Court Opinion

ID: 4331897
Source: CourtListenerOpinion
Date Created: 2018-11-14 00:23:53.235804+00
Date Added: 2024-06-11T14:02:58.782261
License: Public Domain

111 T.C. No. 7

                     UNITED STATES TAX COURT

            GREENBERG BROTHERS PARTNERSHIP #4, a.k.a.
          BREATHLESS ASSOCIATES, RICHARD M. GREENBERG,
            TAX MATTERS PARTNER, ET AL.,1 Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket Nos. 19575-91, 22780-91,       Filed August 24, 1998.
                 29878-91,   621-92,
                   623-92, 3968-92,
                  4432-92, 13014-92,
                 15641-92, 12062-94.

     1
          Cases of the following petitioners are consolidated
herewith: Greenberg Brothers Partnership #12, a.k.a Lone Wolf
McQuade Associates, Richard M. Greenberg, Tax Matters Partner,
docket No. 22780-91; Easy Money Associates, Richard M. Greenberg,
Tax Matters Partner, docket No. 29878-91; Cinema '84, Richard M.
Greenberg, Tax Matters Partner, docket No. 621-92; First Blood
Associates, Richard M. Greenberg, Tax Matters Partner, docket No.
623-92; Under Fire Associates, Richard M. Greenberg, Tax Matters
Partner, docket No. 3968-92; Cinema '85, Richard M. Greenberg,
Tax Matters Partner, docket No. 4432-92; First Blood Associates,
Richard M. Greenberg, Tax Matters Partner, docket No. 13014-92;
First Blood Associates, Richard M. Greenberg, Tax Matters
Partner, docket No. 15641-92; First Blood Associates, Eugene C.
Lipsky, A Partner Other Than the Tax Matters Partner, docket No.
12062-94.
                               - 2 -

          Pursuant to sec. 6224(c)(2), I.R.C., Ps request
     consistent settlement terms of partnership items with
     earlier settlement agreements that include concessions
     pertaining to partnership and nonpartnership items. Held:
     A settlement agreement that includes concessions of
     partnership and nonpartnership items is not subject to the
     consistent settlement provisions under sec. 301.6224(c)-3T,
     Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6787 (Mar. 5,
     1987). Held, further: Sec. 301.6224(c)-3T, Temporary
     Proced. & Admin. Regs., supra, is valid.

     Thomas E. Redding and Sallie W. Gladney, for participants.

     Joseph F. Long and Gerald A. Thorpe, for respondent.

                              OPINION

     DAWSON, Judge:   These cases were assigned to Special Trial

Judge Carleton D. Powell pursuant to the provisions of section

7443A(b)(4) and Rules 180, 181, and 183.2   The Court agrees with

and adopts the opinion of the Special Trial Judge, which is set

forth below.

               OPINION OF THE SPECIAL TRIAL JUDGE

     POWELL, Special Trial Judge:   These consolidated cases are

before the Court on participating partners' (participants)

motions pursuant to section 6224(c)(2) for entry of orders

compelling respondent to extend offers of consistent settlement,

     2
          Unless otherwise indicated, all section references are
to the Internal Revenue Code in effect for the years in issue,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
                                 - 3 -

or, alternatively, for entry of decisions reflecting terms of

prior settlements.3

     The issues are as follows:    (1) Whether, under the

circumstances, participants are entitled to consistent settlement

terms pursuant to section 6224(c)(2); and (2) whether section

301.6224(c)-3T(b), Temporary Proced. & Admin. Regs., 52 Fed. Reg.

6787 (Mar. 5, 1987), is valid.

