We finally get a post-BBA 2015 full-dress T. C., M Assets, LP, A-A-A Storage, LLC, Partnership Representative, 165 T. C. 1, filed 7/2/25, with Judge Ronald L. (“Ingenuity”) Buch getting the OK from 17 (count ’em, 17) of his colleagues.

M was selling off real estate and IRS was increasing Section 1231 recapture of depreciation. IRS wants partial summary J that the NFPA (Notice of Final Partnership Adjustment) was timely per Section 6235. “The Commissioner relies on Treasury Regulation § 301.6235-1(b)(2), which defines the period the Commissioner has to issue the FPA in the event a partnership requests a modification of an imputed underpayment pursuant to section 6225(c).” 165 T. C. 1, at p. 3.

Spoiler alert! IRS loses!

IRS audited, proposed changes, M riposted with a Form 8980 modification request, IRS bought all M’s requests, but then changed its mind and hit M with the NFPA with all the old increases, plus chops.

M claims IRS is too late with the NFPA, per Section 6235(a)(2). IRS says yeah, we goofed, but we’re timely.

Judge Buch lays out the new procedures in 165 T. C. 1, at pp. 8-9. First there’s a notice of proceeding to the Representative, who alone appears and can bind all partners. After audit, the Notice of Proposed Partnership Adjustment (NOPPA). Rep has 270 days to request modifications via Form 8980 with attachments; see 165 T. C. 1, at p. 9, Footnote 3, for a list of modifications. IRS eyeballs any modification requests and issues a Notice of Final Partnership Adjustments (FPA). Rep must petition within 90 days to USTC, Court of Claims, or USDC.

When a modification request of imputed underpayment under section 6225(c) is timely made, IRS must mail FPA no later than 3 years after the date that is 270 days . . . after the date on which everything required to be submitted to the Secretary pursuant to such section is so submitted. IRS has promulgated Reg. Section 301.6235-1(b)(2), which says date everything submitted is 270 days when partnership can request modifications; M says the statute says it’s when they actually submitted everything, as long as it’s less than 270 days after the NOPPA.

It’s time for the Supremes’ gift of discipline to tax law. Cue Loper-Bright.

“As applied in this case, there is a direct conflict between the statute and the regulation on which the Commissioner relies. Section 6235(a)(2) provides the period for when the Commissioner can make an adjustment for a partnership in the event a modification request for the imputed underpayment is submitted to the Commissioner. The plain text of that statute states that date is ‘270 days . . . after the date’ everything required for a complete modification request under section 6225(c) ‘is so submitted.’ I.R.C. § 6235(a)(2). The regulation interprets that date to be 270 days after ‘[t]he date the period for requesting modification ends.’ Treas. Reg. § 301.6235-1(b)(2)(i)(A). As is made evident in this case, those are different dates, and the regulation must give way to the statute.” 165 T. C. 1, at p. 13.

IRS claims statute gives broad authority to promulgate regulations. Yeah, says Judge Buch, but not to rewrite the statute that gives IRS that authority. And M never filed the Form 8981 waiver, shortening the 270-day cutoff. But M didn’t want to waive, and nothing in the statute says a waiver filing is necessary to shorten the 270-day cutoff.

IRS blew the cutoff.

“Factually, there is no genuine dispute that JM Assets submitted everything required to be submitted under section 6225(c) on February 14, 2023. That was the date JM Assets submitted Form 8980 to request modification of the imputed underpayment. At no time after that did JM Assets submit further information, nor did the Commissioner request additional information. And the Commissioner approved the modification request. Taken together, these facts establish that JM Assets submitted everything required to be nsubmitted with its initial submission. Under section 6235(a)(2), the Commissioner had 270 days from receipt of that submission to issue an FPA. The date that is 270 days from February 14, 2023, is November 11, 2023, a Saturday. Thus the 270-day period lapsed on Monday, November 13, 2023. See I.R.C. § 7503. The FPA issued on December 1, 2023, was untimely.” 165 T. C. 1, at p. 14.

IRS tries a goal-line stand, seeking to amend the answer to allege substantial understatement of income, triggering 6SOL. M says it did disclose the sale terms on its Form 6252 filed with its return. IRS says the understatement arose from the Section 1231 recapture. But misstating cost or basis isn’t an understatement; see Home Concrete and my blogpost “Colony Lives,” 4/26/12. No amendment to answer.