95 T.C. 209 (1990), 27857-89, White v. C.I.R.

Docket Nº:27857-89.
Citation:95 T.C. 209
Opinion Judge:NIMS, CHIEF JUDGE:
Party Name:WALLACE J. WHITE AND SANDRA J. WHITE, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:James F. Hart, for the petitioners. Jeffrey I. Rosenberg and Thomas F. Eagan, for the respondent.
Judge Panel:CHABOT, PARKER, HAMBLEN, COHEN, SWIFT, JACOBS, GERBER, WRIGHT, WELLS, RUWE, WHALEN, and HALPERN, JJ., agree with the majority. DISSENT OF JUDGE PARR PARR, J., dissenting:
Case Date:August 30, 1990
Court:United States Tax Court
 
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Page 209

95 T.C. 209 (1990)

WALLACE J. WHITE AND SANDRA J. WHITE, Petitioners

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 27857-89.

United States Tax Court

August 30, 1990

After the partnership level proceeding was completed, R issued a notice of deficiency to Ps determining that Ps were liable for additional interest under I.R.C. section 6621(c) and additions to tax under I.R.C. sections 6651(a)(1), 6653(a)(1), 6653(a)(2) and 6659. Ps timely filed a petition for redetermination of R's determinations. R filed a motion to dismiss for lack of jurisdiction as to I.R.C. section 6621(c). HELD, this Court does not have jurisdiction under I.R.C. section 6230(a)(2)(A)(i) to redetermine I.R.C. section 6621(c) interest because I.R.C. section 6621(c) interest is not a ‘ deficiency‘ attributable to an affected item requiring partner level determinations. HELD FURTHER, this Court does not have jurisdiction under I.R.C. 6621(c)(4) to determine whether section I.R.C. 6621(c) interest applies because the deficiency before the Court is not a substantial underpayment attributable to tax-motivated transactions.

James F. Hart, for the petitioners.

Jeffrey I. Rosenberg and Thomas F. Eagan, for the respondent.

Page 210

OPINION

NIMS, CHIEF JUDGE:

This case is before the Court on respondent's motion to dismiss for lack of jurisdiction as to section 6621(c). (Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for 1984 and all Rule references are to the Tax Court Rules of Practice and Procedure. Section 772l(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2106, 2399, repealed section 6621(c) effective for returns with a due date (determined without regard to extensions) after December 31, 1989.)

On April 5, 1988, respondent issued a Notice of Final Partnership Administrative Adjustment (the FPAA) to the tax matters partner of Accounting Associates partnership (the tax matters partner) determining adjustments to the 1984 Accounting Associates partnership return. On April 5, 1988, respondent mailed a copy of the FPAA to petitioners as notice partners.

No petition was filed by either the tax matters partner, within the 90-day period provided in section 6226(a), or any of the partnership's notice partners within the 60-day period provided in section 6226(b)(1). Thereafter, respondent assessed the deficiency in tax resulting from the partnership adjustments against petitioners as a computational adjustment. See Saso v. Commissioner, 93 T.C. 730, 734 (1989); sec. 6225(c).

By statutory notice of deficiency dated August 17, 1989, respondent determined that petitioners are liable for additional interest under section 6621(c) for 1984. Respondent also determined that petitioners are liable for the following additions to tax for 1984:

Additions to Tax
Sec. 6651(a)(1) Sec. 6653(a)(1) Sec. 6653(a)(2) Sec. 6659
$72.10 $409.80 1 $2,337.90
On November 20, 1989, petitioners timely filed a petition for redetermination of the additional interest under section 6621(c) (hereinafter ‘ additional interest‘ ) and the additions to tax set forth in respondent's notice of deficiency. On March Page 211 30, 1990, respondent filed a motion to dismiss for lack of jurisdiction as to section 6621(c) and a memorandum in support thereof. On April 30, 1990, petitioners filed an objection to motion to dismiss for lack of jurisdiction as to section 6621(c). The issue for decision is whether this Court has jurisdiction to determine whether petitioners are liable for additional interest. Petitioners assert that this Court has jurisdiction over additional interest because (1) additional interest is a deficiency and this Court may redetermine deficiencies; and (2) section 6621(c)(4) authorizes this Court to determine whether additional interest applies. Respondent contends that this Court lacks jurisdiction over additional interest because 1) additional interest is not a ‘ deficiency‘ attributable to an affected item; and (2) section 6621(c)(4) does not, in the present case, allow this Court to determine whether additional interest applies. For purposes of clarity, we will separately determine whether (1) additional interest is a deficiency attributable to an affected item; and (2) section 6621(c)(4) gives this Court jurisdiction over additional interest. AFFECTED ITEM JURISDICTION An ‘ affected item‘ is ‘ any item to the extent such item is affected by a partnership item.‘ Sec. 6231(a)(5). Additional interest is an affected item under section 6231(a)(5). N.C.F. Energy Partners v. Commissioner, 89 T.C. 741, 745 (1987). Affected items are of two types. The first type of affected item is a computational adjustment made to reflect the change in a partner's tax liability resulting from partnership level adjustments. N.C.F. Energy Partners v. Commissioner, supra at 744; sec. 6231(a)(6). Respondent may assess a computational adjustment against a partner without issuing a notice of deficiency once the partnership proceeding is completed. Sec. 6230(a)(1); N.C.F. Energy Partners v. Commissioner, supra at 744. The second type of affected item requires determinations to be made at the partner level. N.C.F. Energy Partners v. Commissioner, supra at 744. Once the partnership proceeding is completed, respondent may issue, in some circumstances, Page 212 a notice of deficiency to a partner for...

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