Mathia v. Commissioner

FILED
United States Court of Appeals
Tenth Circuit

PUBLISH January 5, 2012
Elisabeth A. Shumaker
UNITED STATES COURT OF APPEALS Clerk of Court

TENTH CIRCUIT

JEAN MATHIA, Personal
Representative of The ESTATE OF
DOYLE V. MATHIA, Deceased,

Petitioner-Appellant,
v. No. 10-9004
COMMISSIONER OF INTERNAL
REVENUE,

Respondent-Appellee.

ON APPEAL FROM THE UNITED STATES TAX COURT,
THE HONORABLE L. PAIGE MARVEL
(CIR-1:16483-05L)

Jonathan E. Boatman, McAfee & Taft, P.C., Oklahoma City, Oklahoma (James R.
Webb, Alan G. Holloway, and Michael K. Avery, McAfee & Taft, P.C.,
Oklahoma City, Oklahoma, and Mark W. Curnette, Logan & Lowry, LLP, Vinita,
Oklahoma, with him on the briefs), for Petitioner-Appellant.

Andrew M. Weiner (Gilbert S. Rothenberg, Acting Deputy Assistant Attorney
General, and Kenneth L. Greene, Attorney, with him on the brief), Tax Division,
Department of Justice, Washington, District of Columbia, for Respondent-
Appellee.

Before LUCERO, McKAY, and TYMKOVICH, Circuit Judges.

TYMKOVICH, Circuit Judge.
 Jean Mathia is the widow of Doyle Mathia, a limited partner in Greenwich

Associates. Greenwich was a partnership that incurred losses that were passed

through to the couple’s income tax returns for the years 1982–84. After an

investigation of numerous related tax shelters, the Commissioner of Internal

Revenue disallowed these losses and in 2003, following lengthy administrative

and judicial proceedings involving the partnership, assessed more than $150,000

against Mathia. Mathia appealed to the United States Tax Court, challenging the

assessments as untimely and asserting the government bore the burden of proof in

establishing timeliness. The Tax Court denied the appeal and the case now comes

to us.

Mathia contends the tax assessments were untimely because the relevant

statute of limitations had run. This contention turns on whether Doyle Mathia

entered into a settlement agreement under the tax code that resolved his

partnership tax liability on an individual basis, separate from the partnership-level

proceeding. We agree with the tax court that he entered into no such agreement

which would qualify under the tax code as a settlement of Mathia’s liability as an

individual partner. Therefore, we conclude the assessments were timely and

properly applied by the IRS. We also find the district court correctly assigned the

burden of proof to Mathia.

Accordingly, we AFFIRM.

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 I. Background

A. Partnership Taxation

Before considering the facts of this case, a review of several basic

partnership tax principles is helpful. As a general matter, partnerships are

pass-through entities that do not themselves pay federal income tax. I.R.C. § 701;

see also Katz v. Comm’r of Internal Revenue, 335 F.3d 1121, 1123 (10th Cir.

2003). All income, deductions, and credits are allocated among individual

partners.

Before 1982, partnership proceedings, both administrative and judicial,

were conducted at the level of the individual partner. See Crnkovich v. United

States, 202 F.3d 1325 (Fed. Cir. 2000). This individualized process created

inefficiencies, however, because the IRS was required to conduct distinct, and

potentially duplicative, investigations for each partner in a partnership. Likewise,

the IRS generally could not enter into settlements at the partnership-level;

agreements had to be executed on an individual basis.

Congress responded to these issues by enacting the Tax Equity and Fiscal

Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248, 96 Stat. 324. TEFRA’s

partnership provisions, I.R.C. §§ 6221–6233, streamlined partnership taxation by

requiring resolution of “partnership items”—items, according to regulations, that

are appropriately determined at the partnership level rather than at the partner

level—in a single, unified audit and judicial proceeding. See I.R.C. § 6221

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(“Except as otherwise provided in this subchapter, the tax treatment of any

partnership item shall be determined at the partnership level.”); see also id.

