118 T.C. No. 33
UNITED STATES TAX COURT
RICHARD A. WILSON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13703-01. Filed June 12, 2002.
In conjunction with a criminal prosecution for tax evasion, P executed a Plea Agreement in which he agreed to file delinquent Federal income tax returns and report specific amounts of income. After assessing the tax liabilities reported on the delinquent returns, R sent P a notice of deficiency determining only additions to tax for fraudulent failure to file and failure to pay estimated tax under secs. 6651(f) and 6654(a), I.R.C., respectively. P filed a petition for redetermination. R moved to dismiss for lack of jurisdiction, arguing that the deficiency notice was invalid because R had not determined any “deficiency” as defined in sec. 6211(a), I.R.C.
Held: This Court lacks jurisdiction over the additions to tax for fraudulent failure to file because such additions are not attributable to a deficiency. Sec. 6665(b)(1), I.R.C. - 2 -
Held, further, This Court lacks jurisdiction over the additions to tax for failure to pay estimated tax because P actually filed returns for the years in issue. Sec. 6665(b)(2), I.R.C.
Howard B. Young and John A. Ruemenapp (specially
recognized), for petitioner.
Timothy S. Murphy and Tami Belouin, for respondent.
OPINION
DAWSON, Judge: This case was assigned to Special Trial
Judge Robert N. Armen, Jr., pursuant to the provisions of section
7443A(b)(5) and Rules 180, 181, and 183.1 The Court agrees with
and adopts the opinion of the Special Trial Judge, which is set
forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
ARMEN, Special Trial Judge: This matter is before the Court
on respondent’s Motion to Dismiss for Lack of Jurisdiction.
Respondent asserts that jurisdiction is lacking because “no
deficiency is raised in the notice of deficiency, pursuant to
I.R.C. sections 6211 and 6665, nor has respondent made any other
determination with respect to petitioner’s taxable years 1991,
1992, 1993, and 1994, that would confer jurisdiction on this
1 Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure. - 3 -
Court.” As explained below, we shall grant respondent’s motion
to dismiss.
Background
On July 2, 1999, petitioner executed a Plea Agreement
pursuant to rule 11 of the Federal Rules of Criminal Procedure.
In the Plea Agreement, petitioner agreed, inter alia, to file
with the Internal Revenue Service delinquent Federal income tax
returns for 1991, 1992, 1993, and 1994. In this regard, the Plea
Agreement states in pertinent part:
The defendant will file with the Internal Revenue Service delinquent individual income tax returns, Forms 1040, for the years 1991, 1992, 1993, and 1994, reporting, as income to him, diverted corporate receipts and dividend income totaling $328,915, $176,376, $222,472, and $251,839, respectively.
On March 22, 2000, petitioner filed U.S. Individual Income
Tax Returns, Forms 1040, for 1991, 1992, 1993, and 1994 in
compliance with the Plea Agreement. Petitioner reported tax
liabilities of $95,778, $48,262, $72,760, and $84,247 for the
years 1991, 1992, 1993, and 1994, respectively.
On September 13, 2001, respondent issued to petitioner a
notice of deficiency. In the notice, respondent determined that
although petitioner is not liable for any deficiencies in income
taxes, he is liable for additions to tax under section 6651(f)
(fraudulent failure to file) and section 6654 (failure to pay
estimated tax) for the years and in the amounts as follows: - 4 -
Additions to Tax Year Tax Sec. 6651(f) Sec. 6654 1991 --- $71,834 $5,474 1992 --- 36,197 2,105 1993 --- 54,570 3,049 1994 --- 63,185 4,372
On December 6, 2001, petitioner timely filed with the Court
a petition for redetermination, challenging the above-described
notice of deficiency. At the time that the petition was filed,
petitioner resided in Holly, Michigan.
In response to the petition, respondent filed a Motion to
Dismiss for Lack of Jurisdiction on the ground that the notice of
deficiency is invalid because respondent did not determine any
“deficiency” within the meaning of sections 6211 and 6665.
Petitioner filed an Objection to respondent’s motion to dismiss.
Thereafter, pursuant to notice, respondent’s motion was called
for hearing at the Court's motions session in Washington, D.C.2
Discussion
The Tax Court is a court of limited jurisdiction, and we may
exercise our jurisdiction only to the extent authorized by
statute. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The
Court’s jurisdiction to redetermine a deficiency depends upon the
2 During the hearing, counsel for respondent argued that although the Court lacks jurisdiction to redetermine the additions to tax in question pursuant to its deficiency jurisdiction under sec. 6213(a), the Court may have the authority to review such additions to tax pursuant to its collection review jurisdiction under secs. 6320 and 6330. - 5 -
issuance of a valid notice of deficiency and a timely filed
petition. Rule 13(a), (c); Monge v. Commissioner, 93 T.C. 22, 27
(1989); Normac, Inc. v. Commissioner, 90 T.C. 142, 147 (1988).
