                              T.C. Memo. 2012-316



                        UNITED STATES TAX COURT



     WHO515 INVESTMENT PARTNERS, TYBG, LLC, TAX MATTERS
                    PARTNER, Petitioner v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 12847-05.                        Filed November 13, 2012.



      Kyle R. Coleman, for petitioner.

      Russell Scott Shieldes, for respondent.



                          MEMORANDUM OPINION


      CHIECHI, Judge: This case is before the Court on respondent’s motion for

partial summary judgment.1 The Court will grant respondent’s motion.


      1
       Respondent filed a memorandum of law and a declaration of respondent’s
attorney in support of respondent’s motion for partial summary judgment. (The
Court will refer collectively to that motion, that memorandum of law, and that
declaration as respondent’s motion.)
                                             -2-

 [*2]                                     Background

        The record establishes and/or the parties do not dispute the following.

        At the time the petition was filed, WHO515 Investment Partners (WHO515)

had been dissolved and did not have a principal place of business.

        At least during the period September 19 to December 8, 2000, Mark Scholten

(Mr. Scholten) owned a 100-percent interest in a flowthrough entity known as

TYBG, LLC (TYBG),2 that was to be disregarded for Federal income tax (tax)

purposes. At least during the same period, Denise Scholten (Ms. Scholten)3 owned

a 100-percent interest in a flowthrough entity known as TYBG II, LLC (TYBG II),

that was to be disregarded for tax purposes. At a time not established by the record

during 2000, Mr. Scholten also owned an interest in a flowthrough entity known as

MDGMA, Ltd. (MDGMA).4 MDGMA had a taxable year that ended on December

31, 2000.




        2
            TYBG is the tax matters partner in this case.
        3
       The Court will sometimes refer collectively to Mr. Scholten and Ms.
Scholten as the Scholtens.
        4
        The record does not establish the extent of Mr. Scholten’s interest in
MDGMA or whether Ms. Scholten also owned an interest in that flowthrough
entity.
                                         -3-

[*3] Around September 19, 2000, WHO515 was formed as a general partnership5

under the laws of Texas and became subject to the provisions of sections 6221-

6234.6 At that time, TYBG and TYBG II owned virtually all of the partnership

interests in WHO515.7

      As respective 100-percent owners of TYBG and TYBG II, the Scholtens

were indirect partners of WHO515. On December 7, 2000, TYBG and TYBG II

transferred their respective interests in WHO515 to an S corporation known as Tall

Tree Capital, Inc. (Tall Tree), which had a taxable year that ended on December 31,

2000. After those transfers by TYBG and TYBG II to Tall Tree on December 7,

2000, Mr. Scholten, through TYBG, and Ms. Scholten, through TYBG II, each

owned a 50-percent interest in Tall Tree and thus remained indirect partners of

WHO515.




      5
      The Court’s use of the words “partnership” and “partners” is for
convenience only and not for substantive purposes.
      6
        All section references are to the Internal Revenue Code in effect for the year
at issue. All Rule references are to the Tax Court Rules of Practice and Procedure.
      7
      Throughout WHO515’s existence, the Scholtens’ three minor children
owned a total of one percent of WHO515.
                                         -4-

[*4] WHO515 dissolved and liquidated on December 8, 2000. WHO515 had a

short taxable year that began on September 19, 2000, and that ended on December

8, 2000.

      On July 24, 2001, WHO515 filed Form 1065, U.S. Return of Partnership

Income (WHO515 Form 1065), for its taxable year ended December 8, 2000. In

that form, WHO515 designated petitioner TYBG as its tax matters partner.

      On August 16, 2001, the Scholtens filed a joint tax return (2000 return) for

their taxable year 2000. In that return, the Scholtens, as indirect partners of

WHO515 and as indirect owners of Tall Tree, claimed respective losses attributable

to WHO515 and to Tall Tree.

      On April 14, 2004, the Scholtens executed Form 872-I, Consent to Extend the

Time to Assess Tax As Well As Tax Attributable to Items of a Partnership

(Scholtens’ Form 872-I). On April 22, 2004, an authorized representative of

respondent executed the Scholtens’ Form 872-I. That form stated in pertinent part:

      Mark A. & Denise M. Scholten * * * and the Commissioner of Internal
      Revenue consent and agree to the following: (1) The amount of any
      Federal Income tax due on any return(s) made by or for the above
      taxpayer(s) for the period(s) ended December 31, 2000 may be
      assessed at any time on or before June 30, 2005. * * *

      *           *           *           *           *           *           *
                                         -5-

      [*5] Without otherwise limiting the applicability of this agreement, this
      agreement also extends the period of limitations for assessing any tax
      (including additions to tax and interest) attributable to any partnership
      items (see section 6231(a)(3)), affected items (see section 6231(a)(5)),
      computational adjustments (see section 6231(a)(6)), and partnership
      items converted to nonpartnership items (see section 6231(b)).

