proceed with the day calendar in our first cases de bolt foundation versus the commissioner of internal r microphone up a little bit so i  perfectly legal foundation is here to ask the court to vacate a decision by the tax court that it has a liability for tax that literally would wipe out the charitable efforts of the foundation and its local community foundation asked the court to direct either the dimiss dismissal of this case for lack of jurisdiction or direct that the court tax court enter a decision that there is no liability for a period hundred ninety nine basis for if you are correct what happens next in other words if there is the tax court had no jurisdiction over the petition that you filed with the tax court which is now discovered how many years after that petition for review was filed what what happens next you just walk away with the money the period of  limitations will have expired well first of all there is no taxable year into july two thousand nine hundred ninety nine so nothing for their app ns with respect to that year if there was another period for which the if the proper taxable year on july second was that was your claim in the return that you filed yes based on the facts as reflected in the actual transaction that was undertaken which the sale of stock but as soon as the court decided that as a matter of fact that transaction would not be respected and instead it would be recast as a sale of assets by the corporation doubled the ranch followed by a series of bit of liquidating distributions at that point the whole regulation that requires consolidation of the corporations says no you didn't you don't have a consolidation and therefore the return filed by the consolidated group for june thirt hundred nine is trap and then i'm sorry what should have happened then in your saying i take it that what should have happened in this case according to you is that review of the vet determination what should the tax court have held well we think the tax court should have respected the sale of stock in which case the july two thousand nine hundred ninety nine years entirely appropriate of the consumer but we said you were wrong about that so we're done with that now what should what should have happened in light of our subsequent decision in light of the tax court decision which we have actively yeah but we reversed the tax our decision on the state law question and it's right then she so then what should the  tax court have done on remand well that's first the tax court had to determine the federal questions because as this court made very clear the federal questions are not dictated by the state law questions they're  court first had to make a determination as to whether the trends of the sale of stock transaction would be respected for federal tax law purposes once it determined that it would not respect it and instead would treat it as a sale of assets followed by a series of liquidating distributions then the tax court either should have dismissed the case for lack of drastic point the statute of limitations already run for the i r s to recalculate the tax liability based on what you now say is in light of our decision of the tax court's decision of a correct tax year so so your honor that's actually why we're here because the commissioner of internal revenue  when he determined that he wanted to disregard the sale of stock and treated as a sale of assets followed by a liquidation that determination based on the stipulation of the parties was made on march tenth of two thousand and six at that point the period of limitations for the year ended june thirtieth one thousand nine hundred nine which is the proper taxable year under his theory the commissioners theory the period of them had already expired now that doesn't mean the commissioner hadn't performed an audit the commissioner had requested in obtained an extension of the period of limitations for more than two years beyond the natural express aeration of that period of limitations so what happens the commissioner realised i'm out of time i'm too late to pursue my theory in the proper taxable year like i did in all of the other mid intermediary cases where the that the commissioner didn't do what the commissioner is doing here and that is alleged that the recur to zeeshan truncated the taxable year in none of the other cases has the commissioner taken that position but he had to be here because the period of limitations had already expired for the proper taxable year and so the roots was in that proper taxable year when the sale of assets was really is yours beginning the work with this court determined effectively is that your folks in gauged in what was essentially a fraudulent transaction now with all due respect your are there was no allegation of fraud there's no proof of fraud but but the notice of liability is the issue you're saying that the notice is basically as to the tax here is that the crux of your there's no problem with that here but it's discovered that there's a problem with two thousand i understand that that's a notice and jurisdiction problem but here the tax year you questioning your determination as to that tax year and you were further told that it was because of a liability as transfer of assets so the whole sale of stock thing is raised right at the start i don't understand how that secures no problem the court is now hearing both sides on the propriety of that taxable year filing by you in the end it concludes it's wrong and that part of the error because of the characters ation of the transaction is that you should have filed for the full twelve month period not a one day period i don't understand how any of this race is a concern about whether you will receive adequate notice as to what was in this help me out so your honor the question here isn't one about notice the question is whether