92 T.C. 729 (1989), 29531-87, Pietanza v. C.I.R.

Docket Nº:29531-87.
Citation:92 T.C. 729
Opinion Judge:COHEN, JUDGE:
Attorney:Michael D. Savage, for the petitioners. Richard G. Goldman, for the respondent.
Judge Panel:KORNER, J., dissents. RUWE, J., dissenting: NIMS, C.J., concurs in the result only. BUCKLEY, SPECIAL TRIAL JUDGE:
Case Date:March 30, 1989
Court:United States Tax Court

Page 729

92 T.C. 729 (1989)




No. 29531-87.

United States Tax Court

March 30, 1989

Petitioners and respondent each moved to dismiss the petition for redetermination of petitioners' 1980 Federal income tax for lack of jurisdiction: petitioners on the ground that no valid notice of deficiency had been issued; respondent on the ground that petitioners had not filed their petition within the time set forth in sec. 6213. Petitioners did not receive a notice of deficiency. Respondent has lost the administrative file for petitioners' 1980 year and is unable to supply a copy of a notice of deficiency but he has placed into evidence postal service Form 3877, indicating a certified mailing to petitioners on April 15, 1985, at their last known address, as well as a draft of a deficiency notice.

Held, postal service Form 3877, standing alone, does not prove that respondent issued a valid notice of deficiency where the presumption of official regularity is overcome by evidence of irregularity. Petitioners' motion to dismiss for lack of jurisdiction is granted.

Michael D. Savage, for the petitioners.

Richard G. Goldman, for the respondent.



This case was assigned to Special Trial Judge Buckley pursuant to the provisions of section 7443A(b) of the Internal Revenue Code of 1986 and Rules 180 and 181. [1] After a review of the record, we agree with and adopt her opinion which is set forth below.



This case is before us on cross- motions to dismiss for lack of jurisdiction. Petitioners have moved to dismiss this case for lack of jurisdiction on the alternative grounds that (1) no notice of deficiency was mailed to petitioners, (2) any notice mailed to petitioners was not mailed to them at their last known address, and (3)

Page 730

any notice which was mailed was barred by the statute of limitations. Respondent has moved to dismiss this case for lack of jurisdiction on the ground that the petition was not filed timely pursuant to section 6213.

Petitioners have resided at 1560 Kearney Drive, North Brunswick, New Jersey 08902, at all relevant periods herein. They received a notice at that address from the Internal Revenue Service, Holtsville, New York (Form 3552) dated September 16, 1985, titled Statement of Tax Due on Federal Tax Return, for their 1980 tax year indicating a balance due as follows:

