TFT Galveston Portfolio, Ltd. v. Comm'r, 144 T.C. No. 7

• Court: U.S. Tax Court
• Writing for the Court: GOEKE, Judge
• Decision Date: 26 February 2015
• Docket Number: Docket No. 1082-12,Docket No. 30001-11,Docket No. 682-12,Docket No. 1533-12.,Docket No. 1180-12,144 T.C. No. 7,Docket No. 1175-12,Docket No. 29995-11
• Citation: TFT Galveston Portfolio, Ltd. v. Comm'r, 144 T.C. No. 7, Docket No. 1082-12, Docket No. 1175-12 (T.C. Feb 26, 2015)
• Parties: TFT GALVESTON PORTFOLIO, LTD., AS SUCCESSOR IN INTEREST FOR TFT #2, LTD., ET AL., Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

TFT GALVESTON PORTFOLIO, LTD., AS SUCCESSORIN INTEREST FOR TFT #2, LTD., ET AL.,¹ Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

144 T.C. No. 7

Docket No. 29995-11

Docket No. 30001-11

Docket No. 682-12

Docket No. 1082-12

Docket No. 1175-12

Docket No. 1180-12

Docket No. 1533-12.

UNITED STATES TAX COURT

February 26, 2015

P received a Notice of Determination Concerning Worker Classification and corresponding employment tax liabilities on its own behalf and other such notices as successor in interest to variouspartnerships. The parties dispute whether P was a successor in interest under Texas law, and R asserts this Court should establish a Federal standard of successor in interest as Federal common law. In addition, the status of P's workers for the period involving P is itself at issue.

Held: On the facts before us, P was not a successor in interest under Texas law.

Held, further, we do not adopt a Federal common law standard of successor in interest.

Held, further, P's workers were employees.

Gary I. Currier, for petitioners.

Jeremy H. Fetter and Jason D. Laseter, for respondent.

GOEKE, Judge: These consolidated cases² are before us on petitions for redetermination of employment status filed pursuant to section 7436.³ In separateNotices of Determination Concerning Worker Classification (notices) respondent determined that for purposes of Federal employment taxes, the individuals listed in Table 1 attached to the notices should be legally classified as petitioners' employees and thus determined deficiencies in, additions to, and penalties with respect to petitioner's Federal employment taxes as follows:⁴

TFT Galveston Portfolio, Ltd., docket No. 1082-12

Additions to tax

Period

ended

Type of tax

Amount

Sec.

6651(a)(1)

Sec.

6651(a)(2)

Penalty

sec. 6656

12/31/2004

FICA, ITW

$36,362

$8,182

$9,091

$690

12/31/2004

FUTA

5,414

1,218

1,354

541

TFT Galveston Portfolio, Ltd., As Successor in Interest to TFT #1, Ltd., docket No. 30001-11

Additions to tax

Period

ended

Type of tax

Amount

Sec.

6651(a)(1)

Sec.

6651(a)(2)

Penalty

sec. 6656

3/31/2000

FICA, ITW

$8,817

$1,984

$2,204

$156

6/30/2000

FICA, ITW

7,300

1,642

1,825

129

9/30/2000

FICA, ITW

7,988

1,797

1,997

141

12/31/2000

FICA, ITW

7,926

1,783

1,981

140

12/31/2000

FUTA

2,759

621

690

276

3/31/2001

FICA, ITW

7,730

1,739

1,932

137

6/30/2001

FICA, ITW

8,287

1,865

2,072

146

9/30/2001

FICA, ITW

8,465

1,905

2,116

151

12/31/2001

FICA, ITW

7,977

1,795

1,994

143

12/31/2001

FUTA

2,349

528

587

235

3/31/2002

FICA, ITW

7,524

1,693

1,881

136

6/30/2002

FICA, ITW

7,340

1,652

1,835

133

9/30/2002

FICA, ITW

7,437

1,673

1,859

135

12/31/2002

FICA, ITW

7,615

1,713

1,904

138

12/31/2002

FUTA

2,568

578

642

257

3/31/2003

FICA, ITW

6,882

1,548

1,721

131

6/30/2003

FICA, ITW

7,121

1,602

1,780

135

9/30/2003

FICA, ITW

7,554

1,700

1,888

143

12/31/2003

FICA, ITW

7,511

1,690

1,878

143

12/31/2003

FUTA

1,865

420

466

187

3/31/2004

FICA, ITW

7,598

1,710

1,899

144

6/30/2004

FICA, ITW

7,838

1,763

1,959

149

9/30/2004

FICA, ITW

8,837

1,988

2,209

168

12/31/2004

FICA, ITW

2,837

638

709

54

12/31/2004

FUTA

1,810

407

452

181

TFT Galveston Portfolio, Ltd., As Successor in Interest to TFT #2, Ltd., docket No. 29995-11

Additions to Tax

Period

ended

Type of tax

Amount

Sec.

