Hanashiro v. Commissioner ( 1999 )

PAUL K. HANASHIRO, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Hanashiro v. Commissioner

No. 10486-98

United States Tax Court

T.C. Memo 1999-78; 1999 Tax Ct. Memo LEXIS 87; 77 T.C.M. 1539; T.C.M. (RIA) 99078;

March 12, 1999, Filed

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">*87 An order denying petitioner's motion to dismiss for lack of jurisdiction and dismissing this case for lack of jurisdiction and striking the allegations in the petition pertaining to the taxable year 1996 will be issued.

Bruce E. Gardner, for petitioner.

Melinda Williams, Peter Reilly, and John Q. Walsh, for respondent.

PANUTHOS, CHIEF SPECIAL TRIAL JUDGE.

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PANUTHOS

MEMORANDUM OPINION

">*88 [1] PANUTHOS, CHIEF SPECIAL TRIAL JUDGE: This case is before the Court on petitioner's motion to dismiss for lack of jurisdiction. ^{1999 Tax Ct. Memo LEXIS 87">*89 that the notices of deficiency were rescinded before the filing of the petition. As discussed in greater detail below, we will deny petitioner's motion to dismiss. However, we will dismiss for lack of jurisdiction and strike the allegations in the petition pertaining to the taxable year 1996.}

BACKGROUND

[2] Paul K. Hanashiro (petitioner) failed to file timely Federal income tax returns for 1994, 1995, and 1996. On March 17, 1998, respondent mailed separate notices of deficiency to petitioner determining deficiencies in and additions to his Federal income taxes for 1994 and 1995 as follows:

		Additions to Tax
Year	Deficiency	Sec. 6651(a)(1)	Sec. 6654(a)
1994	$ 78,101	$ 7,036.50	$ 1,172.53
1995	$ 54,085	$ 1,945.00	$ 142.88

[3] As of the date of mailing of the notices of deficiency, respondent had prepared a total of three examination reports regarding petitioner's tax liability for 1994 and 1995. On December 16, 1997, respondent prepared separate">*90 examination reports for 1994 and 1995. 1999 Tax Ct. Memo LEXIS 87">*91 Ms. Jones was listed as the "Person to contact" in the notices of deficiency.

[5] On April 28, 1998, petitioner filed a tax return for 1994 in which he claimed a refund of $ 8,310.57.

[6] On May 4, 1998, counsel for petitioner wrote to Revenue Agent Tom Spolrich in Chicago, who had recently contacted petitioner, to request the withdrawal of the notices of deficiency for 1994 and 1995.

[7] On May 26, 1998, petitioner filed tax returns for 1995 and 1996 claiming refunds of $ 15,020.97 and $ 15,677.41, respectively.

[8] In a letter to petitioner dated June 3, 1998, Revenue Agent John Mayer stated:

   The purpose of this letter is to inform you that your

   case has been changed from status 24 (90 Day) to status

   12 (under examination). If you have any questions, you

   can reach me at [telephone number omitted].

[9] On June 5, 1998, counsel for petitioner wrote to Revenue Agent Mayer as follows:

   This letter concerns my request for the IRS to withdraw the

   Notices of Deficiency dated March 17, 1998 for [the 1994 and

   1995] tax years.

   As you may be aware, on April 29, 1998 I wrote Nancy L. Jones in

 ">*92   the Kansas City Service Center requesting that the notices of

   deficiency be withdrawn, however, to date I have not receive

   [sic] a response to my correspondence.

   Your letter dated June 3, 1998 suggests the status of the above

   referenced tax returns have been changed from status 24 (90 Day)

   to status 12 (under examination) but does not address my

   concerns regarding the withdrawal of the deficiency notices.

   Enclosed you should find a copy of my letters to Ms. Jones and

   the respective deficiency notices. It is my understanding that

   each deficiency notice will be drawn [sic] no later than Monday,

   June 8, 1998. I will need written confirmation that the notices

   have been officially withdrawn to avert filing a petition with

   the U.S. Tax Court to protect the interests of my client.

[10] On June 9, 1998, at 3:50 p.m., counsel for petitioner hand-delivered a petition for redetermination to the Court's petitions section. The petition, although contesting petitioner's tax liability for 1994, 1995, and 1996, states that no notice of deficiency was issued to petitioner for 1996. At">*93 the time the petition was filed, petitioner resided in Chicago, Illinois.

[11] On June 10, 1998, following an examination of petitioner's late-filed tax returns for 1994, 1995, and 1996, respondent issued an examination report which states that petitioner is entitled to refunds of $ 12,919, $ 16,975, and $ 15,535 for 1994, 1995, and 1996, respectively. On June 10, 1998, Revenue Agent Mayer executed Form 8626, Agreement to Rescind Notice of Deficiency, covering the notices of deficiency for 1994 and 1995 and sent a copy of the Form 8626 to counsel for petitioner for his signature. By letter dated June 11, 1998, counsel for petitioner responded as follows:

   This letter concerns the Agreement to Rescind Notice of

   Deficiency (Form 8626) for tax years 1994 and 1995. This letter

   also concerns why we will not execute the Form 8626 we received

   today via facsimile.

