Berger v. CIR
| Decision Date | 29 November 1968 |
| Docket Number | No. 17107-17109.,17107-17109. |
| Citation | 404 F.2d 668 |
| Parties | Milton BERGER and Ruth K. Berger (Deceased), Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. PENNSYLVANIA PAPYRUS CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Joseph YOVANOVICH and Ann Yovanovich, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
| Court | U.S. Court of Appeals — Third Circuit |
Jules I. Whitman, Dilworth, Paxson, Kalish, Kohn & Levy, Philadelphia, Pa., for petitioners; Richard L. Levy, Philadelphia, Pa., of counsel.
Stephen H. Hutzelman, Appellate Section, Tax Division, Dept. of Justice, Mitchell Rogovin, Asst. Atty. Gen., Meyer Rothwacks, Crombie J. D. Garrett, Attys., Dept. of Justice, Washington, D. C., for respondent.
Before BIGGS, FREEDMAN and VAN DUSEN, Circuit Judges.
These three petitions for review, which were consolidated for argument here as they were at the trial in the Tax Court, present two questions for consideration. One is whether the notices of income tax deficiency which the Commissioner sent to the taxpayers were directed to the statutory "last known address", and the other is whether the notices were in any event effective because the taxpayers and their designated attorney admittedly received them in the regular course of the mail.
The problems presented grow out of § 6212 of the Internal Revenue Code of 1954 which provides for notice of a deficiency in income tax:
The Internal Revenue Service questioned the tax treatment in the 1960, 1961 and 1962 income tax returns of Pennsylvania Papyrus Corporation,1 Milton and Ruth K. Berger and Joseph and Anna Yovanovich of alleged royalty payments made by the corporation to the individuals. On April 30, 1965, the District Director of Internal Revenue at Newark, New Jersey, mailed so-called "30-day letters" regarding the controversy to the taxpayers at the addresses given on their returns.2 On May 18, 1965 Jules I. Whitman, Esquire, wrote to the Service that he had been retained as attorney for the taxpayers and requested an extension of time for filing a protest because he had been unable to obtain all the necessary information. Mr. Whitman enclosed copies of powers of attorney executed by the taxpayers designating him as their attorney. In the printed form, supplied by the Internal Revenue Service,3 the words "Copies of" were stricken out of the sentence reading: "Copies of correspondence addressed to the taxpayer in proceedings involving the above matter(s) should be sent to:", and Mr. Whitman's name and office address were typewritten in to complete the sentence.
The Service granted the requested extension of time, and when the protests were filed the names and addresses of the taxpayers were stated as they had been given in the income tax returns for the years involved. Thereafter on September 24, 1965, the District Director sent notices of the time and place of a conference to the taxpayers at the addresses given on their returns. On the same day the District Director sent Mr. Whitman copies of these letters together with a form letter4 which read: "As authorized in a power of attorney on file, we are forwarding, for your information, the enclosed copy of a letter of this date addressed to the taxpayers named below." On a number of occasions thereafter the taxpayers executed consents to extend the period of the statute of limitations.5 In several instances these forms were sent directly to Mr. Whitman for execution by the taxpayers and on one occasion they were sent to Mr. Berger at the request of Mr. Whitman, who expected to be absent from his office.
