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Because the Court of Appeals for the Ninth Circuit has held that,
for purposes of the section 6621 penalty interest provisions, the
character of a partnership’s transactions is a partnership item,
we will treat the character of DGE 85-5’s transactions as if it
were a partnership item for purposes of determining our
jurisdiction in this case. See id.; Golsen v. Commissioner, 54
T.C. 742, 757 (1970), affd. 445 F.2d 985 (10th Cir. 1971).
Both parties argue that in the light of River City Ranches
#1 Ltd. v. Commissioner, 401 F.3d 1136 (9th Cir. 2005), section
6621(c) interest has both a partnership item component to be
determined at the partnership level and affected item components
to be determined at the partner level. The partnership item
component is the character of the partnership’s transactions;
i.e., whether the transactions were tax motivated. See id. at
1143-1144. The affected item components are what amount of the
partner’s underpayment of tax is attributable to the
partnership’s tax-motivated transactions and whether that
underpayment is substantial. See sec. 6621(c)(2).
The determination that DGE 85-5’s transactions were tax
motivated is a prerequisite to determining petitioner’s liability
for section 6621(c) interest. Essentially, the parties ask us to
use the findings (or lack of findings) of the Tax Court in
Shorthorn Genetic Engg. 1982-2, Ltd. v. Commissioner, T.C. Memo.
1996-515, to determine whether DGE 85-5’s transactions were tax
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