Court Opinion

ID: 9407163
Source: CourtListenerOpinion
Date Created: 2023-07-05 21:02:12.149738+00
Date Added: 2024-06-11T17:20:35.606735
License: Public Domain

USCA11 Case: 22-10196   Document: 47-1    Date Filed: 07/05/2023   Page: 1 of 33

                                                         [PUBLISH]
                                 In the
                 United States Court of Appeals
                        For the Eleventh Circuit

                         ____________________

                               No. 22-10196
                         ____________________

        ESTATE OF JAMES P. KEETER, DECEASED,
        GARRY L. HOLTON, JR. and
        THOMAS W. SCHAEFER,
        CO-EXECUTORS, and
        JULIE L. KEETER,
                                                Petitioners-Appellants,
        versus
        COMMISSIONER OF INTERNAL REVENUE,

                                                Respondent-Appellee.

                         ____________________
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        2                   Opinion of the Court                22-10196

                   Petition for Review of a Decision of the
                                U.S. Tax Court
                              Agency No. 6771-16
                          ____________________

                          ____________________

                                No. 22-10197
                          ____________________

        KAYLAN A. LEWIS,
                                                    Petitioner-Appellant,
        versus
        COMMISSIONER OF INTERNAL REVENUE,

                                                   Respondent-Appellee.

                          ____________________

                   Petition for Review of a Decision of the
                                U.S. Tax Court
                              Agency No. 6772-16
                          ____________________
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        22-10196                Opinion of the Court                           3

        Before BRANCH and BRASHER, Circuit Judges, and WINSOR,∗ District
        Judge.
        BRASHER, Circuit Judge:
               This appeal turns on the meaning of the phrase “partner
        level determinations” in Section 6230(a)(2)(A)(i) of the now-re-
        pealed Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”).
        When the IRS adjusts the tax items of a partnership, these partner-
        ship-level changes often require corresponding adjustments to “af-
        fected items” on the individual partners’ income tax returns. The
        IRS makes these resulting partner-level changes using one of two
        procedures. If adjusting a partner-taxpayer’s affected item “re-
        quire[s] partner level determinations,” the IRS must send the tax-
        payer a notice of deficiency describing the adjustment to the tax-
        payer’s tax liability, and the taxpayer has the right to challenge the
        adjustments in court before paying. If, on the other hand, adjusting
        the affected item does not “require partner level determinations,”
        the IRS generally must make a direct assessment against the tax-
        payer, and the taxpayer may challenge the adjustment only in a
        post-payment refund action.
                We must decide which procedure the IRS must apply to ad-
        just the following affected items: (1) losses taxpayers claimed on
        sales of stock and euros distributed to them by a sham partnership
        as a liquidating distribution, and (2) itemized deductions dependent

        ∗Honorable Allen C. Winsor, United States District Judge for the Northern
        District of Florida, sitting by designation.
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        4                      Opinion of the Court                22-10196

        on those losses. Because making these adjustments requires an in-
        dividualized assessment of each taxpayer’s unique circumstances,
        we hold that they “require partner level determinations,” mandat-
        ing deficiency procedures. Because the IRS used that procedure and
        the Tax Court approved it, we affirm.
                                       I.

                                       A.

               We begin by explaining the applicable statutory framework.
        Partnerships are not subject to federal income tax. I.R.C. § 701. Ra-
        ther, a partnership’s taxable items of income, gain, loss, deduction,
        and credit pass through to its partners, who must report their re-
        spective shares of those items on their own tax returns. Id. §§ 702,
        704.
               Still, a partnership must report its tax items on an informa-
        tional return. Id. § 6031. And before 1982, the IRS had no way to
        correct errors on a partnership’s informational return in one fell
        swoop. Instead, to adjust a partnership item—even one that per-
        tained to all partners—the government had to pursue deficiency
        procedures against each partner individually. Greenberg v. Comm’r,
        10 F.4th 1136, 1145 (11th Cir. 2021). Deficiency procedures re-
        quired the IRS to issue a separate notice of tax deficiency to each
        partner, see I.R.C. § 6212(a), who could then challenge the defi-
        ciency amount before paying by filing a petition in the U.S. Tax
        Court, id. § 6213(a). This old scheme generated duplicative
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        22-10196                  Opinion of the Court                                5

        proceedings and inconsistent treatment of partnership items be-
        tween different partners. See United States v. Woods, 571 U.S. 31, 38
        (2013).
               To correct these defects, Congress enacted TEFRA, Pub. L.
        No. 97-248, 96 Stat. 648 (codified as amended at I.R.C. §§ 6221–6234
        (1992 ed. and Supp. IV)). 1 TEFRA required the IRS to engage in a
        coordinated “two-step process” to determine the proper tax treat-
        ment of partnership matters. Highpoint Tower Tech. Inc. v. Comm’r,
        931 F.3d 1050, 1053 (11th Cir. 2019).
                At step one of TEFRA, the IRS adjusts “partnership items”
        relevant to the partnership as a whole in a single, unified proceed-
        ing. See I.R.C. §§ 6221(a), 6231(a)(3). Partnership items are taxable
        items “more appropriately determined at the partnership level than
        at the partner level,” id. § 6231(a)(3), such as “[t]he partnership ag-
        gregate and each partner’s share of . . . income, gain[,] loss, deduc-
        tion, or credit of the partnership,” Treas. Reg. § 301.6231(a)(3)–
        1(a). If the IRS disagrees with a partnership’s reporting of partner-
        ship items, it initiates an audit against the partnership. I.R.C.
        § 6223(a)(1). And if the IRS determines that adjustments to partner-
        ship items are necessary, it issues a notice of final partnership ad-
        ministrative adjustment (“FPAA”) to the partners informing them

