Espinoza v. Comm'r of Internal Revenue
| Citation | 78 T.C. 412 |
| Decision Date | 16 March 1982 |
| Docket Number | Docket No. 10562-80. |
| Parties | FRANCISCO T. ESPINOZA, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
P filed original returns for 1971 through 1974 which were allegedly fraudulent. On June 21, 1976, at a meeting in connection with an audit, P's attorney handed the revenue agent copies of documents labeled as “amended returns” for 1971 through 1974 which showed substantially increased income for such years. There was no payment of the taxes due on the increased income. Such documents were never processed as amended returns, and no assessment of the increased taxes has been made. The Commissioner has evidence that P executed a consent extending until Apr. 15, 1980, the period for assessing taxes for 1972. On Mar. 31, 1980, the Commissioner issued his notice of deficiency for 1971 through 1974. Held, P's motion for summary judgment that the notice of deficiency was barred by the statute of limitations is denied because there are questions as to whether the documents handed to the agent as amended returns were filed at that time and as to whether the time for assessing taxes for 1972 had been extended. William E. Frantz and Clarence H. Glover, Jr., for the petitioner.
Lourdes M. DeSantis and Donald W. Williamson, Jr., for the respondent.
The Commissioner determined deficiencies in the petitioner's Federal income taxes for 1971 through 1974 and additions to tax for each year under section 6653(b) of the Internal Revenue Code of 1954.1 The petitioner has made a timely motion for summary judgment pursuant to Rule 121, Tax Court Rules of Practice and Procedure,2 wherein he seeks to establish that the statute of limitations bars the assessment and collection of such deficiencies and additions to tax
The petitioner, Francisco T. Espinoza, was a legal resident of Marietta, Ga., at the time he filed his petition in this case. He filed his original individual Federal income tax returns for 1971 through 1974 with the Internal Revenue Service Center, Chamblee, Ga.
The petitioner is a physician, and he reported the following amounts on his original returns for 1971 through 1974:
+------------------------------------------------------------------------------------------------+
¦Year ¦Professional income ¦Professional expense ¦Net professional income ¦AGI ¦Tax due ¦
+-----+---------------------+----------------------+-------------------------+---------+---------¦
¦1971 ¦$26,215.77 ¦$17,562.32 ¦$8,653.45 ¦$8,653.45¦$642.95 ¦
+-----+---------------------+----------------------+-------------------------+---------+---------¦
¦1972 ¦27,445.25 ¦20,715.32 ¦6,729.93 ¦6,729.93 ¦504.74 ¦
+-----+---------------------+----------------------+-------------------------+---------+---------¦
¦1973 ¦28,425.00 ¦23,150.26 ¦5,274.74 ¦5,288.63 ¦421.98 ¦
+-----+---------------------+----------------------+-------------------------+---------+---------¦
¦1974 ¦35,168.00 ¦24,829.75 ¦10,338.25 ¦10,338.25¦816.72 ¦
+-----+---------------------+----------------------+-------------------------+---------+---------¦
¦Total¦117,254.02 ¦86,257.65 ¦30,996.37 ¦31,010.26¦2,386.39 ¦
+------------------------------------------------------------------------------------------------+
In the early part of 1976, Revenue Agent Michael Rosser was assigned the investigation of Dr. Espinoza's Federal income tax liability. In connection with such investigation, the agent mailed a letter to the petitioner on March 29, 1976, informing him that an audit was being conducted of his Federal income tax return for 1974. Subsequently, the agent received a telephone call from the attorney then representing the petitioner, and a conference was scheduled to be held at the office of the accountant for Dr. Espinoza. On June 21, 1976, at the beginning of the conference, the attorney handed the revenue agent a letter signed by Dr. Espinoza transmitting four documents stamped “amended return” for 1971 through 1974. These documents were prepared by the accountant.
The transmittal letter was addressed to the IRS at Franklin Square Office Park in Marietta and read:
Dear Sir:
I am filing amended U.S. individual income tax returns for the following years with balance due Internal Revenue Service as listed:
+--------------------+
¦ ¦Amended Return ¦
+----+---------------¦
¦1971¦$5,871.19 ¦
+----+---------------¦
¦1972¦4,380.89 ¦
+----+---------------¦
¦1973¦11,872.85 ¦
+----+---------------¦
¦1974¦16,457.77 ¦
+----+---------------¦
¦ ¦$38,582.70 ¦
+--------------------+
Please acknowledge receipt of the above returns by affixing your receiving stamp on the enclosed copy of this letter, or indicate receipt by you in a similar manner.
