DOJ Argues Partnership Didn’t File Return, Adjustments Were Timely

 SEAVIEW TRADING, LLC,
AGK INVESTMENTS, LLC, TAX MATTERS PARTNER,
Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

ON APPEAL FROM THE DECISION
OF THE UNITED STATES TAX COURT

BRIEF FOR THE APPELLEE

DAVID A. HUBBERT
Acting Assistant Attorney General

ARTHUR T. CATTERALL (202) 514-2937
ANTHONY T. SHEEHAN (202) 514-4339
Attorneys
Tax Division
Department of Justice
Post Office Box 502
Washington, D.C. 20044

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TABLE OF CONTENTS

Table of contents

Table of authorities

Glossary

Statement of jurisdiction

Statement of the issue

Applicable statutes and regulations

Statement of the case

Summary of argument

Argument

Conclusion

Statement of related cases

Addendum

Certificate of compliance

TABLE OF AUTHORITIES

Cases:

Allnutt v. Commissioner, 523 F.3d 406 (4th Cir. 2008)24, 27-28, 38, 40, 56

Appleton v. Commissioner, 140 T.C. 273 (2013)24

Arbern Co. v. Commissioner, 120 F.2d 424 (4th Cir. 1941)44

Badaracco v. Commissioner, 464 U.S. 386 (1984)23, 35, 48

Beard v. Commissioner, 82 T.C. 766 (1984), aff'd, 793 F.2d 139 (6th Cir. 1986)14-15, 18-19, 22, 48-49, 55, 57-58

Berenbeim v. Commissioner, T.C. Memo. 1992-272, 1992 Tax Ct. Memo LEXIS 29450-51, 55

Church of Scientology v. United States, 920 F.2d 1481 (9th Cir. 1990)42

Coffey v. Commissioner, 987 F.3d 808 (8th Cir. 2021)24, 28-30, 37-38

Coggin v. Commissioner, 71 F.3d 855 (11th Cir. 1996)24

Commissioner v. Estate of Sanders, 834 F.3d 1269 (11th Cir. 2016)28-30

Commissioner v. Lane-Wells Co., 321 U.S. 219 (1944)24, 47-48

Connor v. Commissioner, T.C. Memo. 1977-121, 1977 Tax Ct. Memo LEXIS 32142

Crum v. Commissioner, 635 F.2d 895 (D.C. Cir. 1980)42

Dingman v. Commissioner, T.C. Memo. 2011-116, 2011 WL 215002713, 30, 32, 38-39

Espinoza v. Commissioner, 78 T.C. 412 (1982)26

Fargo v. Commissioner, 447 F.3d 706 (9th Cir. 2006)40

Florsheim Bros. Drygoods Co. v. United States, 280 U.S. 453 (1930)47-50, 52

Fowler v. Commissioner, 155 T.C. No. 7, 2020 WL 5414861 (2020)38

Friedmann v. Commissioner, T.C. Memo. 2001-207, 2001 WL 883222, aff'd, 80 Fed. Appx. 285 (3d Cir. 2003)14-15, 26, 37, 49-50

Germantown Tr. Co. v. Commissioner, 309 U.S. 304 (1940)48

Green v. Commissioner, T.C. Memo. 1993-152, 1993 WL 101371, aff'd, 33 F.3d 1378 (5th Cir. 1994)26, 49

Green v. Commissioner, T.C. Memo. 2008-130, 2008 WL 2065187, aff'd, 322 Fed. Appx. 412 (5th Cir. 2009)49 

Harold v. United States, 2021 WL 672117 (E.D. Mich. 2021), aff'g In re Harold, 588 B.R. 484 (Bankr. E.D. Mich. 2018)27, 40, 51, 56-57

Hatton, In re, 220 F.3d 1057 (9th Cir. 2000)48, 58

Helvering v. Campbell, 139 F.2d 865 (4th Cir. 1944)29, 38

Kestin v. Commissioner, 153 T.C. 14 (2019), appeal voluntarily dismissed, 2020 WL 3971328 (4th Cir. 2020)51

Lucas v. Pilliod Lumber Co., 281 U.S. 245 (1930)23-24, 35, 48, 55

McClanahan, Estate of v. Commissioner, 95 T.C. 98 (1990)42

Metals Ref. Ltd. v. Commissioner, T.C. Memo. 1993-115, 1993 WL 8918925, 27, 30, 37

Morton v. Ruiz, 415 U.S. 199 (1974)42

O'Bryan Bros. v. Commissioner, 127 F.2d 645 (6th Cir. 1942)26, 40

Omega Forex Grp. v. United States, 906 F.3d 1196 (10th Cir. 2018)21

Quezada, Matter of, 982 F.3d 931 (5th Cir. 2020)

Sameena Inc. v. U.S. Air Force, 147 F.3d 1148 (9th Cir. 1998)

Seaview Trading, LLC v. Commissioner, 858 F.3d 1281 (9th Cir. 2017)

Smith, In re, 828 F.3d 1094 (9th Cir. 2016)

Smyth v. Commissioner, T.C. Memo. 2017-29

Sollberger v. Commissioner, 691 F.3d 1119 (9th Cir. 2012)

Turco v. Commissioner, T.C. Memo. 1997-564, 1997 WL 786967 

United States v. Caceres, 440 U.S. 741 (1979)

United States v. Rutherford, 39 Fed. Appx. 574 (9th Cir. 2002)

United States v. Sourapas, 515 F.2d 295 (9th Cir. 1975)

W.H. Hill Co. v. Commissioner, 64 F.2d 506 (6th Cir. 1933)

Winnett v. Commissioner, 96 T.C. 802 (1991)

Zeier v. IRS, 80 F.3d 1360 (9th Cir. 1996) 

Zellerbach Paper Co. v. Helvering, 293 U.S. 172 (1934)

Statutes:

Bipartisan Budget Act of 2015, Pub. L. No. 114-74, § 1101, 129 Stat. 584

Internal Revenue Code of 1986 (26 U.S.C.):

Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, §§ 401-407, 96 Stat. 324

Miscellaneous:

1A Sutherland Statutes and Statutory Construction § 21:14 (Conjunctive and disjunctive words) (7th ed.)

9th Cir. Rule 28-2.7

Chief Counsel Advice 199933039, 1999 WL 634177 (June 25, 1999)

Chief Counsel Advice 200518079, 2005 WL 1061033 (May 6, 2005)

Federal Rule of Appellate Procedure 28

I.R.M. ¶ 1.2.2.6.2 (Delegation Order 5-2 (Rev. 2) (Oct. 21, 2013)

Tax Court Rules of Practice and Procedure:

Treasury Regulations (26 C.F.R.):

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GLOSSARY

 

STATEMENT OF JURISDICTION

On October 26, 2010, pursuant to I.R.C. § 6223(a)(2),¹ the IRS mailed a Notice of Final Partnership Administrative Adjustment (FPAA) to Seaview Trading, LLC. (2-ER-31.) On January 21, 2011, Seaview's tax-matters partner timely petitioned the United States Tax Court within 90 days after the mailing of the FPAA. (2-ER-290.) I.R.C. §6226(a)(1). The Tax Court had jurisdiction under I.R.C. §§ 6226(f) and 7442.

On May 15, 2020, the Tax Court entered a final decision that disposed of all the parties' claims. (1-ER-2-4.) On August 7, 2020, Seaview filed a timely notice of appeal within 90 days after the entry of the decision. (2-ER-282-85.) I.R.C. § 7483. This Court has jurisdiction under I.R.C. § 7482(a)(1).

STATEMENT OF THE ISSUE

Whether the Tax Court correctly denied summary judgment to Seaview on the ground that Seaview did not file a return of partnership income for 2001, and that the limitations period for the requisite IRS action had therefore never commenced.

APPLICABLE STATUTES AND REGULATIONS

The statutes and regulations relevant to the disposition of this appeal are included as an addendum to this brief. See Fed. R. App. P. 28(f); 9th Cir. R. 28-2.7.

STATEMENT OF THE CASE

A. Course of proceedings and disposition below

Seaview petitioned the Tax Court after receiving an FPAA for its 2001 tax year. (2-ER-31; 2-ER-289-90.) Seaview moved for summary judgment on the issue whether the adjustments in the FPAA were time barred. (1-ER-7-8.) The Tax Court (Judge Robert P. Ruwe) issued a memorandum opinion (T.C. Memo. 2019-122) and entered an order denying Seaview's motion. (1-ER-5-17.) The parties settled the merits of the adjustments in the FPAA, and the court (Judge Albert G. Lauber) entered a decision. (1-ER-2-4.) Seaview appealed. (2-ER-282-85.)

