Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-08-70485/USCOURTS-ca9-08-70485-0/pdf.json

Parties Involved:
Peter D. Adkison
Appellant
Commissioner of Internal Revenue
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PETER D. ADKISON, 

Petitioner-Appellant, No. 08-70485

v. Tax Ct. No.  2532-06 COMMISSIONER OF INTERNAL

REVENUE, OPINION

Respondent-Appellee. 

Appeal from a Decision of the

United States Tax Court

Argued and Submitted

September 2, 2009—Seattle, Washington

Filed January 21, 2010

Before: Michael Daly Hawkins, M. Margaret McKeown, and

Jay S. Bybee, Circuit Judges.

Opinion by Judge Bybee

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COUNSEL

Cori Flanders-Palmer (argued), Chicoine & Hallert, P.S.,

Seattle, Washington; John M. Colvin, Chicoine & Hallert,

P.S., Seattle, Washington, for the petitioner-appellant. 

Teresa E. McLaughlin (argued), United States Department of

Justice, Tax Division, Washington, D.C.; Randolf L. Hutter,

United States Department of Justice, Tax Division, Washington, D.C. for the respondent-appellee.

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OPINION

BYBEE, Circuit Judge: 

Peter Adkison appeals the Tax Court’s dismissal of his

claim for relief under 26 U.S.C. § 6015 for lack of jurisdiction. Section 6015(c)1

 allows a former spouse who once filed

a joint return and now, no longer married, meets certain

requirements to claim relief from joint and several liability for

a tax deficiency. The Tax Court held that it lacked jurisdiction

because Adkison’s deficiency stemmed from a partnership

interest that is the subject of an ongoing partnership proceeding under the Tax Equity and Fiscal Responsibility Act

(TEFRA) and regulated by a separate set of provisions. We

agree with the Tax Court that no remedy is available to Adkison until the TEFRA partnership proceedings have finished,

although we arrive at that conclusion through a different path.

I

In 1999, Adkison and his then-wife, Cathleen Adkison,

filed a joint tax return claiming deductions and losses through

their investment in a partnership called Shavano Strategic

Investment Fund, LLC (“Shavano”), which had entered into

a transaction with a tax shelter referred to as Bond Linked

Issue Premium Structure or “BLIPS.” In 2002, the Internal

Revenue Service began a disclosure initiative, soliciting taxpayers to disclose their participation in certain tax shelter

transactions, including BLIPS. By this time, the Adkisons had

divorced, but they disclosed their participation in the BLIPS

shelter, and the IRS began an audit of their 1999 joint tax

return. Although negotiations failed between Peter Adkison

and the IRS in October 2004, Adkison remitted $2.5 million

to be posted as a cash bond against his tax liability. 

1All statutes in this opinion refer to the Internal Revenue Code, which

is codified in title 26 of the United States Code. 

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In December 2004, the Internal Revenue Service Commissioner sent Shavano a Notice of Final Partnership Administrative Adjustment (“FPAA”) for the year 1999, as required by

26 U.S.C. § 6223. Five months later, in May 2005, Presidio

Resources, LLC, a partner in Shavano, filed a timely petition

for readjustment of partnership items under TEFRA, see 26

U.S.C. § 6226, in the United States District Court for the

Northern District of California, an action that remains pending. 

Shortly after the petition for readjustment was filed in the

partnership proceeding, Adkison submitted Form 8857, an

official request for Innocent Spouse Relief, seeking individual

relief from joint and several liability on the 1999 tax deficiency due to his partnership participation in the tax shelter.

The Commissioner did not respond to Adkison’s request.

Instead, on November 10, 2005, the Commissioner sent Adkison and his ex-wife a Notice of Deficiency, stating that they

owed $5.8 million for the 1999 tax year. The notice advised

the Adkisons that if they wished “to contest this determination

in court before making any payment,” they had “90 days . . .

to file a petition with the United States Tax Court.” 

In February 2006, Adkison filed a petition with the Tax

Court, invoking the court’s jurisdiction under 26 U.S.C.

