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

No. 12-20523

JOHN A. IRVINE; LYNDA IRVINE; KENNETH L. KRAEMER; BILLY J. WHITE; INA J. WHITE,

Plaintiffs - Appellants

v.

UNITED STATES OF AMERICA,

Defendant - Appellee

Appeal from the United States District Court for the Southern District of Texas

Before SMITH, HAYNES, and GRAVES, Circuit Judges. JAMES E. GRAVES, JR., Circuit Judge:

B i l l y a n d In a W h i te , J o h n a n d L y n d a Irv i n e , a n d K e n n e th K ra e m e r 1
(co lle ctiv e ly “T a x p a y e rs”) a sse rt t h a t th e In te rn a l R e v e n u e S e rv ice (“IR S ”)

e rro n e o u sly a sse sse d a d d itio n a l ta x e s a n d i n te r e s t a g a i n st th e m in co n n e ctio n

w ith th e ir in v e s tm e n ts in v a rio u s p a rtn e rsh ip s in th e 1 9 8 0 s. T a x p a y e rs se e k

re fu n d s o f th e fe d e ra l in co m e ta x e s a n d p e n a lty in te re st p a id

. T a x p a y e rs a sse rt

th a t th e IR S ’s a sse ssm e n t o f a d d itio n a l ta x e s fe ll o u tsid e th e a p p lica b le sta tu te

o f l i m ita tio n s a n d th a t th e IR S e rro n e o u sly a p p lie d p e n a lty in te re st. W e h o ld U n i t e d S t a te s C o u r t o f A p p e al s

F i f t h C i rc u i t 

### F I L E D Septem ber 5, 2013

Ly l e W . Cay ce Clerk

1 K raem e r ’s las t nam e is s p elled d if f erently in d if

f erent docum ents in this litigation. It is s p elled as “K raem er” in the cas e cap tion and in the original com p laint, and as “K ram er” in Ap p ellants ’ brief

ing. In this op inion, w e ad op t the s p elling in the cas e cap tion. Case: 12-20523 Document: 00512364111 Page: 1 Date Filed: 09/05/2013No. 12-20523

th a t th e d istrict co u rt la ck e d ju risd ictio n o v e r th e sta tu te o f lim ita tio n s cla im s
b u t d id h a v e ju risd icti o n o v e r th e p e n a lty in te re st cla im s a n d th a t p e n a lty

in t e re st w a s e rro n e o u sly a sse sse d

.

I. Factual and Procedural Background

T h is ta x re fu n d su it is o n e a m o n g s e v e ra l a risin g fro m a se rie s o f lim ite d

p a rtn e rsh ip s m a n a g e d b y A m e rica n A g ri-C o rp (“A M C O R ”) in t h e 1 9 8 0 s. In a n

e a rlie r A M C O R

- r e la te d ca se , w e e x p la in e d th e b a ck g ro u n d :
In t h e e a r l y 1 9 8 0 s, A M C O R o rg a n i z e d a n u m b e r o f l im ite d
p a rtn e rsh ip s f

o r w h ich it a cte d a s g e n e ra l p a rtn e r. T h e s e p a rtn e rsh ip s h a d a s sta t e d g o a ls a cq u irin g a g ricu ltu ra l la n d
, in v e stin g i n a g ricu l tu ra l v e n tu re s, a n d g ro w in g cro p s. A M C O R

s o licite d in v e stm e n ts fro m h ig h in co m e p ro fe s sio n a ls a cro s s t h e

co u n try

. E a ch p a rtn e r in a n A M C O R p a rtn e r sh ip w o u ld re ce iv e a p ro je cte d ta x lo ss fro m c r o p s p la n te d in th e first y e a r o f ro u g h ly
tw ice th a t p a r tn e r’s i n v e stm e n t

. In v e sto rs p a i d th e fa rm in g

e x p e n se s u p fro n t a n d d e d u cte d th e a m o u n t i n v e s te d o n th e ir t a x

re tu rn s. T h e n e x t y e a r, w h e n th e cro p s w e re h a r v e s te d
, th e

a m o u n t o f lo ss in e x ce ss o f th e a m o u n t in v e ste d w o u l d b e su b je ct to ta x e s. H o w e v e r , t h e f a rm in g e x p e n se s ty p ica lly e x ce e d e d a n y in c o m e re a lize d fro m t h e fa rm in g a ctiv itie s

. I n 1 9 8 7
, t h e IR S b e g a n

a n in v e stig a tio n a n d a u d it i n t o th e A M C O R p a rtn e rsh ip s to d e te rm in e w h e t h e r th e y w e re im p e rm issib le ta x sh e l te rs.
D u ffie v

. U

n ited S t a t es , 6 0 0 F .3 d 3 6 2
, 3 6 7 ( 5 th C ir. 2 0 1 0 ) ( fo o tn o te o m itte d ); see

a lso W ein er v

. U

n ited S ta tes , 3 8 9 F .3 d 1 5 2
, 1 5 3 (5 th C i r. 2 0 0 4 ) (d e scrib in g
sim ila r A M C O R p a rtn e rsh i p s).

T h e se T a x p a y e rs w e re p a r tn e rs in A M C O R lim i t e d p a rtn e rsh ip s in t h e

1 9 8 0 s. B illy W h ite in v e s te d a s a l im ite d p a rtn e r in T e x a s F a r m V e n tu re rs in

1 9 8 4 a n d i n H o u sto n F a rm A sso cia te s-II in 1 9 8 5

. J o h n Irv in e in v e ste d a s a
lim ite d p a r tn e r in A g ri-V e n tu re F u n d in 1 9 8 5

. 2 K e n n e th K ra e m e r in v e ste d a s

2 Although Lynd a I rvine and Ina White w ere not p artners in the AM C O R p artners hip s , each of them f

iled a joint tax return w ith their hus band s f or each o f t he relevant tax years , thus becom ing jointly a n d s everally liable f or the tax rep ortable on thos e returns

. See 26 U

. S. C. § 6013( d ) ( 3)

.
2 Case: 12-20523 Document: 00512364111 Page: 2 Date Filed: 09/05/2013No. 12-20523

a l i m ite d p a rtn e r in R a n ch o C a lifo rn ia P a rtn e rs II in 1 9 8 6

. A l l T a x p a y e r s

re p o rte d th e ir p ro p o rtio n a te sh a re o f th e ir re sp e ctiv e p a rtn e rsh i p s’ l o sse s in t h e

re le v a n t ta x y e a rs.
In 1 9 9 0 a n d 1 9 9 1
, th e IR S issu e d a N o tice o f F in a l P a rtn e r s h ip

