Greenberg Bros. P'ship # 4 v. Comm'r of Internal Revenue

• Decision Date: 24 August 1998
• Docket Number: 3968–92,4432–92,13014–92.,22780–91,623–92,15641–92,621–92,No. 19575–91,29878–91,19575–91
• Citation: 111 T.C. 198,111 T.C. No. 7
• Parties: GREENBERG BROTHERS PARTNERSHIP # 4, a.k.a. Breathless Associates, Richard M. Greenberg, Tax Matters Partner, et al.,1 Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

111 T.C. 198

111 T.C. No. 7

GREENBERG BROTHERS PARTNERSHIP # 4, a.k.a. Breathless Associates, Richard M. Greenberg, Tax Matters Partner, et al.,1 Petitioner

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 19575–91

29878–91

623–92

4432–92

15641–92

22780–91

621–92

3968–92

13014–92.

United States Tax Court.

Aug. 24, 1998.

These cases were assigned to Special Trial Judge Carleton D. Powell pursuant to the provisions of section 7443A(b)(4) and Rules 180, 181, and 183. ² The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below.Thomas E. Redding and Sallie W. Gladney, for participants.

Joseph F. Long and Gerald A. Thorpe, for respondent.

OPINION OF THE SPECIAL TRIAL JUDGE

DAWSON, Judge:

POWELL, Special Trial Judge:

These consolidated cases are before the Court on participating partners' (participants) motions pursuant to section 6224(c)(2) for entry of orders compelling respondent to extend offers of consistent settlement, or, alternatively, for entry of decisions reflecting terms of prior settlements. ³

The issues are as follows: (1) Whether, under the circumstances, participants are entitled to consistent settlement terms pursuant to section 6224(c)(2); and (2) whether section 301.6224(c)–3T(b), Temporary Proced. & Admin. Regs., 52 Fed.Reg. 6787 (Mar. 5, 1987), is valid.

The relevant facts are not in dispute and may be summarized as follows. The partnerships involved in these cases were formed to purchase and exploit the rights to certain films.⁴ The general partners of these partnerships were Richard M. Greenberg and/or A. Frederick Greenberg. Respondent began an examination of the partnerships at some point in the mid–1980's as part of a national project focusing on the various partnerships of the Greenberg Brothers.

The schedule below sets forth the specific dates on which respondent issued notices of final partnership administrative adjustments (FPAA's) determining adjustments to partnership items for each of the partnerships:

+---------------------------------------------------+
                ¦           ¦Docket¦Partnership  ¦         ¦Petition¦
                +-----------+------+-------------+---------+--------¦
                ¦Partnership¦No.   ¦Taxable Years¦FPAA Date¦Date    ¦
                +---------------------------------------------------+
                

Greenberg # 4/Breathless 19575–91 1983–87 June 3, 1991  Aug. 30, 1991
                Greenberg # 12/Lone Wolf 22780–91 1983–86 July 8, 1991  Oct. 7, 1991
                Easy Money Associates    29878–91 1983–86 Oct. 7, 1991  Dec. 20, 1991
                Cinema '84               621–92   1984–89 Oct. 15, 1991 Jan. 8, 1992
                First Blood Associates   623–92   1983–87 Oct. 21, 1991 Jan. 8, 1992
                Under Fire Associates    3968–92  1983–86 Dec. 9, 1991  Feb. 24, 1992
                Cinema '85               4432–92  1985–89 Dec. 2, 1991  Feb. 28, 1992
                First Blood Associates   13014–92 1988    Mar. 24, 1992 June 12, 1992
                First Blood Associates   15641–92 1989    Apr. 20, 1992 July 10, 1992
                First Blood Associates   12062–94 1990    Mar. 14, 1994 July 11, 1994
                

It is undisputed that the petitions were timely filed and the requests for consistent settlement terms were timely made in these cases. With the exception of docket No. 12062–94, at the time the petitions were filed in these cases, each partnership's principal place of business was located at Greenwich, Connecticut. At the time the petition was filed in docket No. 12062–94, that partnership was in dissolution; the partnership's principal place of business during its winddown period was located in New York, New York.

Each of the settlement agreements with which participants seek consistent settlement was entered into and effective on February 8, 1995 (the original settlement agreement). Each original settlement agreement is contained on a Closing Agreement On Final Determination Covering Specific Matters (Form 906), and the essential provisions (excluding the names of each partnership, the names of the settling partners, the partnership taxable years involved, and the actual dollar amounts contributed to each partnership) are identical.

Among the key provisions of the various original settlement agreements are the following:

1. No adjustment to the partnership items shall be made for the taxable years [in issue] for purposes of this settlement.

2. The taxpayers are entitled to claim their distributive share of the partnership losses for [the years in issue] only to the extent they are at risk under I.R.C. [sec.] 465.

3. The taxpayers amount at risk for [the years in issue] is their capital contribution to the partnership.

* * *

6. The taxpayers are not at risk under I.R.C. [sec.] 465 for any partnership notes, entered into by the partnership to acquire rights in the motion picture * * * whether or not assumed by the taxpayers. Any losses disallowed under this agreement are suspended under I.R.C. [sec.] 465. Such suspended losses may be used to offset the taxpayers pro rata share of any income earned by the partnership and/or other income in accordance with the operation of I.R.C. [sec.] 465.

