Partners Seek Supreme Court Review of Federal Circuit Decision Upholding Tax Assessments

2. If the expanded definition of "computational adjustment" is valid, then were these assessments still barred by § 6230(a)(2)(A)(i), which reimposes the deficiency notice requirement on computational adjustments involving "affected items which require partner level determinations"? The Federal Circuit construed that phrase on an ad hoc basis to exclude a partner's "at risk" amount even though "at risk," by statute, applies only to individuals and some corporations, not partnerships, and categorically requires many partner-level determinations. Does that construction conflict with this Court's repeated holdings that tax statutes be strictly construed?

The Federal Circuit's panel opinion was reported at Bush, et al. v. United States, 599 F.3d 1352 (Fed. Cir. 2010), vacated, 400 Fed.Appx. 556 (Fed.Cir. 2010). App. 42-100.

The opinion of the Court of Federal Claims is reported at Bush v. United States, 78 Fed.Cl. 76 (2007) and an order was issued at Shelton v. United States, Nos. 02-1042, 04-1595, 2007 U.S. Claims LEXIS 311 (Aug. 17, 2007). App. 101-129 and 130-142.

The Federal Circuit's en banc opinion directly conflicts with the Second Circuit's interpretation of 26 U.S.C. § 6231(a)(6)² in Randell v. United States, 64 F.3d 101 (2^nd Cir. 1995). App. 143-164.

The Federal Circuit's en banc opinion indirectly conflicts with this Court's holdings that statutory definitions, especially those involving tax, must be strictly construed in:

• Andrus v. Glover Constr. Co., 446 U.S. 608, 616-17, 100 S. Ct. 1905, 64 L. Ed. 2d 548 (1980);

• Colautti v. Franklin, 439 U.S. 379, 392, and n. 10, 99 S.Ct. 675, 58 L.Ed.2d 596 (1979);

• Helvering v. Northwest Steel, 311 U.S. 46, 49, 61 S. Ct. 109; 85 L. Ed. 29 (1940);

• Meese v. Keene, 481 U.S. 465, 107 S. Ct. 1862, 95 L. Ed. 2d 415 (1987);

• Sanford's Estate v. Commissioner, 308 U.S. 39, 60 S. Ct. 51; 84 L. Ed. 20 (1939); and

• Stenberg v. Carhart, 530 U.S. 914; 120 S. Ct. 2597; 147 L. Ed. 2d 743 (2000).

Subchapter 63C (§§ 6221-6233) ("TEFRA"), enacted in the Tax Equity and Fiscal Responsibility Act of 1982,⁴ creates unique procedural laws to resolve partnership-related taxes. Congress left substantive tax treatment of partners and partnerships in subchapter 1K (§§ 701 et seq.) and the § 465 at-risk rules in subchapter 1E.

Section 6222(a) mandates that "a partner shall . . . treat a partnership item . . . in a manner . . . consistent with the treatment . . . on the partnership's return" (emphasis added). App. 172.

The IRS may assess any tax resulting from a partner's failure to report consistently with the partnership return by "computational adjustment," defined in § 6231(a)(6) as:

In § 6230(a)(1), Congress excepted from § 6213(a)'s deficiency notice requirement only assessments made by computational adjustment. App. 177-178.

Section 6230(a)(2)(A)(i) expressly limits this exception, by mandating that:

Here the IRS and Bush and Shelton negotiated complex, multi-year, 20-paragraph settlements, with only one paragraph addressing treatment of partnership items: "No adjustment to partnership items shall be made. . . ." App. 187, ¶ 1; 194, ¶ 1; 201, ¶ 1. It is uncontested that Bush's and Shelton's partnership-item treatment was consistent with their partnerships' treatment.

The IRS assessed without issuing deficiency notices, based solely on one nonpartnership item (§ 465 at-risk amounts) cherry-picked from among 19 paragraphs, including many substantive nonpartnership items, thus disregarding other terms which could have reduced their final liabilities.

The core issue here is whether the § 6230(a)(1) exception -- denying taxpayers deficiency notices and their associated procedural safeguards -- may be avoided by judicially expanding Congress's definition of "computational adjustment" to include changes to tax which solely reflect subchapter 1E treatment of agreed changes to nonpartnership-item elements of a partner's § 465 at-risk amounts.⁶

If the definition of "computational adjustment" can be so rewritten, then it must be resolved whether deficiency notices were separately mandated by § 6230(a)(2)(A)(i)'s exception to the exception for deficiencies attributable to "affected items which require partner-level determinations. . . ." App. 38.

