t c memo united_states tax_court william b meyer petitioner v commissioner of internal revenue respondent docket no 25013-06l filed date william b meyer pro_se paul c feinberg and wesley j wong for respondent memorandum opinion holmes judge william meyer failed to file a return or pay his taxes the commissioner figured out how much he owed and wants to collect by levying on his property meyer got a collection_due_process cdp hearing but the appeals officer upheld the commissioner’s decision to levy meyer argues that the appeals officer abused his discretion by not properly verifying that the commissioner followed applicable law or administrative procedure the heart of meyer’s case is that the commissioner either never created a notice_of_deficiency or never mailed it if meyer is right the commissioner has no right to collect the unpaid tax background meyer has a history of run-ins with the commissioner owing to his reluctance to follow the internal_revenue_code when it comes time to file his annual return see meyer v commissioner tcmemo_2005_82 wl at dollar_figure penalty for filing a return showing zero income aff’d 200_fedappx_676 9th cir meyer v commissioner tcmemo_2005_81 wl at dollar_figure penalty for filing a return showing zero income but for his tax_year meyer decided not to file a return at all meyer told us at trial that he would not file a tax_return unless he had a notice_of_deficiency and accompanying papers to work from because his records were chaotic at best the commissioner believes meyer earned more than more than dollar_figure million in taxable_income for the commissioner prepared a substitute for return sfr under sec_6020 and determined meyer owed more than dollar_figure plus interest and penalties this is common enough--preparing an sfr often prompts delinquent taxpayers to file a return on their own an sfr is not a comprehensive return the commissioner uses only one of two filing statuses--single or married filing separately--and he allows only one personal_exemption and no business_expenses or itemized_deductions see internal_revenue_manual irm pt date because an sfr is usually stingy with deductions a taxpayer who gets the resulting notice_of_deficiency will often respond by filing a petition with us and then preparing a return that reflects the much more complete information he has about himself--especially about greater deductions he is entitled to claim the willingness of his wife to accept married-filing-jointly status and whether he has children or other dependents this case may have wandered off the usual path right after the irs prepared the sfr what the irs usually does next is draft a notice_of_deficiency for the unreported taxes and then mail that notice which usually includes the sfr to the unless otherwise indicated all section references are to the internal_revenue_code for the year at issue all rule references are to the tax_court rules_of_practice and procedure taxpayer the commissioner generally has to do this before he can begin trying to collect and in this case that’s what the commissioner says he did--he claims that he sent meyer a notice_of_deficiency but meyer never responded that would have allowed the commissioner to record the liability-- assessing the deficiency to use_tax jargon--and to begin to collect the unpaid bill from meyer i the cdp hearing the commissioner did send meyer a final notice of his intent to levy this notice told meyer that he had the right to a hearing which meyer promptly demanded even before that hearing the appeals officer requested a form_4340 certificate of assessments payments and other specified matters to verify that the commissioner had properly assessed the tax the form_4340 had an entry which indicated that a dollar_figure tax had been assessed by examination and that there was an audit deficiency per default of day letter although that form apparently satisfied the appeals officer that a notice_of_deficiency existed he was unable to find a copy of the notice before the cdp hearing during the cdp hearing the appeals officer asked meyer to point out any irregularities in the making of the assessment for meyer’s primary contention was that he had not received a notice_of_deficiency meyer indicated that he had repeatedly asked the irs for a copy of the notice_of_deficiency even filing a request under the freedom_of_information_act but all to no avail because the appeals officer still had not found the notice at the time of the hearing he allowed meyer to dispute his underlying tax_liability the cdp hearing however didn’t resolve the notice-of-deficiency issue the appeals officer was clearly aware that if he did not get verification that the commissioner properly mailed a notice_of_deficiency to meyer’s last_known_address the assessment would be invalid he wrote in his case activity record it is potentially possible that account will have to be abated a new snod issued meyer also argued that the commissioner violated his privacy under sec_6103 because entries in the irs records suggested his file had been sent to baltimore for a tax_court trial that both parties later agreed never occurred meyer believes the commissioner violated his privacy by circulating his file throughout the irs we see no problem see sec_6103 allowing for inspection or disclosure of tax records to treasury officials the department of justice and for judicial and administrative proceedings for purposes of tax_administration meyer had no evidence that the commissioner released his file to people outside the irs or used the file for nontax purposes in violation of sec_6103 he seems to have had in mind sec_6330 which allows a taxpayer who has not received a notice_of_deficiency to dispute the underlying liability at the cdp hearing to obtain this verification the appeals officer requested a copy of the certified mailing list u s postal service form the form_3877 in this case reads statutory notices of deficiency for the year s indicated have been sent to the following taxpayers and lists meyer’s name and address followed by an article number and the phrase postage fees paid_by irs the address listed on the form_3877 was and remains meyer’s correct address at the bottom right of the form_3877 there are two separate items that contemplate completion of additional information one is a space for the usps receiving employee to sign his name and the date another is a space labeled notices listed hereon were issued by the only mark near those two items is a rectangular stamp which reads irs ogden ut usps at the top shows an illegible signature at the bottom and the date date in the middle additionally although the form_3877 indicates that the irs was sending pieces of certified mail the space in which the usps should have marked the number of pieces it received is blank although the form is titled substitute usps form and is not a certified copy we will refer to the document as the form_3877 in the commissioner’s briefs he refers to this stamp as a postmark as we discuss later we make no determination whether this was in fact an official usps postmark after reviewing the form_3877 the appeals officer was apparently confident that he now had verified that a notice_of_deficiency existed and had been properly sent to meyer he wrote in his case activity record that the form show ed the statutory_notice_of_deficiency went out on to correct last_known_address even after the hearing however the appeals officer never received a copy of the notice_of_deficiency so far as the record shows nobody at the irs has ever found it ii notice_of_determination with the notice_of_deficiency issue seemingly resolved the appeals officer issued a notice_of_determination he determined that t he secretary has provided sufficient verification that the requirements of all applicable laws and administrative procedures have been met he noted that he reviewed computer transcripts to verify the assessments and he specifically determined that the assessment for the tax period of was valid --because he found that the irs had properly issued the deficiency_notice and sent it to meyer as shown on the united_states postal service form_3877 certified mail list stamped by the united_states postal service because the requirements of all applicable laws or administrative procedures had been met--and because of meyer’s lack of cooperation --the appeals officer determined that the levy balanced the need for efficient collection with the taxpayer’s concern that any collection action be no more intrusive than necessary meyer a resident of nevada when he filed his petition argues that this determination was an abuse_of_discretion because the appeals officer did not meet his obligation to verify that the irs properly issued and mailed a notice_of_deficiency to him i liabilities deficiencies and assessments discussion we begin with some vocabulary liability deficiency and assessment a tax_liability is the tax imposed by the code for a tax_year sec_26 for an individual who correctly reports his taxes the tax_liability is the amount of tax shown on his return for meyer who did not file a return the liability is the amount that would have been shown on a correctly completed tax_return individuals must pay their tax_liability regardless of whether the commissioner requests payment sec_6151 the appeals officer noted that meyer refused to discuss collection alternatives that the appeals officer had raised and somewhat redundantly he also noted that meyer wasn’t eligible for any such alternatives because he hadn’t filed his tax returns for later years a deficiency is generally the difference between the amount of a taxpayer’s liability and the amount shown on his return--and when the commissioner determines a deficiency it means that he thinks a taxpayer owes more than was reported on the return sec_6211 sec_6212 authorizes the commissioner to send a notice_of_deficiency alerting a taxpayer that the commissioner believes he owes more than he has reported a taxpayer ha sec_90 days from the date that notice was mailed to file a petition with this court sec_6213 subject_to exceptions not relevant here the commissioner may not assess levy or take other collection activity until days after the notice_of_deficiency is mailed if the taxpayer files a tax_court petition the commissioner may not take action until our decision becomes final id an assessment is the recording of a tax_liability in the commissioner’s books sec_6203 though nowadays it’s just a computer entry the act of assessment is immensely important because once a liability is assessed the irs can begin trying to collect it by means not usually available to ordinary creditors-- such as seizing a taxpayer’s property without first going to court see 295_us_247 within days after making an assessment the commissioner must send a notice_and_demand for payment of tax under sec_6303 a taxpayer’s failure to respond to a notice_and_demand creates a tax_lien in favor of the commissioner allowing the commissioner to levy sec_6321 before seizing a taxpayer’s property however the commissioner has to offer the taxpayer an opportunity for a cdp hearing with the irs appeals_office see sec_6330 e the appeals officer provides a fresh set of eyes--he cannot have had any prior involvement with respect to the unpaid tax_liability see sec_6330 meyer requested such a hearing as part of the cdp hearing the appeals officer must obtain verification that the requirements of any applicable law or administrative procedure have been met see sec_6330 during the hearing a taxpayer can try to forestall the unhappy outcome of having his property seized by arranging for alternatives like an offer-in-compromise or an installment_agreement see sec_6330 in8 in congress enacted sec_6330 to give taxpayers this opportunity to seek additional protections from unreasonable tax collection see internal_revenue_service restructuring and reform act of pub_l_no sec_3401 sec_112 stat pincite 115_tc_35 sec_6330 also says that a taxpayer may challenge the underlying liability if he has not received a notice_of_deficiency