B. Seaview Trading and the relevant aspects of partnership taxation

Seaview was a limited-liability company, classified as a partnership for federal income-tax purposes, that was created in 2001 and had its principal place of business in California. (1-ER-8.) Seaview's partners were two limited-liability companies. Robert A. Kotick was the sole member of AGK Investments, LLC (AGK), which owned 99.15% of Seaview. (1-ER-7-8.) Charles M. Kotick (Robert's father) was the sole member of KMC Investments, LLC (KMC), which owned the remaining 0.85%. (1-ER-7-8.) For 2001, Seaview claimed that it had incurred a $35,496,542 tax loss from a tax-shelter transaction. (1-ER-7; 1-ER-9.)

Partnerships are not taxable entities for purposes of federal income taxation. I.R.C. § 701. Instead, they annually file an information return on Form 1065 (U.S. Return of Partnership Income) and issue to each partner a Schedule K-1 showing that partner's distributive share of the partnership's tax items. I.R.C. § 6031. Each partner must then report his share of the partnership's items on his individual return and treat them consistently with their treatment on the partnership's return. I.R.C. §§ 702, 6222(a).

Seaview was subject to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248, §§ 401-407, 96 Stat. 324, 648-71 (formerly codified at I.R.C. §§ 6221-6234), which set forth unified audit and litigation procedures applicable to partnerships. Seaview Trading, LLC v. Commissioner, 858 F.3d 1281, 1284 (9th Cir. 2017). Under TEFRA, each partnership had a “tax matters partner” to act on its behalf in dealings with the IRS. See I.R.C. § 6231(a)(7). AGK was Seaview's tax-matters partner. (1-ER-7.)

Under the TEFRA procedures, if the IRS adjusted partnership items as the result of a partnership audit, it did so by issuing an FPAA, which the partners could challenge in a single, partnership-level judicial proceeding. I.R.C. §§ 6223(a), (d), 6226. Upon the completion of the partnership-level proceedings, the IRS made computational adjustments to the partners' returns to reflect the resolution of the partnership items, and it then assessed and collected the resulting taxes owed by the partners. I.R.C. §§ 6230(a)(1), 6231(a)(6).²

In general, the IRS has three years after a taxpayer files his individual return to assess any tax due for the taxable year of the return. I.R.C. § 6501(a). Under TEFRA, if the taxpayer's return contained items passed through from a partnership, the IRS had at least three years after the filing of the partnership's return to make an assessment attributable to those items. I.R.C. § 6229(a). The timely mailing of an FPAA suspended the running of that period until the conclusion of any ensuing court proceedings, plus one year. I.R.C. §6229(d). Thus, if the IRS issued the FPAA within the period described in § 6229(a), then its ability to make timely assessments (i.e., at the partner level) of any additional tax resulting from the partnership-item adjustments was assured.

If, however, the partnership never filed a return for a tax year, any tax attributable to a partnership item arising in such year could be assessed at any time. I.R.C. § 6229(c)(3). At issue is whether Seaview filed a return of partnership income for 2001 that commenced the 3-year period described in § 6229(a).

C. Seaview's Form 1065 for 2001

In early 2002, an accountant named Michael Schwartz prepared Seaview's Form 1065 for 2001.³ (2-ER-67-68; 2-ER-222.) Jeffrey Sedacca, a CPA, prepared Robert Kotick's 2001 Form 1040 individual income-tax return and 2001 returns for other entities with which Kotick was involved. (2-ER-65-66; 2-ER-133; 2-ER-136.) Schwartz and Sedacca were not affiliated, and Sedacca was not then involved with Seaview's accounting or taxes. (2-ER-136-37; 2-ER-153; 2-ER-163; 2-ER-171.)

In March 2002, Schwartz signed Seaview's Form 1065 and sent it to Kotick, but Kotick's lawyer instructed him to hold the form pending the receipt of a tax-advice letter. (2-ER-68-72; 2-ER-222.) At some point, Kotick signed the form, but he never dated his signature. (2-ER-68; 2-ER-74-76; 2-ER-222.) Schwartz also sent a copy of the form to Sedacca to use in preparing Kotick's individual return. (2-ER-170-71; 2-ER-186.) In late June 2002, Sedacca went to Kotick's house to obtain Kotick's signature on his individual return and on a return for an entity other than Seaview. (2-ER-70-73; 2-ER-166-67.)

Kotick and Sedacca testified at their depositions that, as a courtesy to Kotick, Sedacca agreed to mail Seaview's Form 1065 to the IRS. (2-ER-73; 2-ER-169; 2-ER-187.) They testified that Kotick placed Seaview's form in an envelope with the Sedacca-prepared return for the other entity and sealed the envelope. (2-ER-74; 2-ER-79-80; 2-ER-166-68; 2-ER-185-87.) Sedacca testified that, the following Monday, he gave the sealed envelope to an assistant at his office for mailing. (2-ER-168-69; 2-ER-171-72.) The record includes an IRS certification of lack of record, stating that the applicable IRS service center did not receive a 2001 Form 1065 return of partnership income for Seaview (2-ER-23), as well as a Form 4340, Certificate of Assessments and Payments, that lacks an entry for a 2001 return by Seaview (2-ER-24-26).

From March 2004 through March 2005, the IRS audited Kotick's individual income-tax return. (2-ER-235; 2-ER-243.) That audit did not include an examination of the partnership items on Kotick's return because those items had to be examined in a separate partnership audit.⁴ (2-ER-241-42.)

On July 27, 2005, IRS Revenue Agent Jerry Johnson sent a letter to Kotick's attention at Seaview referencing Form 1065 for tax year 2001 and stating, “Our records indicate that we have not received your federal income tax return(s) for the period(s) listed above. I would like  to meet with you to discuss the matter.” (2-ER-231.) The IRS attached a document request seeking, inter alia, documents and information about any return that Seaview might have prepared and the mailing of that return to the IRS. (2-ER-232-33.) The request instructed that the documents be sent to Johnson's office in Rapid City, South Dakota. (2-ER-231-32.)

Sedacca represented Seaview in its dealings with the IRS regarding its 2001 tax year. (2-ER-27-30.) On September 23, 2005, he sent a fax to Revenue Agent Johnson at his South Dakota office. (2-ER-220.) The cover sheet stated, in pertinent part, “As we discussed, I have attached the 2001 tax return for Seaview Trading LLC as well as the certified mailing.” (2-ER-220.) The attachments were images of a certified mail receipt with a postmark of July 3, 2002 (2-ER-221) and of a retained copy of the Form 1065 that Sedacca had recently received from Kotick's office (2-ER-222-29; 2-ER-164-65; 2-ER-178-80). Soon after, Revenue Agent Johnson officially opened an audit of Seaview by sending it a Notice of Beginning of Administrative Proceeding (2-ER-218-19) and additional document requests (2-ER-195-99; 2-ER-209-17).⁵

On July 24, 2007, an individual in the office of Seaview's counsel (Skadden, Arps, Slate, Meagher & Flom) sent a letter to IRS attorney Jack Forsberg at his St. Paul, Minnesota office. (2-ER-44.) The letter said, in relevant part, “Pursuant to our prior conversation, enclosed is a copy of the Seaview Trading, LLC's retained copy of its 2001 Form 1065.” (2-ER-44.) The enclosed Form 1065 was the same document previously faxed to Revenue Agent Johnson. (2-ER-45-52.)

D. The Tax Court proceedings

On October 26, 2010, the IRS mailed an FPAA to Seaview in which it determined that: (i) Seaview had no income, loss, or allowable expense deductions from the 2001 tax-shelter transaction, and (ii) an accuracy-related penalty would be imposed on any tax underpayments resulting from the Seaview adjustments. (2-ER-31-43.) Both Robert Kotick and AGK filed Tax Court petitions challenging the FPAA determinations.⁶

Kotick argued in his case (Tax Ct. No. 1744-11; see 2-ER-286-88) that the FPAA was invalid because Seaview was a “small partnership” not subject to TEFRA. Seaview, 858 F.3d at 1283; see I.R.C. §6231(a)(1)(B)(i). The Commissioner moved to dismiss Kotick's petition for lack of jurisdiction, asserting that Seaview was a TEFRA partnership and that Kotick lacked standing to petition for Seaview because he was not its tax-matters partner. Id. The Tax Court dismissed on those grounds, and this Court affirmed. Id. at 1283, 1287-88.

There were no similar issues with the timely petition in this case (Tax Ct. No. 1837-11) filed by tax-matters partner AGK. The parties agreed in a stipulation of settled issues that no accuracy-related penalty would be imposed on any underpayments attributable to the Seaview adjustments. (2-ER-253-54.)

