Transpac Drilling Venture 1982-12, Guy J. Cutili v. Commissioner of Internal Revenue

CALABRESI, Circuit Judge:

The specific question we address in this appeal is whether, as a'result of being placed under criminal investigation by the IRS (and hence becoming subject to pressure by the IRS), the tax matters partners (TMPs) of various partnerships labored under a conflict of interest and thereby wez'e disqualified from binding the partnerships. The Tax Court held that they had not lost their authority. We disagree and z-everse.

I

Seventy-one partnerships (the “Transpae partnerships”), each containing 30-50 limited partners, were promoted, primarily, by John Galanis, a convicted…