taxable year 1978.3

Twice during April 1984, a clerk in respondent's Manhattan Office contacted Mr. Feldman to discuss a further extension of the period of limitations on assessment, as was sought by the March 1984 letter. During conversations with the clerk, Mr. Feldman expressed his "displeasure" with the Service and advised the clerk that the various consent forms contained different restrictions than the ones to which Mr. Feldman had agreed. Mr. Feldman further advised the clerk that he did not think the period of limitations on assessment was still open for petitioner's taxable year 1978, and that he declined to sign another consent form. Last, Mr. Feldman advised the clerk that if no one in a position of authority would discuss the issue with him, a statutory notice of deficiency should be issued so that the matter could be resolved in court.

On June 26, 1984, respondent issued a statutory notice of deficiency in which he determined the aforementioned deficiency in petitioner's income tax for her taxable year 1978. Respondent's determination was based upon his disallowance of the deduction claimed by petitioner for the $20,000 distributorship fee expense, and was not based upon any adjustments to Churchill's tax return.

OPINION

The issue in the instant case is whether the period for assessing a deficiency against petitioner for her 1978 taxable year expired prior to June 26, 1984, the date on which respondent issued a statutory notice of deficiency with respect to such taxable year.

Income taxes generally must "be assessed within 3 years after the return was filed." Sec. 6501(a).4 Taxpayers and respondent, however, may consent in writing to extend the

"The parties have stipulated that the letter was sent with respect to petitioner's taxable year 1978. *Sec. 6501(a) provides as follows:

SEC. 6501(a). General Rule.-Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) or, if the tax is payable by stamp, at any time after such tax became due and before the expiration of 3 years after the date on which any part of such tax was paid, and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period.

3-year period of limitations on assessment. Sec. 6501(c)(4).5 In the instant case, the parties signed two consent forms. The first consent form purported to extend the period of limitations on assessment to June 30, 1983. The second consent form purported to extend the period of limitations to June 30, 1984, which was subsequent to the date on which respondent issued his statutory notice of deficiency. Petitioner contends, however, that the first consent form should not be given effect by this Court, and offers two alternative bases for her contention: (1) There was mutual assent to the terms contained in the first consent form; or (2) respondent should be equitably estopped from relying upon the first consent form.6 According to petitioner, if this Court does not give effect to the first consent form, the second consent form does not operate to extend the period of limitations on assessment to June 30, 1984, since it would have been signed on behalf of petitioner after the period of limitations on assessment expired. Thus, according to petitioner, the statutory notice of deficiency was issued after the period of limitations expired with respect to petitioner's taxable year 1978.

We analyze each of petitioner's contentions separately. We note at the outset, however, that petitioner bears both the burden of going forward and the ultimate burden of persuasion in the instant case. See Adler v. Commissioner, 85 T.C. 535, 540-541 (1985) (addressing situation where taxpayer pleads the bar of the period of limitations on

5Sec. 6501(c)(4) provides as follows:

(4) EXTENSION BY AGREEMENT.-Where, before the expiration of the time prescribed in this section for the assessment of any tax imposed by this title, except the estate tax provided in chapter 11, 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. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

"In her supplemental reply brief, petitioner raised a third basis for her contention-she argued that she made a unilateral mistake of fact when she signed the first consent form, and that such mistake should cause the form to be set aside by this Court. We refuse to consider petitioner's unilateral mistake argument, since the argument goes beyond the scope of our order granting petitioner's motion to file supplemental reply brief. Our order only granted petitioner's motion so that petitioner could address our Memorandum Sur Order vacating Schwotzer v. Commissioner, T.C. Memo. 1986-161. Petitioner went beyond the issues addressed in our Memorandum Sur Order vacating Schwotzer, and raised the unilateral mistake argument.

7See sec. 6501(a); Molner v. Commissioner, a Memorandum Opinion of this Court dated Mar. 14, 1944 (3 T.C.M. 227, 13 P-H Memo T.C. par. 44,078).

assessment and respondent introduces into evidence a consent form that is valid on its face); Rules 39, 142(a).

Mutual Assent

A consent to extend the period of limitations on assessment is not a contract; it, essentially, is a unilateral waiver of a defense by the taxpayer. Stange v. United States, 282 U.S. 270 (1931); Piarulle v. Commissioner, 80 T.C. 1035, 1042 (1983); Tallal v. Commissioner, 77 T.C. 1291 (1981), affd. on other issues 778 F.2d 275 (5th Cir. 1985). "Contract principles are significant, however, because section 6501(c)(4) requires that the parties reach a written agreement as to the extension." Piarulle v. Commissioner, supra at 1042.

Petitioner contends that there was no "agreement" when she signed the first consent form because respondent caused petitioner to believe that the form would cover a different type of adjustment than it, in fact, covered. According to petitioner, she was led to believe that the restrictions attached to the first consent form only would keep the period of limitations open with respect to adjustments to her return that were based upon adjustments to Churchill's return (these adjustments hereinafter are referred to as the Churchill flowthrough items). Petitioner claims that she signed the first consent form only because she thought it was restricted to Churchill flowthrough items. She contends that Mr. Feldman would not have let her sign it if he had known that it would cover adjustments to the Schedule C attached to her 1978 return.

Respondent counters by arguing that petitioner assented to the terms of the first consent form, including its attached restrictions, when she signed it. We agree with respondent.

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. 1 S. Williston, Contracts, secs. 22 and 35 (3d ed. 1957); 1 Restatement, Contracts 2d, sec. 19 (1979); Pimpinello v. Swift & Co., 253 N.Y. 159, 162-163, 170 N.E. 530, 531 (1930). In the instant case, petitioner intentionally signed the first consent form, and thereby manifested her assent to terms contained in that form.

