Opinion
30074-21 31759-21 32936-21
11-16-2023
ISLAND SHOALS HENRY 430, LLC, ISLAND SHOALS INVESTMENTS, LLC, A PARTNER OTHER THAN THE TAX MATTERS PARTNER, ET AL.,[1] Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
JOSEPH ROBERT GOEKE JUDGE
Pending before the Court in these cases are respondent's Motions to Dismiss for Lack of Jurisdiction on the basis of the Petitions' untimely filings under section 6226(b). Petitioners are notice partners in Island Shoals Henry 430, LLC (Island Shoals) as defined in section 6231(a)(8). On January 25, 2023, petitioners filed Objections to respondent's Motions in which they assert that neither they nor the tax matter partner (TMP) received a notice of final partnership administrative adjustment (FPAA). For convenience we refer to the FPAA directed to the TMP as the TMP FPAA and the copies directed to petitioners as the notice partner FPAAs. On April 20, 2023, we held an evidentiary hearing for the parties to offer testimony on the mailing of the TMP and notice partner FPAAs.
Unless otherwise noted, all statutory references are to the Internal Revenue Code, Title 26 U.S.C. (Code), in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Parties' Arguments
Petitioners argue that the TMP FPAA is invalid because respondent did not mail it to the correct address. They concede that the TMP FPAA correctly named both Island Shoals and the TMP and was mailed to the correct street address and suite number for the TMP. However, the address on the TMP FPAA also included an extra name. Petitioners argue that the extra name prevented the TMP FPAA's delivery and was a prejudicial error that invalidates the TMP FPAA. However, they have not filed cross-motions to dismiss on the basis of the TMP FPAA's invalidity. Respondent counters that the TMP FPAA was correctly addressed despite the extra name and the extra name was a nonprejudicial, inconsequential error that does not invalidate the TMP FPAA. Petitioners respond that if we find that the TMP FPAA is valid, the period for filing a petition under section 6226(b) should be equitably tolled.
Petitioners argue that the notice partner FPAAs were not actually mailed and if they were actually mailed, the notice partner FPAAs were incorrectly addressed. They argue that as a result of respondent's failure to mail the notice partner FPAAs, section 6223(e)(2) applies to convert the partnership items in the FPAA to nonpartnership items and the Court lacks jurisdiction in these partnership cases over the converted nonpartnership items. However, petitioners have not filed cross-motions to dismiss. Respondent counters that the notice FPAAs were in fact mailed to the notice partners' correct addresses.
In their Objections, petitioners also argued that the TMP FPAA is invalid because it is arbitrary, capricious, and clearly erroneous. They did not address this argument further in their briefs and we treat it as abandoned and do not consider it.
Background
The following facts are derived from the pleadings, the parties' Motions papers, Declarations, attached Exhibits, and the evidentiary hearing. Island Shoals had its principal place of business in Georgia when the Petitions were filed. Petitioners had their principal place of business in Georgia or residential addresses in Georgia when the Petitions were filed.
Island Shoals is a limited liability company (LLC) treated as a partnership for federal tax purposes. It filed a return for the short taxable year ending December 31, 2016 (2016), on which it reported a $27 million deduction for the charitable contribution of a conservation easement on land that had been purchased for less than $2 million. During 2016 Island Shoals was owned by (1) Island Shoals Investments, LLC (Investments), an LLC treated as a partnership for federal tax purposes, (2) Zhen Wang, (3) South Consulting Services, LLC (Southern Consulting), a single-member LLC wholly owned by Jeffrey Grant, and (4) Island Shoals Manag in southwestern Hart County er, LLC (Manager), a single-member LLC wholly owned by Daniel Carbonara. On its 2016 return Island Shoals designated Manager as TMP.
Mr. Carbonara was Manager's managing member and representative. Investments also designated Manager as TMP.
In November 2019 Mr. Carbonara moved his office from 460 East Paces Ferry Road to 470 East Paces Ferry Road, Suite 210 (suite 210 address). He used both addresses for Island Shoals, Manager, and Investments as well as multiple unrelated entities. He requested that the USPS forward mail from 460 East Paces Ferry Road to the suite 210 address. However, he has not asserted for which entities he requested USPS forwarding services. On January 13, 2020, Island Shoals submitted Form 8822-B, Change of Address or Responsible Party - Business, to the Internal Revenue Service (IRS) to update its address to the suite 210 address. Investments' address was not updated.
I. TMP FPAA
On February 27, 2020, respondent sent duplicate copies of the TMP FPAA for 2016 by certified mail with return receipt requested as shown on U.S. Postal Service (USPS) Form 3877, Firm Mailing Book For Accountable Mail, addressed as follows (generic and named TMP FPAA, respectively):
TAX MATTERS PARTNER OF ISLAND SHOALS HENRY 430 LLC JEFFERY R GRANT MBR 470 E PACES FERRY ROAD NE STE 210 ATLANTA GA 30305-3301 705
ISLAND SHOALS MANAGER LLC TAX MATTERS PARTNER OF ISLAND SHOALS HENRY 430 LLC JEFFERY R GRANT MBR 470 E PACES FERRY ROAD NE STE 210 ATLANTA GA 30305-3301 705
Petitioners concede that 470 East Paces Ferry Road NE is the correct street address for the TMP FPAA's mailing and that Manager and Island Shoals used suite 210. The administrative file produced by respondent does not include return receipts for the TMP FPAA or either copy of the TMP FPAA returned by the USPS as undeliverable.
During 2020 there was a mailroom in the office building at 470 East Paces Ferry Road NE. In his Declaration Mr. Carbonara asserts that during 2020 USPS mail was delivered to the mailroom and "[u]pon receipt of certified mail that was addressed to me or my office, the mailroom staff would regularly notify me and would hold the mail until I collected it." He further asserts that "[d]uring 2020, the mailroom staff did not notify me about any certified mail related to Island Shoals." He also stated that he regularly checked the mail at suite 210 including on or around February 27, 2020.
Mr. Carbonara and Mr. Grant assert that they did not receive the TMP FPAA. We assume that Mr. Carbonara intended to assert that Manager did not receive the TMP FPAA. Mr. Carbonara is also the representative of the TMPs for two unrelated entities. During 2020 he received TMP FPAAs addressed to the suite 210 address for those two entities and had the TMP timely file petitions with this Court.
Mr. Grant asserts that he did not work for Manager, Island Shoals, or Mr. Carbonara. He further asserts that he was not a tenant of the office building at 470 East Paces Ferry Road NE, did not use the suite 210 address to receive USPS mail, and did not receive any mail at that address.
Manager did not file a petition with this Court within the filing period under section 6226 which expired on May 27, 2020, assuming that the TMP FPAA is valid.
