                    T.C. Memo. 2009-195



                   UNITED STATES TAX COURT



  INTERMOUNTAIN INSURANCE SERVICE OF VAIL, LIMITED LIABILITY
COMPANY, THOMAS A. DAVIES, TAX MATTERS PARTNER, Petitioner v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent



  Docket No. 25868-06.               Filed September 1, 2009.



       P moved for summary judgment on the ground that R’s
  partnership item adjustments were made after the general 3-
  year period of limitations for assessing tax had expired. R
  argues that an extended 6-year period of limitations
  applies.

        Held: The 3-year period of limitations is applicable.
   Thus P’s motion for summary judgment will be granted.



   Steven R. Anderson, for petitioner.

   Gary J. Merken, for respondent.
                                - 2 -

                        MEMORANDUM OPINION


     WHERRY, Judge:   This case is before the Court on

petitioner’s January 18, 2008, motion for summary judgment.      The

sole issue for decision is whether a basis overstatement

constitutes a substantial omission from gross income that can

trigger an extended 6-year period of limitations.    See secs.

6229(c)(2), 6501(e)(1)(A).1    We follow our opinion in Bakersfield

Energy Partners, LP v. Commissioner, 128 T.C. 207 (2007), affd.

568 F.3d 767 (9th Cir. 2009), and hold that the extended

limitations period does not apply.

                              Background

     Intermountain Insurance Service of Vail, LLC

(Intermountain), engaged in a series of transactions--some of

which increased tax basis--culminating in the sale of business

assets on August 1, 1999, for $1,918,844.    It reported the

$1,918,844 gross sales price and, after deducting $131,544 of

allowed or allowable depreciation, claimed a stepped-up

$2,061,808 basis in the assets, on a Form 4797, Sales of Business

Property, attached to its 1999 Form 1065, U.S. Partnership Return

of Income.   It filed that return on September 15, 2000.




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended and in effect for
the tax year at issue (Code), and all Rule references are to the
Tax Court Rules of Practice and Procedure.
                               - 3 -

     Almost 6 years later, on September 14, 2006, respondent

issued a notice of final partnership administrative adjustment

(FPAA) with respect to Intermountain’s 1999 tax year.    Respondent

found that some of the transactions Intermountain engaged in were

improper and ineffective for Federal income tax purposes and

consequently determined that Intermountain had improperly claimed

a $13 expense, overstated capital contributions by $2,197,696,

overstated outside partnership basis by $2,061,808, and

improperly claimed an $87,680 loss.

     Petitioner challenges the timeliness of the FPAA, arguing

that the general 3-year period of limitations had already expired

when respondent issued the FPAA.   Petitioner further cites

Bakersfield Energy Partners, LP v. Commissioner, supra, for the

proposition that a basis overstatement cannot trigger an extended

6-year period of limitations under either section 6229(c)(2) or

6501(e)(1)(A).   Respondent asserts that we decided Bakersfield

incorrectly and urges us to overrule it.2

                            Discussion

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.     Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988).    A party moving for

summary judgment bears the burden of demonstrating that no


     2
      Respondent provides no other reason--beyond the application
of sec. 6501(e)(1)(A)--why the period of limitations would have
remained open.
                              - 4 -

genuine issue of material fact exists and that he or she is

entitled to judgment as a matter of law.     Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994), cert. denied 513 U.S. 821 (1994).    Facts are viewed

in the light most favorable to the nonmoving party.     Dahlstrom v.

Commissioner, 85 T.C. 812, 821 (1985).     Where a motion for

summary judgment has been properly made and supported by the

moving party, the nonmoving party “may not rest upon the mere

allegations or denials” contained in that party’s pleadings but

must by affidavits or otherwise “set forth specific facts showing

that there is a genuine issue for trial.”    Rule 121(d).

     The Code does not provide a period of limitations within

which the Commissioner must file an FPAA.    See Curr-Spec

Partners, L.P. v. Commissioner, __ F.3d __ (5th Cir., Aug. 11,

2009), affg. T.C. Memo. 2007-289; Rhone-Poulenc Surfactants &

Specialties, L.P. v. Commissioner, 114 T.C. 533, 534-535 (2000).

However, any partnership item adjustments made in an FPAA will be

time barred at the partner level if the Commissioner does not

issue the FPAA within the applicable period of limitations for

assessing tax attributable to partnership items.     Curr-Spec

Partners, L.P. v. Commissioner, supra at ____ (slip op. at 5);

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

supra at 535.
                               - 5 -

     The general period of limitations for assessing tax is 3

years from the filing of a Federal income tax return.    Sec.

6501(a).   That period is extended to 6 years “If the taxpayer

omits from gross income an amount properly includible therein

which is in excess of 25 percent of the amount of gross income

stated in the return”.   Sec. 6501(e)(1)(A).   For the assessment

of tax attributable to a partnership item, the period of

limitations remains open at least for 3 years after the date the

partnership return was filed or 3 years after the last day,

disregarding extensions, for filing the partnership return,

whichever is later.   Sec. 6229(a).    The period of limitations for

assessing tax attributable to partnership items remains open for

at least 6 years after the later of the two dates described in

section 6229(a) “If any partnership omits from gross income an

amount properly includible therein which is in excess of 25

percent of the amount of gross income stated in its return”.

Sec. 6229(c)(2).

