Court Opinion

ID: 3066256
Source: CourtListenerOpinion
Date Created: 2015-10-14 23:52:45.636163+00
Date Added: 2024-06-11T11:41:27.648306
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

 BASR PARTNERSHIP, WILLIAM F. PETTINATI,
         SR., Tax Matters Partner,
             Plaintiffs-Appellees

                          v.

                  UNITED STATES,
                 Defendant-Appellant
                ______________________

                      2014-5037
                ______________________

    Appeal from the United States Court of Federal
Claims in No. 1:10-cv-00244-SGB, Judge Susan G.
Braden.
               ______________________

                Decided: July 29, 2015
                ______________________

   THOMAS A. CULLINAN, Sutherland Asbill & Brennan
LLP, Atlanta, GA, argued for plaintiffs-appellees.

    ANDREW M. WEINER, Tax Division, United States De-
partment of Justice, Washington, DC, argued for defend-
ant-appellant. Also represented by DAMON TAAFFE,
TAMARA W. ASHFORD, GILBERT STEVEN ROTHENBERG,
MICHAEL J. HAUNGS.

   BRYAN CAMP, Texas Tech University School of Law,
Lubbock, TX, for amicus curiae Bryan T. Camp.
2                                   BASR PARTNERSHIP   v. US

   PAULA MARIE JUNGHANS, Zuckerman Spaeder LLP,
Washington, DC, for amicus curiae American College of
Tax Counsel.
               ______________________

Before PROST, Chief Judge, O’MALLEY, and CHEN, Circuit
                       Judges.
     Opinion for the court filed by Circuit Judge CHEN.
    Concurring opinion filed by Circuit Judge O’MALLEY.
      Dissenting opinion filed by Chief Judge PROST.
CHEN, Circuit Judge.
    This case is an appeal from a tax readjustment and
refund action filed in the U.S. Court of Federal Claims
(Claims Court). Section 6501(a) of the Internal Revenue
Code (I.R.C. or Code) prohibits the Internal Revenue
Service (IRS) from assessing tax if more than three years
has elapsed from the date of the tax return. Section
6501(c)(1), however, recognizes an exception to this three-
year rule and suspends the statute of limitations in cases
involving “a false or fraudulent return with the intent to
evade tax.” The Claims Court determined that § 6501(a)’s
three-year statute of limitations barred the IRS from
administratively adjusting, in 2010, the 1999 partnership
tax return filed by plaintiff-appellee BASR Partnership
(BASR). See BASR P’ship v. United States, 113 Fed. Cl.
181 (2013). The Government appealed. Although the
Government does not argue that BASR itself acted with
the intent to evade tax, the Government does contend
that BASR’s outside counsel, an attorney involved in
structuring certain financial transactions reported on the
1999 return, acted “with the intent to evade tax.” Accord-
ing to the Government, this attorney’s conduct triggered
§ 6501(c)(1) and suspended the three-year limitation on
the IRS’s ability to assess and impose tax on BASR for the
BASR PARTNERSHIP   v. US                                  3

1999 tax return. The Claims Court disagreed and held
that § 6501(c)(1)’s suspension of the three-year limitation
applies only when the taxpayer—and not a third party—
acts with the requisite “intent to evade tax.” Because we
agree with the Claims Court, we affirm.
                           BACKGROUND
                               I
     The IRS has authority to review tax returns filed by a
taxpayer. I.R.C. § 6201(a). During this review, if the IRS
concludes that the taxpayer has underpaid, the IRS
assesses those taxes and imposes any additional penalties
for the underpayment. Id.; see, e.g., § 6663. As a general
rule, the IRS must make any such assessment “within 3
years after the return was filed.” I.R.C. § 6501(a). The
Code establishes certain exceptions that may extend or
suspend this three-year limitations period. See generally
I.R.C. § 6501(c). Section 6501(c)(1) recognizes one such
exception: “In the case of a false or fraudulent return
with the intent to evade tax, the tax may be assessed . . .
at any time.” I.R.C. § 6501(c)(1).
     The concept of limiting the time period during which
the IRS could assess tax originated almost 100 years ago
in the same statutory provision that authorized the IRS to
impose penalties for underpayment. See Revenue Act of
1918, Pub. L. No. 54-254, 40 Stat. 1057. Section 250(b) of
the 1918 Act authorized the IRS to impose penalties when
an underpayment resulted either from negligence or a
“false or fraudulent” intent to evade the tax. The Act
barred the IRS from imposing a penalty if “the return is
made in good faith and the understatement of the amount
in the return is not due to any fault of the taxpayer.” Id.
Along the same lines, § 250(d) limited the time during
which the IRS could assess tax after the filing of a tax
return, but explicitly provided that this period could be
suspended if the case involved a “false or fraudulent
return[] with intent to evade the tax.” After recodification
4                                    BASR PARTNERSHIP   v. US

and reorganization the provision authorizing penalties for
fraudulent returns was separated from the section gov-
erning extension and suspension of the statute of limita-
tions. Compare I.R.C. § 6663(a), with I.R.C. § 6501(c)(1).
    The taxes at issue here relate to the activities of a
partnership. Under the Code, partnerships like BASR are
“pass-through” entities. I.R.C. § 701. This means that
although the partnership prepares a tax return, I.R.C.
§ 6031, the partnership itself does not incur tax liability,
I.R.C. § 701. Instead, any tax liability arising from items
on a partnership return “passes through” to the individual
partners, who are then liable for their “distributive share”
of the partnership’s gains and losses. Id. §§ 701–702.
Because a partnership and its individual partners are
treated differently for taxation purposes, Congress enact-
ed the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA), which established “coordinated procedures for
determining the proper treatment of ‘partnership items’
at the partnership level in a single, unified audit and
judicial proceeding.” Alpha I, L.P., ex rel. Sands v. United
States, 682 F.3d 1009, 1019 (Fed. Cir. 2012).
     Under TEFRA, when the IRS disagrees with the tax
treatment of a partnership item on any return, the IRS
must determine the proper treatment of the partnership
item at the partnership level. I.R.C. § 6221. If the IRS
finds an underpayment, the IRS must send a final part-
nership administrative adjustment (FPAA) to the part-
ners.    Id. §§ 6223(a)(2), 6223(d)(2), 6225(a).     If the
partnership disagrees, it may file a “petition for read-
justment” in one of several fora, including the Claims
Court. Id. § 6226(a); see also 28 U.S.C. § 1508 (“The Court
of Federal Claims shall have jurisdiction to hear and to
render judgment upon any petition under section 6226 . . .
of the Internal Revenue Code of 1986.”).
BASR PARTNERSHIP   v. US                                  5

                             II
    The facts relevant to this appeal are undisputed. In
1999, the members of the Pettinati family were about to
realize a large capital gain from the sale of their printing
business. Before they consummated the sale, Erwin
Mayer (Mayer), a lawyer in the Chicago office of the now-
defunct law firm of Jenkens & Gilchrist, contacted the
Pettinati family and proposed “a tax advantaged invest-
ment opportunity.” J.A. 1054. Believing that this oppor-
tunity could result in tax savings, the Pettinatis hired
Jenkens & Gilchrist, which recommended a series of
transactions that could reduce the amount of gain report-
ed to the IRS upon the sale of the family printing busi-
ness. At the end of these transactions, all stock in the
printing business would be owned by a family partner-
ship, BASR. The Pettinatis could then sell the printing
business by directing BASR to sell its shares to the buyer.
    In addition to recommending the transactions, three
attorneys at Jenkens & Gilchrist signed a tax opinion
document attesting to the legitimacy of the transactions.
Mayer characterized the transactions as a “tax-
advantaged investment opportunity.” J.A. 1054. Finally,
the Pettinatis received guidance on reporting these trans-
actions on their 1999 tax returns in a manner that was
consistent with the opinion letters. The Pettinatis hired
Malone & Bailey PLLC to prepare their tax returns.
While Malone & Bailey had a long-standing relationship
with the Pettinatis, it had no prior connection with
Jenkens & Gilchrist. Malone considered the legal opin-
ions provided to the Pettinati family when preparing the
BASR and Pettinati tax returns. Ultimately, by creating
the BASR Partnership, the Pettinatis greatly reduced the
tax liability arising from the sale of their printing busi-
ness.
   Five years later, in 2004, the IRS received a list of
Jenkens & Gilchrist clients, including the Pettinatis, who
6                                     BASR PARTNERSHIP    v. US

had employed this type of tax-advantaged investment
structure. In 2010, the IRS issued a FPAA to BASR for
the tax returns that reflected the sale of the printing
business. In the FPAA, the IRS explained that BASR
“lacked economic substance” because its “principal pur-
pose . . . was to reduce substantially the present value of
its purported partners’ . . . aggregate federal tax liability.”
J.A. 43. The IRS adjusted the tax effect of the printing
business sale accordingly, significantly increasing the
Pettinatis’ tax liability for the 1999 tax returns.
    After filing this action in the Claims Court, BASR
sought summary adjudication of its readjustment and
refund claim, arguing that the adjustments and increased
tax liability in the FPAA were untimely under the three-
year statute of limitations found in I.R.C. § 6229(a) 1 and

    1    Section 6229 governs the limitations period for
making assessments attributable to partnership items.
This statute includes a provision that suspends the three-
year limitations period when a partner acts with the
intent to evade tax. I.R.C. § 6229(c)(1). BASR argued
that § 6229(c)(1) supplants § 6501(c)(1), as the statute
that the IRS must use to avail itself of the unlimited
limitations period. According to BASR, the Government
could not prove that a partner acted with intent to evade
tax and therefore the FPAA was untimely because the
IRS could not avail itself of an unlimited assessment
period. The Claims Court rejected this argument as
soundly foreclosed by our case law. We agree that §
6229(c)(1) does not supplant § 6501(c)(1) in a partnership
case. See AD Global Fund, LLC ex rel. N. Hills Holding,
Inc. v. United States, 481 F.3d 1351 (Fed. Cir. 2007); Prati
v. United States, 603 F.3d 1301, 1307 (Fed. Cir. 2010)
(“Sections 6501 and 6229 do not operate independently to
allow a taxpayer to assert one in isolation and thereby
render an otherwise timely assessment untimely.”); see
BASR PARTNERSHIP   v. US                                7

