T.C. Memo. 2004-240
UNITED STATES TAX COURT
GEOFFREY K. CALDERONE, SR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3563-03L. Filed October 19, 2004.
John T. Mulhall III and Thomas E. Redding, for petitioner.
John T. Lortie and Kenneth A. Hochman, for respondent.
MEMORANDUM OPINION
GERBER, Chief Judge: Petitioner, pursuant to section
6330(d),1 seeks review of respondent’s determination to proceed
with collection (by means of levy) of petitioner’s unpaid 1995
Federal income tax liability. The issue for our consideration is
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at all relevant times.
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whether, in the context of a section 6330 proceeding, petitioner
is entitled to challenge the underlying tax liability for 1995.
The resolution of this issue depends upon whether petitioner
received a statutory notice of deficiency for his 1995 tax year
or otherwise had an opportunity to dispute such tax liability.
The parties agree that if we conclude that petitioner is entitled
to challenge the underlying tax liability, we should remand this
case to respondent’s Appeals Office to conduct a hearing under
the provisions of section 6330.
Background
The parties’ stipulation of facts is incorporated by this
reference. At the time of the filing of the petition in this
case, petitioner resided in Fort Lauderdale, Florida. Beginning
in the mid-1980s, petitioner employed Arthur F. Jacob (Mr.
Jacob), a certified public accountant and attorney, to handle his
tax and certain financial matters. Mr. Jacob, through 2002, had
a power of attorney from petitioner. Petitioner trusted Mr.
Jacob and relied on him exclusively with respect to all tax
matters. For the tax years 1993, 1994, and 1996 specifically,
Mr. Jacob represented petitioner before the Internal Revenue
Service on many occasions. Any time petitioner received any
document from respondent, he would immediately contact Mr. Jacob
to find out what needed to be done. In addition, petitioner and
Mr. Jacob often socialized together and had common friends.
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Respondent, by means of a September 17, 1998, certified
letter, sent a statutory notice (the notice) to petitioner and
his former wife, Mary Elizabeth Connor (Ms. Connor), determining
a 1995 income tax deficiency and additions to tax. Respondent
produced a copy of the notice addressed to petitioner, but no
further proof of delivery. Mr. Jacob received a copy of the
notice. At the time the notice was mailed, petitioner and Ms.
Connor did not reside at the same address. Although respondent
contends that the notice was mailed to petitioner’s home,
petitioner claims to have never received it. Petitioner claims
to have seen it only years later in his attorney’s office. Thus,
he did not petition this Court for a redetermination of the
deficiency.
Ms. Connor received the notice of deficiency in or around
September 1998. Her affidavit states that she immediately spoke
about the matter with petitioner and that petitioner indicated
Mr. Jacob “had things under control”, though petitioner and Mr.
Jacob claim they did not speak about the notice during this
period.
On September 22, 1998, however, Mr. Jacob did protect
himself with respect to Ms. Connor by sending her a letter
advising that his office had received a certified letter from the
Internal Revenue Service (IRS). Mr. Jacob’s letter informed Ms.
Connor that the certified letter contained “a proposed Notice of
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Deficiency for tax year 1995” for petitioner and Ms. Connor, but
that he would not be representing her. Mr. Jacob also sent a
copy of his letter to petitioner. Petitioner, however, has no
recollection of receiving the letter, and both petitioner and Mr.
Jacob deny discussing it. On her own, Ms. Connor petitioned this
Court seeking a redetermination of the 1995 deficiency
determination.
With respect to petitioner, Mr. Jacob did not file a
petition on his behalf or take any other action to advise him of
his available options with respect to the 1995 notice of
deficiency. Mr. Jacob attempted to convince the Court that it
was not his normal practice to file petitions without being asked
by the client, and the receipt of a copy of a notice of
deficiency regarding a client for whom he held a power of
attorney did not “obligate [him] to do anything”.
Thus, the 1995 tax liability was never challenged by
petitioner, and on February 4, 1999, respondent assessed the
amount of income tax due for 1995 against petitioner.
Respondent’s internal documents show several unsuccessful
attempts in 1999 and 2000 to try to reach Mr. Jacob regarding
collection actions. On June 27, 2001, respondent issued a Final
Notice of Intent to Levy (which petitioner did receive), advising
petitioner of the proposed collection of his outstanding 1995
income tax liability. On July 9, 2001, respondent received a
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Form 12153, Request for a Collection Due Process Hearing, which
was submitted by Mr. Jacob, for petitioner’s 1995 tax year.
In early 2002, Mr. Jacob told petitioner that he had been
successful in resolving petitioner’s income tax matters before
respondent and that he owed no tax liability. Mr. Jacob had not
in fact achieved such success, and, in or around May or June
2002, petitioner and petitioner’s current wife began questioning
the notices they were still receiving pertaining to the
collection hearings. On September 9, 2002, petitioner contacted
an Appeals officer at the IRS claiming this was the first time he
knew the case was in Appeals. Petitioner discontinued Mr.
