Agri-Cal Venture Assocs. v. Commissioner

T.C. Memo. 2000-271

UNITED STATES TAX COURT

AGRI-CAL VENTURE ASSOCIATES, FREDERICK H. BEHRENS,

TAX MATTERS PARTNER, ET AL.,1 Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket Nos. 12530-90, 12532-90, Filed August 28, 2000.

15034-91, 15041-91

15047-91, 15050-91,

15058-91.

1

Cases of the following petitioners have been consolidated

herewith: Crop Associates-1986, Frederick H. Behrens, Tax

Matters Partner, docket No. 12532-90; Agri-Venture Fund,

Frederick H. Behrens, Tax Matters Partner, docket No. 15034-91;

Houston Farm Associates-II, Robert A. Wright, Tax Matters

Partner, docket No. 15041-91; Agri-Venture Associates,

Frederick H. Behrens, Tax Matters Partner, docket No. 15047-91;

Dixie Ventures-1985, Frederick H. Behrens, Tax Matters Partner,

docket No. 15050-91; Texas Farm Venturers, Robert A. Wright, Tax

Matters Partner, docket No. 15058-91. Prior reports with respect

to Crop Associates–1986, Frederick H. Behrens, Tax Matters

Partner v. Commissioner, docket No. 12532-90, appear at 113 T.C.

115 (1999), and T.C. Memo. 2000-216.

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Five of the seven petitioners in these seven

consolidated cases have raised the affirmative defense

of statute of limitations. Those five petitioners

argue that the notices of final partnership

administrative adjustment in question were not timely

because they were issued after expiration of the

sec. 6229(a), I.R.C., assessment period.

Held: In all five cases, either a valid Form 872-

P, Consent to Extend the Time to Assess Tax

Attributable to Items of a Partnership, was signed by

the tax matters partner or another person authorized in

writing by the partnership to enter into such an

agreement, or no valid partnership return was filed

that would fix the time to assess tax under sec.

6229(a), I.R.C.

Steven Mather and Kenneth Barish, for petitioners.

William H. Quealy, Jr., Alice M. Harbutte, Henry T. Schafer,

Guy Glaser, Laurel Robinson, and Ann Durning, for respondent.

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Table of Contents

Page

MEMORANDUM FINDINGS OF FACT AND OPINION...................... 5

I. Introduction........................................... 5

II. Generally Applicable Provisions of Law................. 6

A. Period of Limitations Applicable to Assessment

of Partnership Items............................... 6

B. Affirmative Defense; Burden of Proof; Importance

of Contract Principles............................. 8

III. AVA.................................................... 9

A. FINDINGS OF FACT................................... 9

1. Formation of AVA; Certificate of

Limited Partnership.............................. 9

2. Agreement of Limited Partnership................. 10

3. AMCOR; Agreement To Make AMCOR Co-General

Partner; Amendment of AVA Certificate............ 14

4. Partnership Returns.............................. 15

5. Designation of TMP............................... 16

6. Consent To Extend the Time To Assess Tax......... 17

7. AVA FPAA......................................... 18

B. OPINION............................................ 18

1. 1984 Taxable Year................................ 18

a. Introduction.................................. 18

b. Requirement That Partnership Make a Return

Signed by a Partner........................... 19

c. California Revised Limited Partnership

Act; AVA Limited Partnership Agreement........ 20

d. AMCOR Was Not a General Partner in the

Partnership on February 1, 1985............... 21

e. AVA’s Other Arguments......................... 24

(1) Stipulation.............................. 24

(2) Agency................................... 24

(3) Miscellaneous............................ 27

f. Conclusion.................................... 27

2. 1985 Taxable Year................................ 27

a. Introduction.................................. 27

b. Code and Regulations.......................... 28

c. September 30 Letter Designates TMP............ 29

d. Timelines of Designation...................... 33

e. AVA’s Other Arguments......................... 34

f. Conclusion.................................... 36

IV. AVF.................................................... 36

A. FINDINGS OF FACT................................... 36

B. OPINION............................................ 37

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Page

V. DV-85.................................................. 38

A. FINDINGS OF FACT................................... 38

B. OPINION............................................ 39

1. Introduction.................................... 39

2. Relevant Law.................................... 40

3. Discussion...................................... 42

4. Conclusion...................................... 45

VI. HFA-II................................................. 45

A. FINDINGS OF FACT................................... 45

B. OPINION............................................ 46

1. Introduction.................................... 46

2. AMCOR Was Not a Partner......................... 47

3. Agency.......................................... 48

4. Authority of Limited Partner.................... 48

5. Conclusion...................................... 49

VII. TFV.................................................... 49

A. FINDINGS OF FACT................................... 49

1. Formation of TFV................................ 49

2. Agreement of Limited Partnership................ 50

3. Agreement To Make AMCOR Co-General Partner...... 50

4. Partnership Returns............................. 51

5. Designation of TMP.............................. 52

6. Consents........................................ 53

7. TFV FPAA........................................ 53

B. OPINION............................................ 53

1. 1984 Taxable Year............................... 53

2. 1985 Taxable Year............................... 55

IX. CONCLUSION............................................. 56

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MEMORANDUM FINDINGS OF FACT AND OPINION

HALPERN, Judge:

I. Introduction

This report concerns the affirmative defense of statute of

limitations raised by five of the petitioners in these seven

consolidated cases.2 Those five petitioners and respondent have

agreed that, at this time, respondent will not claim fraud in

response to such affirmative defense but may, at some later time,

make such response. No additional response by respondent will be

necessary, however, since, on the grounds before us, we do not

sustain any affirmative defense of statute of limitations.

The partnerships raising the affirmative defense of statute

of limitations are Agri-Venture Associates (AVA), Agri-Venture

Fund (AVF), Houston Farm Associates II (HFA-II), Dixie Venture-

1985 (DV-85), and Texas Farm Venturers (TFV). The issues we must

address are whether (1) for 1984, with respect to AVA and TFV,

and for 1985, with respect to HFA-II, a valid partnership return

was filed, which would fix the period provided for in section

6229(a) for assessing any tax, and (2) for 1985, with

2

Frederick H. Behrens, Tax Matters Partner, is petitioner

in three of those five cases, and Robert A. Wright, Tax Matters

Partner, is petitioner in the other two. To avoid confusion in

the discussion that follows, we will use the name of the

partnership, rather than the name of the tax matters partner, to

refer to the petitioner in each case: For instance, we will

refer to the petitioner in Agri-Ventures Associates, Frederick H.

Behrens, Tax Matters Partner, as Agri-Ventures Associates (AVA).

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respect to AVA, AVF, DV-85, HFA-II,3 and TFV, a valid Form 872-P,

Consent to Extend the Time to Assess Tax Attributable to Items of

Partnership (Form 872-P), was executed by a person with the

authority to bind the partnership pursuant to section

6229(b)(1)(B).

For convenience and clarity, we set forth separately our

findings of fact and opinion with respect to each of the five

partnerships (sometimes, collectively, the partnerships). We

precede that discussion, however, with a discussion of certain

provisions of law applicable generally with respect to the

partnerships.

Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

II. Generally Applicable Provisions of Law

A. Period of Limitations Applicable to Assessment of

Partnership Items

These consolidated cases arise in connection with

respondent’s determination of certain partnership items. See

secs. 6221, 6226(a) and (b). Section 6229(a) provides that the

period for assessing any Federal income tax attributable to any

3

For HFA-II, the issues are in the alternative because, if

we find that no valid partnership return was filed for 1985,

which, if filed, would have fixed the period for assessing any

tax, we need not address whether there was a valid consent to

extend such period.

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partnership item for the partnership’s taxable year shall not

expire before 3 years after the later of (1) the date on which

the partnership return for such taxable year was filed, or

(2) the last day for filing a return for that year (the 3-year

period or the section 6229(a) assessment period). Section

6229(b)(1)(A) and (B), however, provides that the 3-year period

may be extended. The 3-year period may be extended with respect

to any partner by an agreement entered into by respondent and

such partner, and may be extended with respect to all partners by

an agreement entered into by respondent and (1) the tax matters

partner or (2) any other person authorized by the partnership in

writing to enter into such an agreement. See sec. 6229(b)(1)(A)

and (B), respectively. The agreement must be executed prior to

the expiration of the 3-year period, and any subsequent agreement

must be executed before the expiration of the period previously

agreed upon.

Section 6229(d) suspends the running of the section 6229(a)

assessment period upon the mailing of a notice of final

partnership administrative adjustment (FPAA) to the tax matters

partner (TMP) of the partnership. The running of the section

6229(a) assessment period is suspended for the period in which an

action may be brought challenging the FPAA. If such an action is

brought during that period, the suspension continues until the

decision of the Court therein becomes final and for 1 year

thereafter. See sec. 6229(d).

