the statute of limitations as a part of the settlement document itself both the decision below and the government's brief in multiple places misquote the waiver language so they can draw court's attention to that very gravely in the decision and in the briefs it is said that the waiver contained the language that the that the taxpayer offered to waive the restrictions on the assessment and collection of any deficiency attributable or to ship items and it ends with a period and close quote the whatever language in the document does not end at that point the sentence continues and it's apparent that it was shrek two interest as required by law close urban which is an point but also continues and says provided in section sixty two twenty five that waiver specifically waived the restrictions in sixty two twenty five a nothing else it was limited to that sixty two twenty five day only provides that the i r s may not make an assessment once the case has been  until there is a final resolution that is not the statute of limitations on assessment collection that waiver language by its very terms is restricted to that one issue it cannot be a waiver of the stage of limitations second very quick point the government alleges that there is a special six month statute of limitations for filing a refile claim and the court below accepted that analysis in neither case does it really focus on the fact that while the government goes on and says that our position is that we're saying that only applies to mathematical errors there's nothing in the section and the code says that the term isn't mathematical error but what it does say very explicitly is that the six month statute applies to claims on the grounds that the iris quote erroneous lea adjustment necessary or when usually computed means they made a mathematical or if it does not say that that statute applies to any claim adjustment was improperly applied only that it was a loop was erroneous like computed every of the court that is looked at that has rejected that argument the six month statute applies and is in fact one c refund case such as were brought in the game and again was appealed to this court the government i think on direction of the solicitor general withdrew the appeal mcgann has now become final no known court precedent against us on that one i understand that but under chevron you have to first look at whether or not the statute is on ambiguous and the stature defining what is a partnership item is absolutely clear there are three tests th have to be satisfied none of them are satisfied with regard to the statute of limitations on assessment you can say that it would make sense that it was a partnership i've given the perhaps it ought to be and that it ought to be in effect congress later came and so the statue of partnership i don't yes you're i'm sure use you read as i have of judge blocks analysis of the statutory language in his the fin which is not overly lengthy but quite detailed and terms of how a legal matters extra construction matter that if you understand and i don't think there's a lot of disagreement as to what congress is fine in chief asked to prom that the statute of limitations question would not be in some way shape or form really intended to centralize the decision of what adjustments should be made the partnership tax which are at a partnership generally is defined as those things that are on the partnership tax return but other things behind it have to go into it to determine those things that's reasonable what the statute of limitations is as to collection of a determined liability resulting from the adjustments is not determine partnership the actual term and in fact the simple hypothetical if i have a partner who did not file a tax return an individual or we do not file a tax return and he's got this huge deduction related to a partnership and twenty years later the government comes in and it is all in an auditing his return they want to adjust that they may issue a notice of final partnership administrative adjustments at the partnership level to make those adjustments because his statute is still open mettler porker not a single one they still have to go through the f bomb procedure the adjustments the partnership items are still valid except except the assessment statured r s assessment against most of the other partners or all the other orders now that's not i think at the fence this reasonably raised as part of the partnership what will proceeding subsequently congress has decided and included in the expansion of the jurisdiction the right to raise that defense that is what chris by the fact and no court no court that has looked at this has been willing to address this question sixty to twenty six so is that a party with respect to whom the statute of limitations for assessment has run may not participate in the tear for a level proceeding how are the statute of limitations defense at least in many respects it cannot be a partnership congress was trying to centralize certain types of determinations and as far as i'm concerned it relates to what was on that tax return and should be this is a this is not something relative that for briefly who make the note of the government in its brief and i think the court below somewhat disparage the taxpayers for raising the statute of limitations saying they want to second bite at the apple they want something that's too good to be true out of the i'm going to just remind the court that generally speaking in tax cases you don't look at equity you look at them just just look at the law equitable revisions rarely number two if that's somehow reprehensible for the taxpayer to raise a legitimate statute of limitations defense if it's not a partnership but how is that any more reprehensible of the government coming in here and saying the statute of limitations listening you know that clearly the fifth circuit looked squarely to exactly the same issue and where it was the same settlements out of the same partnerships or partnerships and i completely concur with that analysis on that issue her appeal of that case and in the cases related with dan we got a notice yesterday before yesterday from the government that they were the and in this case that position is reached by the lower court my finding of the excuse me that these were partial settlements that did not i submit that if there are not partial settlements then the question doesn't even rise you have to look at what the content of the f four was if you have both tacksman tax motivated transaction adjustment grounds and non t m t grounds then when you apply the formula there is no portion attributable to the tax motivated transaction where out the settlements are silent as to the ground dealing in the eleventh circuit has  