Mecom v. Comm'r of Internal Revenue

• Decision Date: 03 November 1993
• Docket Number: No. 22747–91.,22747–91.
• Citation: 101 T.C. No. 26,101 T.C. 374
• Parties: John W. MECOM, Jr., and Katsy Mecom, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

101 T.C. 374

101 T.C. No. 26

John W. MECOM, Jr., and Katsy Mecom, Petitioners,

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 22747–91.

United States Tax Court

Nov. 3, 1993.

Thomas E. Redding, Paul Coselli, and Charles Koerth, Houston, TX, for petitioners.

Melanie R. Urban, Houston, TX, Dennis M. Kelly, Cleveland, OH, and Janet Balboni, Houston, TX, for respondent.

LARO, Judge:

John W. Mecom, Jr., and Katsy Mecom petitioned this Court for a redetermination of respondent's determination of a $413,686.75 deficiency in their 1976 Federal income tax.Although Katsy Mecom is a copetitioner, for simplicity and clarity, we refer to John W. Mecom, Jr., as petitioner.Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for 1976, the taxable year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.

After stipulations by the parties, the issues for decision are: (1) Whether the consents executed by the parties were effective to extend the period of limitation under section 6501 for assessment of a deficiency for 1976; we hold that they were; (2) whether the equitable doctrine of laches bars assessment of a deficiency for 1976; we hold that it does not; (3) whether restrictive language in the final consent bars respondent from adjusting petitioner's 1976 deductions for carryover of net operating loss (NOL) and charitable contribution; we hold that it does not; and (4) whether petitioner has shown that respondent incorrectly determined his income tax deficiency for 1976; we hold that he has not.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.The stipulations and exhibits attached thereto are incorporated herein by this reference.Petitioner and Katsy Mecom are husband and wife; they resided in Houston, Texas, at the time they filed their petition.On October 15, 1977, petitioner and Katsy Mecom filed timely their 1976 Form 1040, U.S. Individual Income Tax Return, using the status of “Married filing joint return”.

On the 1976 Form 1040, petitioner reported an $861,019 NOL deduction.¹This deduction consisted of NOL carryovers of: (1) $169,149 from the 1972 taxable year, (2) $487,387 from the 1973 taxable year, and (3) $204,483 from the 1975 taxable year.A substantial part of this NOL deduction stemmed from petitioner's ownership interest in a Louisiana partnership, the New Orleans Saints (Saints), during the 1968 through 1975 taxable years.Petitioner owned the following interests in the Saints for its taxable years ending in the calendar years shown below:

+-------------------------+
                ¦Year¦Percentage interest ¦
                +----+--------------------¦
                ¦1968¦¦51.33             ¦¦
                +----++------------------+¦
                ¦1969¦¦35.5817           ¦¦
                +----++------------------+¦
                ¦1970¦¦37.7235           ¦¦
                +----++------------------+¦
                ¦1971¦¦40.5062           ¦¦
                +----++------------------+¦
                ¦1972¦¦54.42             ¦¦
                +----++------------------+¦
                ¦1973¦¦64.637            ¦¦
                +----++------------------+¦
                ¦1974¦¦64.37             ¦¦
                +----++------------------+¦
                ¦1975¦¦64.37             ¦¦
                +-------------------------+
                

Respondent started an examination (audit) of petitioner's 1976 taxable year in 1979.Respondent also started examining petitioner's 1973 through 1975 taxable years in 1979.²The two examinations were conducted separately, but simultaneously.

On March 25, 1980, in partial completion of respondent's examinations of petitioner's 1973 through 1976 taxable years, petitioner agreed to an assessment of $15,563 in additional tax for his 1976 taxable year and executed Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment.The additional tax arose from respondent's adjustments to the following items reported on petitioner's 1976 Form 1040: (1) A loss passed through from Le Pavillon Hotel, another partnership in which petitioner was a partner, (2) bad debt expenses, (3) depletion and itemized deductions, and (4) an NOL deduction attributable to the carryover of losses from sources other than petitioner's ownership interest in the Saints.³At the time petitioner signed Form 870, the sole unagreed issue in respondent's examinations of his 1973 through 1976 taxable years concerned her adjustment to his NOL deduction attributable to the carryover of losses stemming from his ownership interest in the Saints during his 1968 through 1975 taxable years.⁴

From 1980 through February 1983, respondent examined the Saints for its taxable years ended March 31, 1968, through March 31, 1975.The examinations of petitioner's 1973 through 1976 taxable years could not be completed due to respondent's ongoing examination of the Saints; thus, respondent suspended her examinations of petitioner's 1973 through 1976 taxable years awaiting the results of the Saints' examination.Respondent notified petitioner of this action on October 8, 1980.

