                             T.C. Memo. 2013-174



                        UNITED STATES TAX COURT



 ESTATE OF ALBERT SIMON, DECEASED, ELLEN S. SIMON, PERSONAL
 REPRESENTATIVE AND ELLEN S. SIMON, Petitioners v. COMMISSIONER
               OF INTERNAL REVENUE, Respondent



      Docket No. 708-12.                       Filed July 29, 2013.



      Lane M. Gensburg, Anthony Calandriello, and Sandra D. Mertens, for

petitioners.

      Meso T. Hammoud, for respondent.



                           MEMORANDUM OPINION


      THORNTON, Judge: This is a partner-level affected items deficiency

proceeding under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),
                                        -2-

[*2] Pub. L. No. 97-248, sec. 402(a), 96 Stat. at 648.1 Respondent issued to Ellen

S. Simon and the Estate of Albert Simon, Deceased, an affected items notice of

deficiency for 2000 that determined a $1,293,264 deficiency in their Federal

income tax, a $33,172 accuracy-related penalty under section 6662(a), a $450,961

accuracy-related penalty under section 6662(h), and a $117,577 addition to tax

under section 6651(a).2 The deficiency notice relates to Albert Simon’s

participation in a Son-of-Boss transaction (transaction) that formally involved a

TEFRA partnership, Charlevoix Investment Partners (Charlevoix). Respondent

issued the deficiency notice to petitioners after no one timely challenged a notice

of final partnership administrative adjustment (FPAA) related to Charlevoix’s

corresponding taxable year.

      Respondent moves to dismiss this case to the extent that it relates to the

accuracy-related penalties (penalties), asserting that section 6230(a)(2)(A)(i)

excludes the penalties from a deficiency proceeding as a prerequisite to their

assessment. Petitioners object to respondent’s motion and have filed a cross-



      1
        Subsequent section references are to the Internal Revenue Code in effect
for the year in issue, unless otherwise indicated. Dollar amounts are rounded.
      2
      While the face of the deficiency notice states that the $117,577 was
determined under sec. 6662, other portions of the notice clarify that the $117,577
was determined under sec. 6651(a).
                                         -3-

[*3] motion to dismiss the case in full, asserting that the Court lacks jurisdiction

because the deficiency notice is invalid.3 The deficiency notice is invalid,

petitioners claim, because the Internal Revenue Service (IRS) failed to give proper

notice of the FPAA. Respondent has filed an objection to petitioners’ motion.

        We hold that the IRS gave proper notice of the FPAA and that the

deficiency notice is valid. We also hold that the Court lacks jurisdiction to decide

the portion of this case that relates to the penalties and will grant respondent’s

motion dismissing this case to that extent. We will deny petitioners’ motion in

full.




        3
        Petitioners also argue that the Court lacks jurisdiction because the
applicable period of limitations for assessment has expired. Because the
expiration of the period of limitations for assessment is an affirmative defense that
does not implicate the Court’s jurisdiction, see Davenport Recycling Assocs. v.
Commissioner, 220 F.3d 1255, 1259-1261 (11th Cir. 2000), aff’g T.C. Memo.
1998-347; Tapper v. Commissioner, 766 F.2d 401, 403 (9th Cir. 1985);
Domulewicz v. Commissioner, 129 T.C. 11, 12 n.4 (2007), aff’d in part, remanded
in part on other grounds sub nom. Desmet v. Commissioner, 581 F.3d 297 (6th
Cir. 2009); Crowell v. Commissioner, 102 T.C. 683, 693 (1994); Badger
Materials, Inc. v. Commissioner, 40 T.C. 1061, 1063 (1963); cf. Day v.
McDonough, 547 U.S. 198, 205 (2006) (“[a] statute of limitations defense * * * is
not ‘jurisdictional’”), we reject this argument without further discussion.
                                        -4-

[*4]                                Background

I. Introduction

       Neither party requested a hearing as to either subject motion, and we

conclude that a hearing is not necessary to decide the motions. For the sole

purpose of deciding the motions, we draw the following background information

from the agreed-upon allegations in the pleadings and from the uncontroverted

statements in the motions and in the accompanying memoranda (including the

exhibits attached to the motions and to the memoranda). Ms. Simon’s “legal

address” was in Michigan when the petition was filed.

II. Background

       ASCS Investments, LLC (AIL), is a limited liability company that Mr.