On their returns, Bush and Shelton reported their allocated partnership items as limited, to the extent they understood applied, by the nonpartnership-item, partner-level "at-risk" and "basis" rules.⁸

The IRS examined C-84, LWM, and other so-called Greenberg partnerships under TEFRA, which bifurcates procedures for resolving "partnership items" and "nonpartnership items."⁹

In 1991, the IRS issued notices of final partnership administrative adjustment (FPAAs) changing partnership items on the partnerships' returns (1985-1989 for C-84 and 1983-1986 for LWM (the "FPAA Years")). For each partnership a § 6226 partnership-level Tax Court suit was filed. Nos. 621-92 (C-84) and 22780-91 (LWM).

For pre-1997 tax years, Tax Court § 6226 jurisdiction is restricted to determining and allocating partnership items. § 6226(f). App. 176. Therefore, it cannot determine nonpartnership items, including affected items.

While those suits were pending, the IRS negotiated extensively with Bush, Shelton, and other Greenberg-related partners who then individually settled not only their disputed partnership items before the Tax Court but also partnership items for years not before the Tax Court (through 1995) and numerous partner-level, nonpartnership items required to determine any tax or refund amounts for any year.

Had they agreed to deficiencies they could and should have used Form 866 "Agreement[s] as to Final Determination of Tax Liability." Instead, due to the extremely complex terms, they chose Form 906 "Closing Agreement[s] on Final Determination Covering Specific Matters" that did not agree to any deficiency amount. App. 187-207.

Of 20 paragraphs, only ¶ 1 concerned treatment of partnership items:

Thus, they agreed there would be no adjustment to any partnership items for any year, not just those before the Tax Court, i.e., that the treatment of partnership items on the partnerships' original returns and their returns was consistent and proper.

Some of the other 19 paragraphs simply recite the law or articulate an amount as agreed from ¶ 1. Others are substantive agreements critical to determine any tax:

During these negotiations, the Federal Circuit held oral argument in Olson,¹⁰ where "the government conceded that, if an 'at risk' determination were necessary, a notice of deficiency would be required." Id., at 1319. Petitioners' counsel represented the Olsons and was, at that time Bush's counsel in the Tax Court negotiating the Greenberg-related settlements on behalf of Bush, Shelton, and other partners.¹¹

The settlements were submitted in June 1999 and countersigned in August.¹² Bush and Shelton promptly filed their ¶ 15 offset claims.¹³

The IRS sent Form 4549 Notices of Adjustment¹⁴ showing adjustments it perceived were "based on the settlement agreement, Form 906"¹⁵ but only actually applied the agreed at-risk limit to the initial years by disregarding their individual assumptions of partnership debt. It ignored other provisions requiring partner-level determinations critical to properly determine their tax and overpayments and even impermissably adjusting an outside basis loss deduction in 1995.¹⁶

Before the § 6229(f) assessment deadline (August 7, 2000), Shelton wrote the IRS stating, inter alia, that § 6213(a) required he receive deficiency notices.¹⁷

Disregarding the government's representation in Olson, the IRS assessed without issuing deficiency notices that would have allowed them to challenge (pre-assessment in the Tax Court) the IRS's failure to properly apply their settlement terms and to determine the actual amount of their tax liabilities.

The IRS erroneously applied its own limited calculation, not Shelton's offset claims and refused to apply any of Bush's offset claims as agreed in ¶ 15. It did not make any of the additional determinations (¶¶ 5-19) it had agreed might mitigate any resulting deficiencies.

The assessments did not result from making Bush's and Shelton's treatment of their partnership items consistent with the partnerships' treatment of those items -- as agreed, their treatment was already consistent. The deficiencies assessed were computed based only on agreed partner-level treatment of some, not all, nonpartnership-item elements of their § 465 at-risk amounts, which are nonpartnership-item affected items.

On assessment, the IRS began statutory collection proceedings, automatically seized existing credits,¹⁸ immediately imposed liens on their property,¹⁹ and issued § 6303(e) notices demanding payment and telling them the IRS had seized their credits.²⁰

The IRS over-assessed Shelton's 1981 interest by $33,000.²¹ On August 24th he estimated and paid the purportedly correct 1981 amount.²² He then paid the remainder.²³ Collection actions continued until finally on November 20th, after repeated pleas for assistance, the IRS abated the unlawful assessment, issued a refund.²⁴

The IRS assessed within days of its August 7, 2000, assessment deadline. Shortly after that deadline, Bush and Shelton paid the amounts remaining after their credits were seized.²⁵

Bush and Shelton filed separate Claims Court suits on their ¶ 15 offset claims.²⁶ They then filed separate administrative refund claims based, inter alia, on the IRS's failure to issue deficiency notices.²⁷ After denial, they filed separate Claims Court suits under § 7244(a) and 28 U.S.C. §§ 1346(a)(1) and 1491(a), which waived sovereign immunity and granted refund jurisdiction.²⁸ App. 181-183.