I.R.C. § 6501(a). The Government acknowledged these
general limitations periods, but asserted that even though
more than three years had passed since BASR’s tax
returns were filed, this period remained open under I.R.C.
§ 6501(c)(1) and I.R.C. § 6229(c)(1) because the case
involved “a false or fraudulent return with the intent to
evade tax.” The IRS concedes that the Pettinatis them-
selves lacked the intent to evade tax. See Oral Argument
at 9:49-10:06 available at http://www.cafc.uscourts.gov/
opinions-orders/0/all/14-5037 (“The government concedes
that 6229(c)(1) doesn’t apply because, as you say Your
Honor, it’s not the partner who commits the fraud, but in
fact the taxpayer’s hired tax professional who set up the
shelter for him.”) The IRS similarly does not allege that
Malone & Bailey, who prepared the relevant tax returns,
acted with intent to evade taxes or to have the Pettinatis
evade taxes. The IRS asserted only that Mayer acted
with the intent to evade tax when he conceived of and
marketed the tax-advantaged investment structure.
Contrary to the opinion letters supplied to the Pettinatis
by Jenkins & Gilchrist, Mayer knew these transactions
were “fraudulently designed to generate large non-
economic tax losses for wealthy taxpayers.” 2 J.A. 945.

also Rhone-Poulenc Surfactants & Specialties, L.P. v.
Comm’r, 114 T.C. 533, 540–41 (2000) (“[S]ections 6229
and 6501 contain alternative periods within which to
assess tax with respect to partnership items, with the
later-expiring period governing in a particular case.”).
    2   On October 19, 2010, Mayer pleaded guilty to con-
spiracy and tax evasion charges relating to his design and
implementation of numerous fraudulent tax shelters.
United States v. Daugerdas, et al., No. 1:09-cr-00581,
(S.D.N.Y. Oct. 19, 2010). As part of the guilty plea pro-
ceedings, Mayer admitted that he knew that these tax
shelters would not be allowed by the IRS if scrutinized
8                                    BASR PARTNERSHIP   v. US

    In reply, BASR argued that the three-year statute of
limitations is suspended only when the taxpayer intended
to evade tax and, therefore, Mayer’s admitted fraud was
insufficient and too remote. Ultimately, the Claims Court
agreed and granted BASR’s motion for summary judg-
ment. The Government filed a timely notice of appeal.
We have jurisdiction under 28 U.S.C. § 1295(a)(3).
                       DISCUSSION
    We review the grant or denial of summary judgment
de novo. Salman Ranch Ltd. v. United States, 573 F.3d
1362, 1370 (Fed. Cir. 2009). Summary judgment is ap-
propriate when “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). In this case, the
parties do not dispute the relevant facts. We are there-
fore presented solely with a question of statutory inter-
pretation, which we review de novo. AD Global Fund,
LLC ex rel. N. Hills Holding, Inc. v. United States, 481
F.3d 1351, 1353 (Fed. Cir. 2007).
    The present case requires us to determine whether
§ 6501(c)(1)’s suspension of the three-year statute of
limitations is only triggered by the intent of the taxpayer,
as urged by BASR, or whether, as the Government main-
tains, the requisite intent can be that of a third-party who
is more remotely connected with the relevant tax return. 3

because the transactions had no genuine, non-tax busi-
ness reasons and had no reasonable possibility of result-
ing in profit. By filing a declaration in the present
proceedings, Mayer continues to maintain that he acted
with the intent “to fraudulently evade the federal income
tax [that the Pettinatis] would otherwise owe on capital
gains from the sale of their business.” J.A. 946.
    3   Importantly, we need not decide whether the term
“taxpayer,” as used in § 6501(c)(1), can be interpreted to
BASR PARTNERSHIP   v. US                                  9

Statutory interpretation begins with the words of the
statute. Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438,
450 (2002). “The first step is to determine whether the
language at issue has a plain and unambiguous meaning
with regard to the particular dispute in the case.” Id.
(internal quotation marks omitted). This inquiry “ceases
if the statutory language is unambiguous and the statuto-
ry scheme is coherent and consistent.” Id. (internal
quotation marks omitted). “The plainness or ambiguity of
statutory language is determined by reference to the
language itself, the specific context in which that lan-
guage is used, and the broader context of the statute as a
whole.” Robinson v. Shell Oil Co., 519 U.S. 337, 341
(1997).
   After examining the overall statutory scheme of the
Code, the case law, and § 6501(c)(1)’s historical roots, we

encompass the actions of a taxpayer’s authorized agents.
The government does not allege—nor under the undisput-
ed facts could it allege—that Mayer acted as an author-
ized agent of BASR or the Pettinatis in connection with
the filing of the tax returns at issue here. The govern-
ment simply argues that the “intent to evade tax” refer-
enced in § 6501(c)(1) can be untethered to the filing of the
return itself—i.e., can be the intent of someone proffering
investment advice, but not making decisions regarding or
making representations on the tax returns themselves.
Because we reject that broad reading of § 6501(c)(1), we
need not decide whether the intent of some other third
party—one more closely connected to the tax preparation
and filings themselves—might be relevant. But see Lov-
ing v. IRS, 742 F.3d 1013, 1017 (D.C. Cir. 2014) (“Put
simply, tax-return preparers are not agents. They do not
possess legal authority to act on the taxpayer's behalf.
They cannot legally bind the taxpayer by acting on the
taxpayer's behalf.”).
10                                   BASR PARTNERSHIP   v. US

conclude that § 6501(c)(1) suspends the three-year limita-
tions period only when the IRS establishes that the tax-
payer acted with the intent to evade tax. Because the
Government concedes that it cannot show that either the
partnership or any of its partners acted with the intent to
evade tax, summary judgment in favor of BASR was
proper.
                             I
     Section 6501(c)(1) provides that “[i]n the case of a
false or fraudulent return with the intent to evade tax,
the tax may be assessed . . . at any time.” On appeal, the
Government contends that the unlimited limitations
period is triggered whenever any individual acts with the
intent to evade tax and the tax return ultimately filed
contains a falsity, without regard to how remotely related
that individual is to the actual tax return or to whether
the taxpayer appreciates that individual’s intentions.
BASR counters that the Claims Court correctly concluded
that § 6501(c)(1)’s suspension of the statute of limitations
is triggered only when the taxpayer acts with intent to
evade tax, 4 and that the statutory scheme and history
compel this conclusion.

     4  In reaching its decision, the Claims Court noted
that § 6501(a) defines the term “return” as “the return
required to be filed by the taxpayer.” The Claims Court
then incorporated this definition into § 6501(c)(1) and
thereby concluded that the statutory language limited the
suspension to cases where the taxpayer possesses fraudu-
lent intent. BASR P’ship, 113 Fed. Cl. at 192 (“Because
the language of 6501(a) is expressly limited to a return
filed by the ‘taxpayer,’ the fraudulent intent referenced in
I.R.C. § 6501(c) is by implication limited to fraud by the
taxpayer.”). Although we disagree that this definition
renders the meaning of § 6501(c)(1) clear and unambigu-
BASR PARTNERSHIP   v. US                                11

    We recognize that Section 6501(c)(1) is silent as to
which party or parties must have the requisite fraudulent
intent to suspend the three-year statute of limitations for
pursuing a past underpayment. But that silence alone
does not automatically compel the conclusion that Con-
gress intended that actions by parties other than the
taxpayer could suspend the three year statute of limita-
tions. The government’s argument that we should simply
focus on the fraudulent nature “of the return,” misses the
mark. A fraud is only committed via submission of a
document when a person acting with an intent to defraud
makes a false entry on that document. The reference to a
fraudulent return in § 6501(c) must be understood in
context—by reference to the intent to evade tax language
in that same statutory section. It is to interpreting that
language which we must turn.
     Under Supreme Court precedent, we cannot deter-
mine the meaning of the statutory language without
examining that language in light of its place in the statu-
tory scheme. Indeed, the Supreme Court recently empha-
sized the importance of looking at the statutory context
when determining whether a statutory provision has a
plain and unambiguous meaning. Yates v. United States,
135 S. Ct. 1074, 1081–82 (2015) (“Whether a statutory
term is unambiguous, however, does not turn solely on
dictionary definitions of its component words. Rather,
‘[t]he plainness or ambiguity of statutory language is
determined [not only] by reference to the language itself,
[but as well by] the specific context in which that lan-
guage is used, and the broader context of the statute as a
whole.” (quoting Robinson v. Shell Oil Co., 519 U.S. at
341)); see also Barnhart, 534 U.S. at 450 (acknowledging
that the inquiry into the plain meaning of a statute ceases

ous, the inquiry into the plain meaning of this statute
does not end here.
12                                   BASR PARTNERSHIP   v. US

only after determining that this meaning is “coherent and
consistent” with the statutory scheme).
     The other provisions in the Code relating to fraudu-
lent conduct strongly suggest that the Code confines the
“intent to evade tax” inquiry to the taxpayer’s intent. The
precursor statute to § 6501(c)(1), in particular, confirms
this understanding. These sources lead us to conclude
that the reading of § 6501(c)(1) most “coherent and con-
sistent” with the statutory scheme is one that limits the
application of this provision to cases involving a false or
fraudulent return where the taxpayer acted with the
intent to evade tax. 5
                             A
    Section 6501(c)(1) is not the only Code provision that
deals with the consequences of intentional tax evasion. A
survey of other fraud-related provisions of the Code
reveals that they contemplate fraud by the taxpayer, as
opposed to by a person who merely contributed, albeit in a
fraudulent way, to the filing of an inaccurate tax return.
                             1
    Ordinarily, the IRS’s tax assessments are presumed
correct, and the taxpayer has the burden of challenging
this determination. United States v. Fior D’Italia, Inc.,

