T.C. Memo. 2002-209
UNITED STATES TAX COURT
MICHAEL T. & LEONE CAREY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9014-01L. Filed August 20, 2002.
Michael T. Carey, pro se.
Jeremy L. McPherson, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
LARO, Judge: Petitioners petitioned the Court under section
6330(d) to review respondent’s determination as to a proposed
levy. Respondent proposed the levy to collect Federal income tax
(including an accuracy-related penalty and interest) that he
determined petitioners owe for 1996. Respondent issued a
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duplicate notice of deficiency to each petitioner for 1996, and
neither petitioner petitioned the Court with respect thereto.
We must decide whether respondent may proceed with the
proposed levy. We hold he may. Section references are to the
applicable versions of the Internal Revenue Code. Rule
references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Most facts were stipulated. We incorporate by this
reference the parties’ stipulations of fact and the accompanying
exhibits. We find those facts accordingly. Petitioners resided
in California when the petition commencing this proceeding was
filed.
On August 4, 1997, respondent received petitioners’ joint
1996 Federal income tax return. Petitioners reported on that
return that their home address was 2205 Hilltop Drive #147,
Redding, California 96002 (Hilltop address). The Hilltop address
was a private mailbox at which petitioners sometimes received
mail. Since 1996, petitioners have also used a mailing address
at 1137 B Hartnell Avenue in Bella Vista, California (Hartnell
address).
Respondent received petitioners’ 1998 Federal income tax
return on October 20, 1999, petitioners’ amended 1998 Federal
income tax return on February 4, 2000, and petitioners’ 1999
Federal income tax return on October 12, 2000. Petitioners
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reported on each of those returns that their mailing address was
3041 Lawrence Road, Redding, California 96002 (Lawrence address).
Petitioners lived at the Lawrence address before 1996 with Ms.
Carey’s mother but did not live there in 1996 or in any
subsequent year. In 1996, petitioners had converted the house at
the Lawrence address into a care home for disabled adults. Mr.
Carey was the administrator of the care home, which was named
Sunshine Residential (Sunshine).
Respondent’s revenue agent, Gil Akers, was assigned to audit
petitioners’ 1995 and 1996 taxable years. He started auditing
those years together but subsequently bifurcated the audit into
its separate years. As to 1996, respondent issued a duplicate
notice of deficiency to each petitioner on June 2, 2000. The
notice determined that petitioners were liable for a $442,993
deficiency in income tax and a $88,598.60 accuracy-related
penalty under section 6662(a). The basis of that determination
was respondent’s disallowance of $455,224 in business deductions,
his $648,443 increase in income stemming from four claimed
trusts, and his $1,066 increase in interest income.1 The claimed
trusts were named Home Health Services (Home Health), Residential
Management Services (Residential), Rancho Residential Program
1
Respondent conceded in his brief that petitioners’
understatement of interest income was $1,065 rather than $1,066.
We consider this concession to be immaterial to our decision.
Accordingly, we do not require a Rule 155 computation to reflect
this concession.
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(Rancho), and Sunshine. In 1996, Mr. Carey had sole signatory
authority on the bank accounts maintained for Home Health,
Residential, Rancho, and Sunshine.
Respondent mailed the subject notices of deficiency to
petitioners at the Lawrence address by way of certified mail.
The United States Postal Service (USPS) attempted unsuccessfully
to deliver the notices to that address on Monday, June 5, 2000,
and Tuesday, June 13, 2000, and returned the notices to
respondent on July 20, 2000. The USPS noted on the certified
envelopes that they were “unclaimed”. On October 30, 2000,
respondent assessed the amount of the deficiency and accuracy-
related penalty against petitioners.
On January 8, 2001, respondent mailed to petitioners as to
1996 a Letter 1058, Final Notice, Notice of Intent to Levy and
Notice of Your Right to a Hearing. Respondent mailed the letter
to the Lawrence address. One week later, respondent mailed to
petitioners as to 1996 a related Letter 3172, Notice of Federal
Tax Lien Filing and Your Right to a Hearing under IRC 6320. That
letter was also mailed to the Lawrence address.