and we do review such a challenge de novo and not for abuse_of_discretion 114_tc_176 this is undoubtedly the section that the appeals officer had in mind when he invited meyer to challenge the liability by filing his missing return but this would have been an improper use of sec_6330 if meyer should have gotten a notice_of_deficiency and it turned out continued summary the irs holds a cdp hearing only after the commissioner has assessed a tax_liability and tried to get the taxpayer to pay voluntarily following a cdp hearing the appeals officer must determine whether to sustain the filing of the lien and whether proceeding with the proposed levy action is appropriate in making that determination the appeals officer is required to consider three things the verification from the commissioner that he met all of the requirements of applicable law and administrative procedure any relevant issues raised by the taxpayer and whether the proposed collection action balances the need for efficient collection_of_taxes with the taxpayer’s legitimate concern regarding the intrusiveness of the proposed collection action sec_6330 ii jurisdiction and standard of review sec_6330 gives us jurisdiction to review the determination made by the appeals officer in connection with a cdp hearing where the validity of the underlying tax_liability is not at issue we review the appeals officer’s continued that one wasn’t properly issued--the correct action then would have been to find the levy improper see 125_tc_14 and if meyer did get a notice_of_deficiency then his underlying liability would not have been properly before the appeals officer and we could not review that part of the determination at all determination--including the verification that the requirements of any applicable law or administrative procedure have been met --for abuse_of_discretion see 114_tc_604 114_tc_176 we review not only those issues that were considered by the appeals officer but also issues that should have been considered by him in arriving at his determination--without regard to whether meyer raised them at the hearing see 131_tc_197 hoyle i because this case would ordinarily be appealable to the ninth circuit we base our decision on the administrative record relied on by the appeals officer during the cdp hearing see 568_f3d_710 9th cir aff’g tcmemo_2006_166 and aff’g in part vacating in part on another ground decisions in related cases this rule has a few narrow exceptions to identify and plug holes in the administrative record 395_f3d_1019 9th cir we can supplement the administrative record to determine whether the agency has considered all relevant factors and explained its decision the agency has relied on documents not in the record when necessary to explain technical terms or complex subject matter or when there is a showing of agency bad faith 671_f3d_1113 9th cir lands council f 3d pincite we use the trial record in this case only to determine how the appeals officer arrived at his decision and whether he considered all relevant factors an appeals officer abuses his discretion if his determination was grounded on an error of law or rested on a clearly erroneous assessment of the facts or if he applied the correct law to facts that weren’t clearly erroneous but ruled in an irrational manner see 447_f3d_706 9th cir aff’g tcmemo_2004_13 249_f3d_1121 9th cir ‘ a finding is ‘clearly erroneous’ when although there is evidence to support it the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed ’ 470_us_564 quoting 333_us_364 iii forms in the administrative record as part of his obligation under sec_6330 an appeals officer must verify among other requirements that a notice_of_deficiency was properly issued to a taxpayer sec_6330 doesn’t require any particular document or set of documents to satisfy this verification requirement see 118_tc_365 ndollar_figure aff’d 329_f3d_1224 11th cir kubon v commissioner tcmemo_2005_71 wl at when the existence of the notice_of_deficiency is in dispute the appeals officer must verify both that it exists and that it was properly mailed we turn to each of the two documents on which the commissioner relies a form_4340 we start with the form_4340 a form_4340 provides a detailed explana- tion of the taxpayer’s account irm pt date an irs employee compiles a form_4340 from existing entries in the commissioner’s computer system and enters only valid assessments and adjustments payments or applied credits id pt c the form_4340 should also reflect the first and last notice date as well as the certified mailing date of the deficiency_notice id a form_4340 constitutes presumptive evidence that a tax has been validly assessed pursuant to sec_6203 115_tc_35 tucker v commissioner tcmemo_2012_30 wl at aff’d 506_fedappx_166 3d cir it is the taxpayer’s burden to identify any irregularity jordan v commissioner tcmemo_2011_243 wl at citing 118_tc_162 supplementing 134_tc_1 and unless he does so a form_4340 that shows that the tax_liability was assessed and remains unpaid is sufficient verification davis t c pincite tucker wl at here however meyer plainly did identify an irregularity in the assessment procedure--he argued that he never received the notice_of_deficiency see hoyle v commissioner t c pincite n w here a taxpayer alleges no notice_of_deficiency was mailed he has ‘ identified an irregularity’ thereby requiring the appeals officer to do more than consult the computerized records quoting chief_counsel notice cc-2006-19 date thus the appeals officer could not rely on computerized records like the form_4340 instead we have said that t he appeals officer may be required ‘to examine underlying documents the commissioner argues that meyer disputed only his receipt of the notice_of_deficiency and not its existence during the cdp hearing thus says the commissioner since the challenge to the existence of the notice is not part of the administrative record it was never in dispute before the appeals officer and we should not consider it we think that’s splitting hairs a bit too fine--especially in a pro_se setting as an initial matter we think meyer did put the existence of the notice at issue at the cdp hearing the declaration he gave to the appeals officer at the cdp hearing says not only that he didn’t receive a notice_of_deficiency but also that he had been unable to obtain a copy from the irs after several requests and that was on top of the fact that the appeals officer himself was unable to find a copy of it even if meyer’s declaration didn’t say the magic word existence we have indicated that challenging receipt is also a challenge to a notice’s existence see clayton v commissioner tcmemo_2009_114 wl at citing butti v commissioner tcmemo_2008_82 wl for the proposition that when the taxpayer state s that he had never received a notice_of_deficiency for the year at issue the taxpayer affirmatively challenge s the existence of the notice see also internal_revenue_manual irm pt officer must review preassessment document including if possible both notice_of_deficiency and certified mailing list when taxpayer denies receipt in addition to the tax transcripts such as the taxpayer’s return a copy of the notice_of_deficiency and the certified mailing list ’ id quoting chief_counsel notice cc-2006-19 therefore the appeals officer had a duty to dig deeper at the very least he had to examine other evidence to verify that the notice was properly maileddollar_figure b form_3877 and the appeals officer did begin to dig deeper when he requested the form_3877 and reviewed it the notice_of_determination indicates that the appeals officer relied on that form alone to verify that the commissioner had followed proper procedures in sending the notice_of_deficiency to meyer that finding formed the cornerstone of the appeals officer’s ultimate determination that the assessment was valid because meyer put the existence of the notice_of_deficiency at issue the appeals officer also had a duty to verify that there really was a notice it’s unclear whether the appeals officer relied on the form_4340 to do this it’s also unclear whether an appeals officer can rely on a form_4340 to verify a notice’s existence without actually finding other corroborating evidence cf butti wl at existence of notice in dispute we think reliance on a form_4340 may be even more suspect when it contains irregularities as it did here see infra note but as we conclude below as we discuss later we are remanding it’s not a question we have to answer here on remand here it might be helpful for an appeals officer to clearly explain in the notice_of_determination what evidence he relied on to verify proper issuance the form_3877 is central to this case although the appeals officer did not review any evidence concerning how the commissioner’s personnel prepared and mailed notices of deficiency in this case our caselaw has explained the general procedures irs employees who mail notices of deficiency are supposed to prepare a postal service form_3877 a certified mailing list that lists all of the notices of deficiency mailed on a particular date see 94_tc_82 the irs worker then is supposed to hand deliver the form and sealed envelopes containing the notices to the post office see id the postal worker is then supposed to enter the number of envelopes on the bottom of the form initial the form and stamp it with a postmark see id in this case meyer challenges the form_3877 on both procedural and substantive grounds first he contends that we should exclude it from the record but even if we don’t he argues that the appeals officer abused his discretion by relying on that form alone to verify that the notice_of_deficiency was properly mailed to him because he alleges that like the form_4340 it too contains numerous irregularities we look at each of those contentions i evidentiary objections before turning to meyer’s substantive challenge we begin with his eviden- tiary objections he asks us to exclude the form_3877 because it is hearsay not falling within any exception and because it is not authenticateddollar_figure hearsay is a statement other than one made by the declarant while testify- ing at the trial or hearing offered in evidence to prove the truth of the matter asserted fed r evid c because we base our decision on the administra- tive record relied on by the appeals officer during the hearing see keller f 3d pincite the commissioner is offering the administrative record--and specifically the form 3877--to demonstrate what documents the appeals officer relied on not to prove that the items in those documents are true see 136_tc_463 hoyle ii citing fed r evid bowman v commissioner tcmemo_2007_114 wl at n the form_3877 was presented as part of the administrative record the fax information on the form_3877 shows that the appeals officer received the form before he made his determination and the case activity record--as well as the meyer also asks us to exclude the form_3877 because it is not complete and because it does not satisfy the commissioner’s burden_of_proof these two objections however go to the credibility and sufficiency of the evidence rather than its admissibility and therefore are not grounds for exclusion fed r evid notice_of_determination itself--indicate that he relied on it to make that determination subject_to authentication we find that it is admissible for the purpose of proving that it was part of the administrative record see hoyle ii t c pincite even if admissible for that purpose the form_3877 still must be authentica- ted before we admit it into evidence see fed r evid e vidence sufficient to support a finding that the item is what the proponent claims will authenticate an item presented as evidence id a an item may be authenticated by a witness with knowledge who testifies that the item is what it is claimed to be id b when we are reviewing a notice_of_determination in a cdp case the commissioner presents the administrative record to show what items the appeals officer relied on in making his determination therefore the appeals officer’s testimony at trial that he