§ 6015(e). He requested two things: (1) a redetermination of

his tax deficiency, as contained in the Commissioner’s Notice

of Deficiency under 26 U.S.C. § 6213, and (2) review of the

Commissioner’s failure to respond to Adkison’s request for

separation of liabilities under 26 U.S.C. § 6015(c). Ten

months later, the Commissioner moved to dismiss the case for

lack of jurisdiction, arguing that the Notice of Deficiency was

invalid because of the Shavano partnership proceeding in the

Northern District of California. See 26 U.S.C. § 6230(a)(3).

The Commissioner advised the Tax Court that it was aware of

the potential confusion and conflict between the Shavano

partnership proceeding pending in district court and its decision to issue a Notice of Deficiency to Adkison. The Commis1300 ADKISON v. CIR

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sioner characterized its approach both as “deliberate” and

“pruden[tial]” while it was sorting out how the deals were

done. 

The Tax Court granted the Commissioner’s motion to dismiss for lack of jurisdiction, reasoning that because a separate

partnership proceeding involving the transaction from which

the deficiency arose was already pending, the Commissioner

did not “assert” a deficiency against Adkison within the

meaning of 26 U.S.C. § 6015(e)(1)(A). Adkison brought this

appeal.

II

We begin with the principle that the Tax Court, as an Article I court, is a court of limited jurisdiction and may only

exercise jurisdiction to the extent authorized by Congress.

Estate of Branson v. Comm’r, 264 F.3d 904, 908 (9th Cir.

2001). Because the deficiency at issue is an affected partnership item, we must examine the interrelationship between the

court’s jurisdiction to hear a claim for relief from joint and

several liability under 26 U.S.C. § 6015 and the court’s jurisdiction under 26 U.S.C. §§ 6221-34—the Tax Code provisions applying to affected partnership items. Conclusions of

law, including the Tax Court’s interpretation of the Internal

Revenue Code, are reviewed de novo. Suzy’s Zoo v. Comm’r,

273 F.3d 875, 878 (9th Cir. 2001). Whether the Tax Court has

subject matter jurisdiction is a question of law and thus

reviewed de novo. Crawford v. Comm’r, 266 F.3d 1120, 1123

(9th Cir. 2001).

[1] When a married couple files a joint tax return, both filers are held jointly and severally liable for any deficiency

stemming from their joint return. 26 U.S.C. § 6013(d)(3). In

§ 6015, Congress provided an avenue of relief from joint and

several liability if a petitioning spouse shows he or she was

unaware of a mistake made in the return, if the spouses

divorced and the petitioning spouse shows no actual knowlADKISON v. CIR 1301

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edge of deficiency, or if equitable relief is appropriate. 26

U.S.C. § 6015(b), (c), (f). In this case, Adkison, as a divorced

spouse, claims he is entitled to relief under § 6015(c) because

he did not have actual knowledge of an understatement in his

joint tax return. 

[2] Section 6015(e)(1) grants jurisdiction to the Tax Court

to hear such claims:

In the case of an individual against whom a deficiency has been asserted, and who elects to have

subsection (b) or (c) apply . . . . 

(A) In general. In addition to any other remedy provided by law, the individual may petition the Tax

Court (and the Tax Court shall have jurisdiction) to

determine the appropriate relief available to the individual under this section if such petition is filed (i)

at any time after the earlier of (I) the date the Secretary mails, by certified or registered mail to the taxpayer’s last known address, notice of the Secretary’s

final determination of relief available to the individual, or (II) the date which is 6 months after the date

such election is filed or request is made with the Secretary and (ii) not later than the close of the 90th day

after the date described in clause (i)(I). 

26 U.S.C. § 6015(e)(1) (emphasis added).

[3] Adkison has met the statutory requirements for jurisdiction in the Tax Court, and if only § 6015 were at play here,

he could proceed with his petition for relief. The Commissioner sent Adkison a notice asserting a $5.8 million deficiency, Adkison filed his petition and elected subsection (c)

to apply, and it had been six months since he officially

requested relief. He meets the requirements to establish jurisdiction in the Tax Court under § 6015(e). Having filed a

Notice of Deficiency stating that Adkison owed $5.8 million

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in back taxes, the Commissioner cannot claim that the Notice

was not an assertion of a deficiency within the meaning of

§ 6015(e). 