     The relevant facts are not in dispute and may be summarized

as follows.   The partnerships involved in these cases were formed

to purchase and exploit the rights to certain films.4   The

general partners of these partnerships were Richard M. Greenberg

and/or A. Frederick Greenberg.    Respondent began an examination

     3
          A list of the participants is attached to this opinion
in an Appendix.
     4
          On the partnerships' respective returns for the years
in issue, the partnerships claimed loss deductions based upon the
alleged purchase of various first-run motion pictures. The films
represent a roster of the famous and forgotten from 1980's
cinema. The partnerships and their underlying films include,
inter alia, the following: Greenberg Brothers Partnership #4,
a.k.a. Breathless Associates (the 1983 remake of "Breathless"
starring Richard Gere); Greenberg Partnership #12, a.k.a. Lone
Wolf McQuade Associates ("Lone Wolf McQuade" starring Chuck
Norris); Easy Money Associates (Rodney Dangerfield and Joe Pesci
starring in "Easy Money"); Cinema '84 (James Cameron directing
Arnold Schwarzenegger in "The Terminator", horror genre entries
"The Howling II" and "Return of the Living Dead"); First Blood
Associates ("First Blood" the initial entry in Sylvester
Stallone's "Rambo" series); Under Fire Associates (Nick Nolte and
Gene Hackman starring in "Under Fire"); and Cinema '85
("Salvador" directed by Oliver Stone and starring James Woods and
James Belushi and "At Close Range" starring Sean Penn and
Christopher Walken).
                                     - 4 -

of the partnerships at some point in the mid-1980's as part of a

national project focusing on the various partnerships of the

Greenberg Brothers.

     The schedule below sets forth the specific dates on which

respondent issued notices of final partnership administrative

adjustments (FPAA's) determining adjustments to partnership items

for each of the partnerships:

                                      Partnership                      Petition
Partnership               Docket No. Taxable Years   FPAA Date           Date

Greenberg #4/Breathless   19575-91   1983-87         June   3, 1991    Aug.   30, 1991
Greenberg #12/Lone Wolf   22780-91   1983-86         July   8, 1991    Oct.   7, 1991
Easy Money Associates     29878-91   1983-86         Oct.   7, 1991    Dec.   20, 1991
Cinema '84                  621-92   1984-89         Oct.   15, 1991   Jan.   8, 1992
First Blood Associates      623-92   1983-87         Oct.   21, 1991   Jan.   8, 1992
Under Fire Associates      3968-92   1983-86         Dec.   9, 1991    Feb.   24, 1992
Cinema '85                 4432-92   1985-89         Dec.   2, 1991    Feb.   28, 1992
First Blood Associates    13014-92   1988            Mar.   24, 1992   June   12, 1992
First Blood Associates    15641-92   1989            Apr.   20, 1992   July   10, 1992
First Blood Associates    12062-94   1990            Mar.   14, 1994   July   11, 1994

     It is undisputed that the petitions were timely filed and

the requests for consistent settlement terms were timely made in

these cases.    With the exception of docket No. 12062-94, at the

time the petitions were filed in these cases, each partnership's

principal place of business was located at Greenwich,

Connecticut.    At the time the petition was filed in docket No.

12062-94, that partnership was in dissolution; the partnership's

principal place of business during its winddown period was

located in New York, New York.

     Each of the settlement agreements with which participants

seek consistent settlement was entered into and effective on
                                - 5 -

February 8, 1995 (the original settlement agreement).   Each

original settlement agreement is contained on a Closing Agreement

On Final Determination Covering Specific Matters (Form 906), and

the essential provisions (excluding the names of each

partnership, the names of the settling partners, the partnership

taxable years involved, and the actual dollar amounts contributed

to each partnership) are identical.

     Among the key provisions of the various original settlement

agreements are the following:

          1. No adjustment to the partnership items shall be
     made for the taxable years [in issue] for purposes of this
     settlement.

          2. The taxpayers are entitled to claim their
     distributive share of the partnership losses for [the years
     in issue] only to the extent they are at risk under I.R.C.
     [sec.] 465.

          3. The taxpayers amount at risk for [the years in
     issue] is their capital contribution to the partnership.

          *     *     *         *       *   *      *

          6. The taxpayers are not at risk under I.R.C. [sec.]
     465 for any partnership notes, entered into by the
     partnership to acquire rights in the motion picture * * *
     whether or not assumed by the taxpayers. Any losses
     disallowed under this agreement are suspended under I.R.C.
     [sec.] 465. Such suspended losses may be used to offset the
     taxpayers pro rata share of any income earned by the
     partnership and/or other income in accordance with the
     operation of I.R.C. [sec.] 465.

