ROGERS v. COMMISSIONER OF INTERNAL REVENUE

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Docket Number

Docket No. 1862-71.

Attorney(S)

Thomas S. Loop, for the petitioners. Andrew S. Coxe and Bruce A. McArdle, for the respondent.

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Smart Summary

Factual and Procedural Background

Respondent, the Commissioner of Internal Revenue, determined deficiencies in petitioners James A. Rogers and Patricia H. Rogers' income tax for the years 1964, 1965, and 1966, including additions to tax under section 6653(a). Petitioners, residing in Grand Valley, Colorado, filed joint returns for those years with the Director of International Operations in Washington, D.C. The parties executed consents extending the assessment period to December 31, 1970.

On December 30, 1970, respondent attempted to mail a notice of deficiency to petitioners at their correct address in Honduras by certified mail. However, certified mail cannot be sent internationally, and the notice was returned stamped "Return to Sender, Certified Mail Limited to Domestic Mail Only" on January 5, 1971. Subsequently, respondent placed the original notice in a new envelope and mailed it by registered mail on January 5, 1971.

Petitioners received the notice in the registered mail envelope and timely filed a petition with the Tax Court, asserting the statute of limitations barred assessment and collection because the notice was not mailed within the statutory period. Respondent answered, asserting the statute was extended and that the notice was issued on December 30, 1970. Petitioners moved to strike the answer on the grounds that the notice was not timely mailed.

Legal Issues Presented

Whether the mailing of the notice of deficiency by certified mail to an overseas address, which is prohibited by postal regulations, constitutes timely mailing under section 6212(a) of the Internal Revenue Code, thereby suspending the statute of limitations under section 6503(a).
Whether the subsequent mailing of the notice by registered mail after the statutory period expired revives or extends the statute of limitations for assessment and collection.

Arguments of the Parties

Petitioners' Arguments

The notice of deficiency was not mailed within the statutory period as required by law.
The statute of limitations bars assessment and collection because the notice was not properly mailed by certified or registered mail within the time allowed.

Respondent's Arguments

The statute of limitations was extended by written consent to December 31, 1970.
The notice of deficiency was issued and delivered to the Post Office for mailing by certified mail on December 30, 1970, thus suspending the statute of limitations under section 6503(a).
Copies of the notice were mailed to petitioners' attorneys and accountant by ordinary mail, which respondent contends should suffice to suspend the statute of limitations.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Clement Brzezinski, 23 T.C. 192	Requirement that notice of deficiency must be mailed by registered mail (originally) to be effective.	Established that mailing by other than registered mail was insufficient; court extended this principle to explain that certified mail must be permitted for the mailing to be valid.
Welch v. Schweitzer, 106 F.2d 885 (9th Cir. 1939)	A notice mailed to an incorrect address is ineffective; re-mailing after the statute of limitations expired does not revive it.	Supported the conclusion that the initial mailing not meeting statutory requirements did not suspend the statute of limitations.
Boccuto v. Commissioner, 277 F.2d 549 (3d Cir. 1960)	Discussed computation of the 90-day period for filing Tax Court petitions.	Deemed not apposite or controlling for the issue of statute of limitations suspension in this case.
Tenzer v. Commissioner, 285 F.2d 956 (9th Cir. 1960)	Addressed timing issues related to Tax Court petitions.	Considered irrelevant to the mailing and statute of limitations question here.
Eppler v. Commissioner, 188 F.2d 95 (7th Cir. 1951)	Related to procedural timing for Tax Court petitions.	Not controlling for the mailing method and statute of limitations issue.
Commissioner v. Stewart, 186 F.2d 239 (6th Cir. 1951)	Valid notices mailed to taxpayers' attorneys by registered mail pursuant to powers of attorney suffice.	Distinguished because in this case it was unclear if timely mailing to attorneys occurred and ordinary mail was used.
Milton Berger, 48 T.C. 848	Similar to Stewart regarding mailing to attorneys by registered mail.	Found not applicable here due to lack of evidence of timely registered mailing to attorneys.

