# Opposition Brief — Curr-Spec Partners v. Commissioner

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2010
- **Citation:** 560 U.S. 924

## Text

No. 09-871 PP Bei SS, Sls

Jn the Supreme Court of the Gnited States

CURR-SPEC PARTNERS, L.P., PETITIONER
Vv,

COMMISSIONER OF INTERNAL REVENUE

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FORTHE FIFTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

ELENA KAGAN
Solicitor Ge neral
Counsel of Record
JOHN A. DICICCO
Acting Assistant Attorney
(reneral
GILBERT 8. ROTHENBERG
Acting Deputy Assistant
Attorne Y General
MICHAEL J. HAUNGS
KAREN G. GREGORY
Attorneys
Department of Justice
Washington, D.C. 20530-0001
SupremeCtBriefs@usdo}.gov

N09) 1)
wa IL -w

POO’?
~ &

QUESTIONS PRESENTED

Partnerships are pass-through entities that do not
themselves pay federal income tax, but nonetheless file
annual information returns stating their income, gains,
losses, deductions, and credits. Those items are then al-
located among the individual partners, and any resulting
income-tax liability is assessed against the individual
partners. To adjust “partnership items,” the Internal
Revenue Service must issue a notice of final partnership
administrative adjustment (F}PAA). Adjustments in the
FPAA may affect the tax liability of the individual
partners, against whom additional income-tax liabilities
arising from the adjustments will be assessed. Certain
partners may (as was done here) challenge the FPAA in
a partnership-level proceeding in the Tax Court. The
questions presented are as follows:

1. Whether 26 U.S.C. 6229(a) provides only a minimum
period for assessments attributable to partnership items
and thus may extend, but not shorten, the statute of limi-
tations in 26 U.S.C. 6501(a) for assessments against indi-
vidual partners.

2. Whether the Tax Court has jurisdiction, in a
partnership-level proceeding, to consider whether the stat-
ute of limitations for assessments attributable to partner-
ship items remains open for a particular partner.

TABLE OF CONTENTS

RPE EIDUOW ccc ccc cccecceveceseeseses aan res
ee aw ke ob eae elk ~ aang l
Statutory provisions involved .............. seca ks Bho
ee ee pacea hs elk sa Rene ee
Argument .... | ; | 6
Pe . 15
Appendix Statutory provisions .......... = Pre

TABLE OF AUTHORITIES
Cases:

AD Global Fund, LLC ex rel. North Hills Holding,

Inc. v. United States, 481 F.3d 1351 (Fed. Cir

LE ANAS ee ee Pe PAF ‘, 14
Andantech L.L.C. v. Commissione

TC. Memo 2002-97, aff'd in part, 331 F.3d 972

(D.C. Cir. 2008) ........ ee :

331 F.3d 972 (D.C. Cir. 2003) 8 14
Anderson v. United States dn re And rsov),

No. 94-5165, 1995 WL 481196 (10th Cir

Aug. &, 1995), cert. denied, 516 U.S. 1119 (1996
Baker v. Carr, 369 U.S. 186 (1962) . 7 vr eS
Bakersfield Energy Partners, LP v. Commissioner,

568 F.3d 767 (9th Cir. 2009) .... - q

BLAK Invs. v. Commissions r, 133 T.C. No. 19.

2009 WL 4981301 (Dee. 23, 1009)
Callaway Vv. Commissioner, 231 F.3d 106 (2d Cir

2000) .... oe ; ; - ; .
CUR&k W. Operations Lid. P'ship v. Commisstone?

273 F.3d 402 (1st Cir. 2001) ) pas 9

IV

Cases—Continued: Page

Chef’s Choice Produce, Ltd. v. Commissioner,

ow EO Ll: ee a ere 4
Chimblo v. Commissioner, 177 F.3d 119 (2d Cir.

1999), cert. denied, 528 U.S. 1154 (2000) ........... }4
Conway Vv. United States, 326 F.3d 1268 (Fed. Cir.

ED cocoa aad ea a ae a ee ee ee ae eee ee ee 2
Davenport Recycling Assocs. v. Commissioner,

220 F.3d 1255 (11th Cir. 2000) .................00.. 14
Field v. U/nited States, 381 F.3d 109 (2d Cir. 2004) ....... i)
G-5 Inv. P’ship v. Commissioner, 128 T.C. 186 (2007) ... 12
Kaplan v. United States, 138 F.3d 469 (7th Cir. 1998) .. 14
Keener v. L/nited States, 551 F.3d 1358 (Fed. Cir.),

cert. denied, 130 S. Ct. 153 (2009) .................. 14
Kligfeld Holdings v. Commassioner, 128 T.C. 192

ER re ek ea ck ke eons Ueda ree Tae 12
Madison Recycling Assocs. v. Commissioner,

re Se ee cae Sas ED 6. 6 0 vo hss e ses eck Rs bee et )
Monahan v. Commissioner, 321 bk’ .3d 1063

Boy Be Sb i: Rete nnn A Re era mar eee Ea i)
Monetary IT Ltd. P’ship v. Commissioner, 47 F.3d

Gee Cate Gs RO? So oc cco kas euneacse bees AS

Rhone Poulenc Surfactants & Specialties, L.P. v.
Commissioner, 114 T.C. 5338 (2000), appeal

dismissed, 249 I .3d 175 (8d Cir. 2001) ...... .. 08,10
l/nited States v. Basye, 410 U.S. 441 (1973) Zz
l/nited States v. Martinez (In re Martinez),

564 F.3d 719 (Sth Cir. 2009) ............... rere

Warth v. Seldin, 422 U.S. 490 (1975)

Cases—Continued: Page
Weiner v. United States, 389 F.3d 152 (Sth Cir. 2004),
cert. denied, 544 U.S. 1050 (2005) ............... 10, 14

Constitution, statutes and regulations

8B ge RS SE >) GR a 13
Small Business Job Protection Act of 1996, Pub. L.

