River City Ranches v. Commissioner

MEMORANDUM *

River City Ranches # 1, Ltd. (RCR), a collection of partnerships, appeals the tax court’s decision holding that the six-year statute of limitations under 26 U.S.C. § 6229 (c)(1) is applicable and that the Commissioner correctly applied the penalty-interest provision of 26 U.S.C. § 6621 (c) for tax-motivated transactions. We affirm.

I

The tax court correctly held that the statute of limitations for the Commissioner to send notice of final partnership administrative adjustments (FPAA) was extended to six years under 26 U.S.C. § 6229 (c)(1). Section 6229(e)(1) applies when any partner who, “with the intent to evade tax, signed or participated directly or indirectly in the preparation of a partnership return which includes a false or fraudulent item.” In the tax court, RCR contested only whether the promoter of the partnerships, Walter J. Hoyt, III, had the requisite intent to evade tax.

RCR principally argues that any evidence of Hoyt’s specific intent to evade taxes is not from the relevant tax years at issue and that a basic tenet of tax law requires each year to stand on its own. The actual rule is not so clean cut; in the case of a continuing enterprise,…