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Section 6229(d) makes clear that, if, for any partnership

taxable year, no partnership return is filed, any tax

attributable to a partnership item arising in that year may be

assessed at any time.

B. Affirmative Defense; Burden of Proof; Importance of

Contract Principles

In Amesbury Apartments, Ltd. v. Commissioner, 95 T.C. 227

(1990), we dealt with a claim that the section 6229(a) assessment

period had expired. We stated:

The expiration of the period of limitation on

assessment is an affirmative defense, and the party

raising it must specifically plead it and carry the

burden of proving its applicability. Rules 39, 142(a).

To establish this defense, the taxpayer must make a

prima facie case establishing the filing of the

partnership return, the expiration of the statutory

period, and receipt or mailing of the notice after the

running of the period. Miami Purchasing Service Corp.

v. Commissioner, 76 T.C. 818, 823 (1981); Robinson v.

Commissioner, 57 T.C. 735, 737 (1972). Where the party

pleading the defense makes such a showing, the burden

of going forward with the evidence shifts to respondent

who must then introduce evidence to show that the bar

of the statute is not applicable. Adler v.

Commissioner, 85 T.C. 535, 540 (1985). Where

respondent makes such a showing, the burden of going

forward then shifts back to the party pleading the

affirmative defense to show that the alleged exception

to the expiration of the period is invalid or otherwise

inapplicable. Adler v. Commissioner, supra at 540.

The burden of proof, i.e., the burden of ultimate

persuasion, however, never shifts from the party who

pleads the bar of the statute of limitations. Adler v.

Commissioner, supra at 540.

An agreement to extend the period of limitation

for assessment and collection is not a contract but

rather a waiver of a defense. Stange v. United States,

282 U.S. 270 (1931); Piarulle v. Commissioner, 80 T.C.

1035, 1042 (1983); Tallal v. Commissioner, 77 T.C. 1291

(1981), affd. on other issues 778 F.2d 275 (5th Cir.

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1985). In determining the validity of such a waiver,

however, contract principles are important, because

section 6229(b) requires a written agreement, and we

look to the objective manifestations of mutual assent

to determine the terms of such an agreement. See

Schulman v. Commissioner, 93 T.C. 623, 639 (1989);

Piarulle v. Commissioner, supra at 1042.

Id. at 240-241. Those statements are applicable here.

III. AVA

A. FINDINGS OF FACT

1. Formation of AVA; Certificate of Limited

Partnership

AVA (sometimes, the partnership) is a limited partnership

formed pursuant to the California Revised Limited Partnership Act

(sometimes, CRLPA), Cal. Corp. Code secs. 15611 through 15723

(West 1991). At the time the petition was filed, the

partnership’s principal place of business was in Coachella,

California.4

On July 1, 1984, a certificate of limited partnership for

the partnership (the AVA certificate) was filed with the

secretary of state of the State of California (California

Secretary of State). The AVA certificate states that it is

presented for filing pursuant to Cal. Corp. Code sec. 15621 (West

1991). It shows Frederick H. Behrens, George L. Schreiber, and

Robert A. Wright as general partners of the partnership (the

initial general partners).

4

That is also true with respect to the petitions filed by

AVF, DV-85, HFA-II, and TFV, and we so find.

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2. Agreement of Limited Partnership

Also on July 1, 1984, the initial general partners and

certain others entered into an agreement of limited partnership

with respect to the partnership (the AVA limited partnership

agreement or the agreement). Among other things, the agreement

establishes the authority and duties of the general partners and

restricts the rights of the limited partners. In part, the

agreement provides:

1. “Definitions”

* * * * * * *

1.6 “Managing Agent” means American Agri-Corp, or

its designated successor as provided for in this

Agreement.

* * * * * * *

9.4 “Role of Limited Partners.” Except as otherwise

provided in this Agreement, a Limited Partner shall not

take part in or interfere in any manner with the

conduct or control of the business of the Partnership

and shall have no right or authority to act for or bind

the Partnership. * * *

* * * * * * *

11. “Rights, Powers and Duties of the General Partners”

11.1 “Management and Control of the Partnership.”

11.1.a Subject to the consent of the Limited

Partners where required by this Agreement,

the General Partners, with the authority

granted under this Agreement, shall have the

exclusive right to manage the business of the

Partnership and are hereby authorized to take

any action of any kind and to do anything and

everything they deem necessary in accordance

with the provisions of this Agreement. In

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decisions by the General Partners, vote by a

majority of them shall be determinative.

11.1.b Except as expressly provided herein,

the authority of the General Partners to

manage the business of the Partnership shall

be exercised only by the General Partners.

11.1.c No Limited Partner (except one who

may also be a General Partner, and then only

in his capacity as General Partner is within

the scope of his authority hereunder) shall

participate in or have any control over the

Partnership business or shall have any

authority or right to act for or bind the

Partnership. * * *

* * * * * * *

11.1.e The General Partners shall have the

right and authority, without the requirement

of obtaining the approval or consent of the

Limited Partners, to admit an additional Co-

General Partner to the Partnership, providing

the existing General Partners remain the

Managing General Partners and do not

relinquish any of their duties,

responsibilities, obligations or liabilities

incurred in connection with this Agreement.

11.2 “Authority of the General Partners.”

11.2.a Except to the extent otherwise

provided herein, the General Partners (or

their designated agent) for, and in the name

and on behalf of the Partnership, are hereby

authorized:

* * * * * * *

(11) to engage in any kind of activity and

to perform and carry out contracts of any

kind necessary to, or in connection with, or

incidental to the accomplishment of the

purposes of the Partnership, as may be

lawfully carried on or performed by a

partnership under the laws of each state in

which the partnership is then formed or

qualified.

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* * * * * * *

11.2.b. Every instrument purporting to be

the action of the Partnership and duly

authorized and executed by the General

Partners shall be conclusive evidence in

favor of every person relying thereon or

claiming thereunder that at the time of

delivery thereof, this Agreement was in full

force and effect and that the execution and

delivery of such instrument was duly

authorized by the Partners and the

Partnership. * * *

* * * * * * *

22. “Amendments”

22.1 “Additional Partners.” Each Limited Partner,

additional Limited Partner, General Partner or

subsequent General Partner shall become a signatory

hereof by signing such number of counterpart signature

pages to this Agreement and such other instrument or

instruments, and in such manner, as the General

Partners shall determine. By so signing, each shall be

considered to have adopted, and to have agreed to be

bound by all the provisions of this Agreement, as

amended from time to time in accordance with the

provisions of this Agreement, provided that no such

counterpart shall be binding until it shall have been

accepted by the General Partners pursuant to the

provisions of this Agreement.

* * * * * * *

22.4 “Execution of Amendments.” If this Agreement

shall be amended to reflect the designation of a new

General Partner and the continuation of the business of

the Partnership, such amendment shall be signed by such

new General Partner.

22.5 “Filing and Recording of Amendments.” In making

any amendments, there shall be prepared and filed and

recorded by the General Partners such documents and

certificates as shall be required to be prepared and

filed pursuant to the * * * [CRLPA] * * *

* * * * * * *

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26. “Miscellaneous”

* * * * * * *

26.6 “Tax Matters Partner.” The General Partners

shall designate one of them to be the Tax Matters

Partner, and he shall possess the administrative powers

and responsibilities required by the Tax Equity and

Fiscal Responsibility Act of 1982.

With respect to the duties of the Managing Agent (managing

agent), the agreement provides, among other things, that the

managing agent shall manage all of the day-to-day activities of

the partnership and “will perform the financial and tax planning

duties for the Partnership as well as oversee the Partnership’s

operational and tax reporting procedures.” The managing agent’s

duties are further specified in a management agreement between

American Agri-Corp and the partnership that authorizes the former

“to furnish such financing and tax planning services as per the

General Partners request.”

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3. AMCOR; Agreement To Make AMCOR Co-General Partner;

Amendment of AVA Certificate

Amcor Capital, Inc., formerly American Agri-Corp (hereafter,

without distinction, AMCOR), was organized in 1981 by Messrs.

Behrens, Schreiber, and Wright.5

Following are pertinent portions of a document (the AMCOR

purchase document) dealing with the purchase of general

partnership interests in certain partnerships (including AVA):

AMERICAN AGRI-CORP

December 12, 1985

Mr. Fred H. Behrens

Mr. George L. Schreiber

Mr. Robert A. Wright

AMERICAN AGRI-CORP

5000 Birch Street

East Tower, Suite 610

Newport Beach, CA 92660

SUBJECT: PURCHASES OF A GENERAL PARTNERSHIP

IN CERTAIN PARTNERSHIPS

Gentlemen:

You are Co-General Partners of the following California

limited partnerships:

* * * [There follows a list of 13 partnerships,

including, AVA.]

It is understood that the three of you, as individuals,

collectively own a 1 percent interest in each of these

partnerships. American Agri-Corp is desirous of

purchasing 50 percent of your collective position so

that it would hold a 1/2 percent interest, as a Co-

General Partner, in each of the above partnerships.