relied on the form_3877 presented in this case is sufficient to authenticate it as part of the administrative record the fundamental problem underlying meyer’s evidentiary arguments is that he presumes each piece of the administrative record must be admissible at trial independent of its role as part of the administrative record ie he seems to argue that the form_3877 must satisfy evidentiary rules in this case in the same way it would have to satisfy evidentiary rules in a deficiency case or any other federal litigation where it would be a stand-alone document to prove only that a notice_of_deficiency had been mailed the court of federal claims dispatched a similar argument in a challenge to more formal charitable-exemption-denial hearings saying of course if plaintiff is right the irs would be obliged to apply evidence rules derivatively lest this court strike materials that it relied upon in denying an exemption but contrary to plaintiff’s importunings courts generally have refused to consider collateral attacks upon the materials in administrative records based upon the post hoc application of evidence rules 70_fedclaims_782 we ourselves have indicated that items in an administrative record need not be independently admissible see hoyle ii t c pincite if they needed to be independently admissible then the appeals officer would abuse his discretion if he relied on any document that would not be admissible in a deficiency case this would effectively merge deficiency law and cdp law a result that we reject ii use of form_3877 to verify mailing that brings us to the meat of meyer’s case--did the irs properly mail the notice_of_deficiency before assessing his tax_liability if not meyer wins because we have definitively held that the commissioner may not use a cdp hearing to cure his failure to properly assess a tax freije v commissioner t c the commissioner had to mail a notice_of_deficiency to meyer’s last known addre sec_90 days before he assessed meyer’s debt or that assessment would be invalid sec_6213 in deficiency cases we have held the commissioner has the initial burden of proving by competent and persuasive evidence that a notice_of_deficiency was properly mailed to a taxpayer 119_tc_183 60_tc_522 aff’d per curiam 499_f2d_550 2d cir we have also required the commissioner in deficiency cases to show that the notice_of_deficiency was properly delivered to the usps for mailing clough t c pincite coleman t c pincite in those cases we have said that the act of mailing may be proven by evidence of the commissioner’s mailing process corroborated by direct testimony or documentary_evidence clough t c pincite coleman t c pincite when the existence of a notice_of_deficiency is not disputed we have ruled that a properly completed form_3877 by itself is sufficient--absent evidence to the contrary--to establish that the notice_of_deficiency was properly mailed to the taxpayer coleman t c pincite more specifically we have held that exact compliance with form_3877 mailing procedures raises a presumption of official regularity in favor of the commissioner clough t c pincite coleman t c pincite see also 724_f2d_808 9th cir although this is not a deficiency case we have applied these same principles in a cdp setting see butti v commissioner tcmemo_2008_82 wl at burden on commissioner citing to coleman t c pincite--without discussing different standard of review in cdp cases--for proposition that the commissioner bears burden of proving by competent and persuasive evidence that the notice_of_deficiency was properly mailed hoyle i t c pincite need for exact compliance noting that w e have held that exact compliance with postal service form_3877 mailing procedures raises a presumption of official regularity in favor of the commissioner and is sufficient absent evidence to the contrary to establish that the notice was properly mailed in hoyle i t c pincite--where the existence of a notice_of_deficiency was not in dispute--we said that it may be true that an appeals officer could rely on a properly completed postal service form_3877 to meet his verification obligation under sec_6330 hoyle i t c pincite when the existence of a notice is not in dispute an appeals officer may rely on a properly completed form_3877 to meet sec_6330’s requirement that he verify proper mailing see id and here unlike hoyle i we know that the appeals officer did rely on the form_3877 to do so before relying on it though an appeals officer must assure himself that the form is properly completed thus we look at whether the form_3877 here was indeed properly completed see hoyle i t c pincite or in other words whether there was exact compliance with the certified-mail-list procedures see clough t c pincite coleman t c pincite we’re far from confident that the irs properly completed the form_3877 in this case the first issue that jumps out at us--specifically on the bottom right- hand side of the form--is the rectangular stamp that reads irs ogden ut usps which purportedly is an official usps postmark and includes an illegible signature although it is generally well known that a usps hand-stamped postmark is round and doesn’t have an irs identification see eg usps postal operations manual at ex date available at http www nalc org depart cau pdf manuals pom pom_9--12_08 pdf listing because the administrative record in hoyle i didn’t contain a form_3877 we determined that the appeals officer could not have based his verification on that form hoyle i t c pincite and since it was unclear what the appeals officer used to verify that the assessment of the taxpayer’s liability was preceded by a duly mailed notice_of_deficiency we remanded the case to the appeals_office for it to clarify the record as to what the appeals officer relied upon in determining that the notice_of_deficiency was properly sent to the taxpayer id pincite hand-stamped postmarks international mail manual pincite available at http pe usps com text imm immc3_001 htm specifying usps postmarks are round our caselaw is not so sure compare coleman t c pincite distinguishing between round postal service stamp and irs dating stamp on a form with clough t c pincite finding rectangular postmark with irs ogden ut usps-84201 was valid usps postmark based on declaration of usps mail processing clerk unlike what the commissioner did in clough the appeals officer here didn’t bother to obtain a declaration from anyone regarding the validity of the only stamp on the form even assuming that this stamp is an official usps postmark and includes a signature of the postal employee who received the notices other red flags are fluttering the form_3877 also requires a signature of the person who issued the notices assuming the signature was that of the postal office employee who received the notices no separate signature from the person who issued the notices was present here additionally even though the form_3877 indicated that the irs was sending pieces of certified mail the space in which the usps should have marked the number of pieces it received to confirm that fact is blank see eg usps registered mail handbook dm-901 pincite date available at http www nalc org depart cau pdf manuals dm901 pdf instructing usps employee to enter total pieces received to properly complete a form see also irm pt date usps employee will verify number of notices before completing form the appeals officer did find that the form_3877 was stamped by the postal service but did not discuss any of the other missing items by relying only on the form_3877 to verify that the irs properly mailed the notice_of_deficiency the appeals officer implicitly found that it was properly completed and that finding borders on being clearly erroneous we don’t think that the appeals officer could have relied on that form alone to verify that the notice_of_deficiency was properly sent see coleman t c pincite a defective form_3877 corroborated by other documentary_evidence does not entitle respondent to the presumption of official regularity that’s not necessarily the end of the story in deficiency cases we have acknowledged that a failure to precisely comply with the form_3877 mailing procedures may not be fatal if the commissioner can come forward with other evidence that the mailing procedures were followed see clough t c pincite coleman t c pincite likewise in a cdp case we want to stress that an appeals officer’s reliance on a defective form_3877 to verify that the irs had fulfilled its requirements to mail out a notice_of_deficiency is not an abuse_of_discretion per se--if the administrative record shows that he relied on other evidence that corrects or explains the defects he could meet his verification obligation regarding the mailing issue that’s not what happened here though the administrative record in this case does not show that the appeals officer relied on anything else to verify proper mailing after meyer argued at the cdp hearing that he didn’t receive a notice of deficiency--with the appeals officer’s acknowledging that it is potentially possible that the lack of a notice_of_deficiency would result in the abatement of the assessment--the form_3877 is the only piece of evidence in the administrative record that the appeals officer relied on to verify that the notice_of_deficiency was properly mailed the appeals officer could’ve sought a declaration or some other kind of verification from an irs employee involved in preparing the form at trial meyer pointed out that the appeals officer couldn’t also rely on the form_4340 to verify proper mailing because it contained no entry for the certified mailing date of the notice_of_deficiency and it’s true that his form_4340 didn’t contain such a date--as it should have see irm pt c date directing that the form_4340 must c learly show the first and last notice date and the certified mailing date of the deficiency_notice however nothing in the administrative record indicates that the appeals officer actually relied on the form_4340 to verify that the notice_of_deficiency was properly mailed before the cdp hearing--before he knew that the mailing of the notice_of_deficiency might be an issue--the appeals officer requested the form_4340 to see if that form could help him verify that the assessment was proper once he realized there might be a problem with the mailing there’s no evidence in the administrative record that he relied on that form to verify that the notice_of_deficiency was in fact properly mailed or if there was one the usps employee signing off on that form eg clough t c pincite or obtained other habit or documentary_evidence eg coleman t c pincite to verify proper mailing the administrative record however doesn’t indicate he sought any of these alternatives and under the chenery doctrine we must judge the propriety of an administrative agency action solely by the grounds invoked by the agency 332_us_194 describing its holding in 318_us_80 see also jones v commissioner tcmemo_2012_274 at applying chenery doctrine to cdp case salahuddin v commissioner tcmemo_2012_141 wl at same so that leads us to the ultimate question should we determine that the appeals officer abused his discretion or remand to the appeals_office to allow the officer to clarify the evidence that he did rely on--or even supplement the administrative record to meet his verification obligation in other words should we hold that the appeals officer’s determination rested on a clearly erroneous finding of fact or remand to the appeals_office to allow the officer to clarify the evidence that he did rely on--or even supplement the administrative record to meet his verification obligation generally speaking we remand a case to the appeals_office when a taxpayer did not receive a proper hearing and the new hearing is necessary or will be productive 130_tc_79 n citing 117_tc_183 lites v commissioner tcmemo_2005_206 wl at and day v commissioner tcmemo_2004_30 wl at the resulting sec_6330 hearing on remand is not a new hearing but rather ‘provides the parties with the opportunity to complete the initial sec_6330 hearing while preserving