UNITED STATES TAX COURT

JMP

T.C. Memo. 2011-116

UNITED STATES TAX COURT

MARTIN R. DINGMAN, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No.

17453-09L.

Filed June 1,

2011.

Martin R. Dingman, pro se.

Ann L. Darnold, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

MARVEL, Judge:

Respondent issued a Notice of Determination

Concerning Collection Action (s) Under Section 6320 and/or 63301

(notice of determination) to collect by levy additions to.tax

Unless otherwise indicated, all section references are to

the Internal Revenue Code (Code), as amended, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

Monetary amounts have been rounded to the nearest dollar.

SERVED Jun 01 2011

- 2 under section 6651(f) for fraudulent failure to file Federal

I

income tax returns for 1996-2000.

Pursuant to section 6330(d),

petitioner timely filed a petition seeking r view of respondent's

determination to proceed with the proposed levy.

The issue for

decision is whether respondent may proceed with the proposed

levy.

However, because petitioner contends that. respondent did

not timely assess the section 6651(f) addition to tax for any of

the years at issue, we must examine whether a d when petitioner

filed his delinquent returns for 1996-2000.

FINDINGS OF FACT

Some of the facts have been stipulated.

We incorporate the

stipulated facts into our findings by this reference.

Petitioner

resided in Missouri when he filed his petitio .

Petitioner failed to timely file his 1996-2000 Federal

income tax returns.

At some point before 2003, the Criminal

Investigation Division (CID) of the Internal Revenue Service

(IRS) initiated a criminal tax investigation against petitioner.

Petitioner retained attorneys Gerald M. Handley (Mr. Handley) and

Mark A. Thornhill (Mr. Thornhill) to represen

him in connection

with the investigation, which ápparently focu ed on petitioner's

failure to file returns.

During the criminal investigation a paid return preparer,

Connie Henderson of RSM McGladrey, Inc., prep red Federal income

tax returns for petitioner using a filing status of "Married

- 3 -

filing separate" for each of the years -1996-2000, which she

signed on October 29, 2002.

Petitioner signed the returns and-on

November 8, 2002, mailed the returns and checks to pay the

Federal income tax liabilities reported on the 1996 and 1997

returns to Mr. Handley, who received the package on November 13,

2002.

Petitioner's counsel had regular meetings with the CID

during the criminal investigation.

i

Sometime before February 19,

2003, petitioner's counsel delivered a package containing

petitioner's 1996-2000 Federal income tax returns and checks to

pay petitioner's 1996 and 1997 tax liabilities as shown on the

1996 and 1997 returns to the office of the CID, the IRS office

that was handling the investigation of petitioner.

On February 19, 2003, respondent posted payments of $31,878

and $86,617 to petitioner's tax accounts for -1996 and 1997,

respectively.

The posted amounts equaled the amounts of the

checks delivered to the CID to pay the tax reported due on

petitioner's 1996 and 1997 returns.

The February 19, 2003,

entries on the transcripts of petitioner,'s 1996 and 1997 tax

accounts show code 640,

,

"Advance Payment of Deficiency", and

confirm that the IRS had received and deposited petitioner's

checks and credited petitioner's accounts.for the payments.2

2The transcripts of petitioner's 1996-2000 tax accounts also

show entries with code 977, "Amended Return Filed", that are

(continued...)

- 4 -

On June 9, 2003, respondent posted payments of $94, 456,

$31, 795, and $61, 795 to petitioner' s tax acc unts for 1998, 1999,

and 2000, respectively.

The payments for 1998-2000, which

petitioner delivered to the IRS sometime betNeen February 19 and

June 9, 2003, are identified with code 640,

Deficiency Cash Bond Credit".

"Advance Payment of

These payments equal the amounts

of tax due that petitioner reported on his 19|98-2000 returns.3

On February 28, 2006, respondent assesse

additions to tax

under section 6651(f) for fraudulent failure to file returns for

2(...continued)

dated Mar. 17, 2003. Lastly, the transcripts show an entry for

each year with code 560, "Assessment Statute Expir. Date Extended

to 03-12-2006".

3The certified transcripts of petitioner's tax accounts for

1996-2000 that were introduced by respondent and admitted into

evidence contain no entries reflecting that tNe delinquent

returns were filed, that the tax liabilities dhown on the

delinquent returns were assessed, or that the (payments reflected

above were credited against any assessments. ,The certified

transcripts also do not contain any entries showing that notices

of deficiency were mailed to petitioner for 1(96-2000 . The

uncertified internal transcripts of petitionee's tax accounts for

1996-2000 that were introduced by petitioner änd admitted into

evidence appear to contain more information, but respondent does

not explain which codes in those transcripts üeflect the filing

of the returns, the assessments, or the creditling of the payments

against assessments.

- 5 1996-2000.4

Respondent concedes~ that he failed to provide

petitioner with notice and demand of the assessments of additions

to tax as required by section. 6303(a).."

On a date that -does not appear in the record but which was

not later than July 12, 2007, petitioner was chargedain a

criminal information with two counts of willfully failing to file

tax returns for 2000 and 2001 under section 7203.

On- July 12,

2007, petitioner executed aoplea agreement pursuant to rule 11 of

the Federal Rules of Criminal Procedure.

The plea agreement

4Respondent assessed the additions to tax as follows:

Year

Amount

1996

1997

1998

1999

2000

$22,400

60,901

65,436

21,995

43,374

SEach certified transcript of petitioner's tax accounts for

1996-2000 bears the following notation:

"NO NOTICES TO THE

TAXPAYER CI IS WORKING THIS FRAUD CASE IRC 6651 F".

We infer

from the entries in the certified transcripts that the CID had

assumed control over the processing of petitioner's case during

the pendency of the criminal investigation. . We also infer that

the CID instructed IRS personnel not to issue otherwise required

notices that would have informed petitioner that the sec. 6651(f)

addition to tax had been assessåd for 1996-2000. See infra pp.

33-36. No one from respondent's CID testified at trial, or

provided information during the sec. 6330 hearing.

In

petitioner's words:

"When my most recent attorney, Mr.

