Petitioners-Appellants, who are limited partners of Madison Recycling Associates (“Madison”), a limited partnership organized under the laws of the State of New York, appeal from judgments of the Tax Court sustaining adjustments sought by the Commissioner of the Internal Revenue Service (the “Commissioner” or the “IRS”) to Madison’s 1982 partnership return and holding them liable for taxes. The principal issue on appeal is whether the Notice of Final Partnership Administrative Adjustment (the “FPAA”) was issued by the IRS within the period of limitations for assessing any income tax, for Madison’s 1982 taxable year, attributable to-any partnership item (or affected item).
BACKGROUND
Madison is a partnership subject to the provisions of the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), Pub.L. No. 97-248, § 402(a), 96 Stat. 324, 26 U.S.C. § 6221 et seq.
Madison’s Agreement of Limited Partnership, executed on September 20, 1982, named Richard Roberts (“Roberts”) as the general partner and tax matters partner (the “TMP”).
(a) to execute, acknowledge and deliver any and all instruments necessary, convenient or advisable to effectuate any and all of the foregoing, including, without limitation, equipment purchase agreements, leases, licenses, security agreements, management consulting agreements and other agreements between the Partnership and one or more third parties;
(e) to employ on behalf of the Partnership agents and independent contractors[,] including, without limitation, employees, accountants, lawyers and appraisers!;,] and to obtain such other assistance and services and to pay such remuneration therefor as the General Partner deems proper;
(j) to file all necessary income and other tax returns and reports required to be filed by the Partnership;
...; [and]
(n) to perform any other acts specifically authorized to the General Partner by any other provision of this Partnership Agreement. In addition, in furtherance of the foregoing, the General Partner shall possess all of the power and authority of a general partner in a partnership without limited partners as is provided under the laws of the State of New York....
Under the partnership agreement, the limited partners have no right or authority to bind or act for the partnership. Rather, upon admission to the partnership, each limited partner granted an irrevocable power of attorney to the general partner, giving Roberts the authority to make, execute, and file, inter alia, “[a]ny and all ... documents as may be deemed necessary or desirable by the General Partner to carry out fully the provisions of [the partnership agreement].”
B. Madison’s 1982 Partnership Tax Return and Related Tax Proceedings
Madison filed its 1982 Form 1065, U.S. Partnership Return of Income, with the Brookhaven Service Center in Holtsville, New York, on March 14, 1983. The return was prepared by H.W. Freedman & Co., Madison’s accountants, and signed by Roberts as Madison’s TMP and general partner. At that time, Harris W. Freedman (“Freedman”) and Shaye Jacobson (“Jacobson”) were partners in H.W. Freedman & Co.
In 1983, the IRS determined that Roberts had violated I.R.C. § 6700 by pro
The IRS began its examination of Madison’s 1982 tax filings in 1984. On April 2, 1984, Roberts executed a Form 2848, Power of Attorney and Declaration of Repre^ sentative, appointing Freedman and Jacobson as attorneys-in-fact to represent Madison before the IRS. Form 2848 stated that the tax matters of Madison for which the attorneys-in-fact were appointed were as follows:
Type of tax: Partnership
Federal tax form number: 1065 and all
related IRC matters
Year(s) or period(s): 1982-19844 -
Form 2848 also stated: “The attorney(s)in-faet (or either of them) are authorized, subject’to revocation,
Subsequently, Jacobson, as attorney-in-fact for Roberts, on two separate occasions signed a Form 872-P, Consent to Extend the Time to Assess Tax Attributable to Items of a Partnership. The first consent, dated November 5, 1985,
Sometime between August and October 1985, while the examination of Madison’s 1982 tax filings was ongoing, the IRS initiated a criminal tax investigation ■ of Roberts. The special agent assigned to conduct the criminal investigation did not contact Roberts, who was in France, during the investigation. On December 9, 1986, the investigation was discontinued without a recommendation that Roberts be prosecuted for any tax-related offenses.
