Court Opinion

ID: 4339615
Source: CourtListenerOpinion
Date Created: 2018-11-14 04:39:34.447924+00
Date Added: 2024-06-11T07:49:39.084413
License: Public Domain

SUGARLOAF FUND LLC, JETSTREAM BUSINESS LIMITED, TAX
                                         MATTERS PARTNER, PETITIONER v. COMMISSIONER OF
                                                 INTERNAL REVENUE, RESPONDENT
                                                    Docket No. 671–10.                     Filed September 5, 2013.

                                                In 2005, S, a purported partnership, set up Illinois common
                                              law business trusts Main Trust and Sub-Trust. S then trans-
                                              ferred distressed Brazilian consumer receivables to Main
                                              Trust. S, Main Trust, and the trustee in turn allocated the
                                              receivables to Sub-Trust. E transferred cash to Main Trust in
                                              exchange for the entire beneficial interest in Sub-Trust. E
                                              wrote off most of the value of the receivables as an I.R.C. sec.
                                              166 bad debt deduction, claiming a carryover basis in the
                                              receivables equal to S’ basis. R issued a notice of final part-
                                              nership administrative adjustment regarding S’ 2004 and
                                              2005 taxable years. R made adjustments to S’ income on a
                                              number of theories. One theory is that S’ basis in the receiv-
                                              ables was zero. An extension of this theory is that E’s basis
                                              in the receivables is a carryover basis and would also be zero.
                                              R made such a determination and issued E a statutory notice
                                              of deficiency denying the deduction. E did not petition this
                                              Court for review of his individual income tax liability. E now
                                              alleges he, as the beneficiary and grantor of Sub-Trust, is a
                                              partner of S such that he may intervene and participate as a
                                              party in this TEFRA proceeding on the grounds that Sub-
                                              Trust’s basis in the receivables is a partnership item of S.
                                              Held: E is not a direct or indirect partner in S.

                                     214

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                                     (214)               SUGARLOAF FUND LLC v. COMMISSIONER                                      215

                                       John E. Rogers (an officer), for petitioner.
                                       Joseph A. DiRuzzo III, for participating partner Timothy J.
                                     Elmes.
                                       Ronald S. Collins, Jr., for respondent.

                                                                                 OPINION

                                        WHERRY, Judge: The petition in this case was filed by Jet-
                                     stream Business Limited (Jetstream) as tax matters partner
                                     for Sugarloaf Fund, LLC (Sugarloaf), on January 8, 2010. On
                                     July 12, 2012, Timothy J. Elmes filed an election to partici-
                                     pate in this case pursuant to section 6226(c). 1 On July 19,
                                     2012, Mr. Elmes filed a motion requesting that the Court
                                     stay consolidation of this case with other transactionally
                                     related cases. On July 30, 2012, Mr. Elmes filed a motion
                                     requesting a determination that he is a partner of Sugarloaf.
                                     The Court invited petitioner and respondent to file responses
                                     to Mr. Elmes’ motions. Respondent on April 11, 2013, filed a
                                     response contending that Mr. Elmes is not a partner of
                                     Sugarloaf. Petitioner did not file a response. On April 17,
                                     2013, we denied Mr. Elmes’ motions to stay consolidation and
                                     to set the partner determination issue for oral argument and
                                     set a briefing schedule. We also denied without prejudice Mr.
                                     Elmes’ motion for a partner determination, believing resolu-
                                     tion of the issue was unnecessary at the time. On May 16,
                                     2013, Mr. Elmes filed a motion to compel discovery from peti-
                                     tioner. We directed petitioner to file a response, which it did
                                     not do. Mr. Elmes then moved on June 12, 2013, for an order
                                     to show cause why the Court should not hold petitioner in
                                     contempt for its failure to file a response.
                                        This Court has for some time, even predating Mr. Elmes’
                                     attempt to intervene in this case, been concerned as to
                                     whether ‘‘individual U.S. investors who claimed to have pur-
                                     chased ownership interests in the Holding Companies as well
                                     as those who acquired beneficial interests in the Sub-Trusts’’
                                     had ‘‘the right to participate in these partnership-level pro-
                                     ceedings’’. This Court’s order dated April 17, 2012, discussed
                                     these issues in some detail and directed the parties to file
                                     briefs addressing these issues. Both petitioner and
                                     respondent have, in response to the Court’s order, filed briefs
                                       1 Unless otherwise indicated, all section references are to the Internal

                                     Revenue Code of 1986, as amended and in effect for the tax years at issue.