Thornhill, tried to work with the criminal investigation

division, he was told very abruptly that they were very sorry but

they could not get involved" with the Appeals case. The parties

stipulated that because respondent failed to send petitioner

notice and demand of the assessments of additions to tax under

sec. 6651(f), statutory interest had not begun to accrue.

- 6 recited that petitioner would plead guilty to the two-count

information and that by entering into the plèa agreement,

petitioner admitted that he knowingly committed the offenses and

was, in fact, guilty of the offenses.

The p%ea agreement also

stated in pertinent part as follows:

The parties agree that the defendant has paid federal

taxes and [sic] totaling $343,983 for tax years 1996

through 2001, and the defendant will receive proper

credit for these payments. The parties further agree

to the assessment of tax in the amounts not to exceed

those reported on the tax returns filed by the

defendant for tax years 1996 through 2001.

[Emphasis

added.]

Petitioner entered a guilty plea in accordance with the plea

I

agreement, which was accepted by the U.S. District Court for the

Western District of Missouri, Southern Division, and he was

sentenced in January 2008.

On December 10, 2008, respondent sent peNitioner a Final

Notice of Intent to Levy and Notice of Your Right to a Hearing

||

(final notice) for 1996-2000.

On or about Jaþuary 2, 2009,

petitioner timely mailed a Form 12153, Request for a Collection

Due Process or Equivalent Hearing.

On the Fo m 12153 petitioner

stated that he disagreed with the proposed le†y because he owed

no tax or penalty.

Attached to the Form 12153 was a letter

explaining petitioner's disagreement with the proposed levy.'

Petitioner denied receiving any notices regarding taxes due.

Il

'Mr. Thornhill wrote the letter on petitioner's behalf.

- 7 Petitioner also stated in the letter that he had paid all income

taxes due for 1996-2000 and that any claim for additional taxes,

penalties, and interest was barred by the statute of limitations.

Petitioner also stated that respondent had used an incorrect

address for him even though he had provided his new address to

respondent in various documents, including the Federal income tax

returns he had filed in 2003 and in later years.?

Petitioner's case was assigned to Settlement Officer Sheila

D. Jenkins (Ms. Jenkins).

On February 3, 2009, Ms. Jenkins wrote

in her activity record that the case had been assigned for the

assistance of an Appeals officer.

Appeals Officer Maria A.

Frazier (Ms. Frazier) reviewed the case and prepared a case

memorandum.

Ms. Frazier wrote in the memorandum that it was not

clear whether petitioner had been notified of the assessments.

She also stated that it was not clear whether'any returns had

been processed.

On the basis of the entries with code 560,

"Assessment Statute Expir. Date Extended to 03-12-2006", on

petitioner's accounts, Ms. Frazier determined that petitioner had

signed an extension agreement® extending the period of

7Although respondent sent the final notice to petitioner's

old address, the- postman handed it to petitioner.

sThroughout the administrative proceeding, at trial, and in

filings with this Court, the parties have referred to the form

that petitioner allegedly signed as a period of limitations

extension, an extension, or a waiver. The forms generally used

to obtain an individual taxpayer's consent to extend the period

(continued...)

- 8 -

limitations to March 12, 2006.

She stated that "Since an

extension was signed there had to be a statute of limitation that

was triggered with either a filing of the return or an agreement

II

of some kind" and concluded that the assessments were timely.

On March 30, 2009, Ms. Jenkins sent pet tioner a letter

scheduling a telephone hearing for April 17, 2009.

Ms. Jenkins

advised petitioner that if he wanted to propose alternative

collection methods, he should submit a compl ted Form 433-A,

Collection Information Statement for Wage Eadners and SelfEmployed Individuals, and/or Form 433-B, Collection Information

Statement for Businesses, and supporting docu 1ents, including

proof of 2008 estimated tax payments, and he should file all

Federal income tax returns due .

Ms . Jenkins also stated that

respondent had investigated the assessments of the additions to

tax9 and determined that they were timely.

as follows:

MÉ. Jenkins commented

"The IRS does in fact, usually give persons notice

of an assessment being made; however, the assessment can be made

* ( . . . continued)

of limitations on assessment are Form 872, Consent to Extend the

Time to Assess Tax, and Form 872-A, Special COnsent to Extend the

Time to Assess Tax. We refer to the form as Ån extension

agreement in this opinion in accordance with t he term used by

respondent's employees in processing petitionèr's case.

9During the sec . 6330 proceeding and in filings with this

Court, the parties have referred to the sec. 6651(f) addition to

tax as a penalty.

- 9 -

without notification as long as it is within the statute of

limitations."

On April 1, 2009, Mr. Thornhill and Ms. Jenkins spoke on the

telephone.

Mr. Thornhill reiterated that petitioner did not

recall executing an extension agreement.

Mr. Thornhill requested

a copy of all extension agreement documents'that respondent

believed petitioner had executed and a copy of any letter that

respondent had allegedly sent petitioner regarding the

assessments.

Mr. Thornhill and Ms. Jenkins agreed to postpone

the section 6330 telephone hearing until May 1, 2009.

The telephone hearing scheduled for May 1, 2009, was held as

scheduled.

During the hearing Mr. »Thornhill reiterated

petitioner's position that the assessments of the additions to

tax under section 6651(f) were time barred and that petitioner

had not received any notices from respondent regarding the unpaid

additions to tax.

Ms. Jenkins advised Mr. Thornhill- that

petitioner's accounts had been referred to the Examination

Division to determine the correctness of the assessments.

She

stated that in the process of that investigation respondent had

determined that the assessments were timely because petitioner

had extended the period of limitations on collection and

assessment to March 12, 2006.

Ms. Jenkins informed Mr. Thornhill

that respondent had attempted without success to find the

extension agreement that she maintained petitioner had signed.

- 10 -

Ms. Jenkins advised Mr. Thornhill that the case would be reviewed

further before a final determination.

On May 13, 2009, Mr. Thornhill and Ms. denkins held a

followup telephone conversation regarding the existence of any

extension agreement.

On May 20, 2009, Ms. Jenkins and Mr.

Thornhill held another telephone conference. | Ms. Jenkins stated

that the case had been reviewed by an Appeal( officer and the

assessed additions to tax would not be abated.