[4] What makes this case complicated is that there is a

TEFRA overlay to the spousal relief provision in § 6015.

TEFRA has specific rules for the treatment of partnership

items that may supersede the general rules for obtaining relief

from joint and several liability under § 6015. Pub. L. 97-248

§ 402(a), 96 Stat. 324, 648-71 (codified as amended at 26

U.S.C. §§ 6221-34). In TEFRA, Congress provided a unified

regulatory scheme for controlling the audit and litigation of

partnership interests. TEFRA requires that “the tax treatment

of any partnership item . . . shall be determined at the partnership level,” thereby ensuring the consistent treatment of partnership taxes and avoiding repetitive audits and litigation. 26

U.S.C. § 6221; see also Wall v. United States, 133 F.3d 1188,

1189 (9th Cir. 1998). TEFRA applies to all partnership items,

which Congress has broadly defined as items that are “more

appropriately determined at the partnership level than at the

partner level,” 26 U.S.C. § 6231(a)(3), and any item that is

“affected by a partnership item.” Id. § 6231(a)(5). 

In general, a partnership proceeding must be completed and

a valid notice of deficiency sent before the Tax Court may

examine the individual tax treatment of an affected item.

“[B]ecause the tax treatment of affected items depends on

partnership level determinations, affected items cannot be

tried as part of a partner’s personal tax case until the completion of the partnership level proceeding.” N.C.F. Energy Partners v. Comm’r, 89 T.C. 741, 743-44 (1987) (superseded on

other grounds by Taxpayer Relief Act of 1997, Pub. L. 105-

34, § 1238(a), 11 Stat. 126); see also GAF Corp. v. Comm’r,

114 T.C. 519, 526 (2000); Crowell v. Comm’r, 102 T.C. 683,

694-95 (1994). This general approach to affected partnership

items has an express “special rule” for spouses who seek

relief from joint and several liability. Section 6230(a)(3)(A),

which is entitled “Coordination with deficiency proceedings:

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Special rule in case of assertion by partner’s spouse of innocent spouse relief,” states: 

[I]f the spouse of a partner asserts that section 6015

applies with respect to a liability that is attributable

to any adjustment to a partnership item . . . then such

spouse may file with the Secretary within 60 days

after the notice of computational adjustment is

mailed to the spouse a request for abatement of the

assessment specified in such notice. Upon the receipt

of such notice, the Secretary shall abate the assessment. 

26 U.S.C. § 6230(a)(3). 

[5] TEFRA thus contemplates a sequence or order by

which a putative innocent spouse may obtain relief in an

ongoing partnership proceeding. Under § 6225, the Commissioner may send an assessment of a deficiency attributable to

a partnership item 150 days after an uncontested FPAA has

been mailed or, if the FPAA has been contested, at the conclusion of the partnership proceeding determining the amount

each partner owes. Under § 6230, a taxpayer may petition for

innocent spouse relief after a notice of computational adjustment has been mailed at the conclusion of the partnership proceedings. At the conclusion of the proceedings and upon the

request of the taxpayer, the Commissioner must abate the

underlying tax deficiency to permit the spouse to assert a

claim for relief from joint and several liability pursuant to

§ 6015. See 26 U.S.C. §§ 6225, 6230. 

Adkison argues that because § 6015 expressly grants the

Tax Court jurisdiction once a deficiency is asserted, he is entitled to have the Tax Court exercise that jurisdiction to grant

him relief irrespective of any procedures mandated by § 6230.

Adkison claims that § 6230 only applies when the partner

contests the amount of the deficiency, a remedy available

under § 6213. The Commissioner, on the other hand, argues

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that § 6230 divests the Tax Court of jurisdiction under § 6015

outright, even though the Commissioner asserted a deficiency

against Adkison. Because §§ 6015 and 6230 do not contemplate the Commissioner’s action of sending both a partnership

notice and an individual notice, we think both interpretations

are plausible; in the end, however, we think neither is correct.

[6] Contrary to Adkison’s position that § 6230 only applies

to deficiency proceedings under § 6213, § 6230 explicitly references § 6015. TEFRA anticipates that partners—like

Adkison—might have a freestanding claim reparable under

§ 6015: “if the spouse of a partner asserts that section 6015

applies with respect to a liability that is attributable to any

adjustment to a partnership item . . . then such spouse may file

with the Secretary . . . after the notice of computational

adjustment is mailed to the spouse . . . .” 26 U.S.C.

