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
1
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
1
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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.