Frieling v. Comm'r of Internal Revenue

• Citation: 81 T.C. No. 4,81 T.C. 42
• Decision Date: 20 July 1983
• Docket Number: Docket No. 10753–80.
• Parties: GERALD H. FRIELING, JR. and JOAN L. FRIELING, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: United States Tax Court

81 T.C. 42

81 T.C. No. 4

GERALD H. FRIELING, JR. and JOAN L. FRIELING, Petitioners

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10753–80.

United States Tax Court

Filed July 20, 1983.

Petitioners' 1976 tax return listed an address for petitioners in Allentown, Pennsylvania. Twelve days before three-year limitations period was to expire, petitioners orally notified respondent by telephone of their new address in Niles, Michigan. That same day respondent mailed to petitioners at the new address a Form 872 to extend the period of limitations on assessment of tax for that year. Petitioners signed the Form 872 and mailed it to respondent but it was not received before the last day of the three-year limitations period. On the last day of the three-year limitations period, respondent mailed a notice of deficiency to petitioners at the old Allentown address. The U.S. Postal Service forwarded the notice of deficiency to petitioners at their Niles address. Within 90 days of the mailing of the notice of deficiency to them, petitioners timely filed a petition in the Tax Court. Held, petitioners' oral notification of their change of address was adequate here and the notice of deficiency was not mailed to petitioners at their “last known address” under section 6212(b)(1), I.R.C. 1954. Held further, the notice of deficiency was nevertheless valid under section 6212(a), I.R.C. 1954, and tolled the statute of limitations on the date the notice of deficiency was mailed pursuant to section 6503(a)(1), I.R.C. 1954. Clodfelter v. Commissioner, 527 F.2d 754 (9th Cir. 1975), affg. 57 T.C. 102 (1971), followed. Richard A. Hanson, for the petitioners.

Val J. Albright, for the respondent.

PARKER, Judge:

Respondent determined a deficiency in petitioners' 1976 Federal income tax in the amount of $7,040.¹ The case is presently before the Court on petitioners' motion to dismiss for lack of a timely notice of deficiency. See Rule 53, Tax Court Rules of Practice and Procedure.

The general issue for decision is whether a valid notice of deficiency was issued within the three-year statute of limitations provided in section 6501(a).² Specifically, we first must decide whether the notice of deficiency was mailed to petitioners at their “last known address,” as that term is used in section 6212(b)(1). If not, we then must decide whether a notice of deficiency must be mailed to the taxpayers' “last known address” in order to be valid under section 6212(a) and to toll the period of limitations on the date it is mailed pursuant to section 6503(a)(1).

FINDINGS OF FACT

Most of the facts have been stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.

Petitioners Gerald H. Frieling, Jr. and Joan L. Frieling, husband and wife, resided in Niles, Michigan, at the time they filed the petition in this case. On or before April 15, 1977, they filed a joint Federal income tax return for the calendar year 1976 with the Internal Revenue Service Center at Philadelphia, Pennsylvania. The address set forth on that return was 9 Maulfair Drive, R.D. #2, Allentown, Pennsylvania 18103 (Allentown address).

During 1976, petitioner Gerald Frieling was a limited partner in the Parke Lessors-Yorkville partnership. Sometime after April 15, 1977, respondent commenced an audit of the partnership and of petitioners' 1976 tax return. At all relevant times, the Office of the Returns Program Manager for the Office of the District Director of Internal Revenue at Philadelphia, Pennsylvania was responsible for monitoring the limitations periods on assessment and requesting consents to extend those periods for tax years of certain taxpayers who were members of partnerships which were either already under audit or to be audited. The Office of the Returns Program Manager thus was responsible for monitoring the limitations period for petitioners' 1976 return and for obtaining their consent to extend that period.

In April of 1979, petitioners moved from the Allentown address shown on their 1976 return to a new address at 514 Laurel Drive, Niles, Michigan 49120 (Niles address). They resided at the Niles address at all times between April of 1979 and the filing of the petition in this case.

On November 1, 1979, the Office of the Returns Program Manager mailed a “Consent to Extend Time To Assess Tax” (Form 872) for the taxable year 1976 to petitioners at the Allentown address. Petitioners received the Form 872 sometime after it was mailed but did not execute it. On February 25, 1980, the Office of the Returns Program Manager mailed a second request to extend the period of limitations for the year 1976 to petitioners at the Allentown address. Again, petitioners received that request sometime after it was mailed but did not execute it.

