                         131 T.C. No. 14



                     UNITED STATES TAX COURT



  PCMG TRADING PARTNERS XX, L.P., DAVID BOYER, DONALD DEFOSSET,
  JR., RICHARD M. KELLEHER, MICHAEL ROWNY AND JOHN A. MCMULLEN,
PARTNERS OTHER THAN THE TAX MATTERS PARTNER, ET AL.,1 Petitioners
                                v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 5078-08, 5149-08,     Filed December 11, 2008.
                 5150-08, 5151-08,
                 5152-08, 5153-08,
                 5154-08.




     1
       Cases of the following petitioners are consolidated
herewith: PCMG Trading Partners XX, L.P., David Boyer, A Partner
Other Than the Tax Matters Partner, docket No. 5149-08; PCMG
Trading Partners XX, L.P., Donald DeFossett, Jr., A Partner Other
Than the Tax Matters Partner, docket No. 5150-08; PCMG Trading
Partners XX, L.P., Richard M. Kelleher, A Partner Other Than the
Tax Matters Partner, docket No. 5151-08; PCMG Trading Partners
XX, L.P., John A. McMullen, A Partner Other Than the Tax Matters
Partner, docket No. 5152-08; PCMG Trading Partners XX, L.P.,
Michael Rowny, A Partner Other Than the Tax Matters Partner,
docket No. 5153-08; and PCMG Trading Partners XX, L.P., PCMG
Trading Fund XX, LLC., A Partner Other Than the Tax Matters
Partner, docket No. 5154-08.
                               - 2 -

          On Feb. 28, 2008, five indirect partners filed a
     petition pursuant to sec. 6226(b)(1), I.R.C., as
     members of a 5-percent group challenging adjustments to
     partnership items in the notice of final partnership
     administrative adjustment (FPAA) and asserting that the
     period of limitations on assessments had expired. On
     Feb. 29, 2008, six petitions regarding the same FPAA
     were filed, one by the pass-thru partner through which
     the five indirect partners held their interests in the
     partnership and one by each of the same individual
     indirect partners who filed the initial petition on
     Feb. 28, 2008. The five petitions filed by the
     individual indirect partners purport to be filed
     pursuant to sec. 6226(d)(1), I.R.C., solely to assert
     that the period of limitations for assessment has
     expired as to each of them.

          Held: The initial petition filed by the five
     indirect partners on Feb. 28, 2008, as members of a 5-
     percent group was valid under sec. 6226(b)(1), I.R.C.,
     and must go forward pursuant to sec. 6226(b)(2), I.R.C.
     Sec. 6226(b)(4), I.R.C., provides that subsequent
     actions regarding the same FPAA must be dismissed.
     Sec. 6226(d)(1), I.R.C., which allows a partner to file
     a petition solely for the purpose of asserting that the
     period of limitations on assessments has expired as to
     him, does not override the provisions of sec.
     6226(b)(2) and (4), I.R.C. The six petitions filed on
     Feb. 29, 2008, must be dismissed for lack of
     jurisdiction pursuant to sec. 6226(b)(4), I.R.C.


     N. Jerold Cohen and Thomas A. Cullinan, for petitioners.

     Bonnie L. Cameron, for respondent.


                              OPINION


     RUWE, Judge:   These seven cases were consolidated for

purposes of considering respondent’s motions to dismiss the six

cases bearing docket Nos. 5149-08, 5150-08, 5151-08, 5152-08,
                               - 3 -

5153-08, and 5154-08, for lack of jurisdiction pursuant to

section 6226(b)(2) and (4).2

                            Background

     On October 3, 2007, pursuant to section 6223(a)(2),

respondent issued a notice of final partnership administrative

adjustment (FPAA) to the Private Capital Management Group,

L.L.C., the tax matters partner (TMP) for PCMG Trading Partners

XX, L.P. (the partnership), for the taxable years 1999 and 2000.3

On the same date respondent also sent a copy of the FPAA to PCMG

Trading Fund XX, LLC (Fund), which was a “notice partner” of the

partnership.   See sec. 6231(a)(8).    Fund was also a “pass-thru

partner.”   See sec. 6231(a)(9).   David Boyer, Donald DeFossett,

Jr., Richard M. Kelleher, Michael Rowny, and John A. McMullen

were members of Fund and as such were indirect partners of the

partnership.   See sec. 6231(a)(10).    None of these individual

indirect partners was a notice partner.




