Court Opinion

ID: 31527
Source: CourtListenerOpinion
Date Created: 2010-04-25 10:18:14+00
Date Added: 2024-06-11T14:55:32.173121
License: Public Domain

United States Court of Appeals
                                                                 Fifth Circuit
                                                              F I L E D
                          Revised May 28, 2003                 April 16, 2003
              IN THE UNITED STATES COURT OF APPEALS       Charles R. Fulbruge III
                      FOR THE FIFTH CIRCUIT                       Clerk

                              No. 02-20640

     FRANK W SMITH; JANICE M SMITH

                             Plaintiffs - Appellants

     v.

     UNITED STATES OF AMERICA

                             Defendant - Appellee

          Appeal from the United States District Court
               for the Southern District of Texas

Before KING, Chief Judge, and DAVIS, Circuit Judge, and VANCE,

District Judge.*

PER CURIAM:

     Plaintiffs-Appellants Frank and Janice Smith appeal the

district court’s order granting the Defendant-Appellee United

States’s motion for summary judgment and denying their motion for

summary judgment.      We affirm in part, reverse in part, and
remand.

                  I.   FACTUAL AND PROCEDURAL HISTORY

     A.   Facts

     This case centers on whether Frank and Janice Smith (“the

     *
          United States District Judge Sarah S. Vance of the
Eastern District of Louisiana, sitting by designation.

                                    1
Smiths”) are subject to penalties and interest due to their

underpayment of income taxes for tax years 1983 and 1984.     The

parties agree on the following facts.

     The Smiths were limited partners in Barrister Equipment

Associates Series 166 (“Barrister 166”), a publishing business.

Barrister 166 was one of 124 similar Barrister partnerships.     In

1983 and 1984, Barrister 166 reported ordinary losses.   For 1983

and 1984, the Smiths claimed a portion of the Barrister 166

losses and a portion of Barrister 166’s bases in property to

receive a tax credit.2

     The Internal Revenue Service (“IRS”) began investigating the

Barrister partnerships.   Though the statute of limitations for

assessing 1983 and 1984 taxes ran in 1987 and 1988, a Barrister

166 representative agreed to extend the statutes of limitations.

In 1989, the IRS sent a “Notice of Final Partnership

Administrative Adjustment,” informing Barrister 166 that it was

disallowing its partnership losses and bases in property subject

to investment tax credit (“ITC”) for 1983 and 1984.

     Several partners in the Barrister partnerships, including

Barrister 166, filed petitions in United States Tax Court to

contest the disallowances.   The Smiths were parties to the

     2
          The Smiths’ claimed shares of the ordinary losses were
$20,955 and $27,108 and their claimed shares of the bases were
$465,005 and $174,615, for 1983 and 1984, respectively.

                                 2
Barrister 166 Tax Court proceedings.3   The Barrister 115 case was

tried as a test case.   In 1995, the Tax Court ruled that the IRS

correctly disallowed Barrister 115’s 1983 and 1984 losses and

bases in investment tax credit property.   This decision was not

appealed.   The Tax Court then entered agreed decisions in the

other Barrister cases, including Barrister 166, disallowing all

losses and bases in property subject to the ITC.

     On February 22, 1996, the IRS sent the Smiths a letter

indicating the tax, penalties, and interest due as a result of

the Tax Court’s decision.   The letter indicated that the IRS used

the increased rate of interest provided for in 26 U.S.C.

§ 6621(c)4 for substantial underpayments attributable to tax-

motivated transactions.   As for the amount of penalties due, the

letter stated:

     Please note that there are two penalty reports enclosed
     reflecting both the Government’s settlement position
     and litigating position being proposed for all
     Barrister investors. We ask that you sign the penalty
     report for the settlement position as this would
     provide both you and the Government with a fair method
     of resolving this matter. If you choose not to
     [accept] the settlement position or if we do not hear
     from you within 30 days from the date of this letter,
     we will have no alternative other than to issue a

     3
          These proceedings took place pursuant to the Tax Equity
and Fiscal Responsibility Act (“TEFRA”), Pub. L. No. 97-248, 96
Stat. 324 (1982), which allows litigation at the partnership
(rather than individual) level. See Alexander v. United States,
44 F.3d 328, 330 (5th Cir. 1995) (explaining TEFRA’s distinction
between partnership and nonpartnership items).
     4
          We use the 1984 version of the United States Code
because the 1983 and 1984 tax years are at issue in this case.
All citations to a specific section are to Title 26 of the United
States Code unless otherwise stated.