Bush and Shelton were representative cases, though no stipulations or agreements to bind were made. Bush's suits were consolidated; as were Shelton's. On separate cross-motions for partial summary judgment, both asserted the assessments were invalid because required deficiency notices were not issued. The Claims Court held that § 6230(a)(1)'s exception applied and deficiency notices were not required because these deficiencies resulted from treatment of partnership items and were assessed as "computational adjustments." Separate partial judgments were entered on October 1, 2008.

Considering litigation costs and to expedite appeal of the primary deficiency-notice issue, Petitioners conceded other claims, including their ¶ 15 offset claims and claims that the assessments were untimely under § 6229(f), which they could have pursued in Tax Court had deficiency notices been issued. On October 28, 2008, both separately appealed of the deficiency-notice holdings to the Federal Circuit under 28 U.S.C. § 1295(a)(3). The Federal Circuit consolidated those appeals. App. 43.

On March 31, 2010, a divided panel affirmed, but on different grounds. The panel-majority reversed the lower court's legal holding as to "computational adjustment,"²⁹ correctly reasoning that:

It held that § 6230(a)(1)'s exception for computational adjustments could not apply and § 6212(a) required deficiency notices before assessment. App. 60.

The panel-majority then, nevertheless, affirmed the Claims Court's judgment holding failures to issue required deficiency notices were harmless errors; importing, for the first time in American jurisprudence, the 28 U.S.C. § 2111 harmless error rule into federal tax law. App. 11-12, 67-73.

The panel-majority also held that Petitioners waived their right to deficiency notices by promptly paying the assessments to avoid penalties and interest.³⁰

Judge Prost concurred with the outcome but disagreed with the panel-majority's statutory interpretation of § 6231(a)(6), its unprecedented application of the harmless error rule to federal tax refund cases, and its analyses as to waivers and CDP hearings. App. 12, 75-88, 92-98, 98-100.

The panel-majority's expansion of the federal harmless error rule immediately invoked ridicule from the tax press.³¹

Bush and Shelton each filed a combined petition for panel rehearing and rehearing en banc on the harmless error and waiver rulings.

The government correctly recognized that as to harmless error, if it won this battle, it would lose the war. Consequently, the government petitioned for panel rehearing to:

On August 24, 2011, a divided en banc court affirmed the decision. Judge Prost, writing for the seven-judge majority, found that the settlements expressly agreed there were no adjustments to partnership items and each partner's tax liability resulted from adjustments to their § 465 amounts at risk. App. 7, 18, 25, 26. Nonetheless, the en banc-majority held that no deficiency notices were required because:

The en banc-majority did not address the remaining three issues (waiver/CDP hearing, Lewis v. Reynolds, and harmless error), which were all predicated on required deficiency notices. App. 31.

Judge Dyk, joined by Judges Newman, Linn, and Reyna, dissented, agreeing with the earlier panel-majority that these deficiencies could not be assessed as computational adjustments because the "change in liability" did not result from the "treatment . . . of a partnership item" but from a change in the treatment of nonpartnership, individual-partner-level items in the settlement agreement, i.e., the agreement to cap each partner's amount at-risk by disregarding the partner assumptions of partnership debt. App. 33.

The dissent reasoned that no partnership item was involved in changing the partners' tax liability and, consequently:

The critical procedural safeguards afforded by deficiency notices directly affect a taxpayer's right to substantive and procedural due process. The en banc-majority's denial of those safeguards to partners is particularly unfortunate given that the Claims Court and Federal Circuit are the only courts with nationwide general refund jurisdiction.³⁷ They are uniquely suited to coordinate the review of common partnership-related nonpartnership-item refund issues for nationwide partnerships.

A deficiency notice is the taxpayer's pre-assessment "ticket to the Tax Court" to challenge the "amount of the deficiency"⁴¹ by asserting any bases not otherwise barred, e.g., income averaging, net operating losses, innocent spouse protection, previously unclaimed deductions, etc.⁴²

The Ninth Circuit, relying on this Court's analysis in Romero-Barcelo, recognizes that § 6213(a) is among the statutes containing "a flat ban" on specific activity (assessments without deficiency notices) that override general equitable principles.⁴³ Because this procedural safeguard is so important, the IRS's failure to send a required deficiency notice is a per se violation of § 6213(a).⁴⁴

The Federal Circuit recognizes:

The Fourth Circuit has held:

Because general contract principles and § 7121(b) control tax settlements,⁵⁰ taxpayers may not dispute the terms of their settlements though they may challenge whether those terms were properly applied.

Congress grants very few exceptions to its § 6213(a) deficiency notice mandate:

In Manko, a non-TEFRA case, the Tax Court held that the Form 866-based judicial exception could not apply where the taxpayer and the IRS settled on a Form 906.

