Hunter v. Comm'r

T.C. Memo. 2004-81

UNITED STATES TAX COURT

THOMAS W. HUNTER, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 9856-02. Filed March 23, 2004.

James David Leckrone, for petitioner.

Rebecca Dance Harris, for respondent.

MEMORANDUM OPINION

HOLMES, Judge: In September 1998, petitioner Thomas Hunter

moved from Gallatin to Hendersonville, Tennessee. He knew when

he moved that the IRS was auditing his tax returns. In October

1998, he hired new accountants to represent him, and filed a

power-of-attorney form that both directed the IRS to send copies

of all correspondence to their office in Nashville and listed his
 - 2 -

own new address in Hendersonville. In January 1999, respondent

sent notices of deficiency for the tax years under audit to

petitioner at his old address in Gallatin. He never received

them. Respondent did not mail duplicates to him at his new

address, nor did he mail duplicates to petitioner’s accountants

in Nashville.

The case comes to us on the parties’ cross-motions to

dismiss for lack of jurisdiction. The question presented is

whether petitioner, by filing this power-of-attorney form, gave

respondent a clear and concise notification of his change of

address.

Background

This case turns on the timing of a few key events:

August 14, 1997 Petitioner files 1991-1995 returns.

July 30, 1998 Petitioner files 1996 return. The
parties assume that this return listed
petitioner’s Gallatin address.

August 13, 1998 The revenue agent issues her findings on
petitioner’s 1991-1996 tax liability in
a revenue agent’s report that she sends
to petitioner at his Gallatin address.
He receives it, but doesn’t respond.

September 1998 Petitioner moves to Hendersonville,
Tennessee.

October 23, 1998 Petitioner signs Form 2848 (“Power of
Attorney and Declaration of
Representative”) listing his
Hendersonville address and naming three
accountants as his designated
representatives for the 6 tax years
under audit. The form directs
 - 3 -

respondent to send copies of all
correspondence to both the first and
second accountants named on the form.

November 19, 1998 The IRS service center in Memphis
receives and processes the Form 2848.

January 28, 1999 Respondent issues three notices of
deficiency covering all 6 tax years.
Respondent sends these notices to the
Gallatin address. All are sent by
certified mail; two are returned to the
IRS as unclaimed, and there is no record
of what happened to the third.

July 1999 Petitioner receives statements of
account for each of the years in
question from the IRS, sent to him at
his Hendersonville address.

September 1999 Petitioner begins suggesting compromise
to resolve all years in question.

July 2000- Petitioner continues settlement talks,
April 2002 first with a revenue agent and then with
the IRS Appeals office.

June 10, 2002 Petitioner files petition. (In lieu of
the notices of deficiency, which he
still hasn’t received, he attaches the
revenue agent’s reports from August
1998).

Petitioner continues to be a resident of Tennessee, as he

was when he filed his petition. When the case neared trial in

Nashville, both parties moved to dismiss the petition for lack of

jurisdiction--petitioner on the ground that respondent never sent

a notice of deficiency to his last known address, and respondent

on the ground that petitioner filed his petition well outside our

90-day jurisdictional limit. The parties have stipulated or not
 - 4 -

contested the key facts and documents.1

Discussion

Our jurisdiction to redetermine deficiencies exists only

when the Commissioner issues a notice of deficiency and a

taxpayer files a timely petition to redetermine that deficiency.

Rule 13(a),(c); Monge v. Commissioner, 93 T.C. 22, 27 (1989);

Normac, Inc. v. Commissioner, 90 T.C. 142, 147 (1988). The

Internal Revenue Code says that a notice of deficiency shall be

“sufficient” if “mailed to the taxpayer at his last known

address.” Sec. 6212(b)(1).2 There is no statutory definition of

“last known address,” and the resulting gap has been filled with

a “plethora of caselaw decided by this and other courts.” Marks

v. Commissioner, T.C. Memo. 1989-575, affd. 947 F.2d 983 (D.C.

Cir. 1991).3

In Abeles v. Commissioner, 91 T.C. 1019, 1035 (1988), we

1
The most important fact that the parties did not stipulate
is whether petitioner ever received a notice of deficiency.
Petitioner testified at the short hearing held before the case
was submitted that he never had. Respondent objected to the
proposed finding of fact citing that testimony, but only by
characterizing the testimony as “self-serving.” On this crucial
point, we agree with petitioner--noting especially that
respondent, in his own motion to dismiss, asserted only that he
sent three notices of deficiency to petitioner--the three
concededly sent to petitioner’s old address in Jan. 1999.
2
Subsequent section references are all to the Internal
Revenue Code.
3
Respondent has issued a regulation, sec. 301.6212-2,
Proced. & Admin. Regs., defining “last known address.” The
regulation’s effective date, however, is Jan. 29, 2001, after the
events giving birth to these motions.
 - 5 -

held that

a taxpayer’s last known address is that address which
appears on the taxpayer’s most recently filed return,
unless respondent has been given clear and concise
notification of a different address.