On December 24, 1987, the IRS mailed the FPAA with respect to Madison’s 1982
Petitioners subsequently sought summary judgment on the ground that the statute of limitations for the assessments had expired prior to the issuance of the FPAA. Petitioners claimed that the consent forms signed by Jacobson did not extend the period of limitations for the individual limited partners because Jacobson was not specifically authorized to extend the period of limitations for them. This is so, they claimed, because the general partner did not file a written statement that met the requirements of Treas. Reg. § 301.6229(b)-lT. The limited partners also contended that the power of attorney executed by Roberts was not sufficient to authorize a representative to extend the period of limitations for the limited partners and, moreover, that Form 2848 was ineffective because it had been altered by handwritten changes.
The Tax Court denied petitioners’ motion for summary judgment. The court held that the TMP had, under the terms of the partnership agreement, broad and exclusive powers over the business of the partnership, including the authority to enter into an agreement with the Commissioner to extend the period of limitations under § 6229(b)(1)(B) with respect to all the limited partners. The court reasoned that Roberts therefore also had the authority to delegate this power to his attorney-in-fact to execute consents to extend the period of limitation with respect to all of Madison’s partners. The court stated, moreover, that, even if Roberts, as the TMP, had not delegated his authority to enter into the agreements with the IRS, Roberts, as the general partner, could and did delegate this authority to Jacobson.
The Tax Court rejected petitioners’ argument that the consents were invalid because the specific procedures of Treas. Reg. § 301.6229(b)-IT had not been met. The court explained that the language of the regulation is permissive and not mandatory, and that, in any event, “noncompliance with th[e] regulation ‘cannot invalidate authority to extend the period of assessment granted by a partnership pri- or to [the] promulgation of the regulation.’ ” Madison Recycling Assocs. v. Comm’r,
Following the trial, petitioners filed a motion to reopen the proceedings in order to allow them the opportunity to secure the complete administrative file on Roberts, including materials relating to the IRS’s criminal investigation. The Commissioner again opposed petitioners’ motion, stating (1) that petitioners could have obtained the information through a formal discovery request, but had failed to do so during the ten years since the filing of the partners’ 1988 petition for readjustment, and (2) that all relevant materials subject to disclosure, including portions of the criminal investigation file, had been provided to petitioners.
The Tax Court subsequently issued an opinion, in which it held that the FPAA was timely because Roberts was not operating under any conflict of interest that would have rendered ineffective the consents that he authorized. The court stated that there was nothing to suggest that Roberts “had a powerful incentive-to ingratiate himself with the Government.” Madison Recycling Assocs. v. Comm’r,
DISCUSSION
We review the Tax Court’s legal conclusions de novo and its factual findings for clear error. See I.R.C. § 7482(a)(1) (“The United States Courts of Appeals ... shall .... review the decisions of the Tax Court ... in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury.”); see also Callaway v. Comm’r,
The period for assessing income tax attributable to any partnership item (or affected item) for a partnership taxable year does not expire until the date that is three years after the later of (a) the date on which the partnership actually files its information return for the taxable year in question, or (b) the last date for filing such return for such year (without extensions). I.R.C. § 6229(a). In this case, absent extensions, any FPAA for Madison’s 1982 taxable year should have been issued by April 15, 1986. Under TEFRA, however, the Commissioner may receive an extension if, before the assessment period expires (including any periods covered by a prior extension), he secures the consent of (a) each and every limited partner or (b) the partnership’s TMP or “any other person authorized by the partnership in writing to enter into such an agreement.” Id. § 6229(b)(1).
“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.” Amesbury Apartments, Ltd. v. Comm’r,
Only the third step of the inquiry is implicated here.
