Alleged Monthlong Trip to Mexico To Celebrate Día De Los Muertos Not Enough To Get Extra Sixty Days To File A Petition

Taxpayers have 90 days to timely file a petition to Tax Court in response to a notice of deficiency. The statute gives taxpayers 150 days to file a petition if the taxpayer is out of the country. Case law adds some gloss to the extra sixty-day rule; the notice need not be addressed to a taxpayer residing outside the United States for the 150-day deadline to apply.

And the taxpayer can get the extra sixty days if they are temporarily out of the country when the IRS mails the notice.

This takes us to the recent order in Shead v Commissioner.  In Shead, IRS mailed a notice of deficiency on October 4, 2021. The taxpayer filed a petition with the Tax Court on January 11, 2022, eight days after the 90-day period elapsed. Last December, following the Hallmark Collective decision where the Tax Court confirmed that in its view the 90-day period was jurisdictional and not subject to tolling, the Tax Court issued an order in Shead to show cause why the Court should not dismiss the case for lack of jurisdiction.

Shead responded by claiming that the petition was timely because he was entitled to the extra 60 days to petition the Tax Court. He stated that he was out of the country at the time the IRS mailed the notice. The Tax Court then issued another order, this time directing Shead “to file a response including relevant documents showing proof of travel outside of the United States on October 4, 2021,”  The order did not provide guidance regarding what relevant documents might serve as necessary support.

Shead responded, sending in an affidavit where “he swore that on October 2, 2021, he left the United States with his family and drove to Mexico to celebrate El Día De Los Muertos.” In the affidavit, he swore that he and his family had remained in Mexico until their return to the United States on November 7, 2021.” In addition to the affidavit, the taxpayer included a copy of his passport card.

Judge Choi found that the affidavit and copy of the passport was insufficient to justify finding that Shead was entitled to the extra sixty days. The affidavit, as the order notes, amounts to testimony. While testimony is evidence (despite what IRS often thinks when conducting a correspondence examination), the order found that the supposedly corroborating passport card did not help because it “was not stamped as a paper passport would be” and he failed to provide any other documentation showing he was in Mexico.

In the absence of any documentary evidence corroborating the affidavit, the Tax Court dismissed the petition despite the absence of any evidence contradicting the affidavit.  The Court apparently determined the testimony in the affidavit was not credible without corroborating documentation.  The Court could have held a hearing in order to question the taxpayer further to establish credibility or could have given him direction as to the type of documentation that would support the information in the affidavit.  Instead, it chose simply to dismiss his case giving no credit to his testimony similar to what would happen in a correspondence examination by the IRS. While the dismissal is without prejudice, the chance to get court review of the deficiency is now likely limited via a refund suit.

That seems like a tough outcome, especially as one imagines that if Shead and his family were in Mexico during the festivity, they probably had other evidence that could have tied them to their trip (e.g., social media posts, hotel or VRBO receipts etc). The order is a reminder that while testimony is evidence, in the absence of confirming documentation, a judge may not find it sufficient.  While most cases involving the 150 day rule establishing absence from the United States may be decided by order, there are published opinions that provide guidance regarding the type of information a petitioner could present to satisfy the Court. 

In Smith v. Commissioner, 140 T.C. 48, 50 (2013), the Court applied the 150-day rule (I.R.C. § 6213(a)) in a fully reviewed opinion that collects many of the prior cases regarding this basis for extending the time to file a Tax Court petition.  The case did not discuss the proof submitted as much as the timing of the petitioner’s move to Canada but still provides some instruction on the proof necessary to satisfy the requirement.

In Wade v. Commissioner, TCM 1998-235, the Court had a hearing and did not simply dismiss the case after receipt of an affidavit and an attachment the Court did not find sufficient.  The court found that:

The evidence in this case establishes that petitioner departed on Korean Airlines flight number 11, from Los Angeles, California, to Seoul, South Korea, on March 19, 1997, the day the notice of deficiency was issued. Prior to his departure from the United States, petitioner put his mail delivery on hold at his local post office. Petitioner arrived in the Philippines, his destination on this journey, on March 21, 1997. On April 3, 1997, petitioner left the Philippines and returned directly to the United States. Subsequently, petitioner picked up the notice of deficiency at his local post office on April 7, 1997.

Hat tip to Anna Gooch for bringing this order to our attention. The issue is one that a student raised in my Villanova Tax Procedure class, and Anna has been working with me and Marilyn Ames and attending the class as we prepare to launch a new revised online procedure class next year.