The pivotal issue in this case is whether respondent
determined a “deficiency” in petitioner’s Federal income tax
within the meaning of sections 6211 and 6665. The term
“deficiency” is defined in section 6211(a) as the amount by which
the tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44,
of the Internal Revenue Code exceeds the excess of the sum of the
amount shown as the tax by a taxpayer on the taxpayer’s return
plus the amounts previously assessed (or collected without
assessment) as a deficiency, over the amount of rebates made.
Consistent with section 6211(a), the definition of a
deficiency is influenced in part by the definition of the term
“tax”. In this regard, section 6665(a) states the general rule
that additions to tax are treated as “tax” for purposes of
assessment and collection. However, section 6665(b) provides an
exception to the general rule as follows:
SEC. 6665(b) Procedure For Assessing Certain Additions To Tax.--For purposes of subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes), subsection (a) shall not apply to any addition to tax under section 6651, 6654, 6655; except that it shall apply--
(1) in the case of an addition described in section 6651, to that portion of such addition which is attributable to a deficiency in tax described in section 6211; or - 6 -
(2) to an addition described in section 6654 or 6655, if no return is filed for the taxable year.
In sum, section 6665(b) provides in pertinent part: (1) An
addition to tax under section 6651 will be 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
section 6211, and (2) an addition to tax under section 6654 will
be treated as a tax for purposes of the deficiency procedures
only if no return is filed for the year in question.
The record in this case shows that, consistent with a
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118 T.C. No. 33
UNITED STATES TAX COURT
RICHARD A. WILSON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13703-01. Filed June 12, 2002.
In conjunction with a criminal prosecution for tax evasion, P executed a Plea Agreement in which he agreed to file delinquent Federal income tax returns and report specific amounts of income. After assessing the tax liabilities reported on the delinquent returns, R sent P a notice of deficiency determining only additions to tax for fraudulent failure to file and failure to pay estimated tax under secs. 6651(f) and 6654(a), I.R.C., respectively. P filed a petition for redetermination. R moved to dismiss for lack of jurisdiction, arguing that the deficiency notice was invalid because R had not determined any “deficiency” as defined in sec. 6211(a), I.R.C.
Held: This Court lacks jurisdiction over the additions to tax for fraudulent failure to file because such additions are not attributable to a deficiency. Sec. 6665(b)(1), I.R.C. - 2 -
Held, further, This Court lacks jurisdiction over the additions to tax for failure to pay estimated tax because P actually filed returns for the years in issue. Sec. 6665(b)(2), I.R.C.
Howard B. Young and John A. Ruemenapp (specially
recognized), for petitioner.
Timothy S. Murphy and Tami Belouin, for respondent.
OPINION
DAWSON, Judge: This case was assigned to Special Trial
Judge Robert N. Armen, Jr., pursuant to the provisions of section
7443A(b)(5) and Rules 180, 181, and 183.1 The Court agrees with
and adopts the opinion of the Special Trial Judge, which is set
forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
ARMEN, Special Trial Judge: This matter is before the Court
on respondent’s Motion to Dismiss for Lack of Jurisdiction.
Respondent asserts that jurisdiction is lacking because “no
deficiency is raised in the notice of deficiency, pursuant to
I.R.C. sections 6211 and 6665, nor has respondent made any other
determination with respect to petitioner’s taxable years 1991,
1992, 1993, and 1994, that would confer jurisdiction on this
1 Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure. - 3 -
Court.” As explained below, we shall grant respondent’s motion
to dismiss.
Background
On July 2, 1999, petitioner executed a Plea Agreement
pursuant to rule 11 of the Federal Rules of Criminal Procedure.
In the Plea Agreement, petitioner agreed, inter alia, to file
with the Internal Revenue Service delinquent Federal income tax
returns for 1991, 1992, 1993, and 1994. In this regard, the Plea
Agreement states in pertinent part:
The defendant will file with the Internal Revenue Service delinquent individual income tax returns, Forms 1040, for the years 1991, 1992, 1993, and 1994, reporting, as income to him, diverted corporate receipts and dividend income totaling $328,915, $176,376, $222,472, and $251,839, respectively.
On March 22, 2000, petitioner filed U.S. Individual Income
Tax Returns, Forms 1040, for 1991, 1992, 1993, and 1994 in
compliance with the Plea Agreement. Petitioner reported tax
liabilities of $95,778, $48,262, $72,760, and $84,247 for the
years 1991, 1992, 1993, and 1994, respectively.
On September 13, 2001, respondent issued to petitioner a
notice of deficiency. In the notice, respondent determined that
although petitioner is not liable for any deficiencies in income
taxes, he is liable for additions to tax under section 6651(f)
(fraudulent failure to file) and section 6654 (failure to pay
estimated tax) for the years and in the amounts as follows: - 4 -
Additions to Tax Year Tax Sec. 6651(f) Sec. 6654 1991 --- $71,834 $5,474 1992 --- 36,197 2,105 1993 --- 54,570 3,049 1994 --- 63,185 4,372
On December 6, 2001, petitioner timely filed with the Court
a petition for redetermination, challenging the above-described
notice of deficiency. At the time that the petition was filed,
petitioner resided in Holly, Michigan.
