Carpenter Family Invs., LLC v. Comm'r
2011 U.S. Tax Ct. LEXIS 17
Tax Ct.2011Background
- Petitioner Carpenter Capital Management, LLC is a Nevada LLC treated as a partnership; it is the tax matters partner of Carpenter Family Investments, LLC, an Oregon partnership.
- For 2000, the partnership sold American Tower Corp. stock for $29,608,861, reporting gain of $6,323,116 on its Form 1065 and the partners reported the gain on their 2000 Form 1040.
- The partnership timely filed Form 1065 and the partners timely filed a joint Form 1040 on October 15, 2001.
- On April 10, 2007, the partnership signed Form 872-P and the partners signed Form 872-1 extending the time to assess tax.
- The FPAA for the partnership’s 2000 year was issued on October 2, 2008.
- The general 3-year period for assessment under § 6501(a) would have expired by October 15, 2004; petitioner argues the FPAA is untimely and the extensions via Forms 872 are ineffective if not obtained within the 3-year period.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FPAA is timely under the 3-year period of § 6501(a) or the 6-year period. | Carpenter argues the FPAA was untimely under § 6501(a) and § 6229(c)(2). | Respondent contends the 6-year period applies per § 6229(c)(2) or § 6501(e)(1)(A) as clarified by final regulations. | 3-year period governs; FPAA untimely. |
| Effect of consents signed after the expiration of the 3-year period. | Consents signed after expiration cannot extend the period. | Consents may extend the period if a longer period applies. | Consents executed after FPAA issuance are invalid to extend the limitations. |
| Validity and applicability of temporary/final regulations interpreting § 6501(e)(1)(A) and § 6229(c)(2). | Colony controls interpretation; temporary regs invalid in light of Intermountain. | Regulations may be read under Brand X/Mayo to alter interpretation. | Final regulations invalid to override Colony; 3-year period applies. |
| Whether Colony (omits from gross income) applies as a Chevron step-one or step-two ruling post-Mayo. | Colony remains controlling, step-one interpretation. | Regulatory interpretation may trump Colony under Brand X. | Colony remains controlling; 3-year period applies. |
Key Cases Cited
- Colony, Inc. v. Commissioner, 357 U.S. 28 (Supreme Court, 1958) (interpretation of 'omits from gross income' not limited to trade or business context)
- Bakersfield Energy Partners, LP v. Commissioner, 568 F.3d 767 (9th Cir. 2009) (Colony not limited to trade or business context; governs § 6501(e)(1)(A) interpretation)
- Salman Ranch Ltd. v. United States, 573 F.3d 1362 (Fed. Cir. 2009) (Colony interpretation extended beyond trade context)
- Beard v. Commissioner, 633 F.3d 616 (7th Cir. 2011) (colony interpretation; controversy over Chevron status)
- Grapevine Imps., Ltd. v. United States, 636 F.3d 1368 (Fed. Cir. 2011) (upholds Chevron deference to final regulations; discusses Colony status)
- Home Concrete & Supply, LLC v. United States, 634 F.3d 249 (4th Cir. 2011) (rules on Chevron deference after Mayo; impacts final regs)
- Intermountain Ins. Serv. of Vail, LLC v. Commissioner, 134 T.C. 211 (Tax Ct. 2010) (invalidated temporary regulations treating 6-year period as applicable; precedential to this case)
- Mayo Foundation v. United States, 131 S. Ct. 704 (Supreme Court, 2011) (affirms Chevron deference for Treasury regs; limits legislative-history use at step one)
- SEC v. Chenery Corp., 332 U.S. 194 (Supreme Court, 1947) (Chenery doctrine; agency grounds must be clear)
- Brand X Internet Servs. v. Natl. Cable & Telecomm. Assn., 545 U.S. 967 (Supreme Court, 2005) (agency interpretations trump prior court rulings only if statute ambiguous)
- Romine v. Commissioner, 25 T.C. 859 (Tax Ct. 1956) (consent extensions; burden-shifting)
- Seltzer v. Commissioner, 21 T.C. 398 (Tax Ct. 1953) (consent extensions)