On or about January 16, 2001, petitioners responded to
Letter 1058 by filing with the Commissioner a Form 12153, Request
for a Collection Due Process Hearing. Petitioners listed on this
form that their address was the Lawrence address and stated that
they planned to challenge the amount of the unpaid taxes which
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respondent alleged were owed. On or about February 20, 2001,
petitioners responded to Letter 3172 by filing another Form
12153. Petitioners listed in that form that their address was
the Hartnell address. Petitioners requested from respondent in
both forms that he provide them with: (1) A copy of the record
of assessment, (2) a copy of any record of any proceeding as to
the notice of assessment, and (3) a copy of any record of any
proceeding or administrative act, upon which respondent had
relied to determine that petitioners were liable taxpayers.
Before the instant judicial proceeding was commenced, respondent
did not provide petitioners with any of the requested
information. During this proceeding, respondent provided
petitioners with the relevant Form 4340, Certificate of
Assessments, Payments, and Other Specified Matter.
On May 22, 2001, the Internal Revenue Service Office of
Appeals held the requisite hearing with Mr. Carey under sections
6320 and 6330. During the hearing, Mr. Carey requested a copy of
the notice of deficiency. The Appeals officer did not give Mr.
Carey a copy of the notice of deficiency and did not allow Mr.
Carey to discuss either the notice of deficiency or the
deficiency itself.
On June 8, 2001, respondent issued to petitioners a Notice
of Determination Concerning Collection Action(s) under Section
6320 and/or 6330. Subsequently, in August 2001, petitioners
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filed with the Commissioner a Form 8822, Change of Address,
changing their address from the Lawrence address to the Hilltop
address.
OPINION
In a proceeding commenced under section 6330(d), the Court
applies a de novo standard to redetermine a taxpayer’s underlying
tax liability, when and if at issue, and an abuse of discretion
standard to review certain other administrative determinations of
the Commissioner. Sego v. Commissioner, 114 T.C. 604, 610
(2000). Section 6330(c)(2)(B) provides that a taxpayer’s
underlying tax liability may be at issue only if he or she “did
not receive any statutory notice of deficiency for such tax
liability or did not otherwise have an opportunity to dispute
such tax liability.”
Here, petitioners argue that they did not receive a notice
of deficiency for 1996 and that respondent never mailed a notice
of deficiency to them for 1996 at their last known address.
Petitioners allege that their last known address for purposes of
the notice of deficiency at hand was the address of an enrolled
agent named Tim Riley (Riley). Petitioners allege that they had
filed with the Commissioner a writing designating Riley as their
authorized representative to receive all of their correspondence
from the Commissioner for 1995, 1996, and 1997.
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We disagree with petitioners’ arguments and are unpersuaded
by their allegations. The record establishes that petitioners’
last known address for purposes of the notice of deficiency was
the Lawrence address. See United States v. Zolla, 724 F.2d 808,
810 (9th Cir. 1984) (taxpayer’s last known address is the address
that appears on the taxpayer’s most recently filed Federal tax
return, unless the Commissioner is given clear and concise
notification of a different address); Abeles v. Commissioner,
91 T.C. 1019 (1988) (same); see also Lifter v. Commissioner,
59 T.C. 818, 821 (1973) (“taxpayer’s last known address may be
his office rather than his residence”). See generally sec.
301.6212-1(a), Proced. & Admin. Regs. (Commissioner adopts the
rule of Zolla and Abeles, effective Jan. 29, 2001). Given our
finding that petitioners’ most recent Federal tax return before
the issuance of the notice of deficiency listed their mailing
address as the Lawrence address, we conclude that the
Commissioner’s mailing of the notice of deficiency to that
address was appropriate.
As to petitioners’ allegations as to Riley, we find them
unsubstantiated. The record includes neither a copy of Form
2848, Power of Attorney and Declaration of Representative,
designating Mr. Riley as petitioners’ authorized representative
for 1996, nor any other credible evidence establishing a clear
and concise notification to the Commissioner that the Lawrence
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address was not their mailing address for purposes of the notices
of deficiency.2
In an attempt to establish that Riley was their authorized
representative for purposes of receiving all of their
correspondence from the Commissioner for 1996, petitioners rely
upon a piece of evidence that includes an undated letter. In the
letter, respondent acknowledges that Riley is an authorized
representative for petitioners. The letter, however, does not
indicate the year or years for which Riley is petitioners’
authorized representative or the time that any such
representation began. Nor does the letter indicate that Riley is
petitioners’ authorized representative for purposes of receiving
all notices and other correspondence.
