Court Opinion

ID: 4480218
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:08.818468+00
Date Added: 2024-06-11T14:53:04.481260
License: Public Domain

Pierce, J. dissenting. This Court, in my opinion, lacks jurisdiction to decide this case, for the following reasons: A. For each of the taxable years here involved, the petitioner and her husband filed a joint income tax return. Therefore, under the applicable statute and regulations hereinafter cited, the gross incomes and deductions of both spouses, and also the tax imposed thereon, must all be com/puted on an aggregate basis/ and although there are two taxpayers, there is only one taxable income in respect of which any deficiency in the tax may be determined. B. Prior to the issuance of the notice of deficiency herein, 100 percent of the deficiency computed in respect of said “one taxable income,” had been assessed. Accordingly under section 6211 of the 1954 Code, there remained no “deficiency”; and in the absence of any such “deficiency” which this Court could “redetermine” under section 6213, the Court lacks jurisdiction to decide the case. C. Prior to the issuance of the notice of deficiency herein, the Secretary or his delegate had been notified that the spouses who had filed the joint return had established separate residences; and in such circumstance, section 6212(b) (2) of the Code required that “a duplicate original of the joint notice [of deficiency] shall be sent by certified mail or registered mail to each spouse at his last known address.” (Emphasis supplied.) In the instant case, however, this express requirement of the statute was not met; and in the absence of the required statutory notices to both spouses, one of the essential prerequisites to this Court obtaining jurisdiction is lacking. In support of the foregoing, the following is submitted. I It should be observed at the outset, that we are here concerned with those provisions of the Internal Revenue Code of 1954 which control and govern the procedures that must be applied in determining “deficiencies” in respect of income taxes of taxpayers, in issuing statutory notices of any such “deficiencies,” and in providing the prerequisites for this Court’s jurisdiction under section 6213 of the Code to make a “redetermination” of any such “deficiencies.” The construction and application of said statutory procedures is entirely a matter of Federal law, and not of local law. This is made clear by the following decisions of the Supreme Court: Burnet v. Harmel, 287 U.S. 103, 110: Here we are concerned only with the meaning and application of a statute enacted by Congress, in the exercise of its plenary power under the Constitution, to tax income. The exertion of that power is not subject to state control. It is the mil of Congress wJiioh controls, and the expression of its will in legislation, in the absence of language evidencing a different purpose, is to be interpreted so as to give a uniform application to a nation-wide scheme of taxation. * * * State law may control only when the operation of the federal taxing act, by express language or necessary implication, makes its own operation dependent upon state law. * * * [Emphasis supplied.] Lyeth v. Hoey, 305 U.S. 188, 193-194: The question as to the construction of the * * * federal statute is not determined by local law. We are not concerned with the peculiarities and special incidences of state taxes or with the policies they reflect. * * * In the instant case, this Court has not, in my opinion, followed and applied the above-mentioned procedural requirements of the Code. Rather, it has changed or modified these Federal statutory procedures, by resort to principles of common law, to principles of local law including the law of the State of Missouri, to textbooks dealing with non-Federal problems, and to comparisons with judgments obtained under local laws — all as shown by numerous citations and statements throughout the majority opinion. In my opinion, this approach of the majority of the Court is unwarranted. For, since Congress has prescribed with particularity the procedural prerequisites to this Court obtaining jurisdiction, such prescriptions are controlling; and it is neither proper nor necessary to have recourse to other procedures employed under local laws. If for any reason, the Commissioner should conclude that said prescribed statutory procedures should be amended or modified, he should present his suggestions in this regard to the Congress, and not to this Court. II The first prerequisite to this Court obtaining jurisdiction under section 6213(a) of the 1954 Code, is that there must be a “deficiency” as defined in section 6211(a) of the Code. In the instant case, no such “deficiency” existed, either at the time of the issuance of the notice of deficiency herein or at the time of the filing of the petition with this Court; for at each of these times, 100 percent of the deficiency previously determined in respect of the joint income tax returns here involved, had already been assessed — thereby eliminating any “deficiency” in respect of said joint returns. 