* This order and judgment is not binding precedent, except under the

doctrines of law of the case, res judicata, and collateral estoppel. The court

generally disfavors the citation of orders and judgments; nevertheless, an order

and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

** Honorable Wesley E. Brown, Senior District Judge, United States District

Court for the District of Kansas, sitting by designation.

F I L E D

United States Court of Appeals

Tenth Circuit

JUL 30 1998

PATRICK FISHER

Clerk

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

JUDITH W. DAVIS,

Petitioner,

v.

COMMISSIONER OF INTERNAL

REVENUE,

Respondent.

No. 97-9020

Appeal from U.S. Tax Court

(T.C. No. 11713-94)

ORDER AND JUDGMENT *

Before TACHA and McKAY , Circuit Judges, and BROWN, ** Senior District

Judge.

After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of
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this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore

ordered submitted without oral argument.

Respondent Commissioner of Internal Revenue issued a statutory notice of

deficiency to petitioner Judith W. Davis determining deficiencies in her income

taxes for the years 1990 and 1991 and additions to tax under 26 U.S.C.

§ 6651(a)(1) for 1990 and 1991 and under 26 U.S.C. § 6654 for 1991. Ms. Davis

filed a petition in Tax Court disputing the determinations. On February 18, 1997,

the Tax Court issued a memorandum findings of fact and opinion in favor of the

Commissioner. On May 5, 1997, the Tax Court entered a decision setting forth

the amount of the deficiencies and additions to tax. Ms. Davis appealed, and

we affirm.

I.

Before addressing the merits of this appeal, we must consider whether

we have jurisdiction over the appeal. At this court’s request, the parties have

addressed (1) whether this court has jurisdiction where the notice of appeal was

filed more than ninety days after entry of the Tax Court’s decision, see

Fed. R. App. P. 13(a), and (2) whether this court has jurisdiction where the notice

of appeal was filed while a motion for reconsideration was pending. Both parties

correctly argue that this court has jurisdiction to consider this appeal.
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After the Tax Court issued its interlocutory memorandum findings of fact

and opinion, on February 18, 1997, Ms. Davis filed a motion to reconsider. The

Tax Court denied the motion on March 27, 1997. Thereafter, the parties filed

their respective computations of taxes owed. On May 5, 1997, the Tax Court

entered a final decision adopting the Commissioner’s computations and setting

forth the income taxes and additions to tax owed by Ms. Davis. On June 4, 1997,

within the thirty days prescribed for a tolling motion, see Tax Ct. R. 162,

Ms. Davis postmarked a timely motion to vacate or revise the decision, see

26 U.S.C. § 7502(a). The Tax Court denied the motion on June 20, 1997. 

Eighty-nine days later, on September 17, 1997, Ms. Davis postmarked a timely

notice of appeal. See Fed. R. App. P. 13(b); 26 U.S.C. § 7502(a); 26 C.F.R.

§ 301.7502-1.

Although Ms. Davis filed the June 4, 1997, motion to vacate or revise

the decision after filing the March 26, 1997, motion to reconsider, there is no

problem with tacking of tolling motions. See Okon v. Commissioner , 26 F.3d

1025, 1026 (10th Cir. 1994) (tolling motions may not be tacked to perpetuate

prescribed appeal period from Tax Court decision). The February 18, 1997,

memorandum findings of fact and opinion was merely an interlocutory ruling

sustaining the Commissioner’s determinations and deciding Ms. Davis would be

liable for some amount of taxes and additions to tax. Cf. Albright v. UNUM Life
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Ins. Co. , 59 F.3d 1089, 1092-93 (10th Cir. 1995) (order determining liability but

leaving damages to be calculated is not final). The May 5, 1997, decision was

the Tax Court’s final order determining the amount of tax liability and additions

to tax. See Fed. R. App. P. 13(a) (referring to “decision”). Thus, Ms. Davis’

motion to reconsider the interlocutory opinion was not a tolling motion. Cf.

Wagoner v. Wagoner , 938 F.2d 1120, 1122 n.1 (10th Cir. 1991) (motion asking

district court to exercise discretionary authority to revise interlocutory ruling

before final judgment does not “call into play the timing and tolling

considerations attendant upon motions to alter or amend judgment under

Fed. R. Civ. P. 59(e)”).

We conclude Ms. Davis filed her notice of appeal within the prescribed

ninety days. See Fed. R. App. P. 13(a). Also, we conclude no motion for

reconsideration remained pending when she filed her notice of appeal. 

Accordingly, we have jurisdiction to consider this appeal. See 26 U.S.C.

