UNITED STATES TAX COURT



ALAN H. GINSBURG AND ESTATE OF HARRIET F. GINSBURG, DECEASED,
  ALAN H. GINSBURG, PERSONAL REPRESENTATIVE, Petitioners v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent



   Docket No. 13330-05.              Filed August 30, 2006.



        A TEFRA partnership claimed losses from an
   investment. See Tax Equity and Fiscal Responsibility
   Act of 1982 (TEFRA), Pub. L. 97-248, secs. 402-407(a),
   96 Stat. 648. Ps reported the losses as shareholders of
   their two wholly owned S corporations, each of which
   owned a 50-percent interest in the partnership. R
   examined the Federal tax return of the partnership.
   Subsequently, R sent a letter to the representative for
   the partnership stating that R accepted the return as
   filed. The partnership and R executed six consecutive
   Forms 872-P, Consent to Extend the Time to Assess Tax
   Attributable to Items of a Partnership, for the taxable
   year 1995, the year at issue. The time to assert
   partnership adjustments has expired pursuant to the
   Forms 872-P. Ps and R executed nine consecutive Forms
   872, Consent to Extend the Time to Assess Tax, related
   to Ps’ 1995 Federal tax return.
                               - 2 -

          R sent a notice of deficiency for 1995 to Ps
     before the expiration date of the last Form 872.
     However, the Forms 872 did not specify that they also
     included tax attributable to partnership or affected
     items. Ps contend that the deficiency notice adjusts
     partnership items and therefore is invalid. R contends
     that the notice adjusts affected items, not partnership
     items. In addition, R stated in argument that there
     are also adjustments of affected items which are
     specific to Ps’ ability to take losses that flow
     through from the partnership.

          Held: The notice adjusts both partnership and
     affected items. We have jurisdiction to review those
     adjustments to the extent that they are for affected
     items.

          Held, further, under sec. 6229(b)(3), I.R.C., the
     notice of deficiency is untimely because the Forms 872
     did not reference adjustments for partnership or
     affected items.


     N. Jerold Cohen, Sheldon M. Kay, and Joseph M. DePew, for

petitioners.

     Stephen R. Takeuchi, for respondent.



                              OPINION


     GOEKE, Judge:   This case is before us on petitioners’

motions to dismiss for lack of jurisdiction and for summary

judgment.   The issue raised by petitioners’ motion to dismiss is

whether respondent’s notice of deficiency properly adjusted

losses attributable to a partnership at the partner level
                               - 3 -

pursuant to the TEFRA provisions of sections 6221-6234.1

Specifically, the inquiry centers on whether these losses should

be classified as “partnership items” or as “affected items” under

the applicable statutes.   We hold that the adjustments in the

notice of deficiency limiting petitioners’ claimed losses concern

affected items over which we have jurisdiction.

     The issue raised by petitioners’ motion for summary judgment

is based on the assumption that we hold that the items respondent

seeks to adjust are affected items.    Under that assumption,

petitioners question whether the period of limitations on

assessment of tax attributable to affected items as set forth in

sections 6501 and 6229 has expired.    In particular, we must

decide whether section 6229(b)(3) causes the extension of the

period of limitations in this case to be ineffective regarding

the affected items at issue.   We hold that it does, and that

therefore the period of limitations on assessment has run.

                            Background

     The parties agree on the basic facts.    At the time that the

petition was filed, petitioner Alan Ginsburg, who is a fiduciary

for the Estate of Harriet Ginsburg, had a mailing address in

Winter Park, Florida.   In 1995, the taxable year at issue, Mr.

and Mrs. Ginsburg, who were married at the time, owned 100

     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                                - 4 -

percent of the stock of North American Sports Management, Inc.

(NASM), an S corporation.   Harriet Ginsburg, who is now deceased,

owned 100 percent of the stock of Family Affordable Partners,

Inc. (FAP), also an S corporation.      NASM and FAP each owned 50

percent of the profits and losses and capital of UK Lotto, L.L.C.

(UK Lotto), a TEFRA partnership.   NASM and FAP were not subject

to the S corporation TEFRA procedures, sections 6241-6245,

because they had fewer than five shareholders and had not

otherwise elected application of the unified procedures under

section 301.6241-1T(c)(2)(v), Temporary Proced. & Admin. Regs.,

52 Fed. Reg. 3003 (Jan. 30, 1987).2

Entity and Individual Returns

     Form 1065, U.S. Partnership Return of Income, for UK Lotto

reflected a total ordinary loss of $7,351,237.      Of that amount,

$6,936,038 was attributable to a loss reported on its Form 1065

from Pascal & Co., a partnership of which UK Lotto was a partner.

