Cir

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SHEA HOMES, INC. AND No. 14-72161

SUBSIDIARIES,

Petitioner-Appellee, Tax Ct. No. 29271-09 v.

COMMISSIONER OF INTERNAL

REVENUE,

Respondent-Appellant.

SHEA HOMES, LP; JF SHEA, LP, FKA No. 14-72162 JF Shea LLC, Tax Matters Partner, Petitioners-Appellees, Tax Ct. No. 1400-10 v.

COMMISSIONER OF INTERNAL

REVENUE,

Respondent-Appellant. VISTANCIA, LLC; SHEA HOMES No. 14-72163 SOUTHWEST, INC., Tax Matters Partner, Tax Ct. No. Petitioners-Appellees, 1401-

v.

OPINION

COMMISSIONER OF INTERNAL

REVENUE,

Respondent-Appellant.

Appeals from Decisions of the Tax Court

Argued and Submitted June 7, 2016 Pasadena, California

Filed August 24, 2016

Before: Ferdinand F. Fernandez, Johnnie B. Rawlinson, and Carlos T. Bea, Circuit Judges.

Opinion by Judge Fernandez; Concurrence by Judge Rawlinson

SHEA HOMES V. CIR

SUMMARY*

Tax

The panel affirmed the Tax Court’s decisions that taxpayers Shea Homes, Inc. and Subsidiaries did not have any deficiencies and that taxpayers Shea Homes, LP and…

Concurrence by Judge RAWLINSON

OPINION

The Commissioner of Internal Revenue (“Commissioner”) appeals the decisions of the United States Tax Court in these consolidated cases that Shea Homes, Inc. and Subsidiaries (“SHI”) did not have any deficiencies for the tax years under consideration and that Shea Homes, LP (“SHLP”) and Vistancia, LLC (“Vistancia”) had no adjustments to partnership items for their tax years which were under consideration. 1 Hereafter, SHI, SHLP and Vistancia are collectively referred to as “the Taxpayers.” 2 The decisions flowed from the Tax Court’s determination 3 that the Taxpayers had used an accounting method 4 that clearly reflected their income during the tax years under consideration. We affirm.

BACKGROUND

The Tax Court found that the Taxpayers are builders and developers of planned communities “ranging in size from 100 homes to more than 1,000 homes in Colorado, California, and Arizona.” Shea Homes, 142 T.C. at 64. It further determined that:

Id. at 65. Because of the magnitude of those undertakings, the process tends to extend across more than one tax year. See 26 U.S.C. § 460 (f)(1); 26 C.F.R. §§ 1.460 -l(b)(5)-(6), 1.460-3(a).

Although the…

concurring in the judgment:

I concur in the judgment affirming the decision of the Tax' Court. However, I do so solely on the basis that the Commissioner of the Internal Revenue Service (Commissioner) is bound by the arguments and theories relied upon during the trial before the' Tax Court. As noted by the majority, the Commissioner advocated before the Tax Court that, for purposes of determining the taxable income from the home construction contracts at issue, the subject matter of the construction contract was only the purchased house and the lot upon which the house was sited. Specifically, the Commissioner argued that none of the amenities included in the housing development were part of the contract, and that any amenities were secondary items unrelated to completion of the contract.

The Tax Court rejected the Commissioner’s argument on both fronts, ruling that each construction contract included the amenities within the development, and that those amenities were not secondary items. On appeal, the Commissioner does not challenge these rulings by the Tax Court. Rather, the Commissioner now seeks to argue that the Tax Court erroneously permitted the Taxpayers to include the…