1. Section 6013 (a) provides that' a husband and wife may (subject to exceptions not here material) make a single joint return of income taxes, even though one of the spouses has neither gross income nor deductions; and subparagraph (d) (3) of this section then further provides that, in such circumstance, the tax shall he computed on the aggregate income of both spouses, and the liability with respect to the tax shall be joint and several. The regulations under this section (Income Tax Regs., sec. 1.6013-4) implement the statute as follows: (b) Computation of income, deductions, and taw. If a joint return is made, the gross income and adjusted gross income of husband and wife on the joint return are computed in an aggregate amount and the deductions allowed and the taxable income are lihemse computed on an aggregate basis. * * * Although there are two taxpayers on a joint return, there is only one taxable income. The tax on the joint return shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several. * * * [Emphasis supplied.] It follows from the foregoing that, where a joint return has been filed (as was the situation for each of the taxable years here involved), there can be one, and only one, tax imposed in respect of the single aggregate taxable income of both the spouses; and it further follows that if there is any “deficiency” in respect of the tax so imposed, it can be only a single deficiency for which both spouses are jointly and severally liable — and not two separate and identical deficiencies (one for each spouse) against which any credits for assessments or payments in respect of the single tax imposed, will be applied for the benefit of only one spouse to the exclusion of the other. 2. Section 6211(a) of the Code defines the term “deficiency”; and it also specifies how any amounts previously assessed (or collected without assessment) as a deficiency, must be credited against the single tax imposed. This section reads: SEC. 6211. DEFINITION OF A DEFICIENCY. (a) In Generar. — For purposes of tbis title in tbe case of income, estate, and gift taxes, imposed by subtitles A and B, tbe term “deficiency” means tbe amount by whicb the tax imposed by subtitles A and B exceeds tbe excess of— (1) tbe sum of (A) the amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plus (B) the amounts previously assessed (or collected without assessment) as a deficiency, over— (2) the amount of rebates, as defined in subsection (b) (2), made. [Emphasis supplied.] It follows from the foregoing that, if 100 percent of any deficiency in the tax imposed has been assessed prior to the issuance of notice of deficiency, there can be no remaining “deficiency” in respect of the tax imposed. It further follows that in the absence of a statutory “deficiency,” there is nothing to be “redetermined” by this Court under section 6213; and accordingly this Court lacks jurisdiction. Stanley A. Anderson, 11 T.C. 841. From and after assessment of 100 percent of the “deficiency,” the situation becomes solely a matter of collection; and this is a matter that is vested solely in the administrative authorities, and which is wholly outside the jurisdiction of this Court. Indeed, under section 6211 (a), supra, assessment is placed on parity with payment, so far as the determination of a statutory “deficiency” is concerned. 3. In the instant case, 100 percent of the deficiency initially determined in respect of the tax imposed on each of the joint returns here involved, was assessed on August 31, 1962, which was prior to the issuance of the notice herein on October 9,1962. The majority of the Court attempted, in the course of its opinion, to meet this situation by concluding (erroneously, I believe) that— the determination as to whether there is a deficiency within the meaning of section 6211(a) must be made separately for each spouse, and prior assessments against one spouse are not to be considered in making the computation with respect to the other spouse. * * * [Emphasis supplied.] The Court, in adopting this approach which contemplates two separate deficiencies for the spouses and which also contemplates separate credits in respect of 'each spouse, failed to give effect to the above-mentioned statutory scheme which Congress has provided, that there is one, and only one, single taxable income and only one single unitary tax imposed thereon. In this connection, see Anderson v. United States, 15 F. Supp. 216, 225, wherein the Court of Claims explained the method by which income tax assessments are made; and in which it held that the assessment contemplated by the statute is an assessment of the tax, and not an assessment of the taxpayer. Ill The second prerequisite to this Court obtaining jurisdiction, is that a valid statutory notice (or notices) of any deficiency in the tax imposed on the joint return, shall be given to both spouses in the particular manner which Congress has prescribed. In my opinion, this prerequisite has not here been met. 1. In the instant case, the Court found as a fact, that prior to the issuance of the notice of deficiency herein, respondent had been notified that the two spouses had established separate residences at separate addresses. The Court further found as a fact that, notwithstanding this situation, respondent did not mail to the husband any statutory notice of deficiency whatsoever; and also that the notice mailed to the wife was neither a joint notice nor a duplicate original of a joint notice. 