Richard K. and Marilyn J. Phillips - Page 25




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               The TMP's approached by the IRS were themselves under                  
          criminal tax investigation, as was the primary promoter of the              
          Transpac partnerships, who was already a convicted tax felon.               
          Sometime during the course of the criminal tax investigations,              
          the TMP's became cooperating Government witnesses whose own                 
          sentencing, or grants of immunity, depended on their cooperation            
          with the Government.  See id. at 223.                                       
               In addition, the Court of Appeals for the Second Circuit               
          found that when the limited partners in the Transpac partnerships           
          inquired about the status of the civil audits, the IRS misled the           
          limited partners by telling them to ask for information from the            
          TMP's, who in turn had been expressly ordered not to disclose any           
          information about the existence of the criminal investigation.              
          See id. at 227.                                                             
               In Transpac, the Court of Appeals reasoned that "where                 
          serious conflicts exist, a TMP may be barred from acting on                 
          behalf of the partnership, quite apart from the issuance of a               
          government letter under current Regulation 301.6231(c)-5T".  Id.            
          The Court of Appeals proceeded to hold that the TMP's in that               
          case had a serious conflict of interest which voided their                  
          consents to the extensions of the periods of limitations.  The              
          Court of Appeals found it "especially disquieting" that the IRS             
          knew the extensions were unwanted by the limited partners on                
          whose behalf the TMP's purported to act.  See id.  The Court of             
          Appeals noted that the IRS, before seeking extensions of the                
          periods of limitations from the TMP's, had already transformed              




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