Blum v. CIR

Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 1

FILED

United States Court of Appeals PUBLISH Tenth Circuit

UNITED STATES COURT OF APPEALS November 2, 2026

FOR THE TENTH CIRCUIT Christopher M. Wolpert Clerk of Court

_________________________________ SCOTT A. BLUM; AUDREY R. BLUM, Petitioners - Appellants,

v. No. 25-9001

COMMISSIONER OF INTERNAL

REVENUE,

Respondent - Appellee. _________________________________

Appeal from the United States Tax Court (CIR No. 5313-16)

_________________________________ William M. Sharp, Sr., Holland & Knight LLP, Atlanta, Georgia (Chad M. Vanderhoef and James P. Dawson, Holland & Knight LLP, Tampa, Florida; Christopher S. Rizek, Holland & Knight LLP, Washington, District of Columbia; and Susan E. Seabrook, Winston & Strawn LLP, Washington, District of Columbia, on the briefs), for Petitioners- Appellants.

Clint A. Carpenter (Brett A. Shumate, Assistant Attorney General; Joshua Wu, Deputy Assistant Attorney General; and Richard L. Parker, Tax Litigation Branch Civil Division, United States Department of Justice, Washington, District of Columbia, with him on the brief), for Respondent-Appellee.

_________________________________

Before MATHESON, McHUGH, and FEDERICO, Circuit Judges.

_________________________________

MATHESON, Circuit Judge. _________________________________

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 2 Scott and Audrey Blum appeal a U.S. Tax Court decision rejecting their challenges to IRS notices of deficiencies ("NODs") for tax years 1999, 2007, and 2010, which disallowed a $78.5 million tax shelter loss and assessed about $22 million in taxes and penalties.

Mr. Blum participated in the tax shelter as a partner in a partnership. The IRS engaged in a two-step process to determine the proper treatment of the Blums' income from the partnership. At the first step, the partnership level, the IRS determined that the tax shelter lacked economic substance. The Blums' partnership challenged that determination in the U.S. District Court for the Northern District of California and lost. At the second step, the partner level, the IRS issued NODs disallowing their claimed $78.5 million loss. The Blums challenged that determination in the Tax Court. In the Tax Court, the Blums argued that the IRS's partnership-level determination was untimely, and that in turn rendered the partner-level NODs untimely. The court held that the Blums waived that argument because they could raise the timeliness issue only at the partnership-level proceeding in the Northern District of California, and they failed to do so.

Exercising jurisdiction under Section 7482(a)(1) of the Internal Revenue Code ("I.R.C." or "Code"), we agree with the Tax Court and affirm.¹

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 3

I. BACKGROUND

A. Legal Background

To facilitate understanding of the factual and procedural history of this case, "we must spend a few moments shedding light on the structure and operation of the relevant statutory provisions." Exby-Stolley v. Bd. of Cnty. Comm'rs, 979 F.3d 784, 811 (10th Cir. 2020) (en banc).

The Code's Structure - Subtitles A and F

During the taxable years at issue, the Code contained 11 subtitles that together governed the federal tax system. Two subtitles are relevant to this case. Subtitle A, titled "Income Taxes," I.R.C. §§ 1-1564, includes "Accounting Periods and Methods of Accounting, §§ 441‑483; "Partners and Partnerships," §§ 701-777; and

"Capital Gains and Losses," §§ 1201-1298. Subtitle F, titled "Procedure and Administration," I.R.C. §§ 6001-7874, includes

"Assessment," §§ 6201-6255, and "Limitations" (statutes of limitations), §§ 6501-6533.

Taxes and Partnerships

For income tax purposes, partnerships are pass-through entities that do not themselves pay tax. Rather, partners in partnerships are "liable for income tax only in their separate or individual capacities." I.R.C. § 701. To calculate partners' "distributive share" of items that affect their individual income tax liability, § 702, partnerships must file informational returns, see § 6031, and send Schedule K‑1s to the partners reporting their shares of partnership items (e.g., income), see id.

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 4

The Tax Equity and Fiscal Responsibility Act of 1982

a. TEFRA - Two-level framework In 1982, Congress enacted the Tax Equity and Fiscal Responsibility Act ("TEFRA") "to promote consistent tax treatment of partners and to avoid duplicative litigation." Omega Forex Grp., LC ex rel. Flath v. United States, 906 F.3d 1196, 1204 (10th Cir. 2018) (quoting Prati v. United States, 603 F.3d 1301, 1305 (Fed. Cir. 2010)). TEFRA's partnership tax provisions were codified in subtitle F at I.R.C. §§ 6221-6234. Id. Congress repealed TEFRA in 2015, effective January 1, 2018, but its provisions applied to the partnership tax matters at issue in this case. See id.² TEFRA set up a two-level framework to address (1) partnership issues at the partnership level and (2) partner-specific issues at the partner level. In our ensuing discussion of that framework, we focus on two statutes:³

I.R.C. § 6221:

[T]he tax treatment of any partnership item (and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to a partnership item) shall be determined at the partnership level. I.R.C. § 6231(a)(3):

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 5 The term "partnership item" means, with respect to a partnership, any item required to be taken into account for the partnership's taxable year under any provision of subtitle A to the extent regulations prescribed by the Secretary provide that, for purposes of this subtitle, such item is more appropriately determined at the partnership level than at the partner level.

b. Treasury Regulation

To implement I.R.C. § 6231(a)(3), the Secretary of the Treasury promulgated Treasury Regulation § 301.6231(a)(3)-1 to define "partnership items." Subsection (a) lists various items that subtitle A of the Code requires partnerships to determine. See Treas. Reg. § 301.6231(a)(3)-1(a). For example, the partnership's income, gain, loss, deduction, or credit are partnership items. Id. So too are the partners' shares of those items. Id.

