T.C. Memo. 2009-158
UNITED STATES TAX COURT
MICHAEL O. WILLIAMS AND SHERYL ANNE WILLIAMS, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 25205-07. Filed June 30, 2009.
Steven R. Mather and Elliott H. Kajan, for petitioners.
Linette B. Angelastro, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: In notices of deficiency, respondent
determined penalties with respect to petitioners’ 1990-96 Federal
income taxes, as follows:
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Penalty
Year Sec. 6662(a)
1990 $7,493.40
1991 9,806.60
1992 15,434.00
1993 18,797.20
1994 8,781.60
1995 3,652.40
1996 997.80
The issue for decision is whether the periods of limitations on
assessment expired for affected items upon which the penalties at
issue are based. Unless otherwise indicated, all section
references are to the Internal Revenue Code in effect for the
years in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioners resided in California at the time their petitions
were filed.
From about 1971 through 1998 Walter J. Hoyt III and other
members of the Hoyt family organized, promoted, and operated
numerous cattle and sheep-breeding partnerships (Hoyt
partnerships), as most recently described in Keller v.
Commissioner, __F.3d__ (9th Cir. June 3, 2009). Petitioners
participated in Shorthorn Genetic Engineering 1982-1 (SGE 1982),
Shorthorn Genetic Engineering 1986-C (SGE 1986), and Shorthorn
Genetic Engineering 1990-1 (SGE 1990), all Hoyt partnerships.
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Petitioners received Schedules K-1, Partner’s Share of Income,
Credits, Deductions, etc., that reported losses for SGE 1982, SGE
1986, and SGE 1990. Petitioners filed joint Federal income tax
returns with attached Schedules E, Supplemental Income and Loss,
claiming the partnership losses, as follows:
Year Partnership Loss
1990 SGE 1986 $127,490
1991 SGE 1986 144,680
1992 SGE 1986 288,420
1993 SGE 1990 323,350
1994 SGE 1982 265,015
1995 SGE 1982 234,319
1996 SGE 1982 216,497
The Internal Revenue Service (IRS) determined that SGE 1982,
SGE 1986, and SGE 1990 were subject to provisions of the Tax
Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-
248, 96 Stat. 324, and disallowed the partnerships’ claimed
losses for the years in issue. The IRS adjusted the TEFRA
partnership items and sent to petitioners Notices of Final
Partnership Administrative Adjustment (FPAAs). Petitioner
husband, as the tax matters partner, petitioned the Court for
redetermination of partnership adjustments for each of the years
in issue. The Court determined the FPAAs to be correct and
entered decisions as follows:
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Year Docket No. Decision Entered
1990 24203-94 5/17/06
1991 10628-95 5/18/06
1992 25002-95 5/17/06
1993 21772-96 5/17/06
1994 15627-98 5/23/06
1995 13603-99 5/17/06
1996 16559-99 5/18/06
The IRS’s TEFRA unit determined the percentage of the
affected items attributable to petitioners, as an individual
partner, for each year. IRS Forms 4700-T, TEFRA Workpapers,
reflected the resulting income adjustments and also showed “1 Yr
Date[s]” indicating that the 1-year assessment dates after the
Court’s final decisions were August 3, 2007, for 1993, August 14,
2007, for 1990, 1992, and 1995, and August 15, 2007, for 1991,
1994, and 1996. Other internal IRS documents showed a “1-Year
Assessment Date” of August 14, 2007, for 1990, 1992, 1993, and
1995, August 15, 2007, for 1991 and 1996, and August 20, 2007,
for 1994. For each tax year in issue, the TEFRA unit generated a
Form 4549, Income Tax Examination Changes, dated August 8, 2007,
which reported the section 6662(a) penalty that resulted because
of the affected items adjustments. On August 9, 2007, the TEFRA
unit sent to petitioners the notices of deficiency (which
included the Forms 4549) that are the bases of this case. The
TEFRA unit then sent petitioners’ file to the IRS’s Centralized
Case Processing (CCP).