Mr. Thornhill

asked to speak with the Appeals team manager, Jean Fuentes (Ms.

Fuentes).

On June 1, 2009, Ms. Fuentes conducted a conference with Mr.

Thornhill.

Ms. Fuentes explained that the as essments dated

March 12, 2006, were timely because petitioner had filed his

returns on March 17, 2003."

She also stated

hat because

petitioner had failed to provide documents re uested in the March

30, 2009, letter, no collection alternatives dould be considered.

On June 23, 2009, respondent sent petitioner the notice of

determination.

In the notice of determinatioñ respondent stated

that "Based upon the best available information, the requirements

of various applicable law and administrative yrocedures have been

met."

Respondent stated that petitioner had failed to present a

"Certified transcripts in the record refiect that the sec.

6651(f) additions to tax for the years at issde were assessed on

Feb. 28, 2006, not Mar. 12, 2006, as stated bŠ Ms. Fuentes and as

later stated in the notice of determination. We find that the

assessment date was Feb. 28, 2006.

- 11 -

viable collection alternative and that the decision to proceed

with collection by levy was appropriate.

In the attachment to

the notice :of determination respondent concluded that petitioner

had extended the period of limitations to March 12, 2006.

The

Appeals Office also determined that the February 28, 2006,

assessments were timely because petitioner had filed his returns

on March 17, 2003.

Petitioner did not execute an extension agreement or any

i

other document that extended the applicable period of

limitations.

Petitioner filed his returns for 1996-2000 no later

than February 19, 2003, when the checks that were delivered with

the 1996-2000 returns ,to the CID were credited to petitioner's i

1996 and 1997 accounts.

OPINION

I.

Statutory Framework

Section 6331(a) authorizes the Secretary to levy upon

property and property rights of a taxpayer liable for taxes who

fails to pay those taxes within 10 days after notice and demand

for payment is made.

Section 6330(a) provides that no levy may

be made on any property or rights to property of any person

unless the Secretary has notified such person in writing of the

right to a hearing before the levy is made.

If the person

requests a hearing, a hearing shall be held before àn impartial

officer or employee of the IRS Office of Appeals.

Sec.

- 12 -

6330 (b) (1) ,

(3) .

At the hearing the person

ay raise any

relevant, issue, including appropriate spousa

defenses,

challenges to the appropriateness of the collection action, and

collection alternatives.

Sec. 6330 (c) (2) (A) .)

A taxpayer may

also contest the existence or amount of the dnderlying tax

liability if he did not receive a notice of deficiency or did not

otherwise have an opportunity to dispute the tax liability.

Sec.

6330 (c) (2) (B) ; see also Sego V. Commissioner,

609

114 T.C.

604,

(2000) .

Following the hearing, the Appeals Offic

must determine

whether the proposed levy action may proceed.

is required to take into consideration:

The Appeals Office

(1) yerification

presented by the Secretary that the requirements of applicable

law and administrative procedure have been met,

(2) relevant

issues raised by the taxpayer, and (3) whethef the proposed levy

action appropriately balances the need for efficient collection

of taxes with the taxpayer's concerns regardiÅg the intrusiveness

of the proposed levy action.

Sec. 6330(c) (3)

Section 6330 (d)-(1) grants this Court jur sdiction to review

the determination made by the Appeals Office in connection with

the section 6330 hearing.

Where the underlying liability is

|

properly at issue, we review the taxpayer's liability de novo.

See Goza v. Commissioner, 114 T.C. 176, 181-1$2 (2000) .

review all other determinations for abuse of discretion.

We

- 13 -

Lunsford v. Commissioner, 117 T.C. 183, 185

(2001); Sego v.

Commissioner, supra at 610; Goza v. Commissioner, supra.at 182:

An abuse of discretion occurs if the Appeals Office exercises its

discretion "arbitrarily, capriciously, or without sound basis in

fact or law."

Woodral v. Commissioner, 112 T.C. 19, 23 (1999).

In his Form 12153 and during the hearing, petitioner

questioned whether respondent had made the assessments within the

applicable limitations period.

The assertion by a taxpayer thalt

the period of limitations has expired constitutes a challenge t:o

the underlying tax liability.

140, 145 (2002).

Hoffman v. Commissioner, 119 T.C.

The underlying liabilities are properly at

issue because respondent did not issue notices of deficiency"

and petitioner had no opportunity to dispute the underlying tax

liabilities.

See sec. 6330(c) (2) ()B).

Accordingly, we review de

novo the question of whether respondent made the assessments

"Sec. 6665(b) provides, inter alia, that an addition to tax

under sec. 6651 is treated as a tax for purposes of the

deficiency procedures only to the extent that the addition to tax

is attributable to a deficiency as defined in sec. 6211.

Petitioner does not suggest that the additions to tax under sec.

6651(f) in this case are attributable to a deficiency, and on the

basis of our finding that petitioner filed delinquent returns for

1996-2000 and made the described tax payments, we agree they are

not. Respondent concedes that petitioner filed delinquent

returns for 1996-2000 and disputes only the date when the returns

were filed. The amounts shown as taxes by a taxpayer on filed

returns do not constitute deficiencies within the meaning of sec.

6211(a).

See Wilson v. Commissioner, 118 T.C. 537, 540 (2002)

(holding that under sec. 6665(b) the additions to tax under sec.

6651(f) were not attributable to deficiencies when those

additions to tax were computed by reference to taxes shown by the

taxpayer on his delinquently filed returns).

- 14 within the applicable period of limitations.

See Sego v.

Commissioner, supra at 609-610.

Generally, any reference in the Code to tax includes

additions to tax, additional amounts, and penalties.

6665(b).

See sec.

Accordingly, we shall apply the limitations provisions

of section 6501 to decide whether the sectio

to tax were timely assessed.

6651(f) additions

Section 6501(a) generally provides

that the amount of any tax imposed by the Co e shall be assessed

within 3 years after the return was filed.

I

Bennett v.

Commissioner, 30 T.C. 114, 123-124 (1958), we held that the

limitations period begins to run when the taxþayer files a

delinquent nonfraudulent return after fraudulently failing to

file a timely return.