II. Notice Partner FPAAs
A. Mailing of Notice Partner FPAAs
Typically, notice partner FPAAs are mailed from the Brookhaven service center. The Brookhaven service center generated the notice partner FPAAs. However, sometime before April 6, 2020, the Brookhaven service center shut down because of the COVID-19 pandemic and was unable to print and mail the notice partner FPAAs.On April 3, 2020, Susan Kent, an IRS program analyst at the Ogden service center, assisted with the preparation of the notice partner FPAAs. She picked up the notice partner FPAAs dated April 6, 2020, from the National Print Service at the Ogden service center, printed schedules of the partnership adjustments which she attached to the notice partner FPAAs, and then hand-delivered them to the Ogden service center's certified mailing unit (Ogden certified mailing unit) for mailing. The notice partner FPAAs used the Brookhaven service center as the sender's return address because they were generated at that service center. April 6, 2020, was the last day that IRS employees were in the Ogden service center before it shut down because of the COVID-19 pandemic. On April 9, 2020, Ms. Kent emailed other IRS employees that "[w]e are not sure [that the notice partner FPAAs] were mailed Monday [April 6, 2020] before Ogden shut down, but we hear the plan was to mail all in the mail room. We will keep our fingers crossed."
On March 13, 2020, the President of the United States issued an emergency declaration in response to the COVID-19 pandemic. Petitioners have not alleged or established that there were any shut-down or stay-at-home orders in effect when the TMP FPAA was mailed on February 27, 2020, or the two following weeks.
Around June 30, 2020, Ms. Kent reviewed an FPAA certified mail listing (CML) to confirm that the notice partner FPAAs were mailed on April 6, 2020. The CML is computer-generated by the IRS to document the mailing of notice partner FPAAs. Respondent has produced the CML as proof of mailing of the notice partner FPAAs. It contains the notice partners' names and the addresses used to mail the notice partner FPAAs. The CML is stamped with a round USPS postmark that states "IRS OGDEN UT USPS-84201" and is dated April 6, 2020. See Clough v. Commissioner, 119 T.C. 183, 185-86 (2002) (finding postmark with "IRS OGDEN UTAH USPS-84201" was a valid USPS postmark based on a declaration of USPS mail processing clerk); Rivas, T.C. Memo. 2017-56, at 14-17 (involving "IRS OGDEN, UT" postmark on USPS Form 3877). The CML is signed on the line marked "Postmaster (Name of receiving employee)" but the name of the USPS employee who signed the CML is not fully legible. The CML shows that the IRS listed four pieces of mail on the CML for mailing (including the three notice partner FPAAs at issue) and the USPS received four pieces of mail. The CML contains USPS tracking numbers that correspond to the tracking numbers on the notice partner FPAAs. There is no line on the CML for an IRS employee's signature, and the CML is not signed by an IRS employee. The record does not indicate the IRS employee that prepared the CML.
The fourth piece of mail was a notice partner FPAA addressed to Manager and is not at issue here because Manager did not file a petition.
In Declarations filed with the Court, Mr. Wang, Mr. Grant, and Mr. Carbonara, as Manager's (Investments' TMP) representative, assert that they did not receive the respective notice partner FPAAs. On October 24, 2022, petitioners checked the USPS tracking information for the notice partner FPAAs and received the message "Label Created, not yet in system" and explanation that "[a] status update is not yet available on your package. It will be available when the shipper provides an update or the package is delivered to USPS. Check back soon."
B. Mailing of Notice Partner FPAAs
Schedules K-1, Partner's Share of Current year Income, Deductions, Credits, and Other Items, attached to Island Shoals' 2016 return show the following street or P.O. Box addresses for the notice partners (Schedule K-1 addresses):
Investments: 460 East Paces Ferry Road
Mr. Wang: Brannan Road
Southern Consulting: P.O. Box 1274
On July 16, 2019, Island Shoals filed a return for 2018 with Schedules K-1 that show these same addresses for the notice partners. Before respondent mailed the notice partner FPAAs on April 6, 2020, the IRS used the Schedule K-1 addresses for the notice partners on various forms and/or correspondence including Form 870-PT, Agreement for Partnership Items and Partnership Level Determinations as to Penalties, Additions to Tax, and Additional Amounts.
1. Mr. Wang's and Mr. Grant's Notice Partner FPAAs
Mr. Grant wholly owned Southern Consulting and is an indirect partner of Island Shoals. § 6231(a)(10) (defining an indirect partner as a person holding a partnership interest through one or more pass-through partners). For convenience we refer to Southern Consulting's notice partner FPAA as Mr. Grant's notice partner FPAA.
Instead of using the Schedules K-1 addresses for Mr. Wang and Mr. Grant, respondent mailed their notice partner FPAAs to their respective last known addresses according to their most recently filed personal returns. Respondent mailed Mr. Wang's notice partner FPAA to Leeds Garden Lane. Mr. Wang asserts that since 2016 his mailing address has been on Brannan Road. However, on October 15, 2019, he filed a personal return for 2018 that shows his address was on Leeds Garden Lane. He also filed a personal return for 2019 in October 2020 that shows Leeds Garden Lane as his address. Accordingly, respondent mailed Mr. Wang's notice partner FPAA to his last known address as stated on his most recently filed personal return.
Respondent mailed Mr. Grant's notice partner FPAA to him on Cotton Plantation Drive. Mr. Grant asserts that he sold the residence on Cotton Plantation Drive in 2011 to unrelated persons. He further asserts that Southern Consulting has not used Cotton Plantation Drive as its mailing address. On February 24, 2020, Mr. Grant filed late personal returns for 2014 and 2015 that show his address was on Cotton Plantation Drive. Accordingly, respondent mailed Mr. Grant's notice partner FPAA to his last known address as stated on his most recently filed personal return.
2. Investments' Notice Partner FPAA
Petitioners concede that Investments' notice partner FPAA used Investments' correct street address, 460 East Paces Ferry Road. It was mailed to Investments' Schedule K-1 address. No one updated Investments' address in accordance with the Treasury regulations. Investments' notice partner FPAA correctly stated its name in the address. However, the address included an extra name, Bilal Malik, and identified him as "SOLE MBR". Mr. Malik is Mr. Carbonara's attorney. We understand that Mr. Malik did not have a membership interest in Investments in 2016. Nor was he authorized as power of attorney to represent either Investments or Manager before the IRS. He was not authorized to receive IRS notices on Investments' behalf. He did not use 460 East Paces Ferry Road as an address to receive USPS mail and did not receive Investments' notice partner FPAA. Mr. Carbonara also asserts that Investments did not receive the notice partner FPAA.
Respondent inserted "NE" at the end of the street address. Petitioners have not challenged this insertion to the address as incorrect.
As described above, in April 2020 Mr. Carbonara did not have an office at 460 East Paces Ferry Road. He moved his office including the office for Investments and multiple other entities to the suite 210 address. He requested that the USPS forward mail addressed to 460 East Paces Ferry Road to the suite 210 address. The record does not indicate for which entities Mr. Carbonara requested forwarding services or that he specifically requested forwarding services for Investments.
III. Petitions' Filings
Petitioners assert that in late September 2020 Island Shoals' attorney learned from the revenue agent who was assigned to Island Shoals' audit that an FPAA had been issued. On October 19, 2020, IRS TEFRA Coordinator Dennis Serwick provided a copy of the TMP FPAA to Island Shoals' attorney, who is also petitioners' counsel in these cases. Counsel provided it to Mr. Carbonara. Petitioners assert that Manager had not received the TMP FPAA before October 19, 2020, and did not receive the TMP FPAA before the deadline for either the TMP or notice partners to file a petition with this Court if we were to measure the section 6226 filing periods by February 27, 2020, the date on the TMP FPAA.
