Tax Court Petition Mailed By Erroneous Due Date on Notice of Deficiency Was Timely

(Parker Tax Publishing January 2024)

The Tax Court held that a couple who filed a Tax Court petition before the deadline specified in a notice of deficiency, which was one year from the date on which the IRS mailed the notice, timely filed the petition, even though the IRS mailed a second notice one day later that purported to correct the deadline for filing a petition. The court found that the petition was timely under the last sentence of Code Sec. 6213(a), the petition was timely, and the court therefore had jurisdiction, because it was filed on or before the date specified for filing on the notice. Dodson v. Comm'r, 162 T.C. No. 1 (2024).

Background

On October 7, 2021, the IRS mailed a notice of deficiency (i.e., the first notice) to Douglas and Rebecca Dobson for their 2017 tax year. The notice was delivered to the Dodsons on October 12, 2021, by the U.S. Postal Service (USPS). The first notice bears a stamped date specifying December 5, 2022, as the last day to file a petition with the Tax Court. The Dodsons filed their petition on March 3, 2022. The petition attached a copy of the first notice and no other notice of deficiency.

On October 8, 2021, the IRS mailed a second notice of deficiency to the Dodsons, which purports to be a corrected version of the first notice. The second notice bears a stamped date specifying January 6, 2022, as the last day to file a petition. The second notice is accompanied by a cover sheet stating: "PREVIOUS NOTICE SENT WITH INCORRECT DATE. CORRECTED NOTICE WITH CORRECT DATES." The second notice does not differ from the first notice in any other material respect.

The Dodsons stated that they did not receive the second notice. The Dodsons produced tracking information for two copies of the second notice reflecting the departure of the notice copies from USPS's El Paso, Texas, distribution center on October 13, 2021, without any indication that USPS ever delivered them to the Dodsons. The Dodsons filed their petition in this case on March 3, 2022, which is 147 days after the IRS mailed the first notice and 146 days after the IRS mailed the second notice.

The Tax Court's jurisdiction depends on (1) the issuance of a valid notice of deficiency to the taxpayer and (20 the timely filing of a petition by the taxpayer. Generally, under the first sentence of Code Sec. 6213(a), a petition must be filed within 90 days after the notice is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day). However, the last sentence of Code Sec. 6213(a) states: "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 IRS filed a motion to dismiss the Dodsons' case for lack of jurisdiction. According to the IRS, the Tax Court lacked jurisdiction under Code Sec. 6213(a) because the Dobsons filed their petition more than 90 days after the IRS mailed the first notice and the second notice. The Dodsons responded that the court had jurisdiction under the last sentence of Code Sec. 6213(a).

Thus, the issue in this case, which was an issue of first impression, was whether the last sentence of Code Sec. 6213(a) requires us to treat a taxpayer's petition as timely filed when it is filed (1) before the petition filing date specified in the notice of deficiency that forms the basis for the taxpayer's petition but (2) after the date specified for filing in a later-issued corrected notice of deficiency and (3) after the 90-day period for filing a petition provided by the first sentence of Code Sec. 6213(a).

Analysis

The Tax Court held that the Dodsons timely filed their petition in accordance with Code Sec. 6213(a). Accordingly, the court determined that it had jurisdiction and denied the IRS's motion to dismiss. The court noted that the issue in this case was one of first impression for the Tax Court.

The court found that the first notice of deficiency unambiguously determined a deficiency against the Dodsons and was therefore valid. The Dodsons filed their petition before December 5, 2022, the last day specified in the first notice for filing a petition with the Tax Court. This was sufficient, in the court's view, to comply with the last sentence of Code Sec. 6213(a). The court noted that in Smith v. Comm'r, 275 F.3d 912 (10th Cir. 2001), aff'g 114 T.C. 489 (2000), the Tenth Circuit interpreted the last sentence of Code Sec. 6213(a) to mean that "if a notice indicates a petition date this more than 90 days after the date of mailing, that date controls."

The court also found that there was no consent by the Dodsons to a rescission of the first notice. Code Sec. 6212(d) permits the IRS, with the consent of the taxpayer, to rescind any notice of deficiency mailed to the taxpayer. Among other consequences, 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." The court found that, absent a rescission with the Dodsons' consent, the first notice continued to be treated as a notice of deficiency for purposes of Code Sec. 6213(a), including for purposes of the last sentence of Code Sec. 6213(a). Accordingly, the IRS's issuance of the second notice without the Dodsons' consent did not have the effect of rescinding the first notice, either in whole or in part. The court stated that as soon as the IRS mailed the first notice to the Dodsons on October 7, 2021, the IRS could no longer unilaterally rescind the first notice.

In addition, the court found that the IRS's characterization of the petition filing date on the first notice as an "obvious mistake" misleading. The court reasoned that, as recognized by the Tenth Circuit in Smith, a taxpayer may timely file a deficiency petition by meeting the requirements of the first sentence of Code Sec. 6213(a) or, alternatively, the last sentence of Code Sec. 6213(a). In the court's view, the petition filing date on 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. The court concluded that the IRS's position attempted to create uncertainty about the meaning of the last sentence of Code Sec. 6213(a) where there is none.

For a discussion of filing a petition with the Tax Court, see Parker Tax ¶263,510.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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