T.C. M em o . 2 0 1 7 -8 0

UNITED STATES TAX COURT

M AE IZZEDIN ASAD, Pet i t i o n er, AND SAM AKEL, In t erv en o r v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

SAM AKEL, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo s . 3 2 4 0 1 -1 5 , 8 9 43 -1 6
. Fi l edM ay 1 5 , 2 0 1 7
.

M ae Izzed i n As ad , fo r h ers el f. Sam Ak el , fo r h im s el f. Harry J . Neg ro , fo r res po n d en t .

M EM ORANDUM FINDINGS OF FACT AND OPINION
M ORRISON, J u d g e: M s . M ae As adan dM r. Sam Ak el fi l edjo i ntfed eral i n co m e t ax retu rn s fo r t h e 2 0 0 8 an d2 0 0 9 t ax y ears . No w d iv o rced , th ey each s eek- 2
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[* 2 ] rev i ew o f t h e IRS’ s d en i al o f t h ei r res p ect i v e cl ai m s fo r rel i ef fro m jo i n tan d
s ev eral l iab i l i t y

fo r t h e 2 0 0 8 an d2 0 0 9 y ears . 1 Th e l i ab i l i t i es fro m wh i ch th ey

s eek rel i ef h adb een d et erm in edi n an earl i er n o t i ce o f d efi ci en cy as fo l l o ws : T y p e o f l i ab i l it y Tax y ear 2 0 08 2 00 9 Defi ci en cy $ 14 ,4 7 8 $ 1 0 ,9 3 3 Accu racy -rel at edp en al ty 2 ,8 9 6 2 ,1 8 7 Ad d i t i o n t o t ax fo r l at e t ax -ret u rn fi l i ng 1 2 -0
- In reco g n i t i o n o f a co n ces s i o n b y th e IRS m ad e s ho rt l y

b efo re t ri al , we h o l d : (1 ) As adi s rel iev edo f 2 8 % o f t h e 2 0 0 8 l i ab i l i t ies an d4 1 % o f t h e 2 0 0 9 l i ab i l it i es , an d (2 ) Ak el i s rel i ev edo f 7 2 % o f t h e 2 0 0 8 l i ab i l i t i es an d 5 9 % o f t h e 2 0 0 9 l i ab i l i t i es . Th e res to f t h i s o p i n i o n d i s cu s s es the reas o n s fo r o u r h o l d i n g. No d i s p u t ed fact ual m at t ers affect o u r d eci s i o n . Th erefo re we n eedn o td et erm i ne wh o h as th e b u rd eno f p ro of.

1 Th e res po n d en ti s referred t o as the IRS. Al l s ect i o n referen ces are t o th e In t ern al Rev en u e Co d e o f 1 9 8 6 , as am en d edan di n effect atal l rel ev an t t i m es . Al l d o l l ar am o u n t s are ro u n d edt o t h e n eares td o l l ar.- 3
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[* 3 ] 1
. As ad ’ s an d Ak el ’ s wi l l i n g n es s attri al t o ag ree t o a 5 0 -5 0 s p l i to f jo i n t

l i ab i l i t i es fo r 2 0 08 an d2 0 0 9 d o es n o t ju st i fy t h e Co u rt ’ s en t eri n g a d eci s i o n rel i ev in g each o f t h em o f 5 0% o f t h e jo i n tl i ab i l i t i es As adan dAk el each o wn edren t al p ro p ert i es du ri n g 2 00 8 an d2 0 0 9 . Inth e
n o t i ce o f d efi ci en cy , th e IRS d is al l o wedth e d educt i o n s fo r ren t al -p ro p ert y l o s s es t h ey cl ai m edo n thei r jo i n treturn s fo r t h os e y ears . Th e n o t i ce o f d efi ci en cy was i s su edi n 2 0 1 3 t o b o t h As adan dAk el . Nei t h er fi l eda p et it i on fo r red et erm i n at io n
o f t h e d efi ci en cy

o r p en al t i es o r ad d i t i o n s t o t ax . In2 0 1 4 , As adreq u es t edth atth e IRS rel i ev e h er o f jo in tan ds ev eral l i ab i l i t y fo r 2 0 0 8 an d 2 0 0 9 . In 2 0 1 5 , Ak el
m ad e h i s o wn req u es tfo r s u ch rel i ef. In 2 01 5 , th e IRS d en i ed As ad ’ s req u es t . As adfi l eda t i m el y

