Contesting Liability in a CDP Hearing (11/23/12)

Judge Halpern has an interesting opinion in JAG Brokerage, Inc. v. Commissioner, T.C. Memo. 2012-315, here.  The case apparently involves John Gotti, reported to be an American mobster (Wikipedia, here),  who appears in the case along with Kim Gotti for the petitioner corporation.  Mr. Gotti was an officer of the petitioner and appears to have been incarcerated in solitary confinement when the notice of deficiency was issued to the corporate taxpayer, an artificial entity.  The notice of deficiency was copied to Mr. and Ms. Gotti (in her case under a different last name).  No Tax Court case was filed in response to the notice of deficiency.  The tax was assessed.  The IRS instituted collection procedures.  The corporate taxpayer sought to contest liability in a Collection Due Process process (CDP), in which the corporation was represented by Mr. and Ms. Gotti.  In a CDP hearing, the Appeals Office Employee (Appeals Officer or Settlement Officer) will not consider any issue previously disposed of in a CDP hearing or in a prior administrative or judicial proceeding in which the taxpayer could have contested liability and participated meaningfully.  As to the underlying liability, the taxpayer can only contest in the CDP hearing if he “did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.”  § 6330(c)(2)(B).  So the question was a nuanced one over whether the IRS's proof of mailing the notice of deficiency was adequate to establish that this receipt requirement was met, so as to preclude the taxpayer from contesting the liability.

Judge Halpern rejects the IRS's motion for summary judgment based on its mailing the notice to the petitioner at its last known address and to the two Gottis.  Judge Halpern reasons: