Piarulle v. Comm'r of Internal Revenue
| Decision Date | 19 May 1983 |
| Docket Number | Docket No. 9467-81. |
| Citation | 80 T.C. 1035 |
| Parties | WILLIAM C. and MARGUERITE PIARULLE, PETITIONERS v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Petitioners executed and respondent accepted a single Form 872, Consent to Extend the Time to Assess Tax, that extended the period for assessment for their 1974 and 1975 taxable years to Dec. 31, 1980. Thereafter, petitioners executed a single Form 872 that purported to extend the period for assessment for their 1974, 1975, and 1977 taxable years to June 30, 1981. Before accepting that form, and at a time at least 55 days prior to the expiration of the period for assessment, respondent struck through the reference to the 1977 taxable year. Respondent did not seek the consent of petitioners for this alteration. Held, the striking of the reference to 1977 was a material alteration rendering the form invalid. Held, further, petitioners' conduct does not estop them from asserting the invalidity of the form. William J. Neild, for the petitioners.
George W. Connelly, Jr., for the respondent.
By statutory notice dated March 27, 1981, respondent determined the following deficiencies in petitioners' Federal income taxes:
+--------------------+
¦Year ¦Deficiency ¦
+------+-------------¦
¦ ¦ ¦
+------+-------------¦
¦1974 ¦$19,734 ¦
+------+-------------¦
¦1975 ¦15,330 ¦
+------+-------------¦
¦1976 ¦8,811 ¦
+------+-------------¦
¦1977 ¦7,158 ¦
+--------------------+
Pursuant to a Joint Motion for Separate Trial granted November 1, 1982, the only issues presently before the Court involve the statute of limitations for the taxable years 1974 and 1975. The issues for determination are: (1) Whether, after a multiyear Form 872, Consent to Extend the Time to Assess Tax, had been executed by petitioners, respondent's striking of the reference to one of the taxable years rendered the consent invalid as to the remaining taxable years, and (2) whether petitioners are estopped from asserting the invalidity of the consent.
Some of the facts have been stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.
Petitioners William C. and Marguerite Piarulle, husband and wife, resided in Rochester, N.Y., at the time their petition in this case was filed. Petitioners timely filed joint Federal income tax returns for the taxable years 1974, 1975, 1976, and 1977 with the Internal Revenue Service Center, Andover, Mass.
On or about June 29, 1974, William C. Piarulle (Dr. Piarulle) and two joint venturers entered into a series of agreements with Oaklawn Farms, Inc. (Oaklawn).1 Dr. Piarulle's pro rata share of receipts, deductions, and credits from that joint venture was reported by petitioners on Schedule F, Form 1040, for their taxable years 1974, 1975, 1976, and 1977.
Dr. Piarulle, as a joint venturer, entered into another series of agreements with Oaklawn in August of 1975. Petitioners reported Dr. Piarulle's pro rata share of receipts, deductions, and credits from that joint venture on Schedule F, Form 1040, for their taxable years 1975, 1976, and 1977.
On or about December 30, 1976, Dr. Piarulle and three joint venturers purchased a limited partnership interest in Hawk Mining Co., Ltd. (Hawk). Petitioners reported Dr. Piarulle's pro rata share of the net losses claimed by Hawk on Schedule E, Form 1040, for their 1976 and 1977 taxable years.
The dates at which the normal 3-year period of assessment of a deficiency expired, pursuant to section 6501(a),2 for the taxable years at issue are as follows:
+------------------------------------------------------------------------+
¦Taxable year ¦Due date Apr. 15— ¦Statute of limitations Apr. 15— ¦
+--------------+---------------------+-----------------------------------¦
¦ ¦ ¦ ¦
+--------------+---------------------+-----------------------------------¦
¦1974 ¦1975 ¦1978 ¦
+--------------+---------------------+-----------------------------------¦
¦1975 ¦1976 ¦1979 ¦
+--------------+---------------------+-----------------------------------¦
¦1976 ¦1977 ¦1980 ¦
+--------------+---------------------+-----------------------------------¦
¦1977 ¦1978 ¦1981 ¦
+------------------------------------------------------------------------+
Petitioners' 1974 return was initially selected for examination on or before September 1, 1975. The issues examined included deductions claimed with respect to Dr. Piarulle's transactions with Oaklawn. The Buffalo Examination Division of the Internal Revenue Service (the Service) issued a 30-day letter to petitioners with respect to the Oaklawn issue on February 5, 1976. Each of petitioners' returns at issue herein was prepared by the C.P.A. firm of Goldstein and Viele. On February 27, 1976, Edmund Viele, C.P.A., of Goldstein and Viele, submitted to respondent a protest to that 30-day letter on behalf of petitioners. At the time that Protest was submitted, an examination of Oaklawn was proceeding in another Internal Revenue District, and petitioners' 1974 return was placed in a “Suspense” file.
