                       128 T.C. No. 4



                UNITED STATES TAX COURT



             VINCENT ALLEN, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 11016-05.                    Filed March 5, 2007.



     P’s returns for the years at issue were false and
fraudulent due to the fraudulent intent of the return
preparer. P himself did not have fraudulent intent and
did not file the returns with the intent to evade
taxes. R issued P a deficiency notice after the
regular 3-year limitations period for assessing P’s
liabilities had expired.

     Held: The limitations period is indefinitely
extended under sec. 6501(c)(1), I.R.C., if a return is
fraudulent, regardless of whether the fraud was
committed by the taxpayer or the taxpayer’s preparer.



Forest J. Dorkowski, for petitioner.

Caroline R. Krivacka, for respondent.
                                  -2-

                               OPINION


     KROUPA, Judge:   Respondent determined a $4,428 deficiency in

petitioner’s Federal income tax for 1999 and a $7,784 deficiency

in petitioner’s Federal income tax for 2000.    We are asked to

decide for the first time whether the limitations period for

assessing income tax under section 6501(c)(1)1 is extended if the

tax on a return is understated due to the fraudulent intent of

the income tax return preparer.    We conclude that it is.

                              Background

     This case was submitted fully stipulated under Rule 122.

The stipulation of facts and the accompanying exhibits are

incorporated by this reference.    Petitioner lived in Memphis,

Tennessee, at the time he filed the petition.

     Petitioner, a truck driver for UPS during 1999 and 2000,

timely filed his returns for 1999 and 2000 (the years at issue).

Petitioner gave his Form W-2, Wage and Tax Statement, section

401(k) statement, mortgage interest statement, and property

statements to Gregory D. Goosby (Mr. Goosby), who prepared

petitioner’s returns for the years at issue and filed them with

respondent.

     Mr. Goosby prepared petitioner’s returns for the years at

issue and claimed false and fraudulent Schedule A, Itemized

Deductions, for both years.    The false deductions included

     1
      All section references are to the Internal Revenue Code in
effect for the years at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
                                -3-

deductions for charitable contributions, meals and entertainment,

and pager and computer expenses, as well as various other

expenses.   Petitioner received complete copies of petitioner’s

returns for the years at issue after they had been filed, but he

did not file an amended tax return for either year.

     Two special agents of respondent’s Criminal Investigation

Division interviewed petitioner concerning Mr. Goosby’s

preparation of his income tax returns.    Mr. Goosby was indicted,

tried, and convicted of 30 violations of section 7206(2)

(willfully aiding and assisting in the preparation of false and

fraudulent income tax returns) in 2006, although petitioner’s

returns for the years at issue were not used as the basis for any

counts of the indictment.

     Respondent issued a deficiency notice to petitioner on March

22, 2005, in which respondent disallowed numerous Schedule A

deductions petitioner claimed on his returns for each of the

years at issue.   The deficiency notice did not assert the fraud

penalty under section 6663 against petitioner.   The regular 3-

year limitations periods for assessment of taxes with respect to

petitioner’s returns for the years at issue expired on April 15,

2003, and April 15, 2004, respectively.   Petitioner timely filed

a petition.

     Petitioner has conceded all adjustments respondent made in

the deficiency notice other than one adjustment respondent

concedes was made in error.   The parties agree that the false

deductions on petitioner’s income tax returns for the years at
                                 -4-

issue made petitioner’s returns false and fraudulent for the

years at issue.   The parties also agree that petitioner himself

did not have the intent to evade tax, but Mr. Goosby claimed the

false deductions for the years at issue on petitioner’s returns

with the intent to evade tax.2

                            Discussion

     The parties have stipulated that the returns petitioner

filed for the years at issue were fraudulent.   The parties

disagree, however, whether the fraudulent intent required to keep

the limitations period open indefinitely under section 6501(c)(1)

must be that of the taxpayer, petitioner.

The Limitations Period

     We shall begin by describing the general principles of the

limitations period for assessment of income taxes.   The

Commissioner must generally make such an assessment within a 3-

year period after a taxpayer files his or her return.   Sec.

6501(a).   An exception to this general rule exists, however, for

a false or fraudulent return with the intent to evade tax.     Sec.

6501(c)(1).   In those situations, the Commissioner may assess the

tax, or commence a proceeding in court for the collection of the

tax, at any time.   Sec. 6501(c).

