1993 Tax Ct. Memo LEXIS 374 | Tax Ct. | 1993
1993 Tax Ct. Memo LEXIS 374">*374 P and H jointly owned an interest in a partnership. P and H signed a Form 870-L(AD), offering to settle partnership and affected items with R. Prior to R's signing the Form 870-L(AD), H filed a bankruptcy petition. P and H later signed a Form 870, consenting to the immediate assessment and collection of tax. R then assessed against P. R subsequently issued a deficiency notice to P and H for the tax previously assessed. R moves to dismiss for lack of jurisdiction on the ground that, due to the prior assessment, there was no deficiency determination and the deficiency notice therefore was invalid. See
1.
1993 Tax Ct. Memo LEXIS 374">*375 2.
MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN,
The sole issue raised by the parties is whether we should grant respondent's motion to dismiss, on the ground that the prior assessment of those amounts rendered the deficiency notice 1993 Tax Ct. Memo LEXIS 374">*376 invalid.
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the taxable years at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts filed by the parties and attached exhibits are incorporated herein by this reference. Petitioner resided in Texas at the time the petition herein was filed.
Petitioner and her husband were married and lived in the State of Texas, at all times during the years at issue. Texas is a community property State. On December 22, 1983, petitioner's husband acquired an interest in a partnership, "Startrac Partnership" (Startrac). Petitioner and her husband filed joint Federal income tax returns for the years at issue, in which they claimed losses from Startrac. Following an examination of Startrac's returns for 1983 and 1984, respondent determined adjustments to those returns and, on March 23, 1987, sent to the tax matters partner of Startrac a notice of final partnership administrative adjustment (FPAA), disallowing certain losses and determining additions to tax, under sections1993 Tax Ct. Memo LEXIS 374">*377 6653(a)(1) and (2), 6659, and 6661, and determining increased interest under section 6621. 1 On June 1, 1987, the tax matters partner of Startrac timely filed its petition for readjustment of partnership items in this Court (docket No. 16561-87). As of the date this opinion was filed, that litigation has not been completed.
On June 21, 1991, and June 29, 1991, petitioner and her husband (respectively) signed a Form 870-L(AD), "Settlement Agreement for Partnership Adjustments and Affected Items" (settlement agreement), offering a settlement to respondent whereby they agreed to the adjustments to partnership items determined by respondent in the FPAA and to the individual partner additions to tax under section 6661 and to the increased interest under section 6621, but not to the other additions to tax. Petitioner and her husband also offered1993 Tax Ct. Memo LEXIS 374">*378 (1) to waive the restrictions on assessment of any deficiency attributable to partnership items, provided in If an offer is executed for a tax year in which a JOINT RETURN OF A HUSBAND AND WIFE was filed, it must be signed by both spouses, unless one spouse, acting under a power of attorney, signs as agent for the other.
On February 24, 1992, respondent assessed the 1983 tax (plus interest), the 1984 tax, and the additional interest under section 6621 as to 1984 against petitioner. On April 6, 1992, respondent assessed the addition to tax under section 6661 and additional interest under 6621 as to 1983 against petitioner. On June 19, 1992, respondent sent a notice of deficiency to petitioner and her husband for the previously assessed 1983 and 1984 taxes (on the ground that Startrac's claimed losses were not allowable), and an addition to tax under section 6661 as to 1983. On September 18, 1992, petitioner timely filed a petition with this Court. On November 13, 1992, respondent timely filed an answer.
On April 5, 1993, respondent moved to dismiss this case for lack of jurisdiction, on the ground that the notice of deficiency was invalid. On April 19, 1993, petitioner opposed that motion. Oral argument was held on April 21, 1993, and a stipulation of facts was filed on April 28, 1993.
OPINION
I.
1993 Tax Ct. Memo LEXIS 374">*380 Respondent argues that, because the amounts determined in the deficiency notice previously were assessed, pursuant to petitioner's signing the settlement agreement, there was no deficiency determination and the deficiency notice therefore was invalid. See
Petitioner opposes respondent's motion, arguing that the assessment was invalid, there
II.
A.