the taxpayer’s right to receive judicial review of the ultimate administrative determination ’ id pincite quoting drake v commissioner tcmemo_2006_151 aff’d 511_f3d_65 1st cir as noted earlier we have remanded a case to the appeals_office to clarify the record regarding an officer’s determination that a notice_of_deficiency was properly mailed see hoyle i t c pincite although a close call we decide that the most productive course here would be to remand to the appeals_office we acknowledge that the administrative record does not show that the appeals officer pursued additional evidence to verify that the notice was properly mailed we also must recognize however that--at the time of his decision--the appeals officer here did not have the benefit of several decisions from this court that could have affected his understanding of the verification obligation for instance he may not have known that when a taxpayer challenges receipt of a notice_of_deficiency that should also be construed as a challenge to a notice’s existence see clayton v commissioner tcmemo_2009_114 wl at and therefore the appeals officer might have thought it proper to rely solely on the form_4340 to verify a notice’s issuance and possibly even rely on it in conjunction with a form_3877 to verify proper mailing the appeals officer also didn’t have the benefit of hoyle i t c pincite so he might not have known that we can review all issues that he should have considered without regard to whether a taxpayer raised them at the hearing furthermore the appeals officer did not know for sure that the burden_of_proof for mailing that had been espoused in deficiency cases would also apply equally in cdp cases despite the differing standards of review see butti wl at burden on commissioner to prove by competent and persuasive evidence that notice_of_deficiency was properly mailed we have remanded cases where the law changed between the cdp hearing and the tax_court trial if that may have affected presentation of a case see hoyle i t c pincite n also made it clear--albeit in a footnote-- that a taxpayer identifies an irregularity in the assessment procedure by simply alleging that no notice_of_deficiency was mailed to him and that requires an appeals officer to do more than consult the computerized records id harrell v commissioner tcmemo_2003_271 wl at and we will do so again here--we will remand to the appeals_office to clarify the record as to whether a notice_of_deficiency was both properly issued and mailed to meyer in light of the intervening caselaw the appeals_office is not limited to what the officer considered during the first administrative hearing but rather should independently verify that a notice_of_deficiency was properly issued and mailed jordan wl at citing hoyle ii t c pincite under the standards we have more fully described in later cases to reflect the foregoing an appropriate order will be issued


t c memo united_states tax_court carlye a christianson petitioner v commissioner of internal revenue respondent docket no filed date judy be hamilton for petitioner ramon estrada for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined the following additions to petitioner's federal_income_tax -- - additions to tax sec sec sec sec sec year f b b a b b b -- dollar_figure -- -- -- -- dollar_figure xm -- -- -- big_number kk -- -- big_number -- -- -- dollar_figure -- -- -- -- big_number -- -- -- -- percent of the interest due on dollar_figure x percent of the interest due on dollar_figure x x percent of the interest due on dollar_figure the issues for decision are have the respective periods of limitations prescribed by sec_6501 for the years at issue expired we hold that they have not is petitioner liable for the additions to tax under sec_6653 for each of the years and and under sec_6651 for each of the years and we hold that she is findings_of_fact some of the facts have been stipulated and are so found ’ petitioner resided in san diego california at the time the petition was filed petitioner an attorney was a sole practitioner and aspired to emulate the amount of money made by similarly situated at-- ‘a111 section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated our findings_of_fact and opin- ion pertain to the years at issue torneys as part of her law practice petitioner was mindful of due dates for inter alia court appearances and filing doc- uments petitioner also served at various times from around the early to mid-1980's until as a part-time judge of the small claims_court municipal court and superior court in and around san diego california as part of her judicial duties peti- tioner imposed on litigants due dates for inter alia court appearances and filing documents and kept track of those dates petitioner has been aware since her youth of her annual obligation to file a federal_income_tax return return for years prior to petitioner signed and filed her returns petitioner married doug reynolds mr reynolds in and they divorced in while they were still married petitioner and mr reynolds were the subject of an audit by the internal_revenue_service service with respect to through they retained daryl golemb mr golemb a certified_public_accountant to represent them with respect to that audit petitioner mr reynolds and the service resolved the audit of through as reflected in form_870 waiver_of_restrictions_on_assessment_and_collection of deficiency in tax and acceptance of overassessment form_870 the form_870 listed the names of the taxpayers to which that form pertained as douglas r and carlye reynolds attached to - - the form_870 was inter alia form 886-a explanation of items which stated in pertinent part you failed to timely file your and federal_income_tax returns you arranged to have your returns prepared only upon contact and request by personnel of the irs as attorneys you knew of your obligation to file tax returns especially with adjusted_gross_income exceeding dollar_figure big_number annually you are reminded that failure_to_file timely federal_income_tax returns can result in criminal prosecution and assertion of civil_fraud penalties although mr golemb as the authorized representative of petitioner and mr reynolds could have signed the form_870 on their behalf it was mr golemb's practice not to sign such a form on behalf of his clients instead mr golemb required the taxpayer to which such a form pertained to sign it in light of mr golemb's practice regarding the signing of a form_870 both petitioner and mr reynolds as the taxpayers to which the form_870 pertained were supposed to have signed that form in order for it to be effective as a result of the service's audit of petitioner and mr reynolds with respect to through petitioner was aware that at a minimum no return for was filed during her marriage to mr reynolds she also had heard rumors that because of that audit mr reynolds could have been imprisoned for failure_to_file a return petitioner was fully aware of the possible criminal consequences for failing to file a return - petitioner filed a joint_return with mr reynolds for after their divorce in petitioner did not file returns for through nor did she timely file california income_tax returns for those years petitioner employed a part-time bookkeeper to assist her inter alia in maintaining books_and_records with respect to her law practice preparing and filing any required federal payroll and similar tax returns and organizing the return-preparation information that petitioner's return preparer mr golemb needed to prepare petitioner's federal_income_tax returns petitioner hired a new bookkeeper around late or early after that new bookkeeper started working for petitioner she became aware that federal payroll tax returns had not been filed for three quarters the new bookkeeper filed those delinquent returns and petitioner paid the federal payroll_taxes and penalties due as a result of such late filing shortly after each of the years at issue and within sufficient time for mr golemb to prepare timely petitioner's return for each such year petitioner's bookkeeper sent him the information that he needed to prepare each such return mr golemb prepared a return for petitioner for each of the years at issue from the information that her bookkeeper sent to him mr golemb prepared the payment section in petitioner's return relating to estimated_tax payments from information that petitioner provided to him -- - after mr golemb prepared petitioner's return for each of the years at issue he signed each such return in the space designated for the signature of the return preparer but not in the space designated for the signature of the taxpayer and mailed the original of each such return to petitioner with a transmittal letter the transmittal letter that mr golemb used to send petitioner her return for each of the years at issue contained precise and specific instructions to petitioner that she should inter alia verify her name address and social_security_number as they appeared in each such return sign each such return and mail it and a check for any_tax due to the service at the address set forth in the transmittal letter or ina pre- addressed mailing envelope enclosed with that letter mr golemb never informed petitioner that he would sign and file her return for any of the years at issue although petitioner received the return that mr golemb prepared for each of the years at issue within sufficient time to file each such return on or before its due_date she did not file any of those returns instead she placed in her desk drawer each of the transmittal packages from mr golemb containing each such return and mr golemb's transmittal letter as petitioner received the return for each of the years at issue that mr golemb had prepared she was reminded of her tax_liability for each such year - petitioner made some estimated_tax payments for her taxable_year mr golemb filed on petitioner's behalf requests for extensions of time to file the returns for certain of the years at issue at some time during the years at issue petitioner discussed with mr golemb the fact that she had not received a tax bill from the service during that discussion petitioner and mr golemb speculated that petitioner had not received a tax bill because respondent might have lost track of her records when her surname changed after her divorce from mr reynolds at no point did petitioner believe that she had a responsibility to contact the service because she had not received a tax bill for any of the years at issue in date the service sent petitioner a letter re- guesting that she telephone a revenue_agent of the service revenue_agent who was responsible for the examination of petitioner in order to discuss her status as a nonfiler pe- titioner never contacted the revenue_agent consequently in date the revenue_agent telephoned petitioner after having obtained her telephone number through the yellow pages during that telephone conversation the revenue_agent told petitioner that the service had no records of her having filed returns since and requested that petitioner clarify her filing_status in response petitioner adamantly maintained that she had filed all her returns subsequently during the same telephone conversa-- --- - tion with the revenue_agent petitioner stated that if her returns had not been filed it was the fault of her return preparer mr golemb who was responsible for filing petitioner's returns for her petitioner also told the revenue_agent at another time that if the service had no record of petitioner's having filed her returns the service must have lost her returns on date the revenue_agent met with mr golemb date meeting who was authorized to represent petitioner with respect to the service's examination of her at that meeting the revenue_agent and mr golemb agreed that petitioner had filed joint returns under the name carlye reynolds with mr reynolds for and as for petitioner's returns for the years at issue mr golemb informed the revenue_agent at the date meeting that it was petitioner's position that originals of those returns had been filed