Subsection (b) adds: "The term 'partnership item' includes the accounting practices and the legal and factual determinations that underlie the determination of the amount, timing, and characterization of items of income, credit, gain, loss, deduction, etc." Id. § 301.6231(a)(3)-1(b). That is, the Regulation considers "partnership items" to include accounting practices and determinations that "underlie" the determination of the partnership items in subsection (a).

c. Affected items

In contrast to partnership items addressed at the partnership level, "affected items"

fall into the partner level. An "affected item" is "any item to the extent such item is affected by a partnership item." I.R.C. § 6231(a)(5). When the IRS adjusts partnership tax items such as income or losses, these partnership-level changes often require

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 6 corresponding adjustments to "affected items" on the individual partners' income tax returns. For example, increasing a partner's share of partnership income, a partnership item, may affect a partner's deductions tied to the partner's individual adjusted gross income ("AGI"), such as the medical expenses deduction. Treas. Reg. § 301.6231(a)(5)- 1(a).⁴In this situation, the medical expenses deduction is an affected item. See id. d. Tax matters partner

Under TEFRA, one general partner of a partnership serves as the tax matters partner ("TMP"). I.R.C. § 6231(a)(7). The TMP's obligations to the partnership and its partners are based on TEFRA's scheme of determining partnership items at the partnership level before determining the partner-level effects. See Omega Forex, 906 F.3d at 1204-05. See generally I.R.C. §§ 6223-6225. For example, the TMP must "keep each partner informed of all administrative and judicial proceedings for the adjustment at the partnership level of partnership items." § 6223(g).

* * * *

The Supreme Court has summarized TEFRA's two-stage framework to adjust partnership items:

Under TEFRA, partnership-related tax matters are addressed

in two stages. First, the IRS must initiate proceedings at the

partnership level to adjust "partnership items," those relevant to the partnership as a whole. §§ 6221, 6231(a)(3). It must

issue a[] [final partnership administrative adjustment]

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 7 notifying the partners of any adjustments to partnership items, § 6223(a)(2), and the partners may seek judicial review of those adjustments, § 6226(a)-(b).

Once the adjustments to partnership items have become final, the IRS may undertake further proceedings at the partner level to make any resulting "computational adjustments" in the tax liability of the individual partners. § 6231(a)(6). Most computational adjustments may be directly assessed against the partners, bypassing deficiency proceedings and permitting the partners to challenge the assessments only in post-payment refund actions. § 6230(a)(1), (c).

Deficiency proceedings are still required, however, for certain computational adjustments that are attributable to "affected items," that is, items that are affected by (but are not themselves) partnership items. §§ 6230(a)(2)(A)(i), 6231(a)(5).

United States v. Woods, 571 U.S. 31, 39 (2013).

Final Partnership Administrative Adjustments

The IRS may initiate adjustments to partnership items, such as determining that partnership income should be different from the amount reported by the partnership. To do so, it must provide notice of an administrative partnership-level proceeding, audit the partnership, and then mail to each notice partner a final partnership administrative adjustment ("FPAA"). I.R.C. § 6223(a); see Omega Forex, 906 F.3d at 1204. A "notice partner" is effectively any partner known to the IRS. See I.R.C. §§ 6223(a), 6231(a)(8). Within 90 days, the TMP "may file" in Tax Court, district court, or the Claims Court, "a petition for a readjustment of the partnership items." § 6226(a). If the TMP does not file a readjustment petition, any notice partner may file one. § 6226(b)(1). Consistent with TEFRA's scheme of adjudicating partnership items at the

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 8 partnership level to "avoid duplicative litigation," Omega Forex, 906 F.3d at 1204; see also Callaway v. Comm'r, 231 F.3d 106, 111 (2d Cir. 2000), if the TMP does not bring the partnership-level readjustment petition and "more than 1 action is brought" by a partner other than the TMP, then the one brought in Tax Court goes forward; if none are brought in Tax Court, the first one goes forward. I.R.C. § 6226(b)(1)-(3). In these partnership-level proceedings—whether brought by the TMP or another partner—all partners are considered parties, and the court hearing the petition must permit their participation. § 6226(c); see also § 6224(a).

The TMP may also enter into settlement agreements about the determination of partnership items—which bind not only notice partners, who are parties to the adjudication, see §§ 6224(c)(1), 6226(c), but also non-notice partners when the TMP

"expressly states that such agreement shall bind the other partners." § 6224(c)(3)(A).

Limitations Periods and Extensions

After a taxpayer files a return, the IRS generally must assess tax or issue a notice of deficiency within three years. I.R.C. § 6501(a). But the IRS and the taxpayer may extend the limitations period by agreement. § 6501(c)(4).

The same is true for a partnership under TEFRA:

[T]he period of assessing any tax . . . which is attributable to a partnership item (or affected item) for a partnership taxable year shall not expire before the date which is 3 years after the later of—(1) the date on which the partnership return for such taxable year was filed, or (2) the last day for filing such return for such year (determined without regard to extensions).

