2000 Tax Ct. Memo LEXIS 320 | Tax Ct. | 2000
An appropriate order will be issued.
Five of the seven petitioners in these seven consolidated
cases have raised the affirmative defense of statute of
limitations. Those five petitioners argue that the notices of
final partnership administrative adjustment in question were not
timely because they were issued after expiration of the sec.
HELD: In all five cases, either a valid Form 872-P,
Consent to Extend the Time to Assess Tax Attributable to Items
of a Partnership, was signed by the tax matters partner or
another person authorized in writing by the partnership to enter
into such an agreement, or no valid partnership return was filed
that would fix the time to assess tax under
This report concerns the affirmative2000 Tax Ct. Memo LEXIS 320">*321 defense of statute of limitations raised by five of the petitioners in these seven consolidated cases. 2 Those five petitioners and respondent have agreed that, at this time, respondent will not claim fraud in response to such affirmative defense but may, at some later time, make such response. No additional response by respondent will be necessary, however, since, on the grounds before us, we do not sustain any affirmative defense of statute of limitations.
The partnerships raising the affirmative defense of statute2000 Tax Ct. Memo LEXIS 320">*322 of limitations are Agri-Venture Associates (AVA), Agri- Venture Fund (AVF), Houston Farm Associates II (HFA-II), Dixie Venture-1985 (DV-85), and Texas Farm Venturers (TFV). The issues we must address are whether (1) for 1984, with respect to AVA and TFV, and for 1985, with respect to HFA-II, a valid partnership return was filed, which would fix the period provided for in
For convenience and clarity, we set forth separately our2000 Tax Ct. Memo LEXIS 320">*323 findings of fact and opinion with respect to each of the five partnerships (sometimes, collectively, the partnerships). We precede that discussion, however, with a discussion of certain provisions of law applicable generally with respect to the partnerships.
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
II. GENERALLY APPLICABLE PROVISIONS OF LAW
A. PERIOD OF LIMITATIONS APPLICABLE TO ASSESSMENT OF PARTNERSHIP
ITEMS
These consolidated cases arise in connection with respondent's determination of certain partnership items. See secs. 6221, 6226(a) and (b).
B. AFFIRMATIVE DEFENSE; BURDEN OF PROOF; IMPORTANCE OF CONTRACT
PRINCIPLES
In
The expiration of the period of limitation on assessment is
an affirmative defense, and the party raising it must
specifically plead it and carry the burden of proving its
applicability. Rules 39, 142(a). To establish this defense, the
taxpayer must make a prima facie case establishing the filing of
the partnership return, the expiration of the statutory period,
and receipt or mailing of the notice after the running of the
period. Miami Purchasing Service Corp. v. Commissioner, 76 T.C.
818, 823 (1981);
(1972). Where the party pleading the defense makes such a
showing, the burden of going forward with the evidence shifts to
respondent who must then introduce2000 Tax Ct. Memo LEXIS 320">*326 evidence to show that the bar
of the statute is not applicable. Adler v. Commissioner, 85 T.C.
535, 540 (1985). Where respondent makes such a showing, the
burden of going forward then shifts back to the party pleading
the affirmative defense to show that the alleged exception to
the expiration of the period is invalid or otherwise
inapplicable. Adler v. Commissioner, supra at 540. The burden of
proof, i.e., the burden of ultimate persuasion, however, never
shifts from the party who pleads the bar of the statute of
limitations. Adler v. Commissioner, supra at 540.
An agreement to extend the period of limitation for
assessment and collection is not a contract but rather a waiver
of a defense.
F.2d 275 (5th Cir. 1985). In determining the validity of such a
waiver, however, contract principles are important, because
objective manifestations of mutual assent to determine the terms
of such an agreement. See
639 (1989);
1. FORMATION OF AVA; CERTIFICATE OF LIMITED PARTNERSHIP
AVA (sometimes, the partnership) is a limited partnership formed pursuant to the California Revised Limited Partnership Act (sometimes, CRLPA),
On July 1, 1984, a certificate of limited partnership for the partnership (the AVA certificate) was filed with the secretary of state of the State of California (California Secretary of State). The2000 Tax Ct. Memo LEXIS 320">*328 AVA certificate states that it is presented for filing pursuant to
2. AGREEMENT OF LIMITED PARTNERSHIP
Also on July 1, 1984, the initial general partners and certain others entered into an agreement of limited partnership with respect to the partnership (the AVA limited partnership agreement or the agreement). Among other things, the agreement establishes the authority and duties of the general partners and restricts the rights of the limited partners. In part, the agreement provides:
1. "DEFINITIONS"
* * * * * * *
1.6 "Managing Agent" means American Agri-Corp, or its
designated successor as provided for in this Agreement.
* * * * * * *
9.4 "ROLE OF LIMITED PARTNERS." Except as otherwise provided in
this Agreement, a Limited Partner shall not take part in or
interfere in any manner with the conduct or control of the
business of2000 Tax Ct. Memo LEXIS 320">*329 the Partnership and shall have no right or authority
to act for or bind the Partnership. * * *
* * * * * * *
11. "RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNERS"
11.1 "MANAGEMENT AND CONTROL OF THE PARTNERSHIP."
11.1.a Subject to the consent of the Limited Partners where
required by this Agreement, the General Partners, with the
authority granted under this Agreement, shall have the
exclusive right to manage the business of the Partnership
and are hereby authorized to take any action of any kind
and to do anything and everything they deem necessary in
accordance with the provisions of this Agreement. In
decisions by the General Partners, vote by a majority of
them shall be determinative.
11.1.b Except as expressly provided herein, the authority
of the General Partners to manage the business of the
Partnership shall be exercised only by the General
Partners.
11.1.c2000 Tax Ct. Memo LEXIS 320">*330 No Limited Partner (except one who may also be a
General Partner, and then only in his capacity as General
Partner is within the scope of his authority hereunder)
shall participate in or have any control over the
Partnership business or shall have any authority or right
to act for or bind the Partnership. * * *
* * * * * * *
11.1.e The General Partners shall have the right and
authority, without the requirement of obtaining the
approval or consent of the Limited Partners, to admit an
additional Co-General Partner to the Partnership, providing
the existing General Partners remain the Managing General
Partners and do not relinquish any of their duties,
responsibilities, obligations or liabilities incurred in
connection with this Agreement.
