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STUTZ v. IRS

March 8, 1994

BRYANT STUTZ, Plaintiff,
v.
INTERNAL REVENUE SERVICE, Defendant.



The opinion of the court was delivered by: CLARKSON S. FISHER

 FISHER, District Judge

 Before the court is defendant's motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure or, alternatively, for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Essentially, defendant asserts that this lawsuit is precluded by an alleged closing agreement subscribed to by the parties under 26 U.S.C. § 7121. For the reasons set forth below, defendant's motion is denied in its entirety.

 Plaintiff brought this suit against the Internal Revenue Service (IRS) to obtain a refund of $ 26,952 assessed against him under 26 U.S.C. § 6672. Defendant contends that the parties entered into a binding closing agreement when they executed IRS Form 2751-AD, whereby the plaintiff was held not responsible and would not be assessed for unpaid employment taxes for periods before June 30, 1985, but that plaintiff was responsible and would be assessed for the periods ended September 30, 1985, and June 30, 1986. The total amount of liability to be assessed for those two periods was $ 26,952.04.

 Plaintiff disputes that Form 2751-AD properly effected a closing agreement under section 7121 of the Internal Revenue Code and that, alternatively, "a pattern of misconduct" on the part of IRS agents, including misrepresentations of material facts respecting plaintiff's right to judicial review, renders the alleged agreement subject to review. Upon close examination, the court finds that Form 2751-AD does not constitute a closing agreement under 26 U.S.C. § 7121; therefore, the predicate underlying defendant's motion, the proposition that plaintiff is foreclosed from judicial recourse by virtue of 26 U.S.C. § 7121 governing closing agreements, is entirely misplaced. Accordingly, defendant's motion must be denied.

 26 U.S.C. § 7121 provides:

 
§ 7121. Closing Agreements
 
(a) Authorization.--The Secretary is authorized to enter into an agreement in writing with any person relating to the liability of such person (or of the person or estate for whom he acts) in respect of any internal revenue tax for any taxable period.
 
(b) Finality.--If such agreement is approved by the Secretary (within such time as may be stated in such agreement, or later agreed to) such agreement shall be final and conclusive, and, except upon a showing of fraud or malfeasance, or misrepresentation of a material fact--
 
(1) the case shall not be reopened as to the matters agreed upon or the agreement modified by any officer, employee, or agent of the United States, and
 
(2) in any suit, action, or proceeding, such agreement, or any determination, assessment, collection, payment, abatement, refund, or credit made in accordance therewith, shall not be annulled, modified, set aside, or disregarded.

 "In order to enter into a closing agreement with the IRS, a taxpayer must first execute a proposed agreement on the forms prescribed for this purpose by the IRS." Federal Procedure, Lawyers Edition, Internal Revenue, § 48:722. Sections 301.7121-1(d)(1) and 601.202(b) of 26 C.F.R. detail the prescribed forms that create a closing agreement under section 7121. In particular, section 601.202(b) provides that "[in] cases in which it is proposed to close conclusively the total tax liability for a taxable period ending prior to the date of the agreement, Form 866, Agreement as to Final Determination of Tax Liability generally will be used." In addition, Rev. Proc. 68-16, 1968-1 CB 770 sections 6 and 7 furnish a detailed description of the proper format for a closing agreement. Several "matters of form" contained therein are particularly salient for purposes of the instant motion.

 At the outset, section 6, governing "Matters of Form," highlights the nature of the proposed agreement implicating ...


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