Court Opinion

ID: 4333844
Source: CourtListenerOpinion
Date Created: 2018-11-14 01:23:27.133925+00
Date Added: 2024-06-11T14:47:20.997491
License: Public Domain

118 T.C. No. 26

                   UNITED STATES TAX COURT

ASA INVESTERINGS PARTNERSHIP, ALLIEDSIGNAL, INC., TAX MATTERS
                    PARTNER, Petitioner v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent

   Docket No. 27320-96.                 Filed May 22, 2002.

        P filed a motion to redetermine interest under
   sec. 7481(c), I.R.C. R moves to dismiss for lack of
   jurisdiction on the basis that a sec. 6215, I.R.C.,
   assessment has not been made.

        Held: Sec. 7481(c), I.R.C., requires that “an
   assessment has been made by the Secretary under section
   6215”. An assessment under sec. 6215, I.R.C., can only
   occur where a notice of deficiency has been issued, a
   sec. 6213(a), I.R.C., petition has been filed, and the
   Tax Court has redetermined or sustained a deficiency by
   a decision that has become final. The instant case
   involves a unified partnership proceeding for the
   readjustment of partnership items. See secs. 6221-
   6234, I.R.C. Deficiencies are not redetermined by Tax
   Court decisions in unified partnership proceedings, and
   no deficiencies have been redetermined by the Tax Court
   in this case. See ASA Investerings Pship. v.
                                - 2 -

     Commissioner, T.C. Memo. 1998-305, affd. 201 F.3d 505
     (D.C. Cir. 2000). Therefore, we lack jurisdiction to
     redetermine interest in this case.

     Jerome Bernard Libin, Steuart Hill Thomsen, David A. Roby

Jr., Robert S. Chase II, William Sanford Corey, Alexa Temple

Dubert, H. Karl Zeswitz Jr., and Joseph M. Persinger, for

petitioner.

     Jill A. Frisch, for respondent.

                               OPINION

     RUWE, Judge:    On October 3, 2001, petitioner, AlliedSignal,

Inc., filed a motion to redetermine interest under section

7481(c) and Rule 261.1   Petitioner claims to have overpaid

deficiency interest in the following amounts and for the

following tax years:

          Tax Year                      Interest

           1988                       $415,714
           1989                      2,658,117
           1990                     17,564,033
           1991                          0
           1992                      3,743,091
           1993                        178,469
           1994                      1,766,896
           1995                      6,347,788

Respondent filed a notice of objection in which he moves to

dismiss petitioner’s motion for lack of jurisdiction.   Respondent

argues that we lack jurisdiction to redetermine petitioner’s

     1
      All section references are to the Internal Revenue Code in
effect at the time of the filing of the motion, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 3 -

interest because no assessment has been made under section 6215.

We agree and hold that we lack jurisdiction to redetermine

petitioner’s interest.2

     Generally, this Court does not have jurisdiction over issues

involving interest.    Bax v. Commissioner, 13 F.3d 54, 56 (2d Cir.

1993), affg. an unpublished order of this Court; Standard Oil Co.

v. McMahon, 244 F.2d 11, 13 (2d Cir. 1957).    However, Congress

has provided the Tax Court with jurisdiction to redetermine

interest in certain limited circumstances.    Section 7481(c)

provides:

          SEC. 7481(c).   Jurisdiction Over Interest
     Determinations.--

                 (1) In general.--Notwithstanding subsection
            (a), if, within 1 year after the date the decision
            of the Tax Court becomes final under subsection
            (a) in a case to which this subsection applies,
            the taxpayer files a motion in the Tax Court for a
            redetermination of the amount of interest
            involved, then the Tax Court may reopen the case
            solely to determine whether the taxpayer has made
            an overpayment of such interest or the Secretary
            has made an underpayment of such interest and the
            amount thereof.

