Munro v. Comm'r of Internal Revenue
| Decision Date | 23 January 1989 |
| Docket Number | Docket No. 21894-87. |
| Citation | 92 T.C. 71,92 T.C. No. 6 |
| Parties | JOEL MUNRO AND ANNE M. MUNRO, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
R issued a notice of final partnership administrative adjustment for one of several partnerships in which Ps were partners for their 1983 taxable year. R is examining the others. R also issued a statutory notice of deficiency to Ps for 1983 in respect of adjustments to nonpartnership items. R calculated the deficiency for 1983 by assuming the correctness of his proposed adjustments to partnership items. Ps move to dismiss for lack of jurisdiction claiming that no deficiency can exist for 1983 until R's proposed adjustments to partnership items are finally determined. HELD, partnership items (whether income, loss, deductions or credits) included on Ps' return are completely ignored in determining whether a deficiency exists that is attributable to nonpartnership items. R may not assume the correctness of his proposed adjustments to partnership items for computational purposes in determining a deficiency, and Ps may not offset net partnership losses against their taxable income for purposes of deficiency proceedings. HELD FURTHER, R determined a deficiency in Ps' 1983 Federal income tax. Ps' motion to dismiss for lack of jurisdiction is granted in part and denied in part. Alfred R. Westfall, for the petitioners.
Lynda B. Taylor, for the respondent.
This case is before us on petitioners' motion to dismiss for lack of jurisdiction. The issue we must decide is whether respondent determined a deficiency in petitioners' 1983 Federal income tax.
The facts have been fully stipulated and are so found. Petitioners were husband and wife during the year in issue and resided in Montecito, California at the time the petition was filed in this case.
On their 1983 Federal income tax return petitioners reported the following income and losses derived from partnerships:
+----------------------------------------+
¦Uversa Thoroughbreds 1981 Ltd.¦($33,218)¦
+------------------------------+---------¦
¦Uversa Thoroughbreds 1981 Ltd.¦7,706 ¦
+------------------------------+---------¦
¦Jasmine Associates, Ltd. ¦(27,713) ¦
+------------------------------+---------¦
¦Amesbury Thoroughbreds Ltd. ¦(269,848)¦
+------------------------------+---------¦
¦Western Thoroughbreds Ltd. ¦(152,487)¦
+------------------------------+---------¦
¦Sectra, Ltd. ¦(415,762)¦
+------------------------------+---------¦
¦Total ¦(891,322)¦
+----------------------------------------+
All of these partnerships are subject to partnership level proceedings pursuant to the partnership audit and litigation procedures of section 6221 1 et seq. with respect to taxable year 1983. Petitioners also claimed various itemized deductions on their return, and reported an overall loss on their 1983 return of $436,337. Respondent examined petitioners' 1983 return and disallowed certain itemized deductions and increased certain items of income. These adjustments were unrelated to partnership items. Respondent's adjustments that were attributable to nonpartnership items on petitioners' return were $259,500. These adjustments are not subject to the partnership audit and litigation procedures of section 6221 et seq.
On August 25, 1986, a Notice of Final partnership Administrative Adjustment (‘FPAA‘) was issued by respondent to Jasmine Associates, Ltd. for the taxable year 1983. At the time the statutory notice of deficiency was issued to petitioners in this case, no FPAA had been issued to any other partnership in respect of its 1983 taxable year. The statute of limitations for assessment had been extended by each of these remaining partnerships.
On April 9, 1987, respondent issued a statutory notice of deficiency to petitioners for their 1983 taxable year determining a deficiency of $313,812. Respondent arrived at the deficiency by including in income or disallowing deductions that aggregate to $259,500 in nonpartnership items on petitioners' 1983 tax return and, further, by prospectively disallowing the $891,322 of net partnership losses reported by petitioners.
Petitioners timely filed a petition for redetermination of deficiency alleging that respondent disallowed losses from the above- mentioned partnerships before issuing an FPAA. Respondent counters by alleging that the partnership losses were prospectively disallowed solely for the purpose of computing petitioners' deficiency attributable to disallowed nonpartnership items. This prospective adjustment to partnership items, respondent contends, was of a computational nature only and thus an FPAA was not necessary. Respondent cannot, however, deny that he has done more than assume the correctness of his proposed adjustments to partnership items for purposes of computing a deficiency attributable to nonpartnership items. On its face a deficiency of $313,812 cannot possibly result from a net adjustment to income and deductions of $259,500. Respondent has effectively determined a deficiency that, in part, is attributable to his adjustment of partnership items. Respondent has, on brief, however, contended only that he should be able to assume the correctness of his proposed TEFRA partnership adjustments for computational purposes.
In Maxwell v. Commissioner, 87 T.C. 783, 788 (1986), we stated as follows:
It is evident both from the statutory pattern and from the Conference report that Congress intended administrative and judicial resolution of disputes involving partnership items to be separate from and independent of disputes involving nonpartnership items. Consequently, the portion of any deficiency...
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Chai v. Comm'r of Internal Revenue
...uncollectible because of the expiration of the statute of limitations vis-à -vis nonpartnership items.That was the case in Munro v. Commissioner , 92 T.C. 71 (1989). There, the IRS presumptively—i.e., prior to the conclusion of ongoing partnership-level TEFRA proceedings—issued a notice of ......
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...LP's cancellation of indebtedness income from their income for that year. The IRS made these adjustments pursuant to Munro v. Commissioner [Dec. 45,441], 92 T.C. 71 (1989). Other Circumstances Surrounding PK Ventures' Operations and Financial A. Going Concern Notes in the Business's Financi......
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Pk Ventures, Inc. v. Commissioner, Dkt. No. 5836-99.
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