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Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 

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United States Court of Appeals 

for the Federal Circuit ______________________ 

BASR PARTNERSHIP, WILLIAM F. PETTINATI, 

SR., Tax Matters Partner,

Plaintiffs-Appellees

v.

UNITED STATES,

Defendant-Appellant

______________________ 

2014-5037

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:10-cv-00244-SGB, Judge Susan G. 

Braden.

______________________ 

Decided: July 29, 2015

______________________ 

THOMAS A. CULLINAN, Sutherland Asbill & Brennan 

LLP, Atlanta, GA, argued for plaintiffs-appellees. 

ANDREW M. WEINER, Tax Division, United States Department of Justice, Washington, DC, argued for defendant-appellant. Also represented by DAMON TAAFFE,

TAMARA W. ASHFORD, GILBERT STEVEN ROTHENBERG,

MICHAEL J. HAUNGS. 

BRYAN CAMP, Texas Tech University School of Law, 

Lubbock, TX, for amicus curiae Bryan T. Camp. 

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2 BASR PARTNERSHIP v. US

PAULA MARIE JUNGHANS, Zuckerman Spaeder LLP, 

Washington, DC, for amicus curiae American College of 

Tax Counsel. 

______________________ 

Before PROST, Chief Judge, O’MALLEY, and CHEN, Circuit 

Judges.

Opinion for the court filed by Circuit Judge CHEN. 

Concurring opinion filed by Circuit Judge O’MALLEY. 

Dissenting opinion filed by Chief Judge PROST. 

CHEN, Circuit Judge.

This case is an appeal from a tax readjustment and 

refund action filed in the U.S. Court of Federal Claims 

(Claims Court). Section 6501(a) of the Internal Revenue 

Code (I.R.C. or Code) prohibits the Internal Revenue 

Service (IRS) from assessing tax if more than three years 

has elapsed from the date of the tax return. Section 

6501(c)(1), however, recognizes an exception to this threeyear rule and suspends the statute of limitations in cases 

involving “a false or fraudulent return with the intent to 

evade tax.” The Claims Court determined that § 6501(a)’s 

three-year statute of limitations barred the IRS from 

administratively adjusting, in 2010, the 1999 partnership 

tax return filed by plaintiff-appellee BASR Partnership 

(BASR). See BASR P’ship v. United States, 113 Fed. Cl. 

181 (2013). The Government appealed. Although the 

Government does not argue that BASR itself acted with 

the intent to evade tax, the Government does contend 

that BASR’s outside counsel, an attorney involved in 

structuring certain financial transactions reported on the 

1999 return, acted “with the intent to evade tax.” According to the Government, this attorney’s conduct triggered 

§ 6501(c)(1) and suspended the three-year limitation on 

the IRS’s ability to assess and impose tax on BASR for the 

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BASR PARTNERSHIP v. US 3

1999 tax return. The Claims Court disagreed and held 

that § 6501(c)(1)’s suspension of the three-year limitation 

applies only when the taxpayer—and not a third party—

acts with the requisite “intent to evade tax.” Because we 

agree with the Claims Court, we affirm. 

BACKGROUND

I 

The IRS has authority to review tax returns filed by a 

taxpayer. I.R.C. § 6201(a). During this review, if the IRS 

concludes that the taxpayer has underpaid, the IRS 

assesses those taxes and imposes any additional penalties 

for the underpayment. Id.; see, e.g., § 6663. As a general 

rule, the IRS must make any such assessment “within 3 

years after the return was filed.” I.R.C. § 6501(a). The 

Code establishes certain exceptions that may extend or 

suspend this three-year limitations period. See generally 

I.R.C. § 6501(c). Section 6501(c)(1) recognizes one such 

exception: “In the case of a false or fraudulent return 

with the intent to evade tax, the tax may be assessed . . . 

at any time.” I.R.C. § 6501(c)(1). 

The concept of limiting the time period during which 

the IRS could assess tax originated almost 100 years ago 

in the same statutory provision that authorized the IRS to 

impose penalties for underpayment. See Revenue Act of 

1918, Pub. L. No. 54-254, 40 Stat. 1057. Section 250(b) of 

the 1918 Act authorized the IRS to impose penalties when 

an underpayment resulted either from negligence or a 

“false or fraudulent” intent to evade the tax. The Act 

barred the IRS from imposing a penalty if “the return is 

made in good faith and the understatement of the amount 

in the return is not due to any fault of the taxpayer.” Id. 

Along the same lines, § 250(d) limited the time during 

which the IRS could assess tax after the filing of a tax 

return, but explicitly provided that this period could be 

suspended if the case involved a “false or fraudulent 

return[] with intent to evade the tax.” After recodification 

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4 BASR PARTNERSHIP v. US

and reorganization the provision authorizing penalties for 

fraudulent returns was separated from the section governing extension and suspension of the statute of limitations. Compare I.R.C. § 6663(a), with I.R.C. § 6501(c)(1).

The taxes at issue here relate to the activities of a 

partnership. Under the Code, partnerships like BASR are 

“pass-through” entities. I.R.C. § 701. This means that 

although the partnership prepares a tax return, I.R.C. 

§ 6031, the partnership itself does not incur tax liability, 

I.R.C. § 701. Instead, any tax liability arising from items 

on a partnership return “passes through” to the individual 

partners, who are then liable for their “distributive share” 

of the partnership’s gains and losses. Id. §§ 701–702. 

Because a partnership and its individual partners are 

treated differently for taxation purposes, Congress enacted the Tax Equity and Fiscal Responsibility Act of 1982 

(TEFRA), which established “coordinated procedures for 

determining the proper treatment of ‘partnership items’ 

at the partnership level in a single, unified audit and 

judicial proceeding.” Alpha I, L.P., ex rel. Sands v. United 

States, 682 F.3d 1009, 1019 (Fed. Cir. 2012). 

Under TEFRA, when the IRS disagrees with the tax 

treatment of a partnership item on any return, the IRS 

must determine the proper treatment of the partnership 

item at the partnership level. I.R.C. § 6221. If the IRS 

finds an underpayment, the IRS must send a final partnership administrative adjustment (FPAA) to the partners. Id. §§ 6223(a)(2), 6223(d)(2), 6225(a). If the 

partnership disagrees, it may file a “petition for readjustment” in one of several fora, including the Claims 

Court. Id. § 6226(a); see also 28 U.S.C. § 1508 (“The Court 

of Federal Claims shall have jurisdiction to hear and to 

render judgment upon any petition under section 6226 . . . 

of the Internal Revenue Code of 1986.”).

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BASR PARTNERSHIP v. US 5

II

The facts relevant to this appeal are undisputed. In 

1999, the members of the Pettinati family were about to 

realize a large capital gain from the sale of their printing 

business. Before they consummated the sale, Erwin 

Mayer (Mayer), a lawyer in the Chicago office of the nowdefunct law firm of Jenkens & Gilchrist, contacted the 

Pettinati family and proposed “a tax advantaged investment opportunity.” J.A. 1054. Believing that this opportunity could result in tax savings, the Pettinatis hired 

Jenkens & Gilchrist, which recommended a series of 

transactions that could reduce the amount of gain reported to the IRS upon the sale of the family printing business. At the end of these transactions, all stock in the 

printing business would be owned by a family partnership, BASR. The Pettinatis could then sell the printing 

business by directing BASR to sell its shares to the buyer.

In addition to recommending the transactions, three

attorneys at Jenkens & Gilchrist signed a tax opinion 

document attesting to the legitimacy of the transactions. 

Mayer characterized the transactions as a “taxadvantaged investment opportunity.” J.A. 1054. Finally, 

the Pettinatis received guidance on reporting these transactions on their 1999 tax returns in a manner that was 

consistent with the opinion letters. The Pettinatis hired 

Malone & Bailey PLLC to prepare their tax returns. 

While Malone & Bailey had a long-standing relationship 

with the Pettinatis, it had no prior connection with 

Jenkens & Gilchrist. Malone considered the legal opinions provided to the Pettinati family when preparing the 

BASR and Pettinati tax returns. Ultimately, by creating 

the BASR Partnership, the Pettinatis greatly reduced the 

tax liability arising from the sale of their printing business. 

Five years later, in 2004, the IRS received a list of 

Jenkens & Gilchrist clients, including the Pettinatis, who 

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6 BASR PARTNERSHIP v. US

had employed this type of tax-advantaged investment 

structure. In 2010, the IRS issued a FPAA to BASR for 

the tax returns that reflected the sale of the printing 

business. In the FPAA, the IRS explained that BASR 

“lacked economic substance” because its “principal purpose . . . was to reduce substantially the present value of 

its purported partners’ . . . aggregate federal tax liability.” 

J.A. 43. The IRS adjusted the tax effect of the printing 

business sale accordingly, significantly increasing the 

Pettinatis’ tax liability for the 1999 tax returns.

After filing this action in the Claims Court, BASR 

sought summary adjudication of its readjustment and 

refund claim, arguing that the adjustments and increased 

tax liability in the FPAA were untimely under the threeyear statute of limitations found in I.R.C. § 6229(a)1 and 

1 Section 6229 governs the limitations period for 

making assessments attributable to partnership items. 

This statute includes a provision that suspends the threeyear limitations period when a partner acts with the 

intent to evade tax. I.R.C. § 6229(c)(1). BASR argued 

that § 6229(c)(1) supplants § 6501(c)(1), as the statute 

that the IRS must use to avail itself of the unlimited 

limitations period. According to BASR, the Government 

could not prove that a partner acted with intent to evade 

tax and therefore the FPAA was untimely because the 

IRS could not avail itself of an unlimited assessment 

period. The Claims Court rejected this argument as 

soundly foreclosed by our case law. We agree that § 

6229(c)(1) does not supplant § 6501(c)(1) in a partnership 

case. See AD Global Fund, LLC ex rel. N. Hills Holding, 

Inc. v. United States, 481 F.3d 1351 (Fed. Cir. 2007); Prati 

v. United States, 603 F.3d 1301, 1307 (Fed. Cir. 2010) 

(“Sections 6501 and 6229 do not operate independently to 

allow a taxpayer to assert one in isolation and thereby 

render an otherwise timely assessment untimely.”); see 

 

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I.R.C. § 6501(a). The Government acknowledged these 

general limitations periods, but asserted that even though 

more than three years had passed since BASR’s tax 

returns were filed, this period remained open under I.R.C. 