Jacob’s representation and retained Rutherford Mulhall, P.A., to
represent him in further proceedings. In addition, petitioner
filed suit against Mr. Jacob asserting various theories of
negligence and malpractice.
Discussion
The parties agree that this case should be remanded for
further consideration of the underlying merits of petitioner’s
1995 tax liability if we hold that petitioner did not receive a
1995 notice of deficiency or otherwise have the opportunity to
dispute the 1995 tax liability. This case presents a curious
factual situation, because it appears that petitioner’s
representative (who held a power of attorney and upon whom
petitioner relied for financial and tax matters) failed to
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contest the notice or advise petitioner of the notice or his
rights in regard thereto. The effect of this, according to
petitioner, was that he did not receive a notice of deficiency or
have the opportunity to dispute his 1995 income tax liability.
I. Legal Background
Section 6331(a) authorizes the Commissioner to levy on
property and property rights of a taxpayer liable for taxes who
fails to pay them within 10 days after notice and demand for
payment. Sections 6331(d) and 6330(a), however, require the
Secretary to send written notice to the taxpayer of the intent to
levy and of the taxpayer’s right to a hearing prior to the
collection activity.
Section 6330(c)(1) requires that the Appeals officer obtain
verification that the requirements of any applicable law or
administrative procedure have been met. Section 6330(c)(2)(A)
provides that the taxpayer may raise at the hearing “any relevant
issue relating to the unpaid tax or the proposed levy” including
spousal defenses, challenges to the appropriateness of collection
actions, and alternatives to collection.
The underlying tax liability may be questioned if the
taxpayer “did not receive any statutory notice of deficiency for
such tax liability or did not otherwise have an opportunity to
dispute such tax liability.” Sec. 6330(c)(2)(B). For purposes
of section 6330(c)(2)(B), receipt of a statutory notice of
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deficiency means receipt in time to petition this Court for
redetermination of the deficiency asserted in such notice. Sec.
301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs. Section
6330(c)(2)(B) contemplates actual receipt of the notice of
deficiency by the taxpayer. See Tatum v. Commissioner, T.C.
Memo. 2003-115.
The parties agree that respondent has the burden of showing
that petitioner either received the notice of deficiency or
otherwise had an opportunity to dispute the tax liability.
II. Analysis
A. Receipt of the Notice of Deficiency
Respondent argues that the notice of deficiency was sent to
petitioner’s last known address and that petitioner failed to
produce any evidence showing that he did not receive the notice
of deficiency in a timely manner. However, petitioner points out
that respondent has failed to produce any evidence that the U.S.
Postal Service (USPS) attempted to deliver the notice of
deficiency or that petitioner refused delivery.
Respondent also argues that petitioner’s allegations are
insufficient to override the “presumption of receipt” or delivery
as described in Sego v. Commissioner, 114 T.C. 604, 611 (2000).
Absent clear evidence to the contrary, USPS employees are
presumed to properly discharge their official duties, justifying
the conclusion that the statutory notice was sent and that
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attempts to deliver were made in the manner contended by
respondent. Id. Further, in the context of a section 6330
proceeding, taxpayers cannot defeat “actual receipt” by
deliberately refusing delivery of a notice of deficiency. Id.;
see also Hochschild v. Commissioner, T.C. Memo. 2002-195 (raising
presumption of delivery when several attempts at delivery were
made, and the notice went unclaimed).
However, the facts we consider here are more analogous to
those in Tatum v. Commissioner, T.C. Memo. 2003-115. In that
case, this Court found it significant that the USPS made only one
attempt at delivery and that the taxpayer did not intentionally
refuse delivery, distinguishing the case from Sego where there
were multiple attempts to deliver and the taxpayer intentionally
refused delivery. Id. Moreover, the taxpayers in Tatum credibly
testified that they did not receive a notice or know the USPS was
attempting to deliver one. Id.
In this case, even though it was shown that the notice was
addressed to petitioner, respondent has not introduced evidence
showing that the notice was submitted to the USPS for delivery at
all. Unlike Sego, where it was shown that delivery was attempted
several times, respondent has not shown a single attempt at
delivery. If Postal Service employees properly discharged their
official duties, respondent would have received a signed
certified mail receipt or a returned notice of deficiency.
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Respondent has not offered evidence of certified mail or of an
attempt to deliver the notice of deficiency. Moreover,
respondent has produced no evidence that petitioner intentionally
refused delivery. Finally, petitioner’s uncontroverted testimony
states that he did not receive a notice of deficiency or know
that the USPS was attempting to deliver one to him.
