Source: http://openjurist.org/635/f2d/895/crum-v-commissioner-of-internal-revenue
Timestamp: 2017-04-24 18:05:19
Document Index: 327273002

Matched Legal Cases: ['§ 6212', '§ 6213', '§ 6212', '§ 6501', '§ 6212', '§ 6213', '§ 6501']

635 F2d 895 Crum v. Commissioner of Internal Revenue | OpenJurist
635 F. 2d 895 - Crum v. Commissioner of Internal Revenue HomeFederal Reporter, Second Series 635 F.2d.
635 F2d 895 Crum v. Commissioner of Internal Revenue 635 F.2d 895
58 A.L.R.Fed. 538, 204 U.S.App.D.C. 37,81-1 USTC P 9123
William J. CRUM, Appellant,v.COMMISSIONER OF INTERNAL REVENUE.
Argued Sept. 26, 1979.Decided Dec. 23, 1980.
Gilbert S. Rothenberg, Atty., U. S. Dept. of Justice, Washington, D.C., with whom Scott P. Crampton, Asst. Atty. Gen., Gilbert E. Andrews and Gary R. Allen, Atty., Dept. of Justice, Washington, D.C., were on the brief for appellee.
Section 6212(a) of the Internal Revenue Code of 1954 (IRC) authorizes the use of certified or registered mail to notify a taxpayer that a deficiency in respect of income tax has been determined against him. IRC § 6212(b)(1) provides that a notice of deficiency "shall be sufficient" if it is "mailed to the taxpayer at his last known address." However, neither the IRC nor the Treasury Regulations specifically define the term "last known address". Section 6213(a) of the IRC states that if a deficiency notice is addressed to a person outside the United States, no assessment and levy of the deficiency may be made for a period of 150 days after the notice is mailed and that within that 150-day period the taxpayer may petition the United States Tax Court for a redetermination of the deficiency. If the taxpayer does not file a petition for redetermination during the allotted 150-day period, IRC § 6213(c) provides that "the deficiency, notice of which has been mailed to the taxpayer, shall be assessed, and shall be paid upon notice and demand ...."1
In Stebbins' Estate v. Helvering, 74 U.S.App.D.C. 21, 22-23, 121 F.2d 892, 893-94 (1941), this court said "it has been decided time and again that the statutory period is jurisdictional, and the duty to dismiss on failure to comply is mandatory." IRC § 6212(a) & (b) specifies that a notice of deficiency be sent to the taxpayer by certified or registered mail at his last known address, and it is clear that the statute requires "a proper giving of notice" before a deficiency is assessed. See Cohen v. United States, 297 F.2d 760, 772 (9th Cir.), cert. denied, 369 U.S. 865, 82 S.Ct. 1029, 8 L.Ed.2d 84 (1962). In Delman v. Commissioner, 384 F.2d 929, 932 (3d Cir. 1967), cert. denied, 390 U.S. 952, 88 S.Ct. 1044, 19 L.Ed.2d 1144 (1968), the United States Court of Appeals for the Third Circuit declared that "(b)y using the phrase 'last known address' Congress must have intended that notice be sent to that address where the Secretary (or his delegate) reasonably believed the taxpayer wished notice to be sent." The United States Tax Court in Alta Sierra Vista, Inc. v. Commissioner, 62 T.C. 367, 374 (1974), aff'd mem., 538 F.2d 334 (9th Cir. 1976), defined "last known address" as "the taxpayer's last permanent address or legal residence known by the Commissioner or the last known temporary address of a definite duration to which the taxpayer has directed the Commissioner to send all communications." Further, the Tax Court held that "while the Commissioner is bound to exercise reasonable diligence in ascertaining the taxpayer's correct address ..., he is entitled to treat the address appearing on a taxpayer's return as the last known in the absence of clear and concise notification from the taxpayer directing the Commissioner to use a different address." Id. Thus, the critical issue in this case is whether the communication between Crum and the Internal Revenue Service prior to the issuance of the deficiency notice for 1969 constituted sufficient notification that the Prince Edward Road address shown on his 1969 tax return was no longer correct.
Th(e) recognized continued relationship of the taxpayer to the Treasury created by statute ... made available in this case to the Commissioner the true residence address of the taxpayer, as shown in his later returns. The application of ordinary business principles to the tax business of the government would seem to require the Commissioner to avail himself of the facilities of his business organization in the performance of his duty to mail the notice of deficiency. (emphasis added)
And in Slaven v. United States, 53-1 U.S.T.C. P 9120 (S.D.Cal.1952), the district court concluded that, where a deficiency notice had been mailed to the taxpayer at her former address, that notice was not sent to the "last known address" as required by statute because the taxpayer had filed subsequent tax returns and a declaration of estimated tax showing her new address and had received a letter from the Commissioner at her new address.
