IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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:

Billy and Ina White, John and Lynda Irvine, and Kenneth Kraemer

1

(collectively “Taxpayers”) assert that the Internal Revenue Service (“IRS”)

erroneously assessed additional taxes and interest against them in connection

with their investments in various partnerships in the 1980s. Taxpayers seek

refunds of the federal income taxes and penalty interest paid. Taxpayers assert

that the IRS’s assessment of additional taxes fell outside the applicable statute

of limitations and that the IRS erroneously applied penalty interest. We hold

United States Court of Appeals

Fifth Circuit

F I L E D

September 5, 2013

Lyle W. Cayce

Clerk

1 Kraemer’s last name is spelled differently in different documents in this litigation.

It is spelled as “Kraemer” in the case caption and in the original complaint, and as “Kramer”

in Appellants’ briefing. In this opinion, we adopt the spelling in the case caption.

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No. 12-20523

that the district court lacked jurisdiction over the statute of limitations claims

but did have jurisdiction over the penalty interest claims and that penalty

interest was erroneously assessed.

I. Factual and Procedural Background

This tax refund suit is one among several arising from a series of limited

partnerships managed by American Agri-Corp (“AMCOR”) in the 1980s. In an

earlier AMCOR-related case, we explained the background: 

In the early 1980s, AMCOR organized a number of limited

partnerships for which it acted as general partner. These

partnerships had as stated goals acquiring agricultural land,

investing in agricultural ventures, and growing crops. AMCOR

solicited investments from high income professionals across the

country. Each partner in an AMCOR partnership would receive a

projected tax loss from crops planted in the first year of roughly

twice that partner’s investment. Investors paid the farming

expenses up front and deducted the amount invested on their tax

returns. The next year, when the crops were harvested, the

amount of loss in excess of the amount invested would be subject to

taxes. However, the farming expenses typically exceeded any

income realized from the farming activities. In 1987, the IRS began

an investigation and audit into the AMCOR partnerships to

determine whether they were impermissible tax shelters.

Duffie v. United States, 600 F.3d 362, 367 (5th Cir. 2010) (footnote omitted); see

also Weiner v. United States, 389 F.3d 152, 153 (5th Cir. 2004) (describing

similar AMCOR partnerships).

These Taxpayers were partners in AMCOR limited partnerships in the

1980s. Billy White invested as a limited partner in Texas Farm Venturers in

1984 and in Houston Farm Associates-II in 1985. John Irvine invested as a

limited partner in Agri-Venture Fund in 1985.

2 Kenneth Kraemer invested as

2 Although Lynda Irvine and Ina White were not partners in the AMCOR partnerships,

each of them filed a joint tax return with their husbands for each of the relevant tax years,

thus becoming jointly and severally liable for the tax reportable on those returns. See 26

U.S.C. § 6013(d)(3).

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a limited partner in Rancho California Partners II in 1986. All Taxpayers

reported their proportionate share of their respective partnerships’ losses in the

relevant tax years. 

In 1990 and 1991, the IRS issued a Notice of Final Partnership

Administrative Adjustment (“FPAA”) for the relevant tax years to the tax

matters partners (“TMP”)

3

of each of the partnerships. The FPAAs disallowed

100% of each partnership’s farming expenses and other deductions. The FPAAs

listed several reasons for disallowing the partnerships’ deductions, including,

inter alia, IRS determinations that the partnerships engaged in a series of sham

transactions, that the partnerships’ activities lacked economic substance, that

the partnerships did not actually engage in farming activities, and that the

partnerships had not substantiated their expenses. The TMPs for the

partnerships did not challenge the FPAAs but other partners filed Tax Court

suits contesting each FPAA, including claiming thatthe FPAAs were untimely. 

