T.C. Memo. 1998-380
UNITED STATES TAX COURT
KEITH K. STROUPE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21614-97. Filed October 22, 1998.
John L. Brennan and John C. King, for petitioner.
James E. Cannon and Richard Fultz, for respondent.
MEMORANDUM OPINION
DAWSON, Judge: This case was assigned to Special Trial
Judge Robert N. Armen, Jr., pursuant to the provisions of section
7443A(b)(4) and Rules 180, 181, and 183.1 The Court agrees with
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.
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and adopts the Opinion of the Special Trial Judge, which is set
forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
ARMEN, Special Trial Judge: This case is before the Court
on the parties' cross motions to dismiss for lack of
jurisdiction. Petitioner's motion is premised on the ground that
respondent failed to send a valid notice of deficiency to
petitioner at his last known address. Respondent's motion is
premised on the ground that petitioner failed to file a timely
petition in response to a valid notice. Because the jurisdiction
of this Court is limited by statute and attaches only upon the
issuance of a valid notice of deficiency and the timely filing of
a petition, this case must be dismissed for lack of jurisdiction.
The only question is on whose motion it will be dismissed. Where
jurisdiction is lacking because of the Commissioner's failure to
issue a valid notice of deficiency, we dismiss on that ground,
rather than on the ground that the taxpayer failed to file a
timely petition. Shelton v. Commissioner, 63 T.C. 193 (1974);
O'Brien v. Commissioner, 62 T.C. 543, 548 (1974); Heaberlin v.
Commissioner, 34 T.C. 58, 59 (1960); see Brannon's of Shawnee,
Inc. v. Commissioner, 69 T.C. 999 (1978) (the Court has
jurisdiction to decide issues regarding its jurisdiction).
Background
Petitioner resided in Wichita, Kansas, at the time that his
petition was filed in this case.
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Respondent initiated an examination of petitioner's taxable
years 1987 through 1992 in April 1993. Respondent attempted to
contact petitioner in that regard by letter dated December 15,
1993. This letter was mailed to petitioner at 2254 Ptarmigan
Lane, Colorado Springs, CO 80918-1410 (the Colorado Springs
Address). The letter was returned to respondent by the Postal
Service on January 6, 1994, bearing the notation "forwarding
order expired".
At the time that respondent sent the letter dated December
15, 1993, the Federal income tax return most recently filed by
petitioner was for the taxable year 1986. That return listed the
Colorado Springs Address.
On January 11, 1994, respondent made another attempt to
contact petitioner. In this regard, respondent mailed a letter
to petitioner at 16185 N. County Road, Nathrop, CO 81236-9703
(the Nathrop Address).2 The Nathrop Address was the address of
petitioner's parents. This letter was returned to respondent by
the Postal Service on January 14, 1994, bearing the notation
"returned to sender". Apparently, petitioner's parents returned
all mail addressed to their son.
2
At the same time, respondent also mailed another copy of
this letter to an address that appears to be a variation of the
Nathrop Address; i.e., 16185 County 162 Rd, Nathrop, CO 81236.
This letter was returned to respondent by the Postal Service
bearing the notations "returned to sender" and "attempted, not
known".
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Respondent mailed petitioner a 30-day letter on February 1,
1994. The 30-day letter was mailed to 5808 Franklin St., Denver,
CO 80216 (the Denver Address). It is not clear where respondent
obtained this address. Regardless, the letter was returned to
respondent by the Postal Service bearing the notations "no
forward order on file", "unable to forward", and "returned to
sender".
In addition, respondent sent five different Forms 4759
(Address Information Request) to the postmasters in Denver,
Colorado, Nathrop, Colorado, and Colorado Springs, Colorado, to
verify five possible addresses of petitioner. None of the
possible addresses were confirmed as petitioner's then current
address. Respondent also contacted petitioner's parents to
ascertain petitioner's correct address. Petitioner's parents
informed respondent that they did not have such information.
Apparently, petitioner moved to a new address, 2200 S. Rock
Road, Apt. 1016, Wichita, Kansas 67207 (the Kansas Address)
sometime in 1993 or 1994. Petitioner did not file Form 8822
(Change of Address) to inform respondent of a new address.