     Pursuant to section 6224(c)(2), participants timely

requested consistent settlement terms respecting partnership

items of the partnerships.   Participants seek to avail themselves
                               - 6 -

of paragraph one of the original settlement agreement without

being bound by the burdens of the at risk provisions set forth in

the remaining paragraphs.   Respondent has refused to extend

offers of settlement terms to participants under these

circumstances.5

                            Discussion

TEFRA--Partnership and Nonpartnership Items

     The parties agree that the partnerships are subject to the

audit and litigation procedures of the Tax Equity & Fiscal

Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, 96 Stat. 324.

The principal purpose behind TEFRA is to provide consistency and

reduce duplication in the treatment of "partnership items" by

requiring that they be determined in a unified proceeding at the

partnership level.   Maxwell v. Commissioner, 87 T.C. 783, 787

(1986); H. Conf. Rept. 97-760, at 600 (1982), 1982-2 C.B. 662;

see also Slovacek v. United States, 40 Fed. Cl. 828 (1998).

     Partnership items include each partner's proportionate share

of the partnership's aggregate items of income, gain, loss,

deduction, or credit.   Sec. 6231(a)(3); sec. 301.6231(a)(3)-

1(a)(1)(i), Proced. & Admin. Regs.     Partnership items also

include each partner's proportionate share of the partnership's

liabilities, including determinations with respect to the amount

     5
          As we understand, at least until these cases were
submitted, respondent was still offering the settlement to
partners who were willing to accept all of the settlement terms.
                               - 7 -

of the liabilities, and whether the liabilities are nonrecourse.

Sec. 301.6231(a)(3)-1(a)(1)(v), Proced. & Admin. Regs.

     A nonpartnership item is "an item which is (or is treated

as) not a partnership item."   Sec. 6231(a)(4).   An "affected

item" is "any item to the extent such item is affected by a

partnership item."   Sec. 6231(a)(5); see also N.C.F. Energy

Partners v. Commissioner, 89 T.C. 741, 743-745 (1987); sec.

301.6231(a)(5)-1T(a), Temporary Proced. & Admin. Regs., 52 Fed.

Reg. 6790 (Mar. 5, 1987).6   The determination of a partner's

amount at risk with respect to partnership liabilities personally

assumed is an affected item.   Hambrose Leasing v. Commissioner,

99 T.C. 298, 312 (1992); sec. 301.6231(a)(5)-1T(c), Temporary

Proced. & Admin. Regs., 52 Fed. Reg. 6790 (Mar. 5, 1987).   While

there are partnership item components to the at risk calculation

that affect that determination at the partner level, the

determination of amounts at risk by individual partners is not a

partnership item.7   Hambrose Leasing v. Commissioner, supra at

309-312; sec. 301.6231(a)(3)-1(a)(1)(vi)(C), Proced. & Admin.

     6
          There are two types of affected items: (1) Those
requiring factual determinations to be made at the partner level,
and (2) a computational adjustment made to record the change in a
partner's tax liability resulting from the proper treatment of
partnership items. N.C.F. Energy Partners v. Commissioner, 89
T.C. 741, 744 (1987).
     7
          For example, paragraph six of the original settlement
agreement refers to the suspension of losses under sec. 465 and
carried forward to future years.
                                   - 8 -

Regs.       It follows, therefore, that the determinations of the

amounts at risk with respect to partnership liabilities are also

"nonpartnership items" within the meaning of section 6231(a)(4).

Accordingly, for purposes here we refer to paragraph one of the

original settlement agreement as the settlement of the

partnership items provision and the remaining paragraphs

referring to "at risk" as nonpartnership items settlement

provisions.

TEFRA--Consistent settlement

        The present dispute involves section 6224(c)(2) and section

301.6224(c)-3T, Temporary Proced. & Admin. Regs., 52 Fed. Reg.

6787 (Mar. 5, 1987).8

        Section 6224(c)(2) provides, in part:

             Other partners have right to enter into consistent
        agreements.--If the Secretary enters into a settlement
        agreement with any partner with respect to partnership items
        for any partnership taxable year, the Secretary shall offer
        to any other partner who so requests settlement terms for
        the partnership taxable year which are consistent with those
        contained in such settlement agreement. * * *

        In construing section 6224(c)(2) our task is to give effect

to the intent of Congress.       We begin with the statutory language,

which is the most persuasive evidence of the statutory purpose.

