Fine v. Commissioner, 167 T.C. No. 13 (2026)

When representing taxpayers in protracted IRS examinations, tax practitioners frequently confront statute of limitations extensions under Internal Revenue Code (I.R.C.) § 6501(c)(4). A common procedural question arises when settlement negotiations fail: Can a taxpayer who previously executed a fixed-date extension on IRS Form 872 (Consent to Extend the Time to Assess Tax) unilaterally terminate that extension prior to its stated expiration date by sending IRS Form 872-T (Notice of Termination of Special Consent to Extend the Time to Assess Tax)?

In Fine v. Commissioner, 167 T.C. No. 13 (2026), the United States Tax Court answered this question with an emphatic “no.” Addressing an open issue in the U.S. Court of Appeals for the Eleventh Circuit, Judge Ashford held that Form 872-T applies exclusively to open-ended waivers executed on Form 872-A (Special Consent to Extend the Time to Assess Tax) and has no legal effect on a properly executed, fixed-date Form 872. Consequently, a Form 872 remains binding until its negotiated expiration date unless the IRS issues a Notice of Deficiency or the parties execute a subsequent written agreement.

For Certified Public Accountants (CPAs) and Enrolled Agents (EAs), Fine v. Commissioner serves as a critical procedural precedent. It underscores the binding nature of fixed-term waivers, highlights the strict contractual interpretative rules applied to IRS consent forms, and reinforces that strategic unhappiness with Appeals settlement progress does not permit taxpayers to alter agreed-upon extension terms.

Factual Background and Audit History

Petitioners Barry Holmes Fine and Monica Dias filed their federal income tax returns for the 2015 and 2016 taxable years on October 16, 2016, and October 15, 2017, respectively. The Internal Revenue Service (IRS) selected both returns for examination.

During the course of the examination, petitioners agreed to extend the standard three-year period for assessment prescribed by I.R.C. § 6501(a). Specifically, the parties executed the following series of fixed-date consent agreements on IRS Form 872:

2015 Taxable Year (First Extension): Executed by petitioners on June 5, 2019, and countersigned by the IRS on June 10, 2019, extending the assessment period to December 31, 2020.
2015 Taxable Year (Second Extension): Executed by petitioners on July 2, 2020, and countersigned by the IRS on July 6, 2020, further extending the assessment period to December 31, 2021.
2016 Taxable Year: Executed by petitioners on January 28, 2020, and countersigned by the IRS on February 4, 2020, extending the assessment period to June 30, 2021.

Following the examination phase, the case proceeded to the IRS Independent Office of Appeals (Appeals). However, settlement negotiations were unsuccessful. On September 11, 2020—seeking to force the IRS’s hand and bring the examination to a close—petitioners’ counsel transmitted IRS Forms 872-T via facsimile. The Form 872-T for 2015 was sent to the assigned Appeals officer, and the Form 872-T for 2016 was sent to the IRS Examination Division group manager.

Because Form 872-T contains no checkboxes or text referencing Form 872, petitioners checked the box on Form 872-T indicating an intent to terminate Form 872-A (Special Consent to Extend the Time to Assess Tax), while attaching copies of their executed Forms 872. Accompanying cover letters explicitly stated that petitioners intended to terminate both the examination and the previously executed Forms 872, requesting the expeditious issuance of a statutory Notice of Deficiency.

On April 15, 2021, the IRS issued Notices of Deficiency to petitioners determining tax deficiencies and accuracy-related penalties under I.R.C. § 6662(a) as follows:

2015: Income tax deficiency of $405,943 and I.R.C. § 6662(a) penalty of $81,189.
2016: Income tax deficiency of $210,003 and I.R.C. § 6662(a) penalty of $42,001.

Crucially, the IRS issued these Notices of Deficiency on April 15, 2021—more than 90 days after receiving the September 11, 2020 Forms 872-T, but well prior to the express expiration dates set forth in the underlying Forms 872 (June 30, 2021, for 2016, and December 31, 2021, for 2015).

Taxpayers’ Request for Relief and Affirmative Defense

Petitioners timely filed a Petition with the U.S. Tax Court while residing in Florida. In addition to challenging the substantive tax deficiencies and accuracy-related penalties, petitioners raised the statute of limitations under I.R.C. § 6501(a) as an affirmative defense.

Petitioners contended that their submission of Forms 872-T effectively terminated the fixed-date Forms 872. Under petitioners’ theory, the submission placed the IRS on a 90-day clock to issue Notices of Deficiency. Because the IRS issued the Notices on April 15, 2021—7 months after receiving the Forms 872-T—petitioners argued that the assessment period had expired and the deficiencies were time-barred.