Further, by August 1994, petitioner had not filed another tax
return, and the 1986 return remained as petitioner's most
recently filed return.
By notice dated August 24, 1994, respondent's district
office in Denver, Colorado, determined deficiencies in, and
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additions to, petitioner's Federal income taxes for the taxable
years 1988 and 1989 as follows:
Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1988 $39,748 $9,937 $2,543
1989 4,120 1,030 277
Respondent mailed a copy of the notice of deficiency to
three addresses, namely, the Colorado Springs Address, the
Nathrop Address, and a third address, 4910 Granby Circle,
Colorado Springs, CO 80919 (the Second Colorado Springs
Address). Respondent had not previously mailed any
correspondence to petitioner at the Second Colorado Springs
Address, but had obtained such address using Form 3242 (Request
for Information from Employer). Respondent received this form
back from the employer in February 1994. The Second Colorado
Springs Address was the address last used by petitioner with this
employer.
Each of the envelopes bearing a copy of the notice of
deficiency was returned to respondent by the Postal Service. The
following notations appeared on the various envelopes: For the
Colorado Springs Address, "addressee not known" and "does not
live here anymore"; for the Nathrop Address, "attempted, not
known; no such number; insufficient address"; and for the Second
Colorado Springs Address, "addressee not known".
For each of the years 1987 through 1994, petitioner filed
Forms 4868 (Application for Automatic Extension of Time to File
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U.S. Individual Tax Return). There is no evidence as to what
addresses, if any, were listed on the Forms 4868 so filed.
Further, no remittance accompanied any of the Forms 4868.
Petitioner filed his extension requests with respondent's
various service centers and district offices as follows:
Year Location Where Form 4868 Was Filed
1987 Ogden, Utah
1988 Ogden, Utah
1989 Omaha, Nebraska, district office
1990 Helena, Montana, district office
1991 Ogden, Utah, service center
1992 Austin, Texas, service center
1993 Austin, Texas, service center
1994 Oklahoma City, Oklahoma, district office
Respondent's internal procedures regarding requests for
extensions mandate the following:
(1) At the time a service center receives a Form 4868, the
Social Security number is matched against the taxpayer's name;
(2) a computer entry is made noting receipt of the request
for extension;
(3) no other information is entered into the computer,
unless a remittance accompanies the request. Specifically, no
entry or change is made if the address on the request for
extension form is different from the taxpayer's address on file.
A taxpayer's signature need not accompany the request. The
request may therefore be filed by a return preparer without the
taxpayer's knowledge. Hence, as a matter of policy, respondent
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does not enter any address information received in this manner on
any of his databases; and
(4) if no remittance accompanies the request, the request is
filed and subsequently destroyed by respondent 1 year after the
end of the processing year.
See Internal Revenue Manual sec. 512(12)(2)(g); Internal Revenue
Manual Handbook, sec. 1(15)59.26 at par. 68.
Except for the requests for extension, respondent did not
receive any correspondence from petitioner prior to the mailing
of the notice of deficiency. Further, prior to the mailing of
the notice of deficiency, no division of the Internal Revenue
Service had ever corresponded with petitioner at the Kansas
address.
Respondent received two Forms 1099-MISC with respect to
petitioner from a third-party employer bearing the Kansas
Address. Respondent's records reflect that these information
returns were received by respondent in 1995 and were issued in
respect of the taxable year 1994.
About 3 years after the notice of deficiency was mailed,
respondent mailed a copy of a notice of Federal tax lien to
petitioner in September 1997, at the Kansas Address. Petitioner
mailed his petition for redetermination to the Court in an
envelope bearing a private postmeter postmark date of October 31,
1997. The petition was filed by the Court on November 3, 1997.
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Discussion
This Court's jurisdiction to redetermine a deficiency
depends on the issuance of a valid notice of deficiency and a
timely filed petition. Rule 13(a), (c); Monge v. Commissioner,
93 T.C. 22, 27 (1989); Normac, Inc. v. Commissioner, 90 T.C. 142,
147 (1988). Section 6212(a) expressly authorizes the
Commissioner, after determining a deficiency, to send a notice of
deficiency to a taxpayer by certified or registered mail. It is
sufficient for jurisdictional purposes if the Commissioner mails
the notice of deficiency to the taxpayer at the taxpayer's "last
known address". Sec. 6212(b); Frieling v. Commissioner, 81 T.C.
