Asa Investerings Partnership, Alliedsignal, Inc., Tax Matters Partner v. Commissioner ( 2002 )

118 T.C. No. 26UNITED STATES TAX COURT
ASA INVESTERINGS PARTNERSHIP, ALLIEDSIGNAL, INC., TAX MATTERS
PARTNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 27320-96. Filed May 22, 2002.
P filed a motion to redetermine interest under
sec. 7481(c), I.R.C. R moves to dismiss for lack of
jurisdiction on the basis that a sec. 6215, I.R.C.,
assessment has not been made.
Held: Sec. 7481(c), I.R.C., requires that “an
assessment has been made by the Secretary under section
6215”. An assessment under sec. 6215, I.R.C., can only
occur where a notice of deficiency has been issued, a
sec. 6213(a), I.R.C., petition has been filed, and the
Tax Court has redetermined or sustained a deficiency by
a decision that has become final. The instant case
involves a unified partnership proceeding for the
readjustment of partnership items. See secs. 6221-
6234, I.R.C. Deficiencies are not redetermined by Tax
Court decisions in unified partnership proceedings, and
no deficiencies have been redetermined by the Tax Court
in this case. See ASA Investerings Pship. v.
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Commissioner, T.C. Memo. 1998-305, affd. 201 F.3d 505(D.C. Cir. 2000). Therefore, we lack jurisdiction to
redetermine interest in this case.
Jerome Bernard Libin, Steuart Hill Thomsen, David A. Roby
Jr., Robert S. Chase II, William Sanford Corey, Alexa Temple
Dubert, H. Karl Zeswitz Jr., and Joseph M. Persinger, for
petitioner.
Jill A. Frisch, for respondent.
OPINION
RUWE, Judge: On October 3, 2001, petitioner, AlliedSignal,
Inc., filed a motion to redetermine interest under section
7481(c) and Rule 261.1 Petitioner claims to have overpaid
deficiency interest in the following amounts and for the
following tax years:
Tax Year Interest
1988 $415,714
1989 2,658,117
1990 17,564,033
1991 0
1992 3,743,091
1993 178,469
1994 1,766,896
1995 6,347,788
Respondent filed a notice of objection in which he moves to
dismiss petitioner’s motion for lack of jurisdiction. Respondent
argues that we lack jurisdiction to redetermine petitioner’s
1
All section references are to the Internal Revenue Code in
effect at the time of the filing of the motion, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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interest because no assessment has been made under section 6215.
We agree and hold that we lack jurisdiction to redetermine
petitioner’s interest.2
Generally, this Court does not have jurisdiction over issues
involving interest. Bax v. Commissioner, 13 F.3d 54, 56 (2d Cir.
1993), affg. an unpublished order of this Court; Standard Oil Co.
v. McMahon, 244 F.2d 11, 13 (2d Cir. 1957). However, Congress
has provided the Tax Court with jurisdiction to redetermine
interest in certain limited circumstances. Section 7481(c)
provides:
SEC. 7481(c). Jurisdiction Over Interest
Determinations.--
(1) In general.--Notwithstanding subsection
(a), if, within 1 year after the date the decision
of the Tax Court becomes final under subsection
(a) in a case to which this subsection applies,
the taxpayer files a motion in the Tax Court for a
redetermination of the amount of interest
involved, then the Tax Court may reopen the case
solely to determine whether the taxpayer has made
an overpayment of such interest or the Secretary
has made an underpayment of such interest and the
amount thereof.
(2) Cases to which this subsection applies.--
This subsection shall apply where--
(A)(i) an assessment has been made by
the Secretary under section 6215 which
includes interest as imposed by this title,
and
2
Petitioner has not requested a hearing on the jurisdiction
issue which respondent raises in his notice of objection, and we
find that this matter is at this time ripe for decision.
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(ii) the taxpayer has paid the
entire amount of the deficiency plus
interest claimed by the Secretary, and
(B) the Tax Court finds under section
6512(b) that the taxpayer has made an
overpayment.
(3) Special rules.--If the Tax Court
determines under this subsection that the taxpayer
has made an overpayment of interest or that the
Secretary has made an underpayment of interest,
then that determination shall be treated under
section 6512(b)(1) as a determination of an
overpayment of tax. An order of the Tax Court
redetermining interest, when entered upon the
records of the court, shall be reviewable in the
same manner as a decision of the Tax Court.[3]
We have jurisdiction to redetermine interest under section
7481(c) where: (1) The entire amount of the deficiency plus the
entire amount claimed by the Commissioner as interest on the
deficiency has been paid; (2) a timely motion to redetermine
interest has been filed; and (3) an assessment has been made by
the Commissioner under section 6215 which includes interest.
See, e.g., Rule 261; Bankamerica Corp. v. Commissioner, 109 T.C.
