                    T.C. Memo. 1996-401



                  UNITED STATES TAX COURT



   WAYNE CALDWELL ESCROW PARTNERSHIP, ROY DIMON, JOHN AND
  MARY SCHUENEMANN, JOSEPH AND LOUISE O'NEAL, CHARLES AND
    LOVETTA NIVEN, CHARLTON AND CYNTHIA THOMAS, PARTNERS
     OTHER THAN THE TAX MATTERS PARTNER, Petitioners v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8043-93.             Filed August 27, 1996.



     James L. Kennedy, for petitioners.

     William A. Roberts and Steven W. Weinstein, for

intervening partner Bill Denny.

     Kemble White, for participating partner Wayne H.

Caldwell (on brief only).

     John P. Haddock, Jr., participating partner, pro se.

     James R. Turton, for respondent.
                            - 2 -

           MEMORANDUM FINDINGS OF FACT AND OPINION

     WHALEN, Judge:   This case is before the Court to

decide cross-motions to dismiss for lack of jurisdiction.

Respondent's motion argues that the instant petition for

readjustment must be dismissed because petitioners failed

to file the petition within the time required by section

6226(b).   All section references are to the Internal

Revenue Code as amended.   Petitioners' motion argues that

the petition must be dismissed because the notice of final

partnership administrative adjustment (notice of FPAA) was

not mailed to the tax matters partner, as required by

section 6225(a), and was not mailed to notice partners, as

required by section 6223(a)(2), within the time required by

section 6223(d)(2).   Petitioners argue that, as a result of

respondent's failure to mail the notice of FPAA to notice

partners, all of the partnership items of the subject

partnership were converted into nonpartnership items,

pursuant to sections 6223(e) and 6231(b)(1)(D) and cannot

be readjusted in this partnership proceeding.


                      FINDINGS OF FACT

     Some of the facts have been stipulated by the parties.

The stipulation of facts filed by the parties and the

exhibits attached thereto are incorporated herein by this
                             - 3 -

reference.    We note that the stipulation of facts was not

signed by or on behalf of participating partners Wayne H.

Caldwell or John P. Haddock, Jr.     We also note that, at

trial, the parties orally agreed that a document entitled

"Stipulation of Facts Pursuant to Rule 122" should be

included in the record of this case.     Hereinafter, we

refer to that document as the Rule 122 stipulation.

     An evidentiary hearing was held on the subject cross-

motions to dismiss, and the parties presented testimonial

and documentary evidence in support of their motions.

Thereafter, the parties filed post-hearing briefs.     The

following findings of fact are based upon the record of the

evidentiary hearing, the stipulation of facts, and the Rule

122 stipulation filed by the parties.

     At the time the petition was filed, the Wayne Caldwell

Escrow Partnership (partnership) was a general partnership

organized and existing under the laws of the State of

Texas.   The partnership's mailing address was in Dallas,

Texas, at the office address of one of its partners,

Mr. Wayne H. Caldwell, who was also a certified public

accountant.

     The partnership had been formed in 1983 by

Mr. Caldwell for the purpose of leasing and distributing

laser disks and copies of movies.     The activities of the
                                  - 4 -

partnership were governed by a partnership agreement.

According to paragraph 3 of the partnership agreement,

there were 27 persons who were partners as of the end of

1983.     The following is a list of partners, their cash

contributions, and their percentage interests in the

partnership, as set forth in the partnership agreement:

                                                    Percent
          Partner                          Cash     Interest

        Paul Abney                        $5,800     2.6925
        Weldon Tillery                    14,500     6.7312
        John Haddock                       5,800     2.6925
        Bill Denny                        21,750    10.0968
        Charles Niven                      7,250     3.3656
        Roy Dimon                         14,500     6.7312
        Bob Jondle                        10,000     4.6422
        Sherrill Stone                    10,015     4.6449
        Janice Bigbee                     10,000     4.6422
        Nugent Oliphant                    2,000      .9284
        Pride Maintenance, Inc.            1,250      .5803
        John Schueneman                    6,000     2.7853
        Gene Nickerson                     2,800     1.2998
        Marilyn Clayton                   14,500     6.7312
        Al Slack                          10,000     4.6422
        Joe Oneal [sic]                   14,500     6.7312
        Wayne H. Caldwell                 14,500     6.7312
        Ray Woody                          1,250      .5803
        Charlton Thomas                    7,500     3.4817
        Steve Walker                       3,500     1.6248
        Gerald Ano                         5,500     2.5532
        J. P. Carney                       7,500     3.4817
        Bruce Graves                       2,000      .9284
        Jimmy Miller                       1,500      .6963
        B. F. Sammons                      3,000     1.3927
        Nolan Haines                      14,500     6.7312
        Don Moore                          4,000     1.8569

         Totals                           215,415   99.9959



On the last page of the version of the partnership

agreement contained in the record of this case, there
                            - 5 -

is the statement "Executed this     16th   day of   December ,

1983", followed by nine signatures, eight of which appear

to be the signatures of persons who are listed above as

partners, and one of which is struck through with a line.

     The partnership agreement states:     "The Managing

Partner shall be responsible for executing all legal

documents, * * * preparation of the partnership tax return,

[and] mailing of K-1's to individual partners".      The

agreement is blank in the space provided for the name of

the managing partner.   The partnership agreement does not

otherwise state how tax matters are to be handled on behalf

of the partnership.

     Paragraph 15 of the partnership agreement governs

voting and states as follows:


     The partners shall vote on all items of
     importance. Included in this area would be
     approval of advertising layouts, art work for
     product package, cable or television contracts,
     etc. Approval of such items will require a two-
     third's (2/3's) majority. Approval of major
     monetary disbursements, (other than incidental
     payments of bookkeeping fees, tax return
     preparation, or copy and mailing cost, and
     managing partner compensation) shall be by a
     unanimous vote. For example, an additional
     payment to the distributor for advertising or
     special promotion would require a unanimous vote
     by all members. Assessments can be made only by
     unanimous vote. Voting may be via telephone with
     later written confirmation.
                             - 6 -

     The partnership filed two Forms 1065, U.S. Partnership

Return of Income, for taxable year 1983.   The first return,

dated March 16, 1984, is signed by Mr. Caldwell in the

space provided for "Signature of general partner".      The

second return, dated April 9, 1984, is blank in the space

provided for the signature of the general partner, but

is signed by Mr. Caldwell in the space provided for

"Preparer's signature".   The two returns appear to be

identical, except for the different placement of

Mr. Caldwell's signature.   Each return claims an ordinary

loss of $28,429, which is composed of gross receipts of

$58, a deduction for "lease rental" of $2,087, and a

deduction for "distribution expense" of $26,400.    Attached

to both returns as "Schedule B" is a document entitled

"Election   to Pass Investment Tax Credit From Lessor To

Lessee".    According to that document, the lessor of a laser

disk, worth $8,436,271, agreed to transfer the investment

credit on the laser disk to the partnership.

     There are 27 Schedules K-1, Partner's Share of Income,

Credits, Deductions, Etc., attached to the partnership's

1983 return.   The ordinary loss of $28,429 reported by the

partnership is allocated among the 27 partners.    In

addition, the alleged fair market value of the laser disk,

$8,436,271, is allocated among the partners in accordance
                            - 7 -

with each partner's percentage interest in the partnership,

and is treated as "Property Eligible for Investment

Credit."

     The Form 1065, U.S. Partnership Return of Income, that

was promulgated by the Commissioner for 1983 did not

contain a space for the designation of the tax matters

partner, and nothing on, or attached to, either of the

returns filed on behalf of the partnership for 1983

expressly identifies Mr. Caldwell or anyone else as the

tax matters partner.   The document attached to both returns

as "Schedule B", entitled "Election to Pass Investment Tax

Credit from Lessor to Lessee", was executed on the

partnership's behalf by Mr. Caldwell as "Managing Partner".