As here, in Manko the taxpayers settled on a Form 906 which did not state the amount of the deficiency to be assessed and did not contain a § 6213(d) waiver.⁵³ The IRS assessed without issuing a deficiency notice. TEFRA did not apply due to TEFRA's small partnership exception. Id., at 196. Therefore, §§ 6230(a)(1) and 6231(a)(6) did not except any assessments from § 6213(a)'s deficiency notice requirement. Manko and the IRS settled only his items that would have been partnership items under TEFRA.

The IRS argued that a deficiency notice was a mere technicality and, while the Form 906 did not agree to the actual amounts to be assessed, it did allow the IRS to compute the amounts to be assessed with only the agreed adjustments in the Form 906, the partnership information, and Manko's tax return. Id., at 199, 203.

The Tax Court disagreed. It acknowledged Marathon Oil but recognized the significant difference between agreeing to a specific tax liability on Form 866 and agreeing to "specific matter" and not an actual tax liability on Form 906.

The Tax Court's analysis in Manko applies equally to and refutes the en banc-majority's analysis here that the agreed partner-level nonpartnership-item at-risk adjustments could be used to compute the amounts to be assessed.

In Manko, the Tax Court was clear:

At TEFRA's heart, § 6231(a) defines three categories:

The IRS categorizes a partner's § 465 amount at-risk as an affected item.⁵⁶ At-risk applies only to individuals and certain corporations. § 465(a). App. 165. Certainly an at-risk determination must include partnership-item facts (e.g., capital contributions) but it applies only at the partner level and also requires consideration of nonpartnership-item facts (e.g., whether personal liability was assumed of any partnership debt for which a limited partner would otherwise not be liable).

Unlike § 465, some affected items do not inherently have partner-level components and tax liability attributable to such affected items resulting from a change to a partnership item may be assessed by computational adjustment. E.g., the § 213 threshold for medical expense deductions and the 2% threshold to deduct § 212 "miscellaneous deductions."⁵⁷

Congress expressly restricted § 6230(a)(1)'s exception to only the assessments by computational adjustment, which, as relevant here, § 6231(a)(6) defines as:

As the panel-majority and the en banc-dissent recognized:

Congress reinforced that deficiency notices remain a critical procedural safeguard even under TEFRA with § 6230(a)(2)(A)(i), which creates an exception to the § 6230(a)(1) exception. If an assessment could be by computational adjustment, § 6230(a)(2)(A)(i) mandates that the general subchapter B deficiency procedures still apply to "any deficiency attributable to . . . affected items which require partner level determinations."

It is widely accepted that a partner's § 465 amount at-risk is an affected item requiring partner-level fact determinations.⁵⁹ Here, only ¶ 1 of Bush's and Shelton's Forms 906 addressed treatment of partnership items.⁶⁰ The other 19 paragraphs addressed complex partner-level determinations required for any actual tax liability.

As evidence by the government's admission at oral argument in Olson, prior to this litigation, the government consistently recognized and represented that the IRS must issue a deficiency notice before making § 465 at-risk assessments.⁶¹

Uniformly issuing deficiency notices before § 465-based assessments (i) streamlines the IRS's administrative burden because it would know when they were required and (ii) makes a particularly complex portion of TEFRA predictable and manageable for both the IRS and taxpayers. The IRS is not prejudiced because interest accrues until payment whether the deficiency notice is defaulted or judicially resolved.

The en banc-majority's creation of a result oriented ad hoc standard for applying the § 6230(a)(1) exception to historic § 6213(a) deficiency rights offers no reasonable guidance. Under that interpretation, the IRS must examine every element of every partner's relevant affected item before it can determine whether it is required to issue a deficiency notice or whether it may assess by computational adjustment. It must presciently decide whether partner-level facts apply.

Congress's language in § 6230(a)(2)(A)(i) supports the administratively streamlined approach advocated by the en banc-dissent: it speaks categorically of "affected items which require partner level determinations" and not on an ad hoc basis to "an affected item of a partner for whom an individual final determination is known to be required."

The ad hoc approach would promote the unintentional waiver by partners of their rights to the procedural safeguards of a deficiency notice. Such hidden waivers are frowned on, even outright prohibited by law. By statute, taxpayers can waive their right to a deficiency notice only "by a signed notice in writing filed with the Secretary. . . ."⁶² Similarly, § 3468 of the IRS Restructuring and Reform Act of 1998 expressly forbids the government to request a taxpayer waive his "right to bring a civil action against the United States . . . for any action taken in connection with the internal revenue laws" unless such waiver is given "knowingly and voluntarily."⁶³

This unprecedented encroachment on these historically available and critical taxpayer substantive and procedural due process rights warrants review by this Court.

