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Contrary to petitioner’s assertion that Phillips is
distinguishable from the instant case, we find that Phillips is
controlling in all pertinent respects.
Petitioner attempts to limit Phillips to a mere
determination that section 301.6231(c)-5T, Temporary Proced. &
Admin. Regs., supra, was a valid regulation. However, this Court
in Phillips v. Commissioner, supra at 129, went well beyond that
sole determination, stating:
Pursuant to the provisions of section 301.6231(c)-5T,
Temporary Proced. & Admin. Regs., supra, the
commencement of a criminal tax investigation of a
partner in a TEFRA partnership does not necessarily or
immediately interfere with the effective and efficient
enforcement of the internal revenue laws and require
the treatment of partnership items as nonpartnership
items in every situation. [Emphasis added.]
From the above language in Phillips, it is clear that section
301.6231(c)-5T, Temporary Proced. & Admin. Regs., supra, does not
require the Commissioner to treat partnership items as
nonpartnership items at the commencement of every criminal tax
investigation of a partner. Accordingly, the Commissioner has
discretion to determine in which instances a criminal
investigation interferes with the effective and efficient
enforcement of the internal revenue laws.
In affirming this Court in Phillips, the Court of Appeals
for the Ninth Circuit addressed the principal issue of whether a
criminal tax investigation of a TMP “does, or must, end the TMP’s
power to act for a partnership.” Phillips v. Commissioner, 272
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