Revenue Agent Kristianson knew that Nathan represented Crum with respect to the 1969 taxable year despite the absence of a power of attorney covering that year. (J.A. at 240, 254) Nevertheless Agent Kristianson made no attempt to verify or secure Crum's correct mailing address from Nathan even though they met on numerous occasions during the course of the audit. Id. at 239. Nor was a copy of the deficiency notice for 1969 sent to Nathan, as the Tax Court admitted would have been the "courteous and prudent" thing for the IRS to have done. Id. at 254-55. Further, if Agent Kristianson had followed the usual, albeit not required, practice of checking the tax return for the year following the one under examination, he would have learned of, and used, Crum's new Hong Kong Marina address. Id. at 239. In addition, Crum's Hong Kong Marina address would have been obtained by Kristianson if, upon receiving the necessary authorization, he had consulted the Internal Revenue Service's master computer file bank located at Martinsburg, West Virginia. Id. at 243-45. Although a search of the computer files for a taxpayer's most recent address would take less than a minute today, that same task would have taken approximately six weeks in 1972. Id. at 245. However, waiting six weeks presented no difficulty for Kristianson because there was no immediate time pressure on the audit of Crum's 1969 income tax return. The three-year statute of limitations provided in IRC § 6501(a)2 was nearing expiration for one of the earlier years under review but not for 1969. Id. at 239. Such conduct on the part of Revenue Agent Kristianson and the Internal Revenue Service hardly qualifies as "reasonable care and diligence in ascertaining and mailing a deficiency notice to the correct address." Arlington Corp. v. Commissioner, supra at 450.
Although there is no constitutional requirement that taxpayers be allowed a forum in which to litigate tax liability prior to payment, see Flora v. United States, 357 U.S. 63, 75-76, 78 S.Ct. 1079, 1086-1087, 2 L.Ed.2d 1165 (1958), aff'd on rehearing, 362 U.S. 145, 80 S.Ct. 630, 4 L.Ed.2d 623 (1960), and in theory Crum's estate can pay the alleged deficiency and then sue for a refund to test its validity, such a procedure is a right without a remedy here in view of the magnitude of the deficiency asserted $915,900.90. (J.A. at 90) Crum never sought a dismissal of the case against him for lack of proper notice, as was granted in Shelton v. Commissioner, 63 T.C. 193 (1974), but merely the opportunity, as provided by statute, to seek in the Tax Court a redetermination of the 1969 deficiency prior to payment upon the filing of a timely petition. We conclude that Crum's estate should have that opportunity because, considering all the surrounding circumstances, the IRS was given legally sufficient notification of the Hong Kong Marina address and acted unreasonably in mailing the deficiency notice for 1969 to the Prince Edward Road address.
For the foregoing reasons we hold that the deficiency notice for 1969 was not mailed to Crum's "last known address" as required by IRC § 6212(b)(1) and that the time period for filing the petition for redetermination did not commence until Crum received actual notice of the deficiency in October 1973.3 Crum's petition thus was timely filed in accordance with IRC § 6213(a). Therefore the Tax Court's order of dismissal for lack of jurisdiction is reversed and the case remanded for adjudication on the merits.
Prior to the Tax Reform Act of 1976 and at all times relevant to this case, the applicable statutes read as follows:
Within 90 days, or 150 days if the notice is addressed to a person outside the (United States), after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A or B or chapter 42 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court.
IRC § 6501(a), which has not been amended since 1958, states:
See DiViaio v. Commissioner, 176 U.S.App.D.C. 229, 539 F.2d 231 (1976) (where the IRS was aware that taxpayer had been incarcerated for more than two years, a tax deficiency notice sent to the prison warden and to his address prior to imprisonment did not constitute mailing the notice to his "last known address" and the statutory period in which to file for redetermination did not begin to run until the actual receipt of the notice); Kennedy v. United States, 403 F.Supp. 619 (W.D.Mich.1975), aff'd mem. 556 F.2d 581 (6th Cir. 1977) (where a notice of tax deficiency was sent to an address that the IRS knew or should have known was not taxpayer's "last known address", the statutory period for seeking redetermination did not commence until the notice was actually received)