Appealed from: U.S. Claims Court, Judge Spector
Before Friedman and Rich, Circuit Judges, and Nichols, Senior Circuit Judge.
This is an appeal from a judgment of the United States Claims Court insofar as that judgment failed to grant the appellants recovery on certain tax refund claims. The judgment was in accord with the prior decision of the Court of Claims that granted summary judgment for the United States on those claims. Gindes v. United States, 228 Ct. Cl. 632, 661 F.2d 194, 48 A.F.T.R.2d (P-H) 6021 (Ct. Cl. 1981). In this appeal the appellants seek to relitigate the identical issues that that decision resolved against them. We hold that the prior decision of the Court of Claims is the law of the case, and affirm.
The will of Charles I. Kaplan, who died in June 1964, created a number of trusts for the benefit of his wife and children. (The appellants here are the children.) The corpus of each trust consisted of interests Mr. Kaplan had upon his death in 19 real estate partnerships. With minor exceptions here irrelevant, the assets of those partnerships consisted of real property upon which substantial depreciation had been taken in the federal partnership tax returns.
The federal estate tax return of Charles Kaplan was filed in April 1965. The Commissioner assessed a deficiency, ruling that the gross estate also included the interests in certain of those partnerships that Charles Kaplan had transferred inter vivos trusts before his death. The estate challenged in the United States Tax Court the assessment of that deficiency and also another deficiency resulting from the Commissioner's redetermination of the value of the decedent's interest in one of the partnerships. The Tax Court suit was settled in 1969 when the government accepted the estate's valuation of the partnership and the estate accepted the Commissioner's inclusion in the gross estate of the partnership interest transferred to the inter vivos trusts.
Following and apparently as a result of the settlement of the Tax Court case, the appellants became aware that if the partnerships made an "election" under section 754 of the Internal Revenue Code of 1954, 26 U.S.C. § 754 (1982), the basis of the partnership property could be adjusted to reflect the transfer of Mr. Kaplan's interests in the partnership property from him to the trusts. The results would have been to increase the amount of depreciation the partnerships could take. The partnerships could pass the additional depreciation to the trusts, and the trusts could pass the larger depreciation to the beneficiaries, the appellants, for use on their personal income tax returns.
Nine of the partnerships filed elections under section 754 with their partnership returns for 1969. The appellants field refund claims for other partnerships for various years between 1961 and 1970. The Commissioner denied the refund claims. The appellants then filed the present suit for refund in the Court of Claims.
Both sides moved for summary judgment. In a lengthy opinion, the Court of claims granted the government partial summary judgment. With respect to the issues before us, the court held that the partnership elections under section 754 were ineffective because untimely filed under Treasury Regulation 1.754-1(b))1). That regulation, promulgated in 1972, requires that the partnership make the section 754 election "with the partnership return for the taxable year during which the distribution or transfer occurs." Treas. Reg. § 1.754-1(b)(1) (1984). The court held that since the transfer to the trusts of Charles Kaplan's interests in the partnerships took place upon his death in 1965, any effective election by the partnerships was required to have been made in the partnership returns for that year, and that the appellants' attempts to make an election in 1969 were ineffective.
Court ruled that Treasury Regulation 1.754-1(b)(1) properly was applied retroactively to the 1965 transfers. It rejected the appellants' claim that the doctrine of equitable recoupment entitled them to avoid the time bar of the regulation. Finally, the court held that the appellants were precluded from arguing that the partnerships were not in fact partnerships because they failed to raise that point in their claim for refund with the Commissioner.
The court remanded the case to the trial division for further proceedings consistent with its opinion. The court denied rehearing and a suggestion for rehearing an banc. See 228 Ct. Cl. 632, 661 F.2d 194.
On October 1, 1982, the Court of Claims ceased to exist. Its appellate functions were assumed by this court, and its trial functions were assumed by the newly created United States Claims Court. Federal Courts Improvement act of 1982, Pub. L. No. 97-164, 96 Stat. 25 (1982). Under that Act, the Claims Court obtained jurisdiction over the remaining issues in this case. Id. § 403(d), 96 Stat. at 58.
The parties settled those issues. On October 27, 1983, the Claims Court entered a judgment in accordance with that settlement, determining the amounts the appellants were to ...