     For the purpose of ruling on petitioner’s motion for summary

judgment we view the facts in the light most favorable to

respondent and assume that the adjustments that respondent made

in the FPAA to Intermountain’s partnership return are correct.

The parties agree that respondent issued the FPAA after the 3-

year periods described in sections 6229(a) and 6501(a) had

expired.   But they disagree whether a basis overstatement by
                               - 6 -

Intermountain could have extended the period of limitations for

assessing tax under either section 6229(c)(2) or

section 6501(e)(1)(A).3   Our opinion in Bakersfield Energy

Partners, LP v. Commissioner, 128 T.C. 207 (2007), is directly on

point.4




     3
      Respondent argues that sec. 6501(e)(1)(A) applies, but he
mostly likely meant to cite sec. 6229(c)(2). Sec. 6501(e)(1)(A)
refers to a taxpayer’s omission from gross income, the amount of
gross income stated on a taxpayer’s Federal income tax return,
and a period running from the filing of a taxpayer’s return.
Respondent, however, has only provided information about
Intermountain’s omission from gross income, the amount of gross
income stated on Intermountain’s partnership return, and the
period running from the filing of that partnership return. These
are considerations directly relevant to sec. 6229(c)(2) and only
tangentially relevant to sec. 6501(e)(1)(A).
     4
      Under Golsen v. Commissioner, 54 T.C. 742, 757 (1970),
affd. 445 F.2d 985 (10th Cir. 1971), we “follow a Court of
Appeals decision which is squarely in point where appeal from our
decision lies to that Court of Appeals”. See Lardas v.
Commissioner, 99 T.C. 490, 495 (1992). If the Court of Appeals
has not yet decided the issue, however, we will give effect to
our own views. Id. Petitioner states in his petition that
Intermountain has no principal place of business, suggesting
that--absent stipulation to the contrary--this case may be
appealable to the Court of Appeals for the District of Columbia
Circuit. See sec. 7482(b)(1). Respondent adds that the case may
be appealable to the Court of Appeals for the Eighth Circuit if
Intermountain continued to have a place of business while it was
winding up its affairs. If that is the case, we question whether
an appeal might actually lie in the Court of Appeals for the
Tenth Circuit because Intermountain was organized under the laws
of Colorado and, at least at one point, had its principal place
of business in that State. Ultimately we do not need to answer
the question of proper venue because none of those Courts of
Appeals has decided the issue before us. We will therefore
follow our opinion in Bakersfield Energy Partners, LP v.
Commissioner, 128 T.C. 207 (2007), affd. 568 F.3d 767 (9th Cir.
2009).
                               - 7 -

     In Bakersfield Energy Partners, LP v. Commissioner, supra at

213-215, we held that a basis overstatement is not an omission

from gross income.   We applied the Supreme Court’s holding in

Colony, Inc. v. Commissioner, 357 U.S. 28, 33 (1958), and stated

that “the extended period of limitations applies to situations

where specific income receipts have been ‘left out’ in the

computation of gross income and not when an understatement of

gross income resulted from an overstatement of basis.”

Bakersfield Energy Partners, LP v. Commissioner, supra at 213

(paraphrasing Colony).

     The Court of Appeals for the Ninth Circuit affirmed our

opinion in Bakersfield, concluding that “Under Colony,

Bakersfield’s allegedly overstated basis is not an omission from

gross income under § 6501(e)(1)(A) or § 6229(c)(2).”     Bakersfield

Energy Partners, LP v. Commissioner, 568 F.3d at 778.    The Court

of Appeals for the Federal Circuit also recently held that Colony

controlled the disposition of a section 6501(e)(1)(A) case

involving a basis overstatement.   Salman Ranch Ltd. v. United

States, __ F.3d __, __ (Fed. Cir., July 30, 2009) (slip op. at

28) (“Our holding today is consistent with the June 17, 2007

decision of the Ninth Circuit in [Bakersfield].”); see also Beard

v. Commissioner, T.C. Memo. 2009-184.   We hereby reaffirm our
                                 - 8 -

holding in Bakersfield and decline respondent’s invitation to

overrule it.5

     The Court has considered all of respondent’s contentions,

arguments, requests, and statements.       To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.

     To reflect the foregoing,


                                              An order and decision for

                                         petitioner will be entered.




     5
      Respondent insists that we should not rely on Colony, Inc.
v. Commissioner, 357 U.S. 28, 33 (1958), asserting that the
Supreme Court did not interpret the applicable version of the
statute and that its holding was nevertheless limited to
situations involving trade or business income from the sale of
goods or services. As we stated in Bakersfield Energy Partners,
LP v. Commissioner, supra at 215, “We are unpersuaded by
respondent’s attempt to distinguish and diminish the Supreme
Court’s holding in [Colony].” Moreover even if we were to agree
with respondent, which we do not, we would be hesitant to
contradict the Supreme Court’s ruling in Colony. The Supreme
Court has advised lower courts that “If a precedent of this Court
[the Supreme Court] has direct application in a case, yet appears
to rest on reasons rejected in some other line of decisions, the
* * * [lower courts] should follow the case which directly
controls, leaving to this Court the prerogative of overruling its
own decisions.” Rodriguez de Quijas v. Shearson/American
Express, Inc., 490 U.S. 477, 484 (1989).
