Opinion ID: 603772
Heading Depth: 3
Heading Rank: 2

Heading: Inclusion of Earnings Expected but Never Received in

Text: Gross Income Base 68 Barrister Associates argues that the district court should not have allowed the government to consider, in assessing the penalty against Barrister Associates, limited partners' fees never actually paid to Barrister Associates by certain of the limited partnerships. Again, we disagree. 69 Section 6700 allows the government to assess a penalty on gross income derived or to be derived from the tax shelter activity. As noted, this language contemplates assessments on earnings to be derived in the future from the promotion of an abusive tax shelter. But [i]n determining the penalty with respect to the amount of gross income yet to be derived from an activity, the [government] may look only to unrealized amounts which the promoter or other person may reasonably expect to realize. S.Rep. No. 494 at 267, 1982 U.S.C.C.A.N. at 1015. 70 In the instant matter, the only income Barrister Associates earned from the tax shelter promotion was the one-time general partner's fees owed it by each of the limited partnerships. With the exception of $28,750 still owed by three of the limited partnerships, Barrister Associates had received all of these fees by 1986. Thus, at issue is whether this $28,750 was unrealized income that Barrister Associates could have reasonably expect[ed] to realize when the government first assessed the penalty in 1986. 3 We believe that the answer is yes. 71 As the district court noted, at the time of the first assessment, Barrister Associates could have brought suit to recover the unpaid fees from the defaulting limited partnerships. While, with the benefit of hindsight, we now know (and indeed the government knew in 1989) that a lawsuit to recover those fees was necessary but never pursued, this fact does not make consideration of the $28,750 improper. The burden was on appellants to show that the fees would not have been recoverable through such a lawsuit. Absent such a showing, the government was entitled to take the $28,750 into account. 72