Carpenter Family Investments, LLC, Carpenter Capital Management, LLC, Tax Matters Partner v. Commissioner
136 T.C. No. 17
Tax Ct.2011Background
- Carpenter Capital Management, LLC is a Nevada LLC classified as a partnership; it is the tax matters partner of Carpenter Family Investments, LLC, an Oregon partnership.
- At end of 2000, ownership of the partnership was 0.5% Tommie Carpenter, 0.5% Virginia Carpenter, and 99% to Carpenter Capital; Tommie and Virginia ultimately allocated all partnership items.
- During 2000 the partnership sold American Tower Corp. stock for 29,608,861; partnership reported gain of 6,323,116 and adjusted basis of 23,285,745 on Form 1065 filed by October 15, 2001.
- Partners filed a joint Form 1040 for calendar year 2000 reporting the same $6,323,116 gain on or before October 15, 2001.
- On April 10, 2007, the partnership executed Form 872-P and Form 872-1 extending the time to assess tax; FPAA issued October 2, 2008 for the 2000 year.
- Petitioner challenged timeliness of the FPAA, arguing the FPAA was issued after the 3-year period under §6501(a) expired and thus the assessment was untimely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of the FPAA under 3-year limit | Carpenter contends FPAA issued after October 15, 2004 is untimely. | Respondent argues a longer period may apply under 6229(c)(2) or 6501(e)(1)(A). | FPAA untimely; 3-year period applies. |
| Whether 6-year extensions apply under 6229(c)(2) or 6501(e)(1)(A) | Longer 6-year period should apply per regulations and open period in 2009. | Final regulations extend the 6-year period and render FPAA timely. | 6-year period does not apply; Colony controls; FPAA remains untimely. |
| Validity of extensions after FPAA due to consents | Consents signed before expiration should permit extension even if FPAA untimely. | Consents were signed after the FPAA issue date; thus invalid to reopen period. | Consents executed after FPAA were invalid. |
Key Cases Cited
- Colony, Inc. v. Commissioner, 357 U.S. 28 (1958) (definitions of omission from gross income; limits on extensions)
- Bakersfield Energy Partners, LP v. Commissioner, 568 F.3d 767 (9th Cir. 2009) (Colony interpretation applied to 6501(e)(1)(A))
- Salman Ranch Ltd. v. United States, 573 F.3d 1362 (Fed. Cir. 2009) (Colony interpretation not limited to trade or business)
- Beard v. Commissioner, 633 F.3d 616 (7th Cir. 2011) (Colony interpretation debated; debate on Chevron deference)
- Intermountain Ins. Serv. of Vail, LLC v. Commissioner, 134 T.C. 211 (2010) (invalidated temporary regulations applying 6-year theory)
- Grapevine Imps., Ltd. v. United States, 636 F.3d 1368 (Fed. Cir. 2011) (final regulations entitled to Chevron deference; open circuit split)
- Home Concrete & Supply, LLC v. United States, 634 F.3d 249 (4th Cir. 2011) (Mayo effect on Chevron deference for tax regulations)
- Mayo Foundation v. United States, 131 S. Ct. 704 (2011) (Chevron deference standard applied to Treasury regulations)