        8
          No court has yet ruled upon the effect of sec.
6224(c)(2) and sec. 301.6224(c)-3T. Temporary Proced. & Admin.
Regs., 52 Fed. Reg. 6787 (Mar. 5, 1987). See, e.g., Pilie v.
United States, 56 F.3d 686 (5th Cir. 1995); Slovacek v. United
States, 40 Fed. Cl. 828 (1998); Vulcan Oil Tech. Partners v.
Commissioner, 110 T.C. 153 (1998); H Graphics/Access, Ltd.
Partnership v. Commissioner, T.C. Memo. 1992-345.
                               - 9 -

United States v. American Trucking Associations, Inc., 310 U.S.

534, 542-543 (1940); Hospital Corp. of Am. v. Commissioner, 107

T.C. 116, 128 (1996).   The plain meaning of statutory language

ordinarily is conclusive.   United States v. Ron Pair Enters.,

Inc., 489 U.S. 235, 241-242 (1989).    If a statute is silent or

ambiguous, we turn to legislative history to ascertain

congressional intent.   Burlington N. R.R. v. Oklahoma Tax Commn.,

481 U.S. 454, 461 (1987); Peterson Marital Trust v. Commissioner,

102 T.C. 790, 799 (1994), affd. 78 F.3d 795 (2d Cir. 1996).9

     Section 6224(c)(2) requires that the settlement agreement

forming the basis for the request for consistent settlement terms

must be "a settlement agreement * * * with respect to partnership

items".   The statute otherwise imposes no conditions upon those

settlement agreements that may be subject to requests for

consistent settlement terms.   On the other hand, the parameters

of what constitutes a settlement agreement for purposes of

section 6224(c)(2) are not statutorily defined.   Reference to the

Spartan legislative history on settlement agreements in TEFRA

proceedings is unilluminating, as the conference report evinces

     9
          Even where the statutory language appears to be clear
we are not precluded from consulting legislative history. United
States v. American Trucking Associations, Inc., 310 U.S. 534,
543-544 (1940); Hospital Corp. of Am. v. Commissioner, 107 T.C.
116, 129 (1996).
                             - 10 -

no particular congressional intent as to the nature of consistent

settlements.10

     Under section 6230(k), however, the Secretary "shall

prescribe such regulations as may be necessary to carry out the

purposes" of subchapter C (the TEFRA provisions).    Regulations

under section 6224(c)(2) were proposed on April 18, 1986.    See 51

Fed. Reg. 13231 (Apr. 18, 1986).    Pursuant to the authority of

sections 6230(k) and 7805,11 T.D. 8128, 1987-1 C.B. 325, 325-326,

temporary regulations identical to the proposed regulations were

promulgated shortly thereafter.    Section 301.6224(c)-3T,

Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6787 (Mar. 5,

1987), provides, in pertinent part:

          [Sec.] 301.6224(c)-3T. Consistent settlements
     (Temporary).--(a) In general. If the Service enters into a
     settlement agreement with any partner with respect to
     partnership items, the Service shall offer to any other
     partner who so requests * * * settlement terms which are
     consistent with those contained in the settlement agreement
     entered into.

          (b) Requirements for consistent settlements.
     "Consistent" settlement terms are those based on the same
     determinations with respect to partnership items.
     Settlements with respect to partnership items shall be self-
     contained; thus, a concession by one party with respect to a

     10
          The conference report simply notes in passing: "The
Secretary must offer to any partner who so requests settlement
terms that are consistent with the settlement with any other
partner." H. Conf. Rept. 97-760, at 602 (1982), 1982-2 C.B. 600,
664.
     11
          Sec. 7805(a) generally provides that the Secretary
"shall prescribe all needful rules and regulations for the
enforcement of this title".
                                - 11 -

     partnership item may not be based upon a concession by the
     other party with respect to a nonpartnership item.
     Settlements shall be comprehensive, that is, a settlement
     may not be limited to selected items. The requirement for
     consistent settlement terms applies only if--

     (1) The items were partnership items for the partner
     entering into the original settlement immediately before the
     original settlement, and

     (2) The items are partnership items for the partner
     requesting the consistent settlement at the time the partner
     files the request. [Emphasis supplied.]