NASM and FAP each reported 50 percent of the total loss from UK

Lotto along with other items of income, deductions, gain, and

loss unrelated to UK Lotto in their respective Forms 1120S, U.S.

Income Tax Return for an S Corporation.      NASM reported a total

ordinary loss from trade or business in 1995 of $4,087,725.      FAP

     2
      Sec. 301.6241-1T(c)(2)(v), Temporary Proced. & Admin. Regs.
was issued under former sec. 6241, which was repealed by the
Small Business Job Protection Act of 1996, Pub. L. 104-188, sec.
1307(c)(1), 110 Stat. 1781, effective for tax years beginning
after Dec. 31, 1996.
                                 - 5 -

reported a total ordinary loss from trade or business in 1995 of

$2,941,054.   On their 1995 Form 1040, U.S. Individual Income Tax

Return, petitioners reported the losses of $4,087,725 and

$2,941,054 from NASM and FAP, respectively, on the attached

Schedule E, Supplemental Income and Loss, Statement 15, Income or

Loss From Partnerships and S Corporations.     Petitioners reported

total net losses on their Schedule E of $3,045,269.

Extensions of Period To Assess Tax

     Respondent examined the 1995 Form 1065 of UK Lotto.     UK

Lotto and respondent entered into six consecutive Forms 872-P,

Consent to Extend the Time to Assess Tax Attributable to

Partnership Items, for partnership items relating to UK Lotto’s

1995 tax year.   The last Form 872-P executed on behalf of UK

Lotto and respondent for the taxable year 1995 extended the

period to assess any Federal income tax attributable to

partnership items to any time on or before December 31, 2003.      On

April 25, 2003, respondent sent a letter to the representative

for UK Lotto stating that respondent accepted the 1995

partnership return as filed.   Respondent did not conduct any more

TEFRA partnership proceedings.

     In addition, petitioners and respondent executed nine

consecutive Forms 872, Consent to Extend the Time to Assess Tax,

for petitioners’ 1995 taxable year.      The last Form 872 extended

the period to assess any Federal income tax to any time on or
                                 - 6 -

before June 30, 2005.   The Forms 872 did not reference

partnership items.

Notice of Deficiency

     Respondent issued to petitioners a notice of deficiency for

the taxable year 1995 dated April 26, 2005.    The total amount of

the deficiency was $2,726,742.    Respondent also determined a

penalty of $545,348 under section 6662(a).    In his notice of

deficiency, respondent listed the following Schedule E

adjustments:

          Family Affordable Partners, Inc.     $3,468,019
          North American Sports Mgmt., Inc.     3,468,019

Respondent provided the same explanation for both adjustments,

except that one referred to FAP and the other to NASP:

     Since it has not been established that Pascal and
     Company incurred a deductible $6,936,038.00 loss in
     1995, nor has it been established that any loss
     attributable to Pascal and Company is allowable to UK
     Lotto, LLC * * * or not limited, nor has it been
     established that any loss attributable to Pascal and
     Company is allowable to * * * [Name of S Corporation],
     or not limited, nor has it been established that any
     loss attributable to Pascal and Company is allowable to
     you, or not limited, your $3,468,019.00 distributive
     loss in 1995 from * * * [Name of S Corporation], that
     represents 50% of the claimed $6,936,038.00 loss by UK
     Lotto, LLC, * * * from Pascal and Company, is
     disallowed, and your taxable income is increased by
     3,468,019.00 for 1995.

     In their Statement 15 accompanying Schedule E, petitioners

did not list any specific item of loss that corresponded with the

$3,468,019 that respondent disallowed.
                                - 7 -

                             Discussion

I.   Petitioners’ Motion To Dismiss for Lack of Jurisdiction

     Petitioners’ motion to dismiss for lack of jurisdiction

focuses on whether the disallowed losses are partnership items

that must be adjusted at the partnership level.   If we find that

those losses are partnership items, then we do not have

jurisdiction over respondent’s adjustments in the notice of

deficiency because such items may not be adjusted in an

individual deficiency proceeding.   See sec. 6230(a)(1).

