Opinion
12930-18
06-24-2022
GINA C. LEWIS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Cary Douglas Pugh, Judge
On March 3, 2022, the Court issued an Opinion in this case. Lewis v. Commissioner, 158 T.C. No. 3 (2022). On March 8, 2022, pursuant to that Opinion, we entered our order and decision denying petitioner's motion for litigation costs and granting respondent's earlier filed motion for entry of decision. Our decision stated that, after application of section 6015(c), there are no deficiencies in income tax or penalties due from petitioner for the years in issue, consistent with respondent's proposed decision. On April 1, 2022, petitioner timely filed a Motion to Vacate or Revise Pursuant to Rule 162, asserting that the March 8, 2022, order and decision "does not resolve all of the issues in this case." Respondent responded that "all issues in this case were properly resolved by the Court's order and decision entered on March 8, 2022" and requested that we deny petitioner's motion to vacate or revise that decision. Petitioner filed a motion for leave to reply on May 19, 2022, which motion we granted on May 25, 2022, and filed petitioner's reply that same date.
Our March 8, 2022, order and decision incorrectly listed this motion as filed "December 28, 2021." It was filed December 28, 2020, and the docket record correctly granted the motion filed on that date.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C, in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Rule 162 authorizes a party to file a motion to vacate or revise a decision, with or without a new or further trial, within 30 days after the decision has been entered, unless the Court shall otherwise permit. The disposition of a motion to vacate or revise a decision rests within this Court's discretion. Vaughn v. Commissioner, 87 T.C. 164, 166-167 (1986). We often look to rule 60 of the Federal Rules of Civil Procedure as a guidepost by which to resolve Rule 162 motions. 1 See Kun v. Commissioner, T.C. Memo. 2004-273, 2004 WL 2712202, at *2 (citing Cinema '84 v. Commissioner, 122 T.C. 264, 267-268 (2004); Estate of Miller v. Commissioner, T.C. Memo. 1994-25; and Pietanza v. Commissioner, T.C. Memo. 1990-524, aff'd without published opinion, 935 F.2d 1282 (3d Cir. 1991)), aff'd without published opinion, 157 F. App'x. 971 (9th Cir. 2005). Under that rule, motions to vacate generally are not granted without a showing of unusual circumstances or substantial error, such as mistake, inadvertence, surprise, excusable neglect, newly discovered evidence, fraud, or other reason justifying relief. See, e.g., Intermountain Ins. Serv. of Vail, LLC v. Commissioner, 134 T.C. 211, 216 (2010), rev'd, 650 F.3d 691 (D.C. Cir. 2011), vacated and remanded, 566 U.S. 972 (2012); Mitchell v. Commissioner, T.C. Memo. 2013-204, at *8, aff'd, 775 F.3d 1243 (10th Cir. 2015). Nonetheless, "[r]econsideration is not the appropriate forum for rehashing previously rejected legal arguments or tendering new legal theories to reach the end result desired by the moving party." Estate of Quick v. Commissioner, 110 T.C. 440, 441-442 (1998).
Petitioner's Rule 162 motion raises two categories of allegedly unresolved issues.
I. Jurisdiction
The first concerns this Court's jurisdiction. We can proceed in a case only if we have jurisdiction, and either party, or the Court sua sponte, can question jurisdiction at any time. Stewart v. Commissioner, 127 T.C. 109, 112 (2006). The notice of deficiency in this case was issued to petitioner and her former spouse on March 28, 2018, and petitioner timely filed a petition challenging it. In her motion to vacate, petitioner argues that we lack jurisdiction because respondent did not mail the notice of deficiency to her last known address, or alternatively because the statute of limitations had expired before she filed her petition and before she "actually received a copy of the [n]otice of [d]eficiency."
The period of limitations for the Commissioner to assess federal tax is generally three years after the taxpayer files a return for a year. § 6501(a). This three-year period begins on the due date of the return if it is timely filed or on the actual filing date if the return is filed late. See § 6501(a) and (b)(1). The period of limitations for assessment can be extended beyond three years, provided the Commissioner and the taxpayer consent in writing before the period of limitations expires. § 6501(c)(4). In the case of a consent under section 6501(c)(4), the Commissioner may assess federal tax up until the date agreed upon, which can be extended further. See Treas. Reg. § 301.6501(c)-1(d).
