Han Kook LLC I-D v. Comm'r

T.C. Memo. 2011-223

UNITED STATES TAX COURT

HAN KOOK LLC I-D, HAN KOOK LLC II-D, CHENERY CAPITAL MANAGEMENT
INC., AND CHENERY MANAGEMENT INC., PARTNERS OTHER THAN THE TAX
MATTERS PARTNER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 17118-10. Filed September 19, 2011.

Roy E. Hahn (an officer), for petitioners.

Trent D. Usitalo, for respondent.

MEMORANDUM OPINION

LARO, Judge: Petitioners, as partners other than the tax

matters partner, filed a petition for readjustment of partnership

items under section 6226(b).1 This case is before the Court on

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Section references are to the applicable version of the
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respondent’s motion to dismiss for lack of jurisdiction on the

ground that the petition for readjustment was not filed within

the time prescribed by section 6226(b)(1) or 7502. Petitioners

object to respondent’s motion and counter that the petition in

this case was timely filed. We will grant respondent’s motion.

Background

On January 25, 2010, respondent issued a notice of final

partnership administrative adjustment (FPAA) by certified mail to

the general (unnamed) tax matters partner of Han Kook LLC I-D for

the taxable years ended December 17 and 31, 2001. Among the

adjustments proposed in the FPAA was the disallowance of

$35,357,822 in losses claimed by Han Kook LLC I-D. The FPAA was

mailed to an address in San Francisco, California.

On March 2, 2010, respondent sent a copy of the FPAA to

petitioner Chenery Management Inc. (Chenery). The FPAA informed

Chenery that respondent had mailed the FPAA to the tax matters

partner on January 25, 2010, and stated that a petition for

readjustment filed by a partner other than the tax matters

partner must be filed on or before the 150th day from the date

the FPAA was mailed to the tax matters partner. The FPAA advised

Chenery that “You may wish to contact the * * * [tax matters

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Internal Revenue Code.
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partner] of the partnership * * * to discuss this matter.” The

copy of the FPAA was mailed to Chenery at the same address

respondent used in mailing the FPAA to the tax matters partner.

Petitioners mailed a petition for readjustment by private

delivery service on July 27, 2010, and the Court filed that

petition on July 28, 2010. Respondent filed a motion to dismiss

this case for lack of jurisdiction on the ground that the

petition was not timely filed. Respondent supports his motion

with a Postal Service Form 3877 which indicates that the FPAA was

sent to the tax matters partner by certified mail on January 25,

2010. Petitioners filed an objection to respondent’s motion and

allege therein that the FPAA was neither delivered to nor

received by the tax matters partner. Petitioners do not assert,

however, that the FPAA was not mailed to either the tax matters

partner’s or the notice partner’s correct address. Respondent

filed a response to petitioners’ objection.

Discussion

Our jurisdiction to review adjustments related to an FPAA is

limited by section 6226. See sec. 6226(f). Pursuant to section

6226(a), the tax matters partner has 90 days to file a petition

for readjustment of partnership items. PCMG Trading Partners XX,

L.P. v. Commissioner, 131 T.C. 206, 207 (2008). Where the tax

matters partner does not timely file such a petition, section
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6226(b)(1) allows any “notice partner” and any “5-percent group”

to file a petition for readjustment of partnership items within

60 days after the close of the 90-day period described in section

6226(a). Section 6231(a)(8) generally defines a notice partner

as one who is entitled to notice under section 6223(a); that is,

any partner in a partnership with 100 or fewer partners, and a

partner with a 1-percent or greater profits interest in a

partnership with more than 100 partners. Barbados #6 Ltd. v.

Commissioner, 85 T.C. 900, 904 (1985). Section 6231(a)(11)

defines a 5-percent group as a group of partners who, for the

partnership taxable year involved, had profits interests which

aggregated 5 percent or more, measured as of the close of the

partnership’s taxable year. See sec. 301.6231(d)-1(a), Proced. &

Admin. Regs.