Seaview moved for summary judgment, asserting a limitations defense to the FPAA. (1-ER-11.) Seaview argued that it filed its 2001 return when Sedacca faxed a copy of its Form 1065 to Revenue Agent Johnson on September 23, 2005, and again when its counsel sent a copy of the Form 1065 to IRS attorney Forsberg on July 24, 2007. (1-ER-11-12.) If either of those events constituted the filing of a return, then the IRS untimely mailed the FPAA more than three years later. Inversely, if neither of those events qualified as the filing of a return, then the FPAA was timely. See I.R.C. § 6229(c)(3) (if partnership return never filed, tax attributable to partnership items can be assessed at any time).

The Tax Court denied Seaview's motion. (1-ER-5.) It explained that, for the limitations period for assessment to commence, the taxpayer must meticulously comply with all requirements, including filing its tax return in the designated place. (1-ER-12.) The court noted, however, that the limitations period will begin to run when a return submitted to the wrong place is later forwarded to and received at the designated place. (1-ER-12-13.) Here, the designated place for Seaview to file its return was the Ogden, Utah service center. (1-ER-13.)

The Tax Court first held that Seaview had not filed its 2001 return when it faxed a copy of its Form 1065 to Revenue Agent Johnson in 2005 and mailed a copy of that document to IRS attorney Forsberg in 2007. (1-ER-12-15.) The court noted that neither Johnson's office nor Forsberg's office was the proper place for filing, and it pointed to a “plethora of caselaw holding that a revenue agent is not a designated filing place.” (1-ER-13.) Moreover, neither of those submissions was forwarded to the Ogden service center. (1-ER-13.)

The Tax Court rejected Seaview's argument that, under Dingman v. Commissioner, T.C. Memo. 2011-116, it should be deemed to have filed its return based on Internal Revenue Manual provisions regarding the processing of delinquent returns received by revenue agents. (1-ER-14.) The court distinguished Dingman, stating that it presented “a unique factual situation” in which returns were treated as filed when: (i) the taxpayer's counsel hand-delivered them with payments to the IRS's Criminal Investigation Division, and (ii) the IRS processed the returns and the payments. (1-ER-14.) The court stated that Dingman had created neither a blanket rule allowing taxpayers to file returns by whatever method they choose nor an additional place for filing. (1-ER-14.) Accordingly, the court held that Seaview had not filed its 2001 return via either the 2005 fax or the 2007 mailing. (1-ER-14-15.)

The Tax Court further held that the copies of the Form 1065 that Seaview had submitted in 2005 and 2007 were not returns for these purposes. (1-ER-15-16.) The court explained that, to be a return that starts the limitations period for assessment, a document must: (i) contain enough information to calculate the taxpayer's liability; (ii) purport to be a return; (iii) be an honest and reasonable attempt to comply with the revenue laws; and (iv) be executed under the penalties of perjury. (1-ER-15 (citing Beard v. Commissioner, 82 T.C. 766, 777 (1984), aff'd, 793 F.2d 139 (6th Cir. 1986)).) The court focused on the second requirement, viz., whether the copies of the Form 1065 submitted by Seaview in 2005 and 2007 purported to be returns. (1-ER-15.)

The Tax Court discussed Friedmann v. Commissioner, T.C. Memo. 2001-207, aff'd, 80 Fed. Appx. 285 (3d Cir. 2003), in which a taxpayer who delivered copies of his return forms to a revenue agent was held not to have intended the filing of those forms as his returns. (1-ER-15-16.) The court explained that, in Friedmann, the revenue agent who received the copies mistakenly believed that the taxpayer had already filed his returns. (1-ER-15-16.) Because of that erroneous belief and the taxpayer's failure to inform the agent otherwise, the Friedmann court — having cited the four Beard requirements — held that the taxpayer had not intended his delivery of the forms to constitute the filing of his returns. (1-ER-16.)

The Tax Court found the instant case to be similar. (1-ER-16.) The court stated that the inclusion of a certified mail receipt in the 2005 fax purporting to show that the Form 1065 had already been filed led the IRS to believe that the return had been filed and indicated that Seaview did not intend its fax to accomplish the filing of its return. (1-ER-16.) Likewise, Seaview's counsel had described the Form 1065 he was mailing in 2007 as a “copy,” leading the court to conclude that Seaview did not intend the mailing to serve as the filing of its return. (1-ER-16.)

In a second stipulation of settled issues, the parties agreed that Seaview had no income, loss, or allowable deductions from the tax-shelter transaction and that the Tax Court could enter a final, appealable decision. (2-ER-19-22.) The court entered that decision, and Seaview appealed. (1-ER-2-4; 2-ER-282-85.)

SUMMARY OF ARGUMENT

1. Seaview was a limited-liability company classified as a partnership for federal income-tax purposes. Under the partnership audit and litigation procedures then in effect, the IRS had at least three years after a partnership filed a Form 1065 return of partnership income to notify the partnership of adjustments to the items on the return. If the partnership failed to file a return, the IRS could issue the notice of adjustments and assess any additional tax attributable to the adjustments at any time.

Seaview claimed that in 2001 it had incurred a $35 million loss from a tax shelter. In July 2005, the IRS informed Seaview that it had no record of Seaview having filed a return for 2001. Throughout the audit and into this litigation, Seaview asserted that it had filed its return in 2002. Seaview abandoned that assertion during the Tax Court proceedings. It now argues that it filed its return later in 2005 when its CPA faxed a copy of its 2001 Form 1065 to an IRS revenue agent at the agent's office in South Dakota. Seaview further argues that it again filed its return in 2007 when its attorney mailed a copy of the 2001 Form 1065 to an IRS attorney at his office in Minnesota.

If either of those events constituted the filing of Seaview's return for 2001, then the notice of adjustments issued by the IRS in 2010 was untimely. If not, then the statute of limitations never started to run. The Tax Court correctly denied summary judgment to Seaview on the ground that it had not filed a partnership return for 2001.

2. Seaview's submission of copies of its Form 1065 to a revenue agent and to an IRS attorney did not constitute the filing of a partnership return. For 90 years, courts have held that, to benefit from the limitations statute, taxpayers must meticulously comply with the requirements for filing their tax returns, which includes filing them in the correct location. The correct location for filing Seaview's return was the IRS's Ogden, Utah service center. Moreover, as the Tax Court stated, a “plethora of caselaw” holds that the submission of a return form to an IRS revenue agent or attorney does not qualify as the filing of the form, even if the IRS employee uses the form in an audit.

Seaview argues that the procedures in the Internal Revenue Manual for securing delinquent returns gave it the right to have the copies of its Form 1065 processed for filing. But the Manual lacks the force and effect of law and does not confer rights on taxpayers. In any event, the cited provisions apply to delinquent returns, not to copies that allegedly were already filed. And they do not purport to confer a right to file delinquent returns with IRS revenue agents. Of course, Seaview — a well-represented entity — could have asked the revenue agent (or even the IRS attorney) about filing a protective return through him (i.e., while reserving the right to argue that it had already filed the return), but it failed to do so.

Because Seaview failed to meticulously comply with the requirement that it file its 2001 Form 1065 at the Ogden service center, the Tax Court correctly held that it never filed a return to start the statute of limitations.

3. The copies of Form 1065 that Seaview submitted to the revenue agent and to the IRS attorney were not returns of partnership income. This Court has adopted the Tax Court's Beard test, under which a document is a return for limitations purposes only if it: (i) contains sufficient data to calculate the taxpayer's liability; (ii) purports to be a return; (iii) is an honest and reasonable attempt to satisfy the requirements of the revenue laws; and (iv) is executed under the penalties of perjury. This case involves the second requirement. If a taxpayer does not intend for a document (including a copy of a return form) to be filed as its return, the document is not a return because it does not purport to be a return.

The Tax Court correctly held that Seaview did not intend for either of the copies of its 2001 Form 1065 that it submitted in 2005 and 2007 to be filed as its return. The 2005 fax included a certified mailing form in support of Seaview's belief that it had already filed its 2001 return, and the 2007 mailing described the enclosed form as a copy of a retained copy. Neither submission requested that the attached copy of the return form be processed for filing or implied that it should be. Under those circumstances, Seaview could not have honestly intended either copy to serve as its return for 2001.

Seaview attempts to muddy the waters by conflating other Beard requirements with the purports-to-be-a-return requirement. And it attacks a strawman by erroneously claiming that, under the Government's position, a taxpayer who believes that it already filed a return can never have the requisite intent to treat a later submission as its return. To the contrary, the Government acknowledges that Seaview could have made a protective filing without forfeiting its right to rely on the alleged earlier filing.

