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New York Footbal Giants, Inc. v. Commissioner of Internal Revenue

November 04, 2003

NEW YORK FOOTBALL GIANTS, INC., APPELLANT
v.
COMMISSIONER OF INTERNAL REVENUE



On Appeal From The United States Tax Court (No. 8563-00) Tax Judge: The Honorable John O. Colvin

Before: McKEE, Smith, Circuit Judges, and SCHILLER,*fn1 District Judge.

The opinion of the court was delivered by: Smith, Circuit Judge

PRECEDENTIAL

Argued September 19, 2003

OPINION OF THE COURT

This case presents a question of our jurisdiction to review orders of the Tax Court under 28 U.S.C. § 7482(a)(1). Appellant New York Football Giants, Inc. (the "Giants") appeals from an order of the Tax Court dismissing its petition with respect to some, but not all, of the tax years at issue. The Tax Court determined that it lacked jurisdiction over the Giants' petition with respect to those years. The Tax Court did not make, nor was it asked to make, a determination of finality under Fed. R. Civ. P. 54(b) with respect to any particular tax year. We conclude that the Tax Court's order is not a final decision and that we lack jurisdiction over the Giants' appeal under section 7482(a)(1). We therefore do not reach the Giants' argument that the Tax Court had jurisdiction over its petition.

I.

The Giants own and operate a professional football franchise in the National Football League ("NFL"). In 1993, the Giants elected to be treated as an S corporation under 26 U.S.C. (I.R.C.) §§ 1361 and 1362. The Internal Revenue Service ("IRS") audited the Giants and determined that the Giants owed taxes on built-in gains *fn2 accruing to it from the expansion of the NFL in 1993. The IRS issued a Notice of Deficiency to the Giants on May 18, 2000 for Fiscal Years Ending ("FYEs") 1996, 1997, and 1998. The Giants filed a petition in the United States Tax Court challenging the Notice of Deficiency for each of those years. In addition to disputing the recognition of built-in gains, the Giants alleged that, as to FYE 1997, the three-year statute of limitations under I.R.C. § 6501 had run.

The IRS conceded that the statute of limitations under I.R.C. § 6501 had expired. However, rather than accept judgment in favor of the Giants as to FYE 1997, the IRS moved to dismiss the Giants' petition with respect to FYE 1996 and 1997 for lack of jurisdiction. The IRS argued that its own Notice of Deficiency as to those years was invalid because the built-in gains tax liability had to be determined in a unified audit proceeding under I.R.C. §§ 6241-45. Under the unified procedures, the IRS must issue notice of final administrative adjustment before judicial review may be had in the Tax Court. I.R.C. §§ 6226, 6244. The Giants opposed the IRS's motion and cross-moved for entry of judgment as to FYE 1997.

The Tax Court agreed with the IRS that the built-in gains tax liability for FYEs 1996 and 1997 were subject to unified audit procedures. New York Football Giants, Inc. v. Comm'r, 117 T.C. 152 (2001). Because the IRS had not issued a notice of final administrative adjustment, the Tax Court entered an order dismissing the Giants' petition with respect to FYEs 1996 and 1997. However, the petition with respect to FYE 1998 was not affected because the statutes establishing the unified procedures were repealed, effective for tax years beginning after Dec. 31, 1996, by the Small Business Job Protection Act of 1996, Pub. L. No. 104-188 § 1307(c)(1), 110 Stat. 1781. Thus, the Giants' petition with respect to FYE 1998 is presently before the Tax Court.

The Tax Court denied the Giants' motion to reconsider the partial dismissal. Thereafter, the Giants moved the Tax Court to certify the partial dismissal for interlocutory appeal, reserving its contention that the dismissal was a final and immediately appealable judgment. The Tax Court denied the Giants' motion, concluding that "immediate appeal of the issues in this case will not materially advance the ultimate termination of this case." New York Football Giants, Inc. v. Comm'r, 85 T.C.M. (CCH) 810 (2003).

The Giants now appeal the partial dismissal of their petition to this court. The Giants argue that the built-in gains tax liability for FYEs 1996 and 1997 is not subject to the unified audit procedures. Instead, the Giants maintain that these liabilities can only be determined through a notice of deficiency and that the Giants properly challenged the IRS's Notice of Deficiency in their petition.

Although not directly implicated in this appeal, a primary concern of the parties is the statute of limitations issue. During the audit, the IRS requested that the Giants and the Giants' shareholders execute separate agreements extending the limitations periods for the assessment of taxes for FYE 1997. Although the shareholders' representative agreed to an extension, the Giants refused to execute an agreement extending the statute of limitations. The IRS takes the position that, under the unified audit procedures, the extension agreed to by the shareholders extended the statute of limitations for both the shareholders and the Giants. If, however, the unified procedures do not apply ...


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