§ 6231(a)(3) (partnership items include “any item required to be taken into

account for the partnership’s taxable year”). Thus, “TEFRA generally requires

determination of the tax treatment of partnership items at the partnership level

. . .” before assessments are made at the individual partner level. AD Global

Fund, LLC ex rel. N. Hills Holdings, Inc. v. United States, 481 F.3d 1351, 1355

(Fed. Cir. 2007). A partnership must file an information return (Form 1065, U.S.

Return of Partnership Income) each year reporting items of income, deduction,

and credit, and these items are then allocated among the partners who individually

bear the tax consequences for them. 1 See Crnkovich, 202 F.3d at 1328; see also

I.R.C. §§ 702, 6031.

TEFRA is intended to facilitate efficient, partnership-level administrative

and judicial proceedings. To commence a partnership-level administrative

proceeding under TEFRA, the Commissioner must issue a Notice of the

Beginning of an Administrative Proceeding (NBAP) to the tax matters partner 2

1
The allocation to each partner is reported on a Schedule K-1 to the
partnership’s Form 1065 return, and the partner must report his or her distributive
share of these partnership items. I.R.C. § 701.
2
A partnership designates a tax matters partner to handle tax questions on behalf
of the partnership. The tax matters partner is empowered to settle tax disputes on
behalf of the partnership and, in some cases, on behalf of individual partners as
well.

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and all other “notice” partners—partners whose “name and address is furnished to

the Secretary [of the Treasury]”—each of whom may participate in the

proceeding. See I.R.C. §§ 6223(a) (notice requirements for NBAPs); 6231(a)(8)

(notice partner is any partner entitled to notice under § 6223(a)). If the IRS

ultimately disagrees with any reported partnership item, it may adjust items

reported on the partnership’s Form 1065 by mailing a Final Partnership

Administrative Adjustment (FPAA) to the tax matters partner and all notice

partners. Id. §§ 6223(a)(2), 6223(d)(2), 6225(a).

Upon receiving an FPAA, a partnership, via its tax matters partner, may file

a petition in the Tax Court, a federal district court, or the Court of Federal Claims

contesting the adjustments. Id. § 6226(a). Once an FPAA is sent, the IRS cannot

make any assessments attributable to relevant partnership items during the time

the partnership seeks review and, if a § 6226 proceeding is brought in the Tax

Court, until one year after the Court’s decision becomes final. Id. § 6225(a).

Every partner with an interest in the administrative proceeding is treated as a

party to that proceeding and is bound by its outcome absent an agreement to the

contrary. See id. § 6226(c). With this in mind, we turn to the Mathias’ situation.

B. Facts

The facts are undisputed. Appellant Jean Mathia and her now-deceased

husband, Doyle Mathia, were married and filed joint tax returns for all years

relevant to this case. Doyle Mathia was a limited partner in Greenwich

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Associates, a New York limited partnership subject to partnership procedures

under TEFRA. Mathia owned an 8.5% interest in Greenwich, which was one of

approximately 50 identically structured coal-related partnerships and joint

ventures sponsored by the Swanton Corporation (the Swanton partnerships).

Thirty of the Swanton partnerships were formed before the enactment of TEFRA.

The remaining 20, including Greenwich, were formed after the enactment of

TEFRA and are subject to TEFRA’s unified audit and litigation provisions

applicable to partnerships.

In the late 1980s, the Commissioner investigated the Swanton partnerships,

including Greenwich, and determined they existed solely to generate tax

deductions for their partners. In 1987, Greenwich received a timely notice of the

beginning of an administrative proceeding for tax years 1982–84, and in 1990 the

Commissioner issued to Greenwich an FPAA stating the losses declared in

association with the Greenwich partnership would be disallowed. In response,

Greenwich’s tax matters partner, Kevin Smith, filed an objection in the Tax Court

and sought reconsideration. In the ensuing litigation, Greenwich was represented

by Zapruder & Odell, a law firm that served as counsel for most of the Swanton

partnerships subject to TEFRA.

