Richard v. Commissioner
| Decision Date | 11 August 1992 |
| Docket Number | Docket No. 13013-90. |
| Citation | 64 T.C.M. 449 |
| Parties | Richard I. and Ellen A. Manas v. Commissioner. |
| Court | U.S. Tax Court |
GOLDBERG, Special Trial Judge:
This case was heard pursuant to section 7443A(b)(3) and Rules 180, 181, and 182. All section references are to the Internal Revenue Code in effect for the years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure.
By a notice of deficiency dated April 11, 1990, respondent determined deficiencies in petitioners' Federal income tax for tax years 1982, 1983, and 1984 as follows:
Year Deficiency
1982 .............................. $4,324
1983 .............................. 2,434
1984 .............................. 1,705
This case was submitted fully stipulated pursuant to Rule 122. The stipulation of facts, supplemental stipulation of facts, and attached exhibits are incorporated by this reference. Petitioners resided in North Bay Village, Florida, when they filed their petition.
After concessions, the only issue for decision is whether the expiration of the period of limitations bars assessment of petitioners' liability for tax attributable to partnership items for the years in question.
Petitioners held a 2.475-percent partnership interest in Fort Myers Office Center, Ltd. (the Partnership). On their Federal income tax returns, petitioners claimed their distributive share of losses from the Partnership for the years 1982, 1983, and 1984 in the following amounts:
Year Claimed Loss
1982 .............................. $20,135
1983 .............................. 22,615
1984 .............................. 6,746
Respondent determined that certain Partnership deductions should be disallowed as follows:
Deductions Disallowed or
Partnership Year Adjustments to Income
1982 ................ $329,324
1983 ................ 251,722
1984 ................ 163,952
Respondent disallowed petitioners the following deductions with respect to each tax year:
Year Amount Disallowed
1982 ........................ $8,825
1983 ........................ 6,230
1984 ........................ 4,058
Given the fact that petitioners held a 2.475-percent interest in the Partnership, respondent concedes in the supplemental stipulation of facts that the amount of the disallowed deduction for 1982 should have been $8,150.
The Partnership filed its initial return for the taxable period beginning October 14, 1982, and ending December 31, 1982, on April 15, 1983. In a notice dated September 17, 1984, respondent sent the Partnership's tax matters partner (sometimes referred to as the TMP) notice of the beginning of an administrative proceeding for tax year 1982. In 1984, respondent was furnished the names and addresses of all partners, including petitioners.
On March 13, 1985, respondent sent the Partnership's TMP notice of the beginning of an administrative proceeding for tax year 1983. Neither petitioners nor respondent has a copy of any notice to the partners of the beginning of the administrative proceeding for the Partnership's 1984 tax year.
On July 4, 1985, respondent sent petitioners a notice of the beginning of an administrative proceeding at the partnership level for tax year 1983. Neither petitioners nor respondent has a copy of any notice sent to petitioners with respect to tax year 1982 or 1984.
Prior to the expiration of the period of limitations for the assessment of income tax attributable to a partnership item for 1982 and 1983, the Partnership's authorized representative executed a series of 3 Forms 872-P, Consent to Extend the Time to Assess Tax Attributable to Partnership Items of a Federally Registered Partnership. These 3 consents operated to extend the period of limitations for assessment for tax years 1982 and 1983 until December 31, 1988. No consent was signed with respect to tax year 1984.
On March 23, 1988, a notice of Final Partnership Administrative Adjustment (the FPAA) was mailed by respondent to the Partnership's TMP; this notice dealt with tax years 1982, 1983, and 1984. No copy of the notice of FPAA was sent to petitioners by respondent before the 60th day after the mailing of the FPAA to the TMP as required by section 6223(a) and (d)(2). Respondent concedes that she failed to provide. the partners with timely notice of FPAA under this provision.
On May 30, 1989, three notices of FPAA concerning Partnership tax years 1982, 1983, and 1984 were mailed to petitioners and some other partners by respondent.
