Borg-Warner Corporation v. Commissioner of Internal Revenue

660 F.2d 324, 48 A.F.T.R.2d (RIA) 5917, 1981 U.S. App. LEXIS 17303
CourtCourt of Appeals for the Seventh Circuit
DecidedSeptember 29, 1981
Docket80-1818
StatusPublished
Cited by28 cases

This text of 660 F.2d 324 (Borg-Warner Corporation v. Commissioner of Internal Revenue) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Borg-Warner Corporation v. Commissioner of Internal Revenue, 660 F.2d 324, 48 A.F.T.R.2d (RIA) 5917, 1981 U.S. App. LEXIS 17303 (7th Cir. 1981).

Opinions

WILL, Senior District Judge.

This is an appeal from the United States Tax Court’s decision in favor of the Commissioner of Internal Revenue (Commission[325]*325er) in the amount of $4,316,132.06. The sole issue on this appeal is whether the assessed deficiency in the taxpayer’s income tax for the year 1968 was barred by the statute of limitations under 26 U.S.C. § 6501.1 For the reasons stated herein, we hold that the asserted deficiency for the year in question is barred by the statute of limitations. We therefore reverse the Tax Court’s judgment.

I. BACKGROUND

On June 3, 1969, the taxpayer filed its federal income tax return for the year 1968. Although the statutory period in which the Service could assess a deficiency with respect to the taxpayer’s 1968 tax year normally would have lapsed on June 13, 1972, the taxpayer and the Service timely agreed in writing on four occasions to extend this statutory period pursuant to section 6501(c)(4) of the Internal Revenue Code. On each of these occasions, the parties executed Internal Revenue Service Form 872, entitled “Consent Fixing Period of Limitations Upon Assessment of Income and Profits Tax.” These agreements provided that the Service could assess a deficiency for the 1968 tax year at any time before a specified date. The last such agreement extended the period for filing a deficiency to December 31, 1974.

On July 18, 1974, the taxpayer and the Service executed Internal Revenue Service Form 872-A, which extended the period for assessing taxes to a date to be determined as provided therein. This form provided, in relevant part:

That the amount(s) of any Federal Income tax due under any return(s) made by or on behalf of the above-named taxpayers) for the tax year(s) ended December 31,1968, under existing or prior revenue acts, may be assessed at any time on or before the 90th day after (1) mailing by the Internal Revenue Service of written notification to the taxpayer(s) of termination of Appellate Division consideration, or (2) receipt by the Regional Appellate Division branch considering the case of written notification from the taxpayers) of election to terminate this agreement, except that if in either event a statutory notice of deficiency in tax for any such year(s) is sent to the taxpayers), the running of the time for making any assessment shall be suspended for the period during which the making of an assessment is prohibited and for 60 days thereafter. . . .

This form was signed by an officer of the taxpayer and by Kenneth E. Christian, Appellate Conferee, on behalf of Fred J. Ochs, Assistant Regional Commissioner, Appellate.

On June 28, 1973, the taxpayer had filed a written protest to the examination report prepared by the District Director’s Office. This report was forwarded to the Appellate Division. Between June 28, 1973 and October 18, 1974, representatives of the taxpayer, John J. Crunican and Neal F. Farrell, met with and wrote to Appellate Conferees Kenneth E. Christian and Anna C. Jobson, in an effort to resolve the parties’ disagreement over the taxpayer’s liability for the tax year 1968. These efforts apparently proved unavailing, however, for on October 18, 1974, Mr. Christian wrote the following letter to Mr. Crunican:

Dear Mr. Crunican:

Conferee Anna Jobson and I have carefully considered the evidence and arguments in support of your position as discussed during our two conferences with you and Mr. Neal Farrell, and as set forth in your protest and supplemental information, the latest of which accompanied your letter of August 29, 1974.

[326]*326We regret that we have been unable to agree upon a mutually satisfactory basis for closing the case, although settlement proposals and counterproposals were made and considered by the parties. Accordingly, this is to inform you that it is our intention to recommend issuance of a statutory notice of deficiency reflecting the adjustments proposed by the District Director.

Your cooperation has been very much appreciated.

Very truly yours,

/s/ Kenneth E. Christian Kenneth E. Christian Appellate Conferee

cc: Miss Anna C. Jobson

Shortly after receiving this letter, Mr. Crunican telephoned Mr. Christian to discuss the contents of the forthcoming statutory notice of deficiency. Mr. Crunican also asked Mr. Christian when he could expect to receive the notice of deficiency. He was told by Mr. Christian that he could expect it some time in December 1974. On December 9, 1974, Mr. Crunican, not having received the notice of deficiency, again telephoned Mr. Christian to inquire as to the status of the notice and to ask that it be issued before the end of the month. Mr. Christian stated that the case had been sent to the Regional Counsel for approval of the issuance of the notice on November 12, 1974.

There were no further communications between the parties until January 17, 1975, the 91st day after Mr. Christian mailed his previously quoted letter of October 18, 1974 to Mr. Crunican. On January 17, Mr. Christian telephoned Mr. Crunican purportedly to outline a settlement proposal differing slightly from the last such proposal discussed by the parties. At Mr. Crunican’s request, a conference was scheduled for January 22, 1975. Mr. Joseph E. McAndrews and Ms. Nora A. Bailey, outside counsel retained by the taxpayer on November 11, 1974, appeared at that conference on behalf of the taxpayer and stated their position that the statutory period for filing a notice of deficiency had expired on January 16, 1975.

The actual notice of deficiency was not mailed to the taxpayer until April 18, 1975.

The taxpayer filed a timely petition for redetermination of the deficiency with the Tax Court on July 10, 1975. Thereafter, the taxpayer filed with the court a motion for summary judgment contending that the notice of deficiency in this case was untimely. The taxpayer argued that Mr. Christian’s letter of October 18, 1974 constituted written notification of termination of Appellate Division consideration. Pursuant to the parties’ Form 872-A agreement regarding extension of the statutory period of filing a notice of deficiency, the taxpayer contended, the period for filing such a notice expired 90 days after Mr. Christian’s letter was mailed, or on January 16, 1975, long before the notice of deficiency in this case was mailed on April 18, 1975. The Service opposed the taxpayer’s motion, asserting that Mr. Christian’s letter was not notification of termination of Appellate Division consideration but simply a notification of Mr. Christian’s intention to recommend to the Regional Counsel that a notice of deficiency be issued.

Judge Caldwell of the Tax Court agreed with the Service, holding that Mr. Christian’s letter was not a notification of termination of Appellate Division consideration. Judge Caldwell noted that the letter does not specifically state that Appellate Division consideration had terminated; it simply set out what steps Mr. Christian intended to take towards terminating Appellate Division consideration in the future. Moreover, according to the court, its reading of the letter was entirely consistent with the Service’s policy of not issuing notice of termination letters in cases, like this one, in which the Service and the taxpayer had not resolved their differences.

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Bluebook (online)
660 F.2d 324, 48 A.F.T.R.2d (RIA) 5917, 1981 U.S. App. LEXIS 17303, Counsel Stack Legal Research, https://law.counselstack.com/opinion/borg-warner-corporation-v-commissioner-of-internal-revenue-ca7-1981.