        1 Congress prospectively repealed the TEFRA partnership procedures begin-
        ning in 2018. See Bipartisan Budget Act of 2015, Pub. L. No. 114-74, § 1101(a),
        129 Stat. 584, 625. Because the events at issue in this appeal took place during
        the 1999–2003 tax years, TEFRA governs our analysis. All citations to the In-
        ternal Revenue Code and Treasury regulations refer to the versions applicable
        during that time.
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        6                      Opinion of the Court                 22-10196

        of the adjustments. Id. § 6223(a)(2). If the partners dispute the ad-
        justments, the designated “tax matters partner” may initiate a
        “partnership-level proceeding” in court. See id. § 6226.
                At step two of TEFRA, the IRS must decide whether its part-
        nership-level adjustments to “partnership items” require any indi-
        vidual partner-level adjustments to “affected items.” Sarma v.
        Comm’r, 45 F.4th 1312, 1316 (11th Cir. 2022). Affected items are
        items reported on the individual partners’ returns “that are affected
        by (but are not themselves) partnership items.” Woods, 571 U.S. at
        39 (citing I.R.C. §§ 6230(a)(2)(A)(i), 6231(a)(5)). Unlike disputes
        over partnership items, “which are addressed at the partnership
        level, issues relating to affected items are addressed at the individ-
        ual partner level.” Monahan v. Comm’r, 321 F.3d 1063, 1066 (11th
        Cir. 2003).
              Under TEFRA, the IRS adjusts affected items partner-by-
        partner using one of two procedures. Which method applies de-
        pends on whether the affected items “require partner level deter-
        minations.” I.R.C. § 6230(a)(2)(A)(i).
               One procedure governs affected items that do not require
        partner-level determinations. For such items, the IRS may make a
        direct computational adjustment to the partner’s return by apply-
        ing the revised tax treatment of the partnership items to the af-
        fected item on the partner’s return. See id. § 6230(a)(1); Woods, 571
        U.S. at 39. The IRS then notifies the partner of the change via a
        “notice of computational adjustment.” See Ginsburg v. United States,
        17 F.4th 78, 81–82 (11th Cir. 2021). Taxpayers are not entitled to
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        22-10196               Opinion of the Court                          7

        challenge direct assessments before paying; instead, they may chal-
        lenge the adjustments only in a post-payment refund action. See
        I.R.C. § 6230(a)(1), (c).
              The second procedure, by contrast, applies when an affected
        item requires partner-level determinations. In this situation,
        TEFRA directs the IRS to make adjustments using its normal defi-
        ciency procedures. That is, the IRS must issue a “notice of defi-
        ciency” to the individual partner, who is entitled to a pre-payment
        forum to dispute the adjustments. Id. § 6230(a)(2)(A)(i); see id.
        § 6212(a).
               With this procedural framework in mind, we turn to the
        case at hand.
                                       B.

                The relevant facts are undisputed. The taxpayer-appellants
        in these consolidated appeals are Julie Keeter; the Estate of her de-
        ceased husband, James Keeter; and the Keeters’ adult daughter,
        Kaylan Lewis. They participated in an abusive tax shelter known as
        “BLIPS”—a variation of the now-familiar “Son-of-BOSS” shelter.
        See IRS Notice 2000–44, 2000–2 C.B. 255 (classifying such schemes
        as illegal tax-avoidance transactions). “Like many of its kin, this tax
        shelter employs a series of transactions to create artificial financial
        losses that are used to offset real financial gains, thereby reducing
        tax liability.” Highpoint, 931 F.3d at 1052 (quoting Petaluma FX Part-
        ners, LLC v. Comm’r, 591 F.3d 649, 650 (D.C. Cir. 2010), abrogated on
        other grounds by Woods, 571 U.S. 31). BLIPS participants “transfer . .
        . assets encumbered by significant liabilities to a partnership” with
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        8                       Opinion of the Court                   22-10196

        the purpose of artificially increasing their “basis” in that partner-
        ship. Id. “Tax basis is the amount used as the cost of an asset when
        computing how much its owner gained or lost for tax purposes
        when disposing of it.” Woods, 571 U.S. at 35. In the partnership con-
        text, “outside basis” refers to each partner’s interest in the partner-
        ship, and “inside basis” refers to the partnership’s basis in its own
        assets. See id. at 35–36. The partners in a BLIPS scheme evade tax
        liability by attaching their inflated outside basis to a liquidating dis-
        tribution received from the sham partnership. When they sell the
        distributed assets, they generate artificial losses.
               The taxpayers took those steps here. In 1999, Lewis and the
        Keeters created and funded single-member LLCs. The LLCs took
        out bank loans consisting of a principal amount and an additional
        “premium” amount. The taxpayers then transferred the LLCs’
        funds to a second entity—Sanford Strategic Investment Fund, LLC
        (a partnership for tax purposes, see I.R.C. § 761(a))—which as-
        sumed the loan obligations.
               Normally, outside basis is equal to a partner’s capital contri-
        butions minus any liabilities assumed by the partnership on the
        partner’s behalf. See I.R.C. §§ 722, 752. But because Sanford’s obli-
        gation to repay the loan premium was treated as contingent, the
        taxpayers did not consider it a liability for tax-basis purposes. By
        ignoring that liability when calculating basis, the taxpayers main-
        tained an inflated outside basis in Sanford equal to their capital con-
        tributions plus the loan premium.
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        22-10196               Opinion of the Court                         9

               That same year, the taxpayers withdrew from the Sanford
        partnership. As part of a liquidating distribution, Sanford distrib-
        uted stocks and euros to the taxpayers, which they sold or ex-
        changed at various times between 1999 and 2003. Because of their
        inflated outside bases in Sanford, the taxpayers’ sales of those dis-
        tributed assets produced artificial losses approximately equal to the
        original loan premium, which the taxpayers claimed on their fed-
        eral income tax returns.
                                       C.

                                       1.

               The taxpayers apparently realized they were participating in
        a scam. So, to soften their expected run-in with the IRS, they vol-
        untarily disclosed their BLIPS transactions as part of a pre-audit in-
        centive program. Following these confessions, the IRS audited San-
        ford and determined the purported partnership was a sham. Ac-
        cordingly, it disallowed Sanford’s transactions as lacking economic
        substance.
               Sanford’s tax matters partner initiated a partnership-level
        proceeding against the IRS in federal district court, claiming San-
        ford’s transactions were legitimate. The district court disagreed
        and upheld the IRS’s relevant partnership-item adjustments. See
        Shasta Strategic Inv. Fund, LLC v. United States, No. C-04-04264-RS,
        2014 WL 3852416, at *9 (N.D. Cal. July 31, 2014), amended, No. C-
        04-4264-RS, 2014 WL 5138027 (N.D. Cal. Sept. 11, 2014), aff’d sub
        nom. Twenty-Two Strategic Inv. Funds v. United States, 859 F.3d 684
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        10                      Opinion of the Court                    22-10196

        (9th Cir. 2017), aff’d sub nom. Sixty-Three Strategic Inv. Funds v. United
        States, 692 F. App’x 432 (9th Cir. 2017).
                                         2.

