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On October 26, 1990, Brown filed a petition in response to the
FPAA, and the case was docketed in the Tax Court at docket No.
24099-90.
Settlement Negotiations
In September 1991, while waiting for the decisions of the
Court in the earlier test cases, the legal representatives of the
20 TEFRA partnerships reached a basis for settlement with the
IRS. The parties agreed to general settlement terms which then
had to be applied individually to each of the 20 TEFRA
partnerships and then to each limited partner within each
partnership. The general basis of settlement, in part, was as
follows:
(a) taxpayers would be entitled to deduct 1/2 of
the out of pocket cash paid to the partnership in the
year the cash was paid;
(b) the Internal Revenue Service agreed to waive
any penalties asserted in the FPAA; and
(c) the I.R.C. section 6621(c) rate of interest
would apply to any deficiency.
The basis of the settlement for all of the TEFRA
partnerships was the same. For the IRS to credit nearly 1,000
limited partners in the TEFRA partnerships with the proper
settlement, individual computations were necessary first at the
partnership level. Each of the TEFRA partnership’s tax returns
was different from the other partnerships’ returns, and each of
the limited partner’s deductions on their individual tax returns
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