11.2 "AUTHORITY OF THE GENERAL PARTNERS."
11.2.a Except to the extent otherwise provided herein, the
General Partners (or their designated2000 Tax Ct. Memo LEXIS 320">*331 agent) for, and in
the name and on behalf of the Partnership, are hereby
authorized:
* * * * * * *
(11) to engage in any kind of activity and to perform and
carry out contracts of any kind necessary to, or in
connection with, or incidental to the accomplishment of the
purposes of the Partnership, as may be lawfully carried on
or performed by a partnership under the laws of each state
in which the partnership is then formed or qualified.
* * * * * * *
11.2.b. Every instrument purporting to be the action of the
Partnership and duly authorized and executed by the General
Partners shall be conclusive evidence in favor of every
person relying thereon or claiming thereunder that at the
time of delivery thereof, this Agreement was in full force
and effect and that the execution and delivery of such
instrument was duly authorized by the Partners2000 Tax Ct. Memo LEXIS 320">*332 and the
Partnership. * * *
* * * * * * *
22. "AMENDMENTS"
22.1 "ADDITIONAL PARTNERS." Each Limited Partner, additional
Limited Partner, General Partner or subsequent General Partner
shall become a signatory hereof by signing such number of
counterpart signature pages to this Agreement and such other
instrument or instruments, and in such manner, as the General
Partners shall determine. By so signing, each shall be
considered to have adopted, and to have agreed to be bound by
all the provisions of this Agreement, as amended from time to
time in accordance with the provisions of this Agreement,
provided that no such counterpart shall be binding until it
shall have been accepted by the General Partners pursuant to the
provisions of this Agreement.
* * * * * * *
22.4 "EXECUTION OF AMENDMENTS." If this Agreement shall be
amended to reflect the designation of a new General Partner and
the continuation of the business of the Partnership,2000 Tax Ct. Memo LEXIS 320">*333 such
amendment shall be signed by such new General Partner.
22.5 "FILING AND RECORDING OF AMENDMENTS." In making any
amendments, there shall be prepared and filed and recorded by
the General Partners such documents and certificates as shall be
required to be prepared and filed pursuant to the * * * [CRLPA]
* * *
* * * * * * *
26. "MISCELLANEOUS"
* * * * * * *
26.6 "TAX MATTERS PARTNER." The General Partners shall
designate one of them to be the Tax Matters Partner, and he
shall possess the administrative powers and responsibilities
required by the Tax Equity and Fiscal Responsibility Act of
1982.
With respect to the duties of the Managing Agent (managing agent), the agreement provides, among other things, that the managing agent shall manage all of the day-to-day activities of the partnership and "will perform the financial and tax planning duties for the Partnership as well as oversee the Partnership's operational and tax reporting procedures." The managing agent's2000 Tax Ct. Memo LEXIS 320">*334 duties are further specified in a management agreement between American Agri- Corp and the partnership that authorizes the former "to furnish such financing and tax planning services as per the General Partners request."
3. AMCOR; AGREEMENT TO MAKE AMCOR CO-GENERAL PARTNER;
AMENDMENT OF AVA CERTIFICATE
Amcor Capital, Inc., formerly American Agri-Corp (hereafter, without distinction, AMCOR), was organized in 1981 by Messrs. Behrens, Schreiber, and Wright. 5
Following are pertinent portions of a document (the AMCOR purchase document) dealing with the purchase of general partnership interests in certain partnerships (including AVA):
AMERICAN AGRI-CORP
December 12, 1985
Mr. Fred H. Behrens
Mr. George L. Schreiber
Mr. Robert A. Wright
AMERICAN AGRI-CORP
5000 Birch Street
East Tower, Suite 610
Newport Beach, CA 92660
SUBJECT: 2000 Tax Ct. Memo LEXIS 320">*335 PURCHASES OF A GENERAL PARTNERSHIP IN CERTAIN
PARTNERSHIPS
Gentlemen:
You are Co-General Partners of the following California
limited partnerships:
* * * [There follows a list of 13 partnerships,
including, AVA.]
It is understood that the three of you, as individuals,
collectively own a 1 percent interest in each of these
partnerships. American Agri-Corp is desirous of purchasing 50
percent of your collective position so that it would hold a
American Agri-Corp agrees to buy, and you agree to sell, a one-
half percent interest in the above general partnerships for a
total consideration of $ 375,000 or $ 125,000 to each of you. It
is understood that American Agri-Corp assumes all the rights,
duties, and obligations of a 50 percent Co-General Partner in
the above named partnerships.
Sincerely, UNDERSTOOD AND AGREED TO:
American Agri-Corp By:
s s/
Fred H. Behrens Fred2000 Tax Ct. Memo LEXIS 320">*336 H. Behrens
Chairman
s s/
George L. Schreiber George L. Schreiber
Vice Chairman
s s/
Robert A. Wright Robert A. Wright
Senior Vice President
On December 23, 1985, an amendment to the AVA certificate, adding AMCOR as a general partner, was filed with the California Secretary of State.
4. PARTNERSHIP RETURNS
For tax purposes, the partnership makes its return on the basis of a calendar year. For 1984 and 1985, the partnership prepared Forms 1065, U.S. Partnership Return of Income (Forms 1065, and the AVA 1984 and 1985 Forms 1065, respectively). Respondent received the AVA 1984 and 1985 Forms 1065 at his Fresno, California, service center on March 27, 1985, and April 14, 1986, respectively. Each of such returns shows the partnership's address as: C/O AMCOR, "5000 BIRCH ST., STE 610, EAST TOWER, NEWPORT BEACH, CA 92660". The AVA 1984 Form 1065 is signed "Joseph O. Voyer Treasurer". It shows the date of that signature as February 1, 1985. It does not state the organization, if any, of which Joseph O. 2000 Tax Ct. Memo LEXIS 320">*337 Voyer was treasurer. The partnership never had a treasurer; Mr. Voyer was never a partner in the partnership. Mr. Voyer was an officer and employee of AMCOR.
Neither the AVA 1984 or 1985 Forms 1065 designates any partner as the TMP of the partnership.
