*1 CORPORATION, BORG-WARNER
Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL
REVENUE, Respondent-Appellee.
No. 80-1818. Appeals,
United States Court
Seventh Circuit.
Argued Dec. Sept.
Decided Ivins, Bailey, Barker,
Nora A. Phillips & C., Washington, petitioner-appellant. D. Perkins, Gen., W. Atty. Richard Asst. Tax Div., Justice, Dept, C., Washington, D. respondent-appellee. SPRECHER, Judge, Before Circuit CU DAHY, WILL,* Judge, Circuit Senior Judge. District WILL, Judge. Senior District appeal This is an from the United States Tax Court’s decision in favor Com- (Commission- missioner of Internal Revenue * Will, sitting by designation. The Honorable L. Hubert Senior District Judge Illinois, of the Northern District of *2 er) $4,316,132.06. The the in the amount of sole Internal Revenue Service of writ- appeal the issue on this is whether assessed taxpayer(s) ten the notification to of ter- deficiency taxpayer’s in the income tax for mination of Division considera- year by the the 1968 was barred statute of tion, (2) receipt by or Regional Appel- the limitations under 26 U.S.C. 6501.1 For late considering Division branch the case herein, reasons we hold stated that the of written notification taxpay- from the deficiency year question asserted for the in ers) of election agree- to terminate this is barred the statute limitations. We ment, except if in either event a Tax judg- therefore reverse the Court’s statutory in tax for ment. any year(s) such is sent to the taxpay- ers), running time for making I. BACKGROUND any suspended assessment shall be for the 3, 1969, taxpayer On June filed its period during making which the of an year federal income tax return for the 1968. prohibited assessment is and for Although period in which the thereafter. . . . could Service assess a with re- signed This form was an officer of the spect taxpayer’s year to the 1968 tax nor- taxpayer and by Kenneth E. Ap- mally lapsed 13, 1972, would have June pellate Conferee, Ochs, on behalf of Fred J. timely agreed and the Service Regional Commissioner, Assistant Appel- writing on four occasions to extend this late. period pursuant to section On June the taxpayer had filed 6501(c)(4) of the Internal Revenue Code. protest report examination occasions, each parties On of these exe- prepared by the District Director’s Office. Internal cuted Revenue Service Form report This was forwarded to the Fixing entitled “Consent Period of Limita- Division. Between June 1973 and Octo- Upon tions Income Assessment of and Prof- 18, 1974, representatives ber agreements provided its Tax.” These er, Farrell, John J. Crunican and Neal F. a deficiency the Service could assess for the met with and wrote to Conferees year any 1968 tax specified time before a Jobson, Kenneth E. Christian and Anna C. agreement The date. last such extended parties’ an effort disagree- to resolve the period filing deficiency for to Decem- ment over the liability for the ber 1974. year tax apparently These efforts July On and the proved however, unavailing, for on October executed Internal Revenue Service 18, 1974, Mr. wrote following Christian 872-A, period which extended the for letter to Mr. Crunican: assessing taxes to a to be date determined Dear Mr. Crunican: provided provided, therein. This form part: relevant Conferee Anna Jobson and I have care fully amount(s) That the any considered the evidence argu Federal In- and come any return(s) support your tax due ments in position under made as dis by or on during behalf of the cussed above-named tax- our two conferences with payers) you for the year(s) Farrell, tax ended and Mr. Decem- Neal and as set forth information, 31,1968, existing your ber prior protest under or supplemental reve- acts, may nue any be assessed at time on he accompanied latest t day (1) or before the 90th mailing your August letter of 6501(c)(4) 1. 26 U.S.C. § after such provides: time, tax may assessed at any time prior Where, expiration before the of the time expiration pre- agreed agreed The so upon. scribed in upon this section for the assessment agreements may be extended subsequent title, imposed except writing estate tax made before the provided expiration both chapter delegate or his Secretary previously upon. writing have consented in to its assessment regret we We have been unable to actual notice of was not upon mutually agree satisfactory basis the taxpayer April mailed to until closing although settlement timely petition filed a proposals counterproposals were redetermination of the with the parties. made and considered Ac- *3 10, July Thereafter, Tax Court on 1975. cordingly, you this is to inform that it is taxpayer filed with court a motion our intention to recommend issuance of a summary judgment contending for that the deficiency reflecting of notice deficiency notice of in this case was untime- adjustments proposed by the District ly. taxpayer argued that Mr. Chris- Director. of tian’s letter October cooperation very Your constituted has been much appreciated. Ap- notification of termination of pellate
Very truly yours,
Division consideration. Pursuant
/s/ Kenneth E. Christian
parties’
agreement regard-
Form 872-A
E.
