Pietanza v. Commissioner

• Court: U.S. Tax Court
• Writing for the Court: Cohen
• Citation: Pietanza v. Commissioner, 60 T.C.M. 948 (T.C. 1990)
• Decision Date: 02 October 1990
• Docket Number: Docket No. 29531-87.
• Parties: Peter and Mary Pietanza v. Commissioner.

60 T.C.M. 948

T.C. Memo. 1990-524

Peter and Mary Pietanza v. Commissioner.

Docket No. 29531-87.

United States Tax Court.

Filed October 2, 1990.

Michael D. Savage, 575 Lexington Ave., New York, N.Y., for the petitioners. Joseph T. Chalhoub, Richard Goldman and Terry W. Vincent, for the respondent.

Supplemental Memorandum Findings of Fact and Opinion

COHEN, Judge:

This case was assigned to Special Trial Judge Buckley pursuant to the provisions of section 7443A(b) of the Internal Revenue Code of 1986 and Rules 180 and 181.¹ After a review of the record, we agree with and adopt her opinion which is set forth below.

1. Section references are to the Internal Revenue Code of 1954 as amended and in effect for the tax year at issue unless otherwise indicated. Rule references are to the Tax Court Rules of Practice and Procedure.

Opinion of the Special Trial Judge

BUCKLEY, Special Trial Judge:

This matter is now before us on respondent's Motion under Rule 161 to Reconsider and Revise our opinion in Pietanza v. Commissioner [Dec. 45,576], 92 T.C. 729 (1989), as well as respondent's Motion under Rule 162 to Vacate Order of Dismissal which was entered on April 5, 1989. A hearing was held on these two motions.

Pietanza v. Commissioner, supra, originally came before the Court on cross-motions to dismiss for lack of jurisdiction. We held in Pietanza that respondent had failed to prove the existence of a valid notice of deficiency where he presented only evidence of postal service Form 3877 indicating a mailing to petitioners and was unable to present a copy of the alleged notice of deficiency to the Court or to petitioners.

Petitioners first started on their odyssey in search of the notice of deficiency after the receipt of a collection notice on September 16, 1985. They assiduously continued their search until the time of filing their petition in this Court on September 1, 1987. Not until respondent filed his objection to petitioners' motion to dismiss on October 26, 1987, did respondent ever state positively that there was a notice of deficiency in existence which had been mailed to petitioners. Respondent, however, was unable to provide a copy of a notice of deficiency to us.

In our opinion at 92 T.C. at 729, we held that the presumption of official regularity in the preparing and mailing of a notice of deficiency was overcome by facts in this matter which indicated to us certain irregularities. Petitioners' motion to dismiss for lack of jurisdiction on the ground that there was no valid notice of deficiency was granted and accordingly, respondent's cross-motion to dismiss was denied.

At the hearing on the cross-motions to dismiss, the Court was concerned about the inability of respondent to produce a notice of deficiency. At the end of the hearing, the Court asked respondent: "On any of these questions, have you found a case where in fact there was not apparently in existence a copy of the notice of deficiency?" The Court continued: "The Court would request the parties to see if they can locate any authority where the only information before the Court is the existence of a Form 3877 and there is no deficiency notice which either party is able to present to the Court." The comments of the special trial judge made it clear to the parties that a pivotal question to the Court was the existence of a copy of a notice of deficiency. None, nevertheless, was supplied to the Court. Respondent's memorandum after the hearing, filed May 2, 1988, continued to contend that the existence of the Form 3877 was sufficient to establish that a notice of deficiency was in existence and had been mailed. Respondent went on, however, to include in his memorandum affidavits together with a copy of a draft of a notice of deficiency in regard to the Pietanzas' 1980 tax year prepared by a revenue agent and retained in her files as a sample, "the sample notice" discussed in our opinion. We were unable to conclude, however, from the fact of the preparation of the "sample notice" that it had ever been approved or mailed to petitioners. Thus, we have already once allowed respondent to add to the record in this matter after the original hearing on the cross-motions. Our order of dismissal of April 5, 1989, for lack of jurisdiction was in favor of petitioners, respondent having failed to prove the existence of a notice of deficiency.

