                      114 T.C. No. 34



                UNITED STATES TAX COURT



   RHONE-POULENC SURFACTANTS AND SPECIALTIES, L.P.,
    GAF CHEMICALS CORPORATION, A PARTNER OTHER THAN
        THE TAX MATTERS PARTNER, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 2125-98.                       Filed June 29, 2000.



     R’s notice of final partnership administrative
adjustment (FPAA) treated 1990 transfers of business
assets to P’s partnership as taxable sales by P rather
than as nontaxable transfers in exchange for
partnership interests under sec. 721, I.R.C. P, a
partner other than the tax matters partner, filed the
petition and then moved for summary judgment on the
ground that the period of limitations for assessing any
tax resulting from this partnership proceeding has
expired. R alleges that failure to report the sale on
P’s return resulted in omission of more than 25 percent
of reported gross income so that, pursuant to sec.
6501(e)(1)(A), I.R.C., the period for assessing tax did
not expire until 6 years after P’s return was filed.
The FPAA was issued several days before the expiration
of 6 years from the filing of P’s 1990 return.
     Held: (1) Sec. 6229(a), I.R.C., includes an
alternative, minimum period of limitations, applicable
                               - 2 -

     to all partners; (2) sec. 6229(a), I.R.C., does not
     preclude the applicability to specific partners of a
     longer period of limitations such as the 6-year period
     in sec. 6501(e)(1)(A), I.R.C.; (3) assuming there was
     inadequate disclosure of P’s alleged omission of
     income, the running of the 6-year period of limitation
     was suspended when the FPAA was issued pursuant to sec.
     6229(d), I.R.C.; and (4) the issue of adequate
     disclosure of the allegedly omitted income presents
     genuine issues of material fact. Summary judgment will
     be denied.



     Albert H. Turkus, Pamela F. Olson, William F. Nelson, and

Anne E. Collier, for petitioner.

     John A. Guarnieri, Craig Connell, and Ruth M. Spadaro,for

respondent.


                              OPINION


     RUWE, Judge:   This case is a partnership-level action based

on a petition filed pursuant to section 6226.1   Section 6226 is

one of a group of provisions concerning the tax treatment of

partnership items that was added to the Code by the Tax Equity

and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248,

sec. 402(a), 96 Stat. 648 (TEFRA partnership provisions).2   The



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
     2
      The TEFRA partnership provisions have been amended since
their enactment in 1982 and now constitute secs. 6221 through
6234.
                                - 3 -

matter before the Court is petitioner’s motion for summary

judgment, based on the claim that the period of limitations for

making assessments of tax has expired.

     The Internal Revenue Code prescribes no period during which

TEFRA partnership-level proceedings, which begin with the mailing

of the notice of final partnership administrative adjustment,

must be commenced.    However, if partnership-level proceedings are

commenced after the time for assessing tax against the partners

has expired, the proceedings would be of no avail because the

expiration of the period for assessing tax against the partners,

if properly raised, would bar any assessments attributable to

partnership items.

     Generally, in order to be a party to a partnership action, a

partner must have an interest in the outcome.    If the statute of

limitations applicable to a partner bars the assessment of tax

attributable to the partnership items in issue, that partner

would generally not have an interest in the outcome.    See sec.

6226(c) and (d).3    However, we have held that a partner may


     3
      Sec. 6226(c) and (d) provides:
     SEC. 6226(c). Partners Treated as Parties.--If an action is
brought under subsection (a) or (b) with respect to a partnership
for any partnership taxable year--
          (1) each person who was a partner in such partnership
     at any time during such year shall be treated as a party to
     such action, and
          (2) the court having jurisdiction of such action shall
     allow each such person to participate in the action.

                                                     (continued...)
                              - 4 -

participate in such action for the purpose of asserting that the

period of limitations for assessing any tax attributable to

partnership items has expired and that we have jurisdiction to

decide whether that assertion is correct.    See Columbia Bldg.,

Ltd. v. Commissioner, 98 T.C. 607 (1992).    Respondent does not

dispute our jurisdiction over this issue.4




     3
      (...continued)
     SEC. 6226(d). Partner Must Have Interest in Outcome.--
          (1) In order to be party to action.--Subsection (c)
     shall not apply to a partner after the day on which--
               (A) the partnership items of such partner for the
          partnership taxable year became nonpartnership items by
          reason of 1 or more of the events described in
          subsection (b) of section 6231, or
               (B) the period within which any tax attributable
          to such partnership items may be assessed against that
          partner expired.
     4
      We note that in 1997 Congress amended sec. 6226(d) in order
to specifically provide that a partner may raise the statute of
limitations defense in a partnership proceeding for partnership
years ending after Aug. 5, 1997. The Taxpayer Relief Act of 1997
(TRA), Pub. L. 105-34, sec. 1239(b), 111 Stat. 1027, added the
following sentence to the end of sec. 6226(d)(1)(B):

     Notwithstanding subparagraph (B), any person treated
     under subsection (c) as a party to an action shall be
     permitted to participate in such action (or file a
     readjustment petition under subsection (b) or paragraph
     (2) of this subsection) solely for the purpose of
     asserting that the period of limitations for assessing
     any tax attributable to partnership items has expired
     with respect to such person, and the court having
     jurisdiction of such action shall have jurisdiction to
     consider such assertion.
                                   - 5 -

I.    Introduction

       Petitioner is a Delaware corporation with its principal

place of business in Wayne, New Jersey.       Rhone-Poulenc

Surfactants and Specialties, L.P., is a Delaware limited

partnership.5      Petitioner is a partner in the partnership other

than the tax matters partner.       By notice of final partnership

administrative adjustment dated September 12, 1997 (the FPAA),

respondent proposed adjustments with respect to the partnership

for its 1990 taxable (calendar) year.       The parties have presented

us with questions of law that, were we to answer them as

petitioner requests, would leave us without any genuine issue of

fact.       However, we do not answer those questions as petitioner

requests.       We are left with a genuine issue of fact.   Therefore,

summary disposition is inappropriate.       See Rule 121(b).6

II.    Discussion

       A.     Respondent’s Adjustments

       Respondent has not adjusted any item of income, loss,

deduction, or credit of the partnership, but he has challenged

the partnership’s treatment of a certain transfer of property.


       5
      For convenience, we use the terms “partnership” and
“partner” without deciding whether a partnership existed or
petitioner was a partner in that partnership, conclusions that
respondent disputes.
       6
      Petitioner has requested a hearing on the motion. The
parties’ submissions fully set forth their respective positions,
and we see no need for any further argument. Therefore, we have
not granted petitioner’s request for a hearing.
                                - 6 -

Petitioner is a subsidiary of GAF Corporation, a Delaware

corporation (GAF).    The transfer was made by petitioner and

another subsidiary of GAF, and the property in question consists

of assets related to businesses carried on by those two

subsidiaries.7    The partnership characterized the transfer as a

contribution of property to the partnership in exchange for an

interest in the partnership.    Respondent’s challenge is based on

his conclusion that the transfer constituted a sale and not a

contribution of the property to the partnership.    Respondent

reaches that conclusion based on two sometimes independent

hypotheses:    (1) There was no partnership, and (2) the transferor

of the property received no partnership interest in exchange

therefor.8    The parties are in agreement that this case involves

one or more partnership items.9


     7
      For simplicity, when discussing the transfer, we use the
term “petitioner”, without distinction, to refer to petitioner,
its parent (GAF corporation), and its sister subsidiary.
     8
      For example, respondent claims, in the alternative: (1)
There was no partnership, (2) if there were a partnership, the
transfer was not to it but to a related party, and (3) if there
were a partnership and the transfer were to it, the transfer was
not in exchange for an interest in the partnership but, rather,
was a sale to the partnership.
     9
      Sec. 301.6231(a)(3)-1(a)(4), Proced. & Admin. Regs.,
provides that the term “partnership item” includes “contributions
to the partnership”. The fact that the partnership might be
determined to be a sham in proceedings under the Tax Equity and
Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, 96
Stat. 324, does not preclude the applicability of the TEFRA
provisions. See sec. 6233; Oceanic Leasing v. Commissioner, T.C.
                                                   (continued...)
                                   - 7 -

     The partnership filed its 1990 income tax return, Form 1065,

U.S. Partnership Return of Income (the return), on either

September 15 or 17, 1991.10

     B.     Arguments of the Parties

             1.   Introduction

     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 the 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.

     The principal disagreement between the parties concerns the

relationship between section 6229 and section 6501.       Petitioner

argues that section 6229 stands alone and describes a period that

is independent of any period described in section 6501.

Respondent argues that section 6229 does not stand alone but



     9
      (...continued)
Memo. 1996-458; sec. 301.6233-1T(a), (c)(1), Temporary Proced. &
Admin. Regs., 50 Fed. Reg. 39,998 (Oct. 1, 1985).
     10
      The parties disagree on this point, but that disagreement
is of no consequence to our disposition of petitioner’s motion.
                               - 8 -

describes an “add on” period that, in some circumstances, extends

the period prescribed by section 6501 but would never subtract

from that period.   Respondent concedes that, if we agree with

petitioner, the motion should be granted.

          2.   Petitioner’s Claims

     Petitioner claims (and respondent agrees) that (1) more than

3 years elapsed between both the due date and filing of the

partnership return and the issuance of the FPAA, and (2) the

partnership did not omit any amount from gross income.   On that

basis, petitioner claims that any assessment of tax with respect

to respondent’s adjustments is barred by the 3-year period of

limitations found in section 6229(a).   In response to

respondent’s argument that section 6229(a) merely extends the

section 6501 period in some instances and is inapplicable in this

case, petitioner answers:   (1) Section 6501 is inapplicable to

the assessment of any tax attributable to any partnership item,11


     11
       The parties are in agreement that this case involves one
or more partnership items. Respondent claims that, if his
determination of partnership items is sustained, nonpartnership
items of one or more partners will be affected (affected items),
resulting in computational adjustments to the tax liabilities of
those partners. See sec. 6231(a)(4),(5), and (6); sec.
301.6231(a)(6)-1T, Temporary Proced. & Admin. Regs., 51 Fed. Reg.
13231 (Apr. 18, 1986). If the determination of any affected item
requires a partner-level determination, then the deficiency
procedures contained in secs. 6211 through 6216 will apply to the
determination of such affected item. See sec. 6230(a)(2). If
the determination of any affected item does not require a
partner-level determination, then the aforementioned deficiency
procedures will not apply to the determination of such affected
                                                   (continued...)
                                - 9 -

(2) even if section 6501 is applicable, the section 6501 period

had expired by the time the FPAA was issued because petitioner

had adequately disclosed all of its gross income for the year of

the transfer (and, thus, avoided the 6-year period provided for

in section 6501(e)(1)(A) in the case of a substantial omission of

income), and (3) even if section 6501(e)(1)(A) is applicable and

the section 6501(e)(1)(A) period did not expire before the FPAA

was issued, the issuance of the FPAA did not suspend the running

of the section 6501(e)(1)(A) 6-year period of limitations, which

has since expired.

