Hubbard v. Comm'r of Internal Revenue
| Decision Date | 08 October 1987 |
| Docket Number | Docket No. 23272-86. |
| Citation | 89 T.C. No. 56,89 T.C. 792 |
| Parties | CHARLES E. HUBBARD, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
R issued a notice of deficiency on November 13, 1985. P did not receive the notice of deficiency and R later agreed that i t was not sent to P's last known address. On May 27, 1986, an agent of R sent P a copy of the November 13, 1985 notice. A petition was filed on June 26, 1986. P moved to dismiss on the grounds that the November 13, 1985 notice of deficiency was invalid and that the copy of the November 13, 1985 notice of deficiency, mailed on May 27, 1986, did not constitute the issuance of a notice of deficiency so as to support jurisdiction. R, throughout the proceeding, maintained that the May 27, 1986 mailing was sufficient to support jurisdiction. When R conceded on April 15, 1987 that the Court was without jurisdiction in this matter, P filed a Motion for Award of Reasonable Litigation Costs.
HELD, R's failure to carefully consider the facts and his maintenance of a position which was clearly against the weight of authority and inconsistent with his positions in other similar cases was unreasonable. Accordingly, R's position was not substantially justified and P is entitled to an award of litigation costs. Geoffrey J. O'Connor, for the petitioner.
Joseph T. Chalhoub and Oksana D. Xenos, for the respondent.
This case was heard by Special Trial Judge Peter J. Panuthos pursuant to the provisions of section 7456 of the Code. 1 The Court agrees with and adopts the Special Trial Judge's opinion, which is set forth below.
This matter came before the Court on petitioner's Motion to Dismiss for Lack of Jurisdiction and petitioner's Motion for an Award of Litigation Costs. At a hearing held on this matter, respondent advised that he had no objection to the granting of petitioner's Motion to Dismiss for Lack of Jurisdiction on the basis that no valid notice of deficiency was issued to petitioner's last known address. Based on the pending Motion for an Award of Litigation Costs under Rule 231, the Court withheld entry of the Order of Dismissal.
The issue for consideration is whether respondent's position was substantially justified within the meaning of section 7430(c)(2)(A)(i) in opposing petitioner's Motion to Dismiss for Lack of Jurisdiction.
The notice of deficiency in this case was issued on November 13, 1985. The notice determined deficiencies as follows:
+----------------+
¦Year¦Deficiency ¦
+----+-----------¦
¦1976¦$8,569.89 ¦
+----+-----------¦
¦1977¦8,334.40 ¦
+----+-----------¦
¦1978¦8,404.02 ¦
+----+-----------¦
¦1979¦5,789.40 ¦
+----------------+
The notice was addressed to petitioner at 950 N. Cass Lake Road, Suite 109, Pontiac, Michigan 48054. Petitioner did not initially receive the notice of deficiency. On May 27, 1986, a representative of the Internal Revenue Service, in a handwritten cover letter, forwarded a copy of the November 13, 1985 notice of deficiency by regular mail to petitioner. The May 27, 1986 letter stated as follows:
Mr. Hubbard
Please review the enclosed 556 and statutory (sic) notice. Your representative should be able to advise you on the best course of actions. If you have any additional questions regarding this matter please feel free to call.
(S)Lynn K. Clink
A petition was filed on June 26, 1986. 2 Petitioner made various claims, including an allegation that the notice of deficiency was not sent to his last known address and also that the statute of limitations had expired before the issuance of the notice of deficiency. On the same date, petitioner's Motion to Dismiss for Lack of Jurisdiction was filed. In his motion, petitioner alleged that the notice of deficiency, mailed on November 13, 1985, was not sent to his last known address and was not received by him. He further alleged that he first received a copy of the notice of deficiency soon after the copy was mailed to him on May 27, 1986 by Revenue Agent Clink. By Notice of Filing, dated July 23, 1986, respondent was given until August 12, 1986 to file an objection to petitioner's motion. By Order dated August 21, 1986, we granted respondent's Motion to Extend Time to File an Objection to October 17, 1986. Respondent's Notice of Objection to petitioner's Motion to Dismiss was filed on October 14, 1986. In the Notice of Objection, respondent stated in part:
3. Admits that the notice of deficiency dated and mailed on November 13, 1985, was not mailed to the petitioner's last known address and was, therefore, insufficient; alleges that the notice of deficiency mailed to the petitioner on May 27, 1986, was mailed to the petitioner's last known address within the time prescribed under I.R.C. section 6501.