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 9 § 6229(a). Section 6501(n)(2) (during the relevant tax years) states, "For extension of period in the case of partnership items (as defined in section 6231(a)(3)), see section 6229." Section 6229(b)(1) permits extending the limitations period by agreement, using Form 872‑P with the TMP or Form 872 with the individual partner. See § 6229(b)(3) (permitting extensions "only if the agreement expressly provides that such agreement applies to tax attributable to partnership items"); § 6501(c)(4). § 6229(b)(1) states:

The period [of limitations for making assessments] . . . may

be extended—

(A) with respect to any partner, by an agreement entered into by the Secretary and such partner, and

(B) with respect to all partners, by an agreement entered into by the Secretary and the tax matters partner (or any other person authorized by the partnership in writing to enter into such an agreement),

before the expiration of such period.

Mailing an FPAA to the TMP suspends the limitations period to "assess[] any tax . . . with respect to any person which is attributable to any partnership item (or affected item) for a partnership taxable year," § 6229(a), until one year after a partnership-level proceeding concludes (or if there is no partnership-level proceeding, then for the period it can be brought plus one year). § 6229(d).

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 10

B. Factual History⁵ Mr. Blum, founder of online retailer Buy.com, participated in the Offshore Portfolio Investment Strategy ("OPIS") and Bond Linked Issue Premium Structure ("BLIPS") tax shelters. A "tax shelter" is "(I) a partnership or other entity, (II) any investment plan or arrangement, or (III) any other plan or arrangement, if a significant purpose . . . is the avoidance or evasion of Federal income tax." I.R.C. § 6662(d)(2)(C)(ii). Both the OPIS and BLIPS shelters were investment plans or arrangements that enabled participants to report losses on their tax returns that they did not actually suffer.

We addressed the Blums' OPIS tax issues in Blum v. Commissioner, 737 F.3d 1303, 1306 (10th Cir. 2013). This case concerns the BLIPS shelter. See Blum v. Commissioner, T.C.M. (RIA) 2025-018 (2025).

The BLIPS Shelter

In broad strokes, the Eleventh Circuit provided a helpful description of the BLIPS tax shelter:

Like many of its kin, this tax shelter employs a series of transactions to create artificial financial losses that are used to offset real financial gains, thereby reducing tax liability. BLIPS participants transfer assets encumbered by significant liabilities to a partnership with the purpose of artificially increasing their basis in that partnership. Tax basis is the amount used as the cost of an asset when computing how

much its owner gained or lost for tax purposes when

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 11 disposing of it. In the partnership context, "outside basis"

refers to each partner's interest in the partnership, and "inside basis" refers to the partnership's basis in its own assets. The partners in a BLIPS scheme evade tax liability by attaching their inflated outside basis to a liquidating distribution received from the sham partnership. When they sell the distributed assets, they generate artificial losses. Estate of Keeter v. Comm'r, 75 F.4th 1268, 1276 (11th Cir. 2023) (citations and quotations omitted). The Blums (through Mr. Blum) took these steps here. In 1999, Mr. Blum participated in the BLIPS shelter through Bogan Ventures, LLC ("Bogan"), his single-member limited liability company, which invested in the partnership Democrat Strategic Investment Fund, LLC ("DSIF"). Because Bogan was a disregarded entity for federal tax purposes (meaning Bogan did not need to file a tax return), Blum, T.C.M. (RIA) 2025-018, at *3-4, Mr. Blum was an indirect partner of DSIF. See id. at *4; I.R.C. § 6231(a)(10). Bogan owned about 90% of DSIF. Blum, T.C.M. (RIA) 2025-018, at *4. Presidio Growth, LLC and Presidio Resources, LLC owned the remaining interests. Id. Presidio Growth was DSIF's TMP. Id. The BLIPS tax shelter involved a series of transactions that "lacked economic substance," id. at *44, meaning they were not legitimate investments and were executed for tax accounting purposes only. See id. at *43-44. First, as pertinent to the Blums, DSIF acquired assets in transactions that inflated Bogan's "outside basis" in DSIF. Id.

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 12 at *4, *43; see Shasta Strategic Inv. Fund, LLC v. United States (Shasta SIF), No. C-04- 04264-RS, 2014 WL 3852416, at *2-3 (N.D. Cal. July 31, 2014).⁶ Eventually, DSIF "liquidate[d] and distribute[d] its assets . . . to Bogan." Blum, T.C.M. (RIA) 2025-018, at *4. Because Bogan was a disregarded entity, this liquidating distribution gave the Blums the same inflated basis as Bogan in the distributed assets. See id. The Blums' basis in the assets "receive[d] in [the] liquidating distribution from a TEFRA partnership [(DSIF)] [was] an affected item." Id. at *43. Finally, Mr. Blum through Bogan sold the assets at their fair market value, not their inflated basis, "to generate $78.5 million in artificial tax loss." Id. at *4.

Resulting Tax Returns

On April 17, 2000, DSIF filed its tax year ("TY") 1999 informational partnership return, which included partner Bogan's Schedule K‑1—the "[p]artner's [s]hare of [the partnership's] [i]ncome, [d]eductions, [c]redits, etc." Id. Based on "Schedule K‑1, Bogan was a notice partner of DSIF and was entitled to receive a copy of [an] FPAA."