. The bar of the period of limitations is an affirmative

defense, and the party raising the defense must.specifically

plead it and prove it.

Rules 39, 142(a); Hof man v.

Commissioner, supra at 146.

Petitioner pleadëd the defense by

claiming that the limitations period had expi ed before

respondent assessed the additions to tax.

To prove the defense

successfully, the taxpayer must establish (1) the filing date of

the returns and (2) that the Commissioner assdssed the relevant

II'

il

amounts after the expiration of the 3-year pe iod for assessment.

See Hoffman v. Commissioner, supra at 146;'Me om v. Commissioner,

101 T.C. 374, 382

(1993), affd. without publi hed opinion 40 F.3d

- 15 -

385 (5th Cir. 1994).

If the taxpayer establishes a prima facie

case that the applicable period of limitations has expired and

that the Commissioner's assessment is barred, the burden of going

forward with evidence shifts to the Commissioner.

See Hoffman v.

Commissioner, supra at 146; Mecom v. Commissioner, supra-at 382.

The Commissioner then must show that the assessment is not barred

by the period of limitations under section 6501(a).

Hoffman v.

Commissioner, supra at 146; -Mecom v. Commissioner, supra at 3821.

If the Commissioner makes such a showing, the burden of going

forward with the evidence shifts back to -the taxpayer.

Hoffman

v. Commissioner, supra at 146; Mecom v. Commissioner', supra at 2

383.

Notwithstanding the shifting of'the "burden of going

'

forward, the burden of ultimate persuasion remains with the party

who pleads the bar of the period of limitations.

Hoffman v.

Commissioner, supra at 146-147.

II.

The Parties' Arguments

The parties do not disagree about the assessment date,

February 28, 2006.

Instead, they disagree about the filing dat'e

of petitioner's delinquent 1996-2000 returns.

Petitioner asserts

that he filed his 1996-2000 returns no later than February 19,

2003, when the checks that were delivered with the returns were

credited to his 1996 and 1997 accounts.

He points to

respondent's records; namely, uncertified transcripts of his

income tax accounts that were admitted into evidence without

- 16 -

objection, which confirm that respondent pos ed petitioner's

payments of his reported 1996-97 liabilities on February 19,

2003.

Petitioner testified at trial that his counsel delivered

the checks to pay petitioner's Federal income tax liabilities for

1996 and 1997" with original signed returns for each of the

years 1996-2000 to the CID.

Petitioner contends that this means

that by February 19, 2003, at the latest, resþondent had received

the payments for 1996 and 1997 and the 1996-2000 returns and had

processed the payments.

Petitioner denies si ning any extension

agreements extending the period of limitations on assessment or

any other documents that would have kept the

-year limitations

period open beyond February 19, 2006, and we accept his testimony

on this point as credible.

Respondent's position during the section 6330 hearing was

different from that asserted during trial and on brief.

During

the section 6330 hearing, respondent contended that the

ll!

assessments were timely because petitioner executed an extension

agreement extending the applicable period of iimitations on

assessment before the limitations period had expired as shown on

"Respondent's records show that petitionÅr paid his 19982000 Federal income tax liabilities in June 2003. Petitioner

testified that he submitted the payments for 1998-2000 later in

the spring because he did not have the money ivailable to make

the payments until then.

"Respondent's counsel'agrees that petiti ner did not

execute an extension agreement.

- 17 -

IRS transcripts and because petitioner had filed the returns on

March 17, 2003.

At trial and on brief, however, respondent

abandoned his argument that petitioner had executed an extension

agreement extending the period of limitations on assessment and

relied only on his contention that petitioner filed his returns

on March 17, 2003, thereby making the assessment timely.

Respondent relies on the transcripts of petitioner's 1996-2000

tax accounts showing entries with code 977, "Amended Return

Filed", that are dated March 17, 2003, to support his

contention."

Respondent also relies on transcript entries

showing that the February 19, 2003, payments were posted as

"Advance Payment of Deficiency" rather than payments accompanying

filed returns."

Respondent therefore claims that the Appeals

Office correctly determined the assessments were timely.

After reviewing the record, including petitioner's

testimony, which.we find credible, an'd respondent's transcript

entries regarding the characterization' and filing date of the

"Petitioner responds in part by contending that the entries

showing that amended returns were filed were in error.

Petitioner contends that he filed original returns, not amended

returns.

"Respondent also points to the so-called TXMODA transcripts

showing that the receipt of payments for 1996 and 1997 was posted

in cycle 20031508, whereas the entries documenting the submission

of the 1996-2000 returns were posted in cycle 20031708. We

interpret respondent's argument to be that because the TXMODA

transcripts show the returns were processed later than the

payments, we should find that the returns and the payments were

submitted on different dates. We decline to make such a finding.

- 18 -

returns, which we do not find credible, we find that petitioner's

counsel delivered a package containing petitioner's fully

executed original returns for 1996-2000 and checks to pay the

1996 and 1997 liabilities shown on the 1996 and 1997 returns to

the CID no later than February 19, 2003.

That finding, however,

is not sufficient, standing alone, to permit us to conclude that

the returns were properly.filed.

We must delve deeper.

Respondent contends that simply deliver ng returns to an IRS

office is not sufficient to constitute prope

filing.

Respondent

relies upon section 6091 and related regulat ons to support his

argument.

In anticipation that we might find that petitioner's

counsel delivered the returns and checks to dhe CID office

handling petitioner's criminal investigation, respondent also

relies on a line of cases holding that the d livery of a return

to the wrong IRS representative or office is

ot a return filing

and does not cause the applicable period of limitations on

assessment to begin to run.

Respondent explains that if the

returns were not delivered to the correct IRS office and to an

IRS employee with authority to accept returns for filing on or

before February 19, 2003, the 3-year limitatiäns period did not

start to run on that date.

Respondent also a gues that delivery

of returns to the CID was not a proper filing because special

agents of the CID were not specifically autho ized to accept

returns for filing.

- 19 -

III. Applicable Law Governing Return Filing in 2003

As discussed above, section 6501(a) provides--that the amount

of any tax imposed by the Code shall be assessed within 3 years

after the return was filed.