Since Roberts could delegate his authority to consent to an extension of the limitations period, the only question that remains is whether he made an effective delegation in this case. Section 6229(b) of the Internal Revenue Code provides, in relevant part, that the limitations period may be extended with respect to all partners by an agreement between the IRS and the TMP or “any other person authorized by the partnership in writing to enter into such an agreement.” I.R.C. § 6229(b)(1)(B). The regulations promulgated thereunder (applicable to the 1982 tax year
The Tax Court, in denying petitioners’ motion for summary judgment, conceded that the specific procedures of the regulation were not met in this case. Even if the p,ower-of-attorney Form 2848 were to be deemed to be a “statement” under the regulation, there is no question that the form signed did not specifically provide that it was an authorization for a person other than the TMP to extend the assessment period with respect to all partners. Rather, it gave Freedman and Jacobson broad powers relating generally to tax matters affecting the partnership.
Even though the requirements of § 301.6229(b)-lT are not met, we find that the consents to extend the limitations period are valid.. For, §. 301.6229(b)-lT was not promulgated until 1987, see sec. 301.6229(b)-lT, Temporary Proced. & Admin. Regs., 52 Fed.Reg. 6789 (Mar. 5, 1987); T.D. 8128, .1987-
Petitioners, relying on our decision in Transpac Drilling Venture 1982-12 v. Commissioner,
In Transpac, we held that a TMP, although an entity created by statute, owes a fiduciary duty to his partners. Since the TMP’s acts bind his partners, the partners secure their due process protection only as a result of the TMP’s faithful discharge of his fiduciary obligations. Id. at 225. Therefore, “where serious conflicts exist, a TMP may be barred from acting on behalf of the partnership.” Id. at 227. Because Transpac’s TMPs were seeking favorable treatment with respect to their own criminal exposure by cooperating with federal criminal prosecutors, we found that they had “a powerful incentive to ingratiate themselves to the government.” Id. We observed, moreover, that “the criminal investigation created, an overwhelming pressure on the TMPs to ignore their fiduciary duties to the limited partners.” Id. Accordingly, we held that the consents signed by the TMPs did not bind Transpac’s limited partners.
Our decision in Transpac was based on the presence of an actual conflict. We did not hold that the existence of a criminal investigation by the IRS automatically disqualifies a TMP or his representative from negotiating or entering into agreements with the IRS. Cf. Phillips v. Comm’r,
The case before us is readily distinguishable from Transpac. There is no evidence in this case that suggests that Roberts had any incentive to ingratiate himself to the government. There is also no suggestion that Roberts was a prospective government witness or that the consents were given to the IRS in exchange for a grant of immunity or other inducements relevant to the IRS’s investigations. Any quid pro quo is unlikely here, where there is no evidence that either Roberts or his representative was aware of the IRS’s criminal investigation.
We also agree with the Tax Court’s position that the § 6700 proceedings and the civil penalties imposed thereunder did not result in a conflict of interest. The injunction against Roberts was issued in August 1983 and civil penalties assessed in January 1985; the consents were executed in November 1985 and August 1986, after the § 6700 proceedings were closed. And, there is no suggestion that Roberts anticipated a criminal investigation or that the subsequent consents were part of a scheme to curry favor with the IRS in exchange for a decreased civil penalty.
Based on the record before us, we are unwilling to infer an abandonment of fiduciary duties by Roberts. For the same reasons, we agree with the Tax Court’s finding that Jacobson was not himself operating under a conflict of interest simply because he was Roberts’s personal representative in Roberts’s dealings with the IRS.
CONCLUSION
In sum, we conclude that petitioners have not mét their burden of showing that the consents executed by Jacobson on behalf of Roberts were invalid or otherwise ineffective.
