Joyner Family Limited Partnership v. Commissioner of Internal Revenue, 060320 FEDTAX, 24704-15

Docket Nº:24704-15
Opinion Judge:JOSEPH ROBERT GOEKE, JUDGE
Party Name:JOYNER FAMILY LIMITED PARTNERSHIP, GARY JOYNER REVOCABLE TRUST, A PARTNER OTHER THAN THE TAX MATTERS PARTNER, ET AL, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Case Date:June 03, 2020
Court:United States Tax Court
 
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JOYNER FAMILY LIMITED PARTNERSHIP, GARY JOYNER REVOCABLE TRUST, A PARTNER OTHER THAN THE TAX MATTERS PARTNER, ET AL, Petitioner(s),

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 24704-15

United States Tax Court

June 3, 2020

ORDER

JOSEPH ROBERT GOEKE, JUDGE

On April 15, 2020, petitioners filed a motion to vacate our order denying an award of administrative and litigation costs on the basis that petitioners failed to exhaust their administrative remedies as required by section 7430(b) (remedies requirement). On May 15, 2020, respondent filed a response to petitioners' motion, and on May 18, 2020, petitioners filed a reply. Petitioners admit that they did not request an Appeals conference or file a written protest before filing the petition.1 They received a 30-day letter with accompanying information about their Appeals rights. However, they argue that they did not receive a notice providing them with an opportunity to request an Appeals conference and were not conferred the right to Appeals before respondent issued the notice of final partnership administrative adjustment (FPAA). Without such an opportunity or conferred right, they argue that they exhausted the administrative remedies that were available to them.

On April 17, 2020, we issued an order directing respondent to file a response to petitioners' motion specifically addressing petitioners' arguments interpreting section 301.7430-1(b), Proced. & Admin. Regs.

A. Background

On October 22, 2014, Revenue Agent Jacqueline A. Patton sent a 30-day letter to the tax matters partner (TMP), JFLP's power of attorney, Philip Miron, and JFLP's certified public accountant, LaNell Sterling, with a copy of the revenue agent's report and publications describing their right to a review by Appeals. See Publication 3498, The Examination Process. Ms. Patton also called Mr. Miron, leaving a message that she had mailed the RAR and wanted to schedule a phone conference to discuss it. He did not respond. The 30-day letter did not explicitly mention an Appeals conference but the publication does. The publication refers to a 30-day letter but not a 60-day letter.

On November 4, 2014, Ms. Patton received a Freedom of Information Act (FOIA) request for the audit file by a letter from Ms. Sterling dated October 30, 2014, stating "We wish to inspect the documents first before finalizing our review of your summary report on the examination". The letter did not request a closing conference, waive it, or seek a postponement. On November 21, 2014, Ms. Patton called Ms. Sterling and left a message offering the audit file sought in the FOIA request and an opportunity to discuss it. Ms. Sterling did not respond. No one contacted Ms. Patton regarding a closing conference. On December 12, 2014, she closed the case and submitted it for issuance of the FPAA.

On December 18, 2014, Ms. Sterling received the FOIA response. On February 13, 2015, Mr. Miron contacted Ms. Patton; she told him that she had closed the case and they should be receiving a letter. He responded that he wanted an Appeals review. The FPAA was issued on May 11, 2015. Petitioners seek an award for costs incurred from the date, or alternatively August 15, 2017, the date of a purported qualified offer.

B. Remedies Requirement

Section 7430 provides for the award of reasonable administrative and litigation costs if the taxpayer: (1) is a prevailing party, (2) has exhausted available administrative remedies, and (3) has not unreasonably protracted the proceeding. Sec. 7430(a), (b)(1), (3), (c)(1) and (2); Polz v. Commissioner, T.C. Memo. 2011-117. Section 7430 is a limited waiver of sovereign immunity and is strictly construed in respondent's favor. United States Dept. of Energy v. Ohio, 503 U.S. 607 (1992); Smith v. Brady, 972 F.2d 1095, 1099 (9th Cir. 1992). Taxpayers have the burden of proof for each requirement.2 Rule 232(e).

For the remedies requirement, when no Appeals office conference is otherwise granted before the petition, the taxpayer must have requested an Appeals conference and filed a written protest before the statutory notice is issued. Sec. 301.7430-l(b)(1), Proced. & Admin. Regs.; see Storey v. Commissioner, T.C. Memo. 2013-59, at *2 (finding that taxpayers, who had received a 30-day letter, were provided the opportunity to request an Appeals conference).

Petitioners argue that they must exhaust only the administrative remedies made available specifically to JFLP. Section 7430(b)(1) states "the prevailing party has exhausted the administrative remedies available to such party within the Internal Revenue Service." (emphasis added). The phrase "such party" means an Appeals conference must be available to the particular taxpayer at issue. Minahan v. Commissioner, 88 T.C. 492 (1987) (no 30-day letter was issued).

Petitioners argue that in a partnership-level proceeding a 60-day letter must be issued to confer Appeals rights. See IRM pt. 8.19.1.6.8.4(3) (Oct. 1, 2013) ("The 60-day letter is the equivalent of a 30-day letter * * * [and] gives the partners the opportunity to appeal"). As there was no 60-day letter petitioners argue that an Appeals conference was not available to JFLP before the FPAA and JFLP exhausted the administrative remedies available to it.

We find the lack of a 60-day letter does not excuse petitioners' failure to request an Appeals conference. First, respondent is not required by statute to issue a 60-day letter. Second, petitioners were informed of their Appeal rights in the 30-day letter. It is immaterial that the 30-day letter did not explicitly state JFLP had a right to Appeals because the enclosures provided that information.

Petitioners base their argument that a 60-day letter is required to grant Appeal rights on the regulations' reference to the Statement of Procedural Rules. The regulations provide that a party has not exhausted its available remedies unless it "[r]equests an Appeals office conference in accordance with sections 601.105 and 601.106 of this chapter". Sec. 301.7403-1(b), Proced. & Admin. Regs. These sections are part of the Statement of Procedural Rules, which explains the...

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