Lerer v. Comm'r of Internal Revenue , Docket No. 4056-68.

• Decision Date: 02 June 1969
• Docket Number: Docket No. 4056-68.
• Citation: 52 T.C. 358
• Parties: NATHAN LERER, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

52 T.C. 358

NATHAN LERER, PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 4056-68.

Tax Court of the United States.

Filed June 2, 1969.

Martin D. Cohen, for the petitioner.

William M. Gross, for the respondent.

A ‘Form 7900’ letter sent by ordinary mail to a bankrupt in care of the trustee in bankruptcy informing the trustee that respondent proposes to assess deficiencies in income tax against the bankrupt for years prior to the one in which the petition in bankruptcy was filed under the provisions of the Internal Revenue Code relating to bankruptcy is not a notice of deficiency to the individual within the meaning of secs. 6212 and 6213, I.R.C. 1954.

OPINION

SCOTT, Judge:

On November 25, 1968, respondent filed a motion to dismiss the above-entitled case for lack of jurisdiction on the ground that no statutory notice of deficiency authorized by section 6212, I.R.C. 1954,¹ and required by section 6213(a) to form the basis for an appeal to this Court has been sent to petitioner with respect to the taxable years alleged to be in issue in the petitioner filed in this case. Respondent in his motion stated that the alleged notice of deficiency dated March 27, 1968, was in fact a ‘Form 7900 Letter’ which is merely a notification that an assessment has been made pursuant to section 6871.

Petitioner on February 4, 1969, filed objections to respondent's motion to dismiss, stating that the Form 7900 notice issued on March 27, 1968, was in substance a notice of deficiency in petitioner's income tax for the calendar years 1963, 1964, and 1965. Petitioner states that when he filed a petition with this Court on August 26, 1968, alleging error in the determination for those years made by respondent in the letter of March 27, 1968, this Court acquired jurisdiction to redetermined petitioner's income tax for the years placed in issue.² Petitioner states that since respondent had not filed a claim in accordance with section 57(n) of the Bankruptcy Act (11 U.S.C.sec. 93(n)) when the petition in this case was filed, he had no available means of litigating the propriety of respondent's determination prior to payment of the tax except by a petition filed with this Court.

The issue presented by respondent's motion was limited to whether a statutory notice of deficiency as required by section 6213(a) had been issued to petitioner. However, in oral argument and on brief respondent contends that this Court lacks jurisdiction over deficiencies and additions to taxes for negligence for the years here in issue since prior to the mailing of the letter and the filing of the petition in this case, petitioner was adjudicated a bankrupt.

Nathan Lerer, the petitioner in this case, is an individual whose legal residence at the time the petition was filed was Freeport, Bahamas. He has resided in the Bahamas since sometime prior to April 15, 1968. For the taxable years 1963, 1964, and 1965 petitioner and his wife, JoAnn Lerer, filed joint Federal income tax returns with the district director of internal revenue, Newark, N.J.

On October 13, 1966, petitioner filed a voluntary petition in bankruptcy in the U.S. District Court for the District of New Jersey. The matter was docketed as No. B1329-66 and assigned to a referee in bankruptcy. The petition in bankruptcy filed by the petitioner in this case disclosed total assets of $250 and total debts of $367,047.38.

On October 19, 1966, the referee issued a notice of first meeting of creditors and notice of order fixing time for filing of objections to discharge. On October 24, 1966, the district director of internal revenue, Newark, N.J., received a copy of this notice. In accordance with section 57(n) of the Bankruptcy Act (11 U.S.C.sec. 93(n)), the referee issued an order under date of October 14, 1966, allowing petitioner's creditors until May 1, 1967, within which time to file claims against petitioner's bankrupt estate. On November 1, 1966, at the first meeting of creditors, the referee appointed John J. McLaughlin as trustee of petitioner's estate in the bankruptcy proceeding.

Up to and including May 1, 1967, 10 creditors had filed proofs of claims in petitioner's bankruptcy proceeding, the total amount of such claims being $43,680.77. At the date of the oral argument in this case the trustee in bankruptcy had taken no action to contest the validity of any of these claims.

Prior to February 27, 1969, respondent had filed no proof of claim in the bankruptcy proceeding of petitioner. Respondent did not within the 6 months' statutory period provided by section 57(n) of the Bankruptcy Act apply for an extension of time to file a claim. On February 27, 1969, respondent filed a proof of claim. This proof of claim was for taxes and additions to taxes for the calendar years 1963, 1964, and 1965 which were shown to be subject to to a lien which arose April 5, 1968. The claim contained, following the listing of the taxes claimed, the following statement:

This claim is filed pursuant to section 57(n) of the Bankruptcy Act in order that the Government may be entitled to distribution against the surplus remaining after all other timely filed allowed claims have been paid in full.

