United States v. Ahrens

• Decision Date: 11 April 1975
• Docket Number: No. F-72-C-41.,F-72-C-41.
• Citation: 394 F. Supp. 531
• Parties: UNITED STATES of America, Plaintiff, v. Edward J. AHRENS, Defendant.
• Court: U.S. District Court — Western District of Arkansas

394 F. Supp. 531

UNITED STATES of America, Plaintiff, v. Edward J. AHRENS, Defendant.

No. F-72-C-41.

United States District Court, W. D. Arkansas, Fayetteville Division.

January 28, 1975.

Supplemental Opinion April 11, 1975.

Francis P. Dicello, Trial Atty., Tax Div., Dept. of Justice, Washington, D.C., for plaintiff.

R. L. Wommack of Wommack, Lineberger & Davis, Fayetteville, Ark., for defendant.

OPINION

JOHN E. MILLER, Senior District Judge.

This is a suit to collect an alleged income tax deficiency brought by the Government against the defendant, Edward J. Ahrens, as authorized by 26 U.S.C.A. (1954) § 6502, and by 28 U.S.C.A. §§ 1340 and 1444.

The suit was commenced October 10, 1972, seeking to recover $152,151.55, plus additional interest, for income taxes allegedly due for the taxable year 1967, which complaint was later amended to strike out the year 1967 and insert in lieu thereof the year 1961.

On October 31, 1972, defendant filed his answer in which he denied the various allegations of the complaint and prayed that the complaint as amended be dismissed.

No other pleadings were filed until February 7, 1974, when the plaintiff filed its first motion for summary judgment supported by a memorandum brief. When that was done, the proceeding was assigned to the writer. By correspondence and otherwise the court urged the parties to prepare the case for trial or other disposition. On February 19, 1974, the defendant filed his response to the motion of plaintiff for summary judgment. In his response the defendant contended and alleged that the motion for summary judgment should be dismissed for the reason that the issues of fact yet to be determined are as follows:

"(a) Whether the originating audit of the income taxpayer's return and notice procedures as provided in the Internal Revenue Code of 1954 were, in fact, performed in the time and manner required by law.

"(b) Whether notice of the deficiency of assessment was served upon the defendant or his duly authorized agent and attorney in fact in the time and manner required by law.

"(c) Whether the `delinquent notice' as provided in Section 6213(c) of the Internal Revenue Code was in fact, filed and served upon the defendant or his duly authorized agent in the time and manner as required by law.

"(d) Whether the defendant, while serving in the Central Intelligence Agency of the United States Government in Viet Nam, during the auditing of the income tax return, was in fact given adequate notice and opportunity to defend himself either through duly authorized legal representation or personal appearance against assessment proceedings brought against him while he was in the service of his Country."

The motion of plaintiff was overruled on April 2, 1974.

Following the entry of the order overruling said motion, the parties proceeded with their discovery procedure and, after completion, the plaintiff requested that the case be set for a pretrial conference. The court entered an order on November 5, 1974, fixing November 20, 1974, as the date for such conference.

However, on November 19, 1974, one day prior to the pretrial hearing, the plaintiff filed its second motion for summary judgment together with brief in support thereof. At the hearing it developed that the defendant had had no opportunity to file a response to the second motion for summary judgment or to submit brief in opposition thereto.

The parties were in agreement that the discovery proceedings were complete on the questions then before the court, subject to the right of the defendant to file response to the motion of plaintiff. Therefore, the defendant asked and was granted time in which to file his response to the second motion above referred to and also to file motion for judgment on the pleadings, motion to strike, and motion for summary judgment, which response and motions referred to were filed by defendant on December 29, 1974, and supported by brief. On January 22, 1975, the plaintiff submitted its reply to the defendant's brief of December 29, 1974.

In the reply the plaintiff reiterates to a great extent its contentions made in its memorandum filed in support of its second motion for summary judgment on November 19, 1974. It further states: "There is no question in this case but that the defendant is trying to escape from the liability assessed against him on the sole grounds that there cannot be produced either by the defendant or the United States a copy of the deficiency notice sent to him and his attorney with respect to the year 1961." The Government also contends that the notice of deficiency was included in its communication of June 22, 1966.

On March 20, 1962, the defendant and his wife signed their joint tax return for 1961, and the return was apparently filed immediately showing a total tax for the year 1961 of $7,687.42.

