Estate of Wood v. C.I.R.

• Decision Date: 10 October 1990
• Docket Number: No. 89-2366,89-2366
• Citation: 909 F.2d 1155
• Parties: -5987, 59 USLW 2097, 90-2 USTC P 50,488, 90-2 USTC P 60,031 ESTATE OF Leonard A. WOOD, Deceased, J.M. Loonan, Personal Representative, Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1155

909 F.2d 1155

66 A.F.T.R.2d 90-5987, 59 USLW 2097, 90-2

USTC P 50,488,

90-2 USTC P 60,031

ESTATE OF Leonard A. WOOD, Deceased, J.M. Loonan, Personal Representative, Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Appellant.

No. 89-2366.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 12, 1990.

Decided July 26, 1990.

Rehearing and Rehearing En Banc Denied

Oct. 10, 1990.

John A. Dudeck, Washington, D.C., for appellant.

Charles K. Frundt, Blue Earth, Minn., for appellee.

Before LAY, Chief Judge, BEAM, Circuit Judge and HANSON, ^* District Judge.

BEAM, Circuit Judge.

The Commissioner of Internal Revenue appeals from a judgment entered by the United States Tax Court in favor of the estate of Leonard A. Wood. The Commissioner had assessed a deficiency of $38,636.54 in the estate's 1981 federal estate tax payment due to an untimely election of special use valuation. See 26 U.S.C. Sec. 2032A (1988). The tax court, however, found that the election was timely because of the "timely mailing as timely filing" provision of the Internal Revenue Code. See 26 U.S.C. Sec. 7502 (1988). ¹ We affirm.

I. BACKGROUND

Leonard A. Wood died a resident of Easton, Minnesota, on June 21, 1981, and left a gross estate consisting primarily of 160 acres of farmland. The estate elected special use valuation under section 2032A and valued the property at $173,334. The Commissioner, however, alleged that the Internal Revenue Service did not receive the estate return. Consequently, the IRS found that special use valuation was not elected in a timely way. The Commissioner valued the farmland at its fair market value of $321,840, and assessed a deficiency of $38,636.54. In its petition for review by the tax court, the estate argued that the special use valuation election was timely in accordance with section 7502.

The estate called two witnesses at trial, the first being the personal representative of the estate, James M. Loonan, a life-long friend of Wood, and the president of the State Bank of Easton. In addition to serving as president of the bank, Loonan also practices law in Easton, a town of 248 people, although he does so in association with a law firm from Blue Earth. Loonan testified that his law practice consists mostly of probate and real property work, and that he has acted as either a personal representative or the attorney for an estate many times.

Loonan himself prepared the federal estate tax return, due March 21, 1982, nine months from the date of death. March 21 fell on Sunday, so the return was due on Monday. Loonan testified that the law firm in Blue Earth normally mails completed estate returns, but that the Wood return was late, so he mailed it himself, from the Easton post office. The Easton post office is a one-room facility, staffed by Marvel Staloch, its postmistress, whom Loonan has known since high school. Loonan testified that he walked next door from the bank to the post office where he specifically mentioned to Staloch that the envelope ² he was mailing contained the federal estate tax return for Wood's estate. He also told Staloch that the return was due on Monday, so that it had to be postmarked that day, Friday, March 19. Loonan had affixed a pre-printed address for the IRS to the envelope, and he watched Staloch weigh the envelope, put postage on it, cancel it, and put it into the appropriate bundle of outgoing mail.

The estate also called Marvel Staloch. At the time of trial, Staloch had been at the Easton post office for eighteen years, and she testified that she remembers the Friday afternoon when Loonan came in with the Wood estate tax return. Staloch was certain that it was a Friday afternoon, ³ because she does not work on Saturday, and she remembers the conversation with Loonan. Staloch testified that she put postage on the envelope and that she hand-cancelled it because she does not have a cancelling machine. In essence, then, Staloch herself affixed, by hand, the postmark, dated March 19, 1982, to the envelope. She put the envelope in the appropriate mail pouch, and is certain that the pouch left Easton for she has not since found it in the post office. Staloch also testified that she had received no complaints from residents of Easton about lost mail.

Although non-receipt is alleged, the Commissioner actually adduced no evidence before the tax court that the IRS did not receive the return.

