                          T.C. Memo. 1997-333



                        UNITED STATES TAX COURT



             THOMAS H. AND MAUREEN HESSE, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 3448-97.              Filed July 23, 1997.


        K. Layne Morrill (specially recognized), for petitioners.

        Richard A. Rappazzo, for respondent.


                          MEMORANDUM OPINION


        ARMEN, Special Trial Judge:   This case was heard pursuant to

the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1



    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.
                                 - 2 -


        This case is before the Court on respondent's Motion to

Dismiss for Lack of Jurisdiction, filed pursuant to Rule 53.

Respondent contends that dismissal is warranted on the ground

that the petition was not filed within the time prescribed by

sections 6213(a) and 7502.     In contrast, petitioners contend

principally that the notice of deficiency was rescinded and that

dismissal is warranted for that reason; alternatively,

petitioners contend that a subsequent Internal Revenue Service

(IRS) letter constitutes a second notice of deficiency and that

the petition was timely filed in respect of such letter.

Background

        At the time that the petition was filed with the Court,

petitioners resided in Mesa, Arizona.

        On August 14, 1996, respondent mailed a notice of deficiency

(the notice of deficiency) to petitioners.     In the notice,

respondent determined a deficiency in petitioners' Federal income

tax for the taxable year 1993 in the amount of $10,002.2    The

deficiency was attributable principally to the disallowance of

Schedule C deductions.      In explanation of the disallowance, the

notice stated that the expenses in question represented startup

expenses that must be capitalized.


    2
      In the petition for redetermination that petitioners
ultimately filed, petitioners placed only $8,115 of the
determined deficiency in dispute. At the hearing on respondent's
motion, petitioners confirmed that they intended to contest only
$8,115 of the determined deficiency.
                                 - 3 -


        The notice of deficiency was issued by respondent's district

office in Phoenix, Arizona.     The contact person specified in the

notice was "R. Fenton".

        The last paragraph of the first page of the notice of

deficiency stated as follows:

             The time for filing a petition with the Court (90
        or 150 days as the case may be) is set by law and
        cannot be extended or suspended. Thus, contacting the
        Service for more information or receiving other
        correspondence from the Service will not change the
        period for filing a petition with the Tax Court. The
        court cannot consider your case if the petition is
        filed late.

        Petitioners received the notice of deficiency shortly after

it was mailed to them.     Petitioners read the notice and

understood the significance of filing a petition within the 90-

day period of time.3    However, petitioners were surprised to

receive the notice because petitioners had been cooperating with

respondent's agents in the examination of their 1993 income tax

return.     In this regard, petitioners had anticipated that the

information that they had most recently furnished would be

dispositive and would lead to an administrative resolution of

their case.

        On or about September 6, 1996, petitioners telephoned Lana

Hatley, an IRS compliance officer to whom, in January 1996,



    3
      The notice of deficiency was not addressed to petitioners
outside of the United States; hence, the 150-day period provided
by sec. 6213(a) does not apply in this case.
                               - 4 -


responsibility for the ongoing examination of petitioners' 1993

income tax return had been reassigned.    Ms. Hatley explained

that, because of the press of other business, she had not had the

opportunity to review the material that petitioners had

previously furnished.   Ms. Hatley suggested that petitioners

write to Ms. Fenton, the "contact person" specified in the notice

of deficiency, and request further consideration of their case by

Ms. Hatley.

     By letter dated September 6, 1996, petitioners wrote to Ms.

Fenton and requested that their file be transferred to Ms. Hatley

for Ms. Hatley's further consideration.    The penultimate

paragraph of petitioners' letter stated as follows:

     The basis for this transfer of file is my request and
     Lana's agreement to a further interview. We believe
     that she now has all the information she requires in
     order to perform her audit of 1993 and our meeting will
     conclude the open issues.

     Petitioners' request was granted, and Ms. Hatley undertook

to consider further petitioners' case.    Accordingly, on September

19, 1996, and at Ms. Hatley's request, petitioners faxed various

documents to Ms. Hatley for her consideration.    Communication

between petitioners and Ms. Hatley continued through October

1996.