p et i t i on ch al l en g i n g h er d en i al o f rel i ef. Th atp et i t i o n was g i v en d o ck etNo . 3 24 0 1 -1 5 . In2 0 1 6 , th e IRS d en i edAk el ’ s req u es t . Ak el fi l eda t i m el y pet i ti o n ch al l en g i n g h i s d en i al o f rel ief. Th atp et i t i o n was g i v en d o ck etNo
. 8 9 4 3 -1 6 . He al s o i n t erv en edi n h i s wi fe’ s cas e, d o ck etNo . 3 2 4 0 1-1 5
. W e
co n so l i d at edth e t wo cas es fo r t ri al , b ri efi n g , an do p i n i o n . 2 Sh ort l y b efo re t ri al , t h e IRS co n ced ed t h at fo r each y ear, 2 0 0 8 an d2 0 09 , As ad s ho u l db e rel iev edo f jo i n t an ds ev eral l i ab il i t y fo r t h e n o t i ce-o f-d efi ci en cy l i ab i l i t i es b y

a fract i o n equ al t o the l o s s es cl ai m edb y

the co up l e fo r Ak el ’ s ren t al p ro p ert y d iv i d edb y the t o t al

2 Bo t h As adan dAk el were res i d en t s o f New J ers ey wh en th ey

fi ledth ei r res p ect i ve p et i ti o n s .- 4
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[* 4 ] l o s s es cl ai m edb y t h e co up l e fo r t h ei r ren t al p ro p ert i es . Th es e are 2 8 % fo r 2 0 0 8 an d4 1 % fo r 2 0 0 9. Th e IRS al s o co n ced edth atfo r each y ear Ak el s h o u l db e rel i ev ed o f jo i nt an ds ev eral l i ab i l i t y fo r t h e n o t i ce-o f-d efi ci en cy l i ab i l i t i es b y

a fract i o n equ al t o the l o ss es cl ai m edb y th e co up l e fo r As ad ’ s ren t al p ro p ert y d i v i d edb y

th e t ot al l o ss es cl ai m edb y th e co up l e fo r t h ei r ren t al p ro p ert i es . Th es e are 7 2 % fo r 2 0 0 8 an d5 9 % fo r 2 0 0 9
. Th e IRS’ s co n ces si o ns were m ad e i n i t s p ret ri al m em o ran du m . Atth e b eg in n i n g o f t ri al , th e IRS rei t erat edth es e co n ces s i o n s . As adan dAk el d i dn o t
co n tes tth e IRS’ s co n ces s i o n s . Ho wev er, t h ey s t at edth at --as an al t ern at iv e t o th e IRS’ s co n ces si o ns --t hey

wo u l db e wi l l i n g t o s et t l e t h e cas es s u ch th ateach o f t h em
wo u l db e l iab le t o the IRS fo r 5 0 % o f each y ear’ s n o t ice-o f-d efi ci en cy l iab i l i t i es . 3 Th i s 5 0-5 0 s p l i t was t h e s am e p ercen t ag e u s ed i n As adan dAk el ’ s 2 0 1 3 d i v o rce ag reem en t . Inthatd i v orce ag reem en t , As adan dAk el h ad ag reed th at each wo u l d b e l i ab l e fo r 5 0 % o f t h ei r t ax l iab i l i t i es fro m p ri o r t ax y ears , i n cl u di n g t ax y ears 2 0 0 8 an d2 0 0 9 . Th e d i scu s s io n o f t he d i v o rce ag reem en t attri al b eg an wi t h As ad p ro p os i n g: “ I wo u l dl i k e t o p os s i b l y s ee i f m y ex -s p o u se, Sam

Ak el , o bject s t o i t

3 Th ey al s o t es t i fi edthatth ey

h i reda p ro fes si on al t ax -ret urn p rep arer t o p rep are t hei r ret u rn s fo r t h e 2 0 0 8 an d 2 0 0 9 y ears an dth atthey s ho u l dth erefo re b e rel i ev ed fro m