Petitioners assert that because the FPAA was allegedly not

delivered to nor received by the tax matters partner, the

subsequent 60-day period of section 6226(b)(1) did not begin to

run until the copy of the FPAA was sent on March 2, 2010. Though

they do not do so explicitly, petitioners essentially argue that

the FPAA mailed to the tax matters partner was invalid. We

disagree. The validity of a properly mailed FPAA is not

contingent upon actual receipt by the tax matters partner. See

Crowell v. Commissioner, 102 T.C. 683, 692 (1994) (citing Yusko

v. Commissioner, 89 T.C. 806, 810 (1987)). An FPAA is legally
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sufficient if, in addition to providing adequate notice to the

taxpayer that respondent has determined adjustments to the

partnership return, it is mailed to the address shown on the

partnership return or to an address furnished to the Secretary by

the tax matters partner or by any other person in accordance with

regulations prescribed by the Secretary. See sec. 6223(c);

Triangle Investors Ltd. Pship. v. Commissioner, 95 T.C. 610, 613

(1990); see also Sirrine Bldg. No. 1 v. Commissioner, T.C. Memo.

1995-185 (“The FPAA is to the litigation of partnership items the

equivalent of the statutory notice of deficiency in other

cases.”), affd. without published opinion 117 F.3d 1417 (5th Cir.

1997).

Respondent mailed a copy of the FPAA to Chenery on March 2,

2011, and petitioners do not dispute that they received it. The

FPAA notified Chenery that respondent had mailed the original

FPAA to the tax matters partner on January 25, 2010. It provided

detailed instructions on the period within which partners other

than the tax matters partner could request judicial review of the

proposed adjustments. It also advised Chenery to contact the tax

matters partner with respect to the proposed adjustments. Given

that the original and the copy of the FPAA were mailed to the

same address, we find it doubtful that the original FPAA was not

received by the tax matters partner. In that regard, respondent

submitted a Postal Service Form 3877 as proof that the FPAA was
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sent to the tax matters partner on January 25, 2010. That form

is prima facie evidence that the FPAA was delivered to the tax

matters partner. See sec. 7502(c)(2). Regardless of whether the

tax matters partner complied with its obligation to inform

petitioners of the administrative proceedings, see sec. 6223(g),

we are satisfied that almost 2 months’ notice within which

petitioners could have filed a petition with this Court was ample

time for petitioners to protect their interests, see Triangle

Investors Ltd. Pship. v. Commissioner, supra at 616-617 (notice

partner received copy of FPAA with ample time to file a timely

petition).

The FPAA was mailed to the tax matters partner for Han Kook

LLC I-D on January 25, 2010. The 90-day period following the

mailing of the FPAA within which the tax matters partner could

file a petition for readjustment of partnership items expired on

April 25, 2010, a Sunday, and was thus extended 1 day to April

26, 2010. See sec. 6226(a). The subsequent 60-day period during

which any notice partner and any 5-percent group could file a

petition for readjustment of partnership items expired on June

24, 2010. See sec. 6226(b)(1). Petitioners mailed their

petition for readjustment on July 27, 2010, 33 days after the

expiration of the subsequent 60-day period. Because the petition

was not mailed within the prescribed 60-day period, section 7502

is inapplicable. See sec. 7502(a)(1) (treating a timely mailed
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document as timely filed only if the postmark date falls within

the prescribed period for filing). Thus, we treat the petition

as being filed on July 28, 2010, 184 days after the FPAA was

mailed to the tax matters partner, and 34 days after the

expiration of the subsequent 60-day period.

Petitioners did not mail the petition within the 60-day

period prescribed by section 6226(b)(1). This Court therefore

lacks jurisdiction over this partnership-level proceeding, and we

are required to grant respondent’s motion to dismiss for lack of

jurisdiction.

To reflect the foregoing,

An appropriate order of

dismissal will be entered.