CONSENT TO EXTEND LIMITATIONS PERIOD WAS VALID.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

MEMORANDUM & ORDER

WHITMAN KNAPP, SENIOR DISTRICT JUDGE

[1] This memorandum will serve as findings of fact and conclusions of law after our bench trial of this case.

BACKGROUND

[2] Plaintiff claims that he is entitled to a refund of income taxes because the statute of limitations has run for the 1979 tax year. Defendant Internal Revenue Service (the "IRS") argues that plaintiff agreed to extend the limitations period. We find in favor of the defendant.

[3] Plaintiff concedes that on September 14, 1983, he signed a Form 872-A, which indefinitely extended the limitations period. He contends, however, that this extension was a nullity because, contrary to the IRS's assertions, he had not previously signed a Form 872, without which the statute would have run before the Form 872-A was presented to him.

[4] The Government admitting that it has lost plaintiff's entire 1979 file and therefore cannot produce the allegedly signed form, relies upon secondary evidence to meet its burden of proving the form's existence. See, e.g., United States v. Conry (9th Cir. 1980) 631 F.2d 599, 600; Cross v. United States (D. Kan. Nov. 30, 1995) 1995 WL 835390, *5, aff'd, 149 F.3d 1190 (table), 1998 WL 255054 (10th Cir. May 19, 1998). Such evidence includes a computer transcript entry noting that the IRS received the relevant form, and numerous standard procedures through which IRS employees would have checked to verify that the limitations period had not run.

DISCUSSION

I. PLAINTIFF'S CASE

[5] Plaintiff, Dr. Stanley Malkin, unequivocally testified that he remembers that he had not signed the pertinent Form 872 when Forms 872-A were presented to him. Although we have no doubt that he believed his testimony to be truthful at the time he gave it, we find it impossible that after sixteen years he could have had an affirmative recollection that he had not signed one of numerous forms sent to him by the IRS during that time period. As one court has aptly noted, "The signing of [or failure to sign] one particular tax form among many is certainly a forgettable experience." Cross, 1998 WL 255054, at *8. In the case at bar, this truism is strengthened by various minor but significant inconsistencies between Malkin's testimony before us and his earlier less precise recollections. Cf., e.g., Tr. at 105 with Tr. at 78-80. ¹

[6] Nicholas Paleologos, plaintiff's accountant, testified on behalf of his client. By 1983, Paleologos had for about fourteen years served as accountant and tax advisor to various clients, filing tax returns and attending audits. He said that he was generally aware of the three-year statute of limitations, but asserted that he had never challenged the IRS on statute of limitations grounds. On the contrary, he routinely advised his clients to sign any requested consent forms extending the limitations period. He invariably acted on the belief -- which we find quite reasonable -- that should the IRS, by a taxpayer's refusal to sign a consent form, be denied sufficient time to make a considered judgment it would simply issue a Notice of Deficiency, thereby throwing the whole matter into Tax Court. Given such a practice, Paleologos could not -- and did not pretend to -- have any present recollection of having discussed with his client any particular request for an extension.

[7] His testimony, therefore, added nothing to that of Malkin on the issue before us. On the contrary, it establishes that had Paleologos become aware that the IRS had presented a Form 872 for signature -- either because the IRS had mailed the form to him or because Malkin had told him of it -- he would routinely have advised Malkin to sign and return it.

[8] In summary, we find that plaintiff has offered insufficient evidence to establish that he did not sign the relevant Form 872. ²

II. THE GOVERNMENT'S CASE

[9] An entry in the IRS's computer database indicates that Malkin signed and returned a valid Form 872. Standard procedures mandate that, upon receipt of a signed Form 872 from a taxpayer, an IRS employee would have co-signed the form. Soon thereafter, other IRS personnel would verify that the form has been duly executed and only then enter an appropriate notation into the computer database. The computer automatically records the dates of such entries. Here, Malkin's transcript shows an entry for a Form 872 on March 16, 1983, a logical time for him to have returned the requested form to the IRS. ³

[10] We have considered, and rejected as highly improbable, any possible way in which an error could have been introduced into this transcript entry. First, conceivably, Malkin's secretary, who usually opens his office mail, might have signed his name to the consent form and returned it, believing such action to be a necessary formality. If such an event had occurred as a result of the manner in which Malkin had organized his affairs, we would find that his secretary had implied authority to act as she had done. Moreover, since the IRS would have acted on her signature of Malkin's name to its detriment we would find that he had been estopped from repudiating her agency.

