William A. Kernen, Betty A. Kernen v. Commissioner of Internal Revenue

In connection with their 1977 tax return, William and Betty Kernen executed three forms extending the limitations period for assessment of deficiencies by the IRS. In November 1980, the Kernens executed a Form 872, which extended the limitations period to December 31, 1981. In December 1980, the Kernens executed a Form 872-A, which extended indefinitely the limitations period for adjustments by the IRS. Finally, in May 1981, the Kernens signed a second Form 872, which provided for extension of the limitations period until April 30, 1983.

On September 9, 1986, the Commissioner issued to the Kernens a statutory notice of deficiency for 1977. The Kernens filed a petition in the tax court, asserting, in part, that the issuance of the notice was barred by the statute of limitations. The tax court ruled that execution of the second Form 872 did not terminate the waiver consented to in Form 872-A, and that, consequently, the statute of limitations did not bar the assessment of additional income tax.

Form 872-A specifically provides for termination of the indefinite extension in three ways: The IRS may assess a deficiency up to ninety days after (1) the IRS receives a Form 872-T from…