                                             GAUGHF PROPERTIES, L.P., BALAZS VENTURES, LLC, A
                                              PARTNER OTHER THAN THE TAX MATTERS PARTNER,
                                                 PETITIONER v. COMMISSIONER OF INTERNAL
                                                          REVENUE, RESPONDENT
                                                    Docket No. 18298–07.                  Filed September 10, 2012.

                                                  A partnership entered a complicated series of transactions
                                               involving currency options and stock trades. Two LLCs and an
                                               S corporation also took part in the transactions. All four enti-
                                               ties were formed in 1999 and were owned either directly or
                                               indirectly by H and/or W. The transactions were intended to
                                               yield losses that would offset substantial unrealized gains in
                                               stock owned by H by inflating outside basis in the partner-
                                               ship. H and W were indirect partners of the partnership but
                                               did not list certain information identifying themselves as part-
                                               ners on the partnership’s 1999 tax return. R was in possession
                                               of certain information identifying H and W as partners which
                                               R had obtained when certain forms were filed with him on
                                               behalf of the four entities in 1999. R possessed additional
                                               identifying information which he had obtained as a result of
                                               a summons issued to the law firm which had helped H and
                                               W complete the transactions. However, the identifying
                                               information was not furnished to R in accordance with certain
                                               requirements of sec. 301.6223(c)–1T, Temporary Proced. &
                                               Admin. Regs., 52 Fed. Reg. 6784 (Mar. 5, 1987). A notice of
                                               final partnership administrative adjustment (FPAA) was
                                               issued in March 2007. P claimed that the statutory period for
                                               assessment was closed at the time the FPAA was issued,
                                               while R made various arguments that the statutory period for
                                               assessment remained open. This issue was separated from the
                                               remaining issues for trial. Held: The statutory period for
                                               assessing tax attributable to partnership items was still open
                                               under I.R.C. sec. 6229(e) with respect to H and W at the time
                                               the FPAA was issued. Held, further, the doctrine of estoppel
                                               does not preclude R’s asserting that the statutory period for
                                               assessment was open with respect to H and W.

                                       David De Coursey Aughtry and William E. Buchanan, for
                                     petitioner.
                                       John Aletta, William Franklin Castor, and Edsel Ford Hol-
                                     man, Jr., for respondent.

                                                                                  OPINION

                                       GOEKE, Judge: On March 30, 2007, respondent mailed a
                                     notice of final partnership administrative adjustment (FPAA)
                                     to the tax matters partner (TMP) for Gaughf Properties, L.P.
                                                                                                                                 219




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                                     220                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     (Gaughf Properties), concerning the tax year ended (TYE)
                                     December 27, 1999. The FPAA reflected respondent’s deter-
                                     mination that Gaughf Properties failed to recognize
                                     $4,455,000 in gross income resulting from the expiration of
                                     a currency option (described further infra). Some issues in
                                     the case have been separated for purposes of trial and
                                     opinion. The issues for decision are: 1
                                       (1) whether, on March 30, 2007, the statutory period for
                                     assessing tax attributable to partnership items was open
                                     under section 6229(e) 2 with respect to the Gaughfs. We hold
                                     that it was; and
                                       (2) whether, under the doctrine of estoppel, respondent
                                     should be precluded from asserting the statutory period for
                                     assessing tax attributable to partnership items was open on
                                     March 30, 2007, with respect to the Gaughfs. We hold the
                                     doctrine of estoppel does not preclude respondent’s assertion.

                                                                               Background
                                       Gaughf Properties was a limited partnership formed under
                                     South Carolina law on September 29, 1999, and was termi-
                                     nated before the timely filing of the petition on August 15,
                                     2007. At all relevant times the Gaughfs have been married
                                     and have resided in South Carolina.
                                     1. Formation of the Entities Involved
                                       During 1999 KPMG persuaded the Gaughfs that they
                                     should participate in a series of complicated stock and option
                                     transactions (plan) through the Chicago office of a national
                                     law firm, Jenkens & Gilchrist (J&G). On the advice of J&G
                                     and KPMG, the Gaughfs asked their attorney, Maurice
                                     Holloway, to form four entities the Gaughfs were told they
                                     needed to complete the plan.
                                       Gaughf Enterprises, LLC (Gaughf Enterprises), was a
                                     single-member limited liability company formed under South
                                     Carolina law on September 22, 1999, and was wholly owned
                                       1 At trial and on brief respondent asserted that the statutory period for assessment is open

                                     under I.R.C. sec. 6501(e)(1)(A) because Andrew and Nan Gaughf (Gaughfs) omitted substantial
                                     gross income from their tax return. In the light of the recent U.S. Supreme Court decision in
                                     United States v. Home Concrete & Supply, LLC, 566 U.S. ll, 132 S. Ct. 1836 (2012), respond-
                                     ent now concedes this argument.
                                       2 Unless otherwise indicated, all section references are to the Internal Revenue Code (Code)

                                     in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice
                                     and Procedure.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   221


                                     by Mr. Gaughf. As such, during 1999 Gaughf Enterprises
                                     was a disregarded entity for Federal income tax purposes. On
                                     September 27, 1999, Mr. Holloway filed a Form SS–4,
                                     Application for Employer Identification Number, on behalf of
                                     Gaughf Enterprises with the Entity Control unit at respond-
                                     ent’s Service Center in Atlanta, Georgia. This Form SS–4
                                     identified Gaughf Enterprises as a disregarded entity.
                                        Balazs Ventures, LLC (Balazs Ventures), was a single-
                                     member limited liability company formed under South Caro-
                                     lina law on September 22, 1999, and was wholly owned by
                                     Mrs. Gaughf. As such, during 1999 Balazs Ventures was a
                                     disregarded entity for Federal income tax purposes. As with
                                     Gaughf Enterprises, on September 27, 1999, Mr. Holloway
                                     filed a Form SS–4 on behalf of Balazs Ventures with the
                                     Entity Control unit at respondent’s Service Center in
                                     Atlanta, Georgia. This Form SS–4 identified Balazs Ventures
                                     as a disregarded entity.
                                        On September 29, 1999, Mr. Gaughf, acting on behalf of
                                     Gaughf Enterprises, and Mrs. Gaughf, acting on behalf of
                                     Balazs Ventures, executed a limited partnership agreement
                                     for Gaughf Properties. The limited partnership agreement
                                     listed Gaughf Enterprises and Balazs Ventures as the only
                                     partners in Gaughf Properties. Also on September 29, 1999,
                                     a Certificate of Limited Partnership for Gaughf Properties
                                     was filed with the secretary of state’s office for the State of
                                     South Carolina and a ‘‘Certificate of Existence, Limited Part-
                                     nership’’ was issued. On October 1, 1999, Mr. Holloway filed
                                     a Form SS–4 on behalf of Gaughf Properties with the Entity
                                     Control unit at respondent’s Service Center in Atlanta,
                                     Georgia.
                                        On September 30, 1999, Bodacious, Inc. (Bodacious), was
                                     organized as a corporation under South Carolina law. Mr.
                                     Gaughf owned 100% of Bodacious and was its president. For
                                     tax year 1999 Bodacious filed an election to be classified as
                                     a subchapter S corporation. On October 1, 1999, Mr.
                                     Holloway filed a Form SS–4 on behalf of Bodacious with the
                                     Entity Control unit at respondent’s Service Center in
                                     Atlanta, Georgia.
                                        Each Form SS–4 filed by Mr. Holloway stated that it was
                                     filed on account of the start of a new business. Each entity
                                     listed the Gaughfs’ personal address in South Carolina as the
                                     entity’s mailing address on its Form SS–4. The Forms SS–




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                                     222                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     4 for Gaughf Properties, Gaughf Enterprises, and Bodacious
                                     also: (1) listed Mr. Gaughf as the ‘‘principal officer, general
                                     partner, grantor, owner, or trustor’’; (2) provided Mr.
                                     Gaughf ’s Social Security number; and (3) were signed by Mr.
                                     Gaughf. 3 The Form SS–4 for Balazs Ventures listed the
                                     same information for Mrs. Gaughf.
                                        The filing of the Forms SS–4 to obtain employer identifica-
                                     tion numbers was part of Mr. Holloway’s standard procedure
                                     in forming entities for his clients. Other than the Forms SS–
                                     4, Mr. Holloway did not file any other documents with the
                                     Internal Revenue Service (IRS) on behalf of the Gaughfs or
                                     entities related to them.
                                     2. Laying the Groundwork To Offset Gains in Stock Owned
                                        by Mr. Gaughf
                                       Per an investor profile prepared by J&G for Mr. Gaughf,
                                     J&G contemplated increasing the basis in Gaughf Properties
                                     through a ‘‘Section 754 step up in the partnership’’ in order
                                     to offset unrealized gains Mr. Gaughf had in stock he owned
                                     in Quanta Services, Inc. (Quanta). 4 J&G charged the
                                     Gaughfs $180,000 for its assistance with the plan.
                                       Investment accounts with Deutsche Bank BT Alex. Brown,
                                     LLC (a division of Deutsche Bank Subsidiaries, Inc., and BT
                                     Alex. Brown, LLC, which are indirect subsidiaries of Deutsche
                                     Bank), were set up for Gaughf Enterprises, Gaughf Prop-
                                     erties, and Bodacious to complete the plan. On November 24,
                                     1999, $90,000 was deposited into Gaughf Enterprises’
                                     account. On November 29, 1999, Gaughf Enterprises entered
                                     into two currency option transactions with Deutsche Bank
                                     regarding the Japanese yen, consisting of a long and a short
                                     currency option. The termination date for these options was
                                     December 20, 1999. The stated premium for the long cur-
                                        3 Above his signature on the Form SS–4 for Gaughf Properties, Mr. Gaughf was identified as

                                     ‘‘Andrew Jackson Gaughf, Jr., Member of Gaughf Enterprises, LLC General Partner of Gaughf
                                     Properties, L.P.’’
                                        4 The investor profile prepared by J&G stated that Mr. Gaughf—


                                     has gain in Quanta stock that has not yet been sold so it is likely that we will be doing the
                                     Section 754 step up in the partnership, however, it is possible that stock price will rise quickly
                                     and client will need to sell suddenly. We concluded that client would keep the stock out of the
                                     partnership for the first 20 days, and if not sold during that period it would be contributed to
                                     the partnership for the 754 step up. If the stock must be sold in the first 20 day period it will
                                     quickly be put into the S-corp and be sold from there.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   223


                                     rency option was $4.5 million, and the stated premium for
                                     the short currency option was $4.455 million.
                                        On November 30, 1999, Gaughf Enterprises transferred
                                     the currency options to Gaughf Properties as a contribution
                                     to capital. On the same date, $45,000 (representing the net
                                     premium for entering into the currency options) was trans-
                                     ferred from the Gaughf Enterprises account to Deutsche
                                     Bank to pay for the options. The $45,000 remaining in
                                     Gaughf Enterprises’ account was then transferred on
                                     November 30, 1999, to Gaughf Properties’ account as a con-
                                     tribution to capital. On the same date, Mr. Gaughf executed
                                     an agreement between Gaughf Enterprises and Bodacious
                                     under which $900 of the $45,000 contributed to Gaughf Prop-
                                     erties from Gaughf Enterprises would instead be deemed to
                                     be a contribution from Bodacious to Gaughf Properties.
                                        On December 20, 1999, the currency options held by
                                     Gaughf Properties terminated according to their terms.
                                     According to a legal opinion issued to Mr. Gaughf by J&G,
                                     Mr. Gaughf ’s 5 basis in Gaughf Properties ‘‘after the con-
                                     tribution of the [currency] Options should include the cost of
                                     the Long Option contributed, without adjustment for the
                                     Short Option’’.
                                        On December 27, 1999, Gaughf Enterprises assigned its
                                     general and limited partnership interests in Gaughf Prop-
                                     erties to Bodacious, and Balazs Ventures assigned its general
                                     partnership interest in Gaughf Properties to Bodacious,
                                     retaining its limited partnership interest. According to the
                                     written assignments of the interests, the assignments were
                                     made to Bodacious as a substitute general partner of Gaughf
                                     Properties, not as an assignee. On the same date, the
                                     Gaughfs executed a Liquidation Agreement on behalf of
                                     Bodacious and Balazs Ventures terminating Gaughf Prop-
                                     erties. The Liquidation Agreement provided that ‘‘Any and
                                     all assets of the Partnership held by the Partnership as of
                                     the date of dissolution shall be distributed to the Partners
                                     prorata in accordance with the Schedule attached hereto.’’
                                     The attached schedule stated that Bodacious was entitled to
                                     99.6% of partnership assets, while Balazs Ventures was enti-
                                     tled to the remaining 0.4% of partnership assets. On
                                       5 The legal opinion discussed Mr. Gaughf ’s basis in Gaughf Properties even though he only

                                     indirectly owned partnership interests.




