McPartlin v. C.I.R.

• Decision Date: 17 July 1981
• Docket Number: No. 80-2135,80-2135
• Citation: 653 F.2d 1185
• Parties: 81-2 USTC P 9569 Robert F. McPARTLIN and Geraldine McPartlin, Petitioners, v. COMMISSIONER OF the INTERNAL REVENUE SERVICE, Respondent.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1185

653 F.2d 1185

81-2 USTC P 9569

Robert F. McPARTLIN and Geraldine McPartlin, Petitioners, v. COMMISSIONER OF the INTERNAL REVENUE SERVICE, Respondent.

No. 80-2135.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 26, 1981.

Decided July 17, 1981.

William J. Harte, Chicago, Ill., for petitioners.

Gilbert S. Rothenberg, Atty., Tax Div., Dept. of Justice, Washington, D. C., for respondent.

Before WOOD and CUDAHY, Circuit Judges, and MAROVITZ, Senior District Judge. ^*

MAROVITZ, Senior District Judge.

Petitioners Robert F. McPartlin and his wife Geraldine McPartlin appeal an order of the United States Tax Court dismissing their petition for a redetermination of a tax deficiency. The tax deficiency was determined by respondent Commissioner of the Internal Revenue Service (the "Commissioner") with respect to petitioners' 1971 tax return. On April 13, 1978, the Commissioner mailed a statutory notice of deficiency to the address appearing on petitioners' 1971 return. Petitioners, who had moved since the filing of their 1971 return, did not receive any notice that the Commissioner claimed a tax deficiency for their 1971 income until early February 1979 and did not actually receive a copy of the notice of deficiency until April 23, 1979. The principal issue presented to this Court is whether the Commissioner's April 13, 1978 mailing of the statutory notice of deficiency was sent to petitioners' "last known address" so as to, inter alia, trigger the commencement of the jurisdictional 90 day period for filing with the Tax Court a petition for redetermination of the deficiency. ¹ The Tax Court ruled that the Commissioner had sent the notice of deficiency to petitioners' "last known address" and therefore that petitioners' April 23, 1979 filing of a petition for redetermination was untimely. We reverse.

I.

Petitioners filed their 1971 tax return jointly, listing their address as 1104 North Lockwood Avenue, Chicago, Illinois. In 1974, the Commissioner, through his Chicago District Office, commenced an investigation into possible civil tax liabilities of petitioners. During the pendency of the civil investigation, Mr. McPartlin was also a subject of a criminal investigation involving, inter alia, petitioners' 1971 tax return. The agent of the Commissioner in charge of that criminal investigation until July 1979 was Agent James Swanson. ²

In October 1976, petitioners moved from their Lockwood Avenue address to 3440 North Oleander Street in Chicago, Illinois. When they moved, petitioners filed a change of address form with their local office of the United States Postal Service, which for the next year forwarded to petitioners' Oleander Street address all mail addressed to the former Lockwood Avenue address. In 1976, petitioners filed with the Commissioner's Kansas City, Missouri Service Center ³ two documents bearing their Oleander address: (1) a request for an extension of time to file their 1976 return; and (2) their 1976 tax return itself. Schedule D of their 1976 return indicates that petitioners had sold their home at the Lockwood Avenue address and purchased a new one at the Oleander Street address. On November 15, 1977, the Kansas City Service Center mailed to petitioners at their Oleander Street address a "Request for Verification of Unreported Income" concerning petitioners' 1975 return, a return that bore petitioners' former Lockwood Avenue address.

In testimony given before the Tax Court, Agent Swanson stated that either during or immediately preceding Mr. McPartlin's late 1977 criminal trial, he was apprised that petitioners had moved from their Lockwood Avenue address. Apparently, however, that knowledge was never communicated to the agents of the Commissioner assigned to investigate petitioners' possible civil tax liabilities.

As a result of the Commissioner's civil investigation, a tax deficiency of $26,211.13 was determined with respect to petitioners' 1971 income. An additional liability of 50 percent of the determined tax deficiency, $13,105.56, was determined to be due from Mr. McPartlin because of the Commissioner's finding that Mr. McPartlin's alleged failure to report the $26,211.13 in 1971 income was fraudulent. On April 13, 1978, the Commissioner sent to petitioners' Lockwood Avenue address by certified mail a notice of deficiency for their 1971 income, claiming a total liability of $26,211.13 as to Mrs. McPartlin and $39,316.69 as to Mr. McPartlin. Petitioners never received the notice mailed April 13, 1978, nor does the Commissioner's file on petitioners contain a return receipt for the notice.