5

This finding is applicable to all the partnerships.

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American Agri-Corp agrees to buy, and you agree to

sell, a one-half percent interest in the above general

partnerships for a total consideration of $375,000 or

$125,000 to each of you. It is understood that

American Agri-Corp assumes all the rights, duties, and

obligations of a 50 percent Co-General Partner in the

above named partnerships.

Sincerely, UNDERSTOOD AND AGREED TO:

American Agri-Corp By:

/s/ /s/

Fred H. Behrens Fred H. Behrens

Chairman

/s/ /s/

George L. Schreiber George L. Schreiber

Vice Chairman

/s/ /s/

Robert A. Wright Robert A. Wright

Senior Vice President

On December 23, 1985, an amendment to the AVA certificate,

adding AMCOR as a general partner, was filed with the California

Secretary of State.

4. Partnership Returns

For tax purposes, the partnership makes its return on the

basis of a calendar year. For 1984 and 1985, the partnership

prepared Forms 1065, U.S. Partnership Return of Income (Forms

1065, and the AVA 1984 and 1985 Forms 1065, respectively).

Respondent received the AVA 1984 and 1985 Forms 1065 at his

Fresno, California, service center on March 27, 1985, and April

14, 1986, respectively. Each of such returns shows the

partnership’s address as: C/O AMCOR, “5000 BIRCH ST., STE 610,

EAST TOWER, NEWPORT BEACH, CA 92660". The AVA 1984 Form 1065 is

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signed “Joseph O. Voyer Treasurer”. It shows the date of that

signature as February 1, 1985. It does not state the

organization, if any, of which Joseph O. Voyer was treasurer.

The partnership never had a treasurer; Mr. Voyer was never a

partner in the partnership. Mr. Voyer was an officer and

employee of AMCOR.

Neither the AVA 1984 or 1985 Forms 1065 designates any

partner as the TMP of the partnership.

5. Designation of TMP

In 1988, Deborah R. Gaither, a revenue agent employed by

respondent, was conducting an examination of various AMCOR

sponsored partnerships. In September 1988, Ms. Gaither prepared

a letter for signature by Messrs. Behrens and Schreiber, which

she carried to Messrs. Behrens and Schreiber, who signed the

letter on September 30, 1988 (the September 30 letter), and

immediately returned it to her. Pertinent portions of the

September 30 letter follow:

Sept. 30, 1988

Internal Revenue Service

24000 Avila Road

Laguna Niguel, California 92677

RE: TAX MATTERS PARTNER

Gentlemen:

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As referenced in the Limited Partnership Agreement, the

General Partners have designated the following to be

the Tax Matters Partner for the 1985 tax year and until

Partnership termination:

George L. Schreiber

5000 Birch Street, Suite 610

Newport Beach, California 92660

SSN XXX-XX-XXXX

The above designation is for the following

partnerships:

* * * [There follows a list of 25 partnerships, including:

“Agri-Venture Associates XX-XXXXXXX".]

Sincerely,

\s\ \s\

Fred H. Behrens, Chairman George L. Schreiber

American Agri-Corp General Partner

\s\

George L. Schreiber, Vice President

American Agri-Corp

The September 30 letter is stamped “Received, Oct. 4, 1988,

Laguna Niguel District”.

6. Consent To Extend the Time To Assess Tax

Following are pertinent portions of a Form 872-P (AVA Form

872-P for 1985), executed by George L. Schreiber, “Tax Matters

Partner”, on September 30, 1988, and by a representative of

respondent’s on October 4, 1988:

AGRI-VENTURE ASSOCIATES, partnership, of 5000 BIRCH

STREET, SUITE 610, NEWPORT BEACH, CA 92660, and the

District Director of Internal Revenue * * * consent and

agree as follows:

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(1) The amount(s) of any Federal income tax with

respect to any person on any partnership item(s) for

the above partnership for the period(s) ended

December 31, 1985 may be assessed at any time on or

before April 30, 1991. If a notice of Final

Partnership Administrative Adjustment is sent to the

partnership, the time for assessing the tax for the

period(s) stated in the notice of Final Partnership

Administrative Adjustment will not end until 1 (one)

year after the date on which the determination of

partnership items becomes final.

The AVA Form 872-P for 1985 shows AVA’s taxpayer identification

number as XX-XXXXXXX.

7. AVA FPAA

On April 10, 1991, respondent issued an FPAA to the

partnership, addressed to “Tax Matters Partner” (the AVA FPAA),

for its 1984 and 1985 taxable years.

B. OPINION

1. 1984 Taxable Year

a. Introduction

Respondent issued the AVA FPAA to the partnership on

April 10, 1991. Since such date is more than 3 years after the

last day for filing the AVA 1984 Form 1065, see section 6072(a),

we must determine whether that date is also more than 3 years

after a valid AVA 1984 Form 1065 was received by respondent. See

sec. 6229(a). If it is not, then the AVA FPAA was timely to

suspend the running of the section 6229(a) assessment period, and

AVA’s affirmative defense of statute of limitations fails for

1984. See also sec. 6229(c)(3). Respondent has responded to

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AVA’s affirmative defense of the statute of limitations by

averring that the AVA 1984 Form 1065 is invalid because it was

not executed in conformance with the Internal Revenue Code.

Respondent is correct that only a return as required by the

Internal Revenue Code (a valid return) will fix the time for the

running of the period to assess tax (i.e., the statute of

limitations). See Plunkett v. Commissioner, 41 B.T.A. 700, 711

(1940), affd. 118 F.2d 644 (1st Cir. 1941). “Failure to satisfy

the requirements for filing a return is fatal to the validity and

timeliness of the return.” Elliott v. Commissioner, 113 T.C.

125, 128 (1999). Petitioner argues that the AVA’s 1984 Form 1065

is a valid return.

b. Requirement That Partnership Make a Return Signed

by a Partner

Section 6031 requires that, for each taxable year, every

partnership shall make a return of income.

In pertinent part, section 6063 provides: “The return of a

partnership made under section 6031 shall be signed by any one of

the partners.”

The AVA 1984 Form 1065 was signed by Joseph O. Voyer,

“Treasurer”. The parties have stipulated that Mr. Voyer, as

Treasurer of AMCOR, was a corporate officer with authority under

the regulations to execute returns and other statements on behalf

of AMCOR. The parties have further stipulated that, if AMCOR is

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determined to have been a general partner in the partnership for

Federal income tax purposes when the AVA 1984 Form 1065 was

signed by Mr. Voyer, on February 1, 1985, then such return is

valid. We must, thus, determine whether AMCOR was a partner in

the partnership on February 1, 1985.

c. California Revised Limited Partnership Act; AVA

Limited Partnership Agreement

CRLPA section 15641 provides as follows:

§15641. Admission of additional general partners

Unless otherwise provided in the partnership

agreement, after the filing of a certificate referred

to in Section 15621, a general partner may be admitted

only (a) with the written consent of each general

partner and such affirmative vote of limited partners

as is required in accordance with the provisions of

subdivision (f) of Section 15636 and the last paragraph

of Section 15636 or (b) with the written consent of

each partner in accordance with the provisions of

subdivision (c) of Section 15681.

Cal. Corp. Code sec. 15641 (West 1991).

As set forth supra in section III.A.2, section 11.1.e of the

AVA limited partnership agreement accorded to the general

partners the “right and authority, without the requirement of

obtaining the approval or consent of the Limited Partners, to

admit an additional Co-General Partner to the Partnership”. The

agreement, therefore, provided an alternative to the otherwise

mandatory provisions of CRLPA section 15641 (requiring some form

of assent by the limited partners). Pursuant to CRLPA section

- 21 -

15641 and the agreement, the initial general partners had the

authority to admit AMCOR as a general partner.

d. AMCOR Was Not a General Partner in the Partnership

on February 1, 1985

Notwithstanding that the initial general partners had the

authority to admit AMCOR to the partnership as a general partner,

the question remains whether they exercised that authority on or

before February 1, 1985. On the record before us, we are not

persuaded that they did.

Mr. Wright testified that, “with respect to the 1985 year”,

it was the design of the initial general partners to each sell

one-half of his interest in the partnership to AMCOR. Mr. Wright

further testified that, although the initial partners intended

such sale to be effective January 1, 1985, documentation of such

sale was not prepared until some time during 1985: “We didn’t

make a big deal as to when it was done. It was just something

that we contemplated.” Mr. Wright also testified that the

partnership reported for tax purposes that AMCOR was a partner

for the whole of the year.

The AMCOR purchase document evidences the agreement of the

initial general partners to sell, and AMCOR to buy, a one-half

percent interest in AVA and 12 other limited partnerships for a

purchase price of $375,000, of which one-third was to be paid by

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AMCOR to each initial general partner. The AMCOR purchase

agreement is dated December 12, 1985, and it is not retrospective

in its discussion of such sale: It states that the initial

general partners “own” a 1-percent interest in the partnership

and AMCOR “is desirous” of purchasing one-half of that interest.

