Kovens v. Comm'r of Internal Revenue

• Decision Date: 17 March 1988
• Docket Number: Dkt. No. 5435-82
• Parties: CALVIN KOVENS AND ROZ M. KOVENS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

90 T.C. 452

90 T.C. No. 31

CALVIN KOVENS AND ROZ M. KOVENS, Petitioners

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Dkt. No. 5435-82

United States Tax Court

Filed March 17, 1988.

P and R entered into a Special Consent to Extend the Time to Assess Tax (Form 872-A). The only method available, under t he Form 872-A, for P to terminate the agreement to extend the tim e for assessment was by means of a Form 872-T. P attempted unsuccessfully for about 2 weeks to obtain a Form 872-T from various sources within R's organization. P, accordingly, obtained and utilized a photocopy of a Form 872-T which was mailed to and accepted by R. R sent P a notice of deficiency which would be timely if we use the day of receipt by R of P's Form 872-T. P contends that R's ‘intentional or negligent‘ act s caused the delay in obtaining and sending a Form 872-T. P further contends that R's actions, or lack of same, constitute some form of actionable breach of R's obligation to provide Forms 872-T under circumstances where these documents are the only means for P to terminate the parties' agreement to extend the limitation on assessment. HELD, the record in this case does not support a finding that R breached an obligation to provide Forms 872-T. HELD FURTHER, P was not prejudiced by the inability to obtain Forms 872-T and P was effectively able to terminate the Form 872-A agreement and pursue litigation, if necessary. Harvey M. Silets, Steven S. Brown, and Royal B. Martin, Jr., for the petitioners.

Thomas R. Ascher, for the respondent.

GERBER, JUDGE:

The parties in this case requested us to consider a bifurcated procedural issue concerning the statute of limitations which would be dispositive of the taxable years in issue if decided in petitioners' favor. ¹ The issue concerns interpretation of the Form 872-A agreement to extend the period within which respondent can assess and collect tax. Petitioners contend that respondent ‘breached‘ the terms of the Form 872-A by failing to provide Form 872-T to petitioners. A Form 872-T was the sole means by which petitioners could terminate the effect of the Form 872-A agreement. Petitioners further contend that respondent's ‘breach‘ should permit petitioners to activate the termination provisions of the 872-A agreement when they ‘irrevocably demonstrated an intent to terminate,‘ rather than upon respondent's receipt of Form 872-T, as provided in the Form 872-A agreement.

FINDINGS OF FACT

The record consists of testimony and stipulations of facts, along with attached exhibits which are incorporated by this reference. Petitioners ² filed Federal income tax returns (Forms 1040) for the taxable years 1971, 1972, 1973, 1974, 1976, 1977 and 1978 with the Internal Revenue Service on April 17, 1972, June 15, 1973, July 18, 1974, September 19, 1975, October 19, 1977, October 19, 1978 and October 17, 1979, respectively. On March 17, 1980, a Special Consent to Extend the Time to Assess Tax (Form 872-A) was timely executed ³ for petitioners' 1971 through 1978 taxable years.

The Form 872-A contains, in pertinent part, the following terms:

(1) The amount(s) of any Federal Income tax due on any return(s) made by or for the above taxpayer(s) for the period(s) »herein involved† * * * may be assessed on or before the (90) 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). * * *

Frank Egger (Egger), a Certified Public Accountant, was employed, beginning September 1980, as a full-time financial consultant to petitioner, Calvin Kovens. Egger was previously employed at Peat, Marwick, Mitchell and Co. and Coopers & Lybrand. Egger represented petitioners during the audit process of the taxable years in issue and had authority, which he exercised on occasion, to extend the period for assessment. Jack Cooney, an accountant with Coopers & Lybrand, and Egger were both named on a Power of Attorney from petitioners, but Egger conducted conferences and was the principal representative of petitioners before the Internal Revenue Service. Respondent's revenue agent issued his report and a protest was prepared and submitted by Egger on behalf of petitioners. Whereafter, petitioners' case was assigned to Lamar Adcock (Adcock), an appeals officer.