A d m in istra tiv e A d

ju stm e n t ( “ F P A A ” ) fo r t h e re le v a n t ta x y e a rs to th e ta x

m a tte r s p a rtn e rs (“T M P ” ) 3 o f e a ch o f th e p a rtn e rsh ip s

. T h e F P A A s d isa llo w e d

1 0 0 % o f e a ch p a rtn e rsh ip ’s fa rm i n g e x p e n se s a n d o th e r d e d u ctio n s. T h e F P AA s
liste d se v e ra l re a so n s f o r d isa llo w in g th e p a rtn e rsh ip s’ d e d u ctio n s, in clu d in g , in ter a lia
, IR S d e ter mi natio n s th a t th e p a rtn e rsh i p s e n g a g e d in a se rie s o f sh a m

tra n sa ctio n s, th a t th e p a rtn e rsh ip s’ a ctiv itie s la ck e d e co n o m ic su b sta n ce , th a t

th e p a rtn e rsh ip s d id n o t a c tu a lly e n g a g e in fa rm in g a ctiv i t ie s, a n d th a t t h e

p a rtn e rsh ip s h a d n o t s u b s t a n tia te d th e ir e x p e n se s

. T h e T M P s fo r t h e

p a rtn e rsh ip s d i d n o t ch a lle n g e th e F P A A s b u t o th e r p a rtn e rs file d T a x C o u rt

su its c o n te stin g e a ch F P A A

, i n clu d in g cla im i n g th a t th e F P A A s w e re u n tim e ly

. A l l p a r t n e rs i n itia lly b e ca m e p a rtie s to th e p a rtn e rsh ip -le v e l s u its. S ee 2 6

U .S

. C

. § 6 2 2 6 (c). T h e se T a x C o u rt su its w e r e e v e n tu a lly co n s o l id a te d w ith

o th e r similar AMCOR-partnership ca se s a n d th e T a x C o u rt issu e d a d e cisio n
d e te rm in in g th a t e a ch F P A A issu e d to th e p a rtn e rsh ip s w a s t im e ly p u rsu a n t

to 2 6 U .S .C

. § 6 2 2 9

. S ee A g ri-C a l V

en tu re A sso cia t e s v

. C o m m issio n er , 8 0

T

. C

. M

. (C C H ) 2 9 5
, 2 0 0 0 W L 1 2 1 1 1 4 7
, a t * 1 6
, * 2 0
, * 2 2 (T .C

. 2 0 0 0 ). In J u ly

2 0 0 1 , a se ttle d stip u la te d d e cisio n w a s e n te re d in e a c h T a x C o u rt su it.

In 1 9 9 9 a n d 2 0 0 0
, d u r in g th e p e n d e n cy o f th e T a x C o u rt su its a n d b e fo re
th e p a rtn e r sh ip

- le v e l stip u l a te d s e t tle m e n ts, th e W h ite s , th e Irv in e s a n d

K ra e m e r in d iv id u a lly s e ttle d w ith th e IR S

. T h e se ttle m e n t a g re e m e n t s
d isa llo w e d o n l y a p o rtio n o f th e fa rm in g d e d u ctio n s, a s o p p o se d to 1 0 0 %

3 “A tax m atters p artner is the p artner d es ignated to act as a liais on betw een the
p artners hip and the IRS in ad minis trative p roceed ing s a n d a s t he rep res entative of the

p artners hip in jud icial proceed ings

. ” D uf f i e , 600 F. 3d at 366 n. 1.

3 Case: 12-20523 Document: 00512364111 Page: 3 Date Filed: 09/05/2013No. 12-20523

d isa llo w a n ce

. A fte r a cce p t in g T a x p a y e r s ’ se ttle m e n t s , th e IR S a sse sse d

a d d itio n a l ta x lia b i lity a g a in s t e a ch T a x p a y e r, in clu d in g p e n a lty in te re s t u n d e r § 6 6 2 1 ( c )

. S e ctio n 6 6 2 1 (c) im p o se d a n in te re st ra te o f 1 2 0 % o f th e sta tu to ry

ra te o n “ a n y su b s ta n tia l u n d e rp a y m e n t a t t r i b u t a b le to ta x m o tiv a te d

tra n sa ctio n s.” 2 6 U .S .C

. § 6 6 2 1 (c) (1 9 8 6 ). 4 T h e IR S a sse sse d a d d itio n a l ta x o f
$ 1 4 ,3 9 7 a n d in te re st o f $ 6 0
, 0 8 7 .6 9 f o r th e W h ite s ’ 1 9 8 4 ta x y e a r , a n d a d d itio n a l

ta x o f $ 1 6 ,8 1 2 a n d in te re st o f $ 5 9 ,2 9 5 .3 4 fo r th e W h ite s’ 1 9 8 5 ta x y e a r. T h e
W h ite s p a id th e a d d itio n a l ta x e s in F e b ru a ry 2 0 0 0 a n d f ile d a n a d m in istra tiv e
cla im fo r re f

u n d o n F e b ru a ry 1 2
, 2 0 0 2

. T h e IR S a sse sse d a d d itio n a l ta x o f
$ 1 4 ,1 5 9 a n d in te re s t o f $ 5 2 ,4 5 9 .6 4 fo r th e Irv in e s ’ 1 9 8 5 ta x y e a r. T h e Irv in e s

p a id th e a d d i tio n a l ta x e s b e g in n in g i n M a y 2 0 0 0 a n d file d a n a d m in i stra tiv e
cla im fo r re fu n d o n M a y 7
, 2 0 0 2

. T h e IR S a sse s se d a d d i tio n a l ta x o f $ 9 ,8 1 7 a n d

in t e re st o f $ 3 1 ,2 9 2 .4 0 fo r K ra e m e r’s 1 9 8 6 ta x y e a r. In F e b r u a ry 2 0 0 1
, th e IR S

a p p lie d a p re v io u s d e p o sit p a id b y K ra e m e r a n d i ssu e d K ra e m e r a re fu n d ;
K ra e m e r f

i l e d a n a d m in istra tiv e cla im fo r re fu n d o n F e b ru a r y 1 1
, 2 0 0 3

. T h e
IR S d id n o t a c t o n a n y o f T a x p a y e rs’ cla im s fo r re f u n d

. In A u g u st 2 0 0 8
, T a x p a y e rs file d th is su it fo r re fu n d o f th e ta x e s a n d in te re st.

