CCA 1030030: Salman Ranch decision required refunds for eligible nonpetitioning partners

Plain-English summary

Chief Counsel Advice explains how the Federal Circuit's Salman Ranch decision affected nonpetitioning partners in the partnership proceeding. The decision held that an overstatement of basis did not constitute an omission from gross income for the six-year limitations period under section 6501(e)(1)(A), for the 1999 period at issue. The advice states that nonpetitioning partners were parties to the proceeding under section 6226(d), and that refunds for partners entitled to them should be issued automatically under section 6230(d)(5). Only partners who had made advance payments on their potential liabilities were entitled to refunds or returns of their deposits.

Ruling snapshot

• Question: How did the final Salman Ranch decision affect refunds for nonpetitioning partners?
• Outcome: Advice given
• Key authorities: IRC §§ 6226(d), 6230(c), 6230(d)(5), and 6501(e)(1)(A); Salman Ranch Ltd. and William J. Salman v. United States, 573 F.3d 1362 (Fed. Cir. 2009)

Full text (IRS public release)

ID: CCA_2010071314270657 Number: 201030030
Release Date: 7/30/2010
Office: ----------
UILC: 6226.03-00, 6230.00-00, 6501.00-
00

From: ----------------------
Sent: Tuesday, July 13, 2010 2:27:10 PM
To: -----------------
Cc: -------------------------
Subject: Tefra Investor

For your files:

On July 30, 2009, the Federal Circuit held that an overstatement of basis may not constitute an omission
from gross income for purposes of the six-year period of limitations under section 6501(e)(1)(A). Salman
Ranch Ltd. and William J. Salman v. United States, 573 F.3d 1362 (Fed. Cir. 2009). On November 19,
2009, the Federal Circuit denied the government’s petition for rehearing from its adverse opinion filed on
July 30, 2009. The government did not file a petition for a writ of certiorari this case and the time period
for filing a petition for writ of certiorari has ended. Thus, the decision in this case is final.

Although only Salman Ranch, Ltd. and William J. Salman were named parties in this case, nonpetitioning
partners are nevertheless parties to the court proceeding under section 6226(d), the same as if they had
personally petitioned. Section 6230(d)(5) provides that we are to issue any refunds automatically. If we
fail to issue refunds to any partners entitled to a refund, they would have the right to file a refund claim
under section 6230(c). Under that provision, the decision of the above partnership case would be binding
on the government for purposes of issuing the refund.

Please note that this decision applies only to period ended December 31, 1999, the year at issue in this
case. Further, only partners who previously made advance payments on their potential liabilities are
entitled to refunds or returns of their deposits.