                        T.C. Memo. 1996-457



                      UNITED STATES TAX COURT



         DOUGLAS P. AND DEBORAH J. SNOW, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


                 DOUGLAS P. SNOW, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 6838-95, 6839-95.          Filed October 10, 1996.



     Josh O. Ungerman, for petitioners.

     Candace M. Williams, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     DAWSON, Judge:   These consolidated cases were assigned to

Special Trial Judge Stanley J. Goldberg, pursuant to the
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provisions of section 7443A(b)(4) 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

     GOLDBERG, Special Trial Judge:     These consolidated cases are

before the Court on cross-motions to dismiss for lack of

jurisdiction.   Petitioners moved for dismissal on the grounds

that the notices of deficiency are invalid because they were not

mailed to their last known address.     Respondent moved for

dismissal on the grounds that the notices of deficiency were

mailed to petitioners' last known address and the petitions were

untimely filed.    A hearing was held on these motions in Dallas,

Texas.

                           FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits received into evidence

are incorporated herein by this reference.     Petitioners resided

in Plano, Texas, at the time their petitions were filed.

     Petitioner Douglas P. Snow (Mr. Snow) filed his 1987

individual Federal income tax return on July 2, 1990.     On

February 18, 1992, respondent mailed a notice of deficiency for

1987 (the first 1987 notice) to Mr. Snow at 12516 Audelia #209,

1
    All section references are to the Internal Revenue Code as
amended, unless otherwise indicated. All Rule references are to
the Tax Court Rules of Practice and Procedure.
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Dallas, Texas (the Audelia address).    Respondent withdrew the

first 1987 notice of deficiency on August 7, 1992.    Therefore,

the first 1987 notice is not at issue.    On May 8, 1992, Mr. Snow

filed a second Federal income tax return for 1987 (the second

1987 return).   On both 1987 returns Mr. Snow used the Audelia

address.

     Sometime after 1987, Mr. Snow married petitioner Deborah J.

Snow (Mrs. Snow).   On November 15, 1991, petitioners filed a

joint Federal income tax return for 1990.    On that return

petitioners used the Audelia address.

     In December 1992, petitioners moved to 3907 San Mateo Drive,

Plano, Texas (the San Mateo address).    At some point they filed a

change of address form with the U.S. Postal Service (postal

service) and requested that all mail sent to the Audelia address

be forwarded to the San Mateo address.    They changed their

telephone number.   They also added a recording to their old

telephone number informing callers of their new number.

Petitioners also changed the address on their driver's licenses

to the San Mateo address.   They did not send a letter to, or

specifically notify, the Internal Revenue Service (IRS) of their

move prior to using the San Mateo address on their joint 1992

Federal income tax return filed on April 15, 1993.

     In late 1992, respondent examined Mr. Snow's second return

for the 1987 tax year and petitioners' joint return for the 1990
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tax year.   Respondent sent seven letters to petitioners at the

Audelia address between November 30, 1992, and March 17, 1993,

requesting information pertaining to the examinations.    Four of

the letters were sent by Tommy Joe Parrish (Mr. Parrish),

respondent's agent assigned to examine petitioners' returns.

Petitioners claim they did not receive any of the letters and

were not aware of the examinations.    None of the letters were

returned to Mr. Parrish as undeliverable.    According to the IRS

computer, on March 25, 1993, the Audelia address was petitioners'

last known address.   On March 25, 1993, Mr. Parrish retrieved a

telephone number for petitioners.   He wrote the telephone number

in his notes from petitioners' case files, and also wrote that

the telephone number had changed.   Mr. Parrish claims to have

called the new number and left a message on an answering machine.

Petitioners acknowledge that the number called is their new

number at the San Mateo address but contend they never received a

message from Mr. Parrish.

     Mr. Parrish also verified that petitioners had filed Federal

income tax returns for 1988 through 1991.