5. DESIGNATION OF TMP
In 1988, Deborah R. Gaither, a revenue agent employed by respondent, was conducting an examination of various AMCOR sponsored partnerships. In September 1988, Ms. Gaither prepared a letter for signature by Messrs. Behrens and Schreiber, which she carried to Messrs. Behrens and Schreiber, who signed the letter on September 30, 1988 (the September 30 letter), and immediately returned it to her. Pertinent portions of the September 30 letter follow:
Sept. 30, 1988
Internal Revenue Service
24000 Avila Road
Laguna Niguel, California 92677
RE: TAX MATTERS PARTNER
Gentlemen:
As referenced in the Limited Partnership Agreement, the General
Partners have designated the following to be the Tax Matters
Partner for the 1985 tax year and until Partnership termination:
George L. Schreiber
5000 Birch Street, 2000 Tax Ct. Memo LEXIS 320">*338 Suite 610
Newport Beach, California 92660
SSN 556-42-XXXX
The above designation is for the following partnerships:
* * * [There follows a list of 25 partnerships, including:
"Agri-Venture Associates 33-0044218".]
Sincerely,
s s/
Fred H. Behrens, Chairman George L. Schreiber
American Agri-Corp General Partner
s/
George L. Schreiber, Vice President
American Agri-Corp
The September 30 letter is stamped "Received, Oct. 4, 1988, Laguna Niguel District".
6. CONSENT TO EXTEND THE TIME TO ASSESS TAX
Following are pertinent portions of a Form 872-P (AVA Form 872-P for 1985), executed by George L. Schreiber, "Tax Matters Partner", on September 30, 1988, and by a representative of respondent's on October 4, 1988:
AGRI-VENTURE ASSOCIATES, partnership, of 5000 BIRCH STREET,
SUITE 610, NEWPORT BEACH, CA 92660, and the District Director of
Internal Revenue * * * consent and agree as follows:
(1) The amount(s) of any Federal income2000 Tax Ct. Memo LEXIS 320">*339 tax with respect to
any person on any partnership item(s) for the above partnership
for the period(s) ended December 31, 1985 may be assessed at any
time on or before April 30, 1991. If a notice of Final
Partnership Administrative Adjustment is sent to the
partnership, the time for assessing the tax for the period(s)
stated in the notice of Final Partnership Administrative
Adjustment will not end until 1 (one) year after the date on
which the determination of partnership items becomes final.
The AVA Form 872-P for 1985 shows AVA's taxpayer identification number as 33-0044218.
7. AVA FPAA
On April 10, 1991, respondent issued an FPAA to the partnership, addressed to "Tax Matters Partner" (the AVA FPAA), for its 1984 and 1985 taxable years.
1. 1984 TAXABLE YEAR
a. INTRODUCTION
Respondent issued the AVA FPAA to the partnership on April 10, 1991. Since such date is more than 3 years after the last day for filing the AVA 1984 Form 1065, see section 6072(a), we must determine whether that date is also more than 3 years after a valid AVA 1984 Form 1065 was received by respondent. See
b. REQUIREMENT THAT PARTNERSHIP MAKE A RETURN SIGNED
BY A PARTNER
In pertinent part, 2000 Tax Ct. Memo LEXIS 320">*341
The AVA 1984 Form 1065 was signed by Joseph O. Voyer, "Treasurer". The parties have stipulated that Mr. Voyer, as Treasurer of AMCOR, was a corporate officer with authority under the regulations to execute returns and other statements on behalf of AMCOR. The parties have further stipulated that, if AMCOR is determined to have been a general partner in the partnership for Federal income tax purposes when the AVA 1984 Form 1065 was signed by Mr. Voyer, on February 1, 1985, then such return is valid. We must, thus, determine whether AMCOR was a partner in the partnership on February 1, 1985.
c. CALIFORNIA REVISED LIMITED PARTNERSHIP ACT; AVA
LIMITED PARTNERSHIP AGREEMENT
CRLPA
Unless otherwise provided in the partnership agreement,
after the filing of a certificate referred to in
a general partner may be admitted only (a) with the written
consent of each2000 Tax Ct. Memo LEXIS 320">*342 general partner and such affirmative vote of
limited partners as is required in accordance with the
provisions of subdivision (f) of Section 15636 and the last
paragraph of Section 15636 or (b) with the written consent of
each partner in accordance with the provisions of subdivision
(c) of Section 15681.
As set forth supra in section III.A.2, section 11.1.e of the AVA limited partnership agreement accorded to the general partners the "right and authority, without the requirement of obtaining the approval or consent of the Limited Partners, to admit an additional Co-General Partner to the Partnership". The agreement, therefore, provided an alternative to the otherwise mandatory provisions of CRLPA
D. AMCOR WAS NOT A GENERAL PARTNER IN THE PARTNERSHIP
ON FEBRUARY 1, 1985
Notwithstanding that the initial general partners had the authority to admit2000 Tax Ct. Memo LEXIS 320">*343 AMCOR to the partnership as a general partner, the question remains whether they exercised that authority on or before February 1, 1985. On the record before us, we are not persuaded that they did.
Mr. Wright testified that, "with respect to the 1985 year", it was the design of the initial general partners to each sell one-half of his interest in the partnership to AMCOR. Mr. Wright further testified that, although the initial partners intended such sale to be effective January 1, 1985, documentation of such sale was not prepared until some time during 1985: "We didn't make a big deal as to when it was done. It was just something that we contemplated." Mr. Wright also testified that the partnership reported for tax purposes that AMCOR was a partner for the whole of the year.