Kenneth
Christian
ing extension of the statutory period of
Appellate Conferee
filing
deficiency,
taxpayer
a notice of
cc: Miss Anna
Jobson
C.
contended,
filing
for
such a no-
Shortly
letter,
expired
tice
receiving
this
Mr.
after Mr. Christian’s
telephoned
Crunican
Mr. Christian to dis-
mailed,
16, 1975,
letter
January
was
or on
forthcoming
cuss the
contents of
statu-
long before the notice of
deficiency
this
tory
deficiency.
Mr. Crunican also
April 18,
case was mailed on
1975. The
expect
asked Mr.
when
Christian
he could
opposed
taxpayer’s motion,
as-
deficiency.
to receive the notice of
He was
serting that Mr. Christian’s letter was not
expect
told Mr. Christian that he could
it
of
notification
termination of
Di-
some time in December 1974. On Decem-
vision
simply
consideration but
a notifica-
9, 1974,
Crunican,
ber
having
Mr.
not
re-
tion of Mr.
intention
Christian’s
to recom-
again
deficiency,
ceived
tele-
Regional
mend to the
Counsel that
notice
phoned
inquire
Mr.
Christian
as to the
be issued.
of the
status
notice and to
ask
issued before the end of the month. Mr.
Judge Caldwell of
Tax
Court
Christian stated that the case had been sent
Service, holding
with the
that Mr. Chris-
Regional
to the
approval
Counsel for
of the
tian’s
was
letter
not a notification
termi-
issuance
the notice on November
nation Division consideration.
Judge Caldwell
noted
letter does
There were no further communications
specifically
not
state that
Divi-
parties
January
between the
until
terminated;
sion consideration had
it sim-
day
the 91st
after Mr.
mailed
Christian
his ply
steps
set out what
Mr. Christian intend-
previously quoted
letter of October
1974 ed to
terminating Appellate
take towards
to Mr.
January
Crunican. On
Mr. Chris- Division consideration in the future. More-
telephoned
tian
purportedly
Mr. Crunican
over, according
court,
reading
its
to outline a
proposal differing
settlement
the letter was entirely consistent with the
slightly from
last
proposal
such
dis-
policy
issuing
Service’s
of not
of ter-
notice
parties.
cussed
At Mr. Crunican’s
cases,
one,
mination letters in
like
this
request, a conference was scheduled for
taxpayer
the Service and the
had not
January
Joseph
E. McAn-
resolved
Consequently,
their differences.
Bailey,
drews
Ms. Nora A.
outside
held,
Judge
parties’ agreement
Caldwell
counsel retained
the taxpayer on No-
issuing
extend the
11, 1974, appeared
vember
at that confer-
expire
on
did
ence
on behalf of the
and stated
90th day following
letter
Mr. Christian’s
position
their
the statutory
and, thus,
the notice
filing
expired
a notice
this
had
January
untimely.
case was not
April
factory
On
filed a
closing
basis for
the case.” He fur-
judge’s
motion to vacate the trial
ther states
taxpayer’s “cooperation
order.
that the
very
has been
Judge
appreciated.”
much
Chief
Dawson denied this motion for
There is
mention in the
essentially
letter of
outstanding
the reasons
earlier
stated
proposals, no hint of the need or
thereafter,
utility of
Judge Caldwell. Some time
discussions,
further
and no invitation to the
filed a motion to reconsider the
to submit additional
information
summary judgment
denial of
ground
on the
or new offers.
Commissioner,
that Johnson v.
and the
Division until
the 91st
day
mailing
the
of the letter. The
II. DISCUSSION
only
telephone
two
conversations between
Agreements
taxpayers
between
and the
Mr. Crunican and Mr.
peri-
Christian in the
government extending the statute of limi
18,
od October
16,
1974 to January.
taxes,
tations for the assessment of
includ
clearly
that,
parties’
indicate
in the
under-
ing agreements to extend the limitations
standing,
the
Division’s consider-
period indefinitely,
like the one at
issue
ation of the case had ended and a notice of
here,
long
have
recognized
been
as valid.
process
was in the
being
is-
Commissioner,
See McManus v.
583 F.2d
sued. Mr. Crunican and Mr. Christian dis-
(9th
1978),
denied,
Cir.
cert.
only
anticipated
cussed
notice of defi-
U.S.
99 S.Ct.
We have in this case those in protest, considered the evi- arguments appellate Johnson : the you dence and conferee here wrote submitted to your “it is support position regarding our intention to issuance the tax recommend liability statutory of a notice deficiency,” above. we were unable to of where- Since Johnson, as in satisfactory agreement appellate a your reach conferees wrote case, that deficiency a a notice of deficiency “will be sent to you” you. early or “will be at an date.” sent issued one, This difference is not a material how- you If desire to contest this matter ever. The critical so event far as the limi- tax, paying you further without first not, tations is concerned is as the notice, may, receiving file a suggest, Commissioner seems to the is- petition with the United Tax States suance of notice deficiency or even the your Court for a redetermination of acceptance appellate conferee’s rec- liability. that deficiency ommendation a notice of Id. at 640. There were no substantive com- issue, Appellate but the termination munications in either case between the tax- Division’s consideration of the case. payers and the Appellate following Division purpose agreements extending the statu- the issuance of letters these until tax- tory limitations is allow a payers deficiency. received notices of In er to compromises seek of its asserted tax cases, both the notices of were liability. Herman, United See States v. 186 days mailed more than 90 after the letters F.Supp. (E.D.N.Y.1960). When the quoted argued taxpayers above. The possibilities of settlement have ex- been these letters constituted notification of the hausted, quid pro quo for the extension Appellate termination of Division consider- period disappears. this limitations that, ation consequently, time filing a notice expired point, At that upon incumbent after the letters were mailed. the Service to issue a notice of fashion, agreed taxpayers timely
The Tax Court with the which Revenue Procedure 71-11, in Johnson. The court noted that lan- 1971-1 C.B. and Form 872-A letters, guage brevity, of both their days. that, consist- define regard- as 90 It is clear language in the particular places great less of the used The Commissioner impor- import letter its tance on fact that Mr. Christian did not possibilities exhaust- of settlement had been expressly state that his letter was a notifi- Appellate ed and the Division’s considera- Appellate cation termination of Division par- tion of the had ceased. That the points consideration. He out that both of ties also understood this to be the correct Appellate the form letters the Louis St. interpretation of the letter is clear from Division uses to terminate cases subsequent telephone their conversations clearly simply state your “this is about when the notice of would of termination of Division constitutes, therefore, issue. The letter consideration referred to Consent Form notice of termination of Service, According 872-A.” to the the ab- 90-day which started limi- consideration direct, similarly of a unambiguous sence running. tations statement Mr. Christian’s letter Furthermore, contrary to the Commis- taxpayer indicates that his letter was not a contention, sioner’s Mr. Christian’s state- notification of termination Di- ment our that “it is intention to recommend vision consideration. deficiency” issuance of a argument simple This fails that Mr. indicate Christian was reason only making that, regardless a recommendation to his su- of whether Mr. Christian who, turn, pervisor might might or not clearly could have stated more that Appel- agree to terminate Division con- ended, late Division had consideration sideration. “Recommend” and “recommen- expressed fact remains that he this idea in dation” are terms of art used to describe he the letter wrote to Mr. Crunican. Cer- process Division fol- tainly, the Service address taxpayers should Regional ap- lows to obtain the Counsel’s straight-forward in the clearest and most proval deficiency. a notice of issue See possible. manner The Service’s failure to 601.106(d)(2)(ii); 26 C.F.R. Internal Rev- so, however, do does mean that we Manual, 33(II)(D).3 enue Position Profile ignore import should its less succinct surrounding Given the circumstances *6 communications. Neither Revenue Proce- letter, phrase Christian’s the our “it is in- nor requires dure 71-11 Form 872-A that tention to recommend issuance of a statuto- any particular language used in be a notifi- ry deficiency” notice obviously refers not cation termination. in the past Courts to a recommendation Mr. Christian to his required precise, explicit have language not supervisor Appellate that Division consider- or to language adherence the used in stat- terminated, Appellate ation be but to the regulations utes or in communications be- Regional Division’s recommendation to taxpayers See, tween and the Service. e. Counsel —after termination of the division’s g., Woodworth, v. Collins 109 F.2d 630 that, the the consideration of as let- case— (6th 1940). Additionally, Cir. we believe states, ter a notice of sent to be that a is to a entitled take letter the taxpayer. Consequently, is there noth- at face value. It be would unreasonable ing language