          3.    Respondent’s Claims

     Respondent argues that, if his adjustments are sustained, a

substantial gain will be recognized to petitioner on account of

the transfer.   Respondent claims that petitioner’s omission of

that gain from its corporate return constitutes a substantial

omission of income, which was not adequately disclosed by

petitioner, with the consequence that the section 6501 period of

limitations for the assessment of any tax with respect to

petitioner is 6 years rather than 3 years.   Respondent

acknowledges that section 6225(a) imposes a bar on the assessment

of any deficiency attributable to any partnership item until the

completion of the partnership-level proceedings.   Respondent



     11
      (...continued)
item. See sec. 6230(a)(1).
                                  - 10 -

believes that, prior to expiration of the section 6501(e)(1)(A)

period, the running of that period was suspended by section

6229(d) when respondent mailed the FPAA to the tax matters

partner.    Respondent believes that the section 6501(e)(1)(A)

period remains suspended today.

     C.    Analysis

            1.   Introduction

     Two views have long competed regarding the basic nature of a

partnership.     The “aggregate theory” considers a partnership to

be no more than an aggregation of individual partners.         The

“entity theory” characterizes a partnership as a separate entity.

See generally 1 Bromberg & Ribstein, Bromberg and Ribstein on

Partnership, sec. 1.03 (1988).      The substantive law with respect

to the income taxation of partners and partnerships is found in

subchapter K, chapter 1, subtitle A of the Internal Revenue Code

(subchapter K).       Authorities on partnership taxation have stated

that subchapter K does not espouse either the aggregate or the

entity theory of partnerships but rather blends the two theories.

See 1 McKee et al., Federal Taxation of Partnerships and

Partners, par. 1.02 (2d ed. 1990).         That blending of the

aggregate and entity theories is a primary source of uncertainty

in the application of subchapter K, see id. at par. 1.02[3], and,

no doubt, is responsible, at least in part, for our description

of the provisions of subchapter K as “distressingly complex and
                                 - 11 -

confusing”.     Foxman v. Commissioner, 41 T.C. 535, 551 n.9 (1964),

affd. 352 F.2d 466 (3d Cir. 1965).

     Subtitle F of the Code is concerned with procedure and

administration.     Both section 6229 and section 6501 are contained

in subtitle F.     Section 6229 is one of a group of provisions

concerning the tax treatment of partnership items that was added

to the Code by TEFRA.     For income tax purposes, partnerships are

not taxable entities (see section 701, which reflects the view

that a partnership is no more than an aggregation of its

members).     Any income tax attributable to partnership items is

assessed at the partner level.     Thus, any statute of limitations

provisions that limit the time period within which assessment can

be made are restrictions on the assessment of a partner’s tax.

     Before TEFRA, adjustments with respect to partnership items

were made to each partner’s income tax return at the time (and

if) that return was examined.     See H. Conf. Rept. 97-760, at 599

(1982), 1982-2 C.B. 600, 662.     An administrative settlement or

judicial determination of a disagreement between a partner (or

partners) and the Commissioner bound only the parties thereto and

did not bind other partners or bind the Commissioner with respect

to other partners.     See id.   The tax writing committees explained

the TEFRA partnership provisions as follows:     “[T]he tax

treatment of items of partnership income, loss, deductions, and

credits will be determined at the partnership level in a unified
                                - 12 -

partnership proceeding rather than in separate proceedings with

the partners.”   Id. at 600, 1982-2 C.B. at 662.   Thus, section

6221 provides for the determination of all partnership items at

the partnership level rather than at the partner level.12    Like

subchapter K, however, the TEFRA partnership provisions blend the

entity and aggregate theories.    For example, if a partner enters

into a settlement agreement with the Commissioner with respect to

all partnership items for a partnership year, they become

nonpartnership items with respect to that partner and further

partnership-level proceedings are of no consequence to that

partner.   See sec. 6231(b)(1)(C).   Because the TEFRA partnership

provisions blend the two theories, subtitle F (with respect to

partnerships), like subchapter K, is distressingly complex and

confusing.

     The TEFRA partnership provisions that we are required to

interpret in this case are those referring to the period of

limitations for assessing tax.    In interpreting these provisions,

we must keep in mind the Supreme Court’s admonition that

“Statutes of limitation sought to be applied to bar rights of the

Government, must receive a strict construction in favor of the

Government.”   E.I. Dupont De Nemours & Co. v. Davis, 264 U.S.


     12
      A “partnership item” is    any item required to be taken into
account for the partnership’s    taxable year to the extent
regulations provide that such    item is more appropriately
determined at the partnership    level rather than at the partner
level. See sec. 6231(a)(3).
                                  - 13 -

456, 462 (1924); see also Badaracco v. Commissioner, 464 U.S.

386, 391 (1984); Colestock v. Commissioner, 102 T.C. 380, 387

(1994); Fehlhaber v. Commissioner, 94 T.C. 863, 868 (1990), affd.

954 F.2d 653 (11th Cir. 1992).

          2.   Relationship Between Sections 6229 and 6501

          a.   Introduction

     Simply put, respondent believes that sections 6229 and 6501

contain alternative periods within which to assess tax with

respect to partnership items, with the later-expiring-period

governing in a particular case.      Petitioner believes that the

period for assessing tax with respect to partnership items is the

later of 3 years from the partnership return due date or filing

date which is referred to in section 6229(a).       Both sides refer

to dicta which lends support to their respective position, and

both acknowledge that no court has ruled directly on this issue.

We conclude that respondent’s position is correct.

          b.   Section 6229 and Section 6501 Contain Alternative
               Periods of Limitations

     To understand the parties’ arguments, it is necessary to

understand the Code’s structure with respect to periods of

limitations.   In pertinent part, section 6501 provides:

          SEC. 6501(a). General Rule.--Except as otherwise
     provided in this section, the amount of any tax imposed
     by this title shall be assessed within 3 years after
     the return was filed * * *

                *    *        *     *      *    *      *
                              - 14 -

          (e) Substantial Omission of Items.--Except as
     otherwise provided in subsection (c)--

               (1) Income taxes.--In the case of any tax
          imposed by subtitle A--

                    (A) General rule.--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, the tax may be assessed, or a
               proceeding in court for the collection of
               such tax may be begun without assessment, at
               any time within 6 years after the return was
               filed. For purposes of this subparagraph--

               *    *     *     *      *    *     *

                         (ii) In determining the amount
                    omitted from gross income, there shall
                    not be taken into account any amount
                    which is omitted from gross income
                    stated in the return if such amount is
                    disclosed in the return, or in a
                    statement attached to the return, in a
                    manner adequate to apprise the Secretary
                    of the nature and amount of such item.

In pertinent part, section 6229 provides:

          SEC. 6229(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). [Emphasis added.]

     Section 6501 unequivocally provides the period of

limitations within which "the amount of any tax imposed by this
                                 - 15 -

title shall be assessed”.   Sec. 6501(a) (emphasis added).

Generally, the period of limitations so provided is 3 years from

the date the taxpayer’s return was filed but varies in the case

of certain enumerated exceptions.     See, e.g., sec. 6501(c), (d),

(e), (f), (h).   The pertinent language of section 6229 is:

"[T]he 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" the

filing or due date of the partnership return.    (Emphasis added.)

Section 6229 provides a minimum period of time for the assessment

of any tax attributable to partnership items (or affected items)

notwithstanding the period provided for in section 6501, which is

ordinarily the maximum period for the assessment of any tax.     The

section 6229 minimum period may expire before or after the

section 6501 maximum period.13    Indeed, section 6501(n)(2) cross-

references section 6229 by providing:     "For extension of period




     13
      For example, the 3-year minimum period described in sec.
6229(a) will expire on April 15 of year four in the case of a
partnership return timely made (without extension) for year one
(a calendar year), while the 3-year maximum period described in
sec. 6501 will expire on August 15 of year four in the case of an
individual partner’s return made (with automatic 4-month
extension) for year one. If a partner is a corporation, which
timely makes its return (without extension) for year one on March
15 of year two, the 3-year maximum period described in sec. 6501
will expire 1 month earlier (on March 15 of year four) than the
3-year minimum period described in sec. 6229(a).
                               - 16 -

in the case of partnership items (as defined in section

6231(a)(3)), see section 6229."    (Emphasis added.)14

       The Court has often stated our understanding that section

6229 extends the section 6501 period with respect to tax

attributable to partnership items or affected items.     See Estate

of Quick v. Commissioner, 110 T.C. 172, 181-182 (1998),

supplemented by Estate of Quick v. Commissioner, 110 T.C. 440

(1998) ("Section 6501(a) provides generally that respondent has 3

years from the date the return was filed in which to assess the

tax.    Section 6501(o) provides a cross-reference to section 6229,

which extends such period in the case of adjustments pertaining

to partnership items or affected items.");15 Harris v.

Commissioner, 99 T.C. 121, 131 (1992), affd. 16 F.3d 75 (5th Cir.