Petitioners' 1975 return was initially selected for examination on or about September 7, 1977. The issues examined included deductions claimed with respect to Dr. Piarulle's transactions with Oaklawn. Petitioners did not agree to the revenue agent's proposed adjustments relative to Oaklawn, and their 1975 return was similarly placed in a “Suspense” file.
In a letter to the Chief of Audit Review dated October 26, 1977, Mr. Viele noted that it had been at least 12 months since the start of the initial audit of petitioners' 1974 return and asked for a reply regarding the cause of the delay. The District Director notified Mr. Viele that he would reply to that letter directly to the petitioners because the Service had no record that petitioners granted authorization for Mr. Viele to receive such information. By letter dated December 6, 1977, the District Director informed petitioners that the tax matters pertaining to Oaklawn were the only remaining items at issue on their 1974 return, that these tax matters were still under study by the Service's National Office, and that the approximate completion date of such study could not be estimated.
In a letter dated February 14, 1978, the District Director asked petitioners to sign a Form 872, Consent Fixing Period of Limitation Upon Assessment of Tax, for 1974. As typed by the Service, that form provided that tax may be assessed at any time on or before June 30, 1979. Petitioners changed the “9” in “1979” to an “8” (thereby indicating “1978”) and executed the form on February 24, 1978. The District Director notified petitioners that this Form 872 was unacceptable because petitioners had not initialed the altered date and asked them to execute a new Form 872 extending the assessment period for 1974 to December 31, 1978. The new Form 872 included a typed restriction that limited its coverage to adjustments related to Oaklawn. Petitioners executed that new Form 872 on March 28, 1978.
On November 29, 1978, petitioners executed another Form 872 extending to December 31, 1979, the period for assessment for their 1974 and 1975 taxable years. This form also included a typed restriction limiting its coverage to adjustments related to Oaklawn.
In a letter dated October 29, 1979, the District Director again asked petitioners to further extend the period for assessment for 1974 and 1975. The letter stated that the tax matters pertaining to Oaklawn were still under consideration by the National Office and that the date when the examination of petitioners' returns could be resumed could not be estimated at that time. Petitioners executed a Form 872 on November 20, 1979, extending the period for assessment for 1974 and 1975 to December 31, 1980. This form included the same restriction as on the previous forms limiting the coverage to Oaklawn adjustments.
On October 6, 1980, Revenue Agent James Stockton telephoned Dr. Piarulle and asked for further extensions for 1974 and 1975. Dr. Piarulle indicated his preference to have Mr. Viele handle the matter. Mr. Viele telephoned Mr. Stockton the same day and stated that he would not recommend that petitioners sign any further extensions; however, he did agree to meet with Mr. Stockton.
Mr. Stockton met with Mr. Viele and Dr. Piarulle on October 23, 1980. The issues discussed included Oaklawn and Hawk. Dr. Piarulle refused to extend the period for assessment for 1974 and 1975, but the parties did agree to have Mr. Viele meet with Mr. Stockton and Dominic Pardi, Mr. Stockton's supervisor. Dr. Piarulle was at this time frustrated that the Service had not resolved the Oaklawn issue to petitioners' satisfaction and was reluctant to extend the period for assessment for a longer period than he considered appropriate.
Sometime after the October 23 meeting and before October 28, 1980, petitioners executed a Form 2848, Power of Attorney, appointing Mr. Viele as their attorney-in-fact for all matters regarding their 1974 and 1975 tax returns. Mr. Viele met with Mr. Stockton and Mr. Pardi on October 28, 1980, but the parties were still unable to reach a settlement on the Oaklawn issues for 1974 and 1975. Mr. Viele agreed, however, to recommend to petitioners that they consent to extend the period for assessment for the taxable years 1974, 1975, and 1977.3 Following this meeting, Mr. Stockton prepared and mailed a Form 872 to petitioners. The pertinent part of that form provided:
(1) The amount of any Federal (2) Income tax due on any *mf return(s) Kind of Tax)
made by or for the above taxpayer(s) for the...
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