     On or about March 28, 1985, respondent initiated an

examination of the partnership's 1983 return.    A represen-

tative of respondent sent a letter to Mr. Caldwell dated

March 28, 1985, which states:   "This is your notice of the

beginning of an administrative proceeding at the partner-

ship level with respect to partnership items."    The letter

further states:   "An appointment has been scheduled for

9:00 a.m., May 2, 1985, at 5952 Royal Lane, #177."    The

letter concludes with the following:
                            - 8 -

     Documents Requested:

     1.    One copy of the video is required, two
           copies if available.

     2.    One copy of partnership agreement.

     3.    One copy of all contracts signed and any
           agreements signed.

     4.    One copy of any lease agreements signed.

     5.    One copy of all cancelled checks (front &
           back), deposit slips and bank statements
           for year under examination.

     6.    One copy of the actual production cost of
           the video.

     7.    One copy of all correspondence with
           National Video or its associates.


Mr. Caldwell informed another partner, Mr. Bill Denny,

of the audit shortly after the date of that notice.

     Based upon the examination of the partnership's 1983

return, respondent's District Director for the Dallas

District sent a letter dated June 2, 1986, to "Wayne H.

Caldwell, Tax Matters Partner", informing the partnership

of certain proposed adjustments, and of the partnership's

right to protest the adjustments to respondent's Appeals

Office.   On August 1, 1986, Mr. Caldwell responded to the

letter from the District Director by transmitting his

"formal protest" to the proposed adjustments.    In his
                             - 9 -

protest letter, Mr. Caldwell stated that he was appealing

on behalf of "Wayne H. Caldwell only".

     On November 17, 1986, an Appeals officer in Dallas,

Texas, Mr. Dan Norstrud, sent a letter to Mr. Caldwell,

addressing him as "Tax Matters Partner".    Mr. Norstrud's

letter states that if Mr. Caldwell was "not appealing the

adjustments to the partnership but some possible future

adjustment to your personal return", then "your appeal

is premature and based on the new TEFRA laws is

inappropriate."    Mr. Norstrud's letter further informs

Mr. Caldwell that if he wished to appeal the proposed

adjustments on behalf of the partnership, then he must

supply the originals or copies of the documents that had

been requested during the examination.    Mr. Norstrud's

letter warns Mr. Caldwell that if he did not respond and

provide the requested documents, "including a copy or

original of the asset (Laser Disk)", then a notice of FPAA

would be issued.    Mr. Norstrud's letter also informs

Mr. Caldwell of the time limits for contesting a notice

of FPAA in court.

     On December 3, 1986, Mr. Caldwell wrote to

Mr. Norstrud and referred to himself as the "Tax
                               - 10 -

Matters Partner Wayne Caldwell, Escrow".         Mr. Caldwell's

letter states as follows:

     Dear Mr. Norstrud,

     I am sorry that the protest letter you received from me
     was inappropriate, because I was writing it on behalf of
     the Partnership as the tax matters partner.

     I will write another protest letter that will clearly show
     and indicate that it is for the partnership "Wayne
     Caldwell, Escrow." and send it to you as soon as possible.

     I am enclosing a copy of your letter, so we will be sure
     that we have the right entity that is to be handled.

     Sincerely yours,
     /s Wayne H. Caldwell
     Wayne H. Caldwell,
     Tax Matters Partner
     Wayne Caldwell, Escrow
     5952 Royal Lane, # 117
     Dallas, Texas 75230

     On January 7, 1987, prior to receiving a revised

protest letter from Mr. Caldwell, Mr. Norstrud received an

executed Form 872-O, Special Consent to Extend the Time to

Assess Tax Attributable to Items of a Partnership, on

behalf of the partnership.       Mr. Caldwell had signed the

form in the space reserved for the tax matters partner.

Following his signature, Mr. Caldwell included the title

"Managing Partner".       Mr. Norstrud signed the extension on

behalf of respondent.       No other partner executed a Form

872-O extending the period of limitations for 1983.             The

Form 872-O executed by Mr. Caldwell extended the period of

limitations on assessment as follows:
                           - 11 -


          (1) The amount of any Federal income tax
     with respect to any person on any partnership
     items(s) for the above named partnership for
     the period(s) ended December 31, 1983 may be
     assessed on or before the 90th (ninetieth) day
     after: (a) the Internal Revenue Service office
     considering the case receives Form 872-N, Notice
     of Termination of Special Consent to Extend the
     Time to Assess Tax Attributable to Items of a
     Partnership, from the partnership; or (b) the
     Internal Revenue Service mails Form 872-N to the
     partnership. If a notice of Final Partnership
     Administrative Adjustment is sent to the part-
     nership, the time for assessing the tax for
     the period(s) stated in the notice of Final
     Partnership Adjustment will not end until 1 year
     after the date on which the determination of the
     partnership items becomes final.


     Mr. Caldwell sent a revised protest letter that was

dated January 21, 1987, and signed on January 31, 1987.

In the letter, Mr. Caldwell identifies himself as "Tax

Matters Partner".

     Mr. Caldwell did not provide the documents that had

been requested by Mr. Norstrud, including a copy of the

video.   As a result, respondent's Appeals Office returned

the case to the District Office for further development

and summons enforcement.

     At a summons enforcement hearing before a United

States District Court, Mr. Caldwell was present as

a party, but he did not provide the records summoned.
                           - 12 -

Mr. Caldwell's uncooperativeness led to a contempt hearing.

The record of this case does not reveal the outcome of the

summons enforcement or contempt proceeding.

     On January 9, 1989, Revenue Agent James Schieck met

with Mr. Caldwell.   Mr. Caldwell would not allow Agent

Schieck to copy the partnership agreement, but he did allow

Agent Schieck to review it and take notes.    In his notes,

Agent Schieck observed that the space in the agreement

reserved for the name of the managing partner was blank,

and the agreement provided that all matters of importance

had to be decided by a two-thirds vote of the partners.

     On July 26, 1989, Agent Schieck sent a letter

addressed to the partnership:   "ATTN: Tax Matters Partner",

in which he requested formal designation of a tax matters

partner.   The agent enclosed forms that could be used for

that purpose, and he warned that if the partnership did not

designate a tax matters partner, then respondent would

designate one as provided by section 6231(a)(7).    On

July 27, 1989, Agent Schieck sent a letter to each of the

partners of the partnership in which he also requested the

designation of a tax matters partner.   He enclosed therein

a copy of his letter of July 26, 1989, addressed to the
                            - 13 -

"Tax Matters Partner".    Agent Schieck never received a

response to the letters he sent in July 1989.

     Sometime in 1989, Mr. Denny received a telephone call

from one of respondent's agents.     The agent said that

Mr. Denny was the tax matters partner because he held the

largest profits interest in the partnership.     However, no

action was taken by respondent, Mr. Denny, or any other

member of the partnership to formally designate Mr. Denny

as tax matters partner.

     In August 1989, Agent Schieck scheduled a conference

to administratively close the partnership's case.

Mr. Caldwell appeared at the conference and was

accompanied by Mr. Raymond Woody, another partner.     During

the conference, Mr. Caldwell asked to see the credentials

and delegation orders of respondent's representatives and

was otherwise uncooperative.    Because Mr. Caldwell had not

brought the documentation that Agent Schieck had requested,

the meeting was quickly concluded.

     Sometime thereafter, the case was returned to

respondent's Appeals Office in Dallas, Texas, and

Mr. Norstrud prepared a so-called FPAA package, a group

of documents, including a notice of FPAA and an explanation

of adjustments, that are required under respondent's
                             - 14 -

procedures to issue a notice of FPAA to the tax matters

partner and the notice partners.      See generally 1 Audit,

Internal Revenue Manual (CCH), sec. 4227.47, at 7233-20.

In the notice of FPAA prepared by Mr. Norstrud, respondent

determined that in computing the amount of property

eligible for investment credit for 1983, the partnership is

not entitled to take into account, as qualifying section 38

property, the alleged basis of the partnership in a video

disk in the amount of $8,436,271.      Mr. Norstrud transmitted

the FPAA package to the Austin Compliance Center in Austin,

Texas, for processing and mailing of the notice of FPAA to

the tax matters partner and notice partners.

