Suspension of the Statute of Limitations from the UBS John Doe Summons (8/11/12)

I have previously blogged on Section 7609(e)(2)'s suspension of the statute of limitations upon nonresponse to a summons after 6 months from the date of service of the summons.  See John Doe Summonses & Statutes Of Limitations (5/27/11), here.

The statute is:

(2) Suspension after 6 months of service of summons.  In the absence of the resolution of the summoned party’s response to the summons, the running of any period of limitations under section 6501 or under section 6531 with respect to any person with respect to whose liability the summons is issued (other than a person taking action as provided in subsection (b)) shall be suspended for the period—
    (A) beginning on the date which is 6 months after the service of such summons, and
    (B) ending with the final resolution of such response.

The complete Section 7609 is here.

I have received information from a fellow practitioner that the IRS included the following language in an IDR with respect to the UBS John Doe summons:

Our counsel has recently brought to light the fact that the statute of limitation for years 2002 through 2007 have been extended due to code section 7609(e)(2). This is because a John Doe third party summons was issued to UBS and it took more than 6 months for UBS to provide the information. The result is an additional 814 days added to these statutes.

Some colleagues have had difficulty reconciling the 814 day count based on known events.  The beginning point for service of the summons seems to have been 7/21/08, making the starting date for the suspension 1/17/2009.  The final resolution date seems to create the uncertainty.  Here is a cut and paste of an email analysis from a colleague:

IRC 7609(e)(2)(B) says the period ends “with the final resolution of such [the summoned party’s] response.”   The last filing in the summons case against UBS was Aug 19, 2009 with the judge’s order dismissing the case.  The IRS and Switzerland announced that the summons was “definitively withdrawn” on Nov. 15, 2010, that was after the handover of information about 4,000 holders of Swiss bank accounts.

So, from (A) 1/17/2009 (6 months from 7/21/2008) until (B) 11/15/2010, the statute of limitations for the 2002-2007 years for persons on the List of 4,000 did not run.  I come up with 667 days, not 814.  Can anyone think of any other relevant dates that might be used for measurement? 

If any readers have any enlightenment on this, I would appreciate their comments.

I do have some questions, however.

First, since UBS's responses were seriatim until full compliance, could it be argued that, as to any U.S. taxpayer, the suspension period should look to the date of delivery of that taxpayer's UBS documents rather than the date of the final compliance with respect to other taxpayers?  I am sure that the IRS will urge a contrary position.  Generally, statutes of limitations serve an important function and are to be strictly construed.  Logically, therefore, suspensions of the statute of limitations should be narrowly construed.  Narrowly construed, the IRS is given what it needs by earlier compliance in a multi-taxpayer compliance cycle.  The statute surely was not intended to give the IRS extra days when it does not need the extra days.

Second, the turnover of the documents was made under the U.S. Swiss double tax treaty, not pursuant to the JDS which was ultimately dismissed for reasons having nothing to do with responsivenss.  Does and should that make a difference?  Can the argument be made that the U.S. knew that it could not get compliance with the JDS and merely used it as a threat / pretext to encourage the Swiss to respond to the treaty request?  Is it clear that this the double tax treaty request would invoke 18 U.S.C. § 3292, here, providing for suspensions during the period a request for information from a foreign country is outstanding?

A lot of issues will have to be faced by practitioners when the IRS tries to assert the suspension it claims.  I would appreciate readers' comments on the issue.