Academic journal article Journal of Accountancy

Statute of Limitations Triggered by Deficiency Notice

Academic journal article Journal of Accountancy

Statute of Limitations Triggered by Deficiency Notice

Article excerpt

The California Court of Appeals, Second Appellate District, ruled that for purposes of maintaining an accountant's malpractice action, die applicable statute of limitations begins when the Internal Revenue Service issues a tax deficiency notice. Richard Talley retained the firm of Henriksen, Bobrowske & Andrews to prepare his income tax returns for the 1986 to 1989 tax years. In 1989, the IRS began auditing Talley's 1987 tax return. Later, the IRS also audited his 1988 tax return.

On January 28, 1992, the IRS sent a notice of deficiency to Talleys home regarding his 1987 tax return. On February 19, 1992, the IRS sent a similar notice of deficiency for the 1988 tax return. On August 10, 1993, Talley filed an accounting malpractice action against the firm. However, this action was dismissed because it was not properly served on the defendant. On June 15, 1994, Talley refiled the action alleging the same malpractice against the firm. The firm filed a motion for summary judgment, stating that Talley's second action was barred by the two-year statute-of-limitations period governing accountants, malpractice actions. The trial court granted this motion, and Talley appealed this case.

In upholding the trial courts judgment, the appellate court noted that a cause of action accrues as soon as the injured party discovers, or should have discovered, the loss or damage suffered. …

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