     On January 28, 1991, respondent mailed duplicate

original notices of FPAA that are the subject of this

proceeding.   One of the notices of FPAA was addressed to

"Wayne H. Caldwell, Wayne H. Caldwell, Escrow".      A second

notice of FPAA was addressed to "Tax Matters Partner c/o

Wayne H. Caldwell Escrow."    Both notices were sent to "5952

Royal Lane #117, Dallas, Texas, 75230".      This is the street

address that was used on the partnership's 1983 returns and

is the address of Mr. Caldwell's business.      In this

opinion, we refer to the second notice of FPAA as the

generic notice of FPAA.
                          - 15 -

     Both notices of FPAA were sent by certified mail.

Before the letters were mailed, an employee of the Austin

Compliance Center prepared a U.S. Postal Service Form 3877

and entered on that form the certified mail number and the

name and address on the envelope of each of the letters.

A postal employee then verified the information on Form

3877 and mailed the letters.    The Form 3877 bears a U.S.

Postal Service cancellation stamp which shows the date,

January 28, 1991, and a U.S. Postal Service code for

Austin, Texas, "78760".

     On January 28, 1991, an employee of the Austin

Compliance Center also sent, by certified mail, copies

of the notice of FPAA to all 27 partners of the partner-

ship, including Mr. Caldwell and Mr. Denny.    Consistent

with respondent's established procedures, one of

respondent's employees at the Austin Compliance Center

obtained a computer-generated document entitled "FPAA

Certified Mail Listing A" which states that "Final

Partnership Administrative Adjustment for the Year(s)

indicated below have been sent to the following Taxpayers:

(Postage Fee Paid by IRS)".    There follows a list of the

certified mail number of each notice of FPAA to be sent,

together with the name, address, and Social Security number
                             - 16 -

of each addressee.    In this case, the list shows that 29

notices of FPAA were mailed to the 27 partners of the

partnership.    In the case of two partners, the list shows

that the notice of FPAA was mailed to a second address.

       The last page of the FPAA Certified Mail Listing A

contains the statement:    "Total No. of pieces received at

P.O.    29 ."   It also states "Postmaster (per name of

receiving employee)             Date:          ."    Following

the word "Date" is a date stamp and initials.       The date

stamp is not fully legible, but the legible portion reads

"Austin, Texas" and bears the U.S. Postal Service code

"78760" and the date "January, 1991".

       The Austin Compliance Center transmitted copies of

the notices of FPAA that had been stamped with the date,

January 28, 1991, to the Appeals Office in Dallas, Texas,

along with the FPAA Certified Mail Listing A.       Mr. Norstrud

received those documents in due course after January 28,

1991.

       At some time after January 28, 1991, Mr. Caldwell

wrote to Mr. Norstrud and complained that the mailing of

the notice of FPAA was "outside the statute of limitation

[sic]."    Mr. Caldwell's letter states as follows:
                           - 17 -
Dept. of the Treasury
Internal Revenue Service
1100 Commerce Street
Dallas, Texas 75242
Att: Mr. D. Norstrud

Reference   (a)   Form (Letter 1827(DO))dtd. Jun 02,1986
                  Exhibit 1 (attached thereto) dated Nov.
                  14,1985 by Mike Bedford

            (b)   Form Letter 1807(DO) dated July 26,1989
                  (certified mail # P 470 982 148) enclosed
                  summary report

            (c)   Letter to District Counsel from James M.
                  Schieck dated Sept. 1, 1989

Enclosure   (1)   Form Letter 1830(AO) dtd Jan.28,1991, to
                  Wayne H. Caldwell from Jacob C. Meyer,
                  Associate Chief, Appeals.

            (2)   Letter to H. Elliot from Caldwell dtd.
                  Aug.1,1986)[sic]



Dear Mr. Norstrud,

      I am in receipt of enclosure (1) document naming you as
the person to contact for the issuing Appeals section, regarding
the disposition of matters relating to Wayne H. Caldwell, Escrow
a partnership.

      At the time of the appeal in question, I was the Tax
Matters Partner for the above partnership and the protest and
appeal (see enclosure (2)) I sent to your section was in regard
to a proposed adjustment to the Partnership tax return (Form
1065) for the year 1983. Exhibit (1) to reference (a) set forth
certain statements and issues as the bases for the proposed
adjustments. These allegation [sic] were in error and I was
given 60 days to protest and appeal them.

      The Statements and Issues that were protested were later
amended and changed and new ones resubmitted as a summary report
attached to reference (b). A closing conference was scheduled
for August 28,1989, and the case was closed August 29,1989 (see
reference (c)).

      Based on the above ,it [sic] appears the enclosure (1)
letter is untimely from the appeal filed by enclosure (2) or is
an attempt to reopen the case. The latter places this action
outside the statute of limitation [sic], and I therefore
consider this letter my Notice to you that this activity is
outside the statute of limitation [sic] and Demand that you
                               - 18 -
     rescind enclosure (1) letter and cease the issuance of like
     letters to the other partners.

      Absent a rescission, a judicial review will be requested
concerning this matter.

           Thank you in advance for your cooperation.


                                         Wayne H. Caldwell
                                         5952 Royal Lane,#117
                                         Dallas, Texas 75230



"Enclosure (1)" to Mr. Caldwell's letter, "Form 1830(AO)

dtd Jan.28, 1991, to Wayne H. Caldwell from Jacob C. Meyer,

Associate Chief, Appeals", is a reference to the notice of

FPAA that had been sent to Mr. Caldwell.

     In an undated letter, Mr. Caldwell informed all of

the partners that a notice of FPAA had been issued by the

Internal Revenue Service.       Mr. Caldwell's letter to the

partners states as follows:

     RE: Partnership, Wayne H. Caldwell, Escrow
     Enclosure (1): Letter to IRS from Wayne H. Caldwell

     Dear Partner,
     Enclosure (1) is a copy of a letter I sent to the Internal
     Revenue Service, Mr. Dan Norstrud, regarding a “Notice of Final
     Partnership Administrative Adjustment” for the Wayne H.
     Caldwell, Escrow Partnership. They sent me this notice since I
     was the tax matters partner at the time the appeal was made back
     in August 1986.

     As I indicated in Encl. (1), the matter was closed as of August
     29,1989, after the closing conference of August 28,1989, I
     therefore asked for a rescission of the Adjustment Notice.

     This office has not as yet received a rescission, and I am
     assuming, the Internal Revenue Service (IRS) may be continuing
     this matter by contacting each partner individually. I wanted
     you to know what had been transmitted to the IRS at the part-
                                - 19 -
     nership level regarding this matter so you would have that
     information available if you would be responding to them.

     If you desire this office to be of further assistance, or
     service to you regarding this matter or any action that you may
     wish to take with the IRS, please send any copies of correspon-
     dence you have received from them any response you have made and
     one hundred dollars ($100) to open your account, and we will
     begin the research and will advise you of which course of action
     we recommend and can be ready to assist you if you so desire.

                                         Sincerely;

                                         Wayne H. Caldwell



     On June 5, 1991, Mr. Denny also wrote to Mr. Norstrud

regarding the notice of FPAA.        Mr. Denny's letter states

that it was his understanding that the matter had been

closed on August 29, 1989, and that the period of

limitations had expired.        Mr. Denny's letter states as

follows:


     Mr. Dan Norstrud
     Internal Revenue Service
     1100 Commerce St
     Dallas TX 75242

     Re:   Partnership, Wayne H. Caldwell, Escrow

     Dear Mr. Norstrud:

     It is my understanding this matter was closed as of
     August 29, 1989. The tax return of 1983 was in question,
     but I am sure the statute of limitations has now expired.

     I request that you send a letter of recission to the Tax
     Matters Partner, Mr. Wayne H. Caldwell and to me.

     I have attached a copy of Mr. Caldwell's letter to you.

                                         Sincerely


                                         Bill R. Denny
                              - 20 -




     Attached to Mr. Denny's letter is a copy of the letter

Mr. Caldwell had sent to Mr. Norstrud, quoted above.           The

date of Mr. Denny's letter, June 5, 1991, is 128 days after

the date on which respondent issued the notice of FPAA,

January 28, 1991.