Court's Reasoning and Analysis

The court analyzed the statutory requirements for mailing a notice of deficiency under sections 6212(a) and 6503(a) of the Internal Revenue Code. The statute authorizes mailing by certified or registered mail. However, postal regulations prohibit certified mail for international addresses. Because the respondent initially attempted to mail the notice by certified mail to an overseas address, this mailing was ineffective and did not suspend the statute of limitations.

The court reasoned that mailing by registered mail was the only valid method to suspend the statute for overseas addresses, which respondent did only after the statutory period expired. The court held that this late mailing could not revive or extend the statute of limitations.

The court found persuasive the precedent in Welch v. Schweitzer, where a similar issue of improper mailing and late re-mailing was resolved against the government. The court rejected respondent's argument regarding mailing copies to attorneys by ordinary mail, noting lack of evidence and distinguishing controlling precedents requiring registered mail.

Holding and Implications

The court held that the notice of deficiency was not timely mailed within the statutory period, and therefore assessment and collection of the tax deficiencies are barred by the statute of limitations.

As a result, the petitioners' motion to strike respondent's answer was granted, and decision was entered in favor of the petitioners. The court's ruling directly prevents the respondent from assessing or collecting the proposed tax deficiencies for the years 1964, 1965, and 1966. No new legal precedent beyond the application of existing statutes and case law was established.

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JAMES A. ROGERS AND PATRICIA H. ROGERS, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

OPINION

DRENNEN, Judge:

Respondent determined deficiencies in petitioners' income tax in the amounts of $8,937.26, $4,888.14, and $10,261.77 for the years 1964, 1965, and 1966, respectively, and additions to tax under section 6653(a) for those years in the amounts of $446.86, $244.41, and $513.09, respectively.

Petitioners were husband and wife residing in Grand Valley, Colo., at the time the petition was filed. They filed joint Federal income tax returns for the years 1964, 1965, and 1966 with the Director of International Operations, Washington, D.C.

This case was heard on petitioners' motion to strike respondent's answer on the ground that assessment and collection of the proposed deficiencies is barred by the statute of limitations because the notice of deficiency was not mailed to petitioners within the statutory period.

Respondent audited petitioners' income tax returns for the years 1964, 1965, and 1966 and proposed certain adjustments increasing petitioners' taxes for those years. Consents extending the time within which respondent could assess the proposed deficiencies to December 31, 1970, were executed by the parties.

A notice of deficiency dated December 30, 1970, addressed to petitioners at their correct address in San Pedro Sula, Honduras, C.A., was delivered by respondent to the Post Office for mailing by certified mail on December 30, 1970. The envelope in which the notice of deficiency was placed bears the notation "Certified Mail No. 175,829" but has no postmark thereon. It also has stamped thereon "Return to Sender, Certified Mail Limited to Domestic Mail Only." In the lower left-hand corner of the envelope there is stamped the date "Jan. 5, 1971."

Respondent offered in evidence a certified mail receipt dated December 30, 1970, which has listed thereon an article bearing the certified mail No. 175,829, which was addressed to petitioners at their correct address in Honduras. This particular entry on the receipt is crossed out and a notation appears "Returned 1/5/70 [sic] and mailed Registered same day."

Petitioners received the notice of deficiency in the above-described unopened envelope which was contained in an outer envelope, properly addressed to petitioners at their Honduras address, which was sent by registered mail and bears a postmark dated January 5, 1971.

Petitioners filed a timely petition with this Court in which they pleaded the bar of the statute of limitations because the notice of deficiency was not mailed within the statutory period, as extended, and alternatively contested the proposed adjustments in the notice of deficiency. Respondent's answer pleaded as defense to the statute of limitations that the statute had been extended by the parties to December 31, 1970, and that the notice of deficiency "was issued on December 30, 1970." Petitioner thereupon moved to strike respondent's answer, as related above.

While it is not certain from the evidence, apparently what happened (and we will so assume for purposes of this opinion) was that respondent delivered the notice of deficiency enclosed in the original envelope, along with other mail, to the Post Office on December 30, 1970, for mailing by certified mail as was customary. A postal employee apparently discovered on January 5, 1971, that the document could not be mailed overseas by certified mail and notified respondent. Respondent then placed the original envelope, unopened, in an outer envelope properly addressed to petitioners and again delivered it to the Post Office on January 5, 1971, for mailing by registered mail.