TEFRA achieves Congress's those multiple goals only if strictly construed. The en banc-dissent recognized that the majority's interpretation of § 6231(a)(6) was primarily based on its concern to not allow a "second bite of the apple" to challenge the terms of the settlement in Tax Court.⁶⁴

It is, inter alia, this type of result-oriented analysis that wreaks havoc on the TEFRA landscape and lead some scholars, and many practitioners, to call for either its repeal or, at a minimum, guidance from this Court as well as the appellate courts to establish some uniformity of interpretation.⁶⁵

Judge Dyk, writing for the four judge dissent, has it right:

Congress speaks through statutes. If clear and unambiguous, courts "need not -- indeed . . . may not -- go further."⁶⁶ Courts must apply a statute "according to its terms."⁶⁷ Directly applicable here is this Court's holding that:

Citing this Court, the Federal Circuit has held: "Where Congress includes certain exceptions in a statute, the maxim expressio unius est exclusio alterius presumes that those are the only exceptions Congress intended."⁷³ This maxim clearly discourages judicial expansion of the limited exceptions granted to § 6213(a)'s deficiency notice mandate:

Here, the en banc-majority judicially rewrote the § 6231(a)(6) definition of computational adjustment to include these deficiencies in order to trigger the § 6230(a)(1) exception to the § 6213(a) deficiency notice requirement. In support, the en banc-majority erroneously opined that "[i]ndeed, if the IRS, in a TEFRA proceeding, accepts the partnership return as fully correct, it may still make assessments as computational adjustments for any changes in tax liability that arise from the partnership proceeding." App. 19. See also App. 18 and 24 (emphasis added). Basically, it concluded that if during a partnership-level proceeding the IRS and partner agree that partnership items will not be adjusted but that some nonpartnership items will be adjusted, then the IRS may

The en banc-majority's analysis begs the question: If there is no change to partnership items, but there is a change in tax liability, what is the source of the change in tax liability? Here, the source of the change in tax liability is the treatment of nonpartnership-item at-risk amount to reflect their partner-level agreement to disregard their personal assumption of a part of the agreed-unchanged partnership debt.

The en banc-majority effectively rewrote the § 6231(a)(6) to read:

Petitioners change in tax liability resulted from the treatment the partner-level agreement to limit the at-risk computation by disregarding the partners' assumption of part of the unchanged, as reported, partnership debt. Multiple paragraphs of the settlement agreement also required the IRS to make additional determinations to compute the actual tax liability. The settlement anticipated refunds from later years and mandated they be applied as offsets to the deficiency year liabilities. As discussed above, it also preserved other matters that might offset the ultimate liability. A very complex agreement for determining the correct amount owed. Even if the en banc-majority's impermissible expansion applies, the changes to Petitioners' liabilities also "arose from the partnership proceeding" because they were negotiated during its pendency and those issues would be "affected items requiring partner level determinations" triggering § 6230(a)(2)(A)(i)'s deficiency notice requirement.

Thus, the en banc-majority erred in holding these deficiencies were not attributable to an affected item which required partner level determinations and, therefore, did not trigger § 6230(a)(2)(A)(i)'s deficiency notice requirement.

Temp. Treas. Reg. § 301.6231(a)(6)-1T(a) recognizes that:

Randell sought an injunction against assessment without a deficiency notice, which is within exception from the anti injunction act. Id., at 107 Because § 6230(a)(1) generally excepts computational adjustment from the § 6213(a) deficiency notice requirement, that court noted: "Our jurisdiction accordingly depends on resolving whether the assessments against plaintiff are or are not computational adjustments." Id. The Second Circuit strictly construed the § 6231(a)(6) definition of computational adjustment, correctly recognizing

The Second Circuit clearly recognized the complete separation of partnership item and nonpartnership item proceedings, "Congress intended administrative and judicial resolution of disputes involving partnership items to be separate from and independent of disputes involving nonpartnership items." Id. at 108, citing Trost v. Commissioner, 95 T.C. 560, 563 (1990).

Each of those cases involve instances where, once the correct partner-level treatment of the partnership item was established, that treatment was inconsistent with the treatment by the partner, thus the change in tax liability meets the definition of a computational adjustment. In all three cases, there was a preliminary determination of disparity between the partner's treatment of the partnership item and the partnership item "as determined" by the partnership; thus the potential assessment would initially qualify for § 6230(a)(1)'s exception to the § 6213(a) deficiency notice requirement unless § 6230(a)(2)(A)(i) applied.

The en banc-majority erroneously relied only on a specific quote from Desmet in the Sixth Circuit:

As the en banc-dissent observed, Desmet actually conflicts with the en banc-majority and the en banc-majority ignored the preliminary requirement of a "computational adjustment" as defined by statute to be relieved of the duty to issue a deficiency notice (§ 6230(a)(1)). The majority then compounded that error by misapplying § 6230(a)(2)(A)(i).

In Duffie and Desmet, the Fifth and Sixth Circuits, respectively, applied the ad hoc approach to determine that those affected items required partner-level determinations. But an ad hoc approach leaves both taxpayers and the IRS with little guidance for complying with important issues that make-or-break the validity of both IRS assessments or taxpayer refund claims.

