T.C. Memo. 2000-65
UNITED STATES TAX COURT
PHOTO ART MARKETING TRUST, JOHN P. WILDE, CO-TRUSTEE, AND PHOTO
ART PUBLISHING TRUST, JOHN P. WILDE, CO-TRUSTEE, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20582-98. Filed February 29, 2000.
John P. Wilde, for petitioners.
David W. Otto and Doreen M. Susi, for respondent.
MEMORANDUM OPINION
CHIECHI, Judge: This case is before the Court on respon-
dent's motion to dismiss for lack of jurisdiction (respondent’s
motion). We shall grant respondent’s motion.
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Background
For purposes of respondent’s motion, the parties do not
dispute the following factual allegations that are part of the
record. At all relevant times, each petitioner was a trust
organized under the laws of the State of Arizona and was engaged
in business in that State.
Upon commencement of the examination of each petitioner’s
taxable years 1995 and 1996, respondent requested that each
petitioner provide respondent with complete copies of the trust
documents relating to each such petitioner as well as other items
of substantiation. Each petitioner refused to provide respondent
with the trust documents and other information requested.
At the time respondent issued the notice of deficiency
(notice) to each petitioner, respondent’s address records indi-
cated an entity named D & E Sword Co. as the trustee for each
petitioner. Respondent’s address records were not based on any
trust documents or other legal documents submitted by each
petitioner that could constitute credible evidence regarding who
was/is the trustee of each petitioner. Instead, respondent’s
address records were prepared and updated in accordance with
respondent’s procedures and were based solely on correspondence
submitted by each petitioner which alleged that D & E Sword Co.
was the trustee for each petitioner.
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The notice issued to petitioner Photo Art Marketing Trust
was addressed as follows:
PHOTO ART MARKETING TRUST
SWORD D & E CO-TTES
P.O. BOX 4047
SEDONA, AZ 86340-4047 473
The notice issued to Photo Art Publishing Trust was addressed as
follows:
PHOTO ART PUBLISHING TRUST
D & E SWORD TRUSTEE CO TTEE
P.O. BOX 4047
SEDONA, AZ 86340-4047 473
Photo Art Marketing Trust and Photo Art Publishing Trust
jointly filed a petition in this Court. That petition was signed
on behalf of Photo Art Marketing Trust and Photo Art Publishing
Trust by John P. Wilde (Mr. Wilde), as “co-Trustee of Photo Art
Marketing Trust and Photo Art Publishing Trust”.
Respondent’s motion contends in pertinent part:
7. Arizona law provides that the trustee has the
capacity to institute court proceedings on behalf of
the trust. A.R.S. § 14-7233 C. 25. However, Mr. Wilde
has not demonstrated with credible evidence that he is
a Co-Trustee of the [petitioner] trusts with capacity
to bring the instant action.
* * * * * * *
11. Moreover, respondent’s counsel contacted the
Arizona Corporation Commission to determine the exis-
tence/validity of the entity called D & E Sword Com-
pany. The Corporation Commission informed respondent’s
counsel that it had no record of any entity by that
name ever existing in the State of Arizona. Further,
the Corporation Commission informed respondent’s coun-
sel that it had no record of any entity incorporated in
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Arizona under the name of, or in reference to, an
individual named John P. Wilde.
12. There is absolutely no evidence from which
the Court can adduce that there has been a legal as-
signment of John P. Wilde as the Co-Trustee of either
of the petitioner trusts.
13. Petitioners have provided no evidence that
Mr. Wilde’s appointment as Co-Trustee is valid or
authorized under the terms of the trust indentures
(assuming they exist).
14. At a minimum, petitioners should be required
to provide complete copies of the original trust docu-
ment(s) wherein the initial trustee is appointed.
Petitioners should also provide any and all documents
in the chain of appointments of subsequent trustees.
If the initial trustees or any successor trustees
thereafter were, in fact, an entity called D & E Sword
Company, petitioners should be required to produce
credible evidence establishing legal existence and
validity of that entity.
15. Without the evidence described above in
paragraph 14., petitioners have failed to demonstrate
that John P. Wilde was legally appointed as Co-Trustee
authorized to act on behalf of the trusts and bring the
instant case before this Court. See T.C. Rule 60(c).
Petitioners filed a response to respondent’s motion in which
they ask the Court to deny that motion. Petitioners’ response to
respondent’s motion asserts in pertinent part:
3. The Respondent’s objection goes to the manage-
ment of the trusts, their internal affairs, concerns
about their administration, the declaration of rights
and the determinations of matters involving the trust-
ees. As the Respondent concedes that these are “Ari-
zona Trusts” * * *, this issue falls within the exclu-
sive jurisdiction of the superior court here in the
State of Arizona. See A.R.S. § 14-7201. At this
point, this court is without jurisdiction to determine
whether * * * Mr. Wilde [is] the duly authorized
Trustee. The Petitioners need not remind the Court of
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the consequences of taking any action over which sub-
ject matter jurisdiction is completely lacking.