                                         a.

               After the partnership-level proceedings, the IRS made corre-
        sponding adjustments to the taxpayers’ affected items at the part-
        ner level. For some of these affected items (like the taxpayers’ dis-
        tributive share of Sanford’s income, gain, and loss), the IRS con-
        cluded that no “partner level determinations” were necessary. See
        I.R.C. § 6230(a)(2)(A)(i). Accordingly, the IRS adjusted those items
        directly and sent the taxpayers notices of computational adjust-
        ment. The taxpayers do not challenge the validity of these compu-
        tational adjustment notices.
                But the IRS believed partner-level determinations were
        needed to adjust the taxpayers’ other affected items—(1) the losses
        they reported from the sales of the stock and euros they received
        from Sanford as a liquidating distribution and (2) itemized deduc-
        tions that depended on those losses. So the IRS notified the taxpay-
        ers of adjustments to those items using notices of deficiency. These
        notices—which indicated that the taxpayers were liable for millions
        of dollars of unpaid taxes during the 1999 through 2003 tax years—
        are the subject of this suit.
                                         b.
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        22-10196               Opinion of the Court                         11

               The taxpayers filed timely petitions in the Tax Court chal-
        lenging the validity of the notices of deficiency. They did not dis-
        pute that they owed the money, just the procedure the IRS em-
        ployed to obtain it. Specifically, the taxpayers claimed that the af-
        fected items adjusted in the deficiency notices did not “require part-
        ner level determinations” under Section 6230(a)(2)(A) because the
        taxpayers’ returns provided the IRS “all of the factual information
        necessary to determine the taxpayers’ correct tax liability.” Thus,
        the taxpayers argued that the IRS should have instead assessed
        these items directly and issued notices of computational adjust-
        ment. And because the IRS issued the wrong notice, the argument
        went, the Tax Court lacked jurisdiction to redetermine the taxpay-
        ers’ deficiencies.
                The Tax Court disagreed and ruled for the IRS, upholding
        the deficiency notices and its jurisdiction to enforce them. First, the
        court concluded that the IRS had to make several partner-level de-
        terminations to adjust the taxpayers’ reported losses from the sale
        of their liquidating distributions. These determinations included
        whether the stock and euros sold by the taxpayers between 1999
        and 2003 were the same stock and euros Sanford distributed to
        them in 1999; the holding periods of those assets; the character of
        any gain or loss on their sale; and whether the taxpayers had any
        basis in those assets that was not attributable to their claimed basis
        in Sanford. Second, the Tax Court held that these same partner-
        level determinations were required to adjust the taxpayers’ re-
        ported itemized deductions. Even though itemized deductions are
        statutorily prescribed mathematical computations, the applicable
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        12                     Opinion of the Court                22-10196

        statutory limitations depend on the taxpayers’ adjusted gross in-
        comes, which themselves depend on the IRS’s adjustments to the
        taxpayers’ reported losses.
               The parties eventually agreed upon the taxes that the tax-
        payers owed, and the Tax Court accepted those agreements in stip-
        ulated decisions. The taxpayers appealed the stipulated decisions,
        and we consolidated their appeals.
                                       II.

               The Tax Court’s conclusions concerning jurisdiction and
        statutory interpretation are legal questions we review de novo.
        Greenberg, 10 F.4th at 1155.
                                       III.

               The taxpayers argue that we should vacate the stipulated de-
        cisions because the Tax Court lacked subject matter jurisdiction
        over the IRS’s deficiency notices. Specifically, the taxpayers con-
        tend that the IRS should have used the abbreviated procedures for
        computational adjustments to their individual returns, rather than
        employing deficiency procedures. In other words, the taxpayers are
        arguing that the IRS granted them more process than the law enti-
        tled them. The taxpayers seem to believe that, if they can convince
        us that the Tax Court lacked jurisdiction to enforce the deficiency
        notices, the IRS will be time barred from assessing their liabilities
        through the correct procedure. See I.R.C. § 6299(d)(2).
               Although Congress repealed TEFRA, we still apply its pro-
        visions to disputes from taxable years before 2018. See Highpoint,
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        22-10196               Opinion of the Court                        13

        931 F.3d at 1052 n.2. To that end, we must answer four questions
        to resolve this appeal. First, do the taxpayers have standing to ap-
        peal the stipulated judgments of the Tax Court? Second, when does
        an affected item “require partner level determinations”? Third, did
        the affected items at issue require partner-level determinations?
        Fourth, is there any other basis to reverse on the specific facts of
        this record?
                                       A.

               We will start with the taxpayers’ standing to appeal. The tax-
        payers appeal the Tax Court’s redeterminations of their deficien-
        cies, which the court made pursuant to stipulations entered be-
        tween the taxpayers and the IRS. Although a party who consents
        to the entry of a stipulated judgment generally lacks standing to
        appeal it, there is an exception when the appellant is challenging
        the lower court’s subject matter jurisdiction. White v. Comm’r, 776
        F.2d 976, 977–78 (11th Cir. 1985). By attacking the IRS’s statutory
        authorization to pursue deficiency procedures, the taxpayers say
        they are challenging the Tax Court’s subject matter jurisdiction.
                We believe the taxpayers have standing. The Tax Court has
        repeatedly and consistently held that “a valid notice of deficiency
        and a timely petition are essential to our deficiency jurisdiction
        and” that the court “must dismiss any case in which one or the
        other is not present.” Monge v. Comm’r, 93 T.C. 22, 27 (1989); see,
        e.g., Pietanza v. Comm’r, 92 T.C. 729, 735 (1989) (“It is well settled
        that to maintain an action in this Court there must be a valid notice
        of deficiency and a timely filed petition.”); Stamm Int’l Corp. v.
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        14                     Opinion of the Court                  22-10196

