
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                                                      ____________________        No. 95-2062                             DAVID R. SILVERMAN, ET AL.,                               Petitioners, Appellants,                                          v.                          COMMISSIONER OF INTERNAL REVENUE,                                Respondent, Appellee.                                                                                      ____________________                            ON APPEAL FROM DECISION OF THE                               UNITED STATES TAX COURT                       [Hon. Arnold Raum, U.S. Tax Court Judge]                                          ____________________                                                                                      ____________________                                        Before                                 Cyr, Circuit Judge,                                      _____________                            Aldrich, Senior Circuit Judge,                                     ____________________                          and Gertner,* U.S. District Judge.                                        ___________________                                                                                      ____________________             James  P. Redding, with whom Gail E. Pergine and James P. Redding             _________________            _______________     ________________        & Associates were on brief for petitioners, appellants.        ____________             Kenneth  W.  Rosenberg,  Attorney,  Tax  Division, Department  of             ______________________        Justice, with whom Loretta C. Argrett, Assistant Attorney General, and                           __________________        Gary R. Allen, Kenneth  L. Greene, and Patricia M.  Bowman, Attorneys,        _____________  __________________      ___________________        Tax  Division, Department of  Justice, were  on brief  for respondent,        appellee.                                                                                      ____________________                                    June 20, 1996                                                                                      ____________________                                    ____________________             *Of the District of Massachusetts, sitting by designation.                    CYR,  Circuit Judge.   Petitioners  David and  Meredith                    CYR   Circuit Judge                          _____________          Silverman appeal a United States Tax Court ruling rejecting their          claim that the statute of limitations barred further  tax assess-          ments by the Internal Revenue Service ("IRS").  We affirm the tax          court decision.                                           I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    The Silvermans  jointly reported losses from  a limited          partnership interest  in a motion picture  production company for          tax years  1975, 1976,  and  1977.   Petitioner David  Silverman,          individually, reported another such loss  on his 1980 tax return.          Later, the company and its investors were audited by IRS.  Within          three  years after filing their returns, see 26 U.S.C.   6501(a),                                                   ___          the Silvermans agreed to extend the limitation periods applicable          to  these four  reporting  years, by  executing  IRS Form  872-A,          entitled Special Consent  to Extend the Time to Assess  Tax.  See                                                                        ___          id.   6501(c)(4) (authorizing extensions by agreement).1            ___                                        ____________________               1In  relevant part, the Form 872-A provided that the tax due          for the specified years                         may be assessed on  or before the 90th (nine-                    tieth)  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 tax-                    payer(s); or (c) the Internal Revenue Service                              __                    mails  a notice of  deficiency for such peri-                    ods. . . .          (Emphasis added.)                                           2                    Thereafter, the  Silvermans and  IRS signed a  Form 906          "Closing Agreement," which  bound them  to the outcome  in a  so-          called "controlling  case" before the  tax court,  relating to  a          similar  tax shelter.  The  Form 906 closing agreement authorized          IRS to assess a tax deficiency within one year after the decision          in the controlling case became final, notwithstanding the expira-          tion  of  any period  of  limitation prescribed  by  the Internal          Revenue Code.   The closing  agreement made no  reference to  the          Form 872-A extensions.                    The  tax court  ruling in  the controlling  case became          final on July  18, 1991.   Almost two  years later, IRS  received          from the  Silvermans separate Forms 872-T,  Notice of Termination          of Special Consent to  Extend the Time to Assess Tax, relating to          all four tax years.  Within ninety days from its receipt of these          Forms  872-T, IRS sent notices of income tax deficiencies for the          tax years in  question, calculated in  conformity with the  final          outcome in the controlling case.                      