On these facts, the tax court found that the estate had established that the envelope was postmarked within the time for filing, and that the requirements of section 7502(a)(2) were satisfied. Section 7502, entitled "Timely mailing treated as timely filing and paying," provides that, upon proof of postmark, the date of the postmark shall be deemed the date of delivery. Given the testimony of Staloch, the tax court found proof of postmark, and thus that a presumption of delivery applied within the terms of section 7502. Accordingly, the tax court held that the federal estate tax return was presumed to have been delivered to the IRS on March 19, 1982, subject to rebuttal by the Commissioner. Since the Commissioner presented no evidence that the IRS did not receive the return, the tax court concluded that the return was, under the law, delivered to the IRS on March 19, 1982.

II. DISCUSSION

The tax court credited the evidence and found that Staloch affixed proper postage to the accurately addressed envelope containing the federal estate tax return, hand-cancelled the stamps--thus affixing a postmark dated March 19, 1982--and placed the envelope in the mail pouch. Estate of Wood v. Commissioner, 92 T.C. 793, 794 (1989). The tax court also stated: "[The Commissioner] called no witnesses and offered no records to show that the return was not received by him. ... [The Commissioner's] claim that he did not receive the return is, in short, not supported in this record by any positive evidence." Id. at 800. As indicated, the Commissioner does not challenge these findings of fact. Rather, the Commissioner appeals the tax court's construction of section 7502. The section, the Commissioner argues, does not allow the date of the postmark to constitute the date of delivery except when the taxpayer establishes actual, belated, delivery or when the return is forwarded by registered or certified mail which act provides prima facie evidence of delivery. Specifically, the Commissioner asserts that no presumption of delivery can operate under section 7502(a). Thus, we review the tax court's interpretation.

Section 7502 was enacted in 1954. Prior to section 7502, filing by mail was subject to the vagaries of postal delivery, which delivery varies from place to place and from season to season. See Miller v. United States, 784 F.2d 728, 730 (6th Cir.1986); Sylvan v. Commissioner, 65 T.C. 548, 551 (1975). However, the courts have long applied a common law presumption of delivery upon proof of mailing to alleviate hardship to the taxpayer. See, e.g., Arkansas Motor Coaches v. Commissioner, 198 F.2d 189, 191 (8th Cir.1952). The effect of section 7502 on this presumption is unclear. In any case, the general rule posited by the statute, found in section 7502(a)(1), ⁴ is that the date of postmark will be deemed the date of delivery. As earlier noted, if a document is postmarked within the prescribed time for filing, but received late, section 7502 provides that the document will be considered to have been timely filed. See section 7502(a)(1). The statute also provides, as indicated, that a showing that a document was sent by registered or certified mail shall constitute prima facie evidence that the document was delivered. Also, the date of registration is deemed to be the date of postmark. Section 7502(c). ⁵ Therefore, the hallmark of the section is the requirement concerning postmark.

No argument is made that section 7502 does not apply in this case. The Commissioner argues instead that the statute requires actual delivery under subsection (a)(1) or proof of delivery by the taxpayer under subsection (c)(1)(A). ⁶ That is, absent registration or certification, neither of which was done in this case, the taxpayer bears the risk of loss as to any document which the IRS claims not to have actually received.

The Commissioner relies heavily on two circuit court decisions, Miller v. United States, 784 F.2d 728 (6th Cir.1986), and Deutsch v. Commissioner, 599 F.2d 44 (2d Cir.1979), cert. denied, 444 U.S. 1015, 100 S.Ct. 665, 62 L.Ed.2d 644 (1980). In Deutsch, taxpayer's petition for review of a deficiency assessed by the Commissioner was never delivered to the tax court. Deutsch, 599 F.2d at 45. The taxpayer's accountant offered an affidavit that the petition was mailed within the prescribed period. Id. The Second Circuit held, however, that while the date of postmark could be deemed the date of delivery, such would be true only under the terms of section 7502(a)(1), which the court held to be "only applicable if the petition is actually delivered." Id. at 46. In Miller, taxpayer's claims for refund were allegedly not received by the IRS, and the court refused to consider the affidavit of taxpayer's attorney that the claims were timely mailed. Miller, 784 F.2d at 729. The Sixth Circuit construed section 7502 as creating two separate exceptions to the requirement of physical delivery, and held that section 7502(a), "both by its terms and as revealed in the legislative history, applies only in cases where the document is actually received by the I.R.S. after the statutory period." Id. at 730. ⁷ Relying largely upon these cases, the Commissioner argues that the tax court's interpretation of section 7502, allowing a presumption of delivery to apply absent registration or certification, is an error of law. To the extent that the Sixth and Second Circuits in Miller and Deutsch hold that a presumption of delivery can never be used to satisfy the requirement of delivery in section 7502(a)(1), we disagree.

The tax ...