     TEFRA provisions divide disputes arising from “partnership

items” from those arising from “nonpartnership items”.     Maxwell

v. Commissioner, 

, 787 (1986) (citing section

6231(a)(3) and (4)).   If the tax treatment of a partnership item

is at issue, the statute requires the matter to be resolved at

the partnership level.   Sec. 6221; Maxwell v. Commissioner, supra

at 787-788.   Section 6231(a)(3) defines a partnership item as

“any item required to be taken into account for the partnership’s

taxable year * * * to the extent regulations prescribed by the

Secretary provide that, for purposes of this subtitle, such item

is more appropriately determined at the partnership level than at

the partner level.”    Partnership items under section 6231(a)(3)

and the applicable regulations include items of loss reflected on
                                - 8 -

the partnership tax return.     Maxwell v. Commissioner, supra at

790; sec. 301.6231(a)(3)-1(a)(1)(i), Proced. & Admin. Regs.

     Section 6231(a)(4) defines the term “nonpartnership item” as

“an item which is (or is treated as) not a partnership item.”

Section 6231(a)(5) provides that the term “affected item” means

“any item to the extent such item is affected by a partnership

item.”    An affected item is by definition neither a partnership

item nor a subchapter S item.    Dial USA, Inc. v. Commissioner, 

, 5 (1990).    An affected item, rather than being

universally applicable to every partner, is peculiar to a

particular partner’s tax posture.       Maxwell v. Commissioner, supra

at 790.

     Petitioners argue that the notice of deficiency shows that

respondent has adjusted partnership items reflected in the 1995

tax return of UK Lotto.    Respondent maintains the items adjusted

in the notice of deficiency were not partnership items but

affected items that were ultimately disallowed on petitioners’

tax returns for reasons that were unique to petitioners’

circumstances.

     The notice of deficiency potentially disallows the loss on

three levels:    The partnership level, the S corporation level,

and the individual partner level.    We will address the parties’

arguments in the context of each level.
                                - 9 -

     A.   Partnership Level

     Respondent concedes that UK Lotto is a partnership within

the meaning of section 6231(a)(1).      Respondent did not issue

notices of final partnership administrative adjustment (FPAAs)

with respect to UK Lotto for 1995.      The loss attributable to

Pascal & Co. is a partnership item at the TEFRA-entity level.

See sec. 6231(a)(3); sec. 301.6231(a)(3)-1(a)(1)(i), Proced. &

Admin. Regs.    The limitations period for issuing FPAAs pertaining

to UK Lotto’s 1995 return expired on December 31, 2003, pursuant

to the last Form 872-P executed on behalf of UK Lotto and

respondent for the taxable year 1995.      See sec. 6229(a) and

(b)(1).   Consequently, the tax treatment of all partnership items

with respect to UK Lotto is final.      See Roberts v. Commissioner,

, 857 (1990).   There can be no partnership proceedings

to adjust or modify the partnership items as reported on the UK

Lotto return.   In addition, respondent through his letter in

April 2003 conceded administratively that the loss attributable

to Pascal & Co. is allowable at the UK Lotto partnership level.

     B.   S Corporation Level

     NASM and FAP are not TEFRA entities.      They each reported 50

percent of the loss from UK Lotto.      NASM and FAP are “pass-thru”

partners under section 6231(a)(9).      Section 6231(a)(9) provides

that a “‘pass-thru partner’ means a partnership, estate, trust, S

corporation, nominee, or other similar person through whom other
                                - 10 -

persons hold an interest in the partnership with respect to which

proceedings under this subchapter are conducted.”     Since the S

corporations are not TEFRA entities, there is no issue of whether

the adjustments should have taken place at the S corporation

level.

     C.      Partner Level

     Petitioners hold their interest in UK Lotto as “indirect

partners” under section 6231(a)(10).     Section 6231(a)(10)

provides that an “‘indirect partner’ means a person holding an

interest in a partnership through 1 or more pass-thru partners.”

Petitioners argue that the adjustments made in the notice of

deficiency are inconsistent with respondent’s position that the

disallowed losses are affected items.

     Petitioners argue that the notice of deficiency describes

only partnership items, and that the explanation of adjustment

calculates the disallowance of the loss to petitioners as if the

basis for disallowing it was a partnership level adjustment.