42, 52 (1983). If a notice of deficiency is mailed to the
taxpayer at the taxpayer's last known address, actual receipt of
the notice is immaterial. King v. Commissioner, 857 F.2d 676,
679 (9th Cir. 1988), affg. 88 T.C. 1042 (1987); Yusko v.
Commissioner, 89 T.C. 806, 810 (1987); Frieling v. Commissioner,
supra at 52. Hence, a notice of deficiency that is returned to
the Commissioner by the Postal Service as "undeliverable" is
valid irrespective of its lack of receipt, as long as it is sent
to the taxpayer at the taxpayer's last known address. Gille v.
United States, 33 F.3d 46, 48 (10th Cir. 1994). The taxpayer, in
turn, has 90 days (or 150 days if the notice is addressed to the
taxpayer outside the United States) from the date that the notice
of deficiency is mailed to file a petition with this Court for a
redetermination of the deficiency. Sec. 6213(a).
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In the present case, respondent mailed the notice of
deficiency to petitioner in triplicate on August 24, 1994. The
petition arrived at the Court in an envelope postmarked October
31, 1997, and was filed by the Court on November 3, 1997. Given
that the petition was neither mailed nor filed before the
expiration of the 90-day statutory period for filing a timely
petition, it follows that we lack jurisdiction over the petition.
Secs. 6213(a), 7502; Rule 13(a), (c); see Normac, Inc. v.
Commissioner, supra.
The question presented is whether dismissal of this case
should be premised on petitioner's failure to file a timely
petition under section 6213(a) or on respondent's failure to
issue a valid notice of deficiency under section 6212.
Petitioner contends that he did not receive the notice of
deficiency and that the notice is invalid because it was not
mailed to him at his last known address.
Although the phrase "last known address" is not defined in
the Internal Revenue Code or in the regulations thereunder, we
have held that a taxpayer's last known address is the address
shown on the taxpayer's most recently filed return, absent clear
and concise notice of a change of address. Abeles v.
Commissioner, 91 T.C. 1019, 1035 (1988); see King v.
Commissioner, supra at 681. In deciding whether respondent
mailed a notice to a taxpayer at the taxpayer's "last known
address", the relevant inquiry "pertains to respondent's
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knowledge rather than to what may in fact be the taxpayer's most
current address." Frieling v. Commissioner, supra at 49. The
burden of proving that a notice of deficiency was not sent to the
taxpayer's last known address is on the taxpayer. Yusko v.
Commissioner, supra at 808.
Respondent mailed one copy of the notice of deficiency to
the address listed on petitioner's 1986 return--the last tax
return filed by petitioner prior to the mailing of the notice of
deficiency on August 24, 1994. Consequently, the notice of
deficiency was mailed to petitioner's last known address unless
petitioner can demonstrate: (1) He provided respondent with clear
and concise notice of a change of address; or that (2) prior to
the mailing of the notice of deficiency, respondent knew of a
change in petitioner's address and did not exercise due diligence
in ascertaining petitioner's correct address. See Abeles v.
Commissioner, supra.
A. Clear and Concise Notice of Change of Address
Petitioner's contention that the notice of deficiency is
invalid rests partially on the contention that he gave clear and
concise notice of a change of address to respondent by filing
Forms 4868 for the years 1987 through 1994. We disagree with
petitioner for several reasons.
First and foremost, petitioner has not established that he
listed the Kansas Address on any of the Forms 4868 that he filed
with respondent. Second, we have repeatedly held that the mere
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filing of a document, such as a Form 4868, indicating a different
address than the taxpayer's address on file, does not give the
Commissioner clear and concise notification of a change of
address. See, e.g., Monge v. Commissioner, supra (Forms 4868 and
2688, extension forms); Mollet v. Commissioner, 82 T.C. 618
(1984), affd. without published opinion 757 F.2d 286 (11th Cir.
