Docket No. 8081-73 | Tax Ct. | Apr 1, 1974

Lead Opinion

OPINION

Dawson, Judge:

On March 29, 1973, the petitioner’s taxable period was terminated by action of the district director of internal revenue pursuant to section 6851.1 Respondent has not sent a statutory notice of deficiency to the petitioner. On November 9,1973, the petitioner filed a petition seeking relief. On December 21, 1973, respondent moved to dismiss the case for lack of jurisdiction.

Respondent points out that the statutory notice of deficiency authorized by section 6212 and required by section 6213(a) has not been sent to the petitioner; and that there is no requirement under the provisions of section 6851 for the respondent to send a notice of deficiency to petitioner for the terminated taxable period. Without such statutory notice, respondent contends that this Court lacks jurisdiction.

The petitioner recognizes the absence of the statutory notice but argues that the respondent is under a nondiscretionary duty to issue a notice of deficiency. He contends that to dismiss this action because of the respondent’s “nonfeasance” would do violence to the legislative intent made manifest by the very creation and establishment of this Court. Petitioner requests this Court to either order the issuance of a notice of deficiency or to proceed to trial as if the notice of deficiency had been sent.

Section 7442 of the Code provides:

The Tax Court and its divisions shall have such jurisdiction as is conferred on them by this title, by chapters 1, 2, 3 and 4 of the Internal Revenue Code of 1939, by title II and title III of the Revenue Act of 1926 (44 Stat. 19-87), or by laws enacted subsequent to February 26,1926.

A case is commenced in this Court by filing a petition seeking a re-determination of tbe deficiency set forth in tbe statutory notice-of deficiency sent to a taxpayer by tbe Commissioner of Internal Revenue. See Rules IB and 20, Tax Court Rules of Practice and Procedure.

Tbe statutory notice of deficiency has been called a “ticket to tbe Tax Court” in Corbett v. Frank, 293 F. 2d 601 (C.A. 9, 1961). Such a description aptly conveys tbe importance of such a notice. It is also important to the petitioner because once be files a petition with this Court jurisdiction is retained even if the respondent attempts to withdraw tbe notice. Daniel E. Hannan, 52 T.C. 787" court="Tax Ct." date_filed="1969-08-11" href="https://app.midpage.ai/document/hannan-v-commissioner-4481310?utm_source=webapp" opinion_id="4481310">52 T.C. 787 (1969).

Tbe action taken by tbe respondent in this case to terminate tbe taxpayer’s taxable period and assess tbe income taxes has become more widespread recently. Judicial reaction has varied.

Faced with tbe terminated taxable period, tbe assessment, and tbe demand for payment, taxpayers have insisted that they be given a notice of deficiency so that they may litigate tbe correctness of tbe deficiency in this Court prior to payment. Some taxpayers have filed suits in United States District Courts to compel tbe issuance of a notice of deficiency. x

Tbe fountainhead case in tbe area is Schreck v. United States, 301 F. Supp. 1265" court="D. Maryland" date_filed="1969-06-30" href="https://app.midpage.ai/document/schreck-v-united-states-1655999?utm_source=webapp" opinion_id="1655999">301 F. Supp. 1265 (D. Md. 1969), reaffirmed on reconsideration F. Supp. (D. Md. 1973), where tbe defendant was enjoined from collecting an asserted tax unless the taxpayer was given a notice of deficiency. Such a notice and the timely filing of a petition in this Court would be sufficient to preclude assessment during tbe pendency of such a proceeding. In tbe jeopardy situation under section 6861 collection of the deficiency may proceed unless tbe taxpayer furnishes a bond to stay collection. Sec. 6863.