A categorical approach overcomes this uncertainty, as was apparently intended in the statute, regulation, and early TEFRA cases.

Whether that test is ad hoc or categorical is critically important and directly impacts millions of partnerships that file federal tax returns each year.

Only such clear guidance from this Court will permit the IRS to anticipate when it must issue a deficiency notice and allow partners/taxpayers to understand when those procedural safeguards will be denied and when they are in danger of unintentionally waiving that statutory right.

² Unless otherwise stated, "Section," "sec.", and " § " all refer to the Internal Revenue Code ("Tax Code") at 26 U.S.C.

³ Deficiency notices are sometimes called "90-day letters."

⁴ Pub.L. No. 97-248, 96 Stat. 324.

⁵Randell, 64 F.3d at 104 ("In other words, the IRS may assess a partner for tax due [as a § 6231(a)(6) computational adjustment] in order to conform a partner's treatment of an item with the partnership's treatment of that item.").

⁶ In its now-vacated opinion, the Federal Circuit's panel-majority held TEFRA's procedural framework authorizes computational adjustments only when taxes result from the IRS bringing a partner into compliance with the partnership's treatment of partnership items. App. 58-60. En banc, a seven-judge majority reversed, holding an agreed change to a nonpartnership item can be the basis for a "computational adjustment." App. 25-26. The dissent, with three judges joining, recognized that interpretation "effectively dispenses with the requirement of a deficiency notice when the change in a tax liability is not the result of a change in treatment of a partnership item but results from a change in an individual partner item." App. 38.

⁷ Bush and Shelton present the same substantive issues and nearly identical, largely undisputed facts. App. 54-55.

⁸ § 465(a). App. 165. Randall v. Loftsgaarden, 478 U.S. 647, 650, 106 S. Ct. 3143; 92 L. Ed. 2d 525 (1986) (limited partner's basis is not restricted to his investment (amount 'at risk'); it may be increased by his proportional share of any nonrecourse loans made to the partnership; consequently, the partner may be able to claim deductible partnership losses in amounts greatly in excess of his investment, and offset those losses against other income); and Commissioner v. Tufts, 461 U.S. 300, 103 S. Ct. 1826, 75 L. Ed. 2d 863 (1983).

⁹ § 6231(a)(3) and (a)(4). App. 178.

¹⁰Olson v. United States, 172 F.3d 1311, 1312 (Fed.Cir. 1999).

¹¹E.g., Bush requests that this Court take judicial notice of docket entry dated December 2, 1994 at Tax Court Docket No. 621-92.

¹² App. 193, 199, 207.

¹³ See Bush v. United States, 84 Fed.Cl. 90 (2008); Shelton v. United States, Nos. 02-1042T, 04-1595T, 2008 WL 4346134, at *2 (Fed.Cl. Sept. 23, 2008)

¹⁴ Forms 4549 are not §§ 6212(a)/6213(a) deficiency notices, e.g., they do not allow the taxpayer to petition the Tax Court.

¹⁵ Shelton-JApp. 307. "Shelton-JApp.X" refers to Bates Stamped page no. X in the joint appendix filed in Shelton's appeal below.

¹⁶ Shelton-JApp. 308-313.

¹⁷ Shelton-JApp. 315.

¹⁸ Bush had a $6,045.33 credit for 1985. Bush-JApp. 285. "Bush-JApp.X" refers to Bates stamped page no. X in the joint appendix filed in Bush's appeal below. Shelton had a $6,766.91 credit for 1981. Shelton-JApp. 153.

¹⁹ Upon assessment and demand "a lien [attaches] in favor of the United States upon all property and rights to property . . . belonging to such person." § 6321. United States v. Speers,382 U.S. 266, 267, 86 S. Ct. 411, 15 L. Ed. 2d 314 (1965).

²⁰ Bush-JApp. 285-287; Shelton-JApp. 153-159.

²¹ Shelton-JApp. 161.

²² Shelton-JApp. 161.

²³ Shelton-JApp. 162-176.

²⁴ Shelton-JApp. 161.

²⁵ Bush-JApp. 285-287, 289-293; Shelton-JApp. 153-179.

²⁶Bush v. United States (Fed.Cl. 02-1041); Shelton v. United States (Fed.Cl. 02-1042).

²⁷ Bush-JApp. 205-280; Shelton-JApp. 182-296.

²⁸Bush v. United States (Fed.Cl. 04-1598); Shelton v. United States (Fed.Cl. 04-1595).

²⁹ App. 63, 73.

³⁰ The panel-majority held that Bush and Shelton should have refused payment and pursued §§ 6320/6330 collection due process ("CDP") hearings where, it erroneously stated, the IRS could have retroactively cured its failure to issue deficiency notices. App. 72.

³¹ Jeremiah Coder, Did the Federal Circuit Just Issue Another Murphy?, 127 Tax Notes 143 (Apr. 12, 2010).