In light of (1) the absence of evidence of any attempted
delivery by the USPS, a certified mail receipt, or an unclaimed
or refused notice of deficiency, or (2) the uncontradicted
testimony that petitioner did not receive the notice of
deficiency, respondent has not shown that petitioner actually
received the notice, despite the presumption of regularity in
delivery.
B. Otherwise Had an Opportunity To Dispute
Respondent contends that petitioner had the opportunity to
dispute the liability because Mr. Jacob timely received the
notice of deficiency and could have filed a Tax Court petition on
petitioner’s behalf. Respondent also contends that petitioner
was sent a copy of correspondence from Mr. Jacob to Ms. Connor
regarding the notice. Further, respondent claims petitioner
communicated with Ms. Connor after she timely received the
notice.
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Petitioner contends that Mr. Jacob’s receipt of a copy of
the notice of deficiency cannot be imputed to petitioner because
Mr. Jacob did not forward it to petitioner, discuss it with
petitioner, or file a petition with this Court. Petitioner also
contends that there is no evidence showing that Ms. Connor
specifically informed petitioner that she had received the notice
of deficiency.
Regardless of whether petitioner was sent a copy of the
letter that Mr. Jacob wrote to Ms. Connor, the evidence does not
support a finding that petitioner actually received notification
of the deficiency notice. Ms. Connor’s claim that petitioner
told her Mr. Jacob was taking care of the matter was presented in
an affidavit, and respondent did not call her as a witness to
provide petitioner the opportunity to cross-examine her
testimony. Therefore, respondent has not adequately shown that
petitioner knew about the notice.
The cases respondent relies upon in support of the position
that a taxpayer can be held liable for an agent’s act or failure
to act are situations in which the principal claimed that the
agent acted without authority or approval, but where the court
ultimately found that the agent acted with such authority or
approval. See Adams v. Commissioner, 85 T.C. 359 (1985); Kraasch
v. Commissioner, 70 T.C. 623 (1978). However, these cases do not
focus on the question of whether the taxpayer has the opportunity
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to dispute an underlying tax liability when the agent fails to
act or acts in a manner contrary to what is appropriate in the
principal-agent relationship.
We find it curious that Mr. Jacob would notify the client’s
ex-wife stating he was not representing her and then never
discuss the notice with the client. It would also be odd for the
client, whose established practice was to contact his trusted
adviser after receiving tax correspondence (and who socializes
with that adviser), not to discuss the deficiency notice
mentioned in a letter to his ex-wife.
Although Mr. Jacob testified that it was not his normal
practice to file a petition in the Tax Court on behalf of a
client without being asked by the client, we find his testimony
to be inconsistent with facts indicating that Mr. Jacob
exclusively represented petitioner before the IRS before the 1995
tax year. Moreover, Mr. Jacob’s statement is self-serving and
entitled to less weight, considering that at the time of the
trial in this case, Mr. Jacob continued to be embroiled in
litigation with petitioner. We also find incredible Mr. Jacob’s
contention that even though he had a power of attorney on file
with the IRS, he was not obligated to act on behalf of his client
when he received correspondence from the IRS, particularly when
he knew that petitioner relied on him exclusively to resolve all
tax matters.
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Moreover, in 2002, Mr. Jacob advised petitioner that his
1995 tax liability had been resolved when in fact he had done
nothing to resolve the underlying tax liability and knew that the
matter was set for a collection due process hearing. While this
deception in 2002 does not directly show that petitioner was
prejudiced by Mr. Jacob’s conduct (or lack thereof) in the period
during which petitioner had the opportunity to dispute the
underlying liability, it does demonstrate that Mr. Jacob was not
forthright in handling petitioner’s affairs and confirms that Mr.
Jacob realized that he had an obligation to act on the matter
sooner.
Under all of these circumstances, respondent’s argument
relying on petitioner’s knowledge imputed from others is
insufficient to show that petitioner had an opportunity to
dispute the 1995 liability. Petitioner trusted and relied
exclusively on Mr. Jacob to handle matters before the IRS while
Mr. Jacob kept information from petitioner and was intentionally
not representing petitioner’s interest. Accordingly, petitioner
did not otherwise have an opportunity to dispute the 1995
liability.
III. Conclusion
Respondent has not met his burden of showing that petitioner
received the notice of deficiency or otherwise had the
opportunity to dispute the tax liability. Thus, petitioner is
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entitled to challenge the underlying tax liability. As such, it
is unnecessary to decide the remaining issue of whether
respondent abused his discretion by denying petitioner’s request
to consider the underlying merits of the 1995 tax liability. In
accordance with the parties’ agreement, this case will be
remanded to respondent’s Appeals Office to conduct a hearing in
accordance with section 6330.
To reflect the foregoing,
An appropriate order will
be issued.