Petitioners therefore conclude that we are without jurisdiction

over the items in dispute because all partnership items must be

determined at the partnership level and not the partner level.

See sec. 6221.

         Respondent contends that the notice of deficiency

originally refers to affected items, not partnership items.

Respondent argues that the reasons for disallowing the losses to
                               - 11 -

petitioners include the limitation of partnership losses to the

partner’s basis in a partnership interest, the at-risk limitation

under section 465, the passive loss limitation rules under

section 469, and the S corporation loss limitation rules under

section 1366, which are all “affected item bases” for disallowing

losses at the partner level.   Respondent reasons that the

statement in the notice of deficiency “nor has it been

established that any loss attributable to Pascal & Co. is

allowable to you, or not limited” (emphasis added) encompasses

the possibility that the loss was not allowable to petitioners

for reasons that were peculiar to their individual tax

circumstances.

     Despite the technical inaccuracies3 in respondent’s notice

of deficiency, the existing jurisprudence regarding the

sufficiency of a notice of deficiency favors respondent.     It is

well settled that no particular form is required for a notice of

deficiency, and that the Commissioner need not explain how the


     3
      On Schedule E of their 1995 Form 1040 petitioners claimed
losses of $4,087,725 from NASM and $2,941,054 from FAP. However,
the notice of deficiency adjusted $3,468,019 of loss from each of
the S corporations, which is each S corporation’s share of loss
from Pascal & Co. reflected on the tax return filed by UK Lotto.
If the notice of deficiency was adjusting an affected item, there
would have been calculations to redetermine the flow-through
amounts from NASM and FAP. In addition, the notice of deficiency
does not discuss petitioners’ bases, nor do the adjustments take
into account any of the passive income petitioners reported.
None of the adjustments respondent made correspond to any of the
losses petitioners deducted on Schedule E of their Form 1040 or
the accompanying Statement 15.
                                - 12 -

deficiencies were determined.    See Benzvi v. Commissioner, 

, 1542 (11th Cir. 1986); Barnes v. Commissioner, 

, 68 (7th Cir. 1969) (citing Commissioner v. Stewart, 

, 242 (6th Cir. 1951), revg. a Memorandum Opinion of this

Court), affg. T.C. Memo. 1967-250.       In Stoecklin v. Commissioner,

(11th Cir. 1989), affg. T.C. Memo. 1987-453, the

Court of Appeals for the Eleventh Circuit required that “A

deficiency notice * * * at a minimum must show that * * * ‘a

deficiency exists for a particular year and specify the amount of

the deficiency.’”    

(quoting Benzvi v. Commissioner,

supra at 1542)).    Similarly, this Court has stated that “the

notice is only to advise the person who is to pay the deficiency

that the Commissioner means to assess him; anything that does

this unequivocally is good enough.”       Jarvis v. Commissioner, 

, 655-656 (1982) (quoting Olsen v. Helvering, 

, 651 (2d Cir. 1937)).

       Respondent argues that his adjustments are based on the

limitation of the partnership losses to the partner’s basis in

the partner’s partnership interest, the at-risk limitation under

section 465, and the passive loss limitation rules under section

469.    We have previously held that each of these items is unique

to the individual characteristics of each partner and does not

have a uniform effect on all of the partners.       Estate of Quick v.

Commissioner, 

, 188 (1998) (holding that a passive
                                - 13 -

loss under section 469 is an affected item because treatment of

the loss does not produce a uniform effect on the partners),

supplemented 

(1998); Hambrose Leasing 1984-5 Ltd.

Pship. v. Commissioner, 

, 308-309 (1992) (holding that

the amount a partner has at risk under section 465 is an affected

item); Dial USA, Inc. v. Commissioner, 

(a

shareholder’s basis in an S corporation cannot always be

determined by simply looking at S corporation items).

     We conclude that the phrase “allowable to you, or not

limited” in respondent’s notice of deficiency suffices to notify

petitioners of the possibility of an affected items adjustment.

The fact that there is a reference to affected items, however

obscure, is sufficient despite the inconsistent adjustments made

in the notice of deficiency.4

     The items respondent seeks to adjust are affected items.

Respondent would have to determine these items on the basis of

factors that were unique to petitioners, such as each

petitioner’s basis in the S corporations and the extent to which

each petitioner was at risk with respect to the Pascal & Co.

investment.   We have jurisdiction over affected items in this

case, even though no FPAA was issued.    See Roberts v.