1994) ("The section 6229 limitations period acts to extend the

limitations period otherwise available under section 6501 when

such period has otherwise expired."); Maxwell v. Commissioner, 87

T.C. 783, 791 n.6 (1986) ("See section 6229(a) which extends the

period of limitations for assessments of tax 'attributable to any

partnership item (or affected item).'").    However, we must



       14
      We are aware that sec. 7806(a) provides that cross-
references are made only for convenience and have no legal
effect. However, it is still noteworthy that the cross-reference
speaks of an “extension” of the period of limitations.
       15
      Sec. 6501(o) was changed to sec. 6501(n)(2) by the Deficit
Reduction Act of 1984, Pub. L. 98-369, sec. 163(b)(1), 98 Stat.
697.
                                - 17 -

acknowledge that some of our opinions contain dicta to the

contrary.   See, for example, Boyd v. Commissioner, 101 TC. 365,

370 (1993), indicating that section 6501(a) does not apply to

income tax attributable to partnership items.      As previously

indicated, the statements referred to in the aforementioned cases

are dicta since those cases did not involve the issue before us.

            c.   Field Service Advice Memoranda; Internal Revenue
                 Manual

     Petitioner relies on two Internal Revenue Service field

service advice memoranda (the FSA’s) in arguing that respondent

has accepted petitioner’s position.      Even if the FSA’s supported

petitioner’s claim, the FSA’s have no precedential status.      See

sec. 6110(k)(3) (formerly (j)(3)).       Both FSA’s, however, express

respondent's position.    One FSA advised the District Counsel,

Illinois District, that petitioner’s position was initially

adopted only because it was considered the more conservative

position (i.e., there would never be a statute of limitations

problem as long as the assessments were always made within the 3-

year period), but that in the future it would not be advanced.

The second FSA advised an undisclosed district counsel to adopt

petitioner’s position only because it was questionable whether

the taxpayer's individual section 6501 period remained open.

     Petitioner also quotes from the Internal Revenue Manual

(IRM) in support of its position.    Whatever force as authority
                              - 18 -

the IRM may have,16 the quoted provisions from IRM section

4226.31(13)(13) are ambiguous and unpersuasive (e.g., “The filing

date of an investor’s return is the beginning of the

three year IRC 6501 statute, but IRC 6229(a), at the partnership

level, probably controls the partnership items even if the

partnership return was filed earlier.”   4 Audit, Internal Revenue

Manual (CCH), sec. 4226.31(13)(13), at 7643 (emphasis added).

          d.   No Inconsistency

     Petitioner directs our attention to various TEFRA

partnership provisions and other provisions of the Code and

regulations in an attempt to show a statutory scheme that

petitioner argues requires us to interpret section 6229(a) as a

stand-alone statute of limitations.    We consider those sections

and regulations cited by petitioner only to express our view that

section 6229 provides a minimum period of limitations.

     First, petitioner cites five sections of the Code that, by

explicitly or implicitly referring to a period of limitations in

section 6229(a), allegedly make clear that section 6229 is a




     16
      The Internal Revenue Manual does not have the force of
law. See Griswold v. United States, 59 F.3d 1571, 1576 n.8 (11th
Cir. 1995) (“While the IRS Manual does not have the force of law,
see Anderson v. United States, 44 F.3d 795, 799 (9th Cir. 1995),
the manual provisions do constitute persuasive authority as to
the IRS’s interpretation of the statute and the regulations.”);
Lane v. Commissioner, T.C. Memo. 1992-11.
                                - 19 -

statute of limitations.17    None of the cited sections are

inconsistent with our interpretation that section 6229 provides

an alternative minimum period of limitations.       Section 6229(a)

holds open the section 6501 limitations period as to all partners

for a fixed period of time, thereby providing a minimum period

within which to assess adjustments attributable to partnership

items against all partners.    A general reference to section

6229(a) as a period of limitations does not demonstrate any

intention as to whether the minimum period provided in section

6229(a) exclusively defines the period of limitations, versus

only a minimum period, or whether it operates on all assessments

versus only specified assessments.       Those questions must be

answered by examining the provision referenced, which, in the

instance of section 6229(a), refers to a period for assessing any

tax which “shall not expire before” the later of the partnership

return filing or due date.    The “period for assessing any tax”

that is specifically referred to in section 6229(a) must, of


     17
      Petitioner cites: (1) Sec. 6503(a)(1) ("the period of
limitations provided in section 6501 or 6502 (or section 6229
* * *)"); (2) sec. 6229(h) ("the running of the period of
limitations provided in this section"); (3) sec. 6230(d)(1) ("the
period of limitation prescribed in section 6229 with respect to
such partner for assessment of any tax attributable to such
[partnership or affected] item."); (4) sec. 6228(a)(3)(C) ("the
expiration of the period prescribed by section 6229 for making
assessments of tax attributable to partnership items for such
taxable year."); and (5) sec. 6234(g)(2) ("the period prescribed
by section 6229 for assessing any tax under subtitle A which is
attributable to any partnership item or affected item for the
taxable year involved.").
                                 - 20 -

necessity, refer to section 6501.     The only change made by

section 6229(a) is the proviso that whatever the applicable

“period for assessing any tax”, it shall not expire before the

minimum period.18     Indeed, in other instances where Congress has

used the "shall not expire before" language of section 6229, it

has done so without displacing one period of limitations by

another.     See, e.g., sec. 6501(c)(7).19   We are convinced that if

Congress had intended to create a completely separate statute of

limitations for assessments attributable to partnership and

affected items, the drafters of section 6229 would have tracked

the language of section 6501(a) and simply provided that “any tax

attributable to partnership items or affected items shall be



     18
      A similar analysis disposes of petitioner's identical
argument with regard to various regulations which reference the
sec. 6229(a) period as "the period of limitations." See sec.
301.6231(a)(1)-1T(b)(2), Temporary Proced. & Admin. Regs., 52
Fed. Reg. 6790 (Mar. 5, 1987), and sec. 301.6231(a)(6)-1, Proced.
& Admin. Regs.
     19
          Sec. 6501(c)(7) provides:

     SEC. 6501(c). Exceptions.--
          *      *      *      *      *      *      *
          (7) Special rule for certain amended returns.--
     Where, within the 60-day period ending on the day on
     which the time prescribed in this section for the
     assessment of any tax imposed by subtitle A for any
     taxable year would otherwise expire, the Secretary
     receives a written document signed by the taxpayer
     showing that the taxpayer owes an additional amount of
     such tax for such taxable year, the period for the
     assessment of such additional amount shall not expire
     before the day 60 days after the day on which the
     Secretary receives such document. [Emphasis added.]
                                 - 21 -

assessed within 3 years of the later of the filing of the

partnership return or its due date.”20

             e.   Congressional Intent

     Because respondent’s position introduces partner specific

considerations into the period of limitations issue, petitioner

believes that respondent’s position introduces the aggregate

theory where Congress meant the entity theory to prevail.     As

stated,21 although Congress enacted the TEFRA partnership

provisions to allow a unified proceeding to determine partnership

items, the TEFRA partnership provisions blend the entity and

aggregate theories.     Petitioner has failed to convince us that



     20
      In 2 Willis et al., Partnership Taxation, par. 20.08[1]
(6th ed. 1999), it is explained:

          Section 6229(a) provides the general rule that the
     limitation period for the assessment of tax
     attributable to partnership items or affected items for
     a partnership taxable year “shall not expire” before
     three years after the later of the date on which the
     partnership return was filed or the due date (without
     extensions) for filing the return. This language
     pointedly is different from the language in the general
     limitation statute that states that tax “shall be
     assessed within 3 years” from the stated date. The
     effect of this provision, therefore, is to retain the
     normal three-year limitation period extended for
     partnership or affected items to at least three years
     (or more in some circumstances) after the filing of the
     partnership return. Consequently, the Service has the
     longer of the period from the filing of the partner’s
     return or the filing of the partnership return within
     which to assess tax with respect to partnership items
     and affected items.
     21
          See discussion supra pp. 10-11.
                                - 22 -

Congress intended the entity theory to govern the limitations

equation.   Indeed, section 6229 itself contains partner specific

provisions.     Section 6229(b)(1) provides that the period of

limitations can be extended by an agreement entered into by the

Commissioner with either one or more partners individually or

with respect to all partners by an agreement entered into with

the tax matters partner.     Section 6229(c)(1) provides that in the

case of a fraudulent partnership return, different periods of

limitations will apply to different partners depending upon the

individual partner’s participation in making the partnership

return.   Section 6229(h) suspends the running of the period of

limitations with respect to a partner (but not all partners)

during the pendency of a bankruptcy proceeding with respect to

such partner.22    Congress did not provide for the necessarily

synchronous expiration of the period for assessing tax with

respect to deficiencies resulting to the partners on account of

the unified examination of the partnership for a partnership

taxable year.     We, therefore, do not agree that respondent’s

theory contravenes congressional intent.     Indeed, in 1997,

Congress recognized that the periods for assessing tax against

individual partners may vary from partner to partner and

specifically provided that an individual partner will be



     22
      Sec. 6229(h) was enacted as part of TRA sec. 1233(b), 111
Stat. 1023.
                               - 23 -

permitted to participate as a party in the partnership proceeding

“solely for the purpose of asserting that the period of

limitations for assessing any tax attributable to partnership

items has expired with respect to such person”.   See last

sentence of sec. 6226(d)(1)(B) added to the Code by the Taxpayer

Relief Act of 1997, Pub. L. 105-34, sec. 1239(b), 111 Stat. 1027-

1028, effective for years ending after August 5, 1997.23

          f.   Internal Superfluities

     Finally, petitioner argues that respondent’s position

creates internal superfluities in section 6229.   Petitioner

explains that section 6229(c)(1)(A) provides an unlimited section

6229(a) assessment period for deficiencies attributable to

partnership items and affected items of a partner who, acting

with intent to evade taxes, signs or participates in the

preparation of a false or fraudulent partnership return.     Section

6229(c)(1)(A), petitioner argues, is superfluous if the

controlling statute of limitations on assessments of deficiencies

attributable to partnership items and affected items is contained

in section 6501, because section 6501(c)(1) contains an identical

unlimited assessment period.

     Again, petitioner's arguments are not persuasive.     An

interpretation that renders a statutory provision superfluous



     23
      See supra note 4, containing the complete addition to sec.
6226(d)(1)(B).
                                 - 24 -

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.”        Weinberger v. Hynson,

Westcott & Dunning, Inc., 412 U.S. 609, 633 (1973); Woods v.

Commissioner, 91 T.C. 88, 98 (1988).       We shall not, however, do

violence to the clear language of the statute in furtherance of a

rule of statutory construction.       In any event, we are not

convinced that respondent’s position renders section

6229(c)(1)(A) superfluous.     We have set forth sections

6229(c)(1)and 6501(c)(1) in the margin.24       Both sections deal


     24
          Sec. 6229(c)(1) provides:

     SEC. 6229(c). Special Rule in Case of Fraud, Etc.--

          (1) False return.--If any partner has, with the
     intent to evade tax, signed or participated directly or
     indirectly in the preparation of a partnership return
     which includes a false or fraudulent item–

                  (A) in the case of partners so signing or
             participating in the preparation of the return,
             any tax imposed by subtitle A which is
             attributable to any partnership item (or affected
             item) for the partnership taxable year to which
             the return relates may be assessed at any time,
             and

                  (B) in the case of all other partners,
             subsection (a) shall be applied with respect to
             such return by substituting “6 years” for
             “3 years.”

     Sec. 6501(c)(1) provides:

     SEC. 6501(c).     Exceptions.--

                                                         (continued...)
                                - 25 -

with false returns.   Petitioner is correct that section

6501(c)(1) provides an unlimited assessment period in the case of

a taxpayer who files a false or fraudulent return with intent to

evade tax.   The definition of fraud for purposes of section

6501(c)(1) is the same as the definition of fraud for purposes of

section 6663 (which imposes a penalty for fraud).   See, e.g.,

Chin v. Commissioner, T.C. Memo. 1994-54 (with respect to the

predecessor to section 6663); Williamson v. Commissioner, T.C.

Memo. 1993-246 (same); Richman v. Commissioner, T.C. Memo. 1993-

32 (same); Callahan v. Commissioner, T.C. Memo. 1992-132 (same).

The elements of fraud are:   (1) That the taxpayer has underpaid

his taxes for each year, and (2) that some part of the

underpayment is due to fraud.    See DiLeo v. Commissioner, 96 T.C.

858, 873 (1991), affd. 959 F.2d 16 (2d Cir. 1992); Parks v.

Commissioner, 94 T.C. 654, 660-661 (1990); Truesdell v.

Commissioner, 89 T.C. 1280, 1301 (1987); Hebrank v. Commissioner,

81 T.C. 640, 642 (1983).

     Section 6501(c)(1) applies to any taxpayer who files a false

or fraudulent return with intent to evade tax.   When a taxpayer

files such a return, “§6501(c)(1) would permit the Commissioner



(...continued)
          (1) False return.--In the case of a false or
     fraudulent return with the intent to evade tax, the tax
     may be assessed, or a proceeding in court for
     collection of such tax may be begun without assessment,
     at any time.
                               - 26 -

to assess ‘at any time’ the tax for a year in which the taxpayer

has filed ‘a false or fraudulent return’”.     Badarracco v.

Commissioner, 464 U.S. 384, 396 (1984).     Section 6501(c)(1) would

literally apply to a partner whose individual or corporate return

was fraudulent regardless of whether the partnership return was

fraudulent.    Section 6501(c)(1) allows for an unlimited period

for assessing any tax for the year in which a fraudulent return

was filed regardless of whether some of the tax may be due to

nonfraudulent items.    See Lowy v. Commissioner, 288 F.2d 517 (2d

Cir. 1961), affg. T.C. Memo. 1960-32; Colestock v. Commissioner,

102 T.C. 380 (1994).    Thus, if section 6501(c)(1) applies to a

particular taxable year, it clearly permits an open-ended period

for any assessment of tax even if part of the assessment was

based on nonfraudulent partnership items.

     Section 6229(c)(1) deals specifically with partnership

returns.    It extends the period of limitations with respect to

the partners if a partner, with intent to evade tax, signs or

participates in the preparation of a fraudulent partnership

return.    Unlike section 6501(c)(1), section 6229(c)(1) applies

only to tax attributable to partnership items or affected items.

For a partner signing or participating in the preparation of a

fraudulent partnership return, the period for assessing tax

attributable to partnership items is unlimited, notwithstanding

that the fraud does not result in a reduction of that partner’s
                               - 27 -

own taxes.    See Transpac Drilling Venture 1983-2 v. United

States, 83 F.3d 1410, 1414-1415 (Fed. Cir. 1996) (“there is no

requirement in §6229(c)(1) that the taxes the signer of the

partnership return intended to evade must have been the signer’s

own”).    Certainly, section 6229(c)(1)(A) applies to tax

attributable to partnership items if it is the signer’s own taxes

that will be reduced, but that possible limited overlap with

section 6501(c)(1) is insufficient for us to conclude that

section 6229(c)(1) is superfluous, given the disjunction between

intent and underpayment contained in section 6229(c)(1).     We also

note that, unlike section 6501(c)(1), section 6229(c)(1)(B)

provides a separate 6-year period for assessment of taxes for

partners who did not sign or participate in the preparation of

the fraudulent return.    Moreover, it is unclear whether the

"return" specified in section 6501(c)(1) included partnership

returns, though we need not address that question here.     See

Stahl v. Commissioner, 96 T.C. 798, 801 (1991); Durovic v.

Commissioner, 54 T.C. 1364, 1384-1385 (1970), affd. in part,

revd. and remanded in part 487 F.2d 36 (7th Cir. 1973).25




     25
      TRA sec. 1284(a), 111 Stat. 1038, amended sec. 6501(a) by
adding at the end: "For purposes of this chapter, the term
'return' means the return required to be filed by the taxpayer
(and does not include a return of any person from whom the
taxpayer has received an item of income, gain, loss, deduction,
or credit).”
                                - 28 -

     Petitioner further argues that respondent’s position makes

section 6229(b)(3)26 superfluous because an extension under

6501(c)(4) extends the section 6501 period for all purposes.

Section 6229(b)(3) is not superfluous.       A valid extension

pursuant to section 6501(c)(4) operates to extend the period of

limitations on assessments and collections with regard to only

those taxes that both the Secretary and the taxpayer explicitly

agree to in writing.   See sec. 6501(c)(4); see also Pursell v.

Commissioner, 38 T.C. 263, 278 (1962), affd. 315 F.2d 629 (3d

Cir. 1963).   Contract principles are pivotal in determining the

existence and scope of that agreement because section 6501(c)(4)

requires a written agreement.    See Mecom v. Commissioner, 101

T.C. 374, 384 (1993), affd. 40 F.3d 385 (5th Cir. 1994).         Section

6229(b)(3) imposes a default rule for purposes of determining

whether an agreement encompasses assessments that are

attributable to partnership items.       It provides that any

agreement under section 6501(c)(4) shall apply to partnership-

level adjustments only if the agreement expressly provides that

it applies to tax attributable to partnership items.       See sec.

6229(b)(3).   We also note that this limitation on the scope of an

agreement under section 6501(c)(4) is meaningless if, as

petitioner argues, section 6501 has no application to the period


     26
      TRA sec. 1233(c), 111 Stat. 1023-1024, amended Code sec.
6229(b). Prior to the amendment, sec. 6229(b)(3) was sec.
6229(b)(2).
                                - 29 -

of limitations for assessments attributable to partnership or

affected items.

          g.   Nonfilers

     In response to petitioner’s policy arguments, respondent

notes that petitioner’s position leaves a gap with respect to

nonfilers; i.e., partners who fail to file their own returns.

Respondent states:

     under petitioner’s proposed interpretation of section
     6229, if a timely filed partnership return reports
     income, the Commissioner would be unable to assess tax
     attributable to such income more than three years after
     the partnership return is filed despite the fact that a
     partner, the only party against whom tax may be
     assessed, has filed no return.

Respondent’s point is well taken.     Congress has determined that

the period for assessment does not run with respect to nonfilers.

See sec. 6501(c)(3).   Section 6229(c)(3) provides that where no

partnership return is filed, tax attributable to partnership

items (or affected items) may be assessed at any time.     Section

6229 contains no parallel provision for partners who fail to file

their own returns.   This is undoubtedly because the applicable

section 6501 period never begins to run for a nonfiling partner.

          h.   Conclusion

     Respondent carried out the unified examination of the

partnership that Congress had in mind when it enacted the TEFRA

partnership provisions.     As a result of that examination,

respondent determined that an adjustment was necessary and issued
                                - 30 -

a notice of final partnership administrative adjustment.     Since

respondent did not make any change in the gross income of the

partnership, the special rule of section 6229(c)(2) (substituting

6 years for 3 years in section 6229(a) on account of a

substantial omission of income from the partnership return) is of

no application.    Nevertheless, if respondent’s adjustments are

sustained, it appears that petitioner has made a substantial

omission of income from its corporate return, with the

consequence that (absent adequate disclosure) the section 6501

period of limitations for the assessment of any tax with respect

to petitioner is 6 years rather than 3 years.    See sec.

6501(e)(1)(A).    As discussed above, section 6501 provides the

period of limitations within which "the amount of any tax imposed

by this title shall be assessed”.    Sec. 6501(a).   Section 6501

contains no exception for deficiencies attributable to

partnership items.    Therefore, we shall not grant petitioner’s

motion to the extent it is based on the ground that section 6501

can have no possible application to this case.

          3.     FPAA Suspended the Section 6501 Period To
                 Assess Tax

          a.     Introduction

     Petitioner next claims that, even if the 6-year period

specified in section 6501(e)(1)(A) is applicable, the 6-year

period has expired.    Petitioner’s claim is based on the argument

that respondent’s issuance of the FPAA did not suspend the
                                - 31 -

running of the 6-year period.     We disagree with petitioner’s

analysis.

             b.   Facts

     Petitioner filed its 1990 Federal income tax return, Form

1120, U.S. Corporation Income Tax Return, on or about September

15, 1991.     On September 12, 1997, respondent issued the FPAA.

The FPAA was issued before the expiration of 6 years from the

date petitioner filed its corporate return.     On February 4, 1998,

in response to the FPAA, petitioner timely filed the petition in

this case.     The question we must answer is whether the issuance

of the FPAA and the filing of the petition suspended the running

of the 6-year period of limitations contained in section

6501(e).27

     Section 6229(d) provides:

          SEC. 6229(d). Suspension When Secretary Makes
     Administrative Adjustment.--If notice of a final
     partnership administrative adjustment with respect to
     any taxable year is mailed to the tax matters partner,
     the running of the period specified in subsection (a)
     (as modified by other provisions of this section) shall
     be suspended--

                  (1) for the period during which an action may
             be brought under section 6226 (and, if a petition
             is filed under section 6226 with respect to such
             administrative adjustment, until the decision of
             the court becomes final), and


     27
      The FPAA was too late to suspend the minimum 3-year period
provided for in sec. 6229(a). That period ran on either Sept. 15
or 17, 1994. See discussion supra p. 7 & note 10. It could not
thereafter be suspended by the FPAA, which was issued on Sept.
12, 1997. See sec. 6229(d).
                                 - 32 -

                  (2) for 1 year thereafter.   [Emphasis
             added.28]

     The question we must answer is what is “the period specified

in subsection (a)”, the running of which is suspended?

