### I N THE UNI TED STATES COURT OF APPEALS FOR THE FI F TH CI RCUI T

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. U n i t e d S t a t es C o u rt o f A p p e a l s F i f t h C i rc u i t 

### F I L E D F ebruary25, 2014 Ly le W . Cay ce Clerk Case: 10-60559 Document: 00512543283 Page: 1 Date Filed: 02/25/2014No. 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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2 Case: 10-60559 Document: 00512543283 Page: 2 Date Filed: 02/25/2014No. 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 f or 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 p roceedings are set forth in this panel’s initial opinion, Nevada Partners Fund, L

. L

. C

. ex rel. Sapphire I I, 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 i n 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 disr e g a r d e d approximately $18 million of clai m e d tax losses and imposed substantial

* Purs uant to 5 T H C I R
. R. 47. 5, the court has d eterm ined that this op inion s houldnot be p ublis hed and is not p reced ent excep t und er the lim ited circum s tances s et f orth in 5 T H C I R
. R. 47. 5. 4. 3 Case: 10-60559 Document: 00512543283 Page: 3 Date Filed: 02/25/2014No. 10-60559

penalties on the ground that the partnerships’ tran s a c t i o ns 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 penalt y , imposed i n the alternative), but disallowed the third penalty (a 40% gross valuation

- m i s s tatement penalty) pursuant to existing circuit precedent that t he gross v aluation-misstatement penalty did not apply under the circumstances. Nevada Partners Fund, LLC ex rel. Sa pphire II, Inc. v. United States , 714 F. Supp. 2d 598 (S.D. Miss. 2010). We affirmed in part and vacated in part. W e affirmed the district court’s judgment: (1) that the transactions in question l acked e conomic substance and

were properly disregarded for tax purposes; (2) that the negligence p e nalty was applicable and the partnerships were not entitled to the “reasonable cause” defense they urged; and (3) that t he gross valuation-misstatement penalty was inapplicab l e. We vacated the district court’s judgment in part and r endered judgment for the pl a i n t i f f s (1) to the extent that the district court affirmed certain of the FPAAs reflecting the IRS’ alternativ e t h e o r y of liability; and (2) with r espect to the district court’s approval of the substantial understatement pe n a l t y b ecause we found it unnecessary to reach the applicability of that penalty i n light of our approval of the 2 0% negligence penalty. Nevada Partners , 720 F.3d at 614, 619. The government petitioned for certiorari with respect to the a pplication of the valuation-misstatement penalty, and the Supreme Court granted certiorari, v acated, and remand e d t he case to this court for further consideration in light of its opinion in Woods v. United States , w hich held that the v aluation -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 r el. Sapphire I I, I nc. , No. 13-343, 2014 WL 102360 (2014).
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The Supreme C ourt’s opinions in Woods and i n the present case calls into question the applicability of the gross v a l u a t ion-misstatement penalty in this case, which in turn may affect the applicability of the lesser penalties and their corresponding defenses. W e r emand the case t o the district co u rt for a determination of these issues in the first instance, along with any other proceedings the d i strict court deems appropriate in light of Woods v. United States

. This is a limited r emand, and should either party seek a ppellate review following disposition of this case by t h e district c ourt, such appe a l w i l l be assigned to this panel. 1 REMANDED.

1 See, e. g. , Ba lla rd v . Com m ’r , 429 F. 3d 1026, 1027 & n. 1 (11th Cir. 2005) ; Peti ti on of G ei sser , 627 F. 2d 745, 749 ( 5th Cir. 1980) ; see a lso, e. g. , U ni t ed S t a tes v . Ca sp er , 332 F. Ap p ’x 222, 223 & n. 1 ( 5th Cir. 2009)

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