Commissioner, 

(holding that the Court has


     4
      We do not address the burden of proof in this situation and
whether respondent’s adjustments raise new matters under Rule
142(a).
                               - 14 -

jurisdiction over affected items when the Government accepts the

partnership return as filed because that fulfills the requirement

that there be an “outcome of a partnership proceeding” before

assessment of affected items); cf. GAF Corp. & Subs. v.

Commissioner, 

(2000) (Tax Court must dismiss for

lack of jurisdiction when the notice of deficiency adjusts

partnership or affected items before the completion of the

partnership-level proceeding).    This situation is distinguishable

from GAF Corp. and similar to Roberts because respondent accepted

UK Lotto’s return as filed.

      Having decided that we maintain jurisdiction and that

respondent’s assertion that the items in question are affected

items is correct, we must now resolve the issue of whether the

period of limitations under section 6229 has run on respondent’s

adjustments.

II.   Statute of Limitations

      The central point of contention in the issue involving the

statute of limitations is whether respondent’s omission of a

reference to partnership items in the Forms 872 executed with

petitioners results in the expiration of the periods of

limitation under sections 6501 and 6229.

      A.   Respondent Did Not Include Partnership Items in the
           Forms 872

      Section 6229(a) provides:
                              - 15 -

     SEC. 6229.   PERIOD OF LIMITATIONS FOR MAKING
                  ASSESSMENTS.

          (a) General Rule.--Except as otherwise provided
     in this section, the period for assessing any tax
     imposed by subtitle A with respect to any person which
     is attributable to any partnership item (or affected
     item) for a partnership taxable year shall not expire
     before the date which is 3 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).

Section 6229(b) allows the parties to extend the period for

assessment by agreement.   However, section 6229(b)(3) provides an

important precondition to extending the period:

               (3) Coordination with section
          6501(c)(4).--Any agreement under section
          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.

     Although “partnership items” were not referenced in the

consents petitioners executed, respondent argues that section

6229 does not apply to this situation because the period of

limitations under section 6501 is still open.   Respondent asserts

that section 6229 merely extends the general period of

limitations provided by section 6501, and that when the period

under section 6501 is still open, reliance on section 6229 is

unnecessary.   In support of his assertion, respondent quotes the

following passage from our Opinion in Rhone-Poulenc Surfactants &
                              - 16 -

Specialties, L.P. v. Commissioner, 

, 537 (2000),

appeal dismissed and remanded 

(3d Cir. 2001):

          Section 6501(a) provides a general period of
     limitations for assessing and collecting any tax
     imposed by the Code. Section 6501(a) defines the
     period in relation to the filing of the return of the
     person liable for tax; in this case petitioner rather
     than the partnership. Section 6229(a) sets forth a
     minimum period for assessing any income tax with
     respect to any person that is attributable to any
     partnership item or affected item. This minimum period
     is defined in relation to the filing of the partnership
     return. This minimum period can be greater than, or
     less than, the period of limitations in section 6501.

Respondent’s reliance on Rhone-Poulenc is misplaced.   In

Rhone-Poulenc, at the time the FPAA was issued, the period for

assessing taxes under section 6501 was still open under section

6501(e) (6-year period in cases involving substantial omissions

of gross income).5   Respondent did not issue an FPAA to UK Lotto

for the 1995 taxable year.   Instead, respondent accepted the 1995

partnership tax return with no changes.   The period for assessing

any partnership item relating to UK Lotto expired on December 31,

2003, the ending date of the last Form 872-P executed between the

tax matters partner for UK Lotto and respondent.   The period for

assessing taxes due from petitioners is open, if at all, solely


     5
      Both the Court of Federal Claims and the U.S. Court of
Appeals for the District of Columbia Circuit have agreed with the
Court’s analysis in Rhone-Poulenc Surfactants & Specialties, L.P.
v. Commissioner, 

, 537 (2000), appeal dismissed and
remanded 

(3d Cir. 2001). See Andantech L.L.C. v.
Commissioner, 

(D.C. Cir. 2003), affg. in part and
remanding T.C. Memo. 2002-97; Schumacher Trading Partners II v.
United States,     Fed. Cl.     (July 31, 2006).
                               - 17 -

by reason of agreements to extend the period for assessing tax

under section 6501(c)(4), which provides that taxpayers and the

Commissioner may extend the time for assessment by agreement.6

     Respondent maintains that section 6229(b)(3) does not apply

because it references only partnership items and not affected

items.    Respondent’s position therefore is that the parties

validly extended the period of limitations pursuant to section

6501(c)(4) and that section 6229(b)(3) refers only to partnership

items and therefore does not affect the limitations period.     For

the reasons stated below, we hold that respondent’s position is

incorrect.

