# UNITED STATES TAX COURT > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3Ad2839a2c390e637d ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text CLC 138 T.C. No. 6 UNITED STATES TAX COURT TIGERS EYE TRADING, LLC, SENTINEL ADVISORS, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 14510-05. Filed February 13, 2012. The stipulated decision in this Son of BOSS TEFRA partnership-level case, entered by the Court Dec. 1, 2009, was agreed to by R and the tax matters partner (TMP) of Tigers Eye Trading, LLC (Tigers Eye), with concurrence of participating partner (P), a partner other than TMP. The first decision paragraph specifies that the partnership items of ordinary loss, other deductions, distributions of property, and capital contributions were reduced to zero as determined in the notice of final partnership administrative adjustment (FPAA) issued to Tigers,Eye. The second decision paragraph, determining that the FPAA is correct, includes the determinations that Tigers Eye is disregarded for Federal income. tax purposes, outside basis is reduced to zero, and a 40% penalty applies to any gross valuation/basis SERVED Feb 13 2012 -2misstatement. The third and fourth decision paragraphs respectively determine that the 40% gross valuation misstatement penalty under I.R.C. sec. 6662(b)(3), (e), and (h) applies to any underpayment of tax attributable to overstating the capital contributions claimed to have been made to the purported partnership and a 20% penalty for negligence or substantial underpayment under I.R.C. sec. 6662 applies to any additional underpayment of tax attributable to the partnership item adjustments other than the claimed capital contributions. On Jan. 12, 2010, the Court of Appeals for the D.C. Circuit, to which this case would be appealable, issued Petaluma FX Partners, LLC v. Commissioner, 591 F.3d 649 (D.C. Cir. 2010) (Petaluma II), aff'g in part, rev'g in part and remanding 131 T.C. 84 (2009) (Petaluma I). In Petaluma II the Court of Appeals for the D.C. Circuit held that outside basis is not a partnership item that the Tax Court had jurisdiction to determine in the partnership-level proceeding and remanded the case on the applicability of penalties. On Jan. 19, 2010, P filed a motion for leave to file a motion to revise the stipulated decision and lodged the motion to revise. On Dec. 30, 2010, the Court granted the motion for leave nunc pro tunc as of Jan. 19, 2010, and as of that date filed the motion to revise. In the motion to revise P asks the Court to revise the stipulated decision to conform to the jurisdictional limits on the authority of the Tax Court established in Petaluma II. On Dec. 15, 2010, this Court issued Petaluma FX Partners, LLC v. Commissioner, 135 T.C. 581 (2010) (Petaluma III), on appeal.(D.C. Cir. Mar. 8, 2011), holding that for this Court to have jurisdiction over a penalty at the partnership level, Petaluma II requires that the penalty be computable without partner-level proceedings to determine affected items, leading at least potentially to only a computational adjustment to the partners' returns. Id. at 586-587. After Petaluma II and Petaluma III were issued, the Supreme Court issued Mayo Found. for Med. Educ. & Research v. United -3States, 562 U.S. __, 131 S. Ct. 704 (2011). In Mayo Found., the Supreme Court made clear that courts must defer to regulations that interpret the Internal Revenue Code unless they fail to meet the two- step standard of Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-843 (1984). In the recently issued opinion in Intermountain Ins. Serv. of Vail, LLC v. Commissioner, 650 F.3d 691 (D.C. Cir. 2011), rev'g and remanding 134 T.C. 211 (2010), supplementing T.C. Memo. 2009-195, the Court of Appeals for the D.C. Circuit held that, prior caselaw to the contrary notwithstanding, the Tax Court must defer to a regulation unless it holds the regulation invalid under Chevron. Held: The motion to revise the stipulated decision will be denied; the jurisdictional limitations established in Petaluma II were based on a concession by the Government that does not apply in the case at hand; the applicability of the accuracy-related penalties determined by the stipulated decision in the case at hand is sustained by the decision's adoption of adjustments to partnership items that are related to said penalties. Held, further, because Tigers Eye filed a partnership return for 1999, the TEFRA procedures apply with respect to 1999 to Tigers Eye and its items and to TMP, P, and other persons holding an interest in Tigers Eye, and the Tax Court has jurisdiction to determine that Tigers Eye does not exist and is not a partnership for Federal income tax purposes. See I.R.C. sec. 6233; sec. 301.6233-1T(a), (c), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6779, 6795 (Mar. 5, 1987). Held, further, because Tigers Eye does not exist and is not a partnership for Federal income tax purposes, the Court has jurisdiction to make determinations with respect to all items of Tigers Eye that would be partnership items, as defined in I.R.C. sec. 6231(a)(3) and sec. 301.6231(a)(3)-1, Proced. & Admin. Regs., if Tigers Eye had been a partnership, including the nature and character of those items. See I.R.C. sec. 6233; sec. 301.6233-1T(a), (c), Temporary Proced. & Admin. Regs., supra. -4Held, further, because Tigers Eye is disregarded for Federal income tax purposes, it acted as a nominee and agent for P and others who participated in the transactions at issue and Tigers Eye's items are of that nature and character. Held, further, the determination that Tigers Eye is disregarded as a partnership for Federal income tax purposes serves as a basis for a computational adjustment reflecting the disallowance of any loss or credit claimed by P or any other purported partner with respect to Tigers Eye, and the Court has jurisdiction to determine that all items of Tigers Eye that purported to be partnership items are adjusted to zero. See I.R.C. sec. 6233; sec. 301.6233-lT(a), Temporary Proced. & Admin. Regs., supra. Held, further, items of Tigers Eye that are necessary for maintaining its books and records as nominee-agent acting on behalf of the purported partners and providing information to them are entity/partnership items that the Court has jurisdiction to decide in this partnership/entity-level proceeding. See sec. 301.6231(a)(3)1(a)(4), Proced. & Admin. Regs. Held, further, because Tigers Eye conducted the transactions as nominee-agent for P, P's basis in the distributed property is Tigers Eye's cost basis in the property, which P concedes is the amount of the distributions shown on the Schedule K-1, Partner's Share of Income, Credits, Deductions, etc., Tigers Eye issued to P; Tigers Eye's cost basis in the distributed property is an entity/partnership item that this Court has jurisdiction to decide in this proceeding. See sec. 301.6231(a)(3)-1(a)(4), (c)(3)(iii), Proced. & Admin. Regs. Held, further, in accordance with Mayo Found. and Intermountain, we must apply the TEFRA regulations that satisfy the Chevron standard and are not bound to follow a contrary holding of Petaluma II to the extent those regulations were not specifically considered and applied by the Court of Appeals in deciding the issue. -5Held, further, Petaluma II notwithstanding, outside basis is an entity/partnership item related to contributions and distributions that Tigers Eye needed to determine for purposes of maintaining its books and records and providing information to its purported partners that the Court has