     On April 15, 1993, petitioners mailed their 1992 joint

Federal income tax return using the San Mateo address as their

home address, and stating the name and address of their tax

preparer.   Attached to the 1992 return were the following:   (1)

Mr. Snow's Form W-2 showing the San Mateo address; (2) Mrs.
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Snow's Form W-2 showing the Audelia address; (3) check No. 2017

made payable to the IRS with the pre-printed Audelia address

crossed out and the San Mateo address handwritten on the check;

and (4) a certified mail receipt acknowledging that the return

was mailed on April 15, 1993.   The information provided on the

1992 return, including petitioners' new address, was processed by

the IRS and added to the computer on July 17, 1993.     On May 11,

1993, respondent's agent checked the computer system for

petitioners' address and found the Audelia address.     On May 19,

1993, respondent sent a notice of deficiency for 1990 to

petitioners at the Audelia address by certified mail.     On May 24,

1993, based on the second 1987 return, respondent mailed a second

notice of deficiency for 1987 to Mr. Snow at the Audelia address

by certified mail.   One envelope was returned to respondent on or

about May 26, 1993, stamped by the Postal Service "Moved, Left No

Address".   No further effort was made by respondent to contact

petitioners until August 25, 1993.      On that date, Sharon Stout, a

reviewer with the District Office, sent two letters to

petitioners at the San Mateo address.     Ms. Stout informed them

that the time for filing petitions with the Tax Court with

respect to the second 1987 notice and the 1990 notice expired on

August 21 and 16, 1993, respectively.     Petitioners filed an

amended 1990 joint Federal income tax return on June 8, 1994.
                                - 6 -


Petitioners filed petitions with this Court disputing the second

1987 notice and the 1990 notice on May 4, 1995.

     In the second 1987 notice, respondent determined a

deficiency in Mr. Snow's 1987 Federal income tax of $8,760 and an

addition to tax for failure to file a timely return under section

6651(a) of $2,190.   In the 1990 notice respondent determined a

deficiency in petitioners' 1990 joint Federal income tax of

$51,272, an addition to tax under section 6651(a) of $11,879.50,

and an accuracy-related penalty under section 6662(a) of

$9,365.20.   Prior to the hearing, petitioners paid the

deficiencies, additions to tax, and penalties in full.

     Assuming, arguendo, that the second 1987 notice and the 1990

notice are valid, the 90-day periods for filing petitions with

this Court expired on August 21 and 16, 1993, respectively, which

dates were not legal holidays in the District of Columbia.    The

petitions for each year, as noted above, were not filed until May

4, 1995.

                               OPINION

     Section 6212(a) authorizes the Secretary or his delegate,

upon determining that there is a deficiency in income tax, to

send a notice of deficiency "to the taxpayer by certified mail or

registered mail."    Section 6212(b)(1) provides that a notice of

deficiency, in respect of an income tax, "shall be sufficient" if

it is duly "mailed to the taxpayer at his last known address".
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Generally, the Commissioner has no duty to effectuate delivery of

the notice after it is mailed.     Monge v. Commissioner, 93 T.C.

22, 33 (1989).

     Neither section 6212 nor the regulation promulgated

thereunder, section 301.6212-1, Proced. & Admin. Regs., defines

what constitutes a taxpayer's "last known address".     We have

defined it as the address to which, in light of all the

surrounding facts and circumstances, the Commissioner reasonably

believed the taxpayer wished the notice of deficiency to be sent.

Weinroth v. Commissioner, 74 T.C. 430, 435 (1980); see also Ward

v. Commissioner, 907 F.2d 517, 521 (5th Cir. 1990), revg. 92 T.C.

949 (1989), and cases cited therein.     Generally, a taxpayer's

last known address is the address shown on his most recently

filed and properly processed return, absent clear and concise

notice of a different address.     Abeles v. Commissioner, 91 T.C.

1019, 1035 (1988).   Our holding in Abeles v. Commissioner, supra,

reiterated this Court's position as stated in Alta Sierra Vista,

Inc. v. Commissioner, 62 T.C. 367, 374 (1974), affd. without

published opinion 538 F.2d 334 (9th Cir. 1976), that what is

significant is what the Commissioner knew or should have known at

the time the notice of deficiency was mailed.     Abeles v.