     By letter dated June 13, 1991, Mr. Norstrud responded

to Mr. Denny.   Mr. Norstrud's letter states as follows:


     Dear Mr. Denny:

           In response to your letter dated June 5, 1991, the
     partnership referenced (Wayne H. Caldwell Escrow) has had a
     final determination made on the case. The FPAA (final part-
     nership administrative adjustment) has been issued. The tax
     matters partner has 90 days from the issuance date of the FPAA
     to file a petition with the Tax Court, District Court or Court
     of Claims if the proposed adjustments are not agreed to. If no
     petition is filed within the first 90 days the notice partners
     then have 60 days in which to file a petition with one of the
     Courts. If no petition is filed the case will be defaulted 150
     days after issuance of the FPAA. At this time the processes
     will begin to have any applicable adjustments made to the
     partners [sic] returns.

           If you have additional questions regarding the partner-
     ship return you should contact the tax matters partner,
     Mr. Caldwell.

                                         Sincerely,


                                         /s/ D.V. Norstrud

                                         Daniel V. Norstrud
                                         Appeals Officer


    Another partner, Mr. Gene A. Nickerson, also wrote

to respondent in response to the notice of FPAA.
                               - 21 -

Mr. Nickerson's letter, is addressed to "Dept. of the

Treasury" and is undated but bears the postmark June 7,

1991.   Mr. Nickerson's letter states as follows:

    Dept. of the Treasury
    Internal Revenue Service
    1100 Commerce Street
    Dallas, Texas 75242

    References   (1):Form Letter 1830(AO) dtd Jan.28,1991, to Gene
                 A. Nickerson from Jacob C. Meyer, Associate Chief,
                 Appeals

    Enclosure    (1):Letter to Don Northstud, [sic] from Wayne H.
                 Caldwell re disposition of matters relating to
                 Wayne H. Caldwell, Escrow a partnership.

    Dear Sir,

    I am in receipt of Reference (1), and Enclosure (1) is correspon-
    dence I have received from the tax matters partner which he sent
    to the Internal Revenue Service regarding the Wayne H. Caldwell,
    Escrow partnership tax adjustment.

    It is my understanding that this matter has been disposed of at
    the Partnership level and there is no need of anything else from
    the individual partners.

    If I can be of any further assistance please advise.

                                        Sincerely;


                                        /s Gene Nickerson

                                        Gene A. Nickerson


Attached to Mr. Nickerson's letter is a copy of the letter

that Mr. Caldwell had sent to Mr. Norstrud, quoted above.

We note that the reference to "Form Letter 1830(AO) dtd

Jan.28,1991, to Gene A. Nickerson from Jacob C. Meyer,

Associate Chief, Appeals" appears to be a reference to

the notice of FPAA.
                           - 22 -

     Mr. Norstrud received Mr. Nickerson's letter on

June 11, 1991, and replied to it on June 13, 1991.

Mr. Norstrud's reply to Mr. Nickerson is similar to the

letter he sent to Mr. Denny, quoted above.   It explains

that a notice of FPAA had been issued and details the

limitations periods for filing "a petition with the Tax

Court, District Court or Court of Claims".

     No petition for readjustment of the partnership items

that were adjusted by respondent in the notice of FPAA

mailed to the tax matters partner on January 28, 1991,

was filed by the tax matters partner within 90 days after

January 28, 1991, nor was a petition for readjustment filed

by any other partner within 150 days, after January 28,

1991.   The petition for readjustment at issue in this case

was not filed until April 23, 1993, 816 days after the

mailing of the notice of FPAA.   It was filed by five

partners other than the tax matters partner.   The names

of those partners are set forth in the caption of this

case, and they are referred to herein as petitioners.

     On March 7, 1994, Mr. Caldwell submitted a Notice of

Election to Participate pursuant to Rule 245(b) of the Tax

Court Rules of Practice and Procedure.   All Rule references

are to the Tax Court Rules of Practice and Procedure.    By

Order dated June 30, 1994, the Court granted leave and
                           - 23 -

filed the motion.   Mr. Caldwell thereby joined this

proceeding as a participating partner.   On July 27, 1994,

Mr. John P. Haddock, Jr., also submitted a Notice of

Election to Participate.   The Court granted leave and

filed the election on the same date.   On August 1, 1994,

Mr. Denny filed a Motion for Leave to File Notice of

Election to Intervene pursuant to Rule 245(a).   By Order

dated November 3, 1994, the Court granted Mr. Denny's

motion, and he intervened in this proceeding.    In acting on

Mr. Denny's motion, the Court accepted Mr. Denny's

representation that he is the tax matters partner.     The

Court did not make a determination to that effect.


                           OPINION

     The Wayne Caldwell Escrow Partnership is subject to

the unified partnership audit and litigation procedures

set forth in sections 6221 through 6231.   The petition for

readjustment, filed by five partners other than the tax

matters partner, asks the Court to readjust partnership

items from the partnership for taxable year 1983.

     In general, the phrase "partnership item" means any

item required to be taken into account under the Internal

Revenue Code, including the partnership's income, gain,

loss, deduction, or credit, to the extent that regulations
                           - 24 -

provide that such an item is more appropriately determined

at the partnership level than at the partner level.    Sec.

6231(a)(3); sec. 301.6231(a)(3)-1, Proced. & Admin. Regs.

The phrase "nonpartnership item" means an item which is not

a partnership item.   Sec. 6231(a)(4).

     The jurisdiction of this Court to readjust partnership

items depends upon the mailing of a valid notice of FPAA by

the Commissioner to the tax matters partner and the filing

of a timely petition for readjustment by the tax matters

partner or by a notice partner with an interest in the

outcome.   Sec. 6226(a) and (b); Rule 240(c); Seneca, Ltd.

v. Commissioner, 92 T.C. 363, 365 (1989), affd. without

published opinion 899 F.2d 1225 (9th Cir. 1990).   The

mailing of a valid notice of FPAA by the Commissioner to

the tax matters partner triggers the time period for filing

a petition for readjustment by either the tax matters

partner or a notice partner under section 6226(a) and (b)

and is a jurisdictional prerequisite to the commencement of

a partnership action.   Sec. 6226(a); Rule 240(c); Maxwell

v. Commissioner, 87 T.C. 783, 788-789 (1986).

     The tax matters partner has 90 days after the

Commissioner mails a valid notice of FPAA to the tax

matters partner in which to file a petition for readjust-

ment in this Court, in the District Court in which the
                             - 25 -

partnership's principal place of business is located, or

in the Court of Federal Claims.       Sec. 6226(a).   If the tax

matters partner fails to do so, any notice partner who has

an interest in the outcome has 60 additional days in which

to file such a petition.     Sec. 6226(b)(1).    If the petition

for readjustment is not filed by the tax matters partner

within 90 days or by a notice partner within 60 days after

the expiration of the 90-day period, as required by section

6226, then this Court lacks jurisdiction to readjust any of

the adjustments determined by respondent in the notice of

FPAA, and the petition must be dismissed.       E.g., Triangle

Investors Ltd. Partnership v. Commissioner, 95 T.C. 610

(1990); Genesis Oil & Gas, Ltd. v. Commissioner, 93 T.C.

562, 563-566 (1989).

     In the event that a court lacks jurisdiction to

consider a petition for readjustment because it was filed

by the tax matters partner beyond the filing deadline of

section 6226(a), then the court also lacks jurisdiction to

consider whether the notice of FPAA was issued beyond the

period of limitations for making assessments, set forth in

section 6229(a).   Genesis Oil & Gas Ltd. v. Commissioner,

supra at 564.   This is true because the issuance of a

notice of FPAA beyond the period of limitations does not

affect its validity.   Id.    Rather, the untimeliness of the
                           - 26 -

notice of FPAA is a defense in bar that can be waived and

is not a plea to the jurisdiction of the Court.    Wind

Energy Technology Associates III v. Commissioner, 94 T.C.