     5   The Government also stresses the Supreme
Court’s recognition, in Badaracco v. Commissioner, that
“‘[s]tatutes of limitation sought to be applied to bar rights
of the Government, must receive a strict construction in
favor of the Government.’” 464 U.S. 386, 391 (1984)
(quoting E.I. Dupont de Nemours & Co. v. Davis, 264 U.S.
456, 462 (1924)). In contrast to the present case, there
was no indication in Badaracco that the Court’s interpre-
tation was inconsistent or incoherent in the greater
statutory scheme.
BASR PARTNERSHIP   v. US                                   13

536 U.S. 238, 242 (2002). When alleging taxpayer fraud,
however, the IRS bears the burden. I.R.C. 7454(a).
Section 7454(a) provides that “[i]n any proceeding involv-
ing the issue whether the petitioner has been guilty of
fraud with intent to evade tax,” the IRS bears the burden
of proving the element of fraud. Id. (emphasis added); see
Badaracco, 464 U.S. at 399. Thus § 7454(a) indicates
that, when pursuing fraudulent conduct, Congress consid-
ered the fraudulent intent of only the taxpayer, not of a
third-party who advised or assisted the taxpayer. Section
7454(a) specifically identifies the “petitioner’s,” or taxpay-
er’s fraud and, by its plain terms, neither this provision
nor the other fraud-related Code provisions discussed
below countenance fraud committed by a third party that
infected the taxpayer’s return.
    The dissent suggests that § 7454(a)’s express refer-
ence to “the petitioner” indicates that Congress knew how
to limit the referenced intent to that of the taxpayer.
Dissenting Op. 4. The dissent attempts to further dimin-
ish the import of this statute by relying on an isolated
sentence in the legislative history of this provision. Id.
True enough, the legislative history explains that Con-
gress shifted the burden of proving fraud from the tax-
payer to the IRS in recognition of the “penal” nature of
proceedings involving allegations of fraud. Id. (citing S.
Rep. No. 70-960, at 38 (1928)). The legislative history
continues, however, by specifying that “the commissioner
should be placed in the position of party plaintiff and
compelled to carry the burden of proving fraud whenever it
is an issue in the case.” S. Rep. No. 70-960, at 38 (empha-
sis added). When read together with the statute’s refer-
ence to the petitioner’s intent to evade tax, the Senate
Report reinforces the conclusion that, “whenever [fraud] is
an issue in the case,” it was fraud by the taxpayer, not by
anyone else, that Congress sought to police. Furthermore,
Congress intended for the government to always carry the
burden of proof for any fraud allegation.
14                                   BASR PARTNERSHIP   v. US

    Taken to its logical conclusion, the dissent’s interpre-
tation, and that of the Government, would allow the IRS
to shift back its statutory burden of proof—and force the
taxpayer to disprove fraud—whenever the IRS alleges
that a party other than the taxpayer committed fraud.
Not only would that create an illogical, party-specific
divergence when it comes to burdens of proof for fraud,
the outcome would directly conflict with the above-
referenced congressional intent. See also Revenue Act of
1928: Hearing on H.R. 1 Before the S. Comm. On Finance,
70th Cong. 25 (1928) (testimony of Hugh Satterlee,
Chairman, American Bar Association Committee on
Federal Taxation) (criticizing how fraud allegations were
handled at that time because “there ha[d] been cases . . .
where in order to avoid a running of the statute of limita-
tions the commissioner charged fraud without a scintilla
of evidence,” placing taxpayers in the difficult position of
having to disprove the fraud charged against them).
                             2
     Our conclusion is further supported by the Govern-
ment’s interpretation of another fraud-related Code
provision, I.R.C. § 6663(a), which requires the IRS to
impose fraud penalties. Section 6663(a) provides that “[i]f
any part of any underpayment of tax required to be shown
on a return is due to fraud, there shall be added to the tax
an amount equal to 75 percent of the portion of the un-
derpayment which is attributable to fraud.”           I.R.C.
§ 6663(a) (emphasis added). Like § 6501(c)(1), § 6663(a)
does not specify whether the “fraud” that triggers the
statutory remedy (§ 6501(c)(1): suspension of the statute
of limitations; § 6663(a): 75 percent penalty) must be
attributable to the taxpayer. Instead, in both provisions a
form of the word “fraud” describes the tax return, rather
than a person (§ 6501(c)(1): “fraudulent”; § 6663(a): “due
to fraud”).
BASR PARTNERSHIP   v. US                                  15

     Despite the similarities between § 6501(c)(1) and
§ 6663(a), the Government contends that § 6663(a)’s fraud
penalty applies only when the taxpayer, not a third party,
commits fraud. 6 Appellant’s Br. 48–49 (“[T]he 75-percent
fraud penalty under I.R.C. § 6663 is intended to punish
and deter wrongful conduct and should therefore be
imposed on the taxpayer only if the taxpayer is culpable.”
(citation and internal quotation marks omitted)). Yet,
nothing in the statute or legislative history supports a
result in which the IRS interprets § 6663(a), on the one
hand, to allow it to penalize the taxpayer only for his own
fraud, but interprets § 6501(c)(1), on the other hand, to
prolong the IRS’s ability to penalize the taxpayer for
fraud committed by others. We see no basis in the statu-
tory language or legislative history of the two provisions
to support the Government’s conflicting interpretations of
who may be the source of the fraud that triggers these
provisions.
                             3
     Finally, the Government’s broad interpretation of
§ 6501(c)(1), if applied to other code provisions, could have
unintended and unfortunate consequences. For example,
it could prevent taxpayers from receiving an extension for
payment of a tax deficiency under I.R.C. § 6161(b)(3).
Section 6161 prohibits the IRS from granting an exten-
sion when the tax deficiency in question is “due to negli-
gence, to intentional disregard of rules and regulations, or
to fraud with intent to evade tax.” Like the other statuto-

    6  The Government also argues that § 6663(a)’s
fraud penalty is discretionary, and therefore the Govern-
ment will not assess a penalty against an innocent tax-
payer when it was a third party that caused the return to
be fraudulent. That argument appears foreclosed by the
language of § 6663(a), which states that the penalty “shall
be added” in cases of fraud.
16                                   BASR PARTNERSHIP   v. US

ry provisions discussed above, § 6161 does not expressly
specify whether a third-party’s negligent or fraudulent
conduct would prevent the taxpayer from receiving an
extension. If the Government prevails in its view that
§ 6501(c)(1) permits the IRS to look beyond the taxpayer
for the requisite intent, the same would surely apply
under § 6161.
                             B
    To support its interpretation, the Government urges
us to follow the lead of the Tax Court and the Second
Circuit. According to the Government, each of these
courts has previously decided that the fraud of a third-
party may trigger the unlimited assessment period of
§ 6501(c)(1). Neither of the cases helps the Government’s
case. As discussed further below, we do not find the
reasoning of the Tax Court persuasive and, contrary to
the Government’s assertion, the Second Circuit has not
actually decided this issue.
                             1
    In the Tax Court case, Allen v. Commissioner, the IRS
sought to invoke § 6501(c)(1)’s unlimited limitations
period to assess tax on a tax return where the tax prepar-
er claimed false and fraudulent deductions, unbeknownst
to the taxpayer. 128 T.C. 37, 38 (2007). After conducting
a limited analysis of the text of § 6501(c)(1), the Tax Court
concluded that a tax preparer could supply the necessary
intent to evade tax. Id. at 42. The Tax Court’s reasoning
parallels the arguments presented by the Government in
the present case, none of which alters our conclusion. As
previously noted, we do not read the Supreme Court’s
statements in Badaracco as requiring us to adopt the
Government’s interpretation of the statute of limitations
here. See id. at 40.
    In addition, although the Tax Court recognized how
this interpretation would affect the application of the
BASR PARTNERSHIP   v. US                                  17

fraud penalty provision in § 6663(a), the court’s analysis
did not consider how its interpretation conflicted with the
IRS’s interpretations of Code provisions § 7454(a) and
§ 6161, discussed above. See id. at 41. Ultimately, the
Tax Court seemed assuaged by the fact that its interpre-
tation of the statute would have no practical effect, as the
IRS was not actually seeking the fraud penalty in that
case. Id.; see also id. at 42 (“We finally note that respond-
ent is seeking to collect only the deficiency in tax from
petitioner. Respondent is not asserting the fraud penalty
against petitioner.”).
    We are not so comforted. True enough, the Govern-
ment now asserts that the fraud penalty should be “im-
posed on the taxpayer only if the taxpayer is culpable.”
Appellant’s Br. 49. Nevertheless, if we accept the Gov-
ernment’s interpretation of § 6501(c)(1), the Government
would be free to use that holding to impose the fraud
penalty on taxpayers based on attenuated third-parties
alleged to have the requisite fraudulent intent. In fact,
§ 6663(a)’s “shall” language apparently requires the
Government to pursue the fraud penalty in this situation.
See I.R.C. § 6663(a) (“If any part of any underpayment of
tax required to be shown on a return is due to fraud, there
shall be added to the tax an amount equal to 75 percent of
the portion of the underpayment which is attributable to
fraud.” (emphasis added)).
    Finally, finding that it was not “unduly burdensome
for taxpayers to review their returns for items that are
obviously false or incorrect,” the Tax Court rejected the
taxpayer’s argument that using the tax preparer’s fraud
to suspend the limitations period under § 6501(c)(1) would
unfairly burden the taxpayer. Id. at 41 (emphasis added).
In this case, however, that reasoning does not apply.
BASR, the taxpayer that signed the return, had a third-
party accountant who prepared the return and yet anoth-
er step removed from Mayer, the lawyer who structured
the fraudulent tax vehicle. There are no allegations that
18                                    BASR PARTNERSHIP   v. US

