TAX COURT OPINION

Case: Caroline Elizabeth Yates
Docket Number: 6502-09
Judge: Gustafson
Opinion Type: bench
Filed: 07/01/2011
Pages: 11

UNITED STATES TAX COURT WASHINGTON, DC 20217 CAROLINE ELIZABETH YATES, KVC Petitioner, v. ) Docket No. 6502-09. COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R Pursuant to Rule 152 (b) , Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of transcript of Gustafson at Houston, Texas, on June 21, 2011, containing his oral the trial. in the above case before Judge David fact and opinion rendered at findings of the pages of the the trial the conclusion of In accordance with the oral findings of fact and opinion, a partial decision will be entered for petitioner. IT IS ORDERED that within 90 days of service of this order, the parties shall submit decision pursuant in accordance with Rule 155. the amount(s) to be included in the to the findings and conclusions of the Court, (Signed) David Gustafson Judge Dated: Washington, D.C. July 1, 2011 SERVED Jul 01 2011 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 Bench Opinion by Judge David Gustafson June 21, 2011 Yates v. Commissioner Docket Number 6502-09 The Court has decided to render oral Findings of Fact and Opinion in this case. The following represents the Court's oral Findings of Fact and Opinion, which shall not be relied on as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 sof the Tax Court Rules of Practice and Procedure. - PROCEDURAL BACKGROUND In July 2008 petitioner Caroline Elizabeth Yates submitted to the Internal Revenue Service (IRS) a Form 8857, "Request for Innocent Spouse Relief", for years 2002, 2003, and 2004. (Ex. 2-J.) On December 24, 2008, the IRS issued to Ms. Yates a determination letter denying her request as untimely. (Ex. 1-J.) - On March 16, 2009, Ms. Yates filed a timely petition with this court, seeking our review of that determination. At the time she filed her petition, Ms. Yates resided in Texas. (Stip. 1.) On June 20, 2011, at the Court's trial session in Houston, Texas, the parties jointly moved to submit the case under Rule 122, and the Court granted the motion. The Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 parties submitted a stipulation of facts (with Exhibits 1-J through 11-J), referred to herein as "Stip.", and a stipulation of settled issues, referred to herein as "SSI". Both parties stated that they would not submit additional briefs but would rely on their pretrial memoranda. The parties agree about the extent to which Ms. Yates would otherwise be entitled to relief under section 6015(f) (see SSI 4, 6, 7); and the issue for decision is whether Ms. Yates is entitled to relief even though her request was submitted to the IRS more than two years after it mailed her a Notice of Intent to Levy. We hold that Ms. Yates is entitled to the relief she seeks. FINDINGS= OF FACT Ms. Yates's maiden name was Caroline Eli abeth Anderson. (Stip. 13.) She was formerly married to Carl Yates. (Stip. 4.) For each of the three years 2002, 2003, and 2004, Ms. Yates filed a joint tax return with her then-husband Carl Yates. (Exs. 3-J, 4-J, 5-J.) The 2002 return listed Ms. Yates's name as "Caroline E Anderson"; and the 2003 and 2004 returns listed her name as "Caroline E Yates". on those returns, Mr. Yates's name appeared first, and his social security number was reported in the blank for "Your social security number". Ms. Heritage Reporting Corporation (202) 628-4888 5 1 2 3 4 5 6 7 8 9 Yates's name appeared second, and her social security number was reported in the blank for "Spouse's social security number". Each of the three returns at issue reported income attributable to each of the two spouses. Ms. Yates's income was wages from which her employer withheld Federal income tax. Mr. Yates's income was self-employment income for which he made no estimated tax payments for 2002 and 2003 and for which he made 10. estimated tax payments for 2004 of only $2,500. (Exs. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3-J, 4-J, 5-J.) Consequently, their taxes were underpaid by $10,588 for 2002, $8,486 for 2003, and- $24,476 for 2004; but of that total of $43,550, the amount attributable to Ms. Yates was only $472 for 2002 and $1,-870 for 2004, totaling $2,342. (Stip. 5, 7, 9.) Thus, tax underpayments totaling more than $41,000 were attributable to Mr. Yates's self-employment income. On October 18, 2005, the IRS sent to Ms. Yates, via certified mail, a "Notice of Intent to Levy and Notice of the Right to a Hearing" for 2002, 2003, and 2004. (Stip. 11; Ex. 7-J.) It was addressed to "Caroline E. Anderson""(Ms. Yates's maiden name, which had appeared on the return for the first of the years at issue), and it listed Mr. Yates's social security Heritage Reporting Corporation (202) 628-4888 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 number, not hers. The notice was sent to Ms. Yates at her last-known address; i.e., the address that appeared on all three of those returns (Stip. 13), the most recent of which had been filed six months before, in April 2005 (Stip. 8). However, Ms. Yates did not receive the notice and it was returned to the IRS. (Stip. 15.) Ms. Yates and Mr. Yates divorced in 2007. (Ex. 2-J, line 8.) Ms. Yates submitted her Form 8857, "Request for Innocent Spouse Relief" (Ex. 2-J), to the IRS on July 30, 2008 (Stip. 3), which was 2 -years and 8 months after the IRS had mailed its October 2005 levy notice. The IRS concedes that Ms. Yates would be entitled to innocent spouse relief under section 15 - 6015(f) for the underpayment attributable to Mr. 16 17 18 19 20 21 22 23 24 25 Yates's income (SSI 4, 6, 7), except that the IRS's regulation (discussed below) requires that such requests be filed no later than 2 years after collection activity begins. Because she submitted her request 2 years and 8 months after the IRS mailed its levy notice, the IRS denied Ms. Yates request as untimely. Ms. Yates timely filed her petition in this case in March 2009. // Heritage Reporting Corporation (202) 628-4888 7 1 2 3 4 5 6 7 8 9 -10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I. Standard and scope of review OPINION When determining whether a taxpayer is entitled to relief under section 6015, we conduct a trial de novo. Porter v. Commissioner, 130 T.C. 115, 117 (2008) (Porter I). We do not review for abuse of discretion but instead employ a de novo standard of review. Porter v. Commissioner, 132 T.C. 203 (2009) (Porter II). Except as otherwise provided in section 6015, the taxpayer bears the burden of proof. Sec. 6015(c) (2); Rule 142(a). However, because this case is fully stipulated, the burden of proof does not affect the outcome of any issue. II. Joint and several liability and section 6015 relief generally Section 6013(d) (3) provides that when taxpayers file a joint return, the tax is computed on their aggregate income, and their liability to pay the tax shown on the return or found to be owing is joint and several. That is, each spouse is liable for the entire joint tax liability. Section 6015 provides three types of relief from joint and several liability: (1) full or apportioned relief under section 6015(b); (2) proportionate relief for divorced or separated Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 8 taxpayers under section 6015(c); and (3) equitable relief under section 6015(f) when relief is unavailable under either section 6015(b) or (c). The IRS treated Ms. Yates' request for relief as a request for equitable relief under section 6015(f); and the parties have stipulated that she is not entitled to relief under subsections (b) and (c) (SSI 1); so we consider only subsection (f). III. Timeliness of a request for relief The statute bars relief under either subsection =(b) or (c) unless the requesting spouse submits a request for relief within two years of the IRS's first collection actio-n~ägainst the requesting spouse. Sec. 6015(b) (1) (E), (c) (3) (1B). Ms. Yates acknowledges that the mailing of a valid levy notice constitutes the commencing of collection action. (See SSI 2.) In section 6015(f), however, Congress did not impose a time limit for requesting relief; but by regulation the IRS purported to impose on section 6015(f) relief the same two-year time limit that Congress imposed by statute on relief under section 6015(b) and (c). See 26 C.F.R. sec. 1.6015-5(b) (1). However, in Lantz v. Commissioner, 132 T.C. 131 (2009), revd. 607 F.3d 479 (7th Cir. 2010), we held that the two-year deadline imposed by the Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 9 regulation is an invalid interpretation of section 6015(f). After the U.S. Court of Appeals for the Seventh Circuit reversed Lantz, we reconsidered the