On November 9, November 23, and December 6, 2021, Mr. Wang, Investments, and Southern Consulting, respectively, filed Petitions for readjustment of the partnership items. The TMP FPAA is attached to the Petitions. In the Petitions, petitioners assert that respondent failed to properly mail the TMP FPAA and notice partner FPAAs. Respondent provided copies of the notice partner FPAAs to petitioners during discovery in August 2022 and filed them with the Court on December 29, 2022.
Statement of the Law
I. Court's Jurisdiction
The Code requires respondent to mail an FPAA to the TMP and within 60 days mail copies of the FPAA to notice partners. § 6223(a) and (d)(2). The TMP has 90 days from the issuance of the TMP FPAA to file a petition, and, if the TMP does not file a petition, notice partners may file a petition during the subsequent 60 days. § 6226(b). Thus, notice partners have 150 days from the issuance of the TMP FPAA to file a petition. Because the mailing of a valid TMP FPAA begins the period for a notice partner to file a petition, a valid TMP FPAA is a prerequisite to our jurisdiction even when a notice partner filed the petition. See Harbor Cove Marina Partners P'ship v. Commissioner, 123 T.C. 64, 78 (2004).
Our jurisdiction depends on the mailing of a valid TMP FPAA and the timely filing of a petition by either the TMP or a notice partner. § 6226(a) and (b); Rule 240(c); see Harbor Cove Marina Partners P'ship, 123 T.C. at 78. Respondent has moved to dismiss because the Petitions were untimely filed. Petitioners counter that the TMP FPAA is invalid. Even when a petition is untimely filed, we have jurisdiction to determine the validity of the TMP FPAA and if the FPAA is invalid, to dismiss the case on that ground. See Triangle Inv. Ltd. P'ship v. Commissioner, 95 T.C. 610, 613 (1990); Genesis Oil & Gas, Ltd. v. Commissioner, 93 T.C. 564, 563-66 (1989); Clovis I v. Commissioner, 88 T.C. 980, 983 (1987). We must determine the proper basis for dismissal. See Triangle Inv. Ltd. P'ship, 95 T.C. at 613; Genesis Oil & Gas, Ltd., 93 T.C. at 564.
The Court of Appeals for the Eleventh Circuit, to which these cases are appealable, has not questioned our Court's authority to determine a TMP FPAA's validity where the petition was untimely under section 6226.
We must determine the proper basis for dismissal because if the TMP FPAA is invalid it may affect respondent's ability to assess tax resulting from the partnership adjustments. See, e.g., Seneca, Ltd. v. Commissioner, 92 T.C. 363, 365 (1989), aff'd without published opinion, 899 F.2d 1225 (9th Cir. 1990); Kennedy v. Commissioner, T.C. Memo. 2008-33.
II. Validity of FPAA
We determine the validity of the FPAA solely on the basis of the TMP FPAA because failure to mail a notice partner FPAA does not invalidate the FPAA. Treas. Reg. § 301.6223(e)-2(a); see Mine v. Commissioner, T.C. Memo. 1992-119; Starlight Mine v. Commissioner, T.C. Memo. 1991-59 at n.3. To be valid, the TMP FPAA must provide adequate or minimal notice that respondent has finally determined adjustments to the partnership return. Triangle Inv. Ltd. P'ship, 95 T.C. at 613; Chomps Assocs. v. Commissioner, 91 T.C. 1069, 1073-74 (1988). A TMP FPAA that is not properly addressed would not provide adequate and minimal notice. Chomps Assocs., 91 T.C. at 1073-75. The TMP's actual receipt of the FPAA is not required for the TMP FPAA to be valid. See, e.g., Crowell v. Commissioner, 102 T.C. 683, 692 (1994); Han Kook LLC I-D v. Commissioner, T.C. Memo. 2011-223.
III. Proper Address
Proper mailing of TMP and notice partner FPAAs requires that respondent mail them to the correct address. A TMP FPAA may be addressed to the TMP by name, or it may be a generic FPAA that is addressed to the title "tax matters partner." Chomps Assocs., 91 T.C. at 1073. In general for both TMP and notice partner FPAAs, respondent "shall use" the names and addresses for the partners shown on the partnership return for the taxable year at issue or additional information that is furnished to the IRS by the TMP or any other person in a written statement that is in accordance with the Treasury regulations. § 6223(c)(1) and (2). The regulations specify the required content of the written statement and when and where it must be filed. See Treas. Reg. § 301.6223(c)-1(b). If additional information is provided in accordance with the regulations, respondent "will use" the updated information. Id. para. (a). A special rule applies to indirect partners of a pass-through notice partner. See § 6223(c)(3). If the TMP or any other person furnishes to respondent information of an indirect partner's name, address, and indirect profits interest on the partnership return for the year at issue or in a written statement in accordance with the regulations, respondent "shall use" that information to mail the notice partner FPAA to the indirect partner in lieu of the pass-through notice partner. Id.
In certain instances, a taxpayer may provide updated address information in a manner that does not satisfy the written statements requirements of the regulations. In such instances, respondent may use such information. The regulations provide that respondent may use other readily available information in his possession such as a change in address reflected on a partner's personal return. Treas. Reg. § 301.6223(c)-1(f). However, respondent has no obligation to search his records for information that was not on the partnership return or updated in accordance with the regulations. Id. Where respondent has information about an indirect partner. respondent is permitted to send the notice partner FPAA to the indirect partner at his address in lieu of using the name and address of the pass-through notice partner. Murphy v. Commissioner, 129 T.C. 82, 87-88 (2007).
IV. Proof of Mailing
Respondent has the burden to prove that he properly mailed the FPAA by competent and persuasive evidence. Clough, 119 T.C. at 187. To meet his burden, respondent must introduce evidence showing that the FPAA was properly delivered to the USPS for mailing. Cataldo v. Commissioner, 60 T.C. 522, 524 (1973), aff'd, 499 F.2d 550 (2d Cir. 1974). Because the TMP's actual receipt is not required for the TMP FPAA to be valid, respondent is not required to prove delivery or actual receipt of the FPAA. Crowell, 102 T.C. at 692; see also Monge v. Commissioner, 93 T.C. 22, 33 (1989) (involving a deficiency notice).
When the existence of an IRS notice is not disputed, a properly completed USPS Form 3877 is prima facie evidence of the date and fact of mailing and raises a rebuttable presumption of official regularity in respondent's favor. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Clough, 119 T.C. at 187-88, Coleman v. Commissioner, 94 T.C. 82, 91 (1990); see also Keado v. United States, 853 F.2d 1209, 1213 (5th Cir. 1988). "There is a strong presumption in the law that a properly addressed letter will be delivered, or offered for delivery, to the addressee." Zenco Eng'g Corp. v. Commissioner, 75 T.C. 318, 323 (1980), aff'd. without published opinion, 673 F.2d 1332 (7th Cir.1981); see also Greenberg v. Commissioner, 10 F.4th 1136, 1162 (11th Cir. 2021). The IRS uses an FPAA CML to establish mailing of a notice partner FPAA. We have recognized that a properly completed CML is the equivalent of USPS Form 3877 and raises a rebuttable presumption of mailing in respondent's favor. See Clough, 119 T.C. at 185.