§ 6230(a)(3)(A). Section 6230(a)(3)(A) thus applies to claims

under § 6015, regardless of any other relief the partner may

seek. Further, § 6230 effectively requires partners to contest

the amount of the deficiency in the TEFRA proceedings alone

by precluding a collateral attack on the deficiency through

§ 6213. Once the TEFRA proceedings are completed and the

notice of computational adjustment is issued the only further

adjustment the partner may seek is spousal relief from joint

and several liability: 

If the spouse files a petition with the Tax Court pursuant to section 6213 with respect to the request for

abatement described in subparagraph (A), the Tax

Court shall only have jurisdiction pursuant to this

section to determine whether the requirements of

section 6015 have been satisfied.

26 U.S.C. § 6230(a)(3)(B). This language does not limit the

application of § 6230 only to petitions under § 6213, as Adkison argues; rather, it limits the Tax Court’s jurisdiction, when

a petitioning spouse has invoked § 6213, to questions of alloADKISON v. CIR 1305

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cation between the spouses under § 6015. It has no effect on

§ 6230’s application to a free-standing claim under § 6015.

[7] The Commissioner’s argument, however, is also

unavailing. Nothing in § 6230 divests the Tax Court of the

jurisdiction granted under § 6015(e). We are reluctant to read

limitations on jurisdiction into a statutory scheme that does

not clearly divest a court of jurisdiction. See generally United

States v. Jacobo Castillo, 496 F.3d 947, 951-54 (9th Cir.

2007) (en banc). As the Supreme Court has recently stated in

Union Pacific R.R. Co v. Brotherhood of Locomotive Eng’r &

Trainmen Gen. Comm. of Adjustment, Cent. Region, 558 U.S.

___ (2009), “Recognizing that the word ‘jurisdiction’ has

been used by courts . . . to convey many, too many, meanings,

we have cautioned . . . against profligate use of the term. Not

all mandatory prescriptions, however emphatic, are . . . properly typed jurisdictional . . . .” Slip Op. at 12 (internal citations and quotation marks omitted). The Court distinguished

provisions that confer or deprive courts of subject matter

jurisdiction from what it calls “claim-processing rules:”

whereas subject matter jurisdiction “refers to a tribunal’s

power to hear a case, a matter that can never be forfeited or

waived,’ a claim processing rule, “does not reduce the adjudicatory domain of a tribunal and is ordinarily forfeited if the

party asserting the rule waits too long to raise the point.” Id.

(internal citations and quotation marks omitted). In our view,

the relationship between § 6015 and § 6230 in this case is

more akin to a “claim processing rule” than a provision conferring or depriving the Tax Court of subject matter jurisdiction. Section 6230 prescribes how a § 6015 claim may be

processed, or in other words, a sequence by which a spouse

may claim relief from joint and several liability when a deficiency is intertwined in a TEFRA proceeding, and it says

nothing about the Tax Court’s subject matter jurisdiction.

Indeed, had Congress intended for TEFRA actions to divest

the Tax Court of jurisdiction under § 6015 during the pendency of TEFRA proceedings, it would have said so explicitly, as it did elsewhere in § 6230. See 26 U.S.C.

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§ 6230(a)(3)(B) (“If the spouse files a petition with the Tax

Court pursuant to section 6213 with respect to the request for

abatement . . . the Tax Court shall only have jurisdiction pursuant to this section to determine whether the requirements of

section 6015 have been satisfied.”). 

[8] The Treasury Regulations also do not aid the Commissioner’s argument. In general, the Regulations do not contemplate the situation where the Commissioner initiates

partnership proceedings and sends an individual notice of

deficiency relating to the same liability. The regulation states:

The Internal Revenue Service will not consider premature claims for relief . . . . A premature claim is

a claim for relief that is filed for a tax year prior to

the receipt of a notification of an audit or a letter or

notice from the IRS indicating that there may be an

outstanding liability with regard to that year. Such

notices or letters do not include notices issued pursuant to section 6223 relating to TEFRA partnership

proceedings. 