At the date of the oral argument in this case no claims other than those of the 10 creditors totaling $43,680.77 and the Government's claim for taxes filed on February 27, 1969, had been filed in petitioner's bankruptcy proceeding.

On February 14, 1967, John J. McLaughlin, the trustee appointed for the bankruptcy estate of petitioner, filed Specification of Objections to Discharge in petitioner's bankruptcy proceeding. Hearing on the objections to discharge has been adjourned from time to time and no determination had been made in the matter at the time of the oral argument in this case.

On April 5, 1968, respondent mailed a notice of deficiency to petitioner's wife, JoAnn Lerer, asserting deficiencies and additions to tax for negligence for the calendar years 1963, 1964, and 1965. JoAnn Lerer has since filed a timely petition with this Court which is presently pending at docket No. 4057-68.

On March 27, 1968, respondent sent by ordinary mail addressed as hereinafter set forth a letter which contained in the supper right-hand corner under the printed words, ‘In reply refer to:‘ the following: ‘AU CC 90’ (deleted) FORM 7900.' The deletion which was made prior to the mailing of the letter was of the symbols ‘AU CC 90’ which are those that usually appear on respondent's statutory notices of deficiency. The letter bearing the notation, ‘In reply refer to: AU CC 90 Form 7900’ was addressed on the right-hand side beneath this reference and the date, ‘March 27, 1968,‘ as follows:

MR. NATHAN LERER, BANKRUPT

c/o MR. JOHN J. MCLAUGHLIN TRUSTEE

11 Commerce Street

Newark, New Jersey

The letter including the salutation reads as follows:

DEAR MR. MCLAUGHLIN:

You are advised that the determination of the income tax liabilities of Nathan Lerer, bankrupt, 10 Briarcliff Road, Upper Saddle River, New Jersey discloses deficiencies for the taxable years ended December 31, 1963, December 31, 1964 and December 31, 1965 in the aggregate amount of $55,512.28 and negligence addition to tax under Code section 6653(a) in the aggregate amount of $2,775.62. The attached statement shows the computation of the deficiencies and additions to tax.

The deficiency in tax is being assessed against you under the provisions of existing internal revenue laws applicable to bankruptcies and receiverships. Accordingly, no petition for redetermination bay be filed with the Tax Court of the United States after the adjudication of bankruptcy or the appointment of a receiver.

Attention is called to the rights and priorities of the United States under section 64(a) or other applicable provisions of the Bankruptcy Act and under section 3466 of the Revised Statutes (31 U.S.C. 191). Section 3467, Revised Statutes (31 U.S.C. 192), imposes personal liability upon every executor, administrator, assignee, or other person who, in paying debts of the person or estate for whom or for which he acts, fails to observe the priority in payment prescribed by law in favor of the United States.

Very truly yours,

SHELDON S. COHEN, Commissioner By JOSEPH M. SHATZ, District Director.

Enclosure:Statement

Exhibit ‘A’

The statement attached to the letter of March 27, 1968, bears in the upper right-hand corner the notation, ‘Form 7900.’ It is addressed, ‘Mr. Nathan Lerer (Bankrupt), c/o Mr. John J. McLaughlin, Trustee,‘ at the same address as that appearing on the letter, itself. The tax liabilities shown in the statement attached to the Form 7900 letter are identical to the liabilities detailed in the statement attached to the notice of deficiency mailed to petitioner's wife, JoAnn Lerer.

We will first consider whether any statutory notice of deficiency as authorized by section 6212 and required by section 6213(a) in order for this Court to obtain jurisdiction as to a taxpayer's tax liability for any taxable year was issued by respondent to this petitioner with respect to the taxable years 1963, 1964, and 1965. If no statutory notice of deficiency has been issued, we do not reach the question raised at the oral argument and on brief of whether we lack jurisdiction in this case because of the provisions of section 6871. See Theodore Stanfield, et al., 8 B.T.A. 787, 819 (1927).

Section 6212 provides that if the Secretary or his delegate determines that there is a deficiency in respect of any tax, he is authorized to send notice of such deficiency ‘to the taxpayers.'³ Section 6213 provides that within 90 days, or 150 days if the notice ‘is addressed to a person outside the States of the Union and the District of Columbia,‘ after the notice of deficiency authorized in section 6212 is mailed, ‘the taxpayer may file a petition with the Tax Court’ for a redetermination of the deficiency. It will be noted that the statute requires that the notice be mailed ‘to the...