Ps allege they overpaid their Federal income tax for 2003 on account of adjustments from a TEFRA partnership. Ps argue that the adjustments are no longer partnership items, in part because Ps filed an amended individual income tax return for 2003 (amended return) that qualifies under
132 T.C. 336">*337 OPINION
KROUPA,
Petitioners are husband and wife. They filed a joint Federal income tax return for 2003. They resided in California when they filed the petition.
H&S Ventures was a limited liability company treated as a partnership for Federal tax purposes. Each petitioner owned 10 percent of H&S Ventures, and petitioners' grantor trust owned the remaining 80 percent. H&S Ventures filed a Form 1065, U.S. Return of Partnership Income, for 2003.
Respondent issued a notice of deficiency to petitioners that reflected respondent's determination of a $ 171,026 deficiency for 2001 and a $ 2,177,532 deficiency for 2003 in petitioners' Federal income taxes. Neither the determination nor the 132 T.C. 336">*338 deficiencies reflected any adjustment to H&S Ventures' Form 1065. Petitioners challenged respondent's determination by timely filing a petition with the Court. The Court redetermined that determination in
Petitioners received from H&S Ventures amended Schedules K-1, Partner's Share of Income, Credits, Deductions, etc., 2009 U.S. Tax Ct. LEXIS 15">*18 for 2003 after petitioners filed their petition. The amended Schedules K-1 reflected a $ 318,671 reduction in petitioners' gross income and a $ 86,042 reduction in their itemized deductions. The reductions were purportedly attributable to a calculation error discovered during an examination of H&S Ventures by the State of California.
Petitioners mailed the amended return to respondent's service center in Fresno, California (the service center where petitioners were required to file their individual income tax return). The amended return was prepared by a certified public accounting firm and stated that petitioners' "U.S. INDIVIDUAL INCOME TAX RETURN FOR THE YEAR ENDED 12/31/2003 IS BEING AMENDED TO PROPERLY REFLECT AMENDED SCHEDULES K-1 RECEIVED FROM H&S VENTURES." The amended return specified that petitioners were reducing their originally reported gross income to reflect the net long-term capital gain income reported on the amended Schedules K-1. The amended return specified that petitioners were reducing their originally reported itemized deductions to reflect a change in the non-cash contribution limitation applicable to their now reduced income. The amended 2009 U.S. Tax Ct. LEXIS 15">*19 return claimed a refund of $ 33,461. The amended return included a copy of petitioners' Form 1040, U.S. Individual Income Tax Return, for 2003 as amended and a copy of petitioners' Form 1040 for 2003 as originally filed. The amended return was three pages in length (exclusive of the Forms 1040), and each page of the amended return was stamped "AMENDED." The amended return did not include copies of the amended Schedules K-1.
132 T.C. 336">*339 H&S Ventures filed an amended Form 1065 for 2003 shortly after petitioners mailed the amended return to respondent.
Petitioners filed with the Court a second amendment to petition after they filed the amended return. Petitioners allege in the second amendment to petition that they overpaid their tax for 2003 by the $ 33,461 and are entitled to a refund of that amount plus statutory interest.
Respondent moves to dismiss part of this case for lack of jurisdiction. We begin our analysis with some general tenets of our jurisdiction. This Court like other Federal courts is a Court of limited jurisdiction. See
We turn to some general tenets involving partnerships. Partnerships are not subject to Federal income tax. See
132 T.C. 336">*340 The Commissioner and the courts 2009 U.S. Tax Ct. LEXIS 15">*21 had to adjust partnership items at the partner level before 1982. See
The parties agree that H&S Ventures is subject to TEFRA for 2003 and that the subject adjustments were partnership items at least until petitioners filed the amended return. We also agree. See generally
Each partner was generally required to file a separate amended return to correct a partnership item before TEFRA. TEFRA allows a "tax matter partner" (as defined in
Petitioners claim they filed a partner AAR in the form 2009 U.S. Tax Ct. LEXIS 15">*23 of the amended return. The Commissioner upon receipt of a partner AAR may take one of four actions. See
The partner in turn may begin a civil action for refund of tax attributable to adjustments claimed in the partner AAR if the Commissioner does not allow any part of the adjustments and neither notifies the partner that the adjustments will be treated as nonpartnership items, nor begins 2009 U.S. Tax Ct. LEXIS 15">*24 a partnership proceeding. See
The Secretary has prescribed rules for the filing of a partner AAR in section 301.6227(d)-1 Administrative adjustment request filed on behalf of a partner. -- (a) In general. A request for an administrative adjustment on behalf of a partner shall be filed on the form prescribed by the Internal Revenue Service for that purpose in accordance with that form's instructions. 132 T.C. 336">*342 Except as otherwise provided in that form's instructions, the request shall-- (1) Be filed in duplicate, the original copy filed with the partner's amended income tax return * * * and the other copy filed with [as applicable here] the service center where the partnership return is filed * * *; (2) Identify the partner and the partnership by name, address, and taxpayer identification 2009 U.S. Tax Ct. LEXIS 15">*25 number; (3) Specify the partnership taxable year to which the administrative adjustment request applies; (4) Relate only to partnership items; and (5) Relate only to one partnership and one partnership taxable year.
