Ramirez v. United States, 312-75.

• Decision Date: 09 July 1976
• Docket Number: No. 312-75.,312-75.
• Citation: 538 F.2d 888
• Parties: Frank A. RAMIREZ v. The UNITED STATES.
• Court: U.S. Claims Court

538 F.2d 888

Frank A. RAMIREZ v. The UNITED STATES.

No. 312-75.

United States Court of Claims.

July 9, 1976.

Michael C. Ferguson, Berkeley, Cal., attorney of record, for plaintiff.

Rose Anne Featherston, with whom was Asst. Atty. Gen. Scott P. Crampton, Washington, D.C., for defendant. Theodore D. Peyser and Robert S. Watkins, Washington, D.C., of counsel.

Before LARAMORE, Senior Judge, and DAVIS and SKELTON, Judges.

ON DEFENDANT'S MOTION AND PLAINTIFF'S CROSS-MOTION FOR SUMMARY JUDGMENT

LARAMORE, Senior Judge.

In this suit for refund of Federal income tax,¹ plaintiff (hereinafter "taxpayer") contends that the government's assessment of a deficiency in his income tax for 1967 was barred by the statute of limitations. The record does not specifically address the merits of the tax assessed, nor is there any controversy as to the amount of the tax collected. Hence, our consideration is limited solely to the question of whether the assessment was made in a timely fashion. For reasons enunciated below, we hold that it was.

The material facts are not in dispute. On December 12, 1970, taxpayer agreed in writing to extend until June 30, 1972 the period during which a timely assessment could be made of his 1967 income tax. The period would otherwise have expired on April 16, 1971.² The agreement, executed by both taxpayer and the government, was a standard Internal Revenue Service Form 872 entitled, "Consent Fixing Period of Limitation Upon Assessment of Income and Profits Tax, which reads, in pertinent part, as follows:

The taxpayer and the government consent and agree that the amount of any Federal income and profits taxes due under any return (or returns) made by or on behalf of the above-named taxpayer (or taxpayers) for the taxable year ended December 31, 1967 under existing or prior revenue acts, may be assessed at any time on or before June 30, 1972 except that if a notice of a deficiency in tax is sent to the taxpayer (or taxpayers) by certified or registered mail on or before that date, then the time for making any assessment shall be extended beyond that date by the number of days during which an assessment is prohibited and for sixty days thereafter.³

On March 14, 1972, taxpayer was sent, by certified mail, a statutory notice of a deficiency in his 1967 income tax. The deficiency was assessed against him on September 4, 1972. Collection was accomplished by compulsorily applying overpayments inadvertently made in respect of later years' taxes (1972 and 1973) in satisfaction of the earlier deficiency.

Subsequently, taxpayer filed a claim with the Internal Revenue Service for refund of that part of his 1967 income tax which had been collected as a deficiency. The claim, which alleged only that the assessment of the deficiency had been barred by the statute of limitations, was in due course disallowed. Thereafter, this suit followed.

Inasmuch as taxpayer grounds his right to recovery upon the sole argument that the assessment of the tax was not effective until after the statute of limitations had outlawed it, logic dictates that we first examine the relevant statute or statutes relating to the limitation of assessments. Section 6501(a)⁴ embodies what may be referred to, for Federal tax assessment purposes, as a general statute of limitation. It directs that, unless otherwise provided, the amount of any tax imposed by the Internal Revenue Code be assessed within three years after the date on which the return for such tax was filed. Section 6501(c)(4),⁵ however, permits a taxpayer and the government to mutually consent to enlarge, by written agreement entered into prior to the expiration of the natural period of limitation, the time within which any tax, except an estate tax, may be timely assessed.

In the case at bar, taxpayer and the government implemented subsection (c)(4) through the written agreement set out in the paragraph above. The undisputed effect of the language therein used was to extend the expiration date of the statutory period at the very least, to June 30, 1972. However, were June 30, 1972 an immutable cutoff date, taxpayer would without more, prevail in this case because the assessment, on September 4, 1972, was made more than two months later. But we note that the agreement contained a proviso which specified that if a notice of deficiency were sent to the taxpayer before that date (meaning June 30, 1972), then the time for making an assessment would be further extended. Such a notice was sent on March 14, 1972. Thus, the precise number of days by which the June 30, 1972 original cutoff date was extended upon the sending of the notice, determined the timeliness vel non of the assessment.

