Hubert v. Internal Revenue Service

Hubert (plaintiff) and his wife filed joint tax returns for 1982 and 1983 in April 1983 and 1984, respectively. The Huberts claimed interests in three tax shelters: Atolia-WMD Project, Oxford Partners (Oxford), and Dore. In November 1985, the Internal Revenue Service (IRS) (defendant) sent Hubert a letter with the heading “Atolia-WMD Project.” The letter stated that the IRS was examining “an entity” in which Hubert held an interest and that the statute of limitations for assessing Hubert’s potential additional tax would expire before the IRS could finish its examination. Accordingly, the IRS asked Hubert to sign IRS form 872-A to extend the limitations period. The IRS added that it would issue a notice of deficiency if Hubert did not sign the form. A few days later, Hubert and his wife signed the form 872-A for 1982, which stated that the Huberts waived the statute of limitations regarding “any Federal income tax due on any” of their 1982 returns. The Huberts returned the signed form with a cover letter headed “re: Atolia-WMD Project.” The IRS and the Huberts exchanged similar correspondence and consents in November 1986 regarding the 1983 return. In December 1988, the Huberts consented to an additional tax assessment for 1982 relating to the Atolia-WMD Project, Oxford, and Dore and to an additional tax assessment for 1983 relating to Oxford and Dore. In 1991 and 1992, Hubert challenged the assessments relating to Oxford and Dore on the ground that the statutes of limitations with respect to those entities had expired because his consent to extend the limitations periods was limited to the Atolia-WMD Project. The IRS disagreed. Hubert then paid the tax and requested a tax adjustment, which the IRS also rejected. Hubert then sued the IRS for a refund. The court conducted a trial, during which Hubert testified that he believed that the consents were limited to the Atolia-WMD Project and that the parties’ correspondence reflected that limitation. The IRS testified to the contrary.