Id.; see also I.R.C. § 6231(a)(8).

For the same TY 1999, the Blums timely filed their personal return, claiming the $78.5 million loss as capital loss, deducting that loss to offset about $74.8 million of capital gain from their sale of an unrelated asset, and therefore reporting no taxable

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 13 income. Blum, T.C.M. (RIA) 2025-018, at *4. For TYs 2007 and 2010, they deducted capital loss carryforward from their remaining TY 1999 artificial loss. Id.

The IRS Audit

On September 5, 2000, the IRS issued I.R.S. Notice 2000-44, 2000-2 C.B. 255, advising the BLIPS investors that the tax shelter was "not bona fide and did not reflect actual economic consequences." Id. at *5. In October 2001, the IRS began auditing the Blums' 1998 return. Id. Because they had participated in the OPIS shelter, the IRS expanded the audit to include their TY 1999 and TY 2000 returns and DSIF's TY 1999 return. Id.

a. Consents to extend the limitations periods

i. TMP Consents During the DSIF audit, "DSIF's TMP Presidio Growth signed three Forms 872‑P, Consent to Extend the Time to Assess Tax Attributable to Partnership Items (["TMP Consents"]), to extend the limitations period for 1999 to December 31, 2004." Id. at *17. The Tax Court noted that the first TMP Consent "extend[ing] the limitations period to June 30, 2004, is signed by the TMP but not the IRS." Id. But it appears from the record that, in addition to the TMP's signing this first TMP Consent on March 27, 2003, the IRS also signed it on April 2, 2003—before the three-year limitations period under I.R.C. § 6229(a) would have expired around April 17, 2003. See Aplee. Suppl. App., Vol. 3

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 14 at 131-32.⁷The TMP and IRS executed two more TMP Consents on February 20, 2004, and on October 13, 2004. Id. at 133-36.

ii. Individual Consents The Blums "and the IRS also executed multiple Forms 872 (["Individual Consents"]), to extend [the Blums'] personal limitations period for 1999 to December 31, 2005." Blum, T.C.M. (RIA) 2025-018, at *17. But these Individual Consents "did not expressly extend the limitations period to assess tax attributable to partnership or affected items." Id.

b. The FPAA

On December 17, 2004, before the extended limitations period expired, the IRS mailed FPAAs to DSIF's TMP and its partners—Presidio Growth, Presidio Resources, and Bogan (recall Bogan was a notice partner, see I.R.C. § 6231(a)(8)). Blum, T.C.M. (RIA) 2025-018, at *12.⁸In the FPAA, the IRS found the DSIF-BLIPS scheme lacked economic substance. Id.

c. Notices of deficiency for affected items

The adjustments in the FPAA increased the Blums' individual tax liability based on the IRS's partner-level determinations after the partnership-level proceeding.

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 15 On December 8, 2015, the IRS issued three affected-items NODs to the Blums, one each for TYs 1999, 2007, and 2010, determining deficiencies of $14,911,356; $214,385, and $736,216, respectively. Id. at *18.⁹The NODs also assessed additional penalties for misstatement ($5,964,542; $85,754; and $294,486, respectively) and failure to timely file the 2007 return ($10,719). Id. The NODs stemmed mainly from the IRS's disallowing the $78.5 million "loss" generated for TY 1999 by the BLIPS shelter. Id. The IRS determined the Blums had zero basis in DSIF's distributed assets. Id. This disallowance trickled down to disallow the Blums' claimed loss carryforwards in TYs 2007 and 2010. Id.

C. Court Proceedings DSIF's District Court Partnership-Level Proceeding

On March 17, 2005, after the IRS issued the FPAA, TMP Presidio Growth "timely filed a consolidated petition for review of the FPAA . . . in the District Court for the Northern District of California"—a partnership-level proceeding. Blum, T.C.M. (RIA) 2025-018, at *13. This proceeding resulted in the Shasta SIF decision. See id. at *14. The Blums knew about and were parties to the proceeding. Id.; see I.R.C. § 6226(c). They could have participated on Bogan's behalf, see § 6226(c), but did not do so, Blum, T.C.M. (RIA) 2025-018, at *14. Instead, they unsuccessfully pursued settling their BLIPS shelter loss. Id.

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 16 In July 2014, the district court held the BLIPS transactions lacked economic substance, "sustaining all adjustments in the FPAAs" that are relevant to this case. Id.; see Shasta SIF, 2014 WL 3852416, at *18. This decision meant the Blums improperly deducted their $78.5 million loss generated by these BLIPS transactions. See Blum, T.C.M. (RIA) 2025-018, at *2.

The district court's decision became final on January 20, 2015. Id. at *36.

The Blums' Tax Court Partner-Level Proceeding

After prevailing in the partnership-level proceeding, the IRS issued the NODs to the Blums for their affected items and penalties for TYs 1999, 2007, and 2010, totaling approximately $22.2 million in additional liability. They challenged the NODs in Tax Court.