Simon wholly owned. ASCS Investments, Inc. (AII), is an S corporation that Mr.

Simon wholly owned. Charlevoix is a general partnership, the sole partners of

which were AIL and an individual whose identity is not relevant to our analysis.

AIL had a 99% interest in Charlevoix’s profit, loss, and capital.

       Mr. Simon caused Charlevoix to be formed on October 26, 2000, to

facilitate the transaction, and he caused Charlevoix’s partners to contribute

essentially offsetting digital options to Charlevoix incident to the formation. On

November 10, 2000, the partners had purportedly gone long on some of the
                                         -5-

[*5] options at a total cost of $5,700,000 and had gone short on the remaining

options at a total selling price of $5,643,000. The options terminated according to

their terms on December 4, 2000, and Charlevoix purchased publicly traded stock

one day later. Approximately one week after that, AIL contributed its interest in

Charlevoix to AII, and Charlevoix terminated and distributed its assets (mainly the

stock) to AII. AII sold the distributed assets and reported that it realized large

capital losses on the sale. The losses were noneconomic losses attributable to

inflated bases in the assets.4 The losses passed through to Mr. Simon as AII’s

shareholder.

      Charlevoix filed a Form 1065, U.S. Return of Partnership Income, for its

taxable year from October 26 to December 14, 2000 (2000 return). The 2000

return was both Charlevoix’s initial and its final return, and it did not designate a

tax matters partner. The 2000 return, which Mr. Simon signed for the partnership

on September 15, 2001, listed Charlevoix’s address as 1142 Charlevoix Ave., #1,

Petoskey, Michigan 49770 (Petoskey address).5 A Schedule K-1, Partner’s Share


      4
       Apparently, the partners had not treated the “short” options as a liability
under sec. 752.
      5
      Some documents refer to the street address of the Petoskey address as
“1142 Charlevoix Ave., #1”, while other documents refer to that street address as
“1142 Charleviox Ave. 1” or “1142 Charlevoix Ave., Apartment 1”. We refer to
                                                                     (continued...)
                                         -6-

[*6] of Income, Credits, Deductions, etc., included in the 2000 return likewise

listed AIL’s address as the Petoskey address. The only other Schedule K-1

included in the 2000 return related to the 1% individual partner. The name and

address of the individual partner were redacted from the Court’s copy of that

document.

      During 2000 the Petoskey address was the Simons’ residential address and

the listed address of Charlevoix’s principal place of business. Charlevoix, AIL,

and AII ceased operation on or shortly after December 14, 2000, and in January

2001 the Simons moved to 09499 Equestrian Way, Charlevoix, Michigan 49720

(Equestrian Way address). The Simons resided at the Equestrian Way address

through November 2010.

      The IRS audited Charlevoix’s 2000 return, and an IRS revenue agent (SL)

in Boston, Massachusetts, mailed to the Petoskey address by certified mail a notice

of beginning of administrative proceeding (NBAP) dated March 1, 2004,

addressed to Charlevoix’s tax matters partner in care of Mr. Simon as a

“Member”.6 The U.S. Postal Service returned the NBAP to the IRS after


      5
        (...continued)
all of the variations as the Petoskey address.
      6
          While the NBAP was addressed to Charlevoix’s tax matters partner in care
                                                                     (continued...)
                                       -7-

[*7] unsuccessfully attempting to deliver it on three occasions. SL also mailed to

the Petoskey address a letter dated March 1, 2004, addressed to Charlevoix in care

of Mr. Simon as a “Member”.

      SL mailed to the Petoskey address another copy of the NBAP, but dated

March 2, 2004, addressed to AIL, “Attn: Mr. Albert Simon, Single Owner”. In

addition, SL mailed to the Equestrian Way address a copy of the NBAP dated

March 2, 2004, addressed to “Albert & Ellen S Simon”.

      SL mailed to the Equestrian Way address an NBAP dated April 2, 2004, for

Charlevoix’s taxable year ended December 14, 2000, addressed to Charlevoix’s

tax matters partner in care of Mr. Simon as a “Member”. At or about the same

time, SL separately mailed to the Equestrian Way address two other letters, one

addressed to Charlevoix’s tax matters partner in care of Mr. Simon as a “Member”

and the other addressed simply to Charlevoix’s tax matters partner.

