William H. Kinsey, and Estate of Irene S. Kinsey, Deceased, William H. Kinsey v. Commissioner of Internal Revenue

This appeal from the Tax Court involves income taxes payable for the years 1977 and 1978. Only two issues are presented on appeal: (1) whether the deficiency notices for 1977 were timely issued by the Internal Revenue Service (the “Service” or “I.R.S.”); and (2) whether the deficiencies determined in the 1977 notices were within the restriction contained in the Form 872-A executed by the parties. The Tax Court held that the statutory notice of deficiency for 1977 was timely issued within the period of the Form 872-A waiver of the statute of limitations for assessment and that the adjustments giving rise to the notice of deficiency for 1977 were within the scope of the special limitation contained therein. We affirm.

FACTUAL BACKGROUND

Taxpayers timely filed a 1977 federal income tax return, claiming a $58,408 loss. This figure represented their distributable share of the loss of Beech Mountain, Ltd. (“Beech Mountain”), in which taxpayers were limited partners. Beech Mountain typically invested in “straddles,” in which a taxpayer entered into a pair of futures contracts to deliver or to take delivery of a specified quantity of a commodity (in this ease, government securities).…