Opinion ID: 206582
Heading Depth: 1
Heading Rank: 7

Heading: The Period for Assessing Grapevine's 1999 Return Remains Open until the Close of Litigation

Text: Grapevine next argues that the Treasury regulations, by their terms, do not apply to its 1999 return because the regulations appl[y] to taxable years with respect to which the period for assessing tax was open on or after September 24, 2009. Treas. Regs. §§ 301.6229(c)(2)-1(b), 301.6501(e)-1(e). Grapevine urges that the period for assessing Grapevine's tax closed on April 19, 2003, pursuant to the judgment of the Court of Federal Claims and this court's subsequent decision in Salman Ranch. Grapevine repeatedly describes the Court of Federal Claims' decision as a final judgment, and contends that it is not within the Treasury Department's power to contravene such a judgment. The government responds that the Tax Code expressly extends the period of assessment being litigated until the decision of the court becomes final. I.R.C. § 6229(d) (2004). Final, according to the government, means for tax assessment purposes that all appeals have been exhausted. Id. § 7481 (stating that a decision of the Tax Court becomes final only after appeals have been exhausted). The government further notes that the preamble to the final regulations makes clear that the regulations will apply to entities in Grapevine's position: [T]he final regulations apply to taxable years with respect to which the six-year period for assessing tax under section 6229(c)(2) or 6501(e)(1) was open on or after September 24, 2009. This includes, but is not limited to, all taxable years (1) for which six years had not elapsed from the later of the date that a tax return was due or actually filed, (2) that are the subject of any case pending before any court of competent jurisdiction (including the United States Tax Court and Court of Federal Claims) in which a decision had not become final (within the meaning of section 7481) or (3) with respect to which the liability at issue had not become fixed pursuant to a closing agreement entered into under section 7121. Preamble to Treas. Regs. §§ 301.6229(c)(2)-1, 301.6501(e)-1, 75 Fed. Reg. at 78,898 (emphasis added). The emphasized clause, concerning pending litigation, is at issue here. Where, as here, a tax matters partner petitions a court for readjustment of partnership items, the Tax Code states that the limitations period is tolled until the decision of the court becomes final. Id. § 6229(d)(1) (2004). In such a case, the term final has the meaning set forth in § 7481that is, a decision is not final until it is beyond further appeal. And although § 7481 speaks in terms of a Tax Court decision not becoming final until opportunities for appeal are exhausted, the Code is clear that the same test applies where a partnership sues in the Court of Federal Claims. I.R.C. § 6230(g) (For purposes of section 6229(d)(1) and section 6230(c)(2)(B), the principles of section 7481(a) shall be applied in determining the date on which a decision of a district court or the Court of Federal Claims becomes final.). Grapevine argues that decisions of the Court of Federal Claims are different from those of the Tax Court: the Tax Court's decisions become final when appellate review is exhausted, but the Court of Federal Claims' decisions are final when entered. As shown above, the Tax Code clearly provides otherwise. We therefore hold that the limitations period for Grapevine's 1999 tax return remains open until this case reaches unappealable termination. It is open today, and it was open on September 24, 2009. As a result, by their plain terms the new Treasury regulations apply to Grapevine's 1999 return.