the liability of the taxpayer pursuant to the judgment is less than the taxpayer's monetary offer in the intercom toad's we generally review attorneys fees and cost orders for abuse of discretion but we review prevailing party determinations to know that defers from our sibling circuits who don't make that distinction should we review to know vote certainly on the legal issues it isn't quite the same as a prevailing party under each of course because it involves a specialized rule that applies only in tax cases and we submit that the court of federal claims here error in applying that rule we if you don't mind because the clock is running i'd like to skip over that and get to then the net worth issue arises so let's assume we're past that ok and we're onto the issue of whether or not the partnership is a real party in yes and then whose net worth that we determining i'm a little confused by the network simply because the regulation that everybody seems to be talking about didn't go into effect till twenty six right yes yes  sixteen regulation ok so why are we all talking relying on that since it wasn't a factor and was not in effect during the operative period well i don't think it's it was not our primary contention rely on the regulation but it in any event our contention regarding this issue of net worth and who's a who is a party is simply that the a s r is a partnership was not a party and cannot be a party under test for us and that's just under the laws of the way temporal works so let's assume we think it can be a what one means because the partnership is not going to be liable for income tax at the end of the day or you're back to the first issue which i tried to lie abt talking about the net worth in whose net worth is operative in terms of the super fun figuring out whether or not they're entitled to reimbursement from th so if we were to conclude that the a s r is a real party in the interest is there another argument you have of that we should nice not just be including their net worth but also go down and look at the partner's net wor yes i mean that the regulation which as you point as effective march one so it wasn't just to look at both but in march one twenty sixteen which was after the yes case it doesn't apply to the scale of say so what what beyond what you point to that we should look assuming again that we found that yes they are is the real part in interest what beyond the net worth we quire mintz with regard to that the party do we look at partner with to go to the partnership to well it would be the fact that the other partners are parties to the proceedings and you had the the roof on the d c circuit the unification church case which says that essentially you have to look at if if there are parties to the case  party with the church right yes and then there were a bunch of individuals that were feel comfortable but right the facts are vacuous it was pretty clear that the church fee in eligible church was the one that was responsible for an obligated to cover all the attorney's fees in this case as i understand it it's the fee eligible partnership that per the partnership agreement is obligated to cover the attorney's fees or is responsible for the attorney's fees and so the the fi in eligible partners to the case that they are parties there that they have a flipped relationship compared to the parties involved in the unification church so that's why i'm trying to figure out whether that case really has some kind of persuasive effect here we don't agree that the partnership really was responsible for the fees notwithstanding what the partnership agreement says because there's little italy so let's assume for the moment we find that the partnership agreement puts the obligation on the partnership itself and then would there be a break between the facts of this case and the facts of unification church for the reasons i gave earlier no it was the partners individually who paid the fees in this case the agreement between the law firm the law firm didn't sign of a retainer or a relationship with the partnership the retainer agreement was with the individual partners individual partners in the billing records are all in the record here partnership doesn't have any assets they stipulated that the partnership well it filed its final return for the ninety nine tax year back in two thousand this audit didn't begin until two thousand and six they agreed at some point in the briefing in the court of federal claims that the partnership was not and not a going concern anymore and that it had no it had zero assets so this partnership essentially wrapped up its operations my question is in order to reimburse the other partners have to and effect demand from the partners that they paid the market money to the partnership so it could repay it to the to the partners it would be an assessment it yes would be sort of circular they would have to get the party she would have to get the money from the park right creates it's confusing but what we're trying to figure out is whether the partnership itself should be regarded as a legal entity that you know it's not something that's so morphed into the individual partner's itself it doesn't really exist in any meaningful way when the law the asli contemplates that there is the existence of this separate thing called the partnership partnership has a separate existence and for tax purposes that would be relevant in certain kinds of cases but not in an income tax case because it's a pastor entity for income tax if i could give the example that i think a lot of people are familiar with which is a law f tax from their salaries paying social security tax on their behalf and paying that over to the i r s just like any business what the partnership as a business entity just as if it were a corporation in those kind of cases a partnership certainly could be a party to