The Blums argued they should not have to pay the $22.2 million because (1) they did not receive notice of the FPAA as TEFRA required, (2) the district court in the Shasta SIF partnership-level case did not disallow the $78.5 million loss, and (3) the FPAA and affected-items NODs were not timely. Blum, T.C.M. (RIA) 2025-018, at *1-2.¹⁰ The Tax Court rejected these theories as "unfounded" and "baseless." Id. at *2. The Blums limit their appeal to this court to the third theory. See Aplt. Br. at 1. The Tax Court rejected it as follows:

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 17 First, the Tax Court said, "Partners cannot challenge the validity of the TMP [C]onsents in a partner-level case. The timeliness of an FPAA is a partnership item that must be raised during the TEFRA [(partnership-level)] case, or it is waived." Id. at *35.

"Accordingly, [the Tax Court did] not address the merits of [the Taxpayers'] argument with respect to the TMP [C]onsents." Id.

Second, the court said the NODs "were timely under section 6229" because the timely mailing of the FPAA suspended the running of the limitations period until one year after the partnership-level proceeding's decision became final. See id. at *35-36; I.R.C. § 6229(d)(2). The Individual Consents were thus immaterial anyway because the Blums' TY "1999 limitations period was open to assess tax attributable to partnership and affected items under section 6229." Blum, T.C.M. (RIA) 2025-018, at *36. Alternatively, the court found the Individual Consents were valid on their face. Id. Third, because the disallowed TY 2007 and TY 2010 losses were loss carryforwards of the TY 1999 tax shelter loss, the limitations periods for those tax years

"remain[ed] open . . . to the same extent as the 1999 limitations period." Id.; see also I.R.C. § 6229.

We resolve this appeal on the ground that the Blums waived their FPAA timeliness argument because they failed to raise it in the partnership-level proceeding. * * * *

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 18 The following summarizes the key factual and procedural occurrences:

The Blums invested in the BLIPS shelter via Bogan and

1999 the partnership DSIF.

Apr. 17, 2000 DSIF filed its TY 1999 informational return.

The Blums timely filed their TY 1999 personal return,

Apr. 17, 2000 claiming $78.5 million capital loss.

The IRS began to audit the Blums' TY 1998 return. It

expanded its audit to include the Blums' TYs 1999 and

2000 returns and DSIF's TY 1999 return—covering the

Oct. 2001 BLIPS transactions.

Feb. & Sept. 2002 The Blums executed two Individual Consents. § 6229(b)(1)(A)

Mar. 27, 2003 DSIF's TMP signed the first TMP Consent. § 6229(b)(1)(B)

The IRS appears to have signed the first TMP Consent,

Apr. 2, 2003 extending limitations period to June 30, 2004. § 6229(b)(1)(B)

Apr. 17, 2003 The limitations period expired if unextended. § 6229(a)

The TMP and the IRS executed the second TMP

Consent, extending the limitations period to Dec. 31,

Feb. 20, 2004 2004. § 6229(b)(1)(B)

The Blums executed the third Individual Consent,

July 28, 2004 extending their limitations period to Dec. 31, 2005. § 6229(b)(1)(A)

The TMP and the IRS executed the third TMP Consent,

Oct. 13, 2004 extending the limitations period to Dec. 31, 2005. § 6229(b)(1)(B)

Dec. 17, 2004 The IRS mailed FPAAs to DSIF's partners.

TMP filed a petition, starting a partnership-level

proceeding in the district court for the Northern District

Mar. 17, 2005 of California.

Dec. 31, 2005 The limitations period expired if validly extended. § 6229(b)(1)(B)

The district court's decision in the partnership-level

Jan. 20, 2015 proceeding, sustaining the FPAAs, became final.

Dec. 8, 2015 The IRS issued affected items NODs to the Blums.

The limitations period with the one-year extension

Jan. 20, 2016 following the partnership-level case expired. § 6229(d)

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 19

II. DISCUSSION

Exercising jurisdiction under I.R.C. § 7482(a)(1), we review Tax Court decisions

"in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury." We therefore review the Tax Court's legal conclusions de novo and its factual findings for clear error. Olsen v. Comm'r, 52 F.4th 889, 896 (10th Cir. 2022); Petersen v. Comm'r, 924 F.3d 1111, 1114 (10th Cir. 2019). On appeal to this court, the Blums argue:

(A) The first TMP Consent was invalid because the IRS did not sign it, so the next two TMP Consents were untimely and invalid; and

(B) The Individual Consents were invalid because they "failed to expressly extend the [TY] 1999 limitations period with respect to partnership or affected items."

Aplt. Br. at 13-15.

For these reasons, the Blums claim "the FPAA, partnership[‑level] proceeding, and . . . 2015 [N]otice of [C]omputational [A]djustments and affected item [NODs]" were invalid. Id. at 16. The Blums' appeal disputes roughly $15.9 million of deficiencies assessed by NODs.¹¹

A. TMP Consents under TEFRA

The Blums argued in the Tax Court partner-level proceeding that the FPAA issued to DSIF was untimely and invalid because the IRS failed to sign the first TMP Consent Form 872-P extending the IRS's examination of DSIF's partnership return through

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 20 June 30, 2004. This alleged defect, along with allegedly defective Individual Consents, in turn rendered the NODs untimely. The Tax Court rejected this argument as waived, holding the Blums should have raised the validity of the TMP Consent in the partnership- level proceeding held in the Northern District of California and failed to do so. We agree with the Tax Court's waiver determination.

In this appeal, the Blums argue the TMP Consent's validity is not a partnership item and may be raised in the partner-level proceeding. We disagree on three grounds.