Drawing on the discussion and reasoning of tbe District Court in Schreck, other courts have granted similar relief. See Clark v. Campbell, 341 F. Supp. 171" court="N.D. Tex." date_filed="1972-01-07" href="https://app.midpage.ai/document/clark-v-campbell-1456899?utm_source=webapp" opinion_id="1456899">341 F. Supp. 171 (N.D. Tex. 1972); Lisner v. McCanless, 356 F. Supp. 398" court="D. Ariz." date_filed="1973-01-24" href="https://app.midpage.ai/document/lisner-v-mccanless-1892693?utm_source=webapp" opinion_id="1892693">356 F. Supp. 398 (D. Ariz. 1973); Williams v. United States, 373 F. Supp. 71" court="D. Nev." date_filed="1973-11-15" href="https://app.midpage.ai/document/williams-v-united-states-2097824?utm_source=webapp" opinion_id="2097824">373 F. Supp. 71 (D. Nev. 1973); Woods v. McKeever, F. Supp. (D. Ariz. 1973); Rambo v. United States, 353 F. Supp. 1021" court="W.D. Ky." date_filed="1972-09-20" href="https://app.midpage.ai/document/rambo-v-united-states-2344664?utm_source=webapp" opinion_id="2344664">353 F. Supp. 1021 (W.D. Ky. 1972), affd. 492 F.2d 1060" court="6th Cir." date_filed="1974-02-12" href="https://app.midpage.ai/document/charles-r-rambo-v-united-states-of-america-and-district-director-of-internal-revenue-for-the-district-of-kentucky-317286?utm_source=webapp" opinion_id="317286">492 F. 2d 1060 (C.A. 6, 1974); Elizabeth Jane Hall v. United States, 493 F.2d 1211" court="6th Cir." date_filed="1974-03-12" href="https://app.midpage.ai/document/elizabeth-jane-hall-v-united-states-of-america-317840?utm_source=webapp" opinion_id="317840">493 F. 2d 1211 (C.A. 6, 1974), affirming per curiam an unreported District Court opinion.

Other courts have disagreed. See Willits v. Richardson, 362 F. Supp. 456" court="S.D. Fla." date_filed="1973-07-11" href="https://app.midpage.ai/document/willits-v-richardson-1449126?utm_source=webapp" opinion_id="1449126">362 F. Supp. 456 (S.D. Fla. 1973); Laing v. United States, 364 F. Supp. 469" court="D. Vt." date_filed="1973-09-12" href="https://app.midpage.ai/document/laing-v-united-states-2259250?utm_source=webapp" opinion_id="2259250">364 F. Supp. 469 (D. Vt. 1973); Johnson v. Coppinger, 320 F. Supp. 716" court="N.D. Ala." date_filed="1971-01-05" href="https://app.midpage.ai/document/johnson-v-coppinger-8785015?utm_source=webapp" opinion_id="8785015">320 F. Supp. 716 (N.D. Ala. 1971); Cohen v. United States, 297 F.2d 760" court="9th Cir." date_filed="1962-01-12" href="https://app.midpage.ai/document/meyer-harris-cohen-aka-michael-mickey-cohen-v-united-states-255883?utm_source=webapp" opinion_id="255883">297 F. 2d 760 (C.A. 9, 1962); Parrish v. Daly, 350 F. Supp. 735" court="S.D. Ind." date_filed="1972-10-16" href="https://app.midpage.ai/document/parrish-v-daly-2005161?utm_source=webapp" opinion_id="2005161">350 F. Supp. 735 (S.D. Ind. 1972); Hogan v. United States, 367 F. Supp. 1022" court="E.D. Mich." date_filed="1973-11-28" href="https://app.midpage.ai/document/hogan-v-united-states-1425662?utm_source=webapp" opinion_id="1425662">367 F. Supp. 1022 (E.D. Mich. 1973); Millington v. Conley, Jr., 367 F. Supp. 1022" court="E.D. Mich." date_filed="1973-11-28" href="https://app.midpage.ai/document/hogan-v-united-states-1425662?utm_source=webapp" opinion_id="1425662">367 F. Supp. 1022 (D. Conn. 1973); Johnston v. Schmidt, F. Supp. (S.D. Cal. 1974); Williamson v. United States, an unreported case ((C.A. 7, 1971), 31 A.F.T.R. 2d 73-800, 69-2 U.S.T.C. par. 9681); Irving v. Gray, 344 F. Supp. 567" court="S.D.N.Y." date_filed="1972-06-15" href="https://app.midpage.ai/document/irving-v-gray-2303483?utm_source=webapp" opinion_id="2303483">344 F. Supp. 567 (S.D. N.Y. 1972), affd. 479 F.2d 20" court="2d Cir." date_filed="1973-06-01" href="https://app.midpage.ai/document/clifford-irving-v-elliot-gray-311340?utm_source=webapp" opinion_id="311340">479 F. 2d 20 (C.A. 2, 1973).