                                 3
     Statutory Notice of Deficiency to you asserting the
     Government’s litigating position.5

     The settlement and litigation penalty amounts were set forth

on four Forms 870, which are titled “Waiver of Restrictions on

Assessment and Collection of Deficiency in Tax and Acceptance of

Overassessment.”   Form 870 states:

     I consent to the immediate assessment and collection of
     any deficiencies (increases in tax and penalties) and
     accept any overassessment (decrease in tax and
     penalties) shown above, plus any interest provided by
     law. I understand that by signing this waiver, I will
     not be able to contest these years in the United States
     Tax Court, unless additional deficiencies are
     determined for these years.

The IRS’s instruction accompanying Form 870 states:

     Your consent will not prevent you from filing a claim
     for refund (after you have paid the tax) if you later
     believe you are so entitled. It will not prevent us
     from later determining, if necessary, that you owe
     additional tax; nor extend the time provided by law for
     either action.
     . . .
     If you later file a claim and the Service disallows it,
     you may file suit for refund in a district court or in
     the United States Claims Court, but you may not file a
     petition with the United States Tax Court.6

The Smiths signed the two “settlement position” forms and

     5
          The “settlement position” form listed 26 U.S.C. § 6659
valuation penalties of $3,720 and $1,397 for 1983 and 1984,
respectively. The “litigation position” form listed § 6653(a)(1)
negligence penalties of $2,384 and $1,376 for 1983 and 1984;
§ 6653(a)(2) negligence penalties in amounts to be determined;
and § 6661 substantial understatement penalties of $11,920 and
$6,811 for 1983 and 1984.
     6
          The Smiths did not receive a copy of the Form 870
instructions with the IRS’s February 22 letter. The attorney for
the United States acknowledged at oral argument, though, that a
tax attorney who received a Form 870 would expect the
instructions to apply.

                                 4
returned them to the IRS on March 20, 1996.    The letter the

Smiths’ attorney sent with the forms stated:

           In accordance with your solicitation, Mr. and Mrs.
     Smith have agreed to waive the restrictions on
     assessment and collection relative to the proposed
     penalty under I.R.C. Sec. 6659 on the understanding
     that by entering into this waiver, the Internal Revenue
     Service will not issue a notice of deficiency for
     additional penalties.
           . . .
           Although my clients have agreed to the Forms 870,
     we remain unclear as to certain aspects of this case
     and are requesting further documentation from
     you. . . . [W]e do not believe that the increased
     interest rate under Code Sec. 6621(c) should apply nor
     that there is actually any basis in the decision for
     the assertion of any penalties in this case. If you
     are in possession of any documentation that indicates
     that those penalties are appropriate, I would
     appreciate your return of that documentation by return
     mail.
           My client[s] recognize[] that, notwithstanding our
     continuing concerns, under the terms of the Forms 870,
     the Government may proceed with the assessment of the
     penalt[ies] and interest thereon set out in the Forms
     870 and that they will not have an opportunity to file
     a petition with the Tax Court to contest th[ose]
     penalt[ies].

     On April 2, 1996, the IRS, unaware that the Smiths had sent

the signed forms, issued the Smiths a notice of deficiency for

the 1983 and 1984 tax years, asserting the penalties referenced

in the “litigation position” forms.   On April 15, the Smiths’

attorney sent a letter to the IRS referencing the Smiths’ March

20 letter and asking the IRS to withdraw the deficiency notices.

The IRS responded with a letter on May 13 stating it had not yet

received the Smiths’ March 20 letter but that the “settlement

position” forms the Smiths signed would be processed and the

deficiency notices would not apply.

                                5
       The Smiths paid the assessments due according to the

“settlement position” Forms 870 and filed refund claims with the

IRS.    Once the IRS disallowed the Smiths’ claims, the Smiths

filed a refund suit in federal district court.