        Comm’r, 84 T.C. 248, 252 (1985) (“A valid petition is the basis of the
        Tax Court’s jurisdiction. To be valid, a petition must be filed from
        a valid statutory notice.”). Although we have never explicitly ad-
        dressed the issue, we have tacitly accepted this proposition, paren-
        thetically quoting the Tax Court’s statement that its “jurisdiction
        to redetermine a deficiency in tax depends upon a valid notice of
        deficiency.” Sarma, 45 F.4th at 1323 (quoting GAF Corp. & Subsidi-
        aries v. Comm’r, 114 T.C. 519, 521 (2000)). And other circuits that
        have addressed the issue have agreed. See, e.g., Scar v. Comm’r, 814
        F.2d 1363, 1366 (9th Cir. 1987) (“The Tax Court has jurisdiction
        only when the Commissioner issues a valid deficiency notice, and
        the taxpayer files a timely petition for redetermination.”); Miles
        Prod. Co. v. Comm’r, 987 F.2d 273, 275 (5th Cir. 1993) (“One of the
        statutory prerequisites to the exercise of the tax court’s jurisdiction
        is a valid notice of deficiency.” (citing Logan v. Comm’r, 86 T.C.
        1222, 1226 (1986))). In light of these authorities, we agree with the
        taxpayers that they have standing to challenge the validity of the
        deficiency notices.
                                       B.

               We turn now to the parties’ principal dispute: when does
        adjusting an affected item “require partner level determinations”
        under Section 6230(a)(2)(A) of TEFRA?
               To answer this question, we begin with the text of the stat-
        ute, assigning its terms their ordinary meaning at the time Con-
        gress adopted them. United States v. Bryant, 996 F.3d 1243, 1252
        (11th Cir. 2021) (citing Wis. Cent. Ltd. v. United States, 138 S. Ct.
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        22-10196                Opinion of the Court                           15

        2067, 2074 (2018)). This ordinary-meaning canon is our “most fun-
        damental semantic rule of interpretation.” Ruiz v. Wing, 991 F.3d
        1130, 1138 (11th Cir. 2021) (quoting Antonin Scalia & Bryan A. Gar-
        ner, Reading Law: The Interpretation of Legal Texts 69 (2012)). Yet the
        taxpayers dispute its application here. Because direct assessment is
        TEFRA’s general rule for adjusting affected items, see I.R.C.
        § 6230(a)(1), the taxpayers urge us to “strictly” or “narrowly” con-
        strue Section 6230(a)(2)(A)’s deficiency-procedure exception for af-
        fected items requiring partner-level determinations.
                We decline the invitation. Save for a handful of special cir-
        cumstances, see, e.g., Dotson v. United States, 30 F.4th 1259, 1264
        (11th Cir. 2022) (statutory waivers of sovereign immunity), we do
        not adopt “strict” or “narrow” interpretations of statutes—even tax
        ones. See Scalia & Garner, supra, at 362 (“[A] tax statute should be
        given its fair meaning, and this includes a fair interpretation of any
        exceptions it contains.”). “Our role,” instead, “is to give . . . stat-
        ute[s] a ‘fair reading.’” Ga. Ass’n of Latino Elected Offs., Inc. v. Gwin-
        nett Cnty. Bd. of Registration & Elections, 36 F.4th 1100, 1120 (11th
        Cir. 2022) (quoting Scalia & Garner, supra, at 3); see Pictet Overseas
        Inc. v. Helvetia Tr., 905 F.3d 1183, 1191 (11th Cir. 2018) (William
        Pryor, J., concurring) (“‘A text should not be construed strictly’; in-
        stead, ‘it should be construed reasonably, to contain all that it fairly
        means.’” (quoting Antonin Scalia, A Matter of Interpretation: Federal
        Courts and the Law 23 (1997))).
               The parties focus their dispute on the meaning of the word
        determinations in the phrase “affected items which require partner-
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        16                     Opinion of the Court                 22-10196

        level determinations.” I.R.C. § 6230(a)(2)(A)(i). According to the
        taxpayers, the ordinary meaning of “determination” is “a judicial
        decision settling or ending a controversy or the resolving of a ques-
        tion by argument or reasoning.’” Under this construction, the tax-
        payers assert that partner-level determinations are required in only
        two circumstances: (1) when there is “an actual dispute” over an
        adjustment amount that requires judicial resolution, or (2) when
        the IRS does not already possess the factual information it needs to
        make the adjustment. The IRS, for its part, says a “determination”
        is “simply the act of deciding something officially,” whether “legal
        or factual,” and whether “by a court or administrative agency.” Ap-
        plying this interpretation, the IRS submits that an adjustment re-
        quires partner-level determinations under TEFRA if it depends on
        the individual taxpayer’s unique circumstances. In other words, if
        an adjustment requires more than plugging partnership values into
        each partner’s returns using a mathematical computation, the IRS
        believes TEFRA entitles the partners to a pre-payment forum to
        dispute the deficiency.
               We think the IRS’s reading is most loyal to the statute’s text.
        The ordinary meaning of “determination” at the time of TEFRA’s
        1982 enactment is not limited to agency fact-gathering or judicial
        resolution of a concrete dispute. It refers, more broadly, to the pro-
        cess of reaching a conclusion. See Random House Dictionary of the
        English Language 541 (2d ed. 1987) (“the act of coming to a deci-
        sion or of fixing or settling a purpose”); Black’s Law Dictionary 405
        (5th ed. 1979) (“The decision of a court or administrative agency.”).
        We have previously held that “determine means ‘establish or
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        22-10196               Opinion of the Court                        17