Further scrutiny of the agreement is necessary. The formula used in the agreement under which the contractual limitation period was to be extended, incorporated by reference a calculable but unspecified measure. It provided that the time for making any assessment would be extended (after the notice of deficiency was sent) by the number of days during which an assessment would be prohibited, and for 60 days more.

Dual issues are raised by this formula. One concerns the numerical measure used, i. e., the number of days. However, both parties urge that 90 days is the correct figure. In light of section 6213(a),⁶ we agree. That section provides (with certain exceptions not relevant here) that where the government issues a notice of a deficiency, the tax may not be assessed until 90 days have expired. Evidently, this period permits the taxpayer time to resist the deficiency, either administratively or by filing a petition in the Tax Court. In any case, 90 days is the proper measure to be incorporated into the agreement, and the time for making any assessment was, thus, to be extended for 90 days and 60 days thereafter, or a total of 150 days.

The other, more debated issue, concerns the manner in which the contractual limitation period was to be enlarged. Taxpayer contends that the 150 days was intended to run from the date the notice of deficiency was sent (March 14, 1972) or only until August 11, 1972. This interpretation would bar the September 4, 1972 assessment.

Two subarguments are said, by taxpayer, to buttress this contention. The first is that the phrase "that date," used for the second time in the agreement, referred not to June 30, 1972, but to the date upon which the notice of deficiency was sent. Taxpayer, therefore, takes the position that the phrase "that date" twice used in the agreement, referred to two different dates.

After examining the language of the agreement, we are unable to accept this line of reasoning. It is not reasonable to assert that the phrase "that date", used twice in the same sentence, referred to two separate dates, without any hint that it did in the language itself. The only date set forth in the agreement that refers to the assessment was June 30, 1972. Under the plain wording of the agreement, which belies the construction taxpayer would place upon it, taxpayer's position is patently incorrect, and we need not devote any more time to this facet of his argument.

Taxpayer's second point is that the agreement at bar, and in particular the extension proviso contained therein, must be read not merely in pari materia with section 6213(a) of the Code (providing for the 90-day prohibition upon assessment), but also in light of the effect that section could have upon the making of an assessment within a period of limitation extended by agreement. Taxpayer perceives that, in the absence of an automatic extension proviso, the government could find itself in the anomalous position of sending a notice of deficiency near the end of a contractual limitation period and being foreclosed from ever making the assessment because the following 90 days would run past the contractually extended cutoff date. The proviso is said to be designed specifically to avoid this pitfall by allowing the government a 60-day grace period immediately after the 90 days comes to an end.

While this argument of taxpayer has appeal insofar as it signals the animus behind the proviso, we think that the taxpayer has, more or less, jumped to the conclusion that a "fair" construction of the language must allow for only the shortest extension of the contractual limitation period that would assure the government an opportunity to assess in a timely fashion. This is not necessarily so. The rather explicit language of the proviso provides that the 150 days be applied so as to "extend" the contractual limitation period by that amount, and the wording of the proviso admits of no other tenable construction.

In point of fact, at the time the agreement was executed the identical result was already assured by the Code. Section 6503(a)(1)⁷ suspends the running of the period of limitations, when a notice of deficiency is sent, for the period during which an assessment is prohibited and for 60 days thereafter. In light of the striking similarity between section 6503(a)(1) and the proviso contained in the agreement, we think the latter was designed to foster the policy underlying the former. That is to say, the section and proviso avoid in the identical manner the pitfall to which taxpayer refers.

Moreover, this is a conclusion we draw not by mere cursory comparison of the corresponding language of section 6503(a)(1) and the proviso. Our research discloses that section 277(b) of the Revenue Act of 1924,⁸ precursor to section 6503(a)(1) of the current Code, used the word "extended" to achieve the same effect that "suspended" achieves in the current section of the Code. Apparently, in the Revenue Act of 1926, section 277(b),⁹ Congress varied the term used to describe the manner under which the limitation period was to be automatically enlarged in certain instances. The 1924 Act provided that the limitation period would be "extended", while the 1926 Act provided that the running of the limitation period would...