Tax Court in Reviewed Opinion Holds TEFRA Litigation Time Limits Jurisdictional (10/25/25)

I am late to post on North Wall Holdings, LLC v. Commissioner, 165 T.C. ___, No. 9 (10/21/25) (reviewed opinion, T.C. Case No. 27773-21, here, at # 50 and  GS here). North Wall is the latest on the tax saga starting with Boechler, P.C. v. Commissioner, 596 U.S. 199 (2022), holding that the time limit for instituting CDP Tax Court proceedings is not jurisdictional, meaning that equitable tolling for late filing may apply. In recent Supreme Court jurisprudence, many time limits have been held to be not jurisdictional. The key tax exception is United States v. Brockamp, 519 U.S. 347 (1997), holding that the refund time limits are jurisdictional.

Notwithstanding the general trend, the Tax Court has held § 6213(a)'s time limits for petitions for redeterminations of deficiencies are jurisdictional. Hallmark Research Collective v. Commissioner, 159 T.C. 126 (2022) (unanimous reviewed opinion). Three Courts of Appeals have now held the § 6213(a) time limits are not jurisdictional, thus permitting equitable tolling. See 6th Circuit Joins 2nd and 3rd Circuits in Holding § 6213(a)’s 90--day Petition-Filing Deadline is Not Jurisdictional (8/25/25; 9/8/25), here.

In North Wall, the opinion for the Court finds the TEFRA time limits jurisdictional. The opinion’s detailed discussion of the TEFRA interrelated time frames is quite excellent. I highly recommend. For purposes of this blog entry, the headnotes are sufficient:

          R mailed a Notice of Final Partnership Administrative Adjustment (FPAA) to the tax matters partner (TMP) of PS, a limited liability company treated as a partnership for federal income tax purposes and subject to the TEFRA unified audit and litigation procedures. P, a notice partner, filed a Petition for readjustment of partnership items 168 days after R mailed the FPAA to the TMP. R moved to dismiss P’s Petition for lack of jurisdiction. P objects.

          A TMP may file a petition for readjustment within 90 days of R’s mailing of an FPAA to the TMP. I.R.C. § 6226(a). A partner or group of partners entitled to notice may file a petition within 60 days after the close of the 90- day TMP petition period. I.R.C. § 6226(b)(1); see also I.R.C. § 6231(a)(8) (defining “notice partner”), (11) (defining “5-percent group”).

          The text, context, and relevant historical treatment of the TEFRA petition period establish that the period within which to file a petition is a jurisdictional limit. The text places the petition period within the jurisdictional grant. I.R.C. § 6226(b)(1), (f). In the context of the broader TEFRA provisions, allowing equitable tolling would render [*2] the TEFRA statutory scheme unworkable. Historically, courts have treated the TEFRA petition deadlines as jurisdictional, and Congress has amended TEFRA to specifically account for the effect of the petition deadlines’ being jurisdictional.

          Even setting aside the jurisdictional question, the complex TEFRA statutory scheme indicates that Congress did not intend for the equitable tolling doctrine to apply to untimely TEFRA petitions.

          Held: P’s Petition was untimely.

          Held, further, equitable tolling does not apply to hold open the prescribed periods set forth in I.R.C. § 6226(a) or (b) for filing a TEFRA petition.

FTPB 2020 Update 03 – Central IRS Web Site for BBA Centralized Partnership Audit Regime (9/2/20)

The IRS has announced a new website “intended to be  one-stop location for anything BBA-related, including regulations and other guidance and instructions related to the Partnership Representative (PR), electing out of the centralized audit regime, Administrative Adjustment Requests (AARs) and what to expect during a BBA administrative proceeding.”  IR-2020-199 (9/1/20), here.  The web site, titled “BBA Centralized Partnership Audit Regime” is here.

As of now, the web site has categories for links for (i) Filing Requirements, (ii) BBA Partnership Audit, (iii) Regulations and Interim Guidance, and (iv) a handy chart comparing partnership procedures under TEFRA and BBA.