§ 6501(c)(1) and I.R.C. § 6229(c)(1) because the case 

involved “a false or fraudulent return with the intent to 

evade tax.” The IRS concedes that the Pettinatis themselves lacked the intent to evade tax. See Oral Argument 

at 9:49-10:06 available at http://www.cafc.uscourts.gov/

opinions-orders/0/all/14-5037 (“The government concedes 

that 6229(c)(1) doesn’t apply because, as you say Your 

Honor, it’s not the partner who commits the fraud, but in 

fact the taxpayer’s hired tax professional who set up the 

shelter for him.”) The IRS similarly does not allege that 

Malone & Bailey, who prepared the relevant tax returns, 

acted with intent to evade taxes or to have the Pettinatis 

evade taxes. The IRS asserted only that Mayer acted 

with the intent to evade tax when he conceived of and 

marketed the tax-advantaged investment structure. 

Contrary to the opinion letters supplied to the Pettinatis 

by Jenkins & Gilchrist, Mayer knew these transactions 

were “fraudulently designed to generate large noneconomic tax losses for wealthy taxpayers.”2 J.A. 945. 

also Rhone-Poulenc Surfactants & Specialties, L.P. v. 

Comm’r, 114 T.C. 533, 540–41 (2000) (“[S]ections 6229 

and 6501 contain alternative periods within which to 

assess tax with respect to partnership items, with the 

later-expiring period governing in a particular case.”).

2 On October 19, 2010, Mayer pleaded guilty to conspiracy and tax evasion charges relating to his design and 

implementation of numerous fraudulent tax shelters. 

United States v. Daugerdas, et al., No. 1:09-cr-00581, 

(S.D.N.Y. Oct. 19, 2010). As part of the guilty plea proceedings, Mayer admitted that he knew that these tax 

shelters would not be allowed by the IRS if scrutinized 

 

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8 BASR PARTNERSHIP v. US

In reply, BASR argued that the three-year statute of 

limitations is suspended only when the taxpayer intended 

to evade tax and, therefore, Mayer’s admitted fraud was 

insufficient and too remote. Ultimately, the Claims Court 

agreed and granted BASR’s motion for summary judgment. The Government filed a timely notice of appeal. 

We have jurisdiction under 28 U.S.C. § 1295(a)(3).

DISCUSSION

We review the grant or denial of summary judgment 

de novo. Salman Ranch Ltd. v. United States, 573 F.3d 

1362, 1370 (Fed. Cir. 2009). Summary judgment is appropriate when “there is no genuine dispute as to any 

material fact and the movant is entitled to judgment as a 

matter of law.” Fed. R. Civ. P. 56(a). In this case, the 

parties do not dispute the relevant facts. We are therefore presented solely with a question of statutory interpretation, which we review de novo. AD Global Fund, 

LLC ex rel. N. Hills Holding, Inc. v. United States, 481 

F.3d 1351, 1353 (Fed. Cir. 2007). 

The present case requires us to determine whether 

§ 6501(c)(1)’s suspension of the three-year statute of 

limitations is only triggered by the intent of the taxpayer, 

as urged by BASR, or whether, as the Government maintains, the requisite intent can be that of a third-party who 

is more remotely connected with the relevant tax return.3 

because the transactions had no genuine, non-tax business reasons and had no reasonable possibility of resulting in profit. By filing a declaration in the present 

proceedings, Mayer continues to maintain that he acted 

with the intent “to fraudulently evade the federal income 

tax [that the Pettinatis] would otherwise owe on capital 

gains from the sale of their business.” J.A. 946.

3 Importantly, we need not decide whether the term 

“taxpayer,” as used in § 6501(c)(1), can be interpreted to 

 

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BASR PARTNERSHIP v. US 9

Statutory interpretation begins with the words of the 

statute. Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 

450 (2002). “The first step is to determine whether the 

language at issue has a plain and unambiguous meaning 

with regard to the particular dispute in the case.” Id.

(internal quotation marks omitted). This inquiry “ceases 

if the statutory language is unambiguous and the statutory scheme is coherent and consistent.” Id. (internal 

quotation marks omitted). “The plainness or ambiguity of 

statutory language is determined by reference to the 

language itself, the specific context in which that language is used, and the broader context of the statute as a 

whole.” Robinson v. Shell Oil Co., 519 U.S. 337, 341 

(1997). 

After examining the overall statutory scheme of the 

Code, the case law, and § 6501(c)(1)’s historical roots, we 

encompass the actions of a taxpayer’s authorized agents. 

The government does not allege—nor under the undisputed facts could it allege—that Mayer acted as an authorized agent of BASR or the Pettinatis in connection with 

the filing of the tax returns at issue here. The government simply argues that the “intent to evade tax” referenced in § 6501(c)(1) can be untethered to the filing of the 

return itself—i.e., can be the intent of someone proffering 

investment advice, but not making decisions regarding or 

making representations on the tax returns themselves. 

Because we reject that broad reading of § 6501(c)(1), we 

need not decide whether the intent of some other third 

party—one more closely connected to the tax preparation 

and filings themselves—might be relevant. But see Loving v. IRS, 742 F.3d 1013, 1017 (D.C. Cir. 2014) (“Put 

simply, tax-return preparers are not agents. They do not 

possess legal authority to act on the taxpayer's behalf. 

They cannot legally bind the taxpayer by acting on the 

taxpayer's behalf.”). 

 

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conclude that § 6501(c)(1) suspends the three-year limitations period only when the IRS establishes that the taxpayer acted with the intent to evade tax. Because the 

Government concedes that it cannot show that either the 

partnership or any of its partners acted with the intent to 

evade tax, summary judgment in favor of BASR was 

proper.

I 

Section 6501(c)(1) provides that “[i]n the case of a 

false or fraudulent return with the intent to evade tax, 

the tax may be assessed . . . at any time.” On appeal, the 

Government contends that the unlimited limitations

period is triggered whenever any individual acts with the 

intent to evade tax and the tax return ultimately filed 

contains a falsity, without regard to how remotely related 

that individual is to the actual tax return or to whether 

the taxpayer appreciates that individual’s intentions. 

BASR counters that the Claims Court correctly concluded 

that § 6501(c)(1)’s suspension of the statute of limitations 

is triggered only when the taxpayer acts with intent to 

evade tax,4 and that the statutory scheme and history 

compel this conclusion. 

4 In reaching its decision, the Claims Court noted 

that § 6501(a) defines the term “return” as “the return 

required to be filed by the taxpayer.” The Claims Court 

then incorporated this definition into § 6501(c)(1) and 

thereby concluded that the statutory language limited the 

suspension to cases where the taxpayer possesses fraudulent intent. BASR P’ship, 113 Fed. Cl. at 192 (“Because 

the language of 6501(a) is expressly limited to a return 

filed by the ‘taxpayer,’ the fraudulent intent referenced in 

I.R.C. § 6501(c) is by implication limited to fraud by the 

taxpayer.”). Although we disagree that this definition 

renders the meaning of § 6501(c)(1) clear and unambigu-

 

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BASR PARTNERSHIP v. US 11

We recognize that Section 6501(c)(1) is silent as to 

which party or parties must have the requisite fraudulent 

intent to suspend the three-year statute of limitations for 

pursuing a past underpayment. But that silence alone 

does not automatically compel the conclusion that Congress intended that actions by parties other than the 

taxpayer could suspend the three year statute of limitations. The government’s argument that we should simply 

focus on the fraudulent nature “of the return,” misses the 

mark. A fraud is only committed via submission of a 

document when a person acting with an intent to defraud 

makes a false entry on that document. The reference to a 

fraudulent return in § 6501(c) must be understood in 

context—by reference to the intent to evade tax language 

in that same statutory section. It is to interpreting that 

language which we must turn.

Under Supreme Court precedent, we cannot determine the meaning of the statutory language without

examining that language in light of its place in the statutory scheme. Indeed, the Supreme Court recently emphasized the importance of looking at the statutory context 

when determining whether a statutory provision has a 

plain and unambiguous meaning. Yates v. United States, 

135 S. Ct. 1074, 1081–82 (2015) (“Whether a statutory 

term is unambiguous, however, does not turn solely on 

dictionary definitions of its component words. Rather, 

‘[t]he plainness or ambiguity of statutory language is 

determined [not only] by reference to the language itself, 

[but as well by] the specific context in which that language is used, and the broader context of the statute as a 

whole.” (quoting Robinson v. Shell Oil Co., 519 U.S. at

341)); see also Barnhart, 534 U.S. at 450 (acknowledging 

that the inquiry into the plain meaning of a statute ceases 

ous, the inquiry into the plain meaning of this statute 

does not end here. 

 

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only after determining that this meaning is “coherent and 

consistent” with the statutory scheme). 

The other provisions in the Code relating to fraudulent conduct strongly suggest that the Code confines the 

“intent to evade tax” inquiry to the taxpayer’s intent. The 

precursor statute to § 6501(c)(1), in particular, confirms 

this understanding. These sources lead us to conclude 

that the reading of § 6501(c)(1) most “coherent and consistent” with the statutory scheme is one that limits the 

application of this provision to cases involving a false or 

fraudulent return where the taxpayer acted with the 

intent to evade tax.5 

A 

Section 6501(c)(1) is not the only Code provision that 

deals with the consequences of intentional tax evasion. A 

survey of other fraud-related provisions of the Code 

reveals that they contemplate fraud by the taxpayer, as 

opposed to by a person who merely contributed, albeit in a 

fraudulent way, to the filing of an inaccurate tax return. 

