                         T.C. Memo. 2009-265



                      UNITED STATES TAX COURT



                      GILBERT HAY, Petitioner v.
              COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 26413-07.               Filed November 23, 2009.



     Terri A. Merriam, Jaret R. Coles, and Adam J. Blake, for

petitioner.

     Nhi T. Luu, for respondent.



                            MEMORANDUM OPINION


     KROUPA, Judge:    This partner-level matter is before the

Court on respondent’s motion to dismiss for lack of jurisdiction

and to strike partnership items and theft loss claim from taxable
                                -2-

year 1998.1   It involves this Court’s jurisdiction under the

partnership provisions of the Tax Equity and Fiscal

Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec. 402, 96

Stat. 648.

     Petitioner was a partner in various TEFRA partnerships

during the years at issue.   Respondent issued petitioner affected

items deficiency notices (deficiency notices) for 1994 and 1995

after the related partnership-level proceedings had concluded.

The deficiencies are attributable to section 6662(a) accuracy-

related penalties based on petitioner’s underpayments of income

tax for 1994 and 1995.2   After concessions,3 we are asked to

decide whether we have jurisdiction to determine the mathematical

accuracy of respondent’s computational adjustments and

petitioner’s entitlement to a 1998 theft loss offset.    We hold

that this Court lacks jurisdiction to redetermine respondent’s

computational adjustments and the theft loss offset because this

is an affected items deficiency proceeding.   Accordingly, we will



     1
      Docket No. 26413-07 (1994 and 1995 taxable years) and
Docket No. 17595-08 (1993 taxable year) are consolidated cases.
Respondent’s motion to dismiss applies only to Docket No. 26413-
07 because petitioner has not challenged respondent’s
computational adjustments for 1993.
     2
      All section references are to the Internal Revenue Code in
effect for the years at issue.
     3
      Petitioner concedes that he is liable for the accuracy-
related penalties for 1994 and 1995 but contests the computation
of the amount of the underpayment upon which the penalties are
based.
                                  -3-

grant respondent’s motion to dismiss for lack of jurisdiction and

to strike the partnership items and 1998 theft loss claim.

                            Background

     The following information is stated for purposes of

resolving the pending motion.   Petitioner resided in Tennessee at

the time he filed the petition.

Computational Adjustments for 1994 and 1995

     Petitioner was a partner in Washoe Ranches #7, a cattle

partnership organized and promoted by Jay Hoyt (Hoyt) during the

years at issue.   Hoyt organized over 100 “investor” partnerships

like Washoe for owning and breeding cattle.   The investor

partnerships were partners in upper-tier Hoyt-managed

partnerships.4

     Respondent issued notices of final partnership

administrative adjustment (FPAAs) to Washoe for 1994 and 1995.

Respondent determined that the Washoe partnership “lacked

economic substance” and therefore disallowed all of Washoe’s

income and expense items for those years.   Washoe’s tax matters

partner filed petitions with this Court seeking redetermination



     4
      This Court determined in 2000 that Hoyt cattle operations
constituted a tax shelter. Durham Farms #1, J.V. v.
Commissioner, T.C. Memo. 2000-159, affd. 59 Fed. Appx. 952 (9th
Cir. 2003). Respondent subsequently removed all Hoyt income and
deductions from the investor partnership returns, and then he
made computational adjustments to the individual partners’
returns following the respective partnership proceedings.
                                -4-

of the adjustments in the 1994 and 1995 FPAAs.5   These Washoe

partnership proceedings for 1994 and 1995 settled in 2006.

     Respondent made computational adjustments to petitioner’s

tax liabilities for 1994 and 1995 once the Washoe partnership

proceedings had concluded.   Respondent disallowed portions of

petitioner’s distributive shares of losses from Washoe that

resulted in underpayments of petitioner’s income taxes for those

years.   Respondent also determined petitioner was liable for

section 6662(a) accuracy-related penalties of $1,675 for 1994 and

$3,796 for 1995.   Respondent issued petitioner the affected items

deficiency notices for 1994 and 1995, which are at issue in this

proceeding.