The AMCOR purchase document evidences the agreement of the initial general partners to sell, and AMCOR to buy, a one-half percent interest in AVA and 12 other limited partnerships for a purchase price of $ 375,000, of which one-third was to be paid by AMCOR to each initial general partner. The AMCOR purchase agreement is dated December 12, 1985, and it is not retrospective in its discussion of such sale: It states2000 Tax Ct. Memo LEXIS 320">*344 that the initial general partners "own" a 1-percent interest in the partnership and AMCOR "is desirous" of purchasing one-half of that interest. Because of the substantial purchase price to be paid to each initial general partner, we think it a fair inference that the initial general partners would take no actions to admit AMCOR to the partnership as a co-general partner until they had received payment. Payments totaling $ 375,000 would be documented by checks, receipts, evidence of withdrawals or deposits, or the like, which could establish the fact of such payments on or before February 1, 1985. AVA's failure to produce such evidence leads to the inference that either such evidence does not exist or would be negative to petitioner. See
We find some additional support for that conclusion in the AVA limited partnership agreement, which, although it is silent on how the initial general partners are to exercise their authority to admit a person as a co-general partner, specifically addresses how additional partners are to become signatories to the agreement. Section 22.1 of the agreement, see supra section III.A.2, requires a prospective partner to execute the agreement "and such other instrument or instruments * * * as the General Partners shall determine" in order to become a signatory to the agreement. Moreover, the second sentence of section 22.1 states: "By so signing, each [new partner] shall be considered to have adopted, and to have agreed to be bound by all the provisions of this Agreement". See also section 22.4 of the agreement (amendment of agreement to reflect designation of a new general partner shall be signed by such new general partner). AVA has failed to show that an officer of AMCOR executed the agreement2000 Tax Ct. Memo LEXIS 320">*346 or any other required instrument on or before February 1, 1985. While we do not conclude that such executions are a precondition to a person's being admitted as a partner, we think that the absence of such executions supports our conclusion that AMCOR was not admitted as a partner on or before February 1, 1985.
For the reasons stated, AVA has failed to prove that AMCOR was admitted to the partnership as a general partner on or before February 1, 1985. The fact that the partnership may have filed its tax return for 1985 consistent with AMCOR's being a partner for the whole year is not determinative; we assume that the return was prepared after the close of 1985.
e. AVA's OTHER ARGUMENTS
(1) STIPULATION
AVA argues that, by way of stipulation, respondent has admitted that AMCOR was a general partner in the partnership throughout 1985. AVA relies on a stipulation of facts filed January 14, 1992, in furtherance of a motion for summary judgment made in a prior consolidation of certain AMCOR test cases. The following language is contained in that stipulation of facts:
Fred Behrens, George Schreiber, and Robert Wright remained as
general partners in the partnerships2000 Tax Ct. Memo LEXIS 320">*347 [including AVA] * * *
throughout 1985. American Agri-Corp. was also a general partner
throughout 1985. As stated in the Preamble of this Stipulation,
THIS FACT IS STIPULATED TO ONLY FOR PURPOSES OF DISPOSITION OF
RESPONDENT'S MOTION FOR PARTIAL SUMMARY JUDGMENT in the above-
referenced cases. [Emphasis added.]
A stipulation is in the nature of a contract and will bind parties only to the terms actually agreed upon. See
(2) AGENCY
AVA argues that, even if AMCOR was not a partner in the partnership on February 1, 1985, AMCOR, as managing agent, had the authority from AVA to execute the AVA 1984 Form 1065.
The evidence establishes that AMCOR had a certain limited authority to act for the partnership, e.g., management of all "day to day activities", and was to "oversee the Partnership's operational and tax reporting procedures." Supra sec. III.A.2. Respondent is correct that AVA has failed to prove AMCOR's authority to file tax returns on behalf of the partnership. Moreover, we agree with respondent that
SIGNING TAX RETURNS. The filing of a power of attorney does not
authorize the recognized representative to sign a tax return on
behalf of the taxpayer unless such act is both --
(i) permitted under the Internal Revenue Code and
regulations thereunder (e.g., the authority to sign income
tax returns is governed by the provisions of '1.6012-
2000 Tax Ct. Memo LEXIS 320">*349 1(a)(5) of the Income Tax Regulations); and
(ii) specifically authorized in the power of attorney.
AVA does not claim that any power of attorney was filed with respondent. Nevertheless, we find the regulation instructive as to the circumstances under which an agent may make a return for a taxpayer. Even were we to accept, arguendo, that
(3) MISCELLANEOUS
AVA also argues that (1) there was only a technical flaw in the AVA 1984 Form 1065, (2) since the partners of AVA relied on the AVA 1984 Form 1065, they ratified it, and (3) respondent accepted the return, and, therefore, it was effective to start the running of the period of limitations. None of those arguments are persuasive.
f. CONCLUSION
We find that the AVA 1984 Form 1065 was not signed by any partner, and, consequently, it was not a valid partnership return. See
2. 1985 TAXABLE YEAR
a. INTRODUCTION
The partnership timely filed the AVA 1985 Form 1065 on April 14, 1986, and, unless the 3-year period was extended, the AVA FPAA, issued on April 10, 1991, was issued after the expiration of the 3-year period. Respondent relies on the AVA Form 872-P for 1985 to show such extension. AVA argues that the AVA Form 872-P for 1985 is invalid, primarily because (AVA argues) George L. Schreiber was not the TMP of the partnership at the time he executed that document. Whether Mr. Schreiber was then a TMP of the partnership turns on whether the September 30 letter, purporting to designate him the TMP of the partnership, is valid. AVA argues that it is not. We believe that the September 30 letter is valid and so find.
b. CODE AND REGULATIONS
As stated supra in section II.A.,
In pertinent part, the term "tax matters partner" is defined in section 6231(a)(7)(A) as "the general partner2000 Tax Ct. Memo LEXIS 320">*352 designated as the tax matters partner as provided in regulations".
In pertinent part, section 301.6231(a)(7)-1T(a), Temporary Proced. & Admin. Regs.,
Section 301.6231(a)(7)-1T(b)(1), Temporary Proced. & Admin. Regs., supra, provides the following general requirement:
A person may be designated as the tax matters partners of a
partnership for a taxable year only if that person --
(i) Was a general partner in the partnership at some time
during the taxable year for which the designation is made, or
(ii) Is a general partner in the partnership as of the time
the designation is made.