In connection with respondent's examinations of petitioner's 1973 through 1976 taxable years, she and petitioner executed six consents seriatim (collectively referred to as the Consents) to extend the period in which she could assess tax for those years.Each of the Consents is signed by petitioner and signed and dated by respondent's agent on her behalf.The first four consents contain the typed name of Robert M. McKeever(McKeever), and list him as District Director of Internal Revenue.The last two consents contain the typed name of Arturo A. Jacobs, and list him as District Director of Internal Revenue.⁵Relevant information from the Consents is as follows:

+-----------------------------------------------------------------------------+
                ¦       ¦      ¦          ¦Date      ¦Date      ¦Surname of  ¦Title 1   of    ¦
                ¦       ¦      ¦          ¦Signed    ¦Signed    ¦            ¦                ¦
                +-------+------+----------+----------+----------+------------+----------------¦
                ¦Taxable¦      ¦Extension ¦by        ¦by        ¦Respondent's¦Respondent's    ¦
                +-------+------+----------+----------+----------+------------+----------------¦
                ¦Years  ¦Form  ¦to        ¦Petitioner¦Respondent¦Signatory   ¦Signatory       ¦
                +-------+------+----------+----------+----------+------------+----------------¦
                ¦1973–76¦872   ¦12/31/80  ¦10/11/79  ¦10/15/79  ¦Hofer       ¦Case Manager    ¦
                ¦       ¦2     ¦          ¦          ¦          ¦            ¦                ¦
                +-------+------+----------+----------+----------+------------+----------------¦
                ¦1973–76¦872   ¦12/31/81  ¦3/25/80   ¦3/26/80   ¦Woodard     ¦Group Manager   ¦
                +-------+------+----------+----------+----------+------------+----------------¦
                ¦1973–76¦872   ¦12/31/82  ¦10/16/81  ¦11/10/81  ¦Field       ¦Classifier      ¦
                +-------+------+----------+----------+----------+------------+----------------¦
                ¦1973–76¦872   ¦12/31/83  ¦3         ¦11/24/82  ¦Anderson    ¦Classifier/     ¦
                ¦       ¦      ¦          ¦          ¦          ¦            ¦Screener 4      ¦
                +-------+------+----------+----------+----------+------------+----------------¦
                ¦1973–76¦872   ¦12/31/84  ¦5         ¦11/23/83  ¦Dodd        ¦Classifier/     ¦
                ¦       ¦      ¦          ¦          ¦          ¦            ¦Screener        ¦
                +-------+------+----------+----------+----------+------------+----------------¦
                ¦1973–76¦872–A ¦indefinite¦9/14/84   ¦10/12/84  ¦Miggins     ¦Classifier/     ¦
                ¦       ¦6     ¦          ¦          ¦          ¦            ¦Screener        ¦
                +-----------------------------------------------------------------------------+
                

As shown above, Hofer's title was Case Manager at the time he signed the first consent on behalf of respondent.Hofer's title previously was Group Manager.The duties and responsibilities of a Case Manager are substantially the same as the duties and responsibilities of a Group Manager; both are intermediate-level managers who are responsible for protecting the expiration of the period of limitation for cases within their group.The primary difference between the two positions is that Case Managers supervise revenue agents who concentrate on the examinations of “large taxpayers”, and Group Managers supervise revenue agents who examine a wider range of taxpayers.⁶

As also shown above, Field signed the third consent.⁷On the date that he signed this consent, Field was a GS–11 in the Southwest Region, and was working as a temporary replacement of the 918–A Coordinator for Returns Program Management (RPM).As a 918–A Coordinator, Field was performing the duties of a Classifier.

RPM is an activity within the Examination Division, and the position of 918–A Coordinator is a subtitle used to identify an Examination Program Coordinator for this specific program.Prior to June 30, 1980, the organizational title in the Southwest region for an “Examination Program Coordinator” was “Returns Classifier”.Following that date, the positions of “Examination Program Coordinator” and “Returns Classifier” had similar job descriptions, and the same duties, responsibilities, and authority.In addition, in the Southwest Region, the title “Examination Program Coordinator” was merely another name for a “Classifier”.⁸

With respect to the sixth consent, Form 872–A, respondent mailed the Form to petitioner's home address with a transmittal letter dated September 11, 1984.The transmittal letter did not indicate that copies were mailed to any other person.At the time of mailing, A.T. Blackshear, Jr.(Blackshear), was petitioner's authorized representative for his 1973 through 1975 examination.⁹At the time Form 872–A was signed by the parties, Form 872–A contained “restrictive language” providing in relevant part that

The amount of any deficiency assessment is limited to that resulting from any adjustment to: (a) the distributive share of any item of income, gain, loss, deduction, or credit of, or distribution from any partnership * * *; (c) the distributive share of any item of income, gain, loss, deduction, or credit of, or...