jurisdiction to decide in the partnership/entity-level proceeding. See sec. 301.6231(a)(3)-1(a)(4), Proced. & Admin. Regs. Held, further, sec. 301.6231(a)(3)-1(a)(4), Proced. & Admin. Regs., is valid under the two-step Chevron standard. Held, further, the ordinary loss and other deductions reduced to zero by the first decision paragraph flowed directly through to the purported partners' returns, and R may compute and assess the deficiencies related to the adjustments of those partnership items to zero without issuing a statutory notice of deficiency; under Petaluma II, this Court has jurisdiction in this partnership-level proceeding to determine applicability of penalties to the underpayments of tax resulting from the adjustments to zero of the ordinary loss and other deductions that flowed directly through to the purported partners' individual returns. Held, further, the adjustment of the ordinary loss to zero is attributable to overstating the capital contributions claimed to have been made to the purported partnership; pursuant to the stipulated decision the 40% gross valuation misstatement penalty and the 20% negligence penalty apply respectively to the underpayments of tax resulting from the adjustments of the loss and other deductions to zero. Held, further, the overstatement of the purported partners' bases in the distributed property is attributable to claiming that capital contributions were made to the purported partnership; the underpayment of tax resulting from the overstatement of basis in the distributed property (distributed property loss deficiency) is attributable to the reduction to zero of capital contributions claimed to have been made to the purported partnership that is disregarded for Federal income tax purposes; this Court has jurisdiction in this partnership- -6level proceeding to determine in the stipulated decision that the 40% gross basis misstatement penalty applies to the distributed property loss deficiency. Held, further, there will be a gross misstatement of basis in the distributed property if the misstatement exceeds four times the amount of the distributions shown on the Schedule K-1 issued to the purported partner; the 40% penalty will apply to any underpayment of tax attributable to claiming basis in the property that is more than four times the amount of the distributions shown on the Schedule K-1 issued to the purported partner. Felix B. Laughlin and Mark D. Allison, for petitioner. David D. Aughtry, Hale E. Sheppard, and William E. Buchanan, for participating partner. James E. Gray, for respondent. CONTENTS Page Background.. . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Discussion.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 I. Introduction: Coniplexity of Income Tax Treatment of Partners and Partnerships.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 A. . Overview of Subchapter K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 B. TEFRA... ......... .......... ..... .. . .. ....... ........ 37 1. In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2. TEFRA Penalty Litigation Structure Before TRA 1997. . . . . . 38 -73. C. TEFRA Penalty Litigation Structure After TRA 1997. . . . . . . 39 Attempted Exploitation by Tax Shelter Promoters of Complex Interactions and Disconnects of Subchapter K Substantive Rules and TEFRA Procedural Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 II. Jurisdiction Under TEFRA When Entity Filing Partnership Return Is Not a Partnership or Does Not Exist. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 A. TEFRA Procedures.Apply When Entity That Filed Partnership Return Is Not a Partnership or Does Not Exist: Sections 6226(f) and 6233..............................................47 B. C. III. Jurisdiction To Determine Items of Disregarded Entity: Section 301.6233-1T(a) and (c), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6779, 6795 (Mar. 5, 1987). . . . . . . . . . . . . . . . . . . . . . . . 51 Jurisdiction To Determine Applicability of Any Penalty That Relates to Adjustment of Entity Item: Section 6226(f). . . . . . . . . . . 56 Jurisdiction To Enter Stipulated Decision as Written With Respect to Partnership Items.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 A. B. Provisions of the Stipulated Decision.. . . . . . . . . . . . . . . . . . . . . . . . 56 Disregard of Tigers Eye.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 C. Items of Tigers Eye. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 D. First Decision Paragraph. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 1. Partnership Loss and Deductions.. . . . . . . . . . . . . . . . . . . . . . 62 2. Contributions and Distributions. . . . . . . . . . . . . . . . . . . . . . . . 62 a. Items Related to Contributions. . . . . . . . . . . . . . . . . . . 63 b. Items Related to Distributions. . . . . . . . . . . . . . . . . . . . 65 3. Adjustment of Items to Zero. . . . . . . . . . . . . . . . . . . . . . . . . . 67 E. Second Decision Paragraph.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 1. Basis in Property Distributed by Disregarded Entity. . . . . . . . 69 2. Outside Basis... . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 a. Petaluma Superseded by Mayo Found. and Intermountain: TEFRA Regulations Must Be Applied. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 b. Determination of Outside Basis: General Rule Under Section 705(a). . . . . . . . . . . . . . . . . . . . . . . . . . 76 -8c. Determination of Outside Basis: Alternative Rule Under Section 705(b). . . . . . . . . . . . . . . . . . . . . . . . . . 79 d. Outside Basis Is a Partnership Item. . . . . . . . . . . . . . . . 80 i. Required To Be Taken Into Account Under Subtitle A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 ii. More Appropriately Determined at the iii. Partnership Level: Outside Basis Determined Under the General Rule. . . . . . . . . . 81 More Appropriately Determined at the Partnership Level: Outside Basis Determined Under Alternative Rule.. . . . . . . . . . 85 iv. More Appropriately Determined at the Partnership Level: Outside Basis When the e. Partnership Is Disregarded.. . . . . . . . . . . . . . . . . 86 Misapplication of Dial USA, Inc. v. Commissioner. . . . 88 f. Validity of the Regulation Under the Chevron Two- Step Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 g. Outside Bases of Tigers Eye's Purported Partners Are Partnership Items. . . . . . . . . . . . . . . . . . . . . . . . . . 99 IV. Jurisdiction To Enter Stipulated Decision as Written With Respect to Application of Penalties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 A. Items Adjusted in the Stipulated Decision and the Application of Accuracy-Related Penalties Thereto Within the Jurisdictional Limitations of Petaluma II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 1. 2. 3. B. 40% Gross Basis Misstatement Penalty.. . . . . . . . . . . . . . . . 107 20% Negligence Penalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 . Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Petaluma II Notwithstanding, Jurisdiction To Determine the 40% Penalty Applies to the Overstatement of the Basis of the Distributed Property. . . .,: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I11 1. Applicability of 40% Penalty to the Overstatement of the Basis of the Distributed Property.. . . . . . . . . . . . . . . . . . . . . 111 2. Petaluma III: The Court Was Bound by the Law of the Case and the Rule of Mandate To Follow Petaluma II Dicta on Lack of Jurisdiction Over Outside Basis. . . . . . . . . 