LEVINE v. COMMISSIONER

Memorandum Opinion

PANUTHOS, Special Trial Judge.

This case is before the Court on respondent's Motion to Dismiss for Lack of Jurisdiction as to Petitioner Dennis B. Levine and to Change Caption.1 The issue for consideration is whether we have jurisdiction over petitioner Dennis B. Levine (hereinafter petitioner) in light of a receivership proceeding commenced against him by the Securities and Exchange Commission.

Respondent issued a notice of deficiency on July 15, 1986, determining deficiencies and additions to tax against petitioners as follows:

                                                              Additions to Tax
                                                 ----------------------------------------
Year                               Deficiency2   Section 6653(b)(1)    Section 6653(b)(2)

1980 ..........................   $ 91,143.76      $ 45,571.88                --
1981 ..........................   $115,358.21      $ 57,679.11                --
1982 ..........................   $246,953.87      $123,476.94         50% of interest
                                                                       due on $246,953.87

Respondent further issued a notice of deficiency on July 16, 1986, determining deficiencies and additions to tax as follows:

                                                              Additions to Tax
                                                 ----------------------------------------
Year                               Deficiency3    Section 6653(b)(1)    Section 6653(b)(2)

1983 ..........................   $  946,165.05    $  473,082.53       50% of interest
1984 ..........................   $1,071,676.83    $  535,832.42       due on deficiency
1985 ..........................   $3,574,241.11    $1,787,120.56       for each year.

The July 16, 1986 notice of deficiency also indicated that the deficiencies and additions with respect to the 1983 through 1985 taxable years were the subject of a jeopardy assessment.

A timely petition was filed with respect to both notices of deficiency. At the time of filing the petition herein, petitioners resided at New York, New York.

The facts are not in dispute. On June 5, 1986, the United States District Court for the Southern District of New York, in Securities and Exchange Commission v. Dennis B. Levine, Diamond Holdings, S.A., International Gold, Inc., Bernhard Meier, 86 Civ. 3726 (RO) (S.D.N.Y. June 5, 1986), entered a "Final Judgment of Permanent Injunction and Other Equitable Relief as to Dennis B. Levine, Diamond Holdings, S.A. and International Gold, Inc." In this action, petitioner and other defendants were restrained and enjoined from conducting certain activities in connection with the purchase or sale of securities. By said Judgment, a receiver was appointed to take custody and control of assets held in the name of petitioner. The Judgment incorporated a Consent and Undertakings entered into by defendants.4 In the Consent and Undertakings, petitioner agreed to facilitate a transfer of his assets to the court-appointed receiver except for certain enumerated assets.5 Both the Judgment and the Consent and Undertakings contained numerous other provisions which are not relevant herein.

Upon motion brought by petitioner, the United States District Court entered an Order in September 1987 that said court would decide all tax claims that had been determined against petitioner by the Internal Revenue Service.6

In his motion, respondent argues that the case should be dismissed for lack of jurisdiction as to petitioner under section 6871(c)(2), which provides that no petition for redetermination of a deficiency shall be filed with the Tax Court after the appointment of a receiver. While petitioner concurs that his tax claims should be resolved in the District Court proceedings,7 petitioner argues that it is not entirely clear whether section 6871(c)(2) divests the Tax Court of jurisdiction where only a portion of the taxpayer's assets are under the control of a receiver.8 Both parties concur that this Court has jurisdiction over petitioner Laurie Levine since she is not a party to the receivership proceeding. See Baron v. Commissioner [Dec. 35,946], 71 T.C. 1028 (1979).9

Section 6871(a) provides that upon the appointment of a receiver for the taxpayer in any receivership proceeding any deficiency may be immediately assessed. Section 6871(c) provides that (1) claims for a deficiency may be presented to the court before which the receivership proceeding is pending, despite the pendency of the Tax Court proceedings, but (2) "in the case of a receivership proceeding, no petition for any such redetermination shall be filed with the Tax Court after the appointment of the receiver." Thus, the Tax Court is without jurisdiction where a petition is filed subsequent to the appointment of a receiver. Pollen v. Commissioner [Dec. 33,214], 64 T.C. 261 (1975); Williams v. Commissioner [Dec. 27,506], 44 T.C. 673 (1965); Ross v. Commissioner [Dec. 25,512], 38 T.C. 309 (1962).

The language of the statute is clear that it is the appointment of a receiver in a receivership proceeding which invokes the provisions of section 6871. See section 6871(c)(2). To this extent, petitioners misconstrue Jamy Corp. v. Riddell [64-2 USTC ¶ 9767], 337 F.2d 11, 13 (9th Cir. 1964). That case recognized that the appointment of a receiver prior to the filing of a petition precludes Tax Court jurisdiction.

We note that section 301.6871(a)-2, Proced. and Admin. Regs., presumes that there may be situations where some, but not all, of a taxpayer's assets are under the control of a court.10 This is consistent with 11 U.S.C. section 522 (1982), which exempts certain assets in a bankruptcy proceeding, and further, is consistent with the power of the District Court to appoint a receiver to disgorge some of an individual's assets in an action commenced by the Securities and Exchange Commission. See 15 U.S.C. section 78u (1982); Securities and Exchange Commission v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1105 (2d Cir. 1972); Securities and Exchange Commission v. S & P National Corp., 360 F.2d 741, 750 (2d Cir. 1966). Certainly section 6871(c) does not contemplate that we should examine, for purposes of determining whether we have jurisdiction over a taxpayer, the extent of the assets under the control of the receiver or the bankruptcy court. Accordingly, we apply the clear and unambiguous language of the statute which provides that it is the appointment of a receiver which invokes the prohibition of the filing of a petition with this Court.

For the reasons set forth herein, respondent's Motion to Dismiss for Lack of Jurisdiction as to Petitioner Dennis B. Levine and to Change Caption will be granted.

An appropriate order will be issued.