Miller v. Comm'r of Internal Revenue
| Decision Date | 08 March 1990 |
| Docket Number | Docket No. 37640-87. |
| Citation | 94 T.C. No. 19,94 T.C. 316 |
| Parties | JACOB B. AND ARDYTHE J. DAGGETT MILLER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
H and W, after regularly filing returns and paying Federal tax, claimed exemption from the withholding of their income tax and ceased filing returns. H and W, after being questioned by R regarding their failure to file and upon advice of their attorney, filed late returns for 1982, 1983, and 1984, properly reported their income, and paid the tax liability. Thereafter, H and W were divorced and began maintaining separate residences and each filed individual returns which advised R of their new addresses. Although R possessed H's and W's separate addresses in his computer system, a joint notice of deficiency determining various additions to tax with respect to both H and W was mailed before the 3-year limitations period for assessment under sec. 6501(a), I.R.C., to what later proved to be only H's ‘last known address.‘ H received the notice and forwarded a copy of it to W. Within the 90-day period in which a petition may be filed with this Court under sec. 6213(a), I.R.C., but after the expiration of the 3-year limitations period for assessment, W received actual notice of the determination. H and W filed a joint petition instituting this case that was timely under sec. 6213(a), I.R.C.
After the filing of the petition, R, by amended answer, pled that H and W were liable for the addition to tax under sec. 6653(b), I.R.C., in the alternative to the addition to tax under sec. 6653(a), I.R.C., determined in the notice of deficiency.
W argues that pursuant to sec. 6212(b)(2, I.R.C., R was required in this case to send duplicate original joint notices to H and W at the respective ‘last known address‘ of each. W contends that R's failure to do so constitutes a failure to send a notice of deficiency to W and that R is now time-barred from sending her a proper notice or assessing the tax. R agrees that he did not send a notice of deficiency to W's ‘last known address‘ and that he did not send a duplicate original notice to W in accord with sec. 6212(b)(2), I.R.C. R contends, however, that he did determine deficiencies with respect to W and attempted to communicate the same by mailing a joint notice, albeit to an address which was not the ‘last known address‘ of W. R further contends that W's actual notice of the determination and her timely filing of a joint petition with H is sufficient to provide this Court with jurisdiction to decide the merits of W's case.
HELD: R determined deficiencies with respect to W and attempted to mail notice of such determination to her. HELD FURTHER: Although R failed to mail a duplicate joint notice to W's ‘last known address,‘ we have jurisdiction to decide the merits of W's case because W received actual notice of the determination and timely petitioned this Court. HELD FURTHER: Although W did not receive actual notice of the determination until after the normal 3-year limitations period for assessment was to expire, the limitations period did not expire because R timely mailed a notice of deficiency for purposes of providing W with notice of the determination, W received actual notice of the determination, and W timely filed a petition with this Court. HELD FURTHER: H and W are liable for an addition to tax under sec. 6653(b), I.R.C., for each of the taxable years 1982, 1983, and 1984. Douglas Scott Maynard and Earle A. Sylva, II, for the petitioners.
Christopher J. Croudace, for the respondent.
Respondent, in a statutory notice of deficiency dated September 1, 1987, determined the following additions to petitioners' 1982, 1983, and 1984 income tax:
+-----------------------------------------------------------------+
¦ ¦Sec. 6651 ¦ ¦ ¦ ¦
+------+----------------+-----------------+-----------+-----------¦
¦Year ¦(a)(1) & (2) 1 ¦Sec. 6653(a)(1) ¦Sec. 6654 ¦Sec. 6661 ¦
+------+----------------+-----------------+-----------+-----------¦
¦1982 ¦$3,146 ¦$629 * ¦$1,532 ¦$3,146 ¦
+------+----------------+-----------------+-----------+-----------¦
¦1983 ¦2,816 ¦563 * ¦691 ¦2,816 ¦
+------+----------------+-----------------+-----------+-----------¦
¦1984 ¦2,934 ¦587 * ¦740 ¦2,934 ¦
+------+----------------+-----------------+-----------+-----------¦
¦ ¦ ¦ ¦ ¦ ¦
+-----------------------------------------------------------------+
Tax Court, 1990.Miller v. C.I.R.94 T.C. No. 19, 94 T.C. 316, Tax Ct. Rep. (CCH) 46,435, Tax Ct. Rep. Dec. (P-H) 94.19
FN* Plus 50 percent of the interest due on the underpayment pursuant to sec. 6653(a)(2).
