Petrie v. Commissioner, Docket No. 8860-85.
| Decision Date | 29 March 1990 |
| Docket Number | Docket No. 8860-85. |
| Citation | 1990 TC Memo 168,59 TCM (CCH) 275 |
| Parties | Branka Petrie v. Commissioner. |
| Court | U.S. Tax Court |
Branka Petrie, pro se. Paul L. Dixon and J. Michal Nathan, for the respondent.
GALLOWAY, Special Trial Judge:
This case was heard pursuant to the provisions of section 7443A(b) of the Internal Revenue Code of 1954 and Rules 180, 181, and 182.1
By notice of deficiency dated February 28, 1985, respondent determined a deficiency of $5,467 in petitioner's 1981 Federal income tax and additions to tax under sections 6653(a)(1) and 6653(a)(2) in the respective amounts of $273.65 and 50 percent of the interest due on the amount of $5,467. The issues for decision are: (1) whether the notice of deficiency in which respondent determined petitioner's tax liability was null and void; (2) whether petitioner understated toke income reported on her tax return; and (3) whether petitioner is liable for the additions to tax for negligence or intentional disregard of rules and regulations.
This case was one of a group of assigned cases called at a pre-trial session of the Court held at Las Vegas, Nevada. The cases contain common questions of fact or law and are among the remaining unresolved cases which arose from a toke compliance program initiated by respondent in Nevada in 1982. At the pretrial session, the Court requested all taxpayers to report on whether their cases would be settled or ready for trial at a future trial session in Las Vegas. The parties in this case requested that their case be tried at the Court's pre-trial session.
Some of the facts have been stipulated and are so found. The stipulation and attached exhibits are incorporated herein by reference. Our findings of fact and opinion are combined for the purposes of clarity and convenience.
Petitioner was a resident of Las Vegas, Nevada, when her petition was filed. She filed her 1981 return with the Internal Revenue Service Center in Ogden, Utah.
In her petition filed with the Court on April 25, 1985, petitioner alleges in part as follows:
Respondants have proceeded improperly in their unauthorized examination of petitioner's private transactions with employer. Section 7609 of Title 26 requires Notice of summons on third party record keepers. Respondants summoned records of petitioner from employer without Notice, to gather information to compute the alleged deficiency which would not have been possible without the unauthorized search of petitioners private transactions with her employer. Petitioner was denied the right to intervene in the search for her business records by respondants failure to give proper Notice. Reproduced literally.
At trial, petitioner further argued: (1) that this Court should suppress and exclude evidence secured by respondent which resulted in respondent's determination of petitioner's underreported toke income; and (2) respondent's notice of deficiency should be quashed because the information obtained by respondent to support respondent's determination was illegally obtained. Cf. Proesel v. Commissioner Dec. 36,514, 73 T.C. 600, 601 (1979).
Petitioner has been employed in Las Vegas at Desert Palace, Inc., dba Caesar's Palace (Caesar's) since 1973. She has worked as a Twenty-one ("21") dealer since 1979. During 1981, the Internal Revenue Service (the Service) issued to Caesar's an Information Document Request (IDR) requesting the names, social security numbers and last known addresses of employees, including "21" dealers employed at Caesar's as of January 30, 1981. Petitioner's name and address was obtained in response to the IDR request.
The IDR represented that the request was in connection with the Service's "Examination of Employment Tax return (Form 941) for the quarter ended June 30, 1981." In fact, no Employment Tax audit was undertaken. Instead, the information obtained was generally used to mail letters to the dealers to inform them of the Service's toke compliance program. Under this discretionary program, the Service agreed not to audit a dealer's tax returns for years prior to 1982 if the dealer accurately reported his tokes for 1982 to his employer on a monthly basis and on his tax return. The program was commonly known to the dealers and the public as an "amnesty program."
The Service could have obtained the information desired concerning petitioner through the use of a "John Doe" summons. See section 7609 (Special Procedures For Third-Party Summonses). However, the Service did not follow the procedures set forth in section 7609(f) for issuance of a John Doe summons in this case. Information concerning petitioner was obtained in response to the IDR described above and her tax return for 1981 was examined in due course. The examiner's report was dated November 19, 1984.
