LOUIS W. ROSZKOS AND VIVIAN L. ROSZKOS, PETITIONERS V. COMMISSIONER
OF INTERNAL REVENUE

   No. 88-857

   In the Supreme Court of the United States

   October Term, 1988

   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Ninth Circuit

   Memorandum for the Respondent in Opposition

   Petitioners contend that the waiver of the statute of limitations
(Form 872-A) that they executed was terminated by the Commissioner's
issuance of a notice of deficiency mailed to the wrong address, with
the result that the Commissioner was barred by the statute of
limitations from seeking to collect delinquent taxes through mailing a
second notice of deficiency to the correct address.

   1. a. Petitioners filed joint federal income tax returns for
1973-1976 on which they claimed losses from tax shelter investments.
During an audit of their returns for those years, petitioners and IRS
officials executed a series of "Form 872" agreements consenting to
limited extensions of the ordinary three-year statute of limitations
on assessment of deficiencies for those years (see I.R.C. Section
6501(a), (c)(4).  /1/ Late in 1980, petitioners executed Form 872-A
agreements (Special Consent to Extend the Time to Assess Tax) for 1973
and 1974 (see Pet. App. 39-44), providing for an unlimited extension
of the statute of limitations on assessment of deficiencies for those
two tax years.  Id. at 3-4, 15-16.

   Under the terms of Form 872-A, the statute of limitations is
extended indefinitely until the agreement is revoked.  The IRS can
revoke the agreement by mailing to the taxpayer a notice of deficiency
or a Form 872-T ()Notice of Termination of Special Consent to Extend
the Time to Assess Tax).  The taxpayer can revoke the agreement by
providing a Form 872-T to the IRS office considering his case.  Form
872-A provides that the IRS has at least 90 days after termination of
the agreement in which to assess the tax, and sometimes longer if a
notice of deficiency is mailed.  /2/

   On December 31, 1981, the Commissioner mailed duplicate copies of a
notice of deficiency covering the years 1973-1976 to the two different
addresses shown on petitioners' tax returns for those years.  In fact,
petitioners were no longer living at either of those addresses, and
they had so informed the IRS at the time they executed the Form 872-A
for 1973 (see C.A. App. 89).  Both copies of the notice of deficiency
were returned undelivered to the IRS.  In May 1982, the IRS assessed
the deficiencies.  Pet. App. 4.

   Sometime thereafter, petitioners learned of the deficiency notice
and paid the assessments in late 1982 and early 1983.  In June 1984,
they petitioned the Tax Court to declare the assessments invalid and
to dismiss the case for lack of jurisdiction on the ground that the
December 1981 notice did not qualify as a "notice of deficiency" under
Section 6212(b)(1) of the Code because it had not been mailed to
petitioners' "last known address." After the Commissioner confirmed
that the notice had not been sent to the "last known address," he
filed a notice of no objection to the requested dismissal, and the Tax
Court dismissed the case for lack of jurisdiction.  Pet. App. 4-5.

   In September 1985, petitioners mailed a Form 872-T to the IRS to
terminate the indefinite extension of the statute of limitations to
which they had agreed.  They added to Form 872-T the following
sentence:  "This Notice of Termination is filed without waiver of the
taxpayers' position that the time to assess tax for the years in
question has expired, based on the Service's mailing of a notice of
deficiency on December 31, 1981." Thereafter, the Commissioner abated
the assessments that had been based on the improperly addressed 1981
notice and refunded to petitioners, with interest, the money that they
had paid.  Believing that the Form 872-A extensions had not been
terminated until petitioners filed the Form 872-T, however, the
Commissioner in October 1985 mailed a new notice of deficiency to
petitioners' correct address determining deficiencies for the years
1973 and 1974.  Pet. App. 4-6, 17.

   b. Petitioners filed a timely petition with the Tax Court
contesting the October 1985 notice of deficiency.  They claimed, inter
alia, that the December 1981 notice mailed to the wrong address, while
ineffective to commence litigation or collection proceedings, was
effective to terminate the Form 872-A agreement, and hence the statute
of limitations barred the October 1985 notice.  The Commissioner
responded that a Form 872-A agreement is not terminated by a
misaddressed notice of deficiency that is not received, which
essentially is treated as a nullity by the Code, but rather is
terminated only by a notice of deficiency that is effective to start
the normal procedures for the collection of an income tax deficiency.