Answering petitioner's amended petition, respondent stated that petitioner executed a Form 872, Consent to Extend Time to Assess Tax, extending the statute of limitations for the years in issue to May 11, 2018. Petitioner acknowledges that she extended the statute of limitation to this date, but averred in her petition that it was under duress. It is the taxpayer's burden to affirmatively show the written consent is not valid. Mecom v. Commissioner, 101 T.C. 374, 382-383 (1993), aff'd without published opinion, 40 F.3d 385 (5th Cir. 1994). Petitioner has not carried this 2 burden, and does not appear to dispute that the statute of limitations expired on May 11, 2018, in her motion to vacate. Respondent mailed the notice of deficiency on March 28, 2018, before the period of limitations for assessment of tax for the years is issue expired.
Nonetheless, petitioner alleges that the notice of deficiency is invalid for having not been mailed to her last known address, or actually received by her, before the limitations period expired.
A. Timely petition: acquisition of jurisdiction
A notice of deficiency is valid if it notifies the taxpayer that a deficiency has been determined against her and gives the taxpayer the opportunity to petition this Court for redetermination of the proposed deficiency. Scar v. Commissioner, 814 F.2d 1363, 1370 (9th Cir.1987), rev'g 81 T.C. 855 (1983); see Frieling v. Commissioner, 81 T.C. 42, 53 (1983).
Section 6212(b) provides that a notice of deficiency is sufficient if sent to the taxpayer's last known address. But sending a notice of deficiency to the last known address is not the only means for giving a taxpayer notice of a deficiency. Clodfelter v. Commissioner, 527 F.2d 754, 757 (9th Cir.1975), aff'g 57 T.C. 102 (1971). Rather, sending the notice to the last known address is merely a safe harbor whereby the notice will be deemed valid even if it never is received by the taxpayer. Frieling v. Commissioner, 81 T.C. at 52-53.
The parties dispute whether the notice of deficiency was mailed to petitioner at her last known address. Petitioner and her former spouse filed joint returns for the years in issue. Respondent mailed the notice of deficiency to three addresses-one petitioner's and the other two petitioner's former spouse's. Petitioner asserts that she changed her address in late 2016, and that respondent did not send the notice to this new address of petitioner's separate residence. Respondent admits as much, but claims that petitioner's December 2016 change of address was not her most recent one (that is, it does not reflect her last known address), and that respondent sent the notice to her last known address.
A notice of deficiency not mailed to the taxpayer's last known address can still be valid. If the mailing results in the taxpayer actually receiving notice with ample time remaining to timely file a petition, it meets the conditions of section 6212(a) "no matter to what address the notice successfully was sent." Clodfelter v. Commissioner, 527 F.2d at 757; Brzezinski v. Commissioner, 23 T.C. 192, 195 (1954). In a limited but established line of cases, incorrectly addressed notices have resulted in our jurisdiction where the taxpayer receives "actual notice [of the contents of the deficiency notice] without prejudicial delay." Clodfelter v. Commissioner, 527 F.2d at 757; see also McKay v. Commissioner, 886 F.2d 1237 (9th Cir. 1989), aff'g 89 T.C. 1063 (1987); Frieling v. Commissioner, 81 T.C. at 51-53; Goodman v. Commissioner, 71 T.C. 974, 977-978 (1979); Zaun v. Commissioner, 62 T.C. 278 (1974); Brzezinski, 23 T.C. at 195. By providing the safe harbor of section 6212(b), Congress did not intend 3 to invalidate actual rather than constructive methods of communicating respondent's determination. McKay v. Commissioner, 89 T.C. at 1068 n.6. Frieling v. Commissioner, discusses the "actual notice" principle:
The deficiency notices in those cases were held to be valid because they served the two functions of section 6212: (1) They notified the taxpayer that a deficiency had been determined against him; and (2) they gave the taxpayer the opportunity to petition this Court for redetermination of the proposed deficiency.81 T.C. at 53.
