TAX COURT OPINION

Case: Steffanie Ann Maxwell Darlin, Petitioner and Shane Darlin, Intervenor
Docket Number: 4481-15S
Judge: Goeke
Opinion Type: bench
Filed: 02/17/2016
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 STEFFANIE ANN MAXWELL DARLIN, PETITIONER AND SHANE DARLIN, INTERVENOR, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) Docket No. 4481-15S. ) ) ) ) ORDER 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, intervenor and respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Houston, Texas on January 14, 2016, containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. February 17, 2016 S$VED FEB 1 8 2016 Capital Reporting Company 3 1 2 Bench Opinion by Judge Joseph Robert Goeke Docket No. 4481-15S 3 Steffanie Ann Maxwell Darlin, Petitioner, and Shane 4 Darlin, Intervenor, v. Commissioner 5 6 7 8 9 January 14, 2016 The Court has decided to render Oral Findings of Fact and Opinion in this case, and the following represents the Court's Oral Findings of Fact and Opinion. The Oral Findings of Fact and 10 Opinion shall not be relied upon as precedent in any 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 other case. This case was heard pursuant to the provisions of section 7463 in effect when the petition was filed. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court. Section references above and hereinafter are to the Internal Revenue Code in effect for the year 2011. The present opinion is authorized by section 7459(b) and Rule 152 of the Tax Court Rules of Practice and Procedure. Petitioner Mrs. Darlin was a resident of Texas when she filed her petition in this case. In the present matter, she seeks review of the joint income tax paid on behalf of her and her former 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 12 spouse, Mr. Darlin, for 2011. Specifically, she seeks a refund under section 6015(g). Her former spouse, Mr. Darlin, has intervened under section 6015(e)(4). The facts are that the Petitioner filed a joint tax return with Mr. Darlin for 2011, and on that joint return, the income Mr. Darlin earned as an employee of the Texas Department of Corrections in the amount of $10,254 was omitted. Respondent proposed to include this income and recalculate the joint federal income tax liability in a letter dated June 24, 2013. Neither 13 Mr. or Mrs. Darlin disputed this change, and 14 15 16 17 18 19 20 21 22 23 24 25 Respondent went ahead and made the additional tax assessment that resulted from including Mr. Darlin's income from the Texas Department of Corrections. Mrs. Darlin was due a refund for her separate 2013 federal income tax return, and the Internal Revenue Service applied a portion of that refund to pay the balance on the 2011 joint taxes after the recomputation referred to above. On March 21, 2014, Mrs. Darlin filed Form 8857 with the Internal Revenue Service, requesting relief from joint and several liability for 2011. Respondent made a determination that she was not 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 entitled to relief under section 2015(b) and therefore was not entitled to a refund of the taxes that had been taken from her 2013 credits. Respondent denied relief under section 6015(b) based upon the determination that Mrs. Darlin had constructive knowledge of Mr. Darlin's wages that were not reported. It's undisputed that the unreported wages were 59 percent of Mr. Darlin's income in 2011 and 28 percent of the total household income reported on the 2011 joint federal income tax return. It is clear, based upon the testimony at trial, that Mrs. Darlin was aware that Mr. Darlin worked for the Texas Department of Corrections in 2011 and that he had income from the Texas Department of Corrections in 2011. The fact that she failed to recognize this when she signed the joint federal income tax return for 2011 was not malicious or fraudulent, but nevertheless was negligent, and we find that she had actual knowledge of the omitