David C. Jackson and Francis I. Jackson v. Commissioner., United States Tax Court - Memorandum Decision, T.C. Memo. 1992-484, Docket No. 8172-85., Filed August 25, 1992

David C. Jackson and Francis I. Jackson v. Commissioner.

United States Tax Court - Memorandum Decision

T.C. Memo. 1992-484

Docket No. 8172-85.

Filed August 25, 1992.

Declan J. O'Donnell, 110 16th St., Denver, 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, and an addition to, David C. and Francis I. Jackson's (petitioners) Federal income tax for the taxable year, and in the amounts, set forth below: ²

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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.

² In her answer, respondent asserts that a portion of the deficiency constitutes a substantial underpayment attributable to a tax-motivated transaction and, therefore, is subject to the increased rate of interest provided for in sec. 6621(d).

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A notice of deficiency was mailed to petitioners on January 3, 1985. Petitioners resided in Littleton, 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. ³

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³ The taxable year at issue antedates the enactment of secs. 6221-6232 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 Agosto Ltd. (Agosto), a limited partnership, for the taxable year ending December 31, 1980. On January 13, 1982, petitioners filed their 1980 individual income tax return. Agosto filed its 1980 partnership information return on January 15, 1982. Consequently, as of January 3, 1985, the period of limitations upon assessment had not expired with respect to petitioners' taxable year 1980, and 3 years had not yet elapsed since the filing of Agosto's 1980 partnership information return.

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 Agosto prior to the issuance of the notice of deficiency. ⁴

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⁴ On Apr. 14, 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.

As a preliminary matter, we note that petitioners' 1980 individual income tax return was filed on January 13, 1982, and that Agosto's 1980 partnership information return was filed on January 15, 1982. A notice of deficiency was mailed to petitioners on January 3, 1985, within 3 years after the date petitioners' and Agosto's 1980 returns were filed. As of January 3, 1985, the period of limitations upon assessment had not expired with respect to either petitioners' or Agosto's 1980 return. Consequently, pursuant to section 6501(a), petitioners' motion for summary judgment is without merit as a matter of law.

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 section 6501(a), and with the holding set forth above, petitioners' motion for summary judgment will be denied.

An appropriate order will be issued.

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