Roszkos v. Comm'r of Internal Revenue

• Decision Date: 04 December 1986
• Docket Number: Docket No. 45403-85.
• Citation: 87 T.C. No. 72,87 T.C. 1255
• Parties: LOUIS E. ROSZKOS AND VIVIAN L. ROSZKOS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

87 T.C. 1255

87 T.C. No. 72

LOUIS E. ROSZKOS AND VIVIAN L. ROSZKOS, Petitioners

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 45403-85.

United States Tax Court

Filed December 4, 1986.

P and R executed an open-ended consent (Form 872-A) to extend the period for assessment. R sent 2 notices of deficiency to addresses which were not P's ‘last known address.‘ P did not receive the notices and R assessed and collected the tax from P. The terms of the consent provided for termination if R mailed a notice of deficiency or assessed the tax. More than 90 days after the mailing of the 2 notices, P petitioned this Court and then moved for dismissal on grounds that the notices were not sent to P's ‘last known address‘ and R posed no objection. We dismissed. R mailed a new notice of deficiency to P which would be timely mailed if the open-ended consent has not been terminated by the prior 2 notices and assessment. P contends the statute has expired and respondent contends that the earlier 2 notices and assessment were a ‘nullity‘ and had no effect upon the consent. R contends, in the alternative, that he can invoke jurisdiction of this Court under the holding in Wallin v. Commissioner, 744 F.2d 674 (9th Cir. 1984).

HELD, the consent was terminated when P subsequently became aware of the notices during the collection process.

FURTHER HELD, the holding in Wallin v. Commissioner, supra, is not available to R to force P into court on the merits where R's lack of diligence is the foundation for such equitable relief. Woodford G. Rowland, for the petitioners.

Thomas M. Rohall, for the respondent.

GERBER, JUDGE:

Respondent, in a notice of deficiency dated October 28, 1985, determined deficiencies in petitioners' 1973 and 1974 Federal income tax in the amounts of $33,178 and $36,136, respectively. Petitioners filed a timely petition reflecting a legal residence of Alamo, California. Petitioners, on January 21, 1986, moved to dismiss for lack of jurisdiction on the ground that respondent's October 28, 1985, notice was mailed beyond the 3-year statutory period within which to assess tax. The circumstances preceding the issuance of the notice are unique and give rise to the following novel issues: (1) Whether a notice of deficiency which is not mailed to the last known address is sufficient to terminate an open-ended consent (Form 872-A) to extend the assessment period; and (2) where respondent has not exercised reasonable diligence in determining a taxpayer's last known address, may respondent invoke the jurisdiction of this Court under the holding in Wallin v. Commissioner, 744 F.2d 674 (9th Cir. 1984), revg. a Memorandum Opinion of this Court.

FINDINGS OF FACT

Petitioners' 1973 and 1974 taxable years were under consideration by respondent. Several consents to extend the statute of limitation on assessment were executed periodically by the parties. Eventually, the parties executed a Special Consent to Extend the Time to Assess Tax, Form 872-A (Rev. July 1979). Form 872-A is essentially an open-ended consent, the pertinent terms of which are as follows:

taxpayer(s) * * * and »respondent† consent and agree as follows: (1) the amount(s) of any Federal _______ tax due on any return(s) made by or for the above taxpayer(s) for the period(s) ended _______, may be assessed on or before the 90th (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). However, if a notice of deficiency is sent to the taxpayer(s), the time for assessing the tax for the period(s) stated in the notice of deficiency will be further extended by the number of days the assessment was previously prohibited, plus 60 days. A final adverse determination subject to declaratory judgment under sections 7428, 7476, or 7477 of the Internal Revenue Code will not terminate this agreement.

(2) This agreement ends on the earlier of the above expiration date or the assessment date of an increase in the above tax that reflects the final determination of tax and the final administrative appeals consideration. An assessment for one period covered by this agreement will not end this agreement for any other period it covers. Some assessments do not reflect a final determination and appeals consideration and therefore will not terminate the agreement before the expiration date. Examples are assessments of: (a) tax under a partial agreement; (b) tax in jeopardy; (c) tax to correct mathematical or clerical errors; (d) tax reported on amended returns; and (e) advance payments. In addition, unassessed payments, such as amounts treated by the Service as cash bonds and advance payments not assessed by the Service, will not terminate this agreement before the expiration. This agreement ends on the date determined in (1) above regardless of any assessment for any period includible in a report to the Joint Committee on Taxation submitted under section 6405 of the Internal Revenue Code.