matter but did not change our position. See Hall v. Commissioner, 135 T.C. 374 (2010). Two other U.S. Courts of Appeals have more recently held the two-year deadline to be valid, see Mannella v. Commissioner, 631 F.3d 115 (3d Cir. 2011), revg. 132 T.C. 196 (2009), Jones v. Commissioner, No. 10-1985 (4th Cir. June 13, 2011), rev'g Tax Court Docket No. 17359-08 (May 28, 2010); but for the~ reasons we have previously expressed, we respectfully disagree. See Pullins v. Commissioner, 136 T.C. No. 20 (May 5, 2011). The - court to which an appeal would lie in this case -- the Court of Appeals for the Fifth Circuit -- has not addressed this issue, and we therefore follow our holding in Lantz and treat the IRS's two-year deadline as invalid. Since the IRS concedes that on the merits Ms. Yates is otherwise entitled to relief under section 6015(f), and since the IRS's only argument against relief is the two-year regulation that we have held invalid, we hold in favor of Ms. Yates. IV. Alternative arguments In addition to her successful contention Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10 that the regulation is invalid, Ms. Yates has advanced alternative contentions that we also briefly address. A. Non-receipt of the levy notice Ms. Yates did not receive the October 2005 notice of levy (Stip. 15), and it appears that she contends that therefore the IRS did not commence collection activity, for purposes of the two-year deadline in the regulation. However, we have held that an.innocent spouse's "actual receipt of the notice of intent to levy is not Tequired for the 2-year period in which to request relief under section 6015(b) or (c)", Mannella, 132 T.C. at 200; and there is no reason to reach a different result as to relief under section 6015(f). Therefore, we conclude that if the two-year rule of the regulation is valid, then the two-year period began running when the IRS mailed the notice of levy, even though Ms. Yates did not receive it. It appears that Ms. Yates's non-receipt of the notice of levy and her apparent resulting unawareness of the IRS's collection activity may have accounted for her failure to request relief any sooner than she did. The parties did not so stipulate, but if this surmise were correct, then it might implicate equitable tolling of the two-year deadline, cf. Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11 Mannella, 631 F.3d 115 (remanding to consider whether equitable tolling applies); Hall v. Commissioner, 135 T.C. 374, 387 n.5 (2010) (Wells, J., concurring) ("such a period of limitations would be subject to the 'doctrine' of equitable tolling"). However, since the parties did not address that issue, we do not decide it here. B. Supposed errors on the levy notice Ms. Yates argues that the levy notice's supposed errors in her name and social security number render it invalid, so that it did not constitute a valid levy notice that could start the running of the two-year regulatory deadline for requesting relief under section 6015(f). However, a minor error on a notice of deficiency will not invalidate that notice, see, e.g., Estate of Berry v. Commissioner, 41 T.C. 702, 704 (1964), and the same should be true for a notice of levy. Moreover, those supposed errors were not really errors. The name on the levy notice was her maiden name --"Caroline E. Anderson" -- which had appeared on the first of the joint returns at issue. The social security number was her husband's and was the primary social security number appearing on the joint returns. A levy notice arriving at Ms. Yates's Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 12 address, addressed to "Caroline E. Anderson", and bearing her husband's social security number could hardly have failed to put her on notice that the IRS proposed to levy against her property. We conclude that the notice of levy at issue here was valid. For the reasons we have stated, we hold in favor of Ms. Yates and under section 6015(f) will grant her relief from liability for the underpayments and additions to- tax, except to the extent the parties have stipulated they are attributable to Ms. Yates herself. (See SSI 5, 8.) Decision will be entered in favor of petitioner. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 9:30 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // Heritage Reporting Corporation (202) 628-4888