The opinion of the court was delivered by: WILLIAM C. CONNER
Plaintiff Mary A. DeSantis ("DeSantis") brings this action for recovery of federal income tax and interest assessed and collected from her by defendant United States of America ("the Government"). Plaintiff moves the Court pursuant to Fed. R. Civ. P. Rule 56 for summary judgment on the ground that the assessment of taxes against her was untimely pursuant to 29 U.S.C. § 6501. Also before the Court is the Government's motion for judgment on the pleadings pursuant to Fed. R. Civ. P. Rule 12(c).
Plaintiff was a limited partner in a partnership known as Merjr Properties ("Merjr"). Complaint at para. 6. A dispute arose between plaintiff and the Internal Revenue Service ("IRS") with respect to deductions on plaintiff's income tax returns for the tax years 1975, 1976, and 1977 based upon losses from the Merjr Partnership, which the Commissioner of the IRS had disallowed. Complaint at para. 6; Answer at para. 6. Before the IRS had made a final determination as to the validity of those deductions, plaintiff and the IRS executed Forms 872-A, Special Consent to Extend the Time to Assess Tax ("Form 872-A Consents").
These Consents extended the limitations period for the IRS to assess taxes against plaintiff related to the Merjr Partnership. Pursuant to these agreements, plaintiff and the IRS agreed that income tax relating to plaintiff's investment in Merjr:
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); except that 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 end 60 days after the period during which the making of an assessment was prohibited.
See Exh. B to the Complaint. Each Form 872-A Consent further provided that:
See Exh. B to the Complaint.
In 1984, litigation regarding the Merjr Partnership was pending before the United States Tax Court in the cases of Roger Dersarkissian and Kimiko Dersarkissian, et al. v. Commissioner of Internal Revenue, 49 T.C.M. (CCH) 635. At issue in the Dersarkissian litigation was whether the activities of the Merjr Partnership were engaged in for profit so as to entitle investors to deduct losses associated with their investments in it. The deductions plaintiff included in her income tax returns for the 1975, 1976, and 1977 tax years were similar to the deductions at issue in Dersarkissian. While that case was pending, plaintiff and the IRS executed a Form 906, Closing Agreement on Final Determination Covering Specific Matters (the "Closing Agreement").
The Closing Agreement provides that plaintiff's distributive share from Merjr would be determined in the same manner as in the Dersarkissian case (which the Closing Agreement refers to as the "controlling case"). The Closing Agreement also provided that:
the amount of any Federal income tax attributable to the determination in clause (a)(1) preceding may be assessed by the Commissioner of Internal Revenue on or before the expiration of the one year (365 days) period following the date on which the decision of the controlling case becomes final notwithstanding the expiration of any period of limitation on assessment and collection otherwise prescribed by section 6501 of the Code.
See Exh. D to the Complaint.
On January 30, 1985 the United States Tax Court held in Dersarkissian that claimed losses from the Merjr Partnership were not deductible because Merjr "was not an activity engaged in for profit." T.C.M. (P-H) para. 85,049, at 216-85. That decision became final on May 1, 1985. On December 13, 1989, the IRS sent plaintiff a statutory notice of deficiency and, on May 11, 1990 assessed plaintiff with tax deficiencies for the tax years 1975, 1976, and 1977. Plaintiff paid the deficiencies and interest thereon under protest on October 5, 1988, and August 15, 1989, paying a total of $ 128,020.29 ...