787, 789 (1990); Genesis Oil & Gas, Ltd. v. Commissioner,

supra at 564; see Rule 39; Crowell v. Commissioner, 102

T.C. 683, 693 (1994); Columbia Building, Ltd. v.

Commissioner, 98 T.C. 607, 611 (1992).

     In addition to the time limits for filing a petition

for readjustment, section 6226(d) provides that no partner

is eligible to file a petition for readjustment or to be a

party to such action unless the partner has an interest in

the outcome.   Section 6226(d) provides as follows:


     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.

          (2) To file petition.--No partner may file a
     readjustment petition under subsection (b) unless
     such partner would (after the application of
                           - 27 -

     paragraph (1) of this subsection) be treated as a
     party to the proceeding.


The above provision is an integral part of the action

described by section 6226(b).   See Amesbury Apts., Ltd.

v. Commissioner, 95 T.C. 227 (1990); Georgetown Petroleum-

Edith Forrest v. Commissioner, T.C. Memo. 1994-13; and

Madison Recycling Associates v. Commissioner, T.C. Memo.

1992-605, in which the petitions for readjustment were

filed by partners other than the tax matters partner, and

the Court considered and rejected the partners' contention

that assessment of the tax on the subject partnership items

was barred under the period of limitations on assessment.

     While an improper petition for readjustment under

section 6226 does not convey jurisdiction to readjust the

adjustments determined in the notice of FPAA, it may permit

the Court to determine the validity of the notice of FPAA,

and if the notice of FPAA is invalid, to dismiss the case

on that ground.   Triangle Investors Ltd. Partnership v.

Commissioner, supra at 613; Genesis Oil & Gas, Ltd. v.

Commissioner, supra at 564; see Holstein ET IV, Ltd. v.

Commissioner, T.C. Memo. 1992-716; cf. Frazell v.

Commissioner, 88 T.C. 1405 (1987).   In that event, the

Commissioner is foreclosed from assessing a deficiency in

tax, under normal circumstances, until a valid notice of
                            - 28 -

FPAA is issued.   Genesis Oil & Gas, Ltd. v. Commissioner,

supra.

     In order to be valid, a notice of FPAA must provide

adequate or minimal notice that the Commissioner has

finally determined adjustments to the partnership return.

Triangle Investors Ltd. Partnership v. Commissioner, supra

at 613; Chomp Associates v. Commissioner, 91 T.C. 1069,

1073-1075 (1988); Clovis I v. Commissioner, 88 T.C. 980,

982 (1987).   The validity of a notice of FPAA that has been

properly mailed is not contingent upon actual receipt by

either the tax matters partner or a notice partner.

Crowell v. Commissioner, supra at 692; cf. Yusko v.

Commissioner, 89 T.C. 806, 810 (1987).

     The parties to this case contend that the subject

petition for readjustment must be dismissed by the Court

for lack of jurisdiction.   Respondent's motion to dismiss

is based upon the fact that the petition for readjustment

was filed by partners other than the tax matters partner

more than 150 days after the date on which the notice of

FPAA was issued to the tax matters partner, and, thus,

was filed beyond the jurisdictional time limit for such a

petition, as set forth in section 6226(b)(1).   Respondent

does not seek dismissal of the instant petition on the

ground that petitioners do not have an interest in the
                            - 29 -

outcome of the proceeding, as defined by section 6226(d).

In this connection, we note that respondent denies that the

period of limitations expired before she mailed the notice

of FPAA to the tax matters partner and denies that

petitioners' partnership items became nonpartnership items.

Sec. 6226(d)(1).

       Respondent argues that, even if the subject notice

of FPAA was mailed after the expiration of the period of

limitations on assessments set forth in section 6229, the

petition must be dismissed for lack of jurisdiction because

it was not filed within the time permitted by section 6226

(b).    In this regard, respondent contends that this case

is governed by Genesis Oil & Gas, Ltd. v. Commissioner,

93 T.C. 562 (1989), in which we dismissed a petition for

readjustment for lack of jurisdiction because it had been

mailed to the Court after the filing deadline provided in

section 6226.    In that case, as mentioned above, we held

that we did not have jurisdiction to consider whether the

notice of FPAA had been issued beyond the period of

limitations on assessment set forth in section 6229.    Id.

at 565-566.

       Petitioners' motion to dismiss the instant petition is

based upon the allegation that respondent has not met her

burden of proving that the notice of FPAA was mailed to the
                          - 30 -

tax matters partner or to any other partner, or, if it was

mailed, it was not mailed within the time required by

section 6223(d)(2) because it was not mailed prior to

expiration of the period of limitations on assessment

prescribed by section 6229(a).    The thrust of petitioners'

argument is set forth in the following passage taken from

their post-trial brief:


     Therefore, when the FPAA   is late, it, by
     definition, violates the   requirements of Code
     §6223(d)(2). Of course,    it is even worse if the
     FPAA was never mailed to   the Tax Matters Partner
     or the notice partners.

          As a result, Petitioners maintain that
     the FPAA was not issued in accordance with
     Code §6223(d)(2). First, it is impossible for
     a notice partner to receive timely notice if the
     Tax Matters Partner has not timely received such
     notice or in fact has not received any notice at
     all. Second, it specifically violates the notice
     rules of Code §6223 when a notice partner does
     not receive the notice of FPAA. If such
     provisions of Code §6223(d)(2) have not been
     followed, Code §6231(b)(1)(D) and §6223(e) state
     that all partnership items become non-partnership
     items. The adjustments originally made at the
     partnership level must then be applied at the
     individual partner level.

          To reiterate, Petitioners' contention is
     that by itself, the lack of mailing and/or the
     late mailing of the FPAA to the Tax Matters
     Partner automatically violates the notice
     requirements of Code §6223(d)(2). [Record
     references omitted.]
                           - 31 -

     Petitioners argue that this Court's opinion in Genesis

Oil & Gas, Ltd. v. Commissioner, supra, does not resolve

the issues raised in their motion to dismiss.   Petitioners'

brief states as follows:


     Petitioners are requesting that the Court define
     the impact of the lapsing of the Statute of
     Limitations in this case differently than this
     Court did in Genesis. This is because there is
     evidence that indicates minimal notification was
     not given to each partner about the Internal
     Revenue Service adjustments made.


     As a preliminary matter, we must consider the first

ground for petitioners' motion to dismiss, their contention

that the notice of FPAA was not mailed to the tax matters

partner.   The mailing of a notice of FPAA to the tax

matters partner is a prerequisite to the assessment and

collection of a deficiency arising out of partnership items

or affected items.   Clovis I v. Commissioner, supra.

Section 6225(a) provides that the Commissioner is

foreclosed from assessing a deficiency attributable to any

partnership item before 150 days after a notice of FPAA is

mailed to the tax matters partner, or, if a proceeding is

begun in this Court during the 150-day period, before the

decision of the Court becomes final.   If the Commissioner

has not mailed a notice of FPAA to the tax matter partner

with respect to the adjustments that are the subject of
                             - 32 -

a petition for readjustment, then the petition for

readjustment must be dismissed for lack of jurisdiction.

Clovis I v. Commissioner, 88 T.C. 980 (1987); Maxwell v.

Commissioner, 87 T.C. at 789.    Respondent bears the burden

of proving that the notice of FPAA was mailed to the tax

matters partner, as well as the date on which it was

mailed.    Cf. Coleman v. Commissioner, 94 T.C. 82, 90

(1990); Cataldo v. Commissioner, 60 T.C. 522, 524 (1973),

affd. 499 F.2d 550 (2d Cir. 1974); August v. Commissioner,

54 T.C. 1535, 1537 (1970).

     Based upon the record in this case, there can be no

dispute about the fact that on January 28, 1991, respondent

mailed duplicate notices of FPAA by certified mail to the

street address listed on the partnership's 1983 return,

one copy addressed to "Wayne H. Caldwell, Escrow" and a

second copy, the generic notice of FPAA, addressed to "Tax

Matters Partner c/o Wayne H. Caldwell Escrow".    At trial,

respondent introduced U.S. Postal Service Form 3877, which

reflects the mailing of the duplicate notices of FPAA on

January 28, 1991, and petitioners have stipulated that the

generic notice of FPAA was mailed on that date.    Form 3877

is highly probative evidence of the fact and date of

mailing.    United States v. Ahrens, 530 F.2d 781, 784 (8th

Cir. 1976); Coleman v. Commissioner, supra at 90-91.
                           - 33 -

     Petitioners' contention that the notice of FPAA was

not sent to the tax matters partner is based upon the

assertion that Mr. Denny, who held the largest profits

interest in the partnership, was the tax matters partner

pursuant to section 6231(a)(7)(B), and that Mr. Caldwell,

who may have held himself out as the tax matters partner,

was not the tax matters partner because he was never

designated as such either by the Internal Revenue Service

or by the partnership.