§ 7482(a)(1).

II.

The issues heard and decided by the Tax Court concerned (1) whether

amounts Ms. Davis received from a subchapter S corporation were wages and

(2) whether she was entitled to a deduction in 1990 for a net operating loss in

excess of the amount of the deduction allowed by the Commissioner. On appeal,
1 Ms. Davis argues in her reply brief that she could not meet her burden of

proof before the Tax Court because the Commissioner had all relevant records

for three years until the Tax Court rendered its decision. She, however, has never

argued that the Commissioner precluded her from looking at these records. 

We conclude this argument is without merit.

2 Ms. Davis first made these arguments in the Tax Court in her motion to

reconsider and motion for deferral of entry of judgment. The Tax Court denied

the motions without explanation. Because it is not clear whether the Tax Court

denied the arguments on their merits, we will consider the arguments. Cf. Oyler

v. Allenbrand , 23 F.3d 292, 299-300 & n.10 (10th Cir. 1994) (recognizing

motion to reconsider is not proper means for raising new grounds for relief, but

entertaining issues on appeal because district court considered them); Burnette v.

Dresser Indus., Inc. , 849 F.2d 1277, 1285 (10th Cir. 1988) (declining to address

on appeal issue first raised in motion to reconsider where district court did not

consider the issue).

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Ms. Davis does not specifically dispute the Tax Court’s determinations with

regard to these issues. 1 Rather, she argues the Commissioner was required to

issue final administrative adjustment reports with respect to a partnership and

subchapter S corporation before passing any adjustments through to her

individual return. According to Ms. Davis, the Commissioner improperly passed

through the adjustments without allowing the partnership and subchapter S

corporation to administratively appeal any adjustments. 2

Ms. Davis’ arguments with respect to the subchapter S corporation are

based upon 26 U.S.C. §§ 6241-6245 (1988). These provisions do not apply to

her case because the subchapter S corporation at issue has fewer than the

requisite number of shareholders. See 26 C.F.R. § 301.6241-1T(c)(2)(ii)

(provisions do not apply to subchapter S corporation with five or fewer
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shareholders); see also R. Ex. B at 8-10 (1989 subchapter S corporation tax

return reporting three shareholders); id. Doc. 10 at 3 (stipulation that Ms. Davis

owned 100% of subchapter S corporation’s stock in 1990 and 1991). Thus, a

final subchapter S administrative proceeding and adjustment were not required.

Ms. Davis’ arguments with respect to the partnership are based upon

26 U.S.C. §§ 6221-6231 (1988 & Supp. I 1989). These provisions also do not

apply because the partnership at issue has fewer than the requisite number of

partners. See id. § 6231(a)(1)(B)(i) (exception for partnership with ten or fewer

partners); 26 C.F.R. § 301.6231(a)(1)-1T (same); see also R. Ex. N. at 10-13

(1989 partnership return showing two individual partners).

Even if the partnership had the required number of partners, the provisions

still would not apply. “[I]f a partner treats an item on the partner’s return

consistently with the treatment of the item on the partnership return, the Internal

Revenue Service generally cannot adjust the treatment of that item on the

partner’s return except through a partnership-level proceeding.” 26 C.F.R.

§ 301.6221-1T(a). If, however, the partner does not treat the item consistently,

the IRS may make an adjustment to the partner’s return without a partnership

level proceeding, unless the partner (1) notifies the Commissioner of the

inconsistent treatment or (2) proves, and makes a proper election, that the

partner’s treatment of the item was consistent with the treatment of the item on
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the schedule K-1 furnished by the partnership to the partner. See 26 C.F.R.

§§ 301.6222(b)-2T; 301.6222(b)-3T.

In this case, the partnership reported income from the discharge of

indebtedness, § 1231 gain, and ordinary loss items on its 1989 return and

provided a schedule K-1 to Ms. Davis reflecting these items. See R. Ex. N at 4,

10. She failed to report the items on her individual tax return. See id. Ex. 7-L

at 4. Her treatment of the items was not consistent with the partnership’s

treatment of the items. Nothing indicates that she notified the Commissioner

of the inconsistent treatment. The Commissioner, therefore, correctly adjusted

her 1989 return to include the partnership items without conducting a partnership

level proceeding. Also, after correctly adjusting her 1989 return, the

Commissioner properly determined her net operating loss carryover deduction

for 1990.

The judgment of the United States Tax Court is AFFIRMED. The mandate

shall issue forthwith.

Entered for the Court

Wesley E. Brown

Senior District Judge