All partners initially became parties to the partnership-level suits. See 26

U.S.C. § 6226(c). These Tax Court suits were eventually consolidated with

other similar AMCOR-partnership cases and the Tax Court issued a decision

determining that each FPAA issued to the partnerships was timely pursuant

to 26 U.S.C. § 6229. See Agri-Cal Venture Associates v. Commissioner, 80

T.C.M. (CCH) 295, 2000 WL 1211147, at *16, *20, *22 (T.C. 2000). In July

2001, a settled stipulated decision was entered in each Tax Court suit. 

In 1999 and 2000, during the pendency of the Tax Court suits and before

the partnership-level stipulated settlements, the Whites, the Irvines and

Kraemer individually settled with the IRS. The settlement agreements

disallowed only a portion of the farming deductions, as opposed to 100%

3

“A tax matters partner is the partner designated to act as a liaison between the

partnership and the IRS in administrative proceedings and as the representative of the

partnership in judicial proceedings.” Duffie, 600 F.3d at 366 n.1.

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disallowance. After accepting Taxpayers’ settlements, the IRS assessed

additional tax liability against each Taxpayer, including penalty interest under

§ 6621(c). Section 6621(c) imposed an interest rate of 120% of the statutory

rate on “any substantial underpayment attributable to tax motivated

transactions.” 26 U.S.C. § 6621(c) (1986).4 The IRS assessed additional tax of

$14,397 and interest of $60,087.69 for the Whites’ 1984 tax year, and additional

tax of $16,812 and interest of $59,295.34 for the Whites’ 1985 tax year. The

Whites paid the additional taxes in February 2000 and filed an administrative

claim for refund on February 12, 2002. The IRS assessed additional tax of

$14,159 and interest of $52,459.64 for the Irvines’ 1985 tax year. The Irvines

paid the additional taxes beginning in May 2000 and filed an administrative

claim for refund on May 7, 2002. The IRS assessed additional tax of $9,817 and

interest of $31,292.40 for Kraemer’s 1986 tax year. In February 2001, the IRS

applied a previous deposit paid by Kraemer and issued Kraemer a refund;

Kraemer filed an administrative claim for refund on February 11, 2003. The

IRS did not act on any of Taxpayers’ claims for refund. In August 2008,

Taxpayers filed this suit for refund of the taxes and interest.

In their refund actions, the Whites and Irvines claimed that the

additional taxes had been assessed after the statute of limitations for making

such assessments had expired (“the statute of limitations claim”), and all

Taxpayers claimed that the interest should not have been computed at the

enhanced § 6621(c) penalty rate (“the penalty interest claim”). Taxpayers and

the government moved for summary judgment. The district court granted

summary judgment to the government on both claims, concluding that it lacked

jurisdiction to consider the statute of limitations claim and that Taxpayers’

4 Section 6621(c) was repealed in 1989 but applies to the tax years in question. See

Weiner, 389 F.3d at 159.

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claims for refund of penalty interest were untimely. Taxpayers timely

appealed.

II. Statutory Background

This case is governed by the Tax Equity and Fiscal Responsibility Act of

1982 (“TEFRA”), generally codified at 26 U.S.C. §§ 6221-6233. See generally

Weiner, 389 F.3d at 154-55 (describing TEFRA’s provisions). TEFRA requires

partnerships to file informational returns reflecting the partnership’s income,

gains, deductions, and credits. Id. at 154. Individual partners then report their

proportionate share of the items on their own tax returns. Id. “TEFRA requires

the treatment of all partnership items to be determined at the partnership

level.” Id. (citing 26 U.S.C. § 6221). “After TEFRA, the IRS could adjust

partnership items at a singular proceeding, and then subsequently assess all

of the partners based upon the adjustment to that particular item.” Duffie, 600

F.3d at 365 (quotations omitted). “While TEFRA defines a ‘partnership item’

in technical terms, the provision generally encompasses items ‘more

appropriately determined at the partnership level than at the partner level.’”