     Petitioner alleges that the limitations periods for

assessment of taxes with respect to petitioner’s returns for the

     2
      The Court ordered, and the parties filed, simultaneous
opening briefs. The Court also ordered the parties to each file
simultaneous answering briefs on or before Jan. 8, 2007.
Respondent timely filed an answering brief, but petitioner failed
to file an answering brief.
                                 -5-

years at issue expired before respondent issued petitioner the

deficiency notice.    Respondent argues that the preparer’s

fraudulent intent to evade tax is sufficient to keep the

limitations periods open.    Petitioner counters that only the

intent of the taxpayer, not the preparer, is relevant to whether

the returns were fraudulent so as to extend the limitations

period.

Plain Meaning Analysis

     The statute provides that the tax may be assessed at any

time “[i]n the case of a false or fraudulent return with the

intent to evade tax.”    Sec. 6501(c)(1).   Notably absent from this

provision is any express requirement that the fraud be the

taxpayer’s.3

     Nothing in the plain meaning of the statute suggests the

limitations period is extended only in the case of the taxpayer’s

fraud.    The statute keys the extension to the fraudulent nature


     3
      Rules regarding the limitations period in the case of false
and fraudulent returns have been in the Code since the Revenue
Act of 1918. Revenue Act of 1918, ch. 18, sec. 250(d), 40 Stat.
1083. That provision addressed the statute of limitations that
applied “in the case of false or fraudulent returns” and did not
by its terms require that the fraud be that of the taxpayer. Id.
The version of the Revenue Act of 1934 that passed the House Ways
and Means Committee would have amended this section to read: “If
the taxpayer * * * files a false or fraudulent return with intent
to evade tax * * * the tax may be assessed * * * at any time.”
H.R. 7835, 73d Cong., 2d Sess. sec. 276(a) (1934) (as passed by
House, Feb. 21, 1934). The Senate Committee on Finance discarded
this language, however, with no discussion. The enacted version
continued to focus on the return with no express requirement that
the fraud be the taxpayer’s and remains the language in sec.
6501(c)(1) today. Revenue Act of 1934, ch. 277, sec. 276(a), 48
Stat. 745; S. Rept. 558, 73d Cong., 2d Sess. 43-44 (1934), 1939-1
C.B. (Part 2) 586, 619.
                                 -6-

of the return, not to the identity of the perpetrator of the

fraud.   Nor do we read the words “of the taxpayer” into the

statute to require the taxpayer to have the intent to evade his

or her own tax.4

     Respondent argues, and we agree, that statutes of

limitations are strictly construed in favor of the Government.

Badaracco v. Commissioner, 464 U.S. 386, 391 (1984); Lucia v.

United States, 474 F.2d 565, 570 (5th Cir. 1973).   An extended

limitations period is warranted in the case of a false or

fraudulent return because of the special disadvantage to the

Commissioner in investigating these types of returns.    Badaracco

v. Commissioner, supra at 398.   Three years may not be sufficient

for the Commissioner to investigate or prove fraudulent intent.

Id. at 399.

     We agree with respondent that the special disadvantage to

the Commissioner in investigating fraudulent returns is present

if the income tax return preparer committed the fraud that caused

the taxes on the returns to be understated.   Accordingly, taking

into account our obligation to construe statutes of limitations

strictly in favor of the Government, we conclude that the




     4
      Accountants who prepare fraudulent returns have
occasionally been convicted of tax evasion under sec. 7201 and
similar predecessor provisions. See United States v. Gordon, 242
F.2d 122, 125 (3d Cir. 1957) (accountants held liable for tax
evasion though tax intended to be evaded was not their own);
Tinkoff v. United States, 86 F.2d 868, 875-876 (7th Cir. 1936)
(same).
                                -7-

limitations period for assessing petitioner’s taxes is extended

if the taxes were understated due to fraud of the preparer.5

Limitations Period and Fraud Penalty

     Petitioner argues that the limitations period is only

extended if the fraudulent intent is that of the taxpayer, not

the preparer.   Petitioner relies on cases in which the fraud

penalty was asserted against the taxpayer and the limitations

period was extended.   See, e.g., Rhone-Poulenc Surfactants &

Specialties, L.P. v. Commissioner, 114 T.C. 533, 548 (2000)

(citing Chin v. Commissioner, T.C. Memo. 1994-54 (regarding the

predecessor to section 6663); Williamson v. Commissioner, T.C.