The decision of the Tax Court is correct and should be affirmed.

ARGUMENT

The Tax Court correctly denied summary judgment to Seaview on the ground that Seaview did not file a return of partnership income for 2001, and that the limitations period for the requisite IRS action had therefore never commenced

Standard of review

This Court reviews de novo the Tax Court's summary-judgment rulings. Sollberger v. Commissioner, 691 F.3d 1119, 1123 (9th Cir. 2012).

A. When a partnership fails to file a return, the IRS can issue the requisite notice to adjust partnership items passed through to the partners — and assess any additional tax attributable to those items as finally determined — at any time

An “assessment” is the official recording of a taxpayer's liability by the IRS. I.R.C. § 6203. In general, the IRS has three years after a taxpayer files his individual income-tax return to assess any tax due for the taxable year of the return. I.R.C. § 6501(a). Other Internal Revenue Code provisions, however, can extend or toll the three-year period for assessment established by I.R.C. § 6501(a).

For a partner in a TEFRA partnership, the period for assessing any income tax “which is attributable to any partnership item [or item affected by a partnership item] for a partnership taxable year shall not expire before the date which is 3 years after the later of ” the filing date of the partnership return or its original due date. I.R.C. § 6229(a).⁷ And the timely mailing of an FPAA suspended the running of that period during “the period [in] which [a judicial] action may be brought under section 6226 (and, if [such] a petition is filed . . . , until the decision of the court becomes final), and . . . for 1 year thereafter.” I.R.C. §6229(d). Thus, as long as it issued the FPAA within the 3-year, partnership-return-based period described in § 6229(a), the IRS was assured that the period for assessing any additional tax attributable to the partnership-item adjustments (as finally determined) for that year would be open with respect to each partner when the time came for making such assessments. See I.R.C. § 6225(a) (prohibiting any such assessment until the expiration of the period for initiating a judicial proceeding in response to the FPAA or, if such a proceeding is commenced, until the decision of the court becomes final).

If, however, the partnership never filed a return for a taxable year, “any tax attributable to a partnership item (or affected item) arising in such year may be assessed at any time.” I.R.C. § 6229(c)(3). And that brings us to the issue presented by this case, viz., whether Seaview ever (i) filed a document that (ii) was a return of partnership income for 2001. Seaview faxed a copy of its 2001 Form 1065 to Revenue Agent Johnson on September 23, 2005, and it mailed a copy of the form to IRS attorney Forsberg on July 24, 2007. (2-ER-44-52; 2-ER-220-29.) Both events occurred more than three years before the October 26, 2010 issuance of the FPAA. (2-ER-31.) The Tax Court correctly held, however, that (i) neither of those events constituted a filing, and (ii) the copies of the Form 1065 so submitted were not returns of partnership income under the Beard test. (1-ER-12-16.) Therefore, the statute of limitations never began to run, precluding the possibility of an untimely FPAA.

B. Seaview's submission of photocopies of its Form 1065 to a revenue agent and to an IRS attorney did not constitute the filing of a partnership return

1. Taxpayers must meticulously comply with the requirements for filing their tax returns, including filing them in the correct location

Limitations statutes invoked to bar the Government's rights (including in the area of taxation) are strictly construed in favor of the Government. Badaracco v. Commissioner, 464 U.S. 386, 391-92 (1984) (construing I.R.C. § 6501(c)(1), which provides that a false or fraudulent return filed with the intent to evade tax does not trigger the assessment limitations period). As the Supreme Court stated in the tax context more than 90 years ago, limitations periods run against the Government only when it “assent[s] and upon the conditions prescribed.” Lucas v. Pilliod Lumber Co., 281 U.S. 245, 249 (1930). The Government's assent for starting the limitations period for a tax assessment is conditioned upon the filing of a tax return, and there must be “meticulous compliance by the taxpayer with all named conditions in order to secure the benefit of the limitation.” Id.

The Internal Revenue Code and the Treasury Regulations do not define the term “file” or “filed.” Coffey v. Commissioner, 987 F.3d 808, at Westlaw (WL) *2 (8th Cir. 2021) (F.3d citation assigned but internal pagination unavailable at time of filing); Allnutt v. Commissioner, 523 F.3d 406, 412 (4th Cir. 2008). However, the conditions for the proper filing of returns appear in both the Code and the Regulations. Pilliod Lumber, 281 U.S. at 247-49 (statutes); Commissioner v. Lane-Wells Co., 321 U.S. 219, 222-24 (1944) (regulations). Accordingly, a return is not filed for limitations purposes until it is in the proper form and delivered as specified by a statute or regulation. Coffey, 987 F.3d 808, at WL *2; Allnutt, 523 F.3d at 412-13.

Courts continue to apply the “meticulous compliance” requirement of Pilliod Lumber for securing the benefit of the statute of limitations on assessment. See Coffey, 987 F.3d 808, at WL *2; Allnutt, 523 F.3d at 412-14; Coggin v. Commissioner, 71 F.3d 855, 862 (11th Cir. 1996); see also, e.g., Appleton v. Commissioner, 140 T.C. 273, 286 (2013). At most, a return sent or delivered to the wrong place can be treated as filed on the date that it is eventually received at the right place. See Allnutt, 523 F.3d at 408, 410, 414; Winnett v. Commissioner, 96 T.C. 802, 804-05, 808-09 (1991); Metals Ref. Ltd. v. Commissioner, T.C. Memo. 1993-115, 1993 WL 89189 at *1-*3. And, as the Tax Court stated, “there is a plethora of caselaw” holding that a return delivered to a revenue agent is not delivered to the right place. (1-ER-13.)

Under the tax system a century ago, returns had to be filed with the “collector,” not the Commissioner. W.H. Hill Co. v. Commissioner, 64 F.2d 506, 507-08 (6th Cir. 1933). Because revenue agents were in the office of the Commissioner, the Sixth Circuit held that the limitations period for assessment did not begin when income-tax returns were delivered to revenue agents. Id. That was so even though the revenue agent there had indicated that he would attend to the filing of the returns. Id. As the Sixth Circuit stated, “there seems to us to be a radical difference between lodging a paper, designated a return, with the commissioner, and filing the same paper with the collector.” Id. at 507 (only filing with collector triggered immediate assessment and collection). Lodging a return with the Commissioner did not constitute the meticulous compliance necessary to start the running of the statute. Id. at 508.

Nine years later, the Sixth Circuit again held that a return provided to a revenue agent (instead of being filed with the collector) did not trigger the statute of limitations for assessing the gift tax. O'Bryan Bros. v. Commissioner, 127 F.2d 645, 647 (6th Cir. 1942). As the court explained, it was the taxpayer's statutory duty “to file the return with the collector of the district. It was not the duty of the internal revenue agent in charge to file a return for the taxpayer.” Id.

The Tax Court has also repeatedly held that a taxpayer's delivering a return to a revenue agent (or otherwise submitting the return to the wrong location) does not constitute the filing of that return. Winnett, 96 T.C. at 807-09 (wrong service center); Espinoza v. Commissioner, 78 T.C. 412, 413-14, 418-22 (1982) (revenue agent); Smyth v. Commissioner, T.C. Memo. 2017-29 at [*3]-[*4], [*8]-[*10] (IRS attorney); Friedmann v. Commissioner, T.C. Memo. 2001-207, 2001 WL 883222 at *2-*3, *6-*7 (revenue agent), aff'd, 80 Fed. Appx. 285 (3d Cir. 2003); Turco v. Commissioner, T.C. Memo. 1997-564, 1997 WL 786967 at *1-*2 (revenue agent); Green v. Commissioner, T.C. Memo. 1993-152, 1993 WL 101371 at *2, *7 (revenue agent), aff'd, 33 F.3d 1378 (5th Cir. 1994) (Table); Metals Ref. Ltd., 1993 WL 89189 at *1-*3, *6-*7 (TEFRA partnership return given to revenue agents).

Seaview cites In re Harold, 588 B.R. 484, 493 (Bankr. E.D. Mich. 2018), in which a bankruptcy court rejected the Government's argument that a return cannot be filed with a revenue officer but held on another ground that a return had not been filed. (O.Br. 28.) After Seaview filed its brief, the district court affirmed the bankruptcy court but disagreed with its analysis of the place-of-filing issue. Harold v. United States, 2021 WL 672117 at *8-*9 (E.D. Mich. 2021). Thus, the court held that affirmance was warranted for the additional reason that the return form had not been delivered to the office specified by the regulations for filing a return. Id.