1 

Ordinarily, the IRS’s tax assessments are presumed 

correct, and the taxpayer has the burden of challenging 

this determination. United States v. Fior D’Italia, Inc., 

5 The Government also stresses the Supreme 

Court’s recognition, in Badaracco v. Commissioner, that 

“‘[s]tatutes of limitation sought to be applied to bar rights 

of the Government, must receive a strict construction in 

favor of the Government.’” 464 U.S. 386, 391 (1984) 

(quoting E.I. Dupont de Nemours & Co. v. Davis, 264 U.S. 

456, 462 (1924)). In contrast to the present case, there 

was no indication in Badaracco that the Court’s interpretation was inconsistent or incoherent in the greater 

statutory scheme. 

 

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536 U.S. 238, 242 (2002). When alleging taxpayer fraud, 

however, the IRS bears the burden. I.R.C. 7454(a). 

Section 7454(a) provides that “[i]n any proceeding involving the issue whether the petitioner has been guilty of 

fraud with intent to evade tax,” the IRS bears the burden 

of proving the element of fraud. Id. (emphasis added); see 

Badaracco, 464 U.S. at 399. Thus § 7454(a) indicates 

that, when pursuing fraudulent conduct, Congress considered the fraudulent intent of only the taxpayer, not of a 

third-party who advised or assisted the taxpayer. Section 

7454(a) specifically identifies the “petitioner’s,” or taxpayer’s fraud and, by its plain terms, neither this provision 

nor the other fraud-related Code provisions discussed 

below countenance fraud committed by a third party that 

infected the taxpayer’s return. 

The dissent suggests that § 7454(a)’s express reference to “the petitioner” indicates that Congress knew how 

to limit the referenced intent to that of the taxpayer. 

Dissenting Op. 4. The dissent attempts to further diminish the import of this statute by relying on an isolated 

sentence in the legislative history of this provision. Id. 

True enough, the legislative history explains that Congress shifted the burden of proving fraud from the taxpayer to the IRS in recognition of the “penal” nature of 

proceedings involving allegations of fraud. Id. (citing S. 

Rep. No. 70-960, at 38 (1928)). The legislative history 

continues, however, by specifying that “the commissioner 

should be placed in the position of party plaintiff and 

compelled to carry the burden of proving fraud whenever it 

is an issue in the case.” S. Rep. No. 70-960, at 38 (emphasis added). When read together with the statute’s reference to the petitioner’s intent to evade tax, the Senate 

Report reinforces the conclusion that, “whenever [fraud] is 

an issue in the case,” it was fraud by the taxpayer, not by 

anyone else, that Congress sought to police. Furthermore, 

Congress intended for the government to always carry the 

burden of proof for any fraud allegation. 

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Taken to its logical conclusion, the dissent’s interpretation, and that of the Government, would allow the IRS 

to shift back its statutory burden of proof—and force the 

taxpayer to disprove fraud—whenever the IRS alleges 

that a party other than the taxpayer committed fraud. 

Not only would that create an illogical, party-specific 

divergence when it comes to burdens of proof for fraud, 

the outcome would directly conflict with the abovereferenced congressional intent. See also Revenue Act of 

1928: Hearing on H.R. 1 Before the S. Comm. On Finance, 

70th Cong. 25 (1928) (testimony of Hugh Satterlee, 

Chairman, American Bar Association Committee on 

Federal Taxation) (criticizing how fraud allegations were 

handled at that time because “there ha[d] been cases . . . 

where in order to avoid a running of the statute of limitations the commissioner charged fraud without a scintilla 

of evidence,” placing taxpayers in the difficult position of 

having to disprove the fraud charged against them).

2 

Our conclusion is further supported by the Government’s interpretation of another fraud-related Code 

provision, I.R.C. § 6663(a), which requires the IRS to 

impose fraud penalties. Section 6663(a) provides that “[i]f 

any part of any underpayment of tax required to be shown 

on a return is due to fraud, there shall be added to the tax 

an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud.” I.R.C. 

§ 6663(a) (emphasis added). Like § 6501(c)(1), § 6663(a) 

does not specify whether the “fraud” that triggers the 

statutory remedy (§ 6501(c)(1): suspension of the statute 

of limitations; § 6663(a): 75 percent penalty) must be 

attributable to the taxpayer. Instead, in both provisions a 

form of the word “fraud” describes the tax return, rather 

than a person (§ 6501(c)(1): “fraudulent”; § 6663(a): “due 

to fraud”).

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Despite the similarities between § 6501(c)(1) and 

§ 6663(a), the Government contends that § 6663(a)’s fraud 

penalty applies only when the taxpayer, not a third party, 

commits fraud.6 Appellant’s Br. 48–49 (“[T]he 75-percent 

fraud penalty under I.R.C. § 6663 is intended to punish 

and deter wrongful conduct and should therefore be 

imposed on the taxpayer only if the taxpayer is culpable.” 

(citation and internal quotation marks omitted)). Yet, 

nothing in the statute or legislative history supports a 

result in which the IRS interprets § 6663(a), on the one 

hand, to allow it to penalize the taxpayer only for his own 

fraud, but interprets § 6501(c)(1), on the other hand, to 

prolong the IRS’s ability to penalize the taxpayer for 

fraud committed by others. We see no basis in the statutory language or legislative history of the two provisions 

to support the Government’s conflicting interpretations of 

who may be the source of the fraud that triggers these 

provisions.

3 

Finally, the Government’s broad interpretation of 

§ 6501(c)(1), if applied to other code provisions, could have 

unintended and unfortunate consequences. For example, 

it could prevent taxpayers from receiving an extension for 

payment of a tax deficiency under I.R.C. § 6161(b)(3). 

Section 6161 prohibits the IRS from granting an extension when the tax deficiency in question is “due to negligence, to intentional disregard of rules and regulations, or 

to fraud with intent to evade tax.” Like the other statuto6 The Government also argues that § 6663(a)’s 

fraud penalty is discretionary, and therefore the Government will not assess a penalty against an innocent taxpayer when it was a third party that caused the return to 

be fraudulent. That argument appears foreclosed by the 

language of § 6663(a), which states that the penalty “shall 

be added” in cases of fraud. 

 

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16 BASR PARTNERSHIP v. US

ry provisions discussed above, § 6161 does not expressly 

specify whether a third-party’s negligent or fraudulent 

conduct would prevent the taxpayer from receiving an 

extension. If the Government prevails in its view that 

§ 6501(c)(1) permits the IRS to look beyond the taxpayer 

for the requisite intent, the same would surely apply 

under § 6161. 

B 

To support its interpretation, the Government urges 

us to follow the lead of the Tax Court and the Second 

Circuit. According to the Government, each of these 

courts has previously decided that the fraud of a thirdparty may trigger the unlimited assessment period of 

§ 6501(c)(1). Neither of the cases helps the Government’s 

case. As discussed further below, we do not find the 

reasoning of the Tax Court persuasive and, contrary to 

the Government’s assertion, the Second Circuit has not 

actually decided this issue. 

1 

In the Tax Court case, Allen v. Commissioner, the IRS 

sought to invoke § 6501(c)(1)’s unlimited limitations 

period to assess tax on a tax return where the tax preparer claimed false and fraudulent deductions, unbeknownst 

to the taxpayer. 128 T.C. 37, 38 (2007). After conducting 

a limited analysis of the text of § 6501(c)(1), the Tax Court 

concluded that a tax preparer could supply the necessary 

intent to evade tax. Id. at 42. The Tax Court’s reasoning 

parallels the arguments presented by the Government in 

the present case, none of which alters our conclusion. As 

previously noted, we do not read the Supreme Court’s 

statements in Badaracco as requiring us to adopt the 

Government’s interpretation of the statute of limitations 

here. See id. at 40. 

In addition, although the Tax Court recognized how

this interpretation would affect the application of the 

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BASR PARTNERSHIP v. US 17

fraud penalty provision in § 6663(a), the court’s analysis 

did not consider how its interpretation conflicted with the 

IRS’s interpretations of Code provisions § 7454(a) and 

§ 6161, discussed above. See id. at 41. Ultimately, the 

Tax Court seemed assuaged by the fact that its interpretation of the statute would have no practical effect, as the 

IRS was not actually seeking the fraud penalty in that 

case. Id.; see also id. at 42 (“We finally note that respondent is seeking to collect only the deficiency in tax from 

petitioner. Respondent is not asserting the fraud penalty 

against petitioner.”). 

We are not so comforted. True enough, the Government now asserts that the fraud penalty should be “imposed on the taxpayer only if the taxpayer is culpable.” 

Appellant’s Br. 49. Nevertheless, if we accept the Government’s interpretation of § 6501(c)(1), the Government 

would be free to use that holding to impose the fraud 

penalty on taxpayers based on attenuated third-parties 

alleged to have the requisite fraudulent intent. In fact, 

§ 6663(a)’s “shall” language apparently requires the 

Government to pursue the fraud penalty in this situation. 

See I.R.C. § 6663(a) (“If any part of any underpayment of 

tax required to be shown on a return is due to fraud, there 

shall be added to the tax an amount equal to 75 percent of 

the portion of the underpayment which is attributable to 

fraud.” (emphasis added)). 

Finally, finding that it was not “unduly burdensome 

for taxpayers to review their returns for items that are 

obviously false or incorrect,” the Tax Court rejected the 

taxpayer’s argument that using the tax preparer’s fraud 

to suspend the limitations period under § 6501(c)(1) would 

unfairly burden the taxpayer. Id. at 41 (emphasis added). 

In this case, however, that reasoning does not apply. 

BASR, the taxpayer that signed the return, had a thirdparty accountant who prepared the return and yet another step removed from Mayer, the lawyer who structured 

the fraudulent tax vehicle. There are no allegations that 

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18 BASR PARTNERSHIP v. US

BASR, or even its accountant, knew or should have 

known that the tax return was false or incorrect, much 

less that it was “obviously” false or incorrect. Even if we 

were to find the Allen court’s reasoning persuasive, that 

decision would be distinguishable on the facts. 