(3) This agreement will not reduce the period of time otherwise provided by law for making such assessment.

(4) The taxpayer(s) may file a claim for credit or refund and the Service may credit or refund the tax within 6 (six) months after this agreement ends.

During October 1980 and September 1980, the Forms 872-A were executed for petitioners' 1973 and 1974 taxable years, respectively. On December 31, 1981, respondent mailed duplicate original notices of deficiency to petitioners' former addresses at Oak Ridge, Tennessee, and Seattle, Washington. Petitioners did not receive either of the duplicate original notices and on May 24, 1982, respondent assessed the full amount of the 1973 and 1974 income tax deficiencies. Petitioners paid the assessed tax and interest late in 1982 and early in 1983. About 2-1/2 years later, during June 1984, petitioners petitioned to this Court and then moved for a dismissal for lack of jurisdiction on the ground that the December 31, 1981, notice was not sent to their ‘last known address‘ in accord with section 6212(b)(1). ¹ Respondent, by a September 12, 1984, notice, advised of no objection to our granting petitioners' motion to dismiss. ² On November 9, 1984, we ordered the dismissal of docket No. 17824-84 due to respondent's failure to mail a notice of deficiency to petitioners' last known address.

Following the dismissal of docket No. 17824-84 petitioners, on September 16, 1985, mailed a Notice of Termination of Special Consent to Extend the Time to Assess Tax, Form 872-T (Rev. August 1984), to respondent concerning the 1973 and 1974 taxable years. The text of Form 872-T, following identifying information including the taxable years involved, reads:

Under the agreement dated _______, between the above taxpayer(s) and the Internal Revenue Service, this form is written notification of termination of Form 872-A * * * for the kind of tax and tax period(s) indicated above.

Petitioners added the following language to the Form 872-T:

This Notice of Termination is filed without waiver of the taxpayers' position that the time to assess tax for the years in question has expired, based on the Service's mailing of a notice of deficiency on December 31, 1981.

On November 25, 1985, respondent refunded all payments of the 1973 and 1974 assessed and collected deficiencies, plus interest, to petitioners. On October 28, 1985, respondent mailed a notice of deficiency for 1973 and 1974 to petitioners' correct address. Petitioners initiated this case by filing a timely petition which respondent answered. For a second time petitioners have moved to dismiss the 1973 and 1974 taxable years, due to lack of jurisdiction. On this occasion, however, petitioners contend that respondent's notice of deficiency (dated October 28, 1985) was not mailed prior to the expiration of the period within which tax for 1973 and 1974 could be assessed by respondent. Respondent's response to petitioners' motion is that the period for assessment is open because the 1980 Forms 872-A (open-ended consents) were never terminated and, if they were terminated, the holding in Wallin v. Commissioner, 744 F.2d 674 (9th Cir. 1984), revg. a Memorandum Opinion of this Court, confers jurisdiction upon this Court.

OPINION

The issues presented have not been addressed in a published opinion of this Court. We must first determine whether either the mailing of a notice of deficiency to the wrong address (not the ‘last known address‘) or the assessment of the tax based upon such a notice is sufficient to terminate an open-ended consent extending the assessment period.

Over the years, respondent has designed various forms by which the parties to a tax audit or controversy could agree to extend the statutory period for assessment under section 6501(c)(4). Initially, the agreements (Forms 872) were designed to extend the assessment period for a finite period. A second type of agreement (Form 872-A) was then designed to permit an open-ended extension or waiver of the statutory period until one of several enumerated events occurred. Respondent announced the new Form 872-A in Rev. Proc. 71-11, 1971-1 C.B. 678. Several administrative and legal problems were encountered with respect to the new Form 872-A. ³ In an attempt to remedy these shortcomings, respondent revised and announced new procedures with respect to Form 872-A in Rev. Proc. 79-22, 1979-1 C.B. 563. Under the revised Form 872-A (Rev. July 1979) used in this case, the open-ended consent terminates after: (1) Respondent RECEIVES a Form 872-T; (2) respondent MAILS a Form 872-T; (3) respondent MAILS a notice of deficiency; or (4) the deficiency is finally ASSESSED.

Respondent has structured the agreement, or consent, to its administrative advantage. The...