Subsection (a) initially refers to “the period for assessing any

tax * * * which is attributable to any partnership item”.     As we

have previously held, this is generally the period prescribed in

section 6501.     Subsection (a) then provides that the above-

referenced period for assessing any tax “shall not expire before”

3 years after the later of the partnership return due date or

filing date.     As previously explained, this “minimum period” may

be greater or less than the period provided for in section 6501.

If the reference in section 6229(d) to “the period specified in

subsection (a)” means only the “minimum period”, an FPAA issued

after the “minimum period”, but while the section 6501 period is

still open, would not suspend the running of the section 6501

period.     If, on the other hand, the “period specified in

subsection (a)” means “the period for assessing any tax * * *


     28
          Sec. 6229(d)(1) was amended by TRA sec. 1233(a), 111 Stat.
1023.      Prior to amendment, sec. 6229(d)(1) read as follows:

          (1) for the period during which an action may be
     brought under section 6226 (and, if an action with
     respect to such administrative adjustment is brought
     during such period, until the decision of the court in
     such action becomes final), and

The amendment applies to partnership tax years with respect to
which the period under Code sec. 6229 for assessing tax has not
expired on or before Aug. 5, 1997.
                              - 33 -

which is attributable to any partnership item” (which period

“shall not expire before” 3 years after the later of the filing

of the partnership return or its due date), the issuance of the

FPAA and the subsequent partnership-level litigation would

suspend the running of any applicable period of limitations.    We

think that the latter interpretation is the correct one.   We

recognize that the disputed statutory language is not a model of

clarity.   Thus, in arriving at our conclusion that section

6229(d) suspends the running of any applicable period of

limitations when an FPAA is issued and during the pendency of

litigation in this Court, we again apply the well-established

rule stated by the Supreme Court in Badaracco v. Commissioner,

464 U.S. at 391-392:

     “Statutes of limitation sought to be applied to bar
     rights of the Government, must receive a strict
     construction in favor of the Government.” E.I. du Pont
     de Nemours & Co. v. Davis, 264 U.S. 456, 462 (1924).
     See also Lucas v. Pilliod Lumber Co., 281 U.S. 245, 249
     (1930). More recently, Judge Roney, in speaking for
     the former Fifth Circuit, has observed that
     “limitations statutes barring the collection of taxes
     otherwise due and unpaid are strictly construed in
     favor of the Government.” Lucia v. United States, 474
     F.2d 565, 570 (1973).[29]

     Our interpretation of section 6229(d) conforms to the

general statutory scheme for allowing taxpayers to contest the


     29
      See also Colestock v. Commissioner, 102 T.C. 380, 387
(1994), and Fehlhaber v. Commissioner, 94 T.C. 863, 868 (1990),
affd. 954 F.2d 653 (11th Cir. 1992), in which we applied this
rule when interpreting provisions of the statute of limitations
in sec. 6501.
                              - 34 -

Commissioner’s income tax determinations prior to assessment and

collection.   The general statutory scheme provides that no

assessment of a deficiency can be made prior to notice and an

opportunity to petition this Court.     See sec. 6213.    While issues

are pending before this Court, the period of limitations for

assessment is generally suspended.     Section 6503 provides that

the mailing of a valid deficiency notice suspends the running of

the period of limitations with respect to the tax liability that

is the subject of such notice.   In the event a petition is filed

with this Court, section 6503(a) also suspends the running of the

period of limitations until 60 days after the decision of this

Court becomes final.   This protects the Government against the

running of the period of limitations during the time when it is

statutorily prohibited from assessing any deficiency.

     The TEFRA partnership provisions, which provide for

partnership issues to be determined at the partnership level,

parallel the deficiency procedures to the extent that notice (the

FPAA) and the right to petition this Court must generally be

given prior to making any assessments attributable to partnership

items or affected items.   See secs. 6225 and 6226.      Section

6229(d) is the partnership-level counterpart to section 6503 in

that it provides for the suspension of the running of the period

of limitations during the period in which the Government is

prohibited from assessing tax attributable to a partnership item
                              - 35 -

or affected item.   Our interpretation of section 6229(d), as

suspending the running of any open period of limitations

applicable to petitioner on the date the FPAA was issued, is

consistent with the overall statutory scheme of the Code which is

to suspend the running of the applicable period of limitations

for making assessments during the time when taxpayers are

permitted to contest the Government’s determination and during

which time the Government is statutorily prohibited from making

an assessment.   Were we to interpret section 6229(d) as only

suspending the minimum period, i.e., 3 years from the later of

the due date or filing date of the partnership return, the

issuance of an FPAA would not suspend the running of the

applicable period of limitations under section 6501.   This would

result in the running and expiration of the applicable period of

limitations during the course of proceedings to resolve the

underlying dispute.   We think it highly unlikely that Congress

intended to create a preassessment procedure for partners to

contest partnership determinations, during which the Government

is prohibited from making related assessments, while at the same

time allowing the applicable period of limitations to expire

during the time those preassessment procedures are being

utilized.

     Our conclusion that the reference in section 6229(d), to the

“period specified in subsection (a)”, refers to the “period for
                                - 36 -

assessing any tax imposed by subtitle A”30 and not just the

minimum period included in subsection (a) is also supported by

the same interpretation that is required to achieve the

congressional purpose in section 6229(b)(3), which provides:

           SEC. 6229(b).    Extension by Agreement.--

           *      *        *      *       *      *      *

                (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. [Emphasis added.31]

     As previously explained, the above-quoted provision was

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.    Thus, the conference committee report for TEFRA states:

“An agreement under section 6501(c)(4) (relating to agreements to

extend the period for assessment) will apply to partnership items

only if it expressly so provides.”       H. Conf. Rept. 97-760, at 606

(1982), 1982-2 C.B. 600, 665.     In 2 Willis et al., Partnership



     30
      The tax referred to in sec. 6229(a) is restricted to tax
“attributable to any partnership item (or affected item)”. Sec.
6229(a).
     31
      TRA sec. 1233(c), 111 Stat. 1023-1024, amended Code sec.
6229(b). Prior to the amendment, sec. 6229(b)(3) was sec.
6229(b)(2).
                               - 37 -

Taxation, par. 20.08[2][a] (6th ed. 1999), it is explained:     “A

standard extension of the limitations period under §6501(c)(4)

(Treasury Form 872) with respect to nonpartnership items does not

apply to partnership and affected items unless it specifically so

provides.”   See also Cohen & Millman, “The Statute of Limitations

for Partners”, 5 J. Psp. Taxn. 256, 257 (1988).    However, if the

language in section 6229(b)(3) requiring an express provision for

partnership items is interpreted to apply only when extending the

minimum period of limitations in subsection (a), the legislative

purpose would be thwarted.   Such a narrow interpretation of “the

period described in subsection (a)” would mean that the

specificity required in an extension agreement referred to in

section 6229(b)(3) was required only to extend the minimum

period.   There would be no such requirement to refer explicitly

to partnership-related assessments when extending the regular

periods of limitations provided in section 6501.   But this is

clearly not what Congress intended by section 6229(b).    The only

way to achieve the legislative objective is to interpret the

reference in section 6229(b)(3) consistently with the way we

interpreted section 6229(d).   Thus, the reference in section

6229(b)(3) to “the period described in subsection (a)” refers to
                              - 38 -

the “period for assessing any tax imposed by subtitle A” rather

than just the minimum period language.32

     Interpreting “the period specified in subsection (a)” in

section 6229(d) as referring only to the minimum period for

making assessments would produce additional anomalous results.

For example, suppose that during the examination of a

partnership, and within 3 years of the filing of the partnership

return, the Commissioner and most of the partners agree to extend

the period of limitations as to partnership items.   The only

partners who do not extend the period of limitations are those

who failed to file individual returns and could not be located.

More than 3 years after the filing of the partnership return and

due date, but prior to the end of the period as extended, an FPAA

is issued.   Under any possible interpretation of section 6229(d),

the FPAA suspends the period of limitations for assessments

attributable to any partnership item (or affected item) for the

partners who signed extensions.   Under section 6501(c)(3), the

tax for those partners who did not file individual returns can be

assessed at any time.   However, if the partners who failed to

file timely individual returns, file their individual returns

after a partnership-level proceeding is commenced, the normal 3-



     32
      We recognize that sec. 6229(d) uses the word “specified”
and sec. 6229(b) uses the word “described” when referring to
subsection (a). We discern no difference in meaning between the
two words in this context.
                              - 39 -

year period of limitations begins to run when those delinquent

returns are filed.   See Badaracco v. Commissioner, 464 U.S. 386,

401 (1984).   If the issuance of the FPAA and the commencement of

the partnership action do not suspend the running of the normal

section 6501(a) 3-year period of limitations for the partners who

failed to timely file, and the decision of the Court does not

become final within 3 years of the date they filed delinquent

returns, the statute of limitations will bar assessment against

the partners who failed to timely file individual returns, while

the period of limitations will remain open for partners who filed

timely returns.   Again, it is highly improbable that Congress

could have intended such a result.33


     33
      In Fehlhaber v. Commissioner, 94 T.C. 863, 870 (1990), we
used a similar analysis in interpreting sec. 6501 stating:

          As we see it, the rationale of the Court of
     Appeals could lead to unintended and adverse
     consequences for taxpayers and the Internal Revenue
     Service. For example, if the information return rather
     than the shareholder’s return starts the running of the
     statutory period for assessment, then the time would
     expire 3 years after the filing of the information
     return even if the shareholder did not file a return.
     While section 6501(c)(3) extends the assessment period
     indefinitely as to taxpayers who fail to file returns,
     the effect of the Ninth Circuit’s decision would be to
     engraft an exception for taxpayers who are shareholders
     of S corporations. Those taxpayers would have a 3-year
     period with respect to flow-through items--a result
     clearly incorrect as a matter of law, policy, and
     judicial prerogative. Cf. Badaracco v. Commissioner,
     464 U.S. at 401. * * *

See also Badaracco v. Commissioner, 464 U.S. 386, 395-396 (1984),
                                                    (continued...)
                              - 40 -

     Our conclusion that the period of limitations referred to in

section 6229(d) is the period of limitations that remains open

when the FPAA is issued, rather than just the minimum period, is

also consistent with the language of the conference committee

report for TEFRA, which states:

          The period for assessment is suspended upon
     mailing of a notice of FPAA until the expiration of the
     period during which a petition for judicial review may
     be filed by any partner (or, if an action is brought
     during such period, until the decision of the court has
     become final) and for one year thereafter. [H. Conf.
     Rept. 97-760, supra at 606, 1982-2 C.B. at 665-666;
     emphasis added.]

