IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 10-60559

NEVADA PARTNERS FUND, L.L.C., by and through Sapphire II,

Incorporated. Tax Matters Partner

 Plaintiff - Appellant Cross-Appellee

v.

UNITED STATES OF AMERICA, by and through its agent, the Internal

Revenue Service

 Defendant - Appellee Cross-Appellant

--------------------------------------------------------------------------------------------------

CARSON PARTNERS FUND, L.L.C., by and through Sapphire II,

Incorporated, Tax Matters Partner

 Plaintiff - Appellant Cross-Appellee

v.

UNITED STATES OF AMERICA, by and through its agent, the Internal

Revenue Service

 Defendant - Appellee Cross-Appellant

--------------------------------------------------------------------------------------------------

RENO PARTNERS FUND, L.L.C., by and through Carson Partners Fund,

L.L.C., Tax Matters Partner, 

 Plaintiff - Appellant Cross-Appellee

v.

United States Court of Appeals

Fifth Circuit

F I L E D

February 25, 2014

Lyle W. Cayce

Clerk

 Case: 10-60559 Document: 00512543283 Page: 1 Date Filed: 02/25/2014
No. 10-60559

UNITED STATES OF AMERICA, by and through its agent, the Internal

Revenue Service, 

 Defendant - Appellee Cross-Appellant

--------------------------------------------------------------------------------------------------

CARSON PARTNERS FUND, L.L.C., by and through Nevada Partners Fund,

L.L.C., Tax Matters Partner

 Plaintiff - Appellant Cross-Appellee

v.

UNITED STATES OF AMERICA, by and through its agent, the Internal

Revenue Service

 Defendant - Appellee Cross-Appellant

--------------------------------------------------------------------------------------------------

RENO PARTNERS FUND, L.L.C., by and through Delta Currency

Management Company, Tax Matters Partner

 Plaintiff - Appellant Cross-Appellee

v.

UNITED STATES OF AMERICA, by and through its agent, the Internal

Revenue Service

 Defendant - Appellee Cross-Appellant

--------------------------------------------------------------------------------------------------

CARSON PARTNERS FUND, L.L.C., by and through Bricolage Capital

Management Company, Tax Matters Partner

 Plaintiff - Appellant Cross-Appellee

v. 

UNITED STATES OF AMERICA, by and through its agent, the Internal

Revenue Service

 Defendant - Appellee Cross-Appellant

--------------------------------------------------------------------------------------------------

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 Case: 10-60559 Document: 00512543283 Page: 2 Date Filed: 02/25/2014
No. 10-60559

NEVADA PARTNERS FUND, L.L.C., by and through Bricolage Capital

Management Company, Tax Matter Partner

 Plaintiff - Appellant Cross-Appellee

v.

UNITED STATES OF AMERICA, by and through its agent, the Internal

Revenue Service

 Defendant - Appellee Cross-Appellant

Appeals from the United States District Court

for the Southern District of Mississippi

USDC No. 3:06-CV-379

ON REMAND FROM THE SUPREME COURT OF THE UNITED STATES

Before KING, BENAVIDES, and DENNIS, Circuit Judges.

PER CURIAM:*

The facts and proceedings are set forth in this panel’s initial opinion,

Nevada Partners Fund, L.L.C. ex rel. Sapphire II, Inc. v. United States ex rel.

I.R.S., 720 F.3d 594, 619 (5th Cir. 2013), vacated, No. 13-343, 2014 WL 102360

(2014). The remand was for further consideration in light of Woods v. United

States, 134 S. Ct. 557 (2013). 

Briefly stated, the plaintiffs challenge eleven notices of final partnership

administrative adjustment (FPAAs) issued by the IRS, which disregarded

approximately $18 million of claimed tax losses and imposed substantial

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

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No. 10-60559

penalties on the ground that the partnerships’ transactions lacked economic

substance and therefore constituted an illegal tax shelter. After a bench trial,

the district court upheld the IRS’s disallowance of the claimed losses and upheld

two of the asserted penalties (a 20% negligence penalty and a 20% substantial

understatement penalty, imposed in the alternative), but disallowed the third

penalty (a 40% gross valuation-misstatement penalty) pursuant to existing

circuit precedent that the gross valuation-misstatement penalty did not apply

under the circumstances. Nevada Partners Fund, LLC ex rel. Sapphire II, Inc.

v. United States, 714 F. Supp. 2d 598 (S.D. Miss. 2010). 

We affirmed in part and vacated in part. We affirmed the district court’s

judgment: (1) that the transactions in question lacked economic substance and

were properly disregarded for tax purposes; (2) that the negligence penalty was

applicable and the partnerships were not entitled to the “reasonable cause”

defense they urged; and (3) that the gross valuation-misstatement penalty was

inapplicable. We vacated the district court’s judgment in part and rendered

judgment for the plaintiffs (1) to the extent that the district court affirmed

certain of the FPAAs reflecting the IRS’ alternative theory of liability; and (2)

with respect to the district court’s approval of the substantial understatement

penalty because we found it unnecessary to reach the applicability of that

penalty in light of our approval of the 20% negligence penalty. Nevada Partners,

720 F.3d at 614, 619. The government petitioned for certiorari with respect to

the application of the valuation-misstatement penalty, and the Supreme Court

granted certiorari, vacated, and remanded the case to this court for further

consideration in light of its opinion in Woods v. United States, which held that

the valuation-misstatement penalty does apply in cases in which the

transactions in question are found to lack economic substance. United States v.

Nevada Partners Fund, LLC ex rel. Sapphire II, Inc., No. 13-343, 2014 WL

102360 (2014).

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The Supreme Court’s opinions in Woods and in the present case calls into

question the applicability of the gross valuation-misstatement penalty in this

case, which in turn may affect the applicability of the lesser penalties and their

corresponding defenses. We remand the case to the district court for a

determination of these issues in the first instance, along with any other

proceedings the district court deems appropriate in light of Woods v. United

States. This is a limited remand, and should either party seek appellate review

following disposition of this case by the district court, such appeal will be

assigned to this panel.1

REMANDED.

1 See, e.g., Ballard v. Comm’r, 429 F.3d 1026, 1027 & n.1 (11th Cir. 2005); Petition of

Geisser, 627 F.2d 745, 749 (5th Cir. 1980); see also, e.g., United States v. Casper, 332 F. App’x

222, 223 & n.1 (5th Cir. 2009).

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