Notice of Deficiency

I.R.C. section 6213

The United States Tax Court in Jeffrey D. Gregory v. Comm’r, Docket No. 1090-16L, filed November 20, 2018, held that a “reprint” of a notice of deficiency is evidence of the creation of the notice before assessment, even though the reprint was prepared more than two years after the alleged mailing of the original notice and omitted or misstated information that would have appeared on any notice actually mailed. Further, the Court ruled, that the omission from a notice of deficiency of the last day to timely file a petition for re-determination does not invalidate the notice. This case was before the Tax Court for review of a determination by IRS Appeals Office to sustain the filing of a notice of Federal Tax Lien for unpaid income tax liabilities. The Petitioner conceded all aspects of the case except the validity of the notice of deficiency issued by the IRS. The IRS asserted that they issued the petitioner a notice of deficiency for the relevant tax period but admitted there was no copy of the original notice that could be reproduced. The Court ultimately ruled that it did not see why the reprints couldn’t serve as evidence that the IRS prepared the notice of deficiency, even if they were not deemed duplicates. The Court inferred from the inclusion in the IRS database of the information about the taxpayer on the reprint that it had created the notice of deficiency in accordance with its “customary practice.” As for the lack of a date to file the Petition in Tax Court, the reprint would not reflect that information as the IRS had explained this information is entered by hand when the original is issued.

Proper Notice of Deficiency Proceedings

I.R.C. 6212

In Daniel Sadek v. Comm’r, T.C. Memo 2018-174, Filed October 16, 2018, the Tax Court takes up the issue of what is deemed to be an appropriate address for the issuance of a notice of deficiency. The rule is set out in I.R.C. section 6212(b)(1): a deficiency notice sent to the taxpayer’s last known address, shall be sufficient. Treasury Regulation section 301.6212-2(a) elaborates: “A taxpayer’s last known address is the address that appears on the taxpayer’s most recently filed and properly processed Federal tax return, unless the IRS is given clear and concise notification of a different address.” In this case, taxpayer’s most recently filed tax return was for 2005, which was filed October 19, 2009. The IRS issued a notice of deficiency for 2005 and 2006 in excess of $25 million dollars, to his address in both California and Nevada. This notice was issued August 25, 2011. Petitioner filed his petition with the Tax Court on January 4, 2017. From September 2010 through May 2014 Petitioner lived in Beirut, Lebanon. Despite the seemingly straightforward notification provision, Petitioner made a couple of arguments that the IRS should have known where he was living. First, the Petitioner argued that the IRS had used his bankruptcy filings to determine that he also had a home in Nevada. The Petitioner argued that the IRS should have known better as the automatic stay had been lifted during the bankruptcy proceedings to allow both lenders to foreclose – thus he no longer could have lived there. There was no evidence the foreclosure actually took place, and no other address was referenced in any bankruptcy filing. Next, while residing in Beirut, Lebanon, the Petitioner was the subject of an investigation by the FBI relating to his former mortgage business. Petitioner had several communications from Beirut with the FBI during this time. The testifying agent indicated that the FBI never had Petitioner’s address, and even if they did, they would not share the details of an ongoing criminal investigation with non-law enforcement agents of the IRS. The Court declined to “impute to the [IRS] the knowledge of the entire Federal Government.” That simply is not the requirement of the statute referenced above. The Court explained that even if the FBI had the address, and even if the Petitioner had provided the State Department with an address while in Lebanon, “change of address information that a taxpayer provides to another government agency, is not clear and concise notification of a different address,” per Treasury regulation section 301.6212-2(b)(1). Petitioner’s petition was deemed untimely and the deficiency stood.