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Because fewer than 60 days remained before the assessment
statute expiration dates (ASEDs) for the affected items, CCP
submitted to the IRS’s Revenue Accounting department (Revenue
Accounting) Forms 2859, Request for Quick or Prompt Assessment,
to ensure quick (manual) assessments. The Forms 2859 show ASEDs
of August 15, 2007, for all the years in issue. Revenue
Accounting, having delegated authority to make quick assessments,
“journaled” the assessments and assigned Document Locator Numbers
(DLNs) onto a “23-C document” that was signed by an assessment
officer and dated August 15, 2007. DLNs assigned to petitioners’
file, one for each year in issue, contained the number sequence
227, which corresponds to the number of days in calendar year
2007 from January 1 to August 15. A tape was created containing
the information journaled by Revenue Accounting; the information
on the tape was entered into the IRS computer systems; and Forms
3552 (Part 3), Notice of Tax Due on Federal Tax Return, were
generated with the DLNs confirming that the actual assessments
had been made. Petitioners received copies of the Forms 3552,
which showed “Date of This Notice” fields as August 15, 2007, but
which were postmarked August 21, 2007.
Petitioners requested and received IRS account transcripts
of all years in issue. The transcripts were dated August 20,
2007, but did not reflect any assessments as having been made on
August 15, 2007. Later account transcripts, dated September 4,
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2007, did reflect the August 15, 2007, assessments. Forms 2866,
Certificate of Official Record, and internal IRS case histories
of petitioners show the assessment dates for the affected items
as having been made on August 15, 2007, for all the years in
issue. For trial purposes only, this case was consolidated with
another case involving petitioners--docket No. 21031-07L,
relating to collection of a partnership adjustment assessed for
1996. See T.C. Memo. 2009-159, filed this date.
OPINION
Petitioners’ sole argument is that the IRS did not timely
assess the affected items that resulted from the FPAA proceedings
and that led to the penalties at issue. Without timely
assessments of these affected items, petitioners contend that
there are no underpayments on which to base section 6662(a)
accuracy-related penalties. Respondent argues that the affected
items were timely assessed on August 15, 2007, and that the
penalties at issue are proper. Petitioners concede that the
section 6662(a) penalties are appropriate if the Court determines
that the assessments were timely.
Because the related partnership tax years occurred before
August 5, 1997, the accuracy-related penalties are properly
contested before the Court at the partner level. See secs. 6221,
6230(a)(2)(A)(i). But cf. Fears v. Commissioner, 129 T.C. 8, 10
(2007) (stating that because Congress, in the Taxpayer Relief Act
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of 1997, Pub. L. 105-34, sec. 1238(a), 111 Stat. 1026, amended
section 6221 to provide that the applicability of any penalty
(including an accuracy-related penalty) which relates to an
adjustment of a partnership item shall be determined at the
partnership level, the Court lacks jurisdiction to redetermine
the applicability of such penalties at the partner level for
partnership tax years ending after August 5, 1997). We consider
the timeliness of the assessments of the affected items only to
make a redetermination of the penalties at issue. The bar of
periods of limitations is an affirmative defense, and petitioners
must show that the assessments were made after the applicable
periods of limitations. See Rules 39, 142(a); Adler v.
Commissioner, 85 T.C. 535, 540 (1985).
The general period of limitations on assessment is 3 years.
Sec. 6501(a). For tax attributable to a partnership and affected
items, however, section 6229(a) extends the general period of
limitations. Sec. 6501(n). Section 6229(a) provides, as
follows:
SEC. 6229(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 partnership 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
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(2) the last day for filing such return for
such year (determined without regard to
extensions).
Furthermore, if an FPAA is mailed to the tax matters partner, the
running of the period specified in section 6229(a) is suspended
for the period during which a court action may be brought under
section 6226 (and if a petition is filed as a result of the FPAA,
until the decision of the court becomes final) and for 1 year
thereafter. Sec. 6229(d). In this context, the running of the
section 6229(a) 3-year period of limitations is temporarily
interrupted during the FPAA proceeding until its entered decision
becomes final plus 1 year, and then the remaining unexpired part
of the 3-year limitations period is tacked on. See Aufleger v.
