- 25 -
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
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011