In September 1991, the Commissioner and Zapruder & Odell reached an

agreement in principle regarding 19 of the 20 Swanton TEFRA partnerships,

including Greenwich. The agreement, which was reflected in a series of letters

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between Zapruder & Odell and the Commissioner’s attorneys, set forth terms for

the resolution of the disallowed losses, and it required that any final settlement

and entry of judgment bind all partnerships and, by extension, each individual

partner.

In the wake of the agreement in principle, the Commissioner began

applying the terms of the settlement to individual partnerships and partners. To

do this, the IRS gathered information enabling it to calculate partnership-level

adjustments and each partner’s distributive share adjustment. The IRS also began

preparing decision documents memorializing the terms of the proposed settlement

for each Swanton partnership subject to TEFRA.

Since the 1991 agreement in principle was not yet complete, the parties

continued to negotiate aspects of the proposed settlement. For example, in a 1993

letter, the Commissioner informed the partners that, because the Commissioner

had not received all tax returns for Greenwich, he could not determine whether

any issues prevented computation of the settlement amount. And later in 1993,

the Commissioner sent Zapruder & Odell a document setting forth “Terms of

Settlement.”

In 1995, the Commissioner sent a “Stipulation of Settlement Agreement” to

Greenwich (Greenwich Stipulation) memorializing the parties’ agreement with

respect to Greenwich. The Greenwich Stipulation set forth adjustments to

Greenwich’s partnership items for tax years 1982–84. To be valid, the document

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had to be signed by Greenwich (via Smith, its tax matters partner) and the IRS.

In 1996, Smith signed the Stipulation and submitted it to the IRS, but, for reasons

not apparent in the record, the Commissioner neither signed nor returned the

Stipulation to Smith. Doyle Mathia died in 2000.

In 2001, the Commissioner sent an identical, unsigned, Greenwich

Stipulation to Greenwich, and this time both parties signed the document. The

Stipulation was filed with the Tax Court on August 31, 2001, pursuant to Tax

Court Rule 248(a). See Ex. 29-J (Greenwich Stipulation) (“Pursuant to Rule

248(a) of the Tax Court Rules of Practice and Procedure, it is ORDERED AND

DECIDED: That the following statement shows the adjustments to the partnership

items of Greenwich Associates . . . .”).

Receiving no objections to the Stipulation, the Tax Court accepted the

settlement and entered its decision. Ninety days later, on April 17, 2002, the

court’s decision became final. In September 2002 and January 2003, the IRS

issued notices of computational adjustment reflecting taxpayers’ deficiencies and

interest owed for 1982–84, based on the Greenwich Stipulation’s agreed-upon

figures, as entered by the Tax Court. And on January 27, 2003—within one year

of the Tax Court’s final decision in the partnership-level proceeding—the IRS

issued the assessments. The Mathias paid deficiencies of $149,360, $4,015, and

$2,331 for the years 1982, 1983, and 1984, respectively, but they paid none of the

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interest due. The IRS subsequently denied Jean Mathia’s request for an

abatement of the interest.

The IRS then sought to recover the unpaid interest. In 2004, the

Commissioner issued a final notice of intent to levy the interest, a notice of

federal tax lien filing, and notices of Mathia’s right to a Collection Due Process

(CDP) hearing, which she was entitled to under I.R.C. §§ 6320 and 6330. At the

CDP hearing, Mathia argued to the IRS’s Appeals Office that the assessments

were untimely, because they were filed more than one year after both the

agreement in principle and the execution of the Greenwich Stipulation. 3 The

court disagreed and found the assessments were timely made within one year of

the Tax Court’s decision becoming final in the partnership-level proceeding.

Mathia petitioned the Tax Court to review the assessments and the

determinations at the CDP hearings. The court affirmed the assessments were

timely and rejected Mathia’s contention that the interest should have been abated.

