Muir v. Commissioner ( 2000 )

T.C. Memo. 2000-304
UNITED STATES TAX COURT
ROSS M. MUIR, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7721-88. Filed September 26, 2000.
Ross M. Muir, pro se.
Tracy Anagnost Martinez, for respondent.
MEMORANDUM OPINION
PARR, Judge: Respondent determined deficiencies in, and
additions to, petitioner's Federal income tax as follows:
Additions to Tax
Year Deficiency Sec. 6653(a)(1) Sec. 6653(a)(2)
1980 $86,844.34 $4,342.00 --
1
1981 334.74 16.73
1
50 percent of the interest due on $334.74.
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Respondent also determined that petitioner is liable for
increased interest on underpayments attributable to tax-motivated
transactions as defined in section 6621(c),1 for the entire
underpayment of tax for 1980.
The sole issue for our decision is whether the statutory
periods of limitations for assessing and collecting the
deficiencies in, and additions to, petitioner's Federal income
taxes for 1980 and 1981 have expired.2 We hold they have not.
Background
Some of the facts have been stipulated and are so found.
The stipulated facts and the accompanying exhibits are
incorporated herein by this reference. Petitioner is an attorney
who resided in Rochester, Minnesota, at the time he filed his
petition in this case.
Petitioner filed his Federal income tax returns for the
taxable years 1980 and 1981 on June 15, 1981, and October 15,
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure. Sec. 6621(c), formerly sec. 6621(d), was
redesignated pursuant to Tax Reform Act of 1986, Pub. L. 99-514,
sec. 1511(c), 100 Stat. 2744.
2
Petitioner asserts on brief that interest on the deficiency
should be abated pursuant to sec. 6404(e). Consideration of
petitioner's request for abatement of interest is premature,
however, as there has been neither an assessment of interest nor
a final determination by respondent not to abate the interest.
See sec. 6404(e), (g), as currently in effect; see also Bourekis
v. Commissioner, 110 T.C. 20, 26 (1998).
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1982, respectively. On each return, petitioner claimed a
substantial loss from his investment in a limited partnership,
relating to, among other things, enhanced oil recovery
technology.
On March 22 and 26, 1984, petitioner and respondent,
respectively, executed a Form 872-A, Special Consent to Extend
the Time to Assess Tax, related to the taxable year ended
December 31, 1980.
On its face, Form 872-A states that the tax due for the
specified year:
MAY BE ASSESSED ON OR BEFORE THE 90TH (NINETIETH) DAY
AFTER: (A) THE INTERNAL REVENUE SERVICE OFFICE
CONSIDERING THE CASE RECEIVES FORM 872-T, NOTICE OF
TERMINATION OF SPECIAL CONSENT TO EXTEND THE TIME TO
ASSESS TAX, FROM THE TAXPAYER(S), OR (B) THE INTERNAL
REVENUE SERVICE MAILS FORM 872-T TO THE TAXPAYER(S), OR
(C) THE INTERNAL REVENUE SERVICE MAILS A NOTICE OF
DEFICIENCY FOR SUCH PERIOD(S), EXCEPT THAT IF A NOTICE
OF DEFICIENCY IS SENT TO THE TAXPAYER(S), THE TIME FOR
ASSESSING THE TAX FOR THE PERIOD(S) STATED IN THE
NOTICE OF DEFICIENCY WILL END 60 DAYS AFTER THE PERIOD
DURING WHICH THE MAKING OF AN ASSESSMENT WAS
PROHIBITED. * * *
On October 7 and 9, 1985, petitioner and respondent,
respectively, executed a Form 872-A related to the taxable year
ended December 31, 1981. That Form 872-A contained the language
quoted above with respect to termination of the extension
agreement.
On January 19, 1988, respondent issued a notice of
deficiency to petitioner. At no time before respondent's
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issuance of the notice of deficiency did respondent or
petitioner, or anyone acting on petitioner's behalf, terminate
the Form 872-A agreements by mailing to or filing with the other
party a Form 872-T, Notice of Termination of Special Consent to
Extend the Time to Assess Tax.
Petitioner timely filed a petition to this Court for
redetermination of the deficiency, affirmatively pleading that
the periods of assessment of the taxes for 1980 and 1981 had
expired and alleging error in respondent's determinations that
disallowed the deductions related to his investment in the
limited partnership.3
Discussion
Petitioner asserts that the Form 872-A extension agreements
terminated by operation of law within a reasonable time after
execution, and, therefore, assessment of the taxes for 1980 and
1981 is barred by the statute of limitations.4 Respondent
3
All items in the notice of deficiency have been resolved in
accordance with the Court's disposition of the issues in Krause
v. Commissioner, 99 T.C. 132 (1992), affd. sub nom. Hildebrand v.