Treas. Reg. § 1.6015-5(b)(5). The Commissioner argues that

Adkison’s claim was premature under this regulation, but

when Adkison filed his petition, he held in his hand a Notice

of Deficiency, a “notification from the IRS indicating that

there may be an outstanding liability.”

2

Id. Thus, under the

2The Commissioner cites the example in Treasury Regulation § 1.6015-

5(c) to support the proposition that the taxpayer must wait until the end

of the partnership proceedings before filing a claim. See Treas. Reg.

§ 1.6015-5(c) (stating that when a partnership interest is involved, a

spouse must wait until “the Internal Revenue Service sends him a notice

of computational adjustment or assesses the liability resulting from the

TEFRA partnership proceeding before he files a claim for relief with

respect to any such liability”). We agree with the Commissioner that in the

ordinary case, where a spouse of a partner has not received an individual

notice of deficiency, this example plainly contemplates that the spouse

wait to file his or her claim. In this case, however, Adkison received a

Notice of Deficiency during the pendency of a TEFRA proceeding. The

Commissioner concedes that in the ordinary case, the IRS will not send

a Notice of Deficiency until after the TEFRA proceedings have concluded.

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plain import of the Treasury Regulation at issue, Adkison’s

claim was not premature and cannot divest the Tax Court of

jurisdiction.3

[9] In our view, the Commissioner, joined by the Tax

Court, has confused the availability of a remedy with the

question of the Tax Court’s jurisdiction. Sometimes jurisdiction and remedy are co-extensive. See, e.g., 28 U.S.C. § 1491

(Tucker Act); 28 U.S.C. § 2671 et seq. (Federal Tort Claims

Act); see also United States v. Park Place Assoc., Ltd., 563

F.3d 907, 923-26 (9th Cir. 2009) (discussing the relationship

between waivers of sovereign immunity and subject matter

jurisdiction). More often in civil proceedings, however, they

are not. Compare FED. R. CIV. P. 12(b)(1) (defense of “lack

of subject-matter jurisdiction”) with FED. R. CIV. P. 12(b)(6)

(defense of “failure to state a claim upon which relief can be

granted”). Although we conclude the Tax Court has jurisdiction over Adkison’s § 6015 petition, the Tax Court’s instincts

were correct: in light of the Shavano TEFRA proceeding in

the Northern District of California, there is no “appropriate

relief available” to Adkison. 26 U.S.C. § 6015(e)(1)(A).

TEFRA plainly contemplates that when a partnership proceeding is pending, the Commissioner will not assert a deficiency against a taxpayer-partner until the partnership

proceeding determines the liability of the partnership, and

consequently, the partners. See 26 U.S.C. § 6221 (“[T]he tax

treatment of any partnership item . . . shall be determined at

the partnership level”); § 6225(a)(1) (“[N]o assessment of a

deficiency attributable to a partnership item may be made . . .

before . . . notice of a final partnership administrative adjust3As the Commissioner now acknowledges, Adkison never should have

been sent the Notice of Deficiency in the first place. The Commissioner

explained that the IRS itself was not sure how the TEFRA proceedings

would play out, and it was protecting itself. We wonder whether the IRS

might have mooted Adkison’s Tax Court petition by simply withdrawing

the Notice of Deficiency. Without a Notice of Deficiency, Adkison’s petition would have been premature and the Tax Court would not have had

jurisdiction. 

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ment was mailed to the tax matters partner.”). Once the

TEFRA proceeding is concluded, the partners are entitled to

a “final partnership administrative adjustment,” id.

§ 6223(a)(2), their tax deficiency is determined, and at that

point, the spouse of a partner may file a petition for relief

under § 6015. Id. § 6230(a)(3)(A). Such petition is limited to

the allocation of the tax deficiency between the spouses, the

determination of the partnership liability “that gave rise to the

liability” being “conclusive.” Id. § 6230(a)(3)(B). 

III

[10] Although we conclude that the Tax Court erred in

finding that it lacked jurisdiction, it properly denied Adkison’s petition because there is no relief the Tax Court can

appropriately grant until the TEFRA proceedings are concluded. The judgment is AFFIRMED.

ADKISON v. CIR 1309

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