SEAVIEW TRADING, LLC, AGK INVE V. CIR, No. 20-72416 (9th Cir. 2022)
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Seaview believed it filed its 2001 partnership tax return (Form 1065) in July 2002, but the Internal Revenue Service (“IRS”) stated they had no record of receiving it. Seaview faxed an agent a signed copy of Form 1065. During an audit interview, the IRS noted that Seaview’s accountant had previously provided a signed tax return and introduced Form 1065 as an exhibit. Seaview’s counsel mailed another signed copy of the 2001 Form 1065 to an IRS attorney.
The IRS issued Seaview a Final Partnership Administrative Adjustment (“FPAA”) for 2001. In that notice, the IRS stated that it had no record of a tax return filed by Seaview for 2001. Seaview filed a petition in the Tax Court challenging the adjustment of losses. The Tax Court held that Seaview did not “file” a tax return when it faxed a copy to the IRS agent or mailed a copy to the IRS counsel.
The Ninth Circuit reversed the Tax Court’s summary judgment in favor of the government. The court held that when (1) an IRS official authorized to obtain and receive delinquent tax returns informs a partnership that a tax return is missing and requests that tax return, (2) the partnership responds by giving the IRS official the tax return in the manner requested, and (3) the IRS official receives the tax return, then the partnership has “filed” a tax return for purposes of Section 6229(a). Further, under the Beard v. Commissioner, 82 T.C. 766 (1984) factors, the Form 1065 was a “return.”
Court Description: Tax. The panel reversed the Tax Court’s summary judgment in favor of the government, in a petition challenging a Final Partnership Administrative Adjustment and involving whether the three-year limitations period for adjustment of partnership losses under 26 U.S.C. § 6229(a) had begun to run, and remanded for further proceedings. Taxpayer Seaview Trading, LLC, a California-based limited liability company, is classified as a partnership for federal tax purposes. Seaview believed it filed its 2001 partnership tax return (Form 1065) in July 2002, but the Internal Revenue Service has no record of receiving it. In 2005, in response to a letter from an IRS revenue agent notifying it that the IRS had not received its 2001 federal income return, Seaview faxed the agent a signed copy of Form 1065. The next month, the same IRS agent informed Seaview that its 2001 return had been selected for examination and requested further information, including all copies of the signed Form 1065. In 2006, during an interview of Seaview’s accountant, the IRS noted that the accountant had previously provided a signed tax return and introduced Form 1065 as an exhibit. In 2007, Seaview’s counsel mailed another signed copy of the 2001 Form 1065 to an IRS attorney. In 2010, the IRS issued Seaview a Final Partnership Administrative Adjustment (FPAA) for 2001. In that notice, SEAVIEW TRADING V. CIR 3 the IRS stated that it had no record of a tax return filed by Seaview for 2001, but that the partnership had provided a copy of the return it claimed to have filed. The notice also indicated that none of the income/loss/expense amounts in the 2001 return were allowable. Seaview filed a petition in the Tax Court challenging the adjustment of losses. The Tax Court held that Seaview did not “file” a tax return when it faxed a copy to the IRS agent or mailed a copy to the IRS counsel and, in any case, the copies of the 2001 Form 1065 sent to the IRS in 2005 and 2007 were not “returns.” Seaview and the IRS then settled all their disputes but reserved Seaview’s right to appeal the Tax Court’s decision. The panel first addressed whether the limitations period for adjustment of partnership losses under 26 U.S.C. § 6229(a) had begun to run. This issue turns on whether Seaview’s tax return was ever “filed.” The panel held that when (1) an IRS official authorized to obtain and receive delinquent tax returns informs a partnership that a tax return is missing and requests that tax return, (2) the partnership responds by giving the IRS official the tax return in the manner requested, and (3) the IRS official receives the tax return, then the partnership has “filed” a tax return for purposes of § 6229(a). Accordingly, the panel concluded that Seaview’s 2001 tax return was filed when the IRS agent requested the missing return, Seaview delivered it, and the IRS acknowledged receipt during the auditing process in connection with the FPAA. Because the return was filed in 2005, the IRS’s notice of FPAA in 2010 was untimely. The panel next addressed whether Seaview’s belated submission of its Form 1065 qualified as a “return.” The panel applied the test under Beard v. Commissioner, 82 T.C. 4 SEAVIEW TRADING V. CIR 766, 777 (1984): (1) the document must purport to be a return, (2) it must be executed under penalty of perjury, (3) it must contain sufficient data to allow calculation of tax, and (4) it must represent an honest and reasonable attempt to satisfy the requirements of the tax law. Applying those factors, the panel concluded that the Form 1065 was a “return.” Dissenting, Judge Bade wrote that because it is undisputed that Seaview failed to file its return to the correct location in Ogden, Utah, in the manner prescribed in the applicable statute and regulations, either on time or belatedly, that conclusion should end the inquiry and the panel should affirm the Tax Court. SEAVIEW TRADING V. CIR 5
The court issued a subsequent related opinion or order on November 10, 2022.
The court issued a subsequent related opinion or order on March 10, 2023.
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