Commissioner, supra; see also Ward v. Commissioner, supra at 521.

     Thus, where the Commissioner is aware before mailing the

notice of deficiency that the taxpayer has moved, the
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Commissioner is required to exercise reasonable care and

diligence to discover and mail the notice of deficiency to the

correct address.   Monge v. Commissioner, supra; see also Ward v.

Commissioner, supra at 522 (citing Mulder v. Commissioner, 855

F.2d 208, 211 (5th Cir. 1988), revg. and remanding T.C. Memo.

1987-363).   Whether the Commissioner has exercised reasonable

care and diligence is a question of fact.   Frieling v.

Commissioner, 81 T.C. 42, 49 (1983), and cases cited therein; see

also Mulder v. Commissioner, supra.

     In Ward v. Commissioner, supra, the taxpayer mailed a letter

to the IRS service center notifying the service center of his new

address.   While the address change was pending, the IRS mailed a

notice of deficiency to the taxpayer at his old address which was

still posted in the central computer.   The Court of Appeals for

the Fifth Circuit (the court to which these cases are appealable)

observed that a properly instructed agent would have recognized a

notation code on the computer record indicating a change of

address was pending for the taxpayer.   Because the IRS knew of

the address change, the Court of Appeals held that the IRS was

required to exercise reasonable diligence in finding the

taxpayer's last known address, and concluded that the IRS had

failed to do so.

     The Court of Appeals noted, however, that the situation is

different if a taxpayer chooses to inform the IRS of an address
                               - 9 -


change solely by placing the new address on the taxpayer's most

recently filed return, without otherwise drawing the attention of

the IRS to the information.   In such cases notice of the new

address is effective as of the date that the IRS properly

processes the return, rather than as of the date the IRS receives

the tax return, provided that the IRS inputs the information

without unreasonable delay.   In Ward v. Commissioner, supra at

523, the court noted:

     The IRS receives millions of tax returns annually. It would
     be unreasonable to expect the IRS to notice a new address
     among these returns before the IRS had processed the
     information. Since the taxpayer elects to run the risk that
     the IRS will issue a notice of deficiency before the IRS
     inputs the new information, the only burden placed on the
     IRS is to process the returns in a reasonable amount of
     time. * * *

     Petitioners argue that respondent knew that their address

had changed prior to mailing the notices of deficiency.   They

contend that such knowledge resulted from receipt of petitioners'

1992 Federal tax return on or around April 15, 1993, which

reflected the San Mateo address; the knowledge of respondent's

agent that petitioners had changed their telephone number; and

petitioners' failure to respond to any of the seven letters from

respondent's agents.

     Here the facts do not show that respondent knew or should

have known that petitioners' address had changed prior to the

date the notices of deficiency were mailed.
                               - 10 -


       Because petitioners informed respondent of their address

change solely by placing their new address on their 1992 return

filed on April 15, 1993, respondent is deemed to have notice of

the address change as of the date the return was processed,

provided that respondent properly processed the tax return

information.    Respondent processed petitioners' return and

updated the record on petitioners in her computer system to

reflect the San Mateo address as of July 17, 1993.    The parties

have stipulated that returns received by the IRS between February

14 and June 1 are considered properly processed if processed on

July 16, 1993, and this is within the guidelines for properly

processed returns as set forth in Rev. Proc. 90-18, 1990-1 C.B.

491.    Thus, as of May 19 and 24, 1993, the dates on which the

notices of deficiency were issued, respondent did not have notice

of petitioners' change of address based on their 1992 Federal

income tax return.

       Petitioners also argue that respondent's agent, Mr. Parrish,

knew or had reason to know that they had changed their address.

After Mr. Parrish, the agent assigned to examine petitioners'

returns, retrieved petitioners' most recent address (the Audelia

address) from the IRS computer system, he went further and

obtained petitioners' current telephone number.    Mr. Parrish

recognized that petitioners' telephone number had changed and he

wrote the new telephone number in his notes from petitioners'
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case file.    It is not clear from the record how Mr. Parrish

obtained petitioners' current telephone number; nonetheless, he

did obtain the new telephone number prior to the issuance of the

notice of deficiency.    However, we do not believe that this

information was sufficient to give respondent reason to know that

petitioners had moved.

