POOLE, Circuit Judge:
The Commissioner appeals from the Tax Court's order dismissing the Kings' petition for lack of jurisdiction. The Tax Court held that the Commissioner failed to exercise reasonable diligence to ascertain the Kings' last known address and that therefore the notice of deficiency mailed to the Kings' former address was invalid. We have jurisdiction pursuant to 26 U.S.C. § 7482 (1982 & Supp. IV 1986)
FACTS AND PROCEEDINGS BELOW
The essential facts are undisputed and are set forth in the Tax Court's opinion. See King v. Commissioner, 88 T.C. 1042, 1043-46 (1987). The following is a brief summary.
Taxpayers filed Federal income tax returns for 1978 and 1979 with the Internal Revenue Service Center in Austin, Texas. At that time, taxpayers resided at 7140 Mossvine Drive in Dallas. When the Dallas District Director's Office selected taxpayers' 1978 and 1979 returns for review, taxpayers filed two powers of attorney with the Dallas office listing the Mossvine address.
In October 1980, taxpayers moved to 17223 Club Hill Drive in Dallas. However, taxpayers subsequently filed with the Dallas office an additional power of attorney and a Form 4549 erroneously listing their Mossvine address. Taxpayers first used their Club Hill address on correspondence with the IRS in April 1981, when they requested an extension of time to file their 1980 return. On June 15, 1981, taxpayers filed their 1980 return using their Club Hill address. Both the request for extension and the return were filed with the Austin Service Center.
On August 17, 1981, the Dallas office sent taxpayers a 30-day letter at the Mossvine address, which was forwarded to the Club Hill address. On September 17, 1981, taxpayers' attorney (Billings) responded by filing a verified protest letter which erroneously listed the Mossvine address. Several weeks later, Mr. King's secretary called Billings to inform him that the Mossvine address was no longer correct, but Billings did not inform the IRS of the change.
In December 1981, the Austin Service Center sent two Statements of Adjustment covering the 1978 and 1979 tax years to taxpayers at the Club Hill address.
On February 19, 1982, the Dallas office mailed a notice of deficiency to the Mossvine
In July 1982, the IRS assessed the deficiency and began collection procedures. Taxpayers sought to enjoin the collection by filing suit in federal district court. That suit was eventually dismissed without prejudice, and taxpayers filed the instant petition in the Tax Court on December 4, 1984. Both parties moved for dismissal. On April 23, 1987, the Tax Court issued an opinion concluding that "the notice of deficiency was not sent to [taxpayers'] last known address and it is therefore invalid." King v. Commissioner, 88 T.C. at 1050. The Commissioner's motions for reconsideration and to vacate the order of dismissal were denied on June 2, 1987, and the Commissioner brought this appeal.
Did the Tax Court err in finding that the Commissioner did not mail the notice of deficiency to the taxpayers' last known address?
STANDARD OF REVIEW
We consider first the question of what standard of review we should apply. In Cool Fuel, Inc. v. Connett, 685 F.2d 309, 312 (9th Cir.1982), we stated: "[i]t is a question of fact as to what knowledge the IRS acquires concerning the taxpayer's address." Findings of fact are reviewed under the clearly erroneous standard. United States v. McConney, 728 F.2d 1195, 1200-01 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984). Here, however, neither party disputes the historical facts as found by the Tax Court; rather, the dispute centers on the Tax Court's ultimate conclusion that the Commissioner did not mail the notice to the taxpayers'"last known address."
The Commissioner argues that de novo review is appropriate, citing Scar v. Commissioner, 814 F.2d 1363 (9th Cir.1987), in which we stated: "In order to decide whether the Tax Court had jurisdiction we review de novo the Tax Court's interpretation of section 6212(a)." 814 F.2d at 1366. However, the issue before the court in Scar was not a determination of the taxpayers'"last known address;" rather, the question was:
Scar, 814 F.2d at 1367. The Scar court treated this issue as one of pure statutory interpretation, since the legal standard had not been established. Here, by contrast, both the historical facts and the legal standard ("reasonable diligence") are established, and the only question is the proper application of the standard to these facts. Thus, "last known address" is a mixed question, and the standard of review should be determined under the analysis set forth in McConney.
Under McConney,"the key to the resolution of this question is the nature of the inquiry that is required." 728 F.2d at 1202. The operative distinction is whether the inquiry is "essentially factual," i.e., founded on the fact-finder's "experience with the mainsprings of human conduct," or whether it requires "judgment about the values that animate legal principles." Id.
We find further guidance in McConney's discussion of two tax cases: Helvering v. Tex-Penn Oil Co., 300 U.S. 481, 57 S.Ct. 569, 81 L.Ed. 755 (1937), and Commissioner v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960). In Tex-Penn,
363 U.S. at 289, 80 S.Ct. at 1198-99, quoted in McConney, 728 F.2d at 1203 n. 10.
Here, the "last known address" inquiry requires an examination of the totality of the circumstances and a balancing of many relevant factual elements, factors which indicate that the inquiry is "essentially factual." We therefore conclude that clearly erroneous review is appropriate.
