Hannan v. Comm'r of Internal Revenue , Docket No. 1216-69.
| Citation | 52 T.C. 787 |
| Decision Date | 11 August 1969 |
| Docket Number | Docket No. 1216-69. |
| Parties | DANIEL E. HANNAN AND JEANNE HANNAN, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
Walter R. Brown, for the petitioners.
Ivan L. Onnen, for the respondent.
Respondent mailed to petitioners a letter meeting all the formal requirements of a statutory notice of deficiency and notifying them that ‘income tax deficiencies' and additions to tax had been determined. The computations of tax due, contained in the statement attached to the letter, reflect no adjustments to petitioners' taxable income but refer to the self-employment tax less credits for estimated tax as ‘Deficiency of income tax.’ Respondent moved to dismiss the petition on the ground that no ‘deficiency’ exists. Held, respondent determined a deficiency in petitioners' income tax, and this Court therefore has jurisdiction over the petition.
Respondent has filed a motion to dismiss the petition on the ground that the Court lacks jurisdiction. The decision turns on the application of sections 6211, 6212, 6213, and 6659.1 Specifically, the issue is whether the section 6651 additions to tax determined by respondent are ‘attributable to a deficiency’ in petitioners' income tax for 1959 to 1965, inclusive.
On December 27, 1968, respondent mailed a letter to petitioners notifying them of determinations of ‘income tax deficiencies' and additions to tax for late filing under section 6651(a). The letter— on the form ordinarily used for notices of deficiency and signed by an official admittedly authorized to issue notices of deficiency pursuant to section 6212(a)2 — states, in pertinent part, the following:
Mr. DANIEL E. HANNAN and Mrs. JEANNE HANNAN 4201 Foster Drive, Des Moines, Iowa 50312.
This letter is to notify you— as required by law— that we have determined the income tax deficiencies shown above. * * * The enclosed statement shows how the deficiencies were computed.
If you do not intend to contest this determination in the Tax Court of the United States, please sign and return the enclosed waiver form. This will permit an early assessment of the deficiencies and limit the accumulation of interest. * * *
If you decide not to sign and return the waiver, the law requires that after 90 days from the date of this letter * * * we assess the deficiencies and take action to collect the tax. However, if within the time stated you contest this determination by filing a petition with the Tax Court, we may not assess any deficiencies for these years until after the Tax Court has decided your case.
The ‘enclosed statement,‘ referred to in the letter, included a table similar to the one quoted immediately above and set forth the computations of the income tax and additions to tax due for each year. These computations reflect no adjustments to petitioners' taxable income or to the self-employment tax reported on the returns, but describe the amount of the reported self-employment tax (less payments of estimated tax for 1959 and ‘Income tax paid or credits allowable’ for 1964 and 1965) as ‘Deficiency of income tax.’
On March 17, 1969, petitioners filed a petition praying that this Court determine:
(1) That the Commissioner erred in determining that they did not timely file their tax returns for 1957 to 1963, inclusive;
(2) That the Commissioner erred in determining that the returns for 1964 and 1965, which were not timely filed, were not timely filed due to reasonable cause;
(3) That the Commissioner erred in determining that payments of $600 in 1957, $700 in 1958, and $150 in 1959 were made as declaration payments of self-employment tax and could not be carried forward from 1959 through each successive taxable year to and including 1966;3 and
(4) That there is no deficiency in income tax or self-employment tax for the calendar years 1959 to 1965, inclusive.
To support his motion to dismiss respondent relies upon section 6659.4 Subsection (a) of this section states that, except as otherwise provided, additions to tax shall be assessed, collected, and paid in the same manner as taxes, and any reference in the Code to ‘tax’ shall be deemed also to refer to ‘additions to tax.’ By Public Law 86-470, effective May 15, 1960, subsection (b) was amended to provide, inter alia, that for the purposes of subchapter B of chapter 63, relating to deficiency procedures, subsection (a) shall not apply to an addition to tax under section 6651, with the exception that it shall apply to that portion of such addition which is attributable to a deficiency described in section 6211.
