Highpoint Tower Technology Inc. v. Commissioner, No. 18-10394 (11th Cir. 2019)Annotate this Case
The Eleventh Circuit affirmed the tax court's order denying taxpayer's motion to restrain collection to the extent it related to the gross valuation-misstatement penalty. At issue was whether, under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), a tax court presiding over partner-level deficiency proceedings has jurisdiction over a gross valuation-misstatement penalty previously determined to be applicable at the partnership level where the partnership was determined to be a "sham" and "lacking economic substance."
The court held that the Internal Revenue Code, as in effect during the relevant time, applicable regulations, and Supreme Court precedent make clear that the valuation-misstatement penalty at issue here relates to an adjustment to a partnership item and, consequently, is explicitly excluded from the tax court's deficiency jurisdiction. Accordingly, the court held that the tax court presiding over partner-level deficiency proceedings does not have jurisdiction over gross valuation misstatement penalties imposed against a partnership previously determined to be a "sham" and "lacking economic substance."