## Facts

- Harry and Norma Holof filed joint federal income tax returns for 1976 and 1977 claiming partnership loss deductions tied to tax shelters.
- The IRS audited the returns, and the Holofs executed Form 872-A (and a similar consent for 1977), extending the normal three-year limitations period for assessment indefinitely.
- On October 8, 1982, the IRS mailed deficiency notices for 1976 and 1977, but the notices were not sent to the taxpayers’ “last known address” and were not received in time for a Tax Court petition.
- The IRS nonetheless assessed the deficiencies and initiated collection activity in April 1983.
- The IRS later conceded the 1982 notices were invalid, abated the assessment, and on June 15, 1984 mailed new deficiency notices for the same years that the Holofs received and timely petitioned in Tax Court.
- The Tax Court held that the 1982 mailing, though invalid under the Code, still terminated the Form 872-A waivers under the form’s wording, making the 1984 notices untimely.
- The Commissioner appealed.

## Issues

1. Whether a misaddressed deficiency notice that is invalid under I.R.C. §§ 6212 and 6213 nonetheless terminates a Form 872-A open-ended consent extending the limitations period for assessment.
2. Whether later actual receipt of a misaddressed notice can cure its defect for purposes of terminating the Form 872-A waiver.

## Decision

- The Third Circuit reversed the Tax Court and remanded.
- A defective, improperly addressed deficiency notice that is invalid under the Internal Revenue Code does not terminate a Form 872-A waiver.
- Form 872-A must be construed with the statutory assessment and deficiency scheme; “notice of deficiency” in the form means an effective statutory notice.
- The Holofs’ later receipt of the misaddressed 1982 notice did not cure the defect.
- Because the waiver remained in force, the properly mailed 1984 notices were timely.

## Legal Principles

- A Form 872-A consent extending the limitations period must be interpreted in harmony with the Internal Revenue Code provisions governing assessment and deficiency procedures.
- In this context, “notice of deficiency” is a term of art referring to a notice satisfying I.R.C. §§ 6212 and 6213, including mailing to the taxpayer’s last known address.
- Only an effective statutory notice of deficiency (or the specified termination form, such as Form 872-T) can terminate a Form 872-A open-ended waiver.
- A misaddressed deficiency notice is not rendered effective merely because the taxpayer later receives it.

## Conclusion

The court held that an invalid, misaddressed deficiency notice cannot terminate a Form 872-A open-ended extension of the assessment limitations period; only a statutorily effective notice (or other authorized termination method) ends the waiver, so the later properly addressed deficiency notices were timely.


Holof v. Commissioner, 872 F.2d 50 (3d Cir. 1989)