     Petitioners assert that the notice of FPAA was not

mailed to Mr. Denny, the tax matters partner.    In order to

prove that fact, they rely upon a stipulation set forth in

the stipulation of facts filed in this case that "No FPAA

was ever sent to Bill Denny in the capacity of Tax Matter

[sic] Partner".   They also rely on a stipulation set forth

in the Rule 122 stipulation that "No FPAA was ever sent to

Bill Denny whose address is 4333 Willow Lane, Dallas,

Texas."   Finally, they rely on Mr. Denny's testimony that

he never received the notice of FPAA.

     In advancing the contention that the notice of FPAA

was not sent to the tax matters partner, petitioners fail

to take into account the fact that respondent mailed the

notice of FPAA not only to Mr. Caldwell but also to "Tax

Matters Partner c/o Wayne H. Caldwell Escrow".    The use of
                           - 34 -

such a generic notice of FPAA was suggested by Congress

during its consideration of the partnership audit and

litigation provisions in precisely the situation presented

in this case; that is, where "the identity of the TMP may

not be known to the Secretary".     H. Conf. Rept. 97-760, at

601 (1982), 1982-2 C.B. 600, 663.     The use of a generic

notice of FPAA is authorized by the temporary regulations

promulgated under section 6223, section 301.6223(a)-1T(a),

Temporary Proced. & Admin. Regs., 52 Fed. Reg. 6783

(Mar. 5, 1987), and has been approved by this Court.

Triangle Investors Ltd. Partnership v. Commissioner, 95

T.C. at 614; Chomp Associates v. Commissioner, 91 T.C. at

1072-1073; Barbados #7 Ltd. v. Commissioner, 92 T.C. 804,

807-808 (1989); Seneca, Ltd. v. Commissioner, 92 T.C. 363

(1989).   Based upon the generic notice of FPAA, we find

that respondent mailed the notice of FPAA to the tax

matters partner on January 28, 1991.     It is unnecessary for

us to resolve the dispute over the identity of the tax

matters partner in order to find that the notice of FPAA

was mailed to the tax matters partner.     Cf. Seneca, Ltd. v.

Commissioner, supra.

     Both the stipulation of facts and the Rule 122

stipulation state that the generic notice of FPAA was

mailed by respondent on January 28, 1991.     We find nothing
                            - 35 -

in either stipulation to preclude giving legal effect to

that notice.   The stipulation filed in this case that no

notice of FPAA was mailed to Mr. Denny "in the capacity of

Tax Matter [sic] Partner" reflects nothing more than what

actually took place.    Respondent mailed duplicate notices

of FPAA to Mr. Caldwell and to the "Tax Matters Partner".

Respondent did not mail a copy of the notice of FPAA

specifically addressed to Mr. Denny as tax matters partner.

Similarly, the Rule 122 stipulation states that "no FPAA

was ever sent to Bill Denny".      However, it does not state

that Mr. Denny was the tax matters partner at that time.

Petitioners argue that Mr. Denny was the tax matters

partner, but respondent argues that Mr. Caldwell was the

tax matters partner.    We have made no finding about the

identity of the tax matters partner, and none is necessary

to resolve this case.    See id.    Furthermore, we note that

the Rule 122 stipulation is contradicted by the FPAA

Certified Mail Listing which states that the notice of FPAA

was mailed to "Billy R & Beverly Denny, 4333 Willow Ln,

Dallas, TX 75244-7450".    We further note respondent's

assertion that the phrase "in the capacity of Tax Matters

Partner" was inadvertently omitted from the Rule 122

stipulation.
                           - 36 -

     Before discussing the other grounds for petitioners'

motion to dismiss, it is necessary to review the provisions

on which petitioners rely, the notice provisions set forth

in section 6223, and the period of limitations on assess-

ments set forth in section 6229.    We start with the notice

provisions.

     As applied to partnerships with fewer than 100

partners, like the subject partnership, the unified audit

and litigation procedures set forth in sections 6221

through 6233 require the Secretary of the Treasury or his

delegate to mail to each partner notice of the beginning

of an administrative proceeding at the partnership level,

and notice of the final partnership administrative

adjustment resulting from such a proceeding.     Secs.

6223(a), 7701(a)(11).   Section 6223 requires the Secretary

to mail notice of the beginning of the administrative

proceeding not later than 120 days before the day on which

the notice of FPAA is mailed to the tax matters partner.

Sec. 6223 (d)(1).   The statute requires the Secretary to

mail the notice of FPAA to each partner not later than 60

days after the day on which the notice of FPAA was mailed

to the tax matters partner.   Sec. 6223(d)(2).

     In the event that the Secretary fails to mail either

or both of the notices required by section 6223(a) to one
                           - 37 -

or more partners within the time period specified in

section 6223(d), the statute provides a comprehensive

remedy provision in section 6223(e).   Under the remedy

provision, the effect of the Secretary's failure to

provide timely notice depends upon whether the partnership

proceeding is finished or is still going on at the time the

Secretary mails "notice of the proceeding" to the notice

partner.   Sec. 6223(e)(2) and (3).

     In effect, each of the notice partners to whom a

timely notice was not mailed is entitled by section 6223(e)

to decide whether to treat his or her partnership items as

nonpartnership items.   If the partnership proceeding is

finished at the time the Secretary mails notice of the

proceeding to the notice partner, the partnership items of

the partner are treated as having become nonpartnership

items as of the day the Secretary mailed the partner notice

of the proceeding, unless the partner elects otherwise.

Sec. 6223(e)(2); sec. 301.6223(e)-2T(a)(2), Temporary

Proced. & Admin. Regs., 52 Fed. Reg. 6785 (Mar. 5, 1987).

That is, the partnership items are treated as

nonpartnership items unless the partner elects to take

advantage of any adjustment, decision, or settlement

agreement that is based upon the partnership proceeding.

Sec. 6223(e)(2).   If the proceeding is still going on, the
                          - 38 -

partner is treated as a party to the proceeding and the

partnership items are treated as partnership items, unless

the partner elects to have them treated as nonpartnership

items as of the day on which the Secretary mails the

partner notice of the proceeding.    Sec. 6223(e)(3); sec.

301.6223(e)-2T(b)(2), Temporary Proced. & Admin. Regs., 52

Fed. Reg. 6785 (Mar. 5, 1987).    Each partner makes an

independent election under section 6223(e).    Thus, it is

evident that this remedy provision is applied to each

partner on an individual basis.     Wind Energy Technology

Associates III v. Commissioner, 94 T.C. at 790-791.

       The remedy provision, section 6223(e), is one of

four events described by section 6231(b)(1) under which

partnership items of a partner become nonpartnership items.

Section 6231(b)(1) prescribes the date on which the change

will be deemed to take place for purposes of the unified

audit and litigation provisions.    In the case of section

6223(e), section 6231(b)(1)(D) provides that the date on

which the change occurs for purpose of the unified audit

and litigation procedures is the date on which the change

occurs under section 6223(e); that is, "the day on which

the Service mails the partner notice of proceeding."      Sec.

301.6223(e)-2T(a)(2) and (b)(2), Temporary Proced. & Admin.

Regs., supra.
                           - 39 -

     We turn to the period of limitations on assessment and

collection of the tax imposed by subtitle A of the Internal

Revenue Code.   Under the general rule set forth in section

6501, the Secretary is required to assess the tax within

3 years after the taxpayer's return is filed.    Sec.