4. Any objection the Respondent or Respondent’s
counsel has in this area must be taken up in the Supe-
rior Court here in Arizona, assuming of course the
Respondent or Respondent’s counsel has standing. The
irony is of course, if Respondent or Respondent’s
counsel does take the matter up with the Superior
Court, where the Respondent will have the burden of
proof, and if the Superior Court finds that the Trusts
are valid, then the Respondent will be barred by res
judicata from asserting the sham trust claim that forms
the basis for his deficiency determination.
5. * * * In essence the factual claims raised by
the Motion to Dismiss are inextricably intertwined with
the facts going to the merits of the Commissioner’s
sham trust claim at issue in this case. If the Trusts
are valid, then Mr. Wilde, under Arizona Law, will be
presumed to be the duly authorized trustee, whether it
is as a Trustee of the resulting trust, constructive
trust or expressed [sic] trust. Therefore, the only
course available to this Court is to defer consider-
ation of the jurisdictional claims to the trial on the
merits. Farr v. United States, 990 F.2d 451, * * *
[454] n.1 (9th Cir., 1993). Careau Group v. United
Farm Workers [of Am.], 940 F.2d 1291, 1293 (9th Cir.
1991). See also Rosales v. United States, 824 F.2d
799, 803 (9th Cir. 1987) (“A * * * [district] court may
hear evidence and make findings of fact necessary to
rule on the subject matter jurisdiction question prior
to trial, if the jurisdictional facts are not inter-
twined with the merits.” (Emphasis added))
The Court held a hearing on respondent’s motion. At that
hearing, Mr. Wilde appeared on behalf of petitioners.1 Petition-
1
At the hearing the Court informed Mr. Wilde that its allow-
ing him to appear at the hearing as the alleged co-trustee of
each petitioner did not mean that the Court agreed that he in
fact was a duly appointed and authorized co-trustee of each
petitioner.
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ers proffered no evidence, and the parties presented no new
arguments, at that hearing.
Discussion
Rule 602 provides in pertinent part:
(a) Petitioner: (1) Deficiency or Liability
Actions: A case shall be brought by and in the name of
the person against whom the Commissioner determined the
deficiency (in the case of a notice of deficiency)
* * * or by and with the full descriptive name of the
fiduciary entitled to institute a case on behalf of
such person. See Rule 23(a)(1). A case timely brought
shall not be dismissed on the ground that it is not
properly brought on behalf of a party until a reason-
able time has been allowed after objection for ratifi-
cation by such party of the bringing of the case; and
such ratification shall have the same effect as if the
case had been properly brought by such party. * * *
* * * * * * *
(c) Capacity: * * * The capacity of a fiduciary
or other representative to litigate in the Court shall
be determined in accordance with the law of the juris-
diction from which such person's authority is derived.
The parties do not dispute that each petitioner is a trust
organized under the laws of, and doing business in, the State of
Arizona. Under Arizona law, see Rule 60(c), a trustee has the
power to commence litigation on behalf of a trust. See Ariz.
Rev. Stat. Ann. sec. 14-7233.C.25. (West 1995). In the instant
case, each petitioner has the burden of proving that this Court
has jurisdiction, see Fehrs v. Commissioner, 65 T.C. 346, 348
2
All Rule references are to the Tax Court Rules of Practice
and Procedure.
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(1975); National Comm. to Secure Justice in the Rosenberg Case v.
Commissioner, 27 T.C. 837, 839 (1957), by establishing affirma-
tively all facts giving rise to our jurisdiction, see Wheeler's
Peachtree Pharmacy, Inc. v. Commissioner, 35 T.C. 177, 180
(1960); Consolidated Cos., Inc. v. Commissioner, 15 B.T.A. 645,
651 (1929). In order to meet that burden, each petitioner must
provide evidence establishing that Mr. Wilde has authority to act
on its behalf. See National Comm. to Secure Justice in the
Rosenberg Case v. Commissioner, supra at 839-840; Coca-Cola
Bottling Co. v. Commissioner, 22 B.T.A. 686, 700 (1931). We
reject petitioners' position that under Arizona law the validity
of the purported appointment of Mr. Wilde as co-trustee of each
petitioner falls within the exclusive jurisdiction of the courts
of the State of Arizona.
On the record before us, we find that each petitioner has
failed to establish that Mr. Wilde is authorized to act on its
behalf.3
To reflect the foregoing,
An order of dismissal for lack
of jurisdiction granting respon-
dent’s motion will be entered.
3
We have considered all of the contentions and arguments of
petitioners that are not discussed herein, and we find them to be
without merit and/or irrelevant.