        ascertain definitely, as after consideration, investigation, or calcu-
        lation.’” Bourdon v. U.S. Dep’t of Homeland Sec., 940 F.3d 537, 542
        (11th Cir. 2019) (quoting The American Heritage Dictionary of the
        English Language 494 (5th ed. 2011)).
                The taxpayers’ proposed definition, however, would read
        atextual limitations into the word “determinations.” Reaching con-
        clusions does not invariably entail gathering new information; a de-
        cisionmaker may also reach a conclusion based on information in
        his possession. See id. (“[Dictionary] definitions show that ‘deter-
        mine’ encompasses making a final decision—and the method for
        reaching that final decision (or, as the dictionaries put it, the
        thought, consideration, research, investigation, or calculation).”).
        Likewise, the ordinary meaning of determination is not limited to
        dispute resolution. To take a common example, insurers often
        make an independent determination that a doctor’s prescription is
        “appropriate” and “medically necessary” before the provider will
        cover the prescription cost, even if there is no dispute to resolve.
        See, e.g., 42 U.S.C. § 1396r-8(g)(1)(A). Further, the relevant deter-
        miners under Section 6230(a)(2)(A) are IRS agents, who conduct
        investigations and draw conclusions, not resolve disputes. Compare
        I.R.C. § 6212(a) (“the [Treasury] Secretary determines that there is a
        deficiency”(emphasis added)), with § 6213(a) (“the taxpayer may
        file a petition with the Tax Court for a redetermination of the defi-
        ciency” (emphasis added)).
                The taxpayers offer two non-textual arguments to support
        their interpretation of Section 6230(a)(2)(A). Neither is persuasive.
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        18                     Opinion of the Court                  22-10196

                First, the taxpayers argue that Treasury Regulation
        § 301.6231(a)(6)-1(a)(2) supports their interpretation. That regula-
        tion clarifies that the act of “substituting redetermined partnership
        items for the partner’s previously reported partnership items . . .
        does not constitute a partner-level determination where the Inter-
        nal Revenue Service otherwise accepts, for the sole purpose of de-
        termining the computational adjustment, all nonpartnership items
        . . . as reported” on the partner’s individual return. According to
        the taxpayers, because the IRS accepted the items reported on their
        returns when adjusting their affected items, Section 301.6231(a)(6)-
        1(a)(2) teaches that those adjustments did not require partner-level
        determinations. But the regulation says no such thing. At most it
        means that, to adjust affected items, the IRS may use the infor-
        mation provided on the partners’ tax returns.
               Second, the taxpayers describe our adopted interpretation of
        Section 6230(a)(2)(A) as both unworkable and inconsistent with
        TEFRA’s purpose. Of course, “we are not at liberty to rewrite [a]
        statute to reflect a meaning we deem more desirable” or to allow a
        theory about its “broad purposes” override its plain text. United
        States v. Crape, 603 F.3d 1237, 1244–45, 1247 (11th Cir. 2010)
        (cleaned up). But, in any event, we disagree with the taxpayers’
        characterizations on this score.
                If workability is the goal, the taxpayers’ interpretation still
        falls short. Their proposal is that no partner-level determinations
        are required whenever an affected-item adjustment (1) “is not sub-
        ject to dispute (i.e., is not objected to or otherwise challenged” or
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        22-10196                Opinion of the Court                          19

        (2) “can be computed by the IRS agent after taking into account,
        and assuming the accuracy of, the reasonable universe of infor-
        mation within its possession (i.e., tax returns, informational re-
        turns, stipulations, settlement and closing agreements, sworn state-
        ments and disclosures).”
                This test reeks of administrative difficulties. Most obviously,
        it is not at all clear how the IRS is to know whether its adjustments
        are “subject to dispute” before making them. Even more, the tax-
        payers’ rule would burden the court in every case with reviewing
        the “universe of information” within the IRS’s possession and de-
        ciding whether that information was sufficient on its own to adjust
        the challenged items. See Tr. u/w/o Namm v. Comm’r, 116 T.C.M.
        (CCH) 457, *11 n.15 (2018) (explaining that the necessity of partner-
        level determinations “is not determined by parsing the fine points
        of the partners’ returns and hypothesizing what inferences the IRS
        might draw therefrom”).
               Our conclusion is also consistent with the Supreme Court’s
        description of TEFRA’s purpose. That purpose is not “to reduce
        the number of partner level proceedings” point blank, as the tax-
        payers would have us believe. Instead, “the precise evil that TEFRA
        sets out to remedy” is “duplicative proceedings, potentially leading
        to inconsistent results, on a question that applies equally to all of the
        partners.” Woods, 571 U.S. at 42 (emphasis added). Put differently,
        TEFRA’s purpose is to unify the procedures for determining part-
        nership items, Bush v. United States, 655 F.3d 1323, 1329 (Fed. Cir.
        2011), not to prevent partner level determinations of individualized
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        20                     Opinion of the Court                22-10196

        questions about affected items. See Desmet v. Comm’r, 581 F.3d 297,
        304 (6th Cir. 2009).
               In fact, it is the taxpayers’ interpretation that would under-
        mine TEFRA’s logic. The reason TEFRA permits the IRS to bypass
        standard deficiency procedures for affected-item adjustments that
        entail only a simple numerical substitution is because, for such ad-
        justments, “the right to a hearing prior to an assessment of taxes
        that a notice of deficiency ordinarily provides is instead secured by
        granting every partner the right to participate in the partnership-
        level proceeding.” Olson v. United States, 172 F.3d 1311, 1317 (Fed.
        Cir. 1999); accord Callaway v. Comm’r, 231 F.3d 106, 109 (2d Cir.
        2000). The flow-through adjustments contemplated by Section
        6230’s direct assessment procedure are effectively settled at the
        partnership level, so pre-payment disputes over those adjustments
        can and should be resolved during those proceedings. But the same
        logic does not apply when affected-item adjustments require the
        IRS to do more than just import the partnership-level adjustments
        into each taxpayers’ returns. In such a case, precluding deficiency
        procedures would deprive the taxpayers of any meaningful oppor-
        tunity to challenge their asserted tax liability before paying.
               We thus hold that the IRS makes “partner level determina-
        tions” under TEFRA when adjusting a partner’s affected item re-
        quires the Service to inspect and account for information particular
        to that partner, even if the IRS already possesses that information
        and the taxpayer never disputes the adjustment. Cf. Greenberg, 10
        F.4th at 1169 (“[T]he Commissioner must consider information
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        22-10196               Opinion of the Court                       21

        that relates to a particular taxpayer before it can be said that the
        Commissioner has ‘determined’ a ‘deficiency’ in respect to that tax-
        payer.” (quoting Scar, 814 F.2d at 1368)). If, on the other hand, ad-
        justing an affected item merely requires the IRS to substitute an
        adjusted partnership item for an item on the partner’s return—and
        “there is nothing left to do but perform a calculation to determine
        tax liability”—partner-level determinations are unnecessary. Bush,
        655 F.3d at 1330–31.
                                       C.