In th e ir re f

u n d a ctio n s, th e W h ite s a n d I rv in e s cla im e d th a t t h e

a d d itio n a l ta x e s h a d b e e n a sse sse d a f te r th e sta tu te o f

lim ita tio n s fo r m a k in g

su ch a s s e ssm e n t s h a d e x p ire d ( “ t h e s ta tu te o f lim ita tio n s cla im ”), a n d a ll

T a x p a y e rs cla i m e d th a t th e in te r e st s h o u ld n o t h a v e b e e n co m p u te d a t t h e

e n h a n ce d § 6 6 2 1 (c) p e n a lty ra te (“th e p e n a l ty in t e re st cla im ”). T a x p a y e rs a n d

th e g o v e rn m e n t m o v e d fo r su m m a ry ju d g m e n t. T h e d i s trict co u rt g ra n te d

su m m a r y ju d g m e n t to th e g o v e rn m e n t o n b o th cla i m s, co n clu d in g th a t it la ck e d
ju risd ictio n t o c o n sid e r th e s ta tu t e o f l i m ita tio n s cla i m a n d th a t T a x p a y e rs’

4 Section 6621( c) w as rep ealed in 1989 but ap p lies to the tax years in ques tion. See Wei ner, 389 F. 3d at 159.

4 Case: 12-20523 Document: 00512364111 Page: 4 Date Filed: 09/05/2013No. 12-20523

c l a i m s fo r re fu n d o f p e n a lty in te re st w e re u n tim e l y

. T a x p a y e rs tim e l y

a p p e a le d

. II. S ta tu to r y B a c k g r o u n d

T h is ca se is g o v e rn e d b y t h e T a x E q u ity a n d F isca l R e sp o n sib ility A ct o f

1 9 8 2 (“T E F R A ” ), g e n e ra lly co d ifie d a t 2 6 U .S .C

. § § 6 2 2 1 -6 2 3 3

. S e e g en era lly

W e in er , 3 8 9 F .3 d a t 1 5 4 -5 5 (d e scrib in g T E F R A ’s p ro v isio n s). T E F R A re q u ire s

p a rtn e rsh ip s to file i n fo r m a tio n a l re tu rn s re f le ctin g th e p a rtn e rsh i p ’s in co m e ,
g a i n s, d e d u c tio n s, a n d cre d i ts. Id

. a t 1 5 4

. In d iv id u a l p a rtn e rs th e n re p o rt th e ir

p ro p o rtio n a te sh a re o f th e ite m s o n th e ir o w n t a x re t u rn s. Id

. “T E F R A re q u ire s
th e tre a t m e n t o f a ll p a r tn e rsh ip ite m s t o b e d e te rm in e d a t th e p a r tn e rsh ip

le v e l.” Id

. (citin g 2 6 U .S .C

. § 6 2 2 1 ). “A fte r T E F R A

, th e IR S co u ld a d j u s t

p a r t n e rsh ip ite m s a t a sin g u la r p ro ce e d i n g , a n d th e n su b se q u e n t ly a sse ss a l l

o f th e p a rtn e rs b a s e d u p o n th e a d j u stm e n t to th a t p a rticu la r ite m .” D u ffie

, 6 0 0

F

. 3 d a t 3 6 5 (q u o ta tio n s o m itte d ). “W h i le T E F R A d e fin e s a ‘p a rtn e rsh ip ite m ’

in te ch n ica l te rm s, th e p ro v isio n g e n e ra lly e n co m p a sse s i t e m s ‘m o r e

a p p ro p ria t e ly d e te rm in e d a t th e p a rtn e rsh ip le v e l th a n a t t h e p a rtn e r l e v e l.’”

W e in er , 3 8 9 F

. 3 d a t 1 5 4 (q u o tin g § 6 2 3 1 (a )(3 )). IR S re g u la tio n s f u r th e r cla rify

th a t “p a r tn e rsh ip ite m ” in clu d e s “th e a c c o u n t i n g p ra ctice s a n d t h e le g a l a n d

fa ctu a l d e te rm i n a t io n s th a t u n d e rlie th e d e te rm in a tio n o f th e a m o u n t, tim in g ,

a n d ch a ra cte riza tio n o f ite m s o f in co m e , cre d it, g a in
, lo ss, d e d u ctio n , e tc.” 2 6

C

. F

. R

. § 3 0 1 .6 2 3 1 (a )(3 )-1 (b ). A “n o n p a r t n e rsh ip ite m ,” co n v e rse ly
, is a n ite m
th a t is n o t tre a te d a s a p a rtn e r sh ip ite m

. 2 6 U .S .C

. § 6 2 3 1 (a )(4 )

. “T h e ta x

tre a tm e n t o f n o n p a rtn e rsh ip ite m s r e q u ire s p a rtn e r-sp e cific d e te rm in a tio n s
th a t m u s t b e m a d e a t th e in d iv i d u a l p a rtn e r l e v e l.” D u ffie, 6 0 0 F .3 d a t 3 6 6

. T E F R A a lso in clu d e s a th ird ca te g o ry o f “a ffe cte d ite m s.” A n “a ffe cte d ite m ” is

“a n y i t e m to th e e x te n t su ch i te m is a ffe cte d b y a p a r t n e r sh ip ite m .” 2 6 U .S

. C

. § 6 2 3 1 (a )(5 ); D u f

fie

, 6 0 0 F .3 d a t 3 6 6

. “ A ffe c te d i te m s c a n h a v e b o th

5 Case: 12-20523 Document: 00512364111 Page: 5 Date Filed: 09/05/2013No. 12-20523

p a rtn e rsh ip -it e m a n d n o n p a rtn e rsh ip -ite m co m p o n e n t s.” D u ffie

, 6 0 0 F .3 d a t

3 6 6

. If th e IR S a d

ju sts any partn e rsh i p ite m s o n a p a rtn e rsh ip ’s in fo rm a tio n a l

in c o m e ta x re tu rn , it m u st n o tify th e in d iv id u a l p a rtn e rs b y issu in g a n F P A A

. 2 6 U .S .C

. § 6 2 2 3 ; see D u ffie

, 6 0 0 F .3 d a t 3 6 6

. T h e p a r t n e r s h a v e th e rig h t to

ch a l le n g e t h e F P A

A in a p a rtn e rsh ip -le v e l p ro ce e d in g in th e T a x C o u rt, d istrict

c o u rt, o r th e C o u rt o f F e d e ra l C la im s, a cco rd in g to sp e c ifie d p r o ce d u re s. 2 6

U .S

. C § 6 2 2 6 (a ), (b ); see D u ffie

, 6 0 0 F .3 d a t 3 6 6

. I n a p a rtn e rsh ip -le v e l

p ro ce e d in g , th e co u rt h a s ju risd ictio n to d e te rm in e a ll p a rtn e rsh ip ite m s fo r t h e

ta x y e a r to w h ich th e F P A A r e la te s , in clu d in g t h e a l lo ca tio n o f th o se ite m s

a m o n g th e p a rtn e rs a n d t h e a p p lica b ility o f a n y p e n a lty

. 2 6 U .S .C

. § 6 2 2 6 (f); see
D u ffie

, 6 0 0 F .3 d a t 3 6 7

. If a p a rtn e r i n d i v id u a lly se t tle s h is o r h e r p a rtn e rsh ip

ta x lia b ility w ith th e IR S

, “th e p a rtn e r w ill n o l o n g e r b e a b le to p a rticip a te in

th e p a rtn e rsh ip le v e l litig a tio n , a n d w ill b e b o u n d in ste a d b y th e te rm s o f th e

se ttle m e n t a g re e m e n t.” W ein er, 3 8 9 F

. 3 d a t 1 5 5

. D istrict co u rts g e n e ra lly h a v e su b je c t m a tte r ju risd ictio n o v e r a n
in d iv i d u a l p a rtn e r ’s re fu n d cla im

. 2 8 U

. S

. C

. § § 1 3 4 0
, 1 3 4 6 (a )(1 ); W ein er , 3 8 9

F

. 3 d a t 1 5 5

. T E F R A

, h o w e v e r, d e p riv e s r ef un d co u rts o f ju risd i c tio n o v e r cla im s
“b ro u g h t fo r a re f

u n d a ttrib u ta b le to p a r tn e r s h i p i te m s,” w ith lim ite d

e x c e p tio n s. 2 6 U .S .C

. § 7 4 2 2 (h ). H o w e v e r, “a co u rt d o e s h a v e ju risd ictio n in a

p a rtn e r-le v e l re fu n d a ctio n o v e r p a rtn e rsh ip ite m s th a t w e re co n v e rte d to

n o n p a rtn e rsh i p ite m s th ro u g h a se ttle m e n t w ith th e IR S .” D u f fie

, 6 0 0 F .3 d a t

3 6 7 (citin g 2 6 U .S

. C . § 6 2 3 1 (b )(1 )(C )).

