United States Court of Appeals,
Fifth Circuit.
No. 94-30738
Summary Calendar.
Kathleen PILIE, wife of/and Noel F. Pilie, Plaintiffs-Appellants,
v.
UNITED STATES of America, Defendant-Appellee.
June 29, 1995.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before JONES, BARKSDALE, and BENAVIDES, Circuit Judges.
PER CURIAM:
At issue is whether the § 6213(d) waiver of the restrictions
on assessment and collection of a deficiency in the settlement
agreement between Kathleen and Noel Pilie and the Internal Revenue
Service suspended the imposition of interest because the IRS did
not make a timely demand of payment. The district court, by
summary judgment, held that it did not; we AFFIRM.
I.
The Pilies were partners in Barrister Equipment Associates 88,
a TEFRA partnership.1 As a result of a dispute with the IRS
regarding the tax treatment of certain partnership items for tax
year 1982, the Pilies and the IRS Commissioner, on May 1, 1990,
1
TEFRA is the Tax Equity and Fiscal Responsibility Act,
Pub.L. No. 97-248, 96 Stat. 324 (1982). For a general overview
of TEFRA, see Alexander v. United States, 44 F.3d 328, 330 (5th
Cir.1995), and Transpac Drilling Venture, 1983-63 by Crestwood
Hosps., Inc. v. United States, 16 F.3d 383, 387 (Fed.Cir.), cert.
denied, --- U.S. ----, 115 S.Ct. 79, 130 L.Ed.2d 33 (1994).
1
executed a settlement agreement.2 Part I of the Agreement
contained a provision whereby, pursuant to § 6224(b) of the
Internal Revenue Code, the Pilies agreed to waive the restrictions
on the assessment and collection of any deficiency;3 in Part II,
the Pilies waived similar restrictions with respect to penalties
and interest, pursuant to § 6213(d).4
On April 29, 1991, nearly a year after executing the
settlement agreement, the IRS assessed a tax deficiency, as well as
interest and a penalty. After paying their tax bill in full, the
Pilies filed a refund action against the United States, seeking
$11,790.68. Based on stipulated facts, both parties moved for
2
The agreement was executed using Treasury Form 870-L (AD),
Settlement Agreement for Partnership Adjustments and Affected
Items.
3
Part I of the Agreement provided, in part:
Under the provisions of section 6224(c) of the Internal
Revenue Code, the undersigned offers to enter into a
settlement agreement with respect to the determination
of partnership items of the partnership for [tax year
1982]. The undersigned, in accordance with the
provisions of section 6224(b) of the Code, also offers
to waive the restrictions on the assessment and
collection of any deficiency attributable to
partnership items ... provided in section 6225(a).
4
Part II of the Agreement provided, in part:
The undersigned offers to enter into a settlement
agreement with respect to penalties (additions to
taxes) and interest under section 6621(c) of the
Internal Revenue Code.... The undersigned, pursuant to
the provisions of section 6213(d) of the Code, also
offers to waive the restrictions provided in section
6213(a) of the Code and to consent to the assessment
and collection of the penalties (additions to tax), and
interest under section 6621(c) attributable to the
adjustment(s) of the partnership items; plus any
interest provided by law.
2
summary judgment. Relying on § 6213(d) of the Code, the Pilies
contended that they executed a valid waiver; and that, therefore,
starting 31 days after they submitted the Agreement to the IRS, the
accumulation of interest was suspended. On the other hand, the IRS
maintained that § 6213(d) had no application to items that had
become nonpartnership items pursuant to the Agreement. The
district court entered judgment for the IRS.
II.
A.
Section 6601(c) of the Code suspends the imposition of
interest on a deficiency if the taxpayer files a waiver of a
deficiency assessment pursuant to § 6213(d), and the IRS fails to
make a demand for payment of the deficiency within 30 days after
the waiver is filed.5 Relying on § 6601(c), the Pilies contend
5
Section 6601(c) provides:
In the case of a deficiency ..., if a waiver of
restrictions under section 6213(d) on the assessment of
such deficiency has been filed, and if notice and
demand by the Secretary for payment of such deficiency
is not made within 30 days after the filing of such
waiver, interest shall not be imposed on such
deficiency for the period beginning immediately after
such 30th day and ending with the date of notice and
demand and interest shall not be imposed during such
period on any interest with respect to such deficiency
for any prior period.
26 U.S.C. § 6601(c). Section 6213(d) provides:
The taxpayer shall at any time (whether or not a notice
of deficiency has been issued) have the right, by a
signed notice in writing filed with the Secretary, to
waive the restrictions provided in subsection (a) on
the assessment and collection of the whole or any part
of the deficiency.