No. 104-188, § 1807(c)(3)(B), 110 Stat. 1782 ....... ; =
Tax Equity and Fiscal Responsibility Act of 1982,

Pub. L. No. 97-248, 96 Stat.324 ..............c0ee. 2

RD, OS UN WO nck ec cscceascesrnovece. i-@
Tax Reform Act of 1984, Pub. L. No. 98-369, § 714(p),

a a re ae a pre be 2
Taxpayer Relief Act of 1997, Pub. L.. No. 105-34,

§§ 1231-1243, 111 Stat. 1020-1029 . Ge.
26 U.S.C. 701-704 ........ eas oe ia aaars > 2
GR 8 be.) ee err ote 2
26 U.S.C. 6110(K)(38) . : . SF oe ee oe ey wee 10
aR Ee rr HO PRO eres
26 U.S.C. 6221-6234 ....... ae algae eat arated eae
26 U.S.C. G223(aX(Z) ........06. erate coat eae an 2
26 U.S.C. 6223(d)(2) .. has Pare Z
26 U.S.C. 62285 . 2
26 U.S.C. 6225(a) ?
- BRR See. ee - ~» 4, de, 22
BSP Sem VE |) Se ke a i
26 U.S.C. 6226(a)(2)-(3) ... a ! seve 1d 18
26 U.S.C. 6226(b) .... . awala ees ee Na

26 U.S.C. 6226(e) .... ; ; . 12. 138. Sa

VI

Statutes and regulations—Continued Page
26 U.S.C. 6226(d) . OH, oa

26 UES.C. 622604)O1) - sh. te ia. 8

26 U.S.C. 6226(d)(1)(B) 12, 3a
26 U.S.C. 6226(f . . , 13, da
26 U.S.C. 6226(¢) 13, da
26 U.S.C. 6226(h) ...... Ll, 5a

26 U.S.C. 6229 (, oa
26 U.S.C. 6229(a) mm, dA

26 U.S.C. 6229(b)(1) 9,5
26 U.S.C. 6229(b)( DB 14, 6
26 U.S.C. 6229(c)(2) 9, 6a

26 U.S.C. 6229(f

1 U.S.C. 6230(a)(1)

7, U.S.C. 6501

6 U.S.C. 6501(a) , 6 x 11, 8a
26 U.S.C, 6501(n)(2) 7. 10a

26 | >. ( {482

ection 1.40]
section L.b0sl-1(a)

Section 301.6251(a)(3)-1U

hief Counsel Advisory, IRS CCA 2OOUVSLOSS,
2009 WIL, 4884136 Clune 24. 20090 ; LQ)

hief Counsel Notice. IRS CON N«¢35)000 14,
LGU WL 84258890 (Oct. 19. 1998) it)

Miscellaneou Continued

Litigation Guideline Memorandum. IRS LGM TI,-42
LOS8 WL S98060 (Jan. 22. 1988)
Litigation Guideline Memorandum. [RS LGM
:

1999 WI, 507271 (Feb

POQQ0D504A0

Jn the Supreme Court of the GAnited States

RRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

| i) >] ne Ps
( ourt Pet \p] 25 s4a) not reported bD
printed in 94 T.C.M. (CCH) 314
IU RISDICTION
lhe lWvment ot tne rt I appe Al Was ent read

\uvust 11. 2009. A petition for rehearing was denied o

October 16, 2009 (ret. App. sva Phe petitior ior a Wt

f certiorari was filed on January 14, 2010, The jurisdi

STATUTORY PROVISIONS INVOLVED

ihe relevant statutory p! »reprod
, i ; ; -_— { A was ! 1/)
ippend Is | eC] A ra, J LU

a

STATEMENT

1. Partnerships are pass-through entities that
do not pay federal income tax but are required to
file annual information returns. 26 U.S.C. 6031;
26 C.F.R. 1.701-1, 1.6031-1(a)(1); United States v. Basye,
110 U.S. 441, 448 (1973). All income, gains, losses, de-
ductions, and credits are allocated among the individual
partners, who must report the allocations on their indi
vidual income-tax returns. 26 U.S.C. 701-704; Conway
v. United States, 326 F.3d 1268, 1271 (Fed. Cir. 2003).
Income tax is thus assessed against the individual part-
ners rather than against the partnership.

a. A unified procedure for determining the proper
tax treatment of partnership items was established in
Section 402(a) of the Tax Equity and Fiscal Responsibil
ity Act of 1982 (TEFRA), Pub. L. No. 97-248, 96 Stat.
324, 648.’ Under TEFRA, the Internal Revenue Service
(IRS or Service) must issue a notice of final partnership
administrative adjustment (F PAA) in order to adjust
items reported on a partnership return. See 26 U.S.C
§223(a)(2) and (d)(2), 6225(a). The F PAA does not itself
assess income tax, but once the F PAA becomes final, its
adjustments to partnership items are allocated to
the individual partners, and any resulting tax liability
is assessed against them. See 26 U.S.C. 6201, 6225,
6250(a)(1).