For these reasons, the Tax Court’s reasoning in Allen

does not persuade us that § 6501(c)(1) necessarily encompasses situations where an attorney advising on financial 

transactions, but not involved with the preparation of the 

taxpayer’s return, acts with intent to evade tax. 

2 

The Government’s reliance on City Wide Transit, Inc. 

v. Commissioner is also misplaced. In that case, City 

Wide, the taxpayer, “concede[d] that . . . City Wide’s 

returns trigger the tolling provision if we find that [the 

tax return preparer] filed them with the intent to evade 

City Wide’s taxes.”). 709 F.3d 102, 107 (2d Cir. 2013). 

Thus, in City Wide, the Second Circuit confronted only the 

issue of whether the person who prepared the tax returns 

acted with the intent to evade taxes. 

In front of the tax court, City Wide argued that it 

was not liable for the returns [the tax return preparer] prepared where ‘(1) [City Wide] did not 

know of the preparer’s defalcations; [and] (2) [City 

Wide] did not sign or knowingly allow to be filed a 

false return . . . .’ The Commissioner anticipated 

these claims on appeal and rebutted them in its 

opening brief. City Wide, however, conceded these 

issues in its response brief. Moreover, each member of this panel asked City Wide whether it had 

intended this concession, and City Wide responded affirmatively to each of us in turn. Accordingly, we accept this concession without deciding 

whether certain factual situations might arise 

that sever the tax payer’s liability from the taxpreparer’s wrongdoing.

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BASR PARTNERSHIP v. US 19

City Wide, 709 F.3d at 107 n.3 (citations omitted). Contrary to the Government’s assertions, City Wide did not 

actually address the question of whether the tax preparer’s intent was sufficient to trigger § 6501(c)(1). Id. at 

107. Accordingly, City Wide has no bearing on the interpretation of § 6501(c)(1). 

II

Based on the statutory scheme and the absence of 

persuasive case law, we cannot agree with the Government that § 6501(c)(1) unambiguously permits the suspension of the limitations period when the taxpayer 

lacked fraudulent intent. The statutory scheme actually 

seems to point in the opposite direction. 

It is also worth noting that the Government’s interpretation is of relatively recent vintage. The IRS previously held the exact opposite position on the scope of 

§ 6501(c)(1) than the one it asserts in the present case. 

Namely, in a 2001 Field Service Advisory, the IRS concluded that, although “[s]ection 6501(c)(1) does not by its 

express language require that the ‘intent to evade tax’ be 

the personal intent of Taxpayer[,] [w]e nonetheless conclude that the fraudulent intent of the return preparer is 

insufficient to make section 6501(c)(1) applicable.” Field 

Service Mem. 200104006, 2001 WL 63261. The IRS 

obviously changed its position on the interpretation of 

§ 6501(c)(1) at some point between 2001 and 2005, when 

the IRS issued the deficiency notices that led to the Allen

litigation. It is unclear what prompted this change in the 

IRS’s position, given that Congress had not altered the 

text of § 6501(c)(1) in any meaningful way over the past 

century. See Revenue Act of 1921 § 250(d), Pub. L. No. 

67-98, 42 Stat. 227; see also Internal Revenue Code of 

1954 § 6501(c)(1), Pub. L. No. 83-591, 68A Stat. 803.

Indeed, reviewing the evolution of § 6501 from its 

origin as § 250(d) of the Revenue Act of 1918 is instructive 

on understanding the proper interpretation. The context 

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20 BASR PARTNERSHIP v. US

provided by this predecessor statute confirms that Congress intended that only the taxpayer’s intent to evade 

tax could trigger the unlimited limitations period that 

now appears in § 6501(c)(1). See Morrison-Knudsen 

Const. Co. v. Dir., Office of Workers’ Comp. Programs, 461 

U.S. 624, 632–33 (1983) (examining the history and 

structure of the Compensation Act to aid in interpretation 

of a single statutory provision).

The fraud penalty and the fraud suspension of the 

statute of limitations appeared together in § 250 of the 

Revenue Act of 1918. First, § 250(b) imposed certain 

penalties for underpayment when the underpayment 

resulted from the taxpayer’s negligence or intent to evade 

tax.

(b) As soon as practicable after the return is filed, 

the Commissioner shall examine it. . . . 

If the amount already paid is less than that which 

should have been paid, the difference shall . . . be 

paid upon notice and demand by the collector. In 

such case if the return is made in good faith and 

the understatement of the amount in the return is 

not due to any fault of the taxpayer, there shall be 

no penalty because of such understatement. If the 

understatement is due to negligence on the part of 

the taxpayer, but without intent to defraud, there 

shall be added as part of the tax 5 per centum of 

the total amount of the deficiency . . . . 

If the understatement is false or fraudulent with 

intent to evade the tax, then . . . there shall be 

added as part of the tax 50 per centum of the 

amount of the deficiency. . . . 

Revenue Act of 1918 § 250(b), Pub. L. No. 54-254, 40 Stat. 

1057 (emphases added). 

Section 250(b) explains that the IRS will impose certain penalties when an underpayment is due to fault of 

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BASR PARTNERSHIP v. US 21

the taxpayer. For example, under § 250(b) the IRS could 

not impose any penalty when an underpayment was “not 

due to any fault of the taxpayer.” If, however, the understatement was “due to negligence on the part of the 

taxpayer, but without intent to defraud,” the statute 

imposed a penalty equal to five percent of the underpayment. Then, the final paragraph of § 250(b) expands on 

the situations involving “intent to defraud” and explains 

that “[i]f the understatement [was] false or fraudulent 

with intent to evade the tax,” the IRS shall impose a 

penalty equal to fifty percent of the underpayment. In 

this way, the structure of § 250(b) and its use of “on the 

part of the taxpayer,” demonstrates that the determination of whether and to what extent a taxpayer would be 

penalized for underpayment is based on the taxpayer’s 

intent. The Government agrees that the fraud penalty 

provision in § 250(b) focuses solely on the taxpayer’s own 

intent. See Oral Argument at 27:52–28:11 available at 

http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2

014-5037.mp3 (“In subsection (b), Congress made it 

perfectly clear that they were talking about taxpayer’s 

intent.”).

Two subsections later, § 250(d) borrows the “false or 

fraudulent with intent to evade tax” language from 

§ 250(b) and uses it to describe situations when the normal period for assessing tax may be extended indefinitely. 

(d) Except in the case of false or fraudulent returns with intent to evade the tax, the amount of 

tax due under any return shall be determined and 

assessed by the Commissioner within five years 

after the return was due or was made, and no suit 

or proceeding for the collection of any tax shall be 

begun after the expiration of five years after the 

date when the return was due or was made. In 

the case of such false or fraudulent returns, the 

amount of tax due may be determined at any time 

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22 BASR PARTNERSHIP v. US

after the return is filed, and the tax may be collected at any time after it becomes due. 

Revenue Act of 1918 § 250(d). 

Although § 250(d) does not expressly identify whose 

“intent to evade the tax” could be used to extend the 

limitations period, the mirroring language in § 250(b), 

which is directed to the taxpayer’s intent, informs the 

interpretation of § 250(d). See Morrison-Knudsen, 461 

U.S. at 633 (“[W]e have often stated that a word is presumed to have the same meaning in all subsections of the 

same statute . . . .”). With this in mind, it becomes abundantly clear that the focal point of § 250 is the intent of 

the taxpayer. The taxpayer’s intent is central to determining whether to impose a penalty and whether the IRS 

may avail itself of an unlimited period to assess tax. As 

with § 6501(c)(1) and § 6663(a), discussed supra, the 

Government fails to explain why § 250(b) and § 250(d) 

should be understood differently.

Since 1918, the concepts within § 250 were separated 

and recodified into three statutory sections. See I.R.C. 

§§ 6663(a), 6664(c), 6501. However, nothing in the recodification and reorganization process altered the meaning of 

the terms “intent” and “fraudulent” as used in this predecessor statute. Section 6501(c)(1) maintains the same 

“false or fraudulent return with the intent to evade tax” 

language that § 250(d) originally used, as informed by 

§ 250(b). The Government has not pointed to any statutory text or legislative history of any of the subsequent 

reenactments that justifies expanding beyond the taxpayer the universe of parties who can supply the requisite 

intent to evade tax to trigger § 6501(c)(1).7 

7 In Allen, the Tax Court briefly mentioned § 6501’s 

origin in the Revenue Act of 1918, but rejected its probative value based on a statutory amendment passed by the 

 

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BASR PARTNERSHIP v. US 23

This statutory history of § 6501(c)(1) confirms and 

further supports the interpretation that limits to the 

taxpayer the fraudulent intent required to trigger suspending the three year statute of limitations. See 

Taniguchi v. Kan Pac. Saipan, Ltd., 132 S. Ct. 1997, 

2004–05 (2012) (examining the “statutory context” and 

the statute “[a]s originally enacted” to construe a statutory term).

Both parties identify policy reasons for and against 

limiting the application of § 6501(c)(1) to cases involving 

fraudulent conduct by the taxpayer, as opposed to other 

parties that may have a role in a fraudulent tax return. 

These policy arguments are best directed to Congress, 

which has the power to amend and update the Code to 

House Ways and Means Committee, which was ultimately 

rejected by the Senate Finance Committee. Allen v. 

Comm’r, 128 T.C. at 39 n.3. True enough, this amendment would have specified that the unlimited assessment 

period was triggered only by the taxpayer’s intent to 

evade tax. Id. But, “failed legislative proposals are a 

particularly dangerous ground on which to rest an interpretation of a prior statute.” Cent. Bank of Denver, N.A. 

v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 187 

(1994) (internal quotation marks and citation omitted). 