The amendment of section 6659(b) grew out of three decisions which held that, under the 1954 Code, the Commissioner could not assess an addition to tax without sending the taxpayer a notice of deficiency (90-day letter). Granquist v. Hackleman, 264 F.2d 9 (C.A. 9, 1959) (); Strawberry Hill Press, Inc. v. Scanlon, 273 F.2d 306 (C.A. 2, 1959) (same); Enochs v. Muse, 270 F.2d 528 (C.A. 5, 1959) ().5 The problem created by these decisions and the solution provided by the amendment were explained as follows (H. Rept. No. 1217, 86th Cong., 2nd Sess. (1960), 1960-1 C.B. 840, 841-842):
These court decisions have confronted the Internal Revenue Service with very serious administrative problems. For example, before a 90-day letter could be mailed with respect to the addition to tax for late filing, the Internal Revenue Service would have to examine the return to insure that there was no deficiency in tax which might be barred from later assessment because of the restrictions on the issuance of additional 90-day letters under section 6212(c) of the 1954 code. Such a procedure would force the Service to audit many thousands of returns which otherwise might not be audited. If the Service were forced to follow the 90-day letter procedure for additions to tax for late filing of returns and for underpayment of estimated tax, the number of 90-day letters issued each year would be increased to about 1 million; whereas the Service now issues only about 78,000 90-day letters each year for all causes.
* * * little purpose is served by invoking the elaborate 90-day letter procedure before assessing these additions to tax.
Accordingly, your committee has provided in general, that, after the date of the enactment of the bill, the additions to tax for the late filing of income, estate, and gift tax returns and the underpayment of estimated income tax are to be assessed and collected without the issuance of a 90-day letter. * * *
Your committee's bill provides two exceptions to (sec. 6659(a)) * * * . An addition to tax for late filing which is attributable to a deficiency in tax will be subject to the 90-day letter procedure. Also, where no return is filed for a taxable year, an addition to tax for underpayment of estimated tax will be subject to the 90-day letter procedure. These exceptions * * * exist because in such cases there is a deficiency in the tax itself which justifies an opportunity for review in the Tax Court.
Respondent contends that this Court lacks jurisdiction and that he may immediately assess and collect the section 6651 additions to tax here in controversy, because (1) section 6659(b) requires resort to the deficiency procedures only for the portion of such additions which are attributable to a deficiency, and (2) no ‘deficiency,‘ as defined in section 6211(a),6 exists herein since the tax imposed does not exceed the amount shown as tax on petitioners' returns in any of the years covered by the petition. We disagree.
Section 6212(a) provides that if the Secretary or his delegate ‘determines' that there is a deficiency, he is authorized to send notice of such deficiency to the taxpayer. By section 6213(a), the taxpayer may then file a petition with the Tax Court, within a specified time, for a ‘redetermination’ of the deficiency, and if this Court finds that there is no deficiency and further finds that the taxpayer has made an overpayment of tax for the same taxable year, section 6512(b) provides that ‘the Tax Court shall have jurisdiction to determine the amount of such overpayment.’ Thus it is not the existence of a deficiency but the...
To continue reading
Request your trial
-
Cent. Pennsylvania Sav. Ass'n & Subsidiaries v. Comm'r of Internal Revenue, 19498-89.
...at issue, even though the deficiencies asserted in respondent's notice of deficiency have been settled. Sec. 6512(b); Hannan v. Commissioner, 52 T.C. 787, 791 (1969). 5. See Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir. 1971). 6. SEC. 593(b). ADDITION TO RESERVES......
-
March v. Comm'r of Internal Revenue (In re Estate of Branson), 10028–95.
...jurisdiction. See Murphree v. Commissioner, 87 T.C. 1309, 1311 (1986); Martz v. Commissioner, 77 T.C. 749, 754 (1981); Hannan v. Commissioner, 52 T.C. 787, 791 (1969). Section 6211(a) defines “deficiency” as follows: SEC. 6211 DEFINITION OF A DEFICIENCY. (a) In General.—For purposes of this......
-
Dees v. Comm'r, 148 T.C. No. 1
...of deficiency; our jurisdiction is instead over the Commissioner's determination that there is a deficiency. See Hannan v. Commissioner, 52 T.C. 787, 791 (1969); H. Milgrim & Bros., Inc. v. Commissioner, 24 B.T.A. 853, 854 (1931) ("It may well be true that the respondent erred in his determ......
-
Ewing v. Comm'r of Internal Revenue, 1940–01.
...case parallels the Court's jurisdiction to decide a taxpayer's income tax liability under sec. 6213(a). See Hannan v. Commissioner, 52 T.C. 787, 791, 1969 WL 1549 (1969). Given the firmly established terrain as to the Court's jurisdiction to decide income tax liabilities in general, I do no......