       B.   Procedural History

       The Smiths filed suit in federal district court to recover

federal income tax, penalties, and interest they paid for the tax

years 1983 and 1984.    The Smiths argued that: (1) the statute of

limitations barred the IRS’s collection of taxes, penalties, and

interest; (2) the Smiths are not liable for § 6659 valuation

overstatement penalties; (3) the Smiths are not liable for

§ 6621(c) interest; (4) the IRS incorrectly calculated the

interest due under Avon Products, Inc. v. United States, 588 F.2d

342 (2d Cir. 1978); and (5) the IRS cannot make investment tax

credit adjustments because it did not send the Smiths a statutory

notice of deficiency as § 6230(a)(2)(A)(i) requires.

       Both the Smiths and the United States moved for summary

judgment.    The United States argued that: (1) the Smiths waived

the statute of limitations; (2) the IRS and the Smiths had

reached an informal settlement agreement that made the Smiths

liable for the § 6659 penalties and § 6621(c) interest; (3) the

interest was correctly calculated because Avon Products does not

apply; and (4) a statutory notice of deficiency was not required

because the IRS’s disallowance was a computational adjustment

pursuant to the Tax Court’s decision.

       In their motion for summary judgment, the Smiths abandoned

                                  6
several of their claims and argued only that: (1) they had not

reached a settlement with the IRS; and (2) they should not be

liable for § 6659 penalties and § 6621(c) interest on the merits.

     The district court granted the United States’s motion for

summary judgment and denied the Smiths’ motion for summary

judgment.    The district court found that the Smiths conceded

several issues so that the only issues remaining were whether the

Smiths were liable for penalties and interest under §§ 6659 and

6621(c).    The district court then found that the Smiths settled

their liability for § 6659 penalties.    The district court

rejected the Smiths’ argument that the Form 870 represented only

a waiver of their right to contest penalties in Tax Court and

held that the Smiths also waived their right to file a refund

action.    The district court then found that imposition of

§ 6621(c) penalty interest was warranted because the Smiths

agreed to liability for § 6659 valuation overstatement penalties,

and a valuation overstatement is by definition a tax-motivated

transaction.

     The Smiths appealed.    They now argue that: (1) the district

court erred in finding that the Smiths settled with the IRS on

§ 6659 penalties and, on the merits, § 6659 penalties are

inappropriate; (2) the district court erred in finding that

§ 6621(c) interest is due, and, on the merits, § 6621(c) interest

is inappropriate; (3) the district court erred in finding they

had conceded two of their other three arguments, and that, on the

merits, the IRS incorrectly calculated interest under Avon

                                  7
Products and the IRS failed to issue a notice of deficiency under

26 U.S.C. § 6320(a)(2)(A)(i).

                       II.    STANDARD OF REVIEW

     We review a grant of summary judgment de novo, applying the

same standards as the district court.       Daniels v. City of

Arlington, 246 F.3d 500, 502 (5th Cir.), cert. denied, 534 U.S.

951 (2001).   Summary judgment should be granted if there is no

genuine issue of material fact for trial and the moving party is

entitled to judgment as a matter of law.         FED. R. CIV. P. 56(c).

In determining if there is a genuine issue of material fact, this

court reviews the evidence in the light most favorable to the

non-moving party.   Daniels, 246 F.3d at 502.

     Further, though the burden of proof is generally on a

taxpayer in a refund action, e.g., Smothers v. United States, 642

F.2d 894, 901 n.17 (5th Cir. Unit A April 1981), the burden of

proof on the issue of equitable estoppel is on the party

asserting estoppel, e.g., Kennedy v. United States, 965 F.2d 413,

417 (7th Cir. 1992).   The district court’s interpretation of a

settlement agreement between the IRS and a taxpayer is an issue

of law we review de novo.      Estate of Kokernot v. Comm’r of

Internal Revenue, 112 F.3d 1290, 1293-94 (5th Cir. 1997).

                             III.   DISCUSSION

     A.   26 U.S.C. § 6659 Penalties

     The Smiths argue that they should not be estopped from

challenging the § 6659 penalties assessed against them because

the Forms 870 they signed were not agreements to settle and

                                     8
reserved their right to contest the penalties in a refund action.

The Smiths point to the specific language on the form, which

states that the form only waives the right to contest the

assessment in Tax Court, and to the instructions, which state

that the taxpayer may later file a refund suit.   The Smiths also

assert that no court has interpreted a Form 870, without more, as

a final settlement of tax liability.   Assuming they are not

estopped, the Smiths urge this court to hold that there is no

basis for § 6659 penalties because the Tax Court did not make a

finding that the disallowance was “attributable to” a valuation

overstatement.

