Court Opinion

ID: 4481194
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:45.614428+00
Date Added: 2024-06-11T07:57:47.602499
License: Public Domain

Scott, /., dissenting: I agree with Judge Sterrett’s dissent and have so indicated. However, if the statutes could properly be interpreted to permit respondent to elect to send a notice of deficiency1 instead of making an immediate assessment during the pendency of a bankruptcy proceeding, in my opinion we lack jurisdiction in this case for a reason not discussed in the majority opinion except by a footnote reference. In my view respondent has issued no proper notice of deficiency in this case since under the provisions of sections 6212(b) (1) and 6903 he has not mailed the notice to the proper person.2  These sections appear to me to clearly require that any notice with respect to a tax liability of a bankrupt for a taxable year prior to the year of the adjudication of bankruptcy be sent while the bankruptcy proceeding is pending to the trustee or other fiduciary in bankruptcy. The trustee or other fiduciary in bankruptcy is the representative of the bankrupt’s estate for all purposes involving Federal taxes during the pendency of the bankruptcy proceeding. The overall import of the statutes is that Federal taxes due for a year prior to the adjudication in bankruptcy should first be collected, if possible, from the bankrupt estate.3  In my view we must assume that tbe trustee or other fiduciary in bankruptcy was not derelict in the performance of his duty in notifying the respondent of the adjudication in bankruptcy.4  In my view we do not reach a problem of the taxpayer’s right to contest a tax prior to payment since no proper notice of deficiency has been sent by respondent. Since petitioner has now been discharged from bankruptcy, respondent is prohibited by section 6213 from assessment of any income tax deficiency without issuance of a notice of deficiency in accordance with section 6212 unless there has been an assessment made during the pendency of the bankruptcy proceeding, which I gather there has not been in this case. Respondent, in my view, would be prohibited from assessment and collection of the deficiency on the basis of the notice from which this petition is filed, which notice in my view is a nullity since if the statutes are interpreted as authorizing respondent to send a deficiency notice during pendency of a bankruptcy proceeding such notice must be sent to the trustee or other fiduciary of the bankrupt estate. This case is entirely different from Pearl A. Orenduff, 49 T.C. 329 (1968), and John V. Prather, 50 T.C. 445 (1968), both of which involved deficiency notices mailed to individuals after their discharge in bankruptcy, which notices were proper notices under sections 6212 (b) and 6903. This same conclusion was reached in Eli McDonald, 23 B.T.A. 521 (1931). The cases dealing with notices sent to taxpayers prior to the appointment of a receiver for their assets or their adjudication in bankruptcy but with petitions filed subsequent thereto involve a different issue from that involved in the instant case, even though in my view we correctly held in those cases that we lacked jurisdiction because of the provisions of the Internal Revenue laws comparable to section. 6871(b). The notice in those cases was valid but the intervention of the receivership or bankruptcy prior to the filing of a petition in this court caused this Court to lack jurisdiction. In cases involving issues of whether a certain assignment of assets was a “receivership proceeding before any court * * * of any State,” the deficiency notices had been sent to the receiver, or the receiver had filed the petition questioning this Court’s jurisdiction. See Louis H. Pink, Supt. of Insurance of New York, 38 B.T.A. 182 (1938), in which the notice was sent to the assignee of the assets and Banco di Napoli Agency in New York, 1 T.C. 8 (1942), in which the assignee of the assets filed the petition. I would dismiss the petition in this case for lack of jurisdiction on the ground that respondent has issued no proper notice of deficiency. Steruett, /., agrees with this dissenting opinion.   It should be noted that why respondent should choose to send a notice of deficiency when such action is not necessary to permit him to assess is not readily apparent.    Sec. 6212(b) (1) provides: (b) Address for Notice of Deficienct.— (1) Income and gift taxes. — In the absence of notice to the Secretary or his delegate under section 6903 of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by subtitle A or chapter 12, if mailed to the taxpayer at his last known address, shall be sufficient for purposes of subtitle A, chapter 12, and this chapter even if such taxpayer is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence. Sec. 6903(a) provides: (a) Rights and Obligations of Fiduciart. — Upon notice to the Secretary or his delegate that any person is acting for another person in a fiduciary capacity, such fiduciary shall assume the powers, rights, duties, and privileges of such other person in respect of a tax imposed by this title (except as otherwise specifically provided, and except that the tax shall be collected from the estate of such other person), until notice is given that the fiduciary capacity has terminated.    Sec. 64 of the Bankruptcy Act (11 U.S.C.) provides for priority of payment of Federal taxes and sec. 17 of the Bankruptcy Act (11 U.S.C. sec. 35) provides thait a discharge in bankruptcy shall release a bankrupt from all Ms provable debts except Federal and State taxes. Prior to 1967 there was no release from any Federal and State taxes but by amendment of the Bankruptcy Act in 1967 the exception from release by discharge in bankruptcy was made for “taxes which become legally due and owing by the bankrupt * * * within three years preceding bankruptcy.” At the same time sec. 64 of the Bankruptcy Act was amended to be applicable only to taxes “which are not released by discharge in bankruptcy.” These provisions give further support to the conclusion that during the pendency of the bankruptcy proceeding respondent must look to payment from the bankrupt estate in the hands of the trustee or other fiduciary. The discussion in Bruning v. United States, 376 U.S. 358 (1964), holding that post-petition interest continues to run on the part of a tax claim not discharged in bankruptcy refers to the “now familiar principle that one main purpose of the Bankruptcy Act is to let the honest debtor begin his financial life anew” not overriding the specific provision that debts for Federal taxes survive bankruptcy. However, this principle would support the interpretation of the statutes as requiring that during pendency of a bankruptcy proceeding the source for the collection of taxes is the bankrupt estate.    Sec. 6036, I.R.C. 1954, specifically provides for such notification and respondent’s regulations provide that notice by a copy of the court order shall be notice under see. 6903 (sec. 301.6903 — 1(a), Proced. & Admin. Regs.) and that notice under any provision of the Bankruptcy Act (11 U.S.C.) shall be notice under sec. 6036. (Sec. 301.3036-1 (a), Proced. & Admin. Regs.) See sec. 58 of the Bankruptcy Act (11 U.S.C. sec. 666) providing for notice to respondent of an adjudication of bankruptcy by the clerk of the court and the referee.