Respondent's production of USPS Form 3877 or a CML shifts the burden of production to the taxpayer to show that the FPAA was not actually or properly mailed. Coleman, 94 T.C. at 91. The taxpayer may rebut the presumption by affirmatively showing that respondent failed to follow his established procedures. Id.; see also United States v. Ahrens, 530 F.2d 781, 785 (8th Cir. 1976). Pietanza v. Commissioner, 92 T.C. 729, 739 (1989), aff'd without published opinion, 935 F .2d 1282 (3d Cir. 1991); Ruddy v. Commissioner, T.C. Memo. 2017-39, at *9, aff'd per curiam, 727 Fed.Appx. 777 (4th Cir. 2018); Portwine v. Commissioner, T.C. Memo. 2015-29, at *10, aff'd, 668 F.2d 838 (10th Cir. 2016). A taxpayer's self-serving testimony that it did not receive an IRS notice is insufficient to rebut the presumption. See Chinweze v. Commissioner, T.C. Memo. 2022-56, at 8; Biomage, LLC v. Commissioner, T.C. Memo. 2013-202, at *9. Generally, taxpayers have rebutted the presumption by establishing that respondent did not use the correct address for the IRS notice, i.e., the taxpayer's last known address, if applicable, or where the taxpayer establishes that he provided a change of address to the IRS and respondent failed to send the IRS notice to the new address.
USPS Form 3877 or CML that is incomplete or defective in some way does not create a rebuttable presumption. Where the presumption does not apply, respondent is subject to a burden of production without the presumption. Coleman, 94 T.C. at 91. USPS Form 3877 or CML with omissions or defects is probative of proper mailing and may be combined with additional evidence to meet respondent's burden. Id.; Portwine, T.C. Memo. 2015-29. Additional evidence can be evidence of the IRS's mailing practices corroborated by direct testimony or documentary evidence that the FPAA was placed in the USPS's custody. Clough, 119 T.C. at 187. Thus, the IRS's failure to comply precisely with established procedures may not be fatal if respondent presents evidence that is otherwise sufficient to prove mailing. Id. at 188. Where the taxpayer has rebutted the presumption, we weigh the evidence and determine on the basis of the preponderance of the evidence whether respondent mailed the FPAA. Chinweze, T.C. Memo. 2002-56, at 7.
V. Prejudicial Error in Address of IRS Notice
As part of his burden of proof of proper mailing, respondent must establish that an FPAA was properly addressed. Estate of McKaig v. Commissioner, 51 T.C. 331 (1969). The presumption created by the USPS Form 3877 and the CML only applies to a properly addressed IRS notice. See BM Constr. v. Commissioner, T.C. Memo. 2021-13, at *12 (citing Rivas, T.C. Memo. 2017-56, at *20). Errors in the address of an IRS notice may invalidate it. Seneca, Ltd., 92 T.C. at 365. We analyze the effect of errors in the address of an FPAA in the same way that we analyze errors contained in a notice of deficiency. See Sealy Power, Ltd. v. Commissioner, 46 F.3d 382, 386 (5th Cir. 1995); Petaluma FX Partners, LLC v. Commissioner, T.C. Memo. 2007-254.
A nonprejudicial, inconsequential error in the taxpayer's name or address does not invalidate a notice. See, e.g., Elings v. Commissioner, 324 F.3d 1110, 1113 (9th Cir. 2003); John C. Hom & Assocs. v. Commissioner, 140 T.C. 210, 213 (2013); Rio Grande Holdings, Inc. v. Commissioner, T.C. Memo. 1994-240 (holding that an IRS notice that contained a minor error in the taxpayer's name was valid); Bunyan v. Commissioner, T.C. Memo. 1991-371 (holding that inclusion of "IRA" after the taxpayer's name on an IRS notice was an inconsequential, minor error). It is well-settled that an error that did not impact the notice's delivery is a nonprejudicial, inconsequential error that does not invalidate the notice. See, e.g., Clodfelter v. Commissioner, 57 T.C. 102 (1971) (holding that an IRS notice was valid despite an error in the taxpayer's street address because it did not prevent the notice's delivery and the taxpayer timely filed a petition), aff'd, 527 F.2d 754 (9th Cir. 1975); Heaberlin v. Commissioner, 34 T.C. 58 (1960) (holding that a notice was valid where respondent used an incorrect street number but the USPS attempted delivery at the correct address); McMullen v. Commissioner, T.C. Memo. 1989-455 (holding that a notice was valid despite an error in the spelling of the street name where the USPS attempted delivery at the correct address, but the taxpayer refused delivery); Riley v. Commissioner, T.C. Memo. 1985-231 (holding that a notice was valid where USPS mail carriers testified that the misspelling of the street name would not have prevented delivery and the USPS business records established that it attempted delivery at the correct address). A timely filed petition cures any defect in the taxpayer's name or address on a notice because it shows that the taxpayer was not prejudiced by the error. Mulvania v. Commissioner, 81 T.C. 65, 68 (1983) (Mulvania I); Zaun v. Commissioner, 62 T.C. 278 (1974).
Errors that prejudice the taxpayer can invalidate a notice. Mulvania v. Commissioner, 769 F.2d 1376, 1380 (9th Cir. 1985), aff'g T.C. Memo. 1984-98 (Mulvania II). We have found that prejudice has occurred where the IRS's error prevented delivery of the notice in time for the taxpayer to file a timely petition. See, e.g., Violette v. Commissioner, T.C. Memo. 1994-173 (holding that a notice of deficiency with transposed numbers in the street number was invalid); Wilson v. Commissioner, T.C. Memo. 1997-515 (same); Mulvania II, T.C. Memo. 1984-98 (holding that a misaddressed notice returned to the IRS as undeliverable was invalid).
Whether a taxpayer has been prejudiced by an error in the name or address on an IRS notice is a question of fact. Looper v. Commissioner, 73 T.C. 690, 698-99 (1980). Failure to file a timely petition is a relevant factor, but alone it is not decisive that prejudice occurred. See Mulvania I, 81 T.C. at 68. We ask whether the taxpayer knew or reasonably should have known that the notice was directed to it despite the error. Rio Grande Holdings, Inc., T.C. Memo. 1994-240; Erickson v. Commissioner, T.C. Memo. 1991-97. Thus, we apply an objective standard as to whether the taxpayer was justifiably misled or deceived because of respondent's addressing error. Erickson, T.C. Memo. 1991-97. A taxpayer's diligence in responding to other IRS notices may be relevant to determine whether an error prejudiced the taxpayer because it tends to indicate that the notice at issue was not received (if it had been received, the taxpayer would have likely filed a petition timely consistent with his past filing). See Violette, T.C. Memo. 1994-173; Wilson v. Commissioner, T.C. Memo. 1997-515.
Discussion
Petitioners challenge the proper mailing of the TMP FPAA and the notice partner FPAAs. We must first decide whether inclusion of Mr. Grant's name in the address of the TMP FPAA was a prejudicial error that invalidates the TMP FPAA.
