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Friday, March 07, 2003


Alice M. Beagles and her husband, now deceased, invested in a tax-shelter limited partnership in 1983 and 1984, and claimed losses that were disallowed by the IRS in 2000. The Beagles asked that the interest be abated. The IRS agreed to a partial abatement for 1992 to 1999. Not satisfied, Ms. Beagle took the issue to Tax Court.

Tax Court provides a detailed history in this case of the litigation of tax shelter cases and the strategies adopted by the IRS, Congress, and Tax Court to respond, and why this all took so many years. The use of test cases and the decision to put civil litigation on hold pending criminal investigations is discussed in detail. The destruction of relevant documents in the World Trade Center on 9/11 is mentioned. Tax Court sounds sympathetic to Ms. Beagle, but also sounds a bit as if it is trying to convince itself of its innocence in the delay.

As fascinating as all of this history is however, it is almost all irrelevant. Buried in the opinion, Tax Court mentions that Ms. Beagle�s real beef is that she was never informed of the ongoing litigation, and therefore was unaware of her potential accumulating interest. Unfortunately, that was the Tax Manager Partner�s responsibility, and a code section expressly states that the TMP�s failure to fulfill this responsibility does not affect the applicability of any section of the tax code to the partner. So Ms. Beagle lost. She should sue the TMP. Unless the statute of limitations applies. Or he has declared bankruptcy from all of the litigation. Or he has died. Or... Or... Or...

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