BASR, or even its accountant, knew or should have
known that the tax return was false or incorrect, much
less that it was “obviously” false or incorrect. Even if we
were to find the Allen court’s reasoning persuasive, that
decision would be distinguishable on the facts.
    For these reasons, the Tax Court’s reasoning in Allen
does not persuade us that § 6501(c)(1) necessarily encom-
passes situations where an attorney advising on financial
transactions, but not involved with the preparation of the
taxpayer’s return, acts with intent to evade tax.
                              2
    The Government’s reliance on City Wide Transit, Inc.
v. Commissioner is also misplaced. In that case, City
Wide, the taxpayer, “concede[d] that . . . City Wide’s
returns trigger the tolling provision if we find that [the
tax return preparer] filed them with the intent to evade
City Wide’s taxes.”). 709 F.3d 102, 107 (2d Cir. 2013).
Thus, in City Wide, the Second Circuit confronted only the
issue of whether the person who prepared the tax returns
acted with the intent to evade taxes.
     In front of the tax court, City Wide argued that it
     was not liable for the returns [the tax return pre-
     parer] prepared where ‘(1) [City Wide] did not
     know of the preparer’s defalcations; [and] (2) [City
     Wide] did not sign or knowingly allow to be filed a
     false return . . . .’ The Commissioner anticipated
     these claims on appeal and rebutted them in its
     opening brief. City Wide, however, conceded these
     issues in its response brief. Moreover, each mem-
     ber of this panel asked City Wide whether it had
     intended this concession, and City Wide respond-
     ed affirmatively to each of us in turn. According-
     ly, we accept this concession without deciding
     whether certain factual situations might arise
     that sever the tax payer’s liability from the tax-
     preparer’s wrongdoing.
BASR PARTNERSHIP   v. US                                 19

City Wide, 709 F.3d at 107 n.3 (citations omitted). Con-
trary to the Government’s assertions, City Wide did not
actually address the question of whether the tax prepar-
er’s intent was sufficient to trigger § 6501(c)(1). Id. at
107. Accordingly, City Wide has no bearing on the inter-
pretation of § 6501(c)(1).
                             II
    Based on the statutory scheme and the absence of
persuasive case law, we cannot agree with the Govern-
ment that § 6501(c)(1) unambiguously permits the sus-
pension of the limitations period when the taxpayer
lacked fraudulent intent. The statutory scheme actually
seems to point in the opposite direction.
     It is also worth noting that the Government’s inter-
pretation is of relatively recent vintage. The IRS previ-
ously held the exact opposite position on the scope of
§ 6501(c)(1) than the one it asserts in the present case.
Namely, in a 2001 Field Service Advisory, the IRS con-
cluded that, although “[s]ection 6501(c)(1) does not by its
express language require that the ‘intent to evade tax’ be
the personal intent of Taxpayer[,] [w]e nonetheless con-
clude that the fraudulent intent of the return preparer is
insufficient to make section 6501(c)(1) applicable.” Field
Service Mem. 200104006, 2001 WL 63261. The IRS
obviously changed its position on the interpretation of
§ 6501(c)(1) at some point between 2001 and 2005, when
the IRS issued the deficiency notices that led to the Allen
litigation. It is unclear what prompted this change in the
IRS’s position, given that Congress had not altered the
text of § 6501(c)(1) in any meaningful way over the past
century. See Revenue Act of 1921 § 250(d), Pub. L. No.
67-98, 42 Stat. 227; see also Internal Revenue Code of
1954 § 6501(c)(1), Pub. L. No. 83-591, 68A Stat. 803.
    Indeed, reviewing the evolution of § 6501 from its
origin as § 250(d) of the Revenue Act of 1918 is instructive
on understanding the proper interpretation. The context
20                                    BASR PARTNERSHIP   v. US

provided by this predecessor statute confirms that Con-
gress intended that only the taxpayer’s intent to evade
tax could trigger the unlimited limitations period that
now appears in § 6501(c)(1).        See Morrison-Knudsen
Const. Co. v. Dir., Office of Workers’ Comp. Programs, 461
U.S. 624, 632–33 (1983) (examining the history and
structure of the Compensation Act to aid in interpretation
of a single statutory provision).
     The fraud penalty and the fraud suspension of the
statute of limitations appeared together in § 250 of the
Revenue Act of 1918. First, § 250(b) imposed certain
penalties for underpayment when the underpayment
resulted from the taxpayer’s negligence or intent to evade
tax.
     (b) As soon as practicable after the return is filed,
     the Commissioner shall examine it. . . .
     If the amount already paid is less than that which
     should have been paid, the difference shall . . . be
     paid upon notice and demand by the collector. In
     such case if the return is made in good faith and
     the understatement of the amount in the return is
     not due to any fault of the taxpayer, there shall be
     no penalty because of such understatement. If the
     understatement is due to negligence on the part of
     the taxpayer, but without intent to defraud, there
     shall be added as part of the tax 5 per centum of
     the total amount of the deficiency . . . .
     If the understatement is false or fraudulent with
     intent to evade the tax, then . . . there shall be
     added as part of the tax 50 per centum of the
     amount of the deficiency. . . .
Revenue Act of 1918 § 250(b), Pub. L. No. 54-254, 40 Stat.
1057 (emphases added).
    Section 250(b) explains that the IRS will impose cer-
tain penalties when an underpayment is due to fault of
BASR PARTNERSHIP   v. US                                  21

the taxpayer. For example, under § 250(b) the IRS could
not impose any penalty when an underpayment was “not
due to any fault of the taxpayer.” If, however, the under-
statement was “due to negligence on the part of the
taxpayer, but without intent to defraud,” the statute
imposed a penalty equal to five percent of the underpay-
ment. Then, the final paragraph of § 250(b) expands on
the situations involving “intent to defraud” and explains
that “[i]f the understatement [was] false or fraudulent
with intent to evade the tax,” the IRS shall impose a
penalty equal to fifty percent of the underpayment. In
this way, the structure of § 250(b) and its use of “on the
part of the taxpayer,” demonstrates that the determina-
tion of whether and to what extent a taxpayer would be
penalized for underpayment is based on the taxpayer’s
intent. The Government agrees that the fraud penalty
provision in § 250(b) focuses solely on the taxpayer’s own
intent. See Oral Argument at 27:52–28:11 available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2
014-5037.mp3 (“In subsection (b), Congress made it
perfectly clear that they were talking about taxpayer’s
intent.”).
    Two subsections later, § 250(d) borrows the “false or
fraudulent with intent to evade tax” language from
§ 250(b) and uses it to describe situations when the nor-
mal period for assessing tax may be extended indefinitely.
   (d) Except in the case of false or fraudulent re-
   turns with intent to evade the tax, the amount of
   tax due under any return shall be determined and
   assessed by the Commissioner within five years
   after the return was due or was made, and no suit
   or proceeding for the collection of any tax shall be
   begun after the expiration of five years after the
   date when the return was due or was made. In
   the case of such false or fraudulent returns, the
   amount of tax due may be determined at any time
22                                  BASR PARTNERSHIP   v. US

     after the return is filed, and the tax may be col-
     lected at any time after it becomes due.
Revenue Act of 1918 § 250(d).
     Although § 250(d) does not expressly identify whose
“intent to evade the tax” could be used to extend the
limitations period, the mirroring language in § 250(b),
which is directed to the taxpayer’s intent, informs the
interpretation of § 250(d). See Morrison-Knudsen, 461
U.S. at 633 (“[W]e have often stated that a word is pre-
sumed to have the same meaning in all subsections of the
same statute . . . .”). With this in mind, it becomes abun-
dantly clear that the focal point of § 250 is the intent of
the taxpayer. The taxpayer’s intent is central to determin-
ing whether to impose a penalty and whether the IRS
may avail itself of an unlimited period to assess tax. As
with § 6501(c)(1) and § 6663(a), discussed supra, the
Government fails to explain why § 250(b) and § 250(d)
should be understood differently.
     Since 1918, the concepts within § 250 were separated
and recodified into three statutory sections. See I.R.C.
§§ 6663(a), 6664(c), 6501. However, nothing in the recodi-
fication and reorganization process altered the meaning of
the terms “intent” and “fraudulent” as used in this prede-
cessor statute. Section 6501(c)(1) maintains the same
“false or fraudulent return with the intent to evade tax”
language that § 250(d) originally used, as informed by
§ 250(b). The Government has not pointed to any statuto-
ry text or legislative history of any of the subsequent
reenactments that justifies expanding beyond the taxpay-
er the universe of parties who can supply the requisite
intent to evade tax to trigger § 6501(c)(1). 7

     7  In Allen, the Tax Court briefly mentioned § 6501’s
origin in the Revenue Act of 1918, but rejected its proba-
tive value based on a statutory amendment passed by the
BASR PARTNERSHIP   v. US                                 23

    This statutory history of § 6501(c)(1) confirms and
further supports the interpretation that limits to the
taxpayer the fraudulent intent required to trigger sus-
pending the three year statute of limitations.          See
Taniguchi v. Kan Pac. Saipan, Ltd., 132 S. Ct. 1997,
2004–05 (2012) (examining the “statutory context” and
the statute “[a]s originally enacted” to construe a statuto-
ry term).
    Both parties identify policy reasons for and against
limiting the application of § 6501(c)(1) to cases involving
fraudulent conduct by the taxpayer, as opposed to other
parties that may have a role in a fraudulent tax return.
These policy arguments are best directed to Congress,
which has the power to amend and update the Code to

