## Facts

- Barry I. Fredericks and his then-wife filed a timely joint federal income tax return for 1977 claiming a tax-shelter deduction.
- In October 1980, the IRS sent Fredericks Form 872-A (an indefinite consent extending the assessment period until a terminating event); Fredericks signed and returned it.
- Fredericks alleged the IRS later stated in 1981 that it never received the Form 872-A.
- After that statement, the IRS solicited and executed three one-year extension consents on Form 872 in 1981, 1982, and 1983; the last one-year extension expired June 30, 1984.
- Fredericks alleged the IRS discovered before June 30, 1984 that it possessed the Form 872-A all along, chose to rely on it, and did not inform him of that change.
- In July 1992, the IRS issued a notice of deficiency for 1977 (additional tax $28,361 plus substantial interest) based on disallowance of the tax-shelter deduction and reliance on Form 872-A.
- Fredericks petitioned the Tax Court, asserting the deficiency was time-barred and that the IRS should be equitably estopped from relying on Form 872-A due to misrepresentation and concealment.
- The Tax Court upheld the deficiency, treating Form 872-A as effective and rejecting Fredericks’s estoppel/statute-of-limitations defense.

## Issues

1. Whether the IRS may be equitably estopped from relying on an otherwise effective Form 872-A to support a 1992 deficiency notice when it allegedly misrepresented that it had not received the form, later rediscovered it, and failed to disclose its renewed reliance.
2. Whether the Tax Court erred by rejecting the estoppel defense without making necessary factual findings on IRS misconduct, taxpayer reliance, and resulting detriment.

## Decision

- The Third Circuit vacated the Tax Court’s decision and remanded.
- The court held the Tax Court did not adequately consider the estoppel claim or make the factual findings required to resolve it.
- On remand, the Tax Court was instructed to determine whether the IRS’s alleged misrepresentation and later concealment warrant equitable estoppel that would prevent reliance on Form 872-A to keep the limitations period open.

## Legal Principles

- Equitable estoppel against the federal government is disfavored but may be available in limited circumstances.
- A taxpayer seeking to estop the IRS must show more than negligence or administrative delay; the claim requires affirmative misconduct (such as misrepresentation or concealment) by government agents.
- The taxpayer must also establish reasonable, detrimental reliance on the government’s conduct.
- Even if a limitations-extension consent is formally valid, equitable estoppel can bar the government from invoking it where government misconduct induced reliance and prejudice.

## Conclusion

The Third Circuit required further fact-finding on whether the IRS’s alleged misrepresentations about receiving Form 872-A, its later undisclosed reliance on that form, and Fredericks’s alleged reliance and prejudice justify equitably estopping the IRS from treating the 1977 assessment period as open in 1992.


Fredericks v. Comm’r, 126 F.3d 433 (3d Cir. 1997)