In similar circumstances, courts of appeals have held that delivering a return to the wrong place or person does not effect the filing of that return. In Allnutt, the taxpayer was required (by regulation) to deliver his hand-carried returns to an individual authorized to accept returns at the office of the IRS District Director in Baltimore, Maryland. Allnutt, 523 F.3d at 412-13. On February 21, 1997, he delivered: (i) original returns to the Baltimore office of IRS District Counsel (not the District Director), and (ii) photocopies of the returns to an unidentified person at the District Director's office who was not authorized to accept returns. Id. at 408-10. The original returns delivered to District Counsel were received by the District Director's office on March 10, 1997, and the photocopies left with the unidentified person arrived at the Philadelphia, Pennsylvania service center with a postmark of May 9, 1997. Id. The IRS issued a notice of deficiency on March 6, 2000 — more than three years after February 21, 1997, but less than three years after those later dates.⁸ Id. at 410-11. Because District Counsel was the wrong office and Allnutt did not show meticulous compliance with the filing requirement for hand-delivered returns at the correct office, the Fourth Circuit held that he could not prove filing before March 6, 1997, rendering the notice of deficiency timely. Id. at 413-14.

And in Coffey and Commissioner v. Estate of Sanders, 834 F.3d 1269 (11th Cir. 2016), the Eighth and Eleventh Circuits, respectively, ruled that the limitations statute for assessing the United States income tax had not begun to run against taxpayers who claimed United States Virgin Islands residency and had filed their returns only there. Coffey, 987 F.3d 808, at WL *1, *3-*4; Estate of Sanders, 834 F.3d at 1272-73, 1275. See also Helvering v. Campbell, 139 F.2d 865, 868 (4th Cir. 1944) (filing returns with the Philippines did not start limitations period for United States taxes). Although the Virgin Islands is a separate taxing entity, its tax laws mirror the Code, and it uses Form 1040. Coffey, 987 F.3d 808, at WL *1, *4; Estate of Sanders, 834 F.3d at 1272. A Virgin Islands resident files her return only there, whereas a United States resident with Virgin Islands income must file her return in both jurisdictions. Coffey, 987 F.3d 808, at WL *1-*2; Estate of Sanders, 834 F.3d at 1272, 1276. The courts ruled that the taxpayers in Coffey and Estate of Sanders had to file their returns with the correct IRS office to begin the running of the statute of limitations for their United States income tax. Coffey, 987 F.3d 808, at WL *2; Estate of Sanders, 834 F.3d at 1274-75. Even if done in good faith, filing with the wrong entity (the Virgin Islands) was not sufficient to trigger the limitations statute for assessing United States taxes, regardless of the fact that the Virgin Islands transmitted parts of the returns to the IRS. Coffey, 987 F.3d 808, at WL *3-*4; Estate of Sanders, 834 F.3d at 1274-79.

2. The Tax Court correctly held that Seaview never filed a partnership return for 2001 because its Form 1065 was never received at the correct location

Seaview properly raised the statute of limitations for assessment in its amended petition as an affirmative defense. (2-ER-272-73; 2-ER-278.) Tax Ct. R. 39, 142(a). The Tax Court employs a burden-shifting analysis under which the party raising the limitations defense must establish a prima facie case by showing the filing of its return, the expiration of the statutory period, and the untimely issuance of the statutory notice (here, the FPAA). Metals Ref. Ltd., 1993 WL 89189 at *4. Although the burden of going forward with the evidence can shift, the ultimate burden of persuasion remains on the party pleading the bar of limitations. Dingman v. Commissioner, T.C. Memo. 2011-116, 2011 WL 2150027 at *5; Metals Ref. Ltd., 1993 WL 89189 at *4.

Seaview moved for summary judgment on its limitations defense, arguing that it filed its 2001 return when Sedacca faxed a copy of its 2001 Form 1065 to Revenue Agent Johnson and again when its counsel sent a copy of the Form 1065 to IRS attorney Forsberg. (1-ER-11-12.) Summary judgment is appropriate when there is no genuine dispute regarding any material fact and a decision may be rendered as a matter of law. Tax Ct. R. 121(b). There is no dispute regarding the facts underlying those two events, and the Tax Court correctly held as a matter of law that neither qualified as the filing of Seaview's return. (1-ER-14-15.)

Every partnership must “make a return for each taxable year” stating its income, deductions, and such other information as the IRS “may by forms and regulations prescribe.” I.R.C. § 6031(a). Partnership statements, elections, requests, and furnishings of information “shall be filed or made at such time, in such manner, and at such place as may be prescribed in the regulations.” I.R.C. § 6230(i). Under Treas. Reg. § 1.6031(a)-1(e)(1), paper Forms 1065 “must be filed with the service center prescribed in the relevant IRS revenue procedure, publication, form, or instructions to the form.” See also Treas. Reg. § 1.6091-1(b)(1) (cross reference to § 1.6031(a)-1(e)(1) regarding place for filing partnership returns). The instructions for Form 1065 for 2001 required that paper returns for partnerships with a principal place of business in California be sent to the Ogden, Utah service center for filing.⁹ (See 1-ER-13; 2-ER-188.) Neither the statute, the regulation, nor the return instructions stated that a partnership could file its return by faxing a copy of its Form 1065 to a revenue agent or by mailing a copy to an IRS attorney.

On September 23, 2005, Sedacca sent a fax to Revenue Agent Jerry Johnson at his Rapid City, South Dakota office. (2-ER-220; 2-ER-232.) The attachments included an image of the retained copy of Seaview's 2001 Form 1065. (2-ER-222-29; 2-ER-164-65; 2-ER-178-80.) On July 24, 2007, Seaview's counsel sent a letter to IRS attorney Forsberg at his St. Paul, Minnesota office, enclosing a copy of the same Form 1065 that had previously been faxed to the revenue agent. (2-ER-44-52.) Seaview no longer alleges that it had previously filed its 2001 Form 1065 with the Ogden service center. See p. 6, n.3, supra. 

The record also contains an IRS certification of lack of record, prepared at Ogden, Utah, stating that the Ogden service center did not receive a 2001 Form 1065 return of partnership income for Seaview. (2-ER-23.) That certificate is corroborated by a Form 4340, Certificate of Assessments and Payments, that lacks an entry for a 2001 return by Seaview. (2-ER-24-26.) Seaview does not contend that either copy of its 2001 Form 1065 that it submitted to IRS personnel in 2005 and 2007 ever reached the Ogden service center (or that it requested either recipient to send it there).

Seaview failed to meticulously comply with the requirement that it file its 2001 Form 1065 at the Ogden service center. Moreover, a “plethora of caselaw” (1-ER-13) holds that the submission of return forms to revenue agents, attorneys, and other IRS employees does not satisfy the filing requirement. Therefore, the Tax Court correctly held that: (i) Seaview never filed a return of partnership income for 2001; (ii) the statute of limitations for assessments of income tax attributable to its partnership items therefore never began to run; and (iii) the IRS therefore timely issued the FPAA.

3. Seaview's and the amici's arguments that the 2005 and 2007 submissions qualify as filings lack merit

a. Seaview argues that the Tax Court should have treated its 2001 Form 1065 as having been filed upon the revenue agent's receipt of a copy thereof in 2005 or the IRS attorney's receipt of such a copy in 2007. (O.Br. 20.) It starts by arguing that the “place for filing” requirement of Treas. Reg. § 1.6031(a)-1(e)(1) is conditioned upon partnership compliance with the “time for filing” requirement of § 1.6031(a)-1(e)(2). (O.Br. 2, 6-7, 18, 21-23, 30.) It then argues that the word “file” should be read expansively for delinquent returns to include any submission of a return form to the IRS during an audit. (O.Br. 1-3, 12-13, 18, 23-25.) In other words, according to Seaview, a partnership seeking to file a timely return must submit it to the correct place, but a partnership seeking to file a delinquent return can do so by giving a return form to any IRS employee auditing its tax reporting.

Seaview has not cited, nor have we have found, any cases adopting its strained reading of Treas. Reg. § 1.6031(a)-1(e). The place-for-filing and time-for-filing requirements are listed in separate numbered subparagraphs. The place-for-filing provision does not contain any exception for delinquent returns, and it does not even suggest that it is conditioned on compliance with the time-for-filing requirement. See 1A Sutherland Statutes and Statutory Construction § 21:14 (Conjunctive and disjunctive words) (7th ed.) (when compliance with each standard is desired, “and one standard is not intended to be a condition upon another, a mere itemization of standards” — i.e., without the use of either the conjunctive or the disjunctive (neither of which is used in §1.6031(a)-1(e)) — “is the best practice”). Moreover, Seaview's reading is incompatible with the principle that there must be “meticulous compliance by the taxpayer with all named conditions in order to secure the benefit of the limitation.” Pilliod Lumber, 281 U.S. at 249.¹⁰ See Badaracco, 464 U.S. at 391-92 (limitations statutes strictly construed in Government's favor). It would make no sense to treat delinquent partnerships with greater lenience than those that timely file their returns.