115 3. TRA 1997: The Tax Court Has Jurisdiction To Determine Applicability of Penalties That Relate to Adjustment of Partnership Items. . . . . . . . . . . . . . . . . . . . . . 119 V. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 OPINION BEGHE, Judge: Following entry of a stipulated decision on December 1, 2009, this Son of BOSS' case remains before this Court on a motion to revise the decision. The motion was filed by participating partner A. Scott Logan Grantor Retained Annuity Trust I, A. Scott Logan, Trustee, a partner other than the tax matters partner. We refer to the trustee in his individual capacity as Mr. Logan and to the trust as Logan Trust I or participating partner. Participating partner argues that the stipulated decision upholds adjustments in the final partnership administrative adjustment (FPAA) and applies accuracyiThe Son of BOSS tax shelter was described by the Internal Revenue Service (IRS) as a "listed transaction" in Notice 2000-44, 2000-2 C.B. 255, 256. In Announcement 2004-46, 2004-1 C.B. 964, the IRS announced a settlement initiative for taxpayers to resolve transactions described in Notice 2000-44, supra, and similar Son of BOSS transactions, with penalties topping out at 20% of the deficiencies. Within a year thereafter, the IRS announced that the settlement initiative had resulted in the collection of more than $3.2 billion of Federal income taxes and reduced penalties from more than 1,000 taxpayers.. See "Son of BOSS Settlement Initiative Reaps $3.2 Billion, With More Expected, IRS Says", TM Weekly Report (BNA), 24 TMWR 467 (Mar. 28, 2005) (Tax Shelters). -10related penalties that exceed this Court's jurisdiction under section 6226(f),2 thereby overstepping the jurisdictional limits under the TEFRA3 statute and regulations,4 as established by the Court of Appeals for the D.C. Circuit in Petaluma FX Partners, LLC v. Commissioner,5 591 F.3d 649 (D.C. Cir. 2010) (Petaluma II), aff'g in part, rev'g in part and remanding on penalty issues 131 T.C. 84 (2008) (Petaluma I). On December 15, 2010, this Court responded to the remand on penalty issues with its reviewed Opinion (7-5, with 2 dissenting opinions), Petaluma FX Partners, LLC v. Commissioner, 135 T.C. 581 (2010) (Petaluma III), and on March 8, 2011, the 2Unless otherwise stated, all section references are to the Internal Revenue Code (Code) in effect for 1999, the year at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. 3Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97248, sec. 402, 96 Stat. at 648, as amended by the Taxpayer Relief Act of 1997 (TRA 1997), Pub. L. No. 105-34, sec. 1238, 111 Stat. at 1026. 4Sec. 301.6231(a)(6)-lT(a), Temporary Proced. & Admin. Regs., 64 Fed. Reg. 3840 (Jan. 26, 1999); see also sec. 301.6231(a)(6)-1(a)(1), Proced. & Admin. Regs. 5In most Son of BOSS cases--as in the case at hand and in Petaluma FX Partners, LLC v. Commissioner, 135 T.C. 581 (2010) (Petaluma III), on remand from Petaluma FX Partners, LLC v. Commissioner, 591 F.3d 649 (D.C. Cir. 2010) (Petaluma II), aff'g in part, rev'g in part and remanding on penalty issues 131 T.C. 84 (2008) (Petaluma I)--the taxpayers contributed money and offsetting long and short foreign currency options to a partnership and reported multimillion-dollar losses on the sale of property that they claimed was distributed to them in liquidation of their partnership interests. -11Commissioner filed a notice of appeal.6 Participating partner argues that under the Golsen7 rule the Court's jurisdiction to decide the issues in dispute in this partnership-level proceeding is controlled by Petaluma II, so that the Court must vacate and revise the stipulated decision to conform to the jurisdictional limits imposed by Petaluma II.8 We observe that the limiting holdings in Petaluma II were the result of a concession by the Government that the Court of Appeals accepted without any discussion of the applicable regulations. In an opinion issued after Petaluma II 6Appeal docketed, No. 024717-05 (D.C. Cir. Mar. 8, 2011). We note that Petaluma II has already been followed by the Court of Appeals for the Federal Circuit in Jade Trading, LLC, v. United States, 598 F.3d 1372, 1379-1380 (Fed. Cir. 2010) (Jade Trading II), aff'g in part, rev'g in part and remanding on penalty issues 80 Fed. Cl. 11 (2007) (Jade Trading I), remanded to 98 Fed. Cl. 453 (2011) (Jade Trading III), aff'd, ___ Fed. Appx. __ (Fed. Cir. Jan. 12, 2012), and by the unpublished summary order of another panel of the Court of Appeals for the D.C. Circuit in LKF X Invs., LLC, v. Commissioner, 106 A.F.T.R. 2d (RIA) 2010-5003, 2010-1 U.S. Tax Cas. (CCH) para. 50, 488 (D.C. Cir. 2011), aff'g in part, rev'g in part and remanding on penalty issues T.C. Memo. 2009-192. 7Golsen v. Commissioner, 54 T.C. 742 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971). 8Tigers Eye Trading, LLC, was dissolved before the petition was filed; pursuant to sec. 7482(b) the proper venue for an appeal would be the Court of Appeals for the D.C. Circuit. When the tax matters partner filed the petition (in its capacity as a notice partner, see Barbados #6 Ltd. v. Commissioner, 85 T.C. 900, 903-905 (1985)), Mr. Logan was a resident of Florida and the place of business of the tax matters partner was in New York. .The business address of Tigers Eye Trading, LLC, before its dissolution was in New York. -12- was filed, Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. ___, 131 S. Ct. 704 (2011), the Supreme Court emphatically reminded lower courts that they must defer to regulations that satisfy the two-step Chevron' standard. More recently, in Intermountain Ins. Serv. of Vail, LLC v. Commissioner, 650 F.3d 691 (D.C. Cir. 2011), rev'g and remanding 134 T.C. 211 (2010), supplementing T.C. Memo. 2009-195, the Court of Appeals for the D.C. Circuit held that the deference given to regulations under Mayo Found. required the Court to apply the definitions of statutory terms provided in valid TEFRA regulations rather than follow earlier caselaw. In accordance with Mayo Found. and Intermountain, this Court must apply the TEFRA regulations, unless we hold them to be invalid, rather than follow the holding in Petaluma II in which the Court of Appeals did not specifically consider and apply the regulations. Under the assumption that this Court was bound by the holdings of the Court of Appeals in Petaluma II, in respondent's response to participating partner's motion to vacate and revise the decision, respondent made the same concession as the Government made in Petaluma II. 9Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842843 (1984). -13Subject-matter jurisdiction relates to a court's statutory or constitutional power to hear a given type of case. United States v. Cotton, 535 U.S. 625, 630 (2002); United States v. Morton, 467 U.S. 822, 828 (1984); Alikhani v. United States, 200 F.3d 732, 734 (1 lth Cir. 2000). The Supreme Court has held that "subject-matter jurisdiction, because it involves a court's power to hear a case, can never be forfeited or waived." Cotton, 535 U.S. at 630. "[S]ubject matter jurisdiction is an unwaivable sine qua non for the exercise of federal judicial power". Curley v. Brignoli, Curley & Roberts, Assocs., 915 F.2d 81, 83 (2d Cir. 1990). Moreover, courts have an independent obligation to determine whether subject matter jurisdiction exists, even in the absence of a challenge from any party. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999). Whether a court has subject matter jurisdiction to adjudicate the merits of a controversy is a question of law. Taylor v. Vo 541s, 271 U.S. 176, 186 (1926) ("a petition for revision will lie to bring up for review the question of law whether the court of bankruptcy has jurisdiction to.adjudicate the merits of such controversy in a summary proceeding"); Adkison v. Commissioner, 592 F.3d 1050, 1052 (9th Cir. 2010) ("Whether the Tax Court has subject matter jurisdiction is a question of law and thus reviewed de novo"), aff'g 129 T.C. 97 (2007); United States v. Moore, 443 F.3d 790, 793 (1lth Cir. 2006). The meaning of a statutory term is -14also a question of law. Crane v. Commissioner, 331 U.S. 1, 15 (1947) (Tax Court's determinations of statutory terms "announced rules of general applicability on clear-cut questions of law"). Neither the Supreme Court nor an appellate court is bound to accept the Government's concession that the court below erred on a question of law. Orloff v. Willoughby 345 U.S. 83, 88 (1953). Similarly, the Tax Court need not accept a party's concession on a question of law, particularly when to do so would strip the Court of its jurisdiction. See Charlotte's Office Boutique, Inc. v. Commissioner, 121 T.C. 89, 102 (2003), aff'd, 425 F.3d 1203 (9th Cir. 2005). The Golsen rule does not apply where the precedent from the Court of Appeals constitutes dicta or contains distinguishable facts or law. See, e.g., Hefti v. Commissioner, 97 T.C. 180, 187 (1991) (dictum not controlling), a_fLd, 983 F.2d 868 (8th Cir.1993); Metzger Trust v. Commissioner, 76 T.C. 42, 72-74 (1981) (factual distinctions render Golsen rule not squarely on point), aff'd, 693 F.2d 459 (5th Cir.1982); Kueneman v. Commissioner, 68 T.C. 609, 612 n.4 (1977) (distinct legal question not governed by the Golsen rule), a_ff£d, 628 F.2d 1196 (9th Cir. 1980). As we stated in Lardas v. Commissioner, 99 T.C. 490, 493-495 (1992), the Golsen rule applies only where the "clearly established" position of a Court of Appeals signals "inevitable" reversal upon appeal. -15In Petaluma II the Government conceded that outside basis was an affected item but argued that the Tax Court had jurisdiction to decide an affected item where its elements consisted entirely of partnership items. The Court of Appeals agreed that outside basis was an affected item but rejected the Government's elements argument. The Court of Appeals did not decide (1) whether under section 301.6231(a)(3)-1(a)(4) and (c)(3)(iii), Proced. & Admin. Regs., outside basis is a partnership.item because it is an item related to contributions and distributions necessary for maintaining its books and records and providing information to the purported partners; (2) whether outside basis was an entity item under section 301.6233-1T(a) and (c), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6779, 6795 (Mar. 5, 1987); (3) whether the basis in the property distributed by an entity that is disregarded as a partnership for Federal income tax purposes is an entity item under section 301.6233-1T(a) and (c), Temporary Proced. & Admin. Regs., supra; or (4) whether section 301.6231(a)(3)-1(a)(4) and (c)(3)(iii), Proced. & Admin. Regs., and section 301.6233-1T(a) and (c), Temporary Proced. & Admin. Regs., supra, are valid. The Court of Appeals for the D.C. Circuit recognizes its "obligation to explore any promising avenue to * * * [the inferior court's] jurisdiction, whether or not suggested by the parties". Ass'n of Am. Med. Colleges v. Califano, 569 -16- F.2d 101, 111 (D.C. Cir. 1977); see also Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 361 (2d Cir. 2000) ("the issue of subject matter jurisdiction is one we are required to consider, even if the parties have ignored it or, as here, have switched sides on the issue"). Because the Court of Appeals did not consider the precise issue we decide herein, Golsen does not apply. See Read v. Commissioner, 114 T.C. 14 (2000), aff'd without published opinion sub nom. Mulberry Motor Parts, Inc. v. Commissioner, 273 F.3d 1120 (11th Cir. 2001); Estate of Branson v. Commissioner, 113 T.C. 6, 34 (1999), aff'd, 264 F.3d 904 (9th Cir. 2001). Accordingly, we reject respondent's concession and apply the applicable regulations, authorized by sections 6231(a)(3) and 6233, and hold that this Court has jurisdiction to enter the stipulated decision as written, even to the extent it adjusts outside basis to zero and applies the 40% gross basis misstatement penalty under section 6662(h) to the deficiency that results from the overstatement of the purported partners' bases in distributed property. Therefore we shall deny participating partner's motion to vacate and revise the decision. Background Entry of the stipulated decision in this 1999 taxable year Son of BOSS case was preceded by our opinion in Tigers Eye Trading, LLC v. Commissioner, T.C. -17Memo. 2009-121 (Tigers Eye I).'°. Tigers Eye I was preceded by extensive 1°In Tigers Eye I we denied, on the authority of New Millennium Trading, LLC, v. Commissioner, 131 T.C. 275 (2008), participating partner's partial summary judgment motion to invalidate sec. 301.6221-lT(c) and (d), Temporary Proced. & Admin. Regs., 64 Fed. Reg. 3838 (Jan. 26, 1999). We thereby denied Mr. Logan and Logan Trust I the right in this partnership-level proceeding to interpose their partner-level good faith/reasonable cause defenses under sec. 6664(c) to the accuracy-related penalties. We also granted respondent's motion in limine to exclude participating partner's expert witness report on the reliability of a tax opinion on which Mr. Logan, Logan Trust I, and Mr. Logan's two other grantor trusts (collectively, Logan Trusts) claim to have relied in preparing their 1999 Federal income tax returns. In Tigers Eye I respondent also contended that Curtis Mallet Prevost Curt & Mosle (Curtis Mallet)--the law firm that issued the tax opinion on which Mr. Logan and participating partner claim to have relied in taking their 1999 Federal income tax return positions--was a promoter of the transaction. In Tigers Eye I we also expressed the view that this promoter contention raised a partnership-level issue that the Court could address at the trial; we also set forth our views on the legal standard for determining promoter status. In 106 Ltd. v. Commissioner, 136 T.C. 67, 77-81 (2011), the Court, notwithstanding that in Tigers Eye I we had expressed those views in dicta, adopted and applied those views in holding that the law firm that had issued the tax opinion in the Son of BOSS transaction in that case was a promoter of the transaction whose opinion could not be reasonably relied upon in good faith by the partnership or the taxpayer. Tigers Eye I concluded with an Afterword that deplored the inefficiency and waste ofjudicial and party resources caused by the apparent splitting of the accuracy-related penalty cause of action under TEFRA as amended by TRA 1997. That inefficiency and waste are exemplified by the motions we have had to deal with in Tigers Eye I and by the continuing controversies in Petaluma, the case at hand, and other Son of BOSS cases over whether the accuracy-related penalties must or can be determined at the partnership level or the partner (individual taxpayer) level. (continued...) -18discovery and motion practice," the lodging of expert reports on the actual and expected financial consequences of the transaction, and the lodging and later filing of two extensive stipulations of fact." The undisputed factual material thereby (...continued) We noted in Tigers Eye I that the IRS has initiated a response to the observed problems, relying