l i ab il i t y fo r t he accu racy -rel at edp en al t i es fo r t h o s e y ears . W e d i s cu s s th i s arg u m en tb el o w i n p art2
.- 5
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[* 5 ] b ei n g 5 0 / 5 0 as we ag reed o n i n th e d i v o rce d ecree.” Aft er s o m e d i s cu s s i o n , Ak el s ai d : “ I ag ree t o s p li t i t5 0 / 5 0 .” Ou r i n t erp ret at io n o f th i s d i s cu s s io n i s th at As adan dAk el th o ug h tth atth ei r wi l l i n g n es s --at tri al --t o ag ree t o a 5 0 -5 0 s p l i t
s h o u ldp erm i tth ei r res p ect i v e l i ab il i t i es t o th e IRS t o b e red uced b y 5 0 %. Th e d i vo rce ag reem en tes t ab l i s h es As ad ’ s an dAk el ’ s ri g h t s ag ai n s t each
o t h er u n d er s t at e l aw. See Ru d e v . Co m m i s si o n er, 4 8 T.C. 1 6 5 , 1 7 4 (1 9 6 7 ). It
m ay al l ow o n e t o reco ver ag ai ns tth e o t h er th ro u g h a ri g h t o f co nt ri bu t i o n . See i d
. Ho wev er, i td o es n o t co n tro l th ei r l i ab i l i ti es t o the IRS. In Co o p er v . Co o p er (In re Co o p er), 8 3 B.R. 5 4 4 , 5 4 5 (Ban kr. C.D. Il l. 1 98 8 ), a s ep arat i o n ag reem en t req u i redth e fo rm er h u sb an dt o p ay th e jo i n ti n co m e t ax l i ab i l i t y fo r 1 98 3 . Th e
co u rto b s erv edthatthe s ep arat i o n ag reem en td i dn o taffect th e fo rm er s p o u s es ’ l i ab i l i t i es t o t h e IRS: “ Of co u rs e, s i n ce t h e IRS was n ota p art y t o t h e s ep arat i o n ag reem en tan dn ev er ag reed t o l o o ks o l el y t o Al v a [th e h u s b an d ] t o reco v er t h e t ax es i n qu es ti o n , th e IRS was n o tb o u ndb y th e co up l e’ s s ep arat i o n ag reem en tan d
was free t o g o aft er ei t h er Al v a o r Darl en e [t h e wi fe] , o r b o t h , fo r t h e u np ai d t ax es .” Id . n .1 . InEs tat e o f Qu i rkv . Co m m i s s i o ner, T.C. M em o . 1 9 95 -2 3 4 , 6 9 T.C.M . (CCH) 2 7 4 6 , 2 7 47 (1 9 9 5 ), a 1 9 7 5 d i v o rce ag reem en treq u i redth e fo rm er h u s b an dt o b e l i ab l e fo r i n co m e t ax fo r t h e t ax y ear 1 9 7 4 , a y ear fo r wh i ch h e an d h i s fo rm er wi fe h adfi l ed a jo i n tretu rn . Th e fo rm er wi fe’ s at t o rn ey ad v i s edh er- 6
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[* 6 ] t h atth e l i ab i li t y

wo u ldfal l o n th e fo rm er h u s b an d . Th e Co urto b s erv edth at t h e at t orn ey

s h o u ld h av e al s o ad v i s edh er t h ats h e rem ai n edjo i n t l y an d s ev eral l y l i ab l e t o th e IRS b ecau s e t h e d i v o rce ag reem en twas n ot b i n d i n g o n th e IRS. Id
. at 2 7 5 0 . Th e Tax p ay er Bi l l o f Ri g h t s 2 , Pub . L. No . 1 0 4-1 6 8 , s ec. 4 01 (2 ), 1 10 St at . at1 4 5 9 (1 9 9 6 ), req ui redth e Dep art m en to f Treas ury an dthe Gen eral Acco u n t i n g Offi ce t o each co n du cts tu d i es o f, am o n g o t h er th i n g s , “ t h e effect s o f p ro v i d i n g t h at , i f a d i vo rce d ecree al l ocat es l i ab i l i t y fo r t ax o n a jo i n t ret u rn fi l edb efo re t h e d i v o rce, t h e Secret ary

[o f t h e Treas u ry ] m ay

co l l ect s uch l i ab i l i t y

o n ly i n
acco rd an ce wi t h the d ecree”. A co m m i t tee rep o rtd is cu s s i n g th e Tax p ay er Bi l l o f Ri g ht s 2 (i n p ro p o s edfo rm ) o b s erv ed : “ In s o m e cas es , a co up l e ad d res s es t h e
res p o n s i b i l i t y

fo r t ax l i ab i l it y

as p arto f th ei r d i v orce d ecree. Ho wev er, t h es e ag reem en t s are n o tb i n di n g o n th e IRS b ecau s e t h e IRS was n o ta p art y t o th e d i v o rce p ro ceed i n g . Thu s , i f a fo rm er s p ou s e v i ol at es th e t ax res p o n s i b i l i ti es
as s i g n edt o h im

