T.C. Memo. 2000-304

UNITED STATES TAX COURT

ROSS M. MUIR, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 7721-88. Filed September 26, 2000.

Ross M. Muir, pro se.

Tracy Anagnost Martinez, for respondent.

MEMORANDUM OPINION

PARR, Judge: Respondent determined deficiencies in, and

additions to, petitioner's Federal income tax as follows:

 Additions to Tax 

Year Deficiency Sec. 6653(a)(1) Sec. 6653(a)(2)

1980 $86,844.34 $4,342.00 --

1981 334.74 16.73 

 1

1 50 percent of the interest due on $334.74.
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1Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the taxable years in

issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure. Sec. 6621(c), formerly sec. 6621(d), was

redesignated pursuant to Tax Reform Act of 1986, Pub. L. 99-514,

sec. 1511(c), 100 Stat. 2744. 

2Petitioner asserts on brief that interest on the deficiency

should be abated pursuant to sec. 6404(e). Consideration of

petitioner's request for abatement of interest is premature,

however, as there has been neither an assessment of interest nor

a final determination by respondent not to abate the interest. 

See sec. 6404(e), (g), as currently in effect; see also Bourekis

v. Commissioner, 110 T.C. 20, 26 (1998).

Respondent also determined that petitioner is liable for

increased interest on underpayments attributable to tax-motivated

transactions as defined in section 6621(c),1 for the entire

underpayment of tax for 1980. 

The sole issue for our decision is whether the statutory

periods of limitations for assessing and collecting the

deficiencies in, and additions to, petitioner's Federal income

taxes for 1980 and 1981 have expired.2 We hold they have not.

Background

Some of the facts have been stipulated and are so found. 

The stipulated facts and the accompanying exhibits are

incorporated herein by this reference. Petitioner is an attorney

who resided in Rochester, Minnesota, at the time he filed his

petition in this case. 

Petitioner filed his Federal income tax returns for the

taxable years 1980 and 1981 on June 15, 1981, and October 15,
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1982, respectively. On each return, petitioner claimed a

substantial loss from his investment in a limited partnership,

relating to, among other things, enhanced oil recovery

technology. 

On March 22 and 26, 1984, petitioner and respondent,

respectively, executed a Form 872-A, Special Consent to Extend

the Time to Assess Tax, related to the taxable year ended

December 31, 1980. 

On its face, Form 872-A states that the tax due for the

specified year: 

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), EXCEPT THAT 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 END 60 DAYS AFTER THE PERIOD

DURING WHICH THE MAKING OF AN ASSESSMENT WAS

PROHIBITED. * * * 

On October 7 and 9, 1985, petitioner and respondent,

respectively, executed a Form 872-A related to the taxable year

ended December 31, 1981. That Form 872-A contained the language

quoted above with respect to termination of the extension

agreement. 

On January 19, 1988, respondent issued a notice of

deficiency to petitioner. At no time before respondent's
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3All items in the notice of deficiency have been resolved in

accordance with the Court's disposition of the issues in Krause

v. Commissioner, 99 T.C. 132 (1992), affd. sub nom. Hildebrand v.

Commissioner, 28 F.3d 1024 (10th Cir. 1994), the test case in the

Elektra/Hemisphere group of Tax Court cases. See also Acierno v.

Commissioner, T.C. Memo. 1997-441, affd. without published

opinion 185 F.3d 861 (3d Cir. 1999); Karlsson v. Commissioner,

T.C. Memo. 1997-432, and Vanderschraaf v. Commissioner, T.C.

Memo. 1997-306, affd. without published opinion 211 F.3d 1276

(9th Cir. 2000), which also involved tax shelter limited

partnerships and which resolved the issues in a manner consistent

with Krause v. Commissioner, supra.

4Specifically, petitioner contends that the Form 872-A

(continued...)

issuance of the notice of deficiency did respondent or

petitioner, or anyone acting on petitioner's behalf, terminate

the Form 872-A agreements by mailing to or filing with the other

party a Form 872-T, Notice of Termination of Special Consent to

Extend the Time to Assess Tax.