                 (2) Cases to which this subsection applies.--
            This subsection shall apply where--

                      (A)(i) an assessment has been made by
                 the Secretary under section 6215 which
                 includes interest as imposed by this title,
                 and

     2
      Petitioner has not requested a hearing on the jurisdiction
issue which respondent raises in his notice of objection, and we
find that this matter is at this time ripe for decision.
                                - 4 -

                           (ii) the taxpayer has paid the
                      entire amount of the deficiency plus
                      interest claimed by the Secretary, and

                      (B) the Tax Court finds under section
                 6512(b) that the taxpayer has made an
                 overpayment.

               (3) Special rules.--If the Tax Court
          determines under this subsection that the taxpayer
          has made an overpayment of interest or that the
          Secretary has made an underpayment of interest,
          then that determination shall be treated under
          section 6512(b)(1) as a determination of an
          overpayment of tax. An order of the Tax Court
          redetermining interest, when entered upon the
          records of the court, shall be reviewable in the
          same manner as a decision of the Tax Court.[3]

We have jurisdiction to redetermine interest under section

7481(c) where:   (1) The entire amount of the deficiency plus the

entire amount claimed by the Commissioner as interest on the

deficiency has been paid; (2) a timely motion to redetermine

interest has been filed; and (3) an assessment has been made by

the Commissioner under section 6215 which includes interest.

See, e.g., Rule 261; Bankamerica Corp. v. Commissioner, 109 T.C.

     3
      Under sec. 7481(a), a decision of the Tax Court becomes
final “after the exhaustion of the possibilities of direct
review”, and, in general, “such finality precludes any subsequent
reconsideration by the tax court”. Kenner v. Commissioner, 387
F.2d 689, 690 (7th Cir. 1968), affg. an unpublished order of this
Court; see also Hanover Ins. Co. v. United States, 880 F.2d 1503,
1506 (1st Cir. 1989); Taylor v. Commissioner, 258 F.2d 89, 92 (2d
Cir. 1958), affg. 27 T.C. 361 (1956). Sec. 7481(c) “specifically
carves out an exception to the rule on the finality of our
decisions”; a prerequisite for invoking that exception is a final
decision of this Court. Bankamerica Corp. v. Commissioner, 109
T.C. 1, 8-9 (1997).
                                - 5 -

1, 6-7 (1997); Asciutto v. Commissioner, T.C. Memo. 1992-564,

affd. 26 F.3d 108 (9th Cir. 1994).4

     Petitioner bases his motion to redetermine interest on our

prior decision in this case.    See ASA Investerings Pship. v.

Commissioner, T.C. Memo. 1998-305, affd. 201 F.3d 505 (D.C. Cir.

2000).   Our prior decision was affirmed by the Court of Appeals

for the District of Columbia Circuit, and the U.S. Supreme Court

denied certiorari on October 2, 2000, 531 U.S. 871 (2000).       Our

decision became final on October 2, 2000.    Sec. 7481(a)(2)(B).

Petitioner mailed its motion to redetermine interest on October

1, 2001; thus, the motion was timely.    Sec. 7481(c)(1); Rule

261(a)(2).    Petitioner claims, and respondent does not dispute,

that it has paid the entire amount of the deficiency plus

interest.    Accordingly, the only issue in the instant case is

whether respondent has assessed a deficiency and interest under

section 6215.

     4
      Sec. 7481(c) was added to the Code by the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec. 6246(a),
102 Stat. 3751. On Aug. 5, 1997, the Taxpayer Relief Act of
1997, Pub. L. 105-34, 111 Stat. 788, 1054, revised sec. 7481(c)
to provide for the filing of a “motion” rather than a “petition”
and to clarify that our jurisdiction includes underpayments of
interest by the Commissioner. See H. Conf. Rept. 105-220, at
732-733 (1997), 1997-4 C.B. (Vol. 2) 1457, 2202-2203. Many of
our prior opinions, including Bankamerica Corp. v. Commissioner,
supra, addressed sec. 7481(c) as originally enacted. However,
the same three requirements we identified in the original
enactment are still apparent in revised sec. 7481(c), including
the requirement that an assessment has been made under sec. 6215.
                               - 6 -