     Participants interpret "settlements" in the regulation as

referring only to the consistent settlement terms of partnership

items.   They maintain that paragraph one of the original

settlement agreement constitutes a "settlement agreement * * *

with respect to partnership items" for purposes of the consistent

settlement provisions and request settlement in accord with

paragraph one.   This interpretation of section 301.6224(c)-3T(b),

Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6787 (Mar. 5,

1987), is nothing more than semantical sophistry and would have

us read out of the regulation the requirement that a settlement

agreement for consistent settlement purposes cannot be based on

concessions of nonpartnership items and that a settlement may not

be limited to selected items.    Where, as here, a settlement

agreement contains interrelated provisions which reflect

concessions of partnership and nonpartnership items, the

temporary regulation provides that such original settlement
                               - 12 -

agreements are not subject to the consistent settlement provision

of section 6224(c)(2).

     Participants argue in the alternative that the regulation is

invalid insofar as it adds restrictions that are inconsistent

with section 6224(c)(2).   In Chevron U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 843 (1984), the

Supreme Court set forth the following analysis:

     If * * * the court determines Congress has not directly
     addressed the precise question at issue, the court does not
     simply impose its own construction on the statute, as would
     be necessary in the absence of an administrative
     interpretation. Rather, if the statute is silent or
     ambiguous with respect to the specific issue, the question
     for the court is whether the agency's answer is based on a
     permissible construction of the statute. [Fn. refs.
     omitted.]

We have already concluded that the statute is silent as to the

scope of consistent settlements.   Under the Chevron analysis, the

question remains whether the requirements in section 301.6224(c)-

3T, Temporary Proced. & Admin. Regs., supra, are a permissible

construction of the statute.   Chevron U.S.A., Inc. v. Natural

Resources Defense Council, Inc., supra.12

     12
          As a general proposition, temporary regulations are
accorded the same weight as final regulations. Peterson Marital
Trust v. Commissioner, 78 F.3d 795, 798 (2d Cir. 1996), affg. 102
T.C. 790 (1994); Nissho Iwai Am. Corp. v. Commissioner, 89 T.C.
765, 776 (1987). In judging the validity of a temporary
regulation, we employ the same analysis as that applied to a
final regulation. Schaefer v. Commissioner, 105 T.C. 227, 229
(1995).
                                - 13 -

     A legislative regulation, which is issued pursuant to a

specific congressional delegation to the Secretary, is entitled

to greater deference than an interpretive regulation, which is

promulgated under the general rulemaking power vested in the

Secretary by section 7805(a).    Peterson Marital Trust v.

Commissioner, 102 T.C. 790, 797 (1994), affd. 78 F.3d 795 (2d

Cir. 1996). Participants concede that section 301.6224(c)-3T,

Temporary Proced. & Admin. Regs., supra, is legislative in

character, and we accord the regulation the highest level of

judicial deference; viz, we are not to invalidate the regulation

unless it is arbitrary, capricious, or manifestly contrary to the

statute.13   Chevron U.S.A., Inc. v. Natural Resources Defense

Council, Inc., supra at 843-844; see also Ahmetovic v.

Immigration and Naturalization Service, 62 F.3d 48, 51 (2d Cir.

1995).    To be valid, section 301.6224(c)-3T(b), Temporary Proced.

& Admin. Regs., supra, need not be the only, or even the best,

construction of section 6224(c)(2).      See Atlantic Mutual Ins. Co.

v. Commissioner, 523 U.S. ___, 118 S.Ct. 1413, 1418 (Apr. 21,

1998).    The Supreme Court has stated that a reviewing court

     13
          Participants' opening brief regarding the consistent
settlement issues states as follows: "Treas. Reg. [sec.]
301.6224(c)-3T(b) is a legislative regulation promulgated
pursuant to Respondent's [sic] grant of authority in [sec.]
6230(k)." Even under the less deferential standard of review
applicable to interpretive regulations, we would conclude that
the regulation is valid. Cf. McKnight v. Commissioner, 7 F.3d
447 (5th Cir. 1993), affg. 99 T.C. 180 (1992).
                              - 14 -

     need not conclude that the agency construction was the only
     one it permissibly could have adopted to uphold the
     construction, or even the reading the court would have
     reached if the question initially had arisen in a judicial
     proceeding. [Chevron U.S.A., Inc. v. Natural Resources
     Defense Council, Inc., supra at 843 n.11; citations
     omitted.]

