Acute Care Specialists II v. United States

During the 1970s and 1980s, American Agri‐Corp organized several limited partnerships, for which the company served as general partner. American solicited high‐income individuals to serve as limited partners, investing in supposed agricultural ventures. According to the IRS, the actual purpose was to shelter the income of limited partners from taxation. Plaintiffs were each limited partners (or spouses) in at least one partnership that was audited by the IRS during the mid‐1980s. Several years later, the IRS concluded that the partnerships were, essentially, tax‐avoidance schemes .In 1990 and 1991, the IRS issued Final Partnership Administrative Adjusts for the partnerships and disallowed several listed farming expenses and other deductions for the 1984 or 1985 tax years. The Tax Court consolidated cases, held that the IRS action was not time‐barred, and determined that the partnerships had engaged in “transactions which lacked economic substance” that resulted in a substantial distortion of income and expense. The district court held that it lacked subject‐matter jurisdiction over the taxpayers’ claims that the assessments were untimely and improperly included penalty interest. The Seventh Circuit affirmed. The determinations at issue are attributable to partnership items over which courts lack subject‐matter jurisdiction. View "Acute Care Specialists II v. United States" on Justia Law