Nor have petitioners persuaded us that they should not be
treated for purposes of section 6330 as receiving the notices of
deficiency. Contrary to petitioners’ suggestion, the mere fact
that they never actually received a notice of deficiency for 1996
does not preclude the Court from concluding that the receipt
requirement of section 6330 was met.
In Sego v. Commissioner, supra, we held that the petitioning
wife was precluded from challenging her underlying tax liability
2
Whereas petitioners did file a Form 8822 with respondent
on or about August 2, 2001, changing their address from the
Lawrence address to the Hilltop address, the notices of
deficiency were mailed to them on June 2, 2000.
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under section 6330 although she did not actually receive a notice
of deficiency. On the basis of Erhard v. Commissioner, 87 F.3d
273 (9th Cir. 1996), affg. T.C. Memo. 1994-344, and Patmon &
Young Profl. Corp. v. Commissioner, 55 F.3d 216, 218 (6th Cir.
1995), affg. T.C. Memo. 1993-143, we held that the conduct of the
wife and her husband “constituted deliberate refusal of delivery
and repudiation of their opportunity to contest the notices of
deficiency in this Court”. Sego v. Commissioner, supra at 611;
accord Baxter v. Commissioner, T.C. Memo. 2001-300. We believe
that the same principle applies here. Although Mr. Carey
testified that he did not know that the Commissioner was
attempting to deliver a notice of deficiency to him and his wife,
the facts and circumstances of this case, coupled with our
observation of Mr. Carey during his testimony, lead us to
conclude that petitioners deliberately refused delivery of the
notice. First, absent clear evidence to the contrary, employees
of the USPS are presumed to properly discharge their official
duties. United States v. Chem. Found., Inc., 272 U.S. 1, 14-15
(1926) (“The presumption of regularity supports the official acts
of public officers and, in the absence of clear evidence to the
contrary, courts presume that they have properly discharged their
official duties.”). Petitioners have not rebutted this
presumption as to the USPS’s attempted delivery of the notices of
deficiency. Second, the Lawrence address housed a small business
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for which Mr. Carey was the administrator. The USPS had
attempted to deliver the notices of deficiency to that address on
two separate business days, and Mr. Carey had received previous
correspondence that the Commissioner had mailed to him at that
address.3
Petitioners also argue that the proposed levy is invalid
because the Commissioner failed to give them at the hearing the
requested documents concerning the validity of the assessment.
We disagree that any such failure by the Commissioner invalidates
the proposed levy. As we recently observed in Nestor v.
Commissioner, 118 T.C. 162, 166 (2002): “Section 6330(c)(1) does
not require the Appeals officer to give the taxpayer a copy of
the verification that the requirements of any applicable law or
administrative procedure have been met.” Moreover, although
petitioners did not receive the Form 4340 at the hearing, they
did receive it contemporaneously with their trial in this Court
and have not established in this proceeding any irregularity in
the assessment procedure that would raise a question about the
3
Even if petitioners’ underlying tax liability for 1996 was
at issue, petitioners have failed to prove that respondent’s
determination of their income tax liability was in error. In
addition, respondent has introduced enough evidence to support
his determination as to the accuracy-related penalty under sec.
6662(a), and petitioners have failed to disprove that
determination. See also Residential Mgmt. Servs. Trust v.
Commissioner, T.C. Memo. 2001-297, wherein the Court held:
(1) Income that petitioners reported and argued for 1995 was
attributable to Residential was assignable to them, and (2)
petitioners were liable for an accuracy-related penalty.
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validity of the assessment. We conclude, as we did in Nestor v.
Commissioner, supra at 167, that petitioners have suffered no
prejudice by their receipt of the Form 4340 after the hearing.
Accordingly, for the reasons stated above, we sustain the
Commissioner’s proposed levy. We have considered all arguments
made by petitioners, and those not discussed herein have been
rejected as without merit.
Decision will be entered
for respondent.