6501(a).   In the case of the tax imposed on partnership

items, however, section 6229 sets forth special rules to

extend the period of limitations prescribed by section

6501.   See sec. 6501(o)(2).

     Section 6229(a) provides that, generally, the period

of limitations for assessing the tax attributable to

partnership items shall not expire before 3 years after

the date on which the partnership return was filed, or,

if later, the last day for filing such return.    This period

can be extended with respect to a particular partner by

agreement entered into by the Secretary and the partner,

or with respect to all partners by an agreement entered

into by the Secretary and the tax matters partner or a

person authorized by the partnership to enter into such

an agreement.   Sec. 6229(b).   If the Secretary mails a

notice of FPAA to the tax matters partner, section 6229(d)

suspends the running of the period of limitations on

assessment for the period during which an action can be

brought to challenge the notice of FPAA in court and for 1
                           - 40 -

year thereafter.   Finally, section 6229(f) provides that,

if one or more of the events described in section 6231(b)

take place, under which partnership items are converted

into nonpartnership items, and if the event takes place

before the expiration of the period of limitations on

assessment, then the period of limitations with respect to

the tax on those items will not expire before 1 year after

the conversion.

     In substance, petitioners argue that their petition

for readjustment must be dismissed and respondent must be

foreclosed from assessing any tax attributable to the

subject partnership items on two grounds.   As mentioned

earlier, the first ground is that respondent failed to mail

the notice of FPAA to the tax matters partner.   We have

disposed of that contention above.   The second ground is

that respondent failed to give petitioners the notice

required by section 6223(a)(2) within the time required by

section 6223(d)(2), with the result that their partnership

items for 1983 became nonpartnership items, pursuant to the

remedy provision set out in section 6223(e), and cannot be

adjusted in this proceeding at the partnership level.

     In support of their second ground, petitioners assert

that the notice of FPAA was never mailed to the notice

partners as required by section 6223(a)(2).   In further
                          - 41 -

support of that ground, petitioners assert that even if we

find that the notice of FPAA was mailed to the notice

partners, it was not mailed until after the expiration of

the period of limitations on assessment and, thus, was not

mailed within the time required by section 6223(d)(2).

In effect, petitioners contend that section 6223(d)(2)

incorporates the period of limitations on assessment set

forth in section 6229 and that expiration of the period

of limitations precludes timely notice under section

6223(d)(2) and, in effect, is one of the events described

by section 6231(b)(1) under which partnership items become

nonpartnership items.

     We agree that if the Commissioner, as the Secretary's

delegate, fails to mail the notice of FPAA to any notice

partner within the time prescribed by section 6223(d)(2),

and if the partnership level proceedings are finished at

the time the Commissioner mails notice of the proceedings

to the notice partner, then the partnership items of the

notice partner are treated as nonpartnership items under

section 6223(e)(2) unless that partner elects otherwise.

In this case, however, as discussed below, we find no

factual or legal basis on which to conclude that respondent

failed to mail the notice of FPAA to notice partners as
                           - 42 -

required by section 6223(a)(2) within the time required by

section 6223(d)(2).

     The record contains sufficient evidence to find that

the notice of FPAA was mailed to each notice partner on

January 28, 1991.   At trial, respondent introduced the

testimony of Mr. Norstrud, the Appeals Officer, who

described the general procedures used in respondent's

Dallas office to mail notices of FPAA to a tax matters

partner and notice partners, and described the steps that

he took in this case to prepare the FPAA package, including

the duplicate notices of FPAA, and to send the FPAA package

to the Austin Compliance Center where the notices of FPAA

were to be dated and mailed.   Mr. Norstrud testified that

in due course thereafter he received from the Austin

Compliance Center copies of the duplicate notices of FPAA

which had been stamped "January 28, 1991", and mailed to

the tax matters partner.   Mr. Norstrud also testified that

he received from the Austin Compliance Center the "FPAA

Certified Mail Listing A", described above, listing the

name and address of each of the 27 notice partners to whom

the notice of FPAA had also been mailed.   Respondent

introduced the FPAA Certified Mail Listing through the

testimony of Mr. Norstrud and a representative of the Ogden

Service Center who was the custodian of that document.
                           - 43 -

Finally, respondent introduced letters from Mr. Caldwell,

Mr. Denny, and Mr. Nickerson, which were received in

response to the notice of FPAA, and which corroborate the

mailing of the notice of FPAA to the tax matters partner

and the notice partners.

     Petitioners raise a variety of questions regarding the

admissibility and probative value of the FPAA Certified

Mail Listing A.   They argue that there was no proper

foundation for the introduction of that document inasmuch

as the individual who identified it at trial was an

employee of the Ogden Service Center, rather than the

Austin Compliance Center where the document was prepared,

and he had no firsthand knowledge regarding who prepared

the document, when it was prepared, or how it was prepared.

Petitioners argue that the FPAA Certified Mail Listing does

not prove the date of mailing of any of the letters on the

list, and that respondent has not introduced "green cards"

to show receipt of the notice of FPAA by Mr. Denny or any

of the other partners, or U.S. Postal Service Forms 3849

to show that delivery was attempted.   According to

petitioners, respondent violated her own procedures, set

forth in 5 Administration, Internal Revenue Manual (CCH),

section 7(11)62.2(5), at 22,863-5, which require the use

of U.S. Postal Service Form 3877(a) to prove certified
                             - 44 -

mailing.    Finally, petitioners note that there were 27

partners in the partnership and that the FPAA Certified

Mail List shows that 29 notices of FPAA were sent in this

case.   According to petitioners, this is an "indication of

the unreliability of" the FPAA Certified Mail Listing.

Petitioners argue:    "This one inconsistency is large enough

to be sufficient to bar * * * [the FPAA Certified Mail

Listing] as evidence as proof of mailing by itself."

     Each of the questions raised by petitioners regarding

the admissibility and probative value of the FPAA Certified

Mail Listing is meritless.    Respondent introduced the

subject document, not only through the testimony of a

representative of the Ogden Service Center, but also

through the testimony of Mr. Norstrud.    The representative

of the Ogden Service Center stated that he was custodian

of the FPAA Certified Mail Listing.    He explained that

the Ogden Service Center had taken over the duties of the

Austin Compliance Center and that the records of the Austin

Compliance Center had been transferred to the Ogden Service

Center.    He also described respondent's procedures for

mailing the notices of FPAA to notice partners and stated

that those procedures are set forth in the Internal Revenue

Manual.    Mr. Norstrud also explained respondent's

procedures for mailing notices of FPAA to notice partners
                            - 45 -

in respondent's Dallas, Texas, office, and he explained the

steps taken to mail the notices of FPAA in this case, which

were consistent with respondent's established procedures.

The evidence is sufficient to prove respondent's procedures

for mailing the notice of FPAA to notice partners, and to

prove that those procedures were followed in this case.   It

is not necessary for respondent to introduce the testimony

of other persons who recall each step in the process of

mailing the notice of FPAA at issue.   See generally

Coleman v. Commissioner, 94 T.C. 82 (1990); Cataldo v.

Commissioner, 60 T.C. 522 (1973); Dorsey v. Commissioner,

T.C. Memo. 1993-182.

     Petitioners' assertion that the use of the FPAA

Certified Mail Listing was contrary to respondent's

procedures is incorrect.    The FPAA Certified Mail Listing

is a three-part computer-generated form that is used by the

Internal Revenue Service to document the mailing of

notices of FPAA to notice partners.    See 1 Audit, Internal

Revenue Manual (CCH), sec. 4227.47, at 7233-20; Partnership

Control System Handbook, 3 Audit, Internal Revenue Manual

(CCH), sec. 524, at 8617, 8617-74 (hereinafter PCS

Handbook).    It is similar to U.S. Postal Service Form 3877

which is used to document the mailing of a notice of

deficiency.    See 5 Administration, Internal Revenue Manual
                            - 46 -

(CCH), sec. 7(11)62.2, at 22,863-5.    Respondent's

procedures call for the preparation and use of an FPAA

Certified Mail Listing, rather than U.S. Postal Service

Form 3877, to document the fact and date of mailing of the

notice of FPAA to notice partners.    Compare PCS Handbook,

supra sec. 524 with 5 Administration, Internal Revenue

Manual (CCH), sec. 7(11)62.2, at 22,863-5.