Because of the substantial purchase price to be paid to each

initial general partner, we think it a fair inference that the

initial general partners would take no actions to admit AMCOR to

the partnership as a co-general partner until they had received

payment. Payments totaling $375,000 would be documented by

checks, receipts, evidence of withdrawals or deposits, or the

like, which could establish the fact of such payments on or

before February 1, 1985. AVA’s failure to produce such evidence

leads to the inference that either such evidence does not exist

or would be negative to petitioner. See Wichita Terminal

Elevator Co. v. Commissioner, 6 T.C. 1158, 1165 (1946) (“the

failure of a party to introduce evidence within his possession

and which, if true, would be favorable to him, gives rise to the

presumption that if produced it would be unfavorable”), affd. 162

F.2d 513 (10th Cir. 1947). Putting such inference together with

the execution of the AVA purchase document on December 12, 1985,

and the filing of the amendment to the AVA certificate on

December 23, 1985, adding AMCOR as a general partner, leads us to

- 23 -

believe that AMCOR was not admitted to the partnership as co-

general partner until after February 1, 1985.

We find some additional support for that conclusion in the

AVA limited partnership agreement, which, although it is silent

on how the initial general partners are to exercise their

authority to admit a person as a co-general partner, specifically

addresses how additional partners are to become signatories to

the agreement. Section 22.1 of the agreement, see supra section

III.A.2, requires a prospective partner to execute the agreement

“and such other instrument or instruments * * * as the General

Partners shall determine” in order to become a signatory to the

agreement. Moreover, the second sentence of section 22.1 states:

“By so signing, each [new partner] shall be considered to have

adopted, and to have agreed to be bound by all the provisions of

this Agreement”. See also section 22.4 of the agreement

(amendment of agreement to reflect designation of a new general

partner shall be signed by such new general partner). AVA has

failed to show that an officer of AMCOR executed the agreement or

any other required instrument on or before February 1, 1985.

While we do not conclude that such executions are a precondition

to a person’s being admitted as a partner, we think that the

absence of such executions supports our conclusion that AMCOR was

not admitted as a partner on or before February 1, 1985.

- 24 -

For the reasons stated, AVA has failed to prove that AMCOR

was admitted to the partnership as a general partner on or before

February 1, 1985. The fact that the partnership may have filed

its tax return for 1985 consistent with AMCOR’s being a partner

for the whole year is not determinative; we assume that the

return was prepared after the close of 1985.

e. AVA’s Other Arguments

(1) Stipulation

AVA argues that, by way of stipulation, respondent has

admitted that AMCOR was a general partner in the partnership

throughout 1985. AVA relies on a stipulation of facts filed

January 14, 1992, in furtherance of a motion for summary judgment

made in a prior consolidation of certain AMCOR test cases. The

following language is contained in that stipulation of facts:

Fred Behrens, George Schreiber, and Robert Wright

remained as general partners in the partnerships

[including AVA] * * * throughout 1985. American Agri-

Corp. was also a general partner throughout 1985. As

stated in the Preamble of this Stipulation, this fact

is stipulated to only for purposes of disposition of

Respondent’s motion for partial summary judgment in the

above-referenced cases. [Emphasis added.]

A stipulation is in the nature of a contract and will bind

parties only to the terms actually agreed upon. See Rule 91(e);

e.g., Stamos v. Commissioner, 87 T.C. 1451, 1455 (1986). As

such, the stipulation on which AVA relies as an admission is

without effect because, by its terms, its effectiveness was

- 25 -

limited to respondent’s motion for partial summary judgment,

which was disposed of long ago.

(2) Agency

AVA argues that, even if AMCOR was not a partner in the

partnership on February 1, 1985, AMCOR, as managing agent, had

the authority from AVA to execute the AVA 1984 Form 1065.

Section 6063 requires that a partnership return be signed by

any one of the partners, and respondent argues that section 6063

is to be taken literally, so that a partnership return must be

signed by a partner “and not by a partner’s agent.” Respondent

also argues that AVA has failed to prove that AMCOR’s agency

relationship with the partnership encompassed the signing of

AVA’s tax return.

The evidence establishes that AMCOR had a certain limited

authority to act for the partnership, e.g., management of all

"day to day activities”, and was to “oversee the Partnership’s

operational and tax reporting procedures.” Supra sec. III.A.2.

Respondent is correct that AVA has failed to prove AMCOR’s

authority to file tax returns on behalf of the partnership.

Moreover, we agree with respondent that section 6063 requires a

partner’s signature and not the signature of a partner’s agent.

Section 601.504(a), Statement of Procedural Rules, addresses the

requirements for filing powers of attorney. Paragraph (a)(6)

thereof states:

- 26 -

Signing tax returns. The filing of a power of attorney

does not authorize the recognized representative to

sign a tax return on behalf of the taxpayer unless such

act is both -

(i) permitted under the Internal Revenue Code

and regulations thereunder (e.g., the

authority to sign income tax returns is

governed by the provisions of §1.6012-1(a)(5)

of the Income Tax Regulations); and

(ii) specifically authorized in the power of

attorney.

AVA does not claim that any power of attorney was filed with

respondent. Nevertheless, we find the regulation instructive as

to the circumstances under which an agent may make a return for a

taxpayer. Even were we to accept, arguendo, that section 6063

permits a partnership return to be made by an agent of a partner,

the Secretary has not provided by regulation for such action.

While section 1.6012-1(a)(5), Income Tax Regs., authorizes the

return of an individual to be made by an agent in certain

circumstances (and upon the condition that the return is

accompanied by a power of attorney specifically authorizing the

agent to make the return), section 1.6013-1, Income Tax Regs.,

providing for the signing of partnership returns, does not, by

its terms, authorize a partnership return to be made by an agent

of a partner. As stated, AVA has not shown any authority for an

agent to make a partnership return for a partner. The Supreme

Court has said that a taxpayer must be meticulously compliant

with all the named conditions in order to secure the benefit of a

- 27 -

statute of limitations. See Lucas v. Pilliod Lumber Co., 281

U.S. 245, 249 (1930). Mr. Voyer’s signature on the AVA 1984 Form

1065 does not comply with section 6063, and it is not adequate to

constitute it a valid return.

(3) Miscellaneous

AVA also argues that (1) there was only a technical flaw in

the AVA 1984 Form 1065, (2) since the partners of AVA relied on

the AVA 1984 Form 1065, they ratified it, and (3) respondent

accepted the return, and, therefore, it was effective to start

the running of the period of limitations. None of those

arguments are persuasive.

f. Conclusion

We find that the AVA 1984 Form 1065 was not signed by any

partner, and, consequently, it was not a valid partnership

return. See Plunkett v. Commissioner, 41 B.T.A. 700, 711 (1940),

affd. 118 F.2d 644 (1st Cir. 1944). Therefore, AVA has failed to

satisfy the first element necessary for it to establish its

affirmative defense for 1984, the filing of the partnership

return, see Amesbury Apartments, Ltd. v. Commissioner, 95 T.C.

227, 240 (1990), and we must conclude that the AVA FPAA was

issued before expiration of the section 6229(a) assessment period

- 28 -

with respect to the partnership’s 1984 taxable year. See supra

sec. III.B.1.a.

2. 1985 Taxable Year

a. Introduction

The partnership timely filed the AVA 1985 Form 1065 on

April 14, 1986, and, unless the 3-year period was extended, the

AVA FPAA, issued on April 10, 1991, was issued after the

expiration of the 3-year period. Respondent relies on the AVA

Form 872-P for 1985 to show such extension. AVA argues that the

AVA Form 872-P for 1985 is invalid, primarily because (AVA

argues) George L. Schreiber was not the TMP of the partnership at

the time he executed that document. Whether Mr. Schreiber was

then a TMP of the partnership turns on whether the September 30

letter, purporting to designate him the TMP of the partnership,

is valid. AVA argues that it is not. We believe that the

September 30 letter is valid and so find.

b. Code and Regulations

As stated supra in section II.A., section 6229(b)(1)(B)

provides that the 3-year period may be extended with respect to

all partners by an agreement entered into by respondent and the

TMP.

In pertinent part, the term “tax matters partner” is defined

in section 6231(a)(7)(A) as “the general partner designated as

the tax matters partner as provided in regulations”.

- 29 -

In pertinent part, section 301.6231(a)(7)-1T(a), Temporary

Proced. & Admin. Regs., 52 Fed. Reg. 6791 (Mar. 5, 1987),

provides: “A partnership may designate a partner as its tax

matters partner for a specific taxable year only as provided in

this section.”

Section 301.6231(a)(7)-1T(b)(1), Temporary Proced. & Admin.