This is especially true where, as in the case of § 250(d), 

the legislature discards a proposed amendment without 

discussion. See Allen, 128 T.C. at 39 n.3. “Congressional 

inaction lacks persuasive significance because several 

equally tenable inferences may be drawn from such 

inaction, including the inference that the existing legislation already incorporated the offered change.” Cent. Bank 

of Denver, 511 U.S. at 187 (emphasis added) (citation 

omitted). 

 

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24 BASR PARTNERSHIP v. US

account for situations that may not have existed a century 

ago.8

CONCLUSION

The language, structure, and history of the Code leads 

us to the conclusion that the Claims Court properly 

interpreted § 6501(c)(1) as limiting the IRS to the threeyear limitations period unless the taxpayer possessed the 

intent to evade tax. 

AFFIRMED

8 To the extent the dissent is concerned with removing a tool from the IRS’s toolbox, however, we note that 

there are many ways the IRS can recoup tax underpayments from third parties who intentionally violate the law 

or encourage others to do so, not the least of which is 

through the criminal prosecution—with attendant restitution orders—of such persons. We note, moreover, that the 

IRS’s need to resort to the strained statutory interpretation it urges upon us was due in large measure to its own 

delays and failure to act despite full disclosure of all 

information necessary to assess the legitimacy of the 

transactions reported. Indeed, the government concedes 

that it took the IRS twenty-seven months from the date 

that Jenkens & Gilchrist disclosed its list of tax shelter 

clients (which included the Pettinatis) to the date it 

initiated an audit of BASR’s returns. See Appellant Br. 

23 (citing J.A. 1703-04; J.A. 202). And, the Tax Court has 

expressly found that a tax return like the Pettinatis was 

sufficient on its face to disclose all relevant aspects of the 

transactions about which the IRS now complains. See R 

& J Partners v. Comm’r, No. 7166-06, 2009 U.S. Tax Ct. 

LEXIS 45, at *4-5 (Tax Ct. Oct. 23, 2009). 

 

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United States Court of Appeals 

for the Federal Circuit ______________________ 

BASR PARTNERSHIP, WILLIAM F. PETTINATI, 

SR., Tax Matters Partner,

Plaintiffs-Appellees

v.

UNITED STATES,

Defendant-Appellant

______________________ 

2014-5037

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:10-cv-00244-SGB, Judge Susan G. 

Braden.

______________________ 

O’MALLEY, Circuit Judge, concurring.

It is undisputed that the Internal Revenue Service 

(“IRS”) ordinarily must assess taxes within three years 

after a return is filed. On appeal, the parties dispute 

which rules govern extension of that three year period for 

taxes that are attributable to allegedly fraudulent partnership items. The government contends that the general 

exception for fraudulent returns contained in Section 

6501(c)(1) of the Internal Revenue Code (“I.R.C”) applies

here and provides an unlimited assessment period, regardless of the absence of any fraudulent intent on behalf 

of the taxpayer. Appellees BASR Partnership and William F. Pettinati, Sr., Tax Matters Partner, (collectively, 

“BASR”) argue, to the contrary, that the specific rules set 

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2 BASR PARTNERSHIP v. US

forth in § 6229(c)(1) apply to allegedly fraudulent partnership returns and to tax attributable to allegedly false 

partnership items reported on the individual partners’ 

returns and, alternatively, that if § 6501(c)(1) controls, 

the time for assessing a tax under that provision may not 

be extended where the taxpayer acts with no intent to 

evade tax. I agree with BASR on both points. More 

specifically, I agree with both BASR and the majority 

that, under § 6501(c)(1), it is the taxpayer (or possibly his 

authorized agent) who must have the requisite “intent to 

evade tax” before the IRS is authorized to go beyond the 

three year statute of limitations in § 6501.1 And, because 

1 In addition to the many cogent points made by the 

majority, it is worth noting one practical reality. Mayer 

spent fifteen years conceiving of and promoting the use of 

the transactions at issue here, even employing them for 

himself. No doubt, his primary intent was to make money 

by providing legal advice regarding these transactions 

and their structure. His business would have had little 

success if he were not able to provide credible grounds 

upon which the clients to whom he pitched these transactions could rest assured that they were legal. Now, after 

years of maintaining the contrary—and years after his 

clients assumed their tax returns were beyond attack—

Mayer claims he personally intended that his clients 

would evade tax when he provided legal advice to them. 

On this basis alone, the government asserts it is free to 

pursue Mayer’s clients without the restraint of any limitations period because, the government argues, “[t]he 

source of the fraud” is irrelevant. Appellant Reply 4. But 

that position cannot be squared with either the statutory 

language or the purpose behind the statutes of limitations 

in both § 6501 and § 6229: finality. The IRS should have 

the ability to pursue fraud by taxpayers without undue 

restriction, and should be permitted to pursue third 

parties who engage in improprieties that ultimately result 

 

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BASR PARTNERSHIP v. US 3

the government concedes that the taxpayers here did not 

act with that intent, I agree that the IRS’s adjustments 

and penalty determinations were untimely. As a threshold matter, however, I believe that resolution of this 

appeal is governed by the specific rules Congress created 

to determine the limitations period for making assessments attributable to partnership items: § 6229. 

Where, as here, the government is arguing that the 

statute of limitations remains open solely because of 

alleged fraud on a partnership return, the special rules 

set forth in § 6229 for partnerships must apply. Although 

the majority suggests that our prior case law requires 

application of § 6501(c)(1) to the exclusion of § 6229(c)(1), 

I disagree. See Majority Op. at 6 n.1. As explained 

below, the plain language of the statutory scheme, canons 

of statutory interpretation, legislative intent, and judicial 

precedent all indicate that § 6229(c)(1) is the governing 

limitations period for the circumstances at issue here. To 

hold otherwise would permit the government to reconstruct the statutory scheme in a way that renders § 6229 

meaningless. Because application of § 6229 here leads to 

the same ultimate conclusion the majority reaches—

which is that the Court of Federal Claims correctly determined that the Final Partnership Administrative 

Adjustment (“FPAA”) was untimely—I join the majority 

opinion with the exception of footnote 1.

I. PLAIN LANGUAGE 

Turning first to the statutory language, § 6501(a) provides that, ordinarily, the IRS must assess taxes “within 3 

in the underpayment of taxes; indeed, it already has the 

tools to do both. It should not, however, be able to conflate the desire to accomplish those two goals by rendering meaningless the statute of limitations Congress put in 

place to assure finality for innocent taxpayers. 

 

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4 BASR PARTNERSHIP v. US

years after the return was filed.” 26 U.S.C. § 6501(a). 

Subsections 6501(c)-(m) contain a number of exceptions to 

the standard three year period, including an indefinite 

extension permitting the IRS to assess tax at any time in 

the event of a “false or fraudulent return with the intent 

to evade tax.” I.R.C. § 6501(c)(1). But to determine 

whether the standard three year limitations period is 

extended “in the case of partnership items,” § 6501(n)(2) 

cross references § 6229. I.R.C. § 6501(n)(2) (“For extension of period in the case of partnership items (as defined 

in section 6231(a)(3), see section 6229.”)). 

Section 6229 is one of several provisions that Congress added to the Code when it enacted the Tax Equity 

and Fiscal Responsibility Act of 1982 (“TEFRA”). As the 

majority recognizes, TEFRA was designed to coordinate 

procedures “for determining the proper treatment of 

‘partnership items’ at the partnership level in a single, 

unified audit and judicial proceeding.” Alpha I, L.P., ex 

rel. Sands v. United States, 682 F.3d 1009, 1019 (Fed. Cir. 

2012).2 The parties agree that whether a partnership 

return is fraudulent such that an extended statute of 

limitations period should apply is a “partnership item.” 

See Prati v. United States, 603 F.3d 1301, 1307 (Fed. Cir. 

2010) (“Based on Keener, we hold that the statute of 

limitations issue is a partnership item and that the Pratis 

and the Deegans were required to raise the limitations 

issue in the partnership-level proceeding prior to either 

entering settlement or stipulating to judgment in the Tax 

Court.”); Keener v. United States, 551 F.3d 1358, 1366 

(Fed. Cir. 2009) (“[T]he nature of a partnership’s transac2 A “partnership item” is “any item required to be 

taken into account for the partnership’s tax year” if the 

applicable regulations provide that the item “is more

appropriately determined at the partnership level than at 

the partner level.” 26 U.S.C. § 6231(a)(3).

 

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BASR PARTNERSHIP v. US 5

tion—and, specifically, whether a partnership transaction 

is a ‘sham’—is a partnership item.”). 

By its terms, § 6229 governs the limitations period for 

making assessments attributable to partnership items 

and generally allows the IRS three years from the date 

that a partnership tax return is filed to assess tax that is 

attributable to any partnership item. I.R.C. § 6229(a). 

Looking to the statutory text, we have explained that: 

Sections 6501 and 6229 operate in tandem to provide a single limitations period. When an assessment of tax involves a partnership item or an 

affected item, section 6229 can extend the time 

period that the IRS otherwise has available under 

section 6501 to make that assessment. Thus, the 

limitations period is the period defined by section 

6501, as extended when appropriate by section 

6229.

Prati, 603 F.3d at 1307 (internal citations omitted). 

Section 6229 contains several exceptions that can extend the period for assessing tax that is attributable to 

partnership items. In particular, § 6229(c) contains a 

“[s]pecial rule in case of fraud” which: (1) applies only if at 

least one partner has “the intent to evade tax;” and

(2) takes into consideration each individual partner’s level 

of participation in the partnership return and, thus, in 

any fraud. I.R.C. § 6229(c)(1). For partners who sign or 

participate in the preparation of a partnership return 

which includes a false or fraudulent item, the tax may be 

assessed at any time. I.R.C. § 6229(c)(1)(A). In the case 

of all other partners, § 6229(c)(1)(B) gives the IRS six 

years, instead of three, to assess tax attributable to partnership items. For non-participating partners, the IRS is 

given this extra three year period without the burden of 

proving any “intent to evade tax” on behalf of those partners. 