with the service he told the revenue_agent that he had retained copies of those returns that he could present to her later in the day on date mr golemb presented the revenue_agent with copies of petitioner's returns for the years at issue the copy of petitioner's return that mr golemb presented to the revenue_agent on date was not signed or dated by petitioner the original signature of petitioner appeared on each of the copies of petitioner's returns for through that mr golemb gave the revenue_agent on that day but no date appeared next to her signature the original of mr --- - golemb's signature did not appear on any of the copies of pe- titioner's returns for the years at issue although copies of his signature as return preparer appeared on each of those copies no date appeared next to the copies of mr golemb's signature on the copies of petitioner's and returns copies of the dates date date date and date appeared next to copies of mr golemb's signature on the copies of petitioner's returns for through respec-- tively because inter alia petitioner through mr golemb main-- tained at the date meeting that her returns for the years at issue had been filed the copies of those returns that mr golemb presented to the revenue_agent on date were not treated as filed returns but instead were treated as information copies only the service on a date that is not clear from the record temporarily processed as filed the copies of petitioner's returns for the years at issue that mr golemb had presented to the revenue_agent on date however around date the service corrected that action on its records and reflected on those records an entry for substitute for return for each year at issue which is an administrative entry used in cases where a taxpayer has not filed a return subsequent to the service's civil audit of petitioner for the years at issue the service through its criminal investiga- - tion division conducted a criminal investigation of petitioner for those years petitioner admitted to the service's special_agent responsible for that investigation special_agent that she was aware of her obligation to file returns and that she knew the consequences of not filing returns petitioner told the special_agent that she filed her and returns that mr golemb filed her and returns for her and that she filed her return petitioner also advised the special_agent that sometime during mr golemb told her that he had not filed her returns which prompted her to file her and returns in however petitioner did not file her and returns in petitioner also informed the special_agent that she and mr golemb had speculated that the service had not contacted her with respect to her failure to make tax_payments because it might have lost her records due to her name change after she divorced mr reynolds petitioner gave the special_agent incorrect information about payments for certain house roof repairs which petitioner claimed that she made but which in fact were paid_by mr reynolds on date a plea agreement in united_states v christianson plea agreement was filed in the u s district_court for the southern district of california in which peti- tioner pleaded guilty under sec_7203 to failing willfully to file her tax_return petitioner admitted in the plea agreement that she knew that she was reguired to file a return for by date and willfully failed to do so and that she went so far as to have an income return prepared by a tax_return preparation business which calculated a tax due and owing for calendar_year in the amount of approximately dollar_figure and then willfully failed to file the return with the internal_revenue_service petitioner also admitted in the plea agreement that she willfully failed to file required returns with the internal_revenue_service for tax years and failing to report an additional tax due and owing in the amount of approximately dollar_figure when petitioner entered into the plea agreement she had had a full opportunity to discuss all the facts and circumstances of the case with her defense counsel and had a clear understanding of the charges and the consequences of her plea she pleaded guilty in the plea agreement because in truth and in fact defendant petitioner is guilty and for no other reason after the criminal case with respect to petitioner had concluded the revenue_agent examined petitioner's bank accounts for the years at issue to determine whether there was cash available to pay the tax that she owed for each of those years the revenue_agent concluded that petitioner had sufficient cash at that time to pay the entire tax due for but not to pay the total of the tax due for each of the remaining years at issue the revenue_agent also determined from her examination of petitioner's bank accounts that petitioner had funds available at -- the time the return for each of the other years was due during the years at issue petitioner expended funds inter alia on several skiing vacations expensive clothing weekly visits to the hairdresser and some very fine antigues that she used as office furniture the income expenses and tax shown in the copy of peti- tioner's return for each of the years at issue that mr golemb presented to the revenue_agent on date have been ac-- cepted by the service with minor adjustments as correct taking those minor adjustments into account petitioner realized adjusted_gross_income of dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure and dollar_figure for through respectively asa result petitioner is liable for and has signed an agreement with respect to the years at issue form_870 in which she agreed that she is liable for additional taxes for those years of dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure and dollar_figure respectively in addition petitioner is liable for and agreed in the form_870 that she is liable for the additions to tax under sec_6654 for failure to pay estimated_taxes in the amounts of dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure and dollar_figure for through respectively on date respondent issued a notice_of_deficiency notice to petitioner for through respondent de- termined in that notice that petitioner is liable for the ad- ditions to tax for fraud under sec_6653 and for - and under sec_6653 a and b for and on the same date respondent issued a separate notice to pe- titioner for through respondent determined in that notice that petitioner is liable for the additions to tax for fraud under sec_6653 for and the additions to tax for fraudulent_failure_to_file under sec_6651 for and opinion in the portion of her brief headed points relied upon petitioner asserts there was no fraud committed by petitioner there- fore she is not liable for any penalty under sec_6651 sec_6653 b a b b or b no other penalties can be assessed against pe- titioner because the statute_of_limitations for as-- sessment and collection of a tax_liability for the taxable years ended date ' through expired prior to respondent's issuance of the statutory notices of deficiency more specifically petitioner filed her income_tax returns for the period in question in date the commissioner issued statutory notices of deficiency on date petitioner did not execute any type of document extending the statute_of_limitations prior to the date of expiration of the assessment_period the three-year period for assess-- ment expired prior to date the six-year period for assessment does not apply because the irs sic the income and deductions reported on peti- tioner's returns was accepted as correct after examina-- tion by the irs fn added salthough not altogether clear we presume that the refer- ence to the taxable_year ended date is a typographical error we shall proceed on the assumption that petitioner claims that the period of limitations for also has expired - in the portion of her brief headed argument petitioner elaborates upon her position that she is not liable for any of the additions to tax under sec_6651 and sec_6653 how- ever petitioner provides no further explanation in that portion of her brief about her claim that the respective periods of limitations for the years at issue have expired we nonetheless shall briefly address that contention the expiration of the period of limitations is an affirma-- tive defense which petitioner raised in the petition and on brief and on which she has the burden_of_proof see rule a 415_f2d_144 5th cir 95_tc_227 petitioner must make a prima facie case establishing that she filed her return for each of the years at issue that the period of limitations for each such year has expired and that respondent mailed the notices to her after the expiration of each such period see 76_tc_818 57_tc_735 if petitioner were to make such a showing the burden of going forward with the evidence would shift to respondent and respondent would have to introduce evidence establishing that the respective periods of limitations for the years at issue have not expired see amesbury apartments ltd v commissioner supra pincite 85_tc_535 if respondent were to make such a showing the -- - burden of going forward with the evidence would shift back to petitioner however the burden of persuasion never shifts from petitioner see amesbury apartments ltd v commissioner supra although petitioner concedes that her returns for the years at issue were not timely filed she claims that those returns were filed when mr golemb presented copies of them to the revenue_agent on date and that the period of limitations for each of those years started to run on that date we disagree when petitioner through mr golemb presented copies of her returns for the years at issue to the revenue_agent on date it was her position that she had already filed the originals of those returns and that she was merely presenting copies of such returns to the service moreover the copy of petitioner's return was not signed or dated by petitioner petitioner's original signature appeared on the copies of her returns for through but no date appeared next to her signature on any of those returns although the service ona date not disclosed by the record temporarily processed as filed the copies of petitioner's returns that mr golemb presented to if petitioner were correct in asserting that her returns for the years at issue were filed on date the period of limitations for each such year would have expired on date the filing of delinquent returns which are not fraudulent is sufficient to commence the running of the period of lim-- itations under sec_6501 see 30_tc_114 - the revenue_agent on date around date the service corrected that action on its records and reflected on those records an entry for substitute for return for each year at issue which is an administrative entry used in cases where a taxpayer has not filed a return we hold that petitioner has failed to carry her burden of establishing a prima facie case showing that she filed her returns for the years at issue on date and that the respective periods of limitations prescribed by sec_6501 for those years have expired ’ since petitioner has failed to establish that those returns were filed on date the tax for each year at issue may be assessed see sec_6501 we shall now address the additions to tax under sec_6653 for through and under sec_6651 for and in order for the additions to tax for fraud under sec_6653 to apply respondent must prove by clear_and_convincing evidence that an underpayment exists and that some portion of such underpayment is due to fraud see sec_7454 rule b 99_tc_202 in order for the additions to tax for fraudulent_failure_to_file under sec_6651 to apply we must consider essen- tially those same elements see clayton v commissioner we express no opinion herein as to the result that would obtain if petitioner had intended to file the copies of her returns for the years at issue that she presented through mr golemb to the revenue_agent on date - t c respondent must prove under sec_6651 that petitioner's tax_liability for each year at issue exceeds her prepayment_credits and that her failure_to_file a return for each such year was due to fraud see