Certain partners may contest the F PAA by filing a
petition in (among other fora) the United States Tax

TEE RA has since been amended by, inferalia, the Tax Reform Act
£1954, Pub. L. No. 98-369, § 714(p), 98 Stat. 964, the Small Business
lob Protection Act of 1996, Pub. L. No. 104-188. §& L3807(c)C3)B)
110 Stat. 1782, and the Taxpayer Reliet Act of 1997, Pub. L.. No. 105-34

231-1245, 111 Stat. 1020-1029 TEFRA in its current forn

dified at 26 U.S.C. 6221-6234

3

Court. See 26 U.S.C. 6226(a)-(b). In that partnership-
level proceeding, the Tax Court has “jurisdiction to
determine all partnership items of the partnership for
the partnership taxable year to which the [FPAA] re-
lates, the proper allocation of such items among the
partners, and [penalties].” 26 U.S.C. 6226(f). “Partner-
ship item” is further defined by regulations promul-
gated by the Secretary of the Treasury at 26 C.F.R.
301.6231(a)(3)-1(b). In a partnership-level proceeding,
the Tax Court is also authorized ti determine whether
a particular partner has no interest in the outcome of
the proceeding because “the period of limitations for
assessing any tax attributable to partnership items has
expired with respect to [that partner]’ 26 U.S.C.
6226(d){1). The Tax Court’s decision is subject to review
in the court of appeals. 26 U.S.C. 7482.

b. The statute of limitations for tax assessments is
set forth in 26 U.S.C. 6501. As relevant here, Section
6501(a) states that “the amount of any tax imposed by
this title [26 U.S.C.] shall be assessed within 3 years
after the return was filed.” Section 6501(a) further pro-
vides that “the term ‘return’ means the return required
to be filed by the taxpayer (and does not include a re-
turn of any person from whom the taxpayer has received
an item of income, gain, loss, deduction, or credit).” Sec-
tion 6501(n)(2) states: “For extension of period in the
case of partnership items * * * , see section 6229.”
Section 6229(a), in turn, states that “the period for as-
sessing any [income tax] with respect to any person
which is attributable to any partnership item (or af-
fected item) for a partnership taxable year shall not ex-
pire before the date which is 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

such return for such year (determined without regard to
extensions).”

2. Curr-Spec Partners, L.P., was the vehicle for an
abusive “Son-of-BOSS” tax shelter scheme. Pet. App.
23a.” The IRS examined Curr-Spec’s partnership return
for the taxable year 1999 and determined, inter alia,
that the partnership was a sham and should be disre-
garded for tax purposes. /d. at 24a. Accordingly, the
Service issued an F PAA in 2004. /bid. The Service rec-
ognized that although it was barred by the statute of
limitations from assessing additional tax against the
partners for 1999, the individual partners had claimed
net operating losses attributable to partnership items,
carried forward from 1999 to 2000 and later years, for
which the assessment period remained open. Jd. at 24a-
zZoa.

3. J. Winston Krause filed a petition in the Tax
Court challenging the F' PAA, conceding all issues except
the timeliness of the FPAA. Pet. App. 2a-3a, 14a n.6.
Krause did not dispute that the F PAA was issued within
three years after the dates on which Curr-Spece’s indi-

The petition for a writ of certiorari names Curr-Spec Partners,
LL.P., as the petitioner. Ajthough identified in the caption of the court
of appeals’ decision below, Curr-Spec was not a proper party to the
proceedings. The partners, and not the partnership, are the parties in
a proceeding challenging an F PAA. 26 U.S.C. 6226; Chef's Chorce Pro-
duce, Ltd. v. Commissioner, 95 TC. 388, 394-395 (1990). The Tax Court
petition that commenced this case was filed by J. Winston Krause
(counsel of record for Curr-Spee in this Court), who identified himself
as “‘successor-in-interest” to Curr-Spec’s tax matters partner, Curr-
spec Managers, I.LC. Neither the partnership nor the [IL.LC was still
in existence at the time the Tax Court petinon was filed, but Krauss
Was a notice partner who could file a petition in his own mght under
26 U.S C, 6226(b). To avoid ambiguity, this bnef will refer to “Curr

Spee” or “Krause” as appropriate

*)

vidual partners had filed returns for 2000 and 2001
claiming losses carried forward from 1999 partnership
items. /d. at 25a, 27a-28a. Rather, Krause argued that,
regardless of the date of filing of a partner’s individual
return reporting items passed through to him from the
partnership, 26 U.S.C. 6229(a) requires an FPAA to be
issued within three years after the date the partnership
return was filed. Pet. App. 6a-7a.

The Tax Court disagreed, relying on uniform author-
ity holding that Section 6229(a) does not “provide[] an
assessment period that. is independent of the period de-
scribed in [Slection 6501.” Pet. App. 27a (citing And-
antech L.L.C. v. Commissioner, T.C. Memo 2002-97, affd
in part, 331 F.3d 972 (D.C. Cir. 2003); Rhone-Poulenc
Surfactants & Specialties, L.P. v. Commissioner,
114 T.C. 533, 540-551 (2000) (en bane),” appeal dis-
missed, 249 F.3d 175 (3d Cir. 2001)). The court held
that, although the assessment period for 1999 had ex-
pired for all partners, the period was still open for 2000
and 2001. Pet. App. 27a-29a. The Tax Court also re-
jected Krause’s argument that it lacked jurisdiction to
consider the dates on which the partners had filed their
individual returns, explaining that its authority to do so
was implicit in Rkone-Poulenc. Id. at 34a n.4. Follow-
ing that decision, Krause and the government stipulated
to entry of a Tax Court decision conforming to the
FPAA. Curr-Spec Partners, LP v. Commissioner, No.
1350-05 (May 28, 2008).

4. The court of appeals affirmed. Pet. App. la-22a.
The court held that 26 U.S.C. 6229(a) does not establish
an independent three-year lmitations period within

For simpheity, we refer to decisions that were reviewed by the en-

ture Tax Court as having been decided “en banc.” See Pet. App. 13a n.2.

6

which an F PAA must be issued, but merely provides a
minimum time period that may extend, but can never
shorten, the three-year statute of limjtations for assess-
ments contained in 26 U.S.C. 6501(a). Pet. App. 6a-10a.
The court of appeals further held that the Tax Court had
jurisdiction pursuant to 26 U.S.C. 6226(d)(1) to consider
whether the partners’ individual assessment periods
under Section 6501(a) remained open. Pet. App. 5a-6a,
l6ann.19 & 20.

ARGUMENT

The court of appeals held that 26 U.S.C. 6229(a) pro-
vides only a minimum period for assessing tax attribut-
able to partnership items. Under that reading, Section
6229(a) ean extend the limitations period provided in
Section 6501(a) but can never shorten the period for an
assessment of tax against an individual partner. That
holding is correct and consistent with the holding of ev-
ery other court of appeals to consider the issue, as well
as with the interpretation of Section 6229(a) adopted by
the Tax Court sitting en banc.

The court of appeals further held that, under 26
U.S.C. 6226(d), the Tax Court had jurisdiction in this
partnership-level proceeding to determine whether the
Section 6501(a) limitations period had expired as to
Curr-Spece’s partners’ 2000 tax year and thereafter.
That holding is also correct. And even if Curr-Spec’s
contrary interpretation of Section 6226(d) were well-
founded, neither Curr-Spec nor the individual partners
could derive any advantage from a decision of this Court
so holding. To the contrary, this Court’s adoption of
that reading would require dismissal of the Tax Court
petition, leaving the F PAA (and the partners’ resultant

=~]

tax liabilities) undisturbed. Further review is not war-
ranted.

A. Curr-Spee contends that 26 U.S.C. 6229(a) is a
statute of limitations, and that the FPAA at issue in this
case was untimely because it was issued more than three
years after the filing of the partnership return for the
taxable year 1999. See, e.g., Pet. 8 (stating that “the
Commissioner issued its FPAA purporting to change
Curr-Spec’s 1999 ppg A tax return beyond the
three-year period of 26 U.S.C. § 6229”). That reading of
Section 6229(a) is incorrect a ec.itrary to uniform ap-
pellate authority. Properly understood, Section 6229(a)
can extend, but can never shorten, the limitations period
(see 26 U.S.C. 6501(a)) for assessing an individual part-
ner’s tax.

1. As every court of appeals to consider the question
(including the court below) has held, Section 6229(a)
is not a statute of limitations. By its terms, Section
6229(a) provides only that the period for assessing tax
attributable to partnership items “shall not expire be-
fore” three years from the date the partnership return
is due or filed. Section 6229(a) identifies no point after
which assessment becomes impermissible, and it there-
fore cannot have the effect of barring an assessment
that would otherwise be timely. Rather, it operates un-
der certain circumstances to extend the limitations pe-
riod in Section 6501(a), which provides (with exceptions
not applicable here) that “any tax” imposed by the In-
ternal Revenue Code “shall be assessed within” three

years after the filing of the individual's return. The
cross-reference in Section 6501(n)(2)—which describes
Section 6229 as an “extension of period”—confirms that
understanding.

8

Thus, all taxes, including those arising from adjust-
ments to partnership items, generally must be assessed
against an individual partner within three years after
the date he filed his individual return. Section 6229(a)
provides, however, that the assessment period for taxes
attributable to partnership items cannot be less than
three years after the filing date of the partnership
return. If a partnership return is filed later than an
individual partner’s return, Section 6229(a) extends the
period for assessing tax against the individual partner
until three years after the partnership return is filed.
Taken together, Sections 6229(a) and 6501(a) ensure
that the Service has at least three years to examine a
partner’s return and the underlying partnership return
together before it must act to assess any additional tax
against a partner.

2. Every court of appeals to consider the matter has
agreed that Section 6229(a) does not create an independ-
ent limitations period, but rather can only extend the
limitations period in Section 6501(a). See Pet. App. 2a,
l4ann.3 & 4; AD Global Fund, LLC ex rel. North Hills
Holding, Inc. v. United States, 431 F.3d 1351, 1354-1355
(Fed. Cir. 2007); Andantech L.L.C. v. Commissioner,
331 F.3d 972, 976-977 (D.C. Cir. 2003); see also Rhone
Poulenc Surfactants & Specialties, L.P. v. Commias-
stoner, 114 T.C. 5383, 540-551 (2000) (en banc), appeal
dismissed, 249 F.3d 175 (3d Cir. 2001).

