DocketNumber: Docket No. 8902-78
Judges: Tannenwald
Filed Date: 2/4/1981
Status: Precedential
Modified Date: 10/19/2024
1981 U.S. Tax Ct. LEXIS 177">*177
Respondent issued a deficiency notice in contravention of an assumed oral agreement between petitioner and respondent's Director of International Operations. Petitioner performed his obligations in reliance on said agreement.
76 T.C. 209">*209 OPINION
Respondent determined deficiencies in petitioner's income tax in the amounts of $ 25,247.68 for the taxable1981 U.S. Tax Ct. LEXIS 177">*179 year ended December 31, 1971, and $ 19,212 for the taxable year ended December 31, 1972. The case is before us on petitioner's motion for summary judgment but, as will subsequently appear, its posture is such that the Court may be in a position to enter a qualified decision for respondent (see note 2
Petitioner Pierre Boulez (Boulez), a French citizen, is a world-renowned conductor, composer, and music director. During 1971 and 1972, Boulez, then a resident of Germany, pursuant to a contract entered into with Beacon Concerts, Ltd. (Beacon), a United Kingdom corporation, performed services in the United States for the New York Philharmonic Orchestra (Philharmonic) and the Cleveland Orchestra under separate contracts entered into by each with Beacon.
Boulez continued to perform services in the United States for the Philharmonic in 1973, 1974, and 1975. Boulez filed timely United States Nonresident Alien Income Tax Returns with the Internal Revenue Service for each of the years 1971 through 1975. In July 1975, the Internal Revenue Service requested that the Philharmonic withhold U.S. income tax at the rate of 30 76 T.C. 209">*210 percent on the gross income paid for Boulez' services. 1981 U.S. Tax Ct. LEXIS 177">*180 In March 1976, Boulez engaged the services of Graubard, Moskovitz, McGoldrick, Dannett & Horowitz to represent him before the Internal Revenue Service. In this connection, Irving Moskovitz (Moskovitz) appeared for Boulez before, and negotiated on behalf of Boulez with, the Director of International Operations, Joseph McGowan (McGowan).
On May 3, 1976, Moskovitz conferred with McGowan in the latter's office in Washington, D.C. Although there is a genuine issue of material fact as to whether they reached an agreement at that meeting, respondent has conceded that, for the limited purpose of disposing of petitioner's motion, the Court may assume that an oral agreement of compromise did exist, which included the following:
Moskovitz, on behalf of Boulez, agreed that Boulez would file amended United States Nonresident Alien Income Tax Returns for the years 1973 and 1974 so as to treat the amounts paid to Beacon for the furnishing of Boulez' artistic services in the United States as if they had been paid directly to Boulez and as constituting gross income of Boulez. McGowan agreed in return that past years (i.e., 1971 and 1972) would remain as filed and no further action or payments 1981 U.S. Tax Ct. LEXIS 177">*181 on Boulez' part would be required, or adjustments made, with respect to any years prior to 1973, and further agreed that no penalties would be asserted with respect to the late filing of tax returns and late payment of additional income tax for the years 1973 and 1974.
In reliance upon said promises of McGowan, Boulez fulfilled the promises made on his behalf as follows:
(a) On May 4, 1976, he terminated his agreement with Beacon as of July 1, 1975, personally assumed the obligations imposed on Beacon by its contract with the Philharmonic, and rendered himself personally liable to the Philharmonic for any breach of such obligations;
(b) He did not challenge the Internal Revenue Service with respect to, or contest the inclusion in his gross income for the year 1973 and subsequent thereto of, the amounts paid to Beacon for the furnishing of his artistic services in the United States;
(c) He did not challenge the Internal Revenue Service with respect to, or contest the applicability to him of,
(d) He did not, with regard to the payments to Beacon, challenge the respondent with respect to, or contest the applicability to him of, the provisions of the United States-United Kingdom Income Tax Convention or any other income tax convention;
(e) He filed amended 1973 and 1974 United States Nonresident Alien Income Tax Returns on February 2, 1977, reporting as his gross income the amounts paid to Beacon or to him for the furnishing of his artistic services in the United States to the Philharmonic and paid the additional income tax due thereon; and
(f) He refrained from filing any claims for refund of tax paid in accordance with the agreement.