     Our jurisdiction over the issues decided in ASA Investerings

Pship. v. Commissioner, supra, was predicated on the issuance of

a notice of a final partnership administrative adjustment (FPAA)

and a petition for a readjustment of partnership items.5   See

sec. 6226(a).   Our decision was based on an application of the

unified partnership procedures.6

     Petitioner contends that “there are a number of ‘affected

items which require partner level determinations’ (Code, Section

6230(a)(2)(A)(i)) with respect to which tax and, necessarily,

interest must have been assessed as a result of this Court’s

decision in this matter.”   Petitioner points to AlliedSignal’s

basis in ASA Investerings Partnership and the determination of an

appropriate amount of interest expense under section 1.861-8,

Income Tax Regs., as affected items that require partner-level

determination under section 6230(a)(2)(A)(i).   Petitioner claims

that “The assessment(s) with respect to these ‘affected items,’

pursuant to the provisions of Code, Section 6230(a)(2)(A)(i) of

     5
      In ASA Investerings Pship. v. Commissioner, T.C. Memo.
1998-305, affd. 201 F.3d 505 (D.C. Cir. 2000), we held that ASA
Investerings Partnership was not a valid partnership for tax
purposes, and we sustained respondent’s reallocation of
partnership items from a foreign entity to AlliedSignal, Inc.,
the tax matters partner in these proceedings.
     6
      The unified partnership procedures have been amended since
their effective date of Sept. 3, 1982, and those procedures are
now contained in secs. 6221 through 6234.
                                 - 7 -

the Code, has occurred under the provisions of Subchapter B of

the Code, including Section 6215.”       We disagree.7

     It is clear that a section 6215 assessment did not and could

not occur in this case.     Section 6215 requires a petition filed

by the taxpayer with the Tax Court and an amount redetermined as

the deficiency by a decision of the Tax Court which has become

final.8   Our jurisdiction to redetermine a deficiency arises only

in the case of a valid notice of deficiency and the filing of a

timely petition for review under section 6213(a).        Savage v.

Commissioner, 112 T.C. 46, 48 (1999); Monge v. Commissioner, 93

T.C. 22, 27 (1989).9

     7
      The mere prospect, assuming one does exist here, of a sec.
6215 assessment’s being made is not sufficient to confer
jurisdiction upon this Court for purposes of sec. 7481(c). Sec.
7481(c)(2)(A)(i) requires that “an assessment has been made”, not
“will be made” or “should have been made”. A motion to
redetermine interest which is based on the mere prospect of a
sec. 6215 assessment would be premature.
     8
      Sec. 6215 provides:

          SEC. 6215(a). General Rule.--If the taxpayer
     files a petition with the Tax Court, the entire amount
     redetermined as the deficiency by the decision of the
     Tax Court which has become final shall be assessed and
     shall be paid upon notice and demand from the
     Secretary. No part of the amount determined as a
     deficiency by the Secretary but disallowed as such by
     the decision of the Tax Court which has become final
     shall be assessed or be collected by levy or by
     proceeding in court with or without assessment.
     9
      Sec. 6230(a)(2)(A)(i) does not discharge the necessary
requirements that must exist for the deficiency procedures to
apply, and, indeed, that provision incorporates subch. B (subtit.
F, ch. 63 of the Code) in its entirety.
                               - 8 -

     In the instant case, no notice of deficiency was issued.    In

the absence of a notice of deficiency, we did not and, indeed,

could not have redetermined or sustained a deficiency

determination made by respondent.   See Saso v. Commissioner, 93

T.C. 730, 735 (1989) (“If we are to redetermine a deficiency, our

jurisdiction is dependent upon the issuance of a notice of

deficiency.”).   It follows that a section 6215 assessment could

not have been made in this case since that Code section

contemplates a redetermination of a deficiency by the Tax Court.