Notes
. Until the enactment of TEFRA, administrative and judicial proceedings related to partnership income were conducted at the level of the individual partner. If the IRS took issue with the partnership’s books or returns, it addressed the matter with each partner individually. See, e.g., Chimblo v. Comm'r,
. The adjustments in the instant case (which is part of the Plastics Recycling Cases, involving the leasing of plastics recycling equipment) arise from transactions similar to those addressed in Provizer v. Comm'r,
. The TMP is "the partner designated to act as a liaison between the partnership and the Internal Revenue Service in administrative proceedings, and as a representative of the partnership in judicial proceedings.” Addington v. Comm’r,
.The notation " — 1984” was handwritten next to the typewritten 'T982” for the year(s) or period(s) covered by the power of attorney. This notation was not initialed. The IRS has conceded that the handwritten and unini-tialed notation "• — 1984” is ineffective to appoint Freedman or Jacobson for years subsequent to 1982.
In addition, handwritten changes to the address of H.W. Freedman & Co., and of the attorneys-in-fact were made on the form and initialed by "S J.”
. Roberts revoked the power of attorney in a letter dated December 28, 1986.
. The consent was countersigned on behalf of the Commissioner of Internal Revenue on November 18, 1985.
. This form was countersigned on behalf of the Commissioner on August 19, 1986.
. A TMP has ninety days from the date that the FPAA is issued to contest the adjustments by filing a petition for readjustment of the partnership items with the Tax Court, the United States Claims Court, or the federal district court for the district in which the partnership's principal place of business is located. See I.R.C. § 6226(a).
. If the TMP has not filed a petition by the ninetieth day from the date that the FPAA was mailed, any other "notice” partner, as defined under I.R.C. § 6223, or any group of partners who collectively have an interest of five percent or more in the profits of the partnership, may petition the Tax Court, the Claims Court, or tire appropriate district court. Such a petition must be filed on or before 150 days from the mailing of the FPAA. Id. § 6226(b)(1).
.Petitioners have not, on appeal, renewed the objection raised in their motion for summary judgment that Form 2848 was invalid as a result of the handwritten alterations to the form. The argument is deemed waived on
. Thereafter, the partnership filed for bankruptcy. See Madison Recycling Assocs. v. I.R.S. (In re Madison Recycling Assocs.), No. Civ. 00-65,
. The IRS claimed that, pursuant to I.R.C. § 6103, portions of the administrative file and certain documents relating to the criminal investigation of Roberts were not subject to disclosure.
. The parties stipulated that the partnership timely filed its partnership return and that any FPAA, to be timely absent any extensions, was required to have been mailed on or before April 15, 1986. Petitioners have put forth a prima facie case, and the Commissioner has met his burden by introducing -two facially valid consents that purport to extend the limitations period beyond the date on which the FPAA was mailed. See Lefebvre v. Comm’r,
. Except as provided in the partnership agreement, the grounds for, and extent' of, Roberts's authority as a general partner are determined under New York law. New York has adopted the Revised Uniform Limited Partnership Act. See N.Y. Partnership Law §§90 to 119 (McKinney 1988). Both the partnership agreement and New York law afford to Roberts, as general partner, the same rights and powers given, to a partner in a partnership without limited partners. See id. § 98.
. The regulations, which were promulgated in 1987, see sec. 301.6229(b)-lT, Temporary Proced. & Admin. Regs., 52 Fed.Reg. 6789 (Mar. 5, 1987); T.D. 8128, 1987-
. At first glance, it is unclear whether, as has been held by the Tax Court, the language in Treas. Reg. § 301.6229(b)-lT is permissive rather than mandatory. See Cambridge Research & Dev. Group,
. The IRS agent in charge of the criminal investigation testified that, to the best of his knowledge, neither Roberts nor Jacobson was aware of the investigation. Petitioners had an opportunity to ascertain the extent of Roberts’s and Jacobson's awareness of the IRS investigation at trial, but failed to call either to testily as witnesses. Based on the record before it, the Tax Court made a factual finding that Roberts and Jacobson were unaware of the criminal investigation. This finding is not clearly erroneous.
. Petitioners make a series of other arguments, all of which we have considered and summarily reject as meritless.