House Ways and Means Committee, which was ultimately
rejected by the Senate Finance Committee. Allen v.
Comm’r, 128 T.C. at 39 n.3. True enough, this amend-
ment would have specified that the unlimited assessment
period was triggered only by the taxpayer’s intent to
evade tax. Id. But, “failed legislative proposals are a
particularly dangerous ground on which to rest an inter-
pretation of a prior statute.” Cent. Bank of Denver, N.A.
v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 187
(1994) (internal quotation marks and citation omitted).
This is especially true where, as in the case of § 250(d),
the legislature discards a proposed amendment without
discussion. See Allen, 128 T.C. at 39 n.3. “Congressional
inaction lacks persuasive significance because several
equally tenable inferences may be drawn from such
inaction, including the inference that the existing legisla-
tion already incorporated the offered change.” Cent. Bank
of Denver, 511 U.S. at 187 (emphasis added) (citation
omitted).
24                                    BASR PARTNERSHIP   v. US

account for situations that may not have existed a century
ago. 8
                        CONCLUSION
    The language, structure, and history of the Code leads
us to the conclusion that the Claims Court properly
interpreted § 6501(c)(1) as limiting the IRS to the three-
year limitations period unless the taxpayer possessed the
intent to evade tax.
                        AFFIRMED

     8   To the extent the dissent is concerned with remov-
ing a tool from the IRS’s toolbox, however, we note that
there are many ways the IRS can recoup tax underpay-
ments from third parties who intentionally violate the law
or encourage others to do so, not the least of which is
through the criminal prosecution—with attendant restitu-
tion orders—of such persons. We note, moreover, that the
IRS’s need to resort to the strained statutory interpreta-
tion it urges upon us was due in large measure to its own
delays and failure to act despite full disclosure of all
information necessary to assess the legitimacy of the
transactions reported. Indeed, the government concedes
that it took the IRS twenty-seven months from the date
that Jenkens & Gilchrist disclosed its list of tax shelter
clients (which included the Pettinatis) to the date it
initiated an audit of BASR’s returns. See Appellant Br.
23 (citing J.A. 1703-04; J.A. 202). And, the Tax Court has
expressly found that a tax return like the Pettinatis was
sufficient on its face to disclose all relevant aspects of the
transactions about which the IRS now complains. See R
& J Partners v. Comm’r, No. 7166-06, 2009 U.S. Tax Ct.
LEXIS 45, at *4-5 (Tax Ct. Oct. 23, 2009).
  United States Court of Appeals
      for the Federal Circuit
                 ______________________

  BASR PARTNERSHIP, WILLIAM F. PETTINATI,
          SR., Tax Matters Partner,
              Plaintiffs-Appellees

                            v.

                   UNITED STATES,
                  Defendant-Appellant
                 ______________________

                       2014-5037
                 ______________________

    Appeal from the United States Court of Federal
Claims in No. 1:10-cv-00244-SGB, Judge Susan G.
Braden.
               ______________________
O’MALLEY, Circuit Judge, concurring.
    It is undisputed that the Internal Revenue Service
(“IRS”) ordinarily must assess taxes within three years
after a return is filed. On appeal, the parties dispute
which rules govern extension of that three year period for
taxes that are attributable to allegedly fraudulent part-
nership items. The government contends that the general
exception for fraudulent returns contained in Section
6501(c)(1) of the Internal Revenue Code (“I.R.C”) applies
here and provides an unlimited assessment period, re-
gardless of the absence of any fraudulent intent on behalf
of the taxpayer. Appellees BASR Partnership and Wil-
liam F. Pettinati, Sr., Tax Matters Partner, (collectively,
“BASR”) argue, to the contrary, that the specific rules set
2                                    BASR PARTNERSHIP   v. US

forth in § 6229(c)(1) apply to allegedly fraudulent part-
nership returns and to tax attributable to allegedly false
partnership items reported on the individual partners’
returns and, alternatively, that if § 6501(c)(1) controls,
the time for assessing a tax under that provision may not
be extended where the taxpayer acts with no intent to
evade tax. I agree with BASR on both points. More
specifically, I agree with both BASR and the majority
that, under § 6501(c)(1), it is the taxpayer (or possibly his
authorized agent) who must have the requisite “intent to
evade tax” before the IRS is authorized to go beyond the
three year statute of limitations in § 6501. 1 And, because

    1    In addition to the many cogent points made by the
majority, it is worth noting one practical reality. Mayer
spent fifteen years conceiving of and promoting the use of
the transactions at issue here, even employing them for
himself. No doubt, his primary intent was to make money
by providing legal advice regarding these transactions
and their structure. His business would have had little
success if he were not able to provide credible grounds
upon which the clients to whom he pitched these transac-
tions could rest assured that they were legal. Now, after
years of maintaining the contrary—and years after his
clients assumed their tax returns were beyond attack—
Mayer claims he personally intended that his clients
would evade tax when he provided legal advice to them.
On this basis alone, the government asserts it is free to
pursue Mayer’s clients without the restraint of any limi-
tations period because, the government argues, “[t]he
source of the fraud” is irrelevant. Appellant Reply 4. But
that position cannot be squared with either the statutory
language or the purpose behind the statutes of limitations
in both § 6501 and § 6229: finality. The IRS should have
the ability to pursue fraud by taxpayers without undue
restriction, and should be permitted to pursue third
parties who engage in improprieties that ultimately result
BASR PARTNERSHIP   v. US                                   3

the government concedes that the taxpayers here did not
act with that intent, I agree that the IRS’s adjustments
and penalty determinations were untimely. As a thresh-
old matter, however, I believe that resolution of this
appeal is governed by the specific rules Congress created
to determine the limitations period for making assess-
ments attributable to partnership items: § 6229.
    Where, as here, the government is arguing that the
statute of limitations remains open solely because of
alleged fraud on a partnership return, the special rules
set forth in § 6229 for partnerships must apply. Although
the majority suggests that our prior case law requires
application of § 6501(c)(1) to the exclusion of § 6229(c)(1),
I disagree. See Majority Op. at 6 n.1.         As explained
below, the plain language of the statutory scheme, canons
of statutory interpretation, legislative intent, and judicial
precedent all indicate that § 6229(c)(1) is the governing
limitations period for the circumstances at issue here. To
hold otherwise would permit the government to recon-
struct the statutory scheme in a way that renders § 6229
meaningless. Because application of § 6229 here leads to
the same ultimate conclusion the majority reaches—
which is that the Court of Federal Claims correctly de-
termined that the Final Partnership Administrative
Adjustment (“FPAA”) was untimely—I join the majority
opinion with the exception of footnote 1.
                    I. PLAIN LANGUAGE
    Turning first to the statutory language, § 6501(a) pro-
vides that, ordinarily, the IRS must assess taxes “within 3

in the underpayment of taxes; indeed, it already has the
tools to do both. It should not, however, be able to con-
flate the desire to accomplish those two goals by render-
ing meaningless the statute of limitations Congress put in
place to assure finality for innocent taxpayers.
4                                   BASR PARTNERSHIP   v. US

years after the return was filed.” 26 U.S.C. § 6501(a).
Subsections 6501(c)-(m) contain a number of exceptions to
the standard three year period, including an indefinite
extension permitting the IRS to assess tax at any time in
the event of a “false or fraudulent return with the intent
to evade tax.” I.R.C. § 6501(c)(1). But to determine
whether the standard three year limitations period is
extended “in the case of partnership items,” § 6501(n)(2)
cross references § 6229. I.R.C. § 6501(n)(2) (“For exten-
sion of period in the case of partnership items (as defined
in section 6231(a)(3), see section 6229.”)).
     Section 6229 is one of several provisions that Con-
gress added to the Code when it enacted the Tax Equity
and Fiscal Responsibility Act of 1982 (“TEFRA”). As the
majority recognizes, TEFRA was designed to coordinate
procedures “for determining the proper treatment of
‘partnership items’ at the partnership level in a single,
unified audit and judicial proceeding.” Alpha I, L.P., ex
rel. Sands v. United States, 682 F.3d 1009, 1019 (Fed. Cir.
2012). 2 The parties agree that whether a partnership
return is fraudulent such that an extended statute of
limitations period should apply is a “partnership item.”
See Prati v. United States, 603 F.3d 1301, 1307 (Fed. Cir.
2010) (“Based on Keener, we hold that the statute of
limitations issue is a partnership item and that the Pratis
and the Deegans were required to raise the limitations
issue in the partnership-level proceeding prior to either
entering settlement or stipulating to judgment in the Tax
Court.”); Keener v. United States, 551 F.3d 1358, 1366
(Fed. Cir. 2009) (“[T]he nature of a partnership’s transac-

    2   A “partnership item” is “any item required to be
taken into account for the partnership’s tax year” if the
applicable regulations provide that the item “is more
appropriately determined at the partnership level than at
the partner level.” 26 U.S.C. § 6231(a)(3).
BASR PARTNERSHIP   v. US                                     5

tion—and, specifically, whether a partnership transaction
is a ‘sham’—is a partnership item.”).
    By its terms, § 6229 governs the limitations period for
making assessments attributable to partnership items
and generally allows the IRS three years from the date
that a partnership tax return is filed to assess tax that is
attributable to any partnership item. I.R.C. § 6229(a).
Looking to the statutory text, we have explained that:
    Sections 6501 and 6229 operate in tandem to pro-
    vide a single limitations period. When an assess-
    ment of tax involves a partnership item or an
    affected item, section 6229 can extend the time
    period that the IRS otherwise has available under
    section 6501 to make that assessment. Thus, the
    limitations period is the period defined by section
    6501, as extended when appropriate by section
    6229.
Prati, 603 F.3d at 1307 (internal citations omitted).
     Section 6229 contains several exceptions that can ex-
tend the period for assessing tax that is attributable to
partnership items. In particular, § 6229(c) contains a
“[s]pecial rule in case of fraud” which: (1) applies only if at
least one partner has “the intent to evade tax;” and
(2) takes into consideration each individual partner’s level
of participation in the partnership return and, thus, in
any fraud. I.R.C. § 6229(c)(1). For partners who sign or
participate in the preparation of a partnership return
which includes a false or fraudulent item, the tax may be
assessed at any time. I.R.C. § 6229(c)(1)(A). In the case
of all other partners, § 6229(c)(1)(B) gives the IRS six
years, instead of three, to assess tax attributable to part-
nership items. For non-participating partners, the IRS is
given this extra three year period without the burden of
proving any “intent to evade tax” on behalf of those part-
ners.
6                                    BASR PARTNERSHIP   v. US