sec_7454 sec_665l1 a b rule b see also clayton v commis-- sioner supra the parties have stipulated that petitioner is liable for and they signed the form_870 in which petitioner agreed that she is liable for additional taxes of dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure and dollar_figure for through respectively on the record before us we find that respondent has established by clear_and_convincing evidence that for each of the years through petitioner has an underpayment and that for each of the years and she has a tax_liability that exceeds her prepayment_credits to prove fraudulent intent respondent must prove by clear_and_convincing evidence that the taxpayer intended to evade taxes that he or she believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such taxes see 398_f2d_1002 3d cir 94_tc_654 see also 889_f2d_910 9th cir affg norman v commissioner tcmemo_1987_265 the existence of fraud is a question of fact to be resolved upon consideration ‘the tax_liability for does not take into account estimated and other tax_payments for that year totaling dollar_figure -- - of the entire record see 96_tc_858 affd 959_f2d_16 2d cir 91_tc_874 67_tc_181 affd without published opinion 578_f2d_1383 8th cir fraud is never presumed or imputed and should not be found in circumstances which create at most only suspicion see 743_f2d_309 5th cir affg tcmemo_1984_25 92_tc_661 90_tc_1130 direct evidence of the requisite fraudulent intent is seldom available see petzoldt v commissioner supra pincite 80_tc_1111 consequently respondent may prove fraud by circumstantial evidence see toussaint v commissioner supra pincite 544_f2d_883 5th cir affg tcmemo_1975_ rowlee v commissioner supra pincite the courts have identified a number of badges_of_fraud from which fraudulent intent may be inferred those badges include consistent and substantial_understatement of income inconsistent or implausible explanations of behavior lack of credibility of the taxpayer's testimony failure_to_file a return conviction under sec_7203 for failure_to_file a return and failure to make estimated_tax payments see laurins v commissioner supra pincite bradford v commis-- sioner f 2d 9th cir affg tcmemo_1984_601 525_f2d_741 9th cir affg in part and revg in part 60_tc_199 449_f2d_311 9th cir affg per curiam tcmemo_1969_48 niedringhaus v commissioner supra pincite parks v commissioner supra pincite 94_tc_316 recklitis v commissioner supra pincite 84_tc_405 in addition the taxpayer's background including the sophistica- tion experience and education of the taxpayer and the context of the events in question may be considered circumstantial evidence of fraud see 465_f2d_299 7th cir affg tcmemo_1970_274 niedringhaus v commissioner supra pincite although no single factor is neces-- sarily sufficient to establish fraud the existence of several indicia constitutes persuasive circumstantial evidence of fraud see bradford v commissioner supra pincite petzoldt v commis-- sioner supra pincite the record in this case is replete with indicia of fraud by petitioner petitioner an attorney in private practice who also served during the 1980's as a part-time judge of various local courts in and around san diego california was fully aware of the requirement to report income and to file returns for the years at issue she also knew about the possible criminal consequences for failing to file a return nonetheless pe- titioner did not report any income or file a return for any of - - the years at issue thereby establishing a six-year pattern of substantial and consistent understatement of income petitioner was convicted under sec_7203 for failing to file her return for in the plea agreement relating to her conviction under sec_7203 petitioner admitted that she also willfully failed to file returns for and and thereby failed to report a tax_liability of approximately dollar_figure except for certain estimated_tax payments for petitioner failed to make required estimated_tax payments for the years at issue petitioner gave inconsistent and implausible explanations of her behavior to the revenue_agent and the special_agent during their examination of the years at issue for example she stated variously that she filed her returns for the years at issue that respondent must have lost those returns that if those returns were not filed mr golemb was at fault because he was supposed to have filed them and that she filed her and returns but mr golemb filed her and returns at trial petitioner offered similar explanations of her behavior that the court did not find credible we do not believe inter alia petitioner's explanation at trial which she also gave to the service's agents that she thought her return preparer mr golemb would sign and file her returns for the years at issue based on our examination of the entire record in this case we find that respondent has established by clear_and_convincing evidence that petitioner intended to evade tax for each of the - years through which she believed to be owing by conduct intended to conceal mislead or otherwise prevent the collection of such tax we further find on that record that petitioner is liable for the additions to tax for fraud a under sec_6653 and for b under sec_6653 a and b for and and c under sec_6653 b for and the additions to tax under sec_6651 for and as determined by respondent in the notices to reflect the foregoing decision will be entered for respondent


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-118566-00 date date x a d1 dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 a the chief_executive_officer of x represents it was intended that x be an s_corporation effective d1 and submitted minutes of x’s first meeting of its directors as evidence of that intent however a form_2553 election by a small_business_corporation was not filed for x sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's first taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 mr littlefield except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours jeanne sullivan assistant to the chief ranch office of the associate chief_counsel passthroughs and specialindustries enclosures copy of this letter copy for sec_6110 purposes


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa cbs br3 posts-158698-01 uilc date date to halvor n adams senior counsel large mid-size business cc lm f li from peter j devlin chief branch collection bankruptcy summonses cc pa cbs br3 subject leasing isp this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent issues may the service properly serve an administrative_summons on a corporation by serving the individual or entity that the corporation has designated as its agent for service of process or by serving a state official if state law designates that official as the corporation’s agent for service of process conclusions there may be a basis in law for this type of process under rule h and rule a of the federal rules of civil procedure frcp but it is not developed by case law and is subject_to the district court’s discretion moreover a corporation’s registered agent whether designated by the corporation or by state law will not have the knowledge or records sought by the summons therefore unless the service has no other way to identify and locate a corporate officer the service should not employ this method for serving a summons if the service cannot locate or identify a corporate officer it may be appropriate to summon the registered or state agent to learn from that posts-158698-01 agent the names and locations of persons the agent would contact to communicate with the corporation facts when examining certain shelters revenue agents have encountered corporations that are difficult to serve with a summons because they may not have a regular place of business you have asked whether under these circumstances the agent can validly serve a summons under sec_7603 by hand delivering it to the individual or entity the corporation has designed as its agent for service of process or to the official that is designated by state law as the corporation’s agent for service of process law and analysis sec_7603 provides the general_rule for serving a summons - a summons may be delivered in hand to the person to whom it is directed or left at his last and usual place of abode the rule provides no direct guidance for serving a summons on a corporation but the case law is well developed that such a summons may be served on a corporate officer 648_f2d_361 5th cir and see eg united_states v grable and sons metal products inc no mc u s dist lexis at w d mich date for this reason the service’s general practice is to serve a summons directed to a corporation on a corporate officer there is some legal authority to support serving a summons directed to a corporation on any person authorized by state law to accept service of process for the corporation that authority is derived by analogy from rule h and rule a of the frcp rule sets for the procedures for serving a summons and complaint when beginning a law suit in federal court in pertinent part rule h provides unless otherwise provided by federal_law service upon a domestic_corporation that is subject_to suit under a common name shall be effected b y delivering a copy of the summons and of the complaint to an officer a managing or general agent or to any other agent authorized by appointment or by law to receive service of process and if the agent is one authorized by statute to receive service and the statute so requires by also mailing a copy to the defendant emphasis added by itself rule does not apply to summons enforcement cases insomuch as it specifically applies to the procedures for beginning a federal_law suit but it is tied to summons proceedings by rule a which states in pertinent part a to what proceedings applicable posts-158698-01 these rules apply to proceedings to compel the giving of testimony or production of documents in accordance with a subpoena issued by an officer or agency of the united_states under any statute of the united_states except as otherwise provided by statute or by rules of the district_court or by order of the court in the proceedings in 400_us_517 the supreme court specifically ruled that rule a applies the frcp to summons enforcement proceedings but the supreme court hastened to add that the rules are not inflexible in this application rule a goes on specifically to recognize that a district_court by local rule or by order may limit the application of the rules in a summons proceeding donaldson v united_states u s pincite declining to apply rule a as guaranteeing the taxpayer a right to intervene in a summons enforcement hearing and reasoning that the application of the frcp was not intended to impair the summary nature of the summons enforcement proceeding so long as the rights of the party summoned are protected thus the courts have considerable discretion in deciding whether to apply a specific rule_of civil procedure in a summons enforcement case this discretion is particularly illustrated in cases in which the court has refused to permit a taxpayer or summoned person to conduct discovery under the frcp in order to challenge a summons see eg united_states v interstate tool engineering corp u s t c e d wis notably the district court’s discretion in modifying the frcp is not limited to the discovery provisions see 954_f2d_1000 5th cir the court modified the 3-day provision of rule b concerning default judgments by entering a show cause order for the enforcement of a summons and later entering a default judgment modification upheld under rule a and the government was not required to give days notice of its application of a default judgment there is a virtual dearth of case law dealing with the precise issue for which you seek guidance you offered one case 561_fsupp_354 c d calif that supports the proposition that the service may follow the methods for service described in rule when serving a corporation in that case the service served a summons on the managing agent of a foreign_corporation and the court referred