[11] Second, we find no merit in plaintiff's speculation that some IRS employee might have destroyed the entire 1979 file and then forged the computer transcript. Neither plaintiff nor our own ingenuity has suggested the identity of any individual with the motive or capacity so to do.

[12] Third, while there is of course the possibility that an IRS employee inadvertently typed in an incorrect transcript entry in March 1983, we find that plaintiff has not sufficiently rebutted the legal presumption that the transcript is accurate. Such a rebuttable presumption arises when the IRS has established administrative procedures that its employees must follow in the course of their official duties. Having found that the IRS has established such procedures and that plaintiff has offered no evidence to the contrary, we conclude that IRS employees actually did obey such procedures. See, e.g., Cross, 1998 WL 255054, at *8; United States v. Dixon (M.D. Ala. 1987) 672 F. Supp. 503, 506, aff'd, 849 F.2d 1478 (11th Cir. 1988).

[13] We also note that since the procedures outlined by the Government mandated the entry into a computer record of various taxpayer transactions, we presume that IRS employees entered such data as required, and hence that a computer-generated transcript of such taxpayer record, certified as authentic by the agency, is in fact accurate. United States v. Forma (S.D.N.Y. Jan. 12, 1993) 1993 WL 15007, *3-4, vacated on other grounds, 42 F.3d 759 (2d Cir. 1994); Flank v. Sellers (S.D.N.Y. 1987) 661 F. Supp. 952, 954.

[14] Plaintiff has failed to rebut this presumption of accuracy. Considering all of the evidence, we find it highly improbable that the entry showing receipt of the consent form is incorrect.

[15] Although, having so found, we need not consider the Government's remaining evidence in order to make our decision, we must say that such evidence seems compelling. If plaintiff had not signed the Form 872, it seems very unlikely that the omission would have gone unnoticed in the multiple "layers of bureaucracy" constructed to ensure that the statute of limitations does not slip by. The Government enumerated twelve independent instances where standard procedure would have required various employees to check Plaintiff's file for consent forms. ⁴ About seven different individuals, including Revenue Officer Joan Carter, would normally have monitored the file. The plaintiff has not suggested any believable reason why any of these employees would have risked being sanctioned by not reporting the absence of a crucial document from the file. ⁵

CONCLUSION.

[16] For the foregoing reasons, plaintiff's complaint is DISMISSED with prejudice and the Clerk is directed to enter judgment in favor of the Government.

[17] SO ORDERED.

January 13, 2000

     Q: How many sheets of paper did you receive all together in that

² This conclusion renders moot the question of whether or not Paleologos received a copy of the signed Form 872 among the seven pages claimed to have been faxed to him in 1991. We simply note that we credit his testimony that he did not receive that form. We take judicial notice from the experience of our own chambers that it sometimes happens that the receiver of a faxed message does not get all of the pages listed on the cover sheet, even though the sender's fax machine has "confirmed" a successful transmission.

³ The Government has properly introduced the transcript into evidence. We find that the IRS conducted a diligent search for the original document -- looking in every place whom the document reasonably could have been found -- and could not locate it. Fed. R. Evid. 1004(1).

⁴ In summation, the Government lists eleven administrative practices. We, however, note an additional level, namely, the yearly "inventory validation listing," during which agents would examine and verify the actual tax return. Tr. at 286.

⁵ During trial, we several times indicated our belief that it was unreasonable for the IRS -- in light of its own mismanagement and delays -- to assess interest of approximately $300,000 because Dr. Malkin failed timely to remit the approximately $40,000 ultimately found to be due. Tr. at 241-51, 379-80. While we adhere to that belief, we conclude that the question is not properly before us.