1TEFRA is the Tax Equity and Fiscal Responsibility Act,

Pub.L. No. 97-248, 96 Stat. 324 (1982). For a general overview

of TEFRA, see Alexander v. United States, 44 F.3d 328, 330 (5th

Cir.1995), and Transpac Drilling Venture, 1983-63 by Crestwood

Hosps., Inc. v. United States, 16 F.3d 383, 387 (Fed.Cir.), cert.

denied, --- U.S. ----, 115 S.Ct. 79, 130 L.Ed.2d 33 (1994). 

1

United States Court of Appeals,

Fifth Circuit.

No. 94-30738

Summary Calendar.

Kathleen PILIE, wife of/and Noel F. Pilie, Plaintiffs-Appellants,

v.

UNITED STATES of America, Defendant-Appellee.

June 29, 1995.

Appeal from the United States District Court for the Eastern

District of Louisiana.

Before JONES, BARKSDALE, and BENAVIDES, Circuit Judges.

PER CURIAM:

At issue is whether the § 6213(d) waiver of the restrictions

on assessment and collection of a deficiency in the settlement

agreement between Kathleen and Noel Pilie and the Internal Revenue

Service suspended the imposition of interest because the IRS did

not make a timely demand of payment. The district court, by

summary judgment, held that it did not; we AFFIRM.

I.

The Pilies were partners in Barrister Equipment Associates 88,

a TEFRA partnership.1 As a result of a dispute with the IRS

regarding the tax treatment of certain partnership items for tax

year 1982, the Pilies and the IRS Commissioner, on May 1, 1990,
 

2The agreement was executed using Treasury Form 870-L (AD),

Settlement Agreement for Partnership Adjustments and Affected

Items. 

 

3Part I of the Agreement provided, in part:

Under the provisions of section 6224(c) of the Internal

Revenue Code, the undersigned offers to enter into a

settlement agreement with respect to the determination

of partnership items of the partnership for [tax year

1982]. The undersigned, in accordance with the

provisions of section 6224(b) of the Code, also offers

to waive the restrictions on the assessment and

collection of any deficiency attributable to

partnership items ... provided in section 6225(a). 

 

4Part II of the Agreement provided, in part:

The undersigned offers to enter into a settlement

agreement with respect to penalties (additions to

taxes) and interest under section 6621(c) of the

Internal Revenue Code.... The undersigned, pursuant to

the provisions of section 6213(d) of the Code, also

offers to waive the restrictions provided in section

6213(a) of the Code and to consent to the assessment

and collection of the penalties (additions to tax), and

interest under section 6621(c) attributable to the

adjustment(s) of the partnership items; plus any

interest provided by law. 

2

executed a settlement agreement.2 Part I of the Agreement

contained a provision whereby, pursuant to § 6224(b) of the

Internal Revenue Code, the Pilies agreed to waive the restrictions

on the assessment and collection of any deficiency;3 in Part II,

the Pilies waived similar restrictions with respect to penalties

and interest, pursuant to § 6213(d).4

On April 29, 1991, nearly a year after executing the

settlement agreement, the IRS assessed a tax deficiency, as well as

interest and a penalty. After paying their tax bill in full, the

Pilies filed a refund action against the United States, seeking

$11,790.68. Based on stipulated facts, both parties moved for
 

5Section 6601(c) provides:

In the case of a deficiency ..., if a waiver of

restrictions under section 6213(d) on the assessment of

such deficiency has been filed, and if notice and

demand by the Secretary for payment of such deficiency

is not made within 30 days after the filing of such

waiver, interest shall not be imposed on such

deficiency for the period beginning immediately after

such 30th day and ending with the date of notice and

demand and interest shall not be imposed during such

period on any interest with respect to such deficiency

for any prior period.

26 U.S.C. § 6601(c). Section 6213(d) provides:

The taxpayer shall at any time (whether or not a notice

of deficiency has been issued) have the right, by a

signed notice in writing filed with the Secretary, to

waive the restrictions provided in subsection (a) on

the assessment and collection of the whole or any part

of the deficiency.

3

summary judgment. Relying on § 6213(d) of the Code, the Pilies

contended that they executed a valid waiver; and that, therefore,

starting 31 days after they submitted the Agreement to the IRS, the

accumulation of interest was suspended. On the other hand, the IRS

maintained that § 6213(d) had no application to items that had

become nonpartnership items pursuant to the Agreement. The

district court entered judgment for the IRS.

II.

A.

Section 6601(c) of the Code suspends the imposition of

interest on a deficiency if the taxpayer files a waiver of a

deficiency assessment pursuant to § 6213(d), and the IRS fails to

make a demand for payment of the deficiency within 30 days after

the waiver is filed.5 Relying on § 6601(c), the Pilies contend
26 U.S.C. § 6213(d). 

