Opinion ID: 1217529
Heading Depth: 3
Heading Rank: 1

Heading: jurisdiction

Text: A threshold question is whether we have jurisdiction to review the accuracy-related penalties imposed under 26 U.S.C. § 6662. See Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340, 1342-43 (Fed. Cir.2001). Because plaintiffs challenge the applicability of a[] penalty ... which relates to an adjustment to a partnership item and do not raise a partner-level defense, we conclude that the answer is yes. 26 U.S.C. §§ 6226(f), 6230. The penalties challenged on appeal relate to Stobie Creek's misstatement of its inside basis in Therma-Tru stock, as well as to adjustments of its basis in that stock pursuant to 26 U.S.C. § 754. The partnership's basis in contributed property is a partnership item. Treas. Reg. § 301.6231(a)(3)-1(a)(vi), (c)(2); see also Am. Boat Co. v. United States, 583 F.3d 471 (7th Cir.2009). Adjustments made pursuant to a § 754 election are also partnership items. Treas. Reg. § 301.6231(a)(3)-1(a)(3). Accordingly, the penalties relate[] to an adjustment to a partnership item, i.e., Stobie Creek's basis in the Therma-Tru stock. 26 U.S.C. § 6226(f). Further, the defense at issue on appeal is a partnership-level defense, not a partner-level defense. In a partnership-level proceeding such as this, we lack jurisdiction to consider partner-level defenses. See 26 U.S.C. §§ 7422(h), 6230(c); Schell, 589 F.3d at 1382; Am. Boat, 583 F.3d at 478-79. Stobie Creek argues it had reasonable cause for stepping up the basis in the Therma-Tru stock. A reasonable-cause defense under 26 U.S.C. § 6664(c) may be a partner- or partnership-level defense, depending on who is asserting it. See Temp. Treas. Reg. § 301.6221-1T(d); Klamath, 568 F.3d at 548; Whitehouse Hotel Ltd. v. Comm'r, 131 T.C. 112, 173 (2008). We have jurisdiction because here the partnership (Stobie Creek) is claiming it had reasonable cause based on the actions of its managing partner, Jeffrey Welles. [7] See Am. Boat, 583 F.3d at 479-80.