Shea v. Commissioner

Beghe, J., concurring: More than 4 years ago Judge Raum made the suggestion that bears fruit today, that section 7522(a) provides a justification for shifting the burden of proof to respondent as a sanction for vague notices of deficiency. See Ludwig v. Commissioner, T.C. Memo. 1994-518 .

I write on to respond to some of the objections to the majority opinion expressed in Judge Halpern’s concurrence.

Judge Halpern’s normative explication of the disjunctive tests for new matter — inconsistency and different evidence— is impeccable so far as it goes. But he pays inadequate attention to another strand in the Tax Court’s jurisprudence on this subject, exemplified by Sorin v. Commissioner, 29 T.C. 959 (1958), affd. per curiam 271 F.2d 741 (2d Cir. 1959), that the Court of Appeals for the Ninth Circuit relied upon, along with Judge Learned Hand’s opinion in Olsen v. Helvering, 88 F.2d 650, 651 (2d Cir. 1937), to reverse us for our shifting of the burden of proof in Abatti v. Commissioner, 644 F.2d 1385 (9th Cir. 1981), revg. T.C. Memo. 1978-392 . That strand is to the effect that a vaguely broad notice that does no more than state an intention to assess a deficiency in a specified amount is not just a valid notice. It’s an empty bottle that can be filled and made specific with any theory and won’t thereby be considered an inconsistent theory or as requiring different evidence so as to justify the shifting of the burden of proof to the Commissioner.

Our jurisprudence and that of the Ninth Circuit is sufficiently murky on this issue to justify using section 7522(a) to clarify the situation and set ourselves and our litigants on the right path for the future.

In so using section 7522(a), I frankly am impelled by pragmatic considerations. Commentators have suggested that the present situation is unsatisfactory because it encourages— even rewards — vagueness and imprecision in the Commissioner’s deficiency notices and discourages the specificity that tells taxpayers the points they must put in issue in their petitions and prove at trial. It’s appropriate to use section 7522(a) as the device for repudiating the line of cases represented by Sorin v. Commissioner, supra.

There’s a theoretical as well as a pragmatic justification for so using section 7522(a) that answers the questions posed in Judge Halpern’s concurrence, pp. 204-205. Judge Halpern follows up the general question — Just what is section 7522(a) supposed to accomplish? — by asking what justifies our decision to sanction a vague notice by shifting the burden of proof when the Commissioner’s theory is finally put forth, as opposed to applying some other sanction, such as extending the period of limitations or awarding attorney’s fees. The answer, I submit, is that shifting the burden on the ground that the theory, once stated by the Commissioner, constitutes “new matter” is an appropriate, proportionate, and specifically directed response to the vagueness and inadequacy of the notice in failing to set forth any matter other than to express the intent to assess a specified amount of a particular tax.

Section 7522(a) was a signal from Congress that vague notices would thenceforth be disfavored. Shifting the burden of proof to the Commissioner under section 7522(a) is an appropriate way to implement the not-too-clearly expressed intent of Congress. In this regard, the “imaginative reconstruction” applied by Judge Learned Hand in other contexts, see, e.g., Lehigh Valley Coal Co. v. Yensavage, 218 F. 547, 553 (2d Cir. 1914) (“Such statutes are partial * * * they should be construed, not as theorems of Euclid, but with some imagination of the purposes which lie behind them.”), and espoused by Judge Posner, as well as by our own Judge Raum, points the direction in which we and the Courts of Appeals should go. See Posner, “Statutory Interpretation — in the Classroom and in the Courtroom”, 50 U. Chi. L. Rev. 800 , 817 (1983).