Our order of dismissal was entered on April 5, 1989, and shortly thereafter counsel for respondent, Joseph T. Chalhoub, who was reviewing the case for the purpose of deciding whether respondent should recommend an appeal of the dismissal to the Department of Justice, felt (in his words) that something had been left undone. Shortly thereafter, he located the administrative file containing a copy of the notice of deficiency in the files of Special Agent Fred Ferreira of the Brooklyn District of the Criminal Investigation Division (sometimes hereafter CID) of the Internal Revenue Service, where it had been since about August 1986. As a result of locating the notice of deficiency, respondent filed on May 1, 1989, the motions to revise and vacate, which we now have under consideration.

Respondent now urges us to reconsider and revise our opinion and to vacate our dismissal order upon the grounds of newly discovered evidence. We agree that respondent has finally located the missing notice of deficiency. A hearing was held on respondent's motions. Our chore is to determine if this evidence in fact is "newly discovered." We note, parenthetically, that if we now admit the notice of deficiency, the probable result will be that we dismiss this case for lack of jurisdiction in favor of respondent, the petition having been filed outside the 90-day period set forth in section 6213.

Rules 161 and 162 provide for the filing of motions for reconsideration of findings or opinion and to vacate or revise decision. Respondent's motions have been timely filed. Rule 1(a) provides that "Where in any instance there is no applicable rule of procedure, the Court or the Judge before whom the matter is pending may prescribe the procedure, giving particular weight to the Federal Rules of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand." Accordingly, we have given some weight to decisions under the Federal Rules in regard to newly discovered evidence.

Both respondent and petitioners have relied upon cases under the Federal Rules to support their contentions. It has been held that cases interpreting Rules 59 and 60 of the Federal Rules are precedents in regard to motions for reconsideration and vacating decisions under Tax Court Rules 161 and 162. Estate of Kraus v. Commissioner [89-1 USTC ¶ 13,808], 875 F.2d 597, 602 (7th Cir. 1989); Wheeler v. Commissioner [Dec. 40,250(M)], T.C. Memo. 1983-385.

Rule 60(b)(2) of the Federal Rules of Civil Procedure allows a Court to grant a motion for reconsideration based upon newly discovered evidence. The Court must weigh the following factors: (1) the evidence was discovered following trial; (2) due diligence on the part of the movant to discover the new evidence is shown or may be inferred; (3) the evidence is not merely cumulative or impeaching; (4) the evidence is material; (5) the evidence is such that a new trial would probably produce a new result. See Estate of Kraus v. Commissioner, supra at 602; Gomez v. Chody, 867 F.2d 395 (7th Cir. 1989); United States v. Walus, 616 F.2d 283, 287 (7th Cir. 1980); United States v. Meyers, 484 F.2d 113 (3d Cir. 1973).

It is apparent that the evidence in question here was located after the original hearing on the motion and after our court-reviewed opinion was served and order of dismissal entered. It is not merely cumulative or impeaching, it is material, and it is of such nature that its admission would probably produce a new and different result. However, it is clear that the "failure to learn must not have been caused by a lack of diligence." Stridiron v. Stridiron, 698 F.2d 204, 207 (3d Cir. 1983). Thus, we must ascertain whether respondent, the movant, exercised due diligence to discover the notice of deficiency.

As the moving party herein, respondent bears the burden of proving that he exercised due diligence in his efforts to discover the notice of deficiency. Bankers Pocahontas Coal Co. v. Burnet [3 USTC ¶ 998], 287 U.S. 308 (1932); Baptist v. Commissioner [Dec. 46,766(M)], T.C. Memo. 1990-400. We consider the efforts of two attorneys for respondent, for the most part, in regard to whether respondent exercised due diligence in the search for the notice of deficiency. One of these attorneys was in the office of the District Counsel in Newark, the other in the Tax Litigation Division (formerly called the Procedural Review Branch) of Chief Counsel's office in Washington, D.C. We refer to them hereafter as the Newark attorney and the D.C. attorney.

We now examine respondent's evidence regarding the search for the notice of deficiency. Our starting point must be the date upon which petitioners filed their petition with this Court, September 1, 1987. On the same date, petitioners filed their motion to dismiss. The case was then assigned to the Newark attorney who had commenced her position with District Counsel about one and a half years earlier. She received the legal file on September 21, 1987, at which time it contained only copies of the papers filed in the Tax Court proceeding. She did not receive the administrative file which normally would contain petitioners' income tax return for the year in question as well as the notice of deficiency. Counsel for petitioners advised her by telephone that another attorney in her office had also been working on a different matter involving petitioners and through that source she was able to obtain the original income tax return filed by petitioners for 1980, although that attorney did not have the administrative file. She also received a printout which indicated that...