A g a in st th is sta tu to ry b a ck d ro p , w e tu rn to th e sp e cific cla im s a t issu e

.

6 Case: 12-20523 Document: 00512364111 Page: 6 Date Filed: 09/05/2013No. 12-20523

III. Discussion

T h is co u rt re v ie w s a d istrict co u rt’s g ra n t o f s u m m a ry ju d g m e n t d e n o v o

a n d co n sid e rs th e sa m e crite r ia th a t th e d istrict co u rt r e lie d u p o n w h e n
d e cid i n g th e m o tio n

. W ein er , 3 8 9 F

. 3 d a t 1 5 5

- 5 6 (citin g M o n g ru e v

. M

o n sa n to

C o

. , 2 4 9 F .3 d 4 2 2
, 4 2 8 ( 5 th C ir. 2 0 0 1 )). S u m m a ry j u d g m e n t is a p p r o p r i a t e

w h e n “th e re is n o g e n u i n e d isp u te a s to a n y m a te ria l fa ct a n d t h e m o v a n t is

e n title d to ju d g m e n t a s a m a tte r o f la w .” F e d . R

. C iv

. P

. 5 6 (a ). T h is co u rt a l so

re v ie w s a d istrict c o u rt’s d e te rm in a tio n o f su b je ct m a t te r ju risd ictio n d e n o v o

. C a l h o u n C o u n ty
, T

e x

. v

. U n i ted S ta t e s , 1 3 2 F .3 d 1 1 0 0
, 1 1 0 3 (5 th C ir. 1 9 9 8 ).

T h e p a r tie s d o n o t a sse rt th a t th e re a re a n y d isp u te d m a te ria l fa cts o n a p p e a l

. A. The Statute of Limitations Claim

T h e W h ite s a n d th e Irv in e s first a s se rt th a t th e ta x e s a n d in te re st m u s t

b e re fu n d e d b e ca u se th e y w e r e a sse s se d b y th e IR S a fte r th e 2 6 U .S .C

. § 6 5 0 1 (a )

sta tu te o f lim i ta tio n s h a d p a sse d

. S e ctio n 6 5 0 1 (a ) is “th e th re e -y e a r sta tu t e o f

lim ita tio n s w h ich is g e n e ra lly a p p lica b le to th e C o m m issio n e r’s a s se ssm e n t o f

ta x .” C u r r-S

p e c P a rtn ers, L .P

. v

. C o m m ’r o f In tern a l R ev en u e , 5 7 9 F .3 d 3 9 1
, 3 9 5 (5 th C ir. 2 0 0 9 ). T a x p a y e rs a rg u e th a t th e IR S h a d n o a u th o rity to a sse ss

a d d itio n a l ta x a n d in te r e st a g a in s t th e m in 1 9 9 9 a n d 2 0 0 0 b e c a u se th e §

6 5 0 1 (a ) s ta tu te o f lim ita tio n s h a d ru n fo r t h e re le v a n t t a x y e a rs. T h e y co n te n d

th a t 2 6 U .S .C

. § 7 4 2 2 (h ) d o e s n o t b a r ju risd ictio n b e c a u se th e § 6 5 0 1 (a ) sta tu te

o f lim it a t i o n s is a n o n p a rtn e rsh ip ite m b a se d o n t h e sp e cific fa cts o f e a ch

p a rtn e r’s situ a tio n

. T h e d istrict c o u rt g ra n te d su m m a r y j u d g m e n t to t h e

g o v e rn m e n t b e ca u se it c o n cl u d e d t h a t th e sta tu te o f lim i t a t io n s in v o lv e d t h e
d e te r m in a tio n o f a p a rtn e r sh ip ite m a n d it th u s la ck e d ju risd ictio n u n d e r §

7 4 2 2 (h ).

T h e d isp o sitiv e q u e stio n is w h e t h e r th e W h ite s’ a n d th e Irv in e s ’ c l a i m
th a t th e a d d itio n a l ta x a sse ssm e n ts w e re tim e -b a r r e d i s a cla i m fo r a re fu n d

7 Case: 12-20523 Document: 00512364111 Page: 7 Date Filed: 09/05/2013No. 12-20523

a ttrib u ta b le to p a rtn e rsh i p o r n o n p a rtn e rsh ip i te m s

. “If th e re fu n d is

at t r i b ut abl e t o p a rtn e rsh ip i te m s, se ctio n 7 4 2 2 (h ) a p p l ie s a n d d epr i ves t he c our t

o f ju risd ictio n

. If, o n t h e o th e r h a n d
, th e re fu n d is a ttrib u ta b l e t o

n o n p a rtn e rsh i p ite m s, th e n se ctio n 7 4 2 2 (h ) i s irre le v a n t, a n d th e g e n e ra l g ra n t

o f ju risd ictio n is e ffe ctiv e .” A lex a n d er v

. U n ited S ta tes , 4 4 F .3 d 3 2 8
, 3 3 1 (5 th C ir.

1 9 9 5 ). T h i s c la i m a lso in v o lv e s th e sig n ifica n t in te rp la y b e tw e e n § 6 5 0 1 (a ) a n d § 6 2 2 9 (a ), a se p a ra t e p ro v isio n th a t ca n e x te n d th e § 6 5 0 1 ( a ) p e r i o d f o r

p a rtn e rsh ip ite m s. S ee C u rr-S p ec P a rtn e rs , 5 7 9 F .3 d a t 3 9 6

. “F o r p a rtn e rsh ip

ite m s, th e o t h e rw ise a p p l ica b le lim ita tio n s p e rio d o f IR C § 6 5 0 1 (a ) s h a ll n o t

e x p ire b e fo re th e d a te w h ich is 3 y e a rs a fte r th e la t e r o f th e d a te o n w h ich t h e

p a rtn e rsh ip re t u rn w a s f ile d o r th e d a te o n w h i ch it w a s d u e

. ” C u rr-S p ec
P a rtn ers , 5 7 9 F

. 3 d a t 3 9 6 (in te rn a l q u o ta t io n s a n d a lte r a t i o n s o m itte d ); 2 6

U .S

. C

. § 6 2 2 9 (a ). Section 6229 can extend t h e tax assessment period in a variety

of ways, such as when the T MP enters i n t o an agreement with the IRS to extend

the period, § 6229(b)(1) ( B )

, f r a udulent returns a re filed, § 6229(c)(1) or the partnership fails to file a return, § 6229(c)(3).