     Based on all the foregoing considerations, we believe that

our interpretation of section 6229(d) is the more reasonable one;

especially in light of the previously mentioned admonition of the

Supreme Court that statutes of limitations are to be strictly

construed in favor of the Government.34


     33
      (...continued)
where in interpreting the statute of limitations in sec. 6501,
the Court stated:

     We agree with the conclusion of the Court of Appeals in
     the instant cases that Congress could not have intended
     to “create a situation in which persons who committed
     willful, deliberate fraud would be in a better
     position” than those who understated their income
     inadvertently and without fraud. * * *

     34
      Recently, the Supreme Court again had occasion to comment
on its approach to construing statutes of limitations when it
stated:

          Even if it could credibly be argued that §6501(a)
                                                    (continued...)
                                - 41 -

          4.     Adequate Disclosure

     Finally, petitioner argues that the 6-year period is

inapplicable because petitioner’s return adequately disclosed any

omitted income.    See sec. 6501(e)(1)(A)(ii).   Adequate disclosure

requires that the return provides a "clue to the existence of the

omitted item."     Colony, Inc. v. Commissioner, 357 U.S. 28, 36

(1958).   The "clue" does not have to be a detailed revelation of

every fact underlying the transaction, but must be sufficiently

detailed to apprise respondent of the nature and amount of the

transaction.   See Estate of Fry v. Commissioner, 88 T.C. 1020,

1023 (1987); Quick Trust v. Commissioner, 54 T.C. 1336, 1347

(1970), affd. 444 F.2d 90 (8th Cir. 1971).    The parties disagree

over whether the return provides a clue.    Indeed the parties

disagree over which documents comprise the "return".35    Such


     34
      (...continued)
     is ambiguous because it does not expressly indicate how
     it is to be applied to S corporations and their
     stockholders, the Commissioner’s construction of the
     section is a reasonable one to say the least, and we
     should accept it absent convincing grounds for
     rejecting it. As noted in Badaracco v. Commissioner,
     464 U.S. 386 (1984), “‘limitations statutes barring the
     collection of taxes otherwise due and unpaid are
     strictly construed in favor of the Government.’” Id.,
     at 392 (quoting Lucia v. United States, 474 F.2d 565,
     570 (CA5 1973)). [Bufferd v. Commissioner, 506 U.S.
     523, 527-528 n.6 (1993).]
     35
      As a general rule, information contained in a partnership
return will be taken into consideration in determining whether an
omitted item was adequately disclosed on the return of a partner
for purposes of sec. 6501(e)(1)(A)(ii). See Quick Trust v.
                                                    (continued...)
                                 - 42 -

disagreements present genuine issues of material fact, making a

summary judgment improper.      See Rule 121(b).

III.    Conclusion

       The motion shall be denied.    To reflect the foregoing,



                                            An appropriate order

                                       will be issued.



       Reviewed by the Court.

     WELLS, COHEN, CHIECHI, VASQUEZ, GALE, THORNTON, and MARVEL,
JJ., agree with this majority opinion.




       35
       (...continued)
Commissioner, 54 T.C. 1336, 1346 (1970), affd. 444 F.2d 90 (8th
Cir. 1971). Respondent's position in the related case, see GAF
v. Commissioner, 114 T.C. ___ (2000), includes, among other
arguments, the argument that certain trust returns necessary to
petitioner’s partnership return disclosure argument were never
filed.
                              - 43 -

      HALPERN, J., concurring in part and dissenting in part:

I.   Introduction

      I agree with the majority’s analysis of the relationship

between sections 6229(a) and 6501 and its conclusions that

(1) section 6229 and section 6501 provide alternative periods for

the assessment of any tax attributable to partnership items and

affected items and (2) section 6229(a) provides a 3-year minimum

period (the 3-year minimum period) for such assessments.    I also

agree with the majority that the question of whether there was

adequate disclosure of any omitted income, which would negate the

application of the 6-year limitations period provided by section

6501(e)(1)(A) (the 6-year period), raises genuine issues of

material fact, making summary judgment improper.   I do not agree

with the majority that respondent’s issuance of a notice of final

partnership administrative adjustment (FPAA) on September 12,

1997, 3 days prior to the expiration of the 6-year period

(assuming that it does, in fact, apply in this case) suspended

the running of such limitations period pursuant to section

6229(d).   I concur, however, with the result reached by the

majority (that the running of the 6-year period was suspended on

September 12, 1997) because of the concurrent issuance of a

notice of deficiency under section 6212(a).1


      1
      Without qualification, Judges Parr and Foley dissent from
the majority’s opinion. They do not distinguish between the
                                                    (continued...)
                              - 44 -

II.   Dispute With the Majority



      Section 6229(d) provides that, upon the mailing of an FPAA

to the tax matters partner, "the running of the period specified

in subsection (a) * * * shall be suspended".   On the facts of

this case, there are three candidates for “the period specified

in subsection (a)” (the period specified in subsection (a)).


      1
      (...continued)
majority’s holdings that (1) with respect to the assessment of
deficiencies attributable to partnership items and affected
items, sec. 6229(a) provides an alternative, minimum period of
limitations to the period set forth in sec. 6501(a), and (2) the
Sept. 12, 1997, notice of final partnership administrative
adjustment suspended the running of the 6-year period (assuming
it is applicable). I agree with the majority’s first holding.
With respect to that holding, Judges Parr and Foley, apparently
believing that the statute is clear on its face, have failed to
answer the majority’s analysis that sec. 6501(a) unequivocally
provides the period of limitations within which the amount of any
tax shall be assessed and, with respect to tax attributable to
partnership items and affected items, sec. 6229(a) merely
provides that such sec. 6501 period shall not expire “before” a
certain date.

     Moreover, sec. 6222(a) provides that a partner shall, on the
partner’s return, treat a partnership item consistently with the
treatment of that item on the partnership’s return (the
consistency requirement). Failure to comply with the consistency
requirement opens the partner to the immediate assessment of any
deficiency attributable to such inconsistency. See sec. 6222(c).
Failure to comply with the consistency requirement is not taken
into account under sec. 6229. Therefore, if, as Judges Parr and
Foley imply, sec. 6229 provides the exclusive period of
limitations for assessing tax with respect to partnership items
and affected items, inconsistent treatment of partnership items
provides no basis for an extended period of limitations under
sec. 6501. It is difficult to believe that Congress intended
such a result in the case of a fraudulent inconsistency or an
inconsistency resulting in a substantial omission of income. See
sec. 6501(c)(1), (e)(1).
                              - 45 -

They are:   (1) The 3-year minimum period, which ended 3 years

after the partnership return was filed, (2) the 6-year period,

which ended 6 years after petitioner’s return was filed, and

(3) the period that ended on the later to end of the 3-year

minimum period and the 6-year period (the later-to-end period).

The majority holds that the period specified in subsection (a) is

the later-to-end period.   I believe that it is the 3-year minimum

period.   That dispute would be academic, however, given the facts

of this case, if the majority would adopt my analysis in the

companion case, GAF Corp. & Subs. v. Commissioner, 114 T.C. __

(2000), and overrule Maxwell v. Commissioner, 87 T.C. 783 (1986),

and the cases that have followed it, to the extent that they hold

that we lack subject matter jurisdiction to redetermine a

deficiency in tax attributable to affected items until the

related partnership proceeding (if any) is completed.   If the

majority were to do so, then it would be compelled to hold that

the notice of deficiency issued in GAF Corp., not the FPAA, was

valid to suspend the 6-year period, petitioner’s motion for

summary judgment could still be denied, and this case could still

proceed to determine whether, in fact, there was a 6-year period

applicable under section 6501(e)(1)(A) and, if so, whether

respondent’s proposed adjustments should be sustained on the

merits.
                                - 46 -

III.    Discussion

       A.   Introduction

       We must determine what Congress intended by its reference,

in section 6229(d), to the period specified in subsection (a).      I

believe that both technical and policy considerations lead to the

conclusion that it is the 3-year minimum period and not, as the

majority holds, the later-to-end period.

       B.   Section 6229(a) and (d)

       In pertinent part, section 6229(a) provides:

       [T]he 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).

In pertinent part, section 6229(d) provides that, if an FPAA is

mailed to the tax matters partner, the running of the period

specified in subsection (a) shall be suspended.     The verb "to

specify" means "to state explicitly or in detail".     The American

Heritage Dictionary 1730 (3d ed. 1992).     The only period

explicitly set forth in subsection (a) of section 6229 is the

3-year minimum period.     Indeed, the sole purpose of section

6229(a) is to "specify" a 3-year minimum period as an alternative

to the section 6501 period under circumstances in which the
                                - 47 -

latter expires sooner.     The language of the statute (section

6229(d)), thus, plainly, refers to the 3-year minimum period.

     C. Notice of Deficiency Required To Suspend the Section
  6501 Period

     I do not believe that, in adding the TEFRA partnership

provisions,2    Congress changed the general rule that, in order to

suspend the section 6501 period particular to any partner,

respondent must mail to that partner a notice of deficiency.      See

sec. 6503(a)(1).

         The 3-year minimum period is a minimum period common to all

of the partners.    Partner-specific factors are irrelevant to a

defense based on the expiration of the 3-year minimum period.

Expiration of the 3-year minimum period is determined solely with

reference to the filing of the partnership return.     Any partner

can defend for all the partners on the basis that the 3-year

minimum period has expired.     In other words, if a defense based

on the expiration of the 3-year minimum period is raised in a

partnership proceeding, any disposition of that defense is

conclusive for all of the parties to the proceeding.