     Other portions of §§ 6501 and 6229 likewise support
the conclusion that § 6229 governs extension of the time
in which the IRS can assess taxes attributable to partner-
ship items. For example, the only subsection of § 6229
that specifically identifies “[c]oordination with section
6501” provides that any extension by agreement between
the IRS and the taxpayer under § 6501(c)(4) “shall apply
with respect to the period described in subsection (a) only
if the agreement expressly provides that such agreement
applies to tax attributable to partnership items.” I.R.C.
§ 6229(b)(3). By virtue of this statutory language, “nor-
mal extensions of a partner’s personal limitations period
pursuant to section 6501(c)(4) are NOT applicable to
extend the period of limitations with respect to partner-
ship items UNLESS the agreement expressly so pro-
vides.” Rhone-Poulenc Surfactants & Specialties, L.P. v.
Comm’r, 114 T.C. 533, 567 (2000) (Parr, J., dissenting).
Congress’ decision to incorporate § 6501 into one section
of § 6229 demonstrates that § 6501 does not control the
time in which the IRS has to assess taxes attributable to
partnership items without consideration of the specific
rules set forth in § 6229. And, if Congress had wanted to
add a provision for coordination with § 6501(c) into
§ 6229(c), it could have done so.
     Read in its entirety, the plain language of the statute
makes clear that § 6229 governs whether and for how
long the standard three-year period the IRS has to assess
tax may be extended for tax attributable to partnership
items. The government does not dispute that the alleged
fraud on BASR’s return is a “partnership item” or that the
allegedly fraudulent items on the partners’ returns flow
from that partnership item. 3 Accordingly, § 6229(c)(1)

    3  The government posits that § 6229(c)(1) should
not apply here because “the United States does not rely on
BASR’s fraudulent returns, but rather on the Pettinatis’
BASR PARTNERSHIP   v. US                                 7

dictates whether the standard three-year assessment
period is extended due to alleged fraud on a partnership
return.
       II. CANONS OF STATUTORY INTERPRETATION
     Reading § 6501(c)(1) to govern how long the limita-
tions period is extended for partnership items violates at
least two canons of statutory interpretation. The first is
that “the specific governs the general.” See RadLAX
Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct.
2065, 2070-71 (2012). As noted, this is a partnership
proceeding and § 6229(c)—entitled a “[s]pecial rule in case
of fraud”—contains specific rules extending the statute of
limitations for fraudulent items on partnership returns.

fraudulent returns, as the basis for an unlimited limita-
tions period.” Appellant Br. 59. According to the gov-
ernment, § 6501(c)(1) is the relevant exception to the
limitations period with respect to a fraudulent taxpayer
return. In its Answer to BASR’s Complaint, however, the
government asked for judgment in its favor “determining
that the adjustments to the partnership returns of BASR
Partnership made by the FPAA are correct.” Answer at 8,
BASR P’ship v. United States, No. 1:10-cv-244 (Fed. Cl.
Aug. 10, 2010), ECF No. 11. And, it alleged that “the
statute of limitations for assessing tax remains open in
this case pursuant to 26 U.S.C. §§ 6501(c)(1)
and 6229(c)(1).” Id. at 6 (emphasis added). As BASR
points out, it is clear that the only reason the government
believes the partners’ returns were fraudulent is because
of the alleged fraud on the partnership return. And, it is
clear that, under TEFRA, no partnership item ever ap-
pears on a partner’s return except as dictated by the
partnership return itself. The government does not claim
that the individual partners/taxpayers here committed
any fraud, either in connection with the partnership
return or in connection with their own individual returns.
8                                      BASR PARTNERSHIP    v. US

Where, as here, the government is arguing that the
statute of limitations remains open solely because the
item on the partner’s individual return flows from BASR’s
allegedly fraudulent partnership return, the rules appli-
cable to partnerships should apply. Congress created a
detailed and comprehensive scheme to govern how part-
nership returns are to be processed and addressed. As
part of that scheme, the tax is paid only on the partner’s
individual returns, but its tax treatment is determined
and assessed at the partnership level.
    Perhaps more importantly, the government’s reading
of the statutory scheme renders § 6229(c)(1) superfluous,
violating “the well-settled rule of statutory construction
that all parts of a statute, if at all possible, are to be given
effect.” Weinberger v. Hynson, Westcott & Dunning, Inc.,
412 U.S. 609, 633 (1973). As noted, § 6229(c)(1)(A) gives
the IRS unlimited time to assess tax “attributable to any
partnership item” against partners who, “with the intent
to evade tax,” signed or participated in the preparation of
a partnership return which includes a false or fraudulent
item. If the government were correct that a fraudulent
partnership return can cause the partners’ returns to be
fraudulent within the meaning of § 6501(c)(1), then in any
case where § 6229(c)(1)(A) would apply, § 6501(c)(1) would
also apply to give the IRS an unlimited time to assess the
same tax. Section 6229(c)(1)(A) would have no independ-
ent meaning because the fraud that satisfies that provi-
sion would always also satisfy § 6501(c)(1). Likewise, if a
fraudulent partnership item reported on an individual
partner’s return makes that partner’s return fraudulent
under § 6501(c)(1)—regardless of whether that partner
acted with an intent to evade tax—then the six year
limitation contemplated in § 6229(c)(1)(B) becomes mean-
ingless. Under what possible circumstances would that
six year period ever apply?
    Although this court has not specifically addressed the
interpretation of and interplay between § 6501(c)(1) and
BASR PARTNERSHIP   v. US                                   9

§ 6229(c)(1), the Tax Court sitting as a full court ex-
plained the relationship between these statutory provi-
sions in Rhone-Poulenc Surfactants & Specialties, L.P. v.
Commissioner, 114 T.C. 533 (2000). There, the taxpayer
explained that § 6229(c)(1)(A) “provides an unlimited
section 6229(a) assessment period for deficiencies at-
tributable to partnership items and affected items of a
partner who, acting with intent to evade taxes, signs or
participates in the preparation of a false or fraudulent
partnership return.” Id. at 547. The taxpayer argued
that § 6229 provides a stand-alone statute of limitations
for taxes attributable to partnership items and that
§ 6501 does not factor into the analysis. Id. at 537.
According to the taxpayer, § 6229(c)(1)(A) would be “su-
perfluous if the controlling statute of limitations on as-
sessments of deficiencies attributable to partnership
items and affected items is contained in section 6501,
because section 6501(c)(1) contains an identical unlimited
assessment period.” Id. at 547.
    The Tax Court found that § 6229(c)(1) retained inde-
pendent meaning, however, because it “deals specifically
with partnership returns,” and, “[u]nlike section
6501(c)(1), section 6229(c)(1) applies only to tax attributa-
ble to partnership items or affected items.” Id. at 548-49.
The court explained that the time to assess tax against an
individual partner could remain open under § 6501(c)(1)
based on that partner’s fraud unrelated to the partnership
return:
    Section 6501(c)(1) would literally apply to a part-
    ner whose individual or corporate return was
    fraudulent regardless of whether the partnership
    return was fraudulent. Section 6501(c)(1) allows
    for an unlimited period for assessing any tax for
    the year in which a fraudulent return was filed
    regardless of whether some of the tax may be due
    to nonfraudulent items. Thus, if section 6501(c)(1)
    applies to a particular taxable year, it clearly
10                                   BASR PARTNERSHIP   v. US

     permits an open-ended period for any assessment
     of tax even if part of the assessment was based on
     nonfraudulent partnership items.
Id. at 548 (internal citations omitted). In other words, the
Tax Court has taken the position that § 6501(c)(1) applies
in the partnership context only when the partner’s return
is fraudulent for reasons independent from the partner-
ship return. See id. The government’s suggestion that a
fraudulent partnership return makes its partners’ returns
fraudulent collapses the distinction between § 6501(c)(1)
and § 6229(c)(1)(A) because fraud that would trigger
§ 6229(c)(1)(A) would, under the government’s theory,
always cause § 6501(c)(1) to apply. And, as the Tax Court
noted, unlike § 6501(c)(1), § 6229(c)(1)(B) “provides a
separate 6-year period for assessment of taxes for part-
ners who did not sign or participate in the preparation of
the fraudulent return.” Id. at 549.
    Read together, therefore, § 6229(c)(1) and § 6501(c)(1)
reveal that the fraud on an individual partner’s return
that can keep that partner’s statute of limitations open
under § 6501(c)(1) must be separate from any fraud on or
flowing from the partnership return. See id at 548-49
(noting that “section 6229(c)(1)(A) applies to tax attribut-
able to partnership items if it is the signer’s own taxes
that will be reduced, but that possible limited overlap
with section 6501(c)(1) is insufficient for us to conclude
that section 6229(c)(1) is superfluous, given the disjunc-
tion between intent and underpayment contained in
section 6229(c)(1)”). The government’s theory that fraud
on a partnership return renders the partners’ individual
returns fraudulent and thus subject to § 6501(c)(1) would
write § 6229(c)(1) out of the statute.
                III. CONGRESSIONAL INTENT
    In addition to rendering § 6229(c)(1) meaningless, the
government’s construction of the statutory scheme vio-
lates Congressional intent. The express language of
BASR PARTNERSHIP   v. US                                11

