-354-
Respondent further asserts that the purpose of diverting the
bonus payments to CMS Investors, which flowed through to THC and
other Levenfeld/Kanter family entities, was the “improper
avoidance of income, gift and estate taxes” because THC had large
operating losses and, therefore, paid no income taxes on the
bonus payments received.
B. Analysis
1. Subject Matter Jurisdiction
The jurisdictional question presented here turns on whether
the bonus payments, in fact, were income to the Levenfeld/Kanter
law partnership (which would make the adjustments partnership
items subjected to the TEFRA partnership provisions). As
previously discussed, the Court generally lacks jurisdiction in a
deficiency proceeding brought under section 6213(a) to review
adjustments to partnership items as defined under the TEFRA
partnership procedures.
Pursuant to a longstanding practice, Levenfeld/Kanter’s law
partners were offered the opportunity to acquire partnership
interests in CMS Investors (and indirectly Delta and Alpha).
Participation was voluntary, and investments were made by a law
firm member, a member’s immediate family, and/or a family entity
for their own accounts and not on behalf of the law partnership.
Some of the law firm partners elected not to participate in the
CMS Investors offering. The Levenfeld/Kanter law partnership did
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