Burford v. Comm'r of Internal Revenue

Decision Date19 January 1981
Docket NumberDocket No. 8330-80.
Citation76 T.C. 96
PartiesS. FRANKLIN BURFORD, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

Respondent issued a notice of deficiency for gift tax for the tax year which ended Dec. 31, 1976. The proper taxable period was the calendar quarter which ended Dec. 31, 1976. Held the notice of deficiency is not invalid because of a typographical error where the deficiency notice sent fully encompassed the proper taxable period, and the petitioner is not misled as to the period covered. S. Franklin Burford pro se.

Barry Lederman for the respondent.

OPINION
OPINION OF THE SPECIAL TRIAL JUDGE
Cantrel, Special Trial Judge

This case is presently before the Court on petitioner's motion to dismiss for lack of jurisdiction filed on June 2, 1980.

Respondent, in his notice of deficiency issued to petitioner on March 27, 1980, determined a deficiency of $73,326.20 in petitioner's gift tax for the tax year ended December 31, 1976. Petitioner timely filed his petition on June 2, 1980, and on the same day, he filed a motion to dismiss for lack of jurisdiction. Petitioner contends not only that the determination set forth in the notice of deficiency is incorrect but also that he made an overpayment of tax for the calendar quarter ended December 31, 1976, in the amount of $54,240.84. The basis for the motion to dismiss is that the notice of deficiency was issued for the tax year ended on December 31, 1976, but that the statute provides for the imposition of gift tax in calendar quarter periods.

Petitioner resided at Four Stemwinder Townhouse, Snowshoe, W. Va., on the date he filed his petition. He filed a gift tax return with the Internal Revenue Service at Memphis, Tenn., for the calendar quarter ended December 31, 1976. In the top right-hand corner of the cover letter to the notice of deficiency, the standard form reads “Tax Year Ended and Deficiency,” and it is followed by typewriting which reads December 31, 1976, $73,326.20.” On Form 3615, which is attached to the cover letter and which sets forth the computation in explanation of the increase in tax, the standard form provides “Calendar Periods” under which is typed 12/31/76.” On the form which provides for “Explanation of Items,” Form 886-A, also attached to the notice of deficiency, the standard heading provides “Year/ Period Ended,” under which is typed 12/31/76.”

Respondent's determination of the gift tax deficiency was made on these grounds:

(a) It is determined that your forgiveness of a debt in the amount of $117,199.07 (the remaining unpaid principal on a note given to you by your former wife, Elizabeth Burford, and payable to you) constitutes a taxable gift in this amount pursuant to the provisions of Section 2511 of the Internal Revenue Code. As you did not report this gift, taxable gifts are increased by $117,199.07.

(b) Due to the gift in Item (a) above an additional exclusion of $3,000.00 is allowable.

(c) In December 1976 you transferred $600,000 into an irrevocable trust established by you. Under the terms of the trust agreement your wife Fern Burford was to receive the net income derived from the trust estate during her lifetime and so much of the principal of the trust estate as the trustee might “from time to time determine to be in her best interests.” The remainder interest was to be divided among your lineal descendents upon her death. That interest transferred in trust for the benefit of your wife, valued at $486,786.00, is ineligible for the split gift provisions of Section 2513(a)(1) of the Internal Revenue Code. It is therefore determined that the following gifts are eligible for the split gift provision:

+---------------------------------------------+
                ¦1. Remainder interest in trust   ¦$113,214.00¦
                +---------------------------------+-----------¦
                ¦2. Valley Industries—7,000 shares¦49,382.90  ¦
                +---------------------------------+-----------¦
                ¦3. Forgiveness of note           ¦117,199.07 ¦
                +---------------------------------+-----------¦
                ¦Total split gifts                ¦279,795.97 ¦
                +---------------------------------+-----------¦
                ¦Less 50%                         ¦139,897.99 ¦
                +---------------------------------+-----------¦
                ¦Split gifts as determined        ¦139,897.98 ¦
                +---------------------------------+-----------¦
                ¦Split gifts per return           ¦324,691.45 ¦
                +---------------------------------+-----------¦
                ¦Increase taxable gifts           ¦184,793.46 ¦
                +---------------------------------------------+
                

With respect to the determined deficiency, petitioner in his petition alleges:

4. The determination of tax set forth in said notice of deficiency and said overpayment are based upon the following errors:

(a) The Commissioner erroneously included in taxable gifts the settlement of a claim against the Petitioner through his forgiveness of a $117,199.07 debt due him.