This web page will be a key resource for the “BBA Centralized Partnership Audit Regime.”

I will try to go through the linked items in advance of the 2021 editions of the Federal Tax Procedure Book.

Peter Reilly on Real Estate Phantom Taxable Income Gaming the Audit Lottery (8/13/20)

Peter Reilly, a friend and frequent tax commenter, has this offering on his Forbes blog:  IRS Veteran Insists That IRS Is Missing Billions In Real Estate Gains (Forbes 8/11/20), here.  Basically, Peter deals with tools that the IRS has in its system that his informant asserts can locate large amounts of income that goes unreported through the phantom income that arises from real estate losses funded by nonrecourse debt.  I am not familiar with the IRS systems that could police the reporting of the income, but I do note (as does Peter) that there is a new IRS initiative for the partnership to report partner level basis.  See Notice 2020-43, here; see also Peter’s discussion on another blog Who Is IRS Aiming At In Recent Partnership Notice? (Your Tax Matters Partner 6/21/20), here.

Those who are partnership tax gurus will like Peter’s offerings and maybe even understand them.  As an aside, my practice over the recent years have not focused on partnership tax, so I am a bit long in the tooth on that.  (Except that I do cover the procedural aspects of the TEFRA and CPAR (often called BBA) regimes, and earlier in my private practice while substantially involved with real estate partnerships (and teaching Real Estate Taxation at UH Law School), I did have particular interest in partnership taxation originating from my handling of the appeal Diamond v. Commissioner, 492 F.2d 286 (7th Cir. 1974), here, a leading case in partnership taxation.  (The Diamond opinion was quite controversial, but in my mind just involved elemental tax principles correctly applied; but the real estate industry was quite powerful and managed to whittle away the results and essentially reverse through IRS administrative largesse, hence the carried interest notion, but I won't go off further on that rant here.)

Peter’s Forbes offering did cover some significant tax history related to Crane v. Commissioner, 331 U.S. 1, 14 n.37 (1947), here, and its tax infamous footnote 37. All tax students and practitioners should have at least a passing acquaintance with that footnote, said to be the most famous footnote in tax history.  Footnote 37 should also mitigate against the expression of apparent disdain for footnotes that Justice Scalia once made in oral argument (I cover Scalia’s statement in both editions of my book).  Footnote 37 said:

Obviously, if the value of the property is less than the amount of the mortgage, a mortgagor who is not personally liable cannot realize a benefit equal to the mortgage. Consequently, a different problem might be encountered where a mortgagor abandoned the property or transferred it subject to the mortgage without receiving boot. That is not this case.

That footnote spawned a myriad of offerings exploiting nonrecourse debt to generate deductions with the notion (or hope) that the taxpayer would not have to balance the books with so-called phantom taxable income at the end.  Those shelters proliferated particularly in the 1970s involving both real estate where lenders might make economic nonrecourse loans in the real world and in other contexts where the nonrecourse loan was basically phony (or magic).  The Supreme Court put an end to (or at least curbed somewhat) that magical thinking in Commissioner v. Tufts, 461 U.S. 300 (1983), here, requiring the taxpayer to include the amount of the nonrecourse debt in the amount realized part of the gain calculation upon foreclosure or deed in lieu of foreclosure, thus at least leaving the taxpayer with deferral and conversion shelter from playing the nonrecourse debt game.  

Centralized Partnership Audit Regime (CPAR) Update -- Looking for Reviewer Volunteers (1/2/19)

I am in the process of finishing up a substantial revision of my discussion of the relatively new Centralized Partnership Audit Regime ("CPAR") (Code Sections 6221 through 6241) applicable for audit years after 2017.  I would greatly appreciate it if anyone would be willing to read and comment on a draft.  You can contact me at jack@tjtaxlaw.com.  (I can provide the draft in WordPerfect, MS Word and Adobe pdf.)