Section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin. Regs., supra, provides:
DESIGNATION BY GENERAL PARTNERS WITH MAJORITY INTEREST. The
partnership may designate a tax matters partner for a
partnership taxable year at any time after the filing of a
partnership return for that taxable year by filing2000 Tax Ct. Memo LEXIS 320">*353 a statement
with the service center with which the partnership return was
filed. The statement shall --
(1) Identify the partnership and the designated partner by
name, address, and taxpayer identification number,
(2) Specify the partnership taxable year to which the
designation relates,
(3) Declare that it is a designation of a tax matters
partner for the taxable year specified, and
(4) Be signed by persons who were general partners at the
close of the year and were shown on the return for that year to
hold more than 50 percent of the aggregate interest in
partnership profits held by all general partners as of the close
of that taxable year. For purposes of this paragraph (e)(4), all
limited partnership interests held by general partners shall be
included in determining the aggregate interest in partnership
profits held by such general partners.
c. SEPTEMBER 30 LETTER DESIGNATES TMP
On September 30, 1988, George L. Schreiber was a general partner in the partnership; he was also a general partner during 1985. 2000 Tax Ct. Memo LEXIS 320">*354 By the September 30 letter, he is designated TMP of the partnership for 1985. On brief, AVA concedes that the September 30 letter was properly signed by Mr. Schreiber and AMCOR and, together, Mr. Schreiber and AMCOR represented 67 percent "of the general partner profits interests". Nevertheless, AVA argues that the September 30 letter was not effective to designate Mr. Schreiber the TMP of the partnership for 1985 because it fails to meet two of the requirements of section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin. Regs., supra: It does not identify the address of the partnership, and it was not filed with the Fresno, California, service center, where the AVA 1985 Form 1065 was filed.
Subparagraph (1) of section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin. Regs., id., requires that the designated partner and the partnership be identified by name, address, and taxpayer identification number. The September 30 letter designates George L. Schreiber, a general partner in the partnership, as the TMP of the partnership for 1985 and shows his address as "5000 Birch Street, Suite 610, Newport Beach, California 92660". The 1985 AVA Form 1065 shows the partnership's address as care2000 Tax Ct. Memo LEXIS 320">*355 of AMCOR, "5000 BIRCH ST., STE 610, EAST TOWER, NEWPORT BEACH CA 92660". AVA has failed to show that the partnership's address was any different on September 30, 1988, or that correspondence addressed to it care of George L. Schreiber, who also signed the September 30 letter as vice president of AMCOR, would not have reached the partnership. We find that the partnership was identified by address in the September 30 letter. Moreover, the September 30 letter was prepared by Deborah Gaither, a revenue agent employed by respondent who was examining various AMCOR-sponsored partnerships. The circumstances surrounding her preparation of that letter and its signature by Messrs. Behrens and Schreiber convince us that there could have been no confusion as to what partnerships were the subject of that letter and that any technical inadequacy in that regard is immaterial.
The first sentence of section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin. Regs., supra, specifies that the statement designating a TMP be filed with the service center with which the partnership return was filed. AVA argues that its failure to file the September 30 letter with the service center is fatal to its validity. 2000 Tax Ct. Memo LEXIS 320">*356 Respondent argues that, since the regulatory requirements in dispute are procedural and respondent was not prejudiced by the omissions, the Court may determine that the regulatory requirements have been fulfilled.
On numerous occasions we have discussed the necessity of literal compliance with the procedural requirements in Treasury regulations on making elections, such as "place of filing" requirements. See, e.g.,
The critical question to be answered is whether the requirements
relate to the substance or essence of the statute. If so, strict
adherence to all statutory and regulatory requirements is a
precondition to an effective election. On the other hand, if the
requirements are procedural or directory in that they are not
the essence of the thing to2000 Tax Ct. Memo LEXIS 320">*357 be done but are given with a view to
orderly conduct of business, they may be fulfilled by
substantial, if not strict, compliance. [Internal quotation
marks and citations omitted.]
We are not dealing here with an election, yet the situation is analogous, and the same considerations apply.
The service center filing specification is not required by the statutory provision providing for an extension by agreement of the 3-year period. See
d. TIMELINESS OF DESIGNATION
AVA argues that, even if the September 30 letter was effective to designate Mr. Schreiber as the TMP of the partnership, the September 30 letter was not filed by respondent before Mr. Schreiber signed the AVA Form 872-P for 1985, which was signed2000 Tax Ct. Memo LEXIS 320">*358 on September 30, 1988. It is true that the September 30 letter is stamped received, Laguna Niguel District, with a date of October 4, 1988. Nevertheless, we have found that the September 30 letter was received in hand by one of respondent's revenue agents on September 30, 1988, and such receipt substantially complied with section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin. Regs.,
e. AVA's OTHER ARGUMENTS
AVA argues, even if the AVA Form 872-P for 1985 was validly executed, Mr. Schreiber's consent to extend the
AVA has failed to prove that, on September 30, 1988, when Mr. Schreiber signed the AVA Form 872-P for 1985, he had a conflict of interest with the limited partners such that he was prevented from acting as a representative of those limited partners. Compare Transpac Drilling Venture 1983-12 v.
f. CONCLUSION
We find that George L. Schreiber was the TMP of the partnership on September 30, 1988, the day he executed the AVA Form 872-P for 1985. The AVA Form 872-P was, thus, effective to extend the 3-year period for all of the partners of the partnership for 1985. The AVA FPAA was timely issued before expiration of the
AVF, a calendar-year taxpayer, is a California limited partnership formed in 1985 pursuant to the CRLPA.
For 1985, AVF timely made a return of income (the AVF 1985 Form 1065) to respondent's Fresno, California, service center. The AVF 1985 Form 1065 shows AVF's address as: C/O2000 Tax Ct. Memo LEXIS 320">*362 AMCOR, "5000 BIRCH ST., STE 610 EAST TOWER, NEWPORT BEACH, CA 92660". The AVF 1985 Form 1065 does not designate any partner as the TMP of AVF.
On September 30, 1988, Messrs. Behrens and Schreiber signed a letter (the second September 30 letter) with respect to AVF that, in pertinent part, is identical to the September 30 letter. See supra sec. III.A.5. The second September 30 letter was properly signed by Messrs. Behrens and Schreiber, who, together, represented 67 percent of the general partner's profit interests. The circumstances surrounding Messrs. Behrens and Schreiber's signing the second September 30 letter are identical to the circumstances surrounding their signing the September 30 letter.
On September 30, 1988, Mr. Schreiber executed a Form 872-P with respect to AVF (the AVF Form 872-P for 1985) that, except for the identification thereon of AVF, is identical to the AVA Form 872-P for 1985. See supra sec. III.A.6. The AVF Form 872-P for 1985 was executed by a representative of respondent's on October 4, 1988.
On April 10, 1991, respondent issued an FPAA to AVF, addressed to "Tax Matters Partner" (the AVF FPAA), for its 1985 taxable year.