The IRS must give notice to the taxpayer before it may assess or collect any deficiency. I.R.C. § 6213(a). A notice of deficiency is valid, even if it is not received by the taxpayer, if it is mailed to the taxpayer's "last known address." I.R.C. § 6212(b)(1); see Wallin v. Commissioner, 744 F.2d 674, 676 (9th Cir.1984); United States v. Zolla, 724 F.2d 808, 810 (9th Cir.), cert. denied, 469 U.S. 830, 105 S.Ct. 116, 83 L.Ed.2d 59 (1984).
The Tax Court has established, and this court has adopted, the following frequently cited rule:
Alta Sierra Vista, Inc. v. Commissioner, 62 T.C. 367, 374 (1974) (citations omitted), aff'd mem. 538 F.2d 334 (9th Cir.1976); see Wallin, 744 F.2d at 676.
This circuit has consistently held that "a subsequently filed tax return with a new address does give the IRS notice" of a change of address. Wallin, 744 F.2d at 676; see also Zolla, 724 F.2d at 810 ("a taxpayer's last known address is that on his most recent return"); accord Cyclone Drilling, Inc. v. Kelley, 769 F.2d 662, 664 (10th Cir.1985) ("we follow the Ninth Circuit in our view that a taxpayer's subsequent return bearing a new address provides the IRS with `clear and concise' notice.").
Id. at 312-13.
Here, it is likewise clear that the IRS had knowledge of the taxpayers' new address. The taxpayers had filed a subsequent return bearing their new address, and the IRS had sent collection notices regarding the tax years at issue to that address. Cool Fuel holds that this is sufficient to impute knowledge of the new address to the audit division. Id.
Zolla is not to the contrary. In Zolla, it was undisputed that the address to which the notice of deficiency was mailed was the address shown on the taxpayer's most recent return. The taxpayer argued, however, that the collection division had discovered his new address while attempting to collect an unrelated tax liability. We rejected this argument, saying:
724 F.2d at 810-11. Zolla holds that knowledge acquired in unrelated investigations is not necessarily imputed from one division to another. Tax returns, however, are a different matter; since Welch v. Schweitzer we have consistently held that address information on subsequent returns is imputed to the IRS as a whole.
We recognized in Zolla that "the IRS must have clear guidance as to what information it must examine in determining a taxpayer's last known address." 724 F.2d at 811. Our adherence to this circuit's bright-line rule is intended to provide such guidance. By establishing a presumption that the taxpayer's "last known address" is the address on his/her most recent return, we provide a clear starting point for the IRS' determination. A notice of deficiency mailed to that address will be sufficient, unless the taxpayer subsequently communicates "clear and concise" notice of a change of address.
The Commissioner, however, argues that the protest letter filed by Billings, which certified that the Mossvine address was correct, constituted clear and concise notice and that the IRS was entitled to rely on it. We think this argument misses the point, since Officer Dwyer never checked to see if the address matched that
The Tax Court followed a somewhat different analysis. It relied on the following language from Cool Fuel, which was appended to our discussion of Welch v. Schweitzer:
685 F.2d at 313 (citation omitted). The Tax Court read this language as imposing a duty on the IRS to reexamine its records after the original notice was returned as undeliverable. See 88 T.C. at 1049. Although this passage from Cool Fuel is admittedly somewhat ambiguous, we reject the Tax Court's interpretation as clearly erroneous in light of the governing statute. Under I.R.C. § 6212(b), validity of the notice turns on whether the IRS used the last known address when the notice was mailed. Nothing in the statute suggests that the IRS is obligated to take additional steps to effectuate delivery if the notice is returned; indeed, a notice mailed to the last known address is sufficient even if it is never received. Wallin, 744 F.2d at 676. Consequently, we do not believe that Cool Fuel imposes a duty of reasonable diligence beyond the time that the notice is mailed. The court in Cool Fuel had already held that the subsequent tax returns were themselves sufficient to provide the IRS with notice, and our previous holding in Welch v. Schweitzer was sufficient to impute that knowledge to the audit division.
However, although we believe the Tax Court erred in its analysis of Cool Fuel, we may nonetheless affirm on any basis clearly supported by the record. Zolla, 724 F.2d at 810 n. 3; Shipley v. United States, 608 F.2d 770, 773-74 (9th Cir.1979). As discussed above, it is clear under our prior precedents that the IRS failed to send the notice of deficiency to the taxpayers' last known address. We therefore affirm the judgment entered by the Tax Court in favor of the taxpayers.