Johnson v. C. I. R., 78-1025

• Decision Date: 13 February 1980
• Docket Number: No. 78-1025,78-1025
• Citation: 611 F.2d 1015
• Parties: 80-1 USTC P 9219 Lewis E. JOHNSON and Jeanne K. Johnson, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1015

611 F.2d 1015

80-1 USTC P 9219

Lewis E. JOHNSON and Jeanne K. Johnson, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 78-1025.

United States Court of Appeals Fifth Circuit.

Feb. 13, 1980.

Jerome J. Reso, Jr., Fred W. Schwendimann, III, James A. McPherson, New Orleans, La., for petitioners-appellants.

M. Carr Ferguson, Asst. Atty. Gen., Tax Div., U.S. Dept. of Justice, Leonard J. Henzke, Atty., Gilbert E. Andrews, Act. Chief, Karl P. Fryzel, Atty., Lester Stein, Acting Chief Counsel, IRS, Washington, D.C., for respondent-appellee.

Appeal from the Decision of the United States Tax Court.

Before AINSWORTH, INGRAHAM and GARZA, Circuit Judges.

INGRAHAM, Circuit Judge.

This appeal is before us on a petition to review an order of the Tax Court which dismissed taxpayer's ¹ petition for redetermination of his 1971 and 1972 income taxes. The Tax Court concluded that the Commissioner had properly mailed the notice of deficiency to taxpayer's last known address and the petition for redetermination had not been filed within the statutory ninety-day period. The court therefore granted the Commissioner's motion to dismiss the petition for lack of jurisdiction. We reverse.

At all relevant times, taxpayer and his wife have resided at 1342 Robert E. Lee Boulevard, New Orleans, Louisiana. However, during this time period taxpayer has had two different addresses where he conducted his business affairs. His first office was located at 307 Cotton Exchange Building, New Orleans. Sometime in August 1975, taxpayer moved his office to the Commerce Building in New Orleans.

In February 1975, taxpayer had filed with the Commissioner a power of attorney, drafted on the Commissioner's own Form 2848, indicating that his address was the Cotton Exchange Building address. That power of attorney also directed that copies of all correspondence be sent to taxpayer's attorneys as listed thereon.

When taxpayer moved his office to the Commerce Building address, he orally notified the Commissioner's agent of the change. It is clear that certain of the Commissioner's agents knew of the change since they were at taxpayer's office on numerous occasions in connection with an ongoing criminal tax investigation directed at taxpayer. Although it is not clear whether the audit division and the criminal investigation division were aware of each other's activities, it appears that the change of business address was known by someone working on taxpayer's file.

As a result of the investigation of taxpayer's returns, the Commissioner determined deficiencies in taxpayer's federal income tax and additions to tax under I.R.C. § 6653(b) ² in the following amounts: for the taxable year 1971, a deficiency of $116,403.07 and a fraud penalty of $58,963.70; for the taxable year 1972, a deficiency of $41,195.03 and a fraud penalty of $20,597.51. The Commissioner prepared a notice of deficiency which was to be mailed to taxpayer. At this time, however, the power of attorney, through no fault of taxpayer, was unexplainably missing from taxpayer's administrative file.

On June 7, 1976, the Commissioner sent the notice of deficiency by certified mail to taxpayer's residence address on Robert E. Lee Boulevard. This was the address that appeared on taxpayer's 1971 and 1972 tax returns. Two attempts to deliver the letter were made by the United States Postal Service. ³ On June 24, 1976, the letter was returned to the Commissioner marked "Unclaimed."

Subsequently, over ninety days after the notice of deficiency was mailed, the Commissioner assessed the deficiencies. On September 24, 1976, he mailed statements of tax due for 1971 and 1972, including the tax deficiency, additions to tax (fraud penalty) and interest, to taxpayer and his wife at their residence address. Taxpayer received this statement and it was the first time that either he or his wife knew of any alleged deficiency.

Taxpayer filed his petition for redetermination of the deficiency in the Tax Court on December 27, 1976. ⁴ The Commissioner answered and moved to dismiss for lack of jurisdiction, alleging that the period for filing the petition had expired on September 5, 1976, ninety days after the notice of deficiency had been mailed. The Tax Court held a hearing and, in a memorandum opinion, found that the Commissioner had exercised reasonable diligence in discovering taxpayer's last known address. Thus, the court held that the statutory notice mailed to taxpayer's residence address was valid. Accordingly, the court entered an order dismissing the petition for lack of jurisdiction. Taxpayer timely appealed to this court.