The issue here is2000 Tax Ct. Memo LEXIS 320">*363 the same as it is with respect to AVA for 1985, except that it is the validity of the second September 30 letter, and not the first, that is at issue. For the reasons set forth supra in section III.B.2, we find that the second September 30 letter is valid. Therefore, we find that George L. Schreiber was the TMP of AVF on September 30, 1988, the day he executed the AVF Form 872-P for 1985. The AVF Form 872-P for 1985 was, thus, effective to extend the 3-year period for all of the partners of the partnership for 1985. The AVF FPAA was timely issued.
DV-85 (sometimes, the partnership), a calendar-year taxpayer, is a California limited partnership formed in 1985 pursuant to the CRLPA.
On June 28, 1985, Messrs. Behrens, Schreiber, and Wright, as general partners, and certain others entered into an agreement of limited partnership with respect to the partnership (the DV-85 limited partnership agreement or the agreement). The agreement contains provisions substantially identical to the provisions of the AVA limited partnership agreement set forth supra in section III.A.2.
For 1985, the partnership timely made a return of income (the DV-85 1985 Form 1065). 2000 Tax Ct. Memo LEXIS 320">*364 The DV-85 1985 Form 1065 does not designate any partner as the TMP of DV-85.
Respondent received three letters with respect to the partnership, dated June 16, July 14, and September 30, 1988, respectively (the three letters). Each of the three letters states that, as referenced in the limited partnership agreement, the general partners have designated George L. Schreiber as TMP (the first two of the three letters say "until the Partnership termination", while the last says "for the 1985 tax year and until the Partnership termination"). The three letters are signed by Messrs. Behrens, Schreiber, and Wright in various capacities with respect to AMCOR or as a general partner of DV-85.
On June 17, 1988, Mr. Schreiber was a general partner of the partnership. On that date, he executed a Form 872-P with respect to the partnership (the DV-85 Form 872-P for 1985) that, except for the date and the identification thereon of DV-85, is identical to the AVA Form 872-P for 1985. The DV-85 Form 872-P for 1985 was executed by a representative of respondent's on June 23, 1988.
On April 10, 1991, respondent issued an FPAA to the partnership, addressed to "Tax Matters Partner" (the DV-85 FPAA), for2000 Tax Ct. Memo LEXIS 320">*365 its 1985 taxable year.
1. INTRODUCTION
The partnership timely filed the DV-85 1985 Form 1065, and, unless the 3-year period was extended, the DV-85 FPAA, issued on April 10, 1991, was issued after the expiration of the 3-year period. Respondent relies on the DV-85 Form 872-P for 1985 to show such extension. There are technical defects in each of the three letters, and respondent concedes that none of them complies with the requirements of section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin. Regs.,
2. RELEVANT LAW
As stated2000 Tax Ct. Memo LEXIS 320">*366 supra in section II.A,
Any partnership may authorize any person to extend the period
described in
filing a statement to that effect with the service center with
which the partnership return is filed. The statement shall --
(a) Provide that it is an authorization for a person other
than the tax matters partner to extend the assessment period
with respect to all partners,
(b) Identify the partnership and the person being
authorized by name, address, and taxpayer identification number,
(c) Specify the partnership taxable year or years for which
the authorization is effective, and
2000 Tax Ct. Memo LEXIS 320">*367 (d) Be signed by all persons who were general partners at
any time during the year or years for which the authorization is
effective.
Respondent concedes that DV-85 filed no statement complying with section 301.6229(b)-1T, Temporary Proced. & Admin. Regs., supra. Respondent argues that, nevertheless, Mr. Schreiber was authorized by DV-85 in writing to execute the DV-85 Form 872-P for 1985 and that such authorization satisfies
We may look to the DV-85 limited partnership agreement to determine whether Mr. Schreiber was authorized by the partnership in writing to enter into an agreement with respondent to extend the 3- year period; i.e., to execute the DV-85 Form 872-P for 1985. See
3. DISCUSSION
In Cambridge Research & Dev. Group, we found that language in the agreement2000 Tax Ct. Memo LEXIS 320">*369 of limited partnership there in question authorizing the general partners to "take any action or do anything in furtherance of the Partnership business" amounted to a grant of agency from the partners to the general partners sufficient for a general partner to enter into an agreement with the Secretary to extend the 3-year period. See
11.1 'MANAGEMENT AND CONTROL OF THE PARTNERSHIP"
11.1.a Subject to the consent of the Limited Partners where
required by this Agreement, the General Partners, with the
authority granted under this Agreement, shall have the exclusive
right to manage the business of the Partnership and are hereby
authorized to take any action of any kind and to do anything and
everything they deem necessary in accordance with the provisions
of this Agreement. In decisions by the General Partners, vote by
a majority of them shall be determinative.
* * * * * * *
11.2 "AUTHORITY OF THE GENERAL PARTNERS"
11.2.a Except to the extent otherwise2000 Tax Ct. Memo LEXIS 320">*370 provided herein, the
General Partners (or their designated agent) for, and in the
name and on behalf of the Partnership, are hereby authorized:
* * * * * * *
(11) to engage in any kind of activity and to perform and carry
out contracts of any kind necessary to, or in connection with,
or incidental to the accomplishment of the purposes of the
Partnership, as may be lawfully carried on or performed by a
partnership under the laws of each state in which the
partnership is then formed or qualified.
There are no pertinent restrictions on the authority of the general partners, and, thus, sections 11.1.a, 11.2.a, and (11) of the DV-85 agreement provide a grant of agency at least as broad as the grant made by the agreement in
DV-85 also makes the same arguments that we considered supra in section III.B.2.e., under the heading "AVA's Other Arguments". We reject those arguments with respect to DV-85 for the same reasons we rejected them with respect to AVA.
4. CONCLUSION
The DV-85 Form 872-P for 1985 was effective to extend the 3-year period for all of the partners of the partnership for 1985. The DV-85 FPAA was timely issued.
HFA-II (sometimes, the partnership), a calendar-year taxpayer, is a Texas limited partnership formed in 1985 pursuant to the Texas Uniform Limited Partnership Act (sometimes, TULPA),
2000 Tax Ct. Memo LEXIS 320">*373 On May 22, 1985, James D. Dannenbaum and Mr. Wright, as general partners, and certain others entered into an agreement of limited partnership with respect to the partnership (the HFA-II limited partnership agreement or the agreement). The agreement contains provisions substantially identical to the provisions of the AVA limited partnership agreement set forth supra in section III.A.2.