     The United States argues that the Smiths should be estopped

because the IRS clearly manifested an intent to reach a final

settlement with the Smiths, the Smiths signed the “settlement

position” Forms 870 intending to settle the claims, and the IRS

relied to its detriment on the signed forms because it allowed

the statute of limitations on assessing higher penalties to run.

Further, the IRS argues that if the Smiths are not estopped, the

panel should remand this case to the district court rather than

addressing whether § 6659 penalties are appropriate on the

merits.

     The district court found that the Smiths agreed to settle

with the IRS when they signed and returned the Forms 870.    The

district court rejected the Smiths’ argument that the form was

merely a waiver of the Smiths’ right to contest the penalty in

Tax Court and instead found it was “part of an overall settlement

                                9
position which, if signed, would resolve the matter between the

Smiths and the United States.”   The district court also noted

that the Smiths’ conduct after signing the forms indicates that

they meant to settle because when the IRS erroneously issued a

deficiency notice listing additional penalties, the Smiths

quickly responded with a letter seeking to enforce the terms of

their agreement with the IRS.

     In this case, though there was an informal settlement, it

was not as broad as the IRS claims.    The Smiths agreed to waive

their right to contest the penalties before payment in Tax Court,

but they did not agree to waive their right to contest the

penalties after payment in a refund action in district court.

     Initially, we review our law on when and how informal

agreements between the IRS and a taxpayer are enforceable.       The

United States Code contains formal settlement procedures for the

IRS to use in settling a taxpayer’s tax liability.    See Gen.

Split Corp. v. United States, 500 F.2d 998, 1000-01 (7th Cir.

1974) (“Under 26 U.S.C. § 7121 the Secretary or his delegate is

authorized to enter into a closing agreement regarding the tax

liability of any person which, when approved, is final and

conclusive.   Under 26 U.S.C. § 7122 the Secretary or his delegate

is authorized to compromise any civil or criminal tax case where

there is doubt as to liability and/or collectibility.”)

(citations omitted).   Because these formal procedures can be

quite cumbersome, the IRS often enters into informal settlement

agreements with taxpayers.   See id.   If the IRS does not use a

                                 10
formal settlement procedure, but instead engages in an informal

settlement, the informal settlement agreement is not, in itself,

enforceable.   See Botany Worsted Mills v. United States, 278 U.S.

282, 288-89 (1929) (“We think that Congress intended by the

statute to prescribe the exclusive method by which tax cases

could be compromised . . . and did not intend to intrust the

final settlement of such matters to the informal action of

subordinate officials in the Bureau.”).7   But, though an informal

settlement agreement is not itself enforceable, several circuits,

including this one, have enforced such agreements using

principles of equitable estoppel.    See Daugette v. Patterson, 250

F.2d 753, 755-57 (5th Cir. 1957); see also, e.g., Ihnen v. United

States, 272 F.3d 577, 579-81 (8th Cir. 2001), cert. denied, 123

S. Ct. 114 (2002); Aronsohn v. Comm’r of Internal Revenue, 988

F.2d 454, 456-57 (3d Cir. 1993); Union Pac. R.R. Co. v. United

States, 847 F.2d 1567, 1570-73 (Fed. Cir. 1988); Gen. Split

Corp., 500 F.2d at 1002-04.

     In this circuit, a taxpayer may be estopped from filing a

refund action if the taxpayer settles with the IRS before the

statute of limitations runs, makes a representation that he will

not file a refund action as part of the settlement, and then

files a refund action once the statute of limitations has run and

the IRS can no longer assess deficiencies related to the

     7
          In Botany Worsted Mills, the Supreme Court left open
the question of whether an informal settlement agreement could be
enforced using estoppel. See 278 U.S. at 289.

                                11
settlement.   See Daugette, 250 F.2d at 756.    Put another way, the

taxpayer is estopped when he misrepresents that he will not file

a refund action and the IRS reasonably relies on this

misrepresentation by allowing the statute of limitations to run.

It is undisputed that the statute of limitations on § 6659

penalties and § 6621(c) interest ran after the Smiths executed

the Forms 870.   Thus, the key question in this case is whether

the Smiths informally settled their liability with the IRS and

agreed, as a part of that settlement, to give up their right to

file a refund action.

     Turning to the facts of this case, we find that the Smiths

did not agree to give up their right to file a post-payment

refund action.   First, we consider the nature of a Form 870.

After a partnership-level Tax Court proceeding, the IRS generally

may not assess nonpartnership items, such as penalties, without

first providing a statutory notice of deficiency.     See 26 U.S.C.

§§ 6212, 6213 (1982 & Supp. 1984); Maxwell v. Comm’r of Internal

Revenue, 87 T.C. 783, 787-88 (T.C. 1986).      Once the IRS issues a

notice of deficiency, a taxpayer has 90 days to file suit in Tax

Court.   See 26 U.S.C. § 6213(a).    Form 870 is the IRS form used

to waive restrictions such as the statutory notice requirement.

Form 870 is generally used when a taxpayer is willing to waive

his right to proceed in Tax Court before paying the tax or

penalties due in order to expedite the collection process.      See

Phila. & Reading Corp. v. United States, 944 F.2d 1063, 1067 (3d

Cir. 1991).   The taxpayer benefits because his waiver stops

                                12
interest from accruing, and the IRS benefits because it can

immediately assess and collect the amount due.       See id.

     We have distinguished the Form 870 from other forms the IRS

could use to settle a taxpayer’s liability.      By its terms, Form

870 is only an offer to waive the right to file a pre-payment

action in Tax Court.    Forms 870-L and 870-L(AD), on the other

hand, are forms memorializing “agreements,” where the taxpayer is

explicitly barred from seeking a refund.      Like Form 870, Form

870-AD is an offer to waive restrictions on collection and

assessment, but it, too, is distinguishable from Form 870.

Unlike Form 870, Form 870-AD must be signed by both the taxpayer

and the IRS and explicitly states that the case is closed.       Thus,

unlike Forms 870-AD, 870-L, and 870-L(AD), Form 870 does not

contain any statements that there is a final agreement or that

the taxpayer is prohibited from filing a refund action.

     We recognized that Form 870 is markedly different from Form

870-AD in Daugette v. Patterson.       See 250 F.2d at 755-57.   In

Daugette, we found estoppel against the taxpayer because Form

870-AD expressly bars the taxpayer from filing a refund action.

See id.   Further, other circuits have distinguished Form 870 from

Form 870-AD, finding that while Form 870-AD purports to be final,

Form 870 does not.     See, e.g., Elbo Coals, Inc. v. United States,

763 F.2d 818, 820-21 (6th Cir. 1985); see also Daugette, 250 F.2d

at 756-57 (distinguishing Joyce v. Gentsch, 141 F.2d 891 (6th

Cir. 1944), on the basis that Form 870 does not purport to be a

final settlement that precludes assertion of further

                                  13
deficiencies).

     In this case, there was an agreement between the Smiths and

the IRS.8    The IRS correctly notes that its letter of February 22

and the accompanying (unsigned) Form 870 were an offer for a

settlement for the tax years 1983 and 1984.    The Smiths accepted

this offer by signing the Form 870.     As consideration, the Smiths

gave up their right to file a pre-payment action in Tax Court and

the IRS gave up its right to assess higher penalties.

     The scope of the agreement, though, is not as broad as the

IRS asserts.    It was reasonable for the Smiths to believe that

Form 870’s effect was limited to its express terms.    The

instructions to Form 870 make it clear that the taxpayer is

waiving only his right to contest the penalties in Tax Court; the

form and instructions say nothing about precluding a refund

action.     After signing the Form 870, the Smiths sent it back to

the IRS with a letter from their attorney, stating the Smiths

waived only “the restrictions on assessment and collection

relative to the proposed penalty under I.R.C. Sec. 6659” so that

the Smiths “will not have an opportunity to file a petition with

the Tax Court to contest that penalty.”     Further, in this letter,

the Smiths’ attorney stated that the Smiths dispute “that there

     8
          Whether there is an agreement is governed by the
federal common law of contracts, which uses “the core principles
of the common law of contract[s] that are in force in most
states.” See United States v. Nat’l Steel Corp., 75 F.3d 1146,
1150 (7th Cir. 1996); see also Estate of Ray v. Comm’r of
Internal Revenue, 112 F.3d 194, 196 (5th Cir. 1997) (applying
“general contract principles” to determine when an agreement
based on a Form 870-L(AD) was formed).