to the text of what was at the time codified at rule d which allowed for service on a foreign_corporation by delivering process to an officer a managing or general agent or to any other agent authorized by appointment or by law to receive service of process in toyota motor corporation the court indicated that where no procedure is otherwise specified by statute it is appropriate to look to the frcp for guidance on the proper method for serving an administrative posts-158698-01 summons on a foreign_corporation our research disclosed an additional case bishop v united_states u s t c big_number n d fla which states in dicta that a summons may be served properly under sec_7603 on a corporation by serving it on an officer director managing agent or other person authorized to accept service thus the case law support for serving a summons on a corporation’s registered agent or anyone authorized under state law to accept service of process on behalf of the corporation is not well developed case development hazards and other considerations we think that a case can be made for serving a corporation by personally handing the summons to the corporation’s registered agent or other person such as the state’s secretary of state who may be authorized under state law to accept service of process nevertheless we cannot recommend that the service routinely serve summonses on corporations by this method given the dearth of interpretative case law on this subject and the discretion vested in the district_court to determine which rules in the frcp will and will not apply to a summons enforcement matter moreover there may be little to be gained by serving such a person a registered agent or a state official certainly will not possess the knowledge or the records that the service would seek in a summons additionally if the service cannot locate a corporation or its officials with the computerized research capacity available to revenue agents and revenue officers a registered agent or state official may be equally unable to do so however in cases where the service has utterly exhausted its ability to locate a corporate officer or other appropriate manager then a summons may be served on a registered agent or other authorized person before doing this the service should contact the registered agent or state official and ask that he or she provide the service with the name and address of the person they would contact as the corporate representative if the agent or state official is unwilling to provide that information informally the service should consider summoning that information directly from the agent or state official as stated above we do not recommend that the service employ this method of service routinely or as a matter of convenience because service of a summons is always best effected if it is made on a corporate officer or other person who clearly has possession or control of the desired records and the authority to turn them over to the service this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views the court in toyota motor corporation apparently viewed sec_7603 as providing no guidance on how to serve a summons on a corporation it is possible that another court could take the opposite view and reason that sec_7603 provides for service in hand to the person to whom it is directed and therefore given that corporations can only act through individual representatives sec_7603 provides for serving these individuals in hand we also note that it is possible for a court to take a different view of rule a it is possible that a court could reason that rule a only applies to procedural issues that arise after a summons enforcement case is commenced not to issues that arise before the suit is brought such as those involving the proper method of serving a summons posts-158698-01 please call if you have any further questions


t c summary opinion united_states tax_court stacey lynn cody petitioner and michael patrick cody commissioner of internal revenue respondent intervenor v docket no 11048-09s filed date jamie a rozzi and adam c losey for petitioner michael patrick cody pro_se christopher a pavilonis for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to 1unless otherwise indicated subsequent section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case this proceeding was commenced under sec_6015 for review of respondent’s determination that petitioner is not entitled to relief from joint_and_several_liability with respect to underpayments of federal_income_tax reported on joint federal_income_tax returns filed for and background petitioner and intervenor were married in together they have three children petitioner sustained back injuries and permanent nerve damage from an automobile accident in she has been disabled since the accident and unable to work petitioner has suffered from chronic pain that has become more severe since the injuries sustained in petitioner received dollar_figure in settlement of her claim for damages resulting from the accident intervenor was a self-employed mortgage broker and received commissions from f s mortgage corp and avalar florida real_estate during the years at issue while the economy and real_estate market were on the rise intervenor was able to 2petitioner received approximately dollar_figure of the settlement proceeds after attorney’s fees no evidence was presented as to the date of receipt of the funds petitioner credibly testified that the proceeds from the settlement were fully expended to purchase the marital home for family necessities and on trips taken by intervenor earn sufficient income to meet the family’s needs petitioner and intervenor shared a joint checking account into which petitioner’s social_security check sec_3 and intervenor’s business income were deposited petitioner had access to the checking account and routinely wrote checks from the account for household expenses petitioner and intervenor’s marriage was not stable petitioner moved out of the marital home with the children on more than one occasion after each departure petitioner and the children returned to the marital home at some point during the marriage intervenor was charged with misdemeanor domestic assault near the end of the marriage petitioner and intervenor began to experience financial difficulty petitioner became aware that the amount of intervenor’s income was decreasing they received foreclosure documents for the marital home dated date on date petitioner permanently separated from intervenor petitioner and intervenor eventually divorced on date 3petitioner’s checks were referred to only as social_security checks the court assumes that petitioner’s checks were social_security disability checks 4a document stating the charge and listing intervenor as the defendant was entered into evidence there was no date on the document petitioner and intervenor’s divorce was conducted through mediation as a result of the mediation petitioner and intervenor agreed to each be responsible for percent of any joint tax_liability also intervenor agreed to pay petitioner a lump sum of dollar_figure for child_support with a continuing monthly obligation there was no amount designated for alimony as of the time of trial petitioner as the custodial_parent supported herself and the three children on her social_security income petitioner received dollar_figure a month for herself and dollar_figure a month for each child petitioner’s expenses exceeded her income by approximately dollar_figure a month when petitioner ran out of money each month she visited a food bank to provide meals for her children at the time of trial intervenor was in arrears on child_support payments he had not paid the dollar_figure ordered by the final judgment of divorce and was behind approximately a payment and a half on his monthly obligations petitioner and intervenor initially did not file federal_income_tax returns for the year sec_2002 and respondent prepared substitutes for returns sfrs for each of 5the agreed amount of intervenor’s monthly child_support obligation is between dollar_figure and dollar_figure 6the commissioner shall make returns from his own knowledge or other information for any individual who fails to make any return required by any internal revenue law or regulation see continued the tax years at issue for intervenor and intervenor was sent a notice_of_deficiency intervenor did not respond to the notice and taxes and additions to tax of dollar_figure dollar_figure dollar_figure and dollar_figure for through respectively were assessed against intervenor after the assessments intervenor prepared joint federal_income_tax returns for all of the years at issue intervenor contacted petitioner and asked that she execute those joint returns because she was afraid to meet intervenor alone petitioner accompanied by her adult niece met with intervenor in a parking lot to sign the returns petitioner signed the returns without reviewing them on date the returns reported tax_liabilities due of dollar_figure dollar_figure dollar_figure and dollar_figure for through respectively on date intervenor filed for chapter bankruptcy petitioner was aware of intervenor’s plans to file for bankruptcy respondent received the signed joint returns on date no remittance accompanied the joint returns respondent accepted the joint returns as filed by petitioner and intervenor assessed the joint tax_liabilities from those returns and abated the assessments against intervenor that were continued sec_6020 7all amounts are rounded to the nearest dollar based upon the sfrs the assessments from the joint returns remain unpaid petitioner filed form_8857 request for innocent spouse relief in date for all of the tax years at issue petitioner’s stated reasons for requesting relief included economic hardship spousal abuse and mental or physical health problems petitioner’s initial request for innocent spouse relief was denied in date and petitioner had a telephone conference with the appeals_office in date to discuss whether she qualified for innocent spouse relief the appeals_office determined that petitioner was ineligible for innocent spouse relief discussion generally married taxpayers may elect to file a joint federal_income_tax return sec_6013 after making the election each spouse is jointly and severally liable for the entire tax due for that year sec_6013 114_tc_276 in certain circumstances however a spouse who has filed a joint_return may seek relief from joint_and_several_liability under procedures set forth in sec_6015 sec_6015 under sec_6015 a spouse may seek relief from joint_and_several_liability under sec_6015 or if eligible may allocate liability according to provisions set forth in sec_6015 if a taxpayer does not qualify for relief under either sec_6015 or c the taxpayer may seek equitable relief under sec_6015 the secretary has discretion to grant equitable relief to a spouse who filed a joint_return with an unpaid liability or to one who has a deficiency or any portion of either sec_6015 sec_1_6015-4 income_tax regs petitioner’s petition for innocent spouse relief is a stand alone petition under sec_6015 because she did not receive a statutory_notice_of_deficiency for the years at issue except as otherwise provided in sec_6015 the taxpayer bears the burden of proving that he or she is entitled to sec_6015 innocent spouse relief rule a 119_tc_306 affd 101_fedappx_34 6th cir both the scope and standard of our review in cases requesting equitable relief from joint_and_several income_tax_liability are de novo 132_tc_203 as directed by sec_6015 the commissioner has prescribed procedures for determining whether a spouse qualifies for relief under that subsection the applicable_provision is found in revproc_2003_61 2003_2_cb_296 8petitioner is not entitled to relief under sec_6015 or c because she has underpayments of tax revproc_2003_61 sec_4 c b pincite sets forth threshold requirements the commissioner will consider before granting a request for relief under sec_6015 all requesting spouses must meet seven threshold requirements the requesting