6651(a)(1)

Sec.

6651(a)(2)

Penalty

sec. 6656

3/31/2000

FICA, ITW

$17,667

$3,975

$4,417

$312

6/30/2000

FICA, ITW

19,286

4,339

4,822

341

9/30/2000

FICA, ITW

18,009

4,052

4,502

318

12/31/2000

FICA, ITW

17,014

3,828

4,254

301

12/31/2000

FUTA

4,298

967

1,075

430

3/31/2001

FICA, ITW

17,372

3,909

4,343

307

6/30/2001

FICA, ITW

17,478

3,933

4,370

309

9/30/2001

FICA, ITW

17,459

3,928

4,365

312

12/31/2001

FICA, ITW

19,564

4,402

4,891

350

12/31/2001

FUTA

3,726

838

931

373

3/31/2002

FICA, ITW

18,301

4,118

4,575

331

6/30/2002

FICA, ITW

16,858

3,793

4,215

305

9/30/2002

FICA, ITW

20,032

4,507

5,008

362

12/31/2002

FICA, ITW

15,588

3,507

3,897

282

12/31/2002

FUTA

4,492

1,011

1,123

449

3/31/2003

FICA, ITW

9,346

2,103

2,337

177

12/31/2003

FUTA

1,438

324

359

144

TFT Galveston Portfolio, Ltd., As Successor in Interest to TFT # 3, Ltd., docket No. 1533-12

Additions to tax

Period

ended

Type of tax

Amount

Sec.

6651(a)(1)

Sec.

6651(a)(2)

Penalty

sec. 6656

3/31/2000

FICA, ITW

$20,126

$4,528

$5,032

$356

6/30/2000

FICA, ITW

22,320

5,022

5,580

394

9/30/2000

FICA, ITW

27,588

6,207

6,897

487

12/31/2000

FICA, ITW

26,026

5,856

6,507

460

12/31/2000

FUTA

8,045

1,810

2,011

805

3/31/2001

FICA, ITW

21,074

4,742

5,268

372

6/30/2001

FICA, ITW

22,729

5,114

5,682

402

9/30/2001

FICA, ITW

21,677

4,877

5,419

387

12/31/2001

FICA, ITW

20,618

4,639

5,155

369

12/31/2001

FUTA

6,706

1,509

1,676

671

3/31/2002

FICA, ITW

17,384

3,911

4,346

314

6/30/2002

FICA, ITW

18,792

4,228

4,698

340

9/30/2002

FICA, ITW

19,124

4,303

4,781

346

12/31/2002

FICA, ITW

18,367

4,133

4,592

332

12/31/2002

FUTA

5,484

1,234

1,371

548

3/31/2003

FICA, ITW

14,287

3,215

3,572

271

6/30/2003

FICA, ITW

14,715

3,311

3,677

279

9/30/2003

FICA, ITW

14,957

3,365

3,739

284

12/31/2003

FICA, ITW

14,603

3,286

3,651

277

12/31/2003

FUTA

4,968

1,118

1,242

497

3/31/2004

FICA, ITW

11,271

2,536

2,818

214

6/30/2004

FICA, ITW

11,713

2,635

2,928

222

9/30/2004

FICA, ITW

20,189

4,543

5,047

383

12/31/2004

FICA, ITW

6,874

1,547

1,718

130

12/31/2004

FUTA

5,230

1,177

1,308

523

TFT Galveston Portfolio, Ltd., Successor in Interest to TFT # 4, Ltd., docket No. 682-12

Additions to tax

Period

ended

Type of tax

Amount

Sec.

6651(a)(1)

Sec.

