Legal-Ease v. Commissioner

MEMORANDUM OPINION

CHIECHI, JUDGE: This case is before the Court on respondent's motion to dismiss for lack of jurisdiction (respondent's motion). We shall grant respondent's motion.

BACKGROUND

For purposes of respondent's motion, the parties do not dispute the following factual allegations that are part of the record. At all relevant times, the mailing address for petitioner was in Arizona.

Petitioner filed a Federal income tax return for estates and trusts, Form 1041 (return), for taxable year 1994. Although the portion of the first page of that return requesting petitioner to identify the "Name and title of fiduciary" was left blank, that return was signed by Dennis H. Lawrence as "fiduciary or officer representing" trust. Petitioner's 1994 return was also signed by R.W. Buchanan as paid return preparer. In the Schedule K-1 attached to the 1994 return filed by petitioner, the beneficiary was identified as "BULL HOLDINGS A TRUST", but no fiduciary*82 was identified as required by that schedule.

Upon commencement of the examination of petitioner's taxable year 1994, respondent requested complete copies of the trust documents relating to petitioner as well as other items of substantiation. Petitioner refused to provide respondent with the trust documents and other information requested.

On March 4, 1998, petitioner filed with the Internal Revenue Service Form 2848, Power of Attorney and Declaration of Representative. That form, which pertained to petitioner's taxable years 1994, 1995, and 1996, was signed by James R. Slagle (Mr. Slagle) as trustee and by Russell W. Buchanan (Mr. Buchanan) as trustee. Attached to the Form 2848 filed by petitioner were two Forms 56, Notice Concerning Fiduciary Relationship, and two documents entitled "ACCEPTANCE OF THE TRUST BY THE TRUSTEE". One of those Forms 56 identified Russell W. Buchanan as the fiduciary for petitioner and was signed by him as trustee. The other Form 56 identified James R. Slagle as the fiduciary for petitioner and was signed by him as trustee.

One of the two documents entitled "ACCEPTANCE OF THE TRUST BY THE TRUSTEE" that were attached to the Form 2848 filed by petitioner*83 with respect to its taxable years 1994, 1995, and 1996 stated in pertinent part:

I/We, DENNIS H. LAWRENCE & MELISSA R. LAWRENCE, the

   Grantor(s) of LEGAL-EASE, A TRUST, do hereby select and

   appoint JAMES R. SLAGLE * * * as the trustee on the

1ST day of JANUARY, 1994.

           *   *   *   *   *   *   *

     I, JAMES R. SLAGLE, * * * do hereby accept the

   position as a trustee of LEGAL-EASE, A TRUST, * * *

The foregoing document contains signatures that purport to be the signatures of Dennis H. Lawrence, Melissa R. Lawrence, and James R. Slagle.

The other document entitled "ACCEPTANCE OF THE TRUST BY THE TRUSTEE" stated in pertinent part:

   I, James R. Slagle , the Trustee of LEGAL-EASE, A

   TRUST, do hereby select and appoint:

      Russell W. Buchanan

      ___________________

      Name of New Trustee

           *   *   *   *   *   *   *

   as a trustee of LEGAL-EASE, A TRUST, on the 1st day

   of February, 1994 .

           *   *   *   *   *   *   *

*84    I, Russell W. Buchanan, * * * do hereby accept the

   position as a trustee of LEGAL-EASE, A TRUST * * *

The foregoing document contains signatures that purport to be the signatures of James R. Slagle and Russell W. Buchanan.

The notice of deficiency issued to petitioner was addressed as follows:

   Legal-Ease, A Trust

   James R. Slagle, Trustee

   2256 E. Jaeger St.

   Mesa, Arizona 85213-2933

Petitioner filed a petition in this Court which was signed on its behalf by Mr. Slagle as "Trustee" and by Mr. Buchanan as "Trustee".

Respondent's motion contends in pertinent part:

     8. * * * Upon information and belief, the petitioner trust

   is an Arizona trust, and the law in Arizona, therefore, controls

   who has the capacity to bring the instant suit.

     9. Arizona law provides that the trustee has the capacity

   to institute court proceedings on behalf of the trust. Ariz.

   Rev. Stat. Ann. section 14-7233 C. 25.

            *   *   *   *   *   *   *

     13. To date, petitioner has not provided respondent with

   any trust document or*85 any other sort of documentary evidence

   regarding who was the first appointed trustee of the petitioner

   trust. Without the trust document, it is impossible to determine

   whether subsequent appointments of successor trustees are legal

   and/or valid.

     14. There is absolutely no evidence from which the Court

   can adduce that the documents referred to * * * above [the two

   Forms 56 and the two documents entitled "ACCEPTANCE OF THE TRUST

   BY THE TRUSTEE" that were attached to the Form 2848 filed by

   petitioner], create a legal assignment to either James R. Slagle

   and/or Russell Buchanan as trustees. These documents appear to

   be self-serving and created solely in response to respondent's

   audit examination.