      On April 12, 2004, Mr. and Ms. Simon each signed as to their 2000 taxable

year a Form 872-I, Consent to Extend the Time to Assess Tax As Well As Tax

Attributable to Items of a Partnership. The consent lists the Simons’ present


      6
       (...continued)
of Mr. Simon as a “Member”, the envelope in which the NBAP was mailed (and
the accompanying return receipt) was simply addressed to Charlevoix’s tax
matters partner.
                                        -8-

[*8] address as the Equestrian Way address and lists their former address in

Naples, Florida. From February 8, 2005, through December 1, 2008, the Simons

signed six additional similar consents, each listing the Equestrian Way address as

their address.7 The seventh and final consent extended the period of limitations

for assessment through June 30, 2010.

      On May 14, 2010, an IRS agent (BK) in St. Paul, Minnesota, mailed to the

Petoskey address separate copies of an FPAA for Charlevoix’s taxable year ended

December 14, 2000, addressed respectively to Charlevoix’s tax matters partner

and to AIL.8 The IRS did not mail a copy of the FPAA to Mr. Simon, either

individually or as an indirect partner. The FPAA, in part, adjusted to zero the

partnership items of other deductions, ordinary dividends, net short-term capital

loss, investment income included in portfolio income, net loss from self-

employment, distributions of property and money, capital contributions, net loss

per books, and cost or other bases in the options. The FPAA, in part, also

determined that Charlevoix is disregarded for Federal income tax purposes,


      7
       The last two consents were signed after Mr. Simon died. Ms. Simon signed
those consents on his behalf.
      8
       A certified mail list that the U.S. Postal Service stamped as received on
May 14, 2010, reports that the IRS separately mailed three copies of the FPAA.
The name and the address corresponding to the third copy have been redacted, yet
it appears that the third copy was most likely mailed to the 1% partner.
                                         -9-

[*9] outside basis is reduced to zero, a 40% penalty applies to the portion of any

underpayment attributable to a gross valuation/basis misstatement, and a 20%

penalty applies to the portion of any underpayment attributable to negligence or

disregard of rules and regulations (or to a substantial understatement of income tax

or to a substantial valuation misstatement). The U.S. Postal Service ultimately

returned the FPAAs to the IRS as “Not Deliverable as Addressed--Unable to

Forward”.

      The FPAA was never timely challenged (e.g., by filing a petition in this

Court), and the FPAA was defaulted on October 11, 2010. Respondent

subsequently assessed the penalties and the addition to tax of $484,133 ($33,172 +

$450,961) and $117,577, respectively, and issued the deficiency notice underlying

this case on October 6, 2011. All items underlying the deficiency in the deficiency

notice relate to adjustments to the partnership items of Charlevoix, and the

penalties in the deficiency notice are the same penalties determined in the FPAA.

                                     Discussion

      Respondent moves to dismiss this case to the extent of the penalties,

asserting that an assessment of the penalties is not subject to the normal deficiency

procedures outlined in sections 6211 through 6216. Respondent asserts that the

applicability of the penalties is a partnership-level determination that is outside of
                                        - 10 -

[*10] this Court’s jurisdiction in this partner-level proceeding. Petitioners state in

their objection to respondent’s motion that they do not dispute that penalties of the

type we have here are regularly determined in a partnership-level proceeding.

They argue, however, that the penalties (and all other items in the deficiency

notice) are no longer partnership items required to be determined at the

partnership level because, they state, the IRS failed to give proper notice of the

FPAA as required by section 6223(a). They assert that neither Charlevoix, AIL,

AII, nor Mr. Simon (in his capacity as an indirect partner) received proper notice

of the FPAA and that the IRS knew as early as March 2004 that (1) the Petoskey

address was no longer a valid address and (2) the proper address was the

Equestrian Way address. They assert that the IRS must make a “good faith” effort

to provide notice of an FPAA and that the IRS failed that standard here given that

the IRS “had sufficient information readily available and directly in the hands of

the agents handling the underlying examination to enable the IRS to ascertain the

names, addresses and profits interest of all direct and indirect partners when the

* * * [FPAA] was issued.” They conclude that the Court lacks jurisdiction over

the deficiency notice and have cross-moved to dismiss this case on those grounds.

      We disagree with petitioners’ assertions that the IRS failed to give proper

notice of the FPAA and that the deficiency notice is invalid. The IRS must timely
                                         - 11 -

[*11] mail an FPAA to certain partners before assessing a partner with an amount

attributable to a partnership item. See secs. 6223(a)(2), (d)(2), 6225(a);

Domulewicz v. Commissioner, 129 T.C. 11, 18 (2007), aff’d in part, remanded in

part on other grounds sub nom. Desmet v. Commissioner, 581 F.3d 297 (6th Cir.

