Prather v. Comm'r of Internal Revenue, Docket No. 2340-67.
| Decision Date | 10 June 1968 |
| Docket Number | Docket No. 2340-67. |
| Citation | 50 T.C. 445 |
| Parties | JOHN V. PRATHER AND HELEN PRATHER, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Arthur J. Whalen, Jr., for the petitioner.
Andrew S. Coxe and Hugh C. McMahon, for the respondent.
Held, where deficiencies for income taxes were immediately assessed and timely claimed in the bankruptcy proceeding of petitioner, but additions to tax for fraud which were also assessed were not claimed in bankruptcy, and would have not been allowed as a claim against the assets of the bankrupt had they been claimed, sec. 6871, I.R.C. 1954, precludes petition to the Tax Court as regards the deficiencies in tax but not as regards the additions to tax for fraud.
The Commissioner, on June 16, 1967, filed a motion to dismiss this proceeding for lack of jurisdiction. The question presented for decision is whether section 6871 of the Internal Revenue Code1 denies the Court jurisdiction to redetermine deficiencies and additions to tax on the facts as set out below.
John V. Prather, hereinafter referred to as the petitioner, and Helen Prather, were husband and wife during the years 1960 through 1964. Petitioner and his wife filed joint Federal income tax returns for each of the years.
Petitioner, in a proceeding designated ‘In the matter of JOHN V. PRATHER a/k/a/ JOHN VAN PRATHER,‘ bankruptcy No. 51-65, filed a voluntary petition in bankruptcy in the U.S. District Court for the District of Columbia and on July 1, 1965 was adjudicated a bankrupt by that court. By order dated July 15, 1965, the referee in bankruptcy set January 27, 1966, as the final day for filing claims in bankruptcy. A trustee was appointed for the bankrupt's estate.
On September 22, 1965, a proof of claim in the amount of $21,227.24 for certain employment taxes of $20,543.43 and interest of $683.81 was filed by the United States in the petitioner's bankruptcy proceeding. This claim relates to certain employment taxes assessed against the petitioner individually under the authority of section 6672 of the Code. This tax claim is not in issue in the case.
On January 4, 1966, a proof of claim in the amount of $41,856.35 for petitioner's estimated income tax liabilities for the years 1960 through 1963 was filed in petitioner's bankruptcy proceedings. This proof of claim provides inter alia as follows:
+-----------------------------------------------------------------------+
¦SUPPLEMENTAL #1 ¦
+-----------------------------------------------------------------------¦
¦ ¦Kind of tax and period¦Amount ¦Remarks ¦
+-----------------+----------------------+---------+--------------------¦
¦ ¦ ¦due ¦ ¦
+-----------------+----------------------+---------+--------------------¦
¦ ¦ ¦ ¦ ¦
+-----------------+----------------------+---------+--------------------¦
¦Additional income¦1960 ¦$6,885.95¦Estimated liability.¦
+-----------------+----------------------+---------+--------------------¦
¦Do ¦1961 ¦9,191.14 ¦Do. ¦
+-----------------+----------------------+---------+--------------------¦
¦Do ¦1962 ¦19,499.64¦Do. ¦
+-----------------+----------------------+---------+--------------------¦
¦DO ¦1963 ¦6,279.62 ¦Do. ¦
+-----------------+----------------------+---------+--------------------¦
¦ ¦ ¦41,856.35¦ ¦
+-----------------------------------------------------------------------+
On March 9, 1967, a proof of claim in the amount of $52,632.79 pertaining to petitioner's income tax liabilities for the years 1960 through 1964 was filed in the bankruptcy proceeding. This proof of claim provides inter alia as follows:
+-------------------------------------------+
¦SUPPLEMENTAL #2 ¦
+-------------------------------------------¦
¦Kind of tax and period¦Amount ¦Date tax ¦
+----------------------+---------+----------¦
¦ ¦due ¦lien arose¦
+----------------------+---------+----------¦
¦Additional income 1960¦$5,776.44¦2/24/67 ¦
+----------------------+---------+----------¦
¦Interest to 7/1/65 ¦1,459.31 ¦ ¦
+----------------------+---------+----------¦
¦Additional income 1961¦9,665.24 ¦2/24/67 ¦
+----------------------+---------+----------¦
¦Interest to 7/1/65 ¦1,861.96 ¦ ¦
+----------------------+---------+----------¦
¦Additional income 1962¦18,455.86¦2/24/67 ¦
+----------------------+---------+----------¦
¦Interest to 7/1/65 ¦2,448.19 ¦ ¦
+----------------------+---------+----------¦
¦Additional income 1963¦11,982.22¦2/24/67 ¦
+----------------------+---------+----------¦
¦Interest to 7/1/65 ¦870.49 ¦ ¦
+----------------------+---------+----------¦
¦Additional income 1964¦111.66 ¦2/24/67 ¦
+----------------------+---------+----------¦
¦Interest to 7/1/65 ¦1.42 ¦ ¦
+----------------------+---------+----------¦
¦ ¦52,632.79¦ ¦
+-------------------------------------------+
The bankruptcy court entered an order allowing claims of general unsecured creditors. Unless an objection is filed to the allowance of a priority tax claim, it is not the practice of the bankruptcy court involved herein to enter a formal order allowing such claims. No objections were filed to the tax claims filed by the United States in petitioner's bankruptcy proceedings. None of the various tax claims filed in the bankruptcy proceedings claimed any amount as an addition to tax for fraud.
