TAX COURT OPINION

Case: Gilbert Hay
Docket Number: 26413-07
Judge: Kroupa
Opinion Type: memo
Filed: 11/23/2009
Pages: 9

T .C . Memo . 2009-26 5 UNITED STATES TAX COURT GILBERT HAY, Petitioner v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 26413-07 . Filed November 23, 2009 . Terri A . Merriam , Jaret R . Coles , and Adam J . Blake , for petitioner . Nhi T . Luu , for respondent . MEMORANDUM OPINION KROUPA, Judge : This partner-level matter is before the Court on respondent's motion to dismiss for lack of jurisdiction and to strike partnership items and theft loss claim-from taxabl e SERVED NOV 2 3 2009 -2- year 1998 .1 It involves this Court's jurisdiction under th e partnership provisions of the Tax Equity and Fisca l Responsibility Act of 1982 (TEFRA), Pub . L . 97-248, sec . 402,, 96, Stat . 648 . - Petitioner was a partner in various TEFRA partnerships during the years at issue . Respondent issued petitioner affecte d items deficiency notices (deficiency notices) for 1994 and 1995 after the related partnership-level proceedings had concluded . The deficiencies are attributable to section 6662(a) accuracy- related penalties based,-,on petitioner's underpayments of incom e tax. for 1994 and 1995 .2 After concessions,3 we are asked t decide whether we have jurisdiction to determine the mathematical . accuracy of respondent's computational adjustments and petitioner's entitlement to a 1998 theft loss offset . We hold that this Court lacks jurisdiction, to redetermine respondent' s computational adjustments and the theft loss offset because thi s is an affected items deficiency proceeding . Accordingly, we .will , 'Docket No . 26413-07 (1994 and 1995 taxable years) an d Docket No . 17595-08 (1993 taxable year) are consolidated cases . 'Respondent's motion to dismiss applies only to Docket No . 26413- 07 because . petitioner has not challenged respondent' s computational adjustments for 1993 . 2A11 section references are to the Internal Revenue Code i n effect for the years at issue . 'Petitioner concedes that he is liable for the accuracy- related penalties for 1994 and 1995 ;, but contests the computatio n -of the amount-of the underpayment upon which the penalties ar e based . grant-respondent's motion tovdismiss fors-lack of jurisdiction and to strike the-partnership items and-1998 theft=loss-".claim :, -3- The -foll"owing information,is-stated for purposes o f resolving-the pending-motion° .~ Petitioner resided'in Tennessee A t the time he filed the petition . Computational Adjustments . for 1994'°ahd 199 5 Petitioner '-was a partner in WashoeRanches #7, a cattle' partnership organized and promoted by ; Jay, .Hoyt' . (Hoyt) during the years at issue- 'Hoyt brganized,,over4100 "investor" .. par tne'rships .like Washoe fo"r owning and breeding cattle'(cid:127)T- .The .'investor , partnerships were partners in upper-tier 'Hoyt-managed : ..'_ : ..- j (cid:127) 'partnerships . 4 Respondent "issued notices ,o f final partnership administrative adjustment(FPAAs) to Washoe for 1994 and 1995 . Respondent determined that the Washoe partnership,"lacke d economic substance and therefore--disallowed-all'of Washoe .' s income and expense items for"thoseyears :: Washoe's .'tax''matters partner',f iled petitions with this'"'Court .seeking". redeterminationr 4This Court determined in 2000 that Hoyt cattle operations constituted a tax shelter . Commissioner , T .C . Memo . .2000-159', affd . 59 Fed . Appx .. 952 (9th Cir .. 2003) . -Respondent subsequently removed all Hoyt ; income and deductions from the investor partnership~-returns, and then he made coniputational'adjustments to the individual partners' returns following the respective partnership-..proceedings . Durham Farms #1, J .V .' v . .- -4- .of the adjustments in the 1994 and_1995 FPAAs .S These .Washoe , partnership proceedings for 1994 and 1995 .settled(cid:127) .in 2006 ., Respondent made computational adjustments to petitioner's tax liabilities for 1994 and 1995 once the .Washoe partnership proceedings had concluded . Respondent .disallowed portions of . petitioner's distributive . shares of losses from Washoe that' . resulted in underpayments of petitioner' s income taxes for thos e years . . Respondent also determined petitioner,was liable for section :6662(a) accuracy-related, penalties of $1 .,675 for 1994 and ;, $3,796 for 1995 . Respondent issued petitioner the affected-items deficiency notices for 1994 and- .1995, which are at issue in this proceeding . Petitioner timely filed a petition seeking a,redetermination, of the section 6662(a) accuracy-related penalties for 1994 an d 1995 . 