TAX COURT OPINION

Case: Intelligent Transportation & Monitoring Wireless LLC, Susan Uecker, Tax Matters Partner
Docket Number: 19514-17
Judge: Goeke
Opinion Type: bench
Filed: 06/13/2023
Pages: 8

Intelligent Transportation & Monitoring Wireless LLC, Warren C. Havens, Tax Matters Partner, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent United States Tax Court Washington, DC 20217 Docket No. 19514-17. ORDER Pursuant to Rule 152(b) of the Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to the Commissioner a copy of the pages of the transcript of the hearing in this case before Judge Joseph Robert Goeke at San Francisco, California containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. (Signed) Joseph Robert Goeke Judge Served 06/13/23 Bench Opinion by Judge Joseph Robert Goeke May 25, 2023 3 Intelligent Transportation & Monitoring Wireless LLC, Warren C. Havens, Tax Matters Partner v. Commissioner of Internal Revenue Docket No. 19514-17 THE COURT: The Court has decided to render oral findings of fact and opinion in this case and the following represents the Court's oral findings of fact and opinion. Section references herein are to the Internal Revenue Code of 1986, as amended, in effect for the relevant periods. Rule references are to the Tax Court Rules of Practice and Procedure. This opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority. Before this trial session, we granted a Motion to Bifurcate the Trial on the merits from a question about the scope of our jurisdiction in this case that was also related to the status of the Tax Matters Partner. The Tax Matters Partner filed a belated statement that he was ill and would not appear when the case was called for hearing earlier this week. We did not take any evidence of a factual nature when the case was called because of the absence of the Tax 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Matters Partner. However, the parties had made detailed 4 filings on several occasions before this session on the scope of the relevant facts in this case. Based upon those filings, we issue this bench opinion to clarify the matters for trial at a date and time which we will set in a related order. The petitioner is a Delaware limited liability company. The petitioner filed a Form 1065 for 2010 on December 22, 2014. The petitioner filed a Form 1065 for 2011 on May 12, 2015. The petitioner filed a Form 1065 for 2012 on June 16, 2015. Finally, the petitioner filed a Form 1065 for 2014 on or about September 15, 2015. Petitioner is involved in the business of wireless spectrum leases. On November 16, 2015, due to a civil dispute the Superior Court of California, the county of Alameda, entered an order appointing a receiver over the petitioner and placed the petitioner in receivership. We point that out because it relates to a later discussion concerning the status of the Tax Matters Partner, Warren Havens. Mr. Havens was designated as the Tax Matters Partner in the Forms 1065 referred to above. During the years 2010 through 2012, based upon the Forms 1065 and the K-1s issued by the petitioner, the petitioner had four partners. Warren Havens, Berkley Spectrum Investment Fund, LLC, Environmental, LLC, and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 James Stobaugh. During 2014, the petitioner listed three 5 partners. Warren Havens, Environmental, LLC, and James Stobaugh. This case has previously been continued on several occasions to give the petitioner time to gather documents and to substantiate claimed expenses. To date, petitioner has not followed through on its representations concerning cooperation with respondent to prepare the case for trial. The petitioner is a Tax Equity and Fiscal Responsibility Act partnership. Generally, entities which satisfy the definition of partnership in section 761(a) are required to file partnership returns under section 6031(a) and are covered by the TEFRA partnership audit procedures. Section 6231(a)(1)(A). The petitioner has partners who elected on its Forms 1065 for the years at issue to be treated as a JRG partnerships for Federal tax purposes. Since petitioner has a flow-through entity as a partner, it does not meet the small partnership exception, and therefore, the petitioner is a TEFRA partnership. Because he was designated as a Tax Matters Partner on all of the returns filed by the petitioner for the years in question, Mr. Havens is, and remains, the Tax Matters Partner of the petitioner. The procedures in state court do not affect his status for purposes of this TEFRA case. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Under the regulations provided for by section 6 6231, a partnership may designate any eligible partner as the Tax Matters Partner. Section 6231(a)(7). The Tax Matters Partner may be designated on Form 1065, as Mr. Havens was designated. Treas. Reg. section 301.6231(a)(7)-1(c). The FPA issued to the petitioner, which generates the controversy in this case and is the basis for the issues now before the Court, disallowed deductions that the partnership claimed on the Forms 1065 filed for 2010, 2011, 2012, and 2014. It also disallowed interest deductions and asserted an addition to tax. Relative to the status of Mr. Havens as the Tax Matters Partner, we note that the receiver in the California State matter was not a partner of the petitioner and therefore, the receiver could not be selected, pursuant to the regulations, as the Tax Matters Partner in this case. See 1983 Western Reserve Oil & Gas Co. v. Commissioner, 95 T.C. 51 (1990). Accordingly, Mr. Havens remains the Tax Matters Partner for purposes of the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 present case. 22 23 24 25 We note that the FPA, which was issued to the petitioner and generates the issues in this case causes the adjustments listed in the FPA to be considered partnership items under Treas. Reg. section 301.6231(a)(3)-1(a)(1)(i). Partnership items are required 7 to be determined in a partnership level proceeding. Section 6621(a). This is such a proceeding. The petition in this case does not differ in JRG listing the issues before the Court than those issues listed in the FPA. However, the petitioner includes vague and ambiguous statements regarding at least one other entity and another individual, who are somehow involved in the petitioner's operations and generate effects upon the petitioner's expenses and activities. These statements do not qualify as allegations because they are too vague and unclear to be deemed appropriate allegations. Nor do they raise specific dollar amounts, and they simply do not constitute issues that are properly before the Court based upon the current state of the pleadings. The Tax Court Rules of Practice and Procedure require that pleadings be clear and straightforward. None of the statements in the petition, beyond the recognition of the adjustments in the FPA, meet the standard of the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Tax Court's Rules. 22 23 24 25 Accordingly, we will set for trial in August of this year, the issues listed in the FPA. If petitioner wishes to raise additional issues and assert that there are other individuals who are shareholders of the petitioner for the years at issue, the petitioner will 8 have the burden of proof regarding any such issues. And we set forth in the associated order to this bench opinion, the dates by which petitioner must amend the petition to make specific allegations, listing the dollar amounts that would offset the income adjustments made through the FPA, and the adjustments to the shareholder's ownership that petitioner alleges should be made, other than the persons relied upon in the FPA, based upon the JRG K-1s previously filed. We note that any such amendments which we order must be filed on or before July 14, 2023, must conform with the Tax Court's Rules of Practice and Procedure and be precise and clear, and as stated, must state specific dollar amounts and adjustments and not vague assertions. We don't order the petitioner to file such an amended petition, but we state, without such an amended petition this trial will be limited to the issues raised in the FPAs previously stated. And if the petitioner's amended petition is deemed sufficient, the issues that would be tried, including any properly raised in an amended petition, would require the petitioner to carry the burden of proof and produce evidence to substantiate any allegations which are made. Any documents or other evidence that the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 petitioner wishes to produce to support the hypothetical 9 amended petition must be produced to respondent on or before July 14, 2023, as we will set forth in the related order. Barring such amended petition, we will proceed for trial simply on the issues previously raised in the FPA and the adjustments as disputed in the original petition filed in this case. Accordingly, an appropriate order will be issued. This ends the Court's oral findings of fact and opinion in this case. (Whereupon, at 9:14 a.m., the above-entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25