Court Opinion

ID: 812605
Source: CourtListenerOpinion
Date Created: 2012-11-27 20:21:18+00
Date Added: 2024-06-11T11:12:18.637132
License: Public Domain

Case: 12-5099     Document: 13    Page: 1   Filed: 11/27/2012

          NOTE:   This order is nonprecedential.

  mlntteb ~tate~ (!Court of §ppeaI~
       for tbe jfeberaI 551 F.3d 1358 (Fed. Cir. 2009)
and Prati v. United States, 603 F.3d 1301 (Fed. Cir. 2010).
The government's motion is opposed by the taxpayers.
    The taxpayers in these suits invested in several lim-
ited partnerships sponsored by American Agri-Corp.
(AMCOR) in the 1980s that were targeted by the Internal
Revenue Service (IRS) as illegal tax shelters. In 1990 and
1991, the IRS issued notices of final partnership adminis-
trative adjustments (FPAA), disallowing the deductions
attributable to the AMCOR partnerships and demanding
that the partners pay the resulting deficiencies.
    Representative partners filed suit in the United
States Tax Court. Among the issues litigated was
whether the adjustments were barred by the statute of
limitations. While the Tax Court proceedings progressed,
some partners chose to settle with the IRS, while other
partners agreed to be bound by the Tax Court's statute of
limitations determination in representative test cases.
    In 2000, the Tax Court rejected the statute of limita-
tions defense in the test cases, finding that one of the
partnerships had failed to file a valid partnership return
and that the other four had validly agreed through their
tax matters partners ("TMP") to extend the time period
pursuant to LR.C. § 6229(b). Subsequently, the Tax
Court entered stipulated decisions in all of the partner-
ship cases. The IRS subsequently assessed additional
interest against the partners under LR.C. § 6621(c) for
substantial underpayment of income tax attributable to
tax-motivated transactions.
    After paying the taxes, the taxpayers brought these
tax refund cases in the United States Court of Federal
Claims, asserting entitlement to a tax refund on the
grounds that the assessments were made after the statute
Case: 12-5099     Document: 13     Page: 3    Filed: 11/27/2012

3                                          JOHN KETTLE v.   us

of limitations had expired, and the assessment of interest
under section 6621(c) was improper because the partner-
ship transactions were not tax-motivated transactions.
    The trial court held that it lacked jurisdiction over the
refund claims because the taxpayers were prohibited by
statute from bringing an action for a refund attributable
to partnership items, and both claims, including the
statute of limitations claim, were partnership items that
should have been challenged in the partnership-level
proceeding instead of in partner-level proceedings.
    This appeal followed.
    Federal Claims' jurisdiction over partnership tax re-
fund actions is limited by statute. Pursuant to the Tax
Equity and Fiscal Responsibility Act of 1982 ("TEFRA"),
Pub. L. No. 97-248, § 402(a), 96 Stat. 648, the tax treat-
ment of "partnership items" is determined in a single
partnership-level proceeding, and section 7422(h) of the
Internal Revenue Code enforces that principle by prohib-
iting partners from bringing individual actions "for a
refund attributable to partnership items[.]"
     In Prati and Keener, we held that statute of limita-
tions claims and challenges as to whether section 6621(c)
interest should have been assessed as sham transactions
are "partnership items," and thus the taxpayers were
required to raise the claim in the partnership level pro-
ceeding. Prati, 603 F.3d at 1306. Since the claims here
are indistinguishable from those in Prati and Keener, the
trial court's ruling that section 7422(h) bars these taxpay-
ers from asserting their section 6621(c) interest and
statute of limitations claims in these refund proceedings
is clearly correct as a matter of law.
    The taxpayers contend that the Tax Court had no ju-
risdictional authority to allow them to participate in the
Case: 12-5099       Document: 13   Page: 4    Filed: 11/27/2012

JOHN KETTLE v. US                                           4

partnership-level Tax Court suits and raise their claims
earlier. But this argument was addressed and rejected by
this court in Prati. There, we explained that even before
the statutory amendment in 1997, tax partners could
have participated in partnership level proceedings. 603
F.3d at 1307 n.4 ("[T]he 1997 amendment merely codified
prior practice in the Tax Court; the appellants, as indi-
vidual partners, were therefore free to participate in the
partnership-level proceedings to litigate the statute of
limitations issue.").
     The cases on which the taxpayers rely that were de-
cided after Prati are not to the contrary, because they do
not address the Tax Court's authority to allow individual
partners to participate in a timely filed partnership-level
proceedings. See A.I.M Controls, LLC v. Comm'r of
Internal Revenue, 672 F.3d 390, 393-95 (5th Cir. 2012)
(time period for filing petition within TEFRA's express
filing period is jurisdictional); see also Henderson ex rel.
Henderson v. Shinseki, _ U.S. _, 131 S. Ct. 1197, 1202-
03 (2011) (directing courts to decide whether statutory
filing periods are jurisdictional based on Congressional
intent). Because the tax partners could have raised these
claims during the Tax Court proceedings, we agree with
the government that their attempts to distinguish them-
selves from the taxpayers in Prati and Keener in that
regard are without merit.
     Finally, the taxpayers contend that they are not
bound by the prior rulings, calling this court's attention to
an affidavit of Mr. Behrens, the TMP who apparently
negotiated the stipulated decisions in the Tax Court. Mr.
Behren's affidavit states in relevant part that: "The IRS
sought to have me concede the transactions were shams.
I refused." The affidavit further purports to explain that
his intent behind entering into the "Stipulation to be
Case: 12-5099        Document: 13   Page: 5     Filed: 11/27/2012

5                                             JOHN KETTLE v.   us

Bound" in the Tax Court was not to bind other partner-
ships in relation to specific statute of limitations claims.
     To the extent that the taxpayers are relying on Mr.
Behren's affidavit to dispute that the transactions were
tax motivated, this court has already rejected those lines
of argument as directed to the nature of the partnership
transaction and therefore barred by section 7422(h) from
being raised before the Court of Federal Claims. See
Prati, 603 F.3d at 1308-09. We therefore agree with the
government that the judgments of the Court of Federal
Claims should be summarily affirmed. See Joshua v.
United States, 17 F.3d 378, 380 (Fed. Cir. 1994) (Sum-
mary affirmance of a case "is appropriate, inter alia, when
the position of one party is so clearly correct as a matter
of law that no substantial question regarding the outcome
of the appeal exists.").
      Accordingly,
      IT Is ORDERED THAT:
   (1) The motion is granted. The judgments of the
Court of Federal Claims are summarily affirmed.
      (2) Each side shall bear its own costs.

                                      FOR THE COURT

                                      lsI Jan Horbaly
                                     Jan Horbaly
                                     Clerk
s19