See Mathia v. Comm’r of Internal Revenue, T.C. Memo. 2009-120, 2009 WL

1471716 (U.S. Tax Ct. May 27, 2009). Finally, the Tax Court denied Mathia’s

motion to shift the burden of proof to the Commissioner under I.R.C. § 7491(a).

Mathia now appeals. We have jurisdiction pursuant to 26 U.S.C. § 7482(a)(1).

3
In parallel proceedings, Mathia sought not only to avoid paying the interest, but
she also sought reimbursement of the deficiencies already paid.

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 II. Discussion

Mathia contends (1) the Commissioner’s assessments were untimely, and

(2) the Tax Court erroneously denied her motion to assign the burden of proof to

the Commissioner. In considering these issues, we review legal questions de

novo and factual questions for clear error. See Jones v. Comm’r of Internal

Revenue, 560 F.3d 1196, 1199 (10th Cir. 2009). Because this case involves

mixed questions of law and fact, and because the factual record is stipulated, our

review is de novo.

A. Timeliness of Assessments

Mathia contends the IRS’s assessments were untimely because they were

levied more than one year after the execution of a “settlement agreement”

pursuant to I.R.C. § 6231(b)(1)(C). This argument is unavailing because Mathia

never entered into an individualized agreement with the IRS, and the IRS timely

issued the assessments within one year of the Tax Court’s decision becoming

final.

1. Settlement Agreements and Statutes of Limitations

Whether the assessments were timely depends on how the 1991 agreement

in principle and the executed Greenwich Stipulation are characterized. Under

TEFRA, the IRS may enter into a settlement agreement with a partnership or an

individual partner. In the ordinary case, TEFRA calls for the IRS to resolve

partnership tax issues at the partnership level, and partnerships may enter into

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partnership-level settlement agreements. See I.R.C. § 6221 (providing for

determination of tax liability of partnership items on a partnership-wide basis).

The default is that settlement agreements entered into by a partnership bind all

individual partners, including non-notice partners. 4 Id. § 6224(c)(3) (providing

that a non-notice partner will be bound by any settlement agreement in which the

tax matters partner states expressly that the agreement will bind the other

partners).

In certain circumstances, however, a settlement agreement between the IRS

and an individual partner may carve out partnership items for resolution outside

the context of a partnership-wide proceeding. See Crnkovich, 202 F.3d at

1328–29. This enables individual partners to resolve their differences with the

IRS notwithstanding proceedings involving the partnership or other partners.

When a partner enters into a settlement agreement individually, he removes

himself from the partnership proceeding and allows the Commissioner to resolve

his tax liability on an individual basis. In this circumstance, the partner is subject

to dismissal from the partnership-level proceeding. I.R.C. §§ 6226(d)(1)(A),

6231(a)(4), 6231(b)(1)(C).

4
If a partner wants to ensure that a partnership-level settlement by the tax
matters partner will not be binding on him, the partner may file a statement with
the IRS to that effect.

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 Internal Revenue Code § 6231(b) details the various methods by which

partnership items are reclassified as nonpartnership items and resolved on the

partner level. Our concern is with the third method:

(1) In general. For purposes of this subchapter, the
partnership items of a partner for a partnership taxable
year shall become nonpartnership items as of the date—

(A) the Secretary mails to such partner a notice that
such items shall be treated as nonpartnership items,

(B) the partner files suit under section 6228(b) after the
Secretary fails to allow an administrative adjustment
request with respect to any of such items,

(C) the Secretary enters into a settlement agreement
with the partner with respect to such items, or

(D) such change occurs under subsection (e) of section
6223 . . . or under subsection (c) of this section.

I.R.C. § 6231(b) (emphasis added).

