Stanley F. Dakolios and I. Helen Dakolios; Harry P. Sidles and Beverly J. Sidles v. Commissioner., United States Tax Court - Memorandum Decision, T.C. Memo. 1992-495, Docket No. 26114-83., Filed September 1, 1992

Stanley F. Dakolios and I. Helen Dakolios; Harry P. Sidles and Beverly J. Sidles v. Commissioner.

United States Tax Court - Memorandum Decision

T.C. Memo. 1992-495

Docket No. 26114-83.

Filed September 1, 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 Stanley F. and I. Helen Dakolios (petitioners Dakolios) for the taxable year ending December 31, 1979, in the amount of $11,838. Respondent determined a deficiency in, and an addition to, Harry P. and Beverly J. Sidles' (petitioners Sidles) income tax for the taxable year, 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 year in issue.

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A notice of deficiency was mailed to petitioners Dakolios on June 30, 1983, and to petitioners Sidles on July 28, 1983. Petitioners Dakolios resided in Longmont, Colorado, and petitioners Sidles resided in Denver, 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 year at issue antedates 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 Cocahol Land II, Ltd. (Cocahol Land), a limited partnership, for the taxable year ending December 31, 1979. On July 30, 1980, petitioners Dakolios filed their 1979 individual income tax return. On July 29, 1980, petitioners Sidles filed their 1979 individual income tax return. Cocahol Land timely filed its 1979 partnership information return. No consent to extend the time to assess tax was entered into with respect to petitioners 1979 individual income tax returns, or with respect to Cocahol Land's 1979 partnership information return. Consequently, as of June 30, 1983, the date a notice of deficiency was mailed to petitioners Dakolios, the period of limitations upon assessment had not expired with respect to petitioners Dakolios' taxable year 1979. Similarly, as of July 28, 1983, the date a notice of deficiency was mailed to petitioners Sidles, the period of limitations upon assessment had not expired with respect to petitioners Sidles' taxable year 1979. Conversely, as of June 30, 1983, more than 3 years had elapsed since the filing of Cocahol Land's 1979 partnership information return.

On April 24, 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 Cocahol Land prior to the issuance of the notices of deficiency. ³

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³ On Apr. 28, 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 petitioners Dakolios have not executed either a stipulation of settled issues or a closing agreement, and that petitioners Sidles have not executed either a stipulation of settled issues or a closing agreement with respect to the nonpartnership adjustments determined in the notice of deficiency. 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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