:/Yours very truly,
(S)Francisco T. Espinoza
FRANCISCO T. ESPINOZA
No payments accompanied the letter. The agent acknowledged receipt of such letter and returns by signing a copy of the letter. After the conference, the agent returned to his office, and the documents were stamped as “Received” by the Audit Division, Marietta, Ga., on June 21, 1976. On June 23, 1976, the agent forwarded these amended returns directly to the Intelligence Division in Atlanta, Ga. Such amended returns reported the following amounts:
+--------------------------------------------------------------------------------------------------+
¦Year ¦Professional income ¦Professional expenses ¦Net professional income ¦AGI ¦Tax due ¦
+-----+---------------------+-----------------------+-------------------------+----------+---------¦
¦1971 ¦$55,410.80 ¦$20,711.81 ¦$34,698.99 ¦$34,870.43¦$6,514.14¦
+-----+---------------------+-----------------------+-------------------------+----------+---------¦
¦1972 ¦55,584.83 ¦24,333.60 ¦31,251.23 ¦31,117.31 ¦4,885.63 ¦
+-----+---------------------+-----------------------+-------------------------+----------+---------¦
¦1973 ¦78,713.40 ¦27,207.78 ¦51,505.62 ¦50,945.25 ¦12,294.83¦
+-----+---------------------+-----------------------+-------------------------+----------+---------¦
¦1974 ¦80,045.61 ¦25,938.19 ¦54,107.42 ¦52,936.06 ¦17,274.49¦
+-----+---------------------+-----------------------+-------------------------+----------+---------¦
¦Total¦269,754.64 ¦98,191.38 ¦171,563.26 ¦169,869.05¦40,969.09¦
+--------------------------------------------------------------------------------------------------+
The amended returns were not forwarded to the Service Center and were not assigned document locator numbers. The individual master file records maintained by the Atlanta Service Center contain no record of any amended tax returns having been filed in the petitioner's name for 1971 through 1974. The additional taxes due on the amended returns were never assessed, and the certificate of assessments reveals that the petitioner never paid any additional taxes for the years 1971 through 1974 based on the submission of such amended returns.
The Intelligence Division conducted an independent investigation of Dr. Espinoza's tax liability for the years 1971 through 1974. His income was computed on the basis of a bank deposit analysis, and many third parties were interviewed. After the Intelligence Division completed its investigation, Dr. Espinoza was indicted by the grand jury in the U.S. District Court for the Northern District of Georgia, Atlanta Division, on four counts of willfully and knowingly attempting to evade and defeat a large part of his income taxes for 1971 through 1974 in violation of section 7201. On June 27, 1978, he was acquitted of such charges after a jury trial. In September 1978, the Intelligence Division closed its case involving Dr. Espinoza and referred the matter to the Chief of the Examination Division for purposes of a civil examination.
The records of the IRS contain a consent (Form 872) to extend the statute of limitations for 1972 until April 15, 1980. Such consent was executed by the petitioner on March 1, 1979, and by the IRS on March 9, 1979.
On March 31, 1980, the Commissioner issued his notice of deficiency. In such notice, he determined that Dr. Espinoza had received the following amounts of net income from self-employment for the years 1971 through 1974 and that he was liable for the following amounts of deficiencies in income taxes and additions to tax under section 6653(b) for such years:
+------------------------------------------------+
¦Year¦Net income ¦Deficiency ¦Addition to tax ¦
+----+------------+------------+-----------------¦
¦1971¦$25,258.78 ¦$2,567.68 ¦$1,283.84 ¦
+----+------------+------------+-----------------¦
¦1972¦27,915.73 ¦3,307.94 ¦1,653.97 ¦
+----+------------+------------+-----------------¦
¦1973¦48,471.32 ¦9,942.02 ¦4,971.01 ¦
+----+------------+------------+-----------------¦
¦1974¦47,563.01 ¦13,732.14 ¦6,866.07 ¦
+------------------------------------------------+
In his motion for summary judgment, the petitioner claims that the Commissioner's proposed deficiencies for 1971 through 1974 are barred by the statute of limitations. For the limited purposes of this motion, Dr. Espinoza has conceded that his original returns were fraudulent. He takes the position that on June 21, 1976, he filed nonfraudulent amended returns and that the filing of such amended returns started the running of the 3-year period of limitations under section 6501(a). Since the notice of deficiency was issued more than 3 years after the filing of such returns, he argues that it was untimely. In opposition, the Commissioner asserts that such notice...
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