Section 6501 does not define the

word "filed", but under pertinent caselaw the general rule is

that a return is filed when it is received."

Lombardo,

241 U.S.

239, 246 (2008).

73,

76

United States v.

(1916); Trout v. Commissioner, ~131 T.C.

Generally, a limitations period "runs against

the United States only when they assent and upon the conditions

prescribed."

(1930).

Lucas v. Pilliod Lumber Co., 281 U.S. 245, 249

For a taxpayer to secure the benefit of a limitations

period bar, there must be "'meticulous compliance by the taxpayer

with all named conditions.'"

802,

807-808

at 249).

(1991)

Winnett v. Commissioner, 96 T.C.

(quoting Lucas v. Pilliod Lumber' Co.,' supra

One such requirement is that a return be filed at the

designated place of filing returns.

See id. at 808.

Section 6091(a) provides that "When not otherwise provided

for by this title, the Secretary shall by regulations prescribe

the place for the filing of any return".

Section 6091(b) (1) (A)

provides generally that a person other.than a corporation must

"Exceptions to the general rule do not apply here.

e.g.,

sec.

7502(e) (1).

See,

'l

- 20 -

make a return to the Secretary" (i) in the iþternal revenue

district of the taxpayer's place of residence or (ii) at a

service center serving such internal revenue district, as the

Secretary may prescribe by regulations.

Section 6091(b) (4)

I

provides that, notwithstanding the above, a Žeturn to which

section 6091(b) (1) would apply but for subsection (b) (4) that is

made to the Secretary by hand carrying shall, under regulations

prescribed by the Secretary, be made to the

nternal revenue

district referred to in section 6091(b) (1) (A) (i).

As in effect for 2003, section 1.6091-1, Income Tax Regs.,

provides that with an exception not applicab

here, an income

tax return required under the Code or regulations shall be filed

at the place for filing specified in the Code or, if no.place is

specified, the return shall be filed at the place prescribed by

regulations.

Section 1.6091-2(a) (1), Income Tax Regs., provides

that income tax returns of individuals shall be -filed with the

district director for the internal revenue di trict of the

taxpayer's residence."

Section 1.6091-2(d) (1), Income Tax

"The term "Secretary" means the Secretary of the Treasury

or his delegate. Sec. 7701(a) (11) (]B). The term "delegate" means

any officer, employee, or agency of the Department of the

Treasury duly authorized by the Secretary of he Treasury,

directly or indirectly, by one or more redele ations of

authority, to perform the relevant function. Sec.

7701(a) (12) (A).

"However, notwithstanding sec. 6091(b) (1), if instructions

applicable to income tax returns provide thatl the returns be

(continued...)

- 21 Regs., provides that returns of individual taxpayers that are

filed by hand carrying "shall be filed -with the district director

(or with any person assigned the administrative supenvision of an

area, zone or local office constituting a permanent post of duty

within the internal revenue-district "of such director) as

provided in * * * [section 1.6091-2(a), Income Tax Regs.].."

also sec.

301.6091-1(b) (1),

Proced.

& Admin. Regst

See

A return is

considered to be hand carried if it is brought to the district

director by the person required to file the return'or other -

document, or by his agent,. such as the taxpayer's attorney or a

member of the taxpayer's family.

See sec. 301.6091-1(c), Proced.

& Admin. Regs.

Although section 6091 and the regùlations thereunder as ind

effect for 2003 authorized returns to be filed with the district

director or his delegate, that directi~on had been rendered

a

obsolete with the restructuring of th^e IRS pursuant to the

Internal Revenue Service Restructuring and Reform Act of 1998,

Pub. L.

105-206,

sec.

1001(a),

112 -Stat.

689.

That act required

the Commissioner to develop and implement a plah to reorganize

the IRS.

Id.

on October 1,

The new organizational structure became effective

2000.

See I.R.S. News Release IR-2000-67

(Sept.

"(...continued)

filed with a service center, the returns must be filed in

accordance with those instructions. See sec. 1.6091-2(c), Incone

Tax Regs.

- 22 -

27, 2000).

As a result of the reorganization, the IRS replaced

the national, regional, and district structu e with

organizational units serving particular industries and groups of

taxpayers with similar needs.

See id.

Desp te these

comprehensive organizational changes, in 2003 regulations under

section 6091 continued to refer to officials whose positions had

.I

been eliminated and to offices that had been eliminated as a

result of the reorganization,

leaving taxpayers with little or no

effective regulatory guidance regarding impo tant requirements

affecting their return filing obligations.

In early 2003 the Commissioner issued N tice 2003-19, 2003-1

C.B. 703

(2003 notice), advising taxpayers of the proper

addresses for filing documents with the IRS, including "with

respect to offices or officials that no longgr exist as part of

the reorganization."

In the 2003 notice the Commissioner

acknowledged that the Office of District Director was an outdated

place of filing.

According to the 2003 notice, to file returns under section

6091,

"Returns should be mailed to the address specified in the

"IRS Deleg. Order 1-23 (formerly IRS Deleg. Order 193, Rev.

6), Internal Revenue Manual (IRM) pt. 1.2.40.22 (Nov. 8, 2000),

titled "Authorization to Perform Functions of the Commissioner"

provides that the authority to take actions previously delegated

to district directors is delegated to Assistant Deputy

Commissioners, Division Commissioners, Chiefs, and Directors,

Submission Processing Field, Compliance Services Field, and

Accounts Management Field.

-,23

form or instructions.""

-

Notice 2003-19, 2003-1 C.B., 707.

The

2003 notice also stated that "Hand-carried returns should be

filed with the local Service office."

Id.

Section 6 of the 2003

notice titled '!Obtaining Information for Location of Service

Offices Where Elections, Statements, Returns, and Other Documents

Can Be Filed By Personal Delivery" provides that "Taxpayers

required to file elections, statements, returns, and other

documents who are permitted to file by personal delivery with a

Service office may obtain information regarding the location of

the nearest Service office by calling the Service's toll-free

number".

Id. at 711.

The 2003 notice was effective for

documents filed on or after April 7, 2003.

See id.

