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Sunday, March 03, 2013


Seems like a simple question, but is it? Is a notice addressed to a person outside of the U.S. if at the time of mailing the person is physically in the U.S., even though they reside outside of the U.S.? What about if it was mailed to a U.S. address? What if it was mailed to a U.S. address and the taxpayer was in the U.S. when it was delivered? More than one tax case has struggled with these questions, including one recently decided by the Tax Court. In the recent case, the Tax Court itself could not even agree on the answers, with some judges filing dissenting opinions to the majority decision.

A taxpayer who received a Notice of Deficiency has 90 days from the date the IRS mails it to file a petition in Tax Court to contest the asserted tax. Otherwise, the taxpayer will need to pay the tax first, and then sue for a refund in federal District Court or the Claims Court. However, Code §2613(a) provides a 150 period in certain circumstances:

Within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. (emphasis added)

So in the recent case, the taxpayer formerly resided in the U.S., but took up residency in Canada. She still had a San Francisco home and post office box, and the IRS mailed the notice to her U.S. post office box. Coincidentally, the taxpayer was in the U.S. when the notice was mailed, and was still there when it was delivered to her P.O. box, but she did not pick it up. She went back to Canada and the notice was eventually forwarded to her in Canada. She filed a petition in Tax Court, but more than 90 days after the date of mailing and less than 150 days after the mailing date.

There were lots of ways the Tax Court could have ruled her petition untimely – she was in the U.S. when it was mailed, and when it was delivered, and it was mailed to a U.S. address. Nonetheless, the Court ruled in favor of the taxpayer and allowed her petition. The Court noted that “the crucial criterion to be gleaned from the decided cases is whether the `person' is physically located outside the United States so that the notice of deficiency mailed to its United States address will be delayed in reaching it in a foreign country *** and thereby hamper its ability to adequately respond by filing a petition to litigate its case in this Court.” Thus, the Court held:

“She was a Canadian resident (i.e., when the notice was mailed and delivered); was not at the address to which the notice was delivered; and received the notice, in Canada, 127 days after the notice's mailing date. Although petitioner was in San Francisco when the notice was mailed and delivered, her status as a person “outside of the United States” is largely a function of her residency and is not vitiated by her brief presence in the United States.”

Note that the opinion never lets us know whether the taxpayer was a U.S. citizen, or a resident for income tax purposes (by reason of the # of days present in the U.S. or green card status). That is because the 150 rule can be used by U.S. taxpayers and not just nonresidents, if they are physically outside of the U.S.

Deborah L. Smith v. Commissioner, 140 T.C. No. 3 (2013)

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