Gary A. Tanner and Carol A. Tanner v. Commissioner., United States Tax Court - Memorandum Decision, T.C. Memo. 1992-518, Docket No. 1739-87., Filed September 8, 1992

Gary A. Tanner and Carol A. Tanner v. Commissioner.

United States Tax Court - Memorandum Decision

T.C. Memo. 1992-518

Docket No. 1739-87.

Filed September 8, 1992.

Declan J. O'Donnell, 6841 S. Yosemite St., Englewood, Colo., for the petitioners. Randall L. Preheim, for the respondent.

Memorandum Findings of Fact and Opinion

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

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

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¹ To be determined for each of the years at issue.

A notice of deficiency was mailed to petitioners on October 17, 1986. Petitioners resided in Evergreen, Colorado, at the time the petition herein was filed. The issue for decision is whether the period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partnership's information return, or by the filing of the partner's individual income tax return, as extended by any agreements relating thereto. ²

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

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Findings of Fact

Petitioners were validly subscribed members of Aspen Synthetic Fuels, Ltd. (Aspen Fuel), a limited partnership, for the taxable years ending December 31, 1980, and December 31, 1982. On August 18, 1981, and on October 19, 1983, petitioners filed their 1980 and 1982 individual income tax returns, respectively. Aspen Fuel timely filed its 1980 and 1982 partnership information returns. On March 12, 1984, petitioners executed a Form 872-A, thereby extending the time to assess individual income tax against petitioners for the taxable year 1980.

Pursuant to Form 872-A, the amount of income tax due for a taxable year may be assessed on or before the 90th day after: (1) Respondent receives a notice of termination from petitioners, (2) respondent mails a notice of termination to petitioners, or (3) respondent mails a notice of deficiency for the applicable period. Respondent neither received a notice of termination from petitioners, nor mailed a notice of termination to petitioners, for the taxable year 1980. Consequently, as of October 17, 1986, the period of limitations upon assessment had not expired with respect to petitioners' taxable years 1980 and 1982. Conversely, as of October 17, 1986, more than 3 years had elapsed since the filing of Aspen Fuel's 1980 and 1982 partnership information returns.

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

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³ On Apr. 16, 1992, petitioners filed an amended petition wherein it was represented that "the parties have settled all issues on the merits of the case in a proposed Stipulation, subject to a determination of jurisdiction as requested herein." Similarly, in the motion for summary judgment, petitioners represent that "no trial on the merits is expected because the parties have executed a Stipulation, subject to jurisdiction." In the notice of objection to motion for summary judgment, however, respondent asserts that neither a stipulation of settled issues nor a closing agreement has been executed by the parties. Consequently, petitioners' motion for summary judgment is properly viewed as a motion for partial summary judgment. See Rule 121(c).

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Opinion

The sole issue for decision is whether the period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partnership's information return, or by the filing of the partner's individual income tax return, as extended by any agreements relating thereto. Petitioners contend that the period of limitations is controlled by the filing of the partnership's information return. Conversely, respondent contends that the period of limitations is controlled by the filing of the partner's individual income tax return.

Petitioners cite Kelley v. Commissioner [89-1 USTC ╤ 9360], 877 F.2d 756 (9th Cir. 1989), revg. and remanding [Dec. 43,314(M)] T.C. Memo. 1986-405, as authority for the proposition that the period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partnership's information return. In Kelley v. Commissioner, supra, the Ninth Circuit held that the Commissioner may not adjust a taxpayer-shareholder's individual income tax return based upon an adjustment to a subchapter S corporation's information return when the period of limitations had run as to the subchapter S corporation's return. Id. at 759. We previously considered and rejected the Ninth Circuit's decision in Kelley in determining the period of limitations applicable to a partner's distributive share of partnership items. In Stahl v. Commissioner [Dec. 47,395], 96 T.C. 798 (1991), we held that the filing of a partnership information return does not affect the period of limitations upon assessment applicable to the determination of a deficiency against individual partners of a partnership. Similarly, in Siben v. Commissioner [91-1 USTC ╤ 50,215], 930 F.2d 1034 (2d Cir. 1991), affg. [Dec. 46,804(M)] T.C. Memo. 1990-435, the Second Circuit held that the applicable period of limitations was controlled by the partners' individual income tax returns rather than by the partnership return. See also Durovic v. Commissioner [73-2 USTC ╤ 9728], 487 F.2d 36 (7th Cir. 1973), affg. on this issue [Dec. 30,204] 54 T.C. 1364 (1970). We consider Stahl v. Commissioner, supra, and Siben v. Commissioner, supra, to be dispositive of this issue; consequently, we hold that the period of limitations upon assessment applicable to a partner's distributive share of partnership items is controlled by the filing of the partner's individual income tax return, as extended by any agreements relating thereto.

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

An appropriate order will be issued.

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