   A divided Tax Court ruled for petitioners (Pet. App. 13-33).  The
majority acknowledged that "an improperly addressed notice of
deficiency * * * which does not have the potential to advise a
taxpayer of the intended termination by (the IRS), would not suffice
to terminate the parties' agreement" (id. at 22).  But the majority
held that "a fair reading of the parties' agreement" was that the
notice became effective to terminate the extension once petitioners
learned that it had been sent (ibid.).

   Judges Simpson and Parker dissented (Pet. App. 31-33).  They
maintained that the majority opinion was inconsistent with "the
cardinal principle of interpretation * * * that the Court should
attempt to give effect to the intentions of the parties to the
agreement" (id. at 31).  The dissenters noted that, when a Form 872-A
agreement is terminated, "the Commissioner is given a period of time
within which to issue his notice of deficiency and commence the tax
collection procedures" (id. at 32).  The dissenters accordingly
further stated that, "(s)urely, no one can doubt that when the parties
executed the extension, they contemplated that it could only be
terminated by a Form 872-T or a notice of deficiency that would be
effective under section 6213 to commence the tax collection
procedures, or that would have been their contemplation if they had
thought about the matter" (id. at 33).  The dissenters therefore
concluded that the mailing of an ineffective notice of deficiency to
the wrong address should not operate to provide a taxpayer with "the
windfall of never having to prove that he did not owe the tax claimed
by the Commissioner" (ibid.).

   c. The court of appeals vacated the Tax Court's decision and
remanded for further proceedings (Pet. App. 1-12).  The court
explained that the notice of deficiency is "intended to serve as a
vehicle of notification" (id. at 8).  Accordingly, "a notice of
deficiency which does not satisfy the minimum statutory requirement
for notice cannot reasonably be considered a notice of deficiency"
under the agreement (ibid.).  The court reasoned that a "misaddressed
notice of deficiency, which is returned to the IRS undelivered, is
'null and void'" unless "the taxpayer acknowledges notice by timely
petitioning the Tax Court for a redetermination of deficiency, thereby
rendering harmless the IRS' error in mailing" (id. at 9-10, quoting
Mulvania v. Commissioner, 769 F.2d 1376, 1379 (9th Cir. 1985)), and
therefore the misaddressed notice in this case was null and void.  The
court concluded that "the Form 872-A reference * * * was (not)
intended to include a misaddressed, undelivered, and unacknowledged
letter which would not qualify as a notice of deficiency in any other
context" -- an interpretation that "gives meaning to the entire * * *
waiver form," including the detailed provision for when the IRS may
assess a tax deficiency for the period covered by the waiver (Pet.
App. 10).

   2. Petitioners contend that the misaddressed notice of deficiency
mailed by the IRS in 1981 operated to terminate the extension of the
assessment period under the terms of the Form 872-A agreement.  The
court of appeals correctly construed that agreement between the
parties in rejecting petitioners' contention.  Moreover, the decision
below, which involves no question of statutory or constitutional
interpretation but concerns only the construction of a form agreement,
does not conflict with any decision of this Court or of another court
of appeals.  /3/ Accordingly, review by this Court is not warranted.