The relevant provision here, § 6231(b)(1)(C), deems that an individual

partner’s partnership items become nonpartnership items when there is a

settlement agreement “with the partner with respect to such items” (emphasis

added). This provision recognizes individual partners may opt out of a

partnership-level proceeding by entering into a settlement agreement with the IRS

with respect to the determination of their individual partnership items. Thus, the

plain terms of the statute signify that a § 6231(b)(1)(C) “settlement agreement” is

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a bilateral compact between the IRS and an individual partner who opts out of a

partnership-level proceeding. 5

Section 6231(b)(1) is important for Mathia’s appeal because which statute

of limitations applies depends on whether partnership items were converted to

nonpartnership items. Internal Revenue Code § 6501(a) provides the default

three-year statute of limitation for assessment and collection of taxes: “Except as

otherwise provided in this section, the amount of any tax imposed by this title

shall be assessed within 3 years after the return was filed . . . .” See also I.R.C.

§ 6229(a) (limitations period for such assessments “shall not expire before the

date which is 3 years after” the filing of the partnership’s return or the return’s

due date, whichever is later). But if a taxpayer challenges an FPAA, I.R.C.

§ 6229(d) suspends the default limitations period, allowing the IRS to make

assessments until one year after the date the decision in the Tax Court proceeding

becomes final. A decision becomes final 90 days after it is entered. Id.

§ 7481(b).

If, however, relevant partnership items have become nonpartnership items

pursuant to § 6231(b), there is a special assessment period under I.R.C.

5
Mathia argues it is significant for this case that a tax matters partner may enter
into a § 6231(b)(1)(C) settlement on behalf of an individual partner. While this is
true (and the Commissioner concedes the point), it does not follow that any
settlement entered into by a tax matters partner is a “settlement agreement”
pursuant to § 6231(b)(1)(C). Indeed, concluding a tax matters partner can enter
into a § 6231(b)(1)(C) settlement does not answer the question of whether the tax
matters partner in fact entered into any such settlement.

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§ 6229(f)(1). That period does not expire until one year after partnership items

become nonpartnership items:

If before the expiration of the period otherwise provided in this
section for assessing any tax imposed by subtitle A [i.e., income
taxes] with respect to the partnership items of a partner for the
partnership taxable year, such items become non-partnership
items by reason of 1 or more of the events described in
subsection (b) of section 6231, the period for assessing any tax
imposed by subtitle A which is attributable to such items (or any
item affected by such items) shall not expire before the date
which is 1 year after the date on which the items become
non-partnership items.

Id. § 6229(f)(1) (emphasis added). In other words, partnership items become

nonpartnership items on the date the IRS enters into a settlement agreement with

an individual partner with respect to those items, and the one-year statute of

limitations runs from that date. Id. § 6231(b)(1). So for our purposes, the nature

and character of the Greenwich agreements is dispositive.

2. Greenwich Agreements

The Tax Court decision implementing the Greenwich Stipulation became

final in April 2002. Given this, and so long as Mathia did not enter into a

separate closing agreement with the IRS, the Commissioner’s January 2003

assessment against Mathia was timely because § 6229(d) suspends the limitation

period to allow the IRS to make assessments until one year after the Tax Court’s

decision becomes final. The outcome would be different, however, if

Greenwich’s partnership items attributable to Mathia were reclassified at any

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point as nonpartnership items. If this were the case, the assessments would be

untimely because they were not made within one year of either the 1991

agreement in principle or the August 2001 execution of the Greenwich

Stipulation. See § 6229(f)(1) (statute of limitations when partnership items

become nonpartnership items).

Mathia contends the 1991 agreement in principle and the 2001 executed

Stipulation qualify as “settlement agreements” for purposes of I.R.C.

§ 6231(b)(1). Therefore, she argues, the relevant partnership items became

nonpartnership items when these agreements were formed, and the IRS was

required under § 6229(f) to assess any taxes due within one year of these

agreements.

As an initial matter, the parties debate whether there was a binding

settlement agreement at all. Specifically, the Commissioner contends the 1991

agreement in principle lacked material terms, and that the Greenwich Stipulation

was not binding absent entry of the proposed decision by the Tax Court. We need

not decide these questions, however, because even if both agreements were

settlements in some sense, they were not the types of settlement agreements

required by § 6231(b)(1)(C). 6

6
A tax controversy may be settled by agreement between the parties, but the
term “settlement agreement” is not defined in the Internal Revenue Code.
Because a settlement is a contract, however, courts generally apply principles of
contract law to determine whether a settlement has been reached. See Dorchester
(continued...)