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                                     224                 139 UNITED STATES TAX COURT REPORTS                                      (219)


                                     December 29, 1999, Bodacious received $45,066.46 6 from
                                     Gaughf Properties as a result of the liquidation. 7
                                     3. The Quanta Stock Transactions
                                        In addition to the investment accounts through Deutsche
                                     Bank BT Alex. Brown, LLC, brokerage accounts for both
                                     Gaughf Properties and Bodacious were established with
                                     Edward D. Jones & Co., L.P. (Edward Jones). Mr. Gaughf
                                     also had a brokerage account with Edward Jones. On
                                     November 19, 1999, Mr. Gaughf transferred 142,783 shares
                                     of Quanta stock from his Edward Jones account to the Boda-
                                     cious Edward Jones account. On December 9, 1999, Boda-
                                     cious sold the 142,783 shares of Quanta stock for prices
                                     ranging from $311⁄8 to $31. 8 After commissions and expenses
                                     were deducted, the stock sale generated net proceeds of
                                     $4,418,243.
                                        On December 14, 1999, Mr. Gaughf transferred an addi-
                                     tional 2,575 shares of Quanta stock from his Edward Jones
                                     account to the Bodacious Edward Jones account. On
                                     December 20, 1999, Bodacious then transferred these shares
                                     to the Gaughf Properties Edward Jones account. Also on
                                     December 20, 1999, Mr. Gaughf transferred an additional
                                     4,925 shares of Quanta stock from his Edward Jones account
                                     directly to the Gaughf Properties Edward Jones account. On
                                     December 30, 1999, Gaughf Properties then transferred, in
                                     liquidation, the 7,500 shares of Quanta it then owned to the
                                     Bodacious Edward Jones account. 9 The next day Bodacious
                                     sold the 7,500 shares for net proceeds of $207,003 after
                                     commissions and expenses.
                                        6 The additional $66.46 was nontaxable dividend income from ‘‘Deutsche Bank Alex. Brown

                                     Cash Reserve Fund, Inc.—Tax Free Ser’’ paid to Gaughf Properties.
                                        7 Despite the fact that the Liquidation Agreement provides that the assets of Gaughf Prop-

                                     erties would be distributed to its partners pro rata in accordance with each partner’s percentage
                                     ownership in Gaughf Properties, Balazs Ventures did not receive any assets upon liquidation
                                     of Gaughf Properties. It is unclear why.
                                        8 Respondent argued that the stock sale was actually three separate stock sales of 133,783

                                     shares at $31, 7,000 shares at $311⁄16, and 2,000 shares at $311⁄8. Given that each sale block
                                     had the same order number, we believe it more likely that the shares were actually part of one
                                     trade, which, because of a lack of sufficient shares for sale at one particular price, extended over
                                     three different prices.
                                        9 The shares were transferred to Bodacious in liquidation of Gaughf Properties because

                                     Gaughf Enterprises assigned its general and limited partnership interests in Gaughf Properties
                                     to Bodacious, and Balazs Ventures assigned its general partnership interest in Gaughf Prop-
                                     erties to Bodacious, on December 27, 1999, as previously described.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   225


                                        According to a legal opinion issued to Mr. Gaughf by J&G,
                                     the 7,500 Quanta shares transferred to Bodacious in liquida-
                                     tion of Gaughf Properties had an increased basis as a result
                                     of the inflated outside partnership basis in Gaughf Properties
                                     held by Mr. Gaughf resulting from the currency options
                                     transactions. As a result, the legal opinion stated that Boda-
                                     cious recognized a significant long-term capital loss upon its
                                     sale of the 7,500 shares on December 31, 1999. Petitioner has
                                     stipulated that the basis in the Quanta stock was ‘‘incorrectly
                                     overstated’’ for purposes of the period of limitation issue
                                     considered in this Opinion.
                                     4. Tax Returns of the Gaughfs, Gaughf Properties, and
                                        Bodacious
                                        The Gaughfs (jointly), Bodacious, and Gaughf Properties
                                     timely filed their 1999 tax returns on or before April 17,
                                     2000. Each of these three returns was prepared by Kathy
                                     Nall of KPMG and was filed with the IRS Service Center in
                                     Atlanta, Georgia. The legal opinion issued by J&G was used
                                     to help prepare the returns.
                                        Ms. Nall was a manager in KPMG’s tax department at the
                                     time she prepared the returns for the Gaughfs, Gaughf Prop-
                                     erties, and Bodacious. However, she left KPMG in 2001, and
                                     all her client files (including those relating to the Gaughfs,
                                     Gaughf Properties, and Bodacious) remained with KPMG. At
                                     trial she was unable to recall most of the work she had com-
                                     pleted on behalf of the Gaughfs, Gaughf Properties, and
                                     Bodacious. The parties stipulated that respondent issued
                                     summonses to KPMG at some unestablished time, but the
                                     point was not well developed, as discussed further infra.
                                        Before filing the tax returns for the Gaughfs, Gaughf Prop-
                                     erties, and Bodacious, Ms. Nall sent an email to her boss,
                                     seeking clarification on certain items. Ms. Nall noted that of
                                     the $45,000 contribution made to Gaughf Properties from
                                     Gaughf Enterprises, $900 was a deemed contribution from
                                     Bodacious. Ms. Nall stated in the email that this transaction
                                     made it look as though Bodacious was a 2% partner in
                                     Gaughf Properties, yet it was not listed as a partner on any
                                     Gaughf Properties Schedule K–1, Partner’s Share of Income,
                                     Deductions, Credits, etc. Ms. Nall also stated that the agree-




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                                     226                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     ments relating to the cash contributions did not indicate that
                                     Balazs Ventures was a partner in Gaughf Properties.
                                        On its 1999 partnership return Gaughf Properties listed
                                     Gaughf Enterprises as its TMP. Gaughf Properties reported
                                     no taxable income, tax-exempt interest income of $66, and an
                                     ordinary loss of $45,000. The Schedule M–2, Analysis of Part-
                                     ners’ Capital Accounts, attached to Gaughf Properties’ part-
                                     nership return, reported total capital contributions of
                                     $300,000 and total distributions of $255,066. The $255,066
                                     distribution was specifically identified as a cash distribution.
                                        Three Schedules K–1 were attached to the Gaughf Prop-
                                     erties partnership return. Two of these were for Gaughf
                                     Enterprises, as Gaughf Properties identified Gaughf Enter-
                                     prises as holding two separate partnership interests (of 99%
                                     and 0.6%) in Gaughf Properties. The third Schedule K–1 was
                                     for Balazs Ventures. On the Schedules K–1 Gaughf Prop-
                                     erties reported contributions of $1,800 and $297,000 from
                                     Gaughf Enterprises, as well as a $1,200 contribution from
                                     Balazs Ventures. Gaughf Properties also reported distribu-
                                     tions of $1,530 and $252,516 to Gaughf Enterprises, as well
                                     as a $1,020 distribution to Balazs Ventures. Gaughf Prop-
                                     erties’ 1999 partnership return did not mention Bodacious.
                                        The Gaughf Properties tax return did not make clear how
                                     the partnership calculated the total of $300,000 in capital
                                     contributions received in the light of the transactions
                                     described supra. The return made no mention of the 7,500
                                     Quanta shares contributed by Bodacious and Mr. Gaughf, the
                                     $44,100 contribution from Gaughf Enterprises, the deemed
                                     $900 contribution from Bodacious, or the currency options
                                     contributed by Gaughf Enterprises. However, considering
                                     these transactions it appears that the $300,000 was reached
                                     by adding: (1) $44,100 and $900 in cash contributions; (2) the
                                     net stated currency option premiums (which equaled
                                     $45,000); and (3) an additional $210,000 representing the
                                     7,500 Quanta shares contributed. 10
                                        The 1999 Bodacious return was signed by Mr. Gaughf and
                                     did not mention Gaughf Properties by name. The Bodacious
                                     return included a statement entitled ‘‘Bodacious, Inc. Section
                                     351 Disclosure Statement’’ which indicated that on December
                                      10 The market value of the 7,500 Quanta shares on December 20, 1999 (the date the shares

                                     were contributed to Gaughf Properties), was $208,125 ($27.75 per share).




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   227


                                     27, 1999, Bodacious received from Mr. Gaughf an interest in
                                     an unnamed partnership having a basis of $4,513,528, that
                                     Mr. Gaughf received no property, money, or securities in
                                     exchange, and that Bodacious assumed no liabilities as a
                                     result of the transfer. The Bodacious return also reported
                                     that Bodacious sold 150,283 shares of Quanta stock on
                                     December 14, 1999. The return reported the sale price of
                                     these 150,283 shares was $4,625,266, and the reported cost
                                     basis in the shares was $4,745,185. 11 The Bodacious return
                                     did not explain how this cost basis in the Quanta shares sold
                                     was calculated.
                                       On Statement 9 of their joint tax return, the Gaughfs
                                     reported a long-term capital loss flowing from Bodacious of
                                     $119,919, equal to Bodacious’ reported cost basis in the
                                     Quanta shares minus the sale proceeds. Had the Gaughfs
                                     sold the Quanta stock without going through the previous
                                     transactions in an attempt to inflate its basis, the result
                                     would have instead been a capital gain of approximately $4.3
                                     million. The Gaughfs’ return also included a section 351
                                     statement claiming that Mr. Gaughf had a ‘‘tax basis’’ in
                                     Gaughf Properties 12 of $4,513,528 which was transferred to
                                     Bodacious on December 28, 1999.
                                     5. J&G Summons and Information Provided by J&G
                                       On June 19, 2003, respondent issued a John Doe sum-
                                     mons 13 to J&G in connection with an audit to determine
                                     whether the firm was liable for penalties as a promoter of a
                                     tax shelter. The summons requested that J&G produce the
                                     names, addresses, and taxpayer identification numbers (TINs)
                                     for taxpayers who from January 1, 1998, through June 15,
                                     2003, participated in any transaction which was or later
                                     became a listed transaction or other potentially abusive tax
                                     shelter, organized or sold by J&G’s Chicago office. J&G did
                                     not comply with the John Doe summons, asserting on
                                       11 This reported $4,745,185 cost basis is the result of the inflated outside basis in Gaughf

                                     Properties purportedly attaching to the block of 7,500 Quanta shares which was distributed to
                                     Bodacious upon the liquidation of Gaughf Properties.
                                       12 Unlike the sec. 351 statement included with the Bodacious return, the sec. 351 statement

                                     included with the Gaughfs’ return did identify Gaughf Properties by name.
                                       13 ‘‘A John Doe summons is any summons where the name of the taxpayer under investigation

                                     is unknown and therefore not specifically identified.’’ Internal Revenue Manual pt. 25.5.7.2
                                     (Nov. 22, 2011).




