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On June 25, 1985, Blue Gem’s Forms 1065, U.S. Partnership
Return of Income, for 1982 and 1983 were selected for examination
by the Internal Revenue Service (IRS). The examination of Blue
Gem’s partnership returns for 1982 and 1983 was assigned to
Revenue Agent Charles Vassalo and was conducted from
approximately July 1985 through February 1988.
On July 22, 1985, Revenue Agent Vassalo sent an appointment
letter to John Herbst, the tax matters partner of Blue Gem (the
Blue Gem TMP).3 On July 26, 1985, the appointment letter was
returned to the sender as undeliverable. On August 5, 1985,
Revenue Agent Vassalo attempted to contact the Blue Gem TMP by
telephone and left a message for him at his place of business.
That same day, Revenue Agent Vassalo received a telephone call
from Irving Kratz, a certified public accountant who had prepared
Blue Gem’s 1982 and 1983 partnership returns, concerning the Blue
Gem examination. Revenue Agent Vassalo continued to deal
primarily with Mr. Kratz during the Blue Gem examination.
3Under the TEFRA unified audit and litigation provisions, a
properly functioning tax matters partner (TMP) is critical to an
efficient and fair partnership audit since the TMP bears
responsibility for notifying partners of developments and
ensuring that partners have a meaningful opportunity to
participate in the partnership proceeding. In keeping with a
TMP’s statutory and regulatory responsibilities, the TMP acts as
a fiduciary whose actions will affect the rights of all partners
in the partnership. See Phillips v. Commissioner, 114 T.C. 115,
120-121 (2000).
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Last modified: May 25, 2011