Regs., supra, provides the following general requirement:

A person may be designated as the tax matters partners

of a partnership for a taxable year only if that person

--

(i) Was a general partner in the partnership at

some time during the taxable year for which the

designation is made, or

(ii) Is a general partner in the partnership as of

the time the designation is made.

Section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin.

Regs., supra, provides:

Designation by general partners with majority

interest. The partnership may designate a tax matters

partner for a partnership taxable year at any time

after the filing of a partnership return for that

taxable year by filing a statement with the service

center with which the partnership return was filed. The

statement shall--

(1) Identify the partnership and the designated

partner by name, address, and taxpayer identification

number,

(2) Specify the partnership taxable year to which

the designation relates,

(3) Declare that it is a designation of a tax

matters partner for the taxable year specified, and

- 30 -

(4) Be signed by persons who were general partners

at the close of the year and were shown on the return

for that year to hold more than 50 percent of the

aggregate interest in partnership profits held by all

general partners as of the close of that taxable year.

For purposes of this paragraph (e)(4), all limited

partnership interests held by general partners shall be

included in determining the aggregate interest in

partnership profits held by such general partners.

c. September 30 Letter Designates TMP

On September 30, 1988, George L. Schreiber was a general

partner in the partnership; he was also a general partner during

1985. By the September 30 letter, he is designated TMP of the

partnership for 1985. On brief, AVA concedes that the

September 30 letter was properly signed by Mr. Schreiber and

AMCOR and, together, Mr. Schreiber and AMCOR represented

67 percent “of the general partner profits interests”.

Nevertheless, AVA argues that the September 30 letter was not

effective to designate Mr. Schreiber the TMP of the partnership

for 1985 because it fails to meet two of the requirements of

section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin. Regs.,

supra: It does not identify the address of the partnership, and

it was not filed with the Fresno, California, service center,

where the AVA 1985 Form 1065 was filed.

Subparagraph (1) of section 301.6231(a)(7)-1T(e), Temporary

Proced. & Admin. Regs., id., requires that the designated partner

and the partnership be identified by name, address, and taxpayer

identification number. The September 30 letter designates George

- 31 -

L. Schreiber, a general partner in the partnership, as the TMP of

the partnership for 1985 and shows his address as “5000 Birch

Street, Suite 610, Newport Beach, California 92660". The 1985

AVA Form 1065 shows the partnership’s address as care of AMCOR,

“5000 BIRCH ST., STE 610, EAST TOWER, NEWPORT BEACH CA 92660".

AVA has failed to show that the partnership’s address was any

different on September 30, 1988, or that correspondence addressed

to it care of George L. Schreiber, who also signed the

September 30 letter as vice president of AMCOR, would not have

reached the partnership. We find that the partnership was

identified by address in the September 30 letter. Moreover, the

September 30 letter was prepared by Deborah Gaither, a revenue

agent employed by respondent who was examining various AMCOR-

sponsored partnerships. The circumstances surrounding her

preparation of that letter and its signature by Messrs. Behrens

and Schreiber convince us that there could have been no confusion

as to what partnerships were the subject of that letter and that

any technical inadequacy in that regard is immaterial.

The first sentence of section 301.6231(a)(7)-1T(e),

Temporary Proced. & Admin. Regs., supra, specifies that the

statement designating a TMP be filed with the service center with

which the partnership return was filed. AVA argues that its

failure to file the September 30 letter with the service center

is fatal to its validity. Respondent argues that, since the

- 32 -

regulatory requirements in dispute are procedural and respondent

was not prejudiced by the omissions, the Court may determine that

the regulatory requirements have been fulfilled.

On numerous occasions we have discussed the necessity of

literal compliance with the procedural requirements in Treasury

regulations on making elections, such as “place of filing”

requirements. See, e.g., Hewlett-Packard Co. v. Commissioner,

67 T.C. 736, 748 (1977), in which we said: “Repeatedly this

Court has held elections effective where the taxpayer complied

with the essential requirements of a regulation even though the

taxpayer failed to comply with certain procedural directions

therein.” In Taylor v. Commissioner, 67 T.C. 1071, 1077 (1977),

we said:

The critical question to be answered is whether the

requirements relate to the substance or essence of the

statute. If so, strict adherence to all statutory and

regulatory requirements is a precondition to an

effective election. On the other hand, if the

requirements are procedural or directory in that they

are not the essence of the thing to be done but are

given with a view to orderly conduct of business, they

may be fulfilled by substantial, if not strict,

compliance. [Internal quotation marks and citations

omitted.]

We are not dealing here with an election, yet the situation is

analogous, and the same considerations apply.

The service center filing specification is not required by

the statutory provision providing for an extension by agreement

of the 3-year period. See sec. 6229(b). We find that the filing

- 33 -

requirement of section 301.6231(a)(7)-1T(e), Temporary Proced. &

Admin. Regs., 52 Fed. Reg. 6778 (Mar. 5, 1987), was substantially

complied with when the September 30 letter was received in hand

by Deborah Gaither, respondent’s revenue agent, and that all

requirements of the regulation have been satisfied. The

September 30 letter was effective to designate George L.

Schreiber the TMP of the partnership.

d. Timeliness of Designation

AVA argues that, even if the September 30 letter was

effective to designate Mr. Schreiber as the TMP of the

partnership, the September 30 letter was not filed by respondent

before Mr. Schreiber signed the AVA Form 872-P for 1985, which

was signed on September 30, 1988. It is true that the

September 30 letter is stamped received, Laguna Niguel District,

with a date of October 4, 1988. Nevertheless, we have found that

the September 30 letter was received in hand by one of

respondent’s revenue agents on September 30, 1988, and such

receipt substantially complied with section 301.6231(a)(7)-1T(e),

Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6792 (Mar. 5,

1987). In pertinent part, section 301.6231(a)(7)-1T(k),

Temporary Proced. & Admin. Regs., provides that a statement

designating a TMP becomes effective on the day the statement is

filed. Generally, the filing of a paper takes place upon the

- 34 -

delivery of it to an officer at his office. See Miton v. United

States, 105 F.2d 253 (5th Cir. 1939) (containing an extensive

summary of the meaning of the term “filing” and consequences

thereof); cf. sec. 7502 (timely mailing is timely filing). Based

on AVA’s substantial compliance with section 301.6231(a)(7)-

1T(e), Temporary Proced. & Admin. Regs., we find that the

September 30 letter was filed on September 30, 1988. The

September 30 letter was, therefore, effective on September 30,

1988, the day the AVA Form 872-P for 1985 was signed by Mr.

Schreiber.

e. AVA’s Other Arguments

AVA argues, even if the AVA Form 872-P for 1985 was validly

executed, Mr. Schreiber’s consent to extend the section 6229(a)

assessment period was a legal nullity because there never was a

meeting of the minds between the parties. AVA avers: “Behrens,

Schreiber and Wright were all unaware of respondent’s criminal

investigation of * * * [AMCOR] and themselves and would not have

executed the Forms 872-P if they had that knowledge.” We have

described respondent’s criminal investigation in Crop

Associates–1986, Frederick H. Behrens, Tax Matters Partner v.

Commissioner, T.C. Memo. 2000-216. AVA has failed to prove that

Mr. Schreiber was unaware of the state of that investigation on

September 30, 1988, or that, given that knowledge, he would have

refused to sign the AVA Form 872-P for 1985.

- 35 -

AVA has failed to prove that, on September 30, 1988, when

Mr. Schreiber signed the AVA Form 872-P for 1985, he had a

conflict of interest with the limited partners such that he was

prevented from acting as a representative of those limited

partners. Compare Transpac Drilling Venture 1983-12 v.

Commissioner, 147 F.3d 221, 227-228 (2d Cir. 1998) (“In sum, the

criminal investigation created an overwhelming pressure on TMPs

to ignore their fiduciary duties to the limited partners. As

such, we cannot let them bind these partnerships"), revg. and

remanding T.C. Memo. 1994-26 (fn. ref. omitted) with Phillips v.

Commissioner, 114 T.C. 115 (2000) (distinguishing Transpac

Drilling Venture on the grounds that, in Phillips (1) the limited

partners had not refused to sign extensions, (2) the general

partner had not been indicted or convicted of a tax felony and

was not cooperating with the Government as a witness, and (3) the

IRS had not misled partners about the existence of a criminal

investigation or instructed the general partner to say nothing

about it). This case is governed by Phillips and not Transpac

Drilling Venture. AVA has not claimed that any limited partners

refused to sign any consent. Also, as stated, AVA professes

that, when Mr. Schreiber signed the AVA Form 872-P for 1985, he

was unaware of any criminal investigation. Given that

representation, it is unlikely that he was cooperating with the

Government as a witness in a criminal investigation. Indeed, the

- 36 -

referral that resulted in a criminal investigation of AMCOR-

related individuals did not occur until October 25, 1988, almost

1 month after he signed the AVA Form 872-P for 1985. See Crop

Associates-1986 v. Commissioner, T.C. Memo. 2000-216. Also, in

Crops Associates-1986, we did not find, as the petitioner therein

requested, that the IRS misled the partners about the existence

of a criminal investigation. Nor did we find that the IRS

instructed the general partner to say nothing about such an

investigation.

f. Conclusion

We find that George L. Schreiber was the TMP of the

partnership on September 30, 1988, the day he executed the AVA

Form 872-P for 1985. The AVA Form 872-P was, thus, effective to

extend the 3-year period for all of the partners of the

partnership for 1985. The AVA FPAA was timely issued before

expiration of the section 6229(a) assessment period with respect

to the partnership’s 1985 taxable year.