The Silvermans promptly initiated a tax  court proceed-          ing,  claiming that  the Form  906 closing  agreement effectively          terminated their  earlier  consent  to  extend  indefinitely  the          limitation periods  as previously  indicated in their  Form 872-A          filings,  with the  result  that IRS  was  required to  make  its          supplemental  tax assessments  within  one year  after the  final          decision  in the controlling case.   IRS responded  that the Form          906 closing agreement had  no effect upon the earlier  Form 872-A          extensions.                                            3                    The  tax court  rejected the  taxpayers' argument  that          their  Form 872-A  extensions  were superseded  by  the Form  906          closing  agreement, holding  that  the tax  assessments were  not          time-barred  since  IRS had  issued  its  tax deficiency  notices          within  ninety days  of its  receipt of  the Forms  872-T.   This          appeal followed.                                                II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________                    A  tax court decision is reviewed in the same manner as          a civil judgment in a case tried to the district  court without a          jury.   See 26 U.S.C.    7482(a); Alexander v. IRS,  72 F.3d 938,                  ___                       _________    ___          941 (1st Cir. 1995).  As  the instant matter was submitted to the          tax court on  a stipulated record,  the proper interpretation  of          the Forms 872-A  and the  Form 906 closing  agreement presents  a          pure  question of  law subject  to plenary review.   Id.  at 941;                                                               __          Hempel v. United States, 14 F.3d 572, 575-76 (11th Cir. 1994).          ______    _____________                    The first  argument raised  by IRS on  appeal, but  by-          passed in the tax court, maintains that the Forms 872-A submitted          by the  Silvermans extended the  limitation periods  indefinitely          and  constituted their agreement to use only Form 872-T to termi-                                                  ____          nate  their Form 872-A extensions.   Several circuits, in various          contexts, have declined to enforce attempted terminations of Form          872-A extensions  unless correctly  implemented in a  manner pre-          scribed  within Form 872-A itself.2  See, e.g., Coggin v. Commis-                                               ___  ____  ______    _______                                        ____________________               2Form 872-A plainly states, on its face, that its indefinite          extension of a statute of limitations terminates on the ninetieth          day following one  of three events:   (1) the  receipt by IRS  of                                          4          sioner,  71 F.3d 855, 861-62 (11th Cir. 1996) (sending Form 872-T          ______          to wrong IRS division); Stenclik v. Commissioner, 907 F.2d 25, 27                                  ________    ____________          (2d Cir.)  (passage of reasonable  time), cert. denied,  498 U.S.                                                    _____ ______          984 (1990); Kernen  v. Commissioner,  902 F.2d 17,  18 (9th  Cir.                      ______     ____________          1990) (executing Form 872 containing specific consent-termination          date); Wall v. Commissioner, 875 F.2d 812, 813 (10th Cir. 1989).                 ____    ____________                    The Silvermans note  that no court  of appeals has  yet          decided  whether  a Form  906  closing  agreement constitutes  an          exception  to this  exclusivity  rule.   Nonetheless, a  district          court  has rejected the contention that a Form 906 closing agree-          ment effectively terminates a Form 872-A extension.  See DeSantis                                                               ___ ________          v. United States, 783 F.Supp. 165, 169 (S.D.N.Y. 1992).  Nor  are             _____________          we  persuaded by  the bald  assertion that  DeSantis  was wrongly                                                      ________          decided.   Furthermore, as  it appears entirely  appropriate that          Form 872-A  extensions be  literally construed, cf.  Badaracco v.                                                          __   _________          Commissioner, 464  U.S. 386,  391-92 (1984) (statutes  of limita-          ____________          tions on tax collections are to be strictly construed in favor of          IRS), and we are presented with no principled basis for not doing          so, there is  every reason to conclude that the  Form 906 closing          agreement did  not constitute a  valid termination device  in the          instant case.                     Form  872-A was  designed to  eliminate the  repetitive          task of renewing extensions of  limitation periods, and to  mini-          mize  the  daunting  administrative  burden of  preventing  their                                        ____________________          Form 872-T from  the taxpayer; (2)  the mailing of Form  872-T by          IRS to  the taxpayer; or (3)  the mailing by IRS  of a deficiency                                __          notice to the taxpayer.  