determining income tax liability the partnership does pay income tax it's only the partners that are going to pay that tax and as the supreme court laid out in words and this court of course has a number of decisions explaining this we conduct an inquiry into steps taffer there's a partnership level proceeding to determine partnership items but it doesn't determine liability and then we supposed to do about section two four one two which clearly contemplates that the prevailing temper case might sample a minute ago of employment tax dispute for example the partnership could be the prevailing party in that case what worries me is where do we find in the stature whether it's twenty four twelve or seventy four thirty or anywhere that says ok but you know we were ratcheting back what of the ability of partnerships and these specific kind of proceedings to be of prevailing party well it goes back to whether it is a party at all to the proceeding and under test for the partnership is not a party what about under the factor of the government was not substantially position with a partnership be able to be prevailing party in that circumstance in a tougher proceeding no the partnership still would not be the right entity to be looking at in underlying litigation b s a s r was a part right it was not actually the litigation was brought by the tax matters partner and others under sixty two twenty six can you explain then how  jibes with your first argument which is that the liability with respect to the partners there is no tax liability at issue here yes this was a test for a partnership level proceeding under sixty two twenty six as you say only by the partners they were the only party correct the tax matters partner brings it every other partner is deemed to be a party to the case that sixty two twenty six c so they are the partners it concerns the partnership  say are the parties because they have the ultimate interest because the determinations will result in either a tax liability or no tax liability in a certain level of proceedings yes there would be this the second level of proceedings which is that and those are automatically flows from the first level so that's the distinction between your mate you're making with respect to whether it's an issue because even though it automatically flows that liability that moment of issue automatically flows from whatever is done in the first proceeding that is not at issue in the don't imagine they don't all have equal shares some partners are sort of bigger shareholders and others are smaller share him but if you have a bucket who cares which partners are getting what amount there's a bucket and the amount in that bucket at or odor or not is automatically the result of what is determined at the partnership level right in this proceeding this f p a proceeding but the amount the monetary that it has you shaking your head i could i'm i'm not quite sure what the question is at it's not a monetary amount at the partnership level because it's a liability determination right not necessarily why someone would want a complex well it's a determination of what a partnership item is but how that effects the actual tax liability depends on the system the position of the different partners in terms of the amount of share or ownership they have in the world ok that's pretty automatic i mean that's a given that's just a calculation right it's complicated is that maybe it's still just a calculate but it may affect their tax liability differently depending on what that city what that item is it's being determined at the partnership level in other words how it affects an individual partner's losses or gains for the year because they have individual tax situation separate from their stage of these tougher proceedings you're saying that sometimes these partnership item determinations can be very complicated and maybe it's very murky as to how they impacted individual partners but i would imagine there's other times that the partnership level of these these determinations are fairly clear cut and how they're going to impact the individual partners so i guess what i'm saying is maybe it's not a one size fits all thing in fact that unlike the one we have in front of us here it's pretty straightforward in terms of understanding and evaluating what the impact is going to be on the individual parties one way or another on how the partnership item is assessed and if i can respond to that our position is simply that the rule does have to be a general rule of general of playability and we have to remember too that this is not the only way for specialized rule that applies only in a subcategory of tax cases in which monetary liability is directly at issue partnerships or are partners in a case like this are certainly free to bring a claim under the apply here but that regulation talks about that now with calculations for the partnership in terms of recovering the us yes the break elation seems to say that the that and make a determination one has to look at the network of the partnership and of the partners who are actually fin fees nothing in this refers to the partnership requesting fees but let's look at little i i know you want to look at little double liability and then little by little the single idea is all about the partnership right that is correct but  yes exactly that's that's exactly right that one has to look at both the partnership as an entity and the partners but it doesn't change the fact that the partners are the ones who are parties to the proceeding and the part of the individuals who would be that i mean you're not government isn't disputing that literally applying the statutory language that's what we're left with notwithstanding that made that may be inconsistent with what the intent was we're not disputing obviously that that's the plain language of the statute we have couched that in terms