IV. AVF

A. FINDINGS OF FACT

AVF, a calendar-year taxpayer, is a California limited

partnership formed in 1985 pursuant to the CRLPA.

For 1985, AVF timely made a return of income (the AVF 1985

Form 1065) to respondent’s Fresno, California, service center.

The AVF 1985 Form 1065 shows AVF’s address as: C/O AMCOR, “5000

- 37 -

BIRCH ST., STE 610 EAST TOWER, NEWPORT BEACH, CA 92660". The AVF

1985 Form 1065 does not designate any partner as the TMP of AVF.

On September 30, 1988, Messrs. Behrens and Schreiber signed

a letter (the second September 30 letter) with respect to AVF

that, in pertinent part, is identical to the September 30 letter.

See supra sec. III.A.5. The second September 30 letter was

properly signed by Messrs. Behrens and Schreiber, who, together,

represented 67 percent of the general partner’s profit interests.

The circumstances surrounding Messrs. Behrens and Schreiber’s

signing the second September 30 letter are identical to the

circumstances surrounding their signing the September 30 letter.

On September 30, 1988, Mr. Schreiber executed a Form 872-P

with respect to AVF (the AVF Form 872-P for 1985) that, except

for the identification thereon of AVF, is identical to the AVA

Form 872-P for 1985. See supra sec. III.A.6. The AVF Form 872-P

for 1985 was executed by a representative of respondent’s on

October 4, 1988.

On April 10, 1991, respondent issued an FPAA to AVF,

addressed to “Tax Matters Partner” (the AVF FPAA), for its 1985

taxable year.

B. OPINION

The issue here is the same as it is with respect to AVA for

1985, except that it is the validity of the second September 30

- 38 -

letter, and not the first, that is at issue. For the reasons set

forth supra in section III.B.2, we find that the second

September 30 letter is valid. Therefore, we find that George L.

Schreiber was the TMP of AVF on September 30, 1988, the day he

executed the AVF Form 872-P for 1985. The AVF Form 872-P for

1985 was, thus, effective to extend the 3-year period for all of

the partners of the partnership for 1985. The AVF FPAA was

timely issued.

V. DV-85

A. FINDINGS OF FACT

DV-85 (sometimes, the partnership), a calendar-year

taxpayer, is a California limited partnership formed in 1985

pursuant to the CRLPA.

On June 28, 1985, Messrs. Behrens, Schreiber, and Wright, as

general partners, and certain others entered into an agreement of

limited partnership with respect to the partnership (the DV-85

limited partnership agreement or the agreement). The agreement

contains provisions substantially identical to the provisions of

the AVA limited partnership agreement set forth supra in section

III.A.2.

For 1985, the partnership timely made a return of income

(the DV-85 1985 Form 1065). The DV-85 1985 Form 1065 does not

designate any partner as the TMP of DV-85.

- 39 -

Respondent received three letters with respect to the

partnership, dated June 16, July 14, and September 30, 1988,

respectively (the three letters). Each of the three letters

states that, as referenced in the limited partnership agreement,

the general partners have designated George L. Schreiber as TMP

(the first two of the three letters say “until the Partnership

termination”, while the last says “for the 1985 tax year and

until the Partnership termination”). The three letters are

signed by Messrs. Behrens, Schreiber, and Wright in various

capacities with respect to AMCOR or as a general partner of DV-

85.

On June 17, 1988, Mr. Schreiber was a general partner of the

partnership. On that date, he executed a Form 872-P with respect

to the partnership (the DV-85 Form 872-P for 1985) that, except

for the date and the identification thereon of DV-85, is

identical to the AVA Form 872-P for 1985. The DV-85 Form 872-P

for 1985 was executed by a representative of respondent’s on

June 23, 1988.

On April 10, 1991, respondent issued an FPAA to the

partnership, addressed to “Tax Matters Partner” (the DV-85 FPAA),

for its 1985 taxable year.

B. OPINION

1. Introduction

The partnership timely filed the DV-85 1985 Form 1065, and,

unless the 3-year period was extended, the DV-85 FPAA, issued on

- 40 -

April 10, 1991, was issued after the expiration of the 3-year

period. Respondent relies on the DV-85 Form 872-P for 1985 to

show such extension. There are technical defects in each of the

three letters, and respondent concedes that none of them complies

with the requirements of section 301.6231(a)(7)-1T(e), Temporary

Proced. & Admin. Regs., 52 Fed. Reg. 6791 (Mar. 5, 1987), for

designating a TMP. Respondent also concedes that Mr. Schreiber

was not the TMP of DV-85 at the time he executed the DV-85 Form

872-P for 1985. Nevertheless, respondent argues that the DV-85

Form 872-P for 1985 was effective to extend the 3-year period for

all of the partners of the partnership since Mr. Schreiber was

authorized by the partnership in writing to enter into an

agreement with respondent to so extend the 3-year period. See

sec. 6229(b)(1)(B). DV-85 argues that Mr. Schreiber was not so

authorized. We believe that he was authorized in writing to

enter into such agreement, and we so find.

2. Relevant Law

As stated supra in section II.A, section 6229(b)(1)(B)

provides that the 3-year period may be extended with respect to

all partners by an agreement entered into by respondent and,

alternatively, (1) the tax matters partner or (2) any other

person authorized by the partnership in writing to enter into

such an agreement. Section 301.6229(b)-1T, Temporary Proced. &

Admin. Regs., 52 Fed. Reg. 6784 (Mar. 5, 1987), Extension by

agreement (Temporary), provides:

- 41 -

Any partnership may authorize any person to extend

the period described in section 6229(a) with respect to

all partners by filing a statement to that effect with

the service center with which the partnership return is

filed. The statement shall--

(a) Provide that it is an authorization for a

person other than the tax matters partner to extend the

assessment period with respect to all partners,

(b) Identify the partnership and the person being

authorized by name, address, and taxpayer

identification number,

(c) Specify the partnership taxable year or years

for which the authorization is effective, and

(d) Be signed by all persons who were general

partners at any time during the year or years for which

the authorization is effective.

Respondent concedes that DV-85 filed no statement complying

with section 301.6229(b)-1T, Temporary Proced. & Admin. Regs.,

supra. Respondent argues that, nevertheless, Mr. Schreiber was

authorized by DV-85 in writing to execute the DV-85 Form 872-P

for 1985 and that such authorization satisfies section

6229(b)(1)(B).

Section 6229(b)(1)(B) does not specify how a person other

than the TMP is to be authorized by the partnership in writing to

enter into an agreement to extend the 3-year period. We have

concluded that section 301.6229(b)-1T, Temporary Proced. and

Admin. Regs., is permissive, not mandatory, in nature. See

Bugaboo Timber Co. v. Commissioner, 101 T.C. 474, 487 (1993)

(with respect to an S corporation, adopting the conclusions of

Amesbury Apartments, Ltd., and Cambridge Research & Dev. Group,

- 42 -

that specificity of the written authorization is not required).

Cambridge Research & Dev. Group v. Commissioner, 97 T.C. 287, 295

(1991); Amesbury Apartments, Ltd. v. Commissioner, 95 T.C. at

242-243. In Amesbury Apartments, Ltd. v. Commissioner, supra, we

reasoned: “[T]he crucial word in temporary regulation section

301.6229(b)-1T is ‘may,’ not ‘shall.’ There is no mandatory

requirement that a partnership give authority to a person to

execute a consent utilizing specific procedures, such as those

outlined in the temporary regulation.” DV-85 contends that our

reasoning in Amesbury Apartments, Ltd., and Cambridge Research &

Dev. Group, is obiter dicta since the consents in both cases were

signed before section 301.6229(b)-1T, Temporary Proced. & Admin.

Regs., supra, came into effect. In any case, we find our

reasoning in those two cases to be persuasive, and follow it

here. See Bugaboo Timber Co. v. Commissioner, supra at 488.

We may look to the DV-85 limited partnership agreement to

determine whether Mr. Schreiber was authorized by the partnership

in writing to enter into an agreement with respondent to extend

the 3-year period; i.e., to execute the DV-85 Form 872-P for

1985. See Cambridge Research & Dev. Group v. Commissioner, supra

at 301-302.