Both elements are satisfied here. Petitioner was notified that deficiencies had been determined against her and timely petitioned for redetermination of the proposed deficiencies. By timely invoking this Court's jurisdiction, she thereby "effectively waived any objection to the notice of deficiency." Mulvania v. Commissioner, 769 F.2d 1376, 1379-80 (9th Cir. 1985), aff'g T.C. Memo. 1984-98; see also Mulvania v. Commissioner, 81 T.C. 65, 69 (1983) ("We agree with the Ninth Circuit that, 'if mailing results in actual notice without prejudicial delay (as clearly was the case here), it meets the conditions of § 6212(a) no matter to what address the notice successfully was sent.'") (quoting Clodfelter v. Commissioner, 527 F.2d at 757); Brzezinski, 23 T.C. at 195 ("Congress was primarily concerned with giving the taxpayer notice within ample time to file a timely petition. When, as here, a timely petition was filed, it is obvious that sufficient notice was received. The problem is different if the wrong address results in a delay in the receipt of the notice, and a timely petition is not filed.").
Petitioner attempts to distinguish these cases on the premise that the taxpayers received the notices at issue before filing their petitions, whereas she did not; petitioner claims that she filed a "protective petition" based on a "rumor" that a notice of deficiency had been mailed. But as the Ninth Circuit wrote in Mulvania when discussing two cases-Lifter v. Commissioner, 59 T.C. 818 (1973) and Whiting v. Commissioner, T.C. Memo. 1984-142-in which this Court found errors in the notice of deficiency to be harmless: "in Whiting, [the taxpayers] chose to invoke jurisdiction of the Tax Court after learning of the notice from their attorney. As in Lifter, by timely invoking Tax Court jurisdiction, taxpayers essentially acknowledged notice; the purpose of § 6212 had been satisfied." 769 F.2d at 1380. The Ninth Circuit concluded:
The IRS is not forgiven for its clerical errors or for mailing notice to the wrong party unless the taxpayer, through his own actions, renders the Commissioner's errors harmless. . . . Had Mulvania timely petitioned the Tax Court for a redetermination of deficiency, the IRS error might have fallen into the line of harmless error cases where the taxpayer suffered no ill effects for the Commissioner's inadvertence.Id. at 1380-1381. 4
Here, unlike the taxpayer in Mulvania, petitioner timely petitioned the Court, and any alleged errors in the notice of deficiency were made harmless by her action. See also Miller v. Commissioner, 94 T.C. 316 (2019) ("Although [the IRS] failed to mail a duplicate joint notice to [the taxpayer's] 'last known address,' we have jurisdiction to decide the merits of [the taxpayer's] case because [the taxpayer] received actual notice of the determination and timely petitioned this Court."). Petitioner's attempt to avoid this result by calling her petition "protective" is unavailing: she cited no authority for this claimed status nor did we identify any authority that would treat such a timely filed petition as merely "protective."
B. Timeliness of notice of deficiency
Petitioner also contends that we lack jurisdiction because "[t]he statute of limitations on assessment expired prior to the date [in August 2018] upon which [she] actually received a copy of the [n]otice of [d]eficiency."