(1) FPAA timeliness is a partnership item under I.R.C. § 6221 as defined by § 6231(a)(3) and its corresponding Treasury Regulation.

(2) Under § 6221, FPAA timeliness relates to adjustments to partnership items and must be determined at the partnership level.

(3) The context, structure, and purpose of TEFRA corroborate that challenges to FPAA timeliness must be raised in partnership-level proceedings. Because the Blums did not do so, they have waived any challenges to the timeliness of the FPAA and therefore also to the NODs sent to them.¹²

Our analysis turns on statutory interpretation, which begins by considering

"whether the language at issue has a plain and unambiguous meaning." Dressen v. AstraZeneca AB, 182 F.4th 1232, 1244 (10th Cir. 2026) (quotations omitted). "We determine '[t]he plainness or ambiguity' of a statute's text 'by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.'" Id. (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997)).

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 21

"Our tools of interpretation include examination of the statute's text, structure, purpose, history, and relationship to other statutes." United States v. Aguilar, 168 F.4th 1319, 1327 (10th Cir. 2026) (quotations omitted).

Partnership Item - I.R.C. § 6231(a)(3) and Treasury Regulation § 301.6231(a)(3)‑1

The parties dispute whether FPAA timeliness is a partnership item under TEFRA. The relevant statute is I.R.C. § 6231(a)(3):

The term "partnership item" means, with respect to a

partnership, any item required to be taken into account for the partnership's taxable year under any provision of subtitle A to the extent regulations prescribed by the Secretary provide that, for purposes of this subtitle, such item is more appropriately determined at the partnership level than at the partner level.

The question is whether FPAA timeliness is a "partnership item" under § 6231(a)(3) and therefore "shall be determined at the partnership level." § 6221. a. Statutory delegation to define partnership item

Section 6231(a)(3) plainly gives the Secretary discretion to decide what a

"partnership item" is, but (1) constrains that discretion to "any item required to be taken into account . . . under any provision of subtitle A," and (2) limits "partnership items" to those items that the Secretary believes are "more appropriately determined at the partnership level than at the partner level."

b. Partnership item under the Regulation

Relying on this statutory authority, the Secretary promulgated Treasury Regulation § 301.6231(a)(3)-1, which lists in subsection (a) various items that subtitle A of the Code

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 22 required partnerships to account for. See Treas. Reg. § 301.6231(a)(3)-1(a). For example, the partnership's income, gain, loss, deduction, or credit are partnership items. Id. So too are the partner's share of those items. Id.

Subsection (b) adds: "The term 'partnership item' includes the accounting practices and the legal and factual determinations that underlie the determination of the amount, timing, and characterization of items of income, credit, gain, loss, deduction, etc." Id. § 301.6231(a)(3)-1(b).¹³

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 23 Although FPAA timeliness may not fall within subsection (a), it falls under subsection (b) as a partnership item based on the "traditional tools of construction,"

which are the same as for a statute or a regulation. See Kisor v. Wilkie, 588 U.S. 558, 575 (2019) (quotations omitted).

The pass-through partnership taxation structure, see I.R.C. § 702, enabled the Blums to claim a $78.5 million loss based on their distributive share from the DSIF partnership. Blum, T.C.M. (RIA) 2025-018, at *12. The FPAA disallowed the loss altogether. But if the FPAA was untimely, the claimed loss would remain at $78.5 million.

Because the FPAA's timeliness significantly affects the loss ($0 or $78.5 million), which is a partnership item, Treas. Reg. § 301.6231(a)(3)-1(a)(1)(i), it "underlies" a loss amount under subsection (b) of the Regulation. FPAA timeliness is also a

"determination" under subsection (b) because "determining" whether the IRS issued an FPAA within its limitations period in turn "determines" the reported loss amount, which is a partnership item under subsection (a) and which appears in subtitle A of the Code, see I.R.C. §§ 1201-1298.

c. The Blums' subtitle F argument

The Blums argue that because the FPAA limitations period appears in the Code's subtitle F, it cannot be a partnership item under the statute. Aplt. Br. at 21. But this overlooks § 6231(a)(3)'s language that a partnership item "means, with respect to a partnership, any item required to be taken into account for the partnership's taxable year under any provision of subtitle A." I.R.C. § 6231(a)(3) (emphasis added).

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 24 Subsection (a) of the Regulation lists as partnership items Code subtitle A items

"income, gain, loss, deduction, or credit of the partnership." Treas. Reg. § 301.6231(a)(3)-1(a). Subsection (b), consistent with the statute's "taken into account"

language, states that partnership items include "determinations that underlie the determination of the amount, timing, and characterization of items of income, credit, gain, loss, deduction, etc." Id. § 301.6231(a)(3)-1(b) (emphasis added). The Regulation thus includes as partnership items, in addition to those listed from subtitle A, those determinations that "underlie" "the amount, timing, and characterization" of those listed items. This comports with § 6231(a)(3)'s directive that

"partnership items" means items that must be "taken into account" to make those determinations.

It follows that certain items outside of subtitle A may need to be "taken into account" as partnership items because they determine—or "underlie"—subtitle A partnership items. As applied here and outlined above, the FPAA limitations period from subtitle F is an example of a partnership item that must be "taken into account" in making those determinations.¹⁴

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 25 * * * *

FPAA timeliness is a partnership item, so it must be challenged at the partnership- level proceeding. See I.R.C. § 6221. The Blums did not do so, so they waived this challenge.