recently said that you can't look won't once that it's been settled you can't go back and then require arise the nature of the that the item i also submit that it's illogical that you can settle an item make one set of adjustments it not state what the character is and then look at a case this decided four years later two to four years after this penalty interest has been assessed and say we're relying on the tax  decision that later occurred to hold that this was a sham transaction that makes no sense it's also clear that when the government solicited these consistent settlements they told the partners that it would end the litigation they filed formal reports with the tax court that says the partner has settled the partnership item subject to this  proceedings that requires a comprehensive settlement that's in fact that's a judicial emission of the made in the tax for proceedings to now come back and say oh gee we really meant for work to be a partial settlement and we're going to wait for a court decision years later to determine what the character was makes no sense furthermore it's evident that's not what they did they actually penalty interest immediately based upon they thought the settlement not only her determination of what the character was i would also argue that it makes no sense to say that i can convert and i don't know when you when you enter into a settlement regarding a partnership to make converts to a non partnership if you ask yourself what's the character that i don't what are you asking yourself you're asking yourself what's the character of this non partnership it's not a partnership item anymore it say we're going to defer the character determination until later so if we agree with you what is the relief that your request i believe that as to the stage limitations issue your honor the case should be remanded proceedings on the merits of our defenses as to sixty six twenty one c i think the court should first determine that we that the the claims court does have jurisdiction and then look at our motion for summary judgment everything was in the record necessary to rule on that motion for summary judgment to say that based on the eight seventy be aiding the settlement agreement the terms contained in the f b i it is clear that you cannot determine a specific ground for the adjustment therefore you must weigh all of the grounds in the f if you weigh all of the grounds in the f off and apply the formula just as the fifth circuit did it is impossible to determine that it is attributable to a tax motivated transaction regulation does in effect is to define what attributable to means and that regulation has the weight of law and it says you make a calculation taking into account all the grounds for adjustment and then make a calculation apply only the t m t grow and the difference is the fortune attributable to the t m t ground and we use the term sholay but that's the effect of the regulation because as long as you have mental grounds of their own differentiated and not even ruled out by the settlement as long as they're left there in an ambiguous situation like this you have to apply that formula by you know first going through that calculation when you do that based on barred by section seventy four twenty two h the court of federal claims correctly hell that they were to do so because just to make sure you don't run out of time address the pre judgment interest issue  pre judgment interest or sixty six twenty one c interest for the tax motivated interest the same that the tax payers are ignoring in their argument regarding the sixty six twenty one see interest is that the nature of partnership indisputable ie a partnership item and the statute says no questions for refunds attributable to partnership items there is no way that they could challenge the imposition of tax motivated interest in their refund cases without arguing that the transactions weren't shams they cannot argue an individual refund case that the trend partnership transactions were not share and the issue is the nature of the partnerships transactions and there is a lot of authority saying that that is a partnership including the ninth circuit decision in reverse of the ranters which said for this very purpose for the purpose of tax motivated interest under former sixty six twenty one c the nature of partnership transactions is a partnership and the tax court should have made findings about that item and there are many other limitations and said as it every other circuit court to have considered this and the tats were the settled limitations argument they raise here is a partnership item and that's pretty much unanimous but it did not reach seventy four twenty two age in connection with the tax code made interest claimed it went to the merits of that claim so as far as the great judge alike was holding a law on the interest the fifth circuit surgeon weiner does not speak to that another problem with raising the tax would mean that interest in a part of a proceeding is that they would essentially need to refute the determination that was made in the that and they settled their case had they wanted to pursue the sham issue they could have done so in the partnership for seating and that's the way test for works it sets up a framework to separate out issues that are common to the tell me that this is the merits of the statue of limitations argument and not the jurisdictional issue that's before a club record but i don't understand how they came to the conclusion because it seems to me with a three year statute of limitations in the statute and boy i certainly not just one three year statute of limitations and that's another thing that taxpayers ignored in their argument is we're not just talking about the individual three year statute of limitations under section sixty five zero one and this court actually has an excellent excellent analysis  very issue in the opinion in goal and what this court held in the global was that section sixty two twenty nine extends the individual through your statue of limitations with respect to partnership items so the reason is to tell me how extensive but what it does is that it says that the statute of limitations for assessing tax attributable to partnership items shall not expire until three years after the partnership return was filed so what that does is that essentially provides a minimum period you look at both sixty five zero one and sixty three twenty nine and the reason i don't know that we can necessarily tell from the record about the timing but the reason that that can be even longer than you might initially think is because the tax matters partner can extend the statue of limitations under sixty two twenty nine or it could be extended on other ground for example the