Kellogg v. Comm'r of Internal Revenue, Docket No. 11208-86.

Citation88 T.C. 167,88 T.C. No. 10
Decision Date15 January 1987
Docket NumberDocket No. 11208-86.
PartiesBURTON KELLOGG, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

P, a beneficiary of Estate, filed a petition seeking a redetermination of transferee liability. Attached to the petition was a letter signed by a revenue officer demanding payment from P of delinquent taxes assessed against Estate. HELD, no notice of deficiency or notice of transferee liability was issued. R's Motion to Dismiss for Lack of Jurisdiction granted. Rule 13, Tax Court Rules of Practice and Procedure; secs. 6212, 6213, 6901, I.R.C. 1954, as amended. Anthony E. Reiss, for the petitioner.

Anne M. DiFonzo and Charles Williams, for the respondent.

OPINION

FEATHERSTON, JUDGE:

Respondent's Motion to Dismiss for Lack of Jurisdiction filed herein was assigned to Special Trial Judge Francis J. Cantrel pursuant to section 7456(d)(4) (redesignated section 7443A(b)(4) by section 1556 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 1755) and Rule 180. 1 After a review of the record, we agree with and adopt his opinion which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

CANTREL, SPECIAL TRIAL JUDGE:

This case is before the Court on respondent's Motion to Dismiss for Lack of Jurisdiction filed on May 27, 1986. Respondent seeks dismissal on the ground that no statutory notice of deficiency or notice of transferee liability was issued to petitioner pursuant to section 6212.

BACKGROUND

At the time the petition was filed, petitioner resided at Ouaquaga, New York.

Petitioner is the sole surviving relative of Herbert Morris Kellogg who died on September 23, 1980 leaving a gross estate in excess of $3,000,000. The estate consisted primarily of cash and marketable securities. Petitioner, a beneficiary of the Estate of Herbert Morris Kellogg (hereinafter the Estate), hired counsel for the Estate to handle all administrative matters including the filing of Federal tax returns. 2 An accounting firm was retained by the Estate's counsel, and a Form 706, Federal Estate Tax Return, was prepared showing a Federal estate tax liability of $1,086,130. The return was not timely filed, however, nor was the tax timely paid. It was not until December of 1983, over 3 years from the date of Herbert Morris Kellogg's death, that the estate taxes reported on the return were paid.

Since the estate tax return was filed late, respondent assessed a late filing addition against the Estate. An addition for the late payment of tax was also assessed. 3 These additional amounts remain unpaid by the Estate, and interest pursuant to section 6601 is accruing thereon. See sec. 6601(e). An administrative appeal was made requesting the abatement of the assessed additions. However, respondent declined to abate the additions to tax.

Subsequently, the case was referred to Revenue Officer Edward Cartin (‘Cartin ‘) of the Binghamton, New York, Internal Revenue Service Office. 4 During his collection activities, Cartin learned that the Estate's last known address was not in New York, but in Pennsylvania. Consequently, Cartin prepared to transfer the case to a Pennsylvania district office for collection. Cartin contacted Revenue Officer Lawrence Ziolkowski (‘Ziolkowski‘), a ‘Special Procedures adviser‘ with the Buffalo district office, to discuss transfer procedures. In the discussion, it was decided that a letter be sent to the Estate's distributee (petitioner) in a last effort to collect the tax by Cartin.

In a letter dated January 24, 1986, Cartin notified petitioner of the estate taxes due from the Estate of Herbert Morris Kellogg. 5 The letter informed petitioner that a lien exists on the property included in the gross estate pursuant to section 6324 and stated, [d]emand for the immediate payment is hereby made for the amount of $1,102,710.38 through 2-28-86, 6 which is the extent of the value, at the time of decedent's death, of property received by you as spouse, beneficiary, transferee, trustee, surviving tenant, or person in possession of property by reason of the exercise, non-exercise, or release of a power of appointment.‘ 7

On January 24, 1986, neither Cartin or Ziolkowski were authorized to issue statutory notices of deficiency or notices of transferee liability.

On April 25, 1986, a petition was filed seeking ‘a redetermination of the liability set forth by the Commissioner of Internal Revenue in his notice of liability * * * dated January 24, 1986 * * *.‘ The petition, in sum, contests petitioner's liability as a ‘transferee.‘ In his prayer for relief petitioner asks that we ‘enjoin the Internal Revenue Service from attempting to collect the Estate Tax from Burton Kellogg [petitioner], that the Tax Court abate the penalties [additions] and interest asserted to be due from the Estate of Herbert Morris Kellogg and that the Tax Court grant any other relief the Court deems just and proper.‘ [Reproduced literally.] Attached to the petition is a copy of the letter dated January 24, 1986.