      On April 11, 2005, respondent issued to TYBG a notice of final partnership

administrative adjustment (FPAA) with respect to WHO515 for its taxable year

ended December 8, 2000. In the FPAA, respondent proposed certain adjustments to

the WHO515 Form 1065.

                                      Discussion

      The Court may grant summary judgment where there is no genuine dispute of

material fact and a decision may be rendered as a matter of law. Rule 121(b);

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965

(7th Cir. 1994).

      In respondent’s motion, respondent seeks “partial summary judgment in

respondent’s favor that the statute of limitations does not bar respondent from

assessing and collecting tax and penalties attributable to the partnership items of

WHO515 * * * for the taxable period ending December 8, 2000.” According to

respondent, there is no genuine dispute of material fact and a decision may be
                                          -6-

[*6] rendered as a matter of law in respondent’s favor with respect to that statute of

limitations issue. Petitioner does not contend that there is any genuine dispute of

material fact that precludes the Court from resolving the statute of limitations issue

presented in respondent’s motion. However, it is petitioner’s position that a

decision should be rendered as a matter of law in petitioner’s favor with respect to

that statute of limitations issue.

       The dispute between the parties with respect to the statute of limitations issue

presented in respondent’s motion is a legal dispute. That dispute concerns whether

Mr. Scholten and Ms. Scholten, by signing the Scholtens’ Form 872-I, consented to

extend until June 30, 2005, the period within which respondent may assess any tax

of theirs, including additions to tax and interest, for their taxable year 2000 that is

attributable to any partnership items, affected items, computational adjustments, and

partnership items converted to nonpartnership items that are in turn attributable to

WHO515 for its taxable year ended December 8, 2000. Petitioner maintains that

they did not. Respondent maintains that they did.

       Before addressing the disagreement of the parties, the Court will summarize

certain statutory provisions that control the Court’s resolution of that

disagreement. We turn first to section 706(a) relating to the computation of the
                                          -7-

[*7] taxable income of a partner. Section 706(a) requires that, in computing the

taxable income of a partner for a taxable year of the partner, the inclusions required

by section 702 (income and credits of a partner) and section 707(c) (guaranteed

payments) with respect to a partnership are to be based on the income, gain, loss,

deduction, or credit of the partnership for any taxable year of the partnership that

ends within or with the taxable year of the partner. To illustrate the rule in section

706(a), if the taxable year of a partnership ends on May 31, 2012, and the taxable

year of a partner of that partnership ends on December 31, 2012, the partner must

take into account in computing the partner’s taxable income for the taxable year of

the partner ending December 31, 2012, the partner’s distributive share of

partnership items set forth in section 702 for the partnership for its taxable year

ending May 31, 2012. See sec. 1.706-1(a)(2), Income Tax Regs.

      The Court will now summarize certain statutory provisions relating to the

period during which the Commissioner of Internal Revenue (Commissioner) may

assess the tax of a partner. As pertinent here, section 6501(a) prescribes a period of

three years after a return is filed within which the Commissioner generally may

assess the tax8 of any person that is attributable to any partnership item or affected


      8
       The term “tax” also includes additions to tax, additional amounts, and
penalties. Sec. 6665(a)(2). For convenience, the Court will refer only to tax and

                                                                          (continued...)
                                          -8-

[*8] item. See Rhone-Poulenc Surfactants & Specialties, L.P. v. Commissioner,

114 T.C. 533, 542 (2000). For this purpose, the term “return” means “the return

required to be filed by the taxpayer (and does not include a return of any person

from whom the taxpayer has received an item of income, gain, loss, deduction, or

credit).” Sec. 6501(a). The period of limitations prescribed by section 6501(a) may

be extended if the taxpayer and the Commissioner consent to an extension in

writing. Sec. 6501(c)(4)(A).

      Section 6229(a) prescribes the following minimum period within which the

Commissioner may assess the tax of “any person [e.g., any partner] which is

attributable to any partnership item (or affected item)”: three years “after the later

of (1) the date on which the partnership return for such taxable year was filed, or (2)

the last day for filing such return for such year (determined without regard to

extensions).”9 See Curr-Spec Partners, L.P. v. Commissioner, 579 F.3d 391, 396-



      8
        (...continued)
not to tax and penalties.

      The term “tax” does not include interest; however, interest on any tax may be
assessed and collected at any time during the period within which the tax to which
such interest relates may be collected. Sec. 6601(g).
      9
        The minimum period of time within which the Commissioner may assess the
tax of any person which is attributable to any partnership item or any affected item
may be extended. See sec. 6229(b)(1).
                                         -9-

[*9] 398 (5th Cir. 2009), aff’g T.C. Memo. 2007-289; AD Global Fund, LLC v.