The legal question raised by petitioners' motion is whether the issuance of the statutory notice under date of December 30, 1970, and delivery thereof in a properly addressed envelope to the Post Office on the same day for mailing by certified mail, which is not permitted for overseas mail, suspended the running of the statute of limitations. We conclude that it did not.

Section 6501(a), I.R.C. 1954, provides that the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed. Section 6501(c)(4) provides for an extension of the time allowed for assessment during a period consented to in writing by the parties. Section 6503(a)(1) provides that the running of the period of limitations provided in section 6501 for making assessments of income tax "shall (after the mailing of a notice under section 6212(a)) be suspended" for the period during which the respondent is prohibited from making an assessment and 60 days thereafter. Section 6212(a) authorizes respondent to "send" a notice of deficiency to the taxpayer by "certified mail or registered mail." Section 6213(a) provides for the filing of a petition by the taxpayer in the Tax Court within 90 days, or 150 days if the notice is addressed to a person outside the United States, and also provides that no assessment may be made within the 90- or 150-day period nor, if a petition is filed with the Tax Court, until the decision of the Tax Court becomes final.

Assessment and collection of the deficiencies here involved was clearly barred by section 6501(a) after December 31, 1970, unless respondent can show that the running of the statute of limitations was in some way suspended until at least January 5, 1971. Respondent claims that his attempt to mail the notice of deficiency to petitioners by certified mail on December 30, 1970, suspended the running of the statute under section 6503(a). We disagree. While there appears to be little direct authority on the subject, we do not believe respondent's effort to mail the notice of deficiency overseas by certified mail on December 30, 1970, meets the requirements of section 6212 and makes section 6503(a) applicable.

Section 6212 or its predecessor originally authorized respondent to mail the notice of deficiency by registered mail — and this Court held in Clement Brzezinski, 23 T.C. 192, that a notice sent by other than registered mail would not suffice. Thus, a notice sent by ordinary mail would not be sufficient. The statute presently authorizes the mailing of the notice by either registered or certified mail. Thus, mailing the notice by certified mail would suffice today if the parcel can be so mailed. But because the postal regulations limit the use of certified mail to domestic mail, the use of that type mail for the notice here involved was not available to respondent and the only way he could comply with the statute and suspend the running of the statute of limitations was by mailing the notice by registered mail. This he did not do until after the statutory period had expired and he could not breathe life back into it by remailing the notice by registered mail at a later date.

What appears to be the closest case in point is Welch v. Schweitzer, 106 F.2d 885 (C.A. 9, 1939), which we believe supports petitioner and our conclusion here. There, respondent mailed the notice of deficiency by registered mail but addressed to other than the taxpayers' last-known address 2 weeks before the expiration of the statute of limitations. It was returned undelivered to respondent who then remailed the notice to the proper address 8 days after the statutory period expired. The court held that the original notice was ineffective because it was not mailed to the proper address.

While arguments pro and con on this issue can be made from statements made in some of the numerous opinions dealing with the date to be used in computing the 90-day period for filing the petition in the Tax Court, we do not find any of those cases to be apposite or controlling here, and there is no point in discussing them in this opinion. See, for example, Boccuto v. Commissioner, 277 F.2d 549 (C.A. 3, 1960); Tenzer v. Commissioner, 285 F.2d 956 (C.A. 9, 1960); Eppler v. Commissioner, 188 F.2d 95 (C.A. 7, 1951).

Respondent argues with little conviction that because copies of the notice of deficiency were mailed, pursuant to powers of attorney on file, to petitioners' attorneys and accountant by ordinary mail on December 30, 1970, this alone was sufficient to suspend the running of the statute, citing Commissioner v. Stewart, 186 F.2d 239 (C.A. 6, 1951); Clement Brzezinski, supra; Milton Berger, 48 T.C. 848. In addition to being unable to determine from the evidence whether copies of the notice were actually mailed to petitioners' attorneys, and, if so, when and by what form of mail, we do not believe those cases are in point. In those cases valid notices of deficiency were timely mailed to the taxpayers' attorneys by registered mail pursuant to powers of attorney.

We conclude that assessment and collection of the deficiencies involved in this case is barred by the statute of limitations. Petitioners' motion will be granted.

Decision will be entered for the petitioners.