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 Both parties point to a 2000 Federal Circuit case in support of their

arguments. In Crnkovich v. United States, 202 F.3d at 1325, the Federal Circuit

analyzed relevant tax code provisions to determine whether several sets of

partners had entered into § 6231(b)(1)(C) agreements, so as to trigger the one-

year assessment period under § 6229(f)(1). After explaining that the purpose of

§ 6231(b)(1)(C) is to enable the resolution of an individual partner’s tax liability

apart from a unified partnership-level proceeding, the court construed the

language of the agreements at issue, under principles of contract interpretation, to

determine whether the agreements sought to convert partnership items into

nonpartnership items. Id. at 1330–33.

In Crnkovich, the Federal Circuit found that the partnership items for one

set of plaintiffs had been transformed into nonpartnership items because plaintiffs

entered into an individual Form 906 closing agreement with the IRS. Id. at 1331.

The Form 906 agreement constituted a “settlement agreement” under

§ 6231(b)(1)(C) in large part because it reflected the IRS’s affirmative “deci[sion]

to deal with the Crnkoviches individually and apart from any partnership-level

determinations.” Id. at 1333. The court explained that, in entering into the Form

6
(...continued)
Indus. Inc. v. Comm’r of Internal Revenue, 108 T.C. 320, 330 (1997). “A
settlement agreement may be reached through offer and acceptance made by
letter, or even verbally.” Id. It is clear, however, that not every settlement
agreement with the IRS transforms partnership items into nonpartnership items, in
accordance with § 6231(b)(1)(C).

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906 agreement, the “IRS chose to forego the advantages of making its

determinations at the partnership level and opted instead to deal with the

Crnkoviches individually with respect to the tax issues addressed in the . . .

agreement.” Id. Similarly, the court found the second set of plaintiffs, who

entered a stipulation with the IRS rather than a Form 906 agreement, had entered

into a § 6231(b)(1)(C) settlement agreement because the stipulation was the

product of “the IRS’s decision to resolve certain issues [at the individual partner

level] rather than to address those issues at the partnership level.” Id. at 1338.

Here, we have the opposite situation. Even assuming the 1991 agreement

in principle and the Greenwich Stipulation were binding agreements with the

Commissioner, both agreements—by their express terms—dealt only with the

treatment of partnership items, and it cannot be disputed that both were entered

into by and with the partnership alone.

First, neither the 1991 agreement in principle nor the 2001 executed

Stipulation (nor any associated correspondence) makes any reference to the

individual liability of any of the Greenwich partners, and the Mathias never

entered into a separate closing agreement with the IRS so as to convert his

partnership items into nonpartnership items. There is no contention the Mathias

ever notified Smith, Greenwich’s tax matters partner, or the government that they

sought to opt out of the partnership-level proceeding, and nothing in the record

reflects an intention, on the part of either party, to settle the Mathias’ liability

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separate from the partnership’s, via an individual closing agreement or any other

means. 7 The agreements at issue did nothing more than contemplate the

resolution of the partnership-level proceeding and the tax liability of all partners

collectively through a court decision. In fact, the Greenwich Stipulation

expressly sets forth “adjustments to the partnership items of Greenwich

Associates” for tax years 1982–84; there is no mention of Mathia’s individual

liability or any conversion of partnership items to nonpartnership items. Ex. 29-J

at 1, 2 (Greenwich Stipulation) (emphasis added). Accordingly, it is unequivocal

that, as a partner bound by the partnership-level decision document, Mathia

remained a party to the Greenwich litigation until the Tax Court’s decision

became final. Nothing in the Greenwich Stipulation or any settlement

correspondence gives even the slightest hint that either party intended to convert

Mathia’s partnership items to nonpartnership items.