     2
       Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended.
     3
       Attached to the seven petitions are copies of two
different FPAAs, both issued to the TMP on Oct. 3, 2007. The
FPAA referred to in this Opinion pertains to tax years 1999 and
2000. The other FPAA pertains only to tax year 1999, contains no
adjustments, and appears to be a partial duplication of the FPAA
for 1999 and 2000. Petitioners dispute the proposed adjustments
to both tax years, and in the motions under consideration and the
responses thereto the parties refer to a single FPAA covering
both years; we do likewise.
                               - 4 -

     Pursuant to section 6226(a), the TMP has 90 days from the

mailing of the FPAA to file a petition for readjustment of

partnership items.   The TMP did not file a petition.    Pursuant to

section 6226(b)(1), if the TMP does not file a timely petition,

any notice partner and any 5-percent group may file a petition

for readjustment of partnership items within 60 days after the

close of the 90-day period described in section 6226(a).     Under

section 6231(a)(11), a 5-percent group is a group of partners who

had aggregate profits interests in the partnership of 5 percent

or more for the partnership’s taxable years at issue.

     On February 28, 2008, David Boyer, Donald DeFossett, Jr.,

Richard M. Kelleher, Michael Rowny, and John A. McMullen filed a

single petition for readjustment of partnership items as a 5-

percent group (docket No. 5078-08).    The aggregate profits

interests of these individual indirect partners for the 1999 and

2000 taxable years exceeded 5 percent.    The petition filed by

members of the 5-percent group was filed within the 60-day period

described in section 6226(b)(1).

     On the following day, February 29, 2008, Fund, as a notice

partner, filed a petition for readjustment of partnership items

with respect to the same FPAA (docket No. 5154-08).     Also on

February 29, 2008, each of the aforementioned individual indirect

partners filed a separate petition with respect to the same FPAA

(docket Nos. 5149-08, 5150-08, 5151-08, 5152-08, and 5153-08)
                              - 5 -

asserting that the period of limitations for assessing any tax

attributable to partnership items had expired as to each of them.

The statute of limitations issue raised in each of the five

petitions filed by the individual indirect partners had also been

raised in the petition filed by the 5-percent group and in the

petition filed by Fund.

                           Discussion

     Respondent argues that the petition filed by the 5-percent

group (docket No. 5078-08) on February 28, 2008, was a valid

petition that gives this Court jurisdiction over the partnership

items and statute of limitations issues and that the six

petitions filed the following day are simply duplications that

must be dismissed for lack of jurisdiction pursuant to section

6226(b)(2) and (4).

     Petitioners4 agree that the first petition by the 5-percent

group was valid for jurisdictional purposes but state that the

subsequent six petitions were filed as a “backup” because of

uncertainty about whether jurisdiction over the petition filed by

the 5-percent group will be upheld.   Petitioners also argue that

the five individual indirect partners each have a right to file

individual petitions pursuant to section 6226(d)(1) even if the

petition filed by the 5-percent group is held to be valid.

     4
       Unless otherwise noted, we will refer to all petitioners
collectively since they share counsel and have collectively made
the same arguments.
                                 - 6 -

Petitioners ask us to deny respondent’s motions to dismiss.

Petitioners also moved for consolidation of the seven cases,

which respondent opposes.

      It is incumbent on us to resolve the various jurisdictional

issues raised by the parties.     As we recently stated:

           This Court can proceed in a case only if it has
      jurisdiction, and either party, or the Court sua
      sponte, can question jurisdiction at any time. Estate
      of Young v. Commissioner, 81 T.C. 879, 880-881 (1983).
      We have jurisdiction to determine whether we have
      jurisdiction. Brannon’s of Shawnee, Inc. v.
      Commissioner, 69 T.C. 999, 1002 (1978). As we stated
      in Wheeler’s Peachtree Pharmacy, Inc. v. Commissioner,
      35 T.C. 177, 179 (1960): “[Q]uestions of jurisdiction
      are fundamental and whenever it appears that this Court
      may not have jurisdiction to entertain the proceeding
      that question must be decided.” [Stewart v.
      Commissioner, 127 T.C. 109, 112 (2006).]

