reached at partnership level milan and whether or not that changed that the treatment of the partnership's income from ordinary income to capital gains go on so you your argument is really a partnership amended eighty two and that we believe in eighty eighty two is is not you know is not strictly required and which one is it what it what if it is strictly required you say and do that it was substantially  compliant anyway correct yes the third case was irvine and irvine irvine is consistent there are actually a couple of issues but the one that's consistent with with our issue is there was also a statute of limitation that issued included that would have required the review of the partnership statute a limitation and actually involve the interplay between the partner statute in the partnership statute and the court chairman's that requires us to pierce down look at what happened in the partnership can't do that  partnership item and the taxpayer lost there as well and all those because the taxpayer was the one who brought suit and claim the refund it worked to pour out the taxpayer here because the shoes on the other foot  it has the opposite effect you're saying we can't look at the partnership return and see if it comply with substantially comply with to have the judge what i'm suggesting is that it would be consistent with this court's precedent in that trilogy of cases to decide not to reach the issue of substantial compliance and just decide this issue on the partnership item so we could decide the case in partnership we could then come back later and claim there was some foot fault after the time has already expired to go back and amend it and the angus milling case the government sites on waiver is it's not on point but it but makes but it highlights an important point there the supreme court stated that dead just investigation of the commissioner just a just performs an investigation on an informal claim that doesn't waive the commissioner's right to then come back and say you know what we actually think the interim a plane was defective we're denying it but here it's different here it's not just an investigation it's an actual acceptance of the claim a payout of the claim we rule in this court is that while a court cannot reach through and decide a partnership issue in the first instance it can certainly look at the outcome of the previous partnership proceeding those cases are also distinguish argument that we shouldn't even look at the partnership return amended return i think that that issue i think that that argument was rejected by this court in irvine that when the court said of course we can look at whether an issue was decided at the partnership level and i think also that in really get this the court looked to the quality of the documents that were alleged to be  that were arguably a r's the court records did not look at the ten sixty five because there was a statute of limitations issue brought suit more i believe it was more than two years after the time sixty five was initially filed the amended time sixty five and so the no matter and that really this was complete capital gains and there's a homo section on that and what can you address that i think that the argument by the district court that holding by the district court is flat inconsistent with the danielson rule that applies in this court that says that the parties are bound by the terms that the way they choose to structure their contracts and the terms they used to define them i also think judge allison in the regus case did a detailed analysis of all the facts and stances of those and in the absence of time to go through them all i think that she laid out the reasons that this appeared to be a service and relationship and not a joint ownership or an umbrella partnership type situation most important from our point of view of course is that the parties did not hold themselves out to the i r s as a partnership at the time that we could have investigated at at the level of that she did have one would you be looking for in this case in this case we'd be looking for a good explanation of why they decided that this income was no longer they believed it was not ordinary income and was instead capital ga s opposing counsel said that the numbers on the return will change but here the numbers didn't actually change they just moved from one place to another and you don't show much emotion for why they now created over to have an asset rather than exactly why why why do they now believe it is different from what it is what it was before if you look at the four made zero eight to half of that form is a blank space for explanation and that's what's missing here on the ten sixty five and also what was missing on the ten