Tax- Tax Equity and Fiscal Responsibility Act

Listen to this article

7^th Circuit Court of Appeals

Case Name: Gail Goldberg v. CIR

Case No.: 22-1085

Officials: Wood, Brennan, and Scudder, Circuit Judges.

Focus: Tax- Tax Equity and Fiscal Responsibility Act

Under the provisions of the Tax Equity and Fiscal Responsibility Act (TEFRA), specifically 26 U.S.C. 6221–6234, the tax obligations of a partnership were allocated to individual partners based on their ownership stakes. Partners were required to report their respective share of income on their personal tax returns, while the partnership provided relevant information through Schedule K-1. Decisions made at the partnership level were binding for all partners, although partners had the option to exclude themselves from partnership-level proceedings and challenge determinations during ongoing proceedings. Partners were entitled to receive a “notice of beginning of administrative proceedings” (NBAP) and a notice of a “final partnership administrative adjustment” (FPAA) through mail.

Goldberg, a partner in two firms, underwent IRS audits of the partnerships between 2001 and 2002. The IRS claims to have sent the required NBAPs and FPAAs to Ronald Goldberg by certified mail within the specified timeframe. However, Goldberg later disputed ever receiving the NBAPs. In 2010, while the Tax Court was reviewing the FPAAs, Goldberg contested his tax liability for both partnership items, asserting that the three-year statute of limitations for assessments had expired. The IRS suggested raising these challenges during the Tax Court proceedings before the adjustments became final, but Goldberg did not take any action. In 2013, the Tax Court issued a judgment, and the resulting determinations on liability became final. Subsequently, the IRS notified Goldberg of the adjustments and initiated collection proceedings for $500,000. The Seventh Circuit upholds the decision. Goldberg was provided with notice and an opportunity to contest the partnership tax liabilities independently, regardless of any alleged failure on the part of the IRS.

Affirmed.

Decided 07/14/23

Full Text