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                                     216                 141 UNITED STATES TAX COURT REPORTS                                    (214)

                                     addressing these issues. After careful consideration, we have
                                     concluded that Mr. Elmes is not a direct or an indirect
                                     partner in Sugarloaf within the meaning of section 6226(c) or
                                     6231(a)(2). Consequently, he may not participate in this case,
                                     and we will deny his outstanding motions as moot for the
                                     reasons discussed below.

                                                                               Background
                                        For the sole purpose of deciding this issue, we draw the fol-
                                     lowing background information from the agreed-upon allega-
                                     tions in the pleadings and from the uncontroverted state-
                                     ments in the motions and in the accompanying memoranda,
                                     including exhibits thereto.
                                        This case is a partnership-level proceeding under the uni-
                                     fied audit and litigation provisions of the Tax Equity and
                                     Fiscal Responsibility Act of 1982, Pub. L. No. 97–248, sec.
                                     402(a), 96 Stat. at 648, commonly referred to as TEFRA and
                                     currently codified at sections 6221 through 6234. Sugarloaf is
                                     an Illinois limited liability company and has filed tax returns
                                     as a partnership under the default classification rules. See
                                     sec. 301.7701–3(a) and (b)(1)(i), Proced. & Admin. Regs. One
                                     or more Brazilian companies allegedly contributed uncol-
                                     lected and overdue consumer receivables to Sugarloaf in
                                     exchange for a 98% interest in Sugarloaf. Warwick Trading,
                                     LLC (Warwick), and Jetstream owned the remaining 2%
                                     interest in Sugarloaf.
                                        Sugarloaf claims to have contributed some of the Brazilian
                                     consumer receivables to ‘‘Illinois common law business
                                     trusts’’ (main trusts). Then, these main trusts purportedly
                                     formed sub-trusts and assigned a portion of the receivables
                                     to these sub-trusts, which, according to petitioner, operated
                                     to hold, preserve, and delegate collections of the receivables.
                                     Investors would contribute cash to a main trust in exchange
                                     for an interest in that main trust and the entire beneficial
                                     interest in a specified sub-trust. Mr. Elmes was apparently
                                     one of these investors. The investors in these sub-trusts
                                     reported on their individual tax returns section 166 bad debt
                                     deductions relating to the consumer receivables. The
                                     Commissioner has denied the claimed deductions and deter-
                                     mined income tax deficiencies and penalties against many of
                                     the investors.

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                                     (214)               SUGARLOAF FUND LLC v. COMMISSIONER                                      217