2009); see also Crowell v. Commissioner, 102 T.C. 683, 692 (1994) (noting that

an FPAA may be properly mailed even if it is not actually received by either the

“tax matters partner” or a “notice partner” within the meaning of section

6231(a)(7) and (8), respectively). For this purpose, the term “partnership item”

includes any item of income, gain, loss, deduction, or credit that the Secretary has

determined is “more appropriately determined at the partnership level than at the

partner level.” Sec. 6231(a)(3); see also sec. 301.6231(a)(3)-1(a), Proced. &

Admin. Regs. A “computational adjustment” must then be made to the tax

liability of a partner to reflect partnership items after the partnership-level

proceeding is complete. See Domulewicz v. Commissioner, 129 T.C. at 19; see

also secs. 6230(c)(1)(A)(ii), 6231(a)(6). When the making of a computational

adjustment requires that facts be determined at the partner level, then the normal

deficiency procedures outlined in sections 6211 and 6216 apply and the IRS must

issue an affected items notice of deficiency to the partner in order to assess tax

attributable to that adjustment. See sec. 6230(a)(2)(A)(i); see also sec.
                                        - 12 -

[*12] 301.6231(a)(6)-1T(a), Temporary Proced. & Admin. Regs., 64 Fed. Reg.

3840 (Jan. 26, 1999).9

      Neither party disputes that the items underlying the deficiency are

computational adjustments that relate to partnership items in the FPAA. The

Court has jurisdiction over the items underlying the deficiency because those

items are computational adjustments and the determination of the tax attributable

to the adjustments requires that certain facts be determined at the partner level.

See Domulewicz v. Commissioner, 129 T.C. at 20; see also Desmet v.

Commissioner, 581 F.3d at 303. Those facts relate to AII’s sale of its assets and

include the identity of the assets, whether the assets came from Charlevoix, the

portion of the assets sold, the holding period for the assets, and the character of

any gain or loss. See Domulewicz v. Commissioner, 129 T.C. at 20; see also

Desmet v. Commissioner, 581 F.3d at 303. The Court likewise has jurisdiction

over the section 6651(a) addition to tax because that addition to tax is attributable

to the deficiency. See sec. 6665(a) and (b)(1). The penalties, however, are a


      9
        Effective for partnership taxable years beginning after October 3, 2001,
these temporary regulations (and sec. 301.6223(c)-1T, Temporary Proced. &
Admin. Regs., 52 Fed. Reg. 6784 (Mar. 5, 1987), discussed infra) have been
replaced with final regulations. See secs. 301.6223(c)-1, 301.6231(a)(6)-1,
Proced. & Admin. Regs. The referenced temporary regulations apply because
Charlevoix’s taxable year in issue began on October 26, 2000.
                                        - 13 -

[*13] different story. The Court lacks jurisdiction in this partner-level proceeding

to redetermine the accuracy-related penalties because the deficiency procedures do

not apply to the assessment of penalties determined at the partnership level,

regardless of whether partner-level determinations must be made to assess the

penalty. See sec. 6230(a)(2)(A)(i); Domulewicz v. Commissioner, 129 T.C. at

22-24; cf. Tigers Eye Trading, LLC v. Commissioner, 138 T.C. 67, 150-155

(2012) (holding that where the overstatement of a purported partner’s basis in

property received upon liquidation of a disregarded partnership is attributable to

claiming that capital contributions were made to the partnership, the

underpayment of tax resulting from the sale of that property is attributable to the

reduction to zero of the claimed capital contributions to the partnership and the

Court has jurisdiction in the partnership-level proceeding to determine the

applicability of the gross valuation misstatement penalty to the loss resulting from

the sale of the property); Rawls Trading, L.P. v. Commissioner, T.C. Memo. 2012-

340, at *28-*42 (deciding the applicability of defenses to accuracy-related

penalties in a TEFRA partnership-level proceeding involving Son-of-Boss

transactions after deciding that the TEFRA entities were disregarded as shams

(among other reasons)).
                                        - 14 -

[*14] Petitioners seek contrary conclusions, arguing that the items in the

deficiency notice are no longer partnership items because the IRS failed to give

proper notice of the FPAA as required by section 6223(a). We disagree.10 Section

6223(a) requires that the IRS notify certain partners of the beginning and end of a

partnership audit. The IRS generally must “use the names, addresses, and profits

interests shown on the partnership return” to determine to whom and where to

send that notice. Sec. 6223(c)(1). Where an “indirect partner” owns an interest in

a partnership through a “pass-thru partner” who otherwise would be entitled to

notice, the IRS must give notice to the indirect partner, in lieu of the pass-thru

partner, if the IRS is properly furnished with information as to the indirect

partner’s name, address, and indirect profits interest in the partnership. See sec.