6651(a)(2)

Penalty

sec. 6656

3/31/2000

FICA, ITW

$14,136

$3,181

$3,534

$250

6/30/2000

FICA, ITW

19,532

4,395

4,883

345

9/30/2000

FICA, ITW

14,889

3,350

3,722

263

12/31/2000

FICA, ITW

14,755

3,320

3,689

261

12/31/2000

FUTA

4,400

990

1,100

440

3/31/2001

FICA, ITW

11,724

2,368

2,931

207

6/30/2001

FICA, ITW

13,868

3,120

3,467

245

9/30/2001

FICA, ITW

11,202

2,520

2,800

200

12/31/2001

FICA, ITW

10,913

2,455

2,728

195

12/31/2001

FUTA

3,752

844

938

375

3/31/2002

FICA, ITW

10,185

2,292

2,546

184

6/30/2002

FICA, ITW

10,675

2,402

2,669

193

9/30/2002

FICA, ITW

8,655

1,947

2,164

157

12/31/2002

FICA, ITW

9,981

2,246

2,495

181

12/31/2002

FUTA

3,395

764

849

340

3/31/2003

FICA, ITW

5,437

1,223

1,359

103

12/31/2003

FUTA

837

188

209

84

TFT Galveston Portfolio, Ltd., As Successor in Interest to TFT Chateau Lafitte-WJT., Ltd.,

docket No. 1175-12

Additions to tax

Period

ended

Type of tax

Amount

Sec.

6651(a)(1)

Sec.

6651(a)(2)

Penalty

sec. 6656

3/31/2003

FICA, ITW

$4,662

$1,049

$1,165

$88

6/30/2003

FICA, ITW

15,803

3,556

3,951

300

9/30/2003

FICA, ITW

16,266

3,660

4,067

309

12/31/2003

FICA, ITW

14,196

3,194

3,549

269

12/31/2003

FUTA

3,727

839

932

373

3/31/2004

FICA, ITW

12,906

2,904

3,227

245

6/30/2004

FICA, ITW

14,503

3,263

3,626

275

9/30/2004

FICA, ITW

13,267

2,985

3,317

252

12/31/2004

FICA, ITW

4,402

991

1,101

84

12/31/2004

FUTA

2,754

620

689

275

TFT Galveston Portfolio, Ltd., As Successor in Interest to TFT Somerset-WJT., Ltd., docket

No. 1180-12

Additions to tax

Period

ended

Type of tax

Amount

Sec.

6651(a)(1)

Sec.

6651(a)(2)

Penalty

sec. 6656

3/31/2003

FICA, ITW

$2,475

$557

$619

$47

6/30/2003

FICA, ITW

8,721

1,962

2,180

166

9/30/2003

FICA, ITW

8,997

2,024

2,249

171

12/31/2003

FICA, ITW

8,007

1,802

2,002

152

12/31/2003

FUTA

3,034

683

758

303

3/31/2004

FICA, ITW

8,124

1,828

2,031

154

6/30/2004

FICA, ITW

8,149

1,833

2,037

155

9/30/2004

FICA, ITW

9,047

2,036

2,262

172

12/31/2004

FICA, ITW

3,303

743

826

63

12/31/2004

FUTA

3,077

692

769

308

After concessions,⁵ the issues for decision are: (1) whether the workers listed in the notice of determination for TFT Galveston Portfolio, Ltd.'s ("TFT Galveston Portfolio") fourth quarter of the taxable year 2004 were properly classified as employees for purposes of Federal employment taxes. We hold that the identified individuals were TFT Galveston Portfolio's employees and TFT Galveston Portfolio is liable for the employment taxes determined with respect to those individuals; (2) whether, in addition to being liable for employment taxes for the fourth quarter of taxable year 2004, TFT Galveston Portfolio is liable for the Federal employment taxes, additions to tax, and penalties, as a successor in interest to TFT #1, Ltd., TFT #2, Ltd., TFT #3, Ltd., TFT #4, Ltd., TFT Chateau Lafitte-WJT, Ltd., and TFT Somerset-WJT, Ltd. We hold it is not; and (3) whether TFT Galveston Portfolio is liable for additions to tax pursuant to section 6651(a)(1) and (2) and penalties pursuant to section 6656. We hold that it is so liable.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The parties' stipulations of facts are incorporated herein by this reference.

Petitioner's Organizational Structure

Petitioner, TFT Galveston Portfolio, and its alleged predecessors, TFT #1, Ltd. (TFT #1); TFT #2, Ltd. (TFT #2); TFT #3, Ltd. (TFT #3); TFT #4, Ltd. (TFT #4); TFT Chateau Lafitte-WJT (TFT Chateau Lafitte-WJT); and TFT Somerset-WJT (TFT Somerset-WJT), are all organized as Texas limited partnerships. At all relevant times TFT Galveston Portfolio's principal office and mailing address was in Tomball, Texas.

During the period at issue TFT #1 comprised one general partner, TFT Holdings, L.L.C. (TFT Holdings), and one limited partner, Walter J. Teachworth. From January 1, 2000, through October 26, 2004, its principal business activity was the operation of The Ebbtide apartment complex. TFT #1's final Form 1065, U.S. Return of Partnership Income,...