As William Faulkner observed in Requiem for a Nun, “[t]he past is never dead. It’s not even past.” While not aimed specifically at taxpayers and practitioners, Faulkner’s observation is nonetheless relevant to tax procedure.
The Seventh Circuit recently demonstrated this in United States v. Titan International, Inc., 2106 U.S. App. LEXIS 1687 (7th Cir. Feb. 1, 2016), an appeal from a summons enforcement proceeding. The taxpayer had taken an operating loss carry-forward in 2010 and the relevant loss had occurred in 2009. Titan Int’l, 2106 U.S. App. LEXIS 1687 at *1. The IRS sought the taxpayer’s records for the 2009 tax year, which it had already inspected in auditing its 2009 return.… Read More
Theoretically, The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) is simple:
- The partnership is audited, and partnership items are subject to adjustment at the partnership level. I.R.C. § 6221.
- Assessments are made at the conclusion of the partnership proceeding. I.R.C. § 6225(a).
- Adjustment to partnership items are typically implemented at the partner level through “computational adjustments” that usually do not require a notice of deficiency. I.R.C. § 6230(a)(1).
Actually, however, TEFRA quickly becomes complicated when applied to a particular fact pattern.
On November 24, 2015, a case in the Court of Federal Claims demonstrated that the theoretically simple process of making “computational adjustments” is anything but simple.… Read More
This will continue coverage of the refund claim by General Mills that went awry. For a detailed review of the facts, look at my earlier post.
The case involved a series of overlapping audits of General Mills and an affiliated LLC, General Mills Cereals, LLC (the “Partnership”). To summarize, the situation was as follows:
- As a C Corporation, General Mills was subject to what is known as LCU interest, a two percent increase in the underpayment rate that applies to underpayments by C Corporations that exceed $100,000. See I.R.C. § 6621(c).
- There were gaps between the time when the IRS issued proposed deficiency notices in the corporate audits and the time when it outlined the impact on General Mills of the adjustments made in the audits of the Partnership.
… Read More
Last week, General Mills, Inc., the cereal maker, lost a significant refund case because its administrative claim was deemed untimely. General Mills, Inc. v. United States, No. 14-89T, 2015 U.S. Claims LEXIS 1311 (Fed. Cl. Oct. 14, 2015). The case involves the intersection of complex facts with confusing statutory provisions; not surprisingly, a partnership was involved.
General Mills is the parent of a number of subsidiary corporations, which were partners in General Mills Cereals, LLC (the “Partnership”), a limited liability company that was taxed as a partnership. General Mills, 2015 U.S. Claims LEXIS 1311 at *1. The refund claim related to interest accruals on tax items addressed in parallel audits of General Mills and the Partnership.… Read More
In the course of an audit, taxpayers are frequently presented with a request to extend the assessment statute of limitations to permit the audit to be concluded.
Section 6501 of the Internal Revenue Code authorizes extensions so long as they are entered into before the limitations period expires. When an extension is requested, the taxpayer is permitted to limit it to specific issues. See I.R.C. § 6501(c)(4)(B). If the scope of the extension is later disputed, courts apply contract principles to determine whether the taxpayer’s extension covered the particular issue in dispute.
A recent case from the Ninth Circuit shows that particular care must be used in looking at the language of the extension agreement in the context of tiered partnerships.… Read More