None of the decisions cited by Curr-Spee or amicus
SRK Wilshire Partners (SRK) holds otherwise. The
court in one of those eases held that the challenged as-
sessment was untimely under all of the relevant provi-
sions. Callaway v. Commissioner, 231 F.3d 106 (2d Cir.
2000) (holding assessment untimely because all applica
ble limitations periods, including 26 U.S.C. 6501(a), had

o

expired). In other cases the courts held that the chal-
lenged assessments were timely under other provisions,
and therefore had no occasion to consider whether See-
tion 6229(a) could operate as an independent limitations
bar under different cireumstances. Sce CC&F W. Oper-
ations Ltd. P’ship v. Commissioner, 273 F.3d 402 (1st
Cir. 2001) (holding assessment timely under extended
limitations period of 26 U.S.C. 6229(c)(2)); Madison Re-
cycling Assocs. v. Commissioner, 295 F.3d 280 (2d Cir.
2002) (holding assessment timely under agreed exten-
sion provision of 26 U.S.C. 6229(b)(1)); Monetary [7 Ltd.
P’ship v. Commissioner, 47 F.3d 342, 343 (9th Cir. 1995)
(same); Anderson v. United States (In re Anderson),
No. 94-5165, 1995 WL 481196 (10th Cir. Aug. 8, 1995)
(unpublished decision) (holding assessment timely under
special liniitations period of 26 U.S.C. 6229(f)), cert. de-
nied, 516 U.S. 1119 (1996). Still other decisions mention
Section 6229(a) only incidentally in the course of resolv-
ing unrelated issues. See, e.g., Monahan v. Commis-
sioner, 321 F.3d 1063 (11th Cir. 2008) (addressing effect
of settlement agreement).

Thus, any fleeting suggestion in those cases that Sec-
tion 6229(a) is a statute of limitations is dicta. Indeed,
some of the circuits offering such dicta have, in later
cases, recognized (again in dicta) that Section 6229(a)
operates only to extend an otherwise applicable limita-
tions period. See Bakersfield Energy Partners, LP vy.
Commissioner, 568 F.3d 767, 770 n.5 (9th Cir. 2009)
(Section 6229(a) “provides a minimum time period in
which the IRS can assess a tax deficiency,” and thus is
not an independent statute of limitations.); veld v.
United States, 381 F.3d 109, 112 n.1 (2d Cir. 2004)
(“[Slection 6229(a), by its terms, does not purport to
lomzt the time available to assess tax, but only to eatend

10

limitations otherwise applicable.”). Likewise, the court
of appeals recognized in the decision below that its own
comments about Section 6229(a) in prior cases had been
dicta. See Pet. App. 1la-13a, 19a n.43 (dismissing as
dicta characterizations of Section 6229(a) made in
Werner v. United States, 389 F.3d 152, 154-155 (5th Cir.
2004), cert. denied, 544 U.S. 1050 (2005), and United
States v. Martinez Un re Martinez), 564 F.3d 719, 724,
726 (5th Cir. 2009)). Because every appellate court to
interpret Section 6229(a) in its holding has correctly
concluded that the provision is not a statute of limita-
tions, further review is unwarranted.’

B. Curr-Spee contends that the Tax Court lacked
jurisdiction in this partnership-level proceeding to con-
sider the limitations issues in this case. That contention
is not properly presented here because neither Curr-
Spec nor the individual partners would obtain any tangi
ble benefit if this Court agreed with Curr-Spec’s juris-
dictional argument. In any event, Curr-Spee’s conten-

* Amicus SKK also points (Br. 6) to informal advice from the Ser-
vice’s Chief Counsel, IRS CCA 200951035, 2009 WL 4884136 (June 24,
2009). Amicus misapprehends that advice. The actual advice, issued 1n
response to an inquiry regarding partnership items in a tiered bank
rupteyv, consisted of only a simple statement (“There 1s no conversion.’’).
The remainder of the texton Westlaw, beginning with “CHAPTER 21,”
was merely an attachment copied from a bankruptcy manual that
predated the D.C. Circuit decision in Andantech in 2003. The out-ot-
date allachment is not the Service's official position on the statute of
limitations in TEF RA proceedings (26 U.S.C. 6110(k)(3)), much less a
“tentative rejection by the [RS of a position it has litigated and won in
a series of cases,” as amicus Claims (Br. 6). See Rhone-Poulenc, 114
TC. at 543; Chief Counsel Notice. IRS CCN N(35)000-154, 1998 WI,
34358890 (Oct. 19, 1998) (revoking Litigation Guideline Memorandum,
IRS LGM TL-43, 1988 WL &98060( Jan. 22, 1988)); Litigation Guideline
Memorandum, IRS LGM 199905040, 1999 WL, 50721 (Feb. 5, 1999).

1]

tion that the Tax Court lacked jurisdiction is contradic-
ted by 26 U.S.C. 6226(d)(1), which expressly confers
jurisdiction over the precise limitations issue presented
here. Finally, even setting Section 6226(d)(1) aside,
courts have long recognized that a limitations issue af-
fecting all individual partners—like the argument Curr-
Spec makes—is a partnership item over which the Tax
Court has jurisdiction in a partnership-level proceeding.

