Wollesen v. Commissioner
| Decision Date | 16 December 1987 |
| Docket Number | Docket No. 25805-85. |
| Citation | 54 TCM(CCH) 1315,1987 TC Memo 611 |
| Parties | Woodrow D. Wollesen v. Commissioner. |
| Court | U.S. Tax Court |
William L. Neff, for the petitioner. David S. Kosterlitz, for the respondent.
Respondent determined deficiencies in petitioner's Federal income tax and additions to tax as follows:
Addition to Tax
Year Deficiency Section 6653(a)1
1979 ...........$12,363.30 $618.17
1980 ........... 19,004.68 950.23
After concessions, the issues that we must decide are: (1) Whether the statute of limitations bars the assessment and collection of deficiencies for the years at issue; (2) if not, whether petitioner is entitled to deduct expenses he claims to have incurred in connection with the practice of law; and (3) whether petitioner is liable for an addition to tax under section 6653(a) for each of the years at issue.
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.
Petitioner was a resident of Vienna, Virginia, when he filed his petition herein. He timely filed individual Federal income tax returns for both of the years at issue.
For convenience and to avoid unnecessary repetition, our remaining findings and opinion will be combined and given separately on the issues as stated above.
Respondent began his audit of petitioner's 1979 and 1980 returns in early 1982. The audit focused initially on verifying and substantiating the expenses petitioner claimed on the returns. After approximately four months, the focus shifted to the issue of whether petitioner was a partner of a law firm headed by Charles F. Wheatley, Jr. Respondent took the position that petitioner was a partner of Wheatley, and that certain of his expenses were therefore not allowable. Petitioner sent respondent a letter dated October 19, 1982, requesting an appeals hearing on that issue. In order to allow respondent time to consider his appeal of that issue, petitioner signed a Form 872 on November 1, 1982, on which he extended the statute of limitations on the assessment of tax due for 1979 until April 15, 1984. In a cover letter accompanying the extension petitioner stated: "I forward these documents with the understanding that the issue on appeal is whether or not a partnership relationship existed between myself and Mr. Wheatley in the tax years 1979-1980."
The audit was subsequently transferred to respondent's Denver, Colorado, office at petitioner's request so that petitioner's attorney, Robert Graft, who was located there, could deal more easily with respondent on the partnership issue. Graft signed Forms 872 on December 9, 1983, on which he extended the statute of limitations on the assessment of tax due for both 1979 and 1980 until April 15, 1985. After the audit was transferred to Denver, respondent decided to refocus on verification and substantiation issues. Frustrated with respondent's decision to refocus on verification and substantiation issues, petitioner mailed respondent a letter on August 1, 1984, in which he stated that he was "revoking and cancelling any and all consents provided by me (or my representatives) to extend the time to assess tax for the years 1979 and 1980 (whenever previously given) effective sixty (60) days from the date of this notice." Respondent mailed petitioner a statutory notice of deficiency for 1979 and 1980 on April 15, 1985.
The first issue for decision is whether the three-year statute of limitations, section 6501(a), bars the assessment and collection of deficiencies for the years at issue. Petitioner argues that the extensions of the statute of limitations were limited to the issue of whether he was a partner of Wheatley and, if they were not so limited, that they were (1) invalid, (2) revoked, or (3) unenforceable. As the consents that the parties have introduced into evidence are apparently valid and apparently unconditionally extend the statute of limitations to the date the statutory notice was issued to petitioner, petitioner has the burden of proving that the consents are invalid. Adler v. Commissioner Dec. 42,425, 85 T.C. 535, 540-541 (1985).