Respondent concluded that the mailing on May 27, 1986 served to: (1) provide jurisdiction to the Court; and, (2) suspend the running of the statute of limitations for assessment. 3
At a November 19, 1986 hearing held in Washington, D.C., counsel for the parties presented argument in support of their respective positions. At the conclusion of the hearing, the Court took petitioner's motion under advisement. After the Court's initial consideration of the pending motion, the Court issued an Order with attached Memorandum Sur Order, dated January 12, 1987. The Court asked that the parties provide further information and argument with respect to respondent's position that the mailing of a copy of the November 13, 1985 notice of deficiency to petitioner on May 27, 1986 constituted the issuance of a notice of deficiency on May 27, 1986. Petitioner in his Response, filed February 4, 1987, argued that the forwarding of a copy of the November 13, 1985 notice of deficiency on May 27, 1986 did not constitute the issuance of a notice of deficiency. In his Report and Supplemental Memorandum of Law, filed January 30, 1987, respondent argued to the contrary that the copy of the November 13, 1985 notice of deficiency sent to petitioner on May 27, 1986 constituted the issuance of a notice of deficiency.
By Order, dated March 10, 1987, the Court set petitioner's Motion to Dismiss for Lack of Jurisdiction for further hearing at a Motions Session for April 15, 1987. In its Order, the Court cited Abrams v. Commissioner, 84 T.C. 1308, 1310 (1985), affd. 814 F.2d 1356 (9th Cir. 1987), affd. 787 F.2d 939 (4th Cir. 1986), affd. sub nom. Benzvi v. Commissioner, 787 F.2d 1541 (11th Cir. 1986), affd. sub nom. Spector v. Commissioner, 790 F.2d 51 (8th Cir. 1986) affd. sub nom. Donley v. Commissioner, 791 F.2d 383 (5th Cir. 1986) affd. in an unpublished order sub nom. Becker v. Commissioner, 799 F.2d 753 (7th Cir. 1986), affd. sub nom. Gaska v. Commissioner, 800 F.2d 633 (6th Cir. 1986), affd. sub nom. Alford v. Commissioner, 800 F.2d 987 (10th Cir. 1986), affd. in an unpublished opinion sub nom. Neal v. Commissioner, ___ F.2d ___ (2d Cir. 1986), cert. denied 479 U.S.___ (1986). In this connection, the Court advised respondent that he should be prepared to present evidence concerning his intentions with respect to the issuance of the ALLEGED notice of deficiency, mailed May 27, 1986. The Court was also interested in whether or not assessments had been made with respect to the years in issue. On March 25, 1987, petitioner's Supplemental Rule 50(c) Statement was filed. In this statement, counsel for petitioner advised that assessments had been made for the taxable years 1976 through 1979. The assessments were made subsequent to a default of the November 13, 1985 notice of deficiency, but prior to the mailing of a copy of the notice to petitioner on May 27, 1986. Counsel for petitioner further stated in his Supplemental Rule 50(c) Statement in part as follows:
If there is any chance that these materials would make the scheduled April 15, 1987 hearing unnecessary, counsel for petitioner would appreciate prompt notice of cancellation of same in order to save petitioner the expense of counsel having to travel to Washington, D.C. for such hearing.
On April 8, 1987, petitioner's Second Supplemental Rule 50(c) Statement was filed with the Court. In this document, petitioner advised the Court that respondent issued a new notice of deficiency, dated March 31, 1987, which was virtually identical to the original November 13, 1985 notice of deficiency. 4 On April 10, 1987, a petition was filed with respect to the notice of deficiency, dated March 31, 1987. This case was docketed at 9008-87S. 5
On April 15, 1987, a further hearing was held on petitioner's Motion to Dismiss for Lack of Jurisdiction. Counsel for both petitioner and respondent appeared. At this hearing, counsel for respondent acknowledged FOR THE FIRST TIME that he no longer objected to petitioner's Motion to Dismiss for Lack of Jurisdiction. Respondent conceded that sending a copy of the November 13, 1985 notice of deficiency on May 27, 1986 did not constitute the issuance of a notice of deficiency on May 27, 1986. Respondent's counsel did not advise petitioner's counsel prior to the April 15, 1987 hearing that respondent was prepared to concede and withdraw his objection in this matter. Petitioner's counsel traveled from Garden City, New York to Washington, D.C. for purposes of presenting argument on behalf of his motion.
OPINIONSection 7430(a) provides that a taxpayer who is the prevailing party in a civil tax proceeding may be awarded reasonable litigation costs incurred in such proceeding. The taxpayer must be a ‘prevailing party,‘ which is described in the statute as a party which:
(1) establishes that the position of the United States in the civil proceeding was not substantially justified (sec. 7430(c)(2)(A)(i));
(2) substantially prevailed in the litigation (sec. 7430(c)(2)(A)(ii)); and
(3) had a net worth which did not exceed $2,000,000 at the time the civil tax case...
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