Petitioner relies upon Piarulle v. Commissioner, 80 T.C. 1035 (1983), and Cary v. Commissioner, 48 T.C. 754 (1967), to support her position that she did not assent to the first consent form signed by her.8 In those cases, we held that consent forms signed by the taxpayers were invalid because the forms were altered by respondent after the taxpayers signed them. The consent forms in the instant case, however, were not altered by respondent after petitioner signed them; Piarulle and Cary therefore do not support petitioner's position.

Based upon the foregoing, we find that mutual assent to the first consent form was established by the uncontroverted showing of the parties' signatures thereon. In other words, the parties objectively manifested their mutual assent to the terms contained in the first consent form, as evidenced by each party's overt act of signing it.9 Therefore, we hold that the first consent form is valid to extend the period of limitations to June 30, 1983. Since the

8Petitioner also cited Schwotzer v. Commissioner, T.C. Memo. 1986-161, and Sheuerman v. Commissioner, T.C. Memo. 1984-160, in support of her position that she did not assent to the first consent form. In Schwotzer, we held that a consent form was invalid because the taxpayer had inserted restrictive language on the back of the form without respondent's knowledge, even though (1) respondent signed the form after the alteration was made, and (2) the only space on the form in which the taxpayer could insert restrictive language was on the back of the form. We based our holding in Schwotzer on the failure of respondent to assent to the terms of the consent form. Schwotzer, however, was vacated by order dated July 17, 1986, and we therefore need not discuss that case any further.

In Sheuerman, we indicated that "statements made in a letter accompanying a Form 872-A may be considered conditions of the waiver and thus part of the agreement or form." Sheuerman v. Commissioner, 47 T.C.M. 1394, 1398, 53 P-H Memo T.C. par. 84-160, at 84,563 (1984). Petitioner has not made clear how Sheuerman supports her position in the instant case. Petitioner apparently is arguing that based upon the February 1982 letter, she believed that the first consent form was restricted in the manner desired by Mr. Feldman. We do not find such belief to have been reasonable. As we indicate more fully, infra, in response to petitioner's equitable estoppel argument, the February 1982 letter does not purport to describe or limit the scope of the first consent form. Moreover, regardless of her belief, as we already have indicated, we look at objective manifestations of assent to determine whether an agreement has been entered into by the parties.

"Only Mr. Feldman testified with regard to petitioner's attempt to read the first consent form and ascertain whether the restrictions limited the consent to Churchill flowthrough items. There was no foundation laid for that testimony. Presumably Mr. Feldman's knowledge was based upon hearsay (i.e., petitioner's statements to Mr. Feldman). Due to respondent's failure to object at trial, Mr. Feldman's testimony was admitted into evidence without any restrictions on its use. However, that testimony, as well as Mr. Feldman's testimony concerning the instructions he left with petitioner when he went on vacation, does not satisfy us that petitioner completely understood Mr. Feldman's instructions. It has not been established to our satisfaction that at the time petitioner signed the first consent form, she only intended to sign a consent form that was limited in scope to Churchill flowthrough items. Nevertheless, since it is petitioner's objective manifestations that control the issue of mutual assent in the instant case, petitioner's subjective intent is not relevant to that issue.

first consent form is valid, the second consent form, which stated that the period of limitations on assessment was extended to June 30, 1984, also is valid.

Estoppel

Petitioner's next contention is that even if she assented to the first consent form, respondent nevertheless is equitably estopped from relying upon the first consent form and the second consent form. Respondent argues that petitioner has not shown the elements necessary to invoke the doctrine of equitable estoppel. We agree with respondent. "[T]he doctrine of equitable estoppel is applied against the Government 'with the utmost caution and restraint.' Boulez v. Commissioner, 76 T.C. 209, 214-215 (1981), affd. 810 F.2d 209 (D.C. Cir. 1987). There are several conditions that must be satisfied before the doctrine is applied. Lignos v. United States, 439 F.2d 1365, 1368 (2d Cir. 1971); Boulez v. Commissioner, supra at 215; Estate of Emerson v. Commissioner, 67 T.C. 612, 617-618 (1977), and cases cited therein. One of the conditions that must be satisfied is the existence of a false representation or wrongful, misleading silence by the party against whom the opposing party seeks to invoke the doctrine. Lignos v. United States, supra at 1368; Estate of Emerson v. Commissioner, supra at

617-618.10

Petitioner first contends that an employee of respondent's Manhattan Office made a false representation to petitioner's counsel, Mr. Feldman. Petitioner's argument is based upon a telephone conversation between Mr. Feldman and an employee of respondent's Manhattan Office. During that phone call, the employee allegedly employee allegedly represented to Mr. Feldman that the only issue under consideration with respect to petitioner's taxable year 1978 involved Churchill

10Other conditions that we have stated must be satisfied are as follows: (1) "[T]he error must be in a statement of fact and not in an opinion or a statement of law" (Estate of Emerson v. Commissioner, 67 T.C. 612, 618 (1977)); (2) "the person claiming the benefits of estoppel must be ignorant of the true facts" (Estate of Emerson v. Commissioner, supra); (3) the person claiming the benefits of estoppel must reasonably rely on the acts or statements of the one against whom estoppel is claimed (Hudock v. Commissioner, 65 T.C. 351, 363 (1975)); and (4) the person claiming the benefits of estoppel "must be adversely affected by the acts or statements of the [one] against whom estoppel is claimed" (Estate of Emerson v. Commissioner, supra).