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6 BASR PARTNERSHIP v. US

Other portions of §§ 6501 and 6229 likewise support 

the conclusion that § 6229 governs extension of the time 

in which the IRS can assess taxes attributable to partnership items. For example, the only subsection of § 6229 

that specifically identifies “[c]oordination with section 

6501” provides that any extension by agreement between 

the IRS and the taxpayer under § 6501(c)(4) “shall apply 

with respect to the period described in subsection (a) only 

if the agreement expressly provides that such agreement 

applies to tax attributable to partnership items.” I.R.C. 

§ 6229(b)(3). By virtue of this statutory language, “normal extensions of a partner’s personal limitations period 

pursuant to section 6501(c)(4) are NOT applicable to 

extend the period of limitations with respect to partnership items UNLESS the agreement expressly so provides.” Rhone-Poulenc Surfactants & Specialties, L.P. v. 

Comm’r, 114 T.C. 533, 567 (2000) (Parr, J., dissenting). 

Congress’ decision to incorporate § 6501 into one section 

of § 6229 demonstrates that § 6501 does not control the 

time in which the IRS has to assess taxes attributable to 

partnership items without consideration of the specific 

rules set forth in § 6229. And, if Congress had wanted to 

add a provision for coordination with § 6501(c) into 

§ 6229(c), it could have done so.

 Read in its entirety, the plain language of the statute 

makes clear that § 6229 governs whether and for how 

long the standard three-year period the IRS has to assess 

tax may be extended for tax attributable to partnership 

items. The government does not dispute that the alleged 

fraud on BASR’s return is a “partnership item” or that the 

allegedly fraudulent items on the partners’ returns flow 

from that partnership item.3 Accordingly, § 6229(c)(1) 

3 The government posits that § 6229(c)(1) should

not apply here because “the United States does not rely on 

BASR’s fraudulent returns, but rather on the Pettinatis’ 

 

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BASR PARTNERSHIP v. US 7

dictates whether the standard three-year assessment 

period is extended due to alleged fraud on a partnership 

return. 

II. CANONS OF STATUTORY INTERPRETATION

Reading § 6501(c)(1) to govern how long the limitations period is extended for partnership items violates at 

least two canons of statutory interpretation. The first is 

that “the specific governs the general.” See RadLAX 

Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 

2065, 2070-71 (2012). As noted, this is a partnership 

proceeding and § 6229(c)—entitled a “[s]pecial rule in case 

of fraud”—contains specific rules extending the statute of 

limitations for fraudulent items on partnership returns. 

fraudulent returns, as the basis for an unlimited limitations period.” Appellant Br. 59. According to the government, § 6501(c)(1) is the relevant exception to the 

limitations period with respect to a fraudulent taxpayer 

return. In its Answer to BASR’s Complaint, however, the 

government asked for judgment in its favor “determining 

that the adjustments to the partnership returns of BASR 

Partnership made by the FPAA are correct.” Answer at 8, 

BASR P’ship v. United States, No. 1:10-cv-244 (Fed. Cl. 

Aug. 10, 2010), ECF No. 11. And, it alleged that “the 

statute of limitations for assessing tax remains open in 

this case pursuant to 26 U.S.C. §§ 6501(c)(1) 

and 6229(c)(1).” Id. at 6 (emphasis added). As BASR 

points out, it is clear that the only reason the government 

believes the partners’ returns were fraudulent is because 

of the alleged fraud on the partnership return. And, it is 

clear that, under TEFRA, no partnership item ever appears on a partner’s return except as dictated by the 

partnership return itself. The government does not claim 

that the individual partners/taxpayers here committed 

any fraud, either in connection with the partnership 

return or in connection with their own individual returns. 

 

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8 BASR PARTNERSHIP v. US

Where, as here, the government is arguing that the 

statute of limitations remains open solely because the 

item on the partner’s individual return flows from BASR’s 

allegedly fraudulent partnership return, the rules applicable to partnerships should apply. Congress created a 

detailed and comprehensive scheme to govern how partnership returns are to be processed and addressed. As 

part of that scheme, the tax is paid only on the partner’s 

individual returns, but its tax treatment is determined 

and assessed at the partnership level. 

Perhaps more importantly, the government’s reading 

of the statutory scheme renders § 6229(c)(1) superfluous, 

violating “the well-settled rule of statutory construction 

that all parts of a statute, if at all possible, are to be given 

effect.” Weinberger v. Hynson, Westcott & Dunning, Inc., 

412 U.S. 609, 633 (1973). As noted, § 6229(c)(1)(A) gives 

the IRS unlimited time to assess tax “attributable to any 

partnership item” against partners who, “with the intent 

to evade tax,” signed or participated in the preparation of 

a partnership return which includes a false or fraudulent 

item. If the government were correct that a fraudulent 

partnership return can cause the partners’ returns to be 

fraudulent within the meaning of § 6501(c)(1), then in any 

case where § 6229(c)(1)(A) would apply, § 6501(c)(1) would 

also apply to give the IRS an unlimited time to assess the 

same tax. Section 6229(c)(1)(A) would have no independent meaning because the fraud that satisfies that provision would always also satisfy § 6501(c)(1). Likewise, if a 

fraudulent partnership item reported on an individual 

partner’s return makes that partner’s return fraudulent 

under § 6501(c)(1)—regardless of whether that partner 

acted with an intent to evade tax—then the six year 

limitation contemplated in § 6229(c)(1)(B) becomes meaningless. Under what possible circumstances would that 

six year period ever apply? 

Although this court has not specifically addressed the 

interpretation of and interplay between § 6501(c)(1) and 

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BASR PARTNERSHIP v. US 9

§ 6229(c)(1), the Tax Court sitting as a full court explained the relationship between these statutory provisions in Rhone-Poulenc Surfactants & Specialties, L.P. v. 

Commissioner, 114 T.C. 533 (2000). There, the taxpayer 

explained that § 6229(c)(1)(A) “provides an unlimited 

section 6229(a) assessment period for deficiencies attributable to partnership items and affected items of a 

partner who, acting with intent to evade taxes, signs or 

participates in the preparation of a false or fraudulent 

partnership return.” Id. at 547. The taxpayer argued 

that § 6229 provides a stand-alone statute of limitations 

for taxes attributable to partnership items and that 

§ 6501 does not factor into the analysis. Id. at 537. 

According to the taxpayer, § 6229(c)(1)(A) would be “superfluous if the controlling statute of limitations on assessments of deficiencies attributable to partnership 

items and affected items is contained in section 6501, 

because section 6501(c)(1) contains an identical unlimited 

assessment period.” Id. at 547. 

The Tax Court found that § 6229(c)(1) retained independent meaning, however, because it “deals specifically 

with partnership returns,” and, “[u]nlike section 

6501(c)(1), section 6229(c)(1) applies only to tax attributable to partnership items or affected items.” Id. at 548-49. 

The court explained that the time to assess tax against an 

individual partner could remain open under § 6501(c)(1) 

based on that partner’s fraud unrelated to the partnership 

return:

Section 6501(c)(1) would literally apply to a partner whose individual or corporate return was 

fraudulent regardless of whether the partnership 

return was fraudulent. Section 6501(c)(1) allows 

for an unlimited period for assessing any tax for 

the year in which a fraudulent return was filed 

regardless of whether some of the tax may be due 

to nonfraudulent items. Thus, if section 6501(c)(1) 

applies to a particular taxable year, it clearly 

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10 BASR PARTNERSHIP v. US

permits an open-ended period for any assessment 

of tax even if part of the assessment was based on 

nonfraudulent partnership items.

Id. at 548 (internal citations omitted). In other words, the 

Tax Court has taken the position that § 6501(c)(1) applies 

in the partnership context only when the partner’s return 

is fraudulent for reasons independent from the partnership return. See id. The government’s suggestion that a 

fraudulent partnership return makes its partners’ returns 

fraudulent collapses the distinction between § 6501(c)(1) 

and § 6229(c)(1)(A) because fraud that would trigger 

§ 6229(c)(1)(A) would, under the government’s theory, 

always cause § 6501(c)(1) to apply. And, as the Tax Court 

noted, unlike § 6501(c)(1), § 6229(c)(1)(B) “provides a 

separate 6-year period for assessment of taxes for partners who did not sign or participate in the preparation of 

the fraudulent return.” Id. at 549. 

Read together, therefore, § 6229(c)(1) and § 6501(c)(1) 

reveal that the fraud on an individual partner’s return 

that can keep that partner’s statute of limitations open 

under § 6501(c)(1) must be separate from any fraud on or 

flowing from the partnership return. See id at 548-49 

(noting that “section 6229(c)(1)(A) applies to tax attributable to partnership items if it is the signer’s own taxes 

that will be reduced, but that possible limited overlap 

with section 6501(c)(1) is insufficient for us to conclude 

that section 6229(c)(1) is superfluous, given the disjunction between intent and underpayment contained in 

section 6229(c)(1)”). The government’s theory that fraud 

on a partnership return renders the partners’ individual 

returns fraudulent and thus subject to § 6501(c)(1) would 

write § 6229(c)(1) out of the statute. 

III. CONGRESSIONAL INTENT

In addition to rendering § 6229(c)(1) meaningless, the 

government’s construction of the statutory scheme violates Congressional intent. The express language of 

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BASR PARTNERSHIP v. US 11

§ 6229(c)(1) reflects Congress’ intent that at least one 

partner in a partnership must intend to evade tax for the 

partnership return to be considered fraudulent for purposes of extending the statute of limitations. See I.R.C. 

§ 6229(c)(1) (“If any partner has, with the intent to evade 

tax, signed or participated directly or indirectly in the 

preparation of a partnership return which includes a false 

or fraudulent item,” the IRS has additional time to assess 

tax attributable to that item depending on the partner’s 

level of involvement). Indeed, this court has recognized 

that “[a] purpose of the ‘intent to evade taxes’ requirement [in Section 6229(c)(1)] is to protect limited partners 

from an extension of the Commissioner’s time for assessing additional taxes against them where the partner 

who signed the return did not know that it contained false 

items.” Transpac Drilling Venture v. United States, 83 

F.3d 1410, 1415 (Fed. Cir. 1996). 