Petitioners' arguments concerning the mailing of the notice partner FPAAs become relevant only if we determine that the TMP FPAA is valid.
I. Validity of the TMP FPAA
Respondent has introduced USPS Form 3877 to satisfy his burden of proof that he mailed the TMP FPAA to Manager. USPS Form 3877 creates a rebuttable presumption of mailing, but the presumption applies only where the TMP FPAA was properly addressed. Accordingly, the primary issue with respect to the TMP FPAA is whether it was properly addressed.
The TMP FPAA correctly names the TMP and Island Shoals and was mailed to Manager's updated address including the correct suite number. Petitioners concede that the suite 210 address is the correct address for mailing the TMP FPAA. Accordingly, respondent satisfied the statutory and regulatory requirements for the TMP FPAA's mailing. Respondent's purported error is that the address included an extra name. We understand that it is not IRS's practice or procedure to include the name of the TMP's representative on a TMP FPAA and the IRS would not have included Mr. Carbonara's name on the TMP FPAA. See IRM pt. 4.31.2.7.2.5(1)(b) (May 10, 2019). Accordingly, Mr. Grant's name is an extra name. Prejudice is a question of fact and our caselaw applies an objective standard of whether the taxpayer should have known that the IRS notice was directed to it or whether the taxpayer was justifiably misled or deceived because of respondent's error. On the basis of the evidence presented, we find that Island Shoals and Manager were not justifiably misled or deceived by Mr. Grant's name on the TMP FPAA.
In his Declaration Mr. Carbonara described procedures of the mailroom staff for the suite 210 address during 2020. He asserts that the mailroom staff did not notify him that it received certified mail related to Island Shoals. Petitioners blame the inclusion of Mr. Grant's name for the nonreceipt of the TMP FPAA. They argue that the mailroom staff would not have recognized Mr. Grant's name. They state: "Even if an office mailroom did accept mail addressed to someone who is not a tenant in the building, e.g. Mr. Grant, it would not know where to deliver that mail. Upon examining the address and identifying a named person not associated with the addressed office suite, the most likely course of action would be to return the mail to the postal service as misaddressed."
Petitioners have not asserted that COVID-19 shutdown or stay-at-home orders were in effect when the TMP FPAA was mailed or whether the mailroom procedures described by Mr. Carbonara were affected by the COVID-19 pandemic. Mr. Carbonara describes the mailroom procedures during 2020 but does not indicate whether those procedures were in place before shutdown orders were implemented or implemented because of the pandemic.
We disagree. The TMP FPAA had the correct street address, the correct suite number, and the correct names of Island Shoals and Manager. Mr. Grant's name appears on the fourth line of the named TMP FPAAs below Manager's and Island Shoals' name. Mr. Grant's name should not have prevented the mailroom staff from contacting Mr. Carbonara to inform him that certified mail was received that was addressed to suite 210 and the entities he represented, Manager and Island Shoals. The mailroom staff should have reasonably known to deliver the TMP FPAA to suite 210 and should have contacted Mr. Carbonara even with Mr. Grant's name on the TMP FPAA. We find that the mailroom staff was not justifiably misled by Mr. Grant's name and it would not have been reasonable for the mailroom staff to refuse delivery of the TMP FPAA addressed to suite 210.
We find that if the mailroom staff was misled, it was because Mr. Carbonara failed to clearly instruct the mailroom staff about the mail addressed to numerous entities that he had use the suite 210 address in his activities to promote and implement conservation easement transactions. We do not know the name of the entity on the lease for suite 210. Mr. Carbonara may have leased the suite in his own name as petitioners assert that Mr. Carbonara is the tenant of suite 210, he had his office at suite 210, and he occupied the office space at suite 210, and describe Island Shoals' principal place of business as the office building where Mr. Carbonara had his office.
In the light of his decision to use the suite 210 address for numerous unrelated entities, Mr. Carbonara should have given clear instructions to the mailroom staff about what to do when the mailroom received mail addressed to suite 210 irrespective of the name of the entity or person to whom the mail was addressed. He should have directed the mailroom to contact him for any mail addressed to suite 210 or should have certainly directed the mailroom to contact him for any mail addressed to Manager or Island Shoals, which is how the TMP FPAA was addressed. If Mr. Carbonara gave the mailroom staff proper instructions about the names of the entities that used the suite 210 address, the mailroom staff should have readily recognized the names of both Manager and Island Shoals in the address of the TMP FPAA. We do not know what instructions Mr. Carbonara gave the mailroom staff. We provided petitioners with an opportunity to present witness testimony at an evidentiary hearing. However, petitioners chose not to have Mr. Carbonara or the mailroom staff testify. Instead, they rely on the vague assertions that Mr. Carbonara made in his Declaration about the mailroom procedures during 2020. He stated that the mailroom staff would contact him when certified mail was "addressed to me or my office." On the basis of Mr. Carbonara's Declaration the mailroom staff should have contacted him about the TMP FPAA because it was addressed to his office, suite 210. Accordingly, we find that if Manager did not receive the TMP FPAA as petitioners allege, it is because of Mr. Carbonara's failure to instruct the mailroom staff and not because of inclusion of Mr. Grant's name. Finally, we note that petitioners did not offer testimony of the USPS mail carrier who would have attempted delivery of the TMP FPAA to establish that the USPS did not know where to deliver the TMP FPAA. Instead, they rely on the lack of return receipts in the administrative file. Return receipts are not required to establish the presumption of delivery. Neither the Code nor the Treasury regulations require the IRS to request return receipt service when it mails a TMP FPAA.
We find that the named TMP FPAA was properly addressed with Manager's and Island Shoals' names, the correct street address, and the correct suite number. We further find that inclusion of Mr. Grant's name did not prevent delivery of the named TMP FPAA and thus inclusion of Mr. Grant's name is a nonprejudicial, inconsequential error that does not invalidate the TMP FPAA. If Manager did not receive the named TMP FPAA, it seems to us Manager did not receive it because Mr. Carbonara failed to properly instruct the mailroom staff as to the numerous entities that used the suite 210 address. A diligent taxpayer would have instructed the mailroom staff to contact him whenever mail was addressed to suite 210 especially in the light of the numerous entities that Mr. Carbonara had use that address. We cannot say that Mr. Carbonara exercised reasonable diligence to protect Island Shoals' rights. Taxpayers are free to organize their business affairs as they see appropriate including sharing an address with other businesses, but having made that choice they assume the responsibility for ensuring receipt of IRS notices. See Ramey v. Commissioner, 156 T.C. 1 (2021).
We note that Mr. Carbonara asserts that he did not receive the TMP FPAA. Under the Code and regulations, respondent is required to send the TMP FPAA to Manager, not Mr. Carbonara. Mr. Carbonara is Manager's sole member and representative.
We hold that the TMP FPAA is valid, and the Petitions were untimely filed in the absence of equitable tolling of the section 6226(b) deadline.
II. Mailing of Notice Partner FPAAs
Because we find that the TMP FPAA is valid, we consider petitioners' arguments that respondent did not actually mail the notice partner FPAAs and if he did, the notice partner FPAAs were not correctly addressed. As we explain further below, we make a preliminary determination that respondent actually mailed the notice partner FPAAs to petitioners at their correct addresses.
