Bullshit Tax Shelter "Investors" Reach the End Game on Tax Dodging from 1999 BLIPS "Transaction" (2/20/25)

Yesterday, the Tax Court (Judge Goeke) entered its opinion in Blum v. Commissioner, T.C. Memo. 2025-18, TN here, GD here*, and GS here**. The opinion is 48 pages long. After reading Slip Op. pp. 1 & 2, I had the sense that Judge Goeke would have made it much shorter except for inappropriate arguments made by the Blums (really their counsel), which he apparently felt necessary to address. So that readers might get that same sense, I quote pages 1 & 2 in their entirety (footnote omitted):

This affected items case deals primarily with the responsibility of taxpayers and the Internal Revenue Service (IRS) to update information about the partners of a partnership under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97- 248, §§ 401–407, 96 Stat. 324, 648–71. The Treasury regulations 1 explicitly and clearly state the requirements for partnerships and their partners to update names and addresses of the partners as well as the IRS’s obligations when mailing a notice of Final Partnership Administrative Adjustment (FPAA).

           Petitioners did not adhere to the regulations; the IRS did. Petitioners did not properly identify Scott Blum as an indirect partner in the TEFRA partnership or update the address for sending the FPAA with respect to his partnership interest. Instead, they try to place the blame for their alleged nonreceipt of the FPAA on the revenue agent (RA) who audited their personal and partnership returns. Petitioners do this because they want to avoid a district court’s decision in the TEFRA partnership case that held that Mr. Blum engaged in a tax shelter and improperly deducted a $78.5 million artificial loss (tax shelter loss). They knew about the partnership case while it was ongoing in district court and are obviously unhappy with the outcome. We find not only that the IRS mailed the required FPAA with respect to Mr. Blum’s partnership interest to the correct address but also that petitioners received it.

          Throughout this case, petitioners have concocted numerous unfounded theories about the IRS’s alleged failure to follow proper procedure. They have also made multiple misrepresentations to the Court and omitted important information. Testimony by IRS employees clearly and credibly establishes that the IRS indeed followed proper procedures and that the IRS mailed the FPAA as required by the Code and the regulations.

          Apart from their argument about their alleged nonreceipt of the FPAA, petitioners also make multiple baseless arguments to avoid paying the tax that they owe pursuant to the district court’s decision.  They argue that the district court did not really disallow the tax shelter loss and that they resolved the disallowance of the $78.5 million tax shelter loss in a prior Tax Court case for a mere $373,641 in tax. They also challenge the timeliness of the FPAA and the affected items Notices of Deficiency that precipitated the filing of the Petition. Each of these arguments fails. Accordingly, we find, in accordance with the district court’s decision in the TEFRA case, that petitioners are not entitled to deduct the $78.5 million tax shelter loss.

Practitioner Warns of IRS Letters and Notices to Not Ignore (8/17/13)

Edward M. Robbins, Jr., a prominent tax litigator (see bio page here), has posted a good series of articles on six IRS Letters and Notices You Must Not Ignore.  The articles present a good summary of the problems encountered in ignoring these letters and notices; or, to state it differently, the reasons you should pay attention to these letters and notices.  This articles are on a blog sponsored by the law firm of Hochman, Salkin, Rettig, Toscher & Perez, P.C, here, which has a strong team in tax controversy matters. Readers might also want to review that firm's publications web site, here.

Ed's list is:

1. Statutory Notice of Deficiency (Ninety Day Letter).
2. Final Partnership Administrative Adjustment (FPAA) under TEFRA.
3. The IRS Summons (including an IRS caused Grand Jury Subpoena).
4. The Final Notice Before Levy.
5. Statutory Notice of Denial of a Claim for Refund.
6. Notice of Computational Adjustment under TEFRA.

The series of articles is:

1. Six IRS Letters and Notices You Must Not Ignore (Tax Controversy (Civil & Criminal) Report 7/7/13), here, addressing items 1 and 2 on his list.
2. Part II – Six IRS Letters and Notices You Must Not Ignore (Tax Controversy (Civil & Criminal) Report 8/5/13), here, addressing items 3 and 4 on his list.
3. I will post the link to the final article when he posts it.