   When you called at 5:00 pm EST on June 9th you were informed

   that U.S. Tax Court Petitions were filed at approximately 4:00

   pm earlier that day. You were also informed that rescission of

   the notices was no longer necessary.

   Based on our agreement">*94 of June 1st, you stated all the tax

   deficiency notices would be withdrawn by June 8th. On June 5th,

   I informed you, that your letter changing the status of this

   case from 90 days to examination did not address my concerns.

   * * *

   On June 8th, I did not hear from you regarding withdrawing the

   tax deficiency notices. Accordingly, on June 9th I filed U.S.

   Tax Court petitions covering the tax years 1994, 1995, and 1996.

   A review of the Form 8626 received on June 11th prohibits

   execution if a U.S. Tax Court petition contesting the

   deficiencies has already been filed. Accordingly, we can not

   execute the Form 8626 in good faith since we have already filed

   the petitions. [Fn. ref. omitted.]

[12] On July 30, 1998, petitioner filed an amended petition which includes allegations that the notices of deficiency for 1994 and 1995 are invalid.

[13] Petitioner subsequently filed a motion to dismiss for lack of jurisdiction arguing that: (1) The notices of deficiency for 1994 and 1995 are invalid; and (2) the notices were rescinded by oral agreement before the filing of the petition. 1999 Tax Ct. Memo LEXIS 87">*95 filed an objection to petitioner's motion to dismiss. Respondent's objection included the allegation that the Court lacks jurisdiction over the 1996 taxable year on the ground that no valid notice of deficiency had been issued to petitioner for that year at the time that the petition was filed.

[14] A hearing in this case was conducted at the Court's motions session in Washington, D.C. Counsel for both parties appeared at the hearing and offered argument in support of their respective positions.

DISCUSSION

[15] The Court's jurisdiction to redetermine a deficiency depends upon the issuance of a valid notice of deficiency and">*96 a timely filed petition. See Rule 13(a), (c); Monge v. Commissioner, 93 T.C. 22">93 T.C. 22, 93 T.C. 22">27 (1989); Normac, Inc. v. Commissioner, 90 T.C. 142">90 T.C. 142, 90 T.C. 142">147 (1988). Section 6212(a) expressly authorizes the Commissioner, after determining a deficiency, to send a notice of deficiency to the taxpayer by certified or registered mail. Pursuant to section 6213(a), the taxpayer has 90 days (or 150 days if the notice is addressed to a person outside of the United States) from the date that the notice of deficiency is mailed to file a petition with the Court for a redetermination of the deficiency.

[16] At a minimum, the notice must indicate that the Commissioner has determined a deficiency in tax in a definite amount for a particular taxable year and that the Commissioner intends to assess the tax in due course. See Olsen v. Helvering, 88 F.2d 650">88 F.2d 650, 88 F.2d 650">651 (2d Cir. 1937); Perlmutter v. Commissioner, 44 T.C. 382">44 T.C. 382, 44 T.C. 382">400 (1965), affd. 373 F.2d 45">373 F.2d 45 (10th Cir. 1967).

[17] Petitioner contends that the notices of deficiency are invalid on the ground that respondent attached conflicting examination reports to the notices. Petitioner's contention is similar">*97 to an argument that the Court addressed in Campbell v. Commissioner, 90 T.C. 110">90 T.C. 110 (1988). In Campbell, the Commissioner mailed a notice of deficiency to the taxpayers including: (1) A cover letter reciting in standard language that it was a notice of deficiency and listing the taxable year as well as the amounts of the deficiency and additions to tax; (2) a notice of deficiency waiver form; and (3) several pages purportedly explaining the adjustments. Although the cover letter and the waiver clearly related to the taxpayers, the Commissioner had inadvertently attached to the notice a seven-page explanation of adjustments for an unrelated taxpayer. In response, the taxpayers filed a petition (and later a motion to dismiss) attacking the validity of the notice of deficiency. See 90 T.C. 110">id. at 111.

[18] Upon review of the matter, we noted that the first two pages of the deficiency notice clearly referred to the taxpayers as the subjects of the notice. While the explanation of adjustments may have caused confusion, there was no indication in the notice that the Commissioner failed to consider information relating to the taxpayers in making the deficiency determination. ">*98 See 90 T.C. 110">id. at 113. Viewing the record as a whole, we concluded that the Commissioner had determined a deficiency against the taxpayers and inadvertently attached the wrong computational sheets to the notice of deficiency. See id. Accordingly, we denied the taxpayers' motion to dismiss.