For 1985, the partnership prepared a Form 1065 (the HFA-II 1985 Form 1065), which was received by respondent on March 24, 1986. At the signature line on the HFA-II 1985 Form 1065 is what appears to be a stamped signature block reading as follows:
AMERICAN AGRICORP, Managing Agent
By ______________________________
The signature of George Schreiber, "Sr VP", appears on the line in that block. The HFA-II 1985 Form 1065 shows the date of Mr. Schreiber's signature as February 4, 1986. The HFA-II 1985 Form 1065 does not designate any partner as TMP.
During 1985, AMCOR was not, at any time, a partner of HFA- II. Mr. Schreiber was never either a general or limited partner of HFA-II.
On April 10, 1991, respondent issued an FPAA to the partnership,2000 Tax Ct. Memo LEXIS 320">*374 addressed to "Tax Matters Partner" (the HFA-II FPAA), for its 1985 taxable year.
1. INTRODUCTION
The issue here is similar to the issue presented with respect to AVA for 1984, see supra section III.B.1. viz, whether the HFA-II 1985 Form 1065 is invalid because not executed in conformance with the Internal Revenue Code. If invalid, then HFA-II's affirmative defense of statute of limitations fails because the 3-year period had not run at the time respondent issued the HFA-II FPAA. See
2. AMCOR WAS NOT A PARTNER
For the HFA-II 1985 Form 1065 to be a valid return, it must be signed by one of the partners of the partnership. See
If * * * [AMCOR] is determined to have been a general
partner for Federal income tax purposes when the * * * [HFA-II
1985 Form 1065] was executed then such return is adequate to
commence the running of the statute of limitations as of the
later of the due date of the return or the date it was actually
filed.
HFA-II has failed to propose a finding of fact that AMCOR was a partner of HFA-II by February 4, 1986, the date of2000 Tax Ct. Memo LEXIS 320">*375 Mr. Schreiber's signature appearing on the HFA-II 1985 Form 1065. The HFA-85 limited partnership agreement gives the general partners the authority to admit a co-general partner. HFA-II has failed to produce any evidence that such authority was exercised on or before February 4, 1986. As with AVA, see supra section III.B.1.d, HFA-II's failure to produce such evidence leads to the inference that either such evidence does not exist or would be negative to petitioner. See
3. AGENCY
Alternatively, HFA-II argues: "In addition, * * * [AMCOR] was managing agent of HFA. As managing agent, * * * [AMCOR] was granted the responsibility for conducting all of HFA's business and tax affairs, and was authorized to sign the 1985 Form 1065 in that capacity." We reject that argument with respect to the HFA-II for the same reasons we reject it with respect to AVA. See supra sec. III.B.1.e.(2).
4. AUTHORITY OF LIMITED PARTNER
As a second alternative, HFA-II2000 Tax Ct. Memo LEXIS 320">*376 argues: "The 1985 Form 1065 for HFA was executed by Schreiber, a general partner in AVF, which was a limited partner in HFA during 1985." Respondent concedes that AVF was a limited partner in HFA-II "for the 1985 year". HFA-II has failed to prove that Mr. Schreiber executed the HFA-II 1985 Form 1065 in any capacity other than as a vice-president of AMCOR. Even if we assume that he executed it as a limited partner of AVF, however, the HFA-II 1985 Form 1065 is still invalid.
5. CONCLUSION
We find that the HFA-II 1985 Form 1065 was not signed by any partner who had authority to sign it and, consequently, it was not a valid partnership return. The HFA-II FPAA was issued before expiration of the
1. FORMATION OF TFV
TFV (sometimes, the partnership) is a Texas limited partnership formed in 1984 pursuant to the TULPA.
2. AGREEMENT OF LIMITED PARTNERSHIP
On December 14, 1984, James2000 Tax Ct. Memo LEXIS 320">*378 D. Dannenbaum and Robert A. Wright, as general partners, and certain others entered into an agreement of limited partnership with respect to the partnership (the TFV limited partnership agreement or the agreement). The agreement contains provisions substantially identical to the provisions of the AVA limited partnership agreement set forth supra in section III.A.2.
3. AGREEMENT TO MAKE AMCOR CO-GENERAL PARTNER
Following are the pertinent portions of a document (the TFV purchase document) dealing with the purchase of a general partnership interest in the partnership:
AMERICAN AGRI-CORP
December 12, 1985
Mr. Robert A. Wright
Mr. James D. Dannenbaum [sic]
AMERICAN AGRI-CORP
5000 Birch Street
East Tower, Suite 610
Newport Beach, CA 92660
SUBJECT: PURCHASES OF A GENERAL PARTNERSHIP INTEREST IN TEXAS
FARM VENTURERS-84
Gentlemen:
You are Co-General Partners of Texas Farm Venturers-84, a Texas
limited partnership.
It is understood that the two of you, as individuals,
collectively own a 1 percent interest in this partnership.
2000 Tax Ct. Memo LEXIS 320">*379 American Agri-Corp is desirous of purchasing 50 percent of the
collective position of Robert A. Wright's General Partnership
interest in Texas Farm Venturers-84.
American Agri-Corp agrees to buy, and you agree to sell, a one-
quarter percent interest in the above general partnership
interest for consideration as agreed upon between the name
parties. It is understood that American Agri-Corp assumes all
the rights, duties, and obligations of a Co-General Partner in
the above named partnerships.
Sincerely, UNDERSTOOD AND AGREED TO:
American Agri-Corp By:
s s/
Fred H. Behrens Robert A. Wright
Chairman
s s/
George L. Schreiber James D. Dannenbaum
Vice Chairman
s/
Robert A. Wright
Senior Vice President
4. PARTNERSHIP RETURNS
For tax purposes, the partnership makes its return on the basis of a calendar year. For 1984 and 1985, the partnership prepared2000 Tax Ct. Memo LEXIS 320">*380 Forms 1065, U.S. Partnership Return of Income (the TFV 1984 and 1985 Forms 1065, respectively). Respondent received the TFV 1984 Form 1065 at his Fresno, California, service center on March 25, 1985, and the TFV 1985 Form 1065 at his Austin, Texas, service center on April 11, 1986. Each of such returns shows TFV's address as: C/O AMCOR, "5000 BIRCH ST., STE 610 EAST TOWER, NEWPORT BEACH, CA 92660". The TFV 1984 Form 1065 is signed "Joseph O. Voyer Treasurer". It shows the date of that signature as February 5, 1985. It does not state the organization, if any, of which Joseph O. Voyer was treasurer. TFV never had a treasurer; Mr. Voyer was never a partner of TFV. Mr. Voyer was an officer and employee of AMCOR.