(a) Limitation. Petitioner argues that a cover letter mailed along with the Form 872 extending the statute of limitations on the assessment of tax due for 1979 until April 15, 1984, limited the extension to the issue of whether he was a partner of Wheatley. The cover letter simply stated that petitioner was forwarding the Form 872 "with the understanding that the issue on appeal is whether or not" he was a partner of Wheatley. Although we doubt that this ambiguous language limited the scope of the extension, we need not decide the issue. Any restrictions that may have existed on the scope of the extension for 1979 originally signed by petitioner had expired when the notice of deficiency was issued. By that time, the original extension had been replaced by extensions executed by petitioner's attorney for both 1979 and 1980. The new extensions were unconditional, and there is no indication that their scope was limited in any way. As the unrestricted extensions signed by petitioner's attorney were in effect when the statutory notice was issued, we hold that the extension of the statute of limitations was not restricted to the issue of whether petitioner was a partner of Wheatley. Cullen v. Commissioner Dec. 11,080, 41 B.T.A. 1054, 1063 (1940) 41-1 USTC ¶ 9364, revd. on another issue 118 F.2d 651 (5th Cir. 1941). See also Pursell v. Commissioner Dec. 25,500, 38 T.C. 263, 278-279 (1962) 63-1 USTC ¶ 9409, affd. per curiam 315 F.2d 629 (3d Cir. 1963).
(b) Validity. Petitioner argues that there was no meeting of the minds between himself and respondent as to the scope of the consents to extend the statute of limitations and that the consents are therefore invalid.2 Petitioner's argument is based on section 6501(c)(4), which requires the parties to consent in writing on the period of extensions. We have interpreted the requirement that parties agree to mean that they must manifest a mutual assent to the extension. Piarulle v. Commissioner Dec. 40,130, 80 T.C. 1035, 1042 (1983). We have accordingly held consents to be invalid when respondent has physically changed the terms of a consent after it is signed by a taxpayer, or when a taxpayer has physically altered the terms of a consent without respondent's knowledge.3 In those circumstances, our rationale for holding the consents to be invalid is that the parties had failed to agree to identical consents. That rationale does not apply to this case. In this case the consents agreed to by respondent were physically identical to the consents agreed to by petitioner. We accordingly conclude that the parties agreed to the consents and hold that the consents are not invalid for lack of agreement.
(c) Revocation. Petitioner argues that his letter of August 1, 1984, revoked the consents he had given to extend the statute of limitations on assessing tax for the years at issue. We disagree.
By signing the consents at issue, petitioner unambiguously extended the statutes of limitations for the years at issue to April 15, 1985. Respondent accepted the consents, thereby entitling petitioner to an extended period for filing a claim for credit or refund of tax paid for the years. The consents clearly stated that they were to end on the earlier of April 15, 1985, "or the assessment date of an increase in the tax due for the years at issue that reflects the final determination of tax and the final administrative appeals consideration." There is no provision in the consents that allows them to be unilaterally revoked earlier by either of the parties. Having mutually agreed to the terms of the consents, neither petitioner nor respondent had the right to unilaterally revoke their consent before the end of the agreement.4
(d) Estoppel. Petitioner argues that even if his consents to the statute of limitations are otherwise valid, respondent is equitably estopped from enforcing them. Petitioner bases his argument on representations allegedly made to him by respondent prior to his execution of the first waiver for 1979, that the waivers were restricted in scope and revocable by letter. According to petitioner, those representations induced him to execute the consents.
The essential elements of estoppel are: (1) There must be a misrepresentation or wrongful misleading silence; (2) the error must be in a statement of fact and not in an opinion or a statement of law; (3) the person claiming the benefits of estoppel must be ignorant of the true facts; and (4) he must be adversely affected by the acts or statements of the person against whom an estoppel is claimed. Estate of Emerson v. Commissioner Dec. 34,201, 67 T.C. 612, 617-618 (1977). The doctrine of estoppel must be applied against respondent with the utmost restraint as the policy of promoting efficient revenue collection normally outweighs the policy of the estoppel doctrine. Schuster v. Commissioner 62-2 USTC ¶ 12,121, 312 F.2d 311, 317 (9th Cir. 1962), affg. Dec. 23,705 32 T.C. 998 (1959); Estate of Emerson v. Commissioner, supra at 617.
Petitioner contends that the first element of estoppel is satisfied by misrepresentations made to him by respondent. The only evidence that misrepresentations were made to petitioner is his own unsubstantiated testimony. We find petitioner's testimony on this issue to be unconvincing,5 and consider it significant that petitioner's attorney, who actually signed the final and effective set of consents on petitioner's behalf, did not testify that misrepresentations were made to him. We accordingly hold that petitioner has failed to prove that respondent should be equitably estopped from enforcing the consents, or that the statute of limitations bars the assessment and...
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