                                        Sugarloaf formed the Elmes 2005 Trust (Elmes Main
                                     Trust) and the Elmes 2005–A Sub-Trust (Elmes Sub-Trust)
                                     and was the initial grantor and beneficiary. Sugarloaf then
                                     purportedly transferred receivables to Elmes Main Trust,
                                     which then purportedly allocated those receivables to Elmes
                                     Sub-Trust. John Rogers, the strategist behind these trans-
                                     actions, was the trustee of both trusts. Mr. Elmes contrib-
                                     uted $75,000 to Elmes Main Trust in exchange for an
                                     interest in Elmes Main Trust and the entire beneficial
                                     interest in Elmes Sub-Trust and claimed to be the grantor of
                                     Elmes Sub-Trust. Sugarloaf, Mr. Elmes, and the trusts
                                     treated the Brazilian receivables as having a carryover basis.
                                     Elmes Sub-Trust reported a business bad debt deduction of
                                     $1,455,000 on account of the partial worthlessness of the
                                     Brazilian receivables. Mr. Elmes, as a purported grantor of
                                     Elmes Sub-Trust, claimed this deduction on his 2005 tax
                                     return.
                                        Respondent disallowed the loss deduction on a number of
                                     grounds and determined an income tax deficiency and a pen-
                                     alty against Mr. Elmes for which a statutory notice of defi-
                                     ciency was issued. According to respondent and to this
                                     Court’s records, Mr. Elmes did not petition this Court for
                                     review of that statutory notice of deficiency, and respondent
                                     assessed the deficiency. 2 Mr. Elmes is now seeking to litigate
                                     his deficiency indirectly by participating in this case.
                                        To support this belated attempt, Mr. Elmes relies on lan-
                                     guage used in the previously mentioned order dated April 17,
                                     2012, that we issued both in this case and a number of
                                     transactionally related cases. In that order we requested
                                     briefs on whether the beneficial owners of trusts similar to
                                     the Elmes Main Trust and the Elmes Sub-Trust should be
                                     considered partners of Sugarloaf. Both respondent and peti-
                                     tioner in this case responded in the negative, as did the peti-
                                     tioners in a number of transactionally related cases. Mr.
                                     Elmes, however, filed a protective election to participate in
                                     this case, although he has no separate case of his own, and
                                     further filed a motion contending that he should be treated
                                        2 As a general matter, while Congress has sought to afford taxpayers a

                                     prepayment forum to dispute the Commissioner’s determined Federal in-
                                     come tax deficiencies, it has also indicated that this opportunity should be
                                     afforded only once as to any determined income tax deficiency for any spec-
                                     ified taxable year. See generally secs. 6320(c), 6330(c)(2)(B).

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                                     218                 141 UNITED STATES TAX COURT REPORTS                                    (214)

                                     as a partner of Sugarloaf, which, if true, would justify his
                                     participation.
                                        Our April 17, 2012, order hypothesized that if Sugarloaf ’s
                                     basis in the receivables was a partnership item of Sugarloaf
                                     and the main trust’s and sub-trust’s basis in the receivables
                                     was a carryover basis, then the sub-trust’s basis in the
                                     receivables would likely be controlled by our finding as to
                                     Sugarloaf ’s basis in the receivables. As we stated in that
                                     order: ‘‘Consequently, an individual U.S. investor who
                                     claimed a beneficial interest in a Sub-trust would seem to
                                     have his Federal income tax liability ‘determined in whole or
                                     [in] part by taking into account directly or indirectly
                                     [Sugarloaf ’s basis in these partnership assets, which are]
                                     partnership items of the partnership.’ Sec. 6231(a)(2).’’

                                                                                Discussion
                                        Generally when the tax matters partner or other partner
                                     petitions this Court for readjustment of items in a notice of
                                     final partnership administrative adjustment (FPAA), each
                                     partner who was a partner during the partnership taxable
                                     year at issue may participate in the proceeding. Sec. 6226(c).
                                     A partner seeking to participate under section 6226(c) must
                                     have an interest in the outcome. Sec. 6226(d). Thus, for Mr.
                                     Elmes to participate in this proceeding, he must have been
                                     a partner in Sugarloaf at some time during the 2005 taxable
                                     year of Sugarloaf, which is at issue in this case. See sec.
                                     6226(c)(1).
                                        Section 6231(a)(2) defines a partner for TEFRA purposes
                                     not just as a ‘‘partner in the partnership’’ but also as ‘‘any
                                     other person whose income tax liability * * * is determined
                                     in whole or in part by taking into account directly or
                                     indirectly partnership items of the partnership.’’ A partner-
                                     ship item is ‘‘any item required to be taken into account for
                                     the partnership’s taxable year under any provision of subtitle
                                     A to the extent regulations prescribed by the Secretary pro-
                                     vide that, for purposes of this subtitle, such item is more
                                     appropriately determined at the partnership level than at the
                                     partner level.’’ Sec. 6231(a)(3). The regulations include as
                                     partnership items ‘‘amounts determinable at the partnership
                                     level with respect to partnership assets’’. Sec. 301.6231(a)(3)–
                                     1(a)(1)(vi), Proced. & Admin. Regs.