6223(c)(3); see also sec. 6231(a)(9) (defining a “pass-through partner” as “a

partnership, estate, trust, S corporation, nominee, or other similar person through

whom other persons hold an interest in the partnership”); sec. 6231(a)(10)

(defining an “indirect partner” as a “person holding an interest in a partnership

through 1 or more pass-through partners”). If the IRS fails to give proper notice to


      10
        We have jurisdiction in this partner-level affected items proceeding to
decide whether the affected items notice of deficiency is invalid on the ground that
the IRS failed to properly notify a partner of the underlying partnership-level
proceeding. See Crowell v. Commissioner, 102 T.C. at 691.
                                        - 15 -

[*15] a partner, then the partner may elect to have the adjustments (or ensuing

decision or settlement agreement) apply to the partner if the period in which to

challenge the FPAA has expired without the filing of such a challenge or if a

decision resulting from a challenge is final. See sec. 6223(e)(2). If the partner

does not make this election, then the partnership items of the partner for the

partnership taxable year to which the proceeding relates are characterized as

nonpartnership items. See id.

      The IRS’ duty to give a direct or indirect partner notice under section

6223(a) arises only to the extent that the IRS is furnished with readily available

information containing the name, address, and profits interest of the partner in

either or both of two ways. See Murphy v. Commissioner, 129 T.C. 82, 86 (2007).

First, the IRS may be furnished the referenced information through the tax return

of the partnership under audit. See id. at 86-87; see also sec. 6223(c)(1). Second,

the IRS may be furnished the referenced information through a written statement

that meets the requirements of section 301.6223(c)-1T, Temporary Proced. &

Admin. Regs., 52 Fed. Reg. 6784 (Mar. 5, 1987).11 See Murphy v. Commissioner,

      11
        Sec. 301.6223(c)-1T(b)(1), Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 6784 (Mar. 5, 1987), requires that the written statement contain certain
minimal information and be properly filed with the IRS and states that the IRS will
take the additional information in the statement into account if received at least 30
                                                                       (continued...)
                                        - 16 -

[*16] 129 T.C. at 87; see also sec. 6223(c)(2); sec. 301.6223(c)-1T(a), Temporary

Proced. & Admin. Regs., supra. In addition, the IRS may (but is not required to)

use other readily available information that it possesses (e.g., a change in address

shown on a partner’s return). Sec. 301.6223(c)-1T(f), Temporary Proced. &

Admin. Regs., supra. The IRS, however, has no obligation to search its records to

obtain information not provided to it under either of the ways set forth in section

6223(c)(1) and (2). Id.

      Petitioners do not dispute that the IRS mailed a copy of the FPAA to

Charlevoix’s partners at the address shown on the 2000 return and that no

additional information was given to the IRS in the manner prescribed in the

temporary regulations. They assert in their objection to respondent’s motion that,

      11
         (...continued)
days before the mailing of the notice to the partner. To be filed properly, the
statement must be filed with the service center where the partnership return is
filed, unless the person filing the statement knows that the NBAP was already
mailed to the tax matters partner, in which case the statement should be filed with
the office that mailed the NBAP. Sec. 301.6223(c)-1T(b)(2), Temporary Proced.
& Admin. Regs., supra. To set forth the required minimal information, the
statement must: (1) identify the partnership, each partner for whom the
information is provided, and the person providing the information by name,
address, and taxpayer identification number; (2) explain that the statement is
submitted to correct or supplement earlier information regarding the partners in
the partnership; (3) specify the taxable year to which the information pertains; (4)
set forth the corrected or additional information; and (5) be signed by the person
providing the information. Sec. 301.6223(c)-1T(b)(3), Temporary Proced. &
Admin. Regs., supra.
                                       - 17 -

[*17] during discovery, they obtained IRS files “replete with evidence that,

beginning in April 2004, the IRS used the Equestrian Way Address for both the

Petitioners individually and for Charlevoix and its Tax Matters Partner”. They

assert in their memorandum that

      implicit in the TEFRA statutory scheme is a requirement that the IRS
      must make a “good faith” effort to provide notice to a taxpayer of an
      NFPAA. IRC Section 6223(c)(1) generally directing the IRS to use
      the address information listed on the taxpayer’s partnership return
      does not excuse or vitiate the IRS’s obligation to comport with due
      process and make a “good faith” effort in mailing the NFPAA to a
      current address.