on its authority under sec. 6231(c) to promulgate regulations with respect to special enforcement areas if it determines that treating certain items as partnership items under TEFRA will interfere with the effective and efficient enforcement of the revenue laws. The IRS has proposed regulations, Notice of proposed rulemaking, sec. 301.6231(c)-9(c), Proposed Proced. & Admin. Regs., 74 Fed. Reg. 7205 (Feb. 13, 2009)), which, when and if promulgated, would enable the Commissioner to convert partnership items to nonpartnership items in partnership cases involving listed transactions; invoking this procedure would have the salutary effect of providing for "one-stop shopping" through application of the traditional deficiency procedures to both deficiencies and accuracy-related penalties in such transactions. See 1 William S. McKee et al., Federal Taxation of Partners and Partnerships, par. 10.02[4], at 10-16 (4th ed. 2007). We also noted that the proposed regulations would not provide relief in the case at hand or the myriad other pending Son of BOSS cases. The proposed regulations have not been finalized. "Including participating partner's motion for partial summary judgment "regarding confirmation of Code and caselaw as to contingent obligations". Participating partner sought a ruling that Helmer v. Commissioner, T.C. Memo. 1975-160, requires a holding that "a contingent obligation such as the Sold Euro Option each of the Logan Trusts sold to AIG falls short of a fixed 'liability' for section 752 and other federal income tax purposes". By order dated August 5, 2008, we denied the motion for a variety of reasons. "On December 1, 2010, the day the stipulated decision was entered, the Court deemed moot and discharged its order to show cause in response to respondent's Rule 91(f) motion to show cause why proposed facts in evidence (embodied in a proposed third stipulation of facts and Exhibits 145-J through (continued...) -19made available enables us to describe the operative facts of the transaction. The extensive and detailed facts set forth in Tigers Eye I are incorporated herein by this reference. In addressing the pending motion, we take account of additional indisputable facts and repeat only the most pertinent facts set forth in Tigers Eye I. The subject transaction was one of a number of such transactions promoted by Sentinel Advisors, LLC (Sentinel)," the tax matters partner, using a limited "(...continued) 155-J) should not be accepted as established. "Among the cases of Sentinel-promoted Son of BOSS transactions that have been filed in the Court of Federal Claims are Jade Trading I; Evergreen Trading, LLC, v. United States, 80 Fed. Cl. 122 (2007), to which Nussdorf v. Commissioner, 129 T.C. 30 (2007), is related; and K2 Trading Ventures, LLC v. United States, _ Fed. Cl. _ (Nov. 30, 2011), to which Asuma Trading Ventures, LLC v. Commissioner, infra, is related. Other cases of Sentinel-promoted transactions filed in this Court include Sterling Trading Opportunities, LLC v. Commissioner, No. 12361-05, and Topaz Trading LLC v. Commissioner, No. 12629-05 (stip. decs. entered June 24, 2008); New Millennium Trading, LLC v. Commissioner, No. 3439-06 (filed Feb. 16, 2006); Asuma Trading Ventures, LLC v. Commissioner, No. 26772-06 (filed Dec. 27, 2006); Sapphire Traders, LLC v. Commissioner, No. 19067-09 (filed Aug. 10, 2009); Eagle Trading Opportunities, LLC v. Commissioner, No. 9733-05 (stip. dec. entered Jan. 23, 2009); Pinnacle Trading Opportunities, LLC v. Commissioner, No. 19291-05 (filed Oct. 14, 2005); and Oak Leaf Trading, LLC v. Commissioner, No. 1896-06 (stip. dec. entered July 29, 2008). Stipulated decisions in Sterling and Topaz are virtually identical to each other and to the decision in the case at hand in adjusting to zero the same four items, in not expressly making an outside basis adjustment (which was expressly made in the FPAA), in providing that the 40% penalty applies to underpayments of tax attributable to overstating capital contributions, and in providing that 20% negligence or substantial understatement penalties apply to any additional (continued...) -20liability company--Tigers Eye Trading, LLC (Tigers Eye), in the case at hand--treated as a partnership for income tax purposes, as the vehicle needed to create the claimed basis step-ups that were the transaction's reason for being.'4 During 1999 Mr. Logan realized a multimillion-dollar long-term capital gain on his sale to a large Canadian f'mancial services holding company of his stock interest in a corporation he had cofounded to act as a distributor of variable annuities. Tigers Eye was a Delaware limited liability company formed in late September 1999, ostensibly to engage in foreign currency trading but in reality to generate paper losses to offset taxpayers' otherwise taxable capital gains. On October 1, 1999, the Logan Trusts each acquired a pair of offsetting long and short foreign currency options through AIG, which they then contributed along with "(...continued) underpayments. See also Diebold v. Commissioner, T.C. Memo. 2010-238, in which Sentinel appears to have played a facilitating role in creating artificial losses claimed on the sale of corporate assets, resulting in a deficiency in Federal corporation income tax and accuracy-related penalties not contested by the selling corporation. 14Although the parties have stipulated the correctness of the determinations in the FPAA, including that the existence of Tigers Eye was not established as a fact and that the transactions in which it claimed to have participated should be disregarded in full, we use the terms "partnership", "partner", and related terms for convemence. -21cash to become partners in Tigers Eye on October 9, 1999. The Logan Trusts inflated their adjusted bases in Tigers Eye to reflect their contributions of the long options without reducing those bases to reflect Tigers Eye's assumption of their obligations under the short options. The basis inflation is premised on (1) treating each purchased option separately from each sold option, (2) each purchased option's having a basis equal to the gross premium in the hands of both the Logan Trusts and Tigers Eye, (3) treating the assignment to and assumption by Tigers Eye of the contingent obligation to satisfy the sold option separately from the purchased option for purposes of section 752, and (4) disregarding the contingent obligation to satisfy the sold option in determining outside basis in the partnership under the authority of Helmer v. Commissioner, T.C. Memo. 1975-160. An unrelated entity, the Batts Group, also acquired interests in offsetting foreign currency options through AIG that were transferred to Tigers Eye and also received other property in liquidation of its interest in Tigers Eye.'5 We refer to participants in offsetting options transactions with partnerships such as the offsetting option transactions of the Logan Trusts and the Batts Group with Tigers Eye as ' option partners. In addition to Sentinel, the tax matters partner, which '5The Batts Group settled its case with the IRS without any court proceeding. In the following description and discussion we will for the most part ignore the role of the Batts Group. -22contributed $3,000 cash, Tigers Eye also had as a partner a foreign entity, Banque Safra-Luxembourg (Banque Safra), which contributed $58,000 cash. Neither Sentinel nor Banque Safra had any financial interest in the option transactions, and neither has a stake in the outcome of this proceeding. During December 