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                                     (214)                SUGARLOAF FUND LLC v. COMMISSIONER                                      219

                                        The records of Sugarloaf for 2005 do not indicate that Mr.
                                     Elmes was a direct partner in Sugarloaf under section
                                     6231(a)(2)(A). Nevertheless, in support of his position that he
                                     was a partner in Sugarloaf in 2005, Mr. Elmes submitted
                                     Schedules K–1, Partner’s Share of Income, Deductions,
                                     Credits, etc., for the 2007 and 2008 tax years. These docu-
                                     ments suggest that as the result of the alleged dissolution of
                                     at least some of the trading companies and liquidation of the
                                     trusts, both of which petitioner alleges have occurred, Mr.
                                     Elmes may have become a partner or indirect partner in
                                     Sugarloaf in 2007 and 2008. Without deciding the authen-
                                     ticity or significance of these Schedules K–1, we note that
                                     Mr. Elmes has not provided a similar document for the 2005
                                     tax year, which is the year at issue in this case. Nor does Mr.
                                     Elmes contend he or his trusts banded together with the Bra-
                                     zilian retailers, Warwick, and Jetstream to jointly conduct,
                                     through the Sugarloaf partnership, a common undertaking. 3
                                     See Commissioner v. Culbertson, 337 U.S. 733 (1949). There-
                                     fore, Mr. Elmes has not demonstrated that either he or the
                                     Elmes Sub-Trust was a direct partner of Sugarloaf for 2005.
                                     Thus, in order for Mr. Elmes to participate in this case, he
                                     must be a ‘‘person whose income tax liability [for 2005] * * *
                                     is determined in whole or in part by taking into account
                                     directly or indirectly partnership items of the partnership.’’
                                     Sec. 6231(a)(2)(B).
                                        Section 6231(a)(2)(B) brings within the definition of
                                     partner certain persons who are liable or jointly and sever-
                                     ally liable for a tax liability attributable to partnership
                                     items. For example, a spouse may be a deemed partner if the
                                     other spouse is a partner and they file jointly or if the
                                     spouse, by operation of State law, has a joint interest in the
                                     partnership interest. See Callaway v. Commissioner, 231
F.3d 106, 111 (2d Cir. 2000), rev’g T.C. Memo. 1998–99. In
                                     addition, a common parent corporation of a consolidated
                                           3 We
                                              also acknowledge that the so-called check-the-box regulation, sec.
                                     301.7701–3(a), Proced. & Admin. Regs., permits ‘‘[a]n eligible entity with
                                     at least two members * * * [to] elect to be classified as * * * a partner-
                                     ship’’. But neither Mr. Elmes nor the Elmes Sub-Trust ever came together
                                     with Sugarloaf or any of its partners to constitute an entity for this pur-
                                     pose. See generally Superior Trading, LLC v. Commissioner, T.C. Memo.
                                     2012–110, slip. op. at 11–15, supplementing 137 T.C. 70 (2011), aff ’d, 728
F.3d 676 (7th Cir. 2013).

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                                     220                  141 UNITED STATES TAX COURT REPORTS                                    (214)