³² App. 26.

³³ App. 39.

³⁴Treaty Pines Inv. Partnership v. Commissioner, 967 F.2d 206, 211 (5^th Cir. 1992).

³⁵ App. 35-38.

³⁶ App. 39.

³⁷ 28 U.S.C. §§§ 1295(a)(3), 1346(a)(1), and 1491(a)(1).

³⁸ IRS Data Book Table 2, Number of Returns Filed, by Type of Return, Fiscal Years 2007 and 2008, http://irs.gov/pub/irs-soi/08db02nr.xls.

³⁹ § 6214App. 169; Commissioner v. Shapiro, 424 U.S. 614, 616-617, 96 S. Ct. 1062, 47 L. Ed. 2d 278 (1976); Manko v. Commissioner, 126 T.C. 195 (2006); Bourekis v. Commissioner, 110 T.C. 20, 27 (1998); McKay v. Commissioner, 89 T.C. 1063, 1067 (1987), affd. 886 F.2d 1237 (9^th Cir. 1989); Mulvania v. Commissioner, 81 T.C. 65, 67 (1983).

⁴⁰Shapiro, 424 U.S. at 618.

⁴¹ § 6214(a) (emphasis added). App. 169. See Bourekis, 110 T.C. at 20; McKay, 89 T.C. at 1067; Mulvania, 81 T.C. at 67.

⁴² § 6213(a). App. 167-168. Cluck v. Commissioner, 105 T.C. 324 (1995) (net operating loss); Estate of Stein v. Commissioner, 25 T.C. 940 (1956) (previously unclaimed deductions); See also Charlton v. Commissioner, T.C. Memo 2001-76 and Maciel v. Commissioner, T.C. Memo 2004-28 (previously unclaimed deductions).

⁴³Gardner v. United States, 211 F.3d 1305, 1312-13 (D.C.Cir. 2000), quoting Weinberger v. Romero-Barcelo, 456 U.S. 305, 313-14, 72 L. Ed. 2d 91, 102 S. Ct. 1798 (1982).

⁴⁴Freije v. Commissioner, 125 T.C. 14, 35 (2005) ("exception to the proscriptions of § 6213(a) on assessments without deficiency procedures is fatal.") See also Nehrlich v. Commissioner, 93 T.C.M. (CCH) 1105, 1107 (2007).

⁴⁵Singleton v. United States, 128 F.3d 833, 839 (4^th Cir. 1997).

⁴⁶ § 6214(a) (emphasis added).

⁴⁷See Cluck, supra. (taxpayer to present evidence and Tax Court allowed a previously unclaimed net operating loss from another year to reduce the deficiency at issue). See also Estate of Stein, supra. (previously unclaimed deductions applied to reduce the tax deficiency asserted in the notice of deficiency) and Maciel, supra. (2004) (taxpayer allowed to raise previously unclaimed deductions in response to a notice of deficiency); and Charlton, supra.

⁴⁸G-5 Investment Partnership v. Commissioner, 128 T.C. 186, 191 (2000).

⁴⁹Looper v. Commissioner, 73 T.C. 690, 695 (1980).

⁵⁰ App. 192 ¶ 20, 198-199 ¶ 20, 206 ¶ 20.

⁵¹Singleton, 128 F.3d at 838 ("Following our sister circuits, the Court frowns upon the government's attempt to bypass congressionally-mandated procedures in the case of purported nonrebate refunds.") citing Bilzerian v. United States, 86 F.3d 1067, 1069 (11^th Cir.1996); Clark v. United States, 63 F.3d 83, 87-88 (1^st Cir.1995); O'Bryant v. United States, 49 F.3d 340, 346-47 (7^th Cir.1995); and United States v. Wilkes, 946 F.2d 1143, 1152 (5^th Cir.1991).

⁵²See Manko, 126 T.C. at 202-03, relying on Marathon Oil Co. v. United States, 42 Fed. Cl. 267 (1998), aff'd. 215 F.3d 1343 (Fed.Cir. 1999).

⁵³Manko, 126 T.C. at 202.

⁵⁴Id., at 204.

⁵⁵ It is well settled that some affected items have a partnership item component. See N.C.F. Energy v. Commissioner, 89 T.C. 741, 743-4 (1987).

⁵⁶ 26 C.F.R. § 301.6231(a)(5)-1T(c). App. 184.

⁵⁷ 26 C.F.R. § 301.6231(a)(5)-1T(a). App. 184-185.

⁵⁸E.g., §§ 6222(b), 6224-6226. App. 172-177.

⁵⁹Hambrose Leasing v. Commissioner, 99 T.C. 298, 310, 312 (1992) (holding § 465 at risk is an affected item and the IRS must issue a deficiency notice before assessment). Other types of affected items also generally require partner-level determinations. Dial U.S.A., Inc., v. Commissioner, 95 T.C. 1, 5-6 (1990) (basis); Univ. Heights at Hamilton Corp v. Commissioner, 97 T.C. 278, 281-282 (1991) (basis).