the company went out of existence on july second determine a liability for a tax period that is not the full taxable period of the taxpayer and that was not included in the notice some deficiency and the notice of liability when when we have a situation such as tax year the commissioner found a deficiency for that year and as it turns out that was the wrong tax year so based on the facts determined by the court and  include the full taxable period of the tax payer the court determined there were still activities in assets that the taxpayer had after the period for which it had filed its return and therefore the proper taxable period was the taxable period of that corporation and therefore the notice did not identify the property tax period did not determine liability based on the full taxable period and the court in that now now there is some confusion and this is reflected in the briefing of the parties as to whether the court ruled that it had no jurisdiction or ruled that it couldn't determine a liability for the improper taxable period but the bottom line is the same whether the court says i don't we don't have jurisdiction over the proper taxable year which is true respect is not the same as if the court had no jurisdiction case over if the court had jurisdiction but determined that it could not determine the correct et c then in that case it came out the same way but in this case we would then proceed to the question of whether in fact the corporation's foundations activities were substantially wound up or not which is a factual determination and the tax court held that they had so why if there is jurisdiction the next question for us it seems to me is whether that was a clearly erroneous  determination on the part of the tax court although may there they have been some minor matters to be dealt with the corporation's activities the foundations activities substantially been wound up so that in fact it was correct to deal with the tax year you're on or the court the court decisions on this are very clear it's not a question of whether they're substantially wound up it's whether they're completely wound up and that's because even a ten thousand dollar investment gives actually had on the tax liability it would be pretty trivial would it not if what had actually been done was to recalculate the tax for a full tax year your folks would still be period beyond july two thousand nine hundred ninety nine that was properly reflected in its tax return ended for the period ended july i'm sorry june thirtieth two thousand also the real estate that was transacted on august twenty seventh benefited your folks in the tax calculation your honor it with all due respect it's not a question of whether it benefits them and or not it's a question of what's the proper and understand the tax where is a very good bridge players in chess players you know there are rules of the game and so on but what we're looking at it seems to me is a set of transactions that ought to have led to a very substantial tax liability and you're claiming that essentially that all goes away because the  r s excepted in the first instance the tax year that the tax payer proposed your honor with all due respect that's not what the commissioner did that tax period at the cut that the taxpayer reported the sale of assets all of them it stipulated reported all of the gain on all of the assets is for the period into june thirtieth one thousand nine hundred nine but the commission i'm sorry to thirty two thousand but the commissioner failed to issue a notice of liability or notice of deficiency on a timely basis for that period so to as a like he did in all of the other cases involving midcoast so instead he says oops what am i going to do i'll go out try to go after this year july two thousand nine hundred ninety nine and the first thing he was also out of time on that the period of limitations had already expired you know what you say you're not claiming that you were misled about the notice of deficiency right you knew what they were talking about the amounts set forth the actual statement that's attached talks about the  the transfer of transfer transaction i mean the facts were all presented to you in the notice of of liability right you knew what they were talking about the does not a question of notice your honor it's a question of the of the the commissioner and the court are not competent to determine when your liability question orders we knew what they were talking about it's just it's a technical error that they made and there's no jurisdiction your honor it isn't a technical error the whole point is the proper taxable year was ended june thirty ninth two thousand and if the commissioner at some point wanted to shift over and say oh wait a second i made a mistake i should have said the put the proper taxable year was ended june thirty two thousand then in theory he might have been able to raise that with the courts have said you can't do that in a guy answer to a petition and the courts have also in this case said you can't do that because that very determination would have been beyond a period of limitations if it had been made on march tenth when they issued a notice of deficiency for the july two year i'm sorry to the tax court filing a petition over which you now say the tax court had no jurisdiction isn't that sort of what happened  be your honor until there was a finding of fact that the for federal tax law purposes the sale of stock would be disregarded because if the sale of stock was regarded then the period did in fact in don hundred ninety nine pursuant to the consolidated return regulations that require w ranch to be in a consolidated group but as soon as the factual determination was made that the in the tax court and the commissioner agree on this as soon as that determination was made to wreak eric ries