                                     group may be a partner when a subsidiary member of the
                                     group is a partner in the partnership, because the common
                                     parent and each subsidiary member of the common group is
                                     severally liable for tax computed under section 1502. Rev.
                                     Rul. 2006–11, 2006–1 C.B. 635. 4 Indirect partners under sec-
                                     tion 6231(a)(10), which are ‘‘person[s] holding an interest in
                                     a partnership through 1 or more pass-thru partners’’, are
                                     also deemed partners under section 6231(a)(2)(B). PCMG
                                     Trading Partners XX, L.P. v. Commissioner, 131 T.C. 206,
                                     209–210 (2008). While the definition of a ‘‘pass-thru partner’’
                                     includes a trust through which ‘‘other persons hold an
                                     interest in the partnership’’, sec. 6231(a)(9), neither Elmes
                                     Main Trust nor Elmes Sub-Trust had such an interest in
                                     Sugarloaf. 5
                                        Mr. Elmes contends, however, that he is a partner in
                                     Sugarloaf by virtue of his status as grantor of Elmes Sub-
                                     Trust. Specifically, he contends:
                                           In Dionne v. Commissioner, T.C. Memo. 1993–117, the Court held that
                                           the petitioner fell within the ambit of Section 6231(a)(2) because he was
                                           a shareholder of a S–Corporation, a pass-through entity. The S–Corpora-
                                           tion was a partner in a TEFRA partnership, and the Court concluded
                                           that the ‘‘petitioner’s income tax liability as stockholder in the S–Cor-
                                           poration [was] clearly determined by taking into account, indirectly,
                                           partnership items of the partnership...’’ Id. Thus, under Section
                                           6231(a)(2)(B), the petitioner was deemed a partner of the partnership.
                                           Id. Like the petitioner’s ownership in the S–Corporation in Dionne,
                                           Elmes is the grantor of 2005 Elmes Subtrust, a passthrough entity.
                                           * * * The 2005 Elmes Subtrust, in turn, has a partnership interest in

                                       4 The mere fact that the subsidiary member is a partner in a partnership

                                     does not make the common parent a partner in the partnership. Rev. Rul.
                                     2006–11, 2006–1 C.B. 635. Rather, it is the several liability that requires
                                     the common parent to be treated as a partner in the partnership for
                                     TEFRA partnership proceedings, but only to the extent that the liability
                                     stems from a partnership item. Id.
                                       5 It is not clear that Elmes Sub-Trust would fall within the definition of

                                     a ‘‘pass-thru’’ partner because, as a grantor trust, it may be treated as a
                                     disregarded entity for Federal income tax purposes. Secs. 671–679; cf.
                                     Samueli v. Commissioner, 132 T.C. 37, 39 n.3 (2009) (discussing a grantor
                                     trust as a disregarded entity such that the grantor is treated as the owner
                                     of what the trust owns), aff ’d in part and remanded on another issue, 661
F.3d 399 (9th Cir. 2011). If this were the case, Mr. Elmes would own what-
                                     ever Elmes Sub-Trust owned for Federal income tax purposes, including
                                     any partnership interest in Sugarloaf. But because Elmes Sub-Trust did
                                     not own a partnership interest in Sugarloaf in 2005, this avenue is also
                                     a dead end for Mr. Elmes.

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                                     (214)                SUGARLOAF FUND LLC v. COMMISSIONER                                      221

                                           SUGARLOAF. As a result, under Section 6231(a)(2)(B), Elmes is consid-
                                           ered a deemed partner of SUGARLOAF. [Fn. ref. omitted.]