spouse filed a joint_return for the taxable_year for which he or she seeks relief relief is not available to the requesting spouse under sec_6015 or c the requesting spouse applies for relief no later than years after the date of the internal revenue service’s irs first collection activity after date with respect to the requesting spouse no assets were transferred between the spouses as part of a fraudulent scheme by the spouses the nonrequesting spouse did not transfer disqualified assets to the requesting spouse the requesting spouse did not file or fail to file the return with fraudulent intent and absent enumerated exceptions the income_tax_liability from which the requesting spouse seeks relief is attributable to an item of the individual with whom the requesting spouse filed the joint_return id this court employs those factors when reviewing the commissioner’s denial 120_tc_137 see also schultz v commissioner tcmemo_2010_233 we find as did respondent during the appeals process that petitioner satisfies the seven threshold requirements for innocent spouse relief where the requesting spouse satisfies the threshold requirements of revproc_2003_61 sec_4 then revproc_2003_61 sec_4 c b pincite sets forth circumstances in which relief will ordinarily be granted under sec_6015 with respect to an underpayment of a properly reported liability if the requesting spouse can prove that he or she was no longer married to or legally_separated from the nonrequesting spouse on the date of the request for relief had no knowledge or reason to know that the nonrequesting spouse would not pay the income_tax_liability and will suffer economic hardship relief will ordinarily be granted revproc_2003_61 sec_4 c b pincite as we will discuss below petitioner had knowledge or reason to know that intervenor would not pay the income_tax_liability and is therefore not eligible for relief under revproc_2003_61 sec_4 where the requesting spouse fails to qualify for relief under revproc_2003_61 sec_4 the irs may nevertheless grant relief under revproc_2003_61 sec_4 c b pincite the court’s analysis with respect to the nonexhaustive list of factors in revproc_2003_61 sec_4 is discussed below i marital status the irs will take into consideration whether the requesting spouse is divorced or separated whether legally_separated or living apart from the nonrequesting spouse revproc_2003_61 sec_4 a i c b pincite we look to petitioner’s marital status at the time of trial in applying de novo review see wilson v commissioner tcmemo_2010_134 at the time of trial petitioner was divorced this factor weighs in favor of relief see id see also mcknight v commissioner tcmemo_2006_155 divorce weighs in favor of relief under rev_proc ii economic hardship the irs will take into consideration whether the requesting spouse will suffer economic hardship if relief is not granted revproc_2003_61 sec_4 a ii c b pincite generally economic hardship exists if collection of the tax_liability will cause the taxpayer to be unable to pay reasonable basic living_expenses butner v commissioner tcmemo_2007_ to determine economic hardship the irs will use the factors provided in sec_301_6343-1 proced admin regs revproc_2003_61 sec_4 a ii citing revproc_2003_61 sec_4 c the pertinent factors here are petitioner’s age employment status and history ability to earn and number of dependents the amount reasonably necessary for food clothing housing including utilities homeowner’s insurance homeowner’s association dues and the like medical_expenses including health insurance transportation and current tax_payments including federal state and local the cost of living in the geographic area in which petitioner resides and any other factor that petitioner claims bears on economic hardship see sec_301_6343-1 proced admin regs petitioner is disabled and has not worked since her automobile accident in at the time of trial petitioner had custody of her three children petitioner’s income including child_support is approximately dollar_figure below the national and local standards for expenses see internal_revenue_manual pt exhibit date intervenor was behind on child_support by one and one-half payments reducing petitioner’s income by approximately dollar_figure for those months given petitioner’s disability and financial standing at the time of trial we find that the factor of economic hardship weighs in favor of granting relief iii knowledge or reason to know in an underpayment case the pertinent question is whether the requesting spouse did not know or had no reason to know that the nonrequesting spouse would not pay the income_tax_liability merendino v commissioner tcmemo_2006_2 typically in the case of a reported but unpaid tax_liability the relevant knowledge is that the tax would not be paid when the return was signed revproc_2003_61 sec_4 a iii a c b pincite in determining whether the requesting spouse had reason to know the following factors are used the requesting spouse’s level of education any deceit or evasiveness of the nonrequesting spouse the requesting spouse’s degree of involvement in the activity generating the income_tax_liability the requesting spouse’s involvement in business and household financial matters the requesting spouse’s business or financial expertise and any lavish or unusual expenditures compared with past spending levels revproc_2003_61 sec_4 a iii c c b pincite a taxpayer who signs a return is generally charged with constructive knowledge of its contents 992_f2d_1256 2d cir affg tcmemo_1992_228 petitioner has some college education though she is not trained in finance business or taxation petitioner testified that although she does not have any technical education in taxation she is aware that taxes have to be paid on income 9no evidence was presented that intervenor was explicitly deceitful or evasive about the returns or the tax_liability the court notes that intervenor’s explanation to petitioner was that the returns had to be signed to keep the marital home out of foreclosure and that the couple met in a parking lot to sign the returns petitioner was not involved with intervenor’s business activities that created the tax_liabilities but she was involved in the couple’s household financial matters because she paid the couple’s bills from their joint checking account petitioner did not have any lavish or unusual expenditures petitioner argues that she was unaware that the couple had any_tax liabilities for the years at issue petitioner was aware of a decline in the household’s income as the real_estate market had weakened and intervenor brought home less and less income petitioner was aware that the marital home was in foreclosure because she and intervenor could not make the mortgage payments we note that petitioner was aware when she signed the returns of intervenor’s plan to file for bankruptcy petitioner also signed the returns without reviewing them see id given petitioner’s understanding of intervenor’s financial and employment situation her knowledge that the marital home was in foreclosure and her lack of review of the returns before signing them the court concludes that petitioner knew or had reason to know that the tax_liabilities would not be paid when the returns were fileddollar_figure this factor weighs against granting relief iv nonrequesting spouse’s legal_obligation the irs will also consider whether the nonrequesting spouse has a legal_obligation to pay the outstanding income_tax_liability pursuant to a divorce decree or agreement see revproc_2003_61 sec_4 a iv c b pincite after the joint returns were signed and filed with the irs petitioner and intervenor each agreed as part of the divorce mediation to be liable for percent of any_tax liability thus it is clear that intervenor had a legal_obligation to pay at least one-half of the outstanding federal_income_tax liabilities this factor the nonrequesting spouse’s legal_obligation will not weigh in favor of relief if the requesting spouse knew or had reason to know that the nonrequesting spouse would not pay the tax_liability id we have found that petitioner knew or had reason to know that intervenor would not pay the tax_liabilities in our discussion supra we reviewed the facts and circumstances that led us to this conclusion our conclusion holds accordingly this factor weighs against granting relief 10although we find below that petitioner was abused by intervenor there was not enough evidence presented for the court to find there was a history of abuse to mitigate petitioner’s knowledge or reason to know that intervenor would not pay the tax_liabilities see revproc_2003_61 sec_4 b i 2003_2_cb_296 v significant benefit the irs will consider whether the requesting spouse received significant benefit beyond normal support as a result of the unpaid tax_liability id sec_4 a v c b pincite respondent has not argued and there is no evidence indicating that petitioner received a significant benefit as a result of the unpaid liabilities therefore the court concludes that this factor weighs in favor of relief see magee v commissioner tcmemo_2005_263 lack of significant benefit weighs in favor of relief under rev_proc vi compliance with federal tax laws the irs will take into consideration whether the requesting spouse has made a good-faith effort to comply with the federal tax laws in the succeeding years see revproc_2003_61 sec_4 a vi c b pincite petitioner has filed all required federal_income_tax returns since her separation and divorce from intervenor we conclude petitioner has made a good-faith attempt to comply with federal tax laws this factor weighs in favor of granting relief vii abuse and mental or physical health abuse and mental or physical health are factors that if present will weigh in favor of relief but will not weigh against relief if not present see id sec_4 b c b pincite when examining the requesting spouse’s mental or physical health at the time of the signing of the returns or the request for relief the nature extent and duration of his or her illness will be taken into account id a abuse in seeking relief petitioner claimed on her form_8857 that she had been abused petitioner and ms sweet petitioner’s mother testified that intervenor abused both petitioner and the couple’s son intervenor denied all allegations of abuse mr nurnberger intervenor’s employer testified that he had known intervenor and petitioner since had been in social situations with them and had never seen intervenor be abusive towards any of intervenor’s family members while the testimony of the witnesses does little more than present contradictory viewpoints two facts seem to rise above the fray the first is that petitioner was afraid to meet intervenor alone when it came time to sign the returns petitioner asked her adult niece to accompany her on that errand the second is that there is one documented charge of misdemeanor domestic assault against intervenor we find that there was evidence of abuse against petitioner this factor weighs in favor of granting relief b mental or physical health petitioner presented evidence that she suffered from depression and anxiety and that she had prescription medication for treatment of her mental health we have no reason to question petitioner’s need of this medication at the time of trial petitioner was also disabled by injuries from an automobile accident in the injuries and associated pain appear to be chronic petitioner’s mental and physical health at the time of trial weigh in favor of granting relief conclusion upon examination of the factors only knowledge or reason to know and the nonrequesting spouse’s legal_obligation weigh against granting relief when these two factors are balanced against the factors of petitioner’s mental and physical health her economic hardship and the abuse she suffered the factors weigh in favor of granting petitioner relief we have considered all of the parties’ arguments and to the extent not addressed herein we conclude the arguments to be moot irrelevant or without merit to reflect the foregoing decision will be entered for petitioner