On or about April 3, 1980, petitioner Gerald Frieling orally advised an employee in the Office of the Returns Program Manager by telephone that petitioners' new address was the Niles address. On that same date, the Office of the Returns Program Manager mailed a Form 872 for the taxable year 1976 to petitioners at the Niles address. The portion of the Form 872 pertaining to petitioners' address stated “Per Return: 9 Maulfair Dr., R.D. 2, Allentown, PA 18103” and “Presently: 514 Laurel Drive, Niles, MI 49120.” Petitioners received this Form 872 on or about April 10, 1980.

Petitioners signed this Form 872³ and mailed it on April 14, 1980, in a pre-addressed envelope to “Internal Revenue Service, 600 Arch Street, Philadelphia, Pennsylvania 19106, Attention: Returns Program Manager, P.O. Box 12836, Philadelphia, Pennsylvania 19106.” The District Director's office received the Form 872 on April 16, 1980. However, the Form 872 was received after April 15, 1980, and therefore was never executed on behalf of the Internal Revenue Service.⁴ The last day for assessment of petitioners' 1976 tax liability was April 15, 1980.

On April 15, 1980, the District Director's office mailed a notice of deficiency for 1976 by certified mail to petitioners at the Allentown address. On April 16, 1980, the notice was received by the Allentown Post Office and delivered to the mail carrier serving the area that included the Allentown address. On that same date, the mail carrier crossed out the Allentown address, wrote in the Niles address on the envelope, and returned the notice to the Allentown Post Office. The United States Postal Service (Postal Service) subsequently delivered the notice of deficiency to petitioners at the Niles address. The record does not indicate exactly when petitioners received the notice of deficiency, other than the fact that it was received sometime between April 16, 1980, and June 26, 1980, the date on which the petition was received by the Court. On June 26, 1980, within 90 days after the notice of deficiency was mailed to them, petitioners timely filed their petition with this Court.

Petitioners made two alternative contentions in their petition:

(a) Respondent erred in failing to mail the Notice of Deficiency to petitioners at their last known address within the statutory period for assessment of a deficiency with respect to the petitioners' 1976 income taxes.

(b) Alternatively, if it is determined that the Notice of Deficiency was timely mailed to petitioners' last known address, respondent erred in determining that petitioners overstated their distributive share of loss from the Parke Lessors - Yorkville partnership by the amount of $14,081, or any lesser amount.

Respondent filed his answer with the Court in which he generally denied petitioners' contentions. Thereafter, petitioners filed the present motion to dismiss for lack of a timely notice of deficiency.

OPINION

Our jurisdiction in deficiency cases depends upon the Commissioner's issuing a valid notice of deficiency to the taxpayer and the taxpayer's timely filing his petition in this Court. The notice of deficiency⁵ triggers three separate but interrelated events. The mailing of a notice of deficiency tolls the running of the period of limitations on assessment or collection of any deficiency. Section 6503(a)(1).⁶ The mailing of a notice of deficiency starts the running of the 90-day [or 150-day] period for filing a petition in this Court. Section 6213(a).⁷ And the mailing of a notice of deficiency also bars the Commissioner from making any assessment or collection during that 90-day [or 150-day] period and if a petition is filed in the Court bars such assessment or collection until the decision of the Tax Court has become final.⁸

The issues in this case are (1) whether or not the notice of deficiency was sent to petitioners' “last known address” as that term is used in section 6212(b)(1), and (2) if not, whether the notice of deficiency is nonetheless valid to toll the limitations period under section 6503(a)(1), where the notice was received by petitioners and where petitioners timely filed their petition within 90 days after the mailing of the notice of deficiency. The Court has decided many cases involving a taxpayer's “last known address,” usually in the context of whether or not the petition was timely filed under section 6213(a). This case for the first time presents the question of whether the “last known address” provision of section 6212(b)(1) is a legal requirement for a notice of deficiency to be valid for purposes of tolling the running of the limitations period under section 6503(a)(1). The issue is critical here because the notice of deficiency was mailed on the last day of the three-year limitations period.

Section 6501(a) provides that the amount of any deficiency shall be assessed within three years after the return was filed.⁹

Section 6503(a)(1) provides, however, that the running of the three-year period of limitations on assessment is suspended by “the mailing of a notice under section 6212(a)” for the period during which assessment is prohibited and for 60 days thereafter....