Commissioner, 99 T.C. 109, 113 (1992).
The parties agree that section 6229 is applicable in
determining the periods of limitations. The only controversy is
when the ASEDs occurred with respect to the provisions of section
6229(d).
Respondent maintains that the earliest ASED possible would
have been August 15, 2007. Petitioners argue that internal IRS
documents and admissions in respondent’s amended answer show the
ASEDs for some or all the years in issue as being before August
15, 2007. Respondent’s answer alleged certain dates that were
erroneous as a matter of law.
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We take judicial notice of the dates this Court entered
decisions for the related partnership cases in issue. Fed. R.
Evid. 201; see Estate of Reis v. Commissioner, 87 T.C. 1016, 1027
(1986). Because the decisions were not appealed in these cases,
the final decision dates can be accurately determined by adding
90 days to the dates the decisions were entered. See secs.
7459(c), 7481(a)(1), 7483. One year is added to the final
decision dates of the partnership cases to complete the ASED
calculations. Sec. 6229(d)(2). The dates of entered decisions,
final decisions, and ASEDs of the section 6229(a) periods of
limitations (as augmented by section 6229(d)) are as follows:
Decision Decision
Year Docket No. Entered Final ASED
1990 24203-94 5/17/06 8/15/06 8/15/07
1991 10628-95 5/18/06 8/16/06 8/16/07
1992 25002-95 5/17/06 8/15/06 8/15/07
1993 21772-96 5/17/06 8/15/06 8/15/07
1994 15627-98 5/23/06 8/21/06 8/21/07
1995 13603-99 5/17/06 8/15/06 8/15/07
1996 16559-99 5/18/06 8/16/06 8/16/07
In alleging the expiration of the periods of limitations,
petitioners contend that their IRS case history transcripts, as
obtained from the IRS computer systems on August 20, 2007, did
not memorialize any assessments made on August 15, 2007.
However, “The date of the assessment is the date the summary
record is signed by an assessment officer.” Sec. 301.6203-1,
Proced. & Admin. Regs.
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Respondent’s witness, a CCP manager for the IRS whose unit
is responsible for assessments, credibly testified that the
assessments did not appear on the August 20, 2007, transcripts
because they were performed manually. The witness explained that
this manual treatment requires a longer period to input the
information into the IRS computer systems and, consequently, for
the information to be reflected in petitioners’ transcripts. The
witness’s explanation for the delay was reasonable and
uncontradicted.
Petitioners also argue that the Forms 3552, while dated
August 15, 2007, were postmarked August 21, 2007. While IRS
procedure is usually to mail out Form 3552 on the same day the
assessment is made, the CCP manager testified that all the
appropriate forms and internal steps for quick assessment of
petitioners’ tax liabilities were timely completed and that the
sheer volume of assessments at that time could have caused the
discrepancy between the date of assessments and the date the
Forms 3552 were mailed.
A presumption of official regularity “supports the official
acts of public officers, and, in the absence of clear evidence to
the contrary, courts presume that they have properly discharged
their official duties.” United States v. Chem. Found., Inc., 272
U.S. 1, 14-15 (1926); see, e.g., Lillis v. Commissioner, T.C.
Memo. 1983-142, affd. without published opinion 740 F.2d 974 (9th
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Cir. 1984). The presumption does not apply where the taxpayer
introduces specific evidence to rebut the presumption. See
Pietanza v. Commissioner, 92 T.C. 729, 739 (1989), affd. without
published opinion 935 F.2d 1282 (3d Cir. 1991). Respondent,
through testimony and exhibits, has shown that the IRS followed
numerous internal procedures and reasonable practices to
accomplish timely assessments. The preponderance of IRS business
records offered into evidence shows that the IRS maintained and
met the appropriate ASEDs. This evidence is more persuasive than
the erroneous admissions in respondent’s amended answer or the
circumstantial evidence relied on by petitioners.
We have considered the other arguments of the parties, and
they are either without merit or need not be addressed in view of
our resolution of the issue.
To reflect the foregoing,
Decision will be entered
for respondent.