Moreover, the Greenwich Stipulation, by its own terms, was a decision

binding the partnership and its members. The document was executed pursuant to

7
Mathia does not claim she and her husband entered into a separate closing
agreement. And nothing in the record suggests the existence of such an
agreement. To the contrary, IRS correspondence suggests the Mathias never
entered into an individual closing agreement with the IRS. See, e.g., Ex. 56-J at 1
(“According to my records Doyle V. Mathia was in the partnership when the
decision was entered on 1/17/2002. He was assessed based on the decision. No
closing agreement was signed.”); id. at 10 (“I can find no [individual closing
agreement] for Mr. Mathia—It is therefore very, very likely that he was covered
by the Decision document in Greenwhich and not an individual [closing
agreement].”).

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Tax Court Rule 248(a), which provides: “A stipulation consenting to entry of

decision executed by the tax matters partner and filed with the Court shall bind

all parties. The signature of the tax matters partner constitutes a certificate by

the tax matters partner that no party objects to entry of decision” (emphasis

added). The “parties” bound by the Stipulation included all members of

Greenwich during the tax years in dispute, including Doyle Mathia. I.R.C.

§ 6226(c)(1). This alone indicates that the partnership-level agreement bound

Mathia, and that he did not opt out—as did the partner in Crnkovich—by

executing an individualized agreement with the IRS.

Finally, language from the negotiations between the Swanton partnerships

and the IRS confirms our interpretation of the Greenwich settlement agreements.

The IRS made it an express prerequisite of any settlement talks that all partners

of the Swanton TEFRA partnerships consent to the partnership-level agreement.

For example, in an October 1992 letter, the Commissioner stated:

[Counsel for the partnerships] agreed that the Tax Matters
Partners would sign a Rule 248(a) decision document. The
amount of our settlement agreement was based on your
representation that the respective Tax Matters Partners 1) had the
ability to bind all the limited partners; 2) were, in fact, binding
all the limited partners; and 3) would sign a Rule 248(a) decision
document . . . . It was on that basis (i.e. the fact that every
partnership . . . and every limited partner in those partnership[s]
was settling) that we agreed to enter into a settlement
agreement. . . . We stated several times during the course of
settlement negotiations that we had no desire to settle with only
some of the limited partners and then be required to go into court
anyway and litigate with a few dissident stragglers who either

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 disagreed with the Tax Matters Partner or had no desire to settle
the case. Litigating several dissident cases in a variety of cities
for several weeks, as you know, would be an extremely
expensive and unacceptable course for the government to take.

We will settle only those partnerships in which the Tax Matters
Partner will sign the Rule 248(a) decision documents. In the
event that there are still some dissenting members in some of the
partnerships and the Tax Matters Partner is unwilling to sign the
Rule 248(a) decision documents, those partnerships cannot be
settled and will have to proceed to trial.

Ex. 19-J at 2 (Oct. 1992 Letter from IRS District Counsel to Zapruder & Odell).

April 1993 correspondence drafted by counsel for the Swanton partnerships shows

the partnerships fully understood the IRS’s conditions:

As you know, under the partnership agreements for your
partnerships, the general partner was authorized to settle disputes
with the IRS based upon the approval of the majority of partners
. . . . And all the partners were bound by such approval. The
idea behind the settlement with the IRS was that it would
eliminate the need for further litigation for both sides, based on
the authority to settle granted to the general partners by the
majority vote. The IRS now advises us that it wants to have even
greater certainty that the settlement will accomplish the purpose
of ending the litigation. Instead of relying on the contractual
obligation each of you has to abide by the settlement of the
majority, it wants the settlement documents for each partnership
to state that no limited partner objects to the settlement.