Weiner, 389 F.3d at 154 (quoting § 6231(a)(3)). IRS regulations further clarify

that “partnership item” includes “the accounting practices and the legal and

factual determinations that underlie the determination of the amount, timing,

and characterization of items of income, credit, gain, loss, deduction, etc.” 26

C.F.R. § 301.6231(a)(3)-1(b). A “nonpartnership item,” conversely, is an item

that is not treated as a partnership item. 26 U.S.C. § 6231(a)(4). “The tax

treatment of nonpartnership items requires partner-specific determinations

that must be made at the individual partner level.” Duffie, 600 F.3d at 366. 

TEFRA also includes a third category of “affected items.” An “affected item” is

“any item to the extent such item is affected by a partnership item.” 26 U.S.C.

§ 6231(a)(5); Duffie, 600 F.3d at 366. “Affected items can have both

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partnership-item and nonpartnership-item components.” Duffie, 600 F.3d at

366.

If the IRS adjusts any partnership items on a partnership’s informational

income tax return, it must notify the individual partners by issuing an FPAA.

26 U.S.C. § 6223; see Duffie, 600 F.3d at 366. The partners have the right to

challenge the FPAA in a partnership-level proceeding in the Tax Court, district

court, or the Court of Federal Claims, according to specified procedures. 26

U.S.C § 6226(a), (b); see Duffie, 600 F.3d at 366. In a partnership-level

proceeding, the court has jurisdiction to determine all partnership items for the

tax year to which the FPAA relates, including the allocation of those items

among the partners and the applicability of any penalty. 26 U.S.C. § 6226(f); see

Duffie, 600 F.3d at 367. If a partner individually settles his or her partnership

tax liability with the IRS, “the partner will no longer be able to participate in

the partnership level litigation, and will be bound instead by the terms of the

settlement agreement.” Weiner, 389 F.3d at 155. 

District courts generally have subject matter jurisdiction over an

individual partner’s refund claim. 28 U.S.C. §§ 1340, 1346(a)(1); Weiner, 389

F.3d at 155. TEFRA, however, deprives refund courts of jurisdiction over claims

“brought for a refund attributable to partnership items,” with limited

exceptions. 26 U.S.C. § 7422(h). However, “a court does have jurisdiction in a

partner-level refund action over partnership items that were converted to

nonpartnership items through a settlement with the IRS.” Duffie, 600 F.3d at

367 (citing 26 U.S.C. § 6231(b)(1)(C)). 

Against this statutory backdrop, we turn to the specific claims at issue.

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III. Discussion

This court reviews a district court’s grant of summary judgment de novo

and considers the same criteria that the district court relied upon when

deciding the motion. Weiner, 389 F.3d at 155-56 (citing Mongrue v. Monsanto

Co., 249 F.3d 422, 428 (5th Cir. 2001)). Summary judgment is appropriate

when “there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). This court also

reviews a district court’s determination of subject matter jurisdiction de novo. 

Calhoun County, Tex. v. United States, 132 F.3d 1100, 1103 (5th Cir. 1998). 

The parties do not assert that there are any disputed material facts on appeal.

A. The Statute of Limitations Claim

The Whites and the Irvines first assert that the taxes and interest must

be refunded because they were assessed by the IRS after the 26 U.S.C. §6501(a)

statute of limitations had passed. Section 6501(a) is “the three-year statute of

limitations which is generally applicable to the Commissioner’s assessment of

tax.” Curr-Spec Partners, L.P. v. Comm’r of Internal Revenue, 579 F.3d 391, 395

(5th Cir. 2009). Taxpayers argue that the IRS had no authority to assess

additional tax and interest against them in 1999 and 2000 because the §

6501(a) statute of limitations had run for the relevant tax years. They contend

that 26 U.S.C. § 7422(h) does not bar jurisdiction because the § 6501(a) statute

of limitations is a nonpartnership item based on the specific facts of each

partner’s situation. The district court granted summary judgment to the

government because it concluded that the statute of limitations involved the

determination of a partnership item and it thus lacked jurisdiction under §

7422(h). 