Nor can Seaview rely on what it contends is the ordinary meaning of the term “file.” Although there is no explicit statutory or regulatory definition of the term “file” or “filed,” that is because the Code authorizes the IRS to establish the requirements for filing, and those regulatory requirements, in turn, take the definition of “filing” out of the realm of ordinary meaning. (See Am.Br. 14-15.) In any event, the definitions quoted by Seaview from dictionaries and opinions in non-tax cases beg the question by defining filing as the delivery of a document to the “proper” or “appropriate” office for retention in the “proper” or “official” place. (O.Br. 23-24.) The question here is: what is the proper place for filing Seaview's 2001 return of partnership income? The answer is the IRS's Ogden, Utah service center.

b. Not surprisingly, courts adjudicating the place-of-filing issue have repeatedly held that submitting a return form to a place other than the one stated in the regulations or the form's instructions does not trigger the limitations statute for assessments. See discussion at pp. 24-30, supra. At most, courts have treated such a return as having been filed for limitations purposes on the date that it was ultimately received in the correct office or by the correct person in that office. Id.

Those same cases confirm (contrary to Seaview's and the amici's argument (O.Br. 12-13, 18-19, 25-26; Am.Br. 1-2, 6, 10, 18, 20-21; see O.Br. 14-15)) that a revenue agent or other IRS employee can receive and use a return form in an audit without that action giving rise to a filing for limitations purposes. “That the IRS actually received the documents, processed and audited them, and issued deficiency notices is irrelevant for statute of limitations purposes.” Coffey, 987 F.3d 808, at WL *3. That is because the “IRS's actual knowledge did not create a filing” and the limitations period “begins only when a return is filed.” Id. Likewise, in W.H. Hill Co., 64 F.2d at 507-08, the court held that lodging a return form with a revenue agent was insufficient to start the limitations statute, even though the form provided the information upon which the assessment was based. See also Friedmann, 2001 WL 883222 at *7; Turco, 1997 WL 786967 at *1-*2; Metals Ref. Ltd., 1993 WL 89189 at *1-*3, *6-*7.

Seaview and the amici argue that older opinions, like the one in W.H. Hill Co., cannot be relied upon because they are from an era when the Commissioner was separate from the collector, who had more immediate assessment authority. (O.Br. 31-32; Am.Br. 16-17.) But the other cases cited above are from the modern era, with Coffey being issued in 2021. Moreover, the IRS was and is a large bureaucracy within which particular offices and employees are given specific responsibilities. Consequently, compliance with the place-of-filing requirement remains “vital so as to 'apprise the proper tax official . . . of the liability of taxpayers for the federal income tax imposed upon them.'” Allnutt, 523 F.3d at 413 (omission in original; quoting Campbell, 139 F.2d at 868).¹¹

Seaview also cites the Tax Court's memorandum opinion in Dingman as an example of a taxpayer filing returns without sending them directly to a service center, but its reliance on that case is misplaced. (O.Br. 28-29; Am.Br. 17.) In Dingman, the taxpayer's attorney hand-delivered original returns with payments to special agents of the IRS's Criminal Investigation Division.¹² 2011 WL 2150027 at *1, *7. The court held that the assessments at issue were untimely because they occurred more than three years after the date on which the IRS had processed the payments (which established that the returns had reached the IRS office with authority to receive and process the returns and payments no later than that date). Id. at *9-*13. Because the assessments were untimely in any event, the court had no occasion to choose between the (unknown) date of receipt by CID and the date of processing.

Thus, Seaview's argument — that the submission of a return to a revenue agent or to an IRS attorney is, by itself, sufficient to accomplish a filing — fails.

c. Seaview and the amici next rely upon the Internal Revenue Manual and other internal IRS procedural documents to argue that revenue agents are required to secure delinquent returns from taxpayers and process them for filing. (O.Br. 7-8, 19, 27-29, 33-35; Am.Br. 10, 15-23.) There are several flaws in that argument.

This Court (like many other circuits) has held that the provisions of the IRM are not codified regulations, are directory rather than mandatory, lack the force and effect of law, and do not confer rights on taxpayers. Fargo v. Commissioner, 447 F.3d 706, 713 (9th Cir. 2006). Many of the opinions discussed in this brief have made similar statements. Allnutt, 523 F.3d at 414 (IRS not bound by its internal documents or self-imposed due dates); O'Bryan, 127 F.2d at 647 (not the duty of the revenue agent to file return for taxpayer); W.H. Hill Co., 64 F.2d at 507 (return form given to revenue agent not treated as filed even though agent said he “'would attend to the filing'”); Harold, 2021 WL 672117 at *9 (Chief Counsel Advice Memoranda lack precedential value in law). That is reason enough to reject Seaview's and the amici's argument.

Nor do the cited provisions themselves purport to confer on taxpayers a right to accomplish the filing of their delinquent returns by submitting them to revenue agents or to have such submissions automatically processed as returns.¹³ The provisions instruct revenue agents and revenue officers when to seek original delinquent returns for filing and how to process them for submission to a service center. As noted in Chief Counsel Advice 199933039, 1999 WL 634177 at n.2 (June 25, 1999), the submission of a delinquent return to a revenue officer (instead of directly to a service center) allows for more efficient processing by the IRS.¹⁴ In other words, the procedures are primarily for the benefit of the IRS, not taxpayers. Despite Seaview's use of verbs like “must” before its quotes from the provisions (e.g., O.Br. 7, 34), they are simply a list of instructions for how to process original delinquent returns and submit them to the service center.

Seaview cites several cases in an attempt to convert the IRS's internal procedures into taxpayer rights (O.Br. 28, 35-37; see also Am.Br. 22-23), none of which is apposite. Some are not tax cases. E.g., Morton v. Ruiz, 415 U.S. 199, 236 (1974) (noting “[t]he overriding duty of our Federal Government to deal fairly with Indians wherever located”); Sameena Inc. v. U.S. Air Force, 147 F.3d 1148, 1153-55 (9th Cir. 1998) (debarred contractor entitled to evidentiary hearing in dispute with Air Force). Others involved rights created by an outside source, like the Constitution or a statute.¹⁵ United States v. Sourapas, 515. F.2d 295, 298 (9th Cir. 1975) (Miranda-type warning)¹⁶; Crum v. Commissioner, 635 F.2d 895, 897 (D.C. Cir. 1980) (last-known-address rule of I.R.C. § 6212(b)). And in Estate of McClanahan v. Commissioner, 95 T.C. 98, 99-101 (1990), and Connor v. Commissioner, T.C. Memo. 1977-121, 1977 Tax Ct. Memo LEXIS 321 at *2, *8-*9, the court had no occasion to comment on the effect of the revenue agents' acceptance of returns on the limitations issue, since the limitations statute was not at issue.

In any event, the procedures on which Seaview relies apply to submissions of delinquent returns (O.Br. 24-27; Am.Br. 20-23), not returns that the taxpayer contends are copies of previously filed returns. On July 27, 2005, the IRS informed Seaview that it had not received Seaview's 2001 return and sought “copies of all retained copies of the return,” along with other documents and information relevant to discovering whether Seaview had filed the return. (2-ER-231-33.) Throughout the audit and even in its Tax Court petition (2-ER-278), Seaview maintained that it had filed its 2001 return in 2002. The 2005 fax included a certified mail receipt as evidence of filing, and the 2007 letter described the enclosed Form 1065 as a copy of a retained copy of the return. (2-ER-44; 2-ER-220-21.)