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                                     228                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     attorney-client privilege grounds that it could not disclose the
                                     information.
                                        On August 14, 2003, the Department of Justice, as counsel
                                     for the IRS, filed a petition in the U.S. District Court for the
                                     Northern District of Illinois seeking to enforce the summons.
                                     By order dated May 14, 2004, the District Court granted the
                                     petition and enforced the summons. On May 17, 2004, J&G
                                     provided a list of existing and/or former clients of J&G to the
                                     Department of Justice in compliance with the summons. This
                                     list included Mr. Gaughf ’s name, address, and TIN, as well
                                     as a reference to his being involved in a transaction with
                                     J&G for tax year 1999. 14 The revenue agent who had been
                                     investigating J&G received the list shortly after it was pro-
                                     duced by J&G. On June 16, 2004, respondent’s Office of
                                     Professional Responsibility used the information supplied to
                                     write Mr. Gaughf a letter advising him of the investigation
                                     of J&G.
                                        On or about July 7, 2004, J&G provided the revenue agent
                                     investigating it with a set of approximately 1,300 compact
                                     disks (CDs) containing documents relating to various existing
                                     or former clients of J&G, a list of such J&G clients, and an
                                     index of the documents which were stored on the CDs. The
                                     CDs included approximately 480 pages of documents per-
                                     taining to the transactions involving the Gaughfs, Gaughf
                                     Properties, Bodacious, Balazs Ventures, and Gaughf Enter-
                                     prises. The names, addresses, and TINs of the Gaughfs,
                                     Gaughf Properties, Bodacious, Balazs Ventures, and Gaughf
                                     Enterprises were also provided on some of the documents on
                                     the CDs. The CDs contained copies of the Forms SS–4 filed
                                     with respondent for Gaughf Properties, Gaughf Enterprises,
                                     and Balazs Ventures. The CDs contained a company profile
                                     of Gaughf Enterprises which included Mr. Gaughf ’s name,
                                     address, and Social Security number and identified him as
                                     owning 100% of Gaughf Enterprises. The company profile
                                     also contained the employee identification number for
                                     Gaughf Enterprises. A similar company profile for Balazs
                                     Ventures with the same information pertaining to that LLC
                                     and Mrs. Gaughf was also provided on the CDs. In addition,
                                     the CDs contained the articles of organization for both
                                       14 It appears that no information pertaining to Mrs. Gaughf was provided on this list, but in-

                                     sufficient evidence was introduced to definitively reach this conclusion. Information pertaining
                                     to Mrs. Gaughf was certainly provided by J&G at a later time, as discussed infra.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                      229


                                     Gaughf Enterprises and Balazs Ventures, both of which pro-
                                     vided information about the Gaughfs similar to the informa-
                                     tion found in the company profiles.
                                        The revenue agent who received the CDs did not conduct
                                     examinations of the J&G clients. He stored the CDs in his
                                     office in Illinois 15 and also downloaded them onto a com-
                                     puter in his office but did not disseminate the information
                                     they contained throughout the IRS or advertise the fact that
                                     he had such information. 16 However, as word got around,
                                     other IRS personnel began to call the revenue agent to
                                     request documents for particular J&G clients, which the rev-
                                     enue agent would then supply.
                                     6. Audits of Returns of the Gaughfs, Gaughf Properties, and
                                        Bodacious
                                       On January 10, 2006, a revenue agent different from the
                                     one investigating J&G was assigned to audit returns of the
                                     Gaughfs and their related entities for tax year 1999. 17 This
                                     revenue agent was initially provided with the Gaughfs’ tax
                                     return and on January 19, 2006, was also provided with the
                                     J&G documents pertaining to the Gaughfs. 18 On January 25,
                                     2006, the revenue agent used information on the Gaughfs’
                                     1999 tax return to send them a letter notifying them that
                                     their 1999 tax return had been selected for examination. On
                                     January 31, 2006, the revenue agent sent a letter to the
                                     Gaughfs enclosing written requests for information and docu-
                                     ments noted on Forms 4564, Information Document
                                     Requests. The Gaughfs provided no information or docu-
                                     ments in response to the requests.
                                       On February 23, 2006, the same revenue agent auditing
                                     the Gaughfs’ return sent a letter to Gaughf Enterprises, as
                                     the TMP of Gaughf Properties, notifying it that Gaughf Prop-
                                     erties’ tax return for 1999 had been selected for examination.
                                     On the same date, the revenue agent sent written requests
                                        15 During the relevant years, the revenue agent did not work at any IRS Service Center. For

                                     all relevant years the revenue agent worked in either Chicago or Downers Grove Park, Illinois.
                                        16 The revenue agent testified that he ‘‘was very protective of ’’ the information and that other

                                     IRS employees would have to learn of the fact that he had the CDs ‘‘through some of these Son
                                     of Boss coordinators that were around.’’
                                        17 This revenue agent worked out of San Jose, California, at the time he was auditing returns

                                     of the Gaughfs and their entities.
                                        18 The revenue agent received tax returns for Gaughf Properties and Bodacious approximately

                                     one month after he was provided with the J&G documents.




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                                     230                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     for information and documents noted on Forms 4564 to
                                     Gaughf Enterprises, as the TMP for Gaughf Properties. No
                                     information or documents were provided in response to the
                                     requests.
                                        On April 12, 2006, the Gaughfs and their certified public
                                     accountant, Porter Thompkins, executed Form 872–I, Con-
                                     sent to Extend the Time to Assess Tax As Well As Tax
                                     Attributable to Items of a Partnership, regarding tax year
                                     1999. On May 10, 2006, an IRS group manager executed the
                                     Form 872–I agreement on behalf of respondent. The Form
                                     872–I extended the limitations period for respondent to
                                     assess tax liabilities against the Gaughfs for tax year 1999,
                                     including liabilities attributable to any partnership items,
                                     affected items, computational adjustments, and partnership
                                     items converted to nonpartnership items until April 16, 2007.
                                     However, the Form 872–I agreement had no effect unless a
                                     limitations period applicable for respondent to timely assess
                                     any of the tax liabilities covered by the Form 872–I was open
                                     on May 10, 2006, the day the agreement was executed on
                                     behalf of respondent.
                                        On May 18, 2006, respondent issued a notice of beginning
                                     of administrative proceeding (NBAP) to both Gaughf Enter-
                                     prises and Balazs Ventures. On March 30, 2007, respondent
                                     issued the FPAA which is the basis of this case for Gaughf
                                     Properties’ TYE December 27, 1999. The FPAA was issued to
                                     Gaughf Enterprises, as TMP for Gaughf Properties. On
                                     August 15, 2007, Balazs Ventures, a partner other than the
                                     TMP, timely filed a Petition for Readjustment of Partnership
                                     Items Under Code Section 6226, on behalf of Gaughf Prop-
                                     erties contesting the FPAA. Petitioner claimed in the petition
                                     that on March 30, 2007, the statutory period for assessment
                                     for Gaughf Properties’ TYE December 27, 1999, was no longer
                                     open. This issue was separated from other issues in the case
                                     for purposes of trial and opinion.
                                     7. Additional Information Relevant to Petitioner’s Estoppel
                                        Argument
                                       At the time the FPAA was issued respondent argued that
                                     there was omitted income resulting from the expiration of
                                     the short currency option. The Commissioner advanced
                                     similar justification for extending the statutory period for




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   231


                                     assessment in another case, Highwood Partners v. Commis-
                                     sioner, docket No. 24463–06. The Commissioner withdrew
                                     this argument in Highwood Partners on April 18, 2008, but
                                     presented alternative arguments why the statutory period for
                                     assessment was properly extended in that case. However, the
                                     Commissioner later withdrew his alternative arguments and
                                     conceded that case in its entirety on March 15, 2010.
                                        Trial for this case was set for February 4, 2010, but on
                                     January 19, 2010, was continued to February 25, 2010, at
                                     respondent’s request. At a February 3, 2010, hearing
                                     respondent stated that he was still contemplating whether to
                                     assert that there was omitted income resulting from the
                                     expiration of the short currency option. In addition,
                                     respondent stated that three other grounds supported the
                                     extension of the statutory period for assessment: (1) the sec-
                                     tion 6229(e) issue being considered in this Opinion; (2) the
                                     section 6501(e)(1)(A) issue that respondent conceded after
                                     trial as a result of the recent Supreme Court decision in
                                     United States v. Home Concrete & Supply, LLC, 566 U.S.
                                     ll, 132 S. Ct. 1836 (2012); and (3) that it was Gaughf
                                     Properties (rather than Bodacious) that sold 7,500 shares of
                                     Quanta stock and failed to report a gain on the sale of
                                     approximately $207,000. On February 3, 2010, we continued
                                     the trial of this case to May 17, 2010.
                                        On February 25, 2010, respondent conceded his original
                                     short option income position regarding the statutory period
                                     for assessment in this case. On March 3, 2010, we allowed
                                     respondent to amend his answer to the petition to assert his
                                     three other alternative statutory-period-for-assessment argu-
                                     ments. Less than a month later respondent conceded that his
                                     argument that it was Gaughf Properties that sold 7,500
                                     shares of Quanta stock and failed to report a gain on the sale
                                     was incorrect. The parties then proceeded to trial on the
                                     remaining two issues.

                                                                                Discussion
                                     I. Burden of Proof
                                       Generally, taxpayers bear the burden of proving, by a
                                     preponderance of the evidence, that the determinations of the
                                     Commissioner are incorrect. Rule 142(a); Welch v. Helvering,
                                     290 U.S. 111, 115 (1933). Taxpayers raising affirmative




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                                     232                    139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     defenses such as the expiration of the period of limitations
                                     also typically bear the burden of proving those defenses
                                     apply. Hoffman v. Commissioner, 119 T.C. 140, 146 (2002).
                                     Petitioner argues that respondent should bear the burden of
                                     proof because: (1) respondent’s argument that the statutory
                                     period for assessing tax attributable to partnership items
                                     remains open with respect to the Gaughfs under section
                                     6229(e) constitutes a ‘‘new matter’’ under Rule 142(a)(1); and
                                     (2) respondent bears the burden of proving the factual
                                     foundation for any exception to the normal three-year limita-
                                     tions period once petitioner demonstrates that respondent
                                     issued the notice beyond that period. However, because we
                                     decide this case on the basis of the preponderance of the evi-
                                     dence, we need not decide upon which party the burden of
                                     proof rests. See Knudsen v. Commissioner, 131 T.C. 185
                                     (2008).
                                     II. Whether the Statutory Period for Assessing Tax Attributa-
                                         ble to Partnership Items Was Open on March 30, 2007,
                                         Under Section 6229(e) With Respect to the Gaughfs
                                            Section 6229(e) provides:
                                           SEC. 6229(e). UNIDENTIFIED PARTNER. If—
                                             (1) the name, address, and taxpayer identification number of a partner
                                           are not furnished on the partnership return for a partnership taxable
                                           year, and
                                             (2)(A) the Secretary, before the expiration of the period otherwise pro-
                                           vided under this section with respect to such partner, mails to the tax
                                           matters partner the notice specified in paragraph (2) of section 6223(a)
                                           with respect to such taxable year, or
                                               (B) the partner has failed to comply with subsection (b) of section
                                             6222 (relating to notification of inconsistent treatment) with respect to
                                             any partnership item for such taxable year,
                                     the period for assessing any tax imposed by subtitle A which is attrib-
                                     utable to any partnership item (or affected item) for such taxable year
                                     shall not expire with respect to such partner before the date which is 1
                                     year after the date on which the name, address, and taxpayer identifica-
                                     tion number of such partner are furnished to the Secretary.