Respondent subsequently moved to dismiss for lack of jurisdiction on the ground that no statutory notice of deficiency authorized by section 6212 was sent to petitioner. 8 Hearings were held on August 20, 1986 and December 3, 1986 at the conclusion of which respondent's motion was taken under advisement.

MOTION TO DISMISS FOR LACK OF JURISDICTION

It is clear that this Court can proceed on the merits of petitioner's case only if we find that the letter dated January 24, 1986, is effective to support Tax Court jurisdiction. Except in actions for declaratory judgment or for disclosure, the jurisdiction of the Court depends (1) in a case commenced by a taxpayer, upon the issuance of a notice of deficiency and (2) in a case commenced by a transferee or a fiduciary, upon the issuance of a notice of liability to the transferee or fiduciary. Rule 13(a). As such, what must be shown is that a notice of deficiency or notice of transferee liability was sent in this case. Without such a showing the Court has no jurisdiction and respondent's motion must be granted.

Petitioner contends that the letter dated January 24, 1986 is a notice of deficiency and, alternatively, a notice of transferee liability. Petitioner's alternative argument is an issue of first impression.

In support of his position that the letter is a notice of deficiency petitioner argues (1) no form for a notice of deficiency is required, (2) a notice of deficiency need not notify petitioner that the matter may be resolved in Tax Court, and (3) petitioner can waive defects in the notice of deficiency in order to avail himself of Tax Court jurisdiction.

This is not the first occasion that we face the task of determining whether a letter or some other communication constitutes a statutory notice of deficiency. 9 Recently we determined that a pre-filing notification letter did not constitute a notice of deficiency within the meaning of sections 6212(a) and 6213(a). See Abrams v. Commissioner, 84 T.C. 1308 (1985), affd. 787 F.2d 939 (4th Cir. 1986), affd. sub nom. Benzvi v. Commissioner, 787 F.2d 1541 (11th Cir. 1986), affd. sub nom. Spector v. Commissioner, 790 F.2d 51 (8th Cir. 1986), affd. sub nom. Donley v. Commissioner, 791 F.2d 383 (5th Cir. 1986), affd. in an unpublished opinion sub nom. Becker v. Commissioner, 799 F.2d 753 (7th Cir. 1986), affd. sub nom. Gaska v. Commissioner, 800 F.2d 633 (6th Cir. 1986), affd. sub nom. Alford v. Commissioner, 800 F.2d 987 (10th Cir. 1986), affd. in an unpublished opinion sub nom. Neal v. Commissioner, ____ F.2d ____ (2d Cir., Mar. 17, 1986), cert. denied ____ U.S. ____ (1986). 10 In Abrams we summarized the principles which guide our determination:

Section 6212(a) authorizes the issuance of a notice of deficiency. No particular form is required. Scar v. Commissioner, [81 T.C. 855 (1983)] at 860; Jarvis v. Commissioner, 78 T.C. 646, 655-656 (1982). However, the notice must fulfill the purpose of providing formal notification that a deficiency in tax has been determined. Foster v. Commissioner, [80 T.C. 34 (1983)] at 229. The notice is ‘only to advise the person who is to pay the deficiency that the Commissioner means to assess him; anything that does this UNEQUIVOCALLY is good enough.‘ Olsen v. Helvering, 88 F.2d 650, 651 (2d Cir. 1937) (emphasis added). The notice must (1) advise the taxpayer that the Commissioner has, in fact, determined a deficiency, and (2) specify the year and amount of the deficiency. Foster v. Commissioner, supra at 229-230. [84 T.C. at 1310; fn. ref. omitted.]

Clearly the letter which petitioner submits as the basis for our jurisdiction in this case cannot be considered a notice of deficiency. Although a notice of deficiency need not be in or on any particular form, it must convey that a deficiency has been determined. The letter in controversy simply does not do this.

In Abrams we noted that the letters which the taxpayers contended supported Tax Court jurisdiction did not purport to be notices of deficiency. We also noted that respondent in that case did not intend that the letters be deficiency notices. 84 T.C. at 1310. As in Abrams, the letter in this case does not purport to be a deficiency notice nor was it intended as such. We said in Lerer v. Commissioner, 52 T.C. 358, 365 (1969), ‘the sufficiency of the notice must be determined from the language used.‘ After carefully reviewing the letter herein the unequivocal message is that the Estate's delinquent taxes be paid. In our opinion, the letter is unmistakably a demand for payment and not a notice of deficiency.

Further, the authority to determine and issue statutory notices of deficiency is vested by statute in the Secretary of the Treasury or his delegate. See secs. 6212(a), 7701(a)(11)(B), and 7701(a)(12)(A)(i). Pursuant to sections 301.6212-1(a) and 301.7701- 9(b), Proced. & Admin. Regs., the Secretary has delegated to District Directors the authority to send deficiency notices. See ...

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