In Weiner
, this court held that the § 6229 assessme n t p e r i od is a partnership item that c annot be raised in partner-level litigation. 389 F.3d at
157-58; a cco rd K

e en er v

. U

n ited S ta tes , 5 5 1 F .3 d 1 3 5 8
, 1 3 6 3

- 6 4 ( F e d

. C ir. 2 0 0 9 ).

The Weiner c ourt explained that because the § 6229 limitations issue “affects the

p a r t n e r s hip as a whole, it should not be litigated in an individual partner proceeding, as such a r esult would contravene the purposes of TEFRA.” Weiner,

389 F.3d at 157. T a x p a y e rs a rg u e th a t th e y h a v e n o t ra ise d a § 6 2 2 9 a rg u m e n t,

b u t i n s t e a d r e ly o n ly o n § 6 5 0 1

. H o w e v e r, a l l o f T a x p a y e rs’ a tte m p ts to

d istin g u ish W

ein er ig n o re th e fa ct th a t w h e r e a b a sis fo r a § 6 2 2 9 e x te n sio n is

a sse r t e d
, a n y li m i ta tio n s d e te rm in a tio n w ith re g a rd t o § 6 5 0 1 (a ) m u st a l so

8 Case: 12-20523 Document: 00512364111 Page: 8 Date Filed: 09/05/2013No. 12-20523

in v o lv e th e re s o lu t io n o f § 6 2 2 9 , a p a rtn e rsh ip ite m . W h e re b o th a re a t issu e , th e § 6 5 0 1 p e r io d ca n n o t b e se p a ra te d fro m th e § 6 2 2 9 p e rio d

. T h e F e d e ra l C ircu i t h a s issu e d a d e cisio n re so l v in g th is e x a ct issu e
in v o lv in g a n o th e r A M C O R p a rtn e rsh ip w ith re a so n in g th a t w e fin d lo g ica l a n d

p e rsu a siv e

. S ee P ra t i v

. U n ited S ta tes , 6 0 3 F

. 3 d 1 3 0 1
, 1 3 0 7 (F e d

. C ir. 2 0 1 0 ). A s
th e P ra ti co u r t e x p la in e d
, “[s]e c tio n s 6 5 0 1 a n d 6 2 2 9 o p e r a te in ta n d e m to

p ro v id e a sin g l e lim i ta tio n s p e r i o d

. W h e n a n a sse ssm e n t o f ta x in v o lv e s a

p a rtn e rsh ip ite m o r a n a ffe c te d i te m , se ctio n 6 2 2 9 ca n e x te n d th e tim e p e rio d

th a t th e IR S o th e rw ise h a s a v a ila b le u n d e r se c t i o n 6 5 0 1 to m a k e th a t

a sse s sm e n t.” Id

. (citin g A n d a n tech L .L .C

. v

. C o m m ’r

, 3 3 1 F .3 d 9 7 2
, 9 7 6 -7 7 (D .C

. C ir. 2 0 0 3 ); G ra

p ev in e Im

p o rts, L td

. v

. U

n ited S t a tes , 7 1 F e d .C l. 3 2 4
, 3 2 8

-
3 9 (2 0 0 6 )). The Federal Circuit rejected the argument that a t axpayer cou l d

a v o id the jurisdictional bar of § 7422(h) b y raising a s tatute of limit a t i o n s argument u n d e r § 6 501 and failing to mention § 6229. I d

. “ S e ctio n s 6 5 0 1 a n d

6 2 2 9 d o n o t o p e ra te in d e p e n d e n tly to a l l o w a ta x p a y e r to a sse rt o n e in iso la tio n

a n d th e r e b y re n d e r a n o th e rw ise tim e ly a sse ssm e n t u n tim e ly .” I d

. A n

u n p u b lish e d d e cisio n o f t h i s co u rt h a s a lre a d y e x p r e sse d a p p ro v a l o f th is

re a so n in g

. S ee M

a tth ew s v

. U

n ited S ta tes , C iv

. N o

. 0 0 -4 1 3 1
, 2 0 1 0 W L 2 3 0 5 7 5 0 (S .D . T e x . J u n e 8 , 2 0 1 0 ), a ff’d su b n o m . S co tt v . U n ited S ta t es , 4 3 7 F e d . A p p ’x

2 8 1 ( 5 th C ir. 2 0 1 1 ) (“e sse n t ia lly ” a p p r o v in g th e d istrict co u rt’s o p in io n ). W e

a g r e e w ith th e F e d e ra l C ircu it th a t w h e re th e g o v e rn m e n t a sse rts § 6 2 2 9 a s a
b a s i s to e x te n d th e § 6 5 0 1 (a ) sta tu te o f lim ita tio n s, th e cla im fo r re f u n d i s
“a ttrib u ta b le t o ” a p a rtn e rsh ip i t e m a n d § 7 4 2 2 (h ) b a rs co n sid e ra t io n o f t h e
lim ita tio n s cla im

. P ra ti, 6 0 3 F .3 d a t 1 3 0 7 ; M a tth ew s , 2 0 1 0 W L 2 3 0 5 7 5 0
, a t * 4

. P a rtn e rs w e r e re q u i r e d to ra ise th e sta tu te o f lim ita t io n s issu e in t h e

p a rtn e rsh ip -le v e l p ro ce e d in g p rio r to se ttle m e n t a n d a re b a rre d fro m ra isin g it

in th e re fu n d a ctio n

. S ee P ra ti , 6 0 3 F

. 3 d a t 1 3 0 7 & n

. 4

.

9 Case: 12-20523 Document: 00512364111 Page: 9 Date Filed: 09/05/2013No. 12-20523

T a x p a y e rs a rg u e th a t th e IR S d id n o t a ctu a l ly “a sse rt” a n y b a sis fo r §

6 2 2 9 e x te n sio n s o f th e § 6 5 0 1 lim ita t io n s p e r io d

. T h is is in co rre c t. T h e

g o v e rn m e n t h a s a sse rte d t h a t § 6 2 2 9 (b )(1 )(B ) (e x te n sio n s b y a g re e m e n t o f t h e
T M P ), a n d § 6 2 2 9 ( c)(3 ) (in d e f in ite to llin g if n o v a lid p a rtn e rsh ip re tu rn is file d )

p ro v id e a b a sis fo r e x te n d in g th e a s s e ssm e n t p e rio d s fo r e a ch o f th e r e le v a n t

p a rtn e rsh ip s. F u rth e r , in th e p a rtn e rsh ip

- le v e l p ro ce e d in g s , th e T a x C o u rt

fo u n d th a t § 6 2 2 9 h a d e x te n d e d th e a sse ssm e n t p e r i o d s. S ee A g ri-C a l V

en tu re
A sso cia tes, 8 0 T .C .M

. (C C H ) 2 9 5
, 2 0 0 0 W L 1 2 1 1 1 4 7
, a t * 1 6
, * 2 0
, * 2 2

. T a x p a y e rs a re c o rre c t t h a t th e y a re n o t b o u n d b y th e T a x C o u rt A g r i