o r h er i n a d i v o rce d ecree, t h e o th er s p o u s e m ay n o trel y o n th e d ecree i n d eal in g wi t h th e IRS.” H.R. Rep t . No . 1 0 4 -5 0 6 , at3 0 (1 99 6 ), 1 9 9 6 U.S.C.C.A.N. 1 1 4 3 , 1 1 5 3 . Th e res u l t i n g rep o rtfro m th e Dep art m en t o f t h e Treas u ry s im i l arl y o b s erv ed : “ M an y

t ax p ay ers are ap p aren tl y s u rp ri s edt o l earn t h atu n d er cu rren tl aw t h ei r d i v o rce d ecree’ s al l o cat i o n o f l iab i l i ti es i s n o tb i n d i n g
o n cred i t o rs (i n cl u d i n g th e IRS) wh o d o n o t p art ici p at e i n the d i v o rce- 7
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[* 7 ] p ro ceed i n g s .” U.S. Dep ’ t o f t h e Treas u ry , Rep o rtt o t h e Co n g res s o n J o i n t Li ab i l i t y an d In n o cen t Sp o u se Is s u es 4 4 (1 9 9 8 ), h t tp s : // www.treas u ry .g ov /
res o u rce-cen t er/ t ax -p o li cy / Do cu m en t s / Rep o rt -J o i n t-Li ab i l i t y -In n o cen t -Sp o u s e1 9 9 8 .p d f. (Th e rep o rts u g g es tedth atb i n d in g t h e IRS t o th e res u l t s o f a d i v o rce d ecree was i m

p ract ical . Id . at4 1 -4 4 .) Th e res u lt i n g Gen eral Acco u n t i n g Offi ce rep o rto b s erv ed : “ Di v o rci n g co up l es m ay s p eci fy i n th ei r d i v o rce d ecrees h o w fu tu re l i ab i l i t i es res u l t i n g fro m th ei r p ri o r jo i n tretu rn s are h an d l ed , i .e., o n e
s p o u se i s en t i rel y

l i ab l e, b o th s p o us es are eq u al l y l i ab l e, o r s o m e o t h er p erm u tat i o n . Ho wev er, IRS i s n o tb o u n db y th es e d iv o rce d ecrees b ecau s e i ti s n o t a p art y t o th e d ecree.” U.S. Gen . Acco u n t i n g Offi ce, GAO/ GGD-9 7 -3 4, In fo rm at i o n o n th e J o i n tan dSev eral Li ab i l i t y St an d ard1 9 (1 9 9 7 ), h t tp : // www.g ao . g o v /as s et s / 2 3 0 / 2 2 3 7 5 9 .p d f. (Th e rep ortco n cl u dedth atb in d i n g t h e IRS t o th e res u l t s o f a d i vo rce d ecree was i m p ract i cal
. Id . at 1 9 -2 1 .) Becau s e t hei r d i v o rce d ecree d o es n o t al t er t hei r l i ab il i ti es t o the IRS, As ad
an d Ak el are jo i n t l y

an d s ev eral l y

l i ab l e fo r th ei r fed eral i n co m e t ax l i ab i l i ti es
u n d er fed eral l aw. See s ec. 6 0 1 3 (a), (d )(3 ); Do l an v . Co m m i ss i o ner, 4 4 T.C. 4 2 0 , 4 2 7 (1 96 5 ) (s t at i n g t h at t h e IRS h as t h e o p t i o n o f p ro ceed i n g ag ai n s tei th er s p o u s e wh o s i g n eda jo i n t retu rn , b u t can co l l ectth e l i ab i li t y o n l y o n ce). Rel ief fro m