Consistent with Seaview's initial position that it had previously filed its 2001 return, nothing in those submissions suggested that Seaview was relying on the IRS's internal procedures to accomplish the filing of the submitted Form 1065. Seaview neither invoked the procedures nor conveyed an expectation that the recipient would process the form for filing. Moreover, the IRS's document request and its summons sought only “retained copies” of the 2001 Form 1065, not originals for filing. (2-ER-196; 2-ER-211.) The IRS never instructed Seaview to submit an original return for filing, and Seaview never represented that it was submitting the copies of its 2001 Form 1065 for that purpose. (O.Br. 18, 29.) In that regard, the amici fail to cite any support for their claim that Seaview genuinely thought it was filing its return when it submitted the copy in 2005 or when it submitted the copy in 2007. (Am.Br. 18-19.) Cf. Arbern Co. v. Commissioner, 120 F.2d 424, 425-26 (4th Cir. 1941) (reversing denial of deduction where IRS agent rejected, for improper execution, original returns submitted in good faith for filing but failed to advise taxpayer that the returns could not be filed with him in any event). (O.Br. 35.)

d. Seaview contends that “the IRS should not get to exploit its own failure to send” the submitted copies of Seaview's 2001 Form 1065 to the Ogden service center and “then fault” Seaview for not doing so. (O.Br. 35 (emphasis in original).) Given Seaview's initial position — communicated to the IRS — that it had already filed the requested return, this attempt to shift blame to the IRS is unavailing.¹⁷ If Seaview wanted to ensure the filing of its 2001 partnership return, it could have easily made a protective filing of that return with the Ogden service center in 2005 — i.e., at the same time it sent the copy to the revenue agent — while reserving the right to argue that it had already filed the return in 2002. And it could have done so without “def[ying]” the revenue agent (O.Br. 29); nowhere does Seaview allege that the revenue agent, in requesting a copy of the return, instructed Seaview not to submit a protective filing to the Ogden service center. Cf. Chief Counsel Advice 199933039, 1999 WL 634177 (Issue 2) (concluding that a revenue officer “could not require taxpayers to file directly with the revenue officer”). Alternatively, nothing prevented Seaview from requesting Revenue Agent Johnson to take the necessary steps to accomplish such a protective filing (again, without forfeiting its right to argue that it had already filed the return in 2002). Seaview was represented in 2005 by a CPA (Sedacca) and in 2007 by a prominent law firm (Skadden Arps). Had it wanted to ensure that the statute of limitations was running, it certainly was able to ascertain and take the steps necessary to do so.

Finally, Seaview contends the Tax Court's holding would give the IRS “breathtaking” power to engage in “abusive” behavior. (O.Br. 3, 20.) It alleges that the IRS will “eviscerate” the limitations period and “evade [it] with impunity.” (O.Br. 19, 37-39; Am.Br. 23.) Those dire predictions ignore that taxpayers always have the power to start the limitations statute simply by filing returns at the designated location. More to the point, if the amici believe that the current rules (and over 90 years of case law) enable the IRS to victimize unsophisticated taxpayers — the polar opposite of Seaview — then their remedy is with Congress, not this Court.

As aptly summarized by the Tax Court, “Seaview sent what purported to be copies of its return to places not designated in the Code or regulations. Therefore, Seaview did not file its return when it faxed a purported copy to Agent Johnson, and it did not file its return when it mailed a purported copy to respondent's counsel.” (1-ER-14-15.)

C. The photocopies of Form 1065 that Seaview submitted to the revenue agent and to an IRS attorney were not returns of partnership income

1. To be treated as a return, a document must purport to be a return

Congress has authorized the IRS “to prescribe by regulation forms of returns and has made it the duty of the taxpayer to comply.” Lane-Wells Co., 321 U.S. at 223. That authority implements our “system of self-assessment” by obtaining tax information not just “in some form,” but instead “with such uniformity, completeness, and arrangement that the physical task of handling and verifying returns may be readily accomplished.” Id. “And, in providing that the period of limitation should begin on the date when the return was filed, rather than when it was due, the statute plainly manifested a purpose that the period was to commence only when the taxpayer had supplied this information in the prescribed manner.” Florsheim Bros. Drygoods Co. v. United States, 280 U.S. 453, 460 (1930).

The term “return” “is not a technical word of art.” Florsheim Bros., 280 U.S. at 462. For that reason, courts have developed a practical approach in determining whether a document qualifies as a return. Here, the Tax Court applied the test announced in Beard v. Commissioner, 82 T.C. 766, 777 (1984), aff'd, 793 F.2d 139 (6th Cir. 1986), under which a document is a return for limitations purposes only if it: (i) contains sufficient data to calculate the taxpayer's liability; (ii) purports to be a return; (iii) is an honest and reasonable attempt to satisfy the requirements of the revenue laws; and (iv) is executed under the penalties of perjury. (1-ER-15.) See also In re Hatton, 220 F.3d 1057, 1060-61 (9th Cir. 2000) (adopting the Beard test). Under Beard and earlier cases, returns for the wrong type of tax, forms issued by the IRS for other purposes, and return forms altered to obscure tax items or to protest the tax laws have been held not to be returns.¹⁸ Lane-Wells Co., 321 U.S. at 220, 222-24; Pilliod Lumber, 281 U.S. at 246-48; Florsheim Bros., 280 U.S. at 459-62; Beard, 82 T.C. at 768-80, aff'd, 793 F.2d at 140.

This case involves the requirement that a document must purport to be a return in order to qualify as a return. In Florsheim Brothers, 280 U.S. at 462, the Supreme Court stated that for a document to have the effect of a return, “it must honestly and reasonably be intended as such.”¹⁹ Cf. Zeier v. IRS, 80 F.3d 1360, 1364 (9th Cir. 1996) (taxpayer cannot negate return treatment for properly filed form by claiming contrary intent). The Tax Court followed its opinion in Friedmann, supra, which applied Florsheim Brothers to adjudicate the status of copies of return forms delivered to a revenue agent. (1-ER-15-16.) Although Seaview contends that Friedmann is a “filing” case, not a “return” case (O.Br. 45-46; Am.Br. 11), the Friedmann court touched on both issues. See 2001 WL 883222 at *6 (citing Beard).

Friedmann involved a revenue agent who, believing that the taxpayer had filed his returns, requested copies for use during an audit. 2001 WL 883222 at *2, *7. The taxpayer provided the copies, but he did not inform the revenue agent of his failure to file. Id. The Tax Court stated that, for a document “to have the effect of a return for statute of limitations purposes, a key element is that the document 'must honestly and reasonably be intended as such' by the taxpayer.” Friedmann, 2001 WL 883222 at *6 (quoting Florsheim Bros.). After finding that “the revenue agent was not the prescribed place for filing those returns,” the court stated that, “[m]oreover, there is nothing in the record to show that [the taxpayer] intended his delivery of those documents to the agent in April 1992 to constitute the filing of his returns.” Id. at *7 (citing Berenbeim v. Commissioner, T.C. Memo. 1992-272, 1992 Tax Ct. Memo LEXIS 294).

In Berenbeim, a taxpayer wife gave copies of returns to IRS agents, erroneously believing that the originals had already been filed by her husband. 1992 Tax Ct. Memo LEXIS 294 at *35-*36. The IRS agents caused those copies to be processed for filing without seeking the wife's permission. Id. at *36. The court held that, because the wife had not intended the copies to be filed as her returns, “no returns were filed” for the relevant years. Id. at *41. See also Harold, 2021 WL 672117 at *8 (“courtesy copy” of return form faxed to revenue officer not considered to be a return for filing).

The amici argue (Am.Br. 12-13) that the Tax Court reached a contrary result in Kestin v. Commissioner, 153 T.C. 14 (2019), appeal voluntarily dismissed, 2020 WL 3971328 (4th Cir. 2020), but Kestin is entirely consistent with the Commissioner's position in this case. In Kestin, the IRS imposed seven $5,000 penalties under I.R.C. § 6702(a), which applies when a taxpayer “files” a frivolous document that “purports to be a return.” Id. at 25. The seven submissions at issue were a Form 1040X amended income-tax return and six copies thereof marked as copies. Id. The court upheld the penalty on the first submission, but not on the copies. Id. at 26-28. Because the evidence showed that the taxpayer did not request that any action be taken on the copies themselves, the court held that they were not subject to the penalty because they did not purport to be returns. Id. Moreover, the footnote quoted by the amici (Am.Br. 13 (quoting id. at 28 n.6) did nothing more than not “rule out the possibility” that, in a situation similar to the one here, a submitted copy “on which [a taxpayer] relies to report his income . . . might constitute a purported return of tax.” Id. (emphasis added). In other words, a taxpayer must be relying on the submitted copy to formally report his income to the IRS, not just to serve as a working copy for an IRS employee.

In sum, where the evidence shows that a taxpayer does not intend for a document (including a copy of a return form) to be filed as its return, the document is not a return because it does not purport to be a return.

2. The Tax Court correctly held that the photocopies of Seaview's Form 1065 were not returns because Seaview did not intend for either copy to be filed as its return

The Tax Court held that Seaview did not intend for either of the photocopies of the 2001 Form 1065 that it submitted to the IRS in 2005 and 2007 to be filed as its return, and, therefore, that the copies were not returns because they did not purport to be returns. (1-ER-15-16.) There is nothing in the circumstances surrounding the submission of the copies suggesting that Seaview “honestly and reasonably . . . intended” either to serve as its return. Florsheim Bros., 280 U.S. at 462. Instead, the circumstances show that Seaview lacked the requisite intent.