The TFV 1985 Form 1065 does not designate any partner as the TMP of TFV.
5. DESIGNATION OF TMP
Respondent received two letters with respect to the partnership, dated June 16, and September 29, 1988, respectively (the June 16 and the September 29 letters, respectively). The June 16 letter states that, as referenced in the limited partnership agreement, the general partners have designated George L. Schreiber as TMP until the partnership termination. The June 16 letter is signed2000 Tax Ct. Memo LEXIS 320">*381 by Messrs. Behrens, Wright, and Schreiber, in various capacities with respect to AMCOR, in Mr. White's case, or as a general partner of TFV. The September 29 letter is similar, except that it designates Robert A. Wright as TMP for 1985 and until the partnership termination, and it is signed only by Robert A. Wright, "General Partner".
6. CONSENTS
On June 17, 1988, Mr. Schreiber executed a Form 872-P with respect to TFV (the June 17 TFV Form 872-P for 1985) that, except for the identification thereon of TFV, is identical to the AVA Form 872-P for 1985. The June 17, 1988, Form 872-P for 1985 was executed by a representative of respondent's on June 23, 1988. On September 29, 1988, Mr. Wright executed a second Form 872-P with respect to TFV (the September 29 TFV Form 872-P for 1985) that, except for the identification thereon of TFV, is identical to the AVA Form 872-P for 1985. The September 29, 1988, Form 872-P for 1985 was executed by a representative of respondent's on October 5, 1988.
7. TFV FPAA
On April 10, 1991, respondent issued an FPAA to TFV, addressed to "Tax Matters Partner" (the TFV FPAA), for its 1984 and 1985 taxable years.
1. 1984 TAXABLE YEAR
The issue2000 Tax Ct. Memo LEXIS 320">*382 here is the same as it is with respect to AVA for 1984. See supra sec. III.B.1.a. The parties have stipulated: On February 5, 1985, when Mr. Voyer signed the 1984 TFV Form 1065, he was an officer and employee of AMCOR; if AMCOR is determined to have been a general partner of TFV for Federal income tax purposes when the TFV 1984 Form 1065 was signed by Mr. Voyer, then such return is valid. We must, thus, determine whether AMCOR was a partner of TFV on February 5, 1985.
TFV makes essentially the same arguments made by AVA. It does not, however, argue that, by way of stipulation, respondent has admitted that AMCOR was a general partner in TFV throughout 1985. The relevant statutory provision is TULPA section 10(5), which, in pertinent part, provides: "[W]ithout the written consent or ratification of the specific act by all the limited partners, a general partner or all the general partners have no authority to: * * * Admit a person as a general partner."
We find that the TFV 1984 Form 1065 was not signed by any partner who had authority to sign it, and, consequently, it was not a valid partnership return. The TFV FPAA was issued before expiration of the
2. 1985 TAXABLE YEAR
The issue here is the same as it is with respect to DV-85 for 1985. See supra sec. V.B. The partnership timely filed the TFV 1985 Form 1065, and, unless the 3-year period was extended, the TFV FPAA, issued on April 10, 1991, was issued after the expiration of the 3-year period. Respondent relies on the September 29 TFV Form 872-P for 1985 to show such extension. There are technical defects in the June 16 and September 29 letters, and respondent concedes that neither of them complies with the2000 Tax Ct. Memo LEXIS 320">*384 requirements of section 301.6231(a)(7)-1T(e), Temporary Proced. & Admin. Regs.,
For the same reasons set forth supra in section V.B.3., we find that the September 29 TFV Form 872-P for 1985 was effective to extend the 3-year period for 1985. The TFV FPAA was timely issued.
None of the partnerships has sustained the affirmative defense of statute of limitations; the FPAA's issued to AVA and TFV for the 1984 and 1985 taxable years are valid. The FPAA's issued to AVF, DV-85, and HFA-II for the 1985 taxable year are valid.
In the partnerships' reply brief, they state that respondent's opening brief identifies William K. Shipley as Acting Regional Counsel and2000 Tax Ct. Memo LEXIS 320">*385 Mr. Shipley was a witness in this case. The partnerships claim: "Any direct involvement by Mr. Shipley in a case in which he testified would be inappropriate and unethical." Mr. Shipley is not among the counsel of record for respondent, nor have the partnerships shown his direct involvement in this case. The partnerships have made no claim that requires any action of us. See Rule 24(g).
An appropriate order will be issued.
Footnotes
2. Frederick H. Behrens, Tax Matters Partner, is petitioner in three of those five cases, and Robert A. Wright, Tax Matters Partner, is petitioner in the other two. To avoid confusion in the discussion that follows, we will use the name of the partnership, rather than the name of the tax matters partner, to refer to the petitioner in each case: For instance, we will refer to the petitioner in Agri- Ventures Associates, Frederick H. Behrens, Tax Matters Partner, as Agri-Ventures Associates (AVA).↩
3. For HFA-II, the issues are in the alternative because, if we find that no valid partnership return was filed for 1985, which, if filed, would have fixed the period for assessing any tax, we need not address whether there was a valid consent to extend such period.↩
4. That is also true with respect to the petitions filed by AVF, DV-85, HFA-II, and TFV, and we so find.↩
5. This finding is applicable to all the partnerships.↩
6. There is a conflict between Stipulation of Facts E-1, which recites that HFA-II was organized under the laws of California, and the HFA-II agreement of limited partnership, which recites that the partnership was formed under the laws of Texas. We may disregard a stipulation where it is clearly contrary to the evidence in the record, and we do so here. See
Jasionowski v. Commissioner, 66 T.C. 312">66 T.C. 312 , 318↩ (1976).7. We need not reach the broader issue anticipated by HFA-II, whether a partnership return that is signed by a limited partner can ever be properly executed under
sec. 6063↩ , since the limited partner in this case lacked authority to execute the HFA-II 1985 Form 1065.8. TFV has not produced any agreement by which AMCOR was engaged as managing partner of the partnership.↩
