Indirect Partner Fails to Avoid Liability Using IRS Mailing Rule

An indirect partner to a California investment fund can’t escape liability using “unfounded theories” about the IRS’s purported failure to comply with its mailing procedures for partnership adjustments, the US Tax Court said Tuesday.

Scott Blum, by way of his single-member limited liability company Bogan Ventures LLC, engaged in a tax shelter during 1999 through a tax partnership called Democrat Strategic Investment Fund LLC, about 90% of which Bogan owned, the Tax Court said. Blum used DSIF to generate $78.5 million in artificial tax loss by inflating Bogan’s outside basis in DSIF, then directing DSIF to liquidate and distribute its ...