                Having settled on the proper test to decide when affected-
        item adjustments “require partner level determinations” under
        Section 6230(a)(2)(A), our next task is to apply that test to the af-
        fected items in question. Those items are (1) the losses the taxpay-
        ers claimed on the sales of stock and euros they received from San-
        ford, a sham partnership, and (2) itemized deductions tied to ad-
        justed gross income. We believe the IRS properly applied defi-
        ciency procedures to adjust these items.
                                       1.

               We start with the taxpayers’ reported losses on their sales of
        euros and stock. To adjust these amounts, the IRS had to make the
        following partner-level determinations: whether the taxpayers sold
        the same euros and stock that they received from the sham part-
        nership, the holding period for the stock, and the taxpayers’ bases
        in the stock and euros. We address each determination in turn.
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        22                     Opinion of the Court                22-10196

                First, perhaps the most basic partner-level determination the
        IRS had to make to adjust the taxpayers’ losses was whether the
        assets the taxpayers sold between 1999 and 2003 were the same as-
        sets Sanford distributed to them in 1999. As for the euros, the tax-
        payers’ filings do not provide enough information even to guess
        whether the euros they received from Sanford in 1999 were the
        same euros they later sold. Consider the following image from the
        Keeters’ 2000 joint returns:

        Because this chart provides no information about the euros’ hold-
        ing period, and column (B) describes their acquired date as
        “VARIOUS,” the IRS had no way to know whether the 38,650 eu-
        ros the Keeters sold in 2000 were among those distributed to them
        by Sanford in 1999. Thus, even under the taxpayers’ own proposed
        test—i.e., that partner-level determinations are required only when
        the IRS lacks the information necessary to make an adjustment—
        the taxpayers lose. The IRS had to conduct a partner-level determi-
        nation to identify the subject euros.
              Turning to the stock, the taxpayers’ filings provided more in-
        formation but not enough to avoid the IRS having to make a
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        22-10196                Opinion of the Court                          23

        partner-level determination. The partnership-level proceedings re-
        vealed that, in 1999, Sanford distributed 242 shares of Coca-Cola
        stock to the Keeters and 333 shares of UPS stock to Lewis. The tax-
        payers’ tax returns demonstrate that the Keeters sold 242 shares of
        Coca-Cola stock in 1999, that Lewis sold 333 shares of UPS stock in
        1999, and that the taxpayers had received those stock shares that
        same year. Based on that information, the IRS could presume that
        the stock the Keeters received from Sanford in 1999 was the same
        stock the Keeters sold that year. But the IRS still had to make that
        determination before adjusting the taxpayers’ losses.
                Second, having determined that the stock the taxpayers sold
        was the same stock that Sanford distributed to them, the IRS also
        had to determine the taxpayers’ respective “holding periods” in the
        stock, as well as the character of any gain or loss they realized upon
        their sales of that stock. An asset’s holding period refers to the time
        it is held by a taxpayer before sale. See I.R.C. §§ 1222, 1223. The
        holding period of a capital asset, like stock, determines the charac-
        ter of the gain or loss realized by the taxpayer from the asset’s sale.
        See I.R.C. §§ 1222(1)–(4). Specifically, the sale of a capital asset with
        a holding period of one year or less produces a short-term capital
        gain or loss, while the sale of a capital asset with a holding period
        exceeding one year yields a long-term capital gain or loss. Id. The
        distinction matters for calculating tax liability because the applica-
        ble tax rate is often much lower for long-term capital gains and
        losses than for short-term capital gains and losses. Accordingly, to
        adjust losses claimed on sales of capital assets, the IRS must
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        24                        Opinion of the Court                       22-10196

        normally determine how long the taxpayer held onto the asset be-
        fore selling it. 2
                The IRS had to make these determinations for the taxpayers’
        stock sales. The partnership-level proceedings resolved only San-
        ford’s holding period in the stock: those proceedings revealed that
        Sanford was organized in 1999 and that it distributed Coca-Cola
        and UPS stock to the taxpayers that same year. But that partner-
        ship-level determination does not resolve the taxpayers’ holding pe-
        riod in that distributed stock—the taxpayers could have held onto
        the stock Sanford gave them for several days, several months, or
        several years. Thus, the IRS had to examine each taxpayer individ-
        ually to determine the date on which he or she sold each share of
        his or her Sanford stock. From that date, the IRS could deduce the
        taxpayer’s holding period in the stock. And from the holding pe-
        riod, the IRS could verify the character of the resulting gain or loss
        and tax it accordingly. These determinations were not especially
        challenging, but they were not mere across-the-board mathemati-
        cal computations.
               Third, before adjusting the taxpayers’ reported losses on the
        sales of their stock and euros, the IRS needed to determine the tax-
        payers’ adjusted bases in those assets. To be sure, there is no ques-
        tion that the taxpayers’ outside bases in Sanford became zero as soon

        2 Under I.R.C. § 988(a)(1)(A), the gain or loss arising from the sale of foreign
        currency like euros is taxed at the short-term rate no matter how long the
        taxpayer held the currency. So the IRS had no need to determine the holding
        period of the euros.
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        22-10196               Opinion of the Court                         25

        as Sanford was disregarded for tax purposes; a taxpayer cannot
        have an interest in a nonexistent partnership. Sarma, 45 F.4th at
        1321; see Woods, 571 U.S. at 42 (noting “the legal impossibility of
        any partner’s possessing an outside basis greater than zero in a part-
        nership that, for tax purposes, d[oes] not exist”). This adjustment
        required no partner-level determinations—we know each partner’s
        outside basis is zero based on the partnership-level proceedings
        alone.
                But a taxpayer’s adjusted outside basis in a sham partnership
        does not determine his adjusted basis in property he received from
        the sham partnership. Under the Tax Code’s partnership provi-
        sions, a legitimate partner’s basis in property distributed to him in
        liquidation of a legitimate partnership is equal to the partner’s ad-
        justed basis in his partnership interest. I.R.C. § 732(b); Woods, 571
        U.S. at 36. But when a partnership is deemed a sham, its purported
        partners are treated as holding the partnership’s assets directly. See
        Sarma, 45 F.4th at 1323. In such a case, “the rules governing the
        income taxation of partners . . . do not apply.” Id. Instead, the tax-
        payers’ basis in property distributed to them by the sham partner-
        ship is calculated using the Code provisions applicable to ordinary
        taxpayers, which provide that the basis of an asset is its cost. I.R.C.
        § 1012(a). That the partners can have no interest in the sham part-
        nership does not necessarily mean that the underlying property it-
        self lacks substantive value. Instead, the IRS must examine each
        taxpayer’s circumstances to determine the cost of the taxpayer’s
        property at the time of its sale.
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        26                     Opinion of the Court                  22-10196