They conclude that proper notice of the FPAA requires that the IRS have sent the

FPAA to the Equestrian Way address in lieu of, or at least in addition to, the

address shown on the 2000 return.

      We disagree with petitioners’ conclusion. Petitioners have cited no opinion

holding that the IRS must send an FPAA to an address other than an address

shown on the partnership return under audit or on a statement that meets the

requirements of section 301.6223(c)-1T, Temporary Proced. & Admin. Regs.,

supra. Nor are we aware of any such opinion.

      Petitioners rely selectively upon section 6223(c)(2), which provides: “The

Secretary shall use additional information furnished to him by the tax matters

partner or any other person in accordance with regulations prescribed by the
                                          - 18 -

[*18] Secretary.” (Emphasis added.) Ignoring the text which we have

emphasized, petitioners draw from the word “shall” that the IRS must use all

information in its possession, notwithstanding how it was obtained. But when

section 6223(c)(2) is read in its entirety, as it must be, it explicitly establishes that

the IRS is required to use additional information only if it is furnished in the

manner set forth in the regulations. As previously discussed, petitioners did not

furnish additional information in the manner prescribed by the regulations.

      Petitioners also rely upon Stone Canyon Partners v. Commissioner, T.C.

Memo. 2007-377, aff’d sub nom. Bedrosian v. Commissioner, 358 Fed. Appx. 868

(9th Cir. 2009), to support their conclusion. There, in a setting factually similar to

the setting at hand, the partnership (SCP) filed a partnership return for 1999

showing its address as Stone Canyon Road. SCP had two partners, a limited

liability company and an S corporation, each wholly owned by the taxpayers (a

husband and wife), and the Schedules K-1 attached to the return reported that the

partners had the same address as the partnership. The partnership return did not

list the taxpayers’ address. On February 2, 2005, the IRS mailed an NBAP to the

taxpayers at their residential address on Rocco Drive. Approximately two weeks

later, the taxpayers’ representative sent a letter to the revenue agent stating that

SCP’s new address was North Canon Drive. Approximately two months after that,
                                       - 19 -

[*19] the representative told the revenue agent that the North Canon address was

no longer a good mailing address, that correspondence should henceforth be

mailed to the taxpayers’ private mailbox on Beverly Glen Circle, and that the

taxpayers still resided at the Rocco address. Three days after that, the IRS mailed

copies of an FPAA to the Stone Canyon address, to the North Canon address, and

to the Beverly Glen address. The IRS did not mail a copy of the FPPA to the

Rocco address.

      The Court held in Stone Canyon Partners that the mailing of the FPAA to

the Stone Canyon address met the notice requirement in section 6223(a).

Petitioners read our opinion in Stone Canyon Partners to uphold the notice

requirement because the IRS made a “good faith” attempt to notify all affected

persons of the FPAA. Petitioners draw from the opinion a “good faith” principle

that requires the IRS to mail a copy of an FPAA to every address at which the IRS

knows that an affected partner may be contacted. Applying that principle here,

petitioners continue, proper notice required that the IRS have mailed a copy of the

FPAA to the Equestrian Way address at which the IRS knew that Mr. Simon

resided.
                                         - 20 -

[*20] We do not read our opinion in Stone Canyon Partners so broadly as

petitioners do.12 The Court held that the address shown on the partnership return

was a proper address for sending notice of the FPAA even though an IRS

employee knew of a different address and had sent correspondence to that address.

