Degill Corp. v. Comm'r of Internal Revenue

• Decision Date: 10 June 1974
• Docket Number: Docket No. 1996-73.
• Parties: DEGILL CORPORATION, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

62 T.C. 292

DEGILL CORPORATION, PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 1996-73.

United States Tax Court

Filed June 10, 1974.

Solomon Fisher and John R. Latourette, Jr., for the petitioner.

Paul J. Sude, for the respondent.

Petitioner is a Pennsylvania corporation with its registered office in Philadelphia. Its entire business operations were conducted in the South Pacific where its officers and employees, most of its shareholders, its books and records, and its business equipment were located. On Dec. 12, 1972, a notice of deficiency was sent to petitioner by certified mail at the address of its registered office in Philadelphia. On the same day a conformed copy of the notice of deficiency was mailed to petitioner's Singapore address. On Mar. 10, 1973, petitioner sent its petition by registered mail from the Philippines. The petition was received in the Washington, D.C., Registry Division of the United States Post Office on Mar. 16, 1973, and was received by the Tax Court on Mar. 19, 1973, the 97th day after the notice of deficiency was mailed. Held:

1. The deficiency notice, which was sent to petitioner's registered office in Philadelphia, was mailed to its ‘last known address: pursuant to sec. 6212(b), I.R.C. 1954.

2. Petitioner was a ‘person’ outside the United States when the notice of deficiency was mailed so that it had 150 days, under sec. 6213(a), I.R.C. 1954, within which to file a timely petition with this Court.

DAWSON, Judge:

Respondent determined the following Federal income tax deficiencies and additions to tax against the petitioner:

+----------------------------------------------------------+
                ¦              ¦           ¦Additions to tax               ¦
                +--------------+-----------+-------------------------------¦
                ¦Tax year ended¦Deficiency ¦                               ¦
                +--------------+-----------+-------------------------------¦
                ¦              ¦           ¦Sec. 6653 (b) 1  ¦Sec. 6651 (a)¦
                +--------------+-----------+-----------------+-------------¦
                ¦              ¦           ¦                 ¦             ¦
                +--------------+-----------+-----------------+-------------¦
                ¦Apr. 30, 1967 ¦$200,360.13¦$122,827.91      ¦($5,198.00)  ¦
                +--------------+-----------+-----------------+-------------¦
                ¦Apr. 30, 1968 ¦44,777.20  ¦32,343.40        ¦             ¦
                +--------------+-----------+-----------------+-------------¦
                ¦Apr. 30, 1969 ¦22,678.74  ¦11,339.37        ¦             ¦
                +--------------+-----------+-----------------+-------------¦
                ¦              ¦           ¦                 ¦             ¦
                +----------------------------------------------------------+
                

1 All statutory references are to the Internal Revenue Code of 1954, as amended, unless otherwise indicated.

On May 22, 1973, respondent filed a motion to dismiss this case for lack of jurisdiction on the ground that the petition was not timely filed within 90 days after the notice of deficiency was mailed. On November 23, 1973, the petitioner filed its objections to respondent's motion, claiming that it had 150 days within which to file its petition, and also filed its own motion to dismiss for lack of jurisdiction on the ground that respondent did not mail his notice of deficiency to petitioner's last known address.

A hearing was held in Washington, D.C., on January 9, 1974, on both motions to dismiss. The disposition of these motions is the subject of this opinion.

We are confronted with two key questions: (1) Was the notice of deficiency mailed to petitioner's ‘last known address' within the intendment of section 6212(b)? (2) was the petitioner a ‘person outside the States of the Union and the District of Columbia’ within the purview of section 6213(a), when respondent mailed the notice of deficiency, so that it had 150 days within which to file its petition in this proceeding? Alternatively, if we should conclude that the 90-day period for filing the petition is applicable, petitioner asks us to consider (a) whether the 90-day period started to run when the notice of deficiency was received by the petitioner on or about December 27, 1972, and (b) whether the Treasury regulation promulgated under section 7502 allowing a postmark date to establish the timely filing of a petition is arbitrary and unreasonable insofar as it denies recognition to foreign postmarks.

FINDINGS OF FACT

Some of the facts have been stipulated by the parties. The stipulation of facts and attached exhibits are incorporated herein by this reference.