               Having gone through this process, the IRS attributed
        greater-than-zero adjusted bases to the taxpayers’ stock and euros
        at the time of their sale. As Lewis’s deficiency notice reveals, for
        instance, the IRS determined Lewis had an outside basis of $7,970
        in the euros she sold in 2000:

        Although the taxpayers insist that their zero outside bases in San-
        ford are conclusive of their bases in the euros and stock, the IRS
        determined otherwise.
                                        2.

               The taxpayers’ reported losses are only one of the affected
        items the IRS adjusted using deficiency procedures. The other af-
        fected item is the taxpayers’ itemized deductions. And we believe
        that adjusting that item also required partner-level determinations.
               Certain expenses deducted as miscellaneous itemized deduc-
        tions are deductible only if they exceed a certain threshold percent-
        age of a taxpayer’s adjusted gross income. See, e.g., I.R.C. §§ 67, 68.
        The taxpayer’s adjusted gross income depends, in turn, upon the
        taxpayer’s recognized losses. Thus, because adjustments to the
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        22-10196               Opinion of the Court                        27

        taxpayers’ losses from the sales of their Sanford assets require part-
        ner-level determinations, resulting adjustments to the taxpayers’
        itemized deductions depend on those partner-level determinations,
        too. So the IRS correctly used deficiency procedures to adjust those
        items.
               We are not faced here with the more common situation
        where itemized deductions adjust automatically as a result of part-
        nership-level adjustments. In such a case, adjusting the deductions
        will not require partner-level determinations because that adjust-
        ment entails only a simple mathematical computation. See Treas.
        Reg. § 301.6231(a)(6)–1(a)(2) (explaining that “the threshold
        amount of medical deductions under section 213 that changes as
        the result of determinations made at the partnership level” does
        not require partner-level determinations). But where, as here, part-
        ner-level determinations to affected items in turn affect itemized
        deductions, adjusting those deduction amounts also depends on
        the same partner-level determinations.
                                       3.

               We note that our conclusions are consistent with the only
        circuits that have addressed a comparable question.
                In Desmet, the Sixth Circuit addressed another Son-of-BOSS
        scheme. A sham partnership distributed stocks to an S corporation
        owned by the taxpayers, and the taxpayers then claimed large arti-
        ficial losses on the S corporation’s sale of those assets. 581 F.3d at
        300. After disallowing the partnership’s transactions, the IRS used
        deficiency procedures to adjust the taxpayers’ claimed losses. Id. at
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        28                     Opinion of the Court                  22-10196

        300–01. The taxpayers sued, arguing that the deficiency notices
        were invalid because the loss deductions did not require partner-
        level determinations. Id. at 301. The Tax Court disagreed, and the
        Sixth Circuit affirmed. Id. at 301, 303. The Sixth Circuit rejected the
        taxpayers’ argument that deficiency procedures were improper be-
        cause “the IRS ha[d] all of the information . . . it needs from their
        . . . returns.” Id. at 303. Partner-level determinations were neces-
        sary in any event “to determine ‘the portion of the stock actually
        sold, the holding period for the stock, and the character of any gain
        or loss.’” Id. (quoting Domulewicz v. Comm’r, 129 T.C. 11 (2007)).
               The Ninth Circuit adopted Desmet’s reasoning in Napoliello
        v. Commissioner of Internal Revenue, 655 F.3d 1060 (9th Cir. 2011).
        The facts were similar to those here. A Son-of-BOSS partnership
        distributed stocks to Napoliello as part of a liquidating distribution,
        and Napoliello claimed an artificial loss on his subsequent sale of
        the securities. Id. at 1062. The IRS later adjusted those losses using
        deficiency procedures, and the taxpayer sued, arguing that “the IRS
        should have made a direct computational adjustment instead.” Id.
        at 1062, 1064. But the Ninth Circuit disagreed, holding that the loss
        adjustments required partner-level determinations. Id. at 1064. As
        in Desmet, “the IRS needed to determine the portion of the stock
        actually sold, the holding period for the stock, and the character of
        any gain or loss.” Id. (quoting Desmet, 581 F.3d at 303) (cleaned up).
               By contrast, the authorities on which the taxpayers rely are
        readily distinguished. For instance, the taxpayers invoke several de-
        cisions holding that no partner-level determinations are necessary
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        22-10196                Opinion of the Court                           29

        if the taxpayer-partner formally agrees to specific adjustments be-
        fore the IRS assesses the taxpayer’s liability. See, e.g., Olson, 172 F.3d
        1311; Bush, 655 F.3d 1323. In such a case, no determinations are
        necessary because the settlement resolves the deficiency amount.
        “[A]ll that remains is the mechanical procedure of applying such settle-
        ment to the partner.” Bob Hamric Chevrolet, Inc. v. Comm’r, 849 F.
        Supp. 500, 510 (W.D. Tex. 1994) (quoting Harris v. Comm’r, 99 T.C.
        121, 126 (1992)); accord Bush, 655 F.3d at 1332. But no such pre-as-
        sessment settlement occurred in this case. The taxpayers here stip-
        ulated to the deficiency amounts only after the IRS made its adjust-
        ments. Pre-assessment-settlement cases are irrelevant on the issue
        at hand. Desmet, 581 F.3d at 304–05 (rejecting as “inapposite” the
        same pre-assessment-settlement decisions the taxpayers invoke
        here, explaining that “[w]here there is a settlement, the settlement
        itself resolves factual questions as to each partner”); Napoliello, 655
        F.3d at 1064 (same).
               The taxpayers also rely on authorities involving penalty as-
        sessments. See Gosnell v. United States, No. CV-09-01399-PHX-
        NVW, 2011 WL 2559832, at *12–13 (D. Ariz. June 28, 2011), aff’d,
        525 F. App’x 598 (9th Cir. 2013). But TEFRA itself makes plain that
        “penalties relating to adjustments to partnership items are treated
        differently (i.e., not subject to Tax Court deficiency jurisdiction)
        even if they are affected items requiring partner level determina-
        tions.” Highpoint, 931 F.3d at 1060; see I.R.C. § 6230(a)(2)(A) (defi-
        ciency procedures required to adjust “affected items which require
        partner level determinations (other than penalties, additions to tax,
        and additional amounts that relate to adjustments to partnership
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        30                     Opinion of the Court                 22-10196