To review, on September 23, 2005, Sedacca transmitted a fax to Revenue Agent Johnson. (2-ER-220.) The cover sheet stated, in pertinent part, “As we discussed, I have attached the 2001 tax return for Seaview Trading LLC as well as the certified mailing.” (2-ER-220.) The attachments were images of a certified mail receipt with a postmark of July 3, 2002 (2-ER-221) and of a retained copy of the Form 1065 that Sedacca had recently received from Kotick's office (2-ER-222-29; 2-ER-164-65; 2-ER-178-80). Later, on July 24, 2007, Seaview's counsel sent a letter to IRS attorney Forsberg. (2-ER-44.) The letter said, in relevant part, “Pursuant to our prior conversation, enclosed is a copy of the Seaview Trading, LLC's retained copy of its 2001 Form 1065.” (2-ER-44.) The enclosed Form 1065 was the same document previously faxed to Revenue Agent Johnson. (2-ER-45-52.)

Regarding the 2005 fax, the cover sheet neither requested that the attached copy of Seaview's 2001 Form 1065 be filed nor implied that it should be. (2-ER-220.) The body of the fax begins with “As we discussed,” and Sedacca testified at his deposition that he transmitted the Form 1065 in response to Revenue Agent Johnson's request for a copy thereof. (2-ER-178-79; 2-ER-220.) Moreover, as the Tax Court noted, Seaview attached a certified-mail receipt in support of its belief that it had filed its return in 2002. (1-ER-16; 2-ER-221.) In the absence of any evidence that Seaview intended the submission to serve as a protective filing, the court could not possibly have found that Seaview honestly intended the faxed copy of the Form 1065 to serve as its return for 2001 while it was also asserting that it had already filed its 2001 return. Nor would it have been reasonable for Seaview to expect Revenue Agent Johnson to process the faxed copy of its Form 1065 for filing under those circumstances.

Seaview's case regarding the 2007 transmittal letter is even weaker. Like the 2005 cover sheet, the transmittal letter neither requested that the enclosed Form 1065 be processed for filing nor implied that it should be. (2-ER-44.) The letter described the enclosure as “a copy of [Seaview's] retained copy of its 2001 Form 1065.” (2-ER-44.) The letter's use of the noun “copy,” especially in conjunction with the adjective “retained,” indicates that Seaview continued to maintain that it had already filed its 2001 return, and nothing in the letter suggests that Seaview wanted the IRS to process the submitted document as a protective filing.

The copy of Form 1065 included with each submission further supports the Tax Court's holding that Seaview did not intend for either to be filed as its return. Both forms bore only an undated photocopy of Kotick's signature. (2-ER-45; 2-ER-222.) A partnership return must be signed under penalty of perjury by one of its partners. I.R.C. §§ 6063, 6065; Treas. Reg. § 1.6063-1; Beard, 82 T.C. at 777 (execution under penalty of perjury is a return requirement). The IRS has traditionally required an original taxpayer signature, or at least a written attestation in support of a reproduced signature. See, e.g., Pilliod Lumber, 281 U.S. at 246, 248-49; Turco, 1997 WL 786967 at *2; Berenbeim, 1992 Tax Ct. Memo LEXIS 294 at *20; Chief Counsel Advice 200518079, 2005 WL 1061033 (May 6, 2005). Seaview argues that Kotick attested to his signature at his June 7, 2007 deposition in response to a question by the IRS's attorney. (O.Br. 41; 2-ER-68.) But one would expect a partnership represented by a CPA and by sophisticated counsel to attend to the details of verification on a Form 1065 that it intended to submit for filing. See Allnutt, 523 F.3d at 408 (blue ink signature over photocopied signature).

Finally, contrary to the amici's claim of diligence (Am.Br. 10), there is no evidence that Seaview's representatives followed up with Revenue Agent Johnson or with IRS attorney Forsberg to request that the submitted copies be processed for filing. That inaction is further evidence that Seaview did not intend for either submission to be filed as its return.

There is no dispute regarding the contents of the 2005 fax and the 2007 letter. They show that Seaview did not intend either of the accompanying copies of its Form 1065 to be filed as its return. The Tax Court therefore correctly held that neither copy was a return because neither purported to be a return.

3. Seaview's and the amici's arguments regarding the nature of the photocopies lack merit

Seaview and the amici contend that either of the submitted copies of Seaview's 2001 Form 1065 should be treated as its return for that year. (O.Br. 19-20, 39; Am.Br. 9-10.) The explanation of what constitutes a return intended for filing in Harold, 2021 WL 672117 at *8, exposes the fundamental flaw in their supporting arguments. As the Harold court recognized, “The term 'filing' denotes an intent to do something to create a permanent record.” Id. “Conversely,” the court said, “a 'courtesy copy' denotes a casual transmittal, as in a sending a copy that the recipient may keep or not, as he or she wishes.” Id. Put another way, a taxpayer's return is its formal report on the correct form to be kept on file with IRS. Although people might colloquially refer to any completed return form as a “return,” the copies of that form that might be produced and used during the course of an audit and in litigation are not the taxpayer's return in the legal sense of the word.

Seaview and the amici conflate other Beard requirements with the purports-to-be-a-return requirement in an attempt to evade the actual question posed, viz., whether the evidence shows an intent by Seaview to have Revenue Agent Johnson or IRS attorney Forsberg process and submit for filing the copies of the 2001 Form 1065 that it sent them. If it lacked that intent, then neither copy could serve as Seaview's return because neither purported to be its return. Instead, each copy purported to be just that, a copy for the recipient's reference in performing his daily duties.

Thus, Seaview's providing of sufficient information on its Form 1065 to allow the IRS to issue an FPAA goes to Beard's sufficient-information requirement, not to its purports-to-be-a-return requirement. (O.Br. 43, 45; Am.Br. 2, 9-10.) Seaview also cites several bankruptcy cases in which the taxpayers filed return forms after tax deficiencies had been assessed, attempting to discharge their tax debts. (O.Br. 40, 44.) But in those cases, the taxpayers usually satisfied the “purports” requirement by filing completed forms with the intent that the forms be their official returns.²⁰ No such intent was present here.

Seaview engages in semantics when it cites IRS statements to create the impression that the IRS treated its submissions as returns. Seaview equates the terms “return” and “Form 1065,” although, as shown, not all Forms 1065 are returns. (O.Br. 40-41.) In any event, a few colloquial references to Forms 1065 as “returns” or oxymorons like “unfiled tax return” (2-ER-39) over the course of an extensive audit and litigation hardly amount to an IRS concession that Seaview filed a “return.”

Similarly, Seaview and the amici attack a strawman and set up a false dilemma in their discussions of a taxpayer's subjective intent. (O.Br. 44-46; Am.Br. 10-11, 13.) Contrary to their suggestion, a taxpayer need not disclaim its belief that it previously filed a missing return in order to demonstrate the requisite intent that a subsequent submission be treated as its return for that year on a protective basis. As of July 2005, Seaview knew that the IRS did not have a record of its 2001 Form 1065 (2-ER-231), but nothing in its later submissions evidenced an intent to resolve that problem. Again, if Seaview was concerned about the open statute of limitations, nothing prevented it from submitting a Form 1065 for filing as its 2001 return — either to the Ogden service center or through the IRS personnel that had requested copies of the return — while expressly reserving the right to prove that it had filed its return in 2002.

Finally, Seaview and the amici contend that a ruling in the Commissioner's favor will “encourage[ ] chicanery” and endorse an “abusive position” under which the IRS could keep the limitations period open indefinitely by requesting additional copies of a return form. (O.Br. 44, 46; Am.Br. 13-14, 23-25.) As shown, taxpayers can make protective filings without forfeiting the right to rely on alleged earlier filings. Thwarting such protective efforts would require official misconduct, which taxpayers could readily demonstrate in litigation by producing the pertinent records. In any event, this Court should not base its ruling on Seaview's and the amici's conjectures that IRS employees will commit malfeasance.

CONCLUSION

The decision of the Tax Court is correct and should be affirmed.

Respectfully submitted,

DAVID A. HUBBERT
Acting Assistant Attorney General

ARTHUR T. CATTERALL (202) 514-2937
ANTHONY T. SHEEHAN (202) 514-4339
Attorneys
Tax Division
Department of Justice
Post Office Box 502
Washington, D.C. 20044

MARCH 5, 2021