the tax matters partner of the partnerships for purposes of filing a petition in this Court since (1) the District Court did not purport to empower him to file a petition with this Court nor (2) does he otherwise meet the requirements of the statute. Accordingly, the petitions filed by Shaffer will be dismissed for lack of jurisdiction.

Respondent's Motions to Dismiss Petitions Filed by

5-Percent Groups

The parties agree that only one petition filed by a 5-percent group may go forward with respect to each limited partnership under section 6226(b)(2). Section 6226(b)(1) provides that if the tax matters partner does not file a readjustment petition with respect to the FPAA, any notice partner or 5-percent group may file a petition within 60 days after the close of the 90-day period set forth in section 6226(a)(1) (i.e., the 90-day period in which the tax matters partner may file a petition for readjustment).

WROG

The WROG 5-percent group filed petitions at docket Nos. 17703-87, 17441-87, and 18596-87. Docket No. 17703-87 was prematurely filed on the 90th day after mailing of the FPAA (June 11, 1987) and must be dismissed. Transpac Drilling Venture 1982-22 v. Commissioner, 87 T.C. 874 (1986). Accordingly, the petition filed at docket No. 17441-87, filed June 12, 1987, should go forward as the first petition properly filed by a 5-percent group. Docket No. 18596-87, filed June 18, 1987, will be dismissed. Sec. 6226(b)(4).

1983 WROG

We have already held that one of the petitions filed with respect to the FPAA issued to 1983 WROG must be dismissed because it was not filed by the tax matters partner. Two other petitions were filed with respect to that FPAA, both of which were filed within the period specified in section 6226(b)(1). The petition at docket No. 18853-87 was filed June 19, 1987. As the first action filed by a 5-percent group, it should go forward under section 6226(b)(2). The

petition at docket No. 27014-87, filed August 11, 1987, will be dismissed. Sec. 6226(b)(2) and (4).

Motions by the 5-Percent Groups to Dismiss for Lack of Jurisdiction

Petitioners comprising the respective 5-percent groups have moved to dismiss for lack of jurisdiction on the ground that the FPAA's issued to WROG and 1983 WROG were invalid because at the time the notices were issued there was no acting tax matters partner for either partnership. According to petitioners, the unified partnership audit and litigation procedures of section 6221 et seq. cannot apply unless there is an acting tax matters partner to provide the notice to other partners required by the statute and the due process clause of the fifth amendment. In this regard, petitioners contend that limited partners who received no notice of the final partnership administrative adjustments and the action brought in this Court have "irrevocably lost rights and opportunities" to plan their financial affairs as a result of the lack of notice. Petitioners conclude that there has been a denial of due process. We have previously upheld the general scheme of the TEFRA partnership provisions. Saso v. Commissioner, 93 T.C. 730 (1989). We have also upheld the statute to the extent that every partner is not necessarily entitled to notice or entitled to file a petition. Energy Resources, Ltd. v. Commissioner, 91 T.C. 913 (1988).

Valid petitions have been filed in the Tax Court with respect to the FPAA's issued to WROG and 1983 WROG for their taxable year 1983. Under section 6226(c), all partners in WROG or 1983 WROG during taxable year 1983 will be treated as parties to these actions, and each may have an opportunity to participate in the proceedings in this Court upon filing a notice of election to participate with the Court. Rule 245(b). This Court may appoint a new tax matters partner, if necessary, to notify nonparticipating partners of these actions, and we may grant leave under Rule 245(c) to such partners to file out of time a notice of election to participate. Petitioners and the other limited partners will thus have full opportunity to participate in these actions. Accordingly, petitioners have not been prejudiced and there has been no denial of due process rights.

Orders granting respondent's motions to dismiss for lack of jurisdiction will be entered in docket Nos. 17301-87, 17703-87, 18039-87, 18596-87, and 27014-87.

Orders denying respondent's motions to dismiss for lack of jurisdiction will be issued in docket Nos. 17441-87 and 18853-87.

Orders denying petitioners' motions to dismiss for lack of jurisdiction will be issued in docket Nos. 17441-87, 17703-87, 18596-87, 18853-87, and 27014-87.

ESTATE OF TIMOTHY F. CARBERRY, DECEASED, MANUFACTURER'S HANOVER TRUST CO., AND ELLA J. BRADY, F.K.A. ELLA J. CARBERRY, EXECUTORS, AND ELLA J. BRADY, F.K.A. ELLA J. CARBERRY, PETITIONERS V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 27350-88.

Filed July 16, 1990.