On or about November 7, 1966, the trustee of the bankrupt estate of petitioner filed his final account with the bankruptcy court. On January 5, 1967, the petitioner was granted a discharge in the bankruptcy proceeding.
In 1967 Prather and his wife were living apart. On February 17, 1967, respondent sent them at their separate addresses duplicate originals of a joint notice of deficiency and a 21-page statement attached thereto, explaining deficiencies and additions to tax for fraud based on their joint returns for each of the years 1960 through 1964. Page 1 of the statement attached to the notice of deficiency is, in part, as follows:
+----------------------------------------------+
¦INCOME TAX ¦
+----------------------------------------------¦
¦ ¦ ¦Addition to tax ¦
+---------------+------------+-----------------¦
¦ ¦ ¦sec. 6653(b) ¦
+---------------+------------+-----------------¦
¦TYE Dec.31— ¦Deficiency ¦I.R.C. 1954 ¦
+---------------+------------+-----------------¦
¦1960 ¦$5,776.44 ¦$2,888.22 ¦
+---------------+------------+-----------------¦
¦1961 ¦9,665.24 ¦4,811.23 ¦
+---------------+------------+-----------------¦
¦1962 ¦18,455.86 ¦9,227.93 ¦
+---------------+------------+-----------------¦
¦1963 ¦11,982.22 ¦5,991.11 ¦
+---------------+------------+-----------------¦
¦1964 ¦111.66 ¦ ¦
+---------------+------------+-----------------¦
¦ ¦45,991.42 ¦22,918.49 ¦
+----------------------------------------------+
On February 20, 1967, the district director mailed to ‘Mr. John V. Prather, Mr. Harrison S. Howes, Trustee in Bankruptcy,‘ a Form 7900 letter indicated that the deficiencies and additions to tax for fraud involved were being assessed against petitioner under the provisions of internal revenue law applicable to bankruptcy. The amounts of the deficiencies and additions to the tax for fraud for the years 1960 through 1964, inclusive, set forth in the letter were identical to the amounts in the notice of deficiency which have been set forth above.
The deficiencies and additions to the tax for the taxable years 1960 through 1964 in the amounts set forth in the Form 7900 letter were assessed against the petitioner on February 24, 1967, while the bankruptcy proceeding was still pending.
On May 15, 1967, petitioner and his wife filed a joint petition in this Court for the redetermination of the deficiency set forth in the respondent's joint notice of deficiency mentioned above. On June 16, 1967, the respondent moved to dismiss the petition for lack of jurisdiction pursuant to section 6871 insofar as it purports to be a petition by or on behalf of the petitioner John V. Prather.
On July 11, 1967, the final meeting of creditors was held and the proceeds of the bankrupt estate were thereafter subsequently distributed by the trustee to creditors, although the estate remained open pending the filing of the trustee's supplemental report.
On October 23, 1967, the referee in bankruptcy, after a hearing, entered an order denying the petitioner's motion, dated July 10, 1967, to stay the proceedings of the bankruptcy court for the purpose of having the bankruptcy court examine into the merits of the claim of the Commissioner for alleged deficiencies, plus additions to tax for fraud, for the taxable years 1960 through 1964.
On January 30, 1968, the referee in bankruptcy entered an order approving the account of the trustee, discharging him, and closing the bankrupt's estate.
Code sections 6211 through 6213 contain the usual deficiency procedure in the case of income taxes. Therein it is provided that if the Secretary or his delegate determines that there is a deficiency in income taxes, he is authorized to send a notice of such deficiency to the taxpayer.2 Upon receipt of the notice of deficiency, the taxpayer generally has 90 days to file a petition with the Tax Court for a redetermination of the deficiency. The...
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