Petitioner first contends that prior to attempting to obtain information about her from Caesar's, the Service was required to give her notice under section 7609. Section 7609(a) requires that notice of a summons be given when the summons is served on a "third-party recordkeeper," as defined in section 7609(a)(3), i.e., in general, a savings bank or similar financial institution. However, Caesar's was not a third-party recordkeeper with regard to petitioner since a taxpayer's employer is not a third-party recordkeeper nor are the employer's records third-party records for the purposes of section 7609. Tomburello v. Commissioner Dec. 42,960, 86 T.C. 540, 545 (1986), affd. without published opinion 838 F.2d 474 (9th Cir. 1988). Therefore, even if respondent had issued a summons to Caesar's, and that summons had identified petitioner as the person about whom information was sought, petitioner had no entitlement to notice of respondent's request for information.
Respondent has conceded that it would have been appropriate to follow the John Doe summons procedures set forth in section 7609(f) and that these procedures were not followed in 1981. However, there was no violation of petitioner's constitutional rights. She has no right to protection under the Fourth Amendment with respect to the information provided respondent by Caesar's Palace. See United States v. Payner 80-2 USTC ¶ 9511, 447 U.S. 727, 734 (1980). Furthermore, as stated above, it appears that only identifying information was obtained by allegedly improper means. The evidence presented at trial by respondent relating to the examination of petitioner's 1981 return was acquired separately and independently from respondent's prior conduct. As this Court held in Proesel v. Commissioner, supra at 608, it would be stretching the exclusion of evidence rule beyond reasonable bounds to hold in every case in which the identity of an individual is somehow illegally obtained that all information subsequently acquired must be suppressed.
There is evidence in the record that respondent used the John Doe summons procedures set forth in section 7609(f) to seek similar information concerning dealers working at Caesar's for years later than 1981. However, even though it is not known why the John Doe summons procedures were not used by respondent in gathering information concerning petitioner in 1981, this Court will rarely look behind a deficiency notice to review the propriety of respondent's motive in using a particular administrative procedure in making his determination. Riland v. Commissioner Dec. 39,230, 79 T.C. 185, 201 (1982); Greenberg's Express. Inc. v. Commissioner Dec. 32,640, 62 T.C. 324, 327-328 (1974). In Greenberg's Express. Inc. v. Commissioner, supra at 328, we stated as follows:
This Court has on occasion recognized an exception to the rule of not looking behind the deficiency notice when there is substantial evidence of unconstitutional conduct on respondent's part and the integrity of our judicial process would be impugned if we were to let respondent benefit from such conduct citing Suarez v. Commissioner Dec. 31,494, 58 T.C. 792 (1972). But even in such limited situations, we have refused to declare the deficiency notice null and void, as petitioners would have us do. Citations omitted.
Assuming arguendo that there are reasons requiring us to look behind the notice of deficiency, we find no grounds for declaring the deficiency notice null and void, as requested by petitioner. We note that generally, a notice of deficiency carries with it a presumption of correctness. Thus, the burden of proof rests with petitioner to prove that respondent's determinations are erroneous. Welch v. Helvering 3 USTC ¶ 1164, 290 U.S. 111, 115 (1933); Rule 142(a). In this case, at best, we would shift the burden of going forward with the evidence to respondent. See Lamport v. Commissioner Dec. 40,537(M), T.C. Memo. 1983-629. If this were done, no benefit would result to petitioner. As discussed below, respondent has presented sufficient evidence of unreported toke income to satisfy the burden of going forward, if it were shifted to him.
In further support of her request that we declare the notice of deficiency null and void, petitioner presented at trial a six-page "Affidavit Opposing Predetermination Of Tips and Tokes," sworn to by her before a Notary Public of Clark County, Nevada. Respondent objected to admission of the affidavit and in particular to three of the exhibits on the ground that these documents are subject to the attorney-client privilege. Ex parte affidavits are inadmissible as evidence. Rule 143(b). Petitioner's affidavit constituted argument and was admissible for that purpose only to the extent of its probative value.
The three exhibits objected to by respondent, as privileged, were: (1) a memorandum from the District Counsel, Las Vegas, Nevada, to the District Director, Las Vegas District; (2) a memorandum from the Regional Counsel, Western Region, to the Director, Tax Litigation Division, Office of Chief Counsel; and (3) a memorandum from the...
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