Memo. 1993-246 (same); Richman v. Commissioner, T.C. Memo. 1993-

32 (same); Callahan v. Commissioner, T.C. Memo. 1992-132 (same)).

The cases petitioner cites are inapposite, however.   Those cases

define fraud with reference to the taxpayer’s actions because it

was the taxpayer who committed the fraud.   The cases did not hold

that fraud for purposes of section 6501(c)(1) is limited to the

fraud of the taxpayer.   Nor do we read these cases to require

     5
      Cases interpreting limitations periods in the Code have
extended them due to malfeasance of return preparers and other
third parties, not just taxpayers. See, e.g., Transpac Drilling
Venture 1983-2 v. United States, 83 F.3d 1410, 1414-1415 (Fed.
Cir. 1996) (extending limitations period for assessing taxes of
partners attributable to partnership items under sec. 6229(c)
where partner intended to evade taxes of other partners); Estate
of Upshaw v. Commissioner, 416 F.2d 737 (7th Cir. 1969)
(extending limitations period for assessment of taxes on joint
returns where only one spouse committed fraud), affg. T.C. Memo.
1968-123; United States v. McLean, 390 F. Supp. 2d 475 (D. Md.
2005) (extending erroneous refund limitations period in sec.
6532(b) where fraud committed by a person other than the
taxpayer); United States v. Southland Oil Co., 339 F. Supp. 2d
764 (S.D. Miss. 2004) (same).
                                 -8-

that the person who causes a return to be fraudulent under

section 6501 must be the person who owes the tax or against whom

the fraud penalty is asserted under section 6663.

Burden on Taxpayers

     Petitioner also argues that extending the limitations period

for the fraudulent intent of the preparer would be unfairly

burdensome because it would require taxpayers to keep records

indefinitely.   We disagree.   Taxpayers are charged with the

knowledge, awareness, and responsibility for their tax returns.

Magill v. Commissioner, 70 T.C. 465, 479-480 (1978), affd. 651

F.2d 1233 (6th Cir. 1981); Teschner v. Commissioner, T.C. Memo.

1997-498.   The taxpayer, not the preparer, has the ultimate

responsibility to file his or her return and pay the tax due.

Kooyers v. Commissioner, T.C. Memo. 2004-281.    This duty cannot

generally be avoided by relying on an agent.    Estate of Clause v.

Commissioner, 122 T.C. 115, 123-124 (2004); Am. Props., Inc. v.

Commissioner, 28 T.C. 1100, 1116-1117 (1957), affd. 262 F.2d 150

(9th Cir. 1958).   We do not find it unduly burdensome for

taxpayers to review their returns for items that are obviously

false or incorrect.   It is every taxpayer’s obligation.

Petitioner cannot hide behind an agent’s fraudulent preparation

of his returns and escape paying tax if the Government is unable

to investigate fully the fraud within the limitations period.

     The Commissioner has just as much need for an extended

limitations period to investigate and examine taxpayers who sign

and allow to be filed returns that greatly overstate expenses or
                                  -9-

include fictitious expenses whether the fraud was committed by

the taxpayer or the taxpayer’s preparer.      To find otherwise would

allow a taxpayer to receive the benefit of a fraudulent return by

hiding behind the preparer.   Taxpayers whose returns are

fraudulent owing to fraud committed by the preparers would escape

their tax liability if the Commissioner were unable to identify

or investigate the fraud within the normal 3-year period.

     We finally note that respondent is seeking to collect only

the deficiency in tax from petitioner.      Respondent is not

asserting the fraud penalty against petitioner.      Petitioner is

therefore required to pay only the correct amount of tax plus

statutory interest and no more.

Conclusion

     We conclude that the limitations period for assessment is

extended under section 6501(c)(1) if the return is fraudulent,

even though it was the preparer rather than petitioner who had

the intent to evade tax.   The plain meaning of the statute

indicates that it is the fraudulent nature of the return that

extends the limitations period.     We therefore find that the

limitations period for assessing tax against petitioner is

extended indefinitely.

     To reflect the foregoing,


                                        Decision will be entered

                                 under Rule 155.