It is the contention of the defendant that the IRS did not comply with the established procedures in making the alleged assessment of taxes against him and that he was not given an opportunity to contest the merits of the alleged assessment of the taxes in the Tax Court since he was not issued a timely notice of the alleged deficiency and assessment and that the complaint should be dismissed.

The plaintiff contends that the IRS properly followed the correct procedures and that its second motion for summary judgment should be granted and judgment entered for plaintiff in accordance with its complaint.

The court believes that the decisive questions may best be answered by first stating the law applicable to the issues, and then applying the law to the facts as established in the record.

Jurisdiction of the controversy is granted by 26 U.S.C.A. § 7402, Internal Revenue Code of 1954.

The taxing system of the United States is premised on self-assessment, and taxes in excess of those voluntarily returned by the taxpayer can be assessed by the IRS only under the procedure provided in the Code except in certain situations not here applicable. This procedure is designed to give the taxpayer the opportunity to appeal to the Tax Court the Service's determination that a deficiency exists. 9 Mertens, Law of Federal Income Taxation, § 49.126. If a deficiency in income tax is determined, then certain officials are authorized to send notice of such deficiency the taxpayer, 26 U.S.C.A. §§ 6212-6213. The notice of deficiency is sometimes referred to as a "ticket to the Tax Court."

Section 49.131, p. 242, of 9 Mertens, Law of Federal Income Taxation, states:

"Until such notice has been sent to the taxpayer and the appropriate waiting period provided in the Code has expired, and except in certain circumstances which are exceptions to the general rule, no assessment of an income tax deficiency can be made and no distraint or proceeding in court for its collection may be made, begun or prosecuted. The mailing of a proper notice of deficiency (1) suspends the statute of limitations on assessment, (2) permits the taxpayer, if he wishes, to appeal to the Tax Court for a redetermination of the deficiency within the applicable period commencing with the mailing of such notice, and if the taxpayer appeals (3) restricts the sending of further deficiency notices."

In Robinson v. Commissioner of Internal Revenue, 57 T.C. 735, the court at page 737 said:

"The statute of limitations is a defense in bar and not a plea to the jurisdiction of this Court. Badger Materials, Inc., 40 T.C. 1061 (1963). In establishing this defense, the petitioner `must make a prima facie case, which ordinarily means proof of the filing of the statutory return and the expiration of the statutory period; whereupon the respondent must go forward with countervailing proof.' E. J. Lorie, 21 B.T.A. 612, 614 (1930); see Knollwood Memorial Gardens, 46 T.C. 764, 792 (1966); Anne Gatto, 20 T.C. 830 (1953); C. A. Reis, 1 T.C. 9 (1942); M. A. Nicholson, et al., 22 B.T.A. 744, 746 (1931); Bonwit Teller & Co., 10 B.T.A. 1300 (1928). Thus, if the petitioners plead and prove that they have not received a notice of deficiency before the running of the period of limitations, it is clear that they have met their burden of proof and that the respondent must then show that the running of the period was in some way suspended. See James A. Rogers, 57 T.C. 711 (1972); T. W. Warner Co., 19 B.T.A. 872 (1930); Bernicedale Coal Co., 16 B.T.A. 696 (1929)."

See, also, Rogers v. Commissioner, 57 T. C. 711.

In United States v. Lehigh (W.D. Ark.1961) 201 F.Supp. 224, the court had before it for decision the identical questions sub judice. The court (Judge Henley) discussed all issues pertaining to the defense, and his conclusions were stated with remarkable clarity. At page 227 the court stated:

"The sole defense tendered by defendant is that he was not given proper notice of the assessment upon which the Government's claim is based, that the failure to give such notice was fatal to the assessment, and that it is now too late for the Government to make any other assessment against him with respect to his 1953 income tax liability.

"The Government contends that either one or both of the notices mailed to defendant constituted sufficient compliance with the statutory requirements of notice. It appears to be recognized by both sides that, unless there was compliance with the notice requirements of the statute, the Government is not entitled to prevail. See in this connection Merten's Law of Federal Income Taxation, Rev. § 49.131FF and § 49.146, and authorities there cited.

"The statutory requirements of notice with which the Court is concerned may be found in sections 6212 and 6861 of the 1954 Internal Revenue Code and in sections 272 and 273 of the 1939 Code. As applicable to this case those sections provide in substance that when a jeopardy assessment is made notice thereof is to be mailed to the taxpayer within 60 days after the making of such assessment. Section 6212(a) authorizes the Secretary of the Treasury or his

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