Ex. 16-J at 1 (April 1993 letter from Swanton Partnerships’ Tax Defense

Committee). The meaning of these excerpts is plain. As counsel for Greenwich

recognized, the IRS would only settle on a partnership basis. The IRS expressly

sought to avoid the inefficiencies associated with reclassifying Greenwich

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partnership items as nonpartnership items and dealing with specific partners on an

individual basis. 8

Ultimately, the record is clear that Mathia was not dismissed from the

partnership-level proceeding, and he (and later, his estate) was a party at the

partnership-level at all times. Because any agreement did not convert taxpayers’

partnership items into nonpartnership items, § 6229(f)’s one-year assessment

period does not govern. To the contrary, as a partnership-level agreement, the

settlement was governed by the statute of limitations set forth in § 6229(d), which

permits the Commissioner to make assessments up to one year after the Tax

Court’s decision becomes final. Therefore, the January 2003 assessments were

timely because they were made well within § 6229(d)’s one-year window, which

began to run in April 2002.

8
The record nonetheless discloses that in 1999 and 2000, several Greenwich
partners—but not Mathia—may have entered into individual, Form 906 settlement
agreements with the IRS. See Ex. 56-J at 17, 102 (Notice of Settlement); see also
id. at 75 (suggesting the Notice of Settlement identified all the individual closing
agreements for Greenwich partners). Those (unsigned) Notices of Settlement are
instructive in that they show how individual partners may opt out of partnership-
level proceedings, with the effect of converting partnership items into
nonpartnership items. The Notice of Settlement document identifying these
individual agreements states that the result of these individual settlements is:
“[P]ursuant to section 6231(b)(1)(C), such partnership items became non-
partnership items as of the various [individual settlement dates], and, pursuant to
section 6226(d)(1)(A), the aforementioned taxpayers are no longer parties to the
proceeding.” Id. Because he did not execute any such agreement, Mathia
remained a party to the partnership-level proceedings.

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 B. Burden of Proof

Mathia also contends the Tax Court erred in placing on the estate the

burden of proof to demonstrate the IRS’s assessments were untimely.

In general, the burden of proof in a Tax Court proceeding is on the

taxpayer, “except as otherwise provided by statute or determined by the Court.”

Tax Court Rule 142(a). The taxpayer also bears the burden of proof when

asserting affirmative defenses. See Tax Court Rule 39; Hoffman v. Comm’r of

Internal Revenue, 119 T.C. 140, 146-47 (2002). An exception to this rule exists,

however. When a taxpayer introduces credible evidence with respect to a factual

issue and meets certain other requirements, I.R.C. § 7491(a) shifts the burden of

proof to the Commissioner. Section 7491(a), however, applies only to

proceedings “arising in connection with examinations” commencing after its July

22, 1998 enactment.

Relying on § 7491(a), Mathia filed a motion in the Tax Court seeking a

declaration the Commissioner bore the burden of proof. The court denied this

motion, explaining:

[S]ection 7491 applies only to court proceedings arising in
connection with examinations commencing after the date of its
enactment, July 22, 1998. Because the relevant examination is
the examination of Greenwich Associates . . . and its partners,
which commenced well before July 22, 1998, we conclude that
section 7491 is inapplicable.

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Mathia, 2009 WL 1471716, at *15 n.17 (citations omitted). The Tax Court

declined to shift the burden because it found that “the computational adjustments

to [taxpayers’] 1982, 1983, and 1984 tax returns were made in accordance with

the Greenwich examination.” Id. We agree.

The application of § 7491(a) turns on whether Mathia’s appeal before the

Tax Court arose “in connection with” the partnership-level examination of

Greenwich, which began before March 16, 1987—well before § 7491(a) took

effect. In the action before the Tax Court, Mathia challenged her underlying tax

liability, as originally determined in the CDP proceeding. This tax liability, and

the resulting assessments, was the direct result of the IRS’s late-1980s

partnership-level examination. Therefore, the case and the examination were

related, § 7491(a) is inapplicable, and the Tax Court correctly assigned the burden

to Mathia.

III. Conclusion

The Commissioner’s assessments were timely, and the Tax Court correctly

assigned the burden of proof. AFFIRMED.

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