The issue to be decided on this appeal is a narrow one. Did the Commissioner comply with the requirements of I.R.C. § 6212 when he sent taxpayer the notice of deficiency? Taxpayer argues that the Commissioner did not so comply because he did not mail the notice to taxpayer's "last known address" as the statute requires. Thus, argues taxpayer, the Tax Court erred in granting the Commissioner's motion to dismiss; the court should have granted a motion to dismiss in taxpayer's favor with the result that the Commissioner must begin anew the process of mailing a deficiency notice. On the other hand, the Commissioner argues that he did comply with § 6212, since he exercised reasonable diligence in trying to discover taxpayer's last known address. Therefore, argues the Commissioner, the Tax Court did not err when it dismissed taxpayer's petition for lack of jurisdiction.

Our analysis begins with an examination of the relevant portions of § 6212:

§ 6212. Notice of deficiency

(a) In general

If the Secretary determines that there is a deficiency in respect of any tax imposed by subtitles A or B or chapter 41, 42, 43 or 44 he is authorized to send notice of such deficiency to the taxpayer by certified mail or registered mail.

(b) Address for notice of deficiency

(1) Income and gift taxes and taxes imposed by chapter 41, chapter 42

In the absence of notice to the Secretary under section 6903 of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by subtitle A, chapter 12, chapter 41, chapter 42, chapter 43, or chapter 44 if mailed to the taxpayer at his last known address, shall be sufficient for purposes of subtitle A, chapter 12, chapter 41, chapter 42, chapter 43, chapter 44, and this chapter even if such taxpayer is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence.

After the Commissioner has properly complied with the provisions of § 6212, the taxpayer has ninety days in which to file with the Tax Court a petition for redetermination of the deficiency for the purpose of litigating the merits of the asserted deficiency prior to paying the tax:

Within 90 days . . . after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6851 or section 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A or B, chapter 41, 42, 43 or 44 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day . . . period, . . . nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. I.R.C. § 6213(a).

The above procedure is the only opportunity for taxpayer to litigate the merits of the deficiency in a prepayment forum. His other remedy is to pay the tax and then file a suit for refund in either the federal district court or the United States Court of Claims. ⁵ DeWelles v. United States, 378 F.2d 37 (9th Cir. 1967).

It cannot now be seriously questioned that the timely filing of the petition for redetermination is jurisdictional. Shipley v. Commissioner, 572 F.2d 212, 213 (9th Cir. 1977); Andrews v. Commissioner, 563 F.2d 365, 366 (8th Cir. 1977); DiViaio v. Commissioner, 176 U.S.App.D.C. 229, 232, 539 F.2d 231, 234 (D.C.Cir. 1976). However, before the statutory ninety-day period can begin to run in favor of the Commissioner, the notice of deficiency must be properly mailed to the taxpayer at his last known address, I.R.C. §§ 6212, 6213; See DeWelles v. United States, supra, 378 F.2d at 39, with the exception, arguably, of the case where a taxpayer has actually received the notice in some other manner. Since it is obvious that taxpayer's petition was not filed within ninety days of the date the Commissioner first mailed the notice, June 7, 1976, the resolution of this appeal must necessarily focus on taxpayer's "last known address."

The Commissioner's position is that the statute requires only that the notice of deficiency be sent to the place where the Commissioner reasonably believes the taxpayer wishes the notice to be sent. Delman v. Commissioner, 384 F.2d 929, 932 (3d Cir. 1967). If, as in this case, the Commissioner is faced with alternative possible addresses, he is protected so long as he uses reasonable diligence to ascertain which one actually is taxpayer's last known address.

The Commissioner then notes that taxpayer's residence address appeared on his 1971 and 1972 tax returns and there had been no clear and concise notification from taxpayer or his wife of any change of address. Additionally, since the power of attorney filed by taxpayer had only directed that Copies of correspondence be sent to the designated representatives, the Commissioner argues that he was reasonable in concluding that the residence address was taxpayer's last known address for purposes of mailing the notice. ⁶ Moreover, the Tax Court agreed and since its finding with respect to the last known address is one of fact, Alta Sierra Vista, Inc. v....