Taxpayers timely filed petition by last date specified in notice

A notice of deficiency specifying a last date to file a petition with the Tax Court that was almost a year after the date of the notice’s mailing was valid, and the taxpayer’s petition, filed in response to the notice before the specified date, was timely filed.

Background

The IRS mailed a notice of deficiency for the 2017 tax year to Douglas and Rebecca Dodson on Oct. 7, 2021. According to tracking information, the Post Office delivered this notice to the Dodsons at their residence in Alamogordo, N. M., on Oct. 12, 2021. The notice stated that Dec. 5, 2022, was the last day to file a Tax Court petition in response to the notice.

The IRS mailed the Dodsons a second notice of deficiency on Oct. 8, 2021, which purported to be a corrected version of the first notice. The second notice stated that Jan. 6, 2022, was the last day to file a Tax Court petition. The second notice was accompanied by a cover sheet stating: “PREVIOUS NOTICE SENT WITH INCORRECT DATE. CORRECTED NOTICE WITH CORRECT DATES.” Other than the change in the last date for filing a petition, the second notice did not differ in any respect materially from the first notice.

The Dodsons claimed they did not receive the second notice. Tracking information for the second notice showed that on Oct. 13, 2021, the notice left the Post Office’s El Paso, Texas, distribution center, but the tracking information did not indicate that the Dodsons had ever received it.

The Dodsons filed a petition (with a copy of the first notice of deficiency attached) for review of the IRS’s determination with the Tax Court on March 3, 2022. The IRS, in response, filed a motion to dismiss the case for lack of jurisdiction, contending that the court lacked jurisdiction under Sec. 6213(a) because the Dodsons filed their petition more than 90 days after the IRS had mailed the first notice of deficiency and the corrected second notice of deficiency. The Dodsons countered that the court did have jurisdiction pursuant to the last sentence of Sec. 6213(a), which provides: “Any petition filed with the Tax Court on or before the last date specified for filing such petition by the Secretary in the notice of deficiency shall be treated as timely filed.”

The Tax Court’s decision

The Tax Court held that the Dodsons had timely filed their petition pursuant to the last sentence of Sec. 6213(a) and that it had jurisdiction over the case. Besides considering Sec. 6213(a), the court also took into account Sec. 6212(d), which governs the rescission of a notice of deficiency with the taxpayer’s consent.

The Tax Court found that the first notice the IRS sent to the Dodsons unambiguously determined a deficiency and therefore, under the court’s precedent in Dees, 148 T.C. 1 (2017), it was a valid notice. The Dodsons filed their Tax Court petition before Dec. 5, 2022, the last day specified in the first notice for filing a petition with the court. The Tenth Circuit, to which an appeal of the Dodsons’ case would lie, stated in Smith, 275 F.3d 912, 916 (10th Cir. 2001), that “if a notice indicates a petition date that is more than 90 days after the date of mailing, that date controls.” Accordingly, the Tax Court found that the Dodsons had complied with the last sentence of Sec. 6213(a).

Sec. 6212(d) permits the IRS, with a taxpayer’s consent, to rescind any notice of deficiency mailed to the taxpayer. Among other consequences, Sec. 6212(d) states that a rescinded notice “shall not be treated as a notice of deficiency for purposes of … section 6213(a)” and “the taxpayer shall have no right to file a petition with the Tax Court based on such notice.” According to Rev. Proc. 98-54, Section 5.07, the only way that a notice of deficiency may be rescinded is by a “properly executed Form 8626 (or a document as provided in section 5.06 of this revenue procedure).”

The Tax Court noted that the record in the case did not show the Dodsons consented to a rescission of the first notice of deficiency, “let alone in a form complying with Rev. Proc. 98-54.” Absent a rescission with a taxpayer’s consent, according to the court, a notice of deficiency continues to be treated as a notice of deficiency for purposes of Sec. 6213(a). Consequently, the IRS’s issuance of the second notice of deficiency to the Dodsons “did not have the effect of rescinding the first notice, either in whole or in part.”