3. Discussion

In Cambridge Research & Dev. Group, we found that language

in the agreement of limited partnership there in question

authorizing the general partners to “take any action or do

- 43 -

anything in furtherance of the Partnership business” amounted to

a grant of agency from the partners to the general partners

sufficient for a general partner to enter into an agreement with

the Secretary to extend the 3-year period. See supra at 297.

Here, in pertinent part, the DV-85 limited partnership agreement

provides:

11.1 ‘Management and Control of the Partnership”

11.1.a Subject to the consent of the Limited Partners

where required by this Agreement, the General Partners,

with the authority granted under this Agreement, shall

have the exclusive right to manage the business of the

Partnership and are hereby authorized to take any

action of any kind and to do anything and everything

they deem necessary in accordance with the provisions

of this Agreement. In decisions by the General

Partners, vote by a majority of them shall be

determinative.

* * * * * * *

11.2 “Authority of the General Partners”

11.2.a Except to the extent otherwise provided herein,

the General Partners (or their designated agent) for,

and in the name and on behalf of the Partnership, are

hereby authorized:

* * * * * * *

(11) to engage in any kind of activity and to perform

and carry out contracts of any kind necessary to, or in

connection with, or incidental to the accomplishment of

the purposes of the Partnership, as may be lawfully

carried on or performed by a partnership under the laws

of each state in which the partnership is then formed

or qualified.

There are no pertinent restrictions on the authority of the

general partners, and, thus, sections 11.1.a, 11.2.a, and (11) of

the DV-85 agreement provide a grant of agency at least as broad

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as the grant made by the agreement in Cambridge Research & Dev.

Group v. Commissioner, supra. Section 26.6 of the agreement (the

same as sec. 26.6 of the AVA limited partnership agreement; see

supra sec. III.A.2), providing that the general partners shall

designate one of them TMP, confirms that drafters of the

agreement contemplated that a general partner would have the

authority to extend the 3-year period for all of the partners of

the partnership. See sec. 6229(b)(1)(B). The fact that the

general partners were not successful in designating one of

themselves TMP, a position which carries responsibilities in

addition to entering into an agreement with the Secretary to

extend the 3-year period, does not convince us that the drafters

of the agreement intended such extension to be accomplished only

by a general partner successfully designated TMP. We believe

that, when read in the light of the California Revised Limited

Partnership Act, the DV-85 limited partnership provided the

authority for a general partner of the partnership to enter into

an agreement to extend the 3-year period with respect to all the

partners of the partnership, and we so find. The DV-85 Form

872-P for 1985, executed by Mr. Schreiber and delivered to

respondent, is evidence that Mr. Schreiber had authority to

execute that document. See section 11.2.b of the DV-85 limited

partnership agreement, which is identical to the same section of

the AVA limited partnership agreement, set forth supra in section

III.A.2. The partnership has failed to prove that

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Mr. Schreiber’s signature on the DV-85 Form 872-P for 1985 was

not duly authorized by the general partners of DV-85.

DV-85 also makes the same arguments that we considered supra

in section III.B.2.e., under the heading “AVA’s Other Arguments”.

We reject those arguments with respect to DV-85 for the same

reasons we rejected them with respect to AVA.

4. Conclusion

The DV-85 Form 872-P for 1985 was effective to extend the

3-year period for all of the partners of the partnership for

1985. The DV-85 FPAA was timely issued.

VI. HFA-II

A. FINDINGS OF FACT

HFA-II (sometimes, the partnership), a calendar-year

taxpayer, is a Texas limited partnership formed in 1985 pursuant

to the Texas Uniform Limited Partnership Act (sometimes, TULPA),

Tex. Rev. Civ. Stat. Ann. art. 6132a (West 1970).6

On May 22, 1985, James D. Dannenbaum and Mr. Wright, as

general partners, and certain others entered into an agreement of

limited partnership with respect to the partnership (the HFA-II

limited partnership agreement or the agreement). The agreement

6

There is a conflict between Stipulation of Facts E-1,

which recites that HFA-II was organized under the laws of

California, and the HFA-II agreement of limited partnership,

which recites that the partnership was formed under the laws of

Texas. We may disregard a stipulation where it is clearly

contrary to the evidence in the record, and we do so here. See

Jasionowski v. Commissioner, 66 T.C. 312, 318 (1976).

- 46 -

contains provisions substantially identical to the provisions of

the AVA limited partnership agreement set forth supra in section

III.A.2.

For 1985, the partnership prepared a Form 1065 (the HFA-II

1985 Form 1065), which was received by respondent on March 24,

1986. At the signature line on the HFA-II 1985 Form 1065 is what

appears to be a stamped signature block reading as follows:

AMERICAN AGRICORP, Managing Agent

By ______________________________

The signature of George Schreiber, “Sr VP”, appears on the line

in that block. The HFA-II 1985 Form 1065 shows the date of

Mr. Schreiber’s signature as February 4, 1986. The HFA-II 1985

Form 1065 does not designate any partner as TMP.

During 1985, AMCOR was not, at any time, a partner of

HFA-II. Mr. Schreiber was never either a general or limited

partner of HFA-II.

On April 10, 1991, respondent issued an FPAA to the

partnership, addressed to “Tax Matters Partner” (the HFA-II

FPAA), for its 1985 taxable year.

B. OPINION

1. Introduction

The issue here is similar to the issue presented with

respect to AVA for 1984, see supra section III.B.1. viz, whether

the HFA-II 1985 Form 1065 is invalid because not executed in

conformance with the Internal Revenue Code. If invalid, then

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HFA-II’s affirmative defense of statute of limitations fails

because the 3-year period had not run at the time respondent

issued the HFA-II FPAA. See sec. 6229(a), (c)(3).

2. AMCOR Was Not a Partner

For the HFA-II 1985 Form 1065 to be a valid return, it must

be signed by one of the partners of the partnership. See sec.

6063. The parties have stipulated:

If * * * [AMCOR] is determined to have been a

general partner for Federal income tax purposes when

the * * * [HFA-II 1985 Form 1065] was executed then

such return is adequate to commence the running of the

statute of limitations as of the later of the due date

of the return or the date it was actually filed.

HFA-II has failed to propose a finding of fact that AMCOR

was a partner of HFA-II by February 4, 1986, the date of

Mr. Schreiber’s signature appearing on the HFA-II 1985 Form 1065.

The HFA-85 limited partnership agreement gives the general

partners the authority to admit a co-general partner. HFA-II has

failed to produce any evidence that such authority was exercised

on or before February 4, 1986. As with AVA, see supra section

III.B.1.d, HFA-II’s failure to produce such evidence leads to the

inference that either such evidence does not exist or would be

negative to petitioner. See Wichita Terminal Elevator Co. v.

Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513 (10th

Cir. 1947). We find that AMCOR was not admitted as a general

partner of the partnership on or before February 4, 1986.

- 48 -

3. Agency

Alternatively, HFA-II argues: “In addition, * * * [AMCOR]

was managing agent of HFA. As managing agent, * * * [AMCOR] was

granted the responsibility for conducting all of HFA’s business

and tax affairs, and was authorized to sign the 1985 Form 1065 in

that capacity.” We reject that argument with respect to the HFA-

II for the same reasons we reject it with respect to AVA. See

supra sec. III.B.1.e.(2).

4. Authority of Limited Partner

As a second alternative, HFA-II argues: “The 1985 Form 1065

for HFA was executed by Schreiber, a general partner in AVF,

which was a limited partner in HFA during 1985.” Respondent

concedes that AVF was a limited partner in HFA-II “for the 1985

year”. HFA-II has failed to prove that Mr. Schreiber executed

the HFA-II 1985 Form 1065 in any capacity other than as a vice-

president of AMCOR. Even if we assume that he executed it as a

limited partner of AVF, however, the HFA-II 1985 Form 1065 is

still invalid.

Section 6063 provides that a partnership return shall be

signed by any one of the partners. It further provides: “The

fact that a partner’s name is signed on the return shall be prima

facie evidence that such partner is authorized to sign the return

on behalf of the partnership.” Prima facie evidence suffices to

establish a fact until contradictory evidence is produced. See

Black’s Law Dictionary, 579 (7th ed. 1999). Section 9.4 of the

- 49 -

HFA-II limited partnership agreement is substantially identical

to section 9.4 of the AVA limited partnership agreement set out

supra in section III.A.2. In pertinent part, it provides that a

limited partner “shall have no right or authority to act for or

bind the Partnership.” Mr. Schreiber, acting as a general

partner in AVF, which was only a limited partner in HFA-II, had

no authority to sign partnership returns on behalf of HFA-II.

