The recent T.C. Memo. 2025-65, Luis Carlos Ibarra Cano v. Commissioner, provides a critical reminder of the Internal Revenue Service’s (IRS) burden in establishing a valid notice of deficiency, particularly when address errors are present. This case highlights the nuanced application of the "last known address" rule and the "harmless error" doctrine.

Factual Background

The case involved Luis Carlos Ibarra Cano, against whom the IRS determined a deficiency of $4,422 for the 2020 tax year. This deficiency stemmed from the IRS’s belief that Mr. Cano had received wage income, as reported on a Form W-2.

On January 23, 2023, the IRS issued a Notice of Deficiency to Mr. Cano. Crucially, while Mr. Cano’s last known address was 220 6th Street, Hempstead, Texas 77445, the Notice was erroneously addressed to him at 2206 TH St. Hempstead, TX 77445-4761. A U.S. Postal Service (USPS) Form 3877, Firm Mailing Book for Accountable Mail, confirmed the Notice was sent by certified mail to the incorrect address, 2206 TH St. Hempstead, TX 77445. Mr. Cano eventually filed a petition with the Tax Court seeking redetermination on February 26, 2024, which was 400 days after the Notice of Deficiency was mailed.

The IRS’s Motion to Dismiss

The Commissioner initially filed a Motion to Dismiss for Lack of Jurisdiction on March 20, 2025, arguing that Mr. Cano’s Petition was not timely filed. Mr. Cano did not respond to this motion.

During the subsequent calendar call, the IRS counsel apprised the Court of additional facts, leading the Court to direct the IRS to file a supplemental memorandum. In this supplement, filed May 13, 2025, the IRS acknowledged the address discrepancy on the Notice of Deficiency. However, the IRS contended that Mr. Cano must have received the Notice because he attached a copy of it to his Tax Court Petition. In the IRS’s view, this fact "establishes that petitioner received the notice without delay, which proves that the [N]otice is valid for purposes of conferring jurisdiction on the Tax Court". Interestingly, IRS counsel also represented that further research indicated the alleged unreported income belonged to Mr. Cano’s father, who shared the same name, and that the IRS would handle the case administratively to ensure the correct tax outcome for Mr. Cano’s 2020 tax year.

Court’s Analysis of Jurisdiction and Notice Validity

The Tax Court’s jurisdiction in a deficiency case is contingent upon two primary elements: a valid notice of deficiency and a timely filed petition [§§ 6213, 7442; Rule 13(a); Hallmark Rsch. Collective v. Commissioner, 159 T.C. 126, 166–67 (2022); Monge v. Commissioner, 93 T.C. 22, 27 (1989)].

A notice of deficiency is generally considered valid if it is mailed to a taxpayer at their last known address [§ 6212(b); Pietanza v. Commissioner, 92 T.C. 729, 736 (1989), aff’d, 935 F.2d 1282 (3d Cir. 1991) (unpublished table decision); Frieling v. Commissioner, 81 T.C. 42, 52 (1983)].

The Commissioner bears the burden of proving, by competent and persuasive evidence, the proper mailing of the notice of deficiency [Coleman v. Commissioner, 94 T.C. 82, 90–91 (1990); O’Neill v. Commissioner, T.C. Memo. 2025-49, at *5]. Typically, this burden is met if the IRS can demonstrate the notice’s existence and provide documentary evidence, such as a USPS Form 3877, showing it was sent to the taxpayer’s last known address, which then entitles the IRS to a presumption of proper mailing [Coleman, 94 T.C. at 90; Magazine v. Commissioner, 89 T.C. 321, 327 n.8 (1987)].

However, a notice of deficiency with an erroneous address may still be deemed valid if the taxpayer was not prejudiced by the error [Bachynsky v. Commissioner, T.C. Memo. 1997-138, 73 T.C.M. (CCH) 2340, 2341 (first citing McKay v. Commissioner, 89 T.C. 1063, 1069 n.7 (1987), aff’d, 886 F.2d 1237 (9th Cir. 1989); and then citing Mulvania v. Commissioner, 81 T.C. 65, 69 (1983))]. This typically requires that the taxpayer actually received the notice with sufficient time remaining to petition the Tax Court within the required 90-day period [Coleman, 94 T.C. at 90–91; Mulvania, 81 T.C. at 69 (citing Clodfelter v. Commissioner, 527 F.2d 754, 757 (9th Cir. 1975), aff’g 57 T.C. 102 (1971))].

Application of Law to the Facts and Court’s Conclusion

Upon reviewing the Notice of Deficiency and the accompanying USPS Form 3877, the Tax Court found that the IRS failed to issue a valid Notice of Deficiency for tax year 2020. The Court noted that both documents displayed an incorrect address for Mr. Cano, resulting from the transposition of the digit "6". The Court emphasized that this was not a harmless typographical error, such as a misspelling of "Street," but rather resulted in what was "almost certainly a nonexistent address.". Consequently, the Court could not determine how the USPS would have handled delivery of a notice to such an address and thus concluded that the IRS was not entitled to a presumption of proper mailing [Magazine, 89 T.C. at 327 n.8].

The Court then turned to the IRS’s argument that Mr. Cano’s attachment of the misaddressed Notice to his Petition proved actual receipt without delay, thereby validating the Notice. The Court rejected this assertion, stating that Mr. Cano’s act of petitioning the Court on February 26, 2024, 400 days after the Notice was mailed, hardly demonstrated that he received the Notice "without delay". The significant delay indicated that the prejudice rule, which requires timely receipt to allow for a timely petition, was not satisfied.

For these reasons, the Tax Court declined to dismiss the case on the ground initially urged by the Commissioner (i.e., that the Notice was valid and the Petition untimely). Instead, the Court dismissed the case for lack of jurisdiction because the Commissioner failed to carry its burden of proving that a valid Notice of Deficiency was mailed to Mr. Cano’s last known address. Furthermore, the facts did not demonstrate that the Notice was actually received by Mr. Cano in time to petition the Court before the expiration of the 90-day filing period [Coleman, 94 T.C. at 90–91; Monge, 93 T.C. at 27].

The outcome in Cano v. Commissioner underscores the meticulous standards the Tax Court applies to jurisdictional prerequisites. While the IRS did indicate its intention to resolve the underlying income issue administratively, the case serves as a powerful reminder to tax practitioners that a Notice of Deficiency, even if eventually received, may still be invalid if not properly mailed to the last known address, particularly when the mailing error is substantial enough to prevent a presumption of proper mailing or timely actual receipt.

Prepared with assistance from NotebookLM.