The additions relate to petitioners' failure to timely file their joint income tax returns and timely pay their income tax. The notice of deficiency, however, did not reflect income tax deficiencies because petitioners made untimely payment of that portion of the tax liability prior to respondent's issuance of a deficiency notice. By an amended answer, respondent has alternatively alleged that petitioners are liable for the section 6653(b) addition to tax for fraud.
Respondent concedes that the section 6661 addition to tax is not applicable here. By an Order dated November 7, 1988, we held that we lacked jurisdiction, in this case, to redetermine additions to tax determined under sections 6651 and 6654.
The primary issues remaining for our consideration concern the validity and timeliness of the notice of deficiency, as it relates to petitioner Ardythe J. Daggett Miller (Ardythe). Respondent issued a joint notice of deficiency in the names of both petitioners which reflected deficiency determinations in petitioners' 1982, 1983, and 1984 joint income tax. Respondent timely mailed the joint deficiency notice to addresses that later proved to belong solely to petitioner Jacob B. Miller (Jacob); but no deficiency notice was mailed to Ardythe's ‘last known address.‘ Petitioners had previously established separate residences. Following the expiration of the 3- year period for assessment (section 6501(a)) and before the expiration of the 90-day period within which to petition this Court (section 6213(a)), Ardythe received actual notice of respondent's deficiency determination and, along with Jacob, timely petitioned this Court. These facts present the following issues for our consideration: (1) Whether respondent mailed a joint notice of deficiency to Ardythe; (2) whether actual notice of the deficiency and timely filing of a petition are sufficient to provide this Court with jurisdiction; (3) whether the joint notice of deficiency was issued timely (as it relates to Ardythe) under section 6501(a); and (4) whether petitioners are liable for the addition to tax for fraud under section 6653(b), or, alternatively, whether petitioners are liable for the addition to tax for negligence under section 6653(a).
Most of the facts have been stipulated. The stipulation of facts, together with the attached exhibits, are incorporated by this reference. At the time their petition was filed Jacob 2 resided in San Leandro, California, and Ardythe resided in Mountain View, California. During the years 1982, 1983, and 1984, petitioners were married and resided together; however before respondent's September 1, 1987, issuance and mailing of the notice of deficiency, petitioners separated and were subsequently divorced. Petitioners are educated professionals. Jacob was employed as an electronics engineer, and Ardythe was employed as a ‘computer specialist.‘
Petitioners were aware of their obligation to file Federal income tax returns and were diligent in preparing and filing their returns for taxable years prior to 1982. Petitioners' 1981 joint income tax return was prepared by the accounting firm of Deloitte, Haskins & Sells, and, like petitioners' previous returns, was timely filed. Petitioners reported total 1981 wages of $54,196, adjusted gross income of $66,017, and a tax liability of $11,832. All but $513 of petitioners' 1981 tax liability was paid through withholding tax credits.
During June 1982, approximately 2 months after filing the 1981 return, Ardythe prepared and submitted to her employer, Ford Aerospace, an Employee's Withholding Allowance Certificate (Form W-4) claiming that she was exempt from withholding taxes because she did not owe any Federal income tax for 1981 and did not expect to owe any income tax for 1982. Also during June 1982, Jacob prepared and submitted to his employer, Honeywell Information Systems, a Form W-4 in which he claimed that he was exempt from withholding taxes because he did not owe any Federal income tax for 1981 and did not expect to owe any income tax for 1982. During 1983, petitioners each prepared and submitted additional Forms W-4 again claiming that they were exempt from withholding taxes. All Forms W-4 were signed under a ‘penalty of perjury.‘
At the time petitioners prepared and submitted the Forms W-4, Ardythe believed that she and her husband would have an income tax liability owing for those taxable years. Petitioners were gainfully employed and they timely received Wage and Tax Statements (Forms W-2) from their employers which correctly reflected their wages for each of the 3 taxable years in issue. The Forms W-2 reflected total wages of $75,139.71 for 1982, $73,341.57 for 1983, and approximately $80,592.00 for 1984.
Once petitioners began submitting false Forms W-4 to their employers (claiming that they were exempt from withholdings), petitioners ceased filing income tax returns and, consequently, reporting and paying their income tax. The failure to file, report, and pay continued until after respondent's Examination Division questioned petitioners regarding their failure to file.
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