§ 6229(c)(1) reflects Congress’ intent that at least one
partner in a partnership must intend to evade tax for the
partnership return to be considered fraudulent for pur-
poses of extending the statute of limitations. See I.R.C.
§ 6229(c)(1) (“If any partner has, with the intent to evade
tax, signed or participated directly or indirectly in the
preparation of a partnership return which includes a false
or fraudulent item,” the IRS has additional time to assess
tax attributable to that item depending on the partner’s
level of involvement). Indeed, this court has recognized
that “[a] purpose of the ‘intent to evade taxes’ require-
ment [in Section 6229(c)(1)] is to protect limited partners
from an extension of the Commissioner’s time for as-
sessing additional taxes against them where the partner
who signed the return did not know that it contained false
items.” Transpac Drilling Venture v. United States, 83
F.3d 1410, 1415 (Fed. Cir. 1996).
    The statutory language further reveals Congress’ in-
tent that the IRS has only an additional six years to
assess tax attributable to partnership items against
partners who were not involved in preparing the fraudu-
lent partnership return. See I.R.C. § 6229(c)(1)(B). If the
government were correct that § 6501 controls, then the
IRS could bypass the six-year limitation period in
§ 6229(c)(1)(B) and rely solely on § 6501(c)(1) to extend
indefinitely the time that the IRS has to assess tax
against any partner. It would make no sense for Congress
to enact § 6229(c)(1)(B) to extend the statute of limita-
tions from three to six years if the government is right
that the same exact conduct permits the IRS to assess the
tax “at any time” under § 6501(c)(1).
    Given this statutory structure, § 6229(c)(1) applies to
extend the time that the IRS has to assess tax attributa-
ble to partnership items against all partners depending
on their level of involvement with the return, whereas
§ 6501(c)(1) extends the time the IRS has to assess tax
against a specific partner based on fraud that is not
12                                  BASR PARTNERSHIP   v. US

attributable to partnership items. See Rhone-Poulenc,
114 T.C. at 548-49. To hold otherwise would contravene
Congress’ express intent.
                IV. APPLICABLE CASE LAW
     Finally, courts, including this one, have applied
§ 6229(c)(1)—not § 6501(c)(1)—to determine the statute of
limitations applicable where the partnership’s tax return
contains false or fraudulent partnership items. See
Transpac, 83 F.3d at 1414-15 (applying Section 6229(c)(1)
where one of the partners signed the partnership’s return
“which reported false losses” knowing “that the limited
partners would use those losses to reduce their own
taxes”); see also River City Ranches v. Comm’r, 313 F.
App’x 935, 937 (9th Cir. 2009) (“Section 6229(c)(1) re-
quires consideration of the intent of the partner who
participated in the preparation of the partnership returns
. . . . Whether the individual partners intended fraud on
their individual returns has no bearing on a partnership
level proceeding.”).
     The government cites our decision in AD Global Fund,
LLC v. United States, 481 F.3d 1351 (Fed. Cir. 2007) for
the proposition that § 6229 “does not create an independ-
ent statute of limitations,” but instead “creates a mini-
mum period during which the period for tax assessments
for partnership items may not end.” Id. at 1354 (internal
citation and quotation marks omitted). There, the tax-
payer argued that § 6229(a) “provides a separate statute
of limitations for tax assessments on partnership items
and that the FPAA was untimely under § 6229(a).” Id. at
1353. We rejected that argument, finding that “Section
6501 explicitly provides that it applies to any tax imposed
by the title, which would include tax imposed for partner-
ship items.” Id. at 1354. We subsequently reiterated
that: (1) Sections 6501 and 6229 work together to provide
a “single limitations period”; and (2) when a tax assess-
ment “involves a partnership item or an affected item,
BASR PARTNERSHIP   v. US                                13

section 6229 can extend the time period that the IRS
otherwise has available under section 6501 to make that
assessment.” Prati, 603 F.3d at 1307.
    The Court of Federal Claims and the majority here
read AD Global to mean that § 6501—not § 6229—
controls our analysis with respect to the timeliness of the
FPAA. See BASR P’ship v. United States, 113 Fed. Cl.
181, 192 (2013); Majority Op. at 6 n.1. To be sure, AD
Global held that § 6229(a) creates a minimum period of
limitations for partnership items and that minimum
period “may expire before or after the maximum period
provided in § 6501.” AD Global, 481 F.3d at 1354. But
AD Global was focused on the interplay between § 6501(a)
and § 6229(a); it had no occasion to consider the relation-
ship between § 6501(c) and § 6229(c). Unlike the taxpay-
er in AD Global, BASR does not argue that § 6229 creates
an independent statute of limitations for partnership
items that can cut short the standard three-year period
provided in § 6501(a).       Instead, it maintains that
§ 6501(a) creates the standard time period for assessing
tax, while § 6229 contains special rules that govern when
that time period can be extended for tax treatment of
partnership items. This approach—which I believe is
consistent with the statutory scheme—remains true to
our prior indication that “Sections 6501 and 6229 operate
in tandem” while at the same time recognizing that
Congress expressly created more detailed rules for fraud-
ulent partnership returns in § 6229(c)(1). See Prati, 603
F.3d at 1307. 4
    As applied here, because the government has not al-
leged that any partner acted with intent to evade tax, the
standard three year limitations period contained in
§ 6229(a) applies. And, because BASR filed the partner-

   4    To the extent that our decision in AD Global fore-
closes this approach, I believe it should be revisited.
14                                   BASR PARTNERSHIP   v. US

ship tax returns at issue in October 2000, the time the
IRS had to assess tax attributable to partnership items
expired in October 2003, more than six years before the
IRS issued the FPAA to BASR in 2010. See BASR, 113
Fed. Cl. at 184-85. Accordingly, the time the IRS had to
assess additional tax against BASR’s admittedly innocent
partners expired before the IRS issued the FPAA that
gave rise to this case.
                     V. CONCLUSION
    Although I agree that the decision in this case is cor-
rect if we are required to apply § 6501, and therefore
concur in the court’s judgment, I do not agree that § 6501
is controlling in these circumstances, where the allegedly
fraudulent items flow only from a partnership return. For
the reasons discussed above, I believe that § 6229 works
in conjunction with § 6501, and that, in the partnership
context, § 6229(c)(1) contains the rules that dictate when
fraudulent items on a partnership return extend the time
the IRS has to assess tax attributable to partnership
items. Section 6501(c) governs the statute of limitations
as to all other items on an individual partner’s return, but
not the partnership items at issue here.
  United States Court of Appeals
      for the Federal Circuit
                 ______________________

  BASR PARTNERSHIP, WILLIAM F. PETTINATI,
          SR., Tax Matters Partner,
              Plaintiffs-Appellees

                            v.

                   UNITED STATES,
                  Defendant-Appellant
                 ______________________

                       2014-5037
                 ______________________

    Appeal from the United States Court of Federal
Claims in No. 1:10-cv-00244-SGB, Judge Susan G.
Braden.
               ______________________

PROST, Chief Judge, dissenting.
    The Internal Revenue Service (“IRS”) normally has
three years after a return is filed in which to assess tax,
but under the Internal Revenue Code (“I.R.C.” or “Code”)
§ 6501(c)(1) that period is extended indefinitely “in the
case of a false or fraudulent return with the intent to
evade tax.” The majority construes § 6501(c)(1) to encom-
pass only the intent of the taxpayer and not the intent of
the taxpayer’s hired tax professional. In my view, the
statute means what it says: the three-year limitation does
not apply if the intent to evade tax manifests in a fraudu-
lent return.
2                                    BASR PARTNERSHIP   v. US

    The majority eschews the statute’s plain meaning
based on “[a] survey of other fraud-related provisions of
the Code,” which “contemplate fraud by the taxpayer”
only. Majority Op. at 12 (emphasis omitted). But all this
survey reveals is that Congress can write a provision that
explicitly applies only to taxpayer fraud. Some Code
sections concern only the taxpayer’s intent to evade tax,
and other rules also encompass the intent of the taxpay-
er’s hired professionals. In the case of § 6501(c)(1), Con-
gress did not limit the statute to the taxpayer’s intent.
Thus, I respectfully dissent. 1
                     I. PLAIN MEANING
    I begin, as I must, with the standard for construing
§ 6501(c)(1): “Statutes of limitation sought to be applied to
bar rights of the Government, must receive a strict con-
struction in favor of the Government.” E.I. Dupont de
Nemours & Co. v. Davis, 264 U.S. 456, 462 (1924). As a
corollary, “limitations statutes barring the collection of
taxes otherwise due and unpaid are strictly construed in
favor of the Government.” Badaracco v. Comm’r, 464 U.S.
386, 392 (1984) (quoting Lucia v. United States, 474 F.2d
565, 570 (5th Cir. 1973)). The majority brushes this
standard aside by distinguishing the circumstances of
Badaracco in a footnote. Majority Op. at 12 n.5. But the
distinction is irrelevant—Badaracco states a general
standard “long ago pronounced” by the Supreme Court
and reiterated in every case since. Badaracco, 464 U.S. at
391; see Dupont, 264 U.S. at 462; Lucas v. Pilliod Lumber
Co., 281 U.S. 245, 249 (1930).
   With this pro-government rule of construction in
mind, I “naturally turn first to the language of the stat-

