DocketNumber: No. 17834-07
Citation Numbers: 2009 T.C. Memo. 254, 98 T.C.M. 424, 2009 Tax Ct. Memo LEXIS 259
Judges: Nims,\"Arthur L.\"
Filed Date: 11/9/2009
Status: Non-Precedential
Modified Date: 4/18/2021
R issued to P's L.L.C. for 1999 a notice of final partnership administrative adjustment (FPAA) which determined that losses claimed by P in 2001 from the sale of stock should be disallowed because they were attributable to the L.L.C.'s participation in so-called Son-of-BOSS transaction in 1999. The FPAA was issued more than 3 years after the L.L.C.'s return was filed but before the extended period for assessing P's 2001 income tax had expired under
MEMORANDUM OPINION
NIMS,
Respondent issued an FPAA to petitioner for the 1999 tax year of LVI Investors, LLC (LVI). Petitioner timely filed a petition contesting the determinations in the FPAA. At the time the petition was filed, LVI had been dissolved and did not have a principal place of business.
The issue for decision is whether the statute of limitations on assessment bars respondent from issuing an FPAA to LVI for its 1999 tax year.
For the reasons discussed below, we will grant respondent's motion for partial summary judgment and deny petitioner's motion for summary judgment.
On September 15, 1999, petitioner and Gene Venesky (Venesky) formed LVI as a Delaware limited liability company with its principal place of business in Norcross, Georgia. Petitioner and Venesky each took a 50-percent membership interest in LVI.
On the same day they formed LVI, petitioner and Venesky each formed a single-member limited liability company, JKL Investments, LLC (JKL), and GVI Investments, LLC (GVI), respectively. JKL and GVI *261 were treated as disregarded entities for Federal income tax purposes under
Petitioner, Venesky, and the aforementioned entities then engaged in a series of transactions (1999 transactions) which respondent has since determined to be, collectively, a Son-of-BOSS transaction described in
On September 30, 1999, LVI closed its short position by purchasing Treasury notes for $ 37,899,065.50 plus interest of $ 346,440.22. Petitioner and Venesky subsequently contributed their interests in LVI to MQ Associates, Inc. (MQ), as capital contributions. The record thus far is unclear as to when MQ was formed and what the stock ownership interests in MQ were before *262 and after these capital contributions. On October 1, 1999, LVI was dissolved, and the euro it held were distributed to MQ in liquidation. On October 4, 1999, MQ sold 20.53 percent of the euro. In 2001 petitioner and Venesky sold their MQ stock.
Petitioner and Venesky obtained opinion letters from the law firm Jenkens & Gilchrist, P.C. (Jenkens), which advised them that their outside bases in LVI had been increased by the contribution of the short sale proceeds but had not been reduced by the contribution of the short position, which was purportedly not a liability within the meaning of
On October 19, 2000, LVI filed a Form 1065, U.S. Partnership Return of Income, for its 1999 tax year (partnership return). The partnership return designated petitioner as tax matters partner and listed JKL and GVI as 50-percent members. 1*263
Petitioner and Mrs. Maureen O. Luke (the Lukes) filed joint Forms 1040, U.S. Individual Income Tax Return, for their 1999, 2000, and 2001 tax years. The Lukes' 2001 return (personal return) was received by respondent on October 17, 2002. Following the advice of the Jenkens opinion letter, the Lukes claimed an increased basis in petitioner's MQ stock. As a result of that increased basis, the Lukes claimed a loss on the sale of the stock in 2001.
On October 4, 2005, the Lukes signed the first of a series of Forms 872-I, Consent to Extend the Time to Assess Tax As Well As Tax Attributable to Items of a Partnership, which collectively extended the limitations period for assessment of their 2001 tax liability to March 31, 2007.
On March 14, 2007, respondent sent the FPAA for LVI's 1999 tax year to petitioner. The FPAA determined, among other things, that the transactions lacked economic substance and had no business purpose. The FPAA also determined that LVI was a sham partnership and was formed in connection with transactions having a principal purpose of substantially reducing the present value of its partners' aggregate Federal tax liability in a manner inconsistent *264 with the intent of subchapter K of the Internal Revenue Code. Consequently, the FPAA determined that neither LVI nor the transactions should be respected and that any claimed basis increases (in LVI and MQ) or losses resulting from the transactions should be disallowed.
On August 10, 2007, petitioner filed a petition contesting the determinations in the FPAA. On July 7, 2008, respondent filed a motion for partial summary judgment on the issue of whether the statute of limitations for assessment bars respondent from issuing the FPAA. On August 25, 2008, petitioner filed his motion for summary judgment on the same issue. Respondent has conceded that the period for assessing the Lukes' 1999 and 2000 income taxes has expired.
Since there are no genuine issues of material fact on the issue as framed by the parties' cross-motions, summary judgment on that issue is appropriate. See
This case is a partnership-level proceeding subject to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec. 402, 96 Stat. 648. The Internal Revenue Code imposes no limit *265 on when the Commissioner may commence a TEFRA partnership-level proceeding by issuing an FPAA.
Respondent issued the FPAA in a timely manner because the period for assessing the Lukes' 2001 income tax has not closed. 2 The Lukes signed timely Forms 872-I agreeing to extend the assessment period *266 to March 31, 2007. Respondent issued an FPAA for LVI's 1999 tax year before that date, and the issuance of the FPAA suspends the period to assess the Lukes' 2001 income tax. See
Petitioner contends that
Petitioner offers several textual and policy arguments in support of his positions. Petitioner's arguments are identical to those we rejected in deciding
We decline to reconsider
The Courts of Appeals that have decided this issue have all approved our decision in Rhone-Poulenc. See
For the foregoing reasons, we hold that respondent's issuance of the FPAA for LVI's 1999 tax year was not barred by any period of limitations *270 and that the period of limitations for assessing taxes attributable to partnership items for the Lukes' 2001 tax year remains open. We will therefore grant respondent's motion for partial summary judgment and deny petitioner's motion for summary judgment. In doing so, we have considered all of the parties' contentions, arguments, requests, and statements. To the extent not discussed herein, we conclude that they are irrelevant, moot, or without merit.
To reflect the foregoing,
1. Petitioner was actually ineligible to serve as tax matters partner because he was not a member-manager of LVI. See
2. The Lukes' 2001 tax year is involved because their basis in the MQ stock they sold in 2001 is an affected item. See
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