of the statute does give the court discretion and we realize this is obviously a tough hill to climb but we submit that on the facts of a case like this it is an abuse of discretion to award fees for a one dollar offer in a case where the government's position obviously was serious and substantial and indeed was supported by precedent before brought the appeal we didn't prevail but we certainly had a reasonable argument here and these rules are no longer operative know requests for fees would b control a given the speed at which litigation brews i expect we're going to be seeing tougher cases for many years to come so it's true that at some point it will stop not having precedential impact in test for us but i think there's a lot of cases in the pipeline and of course if this rule would apply general at least as to our first argument as to any case in which the amount of tax liability is not an issue tepper is an example of that the statute so what the government can they can be and they could be hypothetical instances where they are but why does that mean that necessarily in this case in the circumstances in this case they were party it was a party because the suit was brought on behalf of beer stars it would be in any tougher case you bring the suit on behalf of the cover partnership the whole point of the case was to determine whether the i r s adjustments to be are b s artist tax returns were appropriate or not it was a tax case all about b s ours partnership return so of course it was a party it's also a party because of the legislative history that was mentioned by my colleague you know i think that makes it clear that congress at least intended for partnerships to be parties and what the connection give me more well the way kaffir works is that the first level is as the government explained is at the first level of the partnership level proceeding you determine all of the partnerships partnership item and whether a partnership can be a party in that case i'm talking about for purposes of section seventy four thirty i'm not talking about for purposes of section sixty three twenty six which is what the government relies on and as to the legislative history the house record explains in  seven that the net worth provision in section seventy four thirty applies to partnerships in test for partnership cases and makes that clear says any case involving section sixty two twenty six that net worth requirement applies and the government just six to ignore that legislative history and it says you know it's out of time it's ten years after the statute was inactive but that's not quite true that legislative fishery accompanied in one thousand nine hundred seven changed to section seventy four thirty that clarified the network's requirements and how that would apply in certain circumstances and to read that the next section of sense of the house report which neither party quoted of their briefs congress went on the sale of the networks requirements are explicit for individuals corporations and partnerships it's not clear which network requirements to apply to other potential litigants so congress believed that the net worth requirement was clear as it applied partnerships and they explained in that house report that it applies to partnerships in a case involving the tougher partnership section sixty two twenty sets the government cannot reconcile its position with with the house report at all so they just say we should ignore so we think that you know the court talked about the regulations to to the extent that the regulations apply we think that they also make clear that a partnership can be a is a party unit have a partnership because they apply a net worth test to the partnership with this would be us our partners individually individually met the net worth requirement it did not pass on that question doing need to remand for that purpose i don't think so because i said there are affidavits in the record that accompany the initial feeling motion in the supplement to  your view that in the process in the case we have before us you have to satisfy both the partnership net worth level and the net worth of every partner no no i think of them are you arguing i mean you argued in your briefing you're arguing here held open because of facts you need to the particular parts i spoke a little quickly while i was thinking when you said well it's because it's the partnership that's the one that's asking for the fees but can we so quickly separate out who is really the requester of the fees because let's face facts you know who are going to be the beneficiaries of receiving any fees well it's ultimately going to be to the partners that cover the costs of the turn is feels right trigger and i think the statute so why why i guess so that's why i'm confused why we can so quickly deem the party of the multiple parties in the case as being the request of the fees to be just this entity called the partnership and not of the other parties who are also in the case the partners i think the qualified offer  accepted a qualified offer of the party so the session starts off talking about a partner in that that can cut two ways you're making an assumption and the assumption is that when it when it uses the first phrase if  part of and then reversed the tax payer that well then obviously that includes the partnership but the other way to look at it is to say obviously it doesn't include a partnership under to have and they're making  for their partners and still a partnership can be a party and then you have the qualified offer provision added a year later and they're making a distinction obviously the between party and taxpayers unless you want to reporting tax payers interchangeabl automatically to the partner that paid for the attorney fees who who is the check written to i think technically be written to be a s r and b star be obligated to