For others who are thinking about getting into the CPAR, I offer the following from Introduction to this new discussion:

III. The Centralized Partnership Audit Regime (“CPAR”) After 2017.

A. Introductory Caveat Regarding Code and Regulations Sections.

Reminder:  All Code section citations in this section III are to the CPAR in the Internal Revenue Code applicable for years after 2017.  The PAR replaced the TEFRA Code sections, some of which have the same numbers.  Students and practitioners should be careful to ensure that they refer to the CPAR Code sections and, where applicable, the Regulations under the CPAR Code sections.  All references to the Regulations in this section are to the regulations promulgated under the CPAR Code sections. 

Students and practitioners should assure that the statutes and regulations they refer to incorporate all changes to these provisions (a good practice always, but particularly with major new regimes such as CPAR that require corrections and refinements).  The latest statute changes I incorporate in this discussion occurred in 2018 in Tax Technical Corrections Act of 2018, contained in Title II of Division U of the Consolidated Appropriations Act of 2018, Public Law 115-141 (“TTCA”).  For this purpose, I have used the Code sections offered on the web by the Office of Law Revision Counsel (the link is here).  The latest regulations I have incorporated in the discussion was by T. D. 9844, published in December 2018. 

B. Introduction to the CPAR.

1. General - Audit Adjustments Assessed and Collected at Partnership Level. 

Effective for tax years beginning after 2017, the Code provides a new regime for partnership audits and litigation. This regime is called the Centralized Partnership Audit Regime (“CPAR”), and is contained in§§ 6221-6241 of the Code.

A partnership is generally required to file a partnership return (Forms 1065) each year reporting entity level results of partnership activity and report on Schedules K-1 to partners and to the IRS each partners’ allocable share of partnership items and related items so that the partners report the appropriate tax consequences at the partner level.  This long-time requirement was retained under TEFRA and is retained under CPAR.  As with TEFRA, CPAR applies to audit and related activities after the the partnership year (the reviewed year).  In general, the CPAR carries forward the prior practice of making audit adjustments for partnership-related items in the reviewed year at the partnership level but imposes the tax consequences of the adjustments upon the partnership (rather than the partners) in the year the adjustments are made (the adjustment year).  There are many complexities in implementing the CPAR and there are some situations in which this general regime for partnership level payment will not apply so that the tax consequences, including assessment and payment, apply at the partner level.  But, in broad strokes, the default rule is that CPAR allows one assessment of the tax, penalties and interest at the partnership level and one “taxpayer”–the partnership– from whom to collect the amounts assessed. 

In the text in this section, I provide only a relatively high-level summary addressed to the student of tax procedure.  I provide some detail in the footnotes, but not enough that practitioners should rely either upon the text summary or the footnotes for the detail necessary to actually practice in this CPAR area. 

2. CPAR Code and Regulations Sections and Citations in Text. 

In the text, I generally cite only the major Code section when introducing a topic.  I will not cite subsections in the text, but will provide subsections in the footnotes (along with other explanatory material).  I do offer the following list of the Code sections for CPAR and their titles: 

§ 6221 - Determination at partnership level
§ 6222 - Partner’s return must be consistent with partnership return
§ 6223 - Partners bound by actions of partnership
§ 6225 - Partnership adjustment by Secretary
§ 6226 - Alternative to payment of imputed underpayment by partnership
§ 6227 - Administrative adjustment request by partnership
§ 6231 - Notice of proceedings and adjustment
§ 6232 - Assessment, collection, and payment
§ 6233 - Interest and penalties
§ 6234 - Judicial review of partnership adjustment
§ 6235 - Period of limitations on making adjustments
§ 6241 - Definitions and special rules 

The Regulations (all of which have not yet been finalized) will not be cited in the text but will be cited in the footnotes.  The regulations format is the format for procedural regulations.  The following is an example of the first CPAR regulation: Regs. § 301.6221-1, titled “Tax treatment determined at partnership level.”