It was not until September 16, 2004, that the Department of

the Treasury amended section 1.6091-2, Income Tax Regs., to

reflect the changes in ther IRS organizational structure and to

explain how they affected the filing of returns.

2004-2 C.B. 669.

See T.D. 9156

According to the preamble,- "these final

regulations replace obsolete references to IRS organizations and

"As part of the overall reorganization, starting in 2000

the IRS reorganized its service center operations.

I.R.S. News

Release IR-2000-61 (Sept. 1, 2000).

In the light of these

changes in the service center operations that spanned more than 2

years, in January 2003 the IRS issued a news release reminding

taxpayers that- they would be sending their 2002 returns to

service centers different from those used the previous year.

I.R.S. News Release IR-2003-10 (Jan. 27, 2003). The news release

explained where the returns should be mailed, depending on the

taxpayer's residence, see id., but it contained no instructions

for taxpayers who preferred to file returns by hand delivery.

titles with updated references that are suff ciently flexible to

take into account future changes to IRS stru ture or operations."

Id. at 670.

The preamble provided that the

mended regulations

specify the place of filing hand-carried" returns in a manner

consi-stent with the 2003 notice.

1.6091-2(a) (1),

See id. at 669.

Section

Income Tax Regs., as amended by T.D.

9156,. 2004-2

C.B. at 670, provides that individual income tax returns must be

filed with "any person assigned the responsi ility to receive

returns at the local Internal Revenue Service office that serves

the legal residence * * * of the person required to make ·the

return."

Section 1.6091-2(d) (1), Income Tax

egs., as amended by

T.D. 9156, 2004-2 C.B. at 670, addresses ret rns filed by hand

carrying and provides that "Returns of persons other than *

corporations which are filed by hand carrying shall be filed with

any person assigned the responsibility to rec ive hand-carried

returns in the local Internal Revenue Service office".

Respondent contends that because the 200

amendments to

section 1.6091-2(d) (1), Income Tax Regs., mad

no substantive

"Although the preamble states that the mendment concerns

the filing of hand-carried returns, see T.D. $156, 2004-2 C.B.

669, the amendment also affected sec. 1.6091- (a) (1), Income Tax

Regs.,.which contains general provisions on r turn filing.

Compare sec. 1.6091-2(a) (1), Income Tax Regs. (stating that the

returns shall be filed with a district direct r),. with sec.

1.6091-2(a) (1), income Tax Regs., as amended

y T.D. 9156, 2004-2

C.B. 669 (stating that the returns shall be f led with any person

assigned responsibility to receive returns at the local IRS

office).

|

- 25 -

changes to the taxpayer's ability to file a return by hand

carrying it to a local IRS office as stated in the preamble, see

T.D. 9156, 2004-2 C.B. at 669, it is appropriate to treat amended

section 1.6091-2, Income Tax Regs., as the relevant authority

with respect to the issue of whether petitioner's counsel

delivered the returns to the appropriate IRS employee.

disagree.

We

There is no provision in T.D. 9156, 2004-2 C.B. at

669, that gives amended section 1.6091-2,

Income Tax Regs.,

retroactive effect, and respondent has cited no authority for the

proposition that amended section 1.6091-2, Income Tax Regs.,

controls or should control the filing of an individual income tax

return in 2003.

To summarize, in the first 3 months of 2003, the only

relevant guidance to a taxpayer regarding the filing of his

return was the guidance provided by section 6091, obsolete

regulations, and any instructions for specific returns.

The 2003

notice, which the IRS issued in early 2003 to temporarily fill

the information gap created by the reorganization, was effective

for documents filed after April-'7, 2003, and did not apply to

returns delivered to the IRS before the effective date.

The

amended regulations under section 6091'were not promulgated until

2004 and did not apply to returns filed in 2003.

- 26 IV.

Analysis

The record does not establish exactly how or when

petitioner's counsel delivered the package of returns and checks

to the CID.

In the normal case, such a gap

n the record would

dictate that the taxpayer, who has the burde

limitations issue, must lose.

of proof on the

This is not the normal case,

however.

Although the record is not clear regarding the details of

the delivery of the tax return package to the IRS, the record

clearly establishes two important facts:

(1) The tax return

package was delivered to the IRS no later th n February 19, 2003,

and (2) the package was received by an IRS office that had the

authority to process its contents.

We know these facts because

the income tax transcripts in the record conflirm that the checks

to pay petitioner's 1996 and 1997 tax liabililties as reported on

petitioner's 1996 and 1997 returns were processed, deposited, and

ultimately credited to petitioner's 1996 and 1997 accounts on

February 19, 2003.

Although the transcripts

re less clear about

the processing of the returns, the transcript

also show that

returns of some kind were processed on March

7, 2003, as

"Amended Return Filed".

Because the only ret rns petitioner

!

submitted to the IRS were his original delinqüent returns, we

assume for purposes of this analysis that the returns processed

as amended returns were really petitioner's original returns.

- 27 -

Respondent did not introduce any evidence to explain the "Amended

Return Filed" entries on the transcripts or the lacklof any entry

with respect to the originalt returns.

As stated earlier, petitioner has the 'burden of proof

regarding the limitations issuedand the initial burden of

production.

Petitioner carried his initial burden of production

by introducing credible evidence that his attorney delivered a

package containing his 1996 2000 original returns and checks toi

pay his 1996 and 1997 tax'liabilities to the IRS and by

introducing IRS transcripts confirming that the IRS had Neceived

the package and actually processed at least some of itsicontents.

The earliest processing date, February 19, '2003, appearing on the

transcripts gives rise to an- inference that an IRS office with 4

authority to receive and process the 'documents had received the

returns and checks by that date.

Consequently., the~ burden of '

producing evidence shifted to respondent.

Respondent called no witnesses and introduced no exhibits

other than a few stipulated exhibits and certified transcripts

with respect to the allegedly unpaidsliabilities for each of the

years 1996-2000 that are the subject öf this proceeding.

The

transcripts contain substantially the same entries. : One entry on

each of the transcripts reflects that a f~raud penalty was

assessed on February 28, 2006.

The rest of the entries are

largely uninformative and require us to guess at their meanings,

- 28 -

e.g.,

"Claim Pend",

"470 In Error", and "Litigation".