(b) Petitioner erroneously failed to take an additional exclusion of $3,000.00 on his return.

(c) The Commissioner erroneously included in taxable gifts $184,793.46 that, properly, is attributable to Petitioner's then spouse, Fern J. Burford.

(d) Petitioner erroneously included in his return a transfer in trust of $600,000.00 which transfer was made to satisfy his obligation to a mentally ill spouse.

(e) The Commissioner failed to give Petitioner a tax credit or off-set for the refund that will be due on Petitioner's then Spouse's (Fern J. Burford's) gift tax return for the calendar quarter ended December 31, 1976 in the amount of $54,240.94 if the amount referred to in (c) above is not attributed to said Fern J. Burford.

Petitioner insisted on oral argument and in his statement in support of his motion that respondent could not validly send a notice of deficiency for gift tax for any period other than a calendar quarter. Respondent on oral argument admitted that a typographical error was made in referring to the precise deficiency period as “Tax Year Ended December 31, 1976,” but he asserts that considering the entire notice, petitioner could have, and did, as evidenced in his petition, reasonably determine that the period in question was for the calendar quarter which ended December 31, 1976. We agree with respondent.

This Court is empowered by sections 6214 and 74422 to redetermine deficiencies as determined by the Commissioner in his notice of deficiency.

Section 2501 imposes a tax for each calendar quarter on the transfer of property by gift during such quarter by any individual. The imposition of the gift tax on a calendar quarterly basis instead of on the calendar year was a result of an amendment to the Internal Revenue Code made by Pub. L. 91-614, 84 Stat. 1836, effective January 1, 1971. The Senate report for that amendment clearly states that the provision was “designed to speed up collection of estate and gift taxes.” S. Rept. 91-1444, 91st Cong., 2d Sess. (1970), 1971-1 C.B. 574.

The issuance of a notice of deficiency for a calendar year instead of the proper period, a calendar quarter, does not invalidate the notice in this case. Although this Court does not have jurisdiction over any period other than that specifically covered by the notice of deficiency,3 where the notice covers an entire calendar year which includes the calendar quarter which was the proper taxable quarter, and the petitioner is not misled by the error,...

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12 cases
  • Dees v. Comm'r
    • United States
    • U.S. Tax Court
    • February 2, 2017
    ...the taxpayer was not misled. Id. Referring to another similar case, the Court explained:In holding that we had jurisdiction in Burford v. Commissioner * * * [, 76 T.C. 96, 100 (1981), aff'd without published opinion, 786 F.2d 1151 (4th Cir. 1986),] we pointed out that the taxpayer was not m......
  • Century Data Sys., Inc. v. Comm'r of Internal Revenue
    • United States
    • U.S. Tax Court
    • March 8, 1983
    ...has done, that respondent's reference to Atlas Oil II is inadvertent. 9. The holding in Sanderling was followed in Burford v. Commissioner (Dec. 37,620), 76 T.C. 96 (1981), wherein we held the issuance of a notice of deficiency for gift tax for a calendar year instead of the proper period, ......
  • Oyer v. Commissioner, Docket No. 11887-02L.
    • United States
    • U.S. Tax Court
    • June 17, 2003
    ...notice of deficiency to the corporation would not be invalid merely because it covered the entire 1995 year. See Burford v. Commissioner [Dec. 37,620], 76 T.C. 96, 100 (1981), affd. without published opinion 786 F.2d 1151 (4th Cir. 1986); Sanderling, Inc. v. Commissioner [Dec. 33,939], 66 T......
  • Upchurch v. Commissioner
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    • July 9, 2007
    ...in those cases as petitioner would like. We are likewise not persuaded by petitioner's reliance on comments made in Burford v. Commissioner [Dec. 37,620], 76 T.C. 96 (1981), affd. without published opinion 786 F.2d 1151 (4th Cir. 1986), and Sanderling, Inc. v. Commissioner [78-1 USTC ¶ 9284......
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