    1   On the threshold issue of which statute applies, I
conclude that § 6501(c)(1), not § 6229(c)(1), is the relevant
law. I therefore join footnote 1 of the majority opinion.
BASR PARTNERSHIP   v. US                                  3

ute.” Badaracco, 464 U.S. at 392. I.R.C. § 6501(a) states
the general statute of limitations: “Except as otherwise
provided in this section, the amount of any tax imposed by
this title shall be assessed within 3 years after the return
was filed . . . .” Subsection c provides an exception: “In
the case of a false or fraudulent return with the intent to
evade tax, the tax may be assessed, or a proceeding in
court for collection of such tax may be begun without
assessment, at any time.” I.R.C. § 6501(c)(1).
    The key phrase is “a false or fraudulent return with
the intent to evade tax.” Significantly, the statute’s plain
language does not limit the intent to evade tax to only the
taxpayer’s intent. Rather, the “return” possesses “the
intent to evade tax.” Therefore, the obvious construction
of the statutory text is that the intent to evade tax must
be present in a false or fraudulent return, irrespective of
who possesses that intent. This plain reading of the
statute is bolstered by the pro-government canon of
construction for statutes of limitations. See Badaracco,
464 U.S. at 391–92.
    I need proceed no further. Indeed, the “cardinal can-
on” of statutory construction is that “courts must presume
that a legislature says in a statute what it means and
means in a statute what it says there. When the words of
a statute are unambiguous, then, this first canon is also
the last: judicial inquiry is complete.” Conn. Nat’l Bank v.
Germain, 503 U.S. 249, 253–54 (1992). The text of
§ 6501(c)(1) places no limits on who must have the intent
to evade tax. The statute is unambiguous.
              II. OTHER TAX CODE SECTIONS
    The majority’s response to the plain meaning of the
statute is to “examin[e] that language in light of its place
in the statutory scheme.” Majority Op. at 11. Of course,
the context in which a phrase appears adds to its mean-
ing. See Robinson v. Shell Oil Co., 519 U.S. 337, 341
(1997) (“The plainness or ambiguity of statutory language
4                                   BASR PARTNERSHIP   v. US

is determined by reference to the language itself, the
specific context in which that language is used, and the
broader context of the statute as a whole.”). I have al-
ready considered the context of “intent to evade tax”
above in discussing the surrounding language in
§ 6501(c)(1) and in § 6501 generally. The majority goes
further, and searches the entire tax code for other men-
tions of “the intent to evade tax.” In fact, the sections
cited by the majority for “context” are not even in the
same chapter as § 6501. This is not analogous to the
three cases cited by the majority for the importance of
analyzing statutory language in context. In all three
cases, the Supreme Court considered only closely proxi-
mate statutory provisions.
     Even so, a review of the other Code sections discussed
by the majority reveals only that Congress knows how to
explicitly limit the intent to evade tax to the taxpayer.
Adopting my interpretation of “the intent to evade tax”
does not cause the phrase to be used inconsistently. For
example, take I.R.C. § 7454(a), on which the majority
relies. Section 7454(a) states that “[i]n any proceeding
involving the issue whether the petitioner has been guilty
of fraud with intent to evade tax, the burden of proof in
respect of such issue shall be upon the Secretary.” I.R.C.
§ 7454(a) (emphasis added). Unlike § 6501(c)(1), § 7454(a)
is expressly limited to cases where the government alleges
that the taxpayer had fraudulent intent. The reason for
this limitation is simple: before § 7454(a) was enacted in
1928, the taxpayer had to prove that he did not act with
intent to evade tax. Congress shifted the burden of proof
on taxpayer fraud to the government because
“[p]roceedings before the board involving that issue in
some respects resemble penal suits.” S. Rep. 960, 70th
Cong., 1st Sess., at 38 (May 1, 1928). This concern does
not apply if another’s alleged intent to evade tax is at
issue. Therefore, if anything, § 7454(a) demonstrates that
Congress only limits the intent to evade tax to the tax-
BASR PARTNERSHIP   v. US                                     5

payer’s intent in specific circumstances. Without such
express limitation, the intent to evade tax encompasses
others who cause a return to be fraudulent.
     Consider also § 6229(c)(1), which involves the statute
of limitations for assessing tax to partnerships. Section
6229(c)(1) applies “[i]f any partner has, with the intent to
evade tax, signed or participated directly or indirectly in
the preparation of a partnership return which includes a
false or fraudulent item . . . .” (Emphasis added). As in
§ 7454(a), Congress expressly restricted the intent to
evade tax to a specific individual—in the case of
§ 6229(c)(1), a “partner.” Again, this shows that Congress
can limit “the intent to evade tax” to the taxpayer’s intent
if it so wishes. If “the intent to evade tax” encompasses
only the taxpayer’s intent—as advocated by the majori-
ty—the restrictions to “the petitioner” in § 7454(a) and to
“any partner” in § 6229(c)(1) would be superfluous. The
majority’s construction thus violates the “cardinal princi-
ple of statutory construction that courts must give effect,
if possible, to every clause and word of a statute . . . .” See
Williams v. Taylor, 529 U.S. 362, 364 (2000).
     The majority also places heavy reliance on § 250 of
the Revenue Act of 1918. Majority Op. at 19–23. First,
the import of a nearly 100 year old statute on the mean-
ing of a different statute today is slight. Second, § 250
falls into the same pattern outlined above—when Con-
gress wants to limit intent elements to the taxpayer’s
intent, it does so expressly. Section 250(b), which out-
lined penalties applicable to erroneous returns, stated in
part: “In such case if the return is made in good faith and
the understatement of the amount in the return is not due
to any fault of the taxpayer, there shall be no penalty
because of such understatement.” Revenue Act of 1918
§ 250(b), Pub. L. No. 54-254, 40 Stat. 1057 (emphasis
added). Section 250(b) went on to provide a five percent
penalty “[i]f the understatement is due to negligence on
the part of the taxpayer, but without intent to defraud,”
6                                    BASR PARTNERSHIP   v. US

and a fifty percent penalty “[i]f the understatement is
false or fraudulent with intent to evade the tax . . . .” Id.
(emphasis added). This section, which referenced the
taxpayer twice, assigned tax penalties to the taxpayer
based only on the taxpayer’s intent.
    On the other hand, the statute of limitations, § 250(d),
did not mention the taxpayer. Section 250(d) stated,
“[e]xcept in the case of false or fraudulent returns with
intent to evade the tax, the amount of tax due under any
return shall be determined and assessed by the Commis-
sioner within five years after the return was due or was
made . . . .” Id. (emphasis added). Therefore, because
§ 250(d) did not limit the intent to evade tax to the tax-
payer’s intent as in § 250(b), the statute of limitations did
not apply to fraudulent returns involving the intent to
evade tax generally.
    The majority interprets § 250 differently. According
to the majority, because only the taxpayer’s intent is at
issue in § 250(b), the general reference to “intent to evade
the tax” in § 250(d) must also be limited to the taxpayer’s
intent. However, I do not find this conclusion to be
“abundantly clear.” Majority Op. at 22. It is equally
reasonable—if not more reasonable—to assume that the
intent inquiry is restricted to the taxpayer’s intent only
where the statutory subsection explicitly refers to the
taxpayer’s intent, as in § 250(b). Granted, § 250(b) is
certainly relevant context for construing § 250(d). But
given that Congress did not restrict the intent element in
§ 250(d) to the taxpayer’s intent—as it did in § 250(b)—
the requisite intent to evade the tax could be found in
others, such as tax professionals hired by the taxpayer.
Finally, if there is any remaining doubt, we must turn to
the standard for construction, which requires that we
strictly construe § 6501(c)(1) in favor of the government.
See Badaracco, 464 U.S. at 392.
BASR PARTNERSHIP   v. US                                 7

               III. PURPOSE OF § 6501(c)(1)
      Indeed, it makes perfect sense to impose penalties on
the taxpayer only when the taxpayer intended to evade
the tax, while at the same time allowing the IRS to collect
taxes based on an understated fraudulent return at any
time. Given that the taxpayer must pay any tax penalty,
Congress may reasonably only intend to penalize the
taxpayer when the taxpayer is culpable. See I.R.C.
§ 6664(c)(1) (excepting taxpayers from the penalty if
“there was a reasonable cause” for the underpayment and
they “acted in good faith”). A different rationale applies
to the statute of limitations. Excepting fraudulent re-
turns from the statute of limitations does not penalize the
taxpayer because the taxpayer must only pay the taxes it
properly owed. It is thus inconsequential whether the
taxpayer perpetrated the fraud or whether another indi-
vidual is responsible. Moreover, “fraud cases ordinarily
are more difficult to investigate than cases marked for
routine tax audits. Where fraud has been practiced, there
is a distinct possibility that the taxpayer’s underlying
records will have been falsified or even destroyed.” Bada-
racco, 464 U.S. at 398. Thus, the lack of a statute of
limitations for fraudulent returns with intent to evade tax
in § 6501(c)(1) (and § 250(d)) reasonably compensates the
government for the unique difficulty involved in discover-
ing fraud and determining the taxpayer’s true tax liabil-
ity. 2
    Finally, this case matters. The majority removes a
key tool from the IRS’s toolbox for policing the submission
of fraudulent tax returns. Nearly all taxpayers with
significant sums at issue employ a tax preparer. Often,
the IRS uncovers fraudulent returns by discovering the

   2    Indeed, in this case the government contends that
numerous additional transactions were performed purely
“to throw off suspicion.” See Appellant’s Br. 45–47.
8                                    BASR PARTNERSHIP   v. US

tax professionals who perpetrate fraud. It is not an easy
matter to discover fraud, fully investigate it, and deter-
mine the proper tax liability within three years. See id.
It is even more difficult to prove that a taxpayer knew of a
tax professional’s fraud and acted with intent to evade
tax. Nonetheless, the majority ties the IRS’s hands
behind its back—without impossibly speedy sleuthing or
smoking gun evidence, the IRS cannot collect taxes owed
and the perpetrators make away scot free.
                     IV. CONCLUSION
    To summarize, the majority asserts that “the intent to
evade tax” in § 6501(c)(1) concerns only the taxpayer’s
intent because Congress—using different language in
different context in other chapters of the Code—expressly
limits the intent to evade tax to the taxpayer’s intent. I
disagree. Congress “says in a statute what it means and
means in a statute what it says there.” Conn. Nat’l Bank,
503 U.S. at 253–54. Here, Congress says that § 6501(c)(1)
applies “in the case of a false or fraudulent return with
the intent to evade tax.” I.R.C. § 6501(c)(1). Nowhere
does Congress limit § 6501(c)(1) to only those circum-
stances where the taxpayer has the intent to evade tax.
In this case, it is undisputed that Mayer, the taxpayer’s
lawyer, acted with the intent to evade tax and caused the
return to be fraudulent. Accordingly, I conclude that the
BASR return is fraudulent “with the intent to evade tax,”
such that “the tax may be assessed . . . at any time.”
I.R.C. § 6501(c)(1).