On March 11, 1966, Mr. Whitman wrote the Service that he did not wish the cases to be forwarded for consideration by the appellate division and went on to say: "Under the circumstances, it is my understanding that you will now proceed to cause statutory notices of deficiency (90-day letter) to be issued. * * *" On June 3, 1966, the District Director sent the deficiency notices to the taxpayers by certified mail at the addresses given on their income tax returns for the years involved and sent copies by ordinary mail to Mr. Whitman accompanied by a form letter identical to that of September 24, 1965. The taxpayers and Mr. Whitman received these notices in the regular course of the mail.6
On September 9, 1966, the taxpayers filed petitions for redetermination in the Tax Court. The Commissioner moved for dismissal on the ground that the petitions were not filed within the ninety-day statutory period,7 and the taxpayers filed a countermotion for dismissal for lack of jurisdiction because of the alleged invalidity of the deficiency notices.8 The Tax Court granted the Commissioner's motion to dismiss and denied the taxpayers' countermotion, holding that the deficiency notices were valid and the petitions therefore were filed beyond the statutory period.9
In dealing with these taxpayers the Commissioner ignored the effect of the alteration in the power of attorney, either because he interpreted the power as permitting him to continue to communicate directly with the taxpayers and to send copies to their attorney, or because he decided that the alteration was an impermissible change in the prescribed form,10 or simply because the employees in the busy Internal Revenue Service did not notice that the words "Copies of" had been lined out. The taxpayers contend, however, that the notices of deficiency could properly be sent only to Mr. Whitman and that this had to be done by the use of certified or registered mail. Since Mr. Whitman was sent only copies and these by ordinary mail, they claim the notices mailed to him were doubly inadequate and therefore ineffective. On the other hand, they claim that although the originals were sent to them directly by certified mail, they were ineffective because they were not sent to the "last known address" of the taxpayers, which by virtue of the power of attorney was Mr. Whitman's office address.
The taxpayers rely heavily on Expanding Envelope and Folder Corporation v. Shotz, 385 F.2d 402 (3 Cir. 1967), where we held that notices of deficiency were validly sent to the taxpayers in care of their attorneys-in-fact at the attorneys' addresses given in the powers of attorney. The taxpayers in that case had stricken out of the same form of power of attorney the words "Copies of" and inserted the word "All". We rejected the taxpayers' contention that the address of the attorneys given in the powers was not the "last known address" within the meaning of the statute and that the words "All correspondence addressed to the taxpayers" were not sufficiently broad to include a notice of deficiency. The essence of the decision there was, as we said in our per curiam opinion: "When the taxpayers deleted the words `copies of,' relating to correspondence and substituted the word `all,' they became bound by their actions." 385 F.2d at 404. The two cases are clearly different. There the taxpayers were barred from complaining of the notice which followed their own instructions. It would be quite different, however, to require the Commissioner to follow the instructions in the power of attorney to the exclusion of all other information which sheds light on the determination of the address to which notice should be sent.
The Internal Revenue Service is often presented with more than one address for a taxpayer, and where in the course of dealings between the Commissioner and the taxpayer, letters are successfully sent to different addresses, it is unreasonable to assume that one and not the other of the addresses is the "last known address" for the purpose of giving the deficiency notice. For this reason in Delman v. Commissioner, 384 F.2d 929 (3 Cir. 1967), cert. denied, 390 U.S. 952, 88 S.Ct. 1044, 19 L.Ed.2d 1144 (1968), we accepted the view that the last known address is an address to which the Commissioner in all the circumstances may reasonably believe the taxpayers wish the notices sent.11
In the circumstances of this case, it cannot be said that the alteration of the powers of attorney amounted to a direction that no letters or even formal documents such as notices of deficiency could be addressed to the taxpayers themselves.12 The actions of the parties indicate that they did not consider the altered form of power of attorney to have this effect. The Commissioner never responded to the alteration and Mr. Whitman and the taxpayers never complained that there had been a failure to comply with the power of attorney when letters were sent to the taxpayers directly with copies to Mr. Whitman. When on March 11, 1966 Mr. Whitman decided against appellate division consideration of the controversy and wrote that the Service should now proceed to issue the deficiency notices, he gave no indication of any disagreement with the manner of giving notice which the Service had already followed. Instead the taxpayers waited until the expiration of the ninety-day period and then filed a petition for redetermination which in their view of the law should have been...
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...6212(a) inviting the use of registered or certified mail proves to be a technical, but harmless violation"); Berger v. Comm'r of Internal Revenue, 404 F.2d 668, 673 (3d Cir.1968), cert. denied, 395 U.S. 905, 89 S.Ct. 1744, 23 L.Ed.2d 218 (1969) (section 6212(a) authorization that notice of ......
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