     Petitioner, in its capacity as the tax matters partner of

ASA, did file a petition with the Tax Court.   However, that

petition was filed pursuant to section 6226(a), not section

6213(a).   A petition filed pursuant to section 6226(a) is termed

“a petition for a readjustment of the partnership items”.    A

petition filed pursuant to section 6213(a) is termed “a petition

with the Tax Court for a redetermination of the deficiency”.

Section 6215(a) refers specifically to “the entire amount

redetermined as the deficiency by the decision of the Tax Court”.

We interpret section 6215(a) to refer exclusively to a petition

filed under section 6213(a) and a decision that was entered

pursuant to the deficiency procedures contained in sections 6211-

6216.

     Our deficiency procedures do not extend to the adjustment of

partnership items or to deficiencies attributable to
                                 - 9 -

computational adjustments.10     We cannot redetermine deficiencies

under section 6226.11     See, e.g., Maxwell v. Commissioner, 87

T.C. 783, 787 (1986).     Our prior decision in this case, ASA

Investerings Pship. v. Commissioner, T.C. Memo. 1998-305, was not

a decision which we made under the deficiency procedures.     And,

deficiencies which are attributable to computational adjustments

are assessed under the general assessment authority of section

     10
      Respondent claims that as a result of the partnership-
level proceeding, he has made certain computational adjustments
against petitioner. A computational adjustment is defined as
“the change in the tax liability of a partner which properly
reflects the treatment under this subchapter of a partnership
item.” Sec. 6231(a)(6). “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.” Sec. 301.6231(a)(6)-1T(b),
Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6791 (Mar. 5,
1987). Our deficiency procedures generally do not apply to the
assessment or collection of a computational adjustment, sec.
6230(a)(1), and a notice of deficiency need not be issued, White
v. Commissioner, 95 T.C. 209, 211-212 (1990). However, under
sec. 6230(a)(2)(A)(i), our deficiency procedures do apply with
respect to any deficiency attributable to affected items which
require partner-level determinations.
     11
          See sec. 6226(f), which provides:

          SEC. 6226(f). Scope of Judicial Review.--A court
     with which a petition is filed in accordance with this
     section shall have jurisdiction to determine all
     partnership items of the partnership for the
     partnership taxable year to which the notice of final
     partnership administrative adjustment relates, the
     proper allocation of such items among the partners, and
     the applicability of any penalty, addition to tax, or
     additional amount which relates to an adjustment to a
     partnership item.
                              - 10 -

6201(a), not section 6215.   Brookes v. Commissioner, 108 T.C. 1,

9-10 (1997).12

     We hold that we do not have jurisdiction under section

7481(c) to review petitioner’s motion to redetermine interest.

                                              An appropriate order

                                         will be entered.

     12
      Whether the computational adjustments were in fact made
with respect to affected items requiring partner-level
determinations, as petitioner contends, is not a matter that we
can decide absent a proper jurisdictional basis for review. We
recognize that the import of our decision is that we are unable
to “reopen” a prior unified partnership proceeding under sec.
7481(c) and to redetermine interest attributable to a
computational adjustment deficiency. However, the conference
agreement with respect to the 1997 revision of sec. 7481(c)
states:

     In clarifying the Tax Court’s jurisdiction over
     interest determinations, the conferees do not intend to
     limit any other remedies that taxpayers may currently
     have with respect to such determinations, including in
     particular refund proceedings relating solely to the
     amount of interest due. [H. Conf. Rept. 105-220, at
     733 (1997), 1997-4 C.B. (Vol. 2) 1457, 2203.]

For example, respondent suggests that the refund claim procedures
for challenging erroneous computational adjustments, sec.
6230(c), are the appropriate forum for challenging the
computational adjustments in this case.