In addition, the Court disagreed with the taxpayers’ argument that the IRS’

knowledge of the Rocco address meant that the IRS had to mail a copy of the

FPAA to that address, stating in part:

      SCP never updated in the prescribed manner the address that was on
      the partnership return for 1999. * * * section 301.6223(c)-1T(b)(1)
      and (3), Temporary Proced. & Admin. Regs., supra, provides the
      procedure for furnishing respondent with additional information.
      Petitioner argues that respondent mailed numerous items to Rocco
      and therefore was aware of the address. The mailing of
      correspondence does not alter respondent’s obligations relating to the
      mailing of the FPAA. Triangle Investors Ltd. Pshp. v. Commissioner,
      supra at 616 [95 T.C. 610 (1990)13]. Petitioner never followed the


      12
        Petitioners also draw their good-faith principle from Crowell v.
Commissioner, 102 T.C. at 693, and Byrd Invs. v. Commissioner, 89 T.C. 1, 6-7
(1987), aff’d without published opinion, 853 F.2d 928 (11th Cir. 1988).
Petitioners’ reliance on those cases to support their principle is equally misplaced.
      13
        In Triangle Investors Ltd. P’ship v. Commissioner, 95 T.C. 610, 611-612
(1990), the IRS mailed the FPAA to the address on the partnership return although
the revenue agent who audited the partnership return knew that the partnership’s
current address was different, i.e., the tax matters partner had submitted a power of
attorney form to the IRS stating that the IRS should use the new address and had
orally advised the revenue agent of the new address. The Court held that the IRS
had not been properly advised of a change of address for notice purposes, stating:
                                                                        (continued...)
                                       - 21 -

      [*21] procedures outlined in the regulations for furnishing respondent
      with additional information pertaining to a change of address of SCP,
      or the TMP, JCB. As a result, the address on the 1999 Form 1065,
      the Stone Canyon address, was a proper address which to mail the
      FPAA for 1999.

Accord Int’l Strategic Partners, LLC v. Commissioner, 455 Fed. Appx. 91 (2d Cir.

2012); Gaughf Props., L.P. v. Commissioner, 139 T.C. 219 (2012); see also

Triangle Investors Ltd. P’ship v. Commissioner, 95 T.C. 610, 611-612 (1990).

      Due process requires that notice be “reasonably calculated, under all

circumstances, to apprise interested parties of the pendency of the action and

afford them an opportunity to present their objections.” Mullane v. Cent. Hanover

Bank & Trust Co., 339 U.S. 306, 314 (1950); see also Byrd Invs. v.

Commissioner, 89 T.C. 1, 6-7 (1987), aff’d without published opinion, 853 F.2d

928 (11th Cir. 1988). The Secretary, in part through specific congressionally

delegated authority, has provided a reasonable regulatory procedure to meet that

requirement. The IRS followed this general procedure by mailing separate copies


      13
        (...continued)
              In light of the detailed instructions as to how updating
      partnership information is to be furnished, it cannot be said that * * *
      [the] verbal exchanges with the revenue agent were sufficient to
      notify the appropriate IRS office of the partnership’s change of
      address, * * * [and] the power of attorney in this case did not alter the
      IRS’s obligations relating to the mailing of the FPAA * * * [Id. at
      616.]
                                        - 22 -

[*22] of the FPAA to the Petoskey address addressed respectively to Charlevoix’s

tax matters partner and to AIL, the only partners (other than the 1% partner) whom

the 2000 return identified and provided an address for.14 Accord Int’l Strategic

Partners, LLC v. Commissioner, 455 Fed. Appx. 91.

      Petitioners have not explained why they did not send in the referenced

statement to change their address.15 They were responsible for updating their

contact information in the manner prescribed in the temporary regulations, to the

extent that they believed any such update was appropriate. They did not update

their contact information in that manner. The fact that an FPAA was not mailed to

the Equestrian Way address is due to their own inaction.

      We will grant respondent’s motion and dismiss this case for lack of

jurisdiction to the extent of the penalties. In addition, we will deny petitioners’

cross-motion because the IRS gave proper notice of the FPAA and section

6223(e)(2) therefore does not operate to convert the partnership items to


      14
        We note for completeness that the record does not establish that the
particular IRS office that mailed the FPAA knew that the Petoskey address was an
invalid address.
      15
         Nor have petitioners explained why the 2000 return, which Mr. Simon
signed on behalf of Charlevoix in September 2001, and the attached Schedule K-1
issued to AIL, both report those entities’ address as the Petoskey address, given
that the entities had ceased operation and the Simons had moved to the Equestrian
Way address many months before.
                                      - 23 -

[*23] nonpartnership items as petitioners contend. We have considered all

arguments, and to the extent not discussed, we have rejected those arguments as

without merit.

      To reflect the foregoing,


                                                        An appropriate order will

                                                  be issued.