Commissioner, 481 F.3d 1351, 1354-1355 (Fed. Cir. 2007); Andantech L.L.C. v.

Commissioner, 331 F.3d 972, 977 (D.C. Cir. 2003),10 aff’g in part, remanding in

part T.C. Memo. 2002-97; Rhone-Poulenc Surfactants & Specialties, L.P. v.

Commissioner, 114 T.C. at 542.

      The minimum period prescribed by section 6229 within which the

Commissioner may assess the tax of any partner that is attributable to any

partnership item or any affected item may expire before or after the period

prescribed by section 6501 within which the Commissioner may assess the tax of

that partner. See Rhone-Poulenc Surfactants & Specialties, L.P. v. Commissioner,

supra. In no event will the period within which the Commissioner may assess the

tax of any partner that is attributable to any partnership item or any affected item

expire before the period prescribed by section 6229.

      With the foregoing statutory provisions in mind, the Court will address

petitioner’s position that Mr. Scholten and Ms. Scholten did not consent by signing

the Scholtens’ Form 872-I to extend until June 30, 2005, the period within which

respondent may assess their tax for their taxable year 2000 that is attributable to any



      10
        The U.S. Court of Appeals for the District of Columbia Circuit is the court
to which an appeal in this case would normally lie. See sec. 7482(b)(1).
                                           - 10 -

[*10] partnership items, affected items, computational adjustments, and partnership

items converted into nonpartnership items that are in turn attributable to WHO515 for

its taxable year ended December 8, 2000. In support of that position, petitioner

argues: “the partnership’s [WHO515’s] taxable year is the tax year ended December

8, 2000. In order for the [Scholtens’] Form 872[-I] to be effective, the consent would

have to list both the tax periods ended December 8, 2000 and December 31, 2000 or

two (2) consents could have been executed. Neither was done.” Petitioner’s

argument reflects a misunderstanding, or a total disregard, of the applicable statutory

provisions that control the Court’s resolution of the dispute between the parties as to

the legal effect of the Scholtens’ Form 872-I.

      In the Scholtens’ Form 872-I,11 pursuant to section 6501(c)(4) Mr.



      11
           The Scholtens’ Form 872-I states in pertinent part:

      Mark A. & Denise M. Scholten * * * and the Commissioner of Internal
      Revenue consent and agree to the following: (1) The amount of any
      Federal Income tax due on any return(s) made by or for the above
      taxpayer(s) for the period(s) ended December 31, 2000 may be
      assessed at any time on or before June 30, 2005. * * *

           *          *           *          *          *          *         *

      Without otherwise limiting the applicability of this agreement, this
      agreement also extends the period of limitations for assessing any tax
      (including additions to tax and interest) attributable to any partnership
      items (see section 6231(a)(3)), affected items (see section 6231(a)(5)),
      computational adjustments (see section 6231(a)(6)), and partnership
      items converted to nonpartnership items (see section 6231(b)).
                                         - 11 -

[*11] Scholten and Ms. Scholten expressly extended until June 30, 2005, the

period within which respondent may assess their tax for their taxable year ended

December 31, 2000, that is attributable to any partnership items, affected items,

computational adjustments, and partnership items converted into nonpartnership

items. See sec. 6229(b)(3);12 Ginsburg v. Commissioner, 127 T.C. 75, 89 (2006).

Any such items and adjustments include such items and adjustments attributable to

WHO515 whose taxable year ended December 8, 2000. That is because that

taxable year of WHO515 ended within the Scholtens’ taxable year ended December

31, 2000, and section 706(a) requires the Scholtens to take into account in

computing their taxable income and their tax for their taxable year ended December

31, 2000, their respective distributive shares of any partnership items set forth in

section 702 for WHO515’s taxable year ended December 8, 2000. Mr.

Scholten and Ms. Scholten thus expressly consented in the Scholtens’ Form 872-I to

respondent’s assessing on or before June 30, 2005, any tax of theirs for their




      12
          Section 6229(b)(3) provides: “Any agreement under section 6501(c)(4)
shall apply with respect to the period described in subsection (a) [of section 6229,
i.e., the period for assessing any tax with respect to any person [e.g., any partner]
which is attributable to any partnership item (or affected item) for a partnership
taxable year] only if the agreement expressly provides that such agreement applies
to tax attributable to partnership items.”
                                        - 12 -

[*12] taxable year 2000 attributable to any partnership items, affected items,

computational adjustments, and partnership items converted into nonpartnership

items, including any such items and adjustments that are attributable to WHO515

for its taxable year ended December 8, 2000.13

      On April 11, 2005, before the period of limitations specified in the

Scholtens’ Form 872-I expired on June 30, 2005, respondent issued to TYBG the

FPAA with respect to WHO515 for its taxable year ended December 8, 2000.14 As

a result, the period specified in the Scholtens’ Form 872-I within which

respondent may assess the tax of Mr. Scholten and Ms. Scholten for their taxable

year ended December 31, 2000, that is attributable to, inter alia, any partnership

items or any affected items that are in turn attributable to WHO515 is suspended.