   Permitting the Form 872-A extension to be terminated by a notice of
deficiency that is ineffective for tax collection purposes is not
consistent with either the terms or the spirit of the parties'
agreement.  The agreement, which permits completion of the normal
audit process, contemplates that the extension will continue until one
of the parties decides to terminate it, and that an adequate period
will be provided for the collection of taxes following termination.
The mailing of an improperly addressed notice of deficiency that is
not received imposes no obligation on the taxpayer and does not
commence the collection process.  Clearly, such a mailing is not
intended by the Commissioner to terminate the extension, and a
taxpayer's subsequent awareness that there was such a misaddressed
mailing is not a determination by the taxpayer, or a communication to
the IRS, that the extension should be terminated.  And, because the
notice is a nullity that imposes no obligation on the taxpayer, there
is no logical reason why it should operate to terminate the extension.
 In short, there is no reason to believe that "the intentions of the
parties to the agreement" (Pet. App. 31 (Simpson, J., dissenting)
contemplated termination of the extension by the mailing of "a
misaddressed, undelivered, and unacknowledged letter which would not
qualify as a notice of deficiency in any other context" (id. at 10).

   The terms of Form 872-A support this common sense conclusion that
the agreement does not contemplate termination by a notice of
deficiency that is ineffective for tax collection purposes.  Form
872-A expressly provides that, when the extension is terminated by the
mailing of a notice of deficiency, the time for making an assessment
is extended for 60 days beyond the time that the assessment is
"prohibited." The prohibition on assessment referred to is the bar on
assessment and collection until the expiration of 90 days after the
mailing of the notice of deficiency, during which time the taxpayer
can file a petition for Tax Court review (I.R.C. Section 6213(a)).
Thus, it is apparent that the reference in Form 872-A to a notice of
deficiency pertains to a notice that commences the normal statutory
collection procedures, including the running of the period for seeking
review by the Tax Court;  a misaddressed notice of deficiency that is
not received does not qualify.

   Contrary to petitioners' contention (Pet. 9-11), the decision below
does not undermine the taxpayer's right to a prepayment forum;
indeed, petitioners' argument highlights the correctness of the
decision below.  If the notice of deficiency had triggered the period
during which the taxpayer could petition the Tax Court, it is
undisputed that it would have terminated the Form 872-A extension.  It
is precisely because the misaddressed notice did not trigger that
period, and hence had no effect on the taxpayer or the collection
process, that the court of appeals held that termination of the
extension was not within the contemplation of the parties to the
agreement.  Petitioners retain the right to a prepayment forum under
the decision below;  indeed, this case orginated in the Tax Couty when
petitioners invoked that right in response to the correctly addressed
notice of deficiency.  What petitioners would achieve by reversal of
the decision below is not access to a prepayment forum, but rather the
windfall benefit of not having to contest at all the Commissioner's
claim that they owe aditional taxes.  The court of appeals correctly
held that the parties did not intend that result when they executed
Form 872-A.

   It is therefore respectfully submitted that the petition for a writ
of certiorari should be denied.

   WILLIAM C. BRYSON

      Acting Solicitor General

   JANUARY 1989

   /1/ Unless otherwise noted, all statutory references are to the
Internal Revenue Code of 1954 (26 U.S.C.), as amended (the Code or
I.R.C.).

   /2/ Form 872-A provides in pertinent part (Pet. App. 14-15, 39)
that any tax due:

         may be assessed on or before the 90th (ninetieth) 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 taxpayer(s);
      or (c) the Internal Revenue Service mails a notice of deficiency
      for such period(s).  However, if a notice of deficiency is sent
      to the taxpayer(s), the time for assessing the tax for the
      period(s) stated in the notice of deficiency will be further
      extended by the number of days the assessment was previously
      prohibited, plus 60 days.

   /3/ Petitioners argue (Pet. 6-7) that the Court should grant
certiorari because a conflict in the circuits may arise as a result of
appeals now pending in the Third and Sixth Circuits.  But there is no
reason to expect that either of those courts of appeals will disagree
with the Ninth Circuit's decision in this case.  Moreover, even if
there were a conflict in the circuits on the question presented, it is
not apparent that it would warrant resolution by this Court since, as
the Tax Court explicitly noted (Pet. App. 22 n.8), acceptance of
petitioner's contentions would not preclude the IRS from revising the
terms of Form 872-A.