                                       Respondent argues that the statutory period for assessing
                                     tax attributable to partnership items against the Gaughfs
                                     was open under section 6229(e) 19 at the time the FPAA was
                                     issued because: (1) Gaughf Properties’ partnership return for
                                           19 Respondent   has not argued that sec. 6229(e)(2)(A) applies in this case.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   233


                                     TYE   December 27, 1999 (Gaughf Properties 1999 return),
                                     failed to furnish certain information identifying the Gaughfs
                                     as partners in Gaughf Properties; (2) the Gaughfs failed to
                                     comply with section 6222(b); and (3) the Gaughfs’ taxpayer
                                     information was never ‘‘furnished’’ to respondent in accord-
                                     ance with the requirements of regulations applicable under
                                     section 6229(e). Petitioner makes various counterarguments
                                     why the statutory period for assessment is not open under
                                     section 6229(e). We address each of respondent’s statutory-
                                     period-for-assessment arguments below, as well as the argu-
                                     ments made by petitioner.
                                           A. Whether the Gaughf Properties 1999 Return Furnished
                                              the Gaughfs’ Names, Addresses, and TINs
                                        Respondent claims that the Gaughf Properties 1999 return
                                     failed to furnish the Gaughfs’ names, addresses, and TINs as
                                     required by section 6229(e)(1). Petitioner does not dispute
                                     this fact but states that ‘‘The Gaughfs are not listed because,
                                     under Respondent’s applicable regulations and filing instruc-
                                     tions for 1999, U.S. partnership returns were required to
                                     include Schedules K–1 for their direct partners, not those
                                     holding an interest in those [direct] partners.’’
                                        The court in Costello v. United States Gov’t, 765 F. Supp.
                                     1003 (C.D. Cal. 1991), addressed a similar situation in which
                                     information regarding an indirect partner required to satisfy
                                     section 6229(e)(1) was not included on the partnership
                                     return. The court held that although indirect partners were
                                     not required to be listed on a partnership return, 20 section
                                     6229(e) nonetheless applied to indirect partners. Costello, 765
                                     F. Supp. at 1008. In support of its holding, the court cited
                                     section 301.6229(e)–1T, Temporary Proced. & Admin. Regs.,
                                     52 Fed. Reg. 6789 (Mar. 5, 1987), which provides, in perti-
                                     nent part, that ‘‘A partner who is not properly identified on
                                     the partnership return (including an indirect partner)
                                     remains an unidentified partner for purposes of section
                                     6229(e) until identifying information is furnished’’ 21
                                     (emphasis supplied) to the Commissioner.
                                       20 The court noted that sec. 1.6031–1, Income Tax Regs., required that only immediate part-

                                     ners be listed on a partnership return. While this regulation was later removed, it was effective
                                     for tax years ending during 1999. See 64 Fed. Reg. 61498 (Nov. 12, 1999).
                                       21 Petitioner has argued that sec. 301.6229(e)–1T, Temporary Proced. & Admin. Regs., 52 Fed.

                                                                                                  Continued




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                                     234                 139 UNITED STATES TAX COURT REPORTS                                     (219)


                                        We agree with the U.S. District Court for the Central Dis-
                                     trict of California that section 6229(e) applies to indirect
                                     partners. 22 See sec. 301.6229(e)–1T, Temporary Proced. &
                                     Admin. Regs., supra. Therefore, because the Gaughf Prop-
                                     erties 1999 return failed to furnish the Gaughfs’ names,
                                     addresses, and TINs, the first of respondent’s statutory-
                                     period-for-assessment arguments is satisfied.
                                           B. Whether the Gaughfs Failed To Comply With Section
                                              6222(b)
                                        One of the requirements for extending the statutory period
                                     for assessment under section 6229(e) is that ‘‘the partner has
                                     failed to comply with subsection (b) of section 6222 (relating
                                     to notification of inconsistent treatment) with respect to any
                                     partnership item for such taxable year.’’ Sec. 6229(e)(2)(B).
                                     Section 6222(b)(1) provides that if ‘‘the partnership has filed
                                     a return but the partner’s treatment on his return is (or may
                                     be) inconsistent with the treatment of the item on the part-
                                     nership return’’ then the partner may file ‘‘with the Secretary
                                     a statement identifying the inconsistency’’ in order to satisfy
                                     section 6222(b) (and therefore cause section 6229(e)(2)(B) to
                                     be inapplicable). 23
                                        Respondent argues that the Gaughfs failed to comply with
                                     section 6222(b), claiming that the Gaughfs: (1) treated part-
                                     nership items of Gaughf Properties on their personal return
                                     in a manner inconsistent with how Gaughf Properties treated
                                     those items on the Gaughf Properties 1999 return; and (2)
                                     did not notify respondent of this inconsistent treatment. Peti-
                                     tioner claims that ‘‘Respondent points to (i) no inconsistent
                                     treatment (ii) of a partnership item (iii) by a partnership and
                                     a partner—as required by Section 6222(b).’’

                                     Reg. 6789 (Mar. 5, 1987), is invalid under Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837
                                     (1984). As discussed further infra, we find the regulation is valid.
                                       22 This conclusion is consistent with sec. 6223(c)(3), which requires the Commissioner to send

                                     NBAPs and FPAAs to indirect partners rather than direct partners if the Commissioner is fur-
                                     nished with sufficient information identifying indirect partners.
                                       23 Sec. 6222(b)(2) provides that in the case of a partner receiving incorrect information from

                                     the partnership, the partner is treated as having filed a statement identifying an inconsistency
                                     with the Secretary if the partner: ‘‘(A) demonstrates to the satisfaction of the Secretary that the
                                     treatment of the partnership item on the partner’s return is consistent with the treatment of
                                     the item on the schedule furnished to the partner by the partnership, and (B) elects to have
                                     * * * [sec. 6222(b)(2)] apply with respect to that item.’’ Neither party has argued the applica-
                                     bility of sec. 6222(b)(2) in this case.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   235


                                           1. Whether the Gaughfs Treated Partnership Items of
                                              Gaughf Properties on Their Personal Tax Return in
                                              a Manner Inconsistent With How Gaughf Properties
                                              Treated Those Items on the Gaughf Properties 1999
                                              Return
                                       Partnership items are defined to include not only ‘‘Items of
                                     income, gain, loss, deduction, or credit of the partnership’’,
                                     but also ‘‘the accounting practices and the legal and factual
                                     determinations that underlie the determination of the
                                     amount, timing, and characterization of items of income,
                                     credit, gain, loss, deduction, etc.’’ of the partnership. Sec.
                                     301.6231(a)(3)–1(a)(1)(i), (b), Proced. & Admin. Regs. Part-
                                     nership items also include contributions to and distributions
                                     from the partnership
                                     to the extent that a determination of such items can be made from deter-
                                     minations that the partnership is required to make with respect to an
                                     amount, the character of an amount, or the percentage interest of a
                                     partner in the partnership, for purposes of the partnership books and
                                     records or for purposes of furnishing information to a partner. [Id. para.
                                     (a)(4).]

                                        Given these definitions for the term ‘‘partnership item’’, we
                                     find that the contributions of the currency options and the
                                     7,500 shares of Quanta stock to Gaughf Properties, as well
                                     as the distribution of the 7,500 Quanta shares to Bodacious
                                     upon Gaughf Properties’ liquidation, were partnership items.
                                     The contribution and distribution of the Quanta shares were
                                     determinations that Gaughf Properties was required to make
                                     for purposes of furnishing information to its partners. 24 The
                                     currency options contributed likewise affected amounts
                                     required to be reported to the partners on their Schedules K–
                                     1. The currency options also affected the income reported by
                                     Gaughf Properties, which reported an ordinary loss of
                                     $45,000 when the options terminated according to their
                                     terms.
                                        We find that on their 1999 return the Gaughfs treated
                                     these partnership items inconsistently from the way they
                                     were treated on the Gaughf Properties 1999 return. Although
                                     much of the property contributed to Gaughf Properties came
                                     from either Gaughf Enterprises or Bodacious, and the 7,500
                                       24 Schedule K–1 requires a partnership to state capital contributions received from a partner

                                     in a given year as well as ‘‘Withdrawals and distributions’’ made to the partner.




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                                     236                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     shares were distributed to Bodacious (from Gaughf Prop-
                                     erties), we find that any inconsistent treatment of these part-
                                     nership items by Gaughf Enterprises and Bodacious should
                                     also be considered as inconsistent treatment by the Gaughfs
                                     because Gaughf Enterprises was a disregarded entity, and
                                     Bodacious was an S corporation whose income and losses
                                     flowed through to the Gaughfs’ personal return. See sec.
                                     6231(a)(2)(B) (‘‘The term ‘partner’ means * * * any * * *
                                     person whose income tax liability under subtitle A is deter-
                                     mined in whole or in part by taking into account directly or
                                     indirectly partnership items of the partnership.’’ (Emphasis
                                     supplied.)).
                                        Gaughf Properties netted the amounts of the stated pre-
                                     miums for the two currency options in reporting the value of
                                     the capital contributions on its return. However, Bodacious
                                     (and hence, the Gaughfs) treated only the long option as a
                                     capital contribution to Gaughf Properties for purposes of
                                     determining the basis in the 7,500 Quanta shares distributed
                                     to Bodacious upon the liquidation of Gaughf Properties. This
                                     resulted in an incorrect overstatement of Bodacious’s basis in
                                     the Quanta stock which was not accounted for on Gaughf
                                     Properties’ 1999 return. When Bodacious subsequently sold
                                     the stock, the result was a claimed capital loss of $119,919
                                     instead of a capital gain of approximately $4.3 million which
                                     would have resulted had the basis not been overstated.
                                        In addition to the inconsistent treatment by Bodacious, the
                                     Gaughfs also directly treated partnership items inconsist-
                                     ently from the way they were reported on the Gaughf Prop-
                                     erties 1999 return. A section 351 statement was included
                                     with the Gaughfs’ 1999 tax return which claimed that Mr.
                                     Gaughf had a tax basis in Gaughf Properties of $4,513,528.
                                     This figure included Mr. Gaughf ’s accounting for the con-
                                     tribution of the long option to Gaughf Properties (contributed
                                     by Gaughf Enterprises, a disregarded entity) without
                                     accounting for the contribution of the short option (also
                                     contributed by Gaughf Enterprises). This was inconsistent
                                     with the netting of the currency options used by Gaughf
                                     Properties in determining and reporting the capital contribu-
                                     tions it received from its partners.
                                        For the foregoing reasons, we find that the Gaughfs
                                     treated partnership items of Gaughf Properties on their per-




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   237


                                     sonal return in a manner which was inconsistent with their
                                     treatment on the Gaughf Properties 1999 return.
                                           2. Whether the Gaughfs Notified Respondent of Inconsistent
                                              Treatment of Partnership Items on Their Personal Tax
                                              Return and the Gaughf Properties 1999 Return
                                        As previously mentioned, if a partner’s treatment of a part-
                                     nership item on the partner’s return is inconsistent with the
                                     treatment of the item on the partnership return, then the
                                     partner must file with the Secretary a statement identifying
                                     the inconsistency in order to satisfy section 6222(b) (and
                                     therefore cause section 6229(e)(2)(B) to be inapplicable). Sec-
                                     tion 301.6222(b)–1T, Temporary Proced. & Admin. Regs., 52
                                     Fed. Reg. 6782 (Mar. 5, 1987), provides this statement must
                                     be filed through the Commissioner’s form prescribed for that
                                     purpose. During the relevant period the required form was
                                     Form 8082, Notice of Inconsistent Treatment or Administra-
                                     tive Adjustment Request. Instructions for Form 8082 (Rev.
                                     Jan. 2000); see also Blonien v. Commissioner, 118 T.C. 541,
                                     555–556 (2002).
                                        Petitioner has not argued that the Gaughfs filed a Form
                                     8082. At trial the Gaughfs testified that they had no recollec-
                                     tion of ever filing a Form 8082. The revenue agent assigned
                                     to audit the returns of the Gaughfs and their related entities
                                     testified that the administrative file he maintained in
                                     connection with the audit contained no Form 8082. Ms. Nall,
                                     who prepared the returns for the Gaughfs and their entities,
                                     could not recall filing a Form 8082. Considering these facts,
                                     we find that the Gaughfs did not notify respondent that they
                                     treated partnership items of Gaughf Properties on their per-
                                     sonal return in a manner which was inconsistent with their
                                     treatment on the Gaughf Properties 1999 return.
                                        Given our findings that the Gaughfs: (1) treated partner-
                                     ship items of Gaughf Properties on their personal return in
                                     a manner which was inconsistent with their treatment on
                                     the Gaughf Properties 1999 return; and (2) did not notify
                                     respondent of this inconsistent treatment, we conclude that
                                     the Gaughfs failed to comply with section 6222(b). Thus, the
                                     second of respondent’s statutory-period-for-assessment argu-
                                     ments is satisfied.