Neither the TMP nor any other partner petitioned for a redetermination of the adjustments proposed in the notice of FPAA dated March 23, 1988. No partner who received the notice of FPAA dated May 30, 1989, petitioned for a redetermination of the proposed adjustments.
On April 11, 1990, respondent issued the notice of deficiency which is the basis of the dispute in this case. Petitioners' position is that the notice is not timely. They feel that their refusal to make the election to have the FPAA apply to them should not have the effect of extending the period of limitations for assessment with respect to them and that, if the statute so provides, it is unconstitutional. Petitioners argue that the notice of FPAA mailed to them on May 30, 1989, was an impermissible second notice within the meaning of section 6223(f). They further argue that even if such notice of FPAA was not a second notice, it is not timely for 1984, as the period of limitations expired 3 years after the filing of the Partnership return on April 15, 1985.
In this case, we must resolve a question concerning the interrelationship of the notice requirements concerning the unified partnership proceedings and the period of limitations for assessment with respect to partnership items. Specifically, we address the question of whether under the facts of this case respondent's failure to provide partners with a timely notice of FPAA, as required by section 6223(a) and (d)(2), has any impact upon the period of limitations for assessment. For the reasons stated below, we conclude that the notice of deficiency was timely for tax years 1982, 1983, and 1984.
In the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, 96 Stat. 324, Congress introduced a unified procedure whereby the tax treatment of partnership items is determined at the partnership level in a single proceeding at both the administrative and judicial levels. Secs. 6221 through 6233. These provisions apply to partnership taxable years beginning after September 3, 1982. TEFRA sec. 407(a)(3).
Section 6229 governing the period of limitations in TEFRA partnership cases states that, except as otherwise provided in this section, the period for assessing tax attributable to a partnership item "shall not expire before the date" which is 3 years after the later of the date on which the partnership return was filed or the last day for filing such return. Sec. 6229(a). A partnership item is an item of income, loss, deduction, or credit with respect to a partnership which is more appropriately determined at the partnership level than at the partner level. Sec. 6231(a)(3).
The statement that, except as otherwise provided, the period of limitations "shall not expire before" a date 3 years after the filing of the return provides for a minimum period. Such period may be extended, suspended, or otherwise affected as provided in section 6229. It does not mean that the period shall, without exception, expire in 3 years.
The 3-year period of assessment may be extended in a number of ways. For example, section 6229(b)(1)(B) provides that it may be extended for all partners in a partnership by the consent of the TMP.
Section 6229(d) provides that the running of the limitations period is suspended from the date when the FPAA is mailed to the partnership's TMP for (1) the period during which an action may be brought for judicial review of the FPAA, and if such an action is brought, until the decision of the court becomes final, and (2) for 1 year thereafter. The period during which an action may be brought is typically 150 days. Sec. 6226(a) and (b); see sec. 7503. To say that the running of the period of limitations is "suspended" clearly implies that, after the suspension, any time remaining at the date of suspension is allowed to run before the period expires. Aufleqer v. Commissioner [Dec. 48,369], 99 T.C. — (1992).
The final modification relevant to this case may occur if partnership items of any partner become nonpartnership items. Sec. 6229(f). A nonpartnership item is an item which is not a Partnership item or which is not treated as such. Sec. 6231(a)(4). In other words, such an item is determined with respect to the partner individually, not as part of an FPAA, and the normal deficiency procedures rather than the TEFRA procedures apply:
If, before the expiration of the period otherwise provided in this section for assessing any tax imposed by subtitle A with respect to the partnership items of a partner for the partnership taxable year, such items become nonpartnership items by reason of 1 or more of the events described in subsection (b) of section 6231, the period for assessing any tax imposed by subtitle A which is attributable to such items (or any item affected by such items) shall not expire before the date which is 1 year after the date on which the items become nonpartnership items. * * * [Sec. 6229(f).]
Contrary to petitioners' contention, the application of section 6229(f) does not require the partners' consent. As applied to this case, it requires (1) that the notice of FPAA be mailed to the partner before the expiration...
To continue reading
Request your trial