Petitioners' first notice of an alleged tax deficiency was received in early February 1979 by way of a letter and "Notice of Federal Tax Lien" sent by the Commissioner to Mrs. McPartlin at petitioners' Oleander Street address. ⁴ The notice of deficiency itself was not received by petitioners until their counsel was able to obtain a copy at the Commissioner's Chicago offices on April 23, 1979. On that same date, petitioners mailed to the Tax Court a petition for a redetermination of the deficiency. The petition was received by the Tax Court on April 25, 1979.

The Commissioner moved to dismiss the petition for lack of jurisdiction because it was not timely filed. Petitioners moved for judgment before the Tax Court on the ground that no assessment of taxes for 1971 could be made against them because no notice of deficiency had been properly sent to them within the period of the statute of limitations. After a hearing, the Tax Court granted the Commissioner's motion and denied the petitioners' motion.

II.

The Commissioner is authorized by 26 U.S.C. § 6212(a) to send a notice of deficiency to a taxpayer by certified or registered mail. Subsection (b) of section 6212 provides that notice "mailed to the taxpayer at his last known address, shall be sufficient." ⁵ Although section 6212(a)'s language with respect to the giving of notice is precatory, the Commissioner may not assess a tax deficiency until he has given the taxpayer notice thereof. 26 U.S.C. § 6213(c). Taxpayers residing within the United States may within 90 days of mailing of a notice of deficiency petition the Tax Court for a redetermination of the tax deficiency. 26 U.S.C. § 6213. Filing within the 90 day period is a jurisdictional prerequisite to the Tax Court hearing a petition for a redetermination. Stebbins' Estate v. Helvering, 121 F.2d 892, 893-94 (D.C.Cir.1941). During the 90 day period, the Commissioner may not assess the claimed tax deficiency. 26 U.S.C. § 6213. ⁶ Further, during that period any applicable statute of limitation is tolled. 26 U.S.C. § 6503(a)(1). Once a tax deficiency is assessed, the taxpayer must pay the deficiency and resort to a suit for a refund if he disputes the Commissioner's determination. 26 U.S.C. §§ 7421-22. Hence, the mailing of a notice of deficiency pursuant to section 6212 serves several purposes. Principally, of course, it is to afford the taxpayer notice of any tax deficiency determined by the Commissioner; however, it also serves to otherwise help define the rights of the taxpayer and the power of the Commissioner concerning collection of a deficiency.

As stated, the principal issue in the instant case is whether the Commissioner's April 13, 1978 mailing of the notice of deficiency was sent to petitioners' "last known address" within the meaning of 26 U.S.C. § 6212(b). That phrase is defined by neither the International Revenue Code nor the regulations promulgated thereunder by the Commissioner. Certain principles, however, have evolved from the substantial body of case law interpreting section 6212(b). In Alta Sierra Vista, Inc. v. Commissioner, 62 T.C. 367, 374 (1974), aff'd mem., 538 F.2d 334 (9th Cir. 1976), the Tax Court defined "last known address" as "the taxpayer's last permanent address of a definite duration to which the taxpayer has directed the Commissioner to send all communications." As a general proposition, the Commissioner is entitled to treat the address of the taxpayer appearing on the return being audited as the taxpayer's "last known address" absent "clear and concise notification from the taxpayer directing the Commissioner to use a different address." Id. The Commissioner must, however, exercise reasonable diligence to ascertain a taxpayer's "last known address." Delman v. Commissioner, 384 F.2d 929, 932 (3d Cir. 1967), cert. denied, 390 U.S. 952, 88 S.Ct. 1044, 19 L.Ed.2d 1144 (1968); O'Brien v. Commissioner, 62 T.C. 543, 550 (1974); Alta Sierra Vista, Inc. v. Commissioner, 62 T.C. at 374. Whether the Commissioner has properly discharged his obligation to reasonably ascertain a taxpayer's "last known address" is a question to be resolved upon the facts and circumstances of each case. ⁷ O'Brien v. Commissioner, 62 T.C. at 550; Lifter v. Commissioner, 59 T.C. 818, 821 (1973). Being a factual question, the Tax Court's resolution thereof will only be reversed if clearly erroneous. Johnson v. Commissioner, 611 F.2d 1015, 1019 (5th Cir. 1980).

III.

The particular factual circumstances that, when considered together, cause us to reverse the Tax Court's finding in the instant case include: (1) in 1976, petitioners mailed two documents to the Kansas City Service Center that bore their Oleander Street address; (2) in November 1977, the Kansas City Service Center communicated by mail with petitioners at their Oleander Street address; (3) Agent Swanson of the Commissioner's Chicago offices was aware in 1977 of petitioners' Oleander Street address; (4) petitioners did nothing to conceal their Oleander Street address from the Commissioner; (5) the Commissioner's file on petitioners does not contain a return receipt for the notice of deficiency; and (6) the Commissioner's Chicago offices in early 1979 sent to Mrs. McPartlin a "Notice of Tax Lien" and an accompanying letter at petitioners' Oleander Street address.

A

Turning first to a discussion of the...