in the of this letter which impracticable expect, to the anything indicates is Service that it other than a as does, apparently Appellate compare notification of termination of Di- that a vision any correspondence consideration. it from receives the 601.106(d)(2)(ii) provides part: recommending 26 C.F.R. randum the issuance of such [Emphasis notice. . . . added.] If after consideration of the the case Appellate region Division of the is it deter- Manual, 33(II)(D) pro- IR Position Profile mined that there is a tax in income vides, part: ., . . . tax . to which . the Frequent (Ap- contacts between ARC agree, a will be pellate) Regional required are Counsel on prepared Appellate and issued Divi- such matters as .. . consideration of action regional sion after consideration coun- recommending memoranda tory issuance of statu- sel of such notice and memo- notices, [Emphasis .... added.] with letters or notices issued in has handled a taxpayer’s throughout, Service case signed eases to extending other ascertain whether corre- has Form 872-A the stat- limitations, spondence really says. means what it ute of and notifies the er, stationery, parties on official that unconvincing equally We find the Com- impasse, have an he reached is clothed with that, argument since missioner’s Revenue apparent authority Appellate to terminate “[njotification Procedure 71-11 states that Division consideration. See Johnson v. taxpayer of the Service to the termina- Commissioner, supra at 644. Appellate tion Division consideration will normally accomplished by case, issuance of a In the Mr. present signed Christian letter,” Service, form absence of form letter in Form on 872-A behalf han- this case indicates that Mr. throughout Christian’s let- dled the Ap- case pellate consideration, ter was not a notification of termination of Division’s and wrote Appellate First, Division consideration. to the Division sta- procedure expressly tionery revenue states that a expressing regret parties “normally,” termination not mutually agreeable “al- could not reach settle- ways,” will of a consist form letter. Conse- ment of case. Mr. Christian had thus at quently, while apparent authority the individualized letter least Ap- to terminate may pellate this case not be a run-of-the-mill noti- Division consideration of this case. termination, Furthermore, fication this appears does mean from the record it Second, an ineffectual one. that Mr. authority Christian had actual to argument regard disingen- is at Johnson, least do so. The Conferee in uous, admittedly admission, since had no own Service’s had actual notifying form letter for taxpayers authority terminate end of Division consideration in consideration. See id. 644. There is Thus, unagreed nothing cases such this one. suggest in this case to that Mr. only way individualized letter was the authority in Christian Appel- had less than the which the Service could have notified late Conferee in Johnson.
taxpayer in Ap- this case of termination of Moreover, presumption there pellate Division consideration.4 regularity attached ac Service’s tions; The Commissioner presumed, further contends it is whenever an official letter acted, at issue in the has required give whatever is does a legally cognizable not constitute validity no act in official’s fact exists.5 Ahrens, tification termination of Divi See United States v. 530 F.2d sion (8th 1976); consideration because States, Cir. Lesser v. United letter, author of the (2d was without au 1966). F.2d Cir. In the thority to end the *7 therefore, division’s consideration presume, of we in the According Service, the case. only to the any absence of contrary, indication to the supervisor Mr. Christian’s authority had that delegation to Mr. virtue of a speak Appellate for the Division on of authority, this had authority actual termi to subject. As the Tax Court in Appellate noted John nate the Division’s consideration son, however, the Appellate where Conferee of this case. superseded recently that, 4. Rev.Proc. pre- 71-11 was 5. The Service contends while 79-22, pro- sumption Rev.Proc. regularity 1979-1 C.B. which of official is available to vides, part: government in whenever an official action is challenged, it is not available to a who Written notification the Service to the attempting to establish that an official action taxpayer of termination of Service considera- legal validity. disagree. presump- has We A accomplished tion will be issuance of hardship tion of this sort should work on the 872-T, Spe- of Notice Termination of government, government since the is best able cial Consent to Extend to Time Assess presumption. to rebut In the of interests [M]ailing . . . Tax. of a notice of therefore, fairness, presumption regulari- of will constitute written of notification termi- ty operate to should the benefit of the nation of Service consideration in lieu of government. as well as the mailing Form 872-T. argues Finally, that the letter cated that the the Service Service issued notices of ter- Appellate in issue is not a notification of termination mination Division considera- consideration, unagreed agreed since tion in Appellate Division as well as cases. Division, internal, Louis Appellate unpublished of which St. office’s St. Louis part, policy, any, modifications of if policy had a this Christian was cannot precedence published take over issuing unagreed never letters in cases. announce- such contrary. ments to the problems There are at three with this least First, argument, or not however. whether Third, if the question letter in is not that policy in St. Louis office had contemplated by Form 872-A and the In- pointed regard As the is irrelevant. court Manual, ternal Revenue or if the Service Johnson, poli- out in internal statements of unagreed cases, does not send letters in cy have never carried the force of law. taxpayers sign who Form 872-A are being policy While the can its office’s direct position misled. Commissioner’s in ef- do, agents in it what to cannot limit the that, fect is the language of Form 872-A agents’ effect actions if they of its choose to notwithstanding, apparently this and ignore it. unagreed cases, other statute of limita- never tions runs and the Service can send a Second, it at all clear it can is not that of deficiency time. In the fairly policy be said that is the Service’s instant no other letter than that of issue in una- notices termination advising October 18 was sent the taxpayer Commissioner, greed cases. Johnson v. See that Division consideration had 71-11, supra at 643. Revenue Procedure unagreed cases, terminated.6 In other ap- at the was in effect time Mr. Chris- parently although no letter is sent the tax- tian sent his October 18 letter to the tax- payer so orally. advised states, among payer, things, other Form 872-A extends of limita- permit To abrogate “mailing by tions application to a date 90 provi- Form 872-A and the the Internal sions Revenue Service of Internal Revenue Manual by taxpayer(s) sending import a letter notification to the of termina- the clear of which is tion Division consideration Division has consideration.” but consequences terminated then avoid the provision. Form 872-A an identical contains by contending that the letter does not un- Nothing provisions in these indicates equivocally and so positively state when no only notices of termination will be issued unequivocal other sent letter is would sanc- contrary, pro- cases. On such tion, misrepresenta- condone and reward unagreed vision is at least crucial tion. cases since the is entitled expeditious issuance of the notice of defi- The fact of the is that all matter con- ciency. Additionally, 8233(13)(4) paragraph cerned understood the October 18 letter to of the Internal Revenue Manual states be a notification that “ clearly the Service of [notification Thereafter, consideration had terminated. termination of consideration is Mr. only Christian and Mr. Crunican talked except issued all Form 872-A cases about when the notice of would where received, notification termination has been December, presumably since taxpayer.” (Emphasis received from add- Region- the case had been forwarded *8 ed.) Thus, published pronouncements of appar- al Counsel on November 12 where it policy 17, the Service’s at the time Chris- ently got day, January Mr. lost. On the 91st blue, Christian, sent tian his letter to Mr. indi- Appellate Crunican out of the Mr. the 21, states, that, Judge Sprecher’s page parties 6. dissent the letter is since the “have been mutually agree upon satisfactory the October 18 letter indicates that the issuance unable a case,” statutory deficiency closing of the “would for no further basis the consider- by Appellate Appellate terminate Division the consideration.” ation Division would be war- appears No such in and it statement the letter ranted is terminated. question. contrary, import On the of the clear 332 conferee, Crunican, I the
Division called taxpayer’s representative, purportedly to Taxpayer’s federal income tax for return slightly pro- a discuss different settlement year 13, the 1968 on calendar was filed June representatives posal. taxpayer’s de- three-year 1969. The of statute limitations ground 90-day on statute of clined the the assessing deficiency for a would have ex- April run. limitations had On six pired June 1972. On four occasions letter, the months after the October no- April between March and finally tice of was mailed. taxpayer and the Internal Revenue Service summary, we that Mr. Chris- In conclude timely writing to extensions of letter of October 1974 constituted tian’s pursuant period to 26 U.S.C. Appellate of termination of Di- notification 6501(c)(4).1 Each of these four extensions § vision consideration. Pursuant tax- was evidenced Internal Revenue Service agreement, payer and the the limi- Service’s Form was period 872 and each for time period assessing tations ex- for date, specific ending on a the last date such pired days mailing after the of this let- being December 1974. ter. Since notice was is- of expiration in this July 18, 1974, sued case before of taxpayer’s On after period, the limitations the assessed deficien- Appellate had been transferred to the Divi- therefore, We, cy time is barred. reverse sion of Internal Revenue Service at St. the Tax Court. Louis, Missouri,2 taxpayer and Internal agreement Revenue Service entered into an Reversed. 872-A, “Special evidenced Form entitled SPRECHER, Judge, dissenting. Circuit Fixing Upon Consent Period of Limitation Tax,” Assessment of Income which extend- appeal The issue on is whether certain period ed the days assessment until 90 after appel- an letter written internal revenue party written notification either of ter- late conferee constitutes “written noti- agreement.3 of mination E. Kenneth fication to the of termination of Conferee, Appellate signed Appellate Division consideration” sufficient Ochs, to terminate 872-A on behalf Fred waiver of the statute of limita- of J. Assistant tions under Regional Appellate. Form 872-A. Commissioner — 6501(c)(4) provides: existing prior may 26 U.S.C. der or revenue acts be Where, any expiration pre- assessed at time on or before the 90th before of the time day (1) mailing by scribed in this section for assessment of the Internal Revenue any title, imposed by except taxpay- this Service of written notification to the provided chapter estate tax ers) both the of termination Secretary delegate or his and consideration, (2) receipt by Regional or writing have consented to its assessment considering Division branch office time, may after such any the tax be assessed at the case of written notification from the tax- prior expiration time payers) agree- of election to terminate this agreed upon. agreed upon so ment, except if in either event a statuto- may by subsequent agreements be extended ry any in tax for such writing expiration made before the year(s) taxpayer(s), running is sent to period previously agreed upon. making any time for shall assessment suspended during Internal for Revenue Service received protest making prohibited Division of June an assessment and Subsequently representatives days for 60 thereafter. If such no- participated er taxpayer(s) Conferees two tice is sent to the neither August settlement conferences of June (1) 19 and (2) the conditions enumerated in 14, 1974. preceding occurred, sentence have the time making expire such assessment provided 3. Form 872-A and As- period during after the which the mak- Regional sistant Commissioner — ing prohibited. assessment How- agree consent and as follows: ever, agreement peri- will not reduce the amount(s) That the Federal income provided time od of otherwise law for any return(s) tax due under made or on making such assessment. taxpayer(s) behalf of the above-named *9 31, year(s) ended December 1968 un- taxpayer taxpayer time ever avail itself internal April did Revenue to on At 18, right .1975, $6,316,749.57. to terminate the unlimited waiv- of its the amount of represented the statute of limitations Taxpayer er of petition filed its for redetermina- by 872-A. Form tion with July the Tax Court on 1975. Christian, Appellate E. Confer- Kenneth 23, 1975, taxpayer On October for moved ee, following mailed the letter to summary judgment in the Tax Court on the date of October 1974: under ground that the statute of limitations had Anna and I have Conferee Jobson care- expired. Judge Special Trial Randolph F. fully argu- considered the evidence and Caldwell, April Jr. denied motion on support your position ments as dis- 1976. during
cussed our two conferences with 30, 1976, April On taxpayer moved to Farrell, you and Mr. Neal and as set forth Judge vacate Caldwell’s order denying sum- your protest supplemental and infor- mary judgment. May On Chief mation, accompanied the latest of which Dawson, Judge Howard A. Jr. of the Tax your August letter of Court denied the motion to vacate. regret We that we have been unable to 25, 1977, August On moved upon agree mutually satisfactory basis the Tax Court for reconsideration of its case, closing although for settlement summary judgment. motion for On No- proposals counter-proposals were 7, 1977, Judge vember Theodore Tannen- parties. made considered Ac- wald, Jr. of the Tax Court mo- denied the cordingly, you this is to inform that it is tion to reconsider. our intention to recommend issuance of a 17, 1980, On reflecting Judge March Tannenwald of adjustments proposed Tax Court district determined a $4,316,132.06 Director. against taxpayer. Taxpayer appealed ground has on the that the statute cooperation very been Your has much deficiency. limitations barred appreciated. Very yours, truly Kenneth E. II
Appellate Conferee
A
January
On
Christian tele-
phoned
provides
one
taxpayer’s representatives
statute of limitations
slightly
income taxes
and outlined
different
shall
assessed within 3
settlement
years
proposal than
the last
the return is filed.
one offered the tax-
26 U.S.C.
6501(a).
payer. Taxpayer’s representative request-
period by
§
of this
Extensions
conference,
agreement
ed
another
which was
then ar-
and the Com-
ranged
January 22,
provided
for
missioner
6501(c)(4).4
1975 in
are
St. Louis.
conference,
At the scheduled
attorneys for
872-A,
which has been
called
appeared
and stated that the stat-
form,
“unlimited waiver”
was initiated
expired
ute of limitations had
January
Internal
February,
Revenue
16,1975,
after Christian had mailed mainly
taxpayers
to relieve
and the Service
the letter dated October
from the
irritations
difficulties
ob-
required
notice of deficiency
taining
frequent
stat-
renewals of limited
ute was mailed
the Commissioner of
consents.5
note 1.
See
trols to
ensure that
of limitation
expire during
consideration
71-11,
provided
5. Rev.Proc.
1971-
334 by Appellate Conferees, one
Earlier uses of waivers unlimited
time
Kenneth
upheld
long
have
so
as the
been
E.
constitutes
“written notifi-
right
suspen-
retained
to terminate the
cation to the
of termination of
by giving
sion of the statute of limitations
required
Division consideration”
Greylock
notice to the Commissioner.
In
trigger
90-day
Form
to
872-A
Revenue,
Mills v. Commissioner
Internal
period.
(2nd
1929), Judge
31
658
Cir.
F.2d
6
The
letter
October"
does not
Swan said:
state
is a
that it
notification of the termina-
are
If waivers which
in terms unlimited
tion of
Division consideration.
It
all,
at
they
are to be limited
we think
state
Division con-
expire only
should
after
is
sideration
terminated. While it is true
gives notice to the Commissioner that he
regard
it states “that
it is our
the waiver as at an end after
intention to
time, say
a reasonable
three or four
recommend issuance of a
months, from the date of such notice.
In
deficiency” and that such issuance would
such a rule there is no
to
harshness
either
consideration,
terminate
Division
party;
contrary,
on the
it
to
seems
us the
to
words “intention
recommend” are
most reasonable one.
lacking
finality by
steps
at least two
—an
validity
pro
The
of the unlimited waiver
contingent
may
intention is
in that
it
be
upheld
vided
Form 872-A has been
person
persons
reconsidered
or
so
against
open-
attack that
intending and a recommendation is contin-
ended nature
the form violated 26 U.S.C. gent
may
disapproved by
6501(cX4),
“period
speaks
which
so person
persons
or
to whom it
is made.
agreed upon.” McManus v. Commissioner
expression
The
of a
intention
Revenue,
(1975),
of Internal
provides
Form
for the use of
particular taxpayer
Nor
did
have
Spe-
is entitled
Termination
“Notice of
reasonable expectancy from which it was
cial Consent to Extend the Time to Assess
imply
entitled to
termination of the limita-
Tax”
expressly
that “this
agreed
states
form is
tion
parties
waiver. Both
that set-
appellate
written notification of termination of Form tlement
conferences at
level
872-A.”
August
occurred on June 19 and
Manual, par. 8233(13)(4)
Internal Revenue
cial Consent
to Extend Time to Assess Tax.
provides:
provides
Form 872-A
that 90
will there-
Notification
Service of
remain for
of tax.
termination
assessment
In this
regard, mailing
consideration
issued in all
of a notice of
except
Form 872-A cases
where notice of
constitute written notification of termination
issued,
deficiency has been
or where notifica-
mailing
Service consideration
lieu of
tion of
been
termination has
received from
Receipt
taxpayer(s)
Form 872-A.
from the
taxpayer.
Provision is included for Service
of Form 872-T
the Internal Revenue Ser-
closing
notification in
letter Form L-85 used
considering
vice office
the case will likewise
cases.
See Exhibit 53 of IRM
90-day
running
start
8(24)60, Appellate Division Secretarial Hand-
assessment.
book.
provides:
Sec. 4.02
7, supra.
exception
mailing
With
See note
of a notice
deficiency,
notification
the Ser-
provides:
9. Sec. 3.03 of
79-22
Rev.Proc.
taxpayer(s)
vice to the
of termination of Ser-
Written
the Service
notification
only
using
vice consideration
can
made
taxpayer of
of Service
termination
considera-
Form 872-T.
accomplished
tion will be
issuance of
872-T,
Spe-
Notice of Termination of
have
parties agreed
expectation
Both
that at both confer-
could
had no reasonable
proposals
counter-pro-
ences settlement
early
suspen-
termination
the limitations
posals were discussed but no settlement
sion.
agreement was reached. Crunican affida-
Crunican,
agent
aas
former revenue
vit,
affidavit,
paragraph;
second
Christian
supervisor,
recognize
would also
let-
paragraph.10
third
Christian’s affidavit
signed by Appellate
ter
stating
Conferee
further stated that
written settlement
“[a]
is,
“it
is our intention
the inten-
[that
*12
proposal
Borg-Warner
was received from
tion of Christian and his Co-Conferee Anna
1974,”
Corporation
3,
September
on
which
to recommend issuance of a statuto-
Jobson]
by taxpay-
statement was not controverted
”
ry
. . .
required
.
some
er.11
by
supervisor.
action
the conferees’
Cruni-
regulation
The Internal Revenue Service
can was also on notice that the Form 872-A
compromise
applies
which
to offers in
26is
was executed in the name of the Assistant
provides
C.F.R. Sec. 301.7122-1 and it
in Regional
Appellate. Thus
Commissioner —
part:12
18, 1974,
until some time later than October
(f) Requirement
respect
with
to stat-
negotiate
there
an opportunity
remained
to
ute of
in compro-
limitations. No offer
fact,
a settlement.