1. Curr-Spee’s central contention is that “TEFRA
jurisdiction flowing from [Section] 6226(f) bars” “indi-
vidual partner statutes of limitations under [Section]
6501(a) * * * from being litigated in Curr-Spec’s
partnership-level case below.” Pet. 8. Even if that argu-
ment were legally sound, it would be entirely self-de-
feating, since it would mean that the Tax Court lacked
jurisdiction to consider whether an assessment against
any of the partners was time-barred. Because Krause
eonceded the FPAA’s correctness in all other respects,
the Tax Court would have heen obliged to dismiss the
petition Krause filed. And while Curr-Spec appears to
assume that such a dismissal would have redounded to
the partners’ benefit, exactly the opposite is true: a dis-
missal would have left the FPAA undisturbed. See
26 U.S.C. 6226(h) (“If an action brought under this see
tion is dismissed * * the decision of the court dis-
missing the action shall be considered as its decision
that the |F PAA] is correct.”). Thus, even if this Court
accepted Curr-Spec’s jurisdictional argument, it would
not affect the outcome of the partnership-level proceed-
ing.

2. In any event, the Tax Court did have jurisdiction
to consider whether Curr-Spec’s partners’ individual
assessment periods under Section 64501(a) remained
open. If a given partner's assessment period had ex

12

pired for all tax years, that partner would not have been
a party to the Tax Court proceeding, and the FPAA
would have been moot as to that partner. Section 6226
expressly contemplates, and authorizes the Tax Court to
resolve, the question whether the period for assessing
tax against a particular individual partner remains open.

As a baseline, Section 6226(¢) provides that each per-
son who was a partner during the partnership taxable
year shall be treated as a party to the proceeding chal-
lenging the FPAA. That provision is then qualified by
Section 6226(d)(1)(B), which states that a partner shall
not be treated as a party after “the period within which
any tax attributable to [the adjusted] partnership items
may be assessed against that partner expire|s].” Thus,
if the FPAA will not affect a particular partner because
that partner has a limitations defense to any assessment
arising from adjustments in the FPAA, that partner
cannot challenge the FPAA. In order to invoke Section
6226(d)(1)(B), however, the individual partner must
appear in the partnership-level proceeding, and the
court in that proceeding has jurisdiction to decide
whether the limitations period for assessing tax against
him remains open. See 26 U.S.C. 6226(d)(1) (providing
that such a person “shall be permitted to participate
* * * solely for the purpose of asserting that the period
of limitations for assessing any tax attributable to part-
nership items has expired with respect to such person,
and the court having jurisdiction of such action shall
have jurisdiction to consider such assertion”); Pet. App.
6a; BLAK Invs. v. Commissioner, 133 T.C. No. 19, 2009
WL 4981301, at *4-5 (Dec. 23, 2009); G-5 Inv. P’ship v.
Commissioner, 128 T.C. 186, 190-192 (2007); Kligfeld
Holdings v. Commissioner, 128 T.C. 192, 207 (2007).

That grant of jurisdiction helps to prevent the waste of

limited judicial resources that could otherwise occur if
the Tax Court decided the merits of an FPAA, only to
find in subsequent partner-level proceedings (of which
there could be many depending on the number of part

ners) that no tax could be assessed based on the
adjustments in the FPAA.

Curr-Spec’s assertion that the limitations period had
expired as to all partners is clearly covered by Section
6226(d)(1). Curr-Spec’s only response (Pet. 10) is that
the Tax Court may exercise its jurisdiction under Se
tion 6226(d)(1) only when a partner so requests. But
Curr-Spec cites no authority for that one-sided reading
and the statutory text does not support it. Section
6226(d)(1) states that the court “shall have jurisdiction”
to consider whether “the period within which any tay
attributable to [the adjusted] partnership items may be
assessed against that partner [has] expired.” Moreover,
Curr-Spec’s interpretation of Section 6226(d)(1) would
apparently permit a partner with no stake in the out
come of the partnership-level proceeding to elect to par
ticipate in it nevertheless. That would pose troubling
standing questions for partnership-level proceedings in
and appeals to Article III courts (where many such mat
ters are heard, see 26 U.S.C, 6226(a)(2)-(3), (c) and (¢),
7482). See Warth v. Seldin, 422 U.S. 490, 498-499 (1975)
(“[T]Jhe standing question is whether the plaintiff has
‘alleged such a personal stake in the outeome of the con
troversy as to warrant h7s invocation of federal-court
jurisdiction.”) (quoting Baker v. Carr, 8369 U.S. 186, 204
(1962)).