2. Section 6212 of the Code, which governs the necessity for the issuance of statutory notices of deficiency, provides in material part as follows: SEC. 6212. NOTICE OE DEFICIENCY. (a) In General. — If the Secretary or his delegate determines that there is a deficiency in respect of any taw imposed, by subtitles A or B, he is authorized to send notice of such deficiency to the taxpayer by certified mail or registered mail. (b) Address eor Notice of Deficiency.' — ■ (2) Joint income tax return. — In the case of a joint income tax return filed by husband and wife, such notice of deficiency may be a single joint notice, except that if the Secretary or his delegate has teen notified by either spouse that separate residences have been established, then, in lieu of the single joint notice, a duplicate original of the joint notice shall be sent by certified mail or registered mail to each spouse at his last known address. [Emphasis supplied.] The Procedure and Administration Regulations have implemented these statutory provisions, as follows: Sec. 301.6212-1. Notice of deficiency. (2) Joint income taw returns. If a joint income tax return has been filed by husband and wife, the district director (or assistant regional commissioner, appellate) may, unless the district director for the district in which such joint return was filed has been notified by either spouse that a separate residence has been established, send either a joint or separate notice of deficiency to the taxpayers at their last known address. If, however, the proper district director has been so notified, a separate notice of deficiency, that is, a duplicate original of the joint notice, must be sent by registered mail prior to September 3, 1958, and by either registered or certified mail on and after September 3,1958, to each spouse at his or her last known address. The notice of separate residences should be addressed to the district director for the district in which the joint return was filed. [Emphasis supplied.] Moreover, the report of the House Ways and Means Committee, respecting the Revenue Act of 1938, which contained in section 272(a) thereof the cognate provision to section 6212(b) (2) of the 1954 Code, explained the intent of said provisions. In this report, the committee pointed out that, in the usual joint return case, the notice of deficiency might take the form of either a joint notice to both spouses, or separate notices to these spouses, provided that notice, in one form or the other, is sent to both spouses. The committee then further stated as follows: The committee feels, however, that, in the interests of fairness, an exception to such established, procedure should be made in cases where, subsequent to the filing of the joint return and prior to the notice of deficiency, the spouses have established separate residences and notice of such fact has been given to the Commissioner. The last sentence of section 272(a) of the bill accordingly provides that a single joint notice may be sent in the general case but that, if the Commissioner has been notified by either spouse that separate residences have been established, then, in lieu of the single joint notice, duplicate originals must be sent by registered mail to each of the spouses at his last hnown address. [H. Rept. No. 1860, 75th Cong., 3d Sess., p. 48 (1938). Emphasis supplied.] The conclusion to be drawn from the foregoing statute, regulations, and legislative history is that, in any case where a deficiency is determined in respect of a joint income tax return, notice of such deficiency must be issued in one form or another, to both spouses by registered or certified mail. 3. In the instant case, the evidence establishes and this Court has found as a fact, that no statutory notice of any hind or character was sent to the husband with respect to the joint return; and that even the notice sent to the wife alone, was neither a joint notice nor a duplicate original of a joint notice. Thus, in my opinion, there was here no compliance with the requirements of the statute. And since the notice issued herein did not meet the statutory requirement, it follows that this Court lacks jurisdiction under section 6213 to decide the present case. The majority of the Court, in an effort to overcome this obvious situation, has concluded that, since the husband had theretofore filed a waiver of restrictions on assessment and collection of 100 percent of the deficiency in respect of the joint return, he was not entitled to received any statutory