The statutory language further reveals Congress’ intent that the IRS has only an additional six years to 

assess tax attributable to partnership items against 

partners who were not involved in preparing the fraudulent partnership return. See I.R.C. § 6229(c)(1)(B). If the 

government were correct that § 6501 controls, then the 

IRS could bypass the six-year limitation period in 

§ 6229(c)(1)(B) and rely solely on § 6501(c)(1) to extend 

indefinitely the time that the IRS has to assess tax 

against any partner. It would make no sense for Congress 

to enact § 6229(c)(1)(B) to extend the statute of limitations from three to six years if the government is right

that the same exact conduct permits the IRS to assess the 

tax “at any time” under § 6501(c)(1). 

Given this statutory structure, § 6229(c)(1) applies to 

extend the time that the IRS has to assess tax attributable to partnership items against all partners depending 

on their level of involvement with the return, whereas 

§ 6501(c)(1) extends the time the IRS has to assess tax 

against a specific partner based on fraud that is not 

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12 BASR PARTNERSHIP v. US

attributable to partnership items. See Rhone-Poulenc, 

114 T.C. at 548-49. To hold otherwise would contravene 

Congress’ express intent. 

IV. APPLICABLE CASE LAW 

Finally, courts, including this one, have applied 

§ 6229(c)(1)—not § 6501(c)(1)—to determine the statute of 

limitations applicable where the partnership’s tax return 

contains false or fraudulent partnership items. See 

Transpac, 83 F.3d at 1414-15 (applying Section 6229(c)(1) 

where one of the partners signed the partnership’s return 

“which reported false losses” knowing “that the limited 

partners would use those losses to reduce their own 

taxes”); see also River City Ranches v. Comm’r, 313 F. 

App’x 935, 937 (9th Cir. 2009) (“Section 6229(c)(1) requires consideration of the intent of the partner who 

participated in the preparation of the partnership returns 

. . . . Whether the individual partners intended fraud on 

their individual returns has no bearing on a partnership 

level proceeding.”). 

The government cites our decision in AD Global Fund, 

LLC v. United States, 481 F.3d 1351 (Fed. Cir. 2007) for 

the proposition that § 6229 “does not create an independent statute of limitations,” but instead “creates a minimum period during which the period for tax assessments 

for partnership items may not end.” Id. at 1354 (internal 

citation and quotation marks omitted). There, the taxpayer argued that § 6229(a) “provides a separate statute 

of limitations for tax assessments on partnership items 

and that the FPAA was untimely under § 6229(a).” Id. at 

1353. We rejected that argument, finding that “Section 

6501 explicitly provides that it applies to any tax imposed 

by the title, which would include tax imposed for partnership items.” Id. at 1354. We subsequently reiterated 

that: (1) Sections 6501 and 6229 work together to provide 

a “single limitations period”; and (2) when a tax assessment “involves a partnership item or an affected item, 

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BASR PARTNERSHIP v. US 13

section 6229 can extend the time period that the IRS 

otherwise has available under section 6501 to make that 

assessment.” Prati, 603 F.3d at 1307.

The Court of Federal Claims and the majority here 

read AD Global to mean that § 6501—not § 6229—

controls our analysis with respect to the timeliness of the 

FPAA. See BASR P’ship v. United States, 113 Fed. Cl. 

181, 192 (2013); Majority Op. at 6 n.1. To be sure, AD 

Global held that § 6229(a) creates a minimum period of 

limitations for partnership items and that minimum 

period “may expire before or after the maximum period 

provided in § 6501.” AD Global, 481 F.3d at 1354. But 

AD Global was focused on the interplay between § 6501(a) 

and § 6229(a); it had no occasion to consider the relationship between § 6501(c) and § 6229(c). Unlike the taxpayer in AD Global, BASR does not argue that § 6229 creates 

an independent statute of limitations for partnership 

items that can cut short the standard three-year period 

provided in § 6501(a). Instead, it maintains that 

§ 6501(a) creates the standard time period for assessing 

tax, while § 6229 contains special rules that govern when 

that time period can be extended for tax treatment of 

partnership items. This approach—which I believe is 

consistent with the statutory scheme—remains true to 

our prior indication that “Sections 6501 and 6229 operate 

in tandem” while at the same time recognizing that 

Congress expressly created more detailed rules for fraudulent partnership returns in § 6229(c)(1). See Prati, 603 

F.3d at 1307.4 

As applied here, because the government has not alleged that any partner acted with intent to evade tax, the 

standard three year limitations period contained in 

§ 6229(a) applies. And, because BASR filed the partner4 To the extent that our decision in AD Global forecloses this approach, I believe it should be revisited. 

 

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14 BASR PARTNERSHIP v. US

ship tax returns at issue in October 2000, the time the 

IRS had to assess tax attributable to partnership items 

expired in October 2003, more than six years before the 

IRS issued the FPAA to BASR in 2010. See BASR, 113 

Fed. Cl. at 184-85. Accordingly, the time the IRS had to 

assess additional tax against BASR’s admittedly innocent 

partners expired before the IRS issued the FPAA that 

gave rise to this case. 

V. CONCLUSION

Although I agree that the decision in this case is correct if we are required to apply § 6501, and therefore 

concur in the court’s judgment, I do not agree that § 6501

is controlling in these circumstances, where the allegedly 

fraudulent items flow only from a partnership return. For 

the reasons discussed above, I believe that § 6229 works 

in conjunction with § 6501, and that, in the partnership

context, § 6229(c)(1) contains the rules that dictate when 

fraudulent items on a partnership return extend the time 

the IRS has to assess tax attributable to partnership 

items. Section 6501(c) governs the statute of limitations 

as to all other items on an individual partner’s return, but 

not the partnership items at issue here. 

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United States Court of Appeals 

for the Federal Circuit ______________________ 

BASR PARTNERSHIP, WILLIAM F. PETTINATI, 

SR., Tax Matters Partner,

Plaintiffs-Appellees

v.

UNITED STATES,

Defendant-Appellant

______________________ 

2014-5037

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:10-cv-00244-SGB, Judge Susan G. 

Braden.

______________________ 

PROST, Chief Judge, dissenting.

The Internal Revenue Service (“IRS”) normally has 

three years after a return is filed in which to assess tax, 

but under the Internal Revenue Code (“I.R.C.” or “Code”)

§ 6501(c)(1) that period is extended indefinitely “in the 

case of a false or fraudulent return with the intent to 

evade tax.” The majority construes § 6501(c)(1) to encompass only the intent of the taxpayer and not the intent of 

the taxpayer’s hired tax professional. In my view, the 

statute means what it says: the three-year limitation does 

not apply if the intent to evade tax manifests in a fraudulent return.

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2 BASR PARTNERSHIP v. US

The majority eschews the statute’s plain meaning 

based on “[a] survey of other fraud-related provisions of 

the Code,” which “contemplate fraud by the taxpayer” 

only. Majority Op. at 12 (emphasis omitted). But all this 

survey reveals is that Congress can write a provision that 

explicitly applies only to taxpayer fraud. Some Code 

sections concern only the taxpayer’s intent to evade tax, 

and other rules also encompass the intent of the taxpayer’s hired professionals. In the case of § 6501(c)(1), Congress did not limit the statute to the taxpayer’s intent. 

Thus, I respectfully dissent.1

I. PLAIN MEANING

I begin, as I must, with the standard for construing 

§ 6501(c)(1): “Statutes of limitation sought to be applied to 

bar rights of the Government, must receive a strict construction in favor of the Government.” E.I. Dupont de 

Nemours & Co. v. Davis, 264 U.S. 456, 462 (1924). As a 

corollary, “limitations statutes barring the collection of 

taxes otherwise due and unpaid are strictly construed in 

favor of the Government.” Badaracco v. Comm’r, 464 U.S. 

386, 392 (1984) (quoting Lucia v. United States, 474 F.2d 

565, 570 (5th Cir. 1973)). The majority brushes this 

standard aside by distinguishing the circumstances of 

Badaracco in a footnote. Majority Op. at 12 n.5. But the

distinction is irrelevant—Badaracco states a general 

standard “long ago pronounced” by the Supreme Court 

and reiterated in every case since. Badaracco, 464 U.S. at 

391; see Dupont, 264 U.S. at 462; Lucas v. Pilliod Lumber 

Co., 281 U.S. 245, 249 (1930).

With this pro-government rule of construction in

mind, I “naturally turn first to the language of the stat1 On the threshold issue of which statute applies, I 

conclude that § 6501(c)(1), not § 6229(c)(1), is the relevant 

law. I therefore join footnote 1 of the majority opinion.

 

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BASR PARTNERSHIP v. US 3

ute.” Badaracco, 464 U.S. at 392. I.R.C. § 6501(a) states 

the general statute of limitations: “Except as otherwise 

provided in this section, the amount of any tax imposed by 

this title shall be assessed within 3 years after the return 

was filed . . . .” Subsection c provides an exception: “In 

the case of a false or fraudulent return with the intent to 

evade tax, the tax may be assessed, or a proceeding in 

court for collection of such tax may be begun without 

assessment, at any time.” I.R.C. § 6501(c)(1). 

The key phrase is “a false or fraudulent return with 

the intent to evade tax.” Significantly, the statute’s plain 

language does not limit the intent to evade tax to only the 

taxpayer’s intent. Rather, the “return” possesses “the 

intent to evade tax.” Therefore, the obvious construction 

of the statutory text is that the intent to evade tax must 

be present in a false or fraudulent return, irrespective of 

who possesses that intent. This plain reading of the 

statute is bolstered by the pro-government canon of 

construction for statutes of limitations. See Badaracco, 

464 U.S. at 391–92. 

I need proceed no further. Indeed, the “cardinal canon” of statutory construction is that “courts must presume 

that a legislature says in a statute what it means and 

means in a statute what it says there. When the words of 

a statute are unambiguous, then, this first canon is also 

the last: judicial inquiry is complete.” Conn. Nat’l Bank v. 