I.   Validity of the First Petition by the 5-Percent Group

      Section 6226(b)(1) provides:

           SEC. 6226(b).    Petition by Partner Other Than Tax
      Matters Partner.--

                  (1) In general.--If the tax matters
             partner does not file a readjustment petition
             under subsection (a) with respect to any
             final partnership administrative adjustment,
             any notice partner (and any 5-percent group)
             may, within 60 days after the close of the
             90-day period set forth in subsection (a),
             file a petition for a readjustment of the
             partnership items for the taxable year
             involved with any of the courts described in
             subsection (a).[5]




      5
          This Court is one of the courts described in sec. 6226(a).
                                   - 7 -

     A 5-percent group is defined in section 6231(a)(11) as “a

group of partners who for the partnership taxable year involved

had profits interests which aggregated 5 percent or more.”      “The

term ‘partner’ means--(A) a partner in the partnership, and (B)

any other person whose income tax liability under subtitle A is

determined in whole or in part by taking into account directly or

indirectly partnership items of the partnership.”      Sec.

6231(a)(2).    “The term ‘indirect partner’ means a person holding

an interest in a partnership through 1 or more pass-thru

partners.”    Sec. 6231(a)(10).6    We have held that an indirect

partner is deemed a partner under section 6231(a)(2)(B).      Dionne

v. Commissioner, T.C. Memo. 1993-117.      On the basis of these

definitions, we conclude that a 5-percent group entitled to file

a petition under section 6226(b)(1) can be made up by indirect

partners.    See also section 301.6231(d)-1, Proced. & Admin.

Regs., which prescribes timing rules for determining profits

interests of indirect partners for purposes of qualifying as a 5-

percent group.

     It is undisputed that each of the individuals who filed the

first petition as a 5-percent group (docket No. 5078-08) was an

indirect partner in the partnership who held an interest in the

     6
       “The term ‘pass-thru partner’ means a partnership, estate,
trust, S corporation, nominee, or other similar person through
whom other persons hold an interest in the partnership with
respect to which proceedings under this subchapter are
conducted.” Sec. 6231(a)(9).
                               - 8 -

partnership through Fund, which was a pass-thru partner.     As

such, these five individuals were also “partners” within the

meaning of section 6231(a)(2)(B) who held profits interests which

aggregated 5 percent or more and therefore qualified as a 5-

percent group under section 6231(a)(11).

     The only “fly in the ointment” is that only one reported

case cited by either party directly supports the proposition that

indirect partners may form a 5-percent group:    Third

Dividend/Dardanos Associates v. Commissioner, 88 F.3d 821 (9th

Cir. 1996), revg. T.C. Memo. 1994-412.   In Third Dividend, a

notice partner7 which was also a pass-thru partner filed a

petition after it had filed for bankruptcy and after it had been

notified that it was no longer a party to the partnership

proceedings because its partnership items had been converted to

nonpartnership items.   See sec. 6231(c).   On the following day,

two indirect partners who held aggregate profits interests in the

partnership of more than 5 percent through the pass-thru partner

also filed a petition with respect to the same FPAA.     This Court

dismissed the first petition on the ground that the pass-thru

partner’s bankruptcy disqualified it from filing a petition and

from entitlement to further notice in the partnership proceeding.


     7
       Sec. 6231(a)(8) provides that “The term ‘notice partner’
means a partner who, at the time in question, would be entitled
to notice under subsection (a) of section 6223 (determined
without regard to subsections (b)(2) and (e)(1)(B) thereof).”
                                - 9 -

Because the pass-thru partner was not entitled to notice, the

link of notice to the indirect partners had also been cut.    We

held that because the link of notice had been broken, the

partnership items of the indirect partners had converted to

nonpartnership items.    As a result, we held that the Court lacked

jurisdiction over the petition filed by the indirect partners.

The Court of Appeals for the Ninth Circuit reversed, holding that

the indirect partners qualified as a 5-percent group that was

entitled to file a petition regardless of the bankruptcy of the

pass-thru partner or whether the link of notice to them had been

cut.

       The instant case does not involve any bankruptcy or notice

issues and is therefore distinguishable from Third Dividend.

