                        T.C. Memo. 2009-190



                      UNITED STATES TAX COURT



CAT PARTNERS, A TEXAS GENERAL PARTNERSHIP, ELIZABETH POWELL, TAX
                 MATTERS PARTNER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11572-08.                Filed August 24, 2009.



     G. Tomas Rhodus, for petitioner.

     George E. Gasper, for respondent.



                        MEMORANDUM OPINION


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

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

under the partnership provisions of the Tax Equity and Fiscal

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

Stat. 648.   Respondent issued CAT Partners (the partnership) a
                                 -2-

notice of final partnership administrative adjustment (FPAA) for

2004.    Respondent made several determinations in the FPAA

regarding the partnership’s interests in property giving rise to

tax credits under section 291 for the production of fuel from a

nonconventional source (nonconventional fuel credits).2   The sole

issue for decision is whether these determinations are

partnership items under section 6231(a)(3) that fall within the

scope of our jurisdiction in a partnership-level proceeding.     We

hold that they are.    Accordingly, we shall deny petitioner’s

motion to dismiss for lack of jurisdiction.

                             Background

     The following information is stated for purposes of this

Memorandum Opinion only.    This case has yet to be tried on the

merits.

     This case is one of 50 related cases, each involving a

partnership’s eligibility for nonconventional fuel credits.

Elizabeth Powell is the tax matters partner (TMP) in all 50

cases.    Ms. Powell also prepared the partnership’s 2004 return.

     The partnership allegedly issued a promissory note to Gas

Recovery Partners 2 GP (GRP) in 2003 in exchange for rights to


     1
      All section references are to the Internal Revenue Code in
effect for the year at issue, unless otherwise indicated.
     2
      The “credit for producing fuel from a nonconventional
source” was moved from sec. 29 to sec. 45K by the Energy Policy
Act of 2005, Pub. L. 109-58, sec. 1322(a)(1), 119 Stat. 1011
(effective for tax years ending after Dec. 31, 2005).
                                  -3-

extract methane gas from landfills (landfill rights).   The

partnership reported the landfill rights as assets on the 2003

partnership return.   Similarly, the partnership reported the

promissory note as debt.   The partnership also reported its

eligibility for nonconventional fuel credits on its 2003

partnership return.   These credits were then distributed to the

partnership’s individual partners.

     The partnership reported neither the landfill rights nor the

promissory note on the 2004 partnership return.    In addition, the

2004 partnership return did not indicate that the partnership had

distributed the landfill rights to its partners.   Nor did it

indicate what had happened to the partnership debt.   Further, the

partnership did not report nonconventional fuel credits on the

2004 partnership return or on the K-1s issued to its individual

partners.

     The partnership sent letters to its individual partners in

2005 stating that it had defaulted on the promissory note to GRP

and that, through negotiations with GRP, it had transferred its

landfill rights and corresponding liabilities to the individual

partners as of January 1, 2004.    The letters further stated that

the individual partners owned the landfill rights directly and

that GRP would provide a statement identifying each partner’s

share of tax credits and liabilities for 2004.
                                 -4-

     Respondent issued the FPAA in response to the partnership’s

2004 partnership return.   Respondent determined in the FPAA that

the partnership did not own landfill rights or any other rights

that would give rise to nonconventional fuel credits in 2004.

Respondent further determined that the partnership did not

distribute, assign, or otherwise transfer to its individual

partners the landfill rights or any other right that would give

rise to nonconventional fuel credits.      The FPAA made no

adjustments to items of income, gain, loss, or credit for the

partnership’s taxable year.

     Petitioner timely filed a petition for readjustment of

partnership items and then filed a motion to dismiss for lack of

jurisdiction.   It is this motion that we address.

                              Discussion

     Petitioner’s motion to dismiss for lack of jurisdiction

focuses on whether respondent’s determinations in the FPAA

relating to the landfill rights and nonconventional fuel credits

are partnership items within the scope of our jurisdiction under

section 6226(f).   If we find that these determinations are

partnership items, then we must deny petitioner’s motion.

     We begin our analysis with a discussion of our jurisdiction

over a TEFRA partnership-level proceeding.     This Court is a court

of limited jurisdiction, and we may exercise our jurisdiction

only to the extent provided by Congress.     See sec. 7442; GAF
                                 -5-

Corp. & Subs. v. Commissioner, 114 T.C. 519, 521 (2000).      Our

jurisdiction includes the right to decide whether we have

jurisdiction over the subject matter of a case.      See Brookes v.

Commissioner, 108 T.C. 1, 4 (1997); Brannon’s of Shawnee, Inc. v.

Commissioner, 69 T.C. 999, 1002 (1978).

     Our jurisdiction over a TEFRA partnership-level proceeding

is invoked upon the Commissioner’s issuance of a valid FPAA and

the proper filing of a petition for readjustment of partnership

items for the year or years to which the FPAA relates.      See

Harbor Cove Marina Partners Pship. v. Commissioner, 123 T.C. 64,

78 (2004).   An FPAA may be valid for purposes of invoking our

jurisdiction where, as here, it made no changes to items of

income, gain, loss, or credit on the partnership return.      See

id.; Univ. Heights at Hamilton Corp. v. Commissioner, 97 T.C.