Pursuant to section 6224(c)(2), participants timely requested consistent settlement terms respecting partnership items of the partnerships. Participants seek to avail themselves of paragraph one of the original settlement agreement without being bound by the burdens of the at risk provisions set forth in the remaining paragraphs. Respondent has refused to extend offers of settlement terms to participants under these circumstances.⁵

Discussion

TEFRA—Partnership and Nonpartnership Items

The parties agree that the partnerships are subject to the audit and litigation procedures of the Tax Equity & Fiscal Responsibility Act of 1982 (TEFRA), Pub.L. 97–248, 96 Stat. 324. The principal purpose behind TEFRA is to provide consistency and reduce duplication in the treatment of “partnership items” by requiring that they be determined in a unified proceeding at the partnership level. Maxwell v. Commissioner, 87 T.C. 783, 787, 1986 WL 22033 (1986); H. Conf. Rept. 97–760, at 600 (1982), 1982–2 C.B. 662; see also Slovacek v. United States, 40 Fed. Cl. 828 (1998).

Partnership items include each partner's proportionate share of the partnership's aggregate items of income, gain, loss, deduction, or credit. Sec. 6231(a)(3); sec. 301.6231(a)(3)–1(a)(1)(i), Proced. & Admin. Regs. Partnership items also include each partner's proportionate share of the partnership's liabilities, including determinations with respect to the amount of the liabilities, and whether the liabilities are nonrecourse. Sec. 301.6231(a)(3)–1(a)(1)(v), Proced. & Admin. Regs.

A nonpartnership item is “an item which is (or is treated as) not a partnership item.” Sec. 6231(a)(4). An “affected item” is “any item to the extent such item is affected by a partnership item.” Sec. 6231(a)(5); see also N.C.F. Energy Partners v. Commissioner, 89 T.C. 741, 743–745, 1987 WL 45298 (1987); sec. 301.6231(a)(5)-IT(a), Temporary Proced. & Admin. Regs., 52 Fed.Reg. 6790 (Mar. 5, 1987).⁶ The determination of a partner's amount at risk with respect to partnership liabilities personally assumed is an affected item.⁷ Hambrose Leasing v. Commissioner, 99 T.C. 298, 312, 1992 WL 210580 (1992); sec. 301.6231(a)(5)-IT(c), Temporary Proced. & Admin. Regs., 52 Fed.Reg. 6790 (Mar. 5, 1987). While there are partnership item components to the at risk calculation that affect that determination at the partner level, the determination of amounts at risk by individual partners is not a partnership item. Hambrose Leasing v. Commissioner, supra at 309–312; sec. 301.6231(a)(3)–1(a)(1)(vi)(C), Proced. & Admin. Regs. It follows, therefore, that the determinations of the amounts at risk with respect to partnership liabilities are also “ nonpartnership items” within the meaning of section 6231(a)(4). Accordingly, for purposes here we refer to paragraph one of the original settlement agreement as the settlement of the partnership items provision and the remaining paragraphs referring to “at risk” as nonpartnership items settlement provisions.

TEFRA—Consistent settlement

The present dispute involves section 6224(c)(2) and section 301.6224(c)–3T, Temporary Proced. & Admin. Regs., 52 Fed.Reg. 6787 (Mar. 5, 1987). ⁸

Section 6224(c) (2) provides, in part:

Other partners have right to enter into consistent agreements.—If the Secretary enters into a settlement agreement with any partner with respect to partnership items for any partnership taxable year, the Secretary shall offer to any other partner who so requests settlement terms for the partnership taxable year which are consistent with those contained in such settlement agreement. * * * In construing section 6224(c)(2) our task is to give effect to the intent of Congress. We begin with the statutory language, which is the most persuasive evidence of the statutory purpose. United States v. American Trucking Associations, Inc., 310 U.S. 534, 542–543, 60 S.Ct. 1059, 84 L.Ed. 1345 (1940); Hospital Corp. of Am. v. Commissioner, 107 T.C. 116, 128, 1996 WL 525231 (1996). The plain meaning of statutory language ordinarily is conclusive. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241–242, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). If a statute is silent or ambiguous, we turn to legislative history to ascertain congressional intent. Burlington N. R.R. v. Oklahoma Tax Commn., 481 U.S. 454, 461, 107 S.Ct. 1855, 95 L.Ed.2d 404 (1987); Peterson Marital Trust v. Commissioner, 102 T.C. 790, 799, 1994 WL 284075 (1994), affd. 78 F.3d 795 (2d Cir.1996).⁹

Section 6224(c)(2) requires that the settlement agreement forming the basis for the request for consistent settlement terms must be “a settlement agreement * * * with respect to partnership items”. The statute otherwise imposes no conditions upon those settlement agreements that may be subject to requests for consistent settlement terms. On the other hand, the parameters of what constitutes a settlement agreement for purposes of section 6224(c)(2) are not statutorily defined. Reference to the Spartan...