                                     The problem with this argument is that in Dionne, the S cor-
                                     poration had an interest in the partnership, whereas here,
                                     Elmes Sub-Trust has no such interest.
                                       We have discussed above some of the circumstances under
                                     which a taxpayer is deemed a partner under section
                                     6231(a)(2)(B). Mr. Elmes, however, takes a different tack and
                                     claims that he is a partner of Sugarloaf under section
                                     6231(a)(2)(B) because his income tax liability depends in part
                                     on the trust’s basis in the receivables, which he contends
                                     depends on Sugarloaf ’s basis in those same receivables. Mr.
                                     Elmes is correct that the basis of the receivables is a partner-
                                     ship item of Sugarloaf. See Superior Trading, LLC v.
                                     Commissioner, 137 T.C. 70, 91 n.20 (2011) (involving a tiered
                                     partnership structure that was allegedly set up for servicing
                                     Brazilian receivables, holding that ‘‘[e]ach partnership’s basis
                                     in the receivables is part of that partnership’s inside basis
                                     and is therefore a ‘partnership item’ within the meaning of
                                     sec. 6231(a)(3) and sec. 301.6231(a)(3)–1, Income Tax Regs.’’),
                                     supplemented by T.C. Memo. 2012–110, aff ’d, 728 F.3d 676
                                     (7th Cir. 2013).
                                       The gist of Mr. Elmes’ argument appears to be that any
                                     adjustment to Sugarloaf ’s basis in the receivables deter-
                                     mined by respondent or this Court would necessarily affect
                                     the amount of the bad debt deduction to which Mr. Elmes is
                                     entitled on his individual income tax return. This would
                                     occur because under section 1015(b) the basis of the receiv-
                                     ables in the hands of the transferee trust must be the same
                                     as the basis of those receivables in the hands of transferor
                                     Sugarloaf.
                                       This argument depends on the fact that the receivables
                                     were transferred from Sugarloaf to Elmes Main Trust and
                                     then allocated to Elmes Sub-Trust, but does not depend on
                                     any legal relationship among Mr. Elmes, the trusts, and the
                                     partnership Sugarloaf for purposes of income taxation. We
                                     also note that if the argument were correct, then any trust
                                     to which a partnership transferred assets would be a member
                                     of that partnership. We do not believe that a trust is nec-
                                     essarily a partner of a partnership merely because the trust

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                                     222                 141 UNITED STATES TAX COURT REPORTS                                    (214)

                                     received assets from that partnership, and we do not accept
                                     Mr. Elmes’ expansive interpretation of section 6231(a)(2)(B).
                                        In support of his position that he should be considered a
                                     partner of Sugarloaf, Mr. Elmes cites our Supplemental
                                     Memorandum Opinion, Superior Trading, LLC v. Commis-
                                     sioner, T.C. Memo. 2012–110. In Superior Trading, the tax-
                                     payers contended that a Brazilian retailer contributed dis-
                                     tressed consumer receivables to Warwick, which then
                                     contributed the receivables to a series of trading companies.
                                     Warwick then contributed most of its interest in those
                                     trading companies to various holding companies. Warwick
                                     then sold a supermajority interest in the holding companies
                                     to investors, who claimed substantial bad debt deductions.
                                     Respondent issued FPAAs to both Warwick and the trading
                                     companies. In those FPAAs respondent took several alter-
                                     native positions, including that the receivables had no value
                                     even before they were transferred to Warwick.
                                        Warwick and most of the trading companies filed petitions
                                     with this Court. Warwick’s petition was consolidated with
                                     some, but not all, of the trading companies’ petitions. After
                                     trial of those consolidated cases, we found for respondent on
                                     each of his alternative theories, including the theory that the
                                     receivables had no value.
                                        In our Supplemental Memorandum Opinion on petitioners’
                                     motion for reconsideration, before addressing again each of
                                     respondent’s alternative theories, we discussed the investors
                                     who had acquired ownership interests in the holding compa-
                                     nies. After quoting section 6231(a)(2)(B), we stated that ‘‘to
                                     the extent their income tax liability is affected by the basis
                                     of the * * * [distressed consumer] receivables, a partnership
                                     item in these partnership-level proceedings, these investors
                                     are partners for purposes of these proceedings. Consequently,
                                     pursuant to section 6226(c)(1), each such investor ‘shall be
                                     treated as a party to such action’.’’ Id., slip op. at 9.
                                        Superior Trading did involve a Sugarloaf-type entity (War-
                                     wick), but Warwick’s proceeding had been consolidated for
                                     trial and opinion with the trading companies’ TEFRA pro-
                                     ceedings. Our holding in the consolidated cases that the
                                     receivables’ basis was zero was a factual and legal deter-
                                     mination of a partnership item not just for Warwick, but also
                                     for the trading companies that were also involved in the case.
                                     Unlike Mr. Elmes, the investors, each of whom owned an

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                                     (214)               SUGARLOAF FUND LLC v. COMMISSIONER                                      223