In response, the Commissioner filed a Motion for Partial Summary Judgment under Tax Court Rule 121, maintaining that Form 872-T cannot legally terminate a properly executed Form 872 and that the Notices were timely issued prior to the specified dates in the Forms 872. Petitioners filed a cross-motion for partial summary judgment, arguing that fairness dictates taxpayers be allowed to unilaterally terminate Form 872 because the IRS possesses the “unilateral ability to terminate the Form 872 by issuing a [Notice of Deficiency] or ceasing Appeals consideration.”

Statutory Framework and Burden of Proof Mechanics

The legal baseline governing federal tax assessments is I.R.C. § 6501(a), which requires the IRS to assess any tax within three years after a return is filed. Section 6501(c)(4)(A) provides a statutory exception:

“Where, before the expiration of the time prescribed . . . for the assessment of any tax . . . , both the Secretary and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon.”

In Tax Court litigation, the statute of limitations is an affirmative defense under Tax Court Rules 39 and 142(a). The procedural burden of proof operates under a three-step burden-shifting framework established in Adler v. Commissioner, 85 T.C. 535, 540 (1985), and affirmed in Feldman v. Commissioner, 20 F.3d 1128, 1132 (11th Cir. 1994):

Taxpayer’s Initial Burden: The taxpayer must show that the Notice of Deficiency was issued outside the standard three-year statutory period under I.R.C. § 6501(a).
Commissioner’s Burden: Once established, the burden shifts to the Commissioner to produce written consent agreements (e.g., signed Forms 872) extending the limitations period.
Taxpayer’s Rebuttal Burden: Upon production of valid waivers, the burden shifts back to the taxpayer to prove that the consent was invalid, revoked, or ineffective. As the Eleventh Circuit emphasized in Feldman, “[t]he ultimate burden of proof on the limitations defense always rests on the taxpayer.”

Because petitioners resided in Florida, any appeal of the Tax Court’s decision would lie in the U.S. Court of Appeals for the Eleventh Circuit pursuant to I.R.C. § 7482(b)(1)(A). In Coggin v. Commissioner, T.C. Memo. 1993-209, aff’d, 71 F.3d 855 (11th Cir. 1996), the Tax Court had previously held that Form 872 cannot be terminated by Form 872-T. However, the Eleventh Circuit affirmed Coggin on other grounds and explicitly declined to reach the Form 872-T issue (Coggin, 71 F.3d at 861 n.4). Thus, Judge Ashford noted that under the Golsen doctrine (Golsen v. Commissioner, 54 T.C. 742 (1970)), the Tax Court took “this opportunity to address the question left open by the Eleventh Circuit.”

Judicial Analysis: Contract Principles and Distinction Between Form 872 and Form 872-A

In evaluating whether Form 872-T alters Form 872, the Tax Court examined the fundamental nature of tax assessment extensions. Citing the Supreme Court’s landmark ruling in Stange v. United States, 282 U.S. 270, 276 (1931), Judge Ashford re-affirmed that a consent to extend the statute of limitations “is essentially a voluntary, unilateral waiver of a defense by the taxpayer, not a contract.”

Nevertheless, because I.R.C. § 6501(c)(4)(A) requires that both parties “consent in writing,” courts routinely apply contract principles to evaluate mutual assent (Feldman, 20 F.3d at 1132; Kronish v. Commissioner, 90 T.C. 684, 693 (1988)). Under established precedent, “It is the objective manifestation of mutual assent as evidenced by the parties’ overt acts, not the parties’ secret intentions, that determines whether the parties have made an agreement” (Kronish, 90 T.C. at 693). Courts look strictly within the “four corners” of the written document to ascertain intent (Rink v. Commissioner, 100 T.C. 319, 325 (1993)).

The Tax Court highlighted the administrative and legal distinction between the two primary extension forms prescribed under Revenue Procedure 79-22, 1979-1 C.B. 563:

Form 872 (Fixed-Date Extension): Provides a specific, negotiated expiration date. It creates a well-defined period for IRS performance.
Form 872-A (Indefinite Extension): Does not contain a fixed expiration date. Instead, it remains open indefinitely until terminated by one of three exclusive mechanisms set forth in Revenue Procedure 79-22 and on the face of the form: (1) receipt by the IRS of Form 872-T; (2) receipt by the taxpayer of Form 872-T from the IRS; or (3) issuance by the IRS of a Notice of Deficiency.

Judge Ashford emphasized that general contract principles treat indefinite agreements differently from fixed-term contracts. Indefinite agreements (such as Form 872-A) are terminable at will by either party (New York v. New Jersey, 143 S. Ct. 918, 925 (2023); 1 Williston on Contracts § 4:23 (4th ed. 2022)). By contrast, when an agreement contains a specified, negotiated expiration date (such as Form 872), courts must strictly adhere to those defined terms.

