Tax Court in Brief | Evert v. Commissioner | Extending Notice of Deficiency Deadline and Duress as an Affirmative Defense
The Tax Court in Brief – May 9th – May 13th, 2022
Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.
Tax Litigation: The Week of May 9th, 2022, through May 13th, 2022
- Lewis v. Commissioner, TC Memo. 2022-47| May 9, 2022 | Greaves, J. | Dkt. No. 10007-20W
- Rogerson v. Commissioner, TC Memo. 2022-49| May 12, 2022 | Toro, J. | Dkt. No. 5848-20
- Jackson v. Comm’r, T.C. Memo. 2022-50 | May 12, 2022 | Vasquez, J. | Dkt. No. 19634-18L
- Harrison v. Comm’r, T.C. Memo 2022-6 | May 12, 2022 | Panuthos, J | Dkt. No. 12170-19S
Evert v. Comm’r, T.C. Memo. 2022-48| May 9, 2022 | Marshall, A | Dkt. No. 12901-19
Short Summary: Christian Evert timely filed her 2015 and 2016 tax returns, which were audited by the IRS. Evert sought an Appeals hearing to challenge the proposed adjustments. Through the proceeding, and as the applicable ASED (assessment statute expiration date) for 2015 was approaching, the Appeals officer gave Evert an option to consent to extend the limitations period for 2015, so he mailed to Evert a 2015 Form 872, Consent to Extend the Time to Assess Tax, along with Publication 1035. Publication 1035 explains various purposes for extending the ASED period. Evert signed and returned the Form 872, but thereafter she failed to present her positions and proof. Later, the IRS issued a Notice of Deficiency for 2015 and 2016. Evert timely sought judicial review of the Notice of Deficiency, alleging that she signed the Form 872 for 2015 under duress, that the Form 872 was thus invalid, and that the IRS failed to timely mail the Notice of Deficiency before the ASED for 2015 expired. At trial, Evert’s and the Appeals officer’s testimony conflicted as to the Form 872 matter.
- Whether the Form 872 signed and submitted by Evert was ineffective based on duress such that the ASED for tax year 2015 had expired before the Notice of Deficiency was delivered?
- Petitioner had the burden of affirmatively showing an apparently valid consent was ineffective due to duress, and she failed to carry that burden as to the Form 872. The testimony conflicted, but the Appeals officer’s testimony was substantially corroborated by written notes and other documents; Evert’s testimony was unsupported and self-serving.
Key Points of Law:
Assessment Statute of Limitations
- The period of limitations for the IRS to assess federal income tax for a tax year is generally three years after the taxpayer files a tax return for the year. I.R.C. § 6501(a).
- The three-year period of limitations for assessment begins on the due date of the return if it is timely filed or on the actual filing date if it is filed late. I.R.C. §§ 6501(a)(1) and (b)(1).
- The period of limitations for assessment can be extended beyond three years, provided that the IRS and the taxpayer consent in writing before the period of limitations expires. R.C. § 6501(c)(4).
- In the case of a consent under section 6501(c)(4), the IRS may assess tax up until the date agreed upon, which can be further extended by agreement. Treas. Reg. § 301.6501-(c)(1)(d).
ASED is Affirmative Defense
- To establish a statute of limitations for assessment defense, a taxpayer must make a prima facie case, which ordinarily requires proof of the date of the return and expiration of the statutory period of limitations. See Robinson v. Commissioner, 57 T.C. 735, 737 (1972).
- When the taxpayer makes a prima facie case, the IRS must go forward with countervailing evidence showing that the limitations period for assessment had not expired when the Notice of Deficiency was issued. If a taxpayer pleads and proves that he or she has not received a Notice of Deficiency before the running of the period of limitations for assessment, the taxpayer has met his burden of proof and that the IRS must show that the running of the statute of limitations was in some way suspended. Id.
- The IRS’s burden of going forward with proof that the limitations period was suspended may be discharged by the introduction of a consent, valid on its face, which extends the limitations period for assessment beyond the date of mailing of the Notice of Deficiency. Mecom v. Commissioner, 101 T.C. 374, 382-383 (1993), aff’d without published opinion, 40 F.3d 385 (5th 1994); Concrete Eng’g Co., 19 B.T.A. 212, 221-22 (1930), aff’d, 58 F.2d 566 (8th Cir. 1932); see also Jarvis v. Commissioner, T.C. Memo. 1980-381, at *8.
- Where the IRS has introduced an apparently valid consent and the taxpayer asserts that the consent was ineffective, it is the taxpayer’s burden to affirmatively show that the written consent was not valid. Mecom, 101 T.C. at 392-383; Concrete Eng’g Co., 19 B.T.A. at 221-22; Ballard v. Commissioner, T.C. Memo. 1987-471, at *6-7.
- Where there is duress, “no act of the coerced person is voluntary and contracts made in such circumstances are void [because there has been no] voluntary meeting of the minds.” Diescher v. Commissioner, 18 B.T.A. 353, 358 (1929).
What is and isn’t Duress
- Definition of “duress”: “If [one party’s] act deprives another of his freedom of will to do or not do a specific act, the [coerced party] becomes subject to the will of the other. Diescher , 18 B.T.A. at 358-59. IRS threats have been held to constitute duress. See id.
- However, actions that deprive a person of his or her free will are distinguishable from “legally authorized actions” that merely limit the person “to choose between options that are not desirable.” Hall v. Commissioner, T.C. Memo. 2013-93, at *12.
- It is not duress when the IRS makes statements informing a taxpayer that lawful means to assess and collect the tax will be used. Burnet v. Chi. Ry. Equip. Co., 282 U.S. 295, 303 (1931); Mulford v. Commissioner, 25 B.T.A. 238, 242-43 (1932), aff’d, 66 F2d 296 (3d Cir. 1933); Ballard v. Commissioner, T.C. Memo. 1987-471, at *8 (a taxpayer did not sign a consent under duress when the IRS told the taxpayer that an opportunity for an IRS Appeals conference would not be allowed if the taxpayer failed to sign a consent); Jarvis v. Commissioner, T.C. Memo. 1980-381, at *9-10.
Insights: This case contains a useful analysis of how to prove, or counter, an affirmative defense raised in a petition. It also serves as a warning to taxpayers contemplating a Tax Court challenge to IRS determinations. The Tax Court considers but has little regard for self-serving testimony without any corroboration.