the transaction the consolidated return rules no longer truncate the normal taxable year of the corporation so at that point the question becomes does anything else in the tax law truncate that that period and the only provision that can is section six one point six zero one two dash two a which provides for truncating the taxable year on basically the death of the corporation but that requires as a matter objective fact no assets not most of court diebold has not shown or made any attempt even to show that recalculating the deficiency for the full year length would make any difference in its tax liability much new notice of deficiency for the proper taxable year in columbia river which your adversary cited says there's no jurisdiction for any period beyond the last date included in the deficiency notice the last date jurisdiction to determine whether or not the tax for any other year has been overpaid or underpaid there they say they never acquired the latter i mean that's the quot language right sorry yeah and that's what sixty two fourteen b does is it so it's the court didn't have jurisdiction over the later period but the later period was not the period that was in the notice of the period that was goes back over ten years so no one's no one's certain why that date was chosen we think it was most likely chosen because that was the date that they they put on their return if you look at all these other mid co cases what's consistent throughout those is the commissioner assessed deficiency for whatever whatever year they were part of the returns they wanted to complete all the transactions with think it took a few days longer so it was like july fifth when all the different transactions closed second and then the transfer of most of what was ninety some ninety seven percent roughly of the assets they were which were stocks and sold to marilyn which and they perhaps the one that stands out the most because the actual sale we certainly could see the formal transfer of title did not occur until i think august something however even if it was  july first there was there was an agreement that was entered into that effectively transferred all of the benefits and burdens of ownership and operating agreement was called transfer all benefits o paraphrasing you know accurately but i thought she asked if you want to wanted a different tax year than july second you should have petitioned for that i didn't hear i expected you to answer we deficiency for that's the that's correct so i'm having a little trouble understanding how there can possibly be a jurisdictional issue the commissioner issues a deficiency notice for the very tax year that the tax payer declared was the tax year the tax court eventually after many many many years of up and down back and forth litigation decides that the commissioner was correct so i would have thought that the question before us is really a merits question and what now that doesn't mean it's not a significant question because i take it what mr weber is suggesting is that the calculation is actually incorrect because the tax year should have been something different that the tax court is in error in upholding a deficiency for th a tax year because a correct tax calculation would have thrown out that declaration by the tax payer that the tax year ended on july second now first of all is do you agree with me that raised it only as an issue of jurisdiction they had argued it below in both regards and argued as the merits issue and when they lost on that they tried again with a sort of as a last ditch motion to dismiss you just some following you you agree that the issue is a merits issue but you don't your first argument is you don't think that's properly before the court because it wasn't raised in their opening brief correct then your second argument would be and if we do consider it why the fact that the the corporation's affairs were not really wound up on july second but were ultimately wound up may be no later than august the sixth or something like that or the whatever when the farm  the corporation liquidated on july second and even in form ninety seven percent of the assets were sold and ninety six percent of the the proceeds of that sale were remitted to the shareholders on july second i think and so then you've got the other four percent the other four percent well and what you have here is big you have this in every case and variations on this are argued in every one of these may go cases where where a taxpayer enters into a transaction where the form is is designed to disguise what is actually happening in substance and so the i r s is forced to recur to rise the transaction there is always going to these artificial losses that were generated through of a couple of stock transactions but the record doesn't show actually who engaged in those trans actually you know it you know i mean when i say material yes yes so and actually the concept of materiality right was there anything that happened after joyce second through the next june thirtieth there would have been material to the deficiency that no i don't believe so the burden would have to show that would have been on  and they made no attempt to show that and certainly it would not be material their liability is transferees because as transferees they're liable for any amount of deficiency up to the amount of the assets they received and they received a third of the of the overall assets as i understand it the company retained assets having a value of somewhere in excess of five million dollars which is is a fraction of what it had beforehand nevertheless it did earn interest on that money and it still had other transactions through about august one thousand nine hundred nine is it is it your view that these were not  transactions that would have required the filing of a tax return existence to that extent