3Under sec. 7481(a), a decision of the Tax Court becomes
final “after the exhaustion of the possibilities of direct
review”, and, in general, “such finality precludes any subsequent
reconsideration by the tax court”. Kenner v. Commissioner, 387
F.2d 689, 690 (7th Cir. 1968), affg. an unpublished order of this
Court; see also Hanover Ins. Co. v. United States, 880 F.2d 1503,
1506 (1st Cir. 1989); Taylor v. Commissioner, 258 F.2d 89, 92 (2d
Cir. 1958), affg. 27 T.C. 361 (1956). Sec. 7481(c) “specifically
carves out an exception to the rule on the finality of our
decisions”; a prerequisite for invoking that exception is a final
decision of this Court. Bankamerica Corp. v. Commissioner, 109
T.C. 1, 8-9 (1997).
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1, 6-7 (1997); Asciutto v. Commissioner, T.C. Memo. 1992-564,
affd. 26 F.3d 108 (9th Cir. 1994).4
Petitioner bases his motion to redetermine interest on our
prior decision in this case. See ASA Investerings Pship. v.
Commissioner, T.C. Memo. 1998-305, affd. 201 F.3d 505 (D.C. Cir.
2000). Our prior decision was affirmed by the Court of Appeals
for the District of Columbia Circuit, and the U.S. Supreme Court
denied certiorari on October 2, 2000, 531 U.S. 871 (2000). Our
decision became final on October 2, 2000. Sec. 7481(a)(2)(B).
Petitioner mailed its motion to redetermine interest on October
1, 2001; thus, the motion was timely. Sec. 7481(c)(1); Rule
261(a)(2). Petitioner claims, and respondent does not dispute,
that it has paid the entire amount of the deficiency plus
interest. Accordingly, the only issue in the instant case is
whether respondent has assessed a deficiency and interest under
section 6215.
4
Sec. 7481(c) was added to the Code by the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec. 6246(a),
102 Stat. 3751. On Aug. 5, 1997, the Taxpayer Relief Act of
1997, Pub. L. 105-34, 111 Stat. 788, 1054, revised sec. 7481(c)
to provide for the filing of a “motion” rather than a “petition”
and to clarify that our jurisdiction includes underpayments of
interest by the Commissioner. See H. Conf. Rept. 105-220, at
732-733 (1997), 1997-4 C.B. (Vol. 2) 1457, 2202-2203. Many of
our prior opinions, including Bankamerica Corp. v. Commissioner,
supra, addressed sec. 7481(c) as originally enacted. However,
the same three requirements we identified in the original
enactment are still apparent in revised sec. 7481(c), including
the requirement that an assessment has been made under sec. 6215.
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Our jurisdiction over the issues decided in ASA Investerings
Pship. v. Commissioner, supra, was predicated on the issuance of
a notice of a final partnership administrative adjustment (FPAA)
and a petition for a readjustment of partnership items.5 See
sec. 6226(a). Our decision was based on an application of the
unified partnership procedures.6
Petitioner contends that “there are a number of ‘affected
items which require partner level determinations’ (Code, Section
6230(a)(2)(A)(i)) with respect to which tax and, necessarily,
interest must have been assessed as a result of this Court’s
decision in this matter.” Petitioner points to AlliedSignal’s
basis in ASA Investerings Partnership and the determination of an
appropriate amount of interest expense under section 1.861-8,
Income Tax Regs., as affected items that require partner-level
determination under section 6230(a)(2)(A)(i). Petitioner claims
that “The assessment(s) with respect to these ‘affected items,’
pursuant to the provisions of Code, Section 6230(a)(2)(A)(i) of
5
In ASA Investerings Pship. v. Commissioner, T.C. Memo.
1998-305, affd. 201 F.3d 505 (D.C. Cir. 2000), we held that ASA
Investerings Partnership was not a valid partnership for tax
purposes, and we sustained respondent’s reallocation of
partnership items from a foreign entity to AlliedSignal, Inc.,
the tax matters partner in these proceedings.
6
The unified partnership procedures have been amended since
their effective date of Sept. 3, 1982, and those procedures are
now contained in secs. 6221 through 6234.
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the Code, has occurred under the provisions of Subchapter B of
the Code, including Section 6215.” We disagree.7
It is clear that a section 6215 assessment did not and could
not occur in this case. Section 6215 requires a petition filed
by the taxpayer with the Tax Court and an amount redetermined as
the deficiency by a decision of the Tax Court which has become
final.8 Our jurisdiction to redetermine a deficiency arises only
in the case of a valid notice of deficiency and the filing of a
timely petition for review under section 6213(a). Savage v.
Commissioner, 112 T.C. 46, 48 (1999); Monge v. Commissioner, 93
T.C. 22, 27 (1989).9
7
The mere prospect, assuming one does exist here, of a sec.
6215 assessment’s being made is not sufficient to confer
jurisdiction upon this Court for purposes of sec. 7481(c). Sec.
7481(c)(2)(A)(i) requires that “an assessment has been made”, not
“will be made” or “should have been made”. A motion to
redetermine interest which is based on the mere prospect of a
sec. 6215 assessment would be premature.