partnership return was invalid and if you actually look at the tax court's decision in the partnership level proceeding in this case not the decision it was a prior opinion by judge how he goes into this says you know with respect to some of the partnerships the tax matters partner had extended the statue of limitations for others the partnership return was invalid so that it did not start running now in this particular in the partnership proceeding there was an opinion in agriculture venture associates in august of two thousand the site is eighty t c m to ninety five and judge allegro actually refers that when he says indeed the statue of limitations matter was the reason the very proceeding in which these taxpayers had participated so i think that's why it might appear to be a long time but i mean the bottom line is that fundamentally you always have to look at partnership issues to figure out if the statue of limitations was matter or not and that's why the tax matters part of extend stature limitations growth the partnership or term valid those issues are partnership items they have to be reduced in the partnership proceeding that's why it's a partnership item because you can't argue that the  satchel imitations was blown without necessarily pulling determinations that have to be made at the partnership and you might say that's true for this case but suppose that in fact my understanding the statutory scheme right that you have three years in which to lodge a right under the statute under six to two nine well i mean subject to these abilities to extend it like you explained but technically an f  self isn't necessarily untimely but if the f b i isn't issued within the sixty five zero one sixty two twenty nine window it may not do any good but the problem is that window isn't necessarily three years it's a combination of sixty five a one in sixty to twenty nine and that determination is made at the partnership level because you can't make it without answering questions about what happened with the partnership  how long after the death comes out does the i r s have to go back to the individual partners and go after their individuals or terms which may now be decided to be wrong and  rao i think the answer to that depends upon whether a partnership proceeding is filed or not wouldn't that be an issue for the individual rather than the partnership that part of it not whether or not the f b i sort of came at the minute timely fashion but whether post after the i r s proceed against them in a timely fashion i mean that's really as true to the individual right i mean the iris me proceed against certain partners on certain dates but other partners on different dates no nothing issue related to the partnership rather an issue related to when the i r s proceeded against particular individual partners in light of the decision they made about the whole partnership it is related to the partnership because you can't ascertain whether or not that f pod did any good without ascertaining if it was issued in that sixty five a one sixty two twenty nine window so well whether the f b i so suspended the statute of limitations depends upon whether it was is d during the sixty five or one period as extended by sixty to twenty not it is enough can only suspend the statute of limitations if it comes out during that period right you can't suspend a period that's expired whether it was issued during that period necessarily requires you to look at section sixty two twenty nine would require a single look at things that happened at the partnership level and that's why every court that has looked at this has co that this is a partnership item the only core that found otherwise was a district court that was reversed that determination on appeal so you know that's why regardless  technicalities it's determined at the partnership level because you're looking at things that partnership and that have been a fact on all of the parkers and another thing that  is important to consider and i don't want to believe this but when you're looking at the irises regulation defining partnership items that is a specific authority regulation congress said in defining partnership items in section sixty two thirty one asked the secretary of the treasury to provide a definition of partnership item it said to the extent regulations prescribed by the secretary provide that such things are more appropriately determined at the partnership level and the taxpayers essentially concede that the argument they're trying to make is a partnership item within the terms of that regulation there only argument on this point is that the regulation i think what they're saying is the regulations invalid but what chevron said is that when congress leaves an explicit gap for the agency to fill those regulations are given controlling weight unless they are arbitrary determinations that affect whether other partnership items are allowed on the statute of limitations of certainly one of those i don't i mean i know other way of looking at this to with alternative holding is that the taxpayers then waive the satchel imitations argument for a couple of reasons not only because there's an explicit waiver in the settlement agreement but also because several circuits have held that if you don't pursue the matter further in the partnership proceeding you have waived it by not doing that and i disagree with taxpayers interpretation of sixteen to twenty six it doesn't say that you can't determination with respect to sham transactions or kept motivated transactions i asked later goes some sessions of the partner of penalty interest for such transactions would you agree that the c f c would have jurisdiction over that but might depend on whether or not it was an issue in the partnership proceeding and actually no i would not agree because i still think that the only way they can argue that the interest was improper was to argue that the transactions weren't chance and the court of federal claims had mildred's stiction to determine whether or not the partnership transactions shams that's just not the system not been a determination i mean i thought a lot of your argument was predicated on this issue belongs here but if the issue was not raised and this is an issue which the government would likely waste it right because of the aft pagosa it's a sham transactions oh there are some other grounds for imposing sixty six twenty one c interest like at risk or the other if none of that is in the f i don't see how this would arise because the interest wouldn't clearly a presumption that the interest will be imposed because an a determination that's made in and unchallengeable this would you say well it is challengeable but it's challengeable in the partnership level proceeding i think