        items)” (emphasis added)). The affected items at issue here are not
        subject to that special treatment.
               None of the authorities on which taxpayers rely addressed
        the ultimate question in this case—whether adjusting losses
        claimed on sales of property from a sham partnership requires part-
        ner-level determinations. Instead, all the on-point caselaw bolsters
        our conclusion. Because we conclude that the IRS was required to
        make partner-level determinations to adjust the taxpayers’ re-
        ported losses and itemized deductions, the IRS properly employed
        deficiency procedures to make these adjustments.
                                       D.

              The taxpayers take three final shots to avoid affirmance.
        Each fails.
                First, the taxpayers raise the so-called “claim-splitting doc-
        trine.” When applicable, that prudential rule “requires a plaintiff to
        assert all of its causes of action arising from a common set of facts
        in one lawsuit.” Kennedy v. Floridian Hotel, Inc., 998 F.3d 1221, 1236
        (11th Cir. 2021). Because the IRS employed deficiency procedures
        to adjust some affected items, but direct-assessment procedures to
        adjust others, the taxpayers complain that they will be forced to
        challenge the adjustments in separate actions and violate the claim-
        splitting prohibition.
               But the claim-splitting doctrine is subject to exceptions. At
        least two apply here. First, the rule is inapplicable when splitting
        claims is authorized by an applicable statute. See Restatement
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        22-10196               Opinion of the Court                         31

        (Second) of Judgments § 26(a) (Am. L. Inst. 1980). And TEFRA au-
        thorizes—indeed, it requires—separate proceedings for affected
        items that require partner-level determinations and for those that
        do not. See I.R.C. § 6230(a). Second, the claim-splitting bar does not
        apply if asserting the claims in a single action would violate the lim-
        itations on the court’s subject matter jurisdiction. See Restatement
        (Second) of Judgments § 26(a) (Am. L. Inst. 1980). As we have ex-
        plained, employing the incorrect procedure for adjusting affected
        items strips the Tax Court of subject matter jurisdiction over those
        items.
               Second, the taxpayers say that the IRS never spelled out to
        the Tax Court what specific partner-level determinations were
        needed to adjust the taxpayers’ affected items. By failing to do so,
        the taxpayers contend that the IRS waived the argument that such
        determinations were required. And they argue that the Tax Court
        therefore violated the amorphous “party presentation principle”
        when it specified that necessary partner-level determinations in-
        cluded, among others, the identity, character, and holding periods
        of the stock and euros. See United States v. Sineneng-Smith, 140 S. Ct.
        1575, 1579 (2020) (recalling the general but “supple” rule that par-
        ties, not courts, “are responsible for advancing the facts and argu-
        ment entitling them to relief” (quoting Castro v. United States, 540
        U.S. 375, 386 (2003) (Scalia, J., concurring in part and concurring in
        the judgment))).
              The argument is both incorrect and irrelevant. It is incorrect
        because the IRS’s filings before the Tax Court clearly and
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        32                      Opinion of the Court                   22-10196

        repeatedly specified each partner-level determination it made to
        adjust the taxpayers’ affected items and why each determination
        was necessary. And it is irrelevant because the validity of the defi-
        ciency notices is determinative of the Tax Court’s jurisdiction. As
        the taxpayers themselves point out elsewhere in their briefing,
        “subject-matter jurisdiction . . . can never be forfeited or waived.”
        United States v. Cotton, 535 U.S. 625, 630 (2002); see also United States
        v. Campbell, 26 F.4th 860, 873 & n.6 (11th Cir. 2022) (en banc) (de-
        scribing questions of subject matter jurisdiction as “limited excep-
        tions” to the “principle of party presentation”).
               Third, after the parties submitted their opening briefs, the
        taxpayers filed a motion to supplement the record on appeal. They
        seek to introduce, among other records, a copy of their Announce-
        ment 2002-2 disclosures as well as additional excerpts of their rele-
        vant tax returns. According to the taxpayers, these documents con-
        firm that the IRS possessed all the information necessary to assess
        the taxpayers’ liabilities directly, obviating any need for partner-
        level determinations.
               We deny the taxpayers’ motion. Although we have the au-
        thority to enlarge the record on appeal to include material not be-
        fore the lower court, we exercise this authority only “in exceptional
        circumstances.” Vital Pharms., Inc. v. Alfieri, 23 F.4th 1282, 1288
        (11th Cir. 2022). A primary factor we consider is whether the prof-
        fered material would be dispositive of the issues on appeal. See CSX
        Transp., Inc. v. City of Garden City, 235 F.3d 1325, 1330 (11th Cir.
        2000) (citing Dickerson v. Alabama, 667 F.2d 1364, 1367 (11th Cir.
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        22-10196               Opinion of the Court                         33

        1982)); Young v. City of Augusta ex rel. DeVaney, 59 F.3d 1160, 1168
        (11th Cir. 1995) (citing Ross v. Kemp, 785 F.2d 1467, 1475 (11th Cir.
        1986)). And because we hold that the IRS correctly followed the
        deficiency procedures even if the IRS possessed all the information
        needed to calculate the taxpayers’ liabilities, additional evidence
        that the IRS did, in fact, possess that information is inconsequential.
                                       IV.

              The Tax Court is AFFIRMED and the taxpayers’ motion to
        supplement the record on appeal is DENIED.