     On the basis of their telephone conversation with Ms. Hatley

on or before September 6, 1996, as well as Ms. Hatley's agreement

to consider further their case, petitioners believed that the
                                  - 5 -


notice of deficiency had been rescinded and that they did not

need to file a petition in respect of the notice in order to

protect their appeal rights.      Petitioners' belief was also based

on the fact that Ms. Hatley appeared to be in a management

position at the time of the above-described telephone

conversation and that neither she nor any other of respondent's

agents advised petitioners that the notice of deficiency was

still in effect.    Indeed, if petitioners had been so advised,

they would have filed a petition with this Court within the 90-

day period provided by section 6213(a).

     By letter dated November 21, 1996, respondent's director of

the Phoenix internal revenue district advised petitioners that,

in effect, the deficiency determination previously made in the

notice of deficiency remained unchanged.          The letter dated

November 21, 1996, also stated, in part, as follows:

          We have considered the information you recently
     gave us about your Federal tax liability for the year
     shown above.

                *    *   *    *    *      *   *

          If you do not accept [our findings], you may,
     within the period stated in the statutory notice,
     petition the United States Tax Court for a
     redetermination of your tax liability.

          This correspondence and consideration of your case
     has not extended the period in which you may file a
     petition with the United States Tax Court. If no
     petition is filed within the allotted time, we will
     assess the tax and bill you.
                                 - 6 -


At the bottom of the letter, under the heading "Reason for

Disallowance", the following sentence was hand-written: "To the

extent verified, the expenses are allowable as start-up costs and

must be capitalized."

        The IRS letter dated November 21, 1996, was mailed to

petitioners in an envelope bearing a postmark date of November

27, 1996.

        The IRS letter dated November 21, 1996, was mailed to

petitioners approximately 2 weeks after the 90th day after the

notice of deficiency was sent to petitioners.4    In other words,

when petitioners received the IRS letter dated November 21, 1996,

and, indeed, on the date on which such letter was generated, the

90-day period within which petitioners could have filed a

petition in respect of the notice of deficiency had expired.

        Because petitioners believed that the notice of deficiency

had been rescinded, they regarded the IRS letter dated November

21, 1996, as a second notice of deficiency.     In view of the fact

that further consideration of their 1993 income tax return had

not led to an administrative resolution of their case,

petitioners then filed a petition with this Court.     Such petition

was mailed to the Court on February 20, 1997, and was filed by

the Court on February 24, 1997.     The latter two days; i.e.,



    4
      The 90th day after the notice of deficiency was sent to
petitioners was Tues., Nov. 12, 1996.
                                 - 7 -


February 20, 1997, and February 24, 1997, were both within 90

days of the date on which the IRS letter dated November 21, 1996,

was mailed to petitioners.

     At no time did petitioners ever request Form 8626 (Agreement

to Rescind Notice of Deficiency) from respondent, nor did

petitioners ever execute such form and tender it to respondent.

     At no time did any of respondent's agents ever proffer Form

8626 to petitioners or execute such form on behalf of respondent.

Discussion

     The Court's jurisdiction to redetermine a deficiency depends

upon the 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).   Section 6212(a) expressly authorizes the Commissioner,

after determining a deficiency, to send a notice of deficiency to

the taxpayer by certified or registered mail.    A notice of

deficiency is sufficient if it is mailed to the taxpayer at the

taxpayer's last known address.    Sec. 6212(b)(1).   Pursuant to

section 6213(a), the taxpayer has 90 days (or 150 days if the

notice is addressed to a person outside of the United States)

from the date that the notice of deficiency is mailed to file a

petition with the Court for a redetermination of the deficiency.

      Section 6212(d) authorizes the Commissioner, with the

consent of the taxpayer, to rescind any notice of deficiency
                                - 8 -


mailed to the taxpayer.   If a notice of deficiency is rescinded,

the taxpayer has no right to file a petition with the Court based

on such a notice.   Moreover, a notice that is rescinded is not

treated as a notice of deficiency for purposes of section

6212(c)(1), which restricts the issuance of further notices of

deficiency.   Sec. 6212(d).