                                  14
is actually any basis in the decision for the assertion of any

penalties in this case” and asked for additional information

about § 6621(c) interest, which suggests that the Smiths did not

believe the case closed.   Later, in their April 15 letter to the

IRS, the Smiths characterized their agreement as such: “if [the

Smiths] executed a Form 870 agreeing to waive the restrictions on

assessment and collection on a stated 6659 penalty . . . no

notice of deficiency for additional penalties would be issued.”

Further, Mr. Smith testified in his deposition that he did not

believe signing the “settlement position” Forms 870 waived his

right to later file a refund action.

     The IRS argues that the Smiths must have viewed the Forms

870 as proposing a final settlement for two main reasons.    First,

the IRS points out that it asked the Smiths to sign the

“settlement position” Form 870 as “a fair method of resolving

th[e] matter.”   This language, without more, does not make it

clear that the IRS meant for the Smiths to give up their rights

to both a prepayment action and a refund action.    Second, the IRS

notes that when the IRS assessed a notice of deficiency, the

Smiths objected.   But the Smiths’ objection does not suggest that

they gave up their right to file a refund action.   Rather, this

objection simply showed that the Smiths wanted the IRS to assess

the agreed deficiencies because that assessment would stop

interest from accruing on the deficiencies.   See Phila. & Reading

Corp., 944 F.2d at 1067 (“[A] taxpayer that forgoes review in Tax

Court can, by executing a binding Form 870, suspend interest on

                                15
tax due from the thirtieth day following the filing of the waiver

through the time that the IRS issues a notice and demand for

payment.”) (citing 26 U.S.C. § 6601).    Because there was no

meeting of the minds between the Smiths and the IRS whereby the

Smiths agreed to waive their right to file a refund action, the

Smiths are not estopped from filing this refund action.

     Because we find that the Smiths are not estopped from

seeking a refund on the undisputed facts, we remand to the

district court to address the merits of the Smiths’ refund action

in the first instance.

          B.    26 U.S.C. § 6621(c) Interest

     Next, we consider whether the district court improperly

assessed § 6621(c) interest against the Smiths.

     The district court determined that the Smiths must pay

§ 6621(c) penalty interest.    The district court reasoned that,

according to § 6621(c), interest is imposed when there is

substantial underpayment attributable to a tax-motivated

transaction.   The statute defines a “tax-motivated transaction”

as, inter alia, “any valuation overstatement (within the meaning

of section 6659(c)).”    Because the Smiths agreed to § 6659

penalties, the district court found, they conceded that they

engaged in tax-motivated transactions and § 6621(c) interest was

thus appropriate.

     Because we hold that the Smiths are not estopped from

challenging the § 6659 penalties in this refund action and we

remand for a determination of whether § 6659 penalties are

                                 16
warranted, we remand on the issue of § 6621(c) interest as well.

     C.   Waiver of the Smiths’ Remaining Arguments

     Finally, we consider whether the district court correctly

held that the Smiths conceded all other bases for recovery

contained in their complaint.

     The Smiths argue that they did not actually concede the two

arguments that they expressly conceded in their motion for

summary judgment.   The Smiths reason that, because the United

States’s motion for summary judgment, filed the same day as the

Smiths’ motion for summary judgment, briefed these issues, the

United States could not have believed the issues were conceded.

Then, on the merits, the Smiths argue that the IRS erroneously

computed the interest on the Smiths’ 1983 and 1984 tax liability

according to Avon Products, Inc. v. United States, 588 F.2d 342

(2d Cir. 1978), because the IRS did not account for an

overpayment in computing interest on the Smiths’ 1984 tax

liability.   The Smiths further argue that the IRS’s investment

tax credit-related assessment was invalid because the IRS failed

to issue a statutory notice of deficiency as required by 26

U.S.C. § 6230(a)(2)(A)(i).

     The United States argues that the Smiths abandoned these

arguments before the district court.   The United States points

out that in their motion for summary judgment, the Smiths stated

that they were limiting their claims to recovery of § 6659

penalties and § 6621(c) interest and that they conceded all other

bases for recovery.   If these issues are not waived, the United

                                17
States asserts that the IRS did not incorrectly compute the

interest due because Avon Products does not apply and that the

IRS did not need to issue a statutory notice of deficiency

because ITC-related assessments may be summarily assessed without

a notice of deficiency.