This argument was squarely addressed and rejected by this Court in Frieling v. Commissioner, 81 T.C. at 57. There, respondent mailed the deficiency notice within three years of their returns being filed. The notice was not addressed to the taxpayers' last known address. They did receive the notice, but more than three years after the date their returns were filed. The taxpayers argued that the notice did not become valid for any purpose until it was actually received by them, by which time the limitations period under section 6501(a) had expired. In dismissing this argument, we held as follows:
Based on the express language of section 6503(a)(1), the Ninth Circuit's opinion in Clodfelter, and on the foregoing reasons, we hold that the mailing of the notice of deficiency, which complied with section 6212(a), which was received by petitioners, and in regard to which a timely petition was filed in this Court, tolled the period of limitations on the date the notice was mailed even though the notice was not sent to their last known address. Therefore, since the mailing date of that notice was the last day of the 3-year period under section 6501(a), a valid notice of deficiency was issued.Frieling v. Commissioner, 81 T.C. at 57; see also Clodfelter v. Commissioner, 527 F.2d at 757; Miller v. Commissioner, 94 T.C. at 316 ("Although [the taxpayer] did not receive actual notice of the determination until after the normal 3-year limitations period for assessment was to expire, the limitations period did not expire because [the IRS] timely mailed a notice of deficiency for purposes of providing [the taxpayer] with notice of the determination, [the taxpayer] received actual notice of the determination, and [the taxpayer] timely filed a petition with this Court."). We have therefore considered the very issue petitioner raises here: a notice of deficiency that might have been invalid but for the fact that the taxpayer became aware of it "without prejudicial delay," that is, in time to file a timely petition. In our case, that is exactly what petitioner did, her protestations that the petition was only "protective" 5 notwithstanding.
Here, the notice of deficiency was mailed on March 28, 2018, before the period of limitations expired on May 11, 2018, and the petition was timely filed to challenge that notice. Accordingly, we hold that the period for assessment was tolled and has not expired and we therefore have jurisdiction.
II. Issues other than litigation costs under Rule 231
The second category of issues concerns various matters that petitioner alleges were resolved prior to her filing a Rule 231 motion for litigation costs, and therefore should be included in our decision document. The parties discussed these issues prior to petitioner filing her Rule 231 motion, but could not resolve them through a stipulation of settled issues. See Lewis, 158 T.C., slip op. at 5 n.3 ("Petitioner refused to sign a stipulation of settled issues or decision document that stated that she is entitled to full relief from joint and several liability under section 6015(c) for 2008, 2009, and 2010.") Because petitioner refused to sign a stipulation of settled issues or decision document that stated that she is entitled to full relief from joint and several liability under section 6015(c) for 2008, 2009, and 2010, respondent conceded that petitioner was entitled to relief under section 6015(c) for the years in issue and moved for entry of decision reflecting no tax liability for the years in issue. Id. ("At an impasse, respondent unilaterally filed his motion for entry of decision and notice of concession.") This was the proposed decision document before us when we issued our Opinion denying petitioner's Rule 231 motion. Petitioner was aware of this state of affairs. In our February 22, 2021, Order we outlined the procedural background and stated that we would decide respondent's motion for entry of decision together with petitioner's forthcoming motion for litigation costs:
These include whether petitioner is banned from claiming the Earned Income Tax Credit, see § 32(k)(1), and whether the section 6662(a) penalty should be listed as "none" both before and after the application of section 6015(c) in our decision document (our March 8, 2022, order lists it as "none" after application of section 6015(c)). In response, and in addition to his arguments above, respondent maintains that these issues are "academic" because they "would not affect the outcome because petitioner owes zero additional tax or penalties for [the years in issue] after application of I.R.C. § 6015(c)."
This case most recently was calendared for trial at the Court's February 1, 2021, trial session in San Diego, California. On December 28, 2020, respondent filed a Motion for Entry of Decision and a Notice of Concession. On December 31, 2020, intervenor filed a Notice of No Objection. On January 8, 2021, we ordered petitioner to file an objection or other response to respondent's Motion for Entry of Decision by January 25, 2021. In a conference call with the parties on January 14, 2021, we understood that the only remaining substantive dispute was whether petitioner was entitled to litigation or administrative costs under I.R.C. section 7430. We therefore directed the parties to enter a stipulation of settled issues that petitioner could attach to a motion6
under Rule 231, Tax Court Rules of Practice and Procedure. On January 21, 2021, this case was stricken from the calendar and continued, and jurisdiction was retained by this Division of the Court. We further directed that petitioner shall file a motion for an award of litigation and administrative costs under Rule 231(b), Tax Court Rules of Practice and Procedure, or the parties shall file proposed stipulated decision documents or further reports regarding the then-present status of this case by March 2, 2021.