     We also reject petitioners' argument that respondent

should have introduced "green cards" to show receipt of

the notice of FPAA by a notice partner, or U.S. Postal

Service Forms 3849 to document attempted delivery of the

notice.    Section 6223(a) provides that "the Secretary shall

mail" the notices required by that section.    The statute

does not require the use of certified mail.    Respondent's

procedures require notices of FPAA to be mailed by

certified mail, but there is nothing in respondent's

procedures that calls for the use of a green card or return

receipt.    Similarly, if respondent had introduced U.S.

Postal Service Form 3849 to show attempted delivery of

certified or registered mail with respect to the notice of

FPAA mailed to one or more of the notice partners in this

case, that would be further evidence of the mailing of the

notice of FPAA.    However, the absence of U.S. Postal

Service Form 3849 from the record does not reasonably
                           - 47 -

permit an inference that the notice of FPAA was not mailed

to the notice partners.

     We also reject petitioners' final point that the FPAA

Certified Mail Listing is unreliable and should be excluded

from evidence by reason of the fact that it records the

mailing of 29 letters, whereas there were only 27 partners

in the partnership.   Petitioners fail to take note of the

fact that the notice of FPAA was mailed to petitioners

"Charles P. & Louetta J. Niven" at two different addresses,

and that the notice of FPAA was also mailed to "Robert L.

Jondele" at two different addresses.

     Petitioners' final contention is that, as a matter

of law, the expiration of the period of limitations on

assessment, prescribed by section 6229, prior to the

mailing of the notice of FPAA, made it impossible for

respondent to mail the notice of FPAA to notice

partners within the time required by section 6223(d)(2).

Petitioners contend that, as a result of the expiration

of the period of limitations, all of the partnership items

of the notice partners were automatically converted to

nonpartnership items under the remedy provision of section

6223(e).   In effect, petitioners contend that the period of

limitations on assessment set forth in section 6229 is
                           - 48 -

incorporated within section 6223(d)(2), the period for

mailing the notice of FPAA to notice partners.

     At the outset, we note that the above contention is

based upon the factual premise, disputed by respondent,

that the period of limitations had expired before

January 28, 1991, when the notice of FPAA was mailed to the

tax matters partner and notice partners.   As mentioned

above, petitioners assert that Mr. Denny, who held the

largest profits interest in the partnership, was the tax

matters partner.   They argue that Mr. Caldwell had not been

designated tax matters partner by either the partnership or

the Internal Revenue Service, and that he had no authority

to enter into an agreement to extend the period of

limitations on behalf of the partnership by executing Form

872-O.   Accordingly, petitioners argue that the period of

limitations on assessment expired on April 15, 1987,

3 years after the date on which the partnership's 1983

return was filed, pursuant to the general rule of section

6229(a).   Respondent argues the opposite; i.e., that

Mr. Caldwell was the tax matters partner or had authority

to bind the partnership, that he executed a valid agreement

to extend the period of limitations on assessment on Form

872-O, and that the period of limitations had not expired
                                - 49 -

on January 28, 1991, when respondent mailed notices of FPAA

to the tax matters partner and the notice partners.

     For the reasons discussed below, we reject

petitioners' legal conclusion that the expiration of the

period of limitations on assessment precludes respondent

from mailing notices of FPAA to the notice partners within

the time required by section 6223(d)(2).        In deciding this

case, therefore, it is unnecessary to resolve the factual

dispute between the parties about whether the period of

limitations had actually expired before the notice of FPAA

was mailed to notice partners.

     Petitioners' position is that the period of

limitations on assessment set forth in section 6229 is

incorporated in section 6223(d)(2), the period during which

the statute requires the Secretary to mail the notice of

FPAA to notice partners.        Section 6223(d)(2) provides as

follows:


     SEC. 6223(d). Period for Mailing Notice.--

                *   *   *   *    *   *   *

           (2) Notice of final partnership
           administrative adjustment.--

     The Secretary shall mail the notice specified in
     paragraph (2) of subsection (a) to each partner
     entitled to such notice not later than the 60th
     day after the day on which the notice specified
                          - 50 -

     in paragraph (2) was mailed to the tax matters
     partner.


     Section 6223(d)(2) states that the notice of FPAA

should be mailed to each notice partner not later than 60

days after it was mailed to the tax matters partner.

Section 6223(d)(2) says nothing about the period of

limitations, and there is no reason that it should.

Section 6226(a) gives the tax matters partner 90 days in

which to file a petition for readjustment, and section

6226(b) gives notice partners 60 days thereafter in which

to file a petition for readjustment.   Thus, the effect of

section 6223(d)(2), which requires the Commissioner to mail

the notice of FPAA to notice partners not later than 60

days after it was mailed to the tax matters partner, is to

give notice partners at least 90 days in which to consider

filing a petition for readjustment under section 6226(b).

See secs. 6223(d)(2), 6226(b)(1).

     Petitioners' position is that the expiration of the

period of limitations precludes issuance of a timely notice

under section 6223(d)(2) and automatically invokes the

remedy provision set forth in section 6223(e) under which

partnership items are converted to nonpartnership items.

Thus, under petitioners' theory, the expiration of the

period of limitations under section 6229 automatically
                           - 51 -

causes the conversion of partnership items to non-

partnership items, pursuant to section 6223(e), and is

one of the events described by section 6231(b).     To the

contrary, however, it is evident from section 6226(d),

quoted above, that the expiration of the period of

limitations is not one of the events described by section

6231(b) under which partnership items are converted to

nonpartnership items.   This is evident from the fact that

the period of limitations on assessment is referred to in

section 6226(d)(1)(B), whereas the events under which

partnership items become nonpartnership items are referred

to in section 6226(d)(1)(A).

     Finally, we must say a word about the position of the

other parties to this case, participating partners Wayne H.

Caldwell and John P. Haddock, Jr., and intervening partner

Bill R. Denny.   Intervening partner Denny has joined the

pleadings filed by petitioners.     He has presented nothing

other than the arguments advanced by petitioners, discussed

above.   Participating partner John P. Haddock, Jr., did not

appear at the hearing and has not filed any pleadings.

     The brief filed by Mr. Caldwell adopts the arguments

of petitioners, discussed above.     In considering those

arguments, we note that it is doubtful that the factual

assertions underlying petitioners' arguments apply to
                           - 52 -

Mr. Caldwell.   First, it is undisputed that Mr. Caldwell

signed an open-ended extension of the period of limitations

on assessment on Form 872-O.   Even if Mr. Caldwell was not

the tax matters partner or authorized by the partnership to

enter into such an agreement, as petitioners contend, the

agreement on Form 872-O executed by Mr. Caldwell would seem

to have the effect of extending the period of limitations

in Mr. Caldwell's individual case.   See sec. 6229(b)(1)(A).

Mr. Caldwell does not address this issue.   Second, it is

undisputed that the notice of FPAA was sent to Mr. Caldwell

and was received by him before the expiration of the period

of limitations, as extended by the agreement on Form 872-O.

     In order to bolster his argument that the period of

limitations had expired, Mr. Caldwell argues that the

agreement to extend the period of limitations on Form 872-O

was not valid because the Appeals officer who signed the

agreement on behalf of respondent, Mr. Norstrud, did not

have authority to do so.   We need not resolve this issue.

As discussed above, it is unnecessary to find whether the

period of limitations had actually expired before the

notice of FPAA was mailed to notice partners.   This is

because we reject petitioners' contention that the period

of limitations on assessment is incorporated within the
                          - 53 -

period for mailing the notice of FPAA to notice partners,

prescribed by section 6223(d)(2).

     For reasons discussed above,


                                An order and order of

                           dismissal will be entered

                           granting respondent's motion

                           to dismiss for lack of

                           jurisdiction and denying

                           petitioners' cross-motion.