⁶⁰ App. 187, 194, 201.

⁶¹Olson, 172 F.3d at 1319.

⁶² § 6213(d). App. 168.

⁶³ P.L. 105-206, July 22, 1998, 112 Stat 685, 770.

⁶⁴ App. 39 referring to App. 18. The en banc majority never explains how this could occur in light of general contract principles, § 7121, and ¶ 20's finality clause.

⁶⁵ See, e.g., Afshar, Anisa, Comment, Statute of Limitations for the TEFRA Partnership Proceedings: The Interplay Between § 6229 and § 6501, 64 Tax Law. 701 (Spring 2011) (statute of limitations on partnership-related assessments); Elliott, Wm. D., Survey Article: Fifth Circuit 2009-2010 Review: Taxation, 43 Tex. Tech L. Rev. 1067, 1079 (2011) (noting the Fifth Circuit's failure to strictly construe the § 6231(a)(6) definition of computational adjustment at issue here in Duffie v. United States, 600 F.3d 362 (5^th Cir. 2010)).

⁶⁶IBM v. United States, 201 F.3d 1367, 1372 (Fed.Cir. 2000).

⁶⁷Carcieri v. Salazar, 555 U.S. 379, 129 S. Ct. 1058, 1063-64, 172 L. Ed. 2d 791 (2009), citing Dodd v. United States, 545 U.S. 353, 359 (2005); Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004); Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000); and Caminetti v. United States, 242 U.S. 470, 485 (1917).

⁶⁸Stenberg, 530 U.S. at 942; Meese, 481 U.S. at 484-485.

⁶⁹Meese, 481 U.S. at 484-85; see also Burgess v. United States, 553 U.S. 124, 128 S. Ct. 1572, 1572, 170 L. Ed. 2d 478 (2008) (a definition which declares what a term "means" excludes any meaning that is not stated) citing Colautti at 392-393, n. 10. See also AK Steel v. United States, 226 F.3d 1361, 1372 (Fed.Cir. 2000) and Badaracco v. Commissioner, 464 U.S. 386, 398, 104 S. Ct. 756, 78 L. Ed. 2d 549 (1984).

⁷⁰Black v. S.H.H.S., 93 F.3d 781, 789 (Fed.Cir. 1996), citation omitted.

⁷¹W.V. Univ. Hosp. v. Casey, 499 U.S. 83, 98-99, 111 S. Ct. 1138, 113 L. Ed. 2d 68 (1991).

⁷²Carcieri 111 S.Ct. at 1066-67, quoting Conn. Nat. Bank v. Germain, 503 U.S. 249, 253-254, 112 S. Ct. 1146, 117 L. Ed. 2d 391 (1992).

⁷³Ventas, Inc. v. United States, 381 F.3d 1156, 1161 (Fed.Cir. 2004), citing Tennessee Valley Auth. v. Hill, 437 U.S. 153, 188, 98 S. Ct. 2279, 57 L. Ed. 2d 117 (1978); Cook v. Principi, 318 F.3d 1334, 1339 (Fed.Cir. 2003).

⁷⁴Philadelphia, 944 F.2d at 1073; Andrus, 446 U.S. at 616-17 ("Where Congress explicitly enumerates certain exceptions to a general prohibition, additional exceptions are not to be implied, in the absence of a contrary legislative intent.").

⁷⁵Northwest Steel, 311 U.S. at 49, and citations therein.

⁷⁶Botany v. United States, 278 U.S. 282, 289, 49 S. Ct. 129; 73 L. Ed. 379 (1929) and citations therein.

⁷⁷Sanford's Estate v. Commissioner, 308 U.S. at 48.

⁷⁸Lewyt Corp. v. Commissioner, 349 U.S. 237, 249, 75 S. Ct. 736, 99 L. Ed. 1029 (1955).

⁷⁹ The en banc-majority erred in wrongly focusing on whether there had to be a change to partnership items in order for there to be a treatment of partnership items causing a change in the partner's tax liability. App. 19-20. It was correct that "no change" to partnership items is still a treatment of a partnership items. Petitioners did not assert otherwise.

⁸⁰Stenberg, 530 U.S. at 942; Meese, 481 U.S. at 484-485.

⁸¹AK Steel, 226 F.3d at 1372; Badaracco, 464 U.S. at 398.

⁸²Callaway v. Commissioner, 231 F.3d 106 (2^nd Cir. 2000).

⁸³Desmet, 581 F.3d at 303-04.

⁸⁴ 26 C.F.R. Reg. § 301.6231(a)(6)-1T(c), Hambrose Leasing, 99 T.C. at 310-312.