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                                     238                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                           C. Whether Information Identifying the Gaughfs as Indirect
                                              Partners in Gaughf Properties Was Furnished to Res-
                                              pondent More Than One Year Before the FPAA Was
                                              Issued
                                        Section 6229(e) provides that if certain information identi-
                                     fying a partner is not furnished on the partnership return for
                                     a partnership taxable year and that partner fails to comply
                                     with the requirements pertaining to inconsistent treatment
                                     of partnership items for that taxable year, the period for
                                     assessing any tax attributable to any partnership or affected
                                     item for such taxable year remains open with respect to such
                                     partner until ‘‘1 year after the date on which the name,
                                     address, and taxpayer identification number of such partner
                                     are furnished to the Secretary.’’ Regarding furnishing such
                                     information, section 301.6229(e)–1T, Temporary Proced. &
                                     Admin. Regs., supra, provides that ‘‘[a] partner who is not
                                     properly identified on the partnership return (including an
                                     indirect partner) remains an unidentified partner for pur-
                                     poses of section 6229(e) until identifying information is fur-
                                     nished as provided in § 301.6223(c)–1T.’’
                                        Section 301.6223(c)–1T, Temporary Proced. & Admin.
                                     Regs., 52 Fed. Reg. 6784 (Mar. 5, 1987), 25 provides in perti-
                                     nent part—
                                        (a) In general. In addition to the names, addresses, and profits interests
                                     as shown on the partnership return, the Service will use additional
                                     information as provided in this section for purposes of administering sub-
                                     chapter C of chapter 63 of the Code.
                                        (b) Procedure for furnishing additional information—(1) In general. Any
                                     person may furnish additional information at any time by filing a written
                                     statement with the Service. * * *
                                        (2) Where statement must be filed. A statement furnished under this
                                     section shall generally be filed with the service center with which the part-
                                     nership return is filed. However, if the person filing the statement knows
                                     that the notice described in section 6223(a)(1) (beginning of an administra-
                                     tive proceeding) has already been mailed to the tax matters partner, the
                                     statement shall be filed with the Internal Revenue Service office that
                                     mailed such notice.
                                        (3) Contents of statement. The statement shall—
                                       25 Both sec. 301.6229(e)–1T, Temporary Proced. & Admin. Regs., supra, and sec. 301.6223(c)–

                                     1T, Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6784 (Mar. 5, 1987), are effective for the
                                     year in issue. Effective with partnership taxable years beginning on or after October 4, 2001,
                                     the Commissioner has issued final regulations on the subject matter at hand. See secs.
                                     301.6229(e)–1, 301.6223(c)–1, Proced. & Admin. Regs. The temporary regulations applicable
                                     herein are similar to the final regulations.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   239


                                        (i) Identify the partnership, each partner for whom information is sup-
                                     plied, and the person supplying the information by name, address, and tax-
                                     payer identification number;
                                        (ii) Explain that the statement is furnished to correct or supplement ear-
                                     lier information with respect to the partners in the partnership;
                                        (iii) Specify the taxable year to which the information relates;
                                        (iv) Set out the corrected or additional information, and
                                        (v) Be signed by the person supplying the information.
                                        (c) No incorporation by reference to previously furnished documents.
                                     Incorporation by reference of information contained in another document
                                     previously furnished to the Internal Revenue Service will not be given
                                     effect for purposes of sections 6223(c) or 6229(e). For example, reference to
                                     a return filed by a pass-thru partner which contains identifying informa-
                                     tion with respect to the indirect partners of that pass-through partner is
                                     not sufficient to identify the indirect partners unless a copy of the docu-
                                     ment referred to is attached to the statement.
                                        (d) Information supplied by a person other than the tax matters partner.
                                     The Service may require appropriate verification in the case of information
                                     furnished by a person other than the tax matters partner. The 30-day
                                     period referred to in paragraph (b)(1) of this section shall not begin until
                                     that verification is supplied

                                                              *   *    *   *    *  *    *
                                        (f) Service may use other information. In addition to the information on
                                     the partnership return and that supplied on statements filed under this
                                     section, the Service may use other information in its possession (for
                                     example, a change in address reflected on a partner’s return) in admin-
                                     istering subchapter C of chapter 63 of the Code. However, the Service is
                                     not obligated to search its records for information not expressly furnished
                                     under this section.

                                        Respondent argues that the identifying information
                                     referred to in section 6229(e) was not furnished to him
                                     because no documents he received satisfy the requirements of
                                     section 301.6223(c)–1T, Temporary Proced. & Admin. Regs.,
                                     supra. In addition to contesting respondent’s position, peti-
                                     tioner argues that: (1) respondent failed to prove that he did
                                     not receive the required information from KPMG; (2)
                                     respondent actually used information in his possession which
                                     identified the Gaughfs as indirect partners in Gaughf Prop-
                                     erties and supplied their names, addresses, and TINs; and (3)
                                     section 301.6229(e)–1T, Temporary Proced. & Admin. Regs.,
                                     supra, which incorporates section 301.6223(c)–1T, Temporary
                                     Proced. & Admin. Regs., supra, regarding the procedure for
                                     furnishing identifying information for purposes of section
                                     6229(e), is invalid.




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                                     240                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                       For the reasons stated below we reject each of petitioner’s
                                     arguments and find that the information required pursuant
                                     to section 6229(e) and the applicable regulations identifying
                                     the Gaughfs as partners in Gaughf Properties was not fur-
                                     nished to respondent. As a result, we find that the third of
                                     respondent’s statutory-period-for-assessment arguments is
                                     satisfied.
                                           1. Whether Documents Received by Respondent Satisfy the
                                              Requirements of Section 301.6223(c)–1T, Temporary
                                              Proced. & Admin. Regs.
                                        Respondent does not dispute that he received extensive
                                     amounts of information regarding the Gaughfs from J&G
                                     (including their names, joint address, TINs, and status as
                                     indirect partners in Gaughf Properties), as well as Forms
                                     SS–4 for each of Bodacious, Gaughf Properties, Gaughf
                                     Enterprises, and Balazs Ventures (which contained various
                                     pieces of identifying information regarding the Gaughfs and
                                     their relationships to the various entities). However,
                                     respondent argues that certain elements of section
                                     301.6223(c)–1T, Temporary Proced. & Admin. Regs., supra,
                                     were not satisfied by this information. We agree.
                                        Section 301.6223(c)–1T(b)(2), Temporary Proced. & Admin.
                                     Regs., supra, provides that a correcting statement ‘‘shall gen-
                                     erally be filed with the [IRS] service center with which the
                                     partnership return is filed.’’ An exception exists ‘‘if the per-
                                     son filing the statement knows that the notice described in
                                     section 6223(a)(1) (beginning of an administrative pro-
                                     ceeding) has already been mailed to the tax matters partner.’’
                                     Sec. 301.6223(c)–1T(b)(2), Temporary Proced. & Admin.
                                     Regs., supra. In that case ‘‘the statement shall be filed with
                                     the Internal Revenue Service office that mailed such notice.’’
                                     Id. The information supplied by J&G in response to respond-
                                     ent’s summons fails to meet this requirement, as it was sup-
                                     plied to a revenue agent who worked in Illinois during the
                                     relevant years as opposed to the IRS Service Center in
                                     Atlanta, Georgia. 26
                                       26 We need not consider whether any statements were filed with the IRS office which mailed

                                     the NBAP because the Internal Revenue Service Center in Atlanta would have been the only
                                     place where a statement identifying the Gaughfs as indirect partners in Gaughf Properties could
                                     have been filed to cause the FPAA in this case to have been issued untimely. Sec. 301.6223(c)–
                                     1T(b)(2), Temporary Proced. & Admin. Regs., supra, requires an identifying statement be filed
                                     at the same service center where the partnership return was filed (Atlanta in Gaughf Properties’




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                    241


                                        The information supplied by J&G also fails to satisfy the
                                     requirement of section 301.6223(c)–1T(b)(3)(ii), Temporary
                                     Proced. & Admin. Regs., supra, that a statement ‘‘Explain
                                     that * * * [it] is furnished to correct or supplement earlier
                                     information with respect to the partners in the partnership’’.
                                     No such statement is contained in the extensive number of
                                     documents supplied by J&G.
                                        With regard to the Forms SS–4, it is true that these docu-
                                     ments were properly filed with the IRS Service Center in
                                     Atlanta, Georgia. However, the Forms SS–4 do not state that
                                     they were filed to ‘‘correct or supplement earlier information
                                     with respect to the partners in the partnership’’. See sec.
                                     301.6223(c)–1T(b)(3)(ii), Temporary Proced. & Admin. Regs.,
                                     supra. Indeed, the Forms SS–4 were filed several months
                                     before any of the relevant tax returns were filed. The Forms
                                     SS–4 thus also fail to comply with section 301.6223(c)–1T,
                                     Temporary Proced. & Admin. Regs., supra.
                                        Petitioner points to, and we have found, no other docu-
                                     ments in the record which might comply with the require-
                                     ments of section 301.6223(c)–1T, Temporary Proced. &
                                     Admin. Regs., supra. 27 Beyond speculation, no testimony
                                     was given at trial that any party had filed any such docu-
                                     ment which was not contained in the record. However, peti-
                                     tioner has raised the possibility that KPMG filed a proper
                                     identifying statement with respondent, a possibility which we
                                     address separately below.
                                           2. Whether Respondent Received an Identifying Statement
                                              Conforming With Section 301.6223(c)–1T, Temporary
                                              Proced. & Admin. Regs., From KPMG
                                           The parties stipulated that respondent issued summonses
                                     to     KPMG at some unestablished time. The relevant stipula-

                                     case) unless the person filing the statement knows that an NBAP has already been mailed to
                                     the TMP. In such a case, the statement shall be filed with the IRS office that mailed the NBAP.
                                     Id. However, the NBAP in this case was not mailed until May 18, 2006. Even if the identifying
                                     statement had been filed with the IRS office which mailed the NBAP the same day it was
                                     mailed (May 18, 2006), the statutory period for assessment under sec. 6229(e) would not have
                                     closed for another year (May 18, 2007). In this case the FPAA was issued on March 30, 2007,
                                     less than a year after the NBAP was mailed.
                                        27 Certain Deutsche Bank documents provided to respondent in response to an IRS summons

                                     list Mr. Gaughf, Gaughf Enterprises, Gaughf Properties, and Bodacious as potentially partici-
                                     pating in transactions involving foreign exchange digital options. However, the list fails to sat-
                                     isfy multiple elements of sec. 301.6223(c)–1T, Temporary Proced. & Admin. Regs., supra. Peti-
                                     tioner has not argued that the list satisfies the required elements.