A. Proof of Mailing
Respondent has produced a CML to establish that he actually mailed the notice partner FPAAs. Petitioners argue that the CML is deficient and does not give rise to a presumption in respondent's favor. They have also attempted to rebut the presumption on the basis of purported complications with the mailing of the FPAAs from the COVID-19 pandemic, Ms. Kent's email expressing her concerns with the possible issues with the mailing, and petitioners' alleged nonreceipt of the notice partner FPAAs.
We find that the CML is completed, establishes that the notice partner FPAAs were mailed, and is sufficient to raise a rebuttable presumption of official regularity in respondent's favor. The CML did not omit any required information and is not defective. The Court of Appeals for the Eleventh Circuit, to which these cases are appealable, has stated that a CML is complete when it includes (1) the total number of pieces of mail listed by the sender and the total number of pieces of mail received by the USPS, (2) a USPS employee signature on the line labeled "Postmaster (Name of receiving employee)", and (3) a USPS postmark. Greenberg, 10 F.4th at 1162. Under this standard, the CML is complete.
Petitioners challenge two aspects of the CML, the postmark and the illegibility of the USPS employee's signature. They speculate that the round stamp on the CML is not an official USPS postmark and allege that an IRS employee placed the stamp on the CML because the stamp includes the phrase "IRS OGDEN UTAH". We understand that the stamp is an official postmark of the USPS. See Clough, 119 T.C. at 185-86 (finding postmark with "IRS OGDEN UTAH USPS-84201" was a valid USPS postmark based on a declaration of USPS mail processing clerk); Rivas, T.C. Memo. 2017-56, at 14-17 (involving "IRS OGDEN, UT" postmark on USPS Form 3877). Petitioners have not offered testimony of a USPS official or any other evidence that the stamp was not an official USPS postmark. Petitioners also complain that the USPS employee's signature is illegible. However, they have not produced any evidence that the person who signed the CML was not an USPS employee. The USPS postmark and signature establish that the USPS took possession of the notice partner FPAAs on April 6, 2020, for mailing.
Respondent has established that he followed established procedures in the mailing of the notice partner FPAAs. Ms. Kent asserted that on April 4, 2020, she delivered the notice partner FPAAs to the Ogden certified mailing unit. On the basis of IRS's established procedures, the certified mailing unit delivered the notice partner FPAAs and the CML to the USPS for mailing on April 6, 2020, as shown on the CML. See Coleman, 94 T.C. at 88 (explaining procedures for mailing FPAAs); Meyer v. Commissioner, T.C. Memo. 2013-268 (explaining that an IRS employee prepares a CML for all notices mailed on a particular date and delivers the CML to USPS and an USPS employee enters the number of envelopes at the bottom of the CML and signs and stamps it with a USPS postmark). Upon delivery to the USPS, a USPS employee stamped the CML with a USPS postmark dated April 6, 2020, establishing that the USPS received custody of the notice partner FPAAs on April 6, 2020. The USPS employee who received the notice partner FPAAs completed the CML, and the USPS returned the CML to the IRS as proof of mailing. See IRM pt. 21.1.7.16 (June 4, 2014). Moreover, respondent does not rely solely on the CML as proof of mailing. He has also produced copies of the notice partner FPAAs that bear the same mailing date, mailing addresses, and certified mail tracking numbers as the corresponding entries on the CML.
Petitioners have the burden to rebut the presumption of official regularity in the delivery of a properly mailed notice partner FPAA. To rebut the presumption, petitioners offer nothing more than conjecture that the notice partner FPAAs were not actually mailed. They speculate that the shutdowns of the Brookhaven and Ogden service centers caused irregularities in the notice partner FPAAs' mailing. While the notice partner FPAAs were mailed from a different service center than where they are usually mailed, that alone does not show that IRS mailing procedures were not followed. The IRS has procedures for mailing certified mail from the Ogden service center, and there is no evidence that the IRS failed to follow established procedures. Significantly, petitioners have not identified any specific procedure that the IRS failed to follow for mailing certified mail from the Ogden service center.
Petitioners also attempt to rebut the presumption on the basis of Ms. Kent's email. However, they appear to misunderstand the IRS's mailing procedures and as a result misread the email. We understand Ms. Kent's email to mean that she was concerned whether the Ogden certified mail unit would place the notice partner FPAAs in the custody of the USPS before the unit shut down on April 6, 2020. Around June 30, 2020, she reviewed the postmarked, completed CML that the USPS had returned to the IRS and confirmed that the USPS took possession of the notice partner FPAAs. Thus, the notice partner FPAAs were mailed on April 6, 2020, two days after Ms. Kent prepared the FPAA packages and hand-delivered them to the Ogden certified mailing unit. When Ms. Kent reviewed the CML, she dispelled her initial concerns as expressed in her email that the notice partner FPAAs may not make it out of the Ogden service center. Ms. Kent's email does not rebut the presumption created by the CML.
Petitioners failed to call any witnesses from the USPS or IRS about the mailing procedures that we described above. Nor did they present any testimony from USPS or IRS personnel about whether the shutdown and stay-at-home orders may have impacted the actual mailing of the notice partner FPAAs. Petitioners have not established that the USPS had any problems with delivery of the notice partner FPAAs because of COVID-19 pandemic. Nonreceipt does not override or otherwise invalidate respondent's proper mailing of the notice partner FPAAs as established by the CML. See, e.g., Crowell, 102 T.C. at 692; Han Kook LLC I-D, T.C. Memo. 2011-223. Likewise, nonreceipt of a notice partner FPAA would not give rise to section 6223(e) rights. Crowell, 102 T.C. at 692.
Petitioners' section 6223(e) remedy is not before us in these partnership cases. In the light of section 6223(e), we are uncertain whether it is appropriate to decide the issues that petitioners have raised about the notice partner FPAAs' mailing in a partnership case. Accordingly, we make a preliminary determination that respondent actually mailed the notice partner FPAAs to the correct addresses and give the parties on an opportunity to address whether the Court has jurisdiction in a partnership case to decide the issues raised by petitioners with respect to a notice partner FPAA's mailing.
Petitioners presented evidence of the USPS online tracking service for the notice partner FPAAs to rebut the mailing presumption. However, the tracking information does not establish that respondent did not mail the notice partner FPAAs. On October 24, 2022, petitioners entered the tracking numbers for the notice partner FPAAs into the USPS tracking service and received status messages of "Label created, not yet in system". Petitioners argue that the status message means that the notice partners FPAA were not mailed. However, they did not offer testimony from an USPS employee about the meaning of the status message. They suggest without any offer of proof that the status message means that the FPAAs were "never scanned into the shipping facility's system." Significantly, petitioners have not established that the message means that the USPS did not take possession of the notice partner FPAAs on April 6, 2020. They have not rebutted the presumption that respondent mailed the notice partner FPAAs.