The Tax Court also noted that the restriction on nonconsensual recissions in Sec. 6212(d), unlike the restriction on the IRS from issuing notices of deficiency in Sec. 6212(c), is not limited to situations where the IRS determines an additional deficiency of tax for the same tax year. Therefore, the court stated, “Our straightforward conclusion, derived from the plain text of sections 6213(a) and 6212(d), is that [the court is] required to treat the [Dodsons’ petition] as timely filed.” The court further observed that the Dodsons’ case was not “a case where a taxpayer petitions us for redetermination of a deficiency in a notice that purports to correct a prior notice of deficiency, a circumstance for which we express no view on the application of the last sentence of section 6213(a).”

The IRS argued against the Tax Court’s conclusion, based on the court’s decisions in Smith, 114 T.C. 489 (2000), and Rochelle, 116 T.C. 356 (2001). The court, however, found that the Dodsons’ situation could be distinguished from those of the taxpayers in those cases.

In Smith, the Tax Court considered the validity of a notice of deficiency that did not specify the last day to file a petition with the court and did not contain a letter date. However, the IRS subsequently sent a letter to the taxpayers’ counsel that provided the missing dates, and the taxpayers filed a timely petition challenging the IRS’s determination with the court. The court held that in this case, where the IRS did not put a petition filing date on a notice of deficiency but the taxpayer received the notice and filed a timely petition, the notice was valid because the taxpayer was not prejudiced by the IRS’s failure to put the petition filing date on the notice.

The Tenth Circuit affirmed the Tax Court in Smith, finding that the purpose of the petition filing date requirement is to ensure taxpayers do not miscalculate the last day to file a petition. The Tenth Circuit reasoned that this purpose was advanced by the last sentence of Sec. 6213(a), which provides that if a notice provides a petition filing date that is more than 90 days after the filing of the date the notice was mailed, the petition filing date provided in the notice controls.

In Rochelle, the notice of deficiency the IRS issued to the taxpayer did not contain a petition filing date, and the taxpayer filed a petition with the Tax Court more than 90 days after the mailing date of the notice. The taxpayer moved to dismiss the case for lack of jurisdiction because, lacking a petition filing date, the notice was invalid. The IRS, on the other hand, moved to dismiss because the taxpayer’s petition was untimely filed.

The Tax Court held in Rochelle that the notice was valid and dismissed the taxpayer’s case because the taxpayer did not meet the requirement of the last sentence in Sec. 6213(a). Because the last date for the taxpayer to timely file a Tax Court petition was not specified in the notice, the court concluded that the taxpayer’s petition could not have been filed on or before the last date specified in the notice.

The Tax Court found that Smith and Rochelle did not apply to the Dodsons’ case because the Dodsons’ first notice of deficiency, which they relied on and the court had held to be valid, included a petition filing date, while the notices in Smith and Rochelle did not include a petition filing date. Therefore, the Dodsons’ petition was covered by Sec. 6213(a), which governs the treatment of a petition filed in response to a notice that specifies a petition filing date. No law expressly addresses the treatment of a petition filed in response to a notice with no petition filing date, as was the case in Smith and Rochelle.

Reflections

In the Tax Court proceedings, the IRS repeatedly characterized the petition filing date on the first notice as an “obvious mistake.” Nonetheless, the court pointed out that, as the Tenth Circuit has recognized, a taxpayer may rely on the petition filing date in a notice of deficiency if that date is more than 90 days after the notice’s mailing date. Thus, the petition filing date in the first notice “had independent legal effect and [the Dodsons] were permitted to rely on it regardless of whether they retained counsel and regardless of whether prejudice would result from applying another deadline.” In the Tax Court’s view, the IRS was attempting to create uncertainty about the meaning of the last sentence of Sec. 6213(a) where none exists.

Dodson, 162 T.C. No. 1 (2024)

Contributor

James A. Beavers, CPA, CGMA, J.D., LL.M., is The Tax Adviser’s tax technical content manager. For more information about this column, contact thetaxadviser@aicpa.org.