      13
        On April 22, 2004, an authorized representative of respondent executed the
Scholtens’ Form 872-I and thereby consented to the extension specified in that form.
See sec. 6501(c)(4)(A).
      14
         If respondent had issued to TYBG after June 30, 2005, the FPAA with
respect to WHO515 for its taxable year ended December 8, 2000, which respondent
did not, partnership-level proceedings with respect to WHO515 would have been
“of no avail” because the period within which respondent could have assessed the
tax of Mr. Scholten and Ms. Scholten for their taxable year 2000 attributable to
WHO515 for its taxable year ended December 8, 2000, would have expired. See
Rhone-Poulenc Surfactants & Specialties, L.P. v. Commissioner, 114 T.C. 533,
534-535 (2000).
                                        - 13 -

[*13] See sec. 6229(d); Rhone-Poulenc Surfactants & Specialties, L.P. v.

Commissioner, 114 T.C. at 552-553.

      In further support of petitioner’s position that Mr. Scholten and Ms.

Scholten did not consent in the Scholtens’ Form 872-I to extend until June 30,

2005, the period within which respondent may assess their tax for their taxable

year 2000 attributable to any partnership items, affected items, computational

adjustments, and partnership items converted into nonpartnership items that are in

turn attributable to WHO515 for its taxable year ended December 8, 2000,

petitioner argues that the Scholtens did not intend to do so when they signed that

form. According to petitioner, when Mr. Scholten and Ms. Scholten executed the

Scholtens’ Form 872-I they did not have in mind extending the period within

which respondent may assess their tax for their taxable year 2000 attributable to

any such items and any such adjustments. Petitioner maintains that when Mr.

Scholten and Ms. Scholten executed the Scholtens’ Form 872-I they believed that

they were extending the period within which respondent may assess their tax for

their taxable year 2000 attributable to flowthrough items that are attributable only

to Tall Tree, an S corporation in which Mr. Scholten and Ms. Scholten each

owned a 50-percent interest, and MDGMA, a flowthrough entity in which Mr.
                                        - 14 -

[*14] Scholten owned an interest,15 that had respective taxable years ended

December 31, 2000.

      The Scholtens’ subjective beliefs regarding the entities to which petitioner

contends they intended the Scholtens’ Form 872-I to apply do not determine

whether Mr. Scholten and Ms. Scholten consented in that form to extend the

period within which respondent may assess their tax for their taxable year 2000

attributable to any partnership items, affected items, computational adjustments,

and partnership items converted into nonpartnership items that are in turn

attributable to WHO515 for its taxable year ended December 8, 2000. In

determining the terms of a written form in which a taxpayer consents to extend the

period within which the Commissioner may assess the taxpayer’s tax, the Court

considers objective manifestations of assent, as evidenced by the overt acts of the

parties, not secret intentions. Kronish v. Commissioner, 90 T.C. 684, 693 (1988).

Mr. Scholten and Ms. Scholten intentionally signed the Scholtens’ Form 872-I and

thereby manifested their assent to the terms set forth in that form. See id. Mr.

Scholten and Ms. Scholten, in express and unambiguous language in the

Scholtens’ Form 872-I, extended, without limitation, the period within which

respondent may assess their tax for their taxable year 2000 attributable to any




      15
           See supra note 4.
                                        - 15 -

[*15] partnership items, affected items, computational adjustments, and partnership

items converted into nonpartnership items.

      On the record before the Court, the Court finds that pursuant to section

6501(c)(4) Mr. Scholten and Ms. Scholten consented in the Scholtens’ Form 872-I

to extend until June 30, 2005, the period of limitations prescribed by section 6501(a)

within which respondent may assess their tax for their taxable year 2000 attributable

to any partnership items, affected items, computational adjustments, and partnership

items converted to nonpartnership items that are in turn attributable to WHO515 for

its taxable year ended December 8, 2000.

      Based upon the Court’s examination of the entire record before the Court, the

Court finds that respondent is not barred from assessing and collecting tax of the

Scholtens for their taxable year 2000 attributable to partnership items, affected

items, computational adjustments, and partnership items converted to

nonpartnership items that are in turn attributable to WHO515 for its taxable year

ended December 8, 2000.

      The Court has considered all of the contentions and arguments of the parties

that are not discussed herein with respect to the matters that the Court addresses

herein, and the Court finds them to be without merit, irrelevant, and/or moot.
                                  - 16 -

[*16] To reflect the foregoing,


                                           An order granting respondent’s

                                  motion will be issued.
