Charles G. Fargo Elizabeth A. Fargo v. Commissioner of Internal Revenue

Charles and Elizabeth Fargo (Taxpayers) appeal the decision of the Tax Court holding that the Commissioner of Internal Revenue did not abuse his discretion by rejecting their offer to pay $7,500 in compromise of the approximately $104,000 interest owed on their 1983 and 1984 federal income tax liabilities. We affirm.

I. Facts

More than twenty years ago, Taxpayers bought interests in two partnerships: the Jackson & Associates Partnership (Jackson), and the Smith & Asher Associates Partnership (Smith & Asher). In 1983, Taxpayers claimed a loss of $30,767 attributable to their interest in Jackson; in 1984, they claimed a $2,749 loss from Jackson and a $28,996 loss from Smith & Ash-er. These partnerships were themselves partners in yet other partnerships (Wil-shire West Associates and Redwood Associates, respectively), which in turn were associated with a series of tax shelters called the Swanton Coal Programs. All of the partnerships were subject to the Tax Equity and Fiscal Responsibility Act (TEFRA) provisions of 26 U.S.C. §§ 6221-6234 .

The Swanton Coal Programs were exposed as purely tax-motivated transactions in Kelley v. Commissioner of Internal Revenue, 66 T.C.M. (CCH) 1132…