T.C. Memo. 2001-89

UNITED STATES TAX COURT

HALE EXEMPTION TRUST, SHARON HALE, TRUSTEE, AS SURVIVOR TO THOMAS

W. HALE, DECEASED, AND SYLVIA L. JOHNSON, f.k.a. SYLVIA L. HALE,

Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 30045-88. Filed April 11, 2001.

Mark F. Ornellas, for petitioner Sylvia L. Johnson.

David Esquibias, for petitioner Sharon Hale.

David Jojola and Thomas L. Fenner, for respondent.

MEMORANDUM OPINION

LARO, Judge: Respondent moves the Court for entry of

decision. We must decide whether in the circumstances of this

case the Internal Revenue Service Restructuring and Reform Act of

1998 (RRA), Pub. L. 105-206, sec. 3201, 112 Stat. 685, 734,

allows a nonelecting spouse to seek judicial review of
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respondent’s determination to grant the electing spouse relief

from joint liability on a joint return. We hold it does.

Unless otherwise indicated, section references are to the

Internal Revenue Code as amended. Rule references are to the Tax

Court Rules of Practice and Procedure.

Background

Thomas Hale (Thomas) and Sylvia Hale (Sylvia) (collectively

the Hales) filed joint Federal income tax returns for 1979 and

1980. The Hales separated in 1978 and divorced in 1981. 

Respondent mailed a notice of deficiency to the Hales on August

19, 1988. That notice determined tax deficiencies of $44,017 and

$21,657 for 1979 and 1980, respectively and additions to tax

under section 6653(a) of $2,197 and $1,074 for 1979 and 1980,

respectively. On November 21, 1988, the Hales petitioned the

Court for redetermination of these deficiencies and additions to

tax. The Hales resided in California when their petition was

filed. Thomas died in 1994, and the Court substituted the Hale

Exemption Trust, Sharon Hale, Trustee (the successor in interest

to Thomas), for Thomas as a party in this proceeding.

On July 10, 1998, Sylvia, now represented by separate

counsel, moved the Court to amend the petition to assert her

entitlement to relief under former section 6013(e). The Court

granted Sylvia’s motion on July 17, 1998.
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In September 1998, Sylvia and respondent entered into a

stipulation resolving all issues with respect to Sylvia except

Sylvia’s entitlement to relief from joint liability on the joint

returns. The settlement stated: “Without considering the

innocent spouse provisions of § 6013(e), there are deficiencies

in income tax due from Ms. Johnson for the taxable years 1979 and

1980 in the amounts of $44,017 and $21,657, respectively.” The

stipulation further provided that Sylvia was not liable for

additions to tax under section 6653(a) for 1979 and 1980. It

further provided:

Without considering the innocent spouse provisions of

I.R.C. § 6013(e), $44,017 and $21,657 of the deficiencies

in tax due from Ms. Johnson for the taxable years 1979

and 1980, respectively, are substantial underpayments

attributable to tax motivated transactions, for purposes

of computing the interest payable with respect to such

amounts, pursuant to I.R.C. § 6621(c).

On July 22, 1998, the RRA was enacted. The statute, among

other things, revised and expanded the relief from joint

liability available to spouses filing joint returns. The

relevant provisions of the RRA generally apply to any liability

for tax arising after July 22, 1998, and any liability for tax

arising on or before that date and remaining unpaid on that date.

On November 18, 1998, except for the provisions relating to

relief from joint liability, an identical stipulation was filed

in regard to the Hale Exemption Trust.

On May 1, 2000, the Court filed a second stipulation of
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settlement between Sylvia and respondent. That settlement

provided that after the application of section 6015(c) there was

no deficiency due from or overpayment due to Sylvia for 1979, and

that the provisions of section 6621(c), formerly section 6621(d),

were not applicable to Sylvia for 1979. It further provided that

no relief was granted pursuant to section 6015(c) for 1980 and

that the original stipulation of settlement still applied.

Sharon Hale refused to sign a stipulated decision based on

the second stipulation of settlement between Sylvia and

respondent and the previous stipulation between the Hale

Exemption Trust and respondent.

Discussion

We have previously analyzed the effect of the enactment of

section 6015 on the prior law under section 6013(e). See King v.

Commissioner, 115 T.C. 118 (2000); Corson v. Commissioner, 114

T.C. 354 (2000); Charlton v. Commissioner, 114 T.C. 333 (2000);

Fernandez v. Commissioner, 114 T.C. 324 (2000); Butler v.