notice. But there are two errors in this conclusion. First, the waiver (which is in evidence as Exhibit 6) did not waive the husband’s right to receive notice of any deficiency which might thereafter be issued in respect of the joint return; rather, it waived only the statutory restrictions on immediate assessment and collection of the deficiencies on the joint returns. Secondly, it must be kept in mind that the Congress, in enacting the statutory procedural requirements here involved, was establishing a procedure that was to have uniform application in all joint return cases; and it may not properly be assumed that Congress, in so acting, meant anything other than it said. Also, it cannot properly be assumed that noncompliance with said statutory procedures will, in all cases, result in no prejudice to the spouses involved. To the contrary, assume, for example, a situation where the spouses had separated and were living in different parts of the country, and where neither spouse is familiar with the actions of the other. In such situation, if the husband should waive the restrictions on assessment of 100 percent of the joint return deficiency with a view to thereafter suing in a District Court for any amounts collected on such assessments, and if thereafter the Commissioner should, without any notice to the husband, issue a notice of deficiency to the wife only and she then files a petition to this Court with respect to such notice, prejudice might result to both spouses. As regards the wife, she, being without knowledge that the joint return tax had already been fully assessed, might be deprived of an opportunity to plead in defense, that the joint return deficiency had already been eliminated by such assessment. And as regards the husband, on the other hand, he too might be prejudiced, by having the amount of the joint return deficiency increased during the course of the trial of the wife’s case before this Court; or by having new claims to penalties for fraud or other causes, approved by this Court during the course of the wife’s proceeding, solely on the basis of concessions or testimony presented during the wife’s proceeding, wholly without his knowledge. In addition, the husband’s contemplated action in a District Court might be prejudiced by reason of this Court’s decision in the wife’s case, as to which he had no knowledge. Thus, the only way to provide adequate protection for both spouses who are jointly and severally liable for the joint return tax, is to make sure that the procedures which Congress has prescribed for reasons satisfactory to itself, are strictly applied and enforced. That was not done in the instant case. Finally, I deem it necessary to point out that the case of Kisting v. Commissioner, 298 F. 2d 264 (C.A. 8), upon which the majority of the Court so strongly relies, is distinguishable; for there, as the Eighth Circuit pointed out in its recital of the facts, a statutory notice of the deficiency involved was mailed to each of the spouses as required by the statute, and the only jurisdictional issue pertained to the form of the notices so issued to both spouses. IV The case of Natalie D. Du Mais, 40 T.C. 269 (1963), involved a question of jurisdiction and facts which were substantially the same as those in the instant case. There, as in the present case, the Commissioner had mailed a notice of deficiency in respect of a joint return to the wife only, without sending any statutory notice of any kind to the husband; and thereafter, the wife had filed a petition with this Court in respect of the notice which she had received. Subsequently, after the foregoing facts bearing on this Court’s jurisdiction had been fully developed through use of a show-cause order, the Commissioner submitted the following concession: After careful consideration of all tlie facts of the case, and the law as applicable to these facts, the respondent agrees with the Court that in this case the Tax Court lacks jurisdiction. This Court, in thereupon dismissing the wife’s case for lack of jurisdiction, made the following statement in its published opinion: In the instant case, the Commissioner attempted, to establish joint and several liability for deficiencies in respect of joint returns, without issuing either a joint statutory notice of deficiency or duplicate originals of a joint notice to each spouse — and indeed, without giving any statutory notice whatsoever to one of the joint makers of the returns involved. This does not meet the requirements of the controlling statutes. [Emphasis supplied.] The Commissioner has not, at any time since, published any renunciation of his concession that the Court lacked jurisdiction in said case; and also he has not, at any time since, published any nonac-quiescence with respect to the decision entered in that case. I have found no published decision of any court which is contrary to the above-mentioned decision in the Du Mais case. I believe that said decision was correct; and that it should have been followed in the instant case.