The

Il

certified transcripts, which do not purport to be the type of

income tax transcripts that would show the h story of

petitioner's income tax accounts for 1996-2000, contain no

indication that petitioner filed original re urns for 1996-2000,

that the tax reported on the returns was assessed, or that

payments of the reported tax were credited t

petitioner's

'I

accounts.

However, each of the transcripts contains the

following entry:

"NO NOTICES TO THE TAXPAYER CI IS WORKING THIS

FRAUD CASE IRC 6651 F"

Respondent had the obligation to produce evidence that

demonstrated petitioner did not effectively file his 1996-2000

return until March 2003.

Respondent did not do so.

evidence in the record regarding the receipt

The only

nd processing of

the package that petitioner's counsel delivered to the IRS is the

evidence gleaned from IRS transcripts.

Those) transcripts

establish that the package was received no later than February

19, 2003, when the payments of petitioner's 1996 and 1997 tax

liabilities as reported on petitioner's origi al returns for

those years by checks included in the package were posted to

petitioner's accounts.

Ordinarily, the Commissioner's failure to counter taxpayer's

credible evidence would be fatal to the Commissioner's position.

Respondent seeks to avoid such a result by contending that

- 29 -

petitioner failed to meticulously comply with the filing

requirements.

Respondent relies on a line of cases to support

his argument.

See Helvering v. Campbell, 139 F.2d 865 (4th Cir..

1944), affg. a Memorandum Opinion of this Court; O'Bryan Bros. v.

Commissioner,

127 F.2d 645

(6th.Cir.

1942), affg. 42 B.T.A.

18

(1940); W.H. Hill Co. v. Commissioner, 64 F.2d 506 (6th Cir.

1933), affg. 23 B.T.A. 605

(1931); Winnett v. Commissioner, 96

T.C. at 807-808; Espinoza v. Commissioner,

78 T.C. 412, 413-414

(1982); Allnutt v. Commissioner, T.C. Memo. 2002-311, affd. 523

F.3d 406

(4th Cir.

2001-207, affd.

2008); Friedmann v.

80 Fed. Appx. 285

Commissioner, T.C. Memo.

(3d Cir. 2003); Green v.

Commissioner, T.C. Memo. 1993-152, affd. without published

opinion 33 F.3d 1378 (5th Cir. 1994); Metals Refining Ltd. v.

Commissioner, T.C. Memo. 1993-115; Harrod v. Commissioner, T.C.

Memo.

1961-300; Kotovic v. Commissioner,

T.C. Memo.

1959-177;

Kraus v. United States, 55 AFTR 2d 85-1116, at 85-1119,.85-1 USTC

par. 9310, at 87,752-87,753 (E.D.N.Y. 1985); United States v.

Dolmage,

No.

166 F. Supp. 202

94-1035

(D. Md. 1958); Levert v. United States,

(Bankr. N.D. Ohio 1994).

Most of the cases on which respondent relies involved a

situation where the taxpayer submitted returns to an IRS office

and/or to an IRS employee contrary to the specific guidance set

forth in section 6091 and related regulations.

See,i e.g.,

Winnett v. Commissioner, supra; Espinoza v. Commissioner, supra

- 30 at 422; Allnutt v. Commissioner, supra; Friedmann v.

Commissioner, supra; Metals Refining Ltd. v. Commissioner, supra.

Each of the cases involved an attempted retu n filing that

occurred when IRS districts headed by distridt directors were

still in place.

||

Consequently, the regulations under section 6091

in effect before 2004 offered effective guidance regarding the

filing of returns.

See, e.g., Espinoza v. Cdmmissioner, supra at

422; Allnutt v. Commissioner,. supra; Metals Refining Ltd. v.

Commissioner, supra; Levert v. United States, supra.

Some of the

cases involved attempts by taxpayers to file returns with revenue

Il

agents who were handling their cases at a time when the courts

concluded that delivering returns to a revenue agent did not

constitute filing of a return.

See, e.g., O'Bryan Bros., Inc. v.

Commissioner, supra at 647; Friedmann v. Commlissioner, supra;

Metals Refining Ltd. v. Commissioner, supra; Harrod v.

Commissioner, supra; Kraus v. United States,

1119, 85-1 USTC at 87,752-87,753.

5 AFTR 2d at 85-

None of the cases respondent

cites involved an attempt -by the taxpayer to file executed

original returns with payments, and none of the cases involved

evidence that the payments made with the retukns were actually

processed by the IRS and credited to the taxpayer's account.

Some of the cases respondent cites address the taxpayer's

intent to file a return.

See, e.g., Espinoza v. Commissioner,

supra at 422; Allnutt v. Commissioner, supra; Friedmann v.

- 31 -

Commissioner, supra.

The record supports a.conclusion that

petitioner clearly intended to file the returns when his counsel

submitted them to the CID.

The -returns were accompanied by

payment of petitioner's 1996 and 1997 Federal income tax

liabilities and were filed at a time when the returns could have

been used against petitioner in the criminal investigation."

We

believe that an inference that petitioner intended to file the

returns by submitting them to the CID is warranted on the record

before us.

Respondent also attempts to convince us that the CID had no

authority in 2003 to accept returns for filing.

Respondent,

relying on some of the cases cited above, contends that special

agents of the CID, like revenue agents, had not been specifically

delegated authority to accept returns for filing and that

therefore the delivery of the package of the returns and the

checks to the CID was not a proper filing.

"Submitting returns while a criminal investigation is

ongoing can have very serious and adverse consequences for the

taxpayer and is not undertaken lightly. See, e.g., Smith v.

United States,

348 U.S.

147,

157-158

(1954)

(prior tax returns

sufficiently corroborated the taxpayer's statements as to his

financial history and the opening net worth); United States v.

Karsky, 610 F.2d 548 (8th Cir. 1979) (prior returns relevant to a

determination of the taxpayer's state of mind for establishing

willfulness which is an essential element of the crime of failure

to file an income tax return under sec. 7203); Malnik v.

Commissioner, T.C. Memo. 1985-467 (a criminal investigation

expanded to 1963 after the taxpayer filed his 1963 return during

a criminal investigation).