Relates to an Adjustment to a Partnership Item - I.R.C. § 6221

Section 6221 also supports that FPAA timeliness must be raised in partnership- level proceedings. It provides: "[T]he tax treatment of any partnership item (and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to a partnership item) shall be determined at the partnership level." I.R.C. § 6221 (emphasis added).¹⁵Because the difference between the standard three-year limitations period and the extended period here amounted to the Blums' being able to claim no loss or a $78.5 million loss, it follows that the FPAA's timeliness "relates to an

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 26 adjustment to a partnership item." Id. And this adjustment "shall be determined at the partnership level," not at the partner level. Id.

Statutory Context, Structure, and Purpose

If the foregoing interpretation of §§ 6221 and 6231(a)(3) and Treasury Regulation § 301.6231(a)(3)-1 leaves any ambiguity, TEFRA's context, structure, and purpose should leave no doubt. Our understanding that the FPAA's timeliness must be raised at the partnership-level proceedings draws support from the "specific context in which [the statutory] language is used, and the broader context of the statute as a whole." Dressen,

182 F.4th at 1244 (quotations omitted). The "whole act" rule of statutory construction instructs:

[A] section of a statute should not be read in isolation from the context of the whole Act, and that in fulfilling our responsibility in interpreting legislation, we must not be guided by a single sentence or member of a sentence, but should look to the provisions of the whole law, and to its object and policy.

Richards v. United States, 369 U.S. 1, 11 (1962) (citations and quotations omitted); Aulston v. United States, 915 F.2d 584, 589 (10th Cir. 1990) ("In interpreting . . . relevant language . . . we look to the provisions of the whole law."). "In statutory interpretation disputes, a court's proper starting point lies in a careful examination of the ordinary meaning and structure of the law itself." Food Mktg. Inst. v. Argus Leader Media, 588 U.S. 427, 436 (2019); see Am. Mining Cong. v. EPA, 824 F.2d 1177, 1185 (D.C. Cir. 1987) (In interpreting a statutory provision, "context and structure are, as in examining any legal instrument, of substantial import in the interpretive exercise.").

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 27 a. Context

In addition to Sections 6221 and 6231(a)(3), other TEFRA sections support our interpretation. For example, I.R.C. § 6229(b)(1) provides that extension of the FPAA limitations period requires a partnership's consent from its TMP. Under § 6226(a), within 90 days from when the IRS mails the FPAA, the TMP "may file a petition for a readjustment of the partnership items" in the Tax Court, the district court, or the Claims Court. In settlement agreements about the determination of partnership items, the TMP can bind not only notice partners, but also non-notice partners when the TMP "expressly states that such agreement shall bind the other partners." § 6224(c)(3)(A). If the TMP does not file a readjustment petition, any notice partner may file one. § 6226(b)(1). "If more than 1 action is brought" by a partner other than the TMP, then

"the first such action brought in the Tax Court shall go forward," or if "no such action is brought in the Tax Court, the first such action brought shall go forward." §§ 6226(b)(2)-

(3).

All partners are considered parties to such a partnership-level petition, and the court must permit their participation. § 6226(c); see also § 6224(a). And § 6226(d)(1) provides that all partners may participate "for the purpose of asserting that the period of limitations for assessing any tax attributable to partnership items has expired with respect to [them]."

TEFRA therefore provides various procedural avenues to resolve issues at the partnership level. The TMP Consent and FPAA limitations period fall squarely in this matrix of partnership-level proceedings.

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 28 b. Structure and purpose

TEFRA's two-level framework facilitates consistent partner-level tax treatment and promotes efficiency by consolidating adjudication at the partnership level. See generally I.R.C. § 6226(a)-(b). It enables TMPs to bind most other partners in settlement agreements. See § 6224(c). It enables partners to adjudicate if the TMP does not, but only one proceeding can proceed if multiple partners wish to adjudicate. See § 6226(b)(1)-(4). Indeed, "Congress enacted TEFRA 'to promote consistent tax treatment of partners and to avoid duplicative litigation.'" Omega Forex, 906 F.3d at 1204 (quoting Prati, 603 F.3d at 1305).

TMP Consents affect the timeliness of an FPAA, which affects the outcome of partnership-level proceedings, which affects the interests of all partners. TEFRA's statutory structure and purpose thus confirm that challenges to an FPAA's timeliness must be presented in partnership-level proceedings.¹⁶

Other Circuits

Every circuit to consider the issue has held that a challenge to an FPAA on the ground it was sent after the limitations period expired is a partnership item that must be raised in a TEFRA partnership-level proceeding. See Bedrosian v. Comm'r, 940 F.3d 467, 471-72 (9th Cir. 2019); Keener v. United States, 551 F.3d 1358, 1362-64 (Fed. Cir.

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 29 2009); Weiner v. United States, 389 F.3d 152, 155-58 (5th Cir. 2004); Chimblo v. Comm'r, 177 F.3d 119, 125 (2d Cir. 1999); Kaplan v. United States, 133 F.3d 469, 473- 74 (7th Cir. 1998). A taxpayer's failure to do so waives the right to raise the challenge in a partner-level deficiency proceeding.