     The same cannot be said with respect to the later-to-end

period.     When the later-to-end period is the period of



     2
      Sec. 402(a) of the Tax Equity and Fiscal Responsibility Act
of 1982 (TEFRA), Pub. L. 97-248, 96 Stat. 324, 648, added
subchapter C to chapter 63, subtitle F of the Internal Revenue
Code (the TEFRA partnership provisions). The TEFRA partnership
provisions now comprise secs. 6221 through 6234.
                               - 48 -

limitations prescribed by section 6501 for the assessment and

collection of any tax (the section 6501 period), it is specific

to each partner.   Each partner is entitled to participate in the

partnership proceeding for the purpose of asserting a period of

limitations defense.    See sec. 6226(d)(1).   If the majority is

correct that an FPAA issued to the tax matters partner can

suspend each partner’s section 6501 period (with respect to

partnership items and affected items), then each partner who

believes that her section 6501 period had expired prior to the

issuance of the FPAA will be required to defend against the FPAA.

Indeed, unless all of the partners successfully raise a period of

limitations defense against the FPAA, I assume that respondent

would be entitled to continue the partnership action on the

theory that there is at least one partner whose section 6501

period is still open.

     The majority has painted itself into a corner by refusing to

reconsider Maxwell v. Commissioner, supra.     See GAF Corp. & Subs.

v. Commissioner, 114 T.C. __ (2000).    The majority does not agree

that the period specified in subsection (a) is the 3-year minimum

period because an FPAA issued thereafter would be ineffective to

suspend any partner’s unexpired section 6501 period.     Of course,

I agree with the majority that it is unlikely that Congress

intended to create a preassessment procedure for partners to

contest partnership determinations that could be manipulated to
                              - 49 -

frustrate, by delay, respondent’s ability to collect any tax.

Nevertheless, absent any extension of the 3-year minimum period,

once that period has expired, the unity of a single entity-level

period of limitations is at an end.    The partnership items will

still be determined in a unified partnership proceeding, but a

partner is a party to that proceeding only if the section 6501

period particular to that partner has not expired.   See sec.

6226(d)(1).   Section 6503(a)(1) specifically provides that the

running of the section 6501 period shall be suspended after the

mailing of a notice of deficiency under section 6212(a).     In

order for respondent to proceed against one or more partners, for

deficiencies attributable to partnership items or affected items,

beyond the 3-year minimum period, but within the partner’s

section 6501 period, respondent should directly notify such

partners of the partnership proceeding by notices of deficiency

issued pursuant to section 6212.3   Assuming that I am right that

Maxwell v. Commissioner, supra, is wrong, my approach presents a

technically more straightforward approach to the statute.4


     3
      I assume that respondent would make a preliminary
determination that the partners to whom he would send such
notices of deficiency do, indeed, have open sec. 6501 periods.
     4
      I recognize that the deficiency procedures provided for in
subchapter B, chapter 63, subtitle F of the Internal Revenue Code
(subchapter B), do not generally apply to the assessment and
collection of any computational adjustment resulting from a
partnership proceeding. See sec. 6230(a)(1). Unless subchapter
B applies, respondent may have no authority to send the notice of
                                                    (continued...)
                               - 50 -

     D.   Other Technical Considerations

     The majority reads the reference to “the period described in

subsection (a)” in paragraph (3) of section 6229(b) as a

reference to the later-to-end period.    Paragraph (1)(B) of that

same section contains the identical language:      “The period

described in subsection (a) * * * may be extended * * * (B) with

respect to all partners, by an agreement entered into by the

Secretary and the tax matters partner * * *, before the

expiration of such period.”    (Emphasis added.)   Because of the

interplay between sections 6229(b) and 6227(b);5 it does not make

sense to read section 6229(b)(1)(B) as referring to the later-to-

end period.   Section 6227(a)(1) generally provides a 3-year

period of limitations on the filing of administrative adjustment

requests (partnership refund claims).    If a section 6229(b)


     4
      (...continued)
deficiency contemplated in sec. 6212(a). Without such authority
(which, here, respondent apparently does have), the sending of
the notice of deficiency might not be effective under sec.
6503(a)(1) to suspend the sec. 6501 period. That may be an
appropriate result, however, since no partner-level determination
is required.
     5
      Sec. 6227(b) provides:

     SEC. 6227(b). Special rule in case of extension of
     period of limitations under section 6229.
       The period prescribed by subsection(a)(1) for filing
     of a request for an administrative adjustment shall be
     extended--
          (1) for the period within which an assessment may be
          made pursuant to an agreement (or any extension
          thereof) under section 6229(b), and
          (2) for 6 months thereafter.
                               - 51 -

agreement (which, by virtue of section 6227(b), operates to

extend the period for making partnership refund claims) may be

entered into at any time within the later-to-end period, and if

that period is 6 years, for example, it will be possible for such

section 6229(b) agreement to "extend" the 3-year limitations

period on partnership refund claims even after that period has

expired.    That possibility exists because section 6227(b), unlike

section 6511(c)(1) (which similarly extends the section 6511(a)

3-year limitations period on refund claims in general), is not

specifically limited in its application to circumstances in which

the agreement to extend the period for assessments was entered

into during the basic 3-year limitations period on filing refund

claims.    That apparent difference (which also makes no sense)

between sections 6227(b) and 6511(c)(1) disappears, however, if

we interpret the reference in section 6229(b)(1) to "[t]he period

described in subsection (a)" as a reference to the 3-year minimum

period.

     The majority’s concern that respondent could be caught off

guard if most, but not all, of the partners agree to extend the

statute of limitations during the 3-year minimum period (under

section 6229(b)(1)(A), I assume), is easily remedied if

respondent insists on an extension binding on all partners under

section 6229(b)(1)(B).   If no such extension is forthcoming,
                              - 52 -

respondent can issue an FPAA and suspend the 3-year minimum

period pursuant to section 6229(d).

     E.   Policy Considerations

     My interpretation of Congress’ intent based on the plain

language of section 6229(d) is consistent with what I believe

Congress intended to accomplish in enacting the TEFRA partnership

provisions.   In Chef’s Choice Produce, Ltd. v. Commissioner, 95

T.C. 388, 393 (1990), we described Congress’ intent as follows:

          In enacting the partnership audit and litigation
     procedures, Congress contemplated the use of a unified
     proceeding in which all items of partnership income,
     loss, deduction, or credit that affect each partner’s
     tax liability would be uniformly adjusted at the
     partnership level. * * *

We reached the following conclusion:   “In the litigation context,

Congress adopted the so-called ‘entity theory’ of partnership

jurisprudence.”   Id. (quoting Tempest Associates, Ltd. v.

Commissioner, 94 T.C. 794, 802 (1990)).

     My reading of the period specified in subsection (a) as the

3-year minimum period is consistent with the application of an

entity theory to the litigation of partnership items.   In my

view, policy dictates that the period for issuing an FPAA that

can automatically affect all of the partners should be the 3-year

minimum period, which is keyed to the partnership return.    Under

the majority’s interpretation of the period specified in

subsection (a) as the later-to-end period, the aggregation of

partners, each asserting an individual defense to the
                               - 53 -

administrative adjustment made by respondent to partnership

items, is antithetical to the unified nature of a partnership

proceeding.    I would interpret section 6229(d) consistently with

the entity theory of partnership reflected in Congress’

establishment of the 3-year minimum period.    I would, therefore,

interpret the phrase “the period specified in subsection (a)” as

a reference to the 3-year minimum period.

III.    Conclusion

       I believe that the better reading of section 6229(d) is that

the period specified in subsection (a) is the 3-year minimum

period.    I reach the same result as the majority, however,

because of my position in GAF Corp. & Subs. v. Commissioner,

supra.

       WHALEN and BEGHE, JJ., agree with this concurring opinion.
                                - 54 -



     PARR, J., dissenting:   I agree with Judge Foley's dissenting

opinion and write separately only to note that in addition to

misinterpreting the plain meaning of the words in the statute at

issue, the majority today reverses the position maintained by

this Court for more than a decade and disregards the policy

concerns that served as the impetus for the TEFRA partnership

provisions.

     Although the language of the statute leaves little doubt,

the answer to any question of whether section 6229(a) provides

the period of limitations for assessment with respect to

partnership items for any taxable year is made clear by the

legislative history of TEFRA.    The House conference report

provides:

          The period of assessment with respect to
     partnership items (or affected items) for any
     partnership taxable year shall not expire before 3
     years from the date of filing the partnership return
     or, if later, the last date prescribed for filing such
     return determined without extensions. [H. Conf. Rep.
     97-760, at 606 (1982), 1982-2 C.B. 600, 665.]

     Accordingly, it is clear that the "minimum period" provided

by section 6229(a) is no more than the time that is the later of

3 years from the date that the partnership return was filed or

the latest date prescribed for filing the partnership return

without extensions.   For instance, if a calendar year partnership

filed its return on February 15, and the last date prescribed for
                              - 55 -

filing its return without extensions is April 15, the period of

assessment does not expire until 3 years after April 15.

     The only exceptions to this rule are provided by statute for

the filing of a false partnership return, a substantial omission

of partnership income, no partnership return, or a partnership

return prepared by the Secretary under section 6020(b)(2).     See

sec. 6229(c)(1)-(4).   In addition a partner may extend the

section 6229(a) statute of limitations for himself, or the tax

matters partner may, with the agreement of the Secretary, extend

the statutory limitations period for all partners.   See sec.

6229(b)(1).   Therefore, the section 6229(a) period of limitations

is not extended by a partner's later expiring section 6501

limitation period.

     In holding that section 6229 provides nothing more than a

"minimum period" of limitations as an alternative to the section

6501 limitations period, the majority abandons our own precedent

that section 6229(a) establishes the limitations period for

assessment of partnership items.   See Wind Tech. Associates, III

v. Commissioner, 94 T.C. 787, 788 (1990) ("Section 6229(a)

provides generally for a 3-year period of limitations for the

assessment of tax attributable to partnership items.   * * *    The

running of the limitations period is suspended when an FPAA for

the taxable year is mailed to the tax matters partner." (citation

omitted.)); Barbados #7 Ltd. v. Commissioner, 92 T.C. 804, 808
                              - 56 -

(1989) ("Section 6229(a) provides for a 3-year limitation period

for the assessment of tax attributable to a partnership item.").