1999 Sentinel caused Tigers Eye to unwind or terminate the paired options at a net loss.16 Sentinel through Tigers Eye used the remaining cash contributions to purchase foreign currency (euro) and shares of listed stock (Xerox Corp.) that were purportedly distributed to the Logan Trusts in liquidation of their purported partnership interests. The Logan Trusts claimed that they had hugely inflated bases in Tigers Eye that attached to the foreign currency and stock Tigers Eye transferred to them (sometimes referred to herein as the distributed property). They sold the currency and stock before yearend 1999 and claimed 16Ignoring the various fees paid by the Logan Trusts and Mr. Logan to participate in the transaction, the total outlay of the Logan Trusts to purchase their interests in the options and to make their cash contributions was approximately $400,000. What is important for the claimed basis inflation in the case at hand was that the premium on each option exceeded $9 million and the exercise price of each option exceeded $200 million. However, the net premium the Logan Trusts paid for each purchased option was only $95,003 more than the premium received or receivable for the offsetting sold option. The net premium that Tigers Eye received from AIG on the unwinding of each pair of options was $40,044.68, resulting in a total loss of $164,875 to the Logan Trusts on the unwinding of the options (($95,003 x 3 = $285,009) - ($40,044.68 x 3 = $120,134.04) = $164,874.96). -23huge losses that flowed through to Mr. Logan's 1999 Federal income tax return. Mr. Logan used the claimed losses on the sales of the foreign currency to offset his ordinary income, and he used the claimed short-term losses on the sales of the Xerox Corp. stock to offset most of the multimillion-dollar long-term capital gain he realized on the sale of his stock interest in the annuity distribution business." On April 14, 2000, Tigers Eye filed a Form 1065, U.S. Partnership Return of Income, for its 1999 taxable year. On March 7, 2005, respondent issued an FPAA to the Tigers Eye partners. The FPAA comprises (1) Letter 1830, Notice of Final Partnership Administrative Adjustment, (2) Form 870-PT, Agreement for Partnership Items and Partnership Level Determinations as to Penalties, Additions to Tax, and Additional Amounts, including a Schedule of Adjustments, and (3) an "Exhibit A--Explanation of Items", setting forth respondent's other adjustments or determinations. As compared with their total $400,000 outlay to acquire their interests in the paired options and make their cash capital contributions, see supra note 16, the Logan Trusts received foreign currency and shares of Xerox Corp. having combined cost and value of approximately $230,000, of which approximately $14,000 was attributable to the foreign currency. The Logan Trusts claimed an ordinary loss that they flowed through to Mr. Logan of approximately $1.7 million on the sale of the foreign currency; Mr. Logan and the Logan Trusts claimed an aggregate basis of more than $27 million in the Xerox Corp. shares, resulting in claimed losses of more than $26 million on their sales. -24The Schedule of Adjustments adjusted to zero the following five items: A. Capital Contributions (Sched. M-2, line 2) $698,595 B. Distributions of Property other than Money (Sched. M-2, line 6b) 365,446 C. Outside Partnership Basis 24,500,059 D. Other Deductions (Sched. K, line 11) 11,314 E. Ordinary Income, Other Income (Loss) (Sched. K, line 7) (242,186) Items A, B, D, and E are each identified as the adjustment of a line item on the Tigers Eye 1999 Form 1065. Item C (Outside Partnership Basis) is not such an item and does not correspond to any line item on the partnership return. Unlike the item A, B, D, and E amounts, each of which is identified as the adjustment of a line item on the Tigers Eye 1999 Form 1065, the item C amount does not appear on the partnership return or on the Schedules K-1, Partner's Share of Income, Credits, Deductions, etc., of the partnership return and sent to the partners. Only two of the foregoing adjustments were to items appearing on the partnership return that directly flowed through to the returns of the Logan Trusts and thence to Mr. Logan's individual return. These two adjustments change to zero two items that appeared on Schedule K of the partnership return: "Other -25Deductions" of $11,314 (appearing on line 11, Schedule K, page 3, of the partnership return) and the negative amount "($242,186)" reported for "Ordinary Income, Other Income (Loss)" (on line 7, Schedule K, Partners' Shares_of Income, Credits, Deductions, etc., page 3, of the partnership return). These line items were described in greater detail in Statements 1 and 2 of the return, reproduced below.18 Statement 1, which attributes the negative figure -257,857 to "ORDINARY LOSS 18Statements 1 and 2 reported as follows: SCHEDULE K OTHER INCOME (LOSS) DESCRIPTION STATEMENT 1 AMOUNT NONPORTFOLIO SHORT-TERM CAPITAL GAIN (LOSS) INTEREST INCOME WITHDRAWAL FEES ORDINARY LOSS FROM SEC. 988 TRANSACTIONS 5,354 1,617 8,700 -257,857 TOTAL TO SCHEDULE K, LINE 7 -242,186 SCHEDULE K OTHER DEDUCTIONS DESCRIPTION STATEMENT 2 AMOUNT OPERATING EXPENSES 11,314 TOTAL TO SCHEDULE K, LINE 11 11,314 -26FROM SEC. 988 TRANSACTIONS", thereby indicates that this negative figure included the net loss claimed by Tigers Eye on the termination or unwinding of the contributed paired options, as well as the results of other foreign currency transactions.'' The partnership return Schedules K-1 for the Logan Trusts show that their respective shares of the entries on lines 7 and 11 of Schedule K were a loss of $52,583 and other deductions of $2,136, respectively, for a total loss of $157,749 and total other deductions of $6,408 that flowed from the partnership return through the returns of the Logan Trusts to Mr. Logan's 1999 Federal income tax return.20 Indeed, the Form 1041, U.S. Income Tax Return for Estates and Trusts, 19Respondent's proposed third stipulation of facts and Exhibits 145-J through 155-J, the subjects of respondent's Rule 91(f) motion, see supra note 12, would have conclusively established that the option spreads were terminated at a net loss during December 1999 and that the loss was included in the "ORDINARY LOSS FROM SEC. 988 TRANSACTIONS" that was claimed on the partnership return. Our conclusion that the contributed paired options were terminated or unwound during December 1999 is supported by the fact that Tigers Eye's final return for the year 2000, which showed Sentinel and Banque Safra to be the only partners, also showed relatively small amounts of remaining assets (much less than the aggregate capital contributions of the Logan Trusts and the Batts Group), liabilities, and capital at the beginning of the year, and relatively small losses and income from dispositions of assets and winding-up operations. 