4

that they are entitled to a refund of interest for the period

beginning on the 31st day after they filed the waiver (February 18,

1990) through the day prior to when the IRS gave notice and made a

demand for payment (April 28, 1991). Although the IRS acknowledges

that the Agreement states that the Pilies waived the restrictions

on assessment pursuant to § 6213(d), it maintains that such a

waiver is not effective here.

Under the statutory scheme established by Congress in

Subchapter C of Chapter 63 of the Code, §§ 6221-6233 (Tax Treatment

of Partnership Items), the normal deficiency procedures in

Subchapter B, §§ 6211-6216 (Deficiency Procedures), are generally

inapplicable. Specifically, § 6230(a)(1) provides:

Except as provided in paragraph (2), subchapter B of this

chapter shall not apply to the assessment or collection of any

computational adjustment.

26 U.S.C. § 6230(a)(1). In turn, paragraph (2) provides:

(A) Subchapter B shall apply to any deficiency attributable

to—

....

(ii) items which have become nonpartnership items (other

than by reason of section 6231(b)(1)(C)) and are described in

section 6231(e)(1)(B).

26 U.S.C. § 6230(a)(2). Section 6231(b)(1)(C) provides, however,

that when the IRS and a partner enter into a settlement agreement

with respect to a partnership item, that item ceases to be a

partnership item and becomes, instead, a "nonpartnership item". 26
 

626 U.S.C. § 6231(b)(1) provides:

For purposes of [Subchapter C], the partnership items

of a partner for a partnership taxable year shall

become nonpartnership items as of the date—

....

(C) the Secretary enters into a settlement

agreement with the partner with respect to such

items.... 

 

726 U.S.C. § 6231 defines "computational adjustment" as

the change in the tax liability of a partner which

properly reflects the treatment under this subchapter

of a partnership item. 

5

U.S.C. § 6231(b)(1)(C).6 Because §§ 6230(a) and 6231(b)(1)(C)

makes Subchapter B not applicable to a settlement agreement, and

because § 6213 is in Subchapter B, the § 6213(d) waiver in Part II

of the Agreement is not effective. Thus, the IRS could assess the

interest in issue. Pack v. United States, 992 F.2d 955, 958 (9th

Cir.1993).

B.

The Pilies contend also that, by the terms of the Agreement,

the IRS elected to proceed under Subchapter B and to forego

utilization of Subchapter C.

Conceding that Part I of the Agreement (which dealt with any

deficiency) addresses computational adjustments7 under Subchapter

C (thus, making Subchapter B not applicable), the Pilies contend

that Part II of the Agreement (which dealt with penalties and

interest) does not constitute a computational adjustment, and,

thus, remains subject to the deficiency procedures of Subchapter B.

Notwithstanding the fact that Temporary Treasury Regulation §
 

8Temp.Treas.Reg § 301.6231(a)(6)-1T(b) provides:

A computational adjustment includes any interest due

with respect to any underpayment or overpayment of tax

attributable to adjustments to reflect properly the

treatment of partnership items. 

6

301.6231(a)(6)-1T(b) specifies that interest constitutes a

computational adjustment,8 the Pilies maintain that, pursuant to

the terms of Part II of the Agreement, the IRS elected to opt out

of Subchapter C and, instead, assessed and collected the penalty

and interest pursuant to Subchapter B. In particular, the Pilies

identify the second paragraph of Part II, which provides:

This agreement with respect to penalties (additions to tax)

and interest under section 6621(c) of the [Code] will not

constitute a settlement agreement for purpose of the

consistent settlement provision of section 6224(c)(2) of the

[Code].

To read this language as an election on the part of the IRS to opt

out of Subchapter C (assuming it could do so), fails to appreciate

the limited wording of the above quoted passage. Section 6224(c)

provides:

In the absence of a showing of fraud, malfeasance, or

misrepresentation of fact—

....

(2) Other partners have right to enter into consistent

agreements.—If the Secretary enters into a settlement

agreement with any partner with respect to partnership items

for any partnership taxable year, the Secretary shall offer to

any other partner who so requests settlement terms for the

partnership taxable year which are consistent with those

contained in such settlement agreement.

26 U.S.C. § 6224(c). Thus the limitation relied upon by the Pilies

appears simply to be an attempt on the part of the IRS not to

obligate itself to agree to the same terms when dealing with other
 

9We need not decide whether by agreement with one partner,

the IRS may circumvent the provisions of the consistent

settlement provisions of § 6224(c)(2). 

7

partners of Barrister Equipment Associates.9 In any event, there

is no indication that the IRS intended to proceed under Subchapter

B.

III.

For the foregoing reasons, the judgment is

AFFIRMED.