                                     interest in a trading company through one or more pass-
                                     through partners, were indirect partners of the trading
                                     companies under section 6231(a)(10) and therefore were
                                     bound by our decision as to partnership items of the trading
                                     companies, particularly the basis of the receivables owned by
                                     their particular trading company. 6 Our conclusion that the
                                     investors were partners for purposes of the consolidated
                                     Superior Trading proceeding was correct on the basis of the
                                     legal relationship between the investors and the trading
                                     companies, rather than on the transferor/transferee relation-
                                     ship between Warwick and the trading companies. Mr.
                                     Elmes’ reliance on the language in Superior Trading as sup-
                                     port for his contention that he is a partner of Sugarloaf is
                                     misplaced.
                                       Mr. Elmes does not cite caselaw, other than Superior
                                     Trading and Dionne, discussed supra, to support his
                                     expanded definition of partner for a TEFRA proceeding. But,
                                     the Court of Appeals for the Seventh Circuit, to which this
                                     case appears to be appealable absent stipulation to the con-
                                     trary, has provided some guidance in this realm, and it is
                                     contrary to Mr. Elmes’ position. Cemco Investors, LLC v.
                                     United States, 515 F.3d 749 (7th Cir. 2008). Cemco Investors
                                     involved three entities: a trust, a partnership, and the tax-
                                     payer (Cemco), a limited liability company treated as a part-
                                     nership for Federal income tax purposes. Id. at 750. The
                                     trust entered into two-week-long offsetting short and long
                                     option contracts with a bank and then contributed those
                                     options to the partnership. Id. The partnership purchased
                                     euro and terminated the option contracts the next day. Id.
                                     The partnership then liquidated, transferring its assets, both
                                     dollars and euro, to the trust. Id. The trust turned around
                                     and contributed the euro to Cemco, which then sold them. Id.
                                     Cemco claimed a loss on this sale on the grounds that it took
                                     a carryover basis from the trust, which allegedly had an
                                     increased basis in the euro equal to the full amount of the
                                     long option. Id. at 750–751.
                                       One of Cemco’s arguments in its challenge to the FPAA
                                     was that the Commissioner should have first issued an FPAA
                                       6 Our decision regarding basis did not necessarily bind those trading

                                     company partnerships (and their partners) whose cases had not been con-
                                     solidated.

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                                     224                 141 UNITED STATES TAX COURT REPORTS                                    (214)

                                     to the partnership because the adjustment to Cemco’s basis
                                     in the euro depended on the partnership’s basis in the euro.
                                     Id. at 752–753. The Court of Appeals rejected this argument:
                                     ‘‘Cemco has never been a partner of the Partnership or the
                                     Trust. These sections of the Code [sections 6221 through
                                     6234] therefore do not link the tax treatment of the euros in
                                     Cemco’s hands to their tax treatment in anyone else’s.’’ Id.
                                     at 753.
                                        By analogy, Mr. Elmes has never been a partner in
                                     Sugarloaf. The TEFRA provisions do not require that the tax
                                     treatment of the receivables in Mr. Elmes’ hands match their
                                     treatment in Sugarloaf ’s hands. While consistency of treat-
                                     ment in the two parties’ hands would be ideal, and many
                                     related cases are consolidated with this one in part for that
                                     purpose, nothing in the TEFRA provisions requires this. See
                                     id. (‘‘[T]he IRS need not ensure consistent tax treatment
                                     unless a statute so requires. Sections 6221 to 6234 don’t
                                     require this because Cemco is not an investor in the Partner-
                                     ship.’’). Because Mr. Elmes is not a partner, direct or
                                     indirect, in Sugarloaf, he has no standing to participate in
                                     this TEFRA proceeding.
                                        We have considered all of Mr. Elmes’ contentions, argu-
                                     ments, requests, and statements. To the extent not discussed
                                     herein, we conclude that they are meritless, moot, or irrele-
                                     vant. To reflect the foregoing,
                                                                                An appropriate order will be issued.

                                                                               f

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