3. Itven setting Section 6226(d)(1) aside, a lor y line
of cases establishes that the T'ax Court had jurisdictio:
under 26 U.S.C. 6226f) to decide Curr Spec’ tatute

of-limitations argument. Section 6226() confe) i)

diction to determine all partnership items for the part
nership taxable year to which the F PAA relates. Curr
Spec argue (Pet. 6-8) that the limitations issue here is
not a “partnership item.” But as Curr-Spec concedes,

“eight and perhaps nine or ten Circuits ‘have
reasoned that because the FPAA limitation issue af
fects the partnership as a whole,’” it “thus is a partner
hip item.” Pet. 14 (emphasis added) (quoting Weiner,
389 F.3d at 156-157),

If it had been legally sound, the limitations defense
that Curr-Spec asserted below .€., that any assess
ments based on the FPAA in this case are barred by
26 U.S.C. 6229(a) because the FPAA was issued more
than three years after the partnership return was
filed—-would have been a« omplete defense to the FPAA,
applicable to all partners. That general applicability is
the hallmark of a partnership item, and numerous courts
have therefore treated similar limitations questions as
partnership items. See Aeener v. United States, 551
F.8d 1358, 1362-1364 (red. Cir.) (Section 6229(a)), cert
denied, 180 8S. Ct. 158 (2009); AD Global, 481 F.3d 1351
(sume); Andantech, 331 F.8d 972 (same); Werner,
$89 F.3d at 159 (same); see also Davenport Recycling
issocs. Vv. Commesstoner, 220 F.3d 1255, 1259 & n.9
(Lith Cir, 2000) (extension of limitations period as to al)
partners by ayreement! of lax management partner un-
der 26 U.S.C. 6229(b)(1)(B)); Aaplan v. United States,
133 F.3d 469, 473 (7th Civ, 1998) (same); Chimobio \
Commissioner, 177 F.3d 119, 125 (2d Cir. 1999) (reject
ing taxpayers’ untimely attempt to “raise the partner
ship's statute of limitations defense”) (emphasis added),
cert. denied, 528 U.S. 11454 (2000)

Thus, contrary to amicus SRK’'s claim (Br. &-10), the

relevant appellate decisions uniformly treat limitation

_onve e| im) discussion of “cases that ec
red whether nonpartnership items may be determined
“4 partnership proceeding,” Br. & Imply irrelevant
nee none if the publishe 1 deci mS amicus Cite e'
! 14 mubt . on 627% (a tati
nership ite

APPENDIAN

es

1. 26 U.S.C. 6226 provides in pertinent part

Judicial review of final partnership administrative adjust-

ments
(a) Petition by tax matters partner

Within 90 days after the day on which a notice ot
final partnership administrative adjustment is mailed t
the tax matters partner, the tax matters partner may
lle a petition for a readjustment of the partnershiy

tems for such taxable year with

(] the Tax Court,

the district court of the United States for the
district in Which the partnership's principal! place ol

business is located, or
}) the Court of Federal Clain
(hb) Petition by partner other than tax matters partner
(1) In general

lf the tax matters partner does not file a read
justment petition under subsection (a) with respect
to any final partnership administrative adjustment,
uny notice partner (and any 5-percent group) may,
within 60 days after the close of the 90-day period set
forth in subsection (a), file a petition for a readjust
ment of the partnership items for the taxable year
involved with any of the courts described in subsec

tion (a)

9

ad

(2) Priority of the Tax Court action

If more than 1 action is brought under paragraph
(1) with respect to any partnership for any partner-
ship taxable year, the first such action brought in the
Tax Court shall go forward.

(3) Priority outside the Tax Court

If more than 1 action is brought under paragraph
(1) with respect to any partnership for any taxable
year but no such action is brought in the Tax Court,
the first such action brought shall go forward.

(4) Dismissal of other actions

If an action is brought under paragraph (1) in ad-
dition te the action which goes forward under para-
graph (2) or (3), such action shall be dismissed.

(5) Treatment of premature petitions
If—

(A) a petition for a readjustment of partnership
items for the taxable year involved is filed by a no-
tice partner (or a 5-percent group) during the 90-
day period described in subsection (a), and

(B) no action is brought under paragraph (1)
during the 60-day period described therein with
respect to such taxable year which is not dis-
missed,

such petition shall be treated for purposes of para-
graph (1) as filed on the last day of such 60-day peri-
od.

(c)

4
oad

(6) Tax matters partner may intervene

The tax matters partner may intervene in any
action brought under this subsection.

Partners treated as parties

If an action is brought under subsection (a) or (b)

with respect to a partnership for any partnership tax-
able year—

(d)

(1) each person who was a partner in such part-
nership at any time during such year shall be treated
as a party to such action, and

(2) the court having jurisdiction of such action
shall allow each such person to participate in the ae-
tion.

Partner must have interest in outcome
(1) in order to be party to action

Subsection (c) shall not apply to a partner after
the day on which—

(A) the partnership items of such partner for
the partnership taxable year became nonpartner-
ship items by reason of 1 or more of the events
described in subsection (b) of section 6231, or

(B) the period within which any tax attributable
to such partnership items may be assessed against
that partner expired.

Notwithstanding subparagraph (B), any person
treated under subsection (c) as a party to an action
shall be permitted to participate in such action (or
file a readjustment petition under subsection (b) or
paragraph (2) of this subsection) solely for the pur-

4a

pose of asserting that the period of limitations for
assessing any tax attributable to partnership items
has expired with respect to such person, and the
court having jurisdiction of such action shall have
jurisdiction to consider such assertion.

(2) To file petition

No partner may file a readjustment petition under
subsection (b) unless such partner would (after the
application of paragraph (1) of this subsection) be
treated as a party to the proceeding.

(f) Scope of judicial review

A court with which a petition is filed in accordance
with this section shall have jurisdiction to determine all
partnership items of the partnership for the partnership
taxable year to which the notice of final partnership ad-
ministrative adjustment relates, the proper allocation of
such items among the partners, and the applicability of
any penalty, addition to tax, or additional amount which
relates to an adjustment to a partnership item.