Commissioner, 114 T.C. 276 (2000). We need not reiterate that

analysis here.

Sharon Hale’s objection to respondent’s motion for entry of

decision is that section 6015 altered the prior law and that

section 6015 gives her the right to contest respondent’s

determination to grant section 6015 relief to the electing spouse

in this Court. Sharon Hale finds such a right in section
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6015(e)(4). She argues that in the circumstances of this case

section 6015(e)(4) manifests Congress’ intent for the nonelecting

spouse to become a “full player” in the process of determining

whether relief from liability on a joint return should be

granted. 

There are two primary jurisdictional bases for this Court to

review a claim for relief from joint and several liability. 

First, a claim may be raised as an affirmative defense in a

petition for redetermination of a deficiency filed pursuant to

section 6213(a). See Charlton v. Commissioner, supra; Butler v.

Commissioner, supra. In a deficiency proceeding, we take into

account all the facts and circumstances relevant to ascertaining

the correct amount of the deficiency, including affirmative

defenses. See secs. 6213 and 6214; Butler v. Commissioner, supra

at 287; Woods v. Commissioner, 92 T.C. 776, 784-785 (1989);

Naftel v. Commissioner, 85 T.C. 527, 533 (1985). Relief from

joint liability on a joint return has traditionally been

characterized as an affirmative defense, and passage of the RRA

has not altered our authority to hear it as such. See Butler v.

Commissioner, supra. 

The second jurisdictional basis is found in section 6015(e). 

This section enables an electing spouse to petition for review of

an administrative determination regarding relief from liability,

or failure to make a determination, as a “stand alone” matter
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independent of any deficiency proceeding. Fernandez v.

Commissioner, supra at 329. 

Here, Sylvia’s claim for relief from joint liability was

raised as an amendment to the petition for deficiency

redetermination. No subsequent filing was made to substitute a

claim for relief under section 6015 for the section 6013(e)

claim; the parties apparently assumed that the issue was still

properly before the Court. In such circumstances, we will treat

Sylvia’s request for relief under 6013(e) as a request for relief

under section 6015(c) and treat the petition as so amended. See

Rule 41(b); Corson v. Commissioner, supra at 363-364; Charlton v.

Commissioner, supra at 338-339. We consider Sylvia’s claim

within the framework of our traditional deficiency jurisdiction.

As a threshold matter, we note that “All concessions,

including stipulated settlement agreements, are subject to the

Court’s discretionary review” and may be rejected in the

interests of justice. McGowan v. Commissioner, 67 T.C. 599, 607

(1976). In the interests of justice, it is highly desirable that

identical issues that are before a single tribunal receive

identical treatment. We believe that the interests of justice

would be ill served if the rights of the nonelecting spouse were

to differ according to the jurisdictional predicate for the claim

for section 6015 relief. 

In a stand-alone proceeding brought under section 6015(e)
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the nonelecting spouse is allowed to participate at the

administrative level. See sec. 6015(g)(2). After a

determination is made (or the Commissioner fails to make a

determination), the nonelecting spouse is given an opportunity to

participate in the judicial review of the determination. See

sec. 6015(e)(4). When these provisions are read together, they

reveal Congress’ concern with providing procedural fairness to

the nonelecting spouse by allowing him or her the opportunity to

be heard on whether relief from joint liability should be

granted. See Corson v. Commissioner, supra at 365. Presumably,

the purpose of affording the nonelecting spouse an opportunity to

be heard first in administrative proceedings and then in judicial

proceedings is to ensure that relief from joint liability is

granted on the merits after taking into account all relevant

evidence. See id.; see also King v. Commissioner, supra.

While this case arises under our deficiency jurisdiction, we

are of the opinion that the nonelecting spouse should have the

same rights to participate in the judicial review as their standalone counterparts under our section 6015(e) jurisdiction enjoy. 

The jurisdictional predicate giving rise to the issue of section

6015 relief should not determine the rights of the nonelecting

spouse to participate in the judicial review of Commissioner’s

determinations. See Corson v. Commissioner, supra at 364.
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Here, as in Corson, we hold that Sharon Hale, as Thomas’

successor in interest, is entitled to participate in the judicial

review of the decision granting relief to Sylvia under section

6015(c). To grant respondent’s motion would effectively preclude

the nonelecting spouse’s right to participate in the judicial

review of respondent’s determination. We will, therefore, deny

respondent’s motion to enter a decision. To reflect the

foregoing,

An appropriate order will be

issued.