1998 Theft Loss .Carryback , Petitioner also .filed amended,returns,for .1995 and 1998,,, before the_Washoe partnership proceedings had concluded . Petitioner claimed a $66,685 :personal theft .. loss from the Hoyt, . investment on the amended return for 1998 . Petitioner sought t o "The partnership-level proceedings were Washoe Ranches No . . 7, J .V . v . Commissioner ,. Docket No . 15257-98 ,(taxable year 1994), and Washoe .Ranches No .''7, J .V . v . Commissioner , .'Docket No . 14153-99 (taxable year . 1995) . have the alleged overpayment of income tax for 1998 applied to reduce the deficiency on the amended return for 1995 . . Respondent informed petitioner seven years ago that respondent would refrain from processing petitioner's amended J returns until the Washoe partnership proceedings were completed . As-previously noted, the Washoe partnership proceedings concluded in 2006 . Despite the three yearperiod'since the partnership proceedings' conclusion, respondent has not processed the amended returns for 1995 and'1998,nor has respondent issued petitioner a deficiency notice for 1998 . Petitioner filed a claim of erroneous computation with respondent to obtain a-refund for 1995 and also raises the theft loss issue in this' proceeding to .compel a response from respondent . Discussion We begin our-analysis with a discussion of our jurisdictio n over a TEFRA partner-level proceeding .6 This Court is a court of limited jurisdiction,, and we may exercise Jurisdiction only to the extent provided by statute . Sec .-7442'; GAF . Corp . & Subs . v . Commissioner , 114 'T .C . 519, 521 (2000) Our jurisdiction . to' redetermine a deficiency in tax depends on a valid deficienc y 6Congress enacted the unified audit and litigation procedures of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)- to provide consistent treatment among partners in the same partnership and to,ease the administrative burden that resulted from duplicative audits . and litigation . See Petaluma FX Partners, LLC v . Commissioner , 131 T .C . (2008) .(slip op . at 10) . -6- notice and a timely-filed petition . GAF Corp . & Subs . v . Commissioner , supra at 521 . A taxpayer may generally file,a , petition for redetermination'of a deficiency,, with this Cour t after receiving .a,deficiency notice . Sec. . 6213 . . Our jurisdiction to redetermine the deficiency for a given year i s limited,, however,(cid:127)by the deficiency notice issued by th e Commissioner . Sec . 6214 . Furthermore, normal deficiency , :procedures apply only . to affected items requiring partner-level , factual determinations and do not applysto computationa l adjustments . See sec . 6230(a) (2) (A) . ' We now address each of petitioner's arguments . IF.' Computational .Adjustments for- 1994 and 199 5 We must first decide whether we have jurisdiction t o redetermine the mathematical accuracy of respondent's computational adjustments following the-Hoyt .and .Washo e partnership proceedings . Petitioner, asks us to redetermine th e computational adjustments for :1994 and-1995 by reconsiderin g partnership items that were finally determine d partnership-level proceedings . . Specifically, petitioner asks u s to remove the Hoyt-related income and corresponding self . employment tax that flowed to petitioner from the Washo e 'The Taxpayer Relief Act of,1997 amended sec . 6230(a)(2)(A) to exclude "additions to tax * * * that .relate .to adjustments t o partnership items" from deficiency proceedings, effective for . N. partnership years ending after Aug . 5, . 1997 . -Taxpayer Relief Ac t of 1997, sec . 1238,' Pub . . L . 105-34, 111 Stat . 