T.C. Memo. 2008-147



                      UNITED STATES TAX COURT



         EARL W. AND MARILYN L. MCCLASKEY, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18744-06.                Filed June 9, 2008.



     Edward T. Perry, for petitioners.

     David Rakonitz, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:   Respondent determined that petitioners are

liable for additions to tax for negligence under section

6653(a)(1)1 of $169 and $175 for 1983 and 1985, respectively, and


     1
      Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years at issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
                                                   (continued...)
                                 -2-

under section 6653(a)(2) for 50 percent of the interest due on

$3,386 and $286, respectively.   The issue for decision is whether

respondent timely mailed notices of the beginning of an

administrative proceeding (NBAPs) and notices of final

partnership administrative adjustment (FPAAs) with respect to

Contra Costa Jojoba Research Partners (CCJRP) for the years at

issue.2

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   Petitioners resided in

California when their petition was filed.

     After attending seminars in 1983 on the benefits of

investing in the research and development of methods of growing

and enhancing jojoba plants, petitioners decided to invest in

CCJRP, a limited partnership that purported to do work with the

jojoba plant.   In 1983 they received a 2.857-percent interest in

CCJRP in exchange for $5,500 cash and a $8,250 promissory note.


     1
      (...continued)
Amounts are rounded to the nearest dollar.
     2
      In their pretrial memorandum petitioners raised the issue
of whether they were negligent in claiming losses with respect to
CCJRP on their 1983 and 1985 returns. In their opening and reply
briefs petitioners expressly state that the only issue for
decision is whether respondent timely mailed NBAPs and FPAAs. It
is clear that petitioners intended to abandon or concede all
other issues. Because petitioners bear the burden of proof on
those issues, see Rule 142(a), we need not address them.
                                  -3-

     In 1983 and 1985 CCJRP provided petitioners Schedules K-1,

Partner’s Share of Income, Credits, Deductions, etc., in which

CCJRP allocated petitioners ordinary losses of $12,500 and

$1,290, respectively.   In turn, on their 1983 and 1985 joint

Forms 1040, U.S. Individual Income Tax Return, petitioners

claimed ordinary losses with respect to their interest in CCJRP

of $12,500 and $1,290, respectively.

     On April 12, 1989, respondent issued FPAAs for 1983 and 1985

to CCJRP’s tax matters partner.    On July 13, 1989, a petition in

the name of CCJRP, Charles B. Toepfer, Tax Matters Partner, was

filed with the Court at docket No. 17323-89.    On January 28,

1994, to settle the case at docket No. 17323-89, the tax matters

partner and respondent filed a stipulation to accept and be bound

by the result in Utah Jojoba I Research v. Commissioner (Utah

Jojoba I), a test case at docket No. 7619-90.    Petitioners

testified that the only documents they received with respect to

CCJRP were Schedules K-1 and that they knew nothing of the

partnership proceedings.

     We issued our opinion in Utah Jojoba I on January 5, 1998,

holding that the partnership was not entitled to deduct its

losses for research and development expenditures.    See Utah

Jojoba I Research v. Commissioner, T.C. Memo. 1998-6.    On April

11, 2005, the Court entered a decision against CCJRP sustaining
                                 -4-

the partnership item adjustments as determined and set forth in

the FPAAs.   That decision was not appealed.

     On June 12 and July 3, 2006, respondent timely issued

petitioners affected items notices of deficiency for the years at

issue disallowing the CCJRP losses petitioners claimed.3

Petitioners timely filed a petition, and trial was held on

October 24, 2007.

                               OPINION

Notice of Partnership Proceedings Required

     The tax treatment of a partnership item generally is

determined at the partnership level pursuant to the unified audit

and litigation procedures set forth in sections 6221 through

6231.4   Tax Equity and Fiscal Responsibility Act of 1982, Pub. L.

97-248, sec. 402(a), 96 Stat. 648.     On the other hand,

nonpartnership items are determined at the individual partner

level.   Affiliated Equip. Leasing II v. Commissioner, 

, 576 (1991).    Partnership items include each partner’s

proportionate share of the partnership’s aggregate items of

income, gain, loss, deduction, or credit.      Sec. 6231(a)(3); sec.