     Petitioner timely filed a petition seeking a redetermination

of the section 6662(a) accuracy-related penalties for 1994 and

1995.

1998 Theft Loss Carryback

     Petitioner also filed amended returns for 1995 and 1998

before the Washoe partnership proceedings had concluded.

Petitioner claimed a $66,685 personal theft loss from the Hoyt

investment on the amended return for 1998.   Petitioner sought to




     5
      The partnership-level proceedings were Washoe Ranches No.
7, J.V. v. Commissioner, Docket No. 15257-98 (taxable year 1994),
and Washoe Ranches No. 7, J.V. v. Commissioner, Docket No. 14153-
99 (taxable year 1995).
                                  -5-

have the alleged overpayment of income tax for 1998 applied to

reduce the deficiency on the amended return for 1995.

     Respondent informed petitioner seven years ago that

respondent would refrain from processing petitioner’s amended

returns until the Washoe partnership proceedings were completed.

As previously noted, the Washoe partnership proceedings concluded

in 2006.   Despite the three year period since the partnership

proceedings’ conclusion, respondent has not processed the amended

returns for 1995 and 1998, nor has respondent issued petitioner a

deficiency notice for 1998.    Petitioner filed a claim of

erroneous computation with respondent to obtain a refund for 1995

and also raises the theft loss issue in this proceeding to compel

a response from respondent.

                              Discussion

     We begin our analysis with a discussion of our jurisdiction

over a TEFRA partner-level proceeding.6    This Court is a court of

limited jurisdiction, and we may exercise jurisdiction only to

the extent provided by statute.    Sec. 7442; GAF Corp. & Subs. v.

Commissioner, 114 T.C. 519, 521 (2000).    Our jurisdiction to

redetermine a deficiency in tax depends on a valid deficiency


     6
      Congress enacted the unified audit and litigation
procedures of the Tax Equity and Fiscal Responsibility Act of
1982 (TEFRA) to provide consistent treatment among partners in
the same partnership and to ease the administrative burden that
resulted from duplicative audits and litigation. See Petaluma FX
Partners, LLC v. Commissioner, 131 T.C. __, __ (2008) (slip op.
at 10).
                                   -6-

notice and a timely filed petition.      GAF Corp. & Subs. v.

Commissioner, supra at 521.      A taxpayer may generally file a

petition for redetermination of a deficiency with this Court

after receiving a deficiency notice.       Sec. 6213.   Our

jurisdiction to redetermine the deficiency for a given year is

limited, however, by the deficiency notice issued by the

Commissioner.    Sec. 6214.   Furthermore, normal deficiency

procedures apply only to affected items requiring partner-level

factual determinations and do not apply to computational

adjustments.    See sec. 6230(a)(2)(A).7

     We now address each of petitioner’s arguments.

I. Computational Adjustments for 1994 and 1995

     We must first decide whether we have jurisdiction to

redetermine the mathematical accuracy of respondent’s

computational adjustments following the Hoyt and Washoe

partnership proceedings.      Petitioner asks us to redetermine the

computational adjustments for 1994 and 1995 by reconsidering

partnership items that were finally determined in the related

partnership-level proceedings.     Specifically, petitioner asks us

to remove the Hoyt-related income and corresponding self-

employment tax that flowed to petitioner from the Washoe


     7
      The Taxpayer Relief Act of 1997 amended sec. 6230(a)(2)(A)
to exclude “additions to tax * * * that relate to adjustments to
partnership items” from deficiency proceedings, effective for
partnership years ending after Aug. 5, 1997. Taxpayer Relief Act
of 1997, sec. 1238, Pub. L. 105-34, 111 Stat. 788 (1997).
                                  -7-

partnership proceeding.    Petitioner also asks us to correct an

“overadjustment” from an upper-tier Hoyt partnership proceeding.

Respondent contends that we lack jurisdiction to redetermine

computational adjustments based on partnership items in an

affected items proceeding.    We agree with respondent.

