John D. Reeve and Jerry S. Reeve v. Commissioner., United States Tax Court - Memorandum Decision, T.C. Memo. 1992-511, Docket No. 547-85., Filed September 3, 1992

John D. Reeve and Jerry S. Reeve v. Commissioner.

United States Tax Court - Memorandum Decision

T.C. Memo. 1992-511

Docket No. 547-85.

Filed September 3, 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 a deficiency in income tax against John D. and Jerry S. Reeve (petitioners) 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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A notice of deficiency was mailed to petitioners on October 11, 1984. Petitioners resided in Houston, Texas, at the time the petition herein was filed. 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. 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 Alpha II Real Estate (Alpha II), a limited partnership, for the taxable years ending December 31, 1979, and December 31, 1980. On June 13, 1980, and on October 16, 1981, petitioners filed their 1979 and 1980 individual income tax returns, respectively. Alpha II timely filed its 1979 and 1980 partnership information returns. On April 11, 1983, petitioners executed a Form 872-A, thereby extending the time to assess individual income tax against petitioners for the taxable year 1979.

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 years at issue. Consequently, as of October 11, 1984, the period of limitations upon assessment had not expired with respect to petitioners' taxable years 1979 and 1980. Conversely, as of October 11, 1984, more than 3 years had elapsed since the filing of Alpha II's 1979 and 1980 partnership information returns.

On February 3, 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 from Alpha II prior to the issuance of the notice of deficiency.

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. ³ 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.

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³ Petitioners and respondent entered into a Form 906C Closing Agreement on Final Determination Covering Specific Matters which resolved all substantive issues relating to the adjustments asserted in the notice of deficiency.

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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, and with mutual concessions made by the parties,

An appropriate order will be issued.

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