We also held in Abeles that once a taxpayer notifies the IRS

that his address has changed, the Commissioner “must exercise

reasonable care and diligence in ascertaining, and mailing the

notice of deficiency to, the correct address.” Id. at 1031. And

we focus in deciding whether he’s exercised reasonable care on

“the information that would be available to the IRS at the time

that it issued the deficiency if it had used reasonable

diligence.”4 Ward v. Commissioner, 907 F.2d 517, 521 (5th Cir.

1990), revg. and remanding 92 T.C. 949 (1989). So the specific

question to be answered is whether petitioner, by listing his new

address on his power-of-attorney form, gave respondent “clear and

concise notification” of his new address.

Two courts have already answered the question. In Rizzo v.

Davis, 43 AFTR 2d 985, 79-1 USTC par. 9310 (W.D. Pa. 1979), the

4
Most circuits consider the “last known address” issue to
be a purely factual question, e.g., McPartlin v. Commissioner,
653 F.2d 1185, 1189 (7th Cir. 1981), or a “mixed question” which
is “essentially factual”, King v. Commissioner, 857 F.2d 676, 678
(9th Cir. 1988), affg. 88 T.C. 1042 (1987); cf. Armstrong v.
Commissioner, 15 F.3d 970, 973 (10th Cir. 1994), affg. T.C. Memo.
1992-328. In a case involving “the extraordinary circumstances
of taxpayers whose address had changed twice * * * even though
they have never moved,” the Second Circuit reviewed de novo the
“legal conclusion as to the [Commissioner’s] satisfaction of the
reasonable diligence requirement”. Sicari v. Commissioner, 136
F.3d 925, 928 (2d Cir. 1998), revg. T.C. Memo. 1997-104. The
Sixth Circuit has not decided what standard of review applies.
 - 6 -

court found--at the Government’s insistence--that the taxpayer’s

Form 2848 established a “last known address” different from the

one appearing on the taxpayer’s most recently filed return. And

in Johnson v. Commissioner, 611 F.2d 1015, 1020 (5th Cir. 1980),

revg. and remanding T.C. Memo. 1977-382, the Fifth Circuit

similarly held that a Form 2848 is sufficient to change a last

known address, even if the IRS later loses the form. We

ourselves have repeatedly held that a power-of-attorney form

directing the IRS to send all original documents to a

representative is an adequate notification of a change of

address: Maranto v. Commissioner, T.C. Memo. 1999-266; Elgart v.

Commissioner, T.C. Memo. 1996-379; Honts v. Commissioner, T.C.

Memo. 1995-532.

This case would seem only a bit different--here petitioner

directed that copies be sent to his accountants, and it is he

rather than respondent who is claiming that a Form 2848

effectively makes a change of address. Petitioner suggests

neither of these distinctions makes a difference. In his view,

for a filing to change a “last known address” it must only be

(1) clear and concise, (2) a notification, (3) and show a

different address from the last one sent to the IRS. He then

insists that his October 1998 power-of-attorney form meets all

three requirements. It was “clear and concise” because the Form

2848 was the IRS’s own form; it was a notification because it was
 - 7 -

sent to the appropriate IRS service center, as the IRS required,

see Rev. Proc. 90-18, sec. 4.02, 1990-1 C.B. 491, 492, and it

definitely showed a different address.5

Respondent chose not to file a reply brief and so missed his

chance to grapple with Rizzo and Johnson. Instead, he argues

that petitioner’s proposed test leaves out a critical fourth

element: An express statement of intent by a taxpayer that his

address of record be changed to his new address. See Rev. Proc.

90-18, sec. 5.04(1), 1990-1 C.B. at 494.6 This failure, which

respondent strongly suggests could easily have been cured by

using Form 8852--the IRS’s official change-of-address form--in

his view vitiates petitioner’s attempt to use a Form 2848 to

effect a change of address.