1985) (a Tax Court petition); McCormick v. Commissioner, 55 T.C.
138 (1970) (an informal letter advising the IRS of an address
change); Cantu v. Commissioner, T.C. Memo. 1990-354 (Form 4868);
Pritchett v. Commissioner, T.C. Memo. 1986-559 (a letter with new
address at the bottom without any comment); Marlin v.
Commissioner, T.C. Memo. 1985-600 (Form 2848, power of attorney).
In this regard, we observed in Monge v. Commissioner, 93 T.C.at
32:
Perhaps the most significant objection to * * * [the
taxpayers'] position is that it would require * * *
[the Commissioner] to record the address shown on every
extension request filed with him. The adoption of
their position would clearly upset the balance between
the administrative burdens imposed on * * * [the
Commissioner] and the interest of taxpayers in
obtaining actual notice of * * * [the Commissioner's]
determination. If * * * [the taxpayer] had wanted * *
* [the Commissioner] to use the address shown on * * *
Form 4868 * * * as his last known address, it would
have been a simple matter for him to have so indicated
on the form itself. * * *[The taxpayer] chose not to
do so and thereby failed to clearly and concisely
notify * * * [the Commissioner] of the desired change.
Accordingly, we hold that the Forms 4868 * * * filed by
* * * [the taxpayer] * * * did not provide clear and
concise notification to * * * [the Commissioner] of * *
* [the taxpayer's] change of address. [Citations
omitted.]
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If we were to hold that the Commissioner is obliged to
regard the address shown on a Form 4868 as a taxpayer's current
address, we would impose an unreasonable administrative burden on
the Commissioner to record every address appearing on every Form
4868 for every taxpayer. Also, we would cause uncertainty by
requiring the Commissioner to use an address that the taxpayer
may not have communicated to him3 and that the taxpayer did not
clearly direct the Commissioner to use. Cf. United States v.
Zolla, 724 F.2d 808, 811 (9th Cir. 1984); Farnham v.
Commissioner, T.C. Memo. 1991-642. Therefore, we have held that
the taxpayer must clearly communicate that the new address should
be used by respondent. E.g., King v. Commissioner, 857 F.2d at
681; Tadros v. Commissioner, 763 F.2d 89, 92 (2d Cir. 1985); Alta
Sierra Vista, Inc. v. Commissioner, 62 T.C. 367, 374, affd.
without published opinion 538 F.2d 334 (9th Cir. 1976); McCormick
v. Commissioner, supra at 141.
Petitioner relies on Sicari v. Commissioner, 136 F.3d 925
(2d Cir. 1998), vacating and remanding T.C. Memo. 1997-104, for
the proposition that by filing the Forms 4868, he gave clear and
concise notice to respondent of his change of address. We think
that petitioner's reliance on Sicari v. Commissioner, supra, is
misplaced.
3
It should be recalled that the taxpayer's signature is
not required on a Form 4868 and that a preparer may file a Form
4868 without knowledge of the taxpayer.
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In Sicari, the taxpayers never moved, but the Postal Service
refined the taxpayers' address twice within a period of 1 year.
Although the Court of Appeals noted that the taxpayers had used
the refined address on requests for extension filed with the
Commissioner prior to the mailing of the notice of deficiency,
this was not the primary basis of the Court of Appeals' holding
that the Commissioner had not acted with the requisite reasonable
diligence. Rather, the Court of Appeals based its holding on the
following circumstances, all of which occurred before the mailing
of the notice of deficiency: The taxpayer used the refined
address on a petition filed in bankruptcy proceedings; the
collection division of the IRS received prompt notice of the
bankruptcy filing and entered the refined address in one of the
Commissioner's computer databases; and the collection division
proceeded to use the refined address in correspondence with the
taxpayers and on proof of claim forms filed against the taxpayer
in bankruptcy. It was only in light of such "extraordinary
circumstances" and "on the precise facts of th[e] case" that the
Court of Appeals held that the deficiency notice had not been
mailed to the taxpayers' last known address. Id. at 926.
