Allnutt v. C.I.R.

• Decision Date: 23 April 2008
• Docket Number: No. 06-1477.,06-1477.
• Parties: Fred W. ALLNUTT, Sr., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

523 F.3d 406

Fred W. ALLNUTT, Sr., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 06-1477.

United States Court of Appeals, Fourth Circuit.

Argued: March 19, 2008.

Decided: April 23, 2008.

ARGUED: Charles E. McFarland, New Castle, Kentucky, for Appellant. Marion Elizabeth Erickson, Tax Division, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF: Eileen J. O'Connor, Assistant Attorney General, Andrea R. Tebbets, Tax Division, United States Department of Justice, Washington, D.C., for Appellee.

Before DUNCAN, Circuit Judge, HAMILTON, Senior Circuit Judge, and WILLIAM L. OSTEEN, JR., United States District Judge for the Middle District of North Carolina, sitting by designation.

Affirmed by published opinion. Judge DUNCAN wrote the opinion, in which Senior Judge HAMILTON and Judge OSTEEN joined.

OPINION

DUNCAN, Circuit Judge:

Appellant Fred W. Allnutt, Sr. ("Allnutt") failed to timely file his federal income tax returns for the years 1981 through 1995. In 1997, after being acquitted of certain tax crimes, Allnutt prepared the past returns and submitted them to the Internal Revenue Service ("IRS"). In 2000, the IRS issued a notice of deficiency for those tax years, indicating that he underpaid by nearly two million dollars.

Allnutt subsequently filed a petition before the United States Tax Court arguing that the notice of deficiency was barred by the three-year limitations period established in § 6501(a) of the Internal Revenue Code (the "Code"), 26 U.S.C. § 6501(a), and that the IRS was therefore prohibited from assessing and collecting his delinquent taxes and accrued penalties. The Tax Court found that the IRS properly issued the notice to Allnutt within the three-year period immediately following the date that he filed his income tax returns. Because Allnutt has failed to demonstrate that he "meticulously complied" with the applicable statutory provisions for filing income tax returns on a date more than three years prior to the IRS's issuance of the notice of deficiency, we affirm the Tax Court's judgment.

I.

The parties agree that the IRS issued Allnutt a notice of deficiency on March 6, 2000. The parties also agree that § 6501 of the Code requires the IRS to assess a taxpayer's deficient taxes or to issue him a notice of deficiency within three years from the date the taxpayer "files" his federal income tax return. The dispute here centers on the date Allnutt should be deemed to have "filed" the returns in question. Thus, we focus on the facts pertinent to establishing whether Allnutt's 1981 through 1995 tax returns were filed prior to March 6, 1997.

A.

After a federal investigation into Allnutt's alleged Internal Revenue Code violations concluded in 1997, Allnutt hired an accounting firm to belatedly prepare his tax returns (Forms 1040) for the years 1981 through 1995. He was instructed by his counsel, who was in contact with the Department of Justice, to "file [his returns by hand] with the District Coun[se]l's office in Baltimore."¹ J.A. 208. On February 20, 1997, Allnutt signed his prepared tax returns for the years 1981 through 1995 (the "original returns") and wrote the following letter of transmittal to accompany those returns, addressed to the IRS District Director for the Baltimore area, Paul Harrington ("Harrington"), and the IRS District Counsel for the Baltimore area, Elizabeth Henn ("Henn"):

Dear Mr. Harrington and Mrs. Henn,

I am delivering to District Counsel with this letter original filings of 1040 tax returns for the year 1981 and for each year thereafter up through and including 1995. My attorney, Mr. Jeffrey Dickstein, has spoken with Mr. Gregory S. Hrebiniak, Department of Justice, who instructed him to have me file said returns with District Counsel.

J.A. 199. Allnutt then photocopied the returns and signed over the photocopied signatures with blue ink (the "photocopied returns").

On February 21, 1997, Allnutt delivered the original returns, along with the letter of transmittal, to Henn's secretary at the IRS District Counsel's office in Baltimore. Allnutt admits that he intended for these original returns to be his filed returns and that he thought he had effectively filed them by delivering them to the District Counsel's office.² Henn's secretary stamped the transmittal letter "received 2/21/97" and signed her name under the stamp. J.A. 199. These original returns were ultimately forwarded from the District Counsel's Office to the Special Procedures Office of the Baltimore District Director (the "Special Procedures Office").³ The original returns arrived at the Special Procedures Office without any identifying marks or date/time stamps. The Special Procedures Office stamped them "received" on March 10, 1997. An unknown individual from that office later wrote, "Copy of Return Secured [or Received] by Examination. 5/1/97," on the top of the first page of each of the returns. See Allnutt v. C.I.R., T.C.M. (RIA) 2002-311, 2002 WL 31875119, at *2 (2002). These returns were never further processed by the IRS. See J.A. 24.