Germain, 503 U.S. 249, 253–54 (1992). The text of 

§ 6501(c)(1) places no limits on who must have the intent 

to evade tax. The statute is unambiguous.

II. OTHER TAX CODE SECTIONS

The majority’s response to the plain meaning of the 

statute is to “examin[e] that language in light of its place 

in the statutory scheme.” Majority Op. at 11. Of course, 

the context in which a phrase appears adds to its meaning. See Robinson v. Shell Oil Co., 519 U.S. 337, 341 

(1997) (“The plainness or ambiguity of statutory language 

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4 BASR PARTNERSHIP v. US

is determined by reference to the language itself, the 

specific context in which that language is used, and the 

broader context of the statute as a whole.”). I have already considered the context of “intent to evade tax” 

above in discussing the surrounding language in 

§ 6501(c)(1) and in § 6501 generally. The majority goes 

further, and searches the entire tax code for other mentions of “the intent to evade tax.” In fact, the sections 

cited by the majority for “context” are not even in the 

same chapter as § 6501. This is not analogous to the 

three cases cited by the majority for the importance of 

analyzing statutory language in context. In all three 

cases, the Supreme Court considered only closely proximate statutory provisions.

Even so, a review of the other Code sections discussed 

by the majority reveals only that Congress knows how to 

explicitly limit the intent to evade tax to the taxpayer. 

Adopting my interpretation of “the intent to evade tax” 

does not cause the phrase to be used inconsistently. For 

example, take I.R.C. § 7454(a), on which the majority 

relies. Section 7454(a) states that “[i]n any proceeding 

involving the issue whether the petitioner has been guilty 

of fraud with intent to evade tax, the burden of proof in 

respect of such issue shall be upon the Secretary.” I.R.C. 

§ 7454(a) (emphasis added). Unlike § 6501(c)(1), § 7454(a) 

is expressly limited to cases where the government alleges 

that the taxpayer had fraudulent intent. The reason for 

this limitation is simple: before § 7454(a) was enacted in 

1928, the taxpayer had to prove that he did not act with 

intent to evade tax. Congress shifted the burden of proof 

on taxpayer fraud to the government because 

“[p]roceedings before the board involving that issue in 

some respects resemble penal suits.” S. Rep. 960, 70th 

Cong., 1st Sess., at 38 (May 1, 1928). This concern does 

not apply if another’s alleged intent to evade tax is at 

issue. Therefore, if anything, § 7454(a) demonstrates that 

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BASR PARTNERSHIP v. US 5

payer’s intent in specific circumstances. Without such 

express limitation, the intent to evade tax encompasses 

others who cause a return to be fraudulent.

Consider also § 6229(c)(1), which involves the statute 

of limitations for assessing tax to partnerships. Section 

6229(c)(1) applies “[i]f any partner has, with the intent to 

evade tax, signed or participated directly or indirectly in 

the preparation of a partnership return which includes a 

false or fraudulent item . . . .” (Emphasis added). As in 

§ 7454(a), Congress expressly restricted the intent to 

evade tax to a specific individual—in the case of 

§ 6229(c)(1), a “partner.” Again, this shows that Congress 

can limit “the intent to evade tax” to the taxpayer’s intent 

if it so wishes. If “the intent to evade tax” encompasses 

only the taxpayer’s intent—as advocated by the majority—the restrictions to “the petitioner” in § 7454(a) and to 

“any partner” in § 6229(c)(1) would be superfluous. The 

majority’s construction thus violates the “cardinal principle of statutory construction that courts must give effect, 

if possible, to every clause and word of a statute . . . .” See 

Williams v. Taylor, 529 U.S. 362, 364 (2000). 

The majority also places heavy reliance on § 250 of 

the Revenue Act of 1918. Majority Op. at 19–23. First, 

the import of a nearly 100 year old statute on the meaning of a different statute today is slight. Second, § 250 

falls into the same pattern outlined above—when Congress wants to limit intent elements to the taxpayer’s 

intent, it does so expressly. Section 250(b), which outlined penalties applicable to erroneous returns, stated in 

part: “In such case if the return is made in good faith and 

the understatement of the amount in the return is not due 

to any fault of the taxpayer, there shall be no penalty 

because of such understatement.” Revenue Act of 1918 

§ 250(b), Pub. L. No. 54-254, 40 Stat. 1057 (emphasis 

added). Section 250(b) went on to provide a five percent 

penalty “[i]f the understatement is due to negligence on 

the part of the taxpayer, but without intent to defraud,” 

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6 BASR PARTNERSHIP v. US

and a fifty percent penalty “[i]f the understatement is 

false or fraudulent with intent to evade the tax . . . .” Id. 

(emphasis added). This section, which referenced the 

taxpayer twice, assigned tax penalties to the taxpayer 

based only on the taxpayer’s intent.

On the other hand, the statute of limitations, § 250(d), 

did not mention the taxpayer. Section 250(d) stated, 

“[e]xcept in the case of false or fraudulent returns with 

intent to evade the tax, the amount of tax due under any 

return shall be determined and assessed by the Commissioner within five years after the return was due or was 

made . . . .” Id. (emphasis added). Therefore, because 

§ 250(d) did not limit the intent to evade tax to the taxpayer’s intent as in § 250(b), the statute of limitations did 

not apply to fraudulent returns involving the intent to 

evade tax generally.

The majority interprets § 250 differently. According 

to the majority, because only the taxpayer’s intent is at 

issue in § 250(b), the general reference to “intent to evade 

the tax” in § 250(d) must also be limited to the taxpayer’s 

intent. However, I do not find this conclusion to be 

“abundantly clear.” Majority Op. at 22. It is equally 

reasonable—if not more reasonable—to assume that the 

intent inquiry is restricted to the taxpayer’s intent only 

where the statutory subsection explicitly refers to the 

taxpayer’s intent, as in § 250(b). Granted, § 250(b) is 

certainly relevant context for construing § 250(d). But 

given that Congress did not restrict the intent element in 

§ 250(d) to the taxpayer’s intent—as it did in § 250(b)—

the requisite intent to evade the tax could be found in 

others, such as tax professionals hired by the taxpayer. 

Finally, if there is any remaining doubt, we must turn to 

the standard for construction, which requires that we 

strictly construe § 6501(c)(1) in favor of the government. 

See Badaracco, 464 U.S. at 392.

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BASR PARTNERSHIP v. US 7

III. PURPOSE OF § 6501(c)(1)

Indeed, it makes perfect sense to impose penalties on

the taxpayer only when the taxpayer intended to evade 

the tax, while at the same time allowing the IRS to collect 

taxes based on an understated fraudulent return at any 

time. Given that the taxpayer must pay any tax penalty, 

Congress may reasonably only intend to penalize the 

taxpayer when the taxpayer is culpable. See I.R.C. 

§ 6664(c)(1) (excepting taxpayers from the penalty if 

“there was a reasonable cause” for the underpayment and 

they “acted in good faith”). A different rationale applies 

to the statute of limitations. Excepting fraudulent returns from the statute of limitations does not penalize the 

taxpayer because the taxpayer must only pay the taxes it 

properly owed. It is thus inconsequential whether the 

taxpayer perpetrated the fraud or whether another individual is responsible. Moreover, “fraud cases ordinarily 

are more difficult to investigate than cases marked for 

routine tax audits. Where fraud has been practiced, there 

is a distinct possibility that the taxpayer’s underlying 

records will have been falsified or even destroyed.” Badaracco, 464 U.S. at 398. Thus, the lack of a statute of 

limitations for fraudulent returns with intent to evade tax 

in § 6501(c)(1) (and § 250(d)) reasonably compensates the 

government for the unique difficulty involved in discovering fraud and determining the taxpayer’s true tax liability.2

Finally, this case matters. The majority removes a 

key tool from the IRS’s toolbox for policing the submission 

of fraudulent tax returns. Nearly all taxpayers with 

significant sums at issue employ a tax preparer. Often, 

the IRS uncovers fraudulent returns by discovering the 

2 Indeed, in this case the government contends that 

numerous additional transactions were performed purely 

“to throw off suspicion.” See Appellant’s Br. 45–47.

 

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8 BASR PARTNERSHIP v. US

tax professionals who perpetrate fraud. It is not an easy 

matter to discover fraud, fully investigate it, and determine the proper tax liability within three years. See id. 

It is even more difficult to prove that a taxpayer knew of a 

tax professional’s fraud and acted with intent to evade 

tax. Nonetheless, the majority ties the IRS’s hands 

behind its back—without impossibly speedy sleuthing or 

smoking gun evidence, the IRS cannot collect taxes owed 

and the perpetrators make away scot free.

IV. CONCLUSION

To summarize, the majority asserts that “the intent to 

evade tax” in § 6501(c)(1) concerns only the taxpayer’s 

intent because Congress—using different language in 

different context in other chapters of the Code—expressly 

limits the intent to evade tax to the taxpayer’s intent. I

disagree. Congress “says in a statute what it means and 

means in a statute what it says there.” Conn. Nat’l Bank, 

503 U.S. at 253–54. Here, Congress says that § 6501(c)(1) 

applies “in the case of a false or fraudulent return with 

the intent to evade tax.” I.R.C. § 6501(c)(1). Nowhere 

does Congress limit § 6501(c)(1) to only those circumstances where the taxpayer has the intent to evade tax. 

In this case, it is undisputed that Mayer, the taxpayer’s 

lawyer, acted with the intent to evade tax and caused the 

return to be fraudulent. Accordingly, I conclude that the 

BASR return is fraudulent “with the intent to evade tax,” 

such that “the tax may be assessed . . . at any time.” 

I.R.C. § 6501(c)(1).

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