(g) Determination of court reviewable

Any determination by a court under this section shall
have the force and effect of a decision of the Tax Court
or a final judgment or decree of the district court or the
Court. of Federal Claims, as the case may be, and shall
be reviewable as such. With respect to the partnership,
only the tax matters partner, a notice partner, or a 5-
percent group may seek review of a determination by a
court under this section.

5a

(h) Effect of decision dismissing action

If an action brought under this section is dismissed
(other than under paragraph (4) of subsection (b)), the
decision of the court dismissing the action shall be con-
sidered as its decision that the notice of final partner-
ship administrative adjustment is correct, and an appro-
priate order shall be entered in the records of the court.

2. 26 U.S.C. 6229 provides in pertinent part:
Period of limitations for making assessments
(a) General rule
Except as otherwise provided in this section, the
period for assessing any tax imposed by subtitle A with
respect to any person which is attributable to any part
nership item (or affected item) for a partnership taxable
year shall not expire before the date which is 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 such return for such
year (determined without regard to extensions).

(b) Extension by agreement

(1) In general

The period described in subsection (a) (including
an extension period under this subsection) may be
extended—

ba

(A) with respect to any partner, by an agree-
ment entered into by the Secretary and such part-
ner, and

(B) with respect to all partners, by an agree-
ment entered into by the Secretary and the tax
matters partner (or any other person authorized
by the partnership in writing to enter into such an
agreement),

before the expiration of such period.

o* “s * *

(c) Special rule in case of fraud, etc.
(1) False return

If any partner has, with the intent to evade tax,
signed or participated directly or indirectly in the
preparation of a partnership return which includes a
false or fraudulent item

(A) in the case of partners so signing or par-
ticipating in the preparation of the return, any tax
imposed by subtitle A which is attributable to any
partnership item (or affected item) for the part-
nership taxable year to which the return relates
may be assessed at any time, and

(Bb) inthe case of all other partners, subsection
(a) shall be applied with respect to such return by
substituting “6 years” for “3 years”.

(2) Substantial omission of income

If any partnership omits from gross income an
amount properly includible therein which is in excess
of 25 percent of the amount of gross income stated in

Definitions and special rules

’ Definitions

it ?
>) Partnership item
he ¢?? id } | T é i |
} imine} r 1) l Le rs ] r"¢ t Lah ’ ,
runt for e partne t bie runde
rovision « ibtitle A to the regulations |]
ribed by the Secretary } de that, for purposs
[tl il ( Iten r )} priate
Trrige l { < | i} I Mi} rT tne ) f
I
1) Nonpartnership item
ne te no! irtnersi
h is (or is treat partnership ite
>’ Attected item
i Tie t Tred t if ren |
| r aTié¢ ? r) irl é ’

(6) Computational adjustment

The term “computational adjustment” means the
change in the tax liability of a partner which proper
ly reflects the treatment under this subchapter of a
partnership item. All adjustments required to apply
the results of a proceeding with respect to a partner
ship under this subchapter to an indirect partner
shall be treated as computational adjustments.

{. 26 U.S.C. 6501 provides in pertinent part:
I.imitations on assessment and collection
(a) General rule

Except as otherwise provided in this section, the
amount of any tax imposed by this title shall be assessed
within 3 years after the return was filed (whether or not
such return was filed on or after the date prescribed) or,
if the tax is payable by stamp, at any time after such tax
became due and before the expiration of 3 years after
the date on which any part of such tax was paid, and no
proceeding in court without assessment for the col-
lection of such tax shall be begun after the expiration of
such period. For purposes of this chapter, the term “re
turn” means the return required to be filed by the tax-
payer (and does not include a return of any person from
whom the taxpayer has received an item of income, gain,
loss, deduction, or credit).

‘f

)

Exceptions
(1) False return

[In the case of a false or fraudulent return with the
intent to evade tax, the tax may be assessed, or a
proceeding in court for collection of such tax may be
begun without assessment, at any time

(2) Willful attempt to evade tax

In case of a willful attempt in any manner to de
feat or evade tax imposed by this title (other than tax
imposed by subtitle A or B), the tax may be assessed,
or a proceeding in court for the collection of such tax
may be begun without assessment, at any time

(3) Noreturn

In the case of failure to file a return, the tax may
be assessed, or a proceeding in court for the collec-
tion of such tax may be begun without assessment, at
any time.

(4) Extension by agreement
(A) In general

Where, before the expiration or the time pre
scribed in this section for the assessment of any
tax imposed by this title, except the estate tax
provided in chapter 11, both the Secretary and the
taxpayer have consented in writing to its assess-
ment after such time, the tax may be assessed at
any time prior to the expiration of the period
agreed upon. The period so agreed upon may be
extended by subsequent agreements in writing
made before the expiration of the period previous
ly agreed upon.

10u

(B) Notice to taxpayer of right to refuse or limit
extension

The Secretary shall notify the taxpayer of the
taxpayer's right to refuse to extend the period of
limitations, or to limit such extension to particular
issues or to a particular period of time, on each oc-
casion when the taxpayer is requested to provide
such consent.

(n) Cross references

(2) For extension of period in the case of partner-
ship items (as defined in section 6231(a)(3)), see
section 6229.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_1513%3A2. Public record. Not legal advice.