Because such circumstances are not present in the instant case,
we are not persuaded by petitioner's contention that by filing
Forms 4868 he gave respondent clear and concise notice of a
change of address.
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Petitioner further contends that respondent had clear and
concise notice of the change of his address by virtue of the two
Forms 1099-MISC reporting petitioner's income with respect to the
1994 taxable year. Again, we disagree with petitioner.
First, neither of the Forms 1099-MISC on which petitioner
relies was available to respondent prior to August 24, 1994, the
date on which the notice of deficiency was mailed. Therefore,
neither of those documents could have alerted respondent to any
change in petitioner's address. See Abeles v. Commissioner, 91
T.C. 1019 (1988).
Even assuming arguendo that respondent was in possession of
such documents at the time the notice of deficiency was mailed, a
third-party information return does not constitute clear and
concise notice to respondent of an address change affecting the
payee. See Guillen v. Barnes, 819 F.2d 975, 977 (10th Cir.
1987); Berg v. Commissioner, T.C. Memo. 1993-77; McCart v.
Commissioner, T.C. Memo. 1992-3, affd. without published opinion
981 F.2d 1247 (3d Cir. 1992).
In sum, petitioner failed to give respondent clear and
concise notice of his current address. We must therefore decide
whether respondent knew of a change in petitioner's address prior
to the mailing of the notice of deficiency, and, if so, whether
respondent exercised due diligence in ascertaining petitioner's
new address.
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B. Respondent's Due Diligence
We have held that the Commissioner must exercise reasonable
diligence and care in ascertaining the taxpayer's current address
once the Commissioner becomes aware of a change in the taxpayer's
address. Abeles v. Commissioner, supra; Keeton v. Commissioner,
74 T.C. 377, 382 (1980); Alta Sierra Vista, Inc. v. Commissioner,
supra at 374. Thus, if previous correspondence mailed by the
Commissioner to a taxpayer is returned as undeliverable before
the notice of deficiency is mailed, the Commissioner could
reasonably be expected to conduct a further inquiry. See Abeles
v. Commissioner, supra.
Clearly, in the present case, respondent was aware of a
change in petitioner's address due to the fact that prior
correspondence to petitioner had been returned as undeliverable.
At this point, we must consider the nature of respondent's duty
of due diligence and whether respondent discharged that duty.
The Court will consider all of the facts and circumstances
in deciding whether respondent exercised reasonable care in
ascertaining the taxpayer's current address. Weinroth v.
Commissioner, 74 T.C. 430, 435 (1980). In this context, our
inquiry requires an analysis of the efforts made by respondent to
determine the address for mailing the notice of deficiency. Id.
Courts have typically held that the Commissioner has failed
to discharge the duty of reasonable diligence if a search in the
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Commissioner's computer databases would reveal a taxpayer's
correct address. E.g., Abeles v. Commissioner, supra; Taylor v.
Commissioner, T.C. Memo. 1988-152. On the other hand, courts
have refused to impute knowledge to the Commissioner of all
address information listed on all the various forms (such as
Forms 4868) and correspondence received by the Commissioner.
See, e.g., Guillen v. Barnes, supra at 977; Monge v.
Commissioner, 93 T.C. 22 (1989); Mollet v. Commissioner, 82 T.C.
618 (1984), affd. without published opinion 757 F.2d 286 (11th
Cir. 1985); McCormick v. Commissioner, 55 T.C. 138 (1970);
Pritchett v. Commissioner, T.C. Memo. 1986-559; Marlin v.
Commissioner, T.C. Memo. 1985-600. The objective is to strike a
balance between the administrative burden placed on the
Commissioner and the taxpayer's interest in timely receiving a
notice of deficiency.
In view of the foregoing and in the context of the specific
facts of the present case, we must decide whether respondent
satisfactorily discharged the duty of due diligence in mailing
the notice of deficiency to petitioner. For the following
reasons, we hold that he did.