The issues presented for decision are whether (1) the assumed agreement constituted a binding compromise within the meaning of
1981 U.S. Tax Ct. LEXIS 177">*187 As we see it, the real issue is whether, irrespective of the scope of
Petitioner seeks to avoid the clear impact of the foregoing by asserting that his counsel "went to the one person in the Office of International Operations, its Director,
We start from the premise that the doctrine of equitable 76 T.C. 209">*215 estoppel is applied against the Government "with the utmost caution and restraint." See
Our findings of fact (see pp. 210-211
We reach a similar conclusion with respect to the fact that petitioner did not contest the inclusion in his gross income for 1973 and subsequent years of any amounts paid to Beacon for the furnishing of artistic services by him in the United States. The short answer is that, at the time the deficiency notice herein was issued on May 5, 1978, in breach of the compromise agreement and indeed when the petition herein was filed (it was mailed in an envelope postmarked July 26, 1978), neither the 2-year period for filing a claim for refund for the amounts paid on February 2, 1977, in respect of 1973 and 1974 nor the 3-year period in respect of subsequent years had expired. Sec. 6511(a). The mere fact that petitioner included amounts in his gross income and paid taxes thereon which he might otherwise have not so included or so paid is1981 U.S. Tax Ct. LEXIS 177">*194 not, in our opinion, a sufficient detriment to warrant the application of equitable estoppel. 76 T.C. 209">*216 Petitioner's reliance upon the agreement may have caused him to lose his ability to contest the merits of his claims in
Any claim by petitioner that he put himself in a worse position with respect to taxability of amounts paid for his services to the Philharmonic because they were paid to him directly from a source within the United States and thus may have inhibited his ability to claim, by way of a suit for refund for 1973 and 1974, whatever benefits might have been derived from the continued existence of a "loan-out" arrangement between Beacon and the Philharmonic is undercut by his concession herein that, absent a binding compromise agreement or estoppel, he is liable for the deficiencies asserted herein for 1971 and 1972 when the "loan-out" arrangement was in existence. 1981 U.S. Tax Ct. LEXIS 177">*195 other acts of reliance asserted by petitioner.
The long and the short of the matter is that we conclude that the acts of reliance by petitioner do not involve the level of detriment necessary to bring the instant case within the category of those "rare instances" where respondent should be estopped. See
The cases relied upon by petitioner are all distinguishable:
Petitioner's motion for summary judgment will be denied and, as a consequence, pursuant to the stipulation of the parties,
1. Unless otherwise indicated, all section references are to the Internal Revenue Code of 1954 as amended and in effect during the taxable years at issue.↩
2. Petitioner has stipulated that, in such event, the amounts of gross income as determined by respondent in his notice of deficiency are correct. There is an adjustment, in respect of U.S. income tax withheld at source, which the parties expect to agree upon or, if not, can be disposed of under
3.
(a) Authorization. -- The Secretary or his delegate may compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense; and the Attorney General or his delegate may compromise any such case after reference to the Department of Justice for prosecution or defense.
(b) Record. -- Whenever a compromise is made by the Secretary or his delegate in any case, there shall be placed on file in the office of the Secretary or his delegate the opinion of the General Counsel for the Department of the Treasury or his delegate, with his reasons therefor, with a statement of -- (1) The amount of tax assessed, (2) The amount of interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed, and (3) The amount actually paid in accordance with the terms of the compromise.↩
4.
5. Announcement of the establishment of the Office of International Operations was made by
6. While Delegation Order No. 11 (Rev. 3) contained language similar to that set forth in
7. Petitioner's reliance on Delegation Order No. 77 (Rev. 8),
8. In view of this holding, we find it unnecessary to consider a further argument of respondent that the requirement of
9. Respondent has conceded the existence of an oral agreement solely for the purpose of this motion (see p. 209
10. Nothing in this opinion should be construed to represent any expression of our views as to whether the existence of the "loan-out" arrangement had any substantive effect on petitioner's tax liability. Indeed, the petitioner has not articulated any reasons for any such effect.↩
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