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USA sued for alleged erroneous tax adjustments
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Posted on Sep 15 2008
A Delaware limited liability company, through its CNMI managing member and tax matters partner Sunset Holdings LLC, has sued the United States of America for allegedly making erroneous tax adjustments and assessing penalties over the company’s 2002 tax return.
Claston LLC, through Sunset Holdings LLC, asked the U.S. District Court for the NMI to issue a judgment declaring that the company properly reported its 2002 transactions.
The company, through lawyer Gregory J. Koebel, asked the court to determine that the adjustments, including penalties, made by U.S.A., are without basis in law and fact and are incorrect. It asked the court to rule that there are no additional taxes owed by the company or its partners.
Koebel stated in the complaint that the U.S., through its Maitland, Florida Office of the Internal Revenue Service, mailed to Hatteras Capital Management LLC, the former tax matters partner of Claston, a notice of final partnership administrative adjustments dated June 17, 2008.
Koebel said FPAA set forth various erroneous partnership administrative adjustments for Claston’s taxable year ending Dec. 31, 2002.
He said Claston contests each and every adjustment of the FPAA and the rationales behind each adjustments.
The lawyer said the IRS justified its adjustment and claims for penalties on a litany of alternative arguments, none of which have merit.
Essentially, he said, the IRS disallowed a claimed loss totaling $6,003,974 relating to distressed assets, asserting that the contributions of assets to the partnership should be treated as never having been made because the partnership’s transactions allegedly lacked economic substance and had no bone fide business purpose.
Koebel said the IRS further claimed that the partnership was a sham, that the partnership was only formed to substantially reduce its partners’ tax liabilities, and that all actions by the partnership should be treated as having been undertaken by the partners in their individual capacities.
“The rationale adopted by the IRS is baseless and the loss claimed by Claston must be validated,” he asserted.
