Magazine article The CPA Journal

IRS Estopped from Asserting Open-Ended Extension of the Statute of Limitations

Magazine article The CPA Journal

IRS Estopped from Asserting Open-Ended Extension of the Statute of Limitations

Article excerpt

Mr. and Mrs. Barry Fredericks filed their 1977 tax return in a timely fashion in 1978. In 1981, the IRS sent the Fredericks a Form 872-A, which they signed and returned to the IRS. A Form 872-A is an open-ended extension of the statute of limitations, which is terminated only by the taxpayer's filing a Form 872-T or the IRS's issuing a notice of deficiency.

Also, in 1981, the IRS began auditing the Fredericks ' return. As the three-year statute of limitations was about to run, the examining agent requested that the Fredericks execute a Form 872, which extends the statute of limitations for a one-year period. Mr. Fredericks responded that he had already granted an extension on a Form 872-A. The agent indicated none was in the file and that, unless the taxpayer had received an acknowledgement of the IRS' receipt of the Form 872, it must have been lost in the mail. Fredericks signed the form 872 in 1981 and two more in 1982 and 1983.

Mr. Fredericks had invested in a tax shelter, which itself had been under audit until 1988. The IRS waited until July 1992 to send out a notice of deficiency, that is, a 90-day letter, to the taxpayers. The taxpayers responded that the assessment was barred by the statute of limitations, which had run in 1984. The IRS responded that sometime after the 1983 extension was filed, it had located the Form 872-A, the indefinite extension. Therefore, the IRS argued, the assessment was not time-barred. The U.S. Tax Court agreed with the IRS and upheld the assessment of $28,361 in tax and nearly $158,000 in interest. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.