See supra note 1.                                   ___ _____                                          5          inadvertent expiration  before a  reliable tax assessment  can be          made.    Rev. Proc.  79-22,    2.03,  1979-1 C.B.  563;  see also                                                                   ___ ____          Stenclik,  907 F.2d at 27 (noting that Form 872-T reduces litiga-          ________          tion); Kernen, 902 F.2d at 18 (standardized form required to cope                 ______          with millions  of  taxpayer communications).   A  plain need  for          certainty prompted  IRS to  devise Form  872-T  as the  exclusive          means, apart from mailing a deficiency notice, for either the IRS          or  taxpayers to  terminate  a Form  872-A  consent to  extend  a          limitation period.3  Given  the unmistakable language employed in          Revenue Procedure 79-22  and in Form 872-A itself, as well as the          evident importance  of the policy  considerations at work  in the          tax  collection context, we adhere to the plain language of Forms                                        ____________________               3The applicable Revenue Procedure provides:                    .02  With the  exception of the mailing of  a                    notice of deficiency, written notification by                    the Service to the taxpayer(s) of termination                    of  Service consideration  can  only be  made                    using Form 872-T.                      .03    Written notification  to  the Internal                           ______________________________________                    Revenue  Service from  the taxpayer(s)  of an                    _____________________________________________                    election  to terminate  Form 872-A  is to  be                    _____________________________________________                    made  using Form  872-T.   Taxpayer(s) should                    ________________________                    sign and  mail Form 872-T in  accordance with                    instructions contained on the form.                    .04  Steps taken  to terminate Forms 872-A by                         ________________________________________                    the Service  or the taxpayer(s) other than by                    _____________________________________________                    using Forms 872-T (e.g., by letter or orally)                    _____________________________________________                    will not terminate Form 872-A.                      ______________________________          Rev. Proc. 79-22,    4.02-4.04, 1979-1 C.B. 563 (emphasis added).          Although lacking the force  of law attendant to a  formal regula-          tion, the applicable Revenue  Procedure provides guidance for our          interpretation  of Form  872-A, especially  since it  was readily          available to petitioners.   See Xerox Corp. v. United  States, 41                                      ___ ___________    ______________          F.3d 647,  657 (Fed.  Cir.  1994), cert.  denied, 116  S. Ct.  72                                             _____  ______          (1995);  Clark v.  Modern Group  Ltd., 9 F.3d  321, 335  (3d Cir.                   _____     __________________          1993).                                           6          872-A and 872-T, as informed by the applicable Revenue Procedure,          see supra note 3,  in holding that the Form 906 closing agreement          ___ _____          did not terminate these Form 872-A extensions.                    Finally,  we note that a  contrary ruling is not neces-          sary to protect legitimate taxpayer interests in closing out past          tax  years.   First,  taxpayers need  never  agree to  extend the          prescribed three-year  limitation period.   See Stange  v. United                                                      ___ ______     ______          States,  282 U.S. 270, 276  (1931) (consenting to  extension is a          ______          "voluntary,  unilateral waiver  of a  defense by  the taxpayer").          Moreover, taxpayers may execute waivers for prescribed periods by          using  Form 872, see  Coggin, 71 F.3d  at 861, and  in all events                           ___  ______          Form  872-T is  available  as a  simple  and effective  means  to          terminate indefinite  Form 872-A  extensions.  Finally,  if peti-          tioners  had intended to  limit IRS to the  time specified in the          Form  906 closing  agreement, they  need simply have  filed Forms          872-T,  as they eventually did.   Accordingly, we  can discern no          sound  reason to adopt a strained interpretation of Form 872-A to          excuse their failure to submit Form 872-T at an earlier time.                                         III                                         III                                      CONCLUSION                                      CONCLUSION                                      __________                    As the Form 906 closing agreement did not supersede the          Form 872-A  extensions, and petitioners' remaining  arguments are          without merit, the tax court judgment must be affirmed.                      SO ORDERED.                    SO ORDERED.                    __________                                          7