Respondent finds this fourth element not in any case

involving powers of attorney, but in other cases stating

seemingly broad principles of “last known address” law. He

begins with Alta Sierra Vista v. Commissioner, 62 T.C. 367, 374

(1974), a case where we noted that “Administrative realities

5
Respondent suggests that petitioner could have given the
form to the revenue agent working on the audit. This is true,
but hardly decisive--respondent’s own procedure allows a taxpayer
to mail the form to the Service Center that received his last
return.
6
Note that we have held that revenue procedures generally,
and Rev. Proc. 90-18, supra, in particular, do not bind this
Court. Westphal v. Commissioner, T.C. Memo. 1992-599.
 - 8 -

demand that the burden fall upon the taxpayer to keep the

Commissioner informed as to his proper address.” Id. at 374

(citations omitted). Alta Sierra Vista spoke of respondent’s

“entitlement” to treat the address on a taxpayer’s most recent

tax return as his last known address. Respondent insists that

this “entitlement” creates a presumption which simply listing a

new address on a power-of-attorney form does not rebut.

Respondent then cites cases in which various documents other

than power-of-attorney forms were found insufficient to rebut

this presumption. His leading case is Tadros v. Commissioner,

763 F.2d 89 (2d Cir. 1985). Tadros featured a taxpayer who lived

in New York when he filed his 1981 tax return, but who moved to

New Jersey in January 1983. In March 1983, the Commissioner sent

a notice of deficiency to his old New York address, but the

Postal Service returned it as “undeliverable”.

Tadros argued that he had told the Commissioner of his move

to New Jersey in a letter he had written to the IRS in January

1983 on stationery printed with his New Jersey address. His

letter asked for copies of correspondence and said that he needed

the copies to replace originals that he had “‘lost or misplaced

in the process of moving.’” Id. at 92.

The Second Circuit held that the letter was a mere “routine

inquiry,” not amounting to an official change of address:

Tadros’s letter * * * indicated neither that Tadros had
permanently moved, nor whether the Jersey City address
 - 9 -

on the letterhead was his new place of residence. Nor
did it mention the old address or indicate that it was
no longer to be used.

The steps taken by the IRS when the March 8 notice was
returned as undeliverable show that it exercised
reasonable care to ascertain Tadros’s new address.

Id. (emphasis added).

The letter Tadros had sent the IRS was not an IRS form, and

not in a format drafted by the IRS itself. Respondent would

nevertheless have us find that petitioner’s power of attorney is

like Tadros’s stationery--it too made no mention of his old

address and did not expressly indicate that the old address was

no longer to be used. We do not, however, read Tadros as listing

requirements needed to make an effective change of address in all

cases. Instead, we read it as suggesting ways in which the

letter in that case could have sufficed--for example, by

identifying the old address and noting that it had been replaced

by the new one.

Respondent next points to Pyo v. Commissioner, 83 T.C. 626

(1984), which does at least feature an IRS-designed form–-Form

872, the form the IRS customarily uses to extend the statute of

limitations. The IRS had itself incorrectly filled out the

taxpayer-address portion of the form with the Pyos’ old address

before sending it to their accountant. The Pyos did not catch

the mistake before returning the form to the IRS. A year later,

the IRS sent a notice of deficiency to the old address, despite
 - 10 -

having traded letters with the Pyos at their new address in the

meantime.

When the notice was returned as undeliverable, the IRS

relied on the erroneously completed Form 872 as evidence that the

Pyos’ old address was their “last known address.” The Court

rejected this argument, holding that an “inadvertent” failure by

a taxpayer to correct an IRS mistake on a form would be

insufficient to establish a last known address, especially when

so much time had passed since the Pyos sent back the Form 872 and

the IRS had begun writing to them at their new address. Pyo does

not support the proposition that a form filed for a purpose other

than changing an address will not create a new “last known

address”; rather, it teaches that taxpayers will not be penalized

for inadvertently failing to correct IRS mistakes.

Petitioner’s Form 2848, in contrast, calls upon taxpayers to

fill it out themselves and include their address. “[I]t seems

anomalous to permit * * * [respondent] to prescribe the medicine

and then punish the patient for taking it.” Johnson, 611 F.2d at

1019. And our caselaw--beginning at least with Honts--holds that

a power-of-attorney form works as a change of address.

Respondent tries to limit those cases’ force by arguing that the

Form 2848 is sufficient notice of an address change only when it

directs originals of all notices and communications be sent to

the taxpayer’s representative instead of the taxpayer. He argues
 - 11 -

that petitioner’s case is different: His form directed only

copies go to his representatives, and merely informed respondent

of his address, without saying that he wished the new address to

supplant the old.

But we reject the assertion that a valid change-of-address

notification must use language equivalent to “please note that

this is a change of address.” As petitioner points out, no such

glaring notification exists on a tax return, or on the power-of-

attorney forms given effect in Rizzo and Johnson.