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                                     242                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     tions state: ‘‘Attached * * * are a series of IRS summonses
                                     Respondent issued to Deutsche Bank and its affiliates’’ and
                                     ‘‘Respondent also issued summonses to KPMG.’’ The Deutsche
                                     Bank summonses requested information identifying clients
                                     who had taken part in transactions involving foreign
                                     exchange digital options. The KPMG summonses were not
                                     included in evidence.
                                        Multiple times during pretrial discovery petitioner
                                     requested any information respondent had received from
                                     KPMG concerning the Gaughfs or their entities. Respondent’s
                                     answers to the requests were that he had received no tax-
                                     payer identifying information relating to the Gaughfs from
                                     KPMG and had already supplied petitioner with any informa-
                                     tion KPMG had provided. 28 Neither respondent nor petitioner
                                     chose to call a representative of KPMG at trial. 29
                                        On brief petitioner claims that respondent bears the bur-
                                     den of proof on this issue, a burden which he allegedly failed
                                     to satisfy because he ‘‘utterly failed to prove what he received
                                     from KPMG or when he received it.’’ Respondent did not
                                     address the issue on brief but has previously argued that he
                                     never received an identifying statement conforming with sec-
                                     tion 301.6223(c)–1T, Temporary Proced. & Admin. Regs.,
                                     supra, from any entity.
                                        Petitioner’s argument regarding possible information
                                     received by KPMG relies only on speculation and the fact that
                                     respondent issued summonses to KPMG at some point. We
                                     first note that even if respondent had received identifying
                                     information from KPMG as a result of a summons, we believe
                                     section 301.6223(c)–1T(b)(3)(ii), Temporary Proced. & Admin.
                                     Regs., supra, bars information received as the result of a
                                     generic, third-party summons from satisfying section
                                       28 These answers were set out in a response to interrogatories and a response to a request

                                     for production of documents. Petitioner also made a Freedom of Information Act request for
                                     (among other items) all communications in connection with the liability of the Gaughfs for 1999.
                                     In August 2007 petitioner received information from respondent as a result of the request; no
                                     correspondence between respondent and KPMG was contained in the information supplied to
                                     petitioner.
                                       29 We will not infer from respondent’s failure to call a representative of KPMG that resulting

                                     testimony would have been unfavorable to respondent, see Wichita Terminal Elevator Co. v.
                                     Commissioner, 6 T.C. 1158 (1946), aff ’d, 162 F.2d 513 (10th Cir. 1947), because it appears that
                                     petitioner had an equal opportunity to call a representative of KPMG but did not do so, see
                                     United States v. Rollins, 862 F.2d 1282, 1297–1298 (7th Cir. 1988); Kean v. Commissioner, 469
                                     F.2d 1183, 1187–1188 (9th Cir. 1972), aff ’g on this issue, rev’g on another issue 51 T.C. 337,
                                     343–344 (1968); Grossman v. Commissioner, T.C. Memo. 1996–452, aff ’d, 182 F.3d 275 (4th Cir.
                                     1999).




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                                     (219)                    GAUGHF PROPS., L.P. v. COMMISSIONER                                   243


                                     301.6223(c)–1T, Temporary Proced. & Admin. Regs., supra.
                                     Section 301.6223(c)–1T(b)(3)(ii), Temporary Proced. & Admin.
                                     Regs., supra, requires that an identifying statement
                                     ‘‘[e]xplain that * * * [it] is furnished to correct or supple-
                                     ment earlier information with respect to the partners in the
                                     partnership’’. Information provided in response to a generic,
                                     third-party summons would not meet this requirement.
                                         We also find that the testimony and the lack of any
                                     substantiating evidence favor the proposition that KPMG
                                     never filed a statement identifying the Gaughfs as indirect
                                     partners in Gaughf Properties, in response to the summonses
                                     or otherwise. Ms. Nall and the Gaughfs testified that they
                                     did not know whether KPMG had ever filed an identifying
                                     statement with respondent. While it is not exceptionally
                                     strong evidence that Ms. Nall was unaware of any statement
                                     (given the fact she left KPMG in 2001 and was unable at trial
                                     to remember many of her dealings with the Gaughfs), we
                                     find it is strong evidence that the Gaughfs were not aware
                                     of any statement filed by KPMG. Although nothing in section
                                     301.6223(c)–1T, Temporary Proced. & Admin. Regs., supra,
                                     would have required KPMG to notify the Gaughfs had it filed
                                     an identifying statement, we believe it to be highly unlikely
                                     that KPMG would unilaterally file such a statement without
                                     providing notification to the Gaughfs.
                                         In addition to Ms. Nall and the Gaughfs, both the IRS rev-
                                     enue agent involved in the J&G investigation and the rev-
                                     enue agent assigned to audit returns of the Gaughfs and
                                     their related entities for tax year 1999 were called to testify
                                     at trial. The former testified that he was ‘‘pretty sure’’ a sum-
                                     mons had been issued to KPMG but did not testify whether
                                     KPMG had provided respondent with any documents, in
                                     response to a summons or otherwise. The latter testified that
                                     he had no knowledge of any contact between respondent and
                                     KPMG 30 and that there were not any statements identifying
                                     the Gaughfs as partners in Gaughf Properties in the docu-
                                     ments he received or in the administrative file he main-
                                     tained.
                                         As previously discussed, information provided in response
                                     to a generic, third-party summons would not satisfy section
                                     301.6223(c)–1T, Temporary Proced. & Admin. Regs., supra.
                                           30 This   revenue agent was not aware that respondent had issued summonses to KPMG.




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                                     244                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     Although petitioner argues that other information may have
                                     been filed by KPMG (not in response to a summons), no evi-
                                     dence or testimony supports this theory; it is entirely specu-
                                     lative. Considering the above facts, we find that the prepon-
                                     derance of the evidence favors respondent’s position that
                                     KPMG never filed a statement identifying the Gaughfs as
                                     indirect partners in Gaughf Properties. We therefore reject
                                     petitioner’s argument on this point.
                                           3. Whether the Requirements of Section 301.6223(c)–1T,
                                              Temporary Proced. & Admin. Regs., Were Satisfied
                                              Because Respondent Actually Used Information in His
                                              Possession Which Identified the Gaughfs as Indirect
                                              Partners in Gaughf Properties
                                        Petitioner argues that although respondent is not required
                                     to use identifying information not furnished within the
                                     meaning of section 301.6223(c)–1T, Temporary Proced. &
                                     Admin. Regs., supra, the fact that respondent did obtain and
                                     actually use such information during his investigation satis-
                                     fied the regulation and triggered the running of the one-year
                                     period described in section 6229(e). Petitioner claims that
                                     given the date on which respondent first obtained and used
                                     information identifying the Gaughfs as indirect partners in
                                     Gaughf Properties, the one-year period closed before
                                     respondent issued the FPAA. In support of its argument, peti-
                                     tioner cites section 301.6223(c)–1T(f), Temporary Proced. &
                                     Admin. Regs., supra, which states that ‘‘the Service may use
                                     * * * information in its possession’’ other than information
                                     furnished within the meaning of section 301.6223(c)–1T,
                                     Temporary Proced. & Admin. Regs., supra. We believe that
                                     petitioner’s interpretation of section 301.6223(c)–1T(f), Tem-
                                     porary Proced. & Admin. Regs., supra, as it relates to section
                                     6229(e) is incorrect.
                                        In its entirety, section 301.6223(c)–1T(f), Temporary
                                     Proced. & Admin. Regs., supra, provides—
                                     Service may use other information. In addition to the information on the
                                     partnership return and that supplied on statements filed under this sec-
                                     tion, the Service may use other information in its possession (for example,
                                     a change in address reflected on a partner’s return) in administering sub-
                                     chapter C of chapter 63 of the Code. However, the Service is not obligated
                                     to search its records for information not expressly furnished under this
                                     section.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   245


                                     We believe that the permissive language of the regulation
                                     does not impose any obligations upon the Commissioner, see
                                     Murphy v. Commissioner, 129 T.C. 82, 86–87 (2007), and find
                                     that the Commissioner’s use of identifying information does
                                     not trigger the running of the one-year period described in
                                     section 6229(e).
                                        Before applying section 6229(e) to extend the statutory
                                     period for assessing tax attributable to partnership items,
                                     the Commissioner must often perform an extensive investiga-
                                     tion of a partnership in order to determine whether the part-
                                     nership properly reported profits and losses. 31 The Commis-
                                     sioner must also engage in further investigation to discover
                                     the identity of partners who were not identified on the part-
                                     nership return. During such an investigation involving an
                                     unidentified partner, we believe it quite common that the
                                     Commissioner will at some point come into possession of and
                                     use information identifying that partner, either to further
                                     the investigation or else to contact the unidentified partner
                                     (as occurred in this case after respondent received the J&G
                                     documents). Ruling that use of such information triggers the
                                     running of the one-year period described in section 6229(e)
                                     would hamper investigations of partnerships and partners,
                                     some of which go to great lengths to disguise their incomes,
                                     losses, and identities. We do not believe such a trigger to be
                                     the intended purpose of the permissive language of section
                                     301.6223(c)–1T(f), Temporary Proced. & Admin. Regs., supra,
                                     as it relates to section 6229(e).
                                        Reading section 301.6223(c)–1T(f), Temporary Proced. &
                                     Admin. Regs., supra, in conjunction with section 6229(e), we
                                     find that even if the Commissioner has and uses identifying
                                     information within his possession, such use does not trigger
                                     the running of the one-year period described in section
                                     6229(e), so long as that information was not ‘‘furnished’’
                                     within the meaning of section 6229(e), as explained by sec-
                                     tion 301.6223(c)–1T, Temporary Proced. & Admin. Regs.,
                                     supra. As a result, we reject petitioner’s argument on this
                                     point.

                                       31 In the instant case, for example, respondent’s investigation spanned several years as a re-

                                     sult of the complicated and inconsistently reported transactions which served to mask the prop-
                                     er amounts of profits and loss which should have been reported on the various relevant returns.




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                                     246                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                           4. Whether Section 301.6229(e)–1T, Temporary Proced. &
                                              Admin. Regs., Is Invalid
                                        Petitioner’s final argument regarding section 6229(e) is
                                     that section 301.6229(e)–1T, Temporary Proced. & Admin.
                                     Regs., supra, which incorporates section 301.6223(c)–1T,
                                     Temporary Proced. & Admin. Regs., supra, regarding the
                                     procedure for furnishing additional information for purposes
                                     of section 6229(e), is invalid. Petitioner argues that while sec-
                                     tion 6229(e) merely requires information identifying a
                                     partner to be ‘‘furnished’’ to the Commissioner, section
                                     301.6223(c)–1T, Temporary Proced. & Admin. Regs., supra,
                                     restricts the plain meaning of section 6229(e) by requiring
                                     that identifying information be ‘‘filed’’ with the Commis-
                                     sioner. Petitioner also points out that section 6229(e) con-
                                     tains no ‘‘regulation-enabling language’’. We find that section
                                     301.6229(e)–1T, Temporary Proced. & Admin. Regs., supra, is
                                     a valid regulation.
                                        We first address petitioner’s point regarding the lack of
                                     ‘‘regulation-enabling language’’ in section 6229(e). As the
                                     Supreme Court has noted, section 7805(a) provides the
                                     Commissioner with ‘‘explicit authorization to ‘prescribe all
                                     needful rules and regulations for the enforcement’ of the
                                     Internal Revenue Code.’’ Mayo Found. for Med. Educ. &
                                     Research v. United States, 562 U.S. ll, ll, 131 S. Ct.
                                     704, 714 (2011). Section 301.6229(e)–1T, Temporary Proced.
                                     & Admin. Regs., supra, was issued pursuant to the authority
                                     section 7805 provides to the Commissioner. 32 52 Fed. Reg.
                                     6779, 6780 (Mar. 5, 1987). Secondary authority for issuance
                                     of the regulation is found in section 6230(k), which provides:
                                     ‘‘The Secretary shall prescribe such regulations as may be
                                     necessary to carry out the purposes of this subchapter’’; i.e.,
                                     subchapter C of chapter 63, which contains sections 6221
                                     through 6234. Id. We thus find petitioner’s argument on this
                                     point has no merit.
                                        We proceed to petitioner’s primary argument. We must fol-
                                     low a regulation, unless we hold it to be invalid under the
                                       32 While sec. 7805(e)(2) provides that ‘‘Any temporary regulation shall expire within 3 years

                                     after the date of issuance of such regulation’’, that section applies only to regulations issued
                                     after November 20, 1988. Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100–
                                     647, sec. 6232(a), 102 Stat. at 3734. Thus, sec. 7805(e)(2) does not apply to sec. 301.6229(e)–
                                     1T, Temporary Proced. & Admin. Regs., supra, because that regulation was issued in 1987. 52
                                     Fed. Reg. 6779, 6780 (Mar. 5, 1987).