" TAX $122,869.00

NEG PEN 6,143.00
INT 98,781.47
This statement indicated an assessment date of September 4, 1985. Petitioners subsequently received from the Internal Revenue Service (IRS) an undated communication (Form 8125) which referred to their 1980 year, the ‘ balance of prior assessments‘ in the amount of $227,793.47, together with ‘ late payment penalty‘ of $14,197.28 and ‘ interest‘ of $41,910.19, for a ‘ total amount due‘ of $283,900.94. Petitioners allege they executed a Form 872, Consent to Extend Time to Assess Tax, in regard to 1980 which expired on April 15, 1985. They further allege that the Internal Revenue Service did not send them a notice of deficiency for 1980 either prior to or after that date. Respondent alleges that on April 15, 1985, a statutory notice of deficiency was mailed to petitioners in regard to their 1980 year and that the notice was sent by certified mail to 1560 Kearney Drive, North Brunswick, New Jersey 08902. In support of his allegations, respondent attached to his Motion to Dismiss postal service Form 3877, Application for Registration or Certification, with an April 15, 1985, postmark date from the Newark, New Jersey, U.S. Postal Service, indicating a mailing to petitioners on that date. [2] The petition herein was filed on September 1, 1987, substantially more than the 90 days during which this Page 731 Court has jurisdiction pursuant to section 6213(a), if a notice of deficiency in fact was mailed on April 15, 1985, to petitioners. Respondent is unable to locate his administrative file in this matter, and accordingly, is unable to provide the Court (or petitioners) with a copy of a notice of deficiency for 1980. Further, there is no indication in this record, other than the bare existence of postal service Form 3877, that a notice of deficiency is, or ever was, in existence. We know only that a draft of a notice was prepared. Various communications between the Internal Revenue Service and counsel for petitioners serve only to confuse this matter further. When petitioners received the Statement of Tax Due (Form 3552) from the Internal Revenue Service in September of 1985, their counsel wrote to the IRS office which issued the statement under date of November 20, 1985, enclosing a copy of the consent Form 872, extending the statute of limitations to April 15, 1985, and alleged that the tax had been assessed after the expiration of the statute of limitations. The answer of February 10, 1986, which he received from the Chief, Tax Support Section, IRS, Holtsville, New York, had no reference whatsoever to the issuance of a notice of deficiency. Rather, it stated in relevant part: In reference to your letter of November 20, 1985, please be advised that the Statute of Limitations does not apply in your case. The law states that a 25% omission of income extends the statute to 6 years and fraud extends the statute indefinitely. [3] Next, petitioners' counsel by letter dated February 21, 1986, wrote in response to the IRS, Holtsville, as follows: We have absolutely no reason to believe that a 25% omission of income or an issue of fraud is involved in this case which would extend the statute of limitations beyond 3 years. Indeed, when the taxpayers signed their last Form 872, it was clear that any adjustments to their tax liability would derive from corresponding adjustments on returns of partnerships in which the taxpayers were partners - partnerships which, we know for a fact, reported LOSSES for the 1980 taxable year. Accordingly, it is still our position that the statute of limitations has expired. Page 732 In addition, although the Service assessed the taxpayers for $227,793.47 on September 4, 1985, the taxpayers have never received a Notice of Deficiency or any other document explaining the assessment. Kindly provide an explanation for the assessment at once. Further, he wrote again on February, 27, 1986, in response to another statement of tax due, repeating that petitioners never received a notice of deficiency, that the statute of limitations had expired, and enclosing copies of previous correspondence to the Chief, Taxpayer Assistance Section, IRS, Holtsville. The record does not indicate what, if any, response was received to these two letters. Petitioners' counsel, on March 5, 1986, filed a request pursuant to the Freedom of Information Act (FOIA) on behalf of petitioners requesting the following information: All material in your files relating to the federal income tax return (Form 1040) filed by Peter and Mary Pietanza for the year ended December 31, 1980, including (but not necessarily limited to) the tax return itself and all accompanying statements and schedules, correspondence between the Internal Revenue Service and the taxpayers or their representatives regarding said return, reports (internal or otherwise) of examining or other agents prepared in connection with or following an examination or other review of said return, Forms 872 or comparable forms signed by the taxpayers, 30-day letters, 90-day letters, closing agreements, waivers of restriction on assessment, and other documents pertaining to said return. The response of the IRS to the FOIA request, as all other IRS responses in this record, did not mention that a notice of deficiency had been issued. Rather, it stated that the documents requested ‘ are all exempt from disclosure under the provisions of the Freedom of Information Act, 5 U.S.C. 552 exemptions (b)(3); (b)(5); (b)(7)(A), (B), (D), and (E) in conjunction with the statutory exemption cited in 26 U.S.C. 6103 (e)(7).‘ Petitioners persisted in their inquiries of the IRS. On June 15, 1987, their counsel reiterated that tax was not due for their 1980 year because the statute of limitations had expired and because they had not received a notice of deficiency. He wrote essentially the same letter to the IRS on July 15, 1987. On August 17, 1987, petitioners received yet another letter from the IRS which failed to mention the existence of a notice of deficiency. That letter stated: Page 733 In reply to your recent inquiry please be advised that we have previously explained that the statute of limitations does not apply in your case. If you would like a reopen audit you must file a 1040X with all backup information to substantiate your claim. We do not have before us any communication prior to the petition herein from the IRS in which they alleged the existence of a notice of deficiency. Additionally, we note that there is similarly no statement admitting that such a notice was NOT in existence. Petitioners thereupon filed their petition in this Court on September 1, 1987. Both petitioners have filed affidavits that they never received a notice of deficiency with respect to their 1980 tax year, that they have never seen such a document, and that to the best of their knowledge and belief, no advisor of theirs ever received such a document. Respondent concedes that he is unable to locate the administrative file in this case. He has not provided the Court...

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