Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Seaview Trading, LLC v. Commissioner of Internal Revenue

United States Court of Appeals, Ninth Circuit

June 7, 2017

Seaview Trading, LLC and Robert Kotick, Petitioners-Appellants,
v.
Commissioner of Internal Revenue, Respondent-Appellee.

          Argued and Submitted April 7, 2017 Pasadena, California

         Appeal from the United States Tax Court No. 1744-11

          Daniel Benjamin Levin (argued), Jessica Barclay-Strobel, and Ronald L. Olson, Munger Tolles & Olson LLP, Los Angeles, California; David W. Foster and Armando Gomez, Skadden Arps Slate Meagher & Flom LLP, Washington, D.C.; for Petitioners-Appellants.

          Andrew Weiner (argued) and Richard Farber, Attorneys; Tax Division, United States Department of Justice, Washington, D.C.; for Respondent-Appellee.

          Before: MILAN D. SMITH, JR. and N. RANDY SMITH, Circuit Judges, and GARY FEINERMAN, District Judge. [*]

         SUMMARY[**]

         Tax

         The panel affirmed the Tax Court's dismissal, for lack of jurisdiction, of a petition challenging a notice of Final Partnership Administrative Adjustment.

         Robert Kotick and his father formed Seaview Trading, LLC, a limited liability company, which federal tax regulations treat as a partnership. Seaview acquired an interest in a common trust fund which reported a loss that was allocated to its investors, including Seaview. After an audit of Seaview, the IRS issued a FPAA disallowing the loss from Seaview's trust investment and imposed penalties.

         Because Kotick contended that Seaview was a small partnership not subject to the audit procedures under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), the panel first held that entities that are disregarded for federal tax purposes may nevertheless constitute pass-thru partners under 26 U.S.C. § 6231(a)(9), such that the small-partnership exception under § 6231 does not apply and the partnership is therefore subject to the TEFRA audit procedures. The panel determined that resolution of this question was inextricably intertwined with the contention that Kotick had standing to file a petition for readjustment of partnership items on behalf of his purported small partnership.

          As to standing, the panel held that, because a party (Kotick) other than Seaview's tax matters partner filed a petition for readjustment of partnership items after the partnership had timely done the same, the Tax Court lacked jurisdiction under 26 U.S.C. § 6226.

          OPINION

          M. SMITH, Circuit Judge.

         This appeal presents the question of whether entities that are disregarded for federal tax purposes may nevertheless constitute pass-thru partners under 26 U.S.C. § 6231(a)(9) such that their partnership is not eligible for the small-partnership exception contained in § 6231. For the reasons stated in this opinion, we hold that an entity's disregarded status does not preclude its classification as a pass-thru partner.

         FACTUAL AND PROCEDURAL BACKGROUND

         In 2001, Robert Kotick (Kotick) and his father Charles Kotick (C. Kotick) formed a Delaware limited liability company (LLC), Seaview Trading, LLC (Seaview). Federal tax regulations treat Seaview as a partnership. See Treas. Reg. § 301.7701-3(b)(1)(i). The Koticks each held their respective interests in Seaview through Delaware LLCs: AGK Investments LLC (AGK), owned wholly by Kotick, and KMC Investments LLC (KMC), owned wholly by C. Kotick.

         Seaview acquired an interest in a common trust fund, which in 2001 reported a loss that was allocated to its investors-including Seaview. Kotick reported the loss arising from Seaview's interest in the trust fund on his 2001 Form 1040. In 2004, the Internal Revenue Service (IRS) audited Kotick's 2001 Form 1040, at which time it became aware of Kotick's claimed loss resulting from Seaview's investment. At the conclusion of the audit, the IRS disallowed certain transaction expenses relating to Seaview, and assessed additional taxes. It did not, however, disallow the loss that Kotick had reported on his ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.