11

h

- 32 -

We cannot and need not draw such a conclusion on the facts

il

of this case for several reasons.

First, respondent did not

prove that special agents had not been delegÁted authority to

accept returns for filing in 2003.

In fact, respondent did not

introduce any evidence regarding the IRS employees who were

authorized in -2003 to receive returns on behalf of the IRS.

Second, the Commissioner has recognized in a

least one instance

that a specific delegation of authority to r ceive returns for

filing is not necessary as long as a de facto delegation of

authority exists.

In 1999 the Commissioner'

Office of Chief

Counsel issued Chief Counsel Advice (CCA) 19 933039 (Aug. 20,

1999).

The CCA recognized a revenue officer's authority to

receive delinquent returns for filing even though there was no

specific delegation order permitting revenue officers to do so.

See CCA 199933039

(Aug.

20,

1999).

In the CCA the Office of

Chief Counsel concluded that. a delegation of

uthority may take

many forms including functional statements in' position

descriptions.

Id.

Respondent did not introduce the position

description of a special agent" or any other evidence to support

his arguments.

The third reason for rejecting respondent's argument is

really a corollary of the second reason and relates to the

|

"Respondent cites individual occupational requirements for

the position of a criminal investigator for the Department of the

Treasury but refers to it as a position descr ption.

- 33 -

general authority of the CID over criminal investigations of

taxpayers and related civil matters.

As noted previously, each

of the plain-English.transcripts in the record contains the

following notation:

- "NO NOTICES TO THE TAXPAYER CI IS WORKING

THIS FRAUD CASE IRC 6651 F".

Respondent did not introduces any

evidence to explain the entries.

However, the IRM as in effect

in 2003 contemplated that the CID -could receive delinquent

returns and was entitled to instruct IRS employees regarding the

processing of delinquent returns and payments.

Part 9.8 of the

IRM described the control function of the Fraud Detection Center

(FDC), whose primary responsibilities were to identify -refund

fraud and provide support for the Criminal Investigation field

offices.

See 5 Administration, IRM (CCH), pt. 9.8.1.2.2 (Jan.

29, 2002).

The IRM stated that the FDC was to notify the CID

field office when an IRS campus received amended or delinquent

returns for accounts under the control of the CID.

See id. pt.

9.8.2.6(1)

"The FDC will

(July 29,

2002).

The IRM also stated:-

process amended returns, delinquent returns, and advance payments

submitted to the FDC from the CI field office for accounts under

- 34 -

CI control based on instructions"."

See id.Ilpt. 9.8.2.6.1(1)

,(emphasis supplied).

We have found nothing in the Code or thè regulations that

would authorize the CID to prevent or delay

he processing of

delinquent original returns filed by -a taxpafer during the

pendency of a criminal tax investigation within its jurisdiction.

The above-described IRM provisions, however, llappear to

'I

acknowledge the ability of the CID to "contròl" cases under

investigation and to provide "instructions" regarding the

processing of delinquent returns and payments.

See, e.g., id.;

'l

id. pt. 9.8.2.6(2).

Set against this. background is evidence that

original returns petitioner.filed were not t mely processed and

that the processing of the returns was inexp icably characterized

in the IRS' records as the processing of ame ded returns.

anomalies deserved an explanation, but none

These

as forthcoming.

Although respondent could have called a representative of the CID

office that was responsible for the investigation of petitioner

or other IRS employees to testify regarding

he receipt and

processing of petitioner's delinquent returns, respondent chose

"The general instructions for processin original

delinquent returns stated that before processing those returns,

the IRS' statute function had to determine whether the CID had

requested the service center to control the taxpayer's account.

See 6 Administration,

IRM (CCH), pt. 25.6.4.4.2(6)

(Oct.

1,

2001).

If so, in certain circumstances the IRS' statute function

should have referred cases to CID for the professing

instructions.

Id. pt. 25.6.4.4.1(7).

- 35 -

not to do so.

Respondent's failure to introduce evidence within

his control gives rise to an inference that the evidence would

have been unfavorable.

See Wichita Terminal Elevator Co. v.

Commissioner, 6 T.C. 1158, 1165

(1946), affd. 162 F.2d 513

(10th

Cir. 1947).

Moreover, we have held that if a taxpayer submits a return

to a person who is not authorized to accept the return for filing

and the return is then forwarded to the correct IRS office, the

period of limitations commences when the office designated to

receive the return actually receives it.

See Winnett v.

Commissioner, 96 T.C. at 808 (holding that for purposes of

determining the beginning of the period of limitations a return

is deemed filed when it is received by the "revenue office

designated to receive such return"); Allnutt v. Commissioner,

T.C. Memo. 2002-311 (returns deemed filed when the Di'strict Director's office stamped them received).

We have found that

petitioner's counsel delivered the checks along with five returns

to the CID of the IRS.

The certified transcripts of petitionet's

tax accounts show that the checks were processed as of February:

19, 2003, and we therefore infer that the checks and returns were

transmitted for processing through internal IRS channels.

Accordingly, we also conclude that even if the returns were

considered filed only when they were received for processing (as

- 36 -

opposed to when they were delivered to the C D), such filing

occurred on or before February 19, 2003.

For the foregoing reasons, we find that the package of tax

returns and checks was received by an IRS office with authority

to receive and process the contents of the plckage no later than

February 19, 2003.

We hold therefore that petitioner effectively

filed his 1996-2000 returns no later than February 19, 2003.

It

I

follows then that respondent's assessments of the section 6651(f)

11

additions to tax on February 28, 2006, were not made within the

applicable 3-year period of limitations, and we so find.

Because respondent did not timely assess| the section 6651(f)

additions to tax for 1-996-2000, respondent is barred from

collecting the underlying tax liabilities at issue here.

We hold

therefore that petitioner does not owe the unberlying tax

liabilities at issue, and we do not sustain rþspondent's proposed

collection action.

In the light of this holding, we do not need

to address whether the Appeals Office abused its discretion in

determining to proceed with the levy.

- 37 -

We have considered all of the arguments raised by either

party, and to the extent not discussed above, we find them to be

irrelevant or without merit.

To reflect the foregoing,

Decision will be entered for

petitioner.