Alan Horowitz Comments on Intermountain and UTAM Decisions in Tax Analysts

"D.C. Circuit Upholds Extended Limitations Period in Intermountain"
Tax Analysts
06.22.11

Alan Horowitz and George Clarke discuss Intermountain Insurance Service of Vail LLC et al. v. Commissioner, the June 21, 2011 decision by the U.S. Court of Appeals for the District of Columbia reversing the Tax Court holding that basis overstatement constitutes omission from gross income. The D.C. Circuit noted that its opinion would apply to all taxpayers with returns having overstated basis, beyond the specific context of the son-of-BOSS tax shelter involved in the case. Rejecting the taxpayer’s reliance on Colony v. Commissioner, 357 U.S. 28 (1958), the circuit court held that Congress made some textual changes in the 1954 Code that rendered Colony inapplicable to this case. Horowitz commented, "By providing a more detailed analysis of the background of the Colony decision and the legislative history of the 1954 Code provision, the D.C. Circuit's opinion supplements the reasoning of the other court of appeals cases that have agreed with the government that Colony does not unambiguously resolve the issue."

The same panel of D.C. Circuit judges held that the six-year limitations period applied because of overstated basis on a partnership's tax return, but determined that a final partnership administrative adjustment tolled an individual partner's limitations period under section 6501 in UTAM, Ltd. v. Commissioner (No. 10-1262, see Doc 2011-13514.). Clarke commented that the UTAM decision was important in showing that courts "may have boxed themselves in" with their section 6229 jurisprudence. If section 6229(a) is a "minimum period" as held by UTAM, AD Global, and Rhone-Poulenc, the issuance of an FPAA "triggers section 6229(d) to extend only that same minimum period," he said. After all, under all of these decisions, the minimum period is apparently the only period that, in the language of section 6229(d), is "specified in subsection (a)," he said. "If this is correct, then there is no section anywhere in the Code that provides for the issuance of an FPAA to extend the section 6501(a) period itself since all the courts have said that section 6229(a) merely specifies a minimum period." If the partnership minimum period is already closed when the FPAA is issued, the FPAA cannot extend anything, Clarke said. The problem "is caused by viewing section 6229(a) as the minimum period as opposed to the period of limitations for assessment of partnership items and is a problem in statutory construction that should have been resolved prior to the courts all staking out their positions that section 6229(a) plainly is a minimum period," he said. "There is nothing whatsoever plain" about the meaning of the partnership provisions of the Tax Equity and Fiscal Responsibility Act of 1982, he added.

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