TAX COURT OPINION

Case: Marina Murashova
Docket Number: 6460-14
Judge: Goeke
Opinion Type: bench
Filed: 04/22/2015
Pages: 12

UNITED STATES TAX COURT WASHINGTON, DC 20217 MARINA MURASHOVA, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 6460-14. ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at San Diego, California, on March 27, 2015, containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, petitioner's Motion to Dismiss for Lack of Jurisdiction, filed March 18, 2015, will be granted and respondent's Motion to Dismiss for Lack of Jurisdiction, filed March 2, 2015, will be denied. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. April 22, 2015 SERVED APR 2 3 2015 V Capital Reporting Company 3 1 Bench Opinion by Judge Joseph Robert Goeke 2 March 27, 2015 3 Marina Murashova 4 5 6 7 8 9 10 11 12 13 14 Docket No. 6460-14 THE COURT: The Court has decided to render oral findings of fact and opinion in this case. The following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This opinion is rendered pursuant to the authority provided in Internal Revenue Code Section 7459(b) and Tax Court Rule of Practice and Procedure 152. Hereinafter, rule references are to the Tax 15 Court Rules of Practice and Procedure, and section 16 17 18 19 20 21 22 23 24 references are to the Internal Revenue Code, unless noted. This is a deficiency case in which our jurisdiction is normally predicated upon the timely filing of a petition after Respondent has issued a notice of deficiency. That circumstance has led to cross-motions to dismiss the present case for lack of jurisdiction. Respondent takes the position that the 25 petition was filed late, and that Respondent 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 correctly sent the notice of deficiency to 2 Petitioner's last known address. There's no question 3 4 5 6 7 8 9 that the petition was filed well after the 90-day period for the timely filing of a petition which would trigger our jurisdiction. Petitioner, however, counters that, although the petition was not timely, the case should not be dismissed because of Petitioner's failure to timely file a petition, but rather, because 10 Respondent failed to send the notice of deficiency to 11 Petitioner's last known address. 12 13 14 15 16 17 The pertinent facts are rather succinct in the record we have. Respondent issued a notice of deficiency to the Petitioner for the taxable year 2000, in which Petitioner had filed a joint federal income tax return with her husband, which, by the time Respondent issued the notice of deficiency, saw 18 Petitioner's marriage to be in disarray, and she was 19 20 21 22 23 24 25 living separate from her husband, even though it's undisputed that she filed a joint return with her husband for the year 2000. The address shown on that return is not the address which either party represents should be considered the last known address in the present case because of circumstances after the filing of the return. As stated 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 previously, the notice was issued on November 19th, 2003, and showed an address of 3372 Avenue Nieve, 3 Carlsbad, California 92009. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Petitioner testified that, at the time the notice of deficiency was issued, she lived at 3266 Avenida de Sueno, Carlsbad, California 92009. Her testimony was credible, and there's no contrary evidence in the record that that was in fact where she lived. In October of 2003, Petitioner filed her 2002 federal income tax return, showing the address where she testified she lived at that time. Respondent's records indicate that that return was received on October 17th, which is over a month before the issuance of the notice of deficiency. However, as we will discuss, the pertinent law turns on when Respondent should be deemed to have processed that return. Based upon information in the record from the IRS's computer files, we find as fact that 21 Petitioner's 2002 federal income tax return was 22 23 24 processed on November 17th, 2003. The law that underlies the issue in this case is well-established relative to the requirement that Respondent update 25 Respondent's records and send notices of deficiency 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 to the last address shown on an income tax return which has been properly processed before the issuance of the notice of deficiency. We will explain the background behind the development of that law, as it is pertinent to the outcome in the case. Section 6212(b) (1) provides that a notice of deficiency should be mailed to the taxpayer at the last known address, and that such mailing shall be sufficient. The concept of last known address is not defined in the Internal Revenue Code, but it well- developed in the case law and in Respondent's regulations. The Ninth Circuit Court of Appeals has taken the lead in describing the circumstances for determination of what is a taxpayer's last known address. In Welch v. Schweitzer, 106 F.2d 885, 887 (9th Cir. 1939), the Court of Appeals described the circumstances when Respondent, just in the normal application of good business practices, should rely upon information available to the institution of the Internal Revenue Service as a whole, and avail itself of the facilities of the organization to perform its duties. This analysis has evolved in cases in the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ninth Circuit, as summarized in King v. Commissioner, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 857 F.2d 676 (9th Cir. 1988). In King, the Court of Appeals describes how addresses shown on income tax returns are different from other information that 4 might casually come into the hands of the Internal 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Revenue Service, and that the Internal Revenue Service should be held to the standard of Welch v. Schweitzer with respect to income tax return information as far as determining the taxpayer's last known address. One further development of the law is when return information should be deemed to be properly processed by the Internal Revenue Service. This nuance is also the subject of jurisprudence within the Ninth Circuit Court of Appeals. But in addition, there are several cases of this Court which describe the circumstances when a return should be deemed to be properly processed. In the lead case, Abeles v. Commissioner, 91 T.C. 1019 (1988), at page 1036, the Court describes the type of analysis alluded to in the prior Ninth Circuit precedent. In describing the time frame when a notice is sent, the Court says: "The agent responsible for mailing such notice had available the means to access via an IRS 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company computer transcript the address reflected upon petitioner's separate 1981 tax return." 