once it's challenging the partnership level proceeding the presumption is the partnership will proceed and will run its course and will address any challenges to the nature of the partnership transactions so i think if an app are issues and well in this case it was challenge the taxpayers entered into settling agreements but those settlement agreements did not resolve the nature of the partnership transactions the agreements didn't address that at all so that issue remained alive in the partnership level proceeding and was ultimately resolved adversely to the taxpayers in the partnership level proceeding is that correct as the other side pointed out the government's one drop that mean more of them i think the ones that are directly on point agree with judge allegro you have the opinion by just walking of recent opinion by george friedman who agree with judge labor's analysis of the situation mcgan no we're not dropping any arguments based on that certainly judge alegria correctly concluded in this case that he had no jurisdiction over these sites and you know we're certainly not leaving anything or dropping anything in that two is that if it were true that you had a comprehensive settlement here that result about the issues then the things that they're trying to raise were constitutional adjustments and that is subject to the six year settle limitations computational  mean map the stakes it's big it's a term of art it it means an adjustment that's meant to apply a partnership items to the parkers and if the tax payers were correct in their interpretation of settl then this case looks like this court's decision in olson which said when you have a settlement agreement the adjustment interest including tax motivated interest or computational just means there are no partner level facts was a big things that you have to get that sixty five eleven the normal to your stature limitations post claimant those apply to these types of claims and i'll leave it at that that i think that is the least strong argument the government has anywhere on this that the language in the f all sets out numerous from grounds or the judge granted which and they're not differentiated one of which is that the partnership was not engaged in a trade or business of pharma that's not a tax motivated transaction there are numerous grounds for or through the adjustable some of which if that was the basis of the settlement might support sixty six twenty one say some of which do not and because the settlement is silent you then must go in and apply it were one of those roles to see what the adjustment and what the deficiency would have been and if the deficiency based on a non t t ground is the same as the decision deficiency based on the t m t ground and they're both deemed preserved because they were just dressed in the settlement then under the regulation determining what attributable fifth circuit said when you have the shotgun f cause or shotgun deficiency notices the throw out every possible ground for adjusting something one of which is a t m to rest which are not unless there is a specific determination that the the basis for the adjustment was in fact the ground that was the t m t then you can't apply sixty six twenty one see interest that you have to look at all the tension grounds for the adjustment and many of the ground set forth in this f op do not support sixty six twenty one say the penalty interest and your honor it is not that we are asking the court below to go behind the sham determination we agree the court below cannot go back and read determine whether these transactions were or were not shams that would be a partner ship item determination what the court below is asked to do is determine whether or not the settlement that entered into supported the application of sixty six twenty one c if it does not we win if it does we lose if in fact get that but that's not what it does it makes a naked adjustment to the deductions and in fact allows over fifty percent of the actually it allows much more than fifty percent because of the effort a order ship and the settlements agreed that there were no changes at all in the second year i mean that's completely inconsistent with the concept of sham if you will go in and look at the f b i was an open the settlement agreements it makes no sense to say that these adjustments were attributable or were strictly the result of a sham transaction i don't one step forward one of the point i would like to make the window of for issuing an f off that was discussed here i'll go back to the example i used earlier when we're talking about why it wasn't equitable or why it would be equitable for the statute of limitations not to be deemed to be that window within which the eff hawken be issued and have effect to extend the statute of limitations for a partner who does not file an individual tax return or is open forever the government can come in fifty years later still so for the guy who's twenty or statute is open they can come and assess as liability if was issued when somebody who had aged a sixty five to one statute that was six years because there was substantial emission of income  at the individual factors i can't give the court cite there is one case out there where the i think it was the tax court on it was appealed apparently issuance and the application of a to have tougher adjustment to a partner for whom there was a longer statute of limitations personally clickable so it's not that you look only at sixty two twenty nine and only at the the f o language you have to look at what the individual get there are few the could be purely partnership by and determinations if the adjusted transactions were straddled transactions a type of economic transaction then any adjustment to a straddle transaction is by statute a tax motivated transaction and lastly that in going through this analysis if you hold it is not the that it was a partial settlement and not a comprehensive settlement and ultimately do look at all the way they would be appropriate the tax court decisions for your lawyer please keep in mind that there is a significant difference between economic substance look at this court's  difference between that and now and fraud and even statute making it t m t says sham and fraudulent transactions what's the difference the difference rests with the motive involved i have only through to the extent profit motive has anything to do with pure economic substance question it is subjective possibility of profit or position is on its fifth circuit says that the profit motive issue in sham is profit factor so much like there's different levels of men's right and a simple decision of lack of economic substance we contend is not the equivalent of a sham determination and therefore even if the