The dispositive question is whether the Whites’ and the Irvines’ claim

that the additional tax assessments were time-barred is a claim for a refund

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attributable to partnership or nonpartnership items. “If the refund is

attributable to partnership items, section 7422(h) applies and deprives the court

of jurisdiction. If, on the other hand, the refund is attributable to

nonpartnership items, then section 7422(h) is irrelevant, and the general grant

of jurisdiction is effective.” Alexander v. United States, 44 F.3d 328, 331 (5th Cir.

1995). This claim also involves the significant interplay between § 6501(a) and

§ 6229(a), a separate provision that can extend the § 6501(a) period for

partnership items. See Curr-Spec Partners, 579 F.3d at 396. “For partnership

items, the otherwise applicable limitations period of IRC § 6501(a) shall not

expire before the date which is 3 years after the later of the date on which the

partnership return was filed or the date on which it was due.” Curr-Spec

Partners, 579 F.3d at 396 (internal quotations and alterations omitted); 26

U.S.C. § 6229(a). Section 6229 can extend the tax assessment period in a variety

of ways, such as when the TMP enters into an agreement with the IRS to extend

the period, § 6229(b)(1)(B), fraudulent returns are filed, § 6229(c)(1) or the

partnership fails to file a return, § 6229(c)(3). 

In Weiner, this court held that the § 6229 assessment period is a

partnership item that cannot be raised in partner-level litigation. 389 F.3d at

157-58; accord Keener v. United States, 551 F.3d 1358, 1363-64 (Fed. Cir. 2009). 

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

partnership as a whole, it should not be litigated in an individual partner

proceeding, as such a result would contravene the purposes of TEFRA.” Weiner,

389 F.3d at 157. Taxpayers argue that they have not raised a § 6229 argument,

but instead rely only on § 6501. However, all of Taxpayers’ attempts to

distinguish Weiner ignore the fact that where a basis for a § 6229 extension is

asserted, any limitations determination with regard to § 6501(a) must also

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involve the resolution of § 6229, a partnership item. Where both are at issue,

the § 6501 period cannot be separated from the § 6229 period. 

The Federal Circuit has issued a decision resolving this exact issue

involving another AMCOR partnership with reasoning that we find logical and

persuasive. See Prati v. United States, 603 F.3d 1301, 1307 (Fed. Cir. 2010). As

the Prati court explained, “[s]ections 6501 and 6229 operate in tandem to

provide a single limitations period. When an assessment of tax involves a

partnership item or an affected item, section 6229 can extend the time period

that the IRS otherwise has available under section 6501 to make that

assessment.” Id. (citing Andantech L.L.C. v. Comm’r, 331 F.3d 972, 976-77

(D.C. Cir. 2003); Grapevine Imports, Ltd. v. United States, 71 Fed.Cl. 324, 328-

39 (2006)). The Federal Circuit rejected the argument that a taxpayer could

avoid the jurisdictional bar of § 7422(h) by raising a statute of limitations

argument under § 6501 and failing to mention § 6229. Id. “Sections 6501 and

6229 do not operate independently to allow a taxpayer to assert one in isolation

and thereby render an otherwise timely assessment untimely.” Id. An

unpublished decision of this court has already expressed approval of this

reasoning. See Matthews v. United States, Civ. No. 00-4131, 2010 WL 2305750

(S.D. Tex. June 8, 2010), aff’d sub nom. Scott v. United States, 437 Fed. App’x

281 (5th Cir. 2011) (“essentially” approving the district court’s opinion). We

agree with the Federal Circuit that where the government asserts § 6229 as a

basis to extend the § 6501(a) statute of limitations, the claim for refund is

“attributable to” a partnership item and § 7422(h) bars consideration of the

limitations claim. Prati, 603 F.3d at 1307; Matthews, 2010 WL 2305750, at *4.