3
that they are entitled to a refund of interest for the period
beginning on the 31st day after they filed the waiver (February 18,
1990) through the day prior to when the IRS gave notice and made a
demand for payment (April 28, 1991). Although the IRS acknowledges
that the Agreement states that the Pilies waived the restrictions
on assessment pursuant to § 6213(d), it maintains that such a
waiver is not effective here.
Under the statutory scheme established by Congress in
Subchapter C of Chapter 63 of the Code, §§ 6221-6233 (Tax Treatment
of Partnership Items), the normal deficiency procedures in
Subchapter B, §§ 6211-6216 (Deficiency Procedures), are generally
inapplicable. Specifically, § 6230(a)(1) provides:
Except as provided in paragraph (2), subchapter B of this
chapter shall not apply to the assessment or collection of any
computational adjustment.
26 U.S.C. § 6230(a)(1). In turn, paragraph (2) provides:
(A) Subchapter B shall apply to any deficiency attributable
to—
....
(ii) items which have become nonpartnership items (other
than by reason of section 6231(b)(1)(C)) and are described in
section 6231(e)(1)(B).
26 U.S.C. § 6230(a)(2). Section 6231(b)(1)(C) provides, however,
that when the IRS and a partner enter into a settlement agreement
with respect to a partnership item, that item ceases to be a
partnership item and becomes, instead, a "nonpartnership item". 26
26 U.S.C. § 6213(d).
4
U.S.C. § 6231(b)(1)(C).6 Because §§ 6230(a) and 6231(b)(1)(C)
makes Subchapter B not applicable to a settlement agreement, and
because § 6213 is in Subchapter B, the § 6213(d) waiver in Part II
of the Agreement is not effective. Thus, the IRS could assess the
interest in issue. Pack v. United States, 992 F.2d 955, 958 (9th
Cir.1993).
B.
The Pilies contend also that, by the terms of the Agreement,
the IRS elected to proceed under Subchapter B and to forego
utilization of Subchapter C.
Conceding that Part I of the Agreement (which dealt with any
deficiency) addresses computational adjustments7 under Subchapter
C (thus, making Subchapter B not applicable), the Pilies contend
that Part II of the Agreement (which dealt with penalties and
interest) does not constitute a computational adjustment, and,
thus, remains subject to the deficiency procedures of Subchapter B.
Notwithstanding the fact that Temporary Treasury Regulation §
6
26 U.S.C. § 6231(b)(1) provides:
For purposes of [Subchapter C], the partnership items
of a partner for a partnership taxable year shall
become nonpartnership items as of the date—
....
(C) the Secretary enters into a settlement
agreement with the partner with respect to such
items....
7
26 U.S.C. § 6231 defines "computational adjustment" as
the change in the tax liability of a partner which
properly reflects the treatment under this subchapter
of a partnership item.
5
301.6231(a)(6)-1T(b) specifies that interest constitutes a
computational adjustment,8 the Pilies maintain that, pursuant to
the terms of Part II of the Agreement, the IRS elected to opt out
of Subchapter C and, instead, assessed and collected the penalty
and interest pursuant to Subchapter B. In particular, the Pilies
identify the second paragraph of Part II, which provides:
This agreement with respect to penalties (additions to tax)
and interest under section 6621(c) of the [Code] will not
constitute a settlement agreement for purpose of the
consistent settlement provision of section 6224(c)(2) of the
[Code].
To read this language as an election on the part of the IRS to opt
out of Subchapter C (assuming it could do so), fails to appreciate
the limited wording of the above quoted passage. Section 6224(c)
provides:
In the absence of a showing of fraud, malfeasance, or
misrepresentation of fact—
....
(2) Other partners have right to enter into consistent
agreements.—If the Secretary enters into a settlement
agreement with any partner with respect to partnership items
for any partnership taxable year, the Secretary shall offer to
any other partner who so requests settlement terms for the
partnership taxable year which are consistent with those
contained in such settlement agreement.
26 U.S.C. § 6224(c). Thus the limitation relied upon by the Pilies
appears simply to be an attempt on the part of the IRS not to
obligate itself to agree to the same terms when dealing with other
8
Temp.Treas.Reg § 301.6231(a)(6)-1T(b) provides:
A computational adjustment includes any interest due
with respect to any underpayment or overpayment of tax
attributable to adjustments to reflect properly the
treatment of partnership items.
6
partners of Barrister Equipment Associates.9 In any event, there
is no indication that the IRS intended to proceed under Subchapter
B.
III.
For the foregoing reasons, the judgment is
AFFIRMED.
9
We need not decide whether by agreement with one partner,
the IRS may circumvent the provisions of the consistent
settlement provisions of § 6224(c)(2).
7