Application of Law: Form 872-T Does Not Terminate Form 872

Applying these principles to the facts of Fine, the Tax Court rejected every argument advanced by petitioners:

First, the Court observed that Form 872 contains an explicit expiration date and makes no provision for early termination via Form 872-T or any other unilateral notice. Conversely, Form 872-T explicitly states that it is designed to terminate Form 872-A and requires the taxpayer to check a specific box referencing Form 872-A. Form 872-T contains no mechanism or option to terminate Form 872. As the Court noted:

“A plain need for certainty prompted IRS to devise Form 872–T as the exclusive means, apart from mailing a deficiency notice, for either the IRS or taxpayers to terminate a Form 872–A consent to extend a limitation period.” (Silverman v. Commissioner, 86 F.3d 260, 262 (1st Cir. 1996))

“Notably, Form 872–T does not list an option for terminating Form 872, and conversely, Form 872 makes no mention of Form 872–T. The IRS’s decision to omit that option underscores that Form 872–T’s purpose is to terminate Form 872–A, not Form 872.”

Second, the Court dismantled petitioners’ argument that “fairness” required allowing taxpayers to unilaterally terminate Form 872. Petitioners claimed that because the IRS can issue a Notice of Deficiency at any time, taxpayers should enjoy a reciprocal right to cut short the extension. Judge Ashford exposed the fallacy in this reasoning:

“This contention obfuscates the purpose of Form 872. Form 872 evidences a taxpayer’s consent to unilaterally waive the statute of limitations defense and the power to waive that defense is solely in the hands of the taxpayer. . . . The date on Form 872 simply provides a new deadline for the IRS, and that deadline is set via an agreement between the parties. . . . Today, we determine that only the passage of time can terminate Form 872.”

Third, the Court addressed petitioners’ reliance on Kelley v. Commissioner, 45 F.3d 348 (9th Cir. 1995), where a passing footnote suggested that Form 872-T might terminate Form 872. Judge Ashford clarified that the Ninth Circuit’s footnote was non-binding dictum reciting case background, not a legal holding on the effect of Form 872-T. Moreover, under Golsen, Ninth Circuit dictum would not bind the Tax Court in a case appealable to the Eleventh Circuit.

Finally, the Tax Court emphasized that taxpayers cannot rely on post-execution dissatisfaction with Appeals settlement progress to undo clear contractual commitments:

“By their own admission, petitioners wanted to terminate the extensions only because they did not receive a favorable outcome from the Appeals settlement process and wanted the IRS to expeditiously issue the Notices. Petitioners’ unhappiness with settlement negotiations, however, is not sufficient grounds for contravening longstanding contract principles or undoing valid agreements.”

“Form 872 includes text that the form evidences the entire agreement of the parties, and its express provisions are definite and unambiguous. . . . ‘A deal is after all a deal, and fairness dictates that both parties adhere to the provisions of the document[s] they both voluntarily signed.’” (Grunwald v. Commissioner, 86 T.C. 85, 89 (1986))

Conclusions and Practical Guidance for Tax Practitioners

The Tax Court concluded that Form 872 unambiguously expires on the agreed-upon date and cannot be revoked or terminated by remitting Form 872-T. Consequently, petitioners’ Forms 872 remained in full force and effect through their specified expiration dates (June 30, 2021, and December 31, 2021). Because the IRS issued the statutory Notices of Deficiency on April 15, 2021, the Notices were timely under I.R.C. § 6501(c)(4)(A). The Court granted the Commissioner’s Motion for Partial Summary Judgment.

For CPAs, EAs, and tax attorneys, Fine v. Commissioner provides crucial takeaways for managing audit strategy and statute of limitations extensions:

Form Selection is Strategic and Irrevocable: Choosing between Form 872 and Form 872-A carries distinct legal consequences. While Form 872-A allows taxpayers to trigger a 90-day countdown by filing Form 872-T if Appeals negotiations stall, Form 872 locks both parties in until the specified expiration date.
No Early Exit from Form 872: Once a client signs Form 872, they cannot unilaterally terminate the extension or accelerate the issuance of a Notice of Deficiency prior to the expiration date.
Negotiate Shorter Fixed Periods or Restricted Waivers: If a client is concerned about lengthy examination timelines, practitioners should negotiate shorter extension periods (e.g., 3 or 6 months) or restrict the extension to specific unagreed issues pursuant to I.R.C. § 6501(c)(4)(B) rather than executing broad, long-term Form 872 extensions.

Prepared with assistance from Gemini Notebook.