Delman v. CIR

Citation384 F.2d 929
Decision Date10 October 1967
Docket NumberNo. 15952.,15952.
PartiesJoseph DELMAN and Jeanette Delman, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Martin D. Cohen, Cohen, Rosenbaum & Scher, Newark, N. J., for petitioners.

Willy Nordwind, Dept. of Justice, Tax Division, Washington, D. C. (Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, Harold C. Wilkenfeld, Attys., Dept. of Justice, Washington, D. C., on the brief), for respondent.

Before SMITH, FREEDMAN and SEITZ, Circuit Judges.

OPINION OF THE COURT

WILLIAM F. SMITH, Circuit Judge.

This matter is before us on a petition to review an order of the Tax Court which dismissed as untimely taxpayers' petition for redetermination of 1960 and 1961 income taxes. The material facts as found by the Tax Court are not disputed. A notice of tax deficiencies for the years 1960 and 1961 was sent by certified mail to the taxpayers on December 23, 1964, addressed as follows:

Mr. Joseph Delman and Mrs. Jeanette Delman Husband and Wife c/o Goodman, Israelow & Lipton 249 Clinton Avenue Newark, New Jersey

A copy of this notice was sent by ordinary mail on the same day to taxpayers' attorney, Martin D. Cohen.

Both Cohen and the accounting firm of Goodman, Israelow & Lipton received the notice on December 24, 1964. Goodman et als mailed the original to Cohen on that same date and he received it on December 28, 1964. On the latter date Cohen notified the taxpayer, Joseph Delman, of the notice by telephone. Cohen forwarded a copy of the notice of deficiency to the taxpayers during the week of December 28, and it was received by them on January 4, 1965.

Taxpayers' petition to the Tax Court was filed on April 5, 1965, 103 days after the notice of deficiency was mailed. Section 6213 of the Internal Revenue Code1 provides that a petition for redetermination may be filed within 90 days of the mailing of the notice. On its face taxpayers' petition was out of time.

It is the taxpayers' primary argument that the notice of deficiency was invalid because it was not mailed to their last known address and that mailing to the last known address is essential to the jurisdiction of the Tax Court. If this argument is correct the notice would have no effect and would not have barred the running of the statute of limitations for the years in question.2

Taxpayers alternatively argue that because the notice of deficiency was sent to an incorrect address its effective date, in fairness, must be deemed to be January 4, 1965, the date the taxpayers actually received a copy of the notice of deficiency. The consequence of this argument, if accepted, would be that collection of deficiencies in the 1960 taxes would be barred by the statute of limitations and the petition for redetermination, as it relates to 1961 taxes, would be timely.3

The undisputed primary facts, found by the Tax Court and relied upon by the taxpayers in support of their arguments are as follows. During April, 1961, when taxpayers filed their 1960 return, they resided at 67 Clinton Avenue, Millburn, New Jersey. That address was set forth on their 1960 tax return which was filed in Newark. In the latter part of 1961 taxpayers moved to 1604 Juniper Avenue, Elkins Park, Pennsylvania where they have resided since. Their 1961 tax return, also filed in Newark, listed in a space labeled home address, c/o Goodman, Israelow, & Lipton, 249 Clinton Avenue, Newark, New Jersey. Six other pages of this return also listed that address. Schedule SE of the same return (U. S. Report of Self-Employment Income) listed the Elkins Park address.

In late 1962 or early 1963 revenue agent Nicholas Russo was assigned to audit petitioners' 1961 return. He wrote to taxpayers in care of Goodman et als and was informed that Goodman represented the taxpayers. Russo and Goodman in fact held a conference. On two occasions in 1963 the Newark office of Internal Revenue mailed forms to taxpayers requesting information as to where taxpayers' 1961 tax return was filed and what the taxpayers' address was if different from 67 Clinton Avenue, Millburn. These forms were mailed to 67 Clinton Avenue, Millburn. Joseph Delman responded to the second of these requests and indicated that taxpayers' address was now 1604 Juniper Avenue, Elkins Park, Pennsylvania. In the latter part of 1963 Goodman orally notified Russo of the Elkins Park address.

On two occasions during 1964 Russo prepared a form 872 (extension of the statute of limitations). On both he listed taxpayers' present street address as 1604 Juniper Avenue, Elkins Park, Pennsylvania. On the first occasion the form was sent to Goodman. It was signed by the taxpayers and returned. On the second occasion the form was sent to Cohen. It was signed by the taxpayers but for some unexplained reason was never returned.