- C a l

d e cisio n b e ca u se o f th e ir in d iv id u a l se ttle m e n ts. T h u s, t h e y a rg u e th a t u n til

th e g o v e rn m e n t a ctu a l ly p ro v e s th e se b a se s fo r a n e x te n sio n in th e re fu n d

p ro ce e d in g , j u risd ictio n is n o t b a rre d

. H o w e v e r, a re fu n d co u rt l itig a tin g o r r e

litig a t in g a p a rtn e rsh ip ite m , su ch a s th e m e rits o f th e a sse rte d § 6 2 2 9 b a sis f o r

a n e x te n sio n o f th e lim ita tio n s p e rio d
, is e x a ctly t h e re su lt p r o h i b ite d b y
T E F R A

. S ee W

ein er , 3 8 9 F .3 d a t 1 5 8

. W h e re a § 6 2 2 9 b a sis fo r a n e x te n sio n is

a sse r t e d
, q uestions abou t w h ether the partnerships’ returns w ere fraudulent,

contained substantial o m i s s i o n s, were never filed, or were s ubject to any
extensi o n agreements are matters to be determined at the partnership level under TEFRA’s statutory scheme.

T a x p a y e rs a l so a rg u e th a t ju risd ictio n i s n o t b a rre d b e ca u se t h e
lim ita tio n s i s s u e w a s co n v e rte d to a n o n p a rtn e r sh ip ite m in t h e ir se t tle m e n t

a g r e e m e n ts. S ee A lex a n d er , 4 4 F .3 d a t 3 3 1

. T a x p a y e rs’ a rg u m e n t h e re is

fo re clo se d b y W

ein er

. In W

e in er , th is co u rt h e ld th a t th e a s se ssm e n t p e rio d w a s

n o t co n v e rte d to a n o n p a rtn e rsh ip ite m b y th e ta x p a y e rs’ se ttle m e n t w ith th e
IR S w h e re it w a s n o t sp e c ifica lly m e n tio n e d in th e se ttle m e n t. W ein er , 3 8 9 F .3 d

a t 1 5 6 n .2

. A s in W

ein er , th e s e ttle m e n t a g re e m e n t s h e re d o n o t m e n tio n § 6 2 2 9

a n d th u s th e ite m w a s n o t co n v e rte d b y th e se ttle m e n t a g re e m e n ts. Id

.

10 Case: 12-20523 Document: 00512364111 Page: 10 Date Filed: 09/05/2013No. 12-20523

In su m , b e c a u se th e § 6 5 0 1 lim ita tio n s p e rio d a p p lica b le to a n in d iv id u a l

p a rtn e r ca n n o t b e d e te rm in e d w ith o u t re fe r e n ce to th e a sse rte d b a se s f o r

e x t e n sio n s u n d e r § 6 2 2 9
, w h ich is a p a rtn e rsh ip ite m , th e d istrict co u rt la ck e d
ju risd ictio n o v e r th e sta tu t e o f lim ita tio n s cla im u n d e r § 7 4 2 2 (h ). W e a ffirm t h e

g ra n t o f su m m a ry ju d g m e n t to th e g o v e rn m e n t o n th is cla im

. B

. T h e P en a lty In terest C l a im s
T a x p a y e rs n e x t ch a lle n g e t h e p e n a lty i n te re st a sse sse d a g a in st th e m

u n d e r 2 6 U .S .C

. § 6 6 2 1 (c). W h ite a n d Irv in e b rin g th is c l a im i n th e a lte rn a tiv e ,

w h ile th is is K r a e m e r’s o n ly cla im

. S e ctio n 6 6 2 1 (c) im p o se d a n in te re st ra t e o f

1 2 0 % o f th e sta tu to ry ra te o n “a n y su b sta n t ia l u n d e rp a y m e n t a ttrib u ta b le to

ta x m o tiv a te d tra n sa c tio n s.” 2 6 U .S .C

. § 6 6 2 1 (c) (1 9 8 6 ); see D u ffie

, 6 0 0 F .3 d a t

3 7 2 -7 3

. “T h e I R S m a y n o t a sse ss in te re st u n d e r S e ctio n 6 6 2 1 ( c) u n le ss t h e

su b sta n tia l u n d e r p a y m e n t is a ttrib u ta b le to o n e o f th e ta x -m o tiv a te d

tra n sa ctio n s d e fin e d b y sta t u te .” D u f f i e , 6 0 0 F .3 d a t 3 7 3

. “T a x -m o tiv a te d

tra n sa ctio n s in clu d e ‘a n y s h a m o r fra u d u le n t tra n sa ctio n , ’ 2 6 U .S .C

. §

6 6 2 1 (c)(3 )(A )(v ), a n d a n y u se o f a n a c co u n tin g m e th o d th a t m a y re su lt in a

su b sta n tia l d isto rtio n o f in co m e , 2 6 U .S .C

. § 6 6 2 1 ( c ) ( 3 ) ( A )(iv ) .” Id

. Penalty

interest is an affected item, made up of both partn e r s h ip and non-partnership

components. See D uffie

, 600 F.3d at 378. The partnership component is

whether the partnership’s transactions were t a x m otivated. See i d. The two

non- p artnership components of § 6621(c) i nterest are whether t h e individual taxpayer’s underpayment was (1) “ substantial,” defined as being over $1,000,

and (2) “attributable to” a t ax-motivated transaction. S ee id. U nder this rubric,

a claim for refund based on a partnership c o mponent of § 6621(c) interest is jurisdictionally barred un d e r § 7 422(h), but a claim contesting o ne of the nonpartnership items can be adjudicated by a refund court. I d.; see Weiner
, 389 F.3d

11 Case: 12-20523 Document: 00512364111 Page: 11 Date Filed: 09/05/2013No. 12-20523

at 159-60 (determining whether the underpayment was “ attributable t o” a taxmotivated transaction).