On January 25, 2021, however, petitioner filed an Objection to Motion for Entry of Decision, stating that the parties have been unable to agree to the wording of the stipulation of settled issues. As directed by the Court, respondent filed a response to petitioner's Objection to Motion for Entry of Decision on February 17, 2021. The parties' most recent filings illustrate that they agree that the only substantive issue left for the Court to resolve is the I.R.C. section 7430 issue. As previously ordered, petitioner's motion for an award of litigation and administrative costs under Rule 231(b), Tax Court Rules of Practice and Procedure is due March 2, 2021. The Court will take respondent's Motion for Entry of Decision under advisement and decide it together with petitioner's motion for fees under I.R.C. section 7430.
Petitioner moved for litigation costs and we found that she was not entitled to them under section 7430. See Lewis, 158 T.C. No. 3. We also concluded that respondent's December 28, 2020, motion for entry of decision, which reflected petitioner's entitlement to full relief from joint and several liability under section 6015(c) for all three years in issue, was the appropriate decision to be entered and subsequently entered that decision. Petitioner now argues that we must enter a different decision to account for the issues that were raised in unsigned proposed stipulations of settled issues that pre-dated respondent's motion for entry of decision and petitioner's Rule 231 motion.
Petitioner seems to base her view of what the Court should have understood was the agreement of the parties on her own filings in isolation, disregarding those by respondent or the entirety of our February 22, 2021, Order. She alleges in effect that we should have known the agreement of the parties was reflected in the unsigned stipulations of settled issues attached to her filings. Our February 5, 2021, Order stated our understanding that there was no remaining substantive dispute other than petitioner's claim for attorney's fees on the basis of a conference call with the parties. But we went on to order an additional filing from respondent to help us understand the ongoing dispute between the parties that prohibited them from reaching agreement on the wording of a settlement stipulation, as was evident from their respective filings. Respondent's response to our order described respondent's view of their disagreement.
The long and the short of it is that we never received a stipulation of settled issues that set forth the parties' agreement on the issues now disputed by petitioner. 7 All that we had on the record was respondent's concession that petitioner was entitled to relief under section 6015 and contemporaneously filed motion for entry of decision reflecting that concession, along with the parties' briefs on the issue.
Against this procedural backdrop-of respondent's concession and the ongoing dispute over the final terms of any stipulation of settled issues-we ordered petitioner to file her motion for attorney's fees. Thus pending before us were two motions: respondent's motion for entry of decision and petitioner's motion for attorney's fees. Our February 22, 2021, Order restated our understanding that the parties had resolved the substantive issues other than attorney's fees but could not agree to wording and also explained that respondent's motion remained pending. And in petitioner's motion for attorney's fees, she compared the proposed decision attached to respondent's motion for entry of decision to her original offer to demonstrate why she substantially prevailed.
The briefing on petitioner's motion to vacate illustrates vividly that there was not an agreement between the parties; there was a concession by respondent. Petitioner's motion to vacate has not shown us why we should reopen this case and enter a decision that exceeds the scope of respondent's concession which granted petitioner the substantive relief she sought in her petition. Motions to vacate generally are not granted without a showing of unusual circumstances or substantial error, such as mistake, inadvertence, surprise, excusable neglect, newly discovered evidence, fraud, or other reason justifying relief. See, e.g., Intermountain Ins. Serv. of Vail, LLC v. Commissioner, 134 T.C. at 216. There has been no such unusual circumstance or substantial error.
Petitioner may have adopted her strategy (of refusing to agree to a settlement stipulation) to ensure she could avail herself of the qualified offer provision in section 7430(c)(4)(E)(i), as we discussed in our opinion, see Lewis, 158 T.C., slip op. at 6 n.6, but having done so to preserve that argument she must accept the consequences of the failure to reach an agreement. We agree with respondent's characterization that "[p]etitioner effectively is arguing both sides. On one hand, [p]etitioner has argued that all issues were resolved (by filing the motion for litigation costs) and on the other hand, [p]etitioner argues that certain matters were not resolved in the Motion [to vacate or revise]."
Upon due consideration it is
ORDERED that petitioner's Motion to Vacate or Revise Pursuant to Rule 162, filed April 1, 2022, is denied. 8