In Ludwig Littauer & Co., 37 B.T.A. 840" court="B.T.A." date_filed="1938-05-13" href="https://app.midpage.ai/document/ludwig-littauer--co-v-commissioner-4496752?utm_source=webapp" opinion_id="4496752">37 B.T.A. 840 (1938), the Commissioner terminated the taxable period of the taxpayer as of August 21 and declared the income taxes immediately due and payable. The Commissioner assessed a “total deficiency” in excess of $90,000. Treating the notice of termination as a notice of deficiency the taxpayer filed a petition with the Board of Tax Appeals.2 The Board determined that no notice of deficiency had been sent to the taxpayer, and therefore dismissed the petition for lack of jurisdiction. See also Puritan Church-The Church of America, 10 T.C.M. 485" court="Tax Ct." date_filed="1951-05-22" href="https://app.midpage.ai/document/puritan-church-the-church-of-america-v-commissioner-4616916?utm_source=webapp" opinion_id="4616916">10 T.C.M. 485, 494 (1951), affirmed per curiam 209 F.2d 306" court="D.C. Cir." date_filed="1953-12-11" href="https://app.midpage.ai/document/puritan-church-of-america-v-commissioner-of-internal-revenue-puritan-church-bldg-fund-v-commissioner-of-internal-revenue-233108?utm_source=webapp" opinion_id="233108">209 F. 2d 306 (C.A. D.C. 1953).

A similar result was reached in Charles Patrick Riley, T.C. Memo. 1973-180, and Louis Vincent Musso, Sr., T.C. Memo. 1973-181 (appeal pending, C.A. 5, Nov. 8,1973). Both of these cases involved the termination of a taxable period under the authority of section 6851 with the subsequent attempt to secure a redetermination of the “deficiency.” The Commissioner moved to dismiss for lack of jurisdiction. The Court concluded in both cases “that a notice to a taxpayer of termination of his taxable year issued under section 6851 is not a notice of deficiency within the meaning of section 6212 and therefore we have no jurisdiction over this case.”

Obviously the issue involved herein presents difficult problems of balancing interests and objectives.3 The Courts of Appeals and the District Courts have viewed section 6851 differently. A clear conflict has developed between the Sixth Circuit in Rambo v. United States, supra, on the one hand and the Seventh Circuit in Williamson v. United States, supra, and the Second Circuit in Irving v. Gray, supra, on the other. Clarification of the role of section 6851 is needed. Perhaps the Supreme Court of the United States will resolve the conflict. But regardless of the conflict among the various circuit courts and District Courts as to whether a notice of deficiency should or should not be issued upon the termination of a taxable period under section 6851, the fact remains that no notice of deficiency has been sent to the petitioner herein. Consequently, since our jurisdiction depends upon the issuance of such a notice and the Commissioner has not sent one, we are compelled to grant respondent’s motion to dismiss this case for lack of jurisdiction.

An appropriate order will be entered.

All statutory references are to the Internal Revenue Code of 1954, as amended, unless otherwise Indicated.

For a similar argument see Thomas A. DaBoul, docket No. 287-69, order dismissing petition for lack of jurisdiction .Tune 19, 1969, affirmed per curiam 429 F.2d 38" court="9th Cir." date_filed="1970-07-06" href="https://app.midpage.ai/document/thomas-a-daboul-and-a-commissioner-of-internal-revenue-291161?utm_source=webapp" opinion_id="291161">429 F. 2d 38 (C.A. 9, 1970).

See Silver, “Terminating the Taxpayer’s Taxable Year: How IRS uses It Against Narcotics Suspects,’’ 40 J. Taxation 110 (1974).
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