     15. Petitioner has provided no evidence that said

   assignments are valid or authorized under the terms of the trust

   indenture (assuming one exists).

     16. * * * petitioner has failed to demonstrate that either

   James R. Slagle or Russell Buchanan were [sic] legally appointed

   as trustees and therefore, [is] authorized*86 to act on behalf of

   the petitioner trust and bring the instant case before this

   Court. See T.C. Rule 60(c).

Petitioner filed a notice of objection to respondent's motion in which it asks the Court to deny that motion. That notice of objection asserts in pertinent part:

     1. On October 7, 1998, respondent sent a Notice of

   Deficiency to petitioner. In that Notice of Deficiency,

   respondent identified James R. Slagle & Russell W. Buchanan as

   the Trustees for petitioner, Legal-Ease, A Trust.

     2. Petitioner has filed the appropriate Form 56 in which

   James R. Slagle and Russell W. Buchanan have identified

   themselves as trustees of the said trust and attached as

   supporting documentation the Acceptance of the Trust by the

   Trustee. These documents show that each was appointed as a

   trustee of Legal-Ease, A Trust, and that each signed

   acknowledging their acceptance of said appointment.

     3. Upon commencement of the examination, respondent

   requested a copy of all documents relating to the trust.

   Petitioner requested that respondent first*87 proves [sic]

   jurisdiction over a Pure Trust in order to make such a request.

   Respondent has failed on all requests to present to the

   petitioner any documents or proof that respondent has authority

   to examine the records or documentation of Legal-Ease, A Trust.

   Respondent is now using the Motion to Dismiss for Lack of

   Jurisdiction in an effort to force petitioner to hand over to

   respondent, records and documents it is not entitled to have.

     4. Respondent has recognized James R. Slagle as a Trustee

   of Legal-Ease, A Trust for many years. Respondent routinely

   addresses all correspondence to "Legal-Ease, A Trust; James R.

   Slagle, Trustee". * * *

The Court held a hearing on respondent's motion, at which Mr. Slagle and Mr. Buchanan appeared on behalf of petitioner. ¹ Respondent introduced into evidence the 1994 return filed by petitioner. Petitioner proffered no evidence, and the parties presented no new arguments, at that hearing.

*88 DISCUSSION

Rule 60² provides in pertinent part:

     (a) Petitioner: (1) Deficiency or Liability Actions: A case

   shall be brought by and in the name of the person against whom

   the Commissioner determined the deficiency (in the case of a

   notice of deficiency) * * * or by and with the full descriptive

   name of the fiduciary entitled to institute a case on behalf of

   such person. See Rule 23(a)(1). A case timely brought shall not

   be dismissed on the ground that it is not properly brought on

   behalf of a party until a reasonable time has been allowed after

   objection for ratification by such party of the bringing of the

   case; and such ratification shall have the same effect as if the

   case had been properly brought by such party. * * *

           *   *   *   *   *   *   *

     (c) Capacity: * * * The*89 capacity of a fiduciary or other

   representative to litigate in the Court shall be determined in

   accordance with the law of the jurisdiction from which such

   person's authority is derived.

Petitioner does not dispute respondent's statement in respondent's motion that it is a trust organized under the laws of the State of Arizona. Under Arizona law, see Rule 60(c), a trustee has the power to commence litigation on behalf of a trust. See Ariz.Rev. Stat. Ann. sec. 14-7233.C.25. (West 1995). In the instant case, petitioner has the burden of proving that this Court has jurisdiction, see Fehrs v. Commissioner, 65 T.C. 346, 348 (1975); National Comm. to Secure Justice in the Rosenberg Case v. Commissioner, 27 T.C. 837, 839 (1957), by establishing affirmatively all facts giving rise to our jurisdiction, see Wheeler's Peachtree Pharmacy, Inc. v. Commissioner, 35 T.C. 177, 180 (1960); Consolidated Cos., Inc. v. Commissioner, 15 B.T.A. 645, 651 (1929). In order to meet that burden, petitioner must provide evidence establishing that Mr. Slagle and Mr. Buchanan have authority to act on its behalf. See National Comm. to*90 Secure Justice in the Rosenberg Case v. Commissioner, supra 27 T.C. at 839-840; Coca-Cola Bottling Co. v. Commissioner, 22 B.T.A. 686, 700 (1931).

We are not persuaded by the various documents that are part of the record, including the documents entitled "ACCEPTANCE OF THE TRUST BY THE TRUSTEE", that Mr. Slagle and Mr. Buchanan are the duly appointed and authorized trustees of petitioner. In this connection, it is significant that petitioner has not made part of the record the complete trust documents for petitioner (assuming such documents exist). ³ Without such documents, we are unable to determine whether the appointment of one or more trustees is valid. On the record before us, we find that petitioner has failed to establish that either Mr. Slagle or Mr. Buchanan is authorized to act on its behalf. ⁴

*91 To reflect the foregoing,

An order of dismissal for lack of jurisdiction granting respondent's motion will be entered.