Kings Road: IRS Misinformation and Diligence Supported a Late Partnership Petition

A partnership obtained review of a petition filed 16 days late after counsel diligently investigated a missing final adjustment and the IRS incorrectly said no notice had been issued. In Kings Road Property, LLC v. Commissioner, 167 T.C. No. 11 (2026), the United States Tax Court held that the BBA partnership petition deadline permits equitable tolling and applied it to that record.

The precedential opinion was filed September 21, 2026; an October 27 public report brought renewed attention to it. The court denied both the IRS’s motion to dismiss the late petition and the partnership’s separate motion attacking the notice. The case could proceed with a valid final partnership adjustment.

Counsel investigated the missing notice and filed protectively

Kings Road, a Georgia LLC taxed as a partnership, claimed a $30.57 million conservation-easement deduction for 2020. The IRS proposed disallowance and an imputed underpayment of approximately $11.31 million. Those amounts described the disputed adjustment; the motion ruling did not adjudicate the deduction.

After the proposed adjustment arrived in May 2024, new counsel filed powers of attorney and tracked when a final partnership adjustment, or FPA, could arrive. The IRS mailed the FPA on March 25, 2025, but the packages sent to the partnership and its representative were returned undeliverable. The IRS also mailed a copy to former counsel, but not to current counsel. An IRS call note said former counsel reported forwarding it; the court identified conflicting statements about that point and did not resolve them for these motions.

On May 21, current counsel contacted the IRS and was told there had been no account activity and no notices since the new power of attorney was entered in August 2024. An account transcript also failed to show issuance. Counsel had the partnership representative recheck the mail and files, then filed a protective petition on July 9 based on the dates available to her.

The actual March 25 mailing made the petition deadline June 23. The petition was therefore late despite the protective filing. The court stated the background solely for resolving the motions, rather than as final findings for all purposes. The chronology and that limitation appear in Kings Road.

The BBA deadline allowed the tolling inquiry

Section 6234(a) gives a partnership 90 days after mailing of an FPA to petition for readjustment. Following Big Apple Tompkins Realty LLC v. Commissioner, the court treated that deadline as nonjurisdictional. It then addressed the further question whether the usual presumption favoring equitable tolling was rebutted.

The IRS relied on the older TEFRA partnership regime. The court distinguished TEFRA’s interlocking partner petition periods and partner-level assessment process from the BBA’s revised structure. Those earlier administrative complications did not rebut the presumption for section 6234(a).

The court therefore allowed the partnership to attempt to prove equitable tolling. Its statutory comparison is in Kings Road. Identifying the governing partnership regime matters because the section numbers and procedural structure changed.

Diligence and misinformation supplied separate parts of the proof

The partnership had to establish both diligent pursuit of its rights and extraordinary circumstances outside its control that prevented timely filing. The court applied Menominee Indian Tribe of Wisconsin v. United States, 577 U.S. 250, 255 (2016), and the Eleventh Circuit authorities relevant to this Georgia case.

Counsel did more than wait for a letter. She checked with the client, obtained the transcript, contacted the IRS and filed protectively even after being told no FPA had issued. The court found the chosen date reasonably calculated from the information she possessed.

For extraordinary circumstances, the court considered the returned notices together with the affirmative IRS misinformation. It expressly stated that returned mail alone was not the basis for relief. The combined circumstances prevented timely filing despite the documented follow-up. The application appears in Kings Road.

The notice itself survived the partnership’s challenges

The partnership separately sought to invalidate the FPA. The court found sufficient mailing proof from the postal and IRS records, even assuming a defect in Form 3877. It rejected the distinction between “STE” and “Suite” in an otherwise correct address, observing that the earlier proposed notice reached the same address.

The court also rejected the due-diligence attack on a notice correctly addressed when mailed. As to estoppel, tolling removed the asserted prejudice concerning the petition deadline. A separate claimed loss of a push-out election lacked evidence of an attempted election or an explanation for failing to make a protective one. The court did not resolve tolling of that separate election deadline because the partnership had not developed that question.

Finally, the court rejected the challenge to acting Commissioner Melanie Krause’s authority. It relied on her first-assistant status, the applicable delegation of authority and the independent conclusion that an FPA did not require her signature. These were alternative reasons addressing an argument actually presented.

Both motions were denied and the case continued

The petition was treated as timely through equitable tolling, while the FPA remained valid. This procedural result preserved consideration of the adjustment rather than canceling it.

For a partnership confronting a missing notice, preserve the proposal, FPA, envelopes, mailing records, transcript and contemporaneous follow-up communications. The particular IRS statement and the steps taken before and after it matter to the tolling inquiry. A California case also requires review of the law governing its appellate venue and any later developments. Our business-notice address guide addresses the separate task of identifying the correct entity and address record.