Although these out-of-circuit decisions are not binding on us, we are mindful of this court's "reluctan[ce] to effectively create a circuit split . . . especially where so many circuits would be lined up against us." Exby-Stolley, 979 F.3d at 810 (citing United States v. Thomas, 939 F.3d 1121, 1130-31 (10th Cir. 2019)). The Blums point out that the other circuits' cases were decided before the Supreme Court's decisions in Kisor and Loper Bright, but our analysis of the TEFRA provisions affords no deference to the agency's interpretation. Moreover, we find some of the out-of-circuits' non-deferential analyses persuasive, particularly as to TEFRA's structure and purpose. For example, the Ninth Circuit in Bedrosian highlighted that Congress passed TEFRA to "ensure equal tax treatment among partners of the same partnership, and to remove the burden of duplicative audits and lawsuits involving issues in common to the partnership." 940 F.3d at 469 (citing Woods, 571 U.S. at 38-39). In Keener, the Federal Circuit held the IRS's interpretation of the limitations period as a partnership item was reasonable because of the statutory purpose. 551 F.3d at 1362-64. Indeed, reading I.R.C. § 6231(a)(3)'s definition of "partnership item"

differently would lead to "a partnership-level proceeding [that] would not adjudicate these issues, instead leaving them to a plurality of potentially inconsistent partner-level proceedings"—an "impractical result." Id. at 1364.

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 30 In Weiner, the Fifth Circuit reasoned that "because the FPAA limitations issue affects the partnership as a whole, it should not be litigated in an individual partner proceeding, as such a result would contravene the purposes of TEFRA." 389 F.3d at 156-

57. It then said the Regulation "implicitly include[s] the statute of limitations determination within the definition of 'partnership item'" because it "might be said to affect the amount, timing, and characterization of income, etc. (partnership items) at the partnership level, if only in a thumbs-up or thumbs-down manner." Id. at 157 (quotations omitted).

In Chimblo, the Second Circuit observed: "Allowing individual taxpayers to raise a statute of limitations defense in multiple partner-level proceedings would undermine TEFRA's dual goals of centralizing the treatment of partnership items and ensuring the equal treatment of partners." 177 F.3d at 125.

And in Kaplan, the Seventh Circuit said that challenging FPAA timeliness "is precisely the type of challenge prohibited by TEFRA in light of Congress's decision that such suits are better addressed in one fell swoop at the 'partnership level' than in countless suits by individual partners." 133 F.3d at 473.

The consensus among the circuits is that TEFRA's statutory structure and purpose point to using one partnership-level litigation as much as practicable and permissible. FPAA timeliness is more efficiently and consistently adjudicated in a partnership-level proceeding because an FPAA applies as to all partners. Here, the first TMP Consent was valid as to all partners or none, making the FPAA timely as to all partners or none. The partnership-level proceeding in the district court for the Northern District of California

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 31 could have resolved the issue equally as to all partners, but the Blums did not raise it there.

Conclusion

FPAA timeliness is a partnership item under I.R.C. § 6231(a)(3) and the Regulation. Under § 6221, it at least relates to an adjustment to a partnership item and therefore must be determined at the partnership level. TEFRA's structure and purpose support these conclusions. The Blums therefore may not raise the FPAA's timeliness— including alleged defects in TMP Consents to extend the FPAA's limitations period—in the partner-level proceeding. They must raise these issues in the partnership-level proceeding. Their failure to do so waived this challenge.

B. Individual Consents

The Blums argue the Tax Court erred in finding the Individual Consents were

"valid on their face, and [the Taxpayers] did not present any evidence that the consents [were] invalid." Blum, T.C.M. (RIA) 2025-018, at *36. The Blums argue the Individual Consents were invalid because they did not "expressly provide[] that [they] appl[y] to tax that is attributable to partnership items," as I.R.C. § 6229(b)(3) requires. Aplt. Br. at 14-

15.

We need not address the validity of the Individual Consents because we hold the Blums cannot challenge the first TMP Consent in this partner-level proceeding. They needed to challenge its validity in the partnership-level proceeding. The Blums were parties to that proceeding, see I.R.C. § 6226(c), and the Tax Court found they knew about

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Appellate Case: 25-9001 Document: 59-1 Date Filed: 11/02/2026 Page: 32 it when it was ongoing, Blum, T.C.M. (RIA) 2025-018, at *14. They could have participated on Bogan's behalf. See I.R.C. § 6226(c). Because the Blums have waived a challenge to the first TMP Consent, and because later unchallenged TMP Consents extended the FPAA limitations period to December 31, 2004, see Blum, T.C.M. (RIA) 2025-018, at *17, the IRS timely issued the FPAA on December 17, 2004, id. at *12. The NODs issued to the Blums on December 8, 2015, id. at *35, were timely because the decision in the partnership-level proceeding in the Northern District of California became final on January 20, 2015. Id. at *14. Under §§ 6229(a), (d)(2), that decision suspended the limitations period for assessing tax attributable to partnership items or affected items for one year, until January 20, 2016. Thus, as the Tax Court held, the Individual Consents' validity is

"immaterial." Blum, T.C.M. (RIA) 2025-018, at *36. The Blums remain liable for the roughly $15.9 million at issue in this appeal.

III. CONCLUSION

We deny the Blums' petition and affirm the Tax Court's judgment.

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