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investigation, the tax matters partners became cooperating
Government witnesses in the investigation of the promoter, a
convicted tax felon. In exchange for their cooperation, the tax
matters partners were granted immunity from prosecution or
offered suspended sentences. While the criminal investigation
was proceeding, the IRS pursued a civil examination of the
Transpac partnerships. Because the statute of limitations
applicable to the civil examination was about to expire, the IRS
solicited consents from the limited partners but most refused.
The IRS then approached the tax matters partners--who at this
point were targets of the ongoing criminal investigation--and
solicited and received consents from them on behalf of the
Transpac partnerships. See id. at 223.
In Transpac Drilling Venture 1982-12, the Court of Appeals
for the Second Circuit found that the tax matters partners who
signed the consents had “a powerful incentive to ingratiate
themselves to the government” since their grants of immunity or
sentencing agreements depended upon their cooperation with the
Government. Id. at 227. The Court of Appeals further found that
“the criminal investigation created an overwhelming pressure on
the TMPs to ignore their fiduciary duties to the limited
partners” and determined that if “serious conflicts exist, a TMP
may be barred from acting on behalf of the partnership”. Id.
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Last modified: May 25, 2011