     Mr. Parrish also knew that petitioners had filed Federal

income tax returns for 1988 through 1991, and that seven letters

sent to the Audelia address had garnered no response.    Four of

the seven letters were sent by Mr. Parrish.    It is presumed that

a properly addressed letter placed in the care of the Postal

Service has been delivered to the addressee.    See Mulder v.

Commissioner, 855 F.2d at 212; Zenco Engineering Corp. v.

Commissioner, 75 T.C. 318, 323 (1980), affd. without published

opinion 673 F.2d 1332 (7th Cir. 1981).    Moreover, there is no

evidence in the record that any of the letters were returned to

respondent.

     Respondent was not aware that petitioners had changed their

address before the notices of deficiency were mailed.    Respondent

exercised due diligence in determining petitioners' last known

address at the time the notices of deficiency were mailed by

relying on the information contained in the IRS central computer.

     Petitioners argue, however, that respondent did not exercise

reasonable care and diligence in determining and mailing the
                              - 12 -


notices of deficiency to their last known address.   They contend

that because respondent did not contact a number of sources,

including petitioners' tax return preparer, the Texas Department

of Motor Vehicles, and Mr. Snow's employer, in order to obtain

petitioners' new address, respondent failed to exercise

diligence, relying upon Mulder v. Commissioner, supra.     In

Mulder, the IRS mailed two letters to the taxpayer using the

address which appeared on the taxpayer's return filed for the

year at issue.   Both letters were returned as undeliverable.

Thereafter, the IRS issued and mailed a notice of deficiency,

certified, return receipt requested, to the same address.       The

taxpayer did not receive the notice of deficiency, but instead

learned of the deficiency determination when the IRS mailed a

statement of taxes due to his new address.   The Court of Appeals

for the Fifth Circuit observed that the IRS could have determined

the taxpayer's home address by contacting a number of sources and

that such efforts were "within the reasonable exercise of

diligence required when the IRS knows or should know that the

address on the subject tax return is no longer current."        Mulder

v. Commissioner, supra at 212.   This obligation does not arise,

however, unless the IRS is aware that the taxpayer has changed

addresses.   Because we find that respondent did not know that

petitioners had moved, respondent was not obliged to make these

additional inquiries in exercising reasonable diligence.
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     At least one of the May 1993 notices of deficiency mailed to

petitioners' Audelia address was returned to respondent on or

about May 26, 1993, stamped "Moved, Left No Address".    In Pomeroy

v. United States, 864 F.2d 1191 (5th Cir. 1989), the Court of

Appeals for the Fifth Circuit stated:   "The relevant statutes

simply require that the deficiency be mailed to the taxpayer's

last known address, not that it be received."   Id. at 1195

(taxpayers argued that the IRS should have checked its

administrative file after a notice of deficiency sent to the

address on their most recently filed return was returned

undelivered).   In addition, the Court of Appeals reiterated that

"'the focus is on the information available to the IRS at the

time it issued the notice of deficiency.'"   Id. (quoting Mulder

v. Commissioner, supra at 211).   Thus, under this standard, we do

not believe that respondent was required to investigate further

when one of the notices of deficiency was returned undelivered.

Monge v. Commissioner, 93 T.C. at 32-33.

     For the reasons set forth above, respondent's motions to

dismiss will be granted, and petitioners' motions to dismiss will

be denied.2

2
     Petitioners are not without recourse. Because they paid the
deficiencies, interest, and penalties in full on May 1, 1995, the
time for filing a claim for refund has not yet run. Sec.
6511(a). If a timely refund claim is disallowed by respondent,
petitioners could file a suit for refund in the U.S. District
Court or the U.S. Court of Federal Claims and thus litigate the
merits of their tax liabilities for the years in question.
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     Appropriate orders and orders of

dismissal for lack of jurisdiction

will be entered.