Partners were required to raise the statute of limitations issue in the

partnership-level proceeding prior to settlement and are barred from raising it

in the refund action. See Prati, 603 F.3d at 1307 & n.4. 

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Taxpayers argue that the IRS did not actually “assert” any basis for §

6229 extensions of the § 6501 limitations period. This is incorrect. The

government has asserted that § 6229(b)(1)(B) (extensions by agreement of the

TMP), and § 6229(c)(3) (indefinite tolling if no valid partnership return is filed)

provide a basis for extending the assessment periods for each of the relevant

partnerships. Further, in the partnership-level proceedings, the Tax Court

found that § 6229 had extended the assessment periods. See Agri-Cal Venture

Associates, 80 T.C.M. (CCH) 295, 2000 WL 1211147, at *16, *20, *22. 

Taxpayers are correct that they are not bound by the Tax Court Agri-Cal

decision because of their individual settlements. Thus, they argue that until

the government actually proves these bases for an extension in the refund

proceeding, jurisdiction is not barred. However, a refund court litigating or relitigating a partnership item, such as the merits of the asserted § 6229 basis for

an extension of the limitations period, is exactly the result prohibited by

TEFRA. See Weiner, 389 F.3d at 158. Where a § 6229 basis for an extension is

asserted, questions about whether the partnerships’ returns were fraudulent,

contained substantial omissions, were never filed, or were subject to any

extension agreements are matters to be determined at the partnership level

under TEFRA’s statutory scheme.

Taxpayers also argue that jurisdiction is not barred because the

limitations issue was converted to a nonpartnership item in their settlement

agreements. See Alexander, 44 F.3d at 331. Taxpayers’ argument here is

foreclosed by Weiner. In Weiner, this court held that the assessment period was

not converted to a nonpartnership item by the taxpayers’ settlement with the

IRS where it was not specifically mentioned in the settlement. Weiner, 389 F.3d

at 156 n.2. As in Weiner, the settlement agreements here do not mention § 6229

and thus the item was not converted by the settlement agreements. Id.

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In sum, because the § 6501 limitations period applicable to an individual

partner cannot be determined without reference to the asserted bases for

extensions under § 6229, which is a partnership item, the district court lacked

jurisdiction over the statute of limitations claim under § 7422(h). We affirm the

grant of summary judgment to the government on this claim.

B. The Penalty Interest Claims

Taxpayers next challenge the penalty interest assessed against them

under 26 U.S.C. § 6621(c). White and Irvine bring this claim in the alternative,

while this is Kraemer’s only claim. Section 6621(c) imposed an interest rate of

120% of the statutory rate on “any substantial underpayment attributable to

tax motivated transactions.” 26 U.S.C. § 6621(c) (1986); see Duffie, 600 F.3d at

372-73. “The IRS may not assess interest under Section 6621(c) unless the

substantial underpayment is attributable to one of the tax-motivated

transactions defined by statute.” Duffie, 600 F.3d at 373. “Tax-motivated

transactions include ‘any sham or fraudulent transaction,’ 26 U.S.C. §

6621(c)(3)(A)(v), and any use of an accounting method that may result in a

substantial distortion of income, 26 U.S.C. § 6621(c)(3)(A)(iv).” Id. Penalty 

interest is an affected item, made up of both partnership and non-partnership

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

whether the partnership’s transactions were tax motivated. See id. The two

non-partnership components of § 6621(c) interest are whether the individual

taxpayer’s underpayment was (1) “substantial,” defined as being over $1,000,

and (2) “attributable to” a tax-motivated transaction. See id. Under this rubric,

a claim for refund based on a partnership component of § 6621(c) interest is

jurisdictionally barred under § 7422(h), but a claim contesting one of the nonpartnership items can be adjudicated by a refund court. Id.; see Weiner, 389 F.3d

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

Taxpayers assert that § 6621(c) penalty interest cannot be imposed as a

matter of law because there was no prior binding determination that any of the

partnerships’ transactions were “tax motivated transactions.” The government

again argues that the district court lacked jurisdiction to consider this issue

because whether a partnership engaged in tax-motivated transactions is a

partnership item, and that even if the court had jurisdiction, the claims for

refund are computational adjustments governed by a shortened statute of

limitations and were not timely filed. After initially agreeing with the

Taxpayers that the court had jurisdiction and that circuit precedent required

refund of Taxpayers’ § 6621(c) interest, the district court reconsidered and

granted summary judgment to the government on the grounds that the claims

for refund were untimely. 