Because respondent does not retain any address information
that may be listed on a Form 4868, none of respondent's computer
databases reflected petitioner's Kansas Address when the notice
of deficiency was mailed. Petitioner's most recently filed
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return reflected the Colorado Springs Address, an address to
which respondent mailed a copy of the notice of deficiency. In
addition, respondent mailed a copy of the notice of deficiency to
two other addresses, the Nathrop Address--that of petitioner's
parents--and the Second Colorado Springs Address. Respondent
obtained the Second Colorado Springs Address as a result of a
request for information from one of petitioner's previous
employers. Prior to the mailing of the notice of deficiency,
respondent had not attempted to correspond with petitioner at the
Second Colorado Springs Address and therefore had no
"undelivered" mail from this address. Based on respondent's
inquiries, respondent may have concluded that the Second Colorado
Springs Address was petitioner's last known address.
Petitioner did not inform respondent of his address change
through written notice or otherwise. He did not file tax returns
for 1987 through 1994. As mentioned, if petitioner wanted
respondent to communicate with him at the Kansas Address, it
would have been a simple matter for him to inform respondent of
his change of address. Monge v. Commissioner, supra. Presumably
petitioner knew that he had failed to file tax returns for over 7
years and that respondent might attempt to contact him.
Petitioner contends that respondent could have ascertained
petitioner's current address by reviewing petitioner's transcript
of account, by observing that a Form 4868 had been filed for the
taxable year 1993, and by reviewing that form to determine
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petitioner's new address. However, petitioner has not
established that the Kansas Address was listed on any Form 4868
that he filed previous to the mailing of the notice of
deficiency. If respondent had reviewed any of petitioner's Forms
4868, there is no evidence that respondent would have been able
to ascertain petitioner's Kansas Address.
Even assuming that the Forms 4868 listed the Kansas Address,
such forms were received by a different division of the IRS than
the one that issued the notice of deficiency. In this regard,
the Court of Appeals, in Guillen v. Barnes, 819 F.2d 975, 977
(10th Cir. 1987), stated:
As to the address given on the W-4 form and * * * [the
taxpayer's] other correspondence, it ignores
administrative realities to impute knowledge of an
address change to the division of the IRS that issued
the deficiency notice, based on information received in
another IRS division that was not identified as new
permanent address information. [Emphasis added.]
Based on the circumstances in the present case, respondent's
efforts in mailing the notice of deficiency were reasonably
diligent. Respondent sent five different address information
requests to the postmasters in Denver, Colorado, Nathrop,
Colorado, and Colorado Springs, Colorado, to verify five possible
addresses for petitioner. Respondent also attempted to obtain
petitioner's correct address by contacting petitioner's parents
and a previous employer. Finally, respondent mailed the notice
of deficiency to three different addresses, one of which
respondent may have concluded was petitioner's then current
address.
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The burden of proof is on the taxpayer to prove that the
Commissioner did not exercise "reasonable diligence". Cyclone
Drilling, Inc. v. Kelley, 769 F.2d 662, 664 (10th Cir. 1985).
Under similar circumstances, the Court of Appeals for the Tenth
Circuit, in holding that the taxpayer had failed to prove the
lack of due diligence by the Commissioner, stated that "[A]
taxpayer, who did not bother to file a tax return * * * [for a
number of years], will not now be heard to complain that the IRS
was not adequately diligent in its efforts to track him down."
Gille v. United States, 33 F.3d 46, 48 (10th Cir. 1994). We
similarly hold that petitioner has failed to prove that
respondent did not exercise reasonable diligence in mailing the
notice of deficiency to petitioner's Kansas Address.
In view of the foregoing, we shall deny petitioner's motion
to dismiss and grant respondent's motion to dismiss.4
4
Although petitioner cannot pursue his case in this Court,
he is not without a legal remedy. In short, petitioner may pay
the tax, file a claim for refund with the Internal Revenue
Service, and if the claim is denied or not acted on within 6
months, sue for a refund in the appropriate Federal District
Court or the U.S. Court of Federal Claims. See McCormick v.
Commissioner, 55 T.C. 138, 142 (1970).
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In order to reflect the foregoing,
An order will be entered
denying petitioner's motion,
granting respondent's motion, and
dismissing this case for lack of
jurisdiction on the ground that the
petition was not timely filed.