[19] As in 90 T.C. 110">Campbell v. Commissioner, supra, the notices of deficiency in question include standard cover letters listing the years, deficiencies, and additions to tax in dispute. There is no question that the notices of deficiency pertain to petitioner's tax liability. Although the conflicting examination reports that were purportedly attached to the notices of deficiency may have caused some confusion, ^{1999 Tax Ct. Memo LEXIS 87">*99 of deficiency were rescinded by oral agreement before the date that the petition was filed. The Commissioner's authority to rescind a notice of deficiency derives from section 6212(d), which provides:}

     SEC. 6212(d). Authority to Rescind Notice of Deficiency

   With Taxpayer's Consent. -- The Secretary may, with the consent

   of the taxpayer, rescind any notice of deficiency mailed to the

   taxpayer. Any notice so rescinded shall not be treated as a

   notice of deficiency for purposes of subsection (c)(1) (relating

   to further deficiency letters restricted), section 6213(a)

   (relating to restrictions applicable to deficiencies; petition

   to Tax Court), and section 6512(a) (relating to limitations in

   case of a petition to Tax Court), and the taxpayer shall have no

   right to file a petition with the Tax Court based on such

   notice. Nothing in this subsection shall affect any suspension

   of the running of any period of limitations during any period

   during which the rescinded notice was outstanding.

In sum, section 6212(d) authorizes the Commissioner, with the consent of the taxpayer, to">*100 rescind any notice of deficiency mailed to the taxpayer. If a notice of deficiency is rescinded, the taxpayer has no right to file a petition with the Court based on such a notice. The record in this case shows that counsel for petitioner requested that the notices of deficiency be rescinded shortly after the notices were issued. Although the record suggests that respondent's agents were in general agreement that the notices should be rescinded, counsel for petitioner insisted that the matter be committed to writing. When no written rescission of the notices of deficiency was forthcoming, counsel for petitioner filed a petition with the Court. Moreover, the day after filing the petition, counsel for petitioner notified respondent that rescission of the notices of deficiency was unnecessary because of the filing of the petition.

[21] The rescission of a notice of deficiency requires mutual consent by the Commissioner and the taxpayer, and such mutual consent must be objectively apparent. See Powell v. Commissioner, T.C. Memo 1998-108. The record in this case indicates that petitioner and respondent may have intended to enter into an agreement but had not agreed to rescind">*101 the notices of deficiency before the filing of the petition. Indeed, counsel for petitioner made it clear that he would not consider the notices of deficiency to be rescinded unless respondent reduced the agreement to writing. When no written agreement was forthcoming, counsel for petitioner filed a petition on petitioner's behalf with the Court. Under the circumstances, we hold that the parties did not agree to rescind the notices of deficiency for 1994 and 1995.

[22] Our holding on this point is not affected by Revenue Agent Mayer's June 3, 1998, letter stating that petitioner's case had "been changed from status 24 (90 Day) to status 12 (under examination)". See Hesse v. Commissioner, T.C. Memo 1997-333; Slattery v. Commissioner, T.C. Memo 1995-274 (returning a case file from the 90-day section to the examination division for purposes of a conference is not tantamount to a rescission).

[23] Petitioner also argues that he should be permitted to withdraw his petition and then execute the Form 8626 that Revenue Agent Mayer forwarded to him on June 10, 1998. However, it is well settled that the filing of a timely petition contesting a valid notice of">*102 deficiency invests the Court with jurisdiction to resolve finally the taxpayer's liability for the year in issue. See Estate of Ming v. Commissioner, 62 T.C. 519">62 T.C. 519, 62 T.C. 519">521 (1974). A taxpayer may not unilaterally oust the Court from jurisdiction. See Dorl v. Commissioner, 57 T.C. 720">57 T.C. 720, 57 T.C. 720">721-722 (1972). Because petitioner filed a timely petition in response to valid notices of deficiency, we will deny petitioner's motion to dismiss for lack of jurisdiction.

[24] As a final matter, we will dismiss for lack of jurisdiction and strike all allegations in the petition pertaining to petitioner's tax liability for 1996. Respondent did not issue a valid notice of deficiency to petitioner for 1996, and we so hold.

[25] To reflect the foregoing,

[26] An order denying petitioner's motion to dismiss for lack of jurisdiction and dismissing this case for lack of jurisdiction and striking the allegations in the petition pertaining to the taxable year 1996 will be issued.

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Footnotes

• 1. Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩

• 2. The deficiencies determined for 1994 and 1995 are consistent with these examination reports.↩

• 3. Petitioner seeks to have the notices of deficiency declared invalid or rescinded to avoid having his claim for refund for 1994 barred by the so-called 2-year look-back rule prescribed in sec. 6512(b)(3)(B). See Commissioner v. Lundy, 516 U.S. 235">516 U.S. 235, 133 L. Ed. 2d 611">133 L. Ed. 2d 611, 116 S. Ct. 647">116 S. Ct. 647↩ (1996) (the Tax Court lacks jurisdiction to award a refund of taxes made more than 2 years before the date of mailing of a notice of deficiency, if, on the date that the notice of deficiency is mailed, the taxpayer has not filed a tax return for that year).

• 4. We observe that, at the time that the notices of deficiency were issued, the only confusion concerned whether respondent would allow prepayment credits to petitioner.↩