The governmentis correctthat whether a partnership’s transaction is taxmotivated is a partnership item which a refund court does not have jurisdiction

to determine. Duffie, 600 F.3d at 378-79. However, the question Taxpayers

raise is different; they argue that no tax-motivated determination was actually

made in an applicable partnership proceeding or in their settlements, and thus

that there has been no tax-motivated transaction determination at all. The

government relies on Duffie to essentially argue that the district court lacked

jurisdiction even to determine whether a tax-motivated determination was

made. Duffie does not support this conclusion. The Duffie court looked to the

partnership-level merits decision in the Tax Court, which found that the

partnership’s transactions were shams and lacked economic substance, and

concluded that the determination was a sufficient finding that the transactions

were tax-motivated and was binding on the unsettled partners seeking refunds.

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600 F.3d at 378-80, 383. The court then explained that the Duffies’ claim was

attributable to the Tax Court’s determination that the transactions were shams,

and, “Because the nature of a partnership’s activities—whether they are sham

transactions—is the partnership-item component of an affected item, the

Duffies’ refund claim is based on the determination of a partnership item.” Id.

at 383. The court’s holding that it lacked jurisdiction over the refund claims

clearly hinged on its finding that a sufficient tax-motivated transaction

determination was already made at the partnership level. See id.

This situation is not like the one in Duffie. A refund court need not litigate

the merits of any partnership item to decide whether the required tax-motivated

determination has been made. See Duffie, 600 F.3d at 383; Weiner, 389 F.3d at

162-63; see also Bush v. United States, 717 F.3d 920, 928-29 (Fed. Cir. 2013)

(explaining that whether a tax-motivated transaction was made in a previous

partnership-level proceeding 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

instance. However, the district court does have jurisdiction to determine

whether such a finding has previously been made, either in the partnership-level

proceedings or in a settlement. We thus find that § 7422(h) does not bar

jurisdiction over Taxpayers’ claims that there was no tax-motivated

determination supporting § 6621(c) penalty interest. 

Next, the government argues that even if the district court had

jurisdiction, Taxpayers’ refund claims were not timely filed. Failure to timely

file a refund claim deprives the court of subject matter jurisdiction for lack of

a valid waiver of sovereign immunity. Duffie, 600 F.3d at 384. The regular

deadline for filing a refund claim is two years from the date of payment or three

years from the date of filing of a tax return, whichever is later. 26 U.S.C. §

6511(a); see Duffie, 600 F.3d at 385. Section 6230, however, supplants the

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normal refund procedures and provides that for “[c]laims arising out of

erroneous computations,” taxpayers have six months from the date of

notification to 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 were covered

by the shortened deadlines in § 6230 is dependent on the question of whether the

challenged adjustments including penalty interest are computational or

substantive. See Duffie, 600 F.3d at 385. A computational adjustment to an

individual partner’s tax liability can be made at the conclusion of the

partnership level proceeding “without any factual determination at the partner

level.” Duffie, 600 F.3d at 366; see 26 U.S.C. § 6231(a)(6). A substantive affected

item, however, requires “fact-finding particular to the individual partner” before

any adjustment to tax liability can be made. Duffie, 600 F.3d at 366. 