Petitioner timely filed a petition to this Court for

redetermination of the deficiency, affirmatively pleading that

the periods of assessment of the taxes for 1980 and 1981 had

expired and alleging error in respondent's determinations that

disallowed the deductions related to his investment in the 

limited partnership.3 

Discussion

Petitioner asserts that the Form 872-A extension agreements

terminated by operation of law within a reasonable time after 

execution, and, therefore, assessment of the taxes for 1980 and

1981 is barred by the statute of limitations.4 Respondent
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4(...continued)

should not extend the time to assess tax "to twelve years after

[the] notice of deficiency [was issued] or sixteen years after

the original signing of form 872A." 

Petitioner is mistaken in his contentions about the

extension of time provided by the Forms 872-A. The agreements to

extend the time to assess terminated upon respondent's issuance

of the notice of deficiency. Thus, the agreement to extend the

time to assess the tax due for 1980 terminated less than 4 years

after execution, and the agreement to extend the time to assess

the tax due for 1981 terminated within 3 years of execution.

The period of limitations remained suspended after the

mailing of the notice of deficiency by reason of sec. 6503. See

also sec. 6213(a).

5Section 6501(c)(4), provides in relevant part:

(continued...)

contends that the period of limitations was extended by agreement

and that neither respondent nor petitioner terminated the

agreement before issuance of the notice of deficiency. We agree

with respondent.

Section 6501(a) generally provides that taxes imposed by the 

Internal Revenue Code must be assessed within 3 years from the

time that the return is filed. The notice of deficiency was not

sent to petitioner within 3 years of his filing of either the

return for 1980 or 1981. Thus, respondent's determinations will

be time-barred, unless they fall within an exception to the

general rule.

One exception is under section 6501(c)(4), which provides

that the period for assessment may be extended by agreement, if

such agreement is executed before the period of assessment has

expired.5 "Form 872-A plainly constitutes such an agreed-upon
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5(...continued)

(4) Extension by agreement.--Where, before the

expiration of the time prescribed in this section for

the assessment of any tax imposed by this title * * *

both the Secretary and the taxpayer have consented in

writing to its assessment after such time, the tax may

be assessed at any time prior to the expiration of the

period agreed upon. The period so agreed upon may be

extended by subsequent agreements in writing made

before the expiration of the period previously agreed

upon.

extension as contemplated by the statute". Stenclik v.

Commissioner, 907 F.2d 25, 27 (2d Cir. 1990), affg. T.C. Memo.

1989-516.

The Form 872-A extension, although of indefinite duration

when executed, by its terms provides specific procedures for its

termination. In a Court-reviewed opinion, we held that extension

agreements that contain specific termination provisions do not

expire by operation of law after a reasonable time. See Estate

of Camara v. Commissioner, 91 T.C. 957, 962 (1988) (issuance of

notices of deficiency terminated Form 872-A agreements executed

more than 5 years earlier). Rather, such agreements terminate

only by the express provisions of the agreement. See, e.g.,

Silverman v. Commissioner, 86 F.3d 260, 261-262 (1st Cir. 1996),

affg. 105 T.C. 157 (1995); Bilski v. Commissioner, 69 F.3d 64, 68

(5th Cir. 1995), affg. T.C. Memo. 1994-55; Feldman v.

Commissioner, 20 F.3d 1128, 1133 (11th Cir. 1994), affg. T.C.

Memo. 1993-17; St. John v. United States, 951 F.2d 232, 235 (9th

Cir. 1991); Stenclik v. Commissioner, supra at 28; Wall v.
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Commissioner, 875 F.2d 812, 813 (10th Cir. 1989); Mulder v.

United States, 37 Fed. Cl. 60, 62 (1996), affd. without published

opinion 132 F.3d 52 (Fed. Cir. 1997); Estate of Camara v.

Commissioner, supra.

Finally, under the Form 872-A procedure, the length of the

extension is irrelevant since it is necessarily acquiesced in by

the taxpayer who does not file the Form 872-T to bring the

extension period to a close. See Stenclik v. Commissioner,

supra. In this case, it is undisputed that petitioner never sent

a Form 872-T to respondent to terminate the agreement. 

In accordance with the reasoning set forth in Estate of

Camara v. Commissioner, supra, we hold that assessment of

petitioner's taxes due for 1980 and 1981 is not barred by the

statute of limitations.

To reflect the foregoing,

 Decision will be entered for

 respondent.