8 Thus the Court referenced computer access as a key element in determining whether a return had been properly processed. This principle is explained in great detail in a subsequent memorandum opinion, 1 2 3 4 5 6 7 8 Williams v. Commissioner, T.C. Memo 1989-439. In 9 Williams, the Court goes into great detail to make 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 findings based upon testimony about the IRS's processing of the income tax return in question, and determines that it was a busy filing season, which caused the return to be processed into the IRS's computer system only months after the return was filed. The Court focused on when the information was available on the IRS's computer system and in the IRS computer transcript in determining when the return would be deemed to be properly processed, and therefore become the actual address that should be used by the IRS as a return filed and properly processed. We think the law is well-settled that, prior to Respondent's regulations, Respondent was held responsible for addresses shown on federal income tax returns that were properly processed, and 866.488.DEPO www.CapitalReportingCompany.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Capital Reporting Company 9 that processing the return meant that the information on the return was available in Respondent's computer system. Respondent followed up on this case law and on the statutory requirement by adopting regulations consistent with the case law. In Treas. Reg. Section 301.6212-2(a), Respondent described the general rule regarding the definition of a last known address. The regulation provides as follows: "Except as provided in paragraph (b)(2) of this section, a taxpayer's last known address is the address that appears on the taxpayer's most recently filed and properly processed federal tax return, unless the Internal Revenue Service is given clear and concise notification of a different address. Further information on what constitutes clear and concise notification of a different address and a properly processed federal tax return can be found in Rev. Proc. 90-18 (1990-lCB491) or in 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company procedures subsequently prescribed by the Commissioner." Both Rev. Proc. 90-18 and the Rev. Proc. 10 that was placed in succession to 90-18 during the period at issue in this case, which is Rev. Proc. 2001-18, provide that the last known address is the address on the most recently filed and properly processed return. In fact, both Rev. Procs. cite Abeles v. Commissioner, previously cited in this opinion. However, the Rev. Procs. both go further and provide in section 5.02(1) that, except as otherwise provided, a return will be considered properly processed after a 45-day processing period, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 which begins the day after the date of receipt of the 16 17 18 19 20 return by the Internal Revenue Service Center. Based upon the case law that existed and is cited in the Revenue Procs., it appears the 45-day rule was a safe harbor for the taxpayers so as not to have a processing period that extended beyond several 21 months, which is the circumstance in Williams v. 22 23 24 25 Commissioner, for example. Based upon our findings of fact, the present case presents a somewhat unusual circum- stance, where the return was in fact processed and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 available on Respondent's computer system before the end of the 45-day period. There's no evidence in the record that the individuals processing this return 4 would've had any knowledge of when Petitioner 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 actually filed a return or would've had any expectation that Petitioner would in fact have filed a return prior to the date the notice of deficiency was issued. The simple question is whether, when we have found as fact that Respondent's computer system reflected Petitioner's address based upon her 2002 return on November 17th, we should deem that information to be available to Respondent's employees who sent the notice of deficiency to the Petitioner on November 19th. If we assumed the 45-day rule as having the force of law, then in fact the notice of deficiency would have been issued before 45 days after the return was actually filed in October of 2003. However, if we look to the jurisprudence that was developed before the issuance of Respondent's regulation and before the Revenue Procedures in question, that jurisprudence clearly looks to when the information was available on Respondent's computer system. There's no evidence in the record as to why or whether it was reasonable for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Respondent's employees who issued the notice of deficiency in question to Petitioner to not access that computer system between November 17th and November 19th. We would have to presume that it was reasonable for them not to look at the most recent information before sending out the notice, because it was simply something that had been done previously, when the notice was actually drafted. As I said, however, there is no specific evidence in the record about those circumstances or the normal procedures Respondent would have from the time a notice is reviewed and prepared until it is sent out. We will not presume that it was reasonable for the employees who sent the notice to Petitioner not to have accessed the computer records on November 18th, the day before the notice was issued, to determine the address that was available to them, which was not the address shown on the notice of deficiency. This creates the unusual circumstance where 20 Respondent's efficiency in processing the return 21 22 23 24 25 served to Respondent's detriment. However, we think the best course, based upon the limited record we have about the processing of Petitioner's notice of deficiency, is to follow the case law that existed. We believe this analysis is consistent with the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 2 3 4 5 6 7 8 9 Revenue Procedure, in that the Revenue Procedure also talks about the actual processing date as being the date on which the last known address should be available to Respondent. The fact that the Revenue Procedure goes on to set a black line 45-day rule for that date does not, in our opinion, create a safe haven for Respondent when Respondent actually has the information available before 45 days. Given that analysis, we will grant 10 Petitioner's motion to dismiss for lack of jurisdiction, and deny Respondent's motion. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 9:52 a.m., the above- entitled matter was concluded.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com