     In promulgating regulations, the Secretary has the

discretion to formulate rules not found in the statute:

"supplementation of a statute is a necessary and proper part of

the Secretary's role in the administration of our tax laws."

Hachette USA, Inc. v. Commissioner, 105 T.C. 234, 251 (1995),

affd. per curiam 87 F.3d 43 (2d Cir. 1996).   "'The power of an

administrative agency to administer a congressionally created

* * * program necessarily requires the formulation of policy and

the making of rules to fill any gap left, implicitly or

explicitly, by Congress.'"   Chevron U.S.A., Inc. v. Natural

Resources Defense Council, Inc., supra at 843 (quoting Morton v.

Ruiz, 415 U.S. 199, 231 (1974)).

     Section 301.6224(c)-3T, Temporary Proced. & Admin. Regs.,

supra, is consistent with the TEFRA goal of promoting the uniform

adjustment of partnership items.   H. Conf. Rept. 97-760, at 600,

602 (1982), 1982-2 C.B. 662, 664; see Maxwell v. Commissioner, 87

T.C. at 787.   It furthers this goal by ensuring the integrity of

those original settlement agreements with which requests for

consistent settlement terms may be made.   The regulation

accomplishes this through two requirements.   First, the
                              - 15 -

settlement of partnership items must be self-contained; i.e., not

premised upon the settlement of nonpartnership items, and second,

an original settlement must determine all partnership items.14

Sec. 301.6224(c)-3T(b), Temporary Proced. & Admin. Regs., 52 Fed.

Reg. 6787 (Mar. 5, 1987).

     The instant cases afford a prime example of the mischief

that the temporary regulation aims to curtail.   If, as

participants argue, paragraph one of the original settlement

agreements may be the subject of a consistent settlement

agreement, then they are entitled to receive consistent treatment

only with respect to this provision through their request under

section 6224(c)(2).   In essence, participants seek to extract the

benefits from paragraph one and disregard the burdens from the

other provisions of the original settlement agreements.    Although

cloaked beneath the mantle of consistent settlement, what

participants actually seek are settlements that are inconsistent

with those received by other partners.

     14
          A mechanism exists by which a settlement agreement may
be effected so as to comply with the requirements of the
temporary regulation. The Court takes notice of the fact that
respondent has utilized Form 870-L(AD) (Settlement Agreement for
Partnership Adjustments and Affected Items) to settle adjustments
with individual partners. The form contains two separate and
distinct parts: Part one is used to settle partnership items,
while part two is used to settle nonpartnership and affected
items. See, e.g., Olson v. United States, 37 Fed. Cl. 727, 729
(1997).
                              - 16 -