     B.     Respondent’s Position Ignores the Cross-Reference in
            Section 6229(b)(3) to Section 6229(a), Which Includes
            Affected Items

     Contrary to respondent’s interpretation, “tax attributable

to partnership items” refers to what must be stated in the

agreement in order to extend the period of limitations, not to

the limitations period itself.7   The preceding phrase “the period

described in subsection (a)”, references section 6229(a), which



     6
      The general period of limitations under sec. 6501(a), which
generally provides that tax must be assessed within 3 years after
the return was filed no matter when it was due, has clearly
expired with respect to both the partnership and petitioners
individually as those returns were filed in 1996, and respondent
issued the notice of deficiency in 2005. Respondent has not
argued that section 6501(e) is applicable to this case.
     7
      See Schumacher Trading Partners II v. United 

,
for a discussion of the role of sec. 6229(b)(3).
                               - 18 -

describes the period for assessing tax with respect to any

partnership item or affected item.      The parenthetical in

subsection (a) refers specifically to affected items.     Therefore,

it would have been redundant to include a similar parenthetical

in subsection (b)(3) because the reference to “partnership items”

in that subsection was intended to refer only to the language

required in the Form 872.   The pertinent limitations period is as

described in subsection (a).

     C.     Respondent’s Argument Implies That Section 6229 Applies
            Only If There Is an Adjustment at the Partnership Level

     Although respondent does not specifically make this

argument, implicit in his reading of the statute is that there

must be a partnership level adjustment in order for section 6229

to apply.    In this case, we do not have an adjustment because the

partnership return was accepted as filed.     Therefore, following

this logic, it would not be necessary to include reference to

partnership or affected items in the Forms 872.     We analyze this

problem by reference to the statute.

     Section 6229(b)(3) provides that any agreement under section

6501(c)(4) shall apply with respect to the period described in

subsection (a) only if the agreement expressly applies to “tax

attributable to partnership items.”     As 

in section

B, the phrase “tax attributable to partnership items” describes

what must be in the agreement under section 6501(c)(4).        The

period extended is “the period described in subsection (a)”,
                                   - 19 -

which is “the period for assessing any tax imposed by subtitle A

with respect to any person which is attributable to any

partnership item (or affected item) for a partnership taxable

year”.      Sec. 6229(a).   Accordingly, respondent’s position is

inconsistent with the statute because respondent confuses what is

required to be in the agreement extending the period of

limitations with the period extended.

       D.     Respondent’s Position Is Inconsistent With Prior
              Caselaw, Secondary Authority, and Respondent’s Own
              Pronouncements

       Our conclusion that section 6229(b)(3) applies to affected

items is further solidified by our Court-reviewed Opinion in

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

(2000).        We provided a detailed explanation of the

scope of section 6229(b)(3) and its coordination with section

6501(c)(4).      We stated that those sections were “intended to

allow taxpayers and the Commissioner to extend the period of

limitations for assessments of tax attributable to partnership

items only where the extension agreement expressly provides that

it applies to tax attributable to partnership items.”        

    We further quoted a treatise regarding the scope of the

rule in section 6229(b)(3):       “‘A standard extension of the

limitations period under section 6501(c)(4) (Treasury Form 872)

with respect to nonpartnership items does not apply to
                              - 20 -

partnership and affected items unless it specifically so

provides.’”   

Willis et al., Partnership Taxation,

par. 20.08[2][a] (6th ed. 1999)).8

     In his own manual, the Commissioner emphasized the need to

include a reference to affected items in the Form 872.      See

Internal Revenue Manual (IRM) 4.31.2.6.3.    While the IRM does not

have the force of law, the manual provisions do constitute

persuasive authority as to the IRS’s interpretation of the

statute.   Griswold v. United States, 

, 1576 n.8 (11th

Cir. 1995).