We also think that respondent’s position overlooks a more

general theme in the case law; namely, that the IRS is chargeable

with knowing the information that it has readily available when

it sends notices to taxpayers. As courts have repeatedly

observed, the steady advance of technology continues to lighten

the IRS’s burden in searching its own records for current address

information. Union Tex. Intl. Co. v. Commissioner, 110 T.C. 321,

334 (1998).

Petitioner is thus right in noting that address information

on the Form 2848 is not mere surplusage. The IRS asks for that

information and solicits taxpayer’s directions on what address

should be used for original and duplicate notices. This strongly

implies that respondent will actually incorporate the information

on the form into its databases and use the information when

sending notices to a taxpayer’s “last known address.”
 - 12 -

Respondent’s position is essentially that it is up to

taxpayers to flag change-of-address information in a way so

obvious as to be immune from occasional bureaucratic

irregularities. But the minimal burden to the IRS must be

balanced against the potentially serious consequences for

taxpayers who rely on the IRS to process in a businesslike way

the information that it receives. The Tadros decision itself

recognized that the IRS has an “obligation” to “exercise

reasonable care in determining an address.” Tadros, 763 F.2d at

91-92. And as we announced in Abeles:

the IRS’ computer system was available to respondent’s
agent responsible for mailing the notice of deficiency,
and * * * the system would have reflected the [correct
address] had such agent caused a computer search of
petitioner’s TIN.

Abeles at 1034.7 In short, the IRS should not “ignore that which

it obviously knows.” United States v. Bell, 183 Bankr. 650, 653

(S.D. Fla. 1995).

Respondent’s failure to act on what he knew continued even

after the notices were returned as “unclaimed”. Respondent’s own

manual suggests that he should have kept trying to find the right

7
The record in this case contains scant information on the
procedures and database capabilities of respondent. We are
guided, however, by the stipulation of the parties that the Form
2848 was processed on Nov. 19, 1998; and by Rev. Proc. 90-18,
which indicates that the IRS requires 45 days to process address
information. The 45-day period, even counting from the time the
Form 2848 was filed, would have ended well before Jan. 28, 1998–-
the date that the IRS sent out the notices of deficiency.
 - 13 -

address. 1 Audit, Internal Revenue Manual (CCH), sec.

4243.2(6)(b) (as in effect January 1999) (if mail undeliverable,

IRS should “check all possible sources in the case files”).8

Instead, the stipulated facts show no effort to redeliver the

notices even after respondent began using petitioner’s

Hendersonville address in correspondence, and while he continued

to meet with petitioner’s accountants in settlement talks for

several years. The caselaw calls this evidence of lack of

reasonable care and due diligence. See Pyo, 83 T.C. at 638

(corresponding with taxpayers at new address suggests knowledge

of new address); Honts, T.C. Memo. 1995-532 (Commissioner should

verify address if in regular contact with taxpayer’s

representative). And we ourselves have stressed that the

Commissioner can protect himself from last-known-address problems

by sending copies to each possible address. Elgart v.

Commissioner, T.C. Memo. 1996-379; Karosen v Commissioner, T.C.

Memo. 1983-540. No such steps are on record here, even though

petitioner had asked on his Form 2848 for copies of all

correspondence to go to two of his accountants.

8
Respondent points out that there is no record of the third
notice’s being returned. Because we find that respondent failed
to issue any of these notices to petitioner’s last known address,
the ambiguity surrounding the ultimate fate of this one notice is
irrelevant. Respondent also argues that the house number on the
Form 2848 was incorrectly listed as 2200, rather than 2220. This
would only be relevant if respondent had used it to address the
notices of deficiency at issue.
 - 14 -

Nothing compels the Commissioner to ask taxpayers to list

their address on a Form 2848. By doing so, and by using that

requested information to identify taxpayers within IRS records,

respondent bears the burden of conforming his actions to the

knowledge at his disposal. See Alta Sierra Vista, 62 T.C. at

374. This is important not only because of the statutory

requirements of section 6213, but also because, as petitioner

points out, taxpayers are put in the position of quite reasonably

assuming that the address information they provide to the IRS

will be noted and acted upon.

We agree with petitioner that listing his Hendersonville

address on the Form 2848 provided respondent with “clear and

concise” notification of his change of address. His

Hendersonville address thus became his “last known address” under

section 6213. We shall therefore grant his motion to dismiss

this case for lack of jurisdiction, and deny respondent’s.

To reflect the foregoing,

An order will be entered

granting petitioner’s, and denying

respondent’s, motion to dismiss

for lack of jurisdiction.