20The differences between these figures and the gross amounts shown on Statements 1 and 2, see supra note 18, that were adjusted to zero by the FPAA were attributable to the Batts Group's participation in Tigers Eye. -27for each of the Logan Trusts reports a $55,278 nonpassive loss from partnerships, which is within $600 of the $54,719 sum of the items allocated to each Logan Trust on lines 7 and 11. Mr. Logan's 1999 individual Federal income tax return, in three separate schedules entitled "1999 income from passthroughs", shows a loss of $55,278 from "SCHEDULE E ACTIVITY INCOME (LOSS)" for each of the Logan Trusts ($55,279 loss for Logan Trust II) for total "SCHEDULE E INCOME OR (LOSS) FROM ESTATES OR TRUSTS STATEMENT 21 NONPASSIVE LOSS OF" $165,835. Statement 6 on the partnership return, "PARTNERS' CAPITAL ACCOUNT SUMMARY", shows "Capital Contributed" and "Withdrawals" (the latter is identical to "Distributions of Property Other Than Money") totaling $698,595 and $365,446, respectively, that were also adjusted to zero by the FPAA. The "Capital Contributions" of $698,595 shown by the partnership return and zeroed out by the FPAA (and the stipulated decision) was the sum of the cash contributed by all the partners plus the net value of the paired options that the Logan Trusts and the Batts Group had ostensibly contributed to the partnership; this net value was arrived at by netting the premiums on the long and short options. This partnership return reporting differed from the inflated bases claimed -28by the Logan Trusts through the tax shelter2i in that the option partners claimed bases in their partnership interests that included the premiums on the long options (amounting to more than $27 million, see supra note 17) without reduction or offset for the liabilities represented by the premiums on the short options. The "Withdrawals" ("Distributions of Property Other Than Money") of $365,446 zeroed out by the FPAA was the book value (the aggregate purchase price/cost) of the foreign currency and corporate shares purchased by Sentinel through Tigers Eye on behalf of the Logan Trusts and the Batts Group for distribution to them.22 The Logan Trusts' share of this cost amounted to 2iCapital contributions are to be reported by a partnership at fair market value rather than the cost or adjusted basis of the contributed property to the contributing partners, which is the "inside basis" of such property to the partnership under sec. 723. Secs. 1.704-1(b)(2)(iv)(b), 1.705-1(a)(1), Income Tax Regs.; see also Interhotel Co. v. Commissioner, T.C. Memo. 2001-151; Mitchell v. Commissioner, T.C. Memo. 1997-382 n.5. Because of the short time (less than 1 month) between the option partners' purchases of the option spreads and their contribution to Tigers Eye, it seems likely that there was little difference between the purchase prices of the option spreads and their fair market values when contributed to Tigers Eye. In any event, the determination that Tigers Eye is not a partnership for Federal income tax purposes and the adjustment of capital contributions to zero by both the FPAA and the stipulated decision has had the effects of denying the purported partnership any bases in the paired options and of disallowing any partnership loss claimed by Tigers Eye for 1999 on the termination or unwinding of the paired options and on any other foreign currency transactions. 22Under sec. 732(a)(1) the basis of property (other than money) distributed (continued...) -29approximately $230,000. See supra note 17. .The aggregate inflated "outside" bases claimed by the Logan Trusts on the sales of foreign currency and Xerox Corp. . stock were more than 118 times greater than (11,800% of) the withdrawals/distribution amounts reported on the partnership return. The "EXHIBIT A--Explanation of Items" made the following additional adjustments or determinations: (1) Tigers Eye's existence as a partnership had not been established as a fact; (2) Tigers Eye had no business purpose other than tax avoidance, lacked economic substance, and was an economic sham so that Tigers Eye and the transactions in which it claimed to have participated should be disregarded in full; and (3) Tigers Eye had been formed or availed of, within the meaning of section 1.701-2, Income Tax Regs., for a principal purpose of improperly reducing the partners' Federal income tax liabilities. The Explanation of Items went on to make alternative adjustments or determinations premised on regarding Tigers Eye as a partnership that had 22(...continued) to a partner in a nonliquidating distribution is its cost to the partnership or its "inside basis", whereas, under sec. 732(b), the basis of such property distributed to a partner in liquidation is an amount equal to the distributee partner's interest in the partnership; i.e., its "outside basis". Under sec. 988 and preexisting law, s_ee_Nat'l- Standard Co. v. Commissioner, 80 T.C. 551, 558 (1983), aff'd, 749 F.2d 369 (6th Cir. 1984), foreign currency is generally considered property other than money for Federal income tax purposes. -30received the paired foreign currency options as contributions and assignments from the option partners (the Logan Trusts and the Batts Group) and thereafter distributed foreign currency and listed shares of stock to them in liquidation of their partnership interests. In that regard, the Explanation of Items determined that (1) the partners "have not established [under section 723] adjusted bases in their respective partnership interests in amounts greater than zero"; (2) "the purported partners of Tigers Eye did not enter into the option positions and Tigers Eye did not purchase the foreign currency or [listed] stock with a profit motive for purposes of section 165(c)(2)"; and (3) the obligations under the sold options should be netted against the purchased options so that "any * * * claimed increases in the outside bases in Tigers Eye resulting from the contributions of the sold [sic "purchased"] options should be disallowed". The alternative adjustments described in this paragraph have been rendered inapplicable by the stipulated decision's adoption of the primary adjustments disregarding the partnership described in the immediately proceeding paragraph. Finally, the Explanation of Items determined at the partnership level that accuracy-related penalties to be imposed at the individual taxpayer level apply "to all underpayments of tax attributable to adjustments of partnership items of Tigers Eye Trading, LLC". The Explanation of Items went on to state: -31The penalty shall be imposed on the components of underpayment as follows: A. a 40 percent penalty shall be imposed on the portion of any underpayment attributable to the gross valuation misstatement as provided by Sections 6662 (a), 6662(b)(3),.6662(e), and 6662(h) of the Internal Revenue Code. B. a 20 percent penalty shall be imposed on the portion of the underpayment attributable to negligence or disregard of rules and - regulation as provided by Sections 6662(a), 6662(b)(1), 6662(c) of the Internal Revenue Code. C. a 20 percent penalty shall be imposed on the underpayment attributable to the substantial understatement of income tax as provided by sections 6662(a), 6662(b)(2), and 6662(d) of the Internal Revenue Code. D. a 20 percent penalty shall be imposed on the underpayment attributable to the substantial valuation misstatement as provided by Sections 6662(a), 6662(b)(3), and 6662(e) of the Internal Revenue Code. Sentinel, the tax matters partner, filed the petition in this case but claims to have no direct financial interest in its outcome. Mr. Logan, as trustee of Logan Trust I," sought and was granted leave to participate in this proceeding as "Participating partner had originally filed a refund suit (to recover a deposit of $18,898.93) in the Court of Federal Claims, Tigers Eye Trading, LLC v. United States, No. 05-00864-LAS (filed Aug. 4, 2005), contemporaneously with petitioner's filing of the petition in the case at hand. After the United States filed a motion to dismiss for lack ofjurisdiction by reason of the pendency of the case at hand, see sec. 6226(b)(2), participating partner began proceedings to