     In Maxwell v. Commissioner, 

n.6, we

determined that a deficiency attributable to an affected item is

a “deficiency attributable to a partnership item.”    

in Maxwell was whether we had jurisdiction over a partner’s

deficiency proceeding when the items that were the subject of the

adjustments were affected items determined by reference to a

partnership item that was not the subject of a partnership level

proceeding as required by section 6225(a).    We determined that we

did not have jurisdiction over the affected item at issue because



     8
      See 2 Willis et al., Partnership Taxation, par. 20.08[2][a]
(6th ed. 1999) (citing sec. 6229(b)(3)); 13 U.S. Tax Rep. (RIA)
par. 62,214.08 (2006) (“An agreement to extend the period of
limitations on assessment and collection under I.R.C. §
6501(c)(4) applies to the period of limitations for assessment of
income tax attributable to a partnership item or affected item
only if the agreement expressly provides that it applies to tax
attributable to partnership items.”).
                               - 21 -

“Affected items depend on partnership level determinations,

cannot be tried as part of the personal tax case, and must await

the outcome of the partnership proceeding.”    

    We

explained that a “deficiency attributable to an affected item

such as a partner’s carryback of a partnership’s investment tax

credit is also a ‘deficiency attributable to a partnership

item.’”   

n.6.   Thus, following our reasoning in

Maxwell, the phrase “tax attributable to partnership items” in

section 6229(b)(3) also includes affected items.9

     E.    Respondent’s Position Would Have Untenable Consequences

     Following respondent’s logic, we would have to conclude that

since section 6229(b)(3) applies only to partnership items, the

Forms 872 would not have to make a specific statement about

affected items that are directly related to partnership

adjustments, such as the amount of loss a partnership could claim

from a particular transaction.   We think that this result is

incorrect and that it would negate the import of the statute

because it would make the application of section 6229(b)(3)

ambiguous and potentially superfluous.   “An interpretation that



     9
      Computational adjustments resulting from partnership
proceedings may be assessed directly without issuing a notice of
deficiency. See 2 McKee et al., Federal Taxation of Partnerships
and Partners, par. 9.07[2][c] (1997). We do not decide today
whether affected items that would be the subject of a
computational adjustment are included in the language of sec.
6229(b)(3) because in this case we are not dealing with that
special kind of assessment.
                              - 22 -

renders a statutory provision superfluous should be avoided,

since it would offend ‘the well-settled rule of statutory

construction that all parts of a statute, if at all possible, are

to be given effect.’”   Rhone-Poulenc Surfactants & Specialties,

L.P. v. Commissioner, supra at 547 (quoting Weinberger v. Hynson,

Westcott & Dunning, Inc., 

, 633 (1973)).

     In Rhone-Poulenc Surfactants & Specialties, L.P. v.

Commissioner, supra at 549-550, we emphasized the importance of

ensuring that extension agreements under section 6229(b)(3) be

precise:

     Contract principles are pivotal in determining the
     existence and scope of that agreement because section
     6501(c)(4) requires a written agreement. Section
     6229(b)(3) imposes a default rule for purposes of
     determining whether an agreement encompasses
     assessments that are attributable to partnership items.
     * * * [Citations omitted.]

If we were to adopt respondent’s interpretation, such a course of

action would not only make the application of section 6229(b)(3)

of questionable significance, but also would leave doubt as to

whether the parties had a meeting of the minds, which the

application of section 6229(b)(3) avoids.

     In interpreting section 6229(b)(3), we are cognizant of the

principle that limitations statutes barring the collection of

taxes otherwise due and unpaid are strictly construed in favor of

the Commissioner.   Colestock v. Commissioner, 

, 387

(1994) (citing Badaracco v. Commissioner, 

, 391-392
                               - 23 -

(1984)).    Nevertheless, the period referenced in the statute is

the period described in section 6229(a), as we further described

in Rhone-Poulenc Surfactants & Specialties, L.P. v. Commissioner,

(2000).

III.   Conclusion

       Respondent’s notice of deficiency adequately references

affected items over which this Court has jurisdiction.

Nevertheless, on the basis of the statute and our precedent, we

conclude that to extend the period of limitations for affected

items the Forms 872 must specifically reference “partnership

items” as required by section 6229(b)(3).      Respondent’s failure

to include any reference to tax attributable to partnership items

in the Forms 872 executed with petitioner results in the

expiration of the period of limitations for any affected items

adjustments respondent might raise in this case.

       To reflect the foregoing,


                                        An appropriate order and

                                   decision will be entered.