which may be a different matter from whether there was a material change in the deficiency but i'm not sure i understand how you can argue that the corporation was not still in existence after july second i mean you're not prepared to to say that they didn't have tax obligations and that sounds more like substance than form but the tax obligations resulting from those should have been reported on that july first o july second return because it's a current for interest earned after july second and this is the sort of that in congress rudy the that you get into when when the tax payers force the i r s into the situation of having to read characterize  transactions form you end up there ends up being a there's a there's a degree of artifice that has to take place because the taxpayer is as forced that on the government and so  the company liquidated on july second and so those things are treated for for tax purposes certainly not necessarily for corporate law purposes but for tax purposes those things are statement that a corporation in the process of liquidation is still in existence if it retains assets to pay its debts and where that is true its return must include the period of the retention how do we deal with that but i think i think that's that's correct it's a correct statement it's consistent with the regulation but judge hand was not dealing with the situation where you have where were the foremen the transform the substance didn't match up you didn't have the situation before him and so as i said when you have as here you have that situation where they don't match up and so there there's always going to be these little things  that they're sort of i guess might see a legal fiction and treat it as having happened you have filed a return for the twelve month tax year rather than the one day tax you know their obligations would have been the same once the transaction never ever bring is in the tax court who hasn't been litigated and we certainly do not concede that we don't concede that the government was necessarily precluded from issuing a substance over for me exists in order to to prevent taxpayers from calling something that it's not doing something that it's not i cited unger versus commissioner because it seems to me that in substance as well the split in this corporation would be viewed as continuing to exist at least through the twelve month tax year and i'm not sure why what good reason there is apart from the timeliness question for you as the  was to a different part of the transaction that was that was so that stocks asset sale was not called a stock sale when that's not what it wants correct but what they're relying on to say that the corporation continuing to exist were asset sales for example the sale of the farm that's that's part of the assets that were sold and that in substance have been determined to have been sold on july second because if they were if the transaction was treated as a stock sale the corporation would not have or the well the new the new owners of the corporation would own that asset and that's who wound up owning that us at the end of the i'm trying to understand i'm trying to stand what you just said i think you are saying that the reason why is after occurring events should not be given effect to change the tax year saying that's correct and that was that was part of the reason they chose that form is they choose that form to make it look less like a liquidation and more like a bona fide stock sale and so they choose a form in which the corporation doesn't get rid of that that isn't what happened in substance and so it's recurrent arised the stock sale transaction that inform occurred on july second is really carry rise as an asset sale on july the second and therefore these after occurring events are in essence artificial if we re characterize the july second transaction as the transfer of the asses director or at least that the date on which they occurred is artificial yes  the extent that were tax obligations for transactions arising after july second ninety nine what tax return would be recorded they would be recorded on the july second tax return you know they had happened until one nine hundred ninety nine and that the one turns on june thirtieth two thousand the last day of the ordinary taxable year double d still held about two hundred  fifty thousand dollars in cash and five point seven million dollars in other assets so i'm just asking where are the transactions where any tax generated transactions between july second one nine hundred ninety  previously found and so they did the reporting the way that they did as part of disguising what the transaction was but yes because in substance they the transaction occurred on july second and assets from the get go and conducted on the timetable that they gave they would have had tax obligations on all of this through june thirtieth two thousand right you know substance over form allows free characterization to the extent necessary to avoid the miss labeling of the transaction and so i'm not sure that you need to do anything more than say it's an asset sale it's not a stock sale paying your taxes on that now it's a separate question what tax year you want to call it but i thought you agreed with me that if if if they'd used the june thirtieth two thousand closing date the i r s would have gotten every penny in taxes it was entitle to once the once the the the question of whether or not substance over form requires us to use the july second date i'm not seeing what what reason substance over form requires that well a as a july second asset sale then the assets that inform they sold later were somewhere in substance sold on july second part of the coast scheme though is to retain some of the assets so it looks better is that what you said earlier that that what they do to make it look better