Taxpayers challenging an Internal Revenue Service determination generally face strict deadlines for seeking judicial review. Missing those deadlines can result in the loss of the opportunity to contest substantial tax liabilities before assessment. However, a recent United States Tax Court decision confirms that certain deadlines under the federal partnership audit rules may be extended when extraordinary circumstances prevent a taxpayer from filing on time.
In Kings Road Property, LLC v. Comm’r, 167 T.C. No. 11 (Sept. 21, 2026), the Tax Court held that the 90-day deadline for filing a petition challenging a Final Partnership Adjustment (“FPA”) under Section 6234(a) of the Internal Revenue Code (“IRC”) is subject to equitable tolling, a legal doctrine that permits a filing deadline to be extended under limited circumstances, in light of the facts presented in the instant case.[1]
The decision is particularly significant because the partnership’s attorney had diligently monitored the matter and contacted the IRS, only to receive incorrect information about whether the agency had issued its final determination. Although the petition was filed after the statutory deadline, the court permitted the case to proceed.
Before going deeper, it should be noted that this relief is specific to the facts of this case.
Background: Partnership Audits and the 90-Day Deadline
The Bipartisan Budget Act of 2015 (“BBA”) substantially revised the procedures governing federal income tax audits of partnerships. Under the centralized partnership audit regime, the IRS generally determines adjustments at the partnership level rather than conducting separate proceedings against individual partners.
Following its proposed adjustments, the IRS may issue a Final Partnership Adjustment (“FPA”). Under Section 6234(a), a partnership generally has 90 days after the IRS mails an FPA to file a petition for readjustment in the Tax Court, an appropriate federal district court, or the United States Court of Federal Claims.[2] The statutory period begins with the mailing of the notice, not necessarily its receipt by the partnership.
The Kings Road Dispute
Kings Road Property, LLC, a Georgia limited liability company treated as a partnership for federal income tax purposes, claimed a charitable contribution deduction of approximately $30.57 million for a conservation easement on its 2020 federal income tax return. Following an examination, the IRS proposed to disallow the deduction, determining an imputed underpayment of approximately $11.31 million and asserting substantial accuracy-related penalties.
The IRS issued a Notice of Proposed Partnership Adjustment (“NOPAA”) on May 24, 2024. After receiving it, the partnership retained new counsel, who submitted power of attorney documentation and began tracking the anticipated final notice and corresponding deadlines. Unbeknownst to the partnership and its new counsel, the IRS mailed the FPA on March 25, 2025. The notices sent to the partnership and its partnership representative were returned as undeliverable. The IRS also mailed a copy to former counsel rather than newly retained counsel. Neither the partnership, its partnership representative, nor current counsel received the FPA.
On May 21, 2025, current counsel contacted the IRS to determine whether the FPA had been issued and was incorrectly informed that no relevant notice had been sent. An IRS account transcript likewise failed to reflect issuance of the FPA. Counsel nevertheless filed a protective Tax Court petition on July 9, 2025. Because the FPA had actually been mailed on March 25, the 90-day deadline expired on June 23, 2025. The Tax Court petition was therefore 16 days late. The IRS unsurprisingly moved to dismiss on the basis that the 90-day deadline from the mailing of the FPA had passed.
The Court Recognizes Equitable Tolling
The court considered whether Section 6234(a)’s filing period could be extended under equitable tolling. A jurisdictional deadline generally cannot be waived or extended by a court on equitable grounds; a non-jurisdictional filing requirement may be subject to tolling in appropriate circumstances.
The Tax Court had already held in Big Apple Tompkins Realty LLC v. Comm’r that the 90-day deadline in Section 6234(a) is non-jurisdictional.[3] Kings Road presented the next question: whether Congress had displaced the normal presumption that non-jurisdictional filing deadlines are subject to equitable tolling.
The court concluded that the text and structure of the BBA partnership rules did not rebut that presumption. It distinguished the earlier, more complicated partnership audit framework enacted under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), whose interlocking petition periods and assessment procedures had supported a different outcome. Under the BBA, the court held, equitable tolling may apply to the Section 6234(a) deadline.[4]
Why the Partnership Qualified for Relief
A taxpayer seeking equitable tolling must prove both (1) diligent pursuit of its rights and (2) extraordinary circumstances beyond its control that prevented timely filing. The court applied the principles set out in Menominee Indian Tribe of Wisconsin v. U.S., 577 U.S. 250 (2016).[5]
Kings Road satisfied the diligence requirement because counsel did more than await an expected letter. Specifically, the partnership’s counsel diligently checked with the partnership representative, reviewed the IRS account transcript, contacted the IRS directly, calculated the filing period based on information available, and filed a protective petition even after being informed that no notice had been sent.
The court also found extraordinary circumstances. Both primary notices were returned undelivered, and the IRS affirmatively gave counsel incorrect information concerning issuance of the FPA. The court emphasized that the returned mail alone would not necessarily support equitable tolling and that the combined circumstances and the partnership’s diligence justified relief.
The Original IRS Notice Was Still Valid
The partnership separately challenged the validity of the notice, including the IRS’s use of “STE” instead of “Suite” in the mailing address and the agency’s failure to deliver the notice to current counsel. The court rejected those arguments and held that the FPA had been properly mailed to the last known address within the meaning of Section 6231(a). Actual receipt was not required. The court also rejected a challenge to the authority of the acting IRS Commissioner associated with issuance of the notice.
Thus, while the partnership prevailed on equitable tolling, it did not prevail on its argument that the FPA was invalid. The court treated the petition as timely but did not decide the merits of the conservation easement deduction or the asserted penalties.
Practical Implications for Partnerships and Business Owners
This decision offers an important procedural protection for partnerships and LLCs taxed as partnerships when an IRS examination results in substantial adjustments. It also underscores why partnership representatives, attorneys, and accountants should coordinate to maintain current contact information, track statutory deadlines independently, preserve transcripts and correspondence, and document follow-up inquiries when expected notices do not arrive.
Equitable tolling is not automatic, and ordinary neglect is insufficient. Further, Kings Road did not decide whether the separate 45-day deadline for a partnership push-out election under Section 6226 is subject to tolling. Partnerships should therefore continue treating statutory deadlines as controlling and seek relief only when the supporting facts warrant it.
Conclusion
Kings Road establishes that the 90-day deadline for petitioning for judicial review of an FPA under Section 6234(a) may be equitably tolled. Although the ordinary deadline remains critically important, a partnership that diligently pursues its rights may retain access to judicial review when extraordinary circumstances beyond its control prevent a timely filing. The decision illustrates both the importance of careful deadline management and the limited but meaningful availability of equitable relief in partnership tax disputes. Remember however, documentation and proof of diligence remains key for these fact intensive and rare grants of taxpayer relief.
[1] Kings Road Property, LLC v. Comm’r, 167 T.C. No. 11 (Sept. 21, 2026).
[2] I.R.C. §§ 6231(a), 6234(a).
[3] Big Apple Tompkins Realty LLC v. Comm’r, 167 T.C. (Aug. 5, 2026).
[4] North Wall Holdings, LLC v. Comm’r, 165 T.C. 143 (2025).
[5] Menominee Indian Tribe of Wisconsin v. U.S., 577 U.S. 250, 255–56 (2016); Holland v. Florida, 560 U.S. 631, 649 (2010).
