The United States Tax Court recently ruled on a significant case involving Big Apple Tompkins Realty LLC and its partnership representative, Mojahed H. Bhutta. The court's decision, filed on August 5, 2026, addresses the jurisdictional issues surrounding the filing deadlines for partnership adjustments. This ruling is important for partnerships across the country as it clarifies the legal landscape regarding how and when they can challenge adjustments made by the Internal Revenue Service (IRS).
The case, docket number 19040-23, arose after the IRS issued a Notice of Final Partnership Adjustment (FPA) to Big Apple Tompkins Realty. The FPA indicated that the partnership owed a significant tax underpayment and penalties for the 2018 tax year. The partnership, represented by Bhutta, filed a petition with the Tax Court, claiming that it did not receive the FPA until after the deadline for filing had passed. The IRS countered by arguing that the petition was filed too late and should be dismissed for lack of jurisdiction.
This ruling is crucial for partnerships because it addresses the procedural requirements for filing petitions in response to FPAs. Partnerships must understand their rights and the timelines involved when dealing with the IRS. The court's decision could impact how partnerships manage their tax obligations and their ability to contest IRS determinations.
Big Apple Tompkins Realty LLC is treated as a partnership for federal income tax purposes and is subject to the partnership audit procedures established by the Bipartisan Budget Act of 2015. Mojahed H. Bhutta serves as the partnership representative for Big Apple. The dispute began when the IRS mailed the FPA, which assessed an imputed underpayment of $87,586 and an accuracy-related penalty of $17,517 for the 2018 tax year. The FPA was dated August 11, 2022, and the IRS claimed it was properly mailed to Big Apple and Bhutta at their last known addresses.
After the IRS filed a motion to dismiss the case, arguing that the petition was not filed within the required 90-day period, Big Apple responded by asserting that it did not receive the FPA until November 2023. The court had to determine whether it had jurisdiction to hear the case based on the timing of the petition filing.
In its ruling, the Tax Court, led by Judge Marvel, denied the IRS's motion to dismiss. The court stated, "The 90-day filing deadline in I.R.C. § 6234(a) is not jurisdictional." This means that even if the petition was filed late, the court could still hear the case. The court also concluded that the IRS had properly issued and mailed the FPA, and thus the deadline for filing was indeed November 9, 2022.
The ruling has implications for how partnerships handle tax disputes with the IRS. By clarifying that the filing deadline is not jurisdictional, the court allows for the possibility of equitable tolling, which means that partnerships may have more leeway in contesting IRS decisions if they can demonstrate valid reasons for late filings. This could lead to more partnerships seeking judicial review of IRS adjustments, potentially increasing the number of disputes that reach the Tax Court.
Going forward, partnerships must be diligent in monitoring their correspondence with the IRS, particularly regarding FPAs. They should also be aware of the potential for late filings and the circumstances that could justify equitable tolling. This ruling may encourage partnerships to be more proactive in addressing IRS adjustments, knowing that they have some flexibility in filing deadlines.
As for what’s next, it remains unclear whether the IRS will appeal the Tax Court's decision. The ruling sets a precedent that could influence future cases involving partnership adjustments. Partnerships across the nation will be watching closely to see how this decision impacts their interactions with the IRS and their ability to contest adjustments.