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                                     (219)                     GAUGHF PROPS., L.P. v. COMMISSIONER                                         247


                                     principles of Chevron, U.S.A., Inc. v. Natural Res. Def.
                                     Council, Inc., 467 U.S. 837 (1984). Under Chevron, we first
                                     ask whether Congress has addressed the precise question at
                                     issue. Id. at 842. If the statute is ambiguous, we next ask
                                     whether the agency’s chosen interpretation is a ‘‘reasonable
                                     interpretation’’ of the statute. Id. at 844. We may not find a
                                     regulation to be invalid unless it is ‘‘ ‘arbitrary or capricious
                                     in substance, or manifestly contrary to the statute.’ ’’ Mayo
                                     Found., 562 U.S. at ll, 131 S. Ct. at 711 (quoting House-
                                     hold Credit Servs., Inc. v. Pfennig, 541 U.S. 232, 242 (2004)).
                                        The first issue is whether section 6229(e) is ‘‘silent or
                                     ambiguous’’ on the issue in question such that the agency
                                     has room to interpret the statute. Chevron, 467 U.S. at 843.
                                     While we begin our analysis with the statute’s text, we ‘‘must
                                     examine the meaning of certain words or phrases in context
                                     and also ‘exhaust the traditional tools of statutory construc-
                                     tion, including examining the statute’s legislative history to
                                     shed new light on congressional intent, notwithstanding
                                     statutory language that appears superficially clear.’ ’’ Sierra
                                     Club v. EPA, 551 F.3d 1019, 1027 (D.C. Cir. 2008) (quoting
                                     Am. Bankers Ass’n v. Nat’l Credit Union Admin., 271 F.3d
                                     262, 267 (D.C. Cir. 2001)). Thus, the question we must
                                     answer is whether Congress’ intent is clear with respect to
                                     the use of the term ‘‘furnished to the Secretary’’. Petitioner
                                     argues that the word ‘‘furnish’’ has a meaning distinct from
                                     and broader than the word ‘‘file’’ and that Congress clearly
                                     intended the broader meaning to apply to identifying
                                     information supplied to the Commissioner. In support of its
                                     argument, petitioner claims that ‘‘One may assume that Con-
                                     gress knows how to use the word ‘file’ when it means the
                                     word ‘file’.’’
                                        We turn to the statute itself. Section 6229(e) alone uses the
                                     word ‘‘furnish’’ 33 twice and does not use the word ‘‘file’’. 34
                                     Aside from section 6229(e), section 6229 uses the word ‘‘file’’
                                     four times and does not use the word ‘‘furnish’’. Although
                                     those facts offer some slight support for petitioner’s position,
                                     considering the definitions of the words ‘‘furnish’’ and ‘‘file’’,
                                     we believe that the intent of Congress was not clear with
                                           33 For   the sake of simplicity, we count all variations on the same word.
                                           34 However,    sec. 6229(e) does reference sec. 6222(b), which uses the word ‘‘file’’ multiple times.




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                                     248                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     respect to the use of the term ‘‘furnished to the Secretary’’ in
                                     section 6229(e).
                                        Merriam-Webster’s Collegiate Dictionary 473 (10th ed.
                                     2002) includes the following definitions for ‘‘furnish’’: ‘‘1: to
                                     provide with what is needed; esp: to equip with furniture
                                     [and] 2: SUPPLY, GIVE’’. As this Court has previously noted:
                                     ‘‘[T]he longstanding definition of the word ‘filed’ as used in
                                     Federal statutes is ‘delivered’.’’ Hotel Equities Corp. v.
                                     Commissioner, 65 T.C. 528, 531 (1975), aff ’d, 546 F.2d 725
                                     (7th Cir. 1976). Considering these definitions, we find that
                                     the words ‘‘furnish’’ and ‘‘file’’ are sufficiently similar that
                                     (barring any further clarification provided in the language or
                                     legislative history of a statute) the intent of Congress does
                                     not clearly prohibit an agency from promulgating regulations
                                     which require information to be filed where the relevant
                                     statute provides that the information must be ‘‘furnished’’.
                                     The legislative history is of no aid on this issue. The House,
                                     Senate, and House conference reports pertaining to the Tax
                                     Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97–
                                     248, sec. 402(a), 96 Stat. at 648, which enacted section
                                     6229(e), as well as the reports pertaining to the amendments
                                     to section 6229, contain no discussion of section 6229(e). In
                                     addition, section 6229(e) has not been amended since its
                                     enactment. Following this logic, section 6229(e) does not
                                     clearly bar the Secretary from promulgating section
                                     301.6229(e)–1T, Temporary Proced. & Admin. Regs., supra,
                                     which requires that identifying information be filed with the
                                     Commissioner.
                                        The second issue is whether the regulation is ‘‘based on a
                                     permissible construction of the statute.’’ Chevron, 467 U.S. at
                                     843. ‘‘If the Secretary’s construction is reasonable, Chevron
                                     requires the Court to accept that construction, even if the
                                     Secretary’s ‘reading differs from what the court believes is
                                     the best statutory interpretation.’ ’’ Tigers Eye Trading, LLC
                                     v. Commissioner, 138 T.C. 67, 124–125 (2012) (quoting Nat’l
                                     Cable & Telecomms. Ass’n v. Brand X, 545 U.S. 967, 980
                                     (2005)). Given the similarity between the definitions of the
                                     words ‘‘furnish’’ and ‘‘file’’ previously discussed, we find that
                                     section 301.6229(e)–1T, Temporary Proced. & Admin. Regs.,
                                     supra, is based on a permissible construction of section
                                     6229(e).




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   249


                                       We find that section 301.6229(e)–1T, Temporary Proced. &
                                     Admin. Regs., supra, satisfies both prongs of the Chevron
                                     analysis. It is thus a valid regulation.
                                           D. Conclusion Regarding the Section 6229(e) Issue
                                       We find that the Gaughfs failed to satisfy the requirements
                                     of section 6229(e). We thus hold that the statutory period for
                                     assessing tax attributable to partnership items was still open
                                     on March 30, 2007 (the day the FPAA was issued), with
                                     respect to the Gaughfs.
                                     III. Whether, Under Principles of Estoppel, Respondent
                                          Should Be Prevented From Asserting the Statutory
                                          Period for Assessment Was Open on March 30, 2007
                                       Petitioner argues that respondent should be estopped from
                                     extending the statutory period for assessment or raising the
                                     statutory period for assessment issues considered in this case
                                     because respondent: (1) effectively entrapped the Gaughfs by
                                     delaying publication of materials stating that disregarding a
                                     short option position when determining basis in a partner-
                                     ship is improper; 35 (2) delayed in issuing the summons to
                                     J&G; (3) withheld and destroyed evidence, including several
                                     original Forms SS–4 filed on behalf of the four entities
                                     involved in the transaction at issue in this case which were
                                     destroyed; (4) delayed trial by asserting that Gaughf Prop-
                                     erties omitted income resulting from the expiration of the
                                     short currency option or sale of the 7,500 shares of Quanta
                                     stock at one point owned by Gaughf Properties; (5) ‘‘Lur[ed]
                                     the Court into an opinion’’ on the statutory period for assess-
                                     ment issue but then asserted alternative issues as the
                                     centerpiece of his argument; (6) discriminated against the
                                     Gaughfs as evidenced by his not conceding this case after the
                                     Highwood Partners case was conceded; (7) delayed in con-
                                     ceding his original position in order to keep the case open
                                     long enough to develop new issues; (8) raised new issues
                                     even though evidence in his possession discredited those
                                     positions and those positions were frivolous; (9) performed
                                     other actions relating to now-conceded issues such as promul-
                                       35 Petitioner points out that the Commissioner did not publish Notice 2000–44, 2000–2 C.B.

                                     255, until September 5, 2000. Citing Helmer v. Commissioner, T.C. Memo. 1975–160, petitioner
                                     claims that until Notice 2000–44, supra, was published, it appeared that short options did not
                                     constitute a liability for purposes of determining partnership basis.




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                                     250                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     gating regulations contrary to court precedent and with-
                                     holding evidence regarding why those regulations were
                                     promulgated; and (10) otherwise delayed trial in this case
                                     and caused it to be more expensive than necessary. In addi-
                                     tion, petitioner claims that estoppel should apply against
                                     respondent with greater force than it applies against a pri-
                                     vate citizen. Most of these arguments are undeveloped, but
                                     we shall attempt to address them all.
                                        Petitioner claims that estoppel should apply against
                                     respondent with greater force than against ‘‘a private citizen
                                     because governmental takings of private property like that
                                     pursued here must comport with the Fifth Amendment
                                     requirement of due process.’’ We disagree.
                                        The parties have stipulated that the Court of Appeals for
                                     the District of Columbia Circuit has appellate jurisdiction in
                                     this case. That court has recognized that ‘‘The fundamental
                                     principle of equitable estoppel applies to government agen-
                                     cies, as well as private parties.’’ Invs. Research Corp. v. SEC,
                                     628 F.2d 168, 174 n.34 (D.C. Cir. 1980). However, that court
                                     has also recognized that ‘‘despite the doctrine’s flexibility in
                                     disputes between private parties, its application to the
                                     government must be rigid and sparing.’’ ATC Petroleum, Inc.
                                     v. Sanders, 860 F.2d 1104, 1111 (D.C. Cir. 1988); see also
                                     Bull S.A. v. Comer, 55 F.3d 678, 681 (D.C. Cir. 1995).
                                     Application of the estoppel doctrine against the Government
                                     ‘‘generally requires that government agents engage—by
                                     commission or omission—in conduct that can be character-
                                     ized as misrepresentation or concealment, or, at least, behave
                                     in ways that have or will cause an egregiously unfair result.’’
                                     GAO v. GAO Personnel Appeals Bd., 698 F.2d 516, 526 (D.C.
                                     Cir. 1983). In addition we have recognized that the doctrine
                                     of estoppel ‘‘is to be applied against the Commissioner only
                                     with utmost caution and restraint.’’ McCorkle v. Commis-
                                     sioner, 124 T.C. 56, 68 (2005).
                                        We proceed to addressing whether the elements necessary
                                     to apply estoppel were satisfied. The essential elements of
                                     estoppel are: (1) a false representation was made or a wrong-
                                     ful misleading silence maintained; (2) the error must be in a
                                     statement of fact and not in an opinion or a statement of law;
                                     (3) the person claiming the benefits of estoppel must be
                                     ignorant of the facts; (4) the person claiming the benefits
                                     must be adversely affected by the acts or statements of the