On June 21 and 29, 1991, petitioner and her husband, 1993 Tax Ct. Memo LEXIS 374">*382 respectively, signed the Form 870-L(AD), offering to settle certain partnership items (and additions to tax) with respondent. That offer, of course, could not constitute an agreement until accepted by respondent. 3 Prior to respondent's accepting the offer, petitioner's husband filed a bankruptcy petition. The filing of that petition brought into play the automatic-stay provision of the Bankruptcy Code, which reads in part as follows:
(a) Except as provided in subsection (b) of this section, a petition filed under * * * (4) any act to create, perfect, or enforce any lien against property of the estate; (5) any act to create, perfect, or enforce against property1993 Tax Ct. Memo LEXIS 374">*383 of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title; (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
It seems apparent, and respondent does not appear to contest, that respondent's purported acceptance of the offer was an impermissible act (i) to create a lien against either petitioner's husband's property or that of the estate, or (ii) to collect, assess, or recover a claim against petitioner's husband.
B.
Notwithstanding petitioner's protestations to the contrary, we see no reason why the automatic stay would preclude respondent from reaching an agreement with petitioner, who had not filed for bankruptcy. From our vantage point, the critical inquiry is whether,
The following instruction appears on Form 870-L(AD): If an offer is executed for a tax year in which a JOINT RETURN OF A HUSBAND AND WIFE was filed,
1993 Tax Ct. Memo LEXIS 374">*386 Accordingly, the only offer made was to settle the liability of both petitioner and her husband. On account of the automatic stay, respondent's purported acceptance of that offer is void. See
III.
A.
The1993 Tax Ct. Memo LEXIS 374">*387 unified audit and litigation procedures applicable to partnership items are found in sections 6221-6233. Those procedures (the TEFRA procedures) were enacted as part of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec. 401(a), 96 Stat. 648. The TEFRA procedures provide a method for adjusting "partnership items" in a single, unified partnership proceeding, rather than in separate proceedings with each partner. Sec. 6621. Until such partnership-level proceeding is completed, respondent generally may not assess a deficiency attributable to a "partnership item" against any partner.
B.
A "partnership item" is any item required to be taken into account for the partnership's taxable year, to the extent the regulations provide that such item more appropriately is determined at the partnership level than at the partner level.
C.
Pursuant to (a) Bankruptcy. The treatment of items as
The one-person rule of (a) In general. For purposes of subchapter C of chapter 63 of the Code, spouses holding a joint interest in a partnership are treated as partners. Thus, both spouses are permitted to participate in administrative and judicial proceedings. * * *
Petitioner argues that
D.
Petitioner's share of Startrac's losses is a partnership item. Accordingly, respondent may not assess a deficiency attributable to such losses against petitioner prior to the completion of Startrac's partnership-level proceedings.
Footnotes
1. Startrac was a partnership subject to the rules of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec. 401(a), 96 Stat. 648. See secs. 6221-6233.↩
2. In order to determine a deficiency, respondent must determine that the tax due exceeds the (1) sum of (i) the amount shown as the tax by the taxpayer on her return, and (ii) the amounts previously assessed (or collected without assessment) as a deficiency, minus (2) the amount of rebates made.
Sec. 6211↩ . Respondent argues that, because the tax determined to be due previously was assessed, no deficiency was determined. Petitioner concedes that, if the entire tax due validly was assessed, the notice of deficiency was invalid, and respondent's motion should be granted.3. It is well established that general principles of contract law govern the compromise and settlement of tax cases. E.g.,
, 435-436↩ (1969).Robbins Tire & Rubber Co. v. Commissioner , 52 T.C. 420">52 T.C. 4204. Petitioner's husband had not yet filed his bankruptcy petition and his signature therefore was valid at that time.↩
5. Respondent has not argued that, even if the settlement agreement (Form 870-L(AD)) was invalid, the consent to assess (Form 870) is sufficient to render the purported assessment valid as to petitioner. We do not believe that the Form 870 renders the purported assessment valid in this case.↩
6. Curiously, although both parties have presented arguments as to whether petitioner's share of Startrac's losses is a partnership item, neither has argued that we ought to dismiss for lack of jurisdiction on that ground. Nevertheless, we raise the question on our own. Inasmuch as the parties have briefed the one issue critical to that determination, we will not request further assistance in connection therewith.↩
7. At this stage of our analysis, a holding that the bankruptcy regulation applies would compel the conclusion that respondent's deficiency notice is valid. Thus, it may seem strange that it is petitioner, rather than respondent, who argues the applicability of the regulation. As noted above, petitioner makes that argument in an attempt to prove the settlement agreement inapplicable, on the ground that the settlement agreement (even if valid) applies only to partnership items, and that her share of Startrac's losses, by virtue of the bankruptcy rule, is a nonpartnership item. Respondent, as noted, argues to the contrary.↩