Moreover, they made this query into the tracking services over two years after respondent mailed the notice partner FPAAs. According to the USPS website, the USPS maintains tracking records and proof of delivery for certified mail services only for two years. See www.faq.usps.com/s/article/USPS-Tracking-The-Basics (last accessed Oct. 18, 2023); see also Fong v. Commissioner, T.C. Memo. 2007-137 (citing the USPS website about tracking service), aff'd, (9th Cir. Mar. 6, 2009). Notably, the USPS would still have had the tracking service available when petitioners filed their Petitions, but it appears that they did not check the tracking numbers at that time. even though they asserted in the Petitions that respondent erred in the notice partner FPAAs' mailing.
In summary, the postmarked, properly completed CML is sufficient to establish that respondent properly and actually mailed the notice partner FPAAs on April 6, 2020. The CML creates a rebuttable presumption of delivery, and petitioners have not rebutted that presumption. Even in the absence of the presumption, we would find on the basis of the preponderance of the evidence that respondent has established that he mailed the notice partner FPAAs. He delivered them to the USPS for mailing and the USPS took possession of them on April 6, 2020. If petitioners did not receive the notice partner FPAAs as they allege, it is more likely that nonreceipt was caused by petitioners' own failure to properly update their addresses with the IRS, as discussed below, and not because respondent did not actually mail them.
B. Correct Addresses for Notice Partner FPAAs
Section 6223 places the burden on the TMP and the notice partners to inform respondent of changes in the notice partner's address. See Utah Bioresearch 1984, Ltd. v. Commissioner, T.C. Memo. 1989-612. Respondent can satisfy the notice requirements by mailing a copy of the FPAA to the address listed for the notice partners on Island Shoals' 2016 return. § 6223(c)(1). Respondent is also permitted to use any information in his possession to determine a taxpayer's address but is not required to search his records for an updated address. Murphy v. Commissioner, 129 T.C. at 87; Treas. Reg. § 301.6223(c)-1(f).
1. Investments' Notice Partner FPAA
Respondent mailed Investments' notice partner FPAA to its Schedule K-1 address, 460 East Paces Ferry Road. Neither Manager nor any other person updated Investments' address in accordance with the regulations to the suite 210 address. Accordingly, respondent satisfied the notice requirements of section 6223 and the regulations thereunder when he mailed Investments' notice partner FPAA to the Schedule K-1 address.
Petitioners argue that the address of Investments' notice partner FPAA contains a prejudicial error because it erroneously included Mr. Malik's name. Mr. Malik is Mr. Carbonara's attorney, but he is not otherwise associated with Investments or Manager (Investments' TMP). Investments' notice partner FPAA correctly named Investments as the notice partner and correctly stated Investments' street address. Thus, Investments' notice partner FPAA was properly addressed in accordance with the Code and regulations, and Mr. Malik's name was an extra name.
We find that inclusion of Mr. Malik's name was a minor, inconsequential error that did not prevent delivery of the notice partner FPAA to Investments. Mr. Carbonara requested that the USPS forward mail from the 460 East Paces Ferry Road to the suite 210 address. However, as with the TMP FPAA, we find that if Investment did not receive the FPAA, it was because Mr. Carbonara failed to properly instruct the mailroom staff to anticipate mail addressed to Investments. Mr. Carbonara's statements in his Declaration about Investments' receipt of USPS mail at the suite 210 address are vague and do not satisfy us that he properly instructed the mailroom staff about mail addressed to Investments. We find that had Mr. Carbonara clearly instructed the mailroom staff, inclusion of Mr. Malik's name would not have reasonably misled the mailroom staff that lnvestments' notice partner FPAA was intended for Investments.
2. Mr. Wang's Notice Partner FPAA
Petitioners argue that respondent mailed Mr. Wang's notice partner FPAA to the wrong address. Respondent mailed Mr. Wang's notice partner FPAA to his last known address as shown on his most recently filed return, which he filed on October 15, 2019, less than six months before his notice partner FPAA was mailed.
Petitioners argue that section 6223(c)(1) mandates that respondent mail Mr. Wang's notice partner FPAA to his Schedule K-1 address. They argue that the Treasury regulation section 301.6223(c)-1(f) which allows respondent to use other information in his possession contradicts section 6223(c)(1) and is invalid under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). They argue that respondent cannot disregard a statutory directive that requires that he mail a notice partner FPAA to the Schedule K-1 address. While petitioners tersely state that the regulation is not entitled to deference, they have not made a serious challenge to the validity of the regulation. They have not offered any specific legal argument for us to find that the regulation is invalid. We find it is valid.
Section 6223(c) does not mandate use of the Schedule K-1 address when that subsection is read in its entirety. Petitioners cite only subsection (c)(1). Section 6223(c)(1) provides that respondent shall use the names, addresses, and profits interests shown on the partnership return "except as provided in paragraphs (2) and (3)." Relevant for purposes of Mr. Wang's notice partner FPAA, section 6223(c)(2) allows respondent to prescribe regulations for the use of additional information that the TMP or any other person furnishes to him. It states that respondent "shall use additional information" that is furnished to him in accordance with the regulations.
Thus, section 6223(c)(2) allows respondent to promulgate regulations for the TMP or other persons to furnish additional information.
The regulations provide for respondent's different obligations with respect to the additional information depending on how the taxpayer provides the information. Treasury regulation section 301.6223(c)-1(a) provides that respondent "will use additional information as provided in this section." Paragraph (b) then gives the procedure for furnishing "additional information." Specifically, if the TMP or any other person provides the information in a written statement that contains all the information listed in Treasury regulation section 301.6223(c)-1(b), respondent must use that information. Mr. Wang did not provide additional information pursuant to paragraph (b). Accordingly, paragraph (f) of the regulation applies. Paragraph (f) provides further direction to the IRS about additional information provided by the taxpayer although not in accordance with paragraph (b). Under paragraph (f), if the TMP or any other person provides additional information in a manner that does not satisfy the written statement requirements of the regulations, respondent may, but is not required to, use the additional information. Treas. Reg. § 301.6223(c)-1(f); see Crowell, 102 T.C. at 692-93.
Respondent can satisfy the section 6223(c) notice requirements by mailing the notice partner FPAA to Mr. Wang's Schedule K-1 address. See § 6223(c)(1). However, the statute and regulations do not demand that he use the Schedule K-1 address. The statute directs the Secretary to promulgate regulations, and under the regulations, respondent is entitled to use readily available information in his possession to determine a notice partner's mailing address. See Treas. Reg. § 301.6223(c)-1(f). Paragraph (f) allows respondent to use information that he discovers on his own. Block Devs., LLC v. Commissioner, T.C. Memo. 2017-142. Here it was Mr. Wang himself that provided the Leeds Garden address on his personal returns.
When preparing to mail Mr. Wang's notice partner FPAA, respondent did just that. He reviewed Mr. Wang's most recently filed personal return and learned that he was using Leeds Garden Lane as his address. Respondent relied on additional information that Mr. Wang himself provided. Based on this information, respondent mailed Mr. Wang's notice partner FPAA to him on Leeds Garden Lane in a good faith effort to notify him of the Island Shoals' partnership adjustments pursuant to regulation section 301.6223(c)-1(f). See Crowell, 102 T.C. at 692-93. Accordingly, respondent has satisfied the notice requirements of section 6223 with respect to Mr. Wang's notice partner FPAA.