T a x p a y e rs a sse rt th a t § 6 6 2 1 (c) p e n a lty i n te r e s t ca n n o t b e im p o se d a s a

m a tte r o f la w b e ca u se th e re w a s n o p rio r b in d in g d e te rm in a tio n t h a t a n y o f t h e

p a rtn e rsh ip s’ t r a n s a ctio n s w e re “ta x m o tiv a te d tra n sa ctio n s.” T h e g o v e rn m e n t

a g a in a rg u e s t h a t t h e d istrict co u rt la ck e d ju risd ictio n to co n sid e r t h is issu e
b e ca u s e w h e th e r a p a rtn e rsh ip e n g a g e d i n ta x

- m o t iv a t e d t r a n s a ctio n s is a

p a r t n e r s h ip ite m , a n d th a t e v e n if th e co u rt h a d ju risd ictio n , t h e cla im s f o r

re fu n d a re co m p u ta tio n a l a d ju stm e n ts g o v e r n e d b y a sh o r t e n e d sta tu te o f

lim ita tio n s a n d w e re n o t t i m e l y file d

. A f te r in itia lly a g re e in g w ith t h e
T a x p a y e rs th a t th e co u rt h a d ju risd i c tio n a n d th a t c i r c u i t p r e ce d e n t re q u ire d

re fu n d o f T a x p a y e rs’ § 6 6 2 1 (c) in te re s t, th e d istrict co u rt re c o n sid e re d a n d

g ra n te d su m m a ry ju d g m e n t to th e g o v e rn m e n t o n th e g ro u n d s th a t th e cla im s
fo r re fu n d w e re u n tim e ly

. T h e gover nment i s c or r ec t t hat wh e th e r a p a r t n e r sh ip ’ s tra n sa ctio n is ta x

m o tiv a te d is a p a rtn e rsh ip i te m w h ich a re fu n d co u rt d o e s n o t h a v e ju risd ictio n

to d e te rm i n e

. D u ffie

, 6 0 0 F

. 3 d a t 3 7 8 -7 9

. H o w e v e r, th e q u e stio n T a x p a y e rs

ra ise is d iffe re n t; th e y a rg u e th a t n o ta x -m o t iv a te d d e te rm in a tio n w a s a ctu a lly

m a d e in a n a p p lica b le p a rtn e rsh ip p ro ce e d in g o r in th e ir se ttle m e n t s, a n d th u s
th a t th e r e h a s b e e n n o ta x -m o ti v a t e d tra n sa ctio n d e te rm i n a tio n a t a ll. T h e

g o v e rn m e n t re lie s o n D u ffie t o e sse n tia lly a rg u e t h a t th e d i s trict co u rt la ck e d
ju risd ictio n e v e n t o d e te r m i n e w h eth er a ta x

- m o tiv a te d d e t e rm in a tio n w a s

m a d e

. D u ffie d o e s n o t su p p o rt th is co n clu sio n

. T h e D u f fie co u rt l o o k e d to t h e

p a rtn e rsh ip -le v e l m e rits d e c isio n in th e T a x C o u rt, w h ich fo u n d th a t t h e

p a rtn e rsh ip ’s tra n sa ctio n s w e re sh a m s a n d la ck e d e co n o m ic su b sta n ce , a n d

co n c lu d e d th a t th e d e te rm in a tio n w a s a su fficie n t fin d in g th a t th e tra n s a ctio n s

w e re ta x -m o tiv a t e d a n d w a s b in d in g o n th e u n se ttle d p a r tn e rs s e e k i n g re fu n d s.

12 Case: 12-20523 Document: 00512364111 Page: 12 Date Filed: 09/05/2013No. 12-20523

6 0 0 F .3 d a t 3 7 8 -8 0
, 3 8 3

. T h e co u rt th e n e x p la in e d th a t th e D u ffie s ’ cla im w a s

a tt r i but abl e t o t he T ax Cour t ’ s d e te rm in a t i o n th a t th e t ra n sa ctio n s w e re sh a m s,

a n d
, “ B e ca u se th e n a tu re o f a p a rtn e rsh ip ’s a ctiv itie s— w h e th e r th e y a re sh a m

tra n sa ctio n s— i s th e p a rtn e rsh ip -ite m co m p o n e n t o f a n a f f e cte d ite m , t h e
D u ffie s’ r e fu n d cla im is b a se d o n th e d e te rm in a tio n o f a p a rtn e rsh i p ite m .” Id

.

a t 3 8 3

. T h e co u rt’s h o ld in g t h a t i t la ck e d ju risd i c tio n o v e r th e re fu n d cla im s
cle a rly h in g e d o n its fin d in g th a t a su fficie n t ta x

- m o tiv a te d tra n sa ctio n
d e te rm in a tio n w a s a lre a d y m a d e a t th e p a rtn e rsh ip le v e l. S ee id

. T h is situ a tio n is n o t lik e th e o n e in D u ffie. A refund court need not litigate

the m erits of any partnership item to decide w hether the required tax-motivated

determination has b een made. See Duffie

, 600 F.3d at 383; Weiner
, 389 F.3d at

162-63 ; s ee also B ush v. United States

, 717 F.3d 920, 9 28-29 ( Fed. Cir. 2013) (explaining that whether a tax-motivated transaction was made in a p revious partnership-level p roceeding is a jurisdictional fact). The district court does not have jurisdiction to revisit whether a partnership’s transactions were actually
tax-motivated, nor could the district court make that determination in the first

i n s tance. H owever, the district court d oes h ave jurisdiction to determin e

w h e ther such a finding has previously been made, either in t he partnersh i p

- l e v e l
proceedi n g s o r i n a settlement. We thus find that § 7422(h) does not bar jurisdiction over Taxpayers’ claims t hat there was no tax-mot i v a ted determination supporting § 6621(c) penalty interest.

N e x t , th e g o v e rn m e n t a rg u e s th a t e v e n if t h e d istric t c o u rt h a d
ju risd ictio n , T a x p a y e rs’ re fu n d cla im s w e re n o t tim e ly f ile d

. F a ilu re to tim e ly

file a re fu n d c la im d e p riv e s th e co u rt o f su b je c t m a tte r ju risd ictio n fo r la ck o f

a v a l id w a iv e r o f s o v e re ig n im m u n ity

. D u f fie

, 6 0 0 F .3 d a t 3 8 4

. T h e r e g u l a r
d e a d lin e fo r f

ilin g a re fu n d cla im is tw o y e a rs fro m th e d a te o f p a y m e n t o r th re e

y e a rs fro m th e d a te o f filin g o f a ta x re tu rn , w h ich e v e r is l a te r. 2 6 U .S

. C

. §

6 5 1 1 (a ); see D u ffie

, 6 0 0 F .3 d a t 3 8 5

. Section 6230, however, su p p l a n t s the

13 Case: 12-20523 Document: 00512364111 Page: 13 Date Filed: 09/05/2013No. 12-20523

normal refund procedures and p r o v i d e s that for “ [ c]laims a rising out of

erroneous computations,” t a x p a y e r s have six months from the date of

notification t o bring a refund claim, rather than the normal two years. See 26 U.S.C. § 6230(a), (c)(2)(A).