The HFA-II 1985 Form 1065 was not signed by a partner who had

authority to bind the partnership.7

5. Conclusion

We find that the HFA-II 1985 Form 1065 was not signed by any

partner who had authority to sign it and, consequently, it was

not a valid partnership return. The HFA-II FPAA was issued

before expiration of the section 6229(a) assessment period. See

supra sec. III.B.1.f.

VII. TFV

A. FINDINGS OF FACT

1. Formation of TFV

TFV (sometimes, the partnership) is a Texas limited

partnership formed in 1984 pursuant to the TULPA.

2. Agreement of Limited Partnership

On December 14, 1984, James D. Dannenbaum and Robert A.

Wright, as general partners, and certain others entered into an

7

We need not reach the broader issue anticipated by

HFA-II, whether a partnership return that is signed by a limited

partner can ever be properly executed under sec. 6063, since the

limited partner in this case lacked authority to execute the

HFA-II 1985 Form 1065.

- 50 -

agreement of limited partnership with respect to the partnership

(the TFV limited partnership agreement or the agreement). The

agreement contains provisions substantially identical to the

provisions of the AVA limited partnership agreement set forth

supra in section III.A.2.

3. Agreement To Make AMCOR Co-General Partner

Following are the pertinent portions of a document (the TFV

purchase document) dealing with the purchase of a general

partnership interest in the partnership:

AMERICAN AGRI-CORP

December 12, 1985

Mr. Robert A. Wright

Mr. James D. Dannenbaum [sic]

AMERICAN AGRI-CORP

5000 Birch Street

East Tower, Suite 610

Newport Beach, CA 92660

SUBJECT: PURCHASES OF A GENERAL PARTNERSHIP

INTEREST IN TEXAS FARM VENTURERS-84

Gentlemen:

You are Co-General Partners of Texas Farm Venturers-84,

a Texas limited partnership.

It is understood that the two of you, as individuals,

collectively own a 1 percent interest in this

partnership.

American Agri-Corp is desirous of purchasing 50 percent

of the collective position of Robert A. Wright’s

General Partnership interest in Texas Farm Venturers-

84.

American Agri-Corp agrees to buy, and you agree to

sell, a one-quarter percent interest in the above

general partnership interest for consideration as

agreed upon between the name parties. It is understood

that American Agri-Corp assumes all the rights, duties,

- 51 -

and obligations of a Co-General Partner in the above

named partnerships.

Sincerely, UNDERSTOOD AND AGREED TO:

American Agri-Corp By:

/s/ /s/

Fred H. Behrens Robert A. Wright

Chairman

/s/ /s/

George L. Schreiber James D. Dannenbaum

Vice Chairman

/s/

Robert A. Wright

Senior Vice President

4. Partnership Returns

For tax purposes, the partnership makes its return on the

basis of a calendar year. For 1984 and 1985, the partnership

prepared Forms 1065, U.S. Partnership Return of Income (the TFV

1984 and 1985 Forms 1065, respectively). Respondent received the

TFV 1984 Form 1065 at his Fresno, California, service center on

March 25, 1985, and the TFV 1985 Form 1065 at his Austin, Texas,

service center on April 11, 1986. Each of such returns shows

TFV’s address as: C/O AMCOR, “5000 BIRCH ST., STE 610 EAST

TOWER, NEWPORT BEACH, CA 92660". The TFV 1984 Form 1065 is

signed “Joseph O. Voyer Treasurer”. It shows the date of that

signature as February 5, 1985. It does not state the

organization, if any, of which Joseph O. Voyer was treasurer.

TFV never had a treasurer; Mr. Voyer was never a partner of TFV.

Mr. Voyer was an officer and employee of AMCOR.

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The TFV 1985 Form 1065 does not designate any partner as the

TMP of TFV.

5. Designation of TMP

Respondent received two letters with respect to the

partnership, dated June 16, and September 29, 1988, respectively

(the June 16 and the September 29 letters, respectively). The

June 16 letter states that, as referenced in the limited

partnership agreement, the general partners have designated

George L. Schreiber as TMP until the partnership termination.

The June 16 letter is signed by Messrs. Behrens, Wright, and

Schreiber, in various capacities with respect to AMCOR, in

Mr. White’s case, or as a general partner of TFV. The

September 29 letter is similar, except that it designates

Robert A. Wright as TMP for 1985 and until the partnership

termination, and it is signed only by Robert A. Wright, “General

Partner”.

6. Consents

On June 17, 1988, Mr. Schreiber executed a Form 872-P with

respect to TFV (the June 17 TFV Form 872-P for 1985) that, except

for the identification thereon of TFV, is identical to the AVA

Form 872-P for 1985. The June 17, 1988, Form 872-P for 1985 was

executed by a representative of respondent’s on June 23, 1988.

On September 29, 1988, Mr. Wright executed a second Form 872-P

with respect to TFV (the September 29 TFV Form 872-P for 1985)

- 53 -

that, except for the identification thereon of TFV, is identical

to the AVA Form 872-P for 1985. The September 29, 1988,

Form 872-P for 1985 was executed by a representative of

respondent’s on October 5, 1988.

7. TFV FPAA

On April 10, 1991, respondent issued an FPAA to TFV,

addressed to “Tax Matters Partner” (the TFV FPAA), for its 1984

and 1985 taxable years.

B. OPINION

1. 1984 Taxable Year

The issue here is the same as it is with respect to AVA for

1984. See supra sec. III.B.1.a. The parties have stipulated:

On February 5, 1985, when Mr. Voyer signed the 1984 TFV Form

1065, he was an officer and employee of AMCOR; if AMCOR is

determined to have been a general partner of TFV for Federal

income tax purposes when the TFV 1984 Form 1065 was signed by

Mr. Voyer, then such return is valid. We must, thus, determine

whether AMCOR was a partner of TFV on February 5, 1985.

TFV makes essentially the same arguments made by AVA. It

does not, however, argue that, by way of stipulation, respondent

has admitted that AMCOR was a general partner in TFV throughout

1985. The relevant statutory provision is TULPA section 10(5),

which, in pertinent part, provides: “[W]ithout the written

consent or ratification of the specific act by all the limited

partners, a general partner or all the general partners have no

authority to: * * * Admit a person as a general partner.”

- 54 -

Tex. Rev. Civ. Stat. Ann. art. 6132a (West 1970). TFV has failed

to prove that AMCOR was admitted as a co-general partner of the

partnership in accordance with TULPA section 10(5) on or before

February 5, 1985. We reject TFV’s other arguments for the

reasons set forth supra in section III.B.1.e.(1) and (2).8

We find that the TFV 1984 Form 1065 was not signed by any

partner who had authority to sign it, and, consequently, it was

not a valid partnership return. The TFV FPAA was issued before

expiration of the section 6229(a) assessment period and was

effective to suspend the running of that period. See supra

sec. III.B.1.f.

2. 1985 Taxable Year

The issue here is the same as it is with respect to DV-85

for 1985. See supra sec. V.B. The partnership timely filed the

TFV 1985 Form 1065, and, unless the 3-year period was extended,

the TFV FPAA, issued on April 10, 1991, was issued after the

expiration of the 3-year period. Respondent relies on the

September 29 TFV Form 872-P for 1985 to show such extension.

There are technical defects in the June 16 and September 29

letters, and respondent concedes that neither of them complies

with the requirements of section 301.6231(a)(7)-1T(e), Temporary

Proced. & Admin. Regs., 42 Fed. Reg. 6791 (Mar. 5, 1987), for

designating a TMP. Also, respondent concedes that Mr. Schreiber,

8

TFV has not produced any agreement by which AMCOR was

engaged as managing partner of the partnership.

- 55 -

who signed the June 17 TFV Form 872-P for 1985 was never a

partner of TFV. Nevertheless, respondent argues that the

September 29 TFV Form 872-P for 1985 was effective to extend the

3-year period for all of the partners of the partnership since

Mr. Wright was authorized by the partnership in writing to enter

into an agreement with respondent to so extend the 3-year period.

See sec. 6229(b)(1)(B).

For the same reasons set forth supra in section V.B.3., we

find that the September 29 TFV Form 872-P for 1985 was effective

to extend the 3-year period for 1985. The TFV FPAA was timely

issued.

VIII. Conclusion

None of the partnerships has sustained the affirmative

defense of statute of limitations; the FPAA’s issued to AVA and

TFV for the 1984 and 1985 taxable years are valid. The FPAA’s

issued to AVF, DV-85, and HFA-II for the 1985 taxable year are

valid.

In the partnerships’ reply brief, they state that

respondent’s opening brief identifies William K. Shipley as

Acting Regional Counsel and Mr. Shipley was a witness in this

case. The partnerships claim: “Any direct involvement by

Mr. Shipley in a case in which he testified would be

- 56 -

inappropriate and unethical.” Mr. Shipley is not among the

counsel of record for respondent, nor have the partnerships shown

his direct involvement in this case. The partnerships have made

no claim that requires any action of us. See Rule 24(g).

An appropriate order

will be issued.