8
Sec. 6215 provides:
SEC. 6215(a). General Rule.--If the taxpayer
files a petition with the Tax Court, the entire amount
redetermined as the deficiency by the decision of the
Tax Court which has become final shall be assessed and
shall be paid upon notice and demand from the
Secretary. No part of the amount determined as a
deficiency by the Secretary but disallowed as such by
the decision of the Tax Court which has become final
shall be assessed or be collected by levy or by
proceeding in court with or without assessment.
9
Sec. 6230(a)(2)(A)(i) does not discharge the necessary
requirements that must exist for the deficiency procedures to
apply, and, indeed, that provision incorporates subch. B (subtit.
F, ch. 63 of the Code) in its entirety.
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In the instant case, no notice of deficiency was issued. In
the absence of a notice of deficiency, we did not and, indeed,
could not have redetermined or sustained a deficiency
determination made by respondent. See Saso v. Commissioner, 93
T.C. 730, 735 (1989) (“If we are to redetermine a deficiency, our
jurisdiction is dependent upon the issuance of a notice of
deficiency.”). It follows that a section 6215 assessment could
not have been made in this case since that Code section
contemplates a redetermination of a deficiency by the Tax Court.
Petitioner, in its capacity as the tax matters partner of
ASA, did file a petition with the Tax Court. However, that
petition was filed pursuant to section 6226(a), not section
6213(a). A petition filed pursuant to section 6226(a) is termed
“a petition for a readjustment of the partnership items”. A
petition filed pursuant to section 6213(a) is termed “a petition
with the Tax Court for a redetermination of the deficiency”.
Section 6215(a) refers specifically to “the entire amount
redetermined as the deficiency by the decision of the Tax Court”.
We interpret section 6215(a) to refer exclusively to a petition
filed under section 6213(a) and a decision that was entered
pursuant to the deficiency procedures contained in sections 6211-
6216.
Our deficiency procedures do not extend to the adjustment of
partnership items or to deficiencies attributable to
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computational adjustments.10 We cannot redetermine deficiencies
under section 6226.11 See, e.g., Maxwell v. Commissioner, 87
T.C. 783, 787 (1986). Our prior decision in this case, ASA
Investerings Pship. v. Commissioner, T.C. Memo. 1998-305, was not
a decision which we made under the deficiency procedures. And,
deficiencies which are attributable to computational adjustments
are assessed under the general assessment authority of section
10
Respondent claims that as a result of the partnership-
level proceeding, he has made certain computational adjustments
against petitioner. A computational adjustment is defined as
“the change in the tax liability of a partner which properly
reflects the treatment under this subchapter of a partnership
item.” Sec. 6231(a)(6). “A computational adjustment includes
any interest due with respect to any underpayment or overpayment
of tax attributable to adjustments to reflect properly the
treatment of partnership items.” Sec. 301.6231(a)(6)-1T(b),
Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6791 (Mar. 5,
1987). Our deficiency procedures generally do not apply to the
assessment or collection of a computational adjustment, sec.
6230(a)(1), and a notice of deficiency need not be issued, White
v. Commissioner, 95 T.C. 209, 211-212 (1990). However, under
sec. 6230(a)(2)(A)(i), our deficiency procedures do apply with
respect to any deficiency attributable to affected items which
require partner-level determinations.
11
See sec. 6226(f), which provides:
SEC. 6226(f). Scope of Judicial Review.--A court
with which a petition is filed in accordance with this
section shall have jurisdiction to determine all
partnership items of the partnership for the
partnership taxable year to which the notice of final
partnership administrative adjustment relates, the
proper allocation of such items among the partners, and
the applicability of any penalty, addition to tax, or
additional amount which relates to an adjustment to a
partnership item.
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6201(a), not section 6215. Brookes v. Commissioner, 108 T.C. 1,
9-10 (1997).12
We hold that we do not have jurisdiction under section
7481(c) to review petitioner’s motion to redetermine interest.
An appropriate order
will be entered.
12
Whether the computational adjustments were in fact made
with respect to affected items requiring partner-level
determinations, as petitioner contends, is not a matter that we
can decide absent a proper jurisdictional basis for review. We
recognize that the import of our decision is that we are unable
to “reopen” a prior unified partnership proceeding under sec.
7481(c) and to redetermine interest attributable to a
computational adjustment deficiency. However, the conference
agreement with respect to the 1997 revision of sec. 7481(c)
states:
In clarifying the Tax Court’s jurisdiction over
interest determinations, the conferees do not intend to
limit any other remedies that taxpayers may currently
have with respect to such determinations, including in
particular refund proceedings relating solely to the
amount of interest due. [H. Conf. Rept. 105-220, at
733 (1997), 1997-4 C.B. (Vol. 2) 1457, 2203.]
For example, respondent suggests that the refund claim procedures
for challenging erroneous computational adjustments, sec.
6230(c), are the appropriate forum for challenging the
computational adjustments in this case.