participate in the case at hand. This Court granted leave and recognized Logan Trust I's status (continued...) -32participating partner. Mr. Logan, through his counsel, has wielded the laboring oar and called the shots for the taxpayer interests in this proceeding.24 "(...continued) as participating partner, see this Court's order of Mar. 9, 2007, and the case in the Court of Federal Claims was dismissed per order (Mar. 20, 2007). We would observe that Mr. Logan's deposit in the Court of Federal Claims case was an admission that the FPAA adjusted partnership items on the Tigers Eye 1999 partnership return such that Mr. Logan's Federal income tax liability was increased thereby. See sec. 301.6226(e)-1T (a)(1), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6788 (Mar. 5, 1987); see also sec. 301.6226(e)-1(a)(1), Proced. & Admin. Regs. 240n Oct. 6, 2009, after the filing of Tigers Eye I, participating partner filed a motion and supporting memorandum for partial summary judgment regarding inapplicability of sec. 6662(h). In the motion and supporting memorandum, participating partner conceded that the loss on the sale of the distributed stock and foreign currency was not allowed under sec. 465(b)(4) because it exceeded the amount at risk. The motion and memorandmn and subsequent filings made clear that by conceding the at-risk issue participating partner intended to take the sec. 6662(h) 40% gross basis misstatement penalty out of play at both the partnership and partner/individual levels. In attempting so to do, participating partner cited and relied on the opinion of the Court of Federal Claims in Alpha I, L.P. v. United States, 84 Fed. Cl. 622, 634 (2008). In orders dated November 6 and 18, 2009, respectively, we denied the motion for partial summary judgment and explained our view, citing Hambrose Leasing 1984-5 Ltd. P'ship v. Commissioner, 99 T.C. 298 (1992), and Russian Recovery Fund, Ltd. v. United States, 81 Fed. Cl. 793 (2008), that at risk under sec. 465 is a partner-level issue on which the Court lacks jurisdiction to accept a concession in a partnership-level proceeding such as the case at hand. The importance of the 40% penalty to both the IRS and taxpayers in Son of BOSS cases is shown by the repeated attempts by taxpayers to use concessions to take the penalty out of play. See, e.g., Bergmann v. Commissioner, 137 T.C. 136 (2011), and Chief Counsel Notice CC-2012-001 (Oct. 5, 2011), opposing the (continued...) -33Within a week before the scheduled trial,25 the Court was gratified to receive the stipulated decision document signed by respondent's counsel, by Sentinel, through Ari Bergmann, trustee of the Bergmann Revocable Trust, tax matters partner of Sentinel, tax matters partner of Tigers Eye, and by Sentinel's counsel. Participating partner through counsel indicated no objection to entry of the decision. The decision provides as follows: "(...continued) allowance of concessions to avoid imposition of valuation misstatement penalties. See 199 Daily Tax Rept. (BNA) K-6 (Oct. 14, 2011). In a status report filed November 13, 2009, in the case at hand respondent provided a list, with docket numbers, of more than 40 Son of BOSS cases pending in the Tax Court in which respondent was asserting both sec. 465 at risk (as an alternative position) and the 40% gross basis misstatement penalty. In a previous filing, respondent had asserted that the aggregate amount of the 40% penalties being asserted in such cases amounted to approximately $130 million, ofswhich the 40% penalties in five stillpending Sentinel-promoted Son of BOSS cases amounted to approximately $41 million. 25Participating partner's counsel informed the Court,.in filings of October 26 and November 2, 2009, and in a recorded telephone conference of November 5, 2009, that participating partner would not participate in the trial that had been set for a special session scheduled to commence on November 30, 2010, in Washington, D.C. Participating partner's counsel stated that it would be futile and prohibitively expensive to have a trial in the partnership-level proceeding. Instead, participating partner had decided to "pursue reasonable cause in the refund action consistent with this Court's ruling that it lacks jurisdiction over that reasonable cause". In the preamble of our order of November 18, 2009, we urged participating partner to reconsider not participating in the trial; we ordered participating partner and petitioner to file a status report by November 29, 2009, "informing the Court whether they intend to participate in the trial of this case". -34ORDERED AND DECIDED: That the following statement shows the adjustments to the partnership items of Tigers Eye Trading, LLC, for the taxable year 1999: Partnership Item As Reported As Determined Ordinary Income, Other Income (Loss) ($242,186) $ -0- Other Deductions $11,314 $ -0- Distributions of $365,446 $ -0- $698,595 $ -0- Deductions, Property other than Money Capital Contributions It is determined that the notice of final partnership administrative adjustment dated March 7, 2005, which is the subject matter of this case, is correct. It is determined that a 40 percent gross valuation misstatement penalty under I.R.C. § 6662(a); (b)(3), (e) and (h) applies to any underpayment of tax attributable to overstating the capital contributions claimed to have been made to the purported partnership. It is determined that a 20 percent penalty applies to any additional underpayment of tax attributable to the foregoing partnership item adjustments other than the capital contributions claimed to have been made to the purported partnership, as such underpayment is attributable to negligence or disregard of rules or regulations under I.R.C. § 6662(a), (b)(1) and (c) or a substantial understatement of income tax under I.R.C. § 6662(a), (b)(2) and (d). -35On November 25, 2009, the Court issued an order striking the case from the November 30, 2009, Washington, D.C., special trial session. On December 1, 2009, the Court entered the stipulated decision. The Court's gratification from receipt and entry of the stipulated decision was short lived. On January 12, 2010, the Court of Appeals for the D.C. Circuit issued Petaluma II. One week later, on January 19, 2010, participating partner filed the motion for leave to file a motion to revise the stipulated decision and lodged the motion to revise decision. On November 30, 2010, the Court granted leave and the motion to revise decision was filed.26 Participating partner asserts that the Court must vacate and revise the stipulated decision because it exceeds the jurisdictional limitations imposed by Petaluma II. 26By October 2010 respondent became concerned that if the stipulated decision were not vacated, it would have already become final (on March 1, 2010) and the one-year period of limitations under sec. 6229(d) for making computational adjustments and assessing any resulting deficiency and accuracy-related penalties and/or issuing an affected items notice of deficiency would expire on March 1, 2011. On November 30, 2010, we granted the motion for leave nunc pro tunc as of the date it had been filed, January 19, 2010, and ordered the lodged motion to revise decision to be filed as of that date. As a result, the 90-day period for appeal of the stipulated decision under Fed. R. App. P. 13 does not commence to run until the motion to revise is granted or denied and the one-year period of limitations under sec. 6229(d) is thereby extended. See Nordvik v. Commissioner, 67 F.3d 1489, 1492 (9th Cir. 1995),