In response to the petition, respondent filed a Motion to
Dismiss for Lack of Jurisdiction on the ground that the notice of
deficiency is invalid because respondent did not determine any
“deficiency” within the meaning of sections 6211 and 6665.
Petitioner filed an Objection to respondent’s motion to dismiss.
Thereafter, pursuant to notice, respondent’s motion was called
for hearing at the Court's motions session in Washington, D.C.2
Discussion
The Tax Court is a court of limited jurisdiction, and we may
exercise our jurisdiction only to the extent authorized by
statute. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The
Court’s jurisdiction to redetermine a deficiency depends upon the
2 During the hearing, counsel for respondent argued that although the Court lacks jurisdiction to redetermine the additions to tax in question pursuant to its deficiency jurisdiction under sec. 6213(a), the Court may have the authority to review such additions to tax pursuant to its collection review jurisdiction under secs. 6320 and 6330. - 5 -
issuance of a valid notice of deficiency and a timely filed
petition. Rule 13(a), (c); Monge v. Commissioner, 93 T.C. 22, 27
(1989); Normac, Inc. v. Commissioner, 90 T.C. 142, 147 (1988).
The pivotal issue in this case is whether respondent
determined a “deficiency” in petitioner’s Federal income tax
within the meaning of sections 6211 and 6665. The term
“deficiency” is defined in section 6211(a) as the amount by which
the tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44,
of the Internal Revenue Code exceeds the excess of the sum of the
amount shown as the tax by a taxpayer on the taxpayer’s return
plus the amounts previously assessed (or collected without
assessment) as a deficiency, over the amount of rebates made.
Consistent with section 6211(a), the definition of a
deficiency is influenced in part by the definition of the term
“tax”. In this regard, section 6665(a) states the general rule
that additions to tax are treated as “tax” for purposes of
assessment and collection. However, section 6665(b) provides an
exception to the general rule as follows:
SEC. 6665(b) Procedure For Assessing Certain Additions To Tax.--For purposes of subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes), subsection (a) shall not apply to any addition to tax under section 6651, 6654, 6655; except that it shall apply--
(1) in the case of an addition described in section 6651, to that portion of such addition which is attributable to a deficiency in tax described in section 6211; or - 6 -
(2) to an addition described in section 6654 or 6655, if no return is filed for the taxable year.
In sum, section 6665(b) provides in pertinent part: (1) An
addition to tax under section 6651 will be 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
section 6211, and (2) an addition to tax under section 6654 will
be treated as a tax for purposes of the deficiency procedures
only if no return is filed for the year in question.
The record in this case shows that, consistent with a
criminal plea agreement, petitioner filed delinquent Federal
income tax returns for 1991, 1992, 1993, and 1994. Respondent
accepted those returns as filed and immediately assessed the
taxes reported therein. See sec. 6201(a)(1); Meyer v.
Commissioner, 97 T.C. 555, 559 (1991). The amounts shown as
taxes by petitioner on his returns do not constitute deficiencies
within the meaning of section 6211(a).
Respondent also determined that petitioner is liable for
additions to tax for fraudulently failing to timely file his tax
returns and failing to pay estimated taxes for the years in
question. Applying the plain language of sections 6211 and
6665(b) to the facts presented, we hold that the additions to tax
under section 6651(f) determined in the notice of deficiency are
not attributable to “deficiencies” within the meaning of section - 7 -
6211(a), and, therefore, the Court lacks jurisdiction over such
additions to tax in this case. The additions to tax that
respondent determined under section 6651(f) were computed by
reference to the taxes shown by petitioner on his delinquently
filed returns; thus, those additions are not attributable to a
deficiency as defined in section 6211. See Estate of Forgey v.
Commissioner, 115 T.C. 142 (2000); Meyer v. Commissioner, supra
at 559-563; Estate of DiRezza v. Commissioner, 78 T.C. 19, 25-32
(1982); Estate of Scarangella v. Commissioner, 60 T.C. 184
(1973); Newby’s Plastering, Inc. v. Commissioner, T.C. Memo.
1998-320. Further, the additions to tax that respondent
determined under section 6654 are not subject to the deficiency
procedures because petitioner actually filed tax returns, albeit
delinquently, for the years in question. See Meyer v.
Commissioner, supra at 561-563.
Finally, we repeat what we said nearly 30 years ago in a
case similar to the present one:
We recognize the difficult position in which petitioners are placed by not being able to come to the Tax Court to test the validity of the respondent’s action in asserting the penalty. Nevertheless, that is the law and we must take it as we find it.
Estate of Scarangella v. Commissioner, supra at 186-187. - 8 -
To reflect the foregoing,
An order will be entered
granting respondent’s Motion to
Dismiss for Lack of Jurisdiction.