     3
      The limitations period in this case expired on July 10,
2006, 1 year and 90 days after the Court’s Apr. 11, 2005,
decision was entered. See secs. 6229(d), 7481(a)(1), 7483; Ghose
v. Commissioner, T.C. Memo. 2008-80.
     4
      These procedures apply with respect to all taxable years of
a partnership beginning after Sept. 3, 1982. Sparks v.
Commissioner, 

, 1284 (1986); Maxwell v. Commissioner,

, 789 n.4 (1986).
                                -5-

301.6231(a)(3)-1(a)(1)(i), Proced. & Admin. Regs.      A

nonpartnership item is an item which is not a partnership item.

Sec. 6231(a)(3) and (4).

     Section 6223(a) generally provides that the Commissioner

shall mail to each partner an NBAP with respect to a partnership

item, as well as an FPAA resulting from any such proceeding.

Section 6223(e)(2) provides that the Commissioner’s failure to

provide notice of partnership-level proceedings to a partner may

result in that partner’s share of partnership items being treated

as nonpartnership items.5   See sec. 6231(b)(1)(D).

     Petitioners contend that the CCJRP partnership items became

nonpartnership items by virtue of respondent’s failure to notify

them of partnership-level proceedings.   See Crowell v.

Commissioner, 

(1994).    If respondent did not provide

petitioners with proper notice of the partnership proceedings and

petitioners’ share of partnership items is treated as a

nonpartnership item, the validity of the affected items

deficiency notices is in question.    See

     The

Commissioner cannot issue a valid affected items deficiency

notice to a partner if that partner’s share of partnership items

is entitled to nonpartnership item treatment.

      The parties dispute the effect of respondent’s failure to
mail an NBAP if an FPAA is properly mailed. Because we determine
that NBAPs were timely mailed, we need not address the parties’
arguments on this point.
                                 -6-

validity of an affected items deficiency notice is questioned in

this manner, the Commissioner must demonstrate that he complied

with the notice requirements set forth in section 6223(a).

  As is the case with a notice of deficiency, the

validity of properly mailed partnership notices is not contingent

upon actual receipt by either the tax matters partner or a notice

partner.

Yusko v. Commissioner, 

, 810

(1987); Downs v. Commissioner, T.C. Memo. 2000-155.

Mailing of the NBAPs

     As evidence of the mailing of the 1983 NBAP on October 10,

1985, respondent introduced an NBAP mailing log and the testimony

of Peggy Allred, who is familiar with the practices and

procedures for mailing NBAPs during the relevant period.      For the

years at issue, respondent did not mail NBAPs by certified mail.

In 1985 respondent tracked NBAP mailings using a log.    The 1983

NBAP mailing log is dated October 10, 1985, which matches the

date on the 1983 NBAP.    The log is initialed, which shows it was

reviewed for accuracy.    The log shows petitioners’ names,

address,6 percentage interest in CCJRP, and petitioner husband’s

Social Security Number.




     6
      Respondent mailed the NBAPs and FPAAs to petitioners’ home
address, where they had lived since 1965. Petitioners do not
claim that the notices were sent to an incorrect address.
Rather, they claim that the notices were not mailed at all.
                                -7-

     As evidence of the timely mailing of the 1985 NBAP on

September 14, 1987, respondent introduced the testimony of Peggy

Allred and a Certification of NBAP Notices which respondent used

to track the mailing of NBAPs in 1987.   The date of the

certification matches the date on the NBAP.   The certification

shows petitioners’ names, address, percentage ownership in CCJRP,

and petitioner husband’s Social Security Number.   It is signed

and dated September 14, 1987.

     The evidence indicates that respondent complied with all

applicable procedures in mailing the NBAPs at issue.

Nevertheless, petitioners testified that they did not receive the

NBAPs.   As with an FPAA, actual receipt of the NBAP is not

necessary.   Crowell v. Commissioner, supra at 692.    Petitioners

presented no other evidence which would tend to indicate the

NBAPs were not properly mailed.7   We therefore find on the

preponderance of the evidence that the NBAPs for the years at

issue were timely mailed to petitioners.8




     7
      Respondent’s disclosure office was at first unable to
provide petitioners copies of certain NBAPs and FPAAs because the
1985 examination file was missing. These documents were later
found. We draw no inference from respondent’s temporary
inability to locate the file.
     8
      Sec. 6223(d)(1) provides that an NBAP be mailed more than
120 days before the date that the Commissioner mails the FPAA to
the tax matters partner. Respondent mailed the 1983 and 1985
NBAPs on Oct. 10, 1985, and Sept. 14, 1987, respectively, and the
FPAAs on Apr. 12, 1989, more than 120 days later.
                                 -8-

Mailing of the FPAAs

     As evidence of the timely mailing of the FPAAs on May 30,

1989, respondent introduced into evidence FPAA Certified Mail

Listings for the years at issue and the testimony of Susan Kent,

who is familiar with respondent’s practices and procedures for

FPAA mailings in 1989.    In 1989 respondent mailed FPAAs by

certified mail and tracked FPAA mailings by using an FPAA

Certified Mail Listing.   See Wayne Caldwell Escrow Pship. v.

Commissioner, T.C. Memo. 1996-401.       After preparation of the mail

listings, respondent would correct any discrepancies between the

actual mail dates and the dates on the listing.

     As shown by postmaster stamps, the postmaster reviewed the

FPAA Certified Mail Listings for accuracy.      The postmaster

stamped both listings with the date May 30, 1989.      Petitioners’

names, address, and ownership interest in CCJRP are on both FPAA

Certified Mail Listings along with petitioner husband’s Social

Security Number.

     An FPAA Certified Mail Listing is highly probative evidence

of the fact and date of mailing.       Id.; see Coleman v.

Commissioner, 

, 90-91 (1990).       “There is a strong

presumption in the law that a properly addressed letter will be

delivered, or offered for delivery, to the addressee.”       Zenco

Engg. Corp. v. Commissioner, 

, 323 (1980), affd.

without published opinion 

(7th Cir. 1981).
                                -9-

Further, it is clear that in general, and in the absence of

evidence to the contrary, compliance with certified mail

procedures raises a presumption of official regularity in

delivery with respect to notices sent by the Commissioner.    See

United States v. Zolla, 

, 810 (9th Cir. 1984); United

States v. Ahrens, 

, 784-785 (8th Cir. 1976); Clough

v. Commissioner, 

, 187-188 (2002).

     The evidence indicates that respondent complied with all

procedures in mailing the FPAAs at issue.    Petitioners testified

that they did not receive the FPAAs and that if delivery had been

attempted, they would have accepted it.     They further testified

that they were unaware of the disallowance of CCJRP’s losses.     As

stated previously, actual receipt of the FPAAs is not required.

Crowell v. Commissioner, supra at 692.    Petitioners failed to

present any other evidence that would indicate the FPAAs were not

properly mailed.   Therefore, we find on the preponderance of the

evidence that respondent timely mailed petitioners FPAAs with

respect to CCJRP for the years at issue.9

Conclusion

     Because respondent timely mailed all notices required by

section 6223(a), the partnership items are not entitled to


     9
      Sec. 6223(d)(2) provides that the Commissioner shall mail
an FPAA to a notice partner within 60 days of the mailing of the
FPAA to the tax matters partner. Respondent mailed the FPAAs to
the tax matters partner on Apr. 12, 1989, and to the notice
partners on May 30, 1989, less than 60 days later.
                                 -10-

nonpartnership item treatment under section 6223(e)(2).

Accordingly, the notices of deficiency are valid, and petitioners

are liable for the additions to tax.

     In reaching our holdings herein, we have considered all

arguments made, and, to the extent not mentioned above, we find

them to be moot, irrelevant, or without merit.

     To reflect the foregoing,


                                        Decision will be entered

                                  for respondent.