As of their final conference on October 20, 1981, Egger and Adcock had met four times and engaged in numerous telephone conversations, al of which resulted in agreement on some of the issues and disagreement on others. Egger was advised at the October 20, 1981, conference that Adcock intended to retire at the end of 1981 and Egger understood that the Internal Revenue Service was to issue a notice of deficiency to petitioners for the years under consideration. Egger advised Adcock that Egger desired the notice of deficiency be issued before Adcock retired to avert the possibility of new issues being raised. Egger inquired of Adcock whether it was necessary for petitioners to terminate the Form 872-A and Adcock advised that a notice would be issued before his retirement.

Petitioners, prior to or during the administrative consideration of the 1971 through 1978 taxable years, had filed a petition with this Court concerning earlier years and that case was set on a trial calendar for January 1982. Following the October 20, 1981, appeals conference, Egger met with Jack Cooney and Harvey Silets, tax counsel for petitioners. Concern was expressed that respondent's agents or attorneys might attempt to raise one of the issues already pending in the docketed case in the 1971 through 1978 years that were administratively pending with Adcock. Following his meeting with petitioners' other representatives, Egger decided that he should terminate the Form 872-A agreement for the 1971 through 1978 taxable years and force the issuance of a notice of deficiency. ⁴

Thereafter, Egger sought to obtain the Form 872-T in order to terminate the 872-A agreement. Egger was unable to find a Form 872-T in his Package X. ⁵ There being no forms distribution center in Florida, Egger called the Jacksonville District Office of Internal Revenue Service and was connected with the Atlanta Forms Distribution Center located in the Atlanta Service Center. He requested a Form 872-T and was told that one would be mailed to him. About 1 week following the October 20, 1981, meeting with Adcock, Egger returned to the Appeals office to provide an affidavit to Adcock. At that time, Egger requested a Form 872-T from the Appeals receptionist who, in turn, referred him to the Taxpayer Assistance Office on another floor in the same building. The clerk at Taxpayer Assistance was unable to find a Form 872-T and advised that the form would be ordered from Jacksonville and that it would be received in about 3 or 4 weeks. Egger also went to the office of Coopers & Lybrand and was unable to obtain the form there. Petitioners' representatives did not request a Form 872-T from Adcock.

Egger did not receive a Form 872-T from Atlanta so he again called Jacksonville and spoke with supervisory personnel and Taxpayers Assistance who were unable to provide the requested form. Egger then called Jack Cooney of Coopers & Lybrand who agreed to secure the form. Approximately 2 days later Mr. Cooney hand carried a photocopy of Form 872-T to Egger. Petitioners signed the photocopied Form 872-T on November 3, 1981, and it was mailed on November 5, 1981, and received on November 9, 1981, by the Miami Appeals Office. The 2-day delay in mailing occurred because Egger requested Mr. Cooney to send a photocopy of the back of the Form 872-T which contained instructions.

Respondent mailed a notice of deficiency determining income tax deficiencies totaling $6,377,463.72 to petitioners on February 4, 1982. Approximately 1 year later, Egger and Attorney Silets called the Atlanta Forms Distribution Center and requested a Form 872-T. About 2 weeks after the request, Egger received a form response with a box checked stating ‘internal use only. Information copies may be obtained from your local IRS Freedom of Information Office.‘

During development of this issue for trial, respondent's counsel inquired of internal sources about the availability of Form 872-T and received mixed responses. The first response received by respondent's counsel was that the form's distribution was limited and that taxpayers could obtain it only from Freedom of Information Offices of Internal Revenue Service. A subsequent response to respondent's counsel indicated that the form was available for general distribution to the public. Petitioners' representatives also tried to determine the then current stated policy of Internal Revenue Service concerning the Form 872-T. Approximately 1 week before the trial of this matter, Egger telephoned the Richmond, Virginia, Internal Revenue Service Forms Distribution Center ⁶ to place an order for the Form 872-T and was told by the telephone order clerk that the form was an internal use form that was listed in a computer printout of internal use forms and that Egger would have to visit the local District Director's Office to obtain the form. During a second telephone call to the same clerk, Egger and Attorney Silets were given the same advice about the internal use of the form. Petitioners' representatives then requested a copy of the catalog or list of internal use documents and this request was refused. Petitioners' representatives also spoke by telephone with a supervisor in the same office and received similar responses.

As of October 31, 1980, Internal Revenue Service maintained a catalog (Publication 676) of Federal Tax Return Forms and Related Forms. The catalog is broken into two parts: ‘Part I — A list of Federal tax forms and...