     The district court found that the Smiths conceded these

arguments based on their statement in their summary judgment

brief that they “conceded all other bases for recovery of their

original claims, including their statute of limitations defense.”

     In their complaint, the Smiths made essentially five

arguments.   These are: (1) that they did not agree to § 6659

penalties and § 6659 penalties are unwarranted; (2) that

§ 6621(c) interest is unwarranted; (3) that the IRS incorrectly

calculated the interest due under Avon Products; (4) that the IRS

failed to issue a notice of deficiency before making ITC-related

adjustments; and (5) that the statute of limitations barred the

IRS’s collection of tax, penalties, and interest.    The Smiths now

claim that arguments (3) and (4) were not waived.9

     In their motion for summary judgment, the Smiths made two

statements of concession.   First, at the beginning of their

motion for summary judgment, the Smiths stated:

          Frank W. Smith and Janice M. Smith move for
     summary judgment against the United States for refunds
     based on recovery of the § 6659 penalty and interest
     and the penalty portion of the interest charged under
     § 6621(c). The Smiths did not agree to and the IRS

     9
          The Smiths do not attempt to reinvigorate their statute
of limitations argument on appeal.

                                18
     improperly assessed the § 6659 penalty and interest
     related to the § 6659 penalty. The Smiths did not
     agree to and the IRS improperly assessed the § 6621(c)
     penalty.
          These partial refunds are all that remain in
     issue. The Smiths have conceded all other bases for
     recovery of their original claims, including their
     statute of limitations defense.

Later in the motion, the Smiths stated: “This motion for summary

judgment addresses the only two issues remaining in this case,

(i) the § 6659 valuation overstatement penalty and interest on

that penalty, and (ii) the § 6621(c) penalty interest.”   The

Smiths’ motion for summary judgment makes no argument about the

incorrect calculation of interest under Avon Products or the

deficiency notice requirement under 26 U.S.C.

§ 6230(a)(2)(A)(i).10

     In its motion for summary judgment, filed on the same day as

the Smiths’ motion, the United States argued all five issues.     It

is reasonable to assume that the United States did not realize

that the Smiths conceded these issues until the Smiths filed

their motion for summary judgment.   But in its response to the

Smiths’ motion for summary judgment, the United States argued

that the Smiths waived these two arguments by expressly stating

that they had conceded them and that no other arguments remained.

     The Smiths responded by stating, in their response to the

     10
          Though § 6230(a)(2)(A)(i) was not enacted until 1986,
it was made effective for partnership tax years beginning after
September 3, 1982. See Pub. L. No. 99-514, § 1875, 100 Stat.
2085, 2896 (1986) (stating that the amendments “shall take effect
as if included in the Tax Equity and Fiscal Responsibility Act of
1982”).

                               19
United States’s Motion for Summary Judgment, that they conceded

only the statute of limitations issue.      The Smiths did not

explain why their unambiguous statements of concession of all but

two issues did not waive these issues.      Rather, they simply

argued that the United States was not entitled to summary

judgment on these issues on the merits.

     The Smiths now contend that the two arguments were not

waived and may be addressed by this court on appeal.      We find

that the district court correctly concluded that the arguments

were waived.   The Smiths expressly stated that they conceded the

issues in their motion for summary judgment.      This motion

purported to address the only remaining issues in the case, and

it did not provide any argument on the two issues the Smiths now

urge.   A party’s concession of an issue means the issue is waived

and may not be revived.   See, e.g., Fehlhaber v. Fehlhaber, 681

F.2d 1015, 1030 (5th Cir. 1982).       The Smiths provide no

explanation of why their statements of concession apply only to

the statute of limitations argument and not to the Avon Products

and notice of deficiency arguments.      We thus affirm this portion

of the district court’s ruling.

                          IV.   CONCLUSION

     For the foregoing reasons, the district court’s order

granting the United States’s motion for summary judgment and

denying the Smiths’ motion for summary judgment, is AFFIRMED IN

PART, REVERSED IN PART, and REMANDED for further proceedings.

Costs shall be borne by the United States.

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