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we retain jurisdiction regardless of whether TEFRA applies.
Paragraph 4(g) of the petition assigned error to the adjustment
in paragraph 7 of the explanation of items in the notice of
deficiency denying petitioners a deduction under section 183 or
section 212 for any legal, accounting, consulting, and advisory
fees for the taxable year 2001. These items are neither
partnership items nor affected items. They were claimed by
petitioners on their individual return, not by the partnership on
its partnership return.
Respondent contends that the items referred to in paragraph
4(g) of petitioners’ petition are affected items. Respondent
reasons that the deduction was disallowed because Alameda and the
partnership transaction at issue were shams, and that the
determination of whether a partnership is a sham is a partnership
item. Respondent cites River City Ranches #1 Ltd. v.
Commissioner, 401 F.3d 1136, 1144 (9th Cir. 2005), affg. in part
and revg. in part T.C. Memo. 2003-150, and Andantech L.L.C. v.
Commissioner, 331 F.3d 972, 981 (D.C. Cir. 2003), affg. in part
and remanding T.C. Memo. 2002-97, to support his assertion.
We find that River City Ranches, which dealt with the
penalty-interest provision of section 6621(c), is
distinguishable. The issue of whether the partnership’s
transactions were shams directly affected the penalty-interest
issue. In this case, even if the Court were to determine that
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Last modified: November 10, 2007