     We have consistently held that we lack jurisdiction under

the TEFRA rules to redetermine an underpayment attributable to

partnership items in an affected items proceeding.    Crowell v.

Commissioner, 102 T.C. 683, 689 (1994); Saso v. Commissioner, 93

T.C. 730, 734 (1989); Maxwell v. Commissioner, 87 T.C. 783, 788-

789 (1986).   The items petitioner asks us to reconsider are all

partnership items that should have been addressed in the Hoyt and

Washoe partnership proceedings.    See sec. 301.6231(a)(3)-1(a)(1),

Proced. & Admin. Regs.    Final decisions for 1994 and 1995 have

already been entered at the Hoyt and Washoe partnership levels.

Accordingly, we lack jurisdiction to reconsider these items in

the present partner-level proceeding.

     Petitioner also maintains that we have jurisdiction to

redetermine the accuracy-related penalties because they are

affected items, rather than partnership items, and this is an

affected items deficiency proceeding.    We agree with petitioner

that the accuracy-related penalties are affected items because

they are based on tax petitioner owes as a result of adjustments

to partnership items on Washoe’s partnership returns.     See Olson
                                -8-

v. Commissioner, T.C. Memo. 1996-384; sec. 301.6231(a)(5)-1T(d),

Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6790 (Mar. 5,

1987).

     We lack jurisdiction, however, in an affected items

deficiency proceeding as here to redetermine petitioner’s

liability for affected items that do not require partner-level

factual determinations.   See sec. 6230(a); Brookes v.

Commissioner, 108 T.C. 1, 5 (1997); Crowell v. Commissioner,

supra; N.C.F. Energy Partners v. Commissioner, 89 T.C. 741, 744-

745 (1987).   We have repeatedly held that we lack jurisdiction in

an affected items deficiency proceeding to redetermine

computational adjustments.   Brookes v. Commissioner, supra at 5;

Bradley v. Commissioner, 100 T.C. 367, 371 (1993); Saso v.

Commissioner, supra at 734; Kohn v. Commissioner, T.C. Memo.

1999-150; Olson v. Commissioner, supra.   Moreover, petitioner

concedes that he is liable for the penalties and has put only the

amounts of the computational adjustments at issue.   Accordingly,

we find that we lack jurisdiction to redetermine respondent’s

computational adjustments for 1994 and 1995 in this partner-level

proceeding.

II. 1998 Theft Loss Carryback to 1995

     The next issue we must decide is whether we have

jurisdiction to offset petitioner’s 1995 deficiency with the

theft loss petitioner claimed on the amended return for 1998.
                                -9-

Respondent argues that this Court lacks jurisdiction to determine

the 1998 theft loss carryback to 1995 because we lack

jurisdiction to redetermine the deficiency for 1995.    We agree.

     Generally this Court has jurisdiction to consider the later

years not before the Court that may be necessary to correctly

redetermine the deficiency for the years currently before the

Court.   Sec. 6214(b); Vincentini v. Commissioner, T.C. Memo.

2008-271.   We have already decided, however, that we lack

jurisdiction to redetermine the deficiency for 1995 because this

is an affected items proceeding and petitioner has placed only

respondent’s computational adjustments at issue.    Moreover,

petitioner cannot confer jurisdiction where none exists.     See

Evans Publg., Inc. v. Commissioner, 119 T.C. 242, 249 (2002).

Accordingly, we conclude that we lack jurisdiction to determine

whether petitioner is entitled to a 1998 theft loss carryback to

tax year 1995.8

     To reflect the foregoing and the concessions of the parties,


                                           An appropriate order will

                                      be issued.



     8
      We note that our holding does not bar petitioner from
obtaining future relief on these issues. Petitioner may
challenge respondent’s computational adjustments for 1994 and
1995 by paying the penalty and filing a claim for a refund. See
sec. 6230(c). Furthermore, petitioner’s claim to the 1998 theft
loss is not barred by sec. 6512(a) because the year 1998 is not
before this Court.