278, 282 (1991).    The scope of our jurisdiction in a partnership-

level proceedings is limited, however, to determining all

partnership items of the partnership for the partnership taxable

year to which the FPAA relates, the proper allocation of such

items among the partners, and whether a penalty, addition to tax,

or additional amount applies that relates to an adjustment to a

partnership item.   Sec. 6226(f).      Accordingly, the relevant

question is not whether the FPAA makes a change to the

partnership return, but whether the determinations that it does

make are determinations of partnership items.
                                  -6-

     Petitioner argues that the determinations in the FPAA are

not partnership items because the partnership did not report

nonconventional fuel credits on the 2004 partnership return nor

on the K-1s it issued to the individual partners.       Petitioner

further argues that respondent’s determinations can be made only

by examining the returns and personal circumstances of each

individual partner and are substantively equivalent to

determinations in an FPAA that adjust a partner’s amount at risk

under section 465.   See Russian Recovery Fund Ltd. v. United

States, 81 Fed. Cl. 793 (2008).    We disagree.

     Partnership items include any item of income, gain, loss,

deduction, or credit that subtitle A requires the partnership to

take into account for the taxable year, to the extent that

regulations provide that the item is more appropriately

determined at the partnership level than at the partner level.

See sec. 6231(a)(3); see also sec. 301.6231(a)(3)-1(a), Proced. &

Admin. Regs.   Partnership items include not only the figures

reported on a partnership’s return but also determinations that

may affect nonpartnership items.        Petaluma FX Partners, LLC v.

Commissioner, 131 T.C. __, __ (2008) (slip op. at 13).

     Respondent determined in the FPAA that the partnership did

not own landfill rights or any other interests giving rise to

nonconventional fuel credits in 2004.       Respondent further

determined that the partnership did not distribute, assign, or
                                -7-

otherwise transfer such rights to its individual partners in

2004.   Finally, respondent determined that the partnership was

not entitled to nonconventional fuel credits in 2004.

     The partnership did not report the landfill rights as assets

on its partnership return for the beginning of 2004, as it had

for 2003.   Nor did the partnership determine whether a valid

property interest existed when it purported to distribute or

assign the landfill rights to its partners.   Determinations

concerning these rights are more appropriately made at the

partnership level than the partner level.   Partnership records

would include documents generated when the partnership purported

to purchase the landfill rights from GRP and when the partnership

purported to distribute or assign the landfill rights to its

individual partners.   Accordingly, we conclude that respondent’s

determination that the partnership did not own landfill rights

qualifying for nonconventional fuel credits in 2004 is a

partnership item.

     The partnership also did not report the purported

assignments on the partnership return or on the K-1s issued to

the individual partners.   The partnership’s reporting position is

inconsistent with the assignment letters that purport to assign

pro rata shares of the asset and corresponding liability to the

partners.   The partnership contends that it did not report the

asset, liability, or assignments on the partnership return
                                -8-

because it assigned the landfill rights and corresponding

liabilities to its partners at the beginning of 2004.    This does

not prevent respondent’s determinations from being partnership

items.

     The character and amount of distributed property are

partnership items for any year in which the partnership needs to

determine these items for purposes of its books and records, or

for purposes of furnishing information to a partner.    Sec.

301.6231(a)(3)-1(a)(1)(ii), (c)(3), Proced. & Admin. Regs.     In

addition, the character and amount of partnership debt and any

change in that debt from the proceeding taxable year are

partnership items.   Sec. 301.6231(a)(3)-1(a)(1)(v), Proced. &

Admin. Regs.   Further, this Court has determined the timing of a

transfer, sale, exchange, abandonment, or other disposition of

partnership assets giving rise to energy tax credits in a

partnership-level proceeding.   See Great Plains Gasification

Associates v. Commissioner, T.C. Memo. 2006-276.   Accordingly, we

conclude that the determinations in the FPAA that the partnership

did not transfer, assign, or otherwise distribute landfill rights

or other property giving rise to nonconventional fuel credits are

partnership items.

     Respondent also determined in the FPAA that the partnership

was not eligible for nonconventional fuel credits in 2004.     The

partnership’s aggregate and each partner’s share of a credit of
                                -9-

the partnership are partnership items.   Sec.

301.6231(a)(3)-1(a)(1)(i), Proced. & Admin. Regs.; see S/V

Drilling Partners v. Commissioner, 114 T.C. 83 (2000)

(determining amount of nonconventional fuel credits allowed to

partnership); Nielson-True Pship. v. Commissioner, 109 T.C. 112

(1997) (determining partnership’s eligibility for nonconventional

fuel credits), affd. sub. nom. True Oil Co. v. Commissioner, 170

F.3d 1294 (10th Cir. 1999).   We reject petitioner’s argument that

this determination is a nonpartnership item because the

partnership did not claim nonconventional fuel credits on its

2004 return.   The facts are available only at the partnership

level to determine whether the partnership is entitled to

nonconventional fuel credits.   Such a determination may be a

partnership item even where it does not result in a change to the

partnership return.

     Finally, we reject petitioner’s argument that the

determinations at issue are substantively identical to the

determination at issue in Russian Recovery Fund Ltd. v. United

States, supra.   There the Commissioner adjusted a partner’s

amount at risk under section 465 in an FPAA.     The court

determined that a partner’s amount at risk was a nonpartnership

item and that the FPAA was invalid to the extent that it

purported to adjust a nonpartnership item.      Id. at 801.   The FPAA

here does not adjust the individual partners’ eligibility for
                                 -10-

nonconventional fuel credits.    Instead, the determinations

challenge the existence and transfer of landfill rights and the

partnership’s eligibility for nonconventional fuel credits.

These determinations are more easily made at the partnership

level and apply to all of the partners.

     We conclude that the determinations at issue are partnership

items within the scope of our jurisdiction in a partnership-level

proceeding.   Accordingly, we shall deny petitioner’s motion to

dismiss for lack of jurisdiction.

     In reaching our holdings, we have considered all arguments

made, and, to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.

     To reflect the foregoing,


                                             An order denying

                                        petitioner’s motion to dismiss

                                        for lack of jurisdiction will

                                        be issued.