Respondent determined a deficiency in which he disallowed a special allocation of partnership intangible drilling costs. Petitioners and respondent executed a Form 872-A extending the period of limitations. Held:

1. The form was properly executed and is binding on both petitioners;

2. Respondent is not estopped from asserting the deficiency;

3. The special allocation did not have substantial economic effect and is not recognized pursuant to sec. 704(b)(2), I.R.C.; and

4. The increased interest rate applies since the phrase "without substantial economic effect" is the equivalent of "without economic substance" and therefore "sham" under sec. 6621(c)(3)(A)(v), I.R.C.

Patrick W. Hennessey and William L. O'Conor, Jr., for the petitioners.

Scott P. Borsack, for the respondent.

OPINION

TANNENWALD, Judge: Respondent determined a deficiency of $8,698 in Timothy F. Carberry's (decedent) and Ella J. Brady's (his wife)1 income tax for the taxable year 1967 and increased the interest rate on the underlying deficiency under section 6621(c).2 The deficiency arises in respect of a net operating loss carryback from 1970. The issues for decision are whether: (1) A Form 872-A was properly executed; (2) respondent is estopped from asserting a deficiency because he failed to act diligently; (3) a special allocation of partnership intangible drilling costs (IDC) is valid under section 704(b); and (4) the increased interest rate is applicable.

All of the facts have been stipulated, and the stipulation of facts and attached exhibits are incorporated herein by reference.

At the time of the filing of the petition, petitioner Ella J. Brady resided in Boca Raton, Florida. Decedent and petitioner Ella J. Brady timely filed joint Federal income tax returns for 1967 and 1970 with the Internal Revenue Service.

Decedent died on May 8, 1972, and on June 6, 1972, petitioner Ella J. Brady and Manufacturers Hanover Trust Co. (Manufacturers) were appointed as coexecutors and cotrustees. Manufacturers executed and forwarded to respondent a Form 56, Notice of Fiduciary Relationship (under section 6903 of the Internal Revenue Code) on December 17, 1973 (executors), and on February 23, 1976 (trustees). From January 4, 1974 through March 16, 1979, a series of Forms 872 were executed which extended the statute of limitations for assessment for the 1970 and 1971 taxable years of decedent and petitioner Ella J. Brady, the latest date for assessment being extended to June 30, 1980. The forms were executed by Manufacturers as executor on behalf of the decedent and by Ella J. Carberry or Ella J. Brady as spouse. On March 27, 1980, prior to the expiration of the statute of limitations, respondent accepted and

'Ella J. Brady was decedent's spouse and was formerly known as Ella J. Carberry. 2Unless otherwise indicated, all statutory references are to the Internal Revenue Code as amended and in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.

executed a Form 872-A indefinitely extending the statute of limitations. The Form 872-A was signed by Helen Thome, Vice President, on behalf of the decedent. Above her signature appears the following handwritten statement: "MANUFACTURERS HANOVER TR. Co. & E. JANE BRADY, EXECUTORS." Additionally, the form is signed by "E. Jane Brady (formerly E. Jane Carberry)" on the line provided for "spouse's signature" without any designation as executor. The decedent's estate was settled by a decree of the Surrogate Court of Nassau County dated April 20, 1978. Respondent never filed with the Surrogate Court a notice of a claim, actual or contingent, for additional income taxes for the year 1967 or 1970 of the decedent.

Decedent was a limited partner in Indonesian Marine Resources (Indomar) in 1970. Indomar was a partner in Southeast Exploration (Souex), an oil exploration general partnership. Indomar was formed to raise the funds necessary to finance the drilling for oil and gas from investors who would be limited partners. Under the Souex partnership agreement, Indomar's initial contribution totaled $8,750,000, which was to repay the partnership costs of the initial exploration program. After this initial contribution, all partners in Souex were required to make contributions in proportion to their partnership interest. The provisions of the Souex partnership agreement allocated income and expenditures, in part, as follows:

(a) All Partnership income shall be allocated to the Partners in the percentages set forth in paragraph (a) of Article I [IIAPCO 59 percent; Carver-Dodge 19.6131 percent; Warrior 7.8452 percent; and Indomar 13.5417 percent]

(b) All deductions and credits shall be allocated to the Partners in the same proportion that they contribute to the expenditures that created such deductions and credits ***. Without limiting the generality of the foregoing, all deductions and credits attributable to expenditures representing contributions under paragraph (b) of Article V [Indomar's contributions of not to exceed $8,750,000 to cover "the Partnership's costs of the Initial Exploration Program"] shall be allocated to INDOMAR.

[Brackets used in original.]

During 1970, Indomar partners made investments in Indomar, and Indomar made investments in Souex, of $8,931,284. Souex's partnership return filed for 1970 re