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   251


                                     person against whom estoppel is claimed; and (5) the person
                                     claiming the benefits must have reasonably relied on the acts
                                     or statements of the party against whom estoppel is claimed.
                                     Id.; Wilkins v. Commissioner, 120 T.C. 109, 112–113 (2003);
                                     see also ATC Petroleum, Inc., 860 F.2d at 1111.
                                        Petitioner takes issue with respondent’s years of ‘‘mis-
                                     leading silence’’ and false representations. Petitioner claims
                                     that there is ‘‘no doubt that the Gaughfs’ advisors would not
                                     have led the Gaughfs down this Helmer path in the Fall of
                                     1999 or filed their returns in April of 2000 had Respondent
                                     not delayed issuing Notice 2000–44’’. Petitioner also takes
                                     issue with the amount of time it took respondent to notify
                                     the Gaughfs and issue the FPAA after the Gaughf Properties
                                     1999 return was filed. Finally, petitioner faults respondent
                                     for the three-year period between the issuance of the FPAA
                                     and the trial of this issue, stating that respondent placed
                                     witnesses beyond petitioner’s reach and destroyed documents
                                     during this time, 36 in addition to failing to timely concede
                                     certain legal issues in order to gain additional time to
                                     develop other arguments.
                                        We first address petitioner’s claim that respondent
                                     entrapped the Gaughfs by delaying issuance of Notice 2000–
                                     44, supra. Even if we assumed this delay to be a wrongful
                                     misleading silence, such silence would still pertain to an
                                     issue of law (treatment of short options as they relate to
                                     basis in a partnership) as opposed to an issue of fact.
                                     Because the doctrine of estoppel is not applicable in a case
                                     of misleading statements of law, McCorkle v. Commissioner,
                                     124 T.C. at 68, we reject petitioner’s argument on this point.
                                        We next address whether respondent’s actions taken in the
                                     period between when the Gaughf Properties 1999 return was
                                     filed and the FPAA was issued satisfy the elements of
                                     estoppel. Again, even if we assumed that respondent’s failure
                                     to issue the FPAA sooner was a wrongful misleading silence,
                                     such silence would still pertain to an issue of law (whether
                                     the statutory period for assessment was open) as opposed to
                                     an issue of fact. We also note that respondent contacted the
                                     Gaughfs several times during this period, including shortly
                                     after receipt of the J&G documents, to advise the Gaughfs of
                                       36 Petitioner also claims respondent drafted self-serving regulations pertaining to conceded

                                     issues during this time.




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                                     252                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     the investigation into J&G. We therefore reject petitioner’s
                                     argument on this point.
                                        We next address petitioner’s contention that respondent
                                     withheld and destroyed evidence and placed witnesses
                                     beyond the reach of petitioner. Respondent stipulated that he
                                     destroyed original Forms SS–4 filed on behalf of the four
                                     entities involved in the transaction at issue at some point
                                     after April 17, 2003. However, there was no showing that
                                     destroying those documents years after they were filed was
                                     irregular, or that respondent was investigating any of the
                                     entities at the time the Forms SS–4 were destroyed. In addi-
                                     tion, the loss of the original Forms SS–4 did not prejudice
                                     petitioner, as copies existed and were introduced into evi-
                                     dence. No evidence that other relevant documents were with-
                                     held or destroyed exists; petitioner merely speculates that
                                     other documents may have been. 37 The argument that
                                     respondent placed witnesses beyond the reach of petitioner is
                                     not sufficient to invoke the doctrine of estoppel, as petitioner
                                     has alleged no misstatement of fact in connection with the
                                     unavailable witnesses. The witnesses petitioner complains of
                                     were unavailable on account of criminal investigations,
                                     health issues, or petitioner’s inability to find them. As a
                                     result, we reject petitioner’s argument on this point. We note
                                     that if petitioner later discovers evidence proving respondent
                                     destroyed or withheld relevant documents, petitioner has
                                     other avenues of recourse available.
                                        We next address petitioner’s contentions that respondent
                                     delayed trial by raising or not timely conceding a multitude
                                     of issues and ‘‘lured’’ this Court into writing an opinion on
                                     the statutory period for assessment issue but then changed
                                     his arguments. Many of these arguments we have already
                                     rejected when we allowed respondent to amend his answer to
                                     raise additional issues. We note that respondent has shown
                                     a willingness to concede issues in this case once having
                                     received evidence sufficient to show that no possible issue
                                     existed. Given the confusing and inconsistent positions taken
                                       37 Petitioner states that other than the Forms SS–4 which were destroyed, ‘‘No one can say

                                     what else has been lost.’’ The only specific argument petitioner makes with respect to this state-
                                     ment regards information potentially provided to respondent by KPMG, an argument which we
                                     have already found to be contrary to the evidence presented.
                                       We also note that while respondent destroyed certain tax returns of entities related to the
                                     Gaughfs but not discussed in this Opinion there was no showing that the destruction of these
                                     returns prejudiced petitioner in any way.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                    253


                                     by Gaughf Properties, the Gaughfs, and related entities on
                                     their tax returns, we do not blame respondent for his reluc-
                                     tance to concede some issues until he received evidence suffi-
                                     cient to confirm that his stated argument was incorrect. 38
                                     We also believe that: (1) respondent’s decisions to raise or
                                     concede certain issues are more analogous to opinions or
                                     statements of law rather than statements of fact; and (2)
                                     that respondent’s actions did not amount to false representa-
                                     tion or misleading silence. We therefore reject petitioner’s
                                     argument on this point.
                                        We reject petitioner’s argument regarding promulgation of
                                     regulations, on the ground that the issuance of a regulation
                                     does not amount to a statement of fact; rather, the regulation
                                     is a statement of law. With regard to the underlying reason
                                     for issuing regulations, 39 we disregard this issue on the
                                     ground that petitioner has shown no reliance on any under-
                                     lying reasons for issuance. We also note that no new regula-
                                     tions were promulgated after the FPAA with respect to section
                                     6229(e), the section under which we have decided this case.
                                     With regard to the new section 6501(e)(1)(A) regulation, sec-
                                     tion 301.6501(e)–1, Proced. & Admin. Regs., we also note
                                     that although the Supreme Court rejected the regulation (on
                                     grounds that the statute it applied had already been inter-
                                     preted by that Court and no different, consistent construction
                                     was available for adoption by the Commissioner), we do not
                                     believe it was promulgated in bad faith. See United States v.
                                     Home Concrete & Supply, LLC, 566 U.S. ll, 132 S. Ct.
                                     1836.
                                        We finally address petitioner’s argument that respondent
                                     discriminated against the Gaughfs by not conceding this case
                                        38 Petitioner harps on the fact that respondent amended his answer (in part) to raise the issue

                                     of whether Gaughf Properties omitted income resulting from the sale of the 7,500 shares of
                                     Quanta stock at one point owned by Gaughf Properties. Petitioner states that respondent knew
                                     this argument was entirely incorrect because the J&G documents in respondent’s possession con-
                                     tained a trade confirmation that the 7,500 shares were sold by Bodacious rather than Gaughf
                                     Properties. However, we recognize that Gaughf Properties did not file any information regarding
                                     distribution of Quanta stock to a partner upon liquidation. In addition, respondent conceded this
                                     issue less than a month after amending his answer (presumably upon receiving additional evi-
                                     dence that his position was incorrect). Given the confusion resulting from Gaughf Properties’
                                     tax return and respondent’s willingness to concede the issue before trial, we do not believe re-
                                     spondent raised the issue in bad faith. Even if respondent did, petitioner has not shown that
                                     it was prejudiced by the fact this issue was raised, that it was ignorant of the facts regarding
                                     this issue, or that respondent’s raising this issue amounted to a statement of fact rather than
                                     a statement of law.
                                        39 Petitioner claims respondent will not reveal the reasons for issuing certain regulations.




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                                     254                 139 UNITED STATES TAX COURT REPORTS                                    (219)


                                     after the Highwood Partners case was conceded. We find this
                                     argument inapplicable in an estoppel context because the
                                     decision to concede a case is analogous to an opinion or legal
                                     statement rather than a factual statement, that no false rep-
                                     resentation or misleading silence resulted, and that there
                                     was no showing that the Gaughfs reasonably relied on the
                                     concession. 40 In addition, ‘‘It has long been the position of
                                     this Court that our responsibility is to apply the law to the
                                     facts of the case before us and determine the tax liability of
                                     the parties before us; how the Commissioner may have
                                     treated other taxpayers has generally been considered irrele-
                                     vant in making that determination.’’ Davis v. Commissioner,
                                     65 T.C. 1014, 1022 (1976). We therefore reject petitioner’s
                                     argument on this point.
                                       In sum, petitioner has alleged that respondent has caused
                                     a multitude of delays, ‘‘lost documents, unavailable wit-
                                     nesses, faded memories, [and] horrible expense[s]’’ among
                                     other things. However, petitioner, Gaughf Properties, the
                                     Gaughfs, and other relevant entities are responsible for
                                     many of the delays and changed positions taken by
                                     respondent through their implementation of a complex trans-
                                     action to increase basis in a partnership, their inconsistent
                                     and incomplete reporting of facts regarding the transaction,
                                     and their failure to list the Gaughfs as indirect partners in
                                     Gaughf Properties. 41 These facts provide additional support
                                     for our decision to reject all of petitioner’s estoppel argu-
                                     ments based on delay of the case.
                                       Considering the facts and law previously discussed, we
                                     reject all of petitioner’s arguments regarding the estoppel
                                        40 Even addressing this issue in a constitutional context we do not believe petitioner would

                                     prevail. To prevail on an allegation of discrimination a taxpayer must meet both requirements
                                     of a two-pronged standard. The taxpayer must first demonstrate that others similarly situated
                                     have not been singled out for adverse treatment, and second, that the Commissioner singled it
                                     out for irrational or impermissible reasons such as race, religion, or the desire to prevent the
                                     exercise of constitutional rights. Penn-Field Indus., Inc. v. Commissioner, 74 T.C. 720, 723
                                     (1980); Slovacek v. United States, 40 Fed. Cl. 828, 832 (1998). Petitioner has not argued any
                                     facts which would tend to satisfy the second prong and has produced insufficient evidence to
                                     satisfy the first prong.
                                        41 As previously discussed, the failure to list the Gaughfs as indirect partners on the Gaughf

                                     Properties partnership return was not a violation of any Code section or regulation; however,
                                     it did serve to keep the statutory period for assessment open under sec. 6229(e). While not a
                                     violation of law, the failure to report the Gaughfs as indirect partners almost certainly delayed
                                     any investigation by respondent. The fact that sec. 6229(e) holds the statutory period for assess-
                                     ment open (potentially indefinitely) when an indirect partner is not reported on a partnership
                                     return implicitly recognizes that failure to list an indirect partner may significantly delay any
                                     investigation by the Commissioner.




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                                     (219)                 GAUGHF PROPS., L.P. v. COMMISSIONER                                   255


                                     issue and find that the doctrine of estoppel does not preclude
                                     respondent’s assertion that the statutory period for assess-
                                     ment remained open on the date the FPAA was issued.
                                     IV. Conclusion
                                       We find the statutory period for assessing tax attributable
                                     to partnership items was open under section 6229(e) with
                                     respect to the Gaughfs on March 30, 2007, the date the FPAA
                                     was issued. We also find that the doctrine of estoppel does
                                     not preclude respondent’s assertion that the statutory period
                                     for assessment was open on that date.
                                       In reaching our holdings herein, we have considered all
                                     arguments made, and, to the extent not mentioned above, we
                                     conclude they are moot, irrelevant, or without merit.
                                       To reflect the foregoing,
                                                                     An appropriate order will be issued as to
                                                                   the period of limitations issue.

                                                                               f




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