     Participants attempt to place these cases within the realm

of those decisions in which courts have invalidated Treasury

regulations.   Although it is well settled that respondent "may

not usurp the authority of Congress by adding restrictions to a

statute which are not there", Estate of Boeshore v. Commissioner,

78 T.C. 523, 527 (1982), participants' reliance on this line of

authority is misplaced.   In each of the cases cited by the

participants, a regulation was invalidated either because it

directly conflicted with an unambiguous statutory provision or

because it was inimical to the clear congressional mandate set

forth in the pertinent legislative history.15   As previously

     15
          See, e.g., United States v. Vogel Fertilizer Co., 455
U.S. 16, 26 (1982) ("The legislative history of sec. 1563(a)(2)
resolves any ambiguity in the statutory language and makes it
plain that Treas. Reg. sec. 1.1563-1(a)(3) is not a reasonable
statutory interpretation."); Koshland v. Helvering, 298 U.S. 441,
447 (1936) ("where, as in this case, the provisions of the act
are unambiguous, and its directions specific, there is no power
to amend it by regulation"); Jackson Family Foundation v.
Commissioner, 97 T.C. 534, 542 (1991), affd. 15 F.3d 917 (9th
Cir. 1994) ("there is simply no statutory basis for the
regulation"); (holding that sec. 1.863-1(b), Income Tax Regs.,
contradicts the clear and unambiguous language of sec.
863(b)(2)); Phillips Petroleum Co. v. Commissioner, 97 T.C. 30,
34-36 (1991), affd. without published opinion 70 F.3d 1282 (10th
Cir. 1995); Durbin Paper Stock Co. v. Commissioner, 80 T.C. 252,
260 (1983) ("we find section 992(a)(1)(C) to be unambiguous. In
our view, there is no statutory authority for the 'paid-in'
capital requirement set forth in section 1.992-1(d)(1), Income
Tax Regs."); Estate of Boeshore v. Commissioner, 78 T.C. 523,
531-532 (1982) ("the regulation adds restrictions to the statute
that are not there, and the regulation is out of 'harmony' with
the statute's origin and purpose"); ("respondent's interpretation
of section 103(c)(2)(A) is at odds with the legislative history
and the totality of the circumstances surrounding the enactment
                                                   (continued...)
                              - 17 -

discussed, here there is neither an unambiguous specific

statutory directive, nor any specific evidence in the legislative

history as to the congressional intent behind the consistent

settlement provisions.

     In sum, section 301.6224(c)-3T(b), Temporary Proced. &

Admin. Regs., supra, harmonizes with section 6224(c)(2) and the

broader legislative purpose behind TEFRA, and we conclude that

the regulation constitutes a permissible interpretation of the

statute.   Accordingly, we uphold the validity of the regulation

as neither arbitrary, capricious, nor manifestly contrary to the

statute.   See Chevron U.S.A., Inc. v. Natural Resources Defense

Council, 467 U.S. at 844.16

     15
      (...continued)
of section 103(c)"); State of Washington v. Commissioner, 77 T.C.
656, 672 (1981), affd. 692 F.2d 128 (D.C. Cir. 1982); Arrow
Fastener Co. v. Commissioner, 76 T.C. 423, 431 (1981) ("we find
the statute clear and unambiguous, and respondent has no power to
promulgate a regulation adding provisions that he believes
Congress should have included.").
     16
        Participants argue that respondent provided them with
the necessary information regarding each of the original
settlement agreements, fully aware that participants sought the
information for the purpose of making requests for offers of
consistent settlement terms. Therefore, participants suggest
that respondent should be estopped from now claiming that the
original settlement agreements are not subject to requests for
consistent settlement terms.
     Equitable estoppel is a judicial doctrine that precludes a
party from denying that party's own acts or representations which
induced another to act to his or her detriment. Hofstetter v.
Commissioner, 98 T.C. 695, 700 (1992). Equitable estoppel is to
be applied against respondent only "'with utmost caution and
restraint.'" Id. at 700 (quoting Estate of Emerson v.
                                                   (continued...)
                             - 18 -

    To reflect the foregoing,

                                 An appropriate order will

                          be issued.

    16
      (...continued)
Commissioner, 67 T.C. 612, 617 (1977)). The burden of proof is
on the party claiming estoppel against the Government. Rule
142(a); Hofstetter v. Commissioner, supra at 701.
     A key element required for an estoppel is reasonable
reliance on the acts or statements of the one against whom
estoppel is claimed. Norfolk S. Corp. v. Commissioner, 104 T.C.
13, 60 (1995), affd. 140 F.3d 240 (4th Cir. 1998); Hofstetter v.
Commissioner, supra at 700. Although respondent provided
participants with information about the original settlement
agreements, participants were not entitled to rely upon this
information as a legal guaranty from respondent that such
settlement agreements would fit squarely within the requirements
of sec. 6224(c)(2) and the temporary regulation. Moreover, even
if participants did so rely, their reliance was not reasonable.
Thus, participants have not shown that estoppel applies against
respondent.
                                      - 19 -

