Docket No. 3435-88 | Tax Ct. | Dec 28, 1989
1989 Tax Ct. Memo LEXIS 679">*679 Petitioners moved to dismiss for lack of jurisdiction on grounds that the notice of final partnership administrative adjustment was invalid because it was issued after expiration of the period of limitations.
MEMORANDUM FINDINGS OF FACT AND OPINION
WOLFE,
1989 Tax Ct. Memo LEXIS 679">*681 Some of the facts have been stipulated and are so found. The stipulation of facts and attached exhibits are incorporated herein by reference.
Cambridge Research and Development Group (Cambridge Research) was formed as a limited partnership in September, 1966. The two general partners from 1966 until 1984 were Lawrence M. Sherman and his twin brother Kenneth N. Sherman. The business of the partnership was developing and licensing the inventions of the general partners and those of other individuals or companies. Major industrial companies submitted inventions to Cambridge Research for development and licensing.
Lawrence and Kenneth Sherman were equally active in partnership affairs from 1966 through 1983. In 1984, Kenneth Sherman accepted a management position with a health facility organization on the west coast. On October 1, 1984, he resigned as general partner of Cambridge Research and converted his general partnership interest into a limited partnership interest.
Schedule K-1 of the partnership's 1983 tax return indicated that the brothers had equal interests in partnership profits at year end. The partnership reported income of $ 1,478,468 and expenses of $ 2,639,526, 1989 Tax Ct. Memo LEXIS 679">*682 for a net loss of $ 1,161,058. The return was signed by Lawrence Sherman and filed on April 18, 1984.
In March, 1985, respondent issued a report of examination changes with respect to the partnership's 1983 return. The report listed Lawrence and Kenneth Sherman as general partners with equal interests in the partnership. In January, 1986, Lawrence Sherman filed with the District Director a protest in which he disputed all examination changes and requested a conference with the Appeals Division. Lawrence Sherman signed the protest as Tax Matters Partner (TMP). The case then was assigned to Appeals Officer Stuart G. Rosen of the Hartford, Connecticut Appeals Office. In April, 1986, Lawrence Sherman executed Form 2848, Power of Attorney, authorizing Geoffrey O'Connor, counsel to the partnership, to represent the partnership before the IRS as to partnership tax matters for 1983.
In September, 1986, Appeals Officer Rosen sent Geoffrey O'Connor a consent to extend the time to assess tax attributable to items of a partnership (Form 872-O) for 1983. O'Connor sent the form to the partnership's house counsel, who in turn gave it to Lawrence Sherman with instructions to sign. The form1989 Tax Ct. Memo LEXIS 679">*683 provides a signature line for the TMP and instructs any signer who is not the TMP to sign instead on the next line as "authorized representative." Lawrence Sherman signed the consent as TMP and returned it to Appeals Officer Rosen, who executed it on behalf of respondent on September 18, 1986.
A notice of final partnership administrative adjustment (FPAA) was issued in January, 1988. Respondent determined an increase of $ 3,549,762 in ordinary income, a decrease of $ 622,914 in long term capital gains, and an increase of $ 1,884,462 in the partners' net earnings for 1983. Petitioner now contends that the FPAA is invalid because it was issued after the period of limitations had expired. According to petitioner, the consent to extend the period of limitations signed by Lawrence Sherman is ineffective because at the time he signed it he was neither the TMP for 1983 nor petitioner's authorized representative for 1983. 2 Petitioner contends that this Court has no jurisdiction to decide any adjustments to petitioner's tax liabilities determined in respondent's FPAA.
1989 Tax Ct. Memo LEXIS 679">*684 The prerequisites to this Court's jurisdiction are the issuance of a valid notice of deficiency and the timely filing of a petition.
Petitioner's assertion concerning the statute of limitations is a defense at bar and not a plea to the jurisdiction of this Court.
Petitioner received a valid FPAA as required by section 6223 and filed a timely petition as required by section 6226. Consequently this Court has jurisdiction to decide petitioner's claim.
In view of our holding that the statute of limitations argument here is a defense at bar and not a plea to the jurisdiction of this Court, we need not decide at this time whether the consent to extend the time to assess tax executed by Lawrence Sherman as TMP was effective to extend the time for respondent to issue an FPAA.
Petitioner's motion to dismiss for lack of jurisdiction is denied.
Footnotes
1. This case was assigned pursuant to sec. 7443A and Rule 180, et seq. All section references are to the Internal Revenue Code, as amended and in effect for the year in issue, unless otherwise indicated. All rule references are to the Tax Court Rules of Practice and Procedure.↩
2. Petitioner bases his conclusion on the definition of TMP in Section 6231(a)(7)(B) and accompanying regulations. This section provides that if no general partner is designated TMP, the general partner with the largest profits interest at the close of the taxable year involved is TMP; or if there is more than one such partner, the TMP is the general partner whose name is first alphabetically. Section 301.6231(a)(7)-1T, Temp. Proced. & Admin. Regs.,
52 Fed. Reg. 6793↩ (Mar. 5, 1989), provides rules for designating and terminating the designation of the TMP.