On June 2, 1964, a power of attorney was executed by taxpayers in favor of Martin D. Cohen and Edward Goodman and was filed with the Internal Revenue Service. It gave Cohen and Goodman the authority to represent the taxpayers before the Treasury Department in connection with any matter involving federal income taxes with which the petitioners were connected. It requested that a copy of all communications addressed to the taxpayers be sent to Martin Cohen. On November 12, 1964, Russo forwarded an information report to the District Director of Internal Revenue at Philadelphia. It indicated that taxpayers resided at 1604 Juniper Avenue, Elkins Park, Pennsylvania.

The Tax Court found that the Internal Revenue Service acted reasonably in sending the notice c/o Goodman, et als. Our examination of the record indicates that the Tax Court was clearly correct in this conclusion. The taxpayers were successfully reached at this address; they had been reached there before. The Service could reasonably believe that this was the method of communication taxpayers wished it to use. Under these circumstances may the method of service be held inadequate or invalid? We think not.

A resolution of the questions presented by the taxpayers requires at the outset a consideration of two statutory provisions. Section 6212(a) of the Code authorizes the Secretary or his delegate to send a notice of deficiency to the taxpayer by certified or registered mail. Section 6212(b) (1) provides in part:

In the absence of notice to the Secretary or his delegate under section 6903 of the existence of a fiduciary relationship, notice of a deficiency * * *, if mailed to the taxpayer at his last known address, shall be sufficient * * * even if such taxpayer is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence.

Addressing ourselves to the taxpayers' primary argument, the decision of the Tax Court may be upheld on any of three alternative grounds. (1) The notice of deficiency was in fact sent to taxpayers' last known address within the meaning of the statute. (2) Section 6212(b) (1) is inapplicable to the instant case. (3) Even if the notice were not mailed to taxpayers' last known address and this were required by the statute the instant mailing was not so deficient as to bar the Tax Court's jurisdiction.

Numerous cases have considered the question of whether a notice of deficiency was sent to taxpayer's "last known address." Few cases, however, have attempted to define what Congress meant by the term. Clark's Estate v. Commissioner of Internal Revenue, 173 F.2d 13 (2nd Cir. 1949) suggests that a notice complies with the statute if it is sent to the address where the Commissioner reasonably believes the taxpayer wished to be reached. Gregory v. United States, 57 F.Supp. 962, 973, 102 Ct.Cl. 642 (1944), cert denied, 326 U.S. 747, 66 S.Ct. 26, 90 L.Ed. 447, states that the term "had reference to the last known permanent address or legal residence of the taxpayer, or the last known temporary address of a definite duration or period to which all communications during such period should be sent." Kisting v. C.I.R., 298 F.2d 264 (8th Cir. 1962) suggests that the last known address may be that of taxpayers' attorney where taxpayer directed that communications be sent. D'Andrea v. C.I.R., 105 U.S.App.D.C. 67, 263 F.2d 904 (1959) makes that point explicitly. Eppler v. Commissioner of Internal Revenue, 188 F.2d 95 (7th Cir. 1951) suggests that under certain circumstances the last known address may be the taxpayer's business address. Petitioner urges that the last known residence address must be chosen.

In our view the spirit of the Act would dictate acceptance of the attitude expressed in Clark's Estate, supra. The purpose of the notice of deficiency is to give the taxpayer notice. Commissioner of Internal Revenue v. Stewart, 186 F.2d 239 (6th Cir. 1951); Boren v. Riddell, 241 F.2d 670, 672 (9th Cir. 1957); Commissioner of Internal Revenue v. New York Trust, 54 F.2d 463, 465 (2nd Cir. 1931). By using the phrase "last known address" Congress must have intended that notice be sent to that address where the Secretary (or his delegate) reasonably believed the taxpayer wished notice to be sent. Here the Secretary had two addresses for the taxpayer, both of which were equally suitable. The service had been dealing through the accounting firm even after receipt of the Pennsylvania address. It could reasonably have concluded that the taxpayer wished the communication sent there. This view is strengthened by the fact that the accountant was one of taxpayers' authorized attorneys.

Perhaps the most serious difficulty with this case is the attempt to apply a section of the code which is not applicable. Section 6212(b) (1) was intended to apply only in situations where the Secretary did not have the taxpayer's correct address because of the failure or inability of the taxpayer to notify him of a change. This section was enacted to protect the Secretary in this circumstance and is not a sword to be used by the taxpayer. The...

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