After Allnutt left the District Counsel's office, he took the transmittal letter and the photocopied returns in a clasped envelope marked "Attention Mr. Paul Harrington" to the IRS office building housing the Baltimore District Director's offices. He did so to "provid[e] [District Director Harrington] copies of the returns . . . as a courtesy more than as a filing." J.A. 218. Upon his arrival to the building, Allnutt asked a security guard for directions to Harrington's office. The guard told him that Harrington was at lunch and directed him to a second person. The second person, an unidentified gentleman whom Allnutt encountered on a different floor than Harrington's office, also told Allnutt that Harrington was at lunch and offered to take the package from him and give it to Harrington upon his return. Allnutt asked the gentleman, whose title or position Allnutt failed to request or obtain, if he had "authority to accept packages on behalf of Mr. Harrington." J.A. 221. The gentleman responded affirmatively. Allnutt then asked if he would "be sure to give it to Mr. Harrington personally." J.A. 221. The gentleman agreed, and Allnutt gave him the package. At no time did Allnutt disclose to the gentleman the contents of the package, ask that the gentleman see to the filing of the enclosed returns, ask that the package or the enclosed returns receive a date stamp, or request a filing receipt. Allnutt testified that he "didn't consider getting a second date stamp [at the District Director's offices] because the first date stamp [at the District Counsel's office] to [him] confirmed the filing date." J.A. 218. Allnutt also failed to consult the IRS employees working at the "Taxpayer Services" walk-in area located on the first floor of the building, as is customary for taxpayers attempting to file hand-delivered returns.

District Director Harrington's secretary, Susan Arczynski ("Arczynski"), testified before the Tax Court that she typically processed all deliveries addressed to Harrington and that if the gentleman in the hallway brought the package in question to Harrington's office it "would have been presented to [her]." J.A. 221. Her usual practice was to stamp an item with the time and date that she received it, and to use Harrington's routing stamp on the item if there was room to do so. If there was no room on the document, she would ordinarily staple to the item a small routing slip containing the same information as the routing stamp. According to Arczynski, she always used a routing stamp if the item was an income tax return. She also testified that personnel in the District Director's offices usually directed persons who wanted to file a tax return to the walk-in area of the Taxpayer Services office located on the entry level, or first floor.

Arczynski was present at the District Director's offices on February 21, 1997— the day that Allnutt visited the building— but could not remember whether she had received the package containing his photocopied returns. These photocopied returns received no routing stamp or routing slip marked February 21, 1997. Sometime between that date and May 9, 1997, however, the photocopied returns were forwarded to the IRS Philadelphia Service Center. On the front page of each return appears: (1) "IRS Received from District 052197"; (2) "Postmark 050997" and "Received 051497"; (3) "Delinquent Original Cleared for Processing by 285" on June 16, 1997; and (4) "Resort Received" on June 27, 1997. See Allnutt v. C.I.R., T.C.M. (RIA) 2002-311, 2002 WL 31875119, at *3 (2002). On the bottom left corner of the front page of each return, "POS sorted for statute review, 5-14-97," also appears, but is struck out in an attempt to make it indistinguishable. Id. On a date not specified in the record, an unidentified IRS employee also added a document locator number to the upper right corner of the first page of each photocopied return. The government admits that these returns, rather than the originals delivered to the District Counsel's office, were those processed by the IRS. See J.A. 24.

B.

Section 6501 of the Code requires the IRS to assess any deficiency in a taxpayer's payment of taxes or to issue a notice of deficiency to the taxpayer within three years from the date the taxpayer files the applicable return. See 26 U.S.C. § 6501. IRS personnel use an internal document, Form 895, to keep track of the limitations period for each filed return. Any IRS employee who handles a return "has the responsibility to ensure that the statute of limitations date for that return is correctly reflected in the case file" and on the form. Internal Revenue Service, Internal Revenue Manual 4.7.3.4, http://www.irs.gov/irm/ (last visited April 16, 2008). Personnel are instructed to determine that date by first ascertaining the return's "Received Date" and then adding to it the...