The question of whether the penalty interest refund claims w ere covered by the shortened deadlines in § 6230 is dependent o n the question of w hether the challenged adjustments i ncluding penalty i nterest are c o mputational or
substan t i v e

. See Duffie

, 600 F.3d at 385. A co m p u ta tio n a l a d ju stm e n t to a n
in d iv i d u a l p a rtn e r’s ta x l i a b i l i ty ca n b e m a d e a t th e co n clu sio n o f t h e

p a rtn e rsh ip le v e l p ro c e e d in g “ w ith o u t a n y fa ctu a l d e te rm in a t io n a t th e p a rtn e r
le v e l.” D u ffie

, 6 0 0 F .3 d a t 3 6 6 ; see 2 6 U .S .C

. § 6 2 3 1 ( a )(6 )

. A su b sta n tiv e a ffe cte d

ite m , h o w ever , r e qui r es “ f ac t

- f i ndi ng par t i c ul ar to t h e in d iv id u a l p a rtn e r” b e fo re

a n y a d ju stm e n t t o ta x lia b ility ca n b e m a d e

. D u ffie

, 6 0 0 F .3 d a t 3 6 6

. Computational and substant i v e a f f e c t e d i t e m s e a c h r e q u i re different assessment procedures. Id. at 385. For computational affected items, the IRS need not issue

a statutory notice o f d eficiency, and § 6230 procedures and shortened time
requirements apply. Id. By contrast, if the a djustment is a substantive affected
item, the IRS must follow the normal deficiency procedures, including sending

a notice of d e ficiency, a nd the normal § 6511(a) statute of limitations applies. Id. 5
Where, a s here, Taxpayers’ refund claim is de p e n d e n t on whether there

was a sufficient tax-motivated transaction determination, a nd thus whether

t h e ir underpayment was “attributable to” a tax-motivated transaction, se e
Weiner
, 3 89 F.3d at 1 59-60, we find that § 6621( c ) interest is a substantive

affected item. This hol d i n g i s supported b y relevant c ase law. See Duffie

, 600

F.3d at 386 (analyzing w hether penalty i nterest was computational i n t h a t c a se) ;

5 The IRS as s es s ed ad d itional taxes and p enalties agains t Taxp ayers by notice of

com p utational ad

jus tm ent rather than by s end ing a notice of d ef iciency. H ow ever, w e reject
any argum ent that the IRS’s chos en m ethod of as s es s m ent is d eterm inative.

14 Case: 12-20523 Document: 00512364111 Page: 14 Date Filed: 09/05/2013No. 12-20523

see also Weiner
, 389 F.3d at 159-62 (analyzing whether an underpaym e n t is

“attributable to” dis a l l owed d eductions); McGann v. United States

, 76 Fed. Cl.
745, 751, 754-59 (Fed. Cl. 2007). In D uffie

, t hough ultimately determining that

the adjustments at issue in that case w ere c o m p u t a tional, this court first

determined w h e t h e r t he Tax Court’s tax-motivated transaction determination

was sufficient as a matter o f law. Duff i e , 600 F.3d at 378-80, 383. The Duffie

court found that the tax-motivated transaction determination did not require a finding that an individual partner lacked a profit motive when e ngaging in the

relevant tra n s a ction, and thus r ejected the taxpayers’ argument t h at the taxmotivated transaction determination was insufficient

. See Duffie

, 600 F.3d at

378. After making that determination, the “only issue ” w as w hether the underpayment attributable to tax-motivated t ransactions was “substantial,” i.e.

whether it was o v e r $1,000; “clearly a computational r ather than a substantive

issue.” 600 F.3d a t 386. H ere, however, Taxpayers’ c laims f or refund assert that

their underpayment was not attributable to any t r a n s a c tion found t o be taxmotivated. This i s a non-partnership component of § 6 621(c) interest. See Duffie

, 6 00 F .3d a t 378. Further, answering this question requires a nalysis of

substantive issues, i ncluding review and application of each individual p artner’s

s e t t l e m e nt. See W

einer
, 389 F.3d at 162-63. These c laims require m ore than

mere computations r eflecting the treatment of partnership items. They are thus

substantive and n o t computational, and T axpayers claims are not governed by § 6230. We h old that Taxpayers’ claims for refund of pen a l t y i n t e r e st were timely filed. 6

Both pa r t i es a gree that if the d i strict court had jurisdiction o ver Taxpayers’ penalty interest claims and those c l a i m s w e r e t i m ely, Weiner dictates

6 B ecaus e w e find that the claim s w ere tim ely f iled
, w e need not reach Tax p a y e r s ’ ad d itional argum ent that if § 6230 ap p lies
, the notices of com p utational ad jus tm ent s ent by the IRS w ere not ad equate to s tart the running of the statute of lim itations

.
15 Case: 12-20523 Document: 00512364111 Page: 15 Date Filed: 09/05/2013No. 12-20523

that Taxpayers win on the m erits of those claims. T h e F P A A s in W ein er liste d

se v e ra l in d e p e n d e n t b a s e s fo r d isa llo w in g th e d e d u ctio n s, o n ly s o m e o f w h ich

w e r e ta x -m o t iv a te d tra n sa ctio n f i n d i n g s , th e ta x p a y e rs se ttle d a n d th u s

re m o v e d th e n e e d f

o r a b in d in g m e rits d e te rm in a tio n o n a n y o f t h e g ro u n d s f o r
d isa llo w a n ce , a n d th e se ttle m e n ts in clu d e d n o s p e cific fin d i n g s re g a rd in g t h e

ta x -m o tiv a te d t r a n s a ctio n issu e

. S ee W ein er , 3 8 9 F .3 d a t 1 6 2 -6 3

. T h e W ein er

co u r t f o u n d th a t in su ch a situ a tio n , “[t]h e re is n o w a y , g i v e n th e m u ltip l e

re a so n s p ro v id e d f

o r th e d isa llo w a n ce in th e F P A A s, to d e te r m in e w h e th e r t h e

u n d e r p a y m e n ts a re ‘a ttrib u ta b le to ’ a ta x m o tiv a te d tra n s a ctio n .” Id

. T h e
situ a tio n is id e n tica l h e re

. Weiner thus dictates that the a ssessment of § 6621(c)
penalty interest against T axpayers was erroneous as a matter o f law

. A lth o u g h

o th e r circu its h a v e ta k e n a d iffe re n t a p p r o a c h
, s e e e.g

. , K een er , 5 5 1 F .3 d a t 1 3 6 7
, W e in er is co n tro llin g in th i s circu it. W e th e re fo re re v e rse th e g ra n t o f su m m a ry ju d g m e n t t o th e g o v e r n m e n t a n d r e n d e r ju d g m e n t in fa v o r o f T a x p a y e rs o n th is

issu e

. IV. Conclusion

For the foregoing reasons, we AFFIRM the district court’s grant of

summary judgment t o the government o n T a x p ayers’ statute of limitations

claims. We REVERSE the di s t r i c t court’s g rant of summary judgment to the

g o v ernment and RENDER judgment in favor o f Taxpayers’ on their pena l t y
interest claims. W e R E M A N D fo r a n y fu rth e r n e ce ssa ry p ro ce e d in g s, su ch a s

w h e th e r th e re is a n y re m a in in g issu e re g a rd in g th e a m o u n t to b e re fu n d e d to

T a x p a y e rs.

16 Case: 12-20523 Document: 00512364111 Page: 16 Date Filed: 09/05/2013