3. Mr. Grant's Notice Partner FPAA
Petitioners argue that respondent mailed Mr. Grant's notice partner FPAA to the wrong address. They argue that respondent should have mailed it to the Southern Consulting's Schedule K-1 address. Instead, respondent mailed it to Mr. Grant at Cotton Plantation Drive. Petitioners assert that Southern Consulting has never used Cotton Plantation Drive as its address to receive USPS mail.
When respondent mailed the notice partner FPAAs on April 6, 2020, he had information that established that Mr. Grant was an indirect partner in Island Shoals through his sole ownership of Southern Consulting. Respondent also had information establishing Mr. Grant's name, address, and indirect profit interest. As we stated above, section 6223(a) provides two exceptions for the use of Schedule K-1 addresses. Relevant for Mr. Grant's notice partner FPAA is section 6223(c)(3). When he has such information about an indirect partner, respondent is permitted to mail the notice partner FPAA to the indirect partner in lieu of mailing it to the pass-through partner. See Taurus FX Partners, T.C. Memo. 2013-68, at *13-*14. This is what respondent did in satisfaction of the statute and regulations. See Murphy, 129 T.C. at 87-88. Respondent mailed Mr. Grant's notice partner FPAA to his last known address as shown on his most recently filed returns. Respondent used information that Mr. Grant himself furnished. Accordingly, we conclude that respondent properly mailed Mr. Grant's notice partner FPAA to the correct address.
C. Jurisdiction over Notice Partner FPAAs' Mailing
The parties have asked the Court to determine whether respondent properly mailed the notice partner FPAAs. We find that the CML creates a rebuttable presumption of delivery in respondent's favor that respondent mailed the notice partner FPAAs on April 6, 2020, to petitioners' correct addresses. Petitioners have not rebutted that presumption with competent and persuasive evidence on the basis of the record before us. It seems more likely than not that if petitioners did not receive the notice partner FPAAs as they allege, it was their own fault. Respondent used the addresses that Mr. Grant and Mr. Wang furnished on their personal returns. Investments failed to update its address in accordance with the regulations so respondent properly mailed its notice partner FPAA to the Schedule K-1 address. While Mr. Carbonara requested USPS forwarding services, he failed to clearly instruct the mailroom staff about mail addressed to Investments at the suite 210 address.
If we had found that respondent failed to mail a notice partner FPAA, it would not have affected the validity of the TMP FPAA. Instead, the affected notice partner is provided with a statutory remedy under section 6223(e) that gives the partner the option to elect to have his share of the partnership items be treated as nonpartnership items. See, e.g., Crowell, 102 T.C. at 692. Taurus FX Partners, LLC v. Commissioner, T.C. Memo. 2013-168; Wayne Caldwell Escrow P'ship v. Commissioner, T.C. Memo. 1996-401; Mine, T.C. Memo. 1992-119. The parties agree that if respondent failed to mail a notice partner FPAA to the correct address, the affected notice partner would have had a statutory remedy under section 6223(e). When an individual partner elects to have his share of partnership items become nonpartnership item, the normal deficiency procedures apply for that partner. See § 6231(b)(1)(D); Manas v. Commissioner, T.C. Memo. 1992-454. An election could deprive the Court of jurisdiction over a partnership case where there are no partnership items left to adjudicate. See Pacific Mgmt. Grp. v. Commissioner, T.C. Memo. 2018-131, at *36; see also § 6226(f) (defining our jurisdiction in partnership cases).
The manner of the election differs depending on whether the partnership case is ongoing or finished when respondent mails notice of the partnership proceeding to the affected notice partner. See § 6223(e)(2) and (3).
Given the section 6223(e) remedy available to notice partners who were not mailed notice partner FPAAs, we are uncertain whether we have jurisdiction in these partnership cases to determine issues relating to the notice partner FPAAs' mailing. We must address whether we have jurisdiction in a partnership case to decide whether respondent mailed the notice partner FPAAs including whether we have jurisdiction to decide that issue where the notice partners filed the Petitions untimely in the absence of equitable tolling.
No party has expressly addressed our jurisdiction to determine the proper mailing of a notice partner FPAA in a partnership case. We are a court of limited jurisdiction and may exercise jurisdiction only to the extent authorized by Congress. § 7442; Naftel v. Commissioner, 85 T.C. 527, 529 (1985). We have jurisdiction to determine our jurisdiction. E.g., U.S. Auto Sales, Inc. v. Commissioner, 153 T.C. 94, 97 (2019). We may raise our jurisdiction to decide an issue sua sponte at any time. David Dung Le, M.D., Inc. v. Commissioner, 114 T.C. 268, 269 (2000), aff'd, 22 Fed.Appx. 837 (9th Cir. 2001). When there is a jurisdictional question, we must address it before deciding the case. Stewart v. Commissioner, 127 T.C. 109, 112 (2006). Notice partners have the opportunity for judicial review of whether respondent mailed a notice partner FPAA upon receiving an affected item notice of deficiency. See e.g., Murphy, 129 T.C. at 87-88; Crowell, 102 T.C. at 692; Estate of Simon v. Commissioner, T.C. Memo. 2013-174; McClaskey v. Commissioner, T.C. Memo. 2008-147. Accordingly, it seems unnecessary to decide the questions underlying the notice partner FPAAs' mailing in these partnership cases.
We will treat our conclusion that respondent actually and properly mailed the notice partner FPAAs to petitioners as a preliminary determination and invite the parties to brief the issue of whether the Court has jurisdiction in a partnership case to decide whether respondent mailed a notice partner FPAA. The parties should address whether our jurisdiction to do so should be affected by the fact that the Petitions were filed by notice partners and were untimely filed in the absence of equitable tolling. To clarify, we do not want the parties to address further any factual or legal issues relating to our preliminary determination that the notice partner FPAAs were actually and correctly mailed. We will not consider any further arguments on the issues relating to the notice partner FPAAs' mailing that we have already determined herein. The parties should also address petitioners' argument that the section 6226(b) period for filing a petition in a partnership case is a nonjurisdictional deadline that is subject to equitable tolling where the circumstances of the untimely filing warrant it.
Our preliminary determination that respondent actually mailed the notice partner FPAAs to petitioners at their correct addresses cannot be used as collateral estoppel or res judicata in any future cases unless we determine that we have jurisdiction in these partnership cases to decide issues relating to respondent's mailing of the notice partner FPAAs.
Upon due consideration, it is
ORDERED that the TMP FPAA is valid and the Petitions were not timely filed under section 6226(b) in the absence of equitable tolling. It is further
ORDERED that the parties are to file supplemental briefs on or before February 2, 2024, addressing (1) whether the Court has jurisdiction in a partnership case under section 6226(f) to determine whether respondent mailed notice partner FPAAs and (2) whether the section 6226(b) period for filing a petition with this Court for review of partnership adjustments is a jurisdictional or nonjurisdictional deadline, and if it is a nonjurisdictional deadline, whether it is subject to equitable tolling. It is further
ORDERED that respondent's Motions to Dismiss for Lack of Jurisdiction as Supplemented are held in abeyance pending consideration of the issues relating to equitable tolling.