788 (1997) .,,- -7- partnership proceeding . . Petitioner also -asks us to correct-an " overadjustment " from -an upper - tier Hoyt partnership proceeding . Respondent contends that we lack jurisdiction to redetermine computational adjustments based on partnership i tems in an affected items proceeding . We agree - with respondent . We have consistently held that we lack jurisdiction unde r the TEFRA rules to. redetermine an underpayment attributable t o partnership items in an. affected items proceeding . Crowell v . ~ Commissioner , 102 T .C . 683, 689 (1994) ; Saso v .-Commissioner ,,, 93 T .C . 730, 734 (1989) ; Maxwell v . Commissioner , 87 T .C . 783, 788- 789 (1986) . The items-petitioner asks us to reconsider are . : all partnership items that should have been .addressed in the Hoyt-ar d Washoe partnership proceedings . . See sec . 301 .6231(a)(3)-l(a)(1), Proced . & Admin . Regs .' ., Final decisions for,1994 and 1995 have already been entered at the Hoyt and Washoe partnership levels . Accordingly, we lack jurisdiction to reconsider these items in the present partner-level proceeding . Petitioner also maintains that we have jurisdiction-to redetermine the accuracy-related penalties because they are- affected items, rather than partnership items, and this is a n affected items deficiency proceeding . We agree with petitioner that the accuracy-related penalties are affected items because they are based on-tax petitioner owes as a result of . adjustment s partnership items on Washoe's partnership returns . See Olson -8- v . Commissioner , T .C .RMemo . 1996-384;sec . 301 .6231(a)(5)-1T(d) , Temporary Proced . .& Admin . Regs ., . 52 .Fed . Reg . 6790 ( Mar . 5 , 1987). . We lack ; jurisdiction, however, in an affected items , deficiency proceeding as hereto redetermine petitioner's ;, .liability for .affected .items that do not require partner-level factual determinations . See sec:. 6230 ( a) ; Brookes v .. Commissioner , 108 T .C . 1, 5 (199 7 ) ; Crowell v . Commissioner , - supra ;(cid:127) N .C .F . Eneray'Partners v Commissioner , 89 T .C . 741, .744- 7'45 (1987) . We have-repeatedly held that we lackjurisdiction in an, affected' items deficiency proceeding to,redetermine computational adjustments . . Brookes v . Commissioner , supra at 5 ; Bradley v . Commissioner , 100-T .C .,367, 371 (1993) ; Saso v . - Commissioner , supra at- 734 Kohn v . , Commissioner , T .C . Memo . 1999 - 150 ; Olson v .-,Commissioner , supra ., Moreover, petitioner concedes that he is liable . for the , penalties and has put only they ; amounts of the computational adjustments at issue . Accordingly, we find that we lack-jurisdiction-to redetermine respondent' s computational adjustments for 1994 and :1995 in this partner-leve l proceeding . .II 1998 Theft .Loss Carryback to 199 5 The next issue we must decide whether we have jurisdic .tion .to offset petitioner's 1995 deficiency with the . .theft-loss petitioner claimed on the amended returnfor 1998 . -9- Respondent argues that this Court lacks jurisdiction to determin e the 1998 theft loss carryback to 1995 because we lac k jurisdiction to redetermine the deficiency for 1995 . We agree . Generally this Court has jurisdiction to consider the late r years not before the Court that may be necessary to correctly redetermine the deficiency for the years currently before the Court . Sec . 6214(b) ; Vincentini v . Commissioner , T .C . Memo . 2008-27.1 . We have already decided, however, that we lack jurisdiction to,redetermine the deficiency for-1995 because this is an affected items proceeding and petitioner has placed only respondent's computational adjustments at issue . Moreover , petitioner cannot confer jurisdiction where none exists . See Evans Publg ., Inc . v . Commissioner , 119 T .C . 242, 249 (2002) . Accordingly, we conclude that we lack jurisdiction to determine whether petitioner is entitled to a 1998 theft loss carryback to tax year 1995 . 8 To reflect the foregoing and the concessions of the parties , An appropriate order wil l be issued . 8We note that our holding does not bar petitioner from obtaining future relief on these issues . Petitioner may challenge respondent's computational adjustments for 1994 and, 1995 by paying the penalty and filing a claim for a : refund . See sec . 6230(c) . Furthermore, petitioner's claim to the 1998 theft loss is not barred-by sec . 6512(a) because the year 1998 is not before this Court .