At the time its petition was filed and during the years in issue, Degill Corp. (herein called petitioner) was a Pennsylvania corporation which conducted all its business operations in the South Pacific, including South Vietnam, Singapore, and the Philippines. It maintained a ‘registered office’ at the address of its accountants, as follows:

c/o Goldenberg, Rosenthal Company

Room 820, 12 S. 12th Street

Philadelphia, Pennsylvania 19107

Petitioner conducted its construction and leasing business first in South Vietnam until January 1969, then in Singapore until December 1973, and thereafter moved all its operations to the Philippines. In December 1972, petitioner was using Singapore as its mailing address, while also using stationery in its business which showed the Philadelphia address of its accountants as its corporate address.

Respondent was aware both before and when he issued the notice of deficiency that all of the petitioner's officers, books, records, and equipment were located at its offices in the South Pacific. In August 1970, respondent conducted, through his Office of International Operations, an investigation of petitioner's Federal tax returns, contacting its officers in Singapore and the Philippines to examine its corporate records there. In addition, respondent knew through various interviews, correspondence, and other communications with petitioner's accountant in Philadelphia that its entire business operations were conducted in the South Pacific.

All of petitioner's tax returns filed during the years in issue, and in years thereafter, show the corporate address to be that of its accountants in Philadelphia. These tax returns were prepared in Philadelphia by Mr. Rosenthal, who was not an employee of petitioner and only corresponded with petitioner by mail. He has never had a power of attorney to represent petitioner in the United States.

On or about April 20, 1970, Mr. Rosenthal mailed respondent a letter, attached to an Employer's Quarterly Federal Tax Return (Form 941), indicating that petitioner's address was changed from South Vietnam to Singapore. Respondent does not change a taxpayer's address on his Service Center records unless so authorized by an officer of the corporation or other representative, and did not thereafter alter petitioner's Philadelphia corporate address in its files. Except for Mr. Rosenthal's letter, no authorization from any officer or stockholder of petitioner was ever provided respondent by the corporation to change its Pennsylvania address during the years in issue and up to the time respondent issued his notice of deficiency.

In July 1970 and in July 1972, Mr. Rosenthal filed applications with respondent for automatic extensions of time within which to file one of petitioner's Federal income tax returns and in both instances listed the Philadelphia address as its corporate address. In March 1971, a claim for refund was filed with respondent signed by petitioner's president listing the Philadelphia address as the corporate address. And finally in May 1972, Mr. Rosenthal again mailed a Form 941 to respondent using the Philadelphia address as the corporate address.

Respondent sent a notice of deficiency to petitioner on December 12, 1972, by certified mail at the Philadelphia address. He also sent a conformed copy by regular mail the same day to petitioner at its Singapore business address.

The original notice of deficiency was received at Mr. Rosenthal's office in Philadelphia on December 13, 1972, and was thereafter forwarded to the Philippines and received there on December 29, 1972. The conformed copy of the notice reached Singapore sometime between December 18 and December 27, 1972. Mail from the eastern part of the United States reaches a designated address in Singapore in 5 to 6 days, and a designated address in the Philippines in 6 to 7 days.

On March 10, 1973, petitioner sent by registered mail from the Philippines its petition for filing with this Court. The envelope which contained the petition bears a March 10, 1973, registry date of the Makati Commercial Center, Philippines, as well as two other postal stamps indicating it was received in the Washington, D.C., Registry Division of the United States Post Office on Friday, March 16, 1973, and in the Ben Franklin Branch, United States Post Office, on Monday, March 19, 1973. It was also received by this Court on March 19, 1973. The March 10, 1973, Philippines postmark is the only postmark within the 90-day period commencing when respondent mailed the notice of deficiency. All three postmarks fall within 150 days after the notice was sent to the petitioner.

OPINION

1. Validity of deficiency notice— last known address.— We must first decide whether respondent mailed the notice of deficiency to petitioner's ‘last known address' within the intendment of section 6212(b)(1). Petitioner raised this issue in its cross-motion to dismiss for lack of jurisdiction.

The statute is intended to give a taxpayer notice of respondent's deficiency determination in order that the jurisdiction of this Court may be invoked without the prior payment of the tax. A taxpayer's last known address must be determined by a consideration of all relevant circumstances. It is the address which, in the light of such circumstances, the respondent reasonably believes the taxpayer wishes to have the respondent use in sending mail to him. Daniel Lifter, 59 T.C. 818, 821 (1973), and cases cited therein.

We...