The Commissioner has prescribed Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), as the form to be used by a partner requesting an administrative adjustment. See Instructions for Form 8082 (rev. Jan. 2000) (instructions), at 1. The instructions require that taxpayers file Form 8082 as an AAR to adjust passthrough items and that taxpayers explain in detail on the form the reasons for any adjustment reported on the form. See
Respondent argues that the subject adjustments are partnership items the propriety of which must be decided in a partnership-level proceeding. Petitioners argue that the subject adjustments, while once partnership items, are no longer partnership items, in part because petitioners filed the amended return that qualified under
We now focus on whether the amended return here qualifies as a partner AAR. This Court has held that
Neither party disputes that the amended return fails to meet all of the requirements for a partner AAR set forth in
Petitioners first argue that the Court of Appeals for the Ninth Circuit considers amended returns to be AARs in all instances, citing
Petitioners also argue that their amended return was a partner AAR because it substantially complied with the requirements 2009 U.S. Tax Ct. LEXIS 15">*30 for a partner AAR. We agree with petitioners that their amended return, filed without a Form 8082, may be characterized as a partner AAR if it substantially complied with the requirements for a partner AAR. We disagree with 132 T.C. 336">*345 petitioners, however, that their amended return substantially complied with those requirements.
The substantial compliance doctrine is a narrow equitable doctrine that courts may apply to avoid hardship where a party establishes that the party intended to comply with a provision, did everything reasonably possible to comply with the provision, but did not comply with the provision because of a failure to meet the provision's specific requirements. See
The record does not establish that petitioners intended to file the amended return as a partner AAR. The 2009 U.S. Tax Ct. LEXIS 15">*31 amended return was professionally prepared for petitioners, whom we consider sophisticated and financially adept individuals, and indicated that petitioners were amending their individual income tax return merely to conform the return to amended Schedules K-1 received from H&S Ventures. The amended return did not include a copy of any of the amended Schedules K-1, and it did not include a Form 8082 that would indicate that petitioners were filing the amended return as other than an amended return. 32009 U.S. Tax Ct. LEXIS 15">*32 The amended return further stressed the word "AMENDED" on each of its pages and included a copy of petitioners' Form 1040 for 2003, both as originally filed and as amended by the amended return. We also note that petitioners asserted for the first time that the amended return should be considered a partner AAR only after receiving respondent's motion now before us. The requisite intent needed to be present contemporaneously with the filing of the partner AAR, not later when petitioners 132 T.C. 336">*346 believed it to be more advantageous to have had that intent initially.
Nor did the amended return substantially comply with the requirements for a partner AAR in that the amended return was not filed in the manner required for a Form 8082 and did not include all information required to be provided on a Form 8082. The amended return failed the former requirement because a copy of the amended return was not filed with the service center where the partnership return was filed. Respondent stated explicitly in the referenced regulations and in the instructions that a partner AAR must be filed in duplicate, one copy at each of the designated places. Petitioners do not assert that the dual 2009 U.S. Tax Ct. LEXIS 15">*33 filing requirement is unreasonable as applied to them, nor do we consider that to be the case. The amended return failed the latter requirement because, in part, the amended return did not list the address of H&S Ventures and did not specify the partnership taxable year to which the requested adjustments related. The amended return also did not explain in detail the reasons for the requested adjustments. Such reasons are necessary, respondent argues and we agree, so that respondent can properly carry out the function of
We conclude that petitioners' amended return did not substantially comply with the requirements for a partner AAR. Petitioners' amended return is therefore not a partner AAR.
The 2009 U.S. Tax Ct. LEXIS 15">*34 amended return does not qualify as a partner AAR, and the claimed adjustments from H&S Ventures are partnership items over which we lack jurisdiction. We have considered all arguments petitioners have made for a contrary conclusion 132 T.C. 336">*347 and, to the extent not discussed, we have rejected those arguments as without merit.
To reflect the foregoing,
1. Section references are to the applicable versions of the Internal Revenue Code, unless otherwise stated.
2. Petitioners conclude that their filing of the amended return as a partner AAR and their filing of the second amendment to petition made the subject adjustments nonpartnership items pursuant to
3. A partnership AAR must include revised Schedules K-1, see