Kelley v. Commissioner

1992 T.C. Memo. 510, 64 T.C.M. 654, 1992 Tax Ct. Memo LEXIS 530

Opinion

ROBERT L. KELLEY AND LOLITA A. KELLEY, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Kelley v. Commissioner

Docket No. 3647-86

United States Tax Court

T.C. Memo 1992-510; 1992 Tax Ct. Memo LEXIS 530; 64 T.C.M. (CCH) 654;

September 3, 1992, Filed

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Held: The period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partner's individual income tax return, as extended by any agreements relating thereto. See Siben v. Commissioner, 930 F.2d 1034 (2d Cir. 1991), affg. T.C. Memo. 1990-435; Stahl v. Commissioner, 96 T.C. 798 (1991).

For Petitioners: Declan J. O'Donnell.

For Respondent: Randall L. Preheim.

WHITAKER

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WHITAKER

MEMORANDUM FINDINGS OF FACT AND OPINION

WHITAKER, Judge: This matter is before the Court on petitioners' motion for summary judgment filed pursuant to Rule 121. ¹ Respondent determined deficiencies in, increased interest on, and additions to, Robert L. and Lolita A. Kelley's (petitioners) Federal income taxes for the taxable years, and in the amounts, set forth below:

		Increased
		Interest
		and Addition
		to Tax
		Sec.	Sec.
Tax Year Ended	Deficiency	6621(c)	6653(a)
December 31, 1979	$ 25,138	4	$ 1,256.90
December 31, 1980	$ 18,826	4	941.30

A notice of deficiency was mailed to petitioners on November 20, 1985. Petitioners resided in Las Vegas, Nevada, at the time the petition herein was filed. The issue for decision is whether the period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partnership's information return, or by the filing of the partner's individual income tax return, as extended by any agreements relating thereto. ²

FINDINGS OF FACT

Petitioners were validly subscribed members of Tiger Fuel & Investment Co. (Tiger Fuel), a limited partnership, for the taxable years ending December 31, 1979, and December 31, 1980. On April 15, 1980, and April 15, 1981, petitioners filed their 1979 and 1980 individual income tax returns, respectively. Tiger Fuel timely filed its 1979 and 1980 partnership information returns. On November 23, 1982, petitioners executed a Form 872, thereby extending through December 31, 1985, the time to assess individual income tax against petitioners for the taxable year 1979. On October 13, 1983, petitioners executed a second Form 872, thereby extending through April 15, 1985, the time to assess individual income tax against petitioners for the taxable year 1980. On December 7, 1984, petitioners executed a Form 872-A, thereby further extending the time to assess individual income tax against petitioners for the taxable year 1980.

Pursuant to Form 872-A, the amount of income tax due for a taxable year may be assessed on or before the 90th day after: (1) Respondent receives a notice of termination from petitioners, (2) respondent mails a notice of termination to petitioners, or (3) respondent mails a notice of deficiency for the applicable period. Respondent neither received a notice of termination from petitioners, nor mailed a notice of termination to petitioners, for the taxable year 1980. Consequently, as of November 20, 1985, the period of limitations upon assessment had not expired with respect to petitioners' taxable years 1979 and 1980. Conversely, as of November 20, 1985, more than 3 years had elapsed since the filing of Tiger Fuel's 1979 and 1980 partnership information returns.

On April 13, 1992, petitioners filed a motion for summary judgment asserting that the period of limitations upon assessment had expired with respect to their distributive share of losses, deductions, and credits from Tiger Fuel prior to the issuance of the notice of deficiency. ³

OPINION

The sole issue for decision is whether the period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partnership's information return, or by the filing of the partner's individual income tax return, as extended by any agreements relating thereto. Petitioners contend that the period of limitations is controlled by the filing of the partnership's information return. Conversely, respondent contends that the period of limitations is controlled by the filing of the partner's individual income tax return. Respondent agrees that there is no genuine issue as to any material fact relating to the applicable period of limitations upon assessment, and that a decision on this issue may be rendered as a matter of law. See Rule 121(b).

Petitioners cite , revg. and remanding , as authority for the proposition that the period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partnership's information return. In , the Ninth Circuit held that the Commissioner may not adjust a taxpayer-shareholder's individual income tax return based upon an adjustment to a subchapter S corporation's information return when the period of limitations had run as to the subchapter S corporation's return. . We previously considered and rejected the Ninth Circuit's decision in Kelley in determining the period of limitations applicable to a partner's distributive share of partnership items. In , we held that the filing of a partnership information return does not affect the period of limitations upon assessment applicable to the determination of a deficiency against individual partners of a partnership. Similarly, in , affg. , the Second Circuit held that the applicable period of limitations was controlled by the partners' individual income tax returns rather than by the partnership return. See also , affg. on this issue .We consider , and , to be dispositive of this issue; consequently, we hold that the period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partner's individual income tax return, as extended by any agreements relating thereto.

In accordance with the holding set forth above, petitioners' motion for summary judgment will be denied.

An appropriate order will be issued.

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Footnotes

• 1. Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code of 1954 in effect for the years in issue.

• 4. To be determined.

• 2. The taxable years at issue antedate the enactment of secs. 6221-6233 which provide that the tax treatment of partnership income, loss, deductions, and credits is to be determined at the partnership level in a unified partnership proceeding for partnership taxable years beginning after Sept. 3, 1982.

• 3. On Apr. 15, 1992, petitioners filed an amended petition wherein it was represented that "the parties have settled all issues on the merits of the case in a proposed Stipulation, subject to a determination of jurisdiction as requested herein." Similarly, in the motion for summary judgment, petitioners represent that "no trial on the merits is expected because the parties have executed a Stipulation, subject to jurisdiction." In the notice of objection to motion for summary judgment, however, respondent asserts that neither a stipulation of settled issues nor a closing agreement has been executed by the parties. Consequently, petitioners' motion for summary judgment is properly viewed as a motion for partial summary judgment. See Rule 121(c).