yeah i mean they tell you to make it look more like it was a bona fide the stock's bonafide stock sale of a of a the ongoing concern right ok thank you thank you robert have a few minutes left respectfully request the court reversed the tax court's order vacate the tax court's decision and remember the case for the texas court to grant the foundation's motion to dismiss for lack of jurisdiction where in the brief does it say and in the alternative  so your honor that of course that's what we said in our brief and we did because of the posture of the case so notwithstanding that we had raised as his counsel acknowledged raised this sort of merits based question to use it  that way during the pendency of the case judge kooky in his opinions never addressed that point and in fact in his order dealing with the jurisdictional question maybe you did raise it below i'm asking what you raised in the merits brief to this court what you said was there is no jurisdiction you didn't address what should happen if there was duress diction your honor that's because the posture of that issue as framed in the tax court and with no objection by the commissioner was all focused on jurisdiction ok to fine but still what you're asking us to do is say there was no jurisdiction if the answer is there was jurisdiction why isn't that the end of it  think it isn't the end of it don't you have an obligation to alert us in your appeal brief that you have an alternative argument in case you were wrong about the jurisdictional point we had no reason your honor to believe that we were wrong because the cases consistently talk about this as a proposition of jurisdiction that's fine you make your choice to argue jurisdiction on the question we're asking you is if we don't agree with you given that you only his reply brief there was no assertion in the tax court or in this case that that it wasn't a jurisdictional question let's do it i'm sorry they said all along in the text but they didn't concede there is no jurisdiction they argued there is right that's the argument they made right so you say i had no one had no possible expectation that anyone would believe that there is jurisdiction of the tax court they argued there is jurisdiction the tax court the tax court said we do have jurisdiction you then come to this court and say they're wrong there's no jurisdiction that's fine if we address that argument and decide there is jurisdiction what would we have left so so so your honor if you in replete with statements and direct on point saying that the commissioner and the tax court are not competent to determine a deficiency for a period that is not the full period of the taxpayer and we're now talking about the question of whether on the merits it was inaccurate for them to conclude that the tax year properly ended on july second and it's that's a deficiency for that that's what they're saying and you're saying they're wrong well that's fine that's a question of whether the corporation wound up its affairs or didn't wind up its affairs that's a whole other question than the question of is this tax consequences for july second again your honor you're quite right that that that the foundational question it's actually where i think the analysis has to start is a question of what is the proper taxable year the court said since i don't see why that so  the question is there is a tax deficiency notice it says relying on the tax year that the taxpayer chose it says there's a deficiency for that tax year you are saying that notice was insufficient to confer jurisdiction on the tax court over your petition well it may be or it may not be but what you're saying is that's that's so because there really calculating a different time here they're not saying that they're saying we calculated for that tax year the one that was noticed in the deficiency therefore there is jurisdiction and anything else is a merits question about whether that's the correct tax if you want to say no there wasn't because the tax court was incorrect on the merits to say this transaction occurred in one thousand nine hundred ninety nine whatever that's all america's question that's not a question of jurisdiction of the court to assess or to address the commissioner's deficiency claim about one thousand nine hundred yuan or the substance of our brief analyzes the question in its raw form from the ground up and the label you put on issue doesn't change the issue that this court needs to resolve the consequence if you decide that the cases that have treated this question of whether or not the notice of deficiency identified the right those cases that treated it as a jurisdictional question are wrong and that's your belief then then we ask that you make a determination that nonetheless the disputed deficiency did i'm sorry the liability determination of the tax court must be set aside because it hasn't the competence to issue a decision for a wrong taxable year and wrong tax will be your competence is another word for jurisdiction what you're saying is they what you're really saying in you alternative argument is they made an incorrect decision about the correctness of the commissioner's assessment in our opening brief address is that the whole brief is devoted to that all we're talking about here over the last five minutes is the consequence of that is do you do you write it down is the order from this court that the tax court didn't have jurisdiction in the first place or is the order from the court that ok it did have jurisdiction but it could not have determined a liability for the period a period into july two nine hundred ninety nine because it incorrectly determined  again the consequence is the same the foundation cannot be held liable for a period that is different from the full taxable period of the corporation the transfer or in the transfer or transfer