     The parties do not dispute that the notice of deficiency was

mailed to petitioners at petitioners' last known address, nor do

the parties dispute that the petition was mailed and filed more

than 90 days after the issuance of such notice.   Respondent

contends that this case should be dismissed for lack of

jurisdiction because the petition was not filed within the time

provided by sections 6213(a) and 7502.   In contrast, petitioners

contend principally that the notice of deficiency was rescinded

and that, for such reason, this case should be dismissed for lack

of jurisdiction.    Alternatively, petitioners contend that the IRS

letter dated November 21, 1996, constituted a second notice of

deficiency and that their petition was timely filed when measured

from the date of mailing of such letter.

     We must first decide whether the notice of deficiency was

rescinded, because, if such notice was rescinded, we will dismiss

on that ground, rather than for lack of a timely-filed petition.

See, e.g., Pietanza v. Commissioner, 92 T.C. 729, 735-736 (1989),

affd. without published opinion 935 F.2d 1282 (3d Cir. 1991).
                                   - 9 -


     The rescission issue is indistinguishable from that in

Slattery v. Commissioner, T.C. Memo. 1995-274.          What we said in

that case regarding rescission applies equally in the present

case.   Thus:

          We now turn to the question of whether the notice
     of deficiency was rescinded. Section 6212(d) provides
     that the Secretary may, with the consent of the
     taxpayer, rescind any notice of deficiency mailed to
     the taxpayer. Clearly, the statute requires mutual
     consent by the Secretary and the taxpayer to effect a
     rescission of a notice of deficiency.4 We know of no
     authority deeming a notice of deficiency rescinded in
     absence of a formal rescission. While the facts
     presented herein may suggest that respondent considered
     a rescission, she did not consent to a rescission.
     Returning a case file from the 90-day section of
     respondent's office to the examination division for
     purposes of a conference is not tantamount to a
     rescission, even though the conference, due to
     miscommunication, was eventually scheduled for a date
     subsequent to the running of the 90-day period.
     Accordingly, we conclude that the notice of deficiency
     involved herein was not rescinded pursuant to section
     6212(d).
     _________________
           4
             The Internal Revenue Service has provided guidance to
     taxpayers wishing to consent to the rescission of a notice of
     deficiency. See Rev. Proc. 88-17, 1988-1 C.B. 692. This revenue
     procedure requires the taxpayer to request Form 8626, Agreement to
     Rescind Notice of Deficiency, which becomes effective when
     executed on behalf of the Commissioner.

     We recognize that petitioners in the present case believed

that the notice of deficiency had been rescinded.           However, under

the operative statute, the rescission of a notice of deficiency

is not a function of the taxpayer's subjective belief.            Rather,

the rescission of a notice of deficiency requires mutual consent

by the Commissioner and the taxpayer, and such mutual consent

must be objectively apparent.
                                 - 10 -


        In the present case, there is no objective manifestation of

mutual consent by respondent and petitioners to rescind the

notice of deficiency.     Indeed, we find no evidence that

respondent even contemplated the rescission of such notice.