However, putting those issues aside, we agree with the holding of

the Court of Appeals for the Ninth Circuit that this Court has

jurisdiction over a timely petition filed by members of a 5-

percent group composed of indirect partners.    Therefore, we hold

that this Court has jurisdiction over the petition filed by the

members of the 5-percent group in docket No. 5078-08.

II.    Dismissal of Subsequent Petitions

       As previously stated, section 6226(b)(1) sets forth our

jurisdiction over petitions for readjustment of partnership items
                               - 10 -

filed by notice partners and 5-percent groups.   Section

6226(b)(2) and (4) then provides:

          (2) Priority of the tax court action.--If more
     than 1 action is brought under paragraph (1) with
     respect to any partnership for any partnership taxable
     year, the first such action brought in the Tax Court
     shall go forward.

                 *    *    *      *     *   *    *

          (4) Dismissal of other actions.--If an action is
     brought under paragraph (1) in addition to the action
     which goes forward under paragraph (2) or (3), such
     action shall be dismissed.

     Since we have already held that we have jurisdiction over

the petition filed by the 5-percent group at docket No. 5078-08,

which was the first action brought, that action must go forward

pursuant to section 6226(b)(2).   Section 6226(b)(4) would seem to

require that the six subsequently filed petitions regarding the

same FPAA be dismissed for lack of jurisdiction.     See Cablevision

of Conn. v. Commissioner, T.C. Memo. 1993-106; Cambridge Research

& Dev. Group v. Commissioner, T.C. Memo. 1991-434.     However, with

respect to the five petitions filed by the individual indirect

partners, petitioners argue that there is a statutory exception

to the dismissal requirement of section 6226(b)(4).    They glean

this exception from section 6226(c) and (d), which 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--
                              - 11 -

               (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.

          (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.

          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. [Emphasis added.]

     The above emphasized provisions of section 6226(d)(1) were

added by the Taxpayer Relief Act of 1997, Pub. L. 105-34, sec.

1239(b), 111 Stat. 1027.   The legislative history explains:   “The

provision * * * permits a partner to participate in an action or
                             - 12 -

file a petition for the sole purpose of asserting that the period

of limitations for assessing any tax attributable to partnership

items has expired for that person.”   H. Rept. 105-148, at 594

(1997), 1997-4 C.B. (Vol. 1) 319, 916.8

     The individual indirect partners argue that even though

their individual petitions raise the same issue regarding the

statute of limitations that was raised in the lead petition of

the 5-percent group, section 6226(d)(1) permits them each to file

a petition solely for the purpose of asserting that the period of

limitations for assessing any tax attributable to partnership

items has expired with respect to them.9

     8
       The report explains the law that existed before the 1997
amendment as follows:

          For a partner other than the Tax Matters Partner
     to be eligible to file a petition for redetermination
     of partnership items in any court or to participate in
     an existing case, the period for assessing any tax
     attributable to the partnership items of that partner
     must not have expired. Since such a partner would only
     be treated as a party to the action if the statute of
     limitations with respect to them was still open, the
     law is unclear whether the partner would have standing
     to assert that the statute of limitations had expired
     with respect to them. [H. Rept. 105-148, at 594
     (1997), 1997-4 C.B. (Vol. 1) 319, 916.]
     9
       Generally the Court’s jurisdiction in a partnership
proceeding is restricted to determining “partnership items”.
Sec. 6226(f); Petaluma FX Partners, LLC v. Commissioner, 131 T.C.
___, ___ (2008) (slip op. at 11-12). However, our jurisdiction
over whether the period of limitations has expired as to
individual partners presents an exception since the expiration of
the period of limitations can depend on facts that are peculiar
to the individual partners. See Rhone-Poulenc Surfactants &
                                                   (continued...)
                                - 13 -

     Assuming that section 6226(d)(1) may, in some situations,

permit a partner who is neither a notice partner nor a member of

a 5-percent group to file a petition for the sole purpose of

raising the statute of limitations,10 we do not think it can be

done under the present facts.    The pertinent language of section

6226(d)(1) permits a party to “participate” in an existing

partnership case “or file a readjustment petition” (emphasis

added) for the sole purpose of asserting that the period of

limitations has expired as to that party.   This statutory




     9
      (...continued)
Specialties, L.P. v. Commissioner, 114 T.C. 533 (2000), appeal
dismissed and remanded 249 F.3d 175 (3d Cir. 2001). As we
observed therein:

     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 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 the last
     sentence of section 6226(d)(1)(B), added to the Code by
     the Taxpayer Relief Act of 1997, Pub. L. 105-34,
     section 1239(b), 111 Stat. 1027, effective for years
     ending after August 5, 1997. [Id. at 546; fn. ref.
     omitted.]
     10
       Respondent argues that since sec. 6226(d)(1) permits a
petition to be filed under sec. 6226(b), a party filing a
petition under sec. 6226(d)(1) must also be a notice partner or a
member of a 5-percent group as required in sec. 6226(b)(1). We
express no opinion on this issue.
                                - 14 -

provision presents parties with a choice.11    The individual

indirect partners made their choice on February 28, 2008, when

they filed their petition as members of a 5-percent group.      As

petitioners in the petition filed by the 5-percent group, they

obviously have elected to participate in that case regarding the

statute of limitations issues and should not be able to file

separate petitions involving the same issue.    This interpretation

of section 6226(d)(1) is consistent with the purpose of the

unified litigation procedures contained in subchapter C (sections

6221-6234) of chapter 63 of the Internal Revenue Code, which was

to resolve partnership issues in one proceeding.    Any other

interpretation of section 6226(d)(1) would be contrary to this

statutory objective.12

     11
       Webster’s Dictionary defines “or” as a “function word to
indicate * * * an alternative between different or unlike * * *
actions”. Webster’s Third New International Dictionary (1986).
“Normally, use of a disjunctive indicates alternatives and
requires they be treated separately unless such a construction
renders the provision repugnant”. George Hyman Constr. Co. v.
Occupational Safety & Health Review Commn., 582 F.2d 834, 840
n.10 (4th Cir. 1978). “As a general rule, the use of a
disjunctive in a statute indicates alternatives and requires that
they be treated separately.” Azure v. Morton, 514 F.2d 897, 900
(9th Cir. 1975).
     12
          As we recently observed:

          To remove the substantial administrative burden
     occasioned by duplicative audits and litigation and to
     provide consistent treatment of partnership tax items
     among partners in the same partnership, Congress
     enacted the unified audit and litigation procedures of
     the Tax Equity and Fiscal Responsibility Act of 1982
                                                   (continued...)
                                - 15 -

     Alternatively, even if each of the five individual indirect

partners could have filed a petition under section 6226(d)(1),

that subsection specifically permits a party to file such a

“petition under subsection (b)”.     Any petition filed under

section 6226(b) would be subject to the rule in section

6226(b)(2), which gives priority to the first petition filed with

respect to an FPAA, and section 6226(b)(4), which provides for

dismissal of subsequent actions brought with respect to the same

FPAA.     These provisions require that the five petitions filed by

the individual indirect partners be dismissed.     This still

permits all of the parties to litigate all of the issues that

have been raised and is consistent with the overall statutory

purpose of doing so in one proceeding.

     Our jurisdiction to review FPAAs is contained in section

6226.     Because the specific provisions of that section give us

jurisdiction over the petition filed on February 28, 2008, in

docket No. 5078-08 and require dismissal of subsequent actions

brought with respect to the same FPAA, we hold that the six

petitions filed on February 29, 2008, in docket Nos. 5149-08,




     12
      (...continued)
     (TEFRA), Pub. L. 97-248, sec. 401, 96 Stat. 648. See
     Randell v. United States, 64 F.3d 101, 103 (2d Cir.
     1995); H. Conf. Rept. 97-760, at 599-600 (1982), 1982-2
     C.B. 600, 662-663. [Petaluma FX Partners, LLC v.
     Commissioner, supra at ___ (slip op. at 10).]
                             - 16 -

5150-08, 5151-08, 5152-08, 5153-08, and 5154-08 will be dismissed

for lack of jurisdiction.


                                        Orders of dismissal for

                                   lack of jurisdiction will be

                                   entered in docket Nos.

                                   5149-08, 5150-08, 5151-08,

                                   5152-08, 5153-08, and 5154-08.