jo i n t
an d s ev eral l i ab i l i t y

i s affo rd edt o jo i n t -ret u rn fi l ers u n der t h e t es t s s et fo rt h i n- 8
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[* 8 ] s ect i o n 6 0 1 5. Al t h o u g h As adan dAk el p et it i on edth e Co u rt fo r rel i ef fro m jo i n t an ds ev eral l i ab il i t y u n d er s ect io n 6 0 15 , attri al n ei t h er co nt en d edth atth ey
s at i s fi edth e t es t s fo r rel i ef u n d er s ect i o n 6 0 15 . Iti s ap paren tth at t hey b o t h wo u l d ag ree t o a 5 0 -5 0 s et t l em en t o f t h es e cas es . Bu tth e IRS i s al s o a p art y t o th es e
cas es . W i t h o u tth e IRS’ s co n s en tt o a s et t l em en tu nd er wh i ch As adan dAk el ’ s l i ab i l i t y is each redu ced t o 50 %, th ere can b e n o en fo rceab l e s et t l em en to n th o s e t erm s . See Co rs o n v . Co m m i s s i o n er, 1 14 T.C. 3 5 4 (2 0 0 0 ) (h o l d i ng th at wh ere b o t h s p o u s es fi l eda p et i t i o n t o red et erm i n e th e d efi ci en cy an dth e wi fe al s o s o u g h t
s ect i on 6 0 1 5 rel i ef i n th e s am e p ro ceed in g an d s h e an dth e IRS ag reed th ats h e
was en t i t l ed t o s ect i o n 6 0 15 rel i ef, wi t h o u tth e h u s b an d ’ s s ig nat u re o n th e
s et t l em en tag reem en t , i tcan n o tfo rm th e b as i s fo r a ju d i ci al d eci s i on ). W e accep t t h e IRS’ s co n ces s i o n s , wh i ch are n o tco n t es t edb y As ad an dAk el
. 2
. As ad ’ s an d Ak el ’ s ret u rn -p rep arer d efen s e t o t h e accu racy -rel at edp en al t i es Attri al , the o n l y

real i s s u e rai s edb y

As adan dAk el was th atb ecau s e a p ro fes s i on al t ax -ret u rnp rep arer p rep ared th ei r 2 0 0 8 an d 2 0 0 9 ret u rn s, t h ey s h o u l d b e rel iev edfro m

l i ab i l it y fo r t h e accu racy -rel at edp en al t i es i m p o s edb y s ect i o n 6 6 6 2 . Th atp en al t y

d o es n o tap p l y

i f t h e t ax retu rn s were p rep ared b y a p ro fes s i on al t ax -ret u rnp rep arer an di f cert ai n o t h er co n d i t i o n s are m et . Sec. 6 6 6 4 (c)(1 ) (t h ere i s an ex cep t io n t o th e p en al t y fo r reas on ab l e cau s e an dg o o d- 9
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[* 9 ] fai t h ); s ec. 1
. 6 6 6 4-4 (c), In co m e Tax Reg s. (reas o n ab l e cau s e an dg o o d fai t h
m ay i n cl u d e reas o n ab l e rel ian ce i n g o o dfai t h o n o p i n i o n o f p ro fes s i o n al t ax ad v is er). Th e Co u rti s wi t h o ut ju ri s d i ct i o n i n t h es e cas es t o co n s i d er As ad ’ s an d Ak el ’ s retu rn -p rep arer d efen s e. Nei t h er As adn o r Ak el p et i t i o n edthe Tax Co u rti n
res p o n s e t o th e IRS’ s n o t i ce o f d efi ci en cy . See s ec. 6 21 3 (a) (al l o wi n g t ax p ay er t o p et i t i o n th e Tax Co u rtt o red et erm i n e a d efi ci en cy wi t hi n 9 0 d ay s aft er t h e m ai l i n g
o f a n o ti ce o f d efi ci en cy ). In s t ead , th ey p et i t i o n edth e Co urtt o rev i ew t he IRS’ s d en ial o f t h ei r res pect i v e cl ai m s fo r rel i ef fro m jo i n t an ds ev eral l i ab i l i t y u n d er
s ect i on 6 0 1 5 . See s ec. 6 0 1 5(e). In a s t an d -al o n e s ect i o n -6 0 1 5 cas e s u ch as th i s , wh i ch i s i n d ep en d en to f a d efi ci en cy p ro ceed i n g, t he Co u rtcan co n s id er o n l y wh et h er t h e rel i ef p ro v i s i o n s o f s ect i o n 6 0 1 5 are av ai l ab l e. See Bl o ckv . Co m m i s s i o n er, 1 2 0 T.C. 6 2 , 6 8 (2 0 0 3 ). Th e Co u rtcan n o tco n si der i s su es o t h er t h an s ect i o n -6 01 5 rel i ef. Id . Thu s , i tcan n o t co n s i d er As ad ’ s an dAk el ’ s t ax ret u rn -p rep arer d efen s e t o th e accu racy -rel at edp en al ti es .- 1 0 -

[* 1 0 ] To refl ectth e fo reg o i n g , Deci s i o n s wi l l b e en t ered u n der Tax Co u rt Ru l e o f Pract ice & Pro cedu re 1 5 5 refl ect i n g res p o n d en t ’ s co nces s i o n s .