reimburse the partners that pay the fees and what if  because the other son structure was absent no assets the son was destitute so that you know all that they did is they pay their share of the fees that they were required to pay by the partnership agreement so they performed didn't but i thought the partnership agreement we were talking a few minutes ago requires that the partnership indemnify three not the indemnify these right but we are all recognize the thought of possibility here well so what they could have done is they could have had the partnership go after each of the partners to recover and share the feeds and apply to indemnification for the partner who is managing member i think that as we pointed out our brief there's also a question under texas state law i think texas statutory law governs over any limitations and in indemnification the partnership agreement itself so i think b a s r was obligated to reimburse the other partners technically they could have gone b s r could have gone and sued for those fees to redistribute to the partners who paid them but it didn't need to persuade they did it on their own was no or those trust fund and they were funded initially with the sell the stock from the printing business so that was that was done through the family credit and but it was a trust that was apparently not a spendthrift of of any store correct credit and so one of the trust contributed it did what ought effectively they got the only release that they could have gotten if they'd gone to court and tried to make the parties perform under the under the  the partnership agreement got back to the qualified offers that she talks about the taxpayer giving the qualifying offer is the partnership a tax payer now so then it has to be has to be a partner that is the one that's giving you the qualified offer not not bad is that right no you're out of it again the statute says a just directly in conflict with the statute which recognizes that you agreed with it when i asked you that question before then i'm sorry i missed both but i think the statute is very clear that partnerships can be bargained expressly makes that  the net worth provision that says that a partnership can be a party the legislative history in one thousand nine hundred seven could not be more clearly written that a partnership is a party and you test the networks of the party including in a cover partnership or see exactly like taxpayer correct and the it again the statute says a party to a court proceeding we did a network requirement so that we have sar shall be treated as the prevailing party if the liability of the taxpayer so it switches from talking about the prevailing party as a party that it talks about the liability of the taxpayer pursuant to the judgment in the proceeding is less than or equal to the liability of the taxpayer that would have been your taxpayer party doesn't need to be ok so censure so conversant with legislative history what was said in the ledge is free about the use of the word taxpayer as opposed to part of the time that i think that there's nothing that i could find a valid party and that's under the substantially justified provision and the government mainly argues that we waive that by not raising and below and that they make a mistake of law in the reply brief that i just want to point out as to whose burden this really was that there's nothing in section and rule fifty four section seventy four thirty that required p s r to assert anything more than it did which is it said in its be application worth were prevailing party we invoke section seventy four thirty and the government says well you had to argue that you should stand as you that the government's position was essential justified it and that's wrong the government claims on page twenty eight of his reply brief that twenty eight u s c twenty four twelve the one b required b s are specifying a sphere of occasion that that it was a prevailing party and that the government's position was not substantially justify it and that's not right seventy four thirty expressly states that to be a prevailing party you only need to comply with the first sentence of twenty four twelve twenty one it's actually the second sentence of twenty four d one twelve that says that you have to do the leg even if there was no waiver you'd have to have to re ma sleep discretion it's more of a gray area but nothing in that we should not be penalized by attaching a brief to our fee application that goes above and beyond what will fifty four required and in fact to begin with this with my friends last point regarding substantial justification i would just point to the the application itself which is in the appendix at page one hundred forty one it lists the requirements that a taxpayer has to show and  taxpayer need not show the first two requirements however if as b s started in this case it made a qualified offer and then the rest would proceed to argue a qualified offer so we would submit they really did not preserve this argument or one might almost say l of federal claims by asking it to focus on that the government certainly did not attempt to show that it substantially prevailed because there was no need for us to do so we were not under the impression so when the case was about i'm sorry if we're getting ourselves but what do you currently government is disputed whether that son's gift trust satisfies the network's requirement in the court of federal claims made no findings on that point so we would say at most that case would have to be really mad for consideration at that point the court could not consider that ultimately does not award fees to the partnership the partners really are stuck with the bill in other words they have already paid the bill they're not going to be getting reimbursement from anybody because there are no assets unless the court gives them a field