Computational and substantive affected items each require different assessment

procedures. Id. at 385. For computational affected items, the IRS need not issue

a statutory notice of deficiency, and § 6230 procedures and shortened time

requirements apply. Id. By contrast, if the adjustment is a substantive affected

item, the IRS must follow the normal deficiency procedures, including sending

a notice of deficiency, and the normal § 6511(a) statute of limitations applies. Id.5

Where, as here, Taxpayers’ refund claim is dependent on whether there

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

their underpayment was “attributable to” a tax-motivated transaction, see

Weiner, 389 F.3d at 159-60, we find that § 6621(c) interest is a substantive

affected item. This holding is supported by relevant case law. See Duffie, 600

F.3d at 386 (analyzing whether penalty interest was computational in that case);

5 The IRS assessed additional taxes and penalties against Taxpayers by notice of

computational adjustment rather than by sending a notice of deficiency. However, we reject

any argument that the IRS’s chosen method of assessment is determinative.

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see also Weiner, 389 F.3d at 159-62 (analyzing whether an underpayment is

“attributable to” disallowed deductions); McGann v. United States, 76 Fed. Cl.

745, 751, 754-59 (Fed. Cl. 2007). In Duffie, though ultimately determining that

the adjustments at issue in that case were computational, this court first

determined whether the Tax Court’s tax-motivated transaction determination

was sufficient as a matter of law. Duffie, 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 engaging in the

relevant transaction, and thus rejected the taxpayers’ argument that the taxmotivated transaction determination was insufficient. See Duffie, 600 F.3d at

378. After making that determination, the “only issue” was whether the

underpayment attributable to tax-motivated transactions was “substantial,” i.e.

whether it was over $1,000; “clearly a computational rather than a substantive

issue.” 600 F.3d at 386. Here, however, Taxpayers’ claims for refund assert that

their underpayment was not attributable to any transaction found to be taxmotivated. This is a non-partnership component of § 6621(c) interest. See

Duffie, 600 F.3d at 378. Further, answering this question requires analysis of

substantive issues, including review and application of each individual partner’s

settlement. See Weiner, 389 F.3d at 162-63. These claims require more than

mere computations reflecting the treatment of partnership items. They are thus

substantive and not computational, and Taxpayers claims are not governed by

§ 6230. We hold that Taxpayers’ claims for refund of penalty interest were

timely filed.6

Both parties agree that if the district court had jurisdiction over

Taxpayers’ penalty interest claims and those claims were timely, Weiner dictates

6 Because we find that the claims were timely filed, we need not reach Taxpayers’

additional argument that if § 6230 applies, the notices of computational adjustment sent by

the IRS were not adequate to start the running of the statute of limitations.

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No. 12-20523

that Taxpayers win on the merits of those claims. The FPAAs in Weiner listed

several independent bases for disallowing the deductions, only some of which

were tax-motivated transaction findings, the taxpayers settled and thus

removed the need for a binding merits determination on any of the grounds for

disallowance, and the settlements included no specific findings regarding the

tax-motivated transaction issue. See Weiner, 389 F.3d at 162-63. The Weiner

court found that in such a situation, “[t]here is no way, given the multiple

reasons provided for the disallowance in the FPAAs, to determine whether the

underpayments are ‘attributable to’ a tax motivated transaction.” Id. The

situation is identical here. Weiner thus dictates that the assessment of § 6621(c)

penalty interest against Taxpayers was erroneous as a matter of law. Although

other circuits have taken a different approach, see e.g., Keener, 551F.3d at 1367,

Weiner is controlling in this circuit. We therefore reverse the grant of summary

judgment to the government and render judgment in favor of Taxpayers on this

issue. 

IV. Conclusion

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

summary judgment to the government on Taxpayers’ statute of limitations

claims. We REVERSE the district court’s grant of summary judgment to the

government and RENDER judgment in favor of Taxpayers’ on their penalty

interest claims. We REMAND for any further necessary proceedings, such as

whether there is any remaining issue regarding the amount to be refunded to

Taxpayers. 

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