In
further settlement
accepted
mise shall be
unless
proposals
by
made
on
were
Christian
Janu-
running
er waives the
17,
ary
1975 and on behalf of the
period of limitations on
or either
both
20,
February
1975.
Therefore
was
assessment or collection of the tax liabili-
impossible
18,1974
October
letter to
ty
period during
involved for the
which
be a written notification of termination of
pending,
period during
the offer is
or the
Appellate Division consideration inasmuch
any
unpaid,
installment
remains
as termination had not occurred
year
and for one
thereafter.
time.
Crunican,
representative
A mere recommendation from a revenue
negotiations,
settlement
was an Inter-
agent
supervisor
to
trigger
his
any
Agent
nal Revenue
from 1945 to 1957
and
critical
factors
the relation between
Group Supervisor,
Division,
Audit
from
government
taxpayer.
Supreme
and a
The
1957 to 1961.
must
He
have been well
States,
Court
Donaldson v. United
400
aware of the requirement
offers
517,
534,
91
(1971)
U.S.
S.Ct.
the Christian letter of October 1974. So Bank, United v. States LaSalle National erroneously even 437 interpreted if Crunican S.Ct. rejection U.S. 98 57 L.Ed.2d Sep- Christian letter as 221 (1978), tember 1974 the Court proposal by settlement clarified as tax- Donaldson not payer referring and if this had been the usual offer recommendation situation, agent and waiver suspension supervisor to his but to the recom- statute of limitations would have ex- mendation Internal Revenue Service to pired until Department October 1975. Crunican of Justice. The Court not- requirement suspension Christian’s letter to dated October of the statute parties’ inability compromise referred to the of limitations while an offer in agree “although proposals plus year pending present regula- settlement one is in the counter-proposals (26 C.F.R., 301, 301.7122(f)); were made considered tion Part was in parties.” (see effect as far back as 1960 United States v. Bank, Savings (7th Harris Trust & 285 390 F.2d 1968)); early any Cir. and was utilized as 11. The record as 1935 does not reveal the dates of Havner, (see proposals United States v. other written 101 F.2d 162 settlement made (8th 1939)). taxpayer. Cir. interpretation “would un- ed that other hamstring performance
necessarily RUIZ, Petitioner-Appellee, Frank J. func- the tax determination and collection v. 313, n.15, at tions the Service.” U.S. here, if Similarly n.15. CADY, S.ct. Respondent-Appellant. Elmer O. purpose for a en-
letter intended different No. 81-1164. tirely imply was held foreclosure government to collect from to six four Appeals, United States Court of taxes, tax would million dollars of functions Seventh Circuit. agents time hamstrung spent their exactly composing proper language. It Argued May 26, 1981. preferable bright requiring to draw a line Sept. Decided notifications of termination explicitly state that fact.
Taxpayer heavily v. relied on Johnson *13 Revenue, 68
Commissioner of Internal T.C. (1977), the Tax in two where Court held that an Con-
consolidated cases statutory saying
feree’s two letters —one “a you” will
notice of be sent to other, statutory “a early
will be at an date” —constitut- issued un-
ed written notification of termination
der Johnson affect Form 872—A.
our conclusion for several reasons. place,
In the John- first footnote opinion
son refers to the as
“clearly distinguishable.” 68 T.C. Secondly,
n.l. the issue in this case was
passed upon by three different Tax Court separate
judges they on three occasions and
all reached a different conclusion than
one reached in Johnson. One of the three Judge
was Tax Court Dawson was the who Thirdly,
author of Johnson. Johnson is
clearly language distinguishable in that the (“it
here is our intention to recommend statutory
issuance of a notice of deficien-
cy") finality lacks the found in Johnson’s (“a
language statutory issued]”). Finally,
will be sent we be- [or
lieve that Johnson is in event incorrect implied permitting opposed to an
explicit notice of termination. judgment
I would the Tax affirm
Court. Manual, par. pro- advised of Internal Revenue be this conclusion advance mailing vides: notice. Such need form If, advice not be in written unless in consideration of a it is conclud- circumstances warrant such advice. ed that a is to issued, representative or his