Commissioner, 28 F.3d 1024 (10th Cir. 1994), the test case in the
Elektra/Hemisphere group of Tax Court cases. See also Acierno v.
Commissioner, T.C. Memo. 1997-441, affd. without published
opinion 185 F.3d 861 (3d Cir. 1999); Karlsson v. Commissioner,
T.C. Memo. 1997-432, and Vanderschraaf v. Commissioner, T.C.
Memo. 1997-306, affd. without published opinion 211 F.3d 1276
(9th Cir. 2000), which also involved tax shelter limited
partnerships and which resolved the issues in a manner consistent
with Krause v. Commissioner, supra.
4
Specifically, petitioner contends that the Form 872-A
(continued...)
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contends that the period of limitations was extended by agreement
and that neither respondent nor petitioner terminated the
agreement before issuance of the notice of deficiency. We agree
with respondent.
Section 6501(a) generally provides that taxes imposed by the
Internal Revenue Code must be assessed within 3 years from the
time that the return is filed. The notice of deficiency was not
sent to petitioner within 3 years of his filing of either the
return for 1980 or 1981. Thus, respondent's determinations will
be time-barred, unless they fall within an exception to the
general rule.
One exception is under section 6501(c)(4), which provides
that the period for assessment may be extended by agreement, if
such agreement is executed before the period of assessment has
expired.5 "Form 872-A plainly constitutes such an agreed-upon
4
(...continued)
should not extend the time to assess tax "to twelve years after
[the] notice of deficiency [was issued] or sixteen years after
the original signing of form 872A."
Petitioner is mistaken in his contentions about the
extension of time provided by the Forms 872-A. The agreements to
extend the time to assess terminated upon respondent's issuance
of the notice of deficiency. Thus, the agreement to extend the
time to assess the tax due for 1980 terminated less than 4 years
after execution, and the agreement to extend the time to assess
the tax due for 1981 terminated within 3 years of execution.
The period of limitations remained suspended after the
mailing of the notice of deficiency by reason of sec. 6503. See
also sec. 6213(a).
5
Section 6501(c)(4), provides in relevant part:
(continued...)
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extension as contemplated by the statute". Stenclik v.
Commissioner, 907 F.2d 25, 27 (2d Cir. 1990), affg. T.C. Memo.
1989-516.
The Form 872-A extension, although of indefinite duration
when executed, by its terms provides specific procedures for its
termination. In a Court-reviewed opinion, we held that extension
agreements that contain specific termination provisions do not
expire by operation of law after a reasonable time. See Estate
of Camara v. Commissioner, 91 T.C. 957, 962 (1988) (issuance of
notices of deficiency terminated Form 872-A agreements executed
more than 5 years earlier). Rather, such agreements terminate
only by the express provisions of the agreement. See, e.g.,
Silverman v. Commissioner, 86 F.3d 260, 261-262 (1st Cir. 1996),
affg. 105 T.C. 157 (1995); Bilski v. Commissioner, 69 F.3d 64, 68
(5th Cir. 1995), affg. T.C. Memo. 1994-55; Feldman v.
Commissioner, 20 F.3d 1128, 1133 (11th Cir. 1994), affg. T.C.
Memo. 1993-17; St. John v. United States, 951 F.2d 232, 235 (9th
Cir. 1991); Stenclik v. Commissioner, supra at 28; Wall v.
5
(...continued)
(4) Extension by agreement.--Where, before the
expiration of the time prescribed in this section for
the assessment of any tax imposed by this title * * *
both the Secretary and the taxpayer have consented in
writing to its assessment after such time, the tax may
be assessed at any time prior to the expiration of the
period agreed upon. The period so agreed upon may be
extended by subsequent agreements in writing made
before the expiration of the period previously agreed
upon.
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Commissioner, 875 F.2d 812, 813 (10th Cir. 1989); Mulder v.
United States, 37 Fed. Cl. 60, 62 (1996), affd. without published
opinion 132 F.3d 52 (Fed. Cir. 1997); Estate of Camara v.
Commissioner, supra.
Finally, under the Form 872-A procedure, the length of the
extension is irrelevant since it is necessarily acquiesced in by
the taxpayer who does not file the Form 872-T to bring the
extension period to a close. See Stenclik v. Commissioner,
supra. In this case, it is undisputed that petitioner never sent
a Form 872-T to respondent to terminate the agreement.
In accordance with the reasoning set forth in Estate of
Camara v. Commissioner, supra, we hold that assessment of
petitioner's taxes due for 1980 and 1981 is not barred by the
statute of limitations.
To reflect the foregoing,
Decision will be entered for
respondent.