                                     APPENDIX

Partnership/Docket No.                    Participants

Greenberg Brothers Partnership #4,        John M. Kash
a.k.a. Breathless Associates--            Gerald N. and Margie L. Cooper
19575-91                                  Helen (Maude) L. Shepler
                                          Jack and Shirlee Pines
                                          James D. and Mary Kay Hudson
                                          Dale C. and Sarah L. Hudson
                                          Margaret A. Hudson
                                          Dennis C. and Kellie S. Hudson
                                          John A. and Maria A. Barnett

Greenberg Brothers Partnership #12,       Wilderness Village Properties
a.k.a. Lone Wolf McQuade Associates--     Lyman F. Bush
22780-91                                  Robert G. Wekell
                                          Murray D. and Bonnie B. Nelson
                                          Warren A. Secord
                                          Richard K. Baker
                                          Edwin A., Jr. and Karin M. Locke
                                          Dick E. and Janet R. Jones
                                          Shirley M. and Lois B. Wekell
                                          Herman M. and Gloria R. Nirschl
                                          Stephen O. and Lynn M. Roberts
                                          William H. Bratton
                                          James A. and Patricia A. Grever
                                          Robert A. Mandich
                                          William M. and Rose Marie Wagner
                                          Douglas C. and Robin T. Larson
                                          William Edward Duncan

Easy Money Associates--29878-91           Albert Louis Wade, Jr.
                                          David D. & Joyce N. Fagerland
                                          Henry W. and Patricia D. Bates
                                          Charles W. and Naomi J. Yett
                                          George R. Blitch
                                          Lynn F. Cassidy
                                          Ronald Braunschweig

Cinema '84--621-92                        Friar Tuck Partners
                                          Lyman F. Bush
                                          C. William and Charlotte I. Clay
                                          Edwin A., Jr. and Karin M. Locke
                                          Dick E. and Janet R. Jones
                                          Mohan S. and Kalyani Phanse
                                          Jack and Shirley Pines
                                          John M. and Mary D. Kash
                                          Henry J. and Shirlene Romain
                                          Tommy S. Shelton
                                          Raymond and Develya Cox
                                          Jeffrey Dubnow
                                          Stephanie Lite
                                          Francis Dan and Mary Day Whitehurst
                                          James S. Greenwood
                                   - 20 -

                                         Kenneth G. and Patricia Gamble
                                         Jerry R. and Marlynne Olson
                                         Roger A. and Rebecca M. Myklebust
                                         Richard J. and Patricia Panicco
                                         Karl E. Epstein
                                         Charles and Jane Osborn

First Blood Associates--623-92,          Joe A. Clements
      13014-92, 15641-92, and 12062-94   Joseph E. and Bernice L. Goodwin
                                         Don R. and Patsy A. Slaughter
                                         Charles W. and Collette L. Russell
                                         Vincent L. and Marilyn L. Mogas
                                         Hurdle H., Jr. and Frances J. Lea
                                         William L. Green
                                         Thomas L. and Lynda L. Arnold
                                         Lance H. and Franzel S. Bondy*
                                         David D. and Betty A. Maytag
                                         Glenna Goodacre
                                         Louis F., Jr. and Cynthia B. Wood
                                         William H. Bratton
                                         Charles S. and Julie Filleman
                                         Richard K. Baker
                                         Ronald and Elaine Altman
                                         Barry J. MacNeal
                                         Michael J. and Jo Ann Scarfia
                                         Stephen O. and Lynn M. Roberts
                                         Thomas M. Nixon

Under Fire Associates--3968-92           Louis D. Cross
                                         C. William and Charlotte I. Clay
                                         Charles W. and Collette L. Russell
                                         Howard W. and Carole L. Neuner

Cinema '85--4432-92                      Jack P. McCarthy
                                         Roger A. and Rebecca M. Myklebust
                                         Thomas L. and Miriam Holt
                                         Paul E. and Kathleen A. Weaver
                                         Wallace and Maria Steinberg
                                         William A. Newman
                                         Karl E. Epstein
                                         Lawrence C. Board

* Only as to the Motion for Entry of Order to Compel Respondent to Extend
Offers of Consistent Settlement filed in each of the First Blood Associates
cases.