Court Opinion

ID: 4485539
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:33:45.358921+00
Date Added: 2024-06-11T12:14:32.413313
License: Public Domain

SIMPSON, J., dissenting: I must disagree with the majority’s interpretation of the extension agreement. My understanding of contract law is that the cardinal principle of interpretation is that the Court should attempt to give effect to the intentions of the parties to the agreement, and I believe that the majority has lost sight of that objective. 3 A. Corbin, Contracts, sec. 538 (Supps. 1960 & 1971); 1 Restatement, Contracts 2d, sec. 202 (1979); 4 S. Williston, Contracts, sec. 601 (3d ed. 1961 & Cum. Supp. 1986). Additionally, in interpreting a contract, “technical terms and words of art are given their technical meaning when used in a transaction within their technical field,” unless the parties have manifested a different intention. Restatement, supra at sec. 202(3). Section 6501 establishes the various statutes of limitation on the time within which the Commissioner must act. However, a taxpayer and the Commissioner may agree to extend those times. Historically, an extension was for a fixed period. Whether the parties were operating under the statutory limitations or under a limitation established by an extension agreement, the Commissioner knew when he had to act — he knew that if he did not issue a notice of deficiency and commence the tax collection procedures by the known date, he would forego his right to collect the tax. In this case, we have a new type of an extension agreement: under it, the extension continues indefinitely, but it can be terminated by either party. It can be terminated by either party giving notice of his intention to terminate, but if it is terminated in that manner, the Commissioner is given a period of time within which to issue his notice of deficiency and commence the tax collection procedures. To avoid the Commissioner’s having to issue a notice of termination followed by a notice of deficiency, the agreement also provides that it can be terminated simply by the Commissioner’s issuing a notice of deficiency. When the notice of deficiency is issued, both parties will then have their days in court to dispute the merits of the claimed deficiency. The Court’s interpretation of the agreement has undermined these arrangements. In the earlier case, the taxpayer asked the Court to set aside the assessment on the ground that the notice of deficiency was invalid, and the Court granted that request. Now the taxpayer asks the Court to hold that the notice of deficiency was effective to terminate the extension because he learned of it in 1982, and the Court is granting that request. As a result of these two decisions, the Court has construed the agreement so as to deprive the Commissioner of any right to come to Court to claim a deficiency, and to relieve the taxpayer from any claimed deficiency without his having to prove that he did not owe such deficiency. Surely, no one can doubt that when the parties executed the extension, they contemplated that it could only be terminated by a Form 872-T or a notice of deficiency that would be effective under section 6213 to commence the tax collection procedures, or that would have been their contemplation if they had thought about the matter. Yet, as a result of this decision, it will be necessary for the Commissioner to revise his Form 872-A to make clear that the consent is terminated by a notice of deficiency that is effective under section 6213, but this taxpayer will enjoy the windfall of never having to prove that he did not owe the tax claimed by the Commissioner. Parker, J., agrees with this dissent.