     Furthermore, in Roberts v. Commissioner, 94 T.C. 853, 857

(1990), the section 6229(a)limitations period had expired when

the FPAA's were issued, and we found that:

     Consequently, the tax treatment of all partnership
     items with respect to these partnerships is final in
     accordance with the tax returns filed by these
     partnerships. Clearly, there can be no partnership
     proceedings to adjust or modify the partnership items
     as reported * * * .[1]

     Sections 6229 and 6501 provide parallel but independent

statutes of limitation.   Section 6229(b)(2),2 which is the only

subsection of section 6229 that refers to section 6501, provides

that any agreement under section 6501(c)(4)3 shall apply with


     1
      See also 1 McKee et al., Federal Taxn. of Partnerships &
Partners, par. 9.07[6], at 9-204 n.1027 (3d ed. 1997) (once the
limitations period has run, the tax treatment of all partnership
items is final in accordance with the returns filed by the
partnership).

     Deficiency proceedings do apply, however, to the assessment
of affected items which require partnership level determinations
and to the assessment of partnership items that have become
nonpartnership items. See sec. 6230(a)(2)(A); Roberts v.
Commissioner, 94 T.C. 853, 859, 861 (1990).
     2
      The Taxpayer Relief Act of 1997, Pub. L. 105-34, sec.
1233(c), 111 Stat. 1023-1024, amended sec. 6229(b) by
redesignating par. (2) as par. (3) and by inserting after
paragraph (1) a new par. (2), effective for agreements entered
into after Aug. 5, 1997.
     3
      Sec. 6501(c)(4), titled Extension By Agreement, provides:

     Where, before expiration of the time prescribed in this
                                                    (continued...)
                              - 57 -

respect to the period described in subsection (a) only if the

agreement expressly provides that such agreement applies to tax

attributable to partnership items.

     Therefore, normal extensions of a partner's personal

limitations period pursuant to section 6501(c)(4) are not

applicable to extend the period of limitations with respect to

partnership items unless the agreement expressly so provides.

     This is because Congress intended TEFRA to provide uniform

treatment of partnership items to all the partners.   It is clear

that for this result to obtain, sections 6229 and 6501, while

parallel in their provisions, must be independent.4   Thus,


     3
      (...continued)
     section for the assessment of any tax imposed by this
     title, * * * , both the Secretary and the taxpayer have
     consented in writing to its assessment after such time,
     the tax may be assessed at any time prior to the
     expiration of the period agreed upon. * * *

     Sec. 6501(c)(4) provides only for the extension of the sec.
6501 limitations period. Therefore, if sec. 6501 were the
controlling statute of limitations for assessments attributable
to partnership items, a normal sec. 6501(c)(4) agreement would
extend the sec. 6229(a) period for assessment of partnership
items, which would make sec. 6229(b)(2) superfluous.
     4
      Furthermore, although it is not an issue in the instant
case, respondent asserts that if petitioner's view is accepted, a
non-filing partner would escape taxation on a properly reported
partnership item. Majority op. p. 29. However, there is no
limitation on assessing against a non-filer. See sec.
6501(c)(3). Therefore, a non-filing partner would gain no
immunity on a partnership item by way of section 6229, because if
the item was properly reported by the partnership there would be
no partnership-level issue and section 6229 would never come into
play.
                                                    (continued...)
                             - 58 -

treatment of one partner separate from the others requires a

special agreement by that partner.

     As the majority states, the intent of TEFRA is to provide a

unified proceeding that will result in consistent treatment of

partnership items to all partners:



     4
      (...continued)
     The separateness of a proceeding with respect to a partner
and a proceeding with respect to a partnership is evident from
the legislative history which provides:

          A judicial determination of a partner's income tax
     liability not resulting from a partnership proceeding
     will not bar any adjustment to such liability
     attributable to the treatment of partnership items
     pursuant to a proceeding under these rules. [H. Conf.
     Rept. 97-760, at 610 (1982), 1982-2 C.B. 600, 668.]

See also sec. 6222(c) (if the partner fails to notify the
Secretary of its inconsistent treatment of a partnership item,
the Secretary may make a computational adjustment to conform the
partnership item to the partnership return and may assess
immediately the tax deficiency arising from the adjustment); sec.
301.6222(a)-1T(c), Example (1), Temporary Income Tax Regs., 52
Fed. Reg. 6779 (Mar. 5, 1987) (if the partnership reports income
in one calendar year, the partners are required to report income
in that calendar year).

     However, if the partnership did not file a return, i.e., the
partnership is a non-filer, sec. 6229(c)(3) provides that any tax
attributable to a partnership item may be assessed at any time.
Again, note that the secs. 6501 and 6229 provide similar
remedies, but they do so separately.

     Implicit in sec. 6229(c) is that the sec. 6229 limitation
period controls the partner-level limitations period with respect
to partnership items. That is, if the partnership-level
limitations period has not expired, then even if the partner-
level limitations period has run, the Commissioner may assess the
tax that is attributable to any partnership item.
                             - 59 -

     Before TEFRA, adjustments with respect to partnership
     items were made to each partner's income tax return at
     the time (and if) that return was examined. * * * The
     tax writing committees explained the TEFRA partnership
     provisions as follows: "[T]he tax treatment of items
     of partnership income, loss, deductions, and credits
     will be determined at the partnership level in a
     unified partnership proceeding rather than in separate
     proceedings with the partners." * * * Thus, section
     6221 provides for the determination of all partnership
     items at the partnership level rather than at the
     partner level. [Majority op. pp. 11-12; citations
     omitted.]

     Despite its acknowledgment of the purpose of the TEFRA

partnership rules, the majority holds that if the partner's

personal limitations period has not expired, then the

partnership's limitations period is irrelevant with respect to

that partner so that the Commissioner may make a partnership-

level determination of a partnership item, which would apply to

only the partner with the unexpired personal limitations period.

This result is contrary to the statutory scheme and frustrates

the TEFRA goal to minimize inconsistent treatment of partners.

     In addition to providing inconsistent treatment of

partnership items, the majority's holding will complicate the

administration of the TEFRA statutes because it will cause

nonpartnership items to be adjudicated in TEFRA partnership-level

proceedings, which result is inconsistent with TEFRA policy.5


     5
      The separate treatment of partnership and nonpartnership
items in partnership proceedings is integral to the statutory
framework of TEFRA and reflects the intent of Congress. For
instance,
                                                    (continued...)
                             - 60 -

     For example, if the FPAA is issued after the 3-year period

of limitations provided in section 6229(a), and none of the

special rules of section 6229(c) apply, each partner will be

obligated separately to assert its own section 6501 statute of

limitations defense in the TEFRA partnership-level proceeding.

In this circumstance, each partner's proof will require the court

to adjudicate items that have no relevance to the partnership;

e.g., whether the partner filed a return, whether the partner

executed a valid section 6501(c)(4) extension that did not expire

before the FPAA was issued, whether the partner omitted from

gross income an amount (including nonpartnership income) properly




     5
      (...continued)

     Neither the Secretary nor the taxpayer will be
     permitted to raise nonpartnership items in the course
     of a partnership proceeding nor may partnership items,
     except to the extent they become nonpartnership items
     under the rules, be raised in proceedings relating to
     nonpartnership items of a partner.

          The separate statute of limitations applicable to
     nonpartnership items of a partner may have expired when
     the computational adjustment of a partner's tax
     liability attributable to a FPAA or final court
     decision is made. In such case neither the Secretary
     (to reduce a refund) nor a partner (to reduce an
     assessment) may raise nonpartnership items in
     determining the partner's tax liability resulting from
     such computational adjustment.   [H. Conf. Rept. 97-
     760, at 611 (1982), 1982-2 C.B. 600, 668.]

     See also Maxwell v. Commissioner, 87 T.C. 783, 788 (1986)
(Court cannot consider partnership items in a partner's personal
case or nonpartnership items in the partnership proceeding).
                              - 61 -

includable therein which is in excess of 25 percent of the amount

of gross income stated in the return, etc.

     In contrast, if section 6229 is the only assessment period

for TEFRA partnership items, the only relevant facts will be the

partnership-related facts.   This will result in adjustments in

the tax treatment of partnership items in one proceeding at the

partnership level, rather than in separate proceedings with the

partners.   Thus, interpreting section 6229(a) as it is written

and as Congress intended effects an entity approach that results

in minimizing the inconsistent and unfair treatment of the same

partnership item.

     Accordingly, I respectfully dissent.

     CHABOT and FOLEY, JJ., agree with this dissent.
                               - 62 -



      FOLEY, J., dissenting:   The majority highlights the

anomalous results, gaps in the application of the statutory

scheme, and tax policy concerns if section 6229(d) does not

suspend the section 6501 period of limitations.     If the statute

needs repair we are not charged with the responsibility of fixing

it.   See Resolution Trust Corp. v. Westgate Partners, Ltd., 937

F.2d 526, 531 (10th Cir. 1991)(stating that it is the function of

the legislative branch, not the judicial branch, to make the

laws).   The majority states that the statutory regime is

“distressingly complex” and “not a model of clarity”, yet

exacerbates this ostensible problem by forcing section 6501, an

inapplicable provision, into section 6229(a).     Where a statute is

clear on its face, we require unequivocal evidence of legislative

purpose before construing the statute so as to override the plain

meaning of the words used therein.      See Huntsberry v.

Commissioner, 83 T.C. 742, 747-748 (1984).     There is no such

evidence of legislative purpose.

      Section 6229(a) and (d) does not reference the section 6501

limitations period.   The “period specified in subsection (a)”,

referenced by subsection (d), is the 3-year period expiring on

the later of the date the partnership return is filed, or the

last day for filing such return.   The statute and legislative

history do not support the majority’s holding.
                              - 63 -

     In essence, the majority’s holding rests on the Supreme

Court’s pronouncement that a statute of limitations receives

strict construction in favor of the Government.   See E.I. DuPont

De Nemours & Co. v. Davis, 264 U.S. 456, 462 (1924).   Strict

construction is a “close or rigid reading and interpretation of a

law” and “refuses to expand the law by implications or equitable

considerations”.   Black’s Law Dictionary 1422 (6th ed. 1990).

The majority, however, stretches the applicability of the statute

to ensure that the Government prevails.   That is reconstruction,

not strict construction.   Accordingly, I respectfully dissent.

     CHABOT and PARR, JJ., agree with this dissent.