        Further consideration of a taxpayer's case during the

pendency of the 90-day period, without more, does not constitute

a rescission.5    Slattery v. Commissioner, supra.   Accordingly,

although it is regrettable that petitioners came to believe that

the warning set forth in the last paragraph of the first page of

the notice of deficiency (see supra page 3) did not apply to

them, we hold that the notice of deficiency was not rescinded

pursuant to section 6212(d).6


    5
      We note that one of the reasons that the Commissioner may
(with the taxpayer's consent) rescind a notice of deficiency is
"If the taxpayer submits information establishing the actual tax
due to be less than the amount shown in the notice." Rev. Proc.
88-17, sec. 3.04(2), 1988-1 C.B. 692, 693. What we think that
the revenue procedure suggests is that the Commissioner intends
to "consider first and then rescind if appropriate", rather than
to "rescind first and then consider". Obviously, there will be
cases, such as the present one, where the Commissioner considers
the taxpayer's information but nevertheless concludes that such
information does not warrant any revision to the determination
made in the notice of deficiency.
    6
      It is also regrettable that respondent's letter dated Nov.
21, 1996, was issued after the expiration of the 90-day period
provided by sec. 6213(a). Although we are sensitive to this
unfortunate fact, we must note that neither estoppel nor other
equitable considerations afford any basis for us to assume
jurisdiction over a case in the absence of a timely-filed
petition.    Sec. 7442; Elgart v. Commissioner, T.C. Memo. 1996-
379; Slattery v. Commissioner, T.C. Memo. 1995-274; Lamont v.
Commissioner, T.C. Memo. 1993-469, and cases cited therein.
                                                        (continued...)
                                 - 11 -


        We turn now to petitioners' alternative contention that the

IRS letter dated November 21, 1996, constitutes a second notice

of deficiency.     In this regard, petitioners point out that their

petition was timely filed if measured from the date of mailing of

such letter.

        A notice of deficiency must meet certain substantial

requirements.     Abrams v. Commissioner, 787 F.2d 939, 941 (4th

Cir. 1986), affg. 84 T.C. 1308 (1985).     Thus, the notice must, at

a minimum, disclose that the Commissioner has determined a

deficiency, the amount, the basis thereof, and the applicable

taxable year.     Benzvi v. Commissioner, 787 F.2d 1541, 1542 (11th

Cir. 1986), affg. Abrams v. Commissioner, 84 T.C. 1308 (1985);

see Scar v. Commissioner, 814 F.2d 1363, 1367 (9th Cir. 1987),

revg. on another issue 81 T.C. 855 (1983); Foster v.

Commissioner, 80 T.C. 34, 229-230 (1983), affd. in part and

vacated in part on another issue 756 F.2d 1430 (9th Cir. 1985);

see also sec. 7522.

        In the present case, we do not think that the IRS letter

dated November 21, 1996, constituted a notice of deficiency.

Such letter did not purport to determine any deficiency;

moreover, such letter was clearly not intended by respondent to

be a notice of deficiency.     Rather, the IRS letter merely served



    6
     (...continued)
                                 - 12 -


to advise petitioners that respondent had considered the

information that petitioners had furnished and had concluded that

such information did not warrant any revision to the

determination previously made.7     Indeed, such letter also advised

petitioners that "This correspondence and consideration of your

case has not extended the period in which you may file a petition

with the United States Tax Court" and that if petitioners wished

to pursue the matter, they could, "within the period stated in

the statutory notice, petition the United States Tax Court".

Such advice is only consistent with a finding that the IRS letter

dated November 21, 1996, did not constitute a (second) notice of

deficiency, and we so hold.

Conclusion

        Because petitioners did not file their petition with the

Court within the time prescribed by sections 6213(a) and 7502, we

lack jurisdiction to redetermine petitioners' tax liability for

the year in issue.     Accordingly, we must grant respondent's

motion to dismiss for lack of jurisdiction.8


    7
     Here we recall that the notice of deficiency disallowed
petitioners' Schedule C deductions because such deductions
constituted startup expenses that were required to be
capitalized; the IRS letter dated Nov. 21, 1996, reaffirmed that
determination.
    8
       Although petitioners cannot pursue their case in this
Court, they are not without a judicial remedy. Specifically,
they may pay the tax, file a claim for refund with the Internal
Revenue Service, and, if their claim is denied, sue for a refund
                                                        (continued...)
                                 - 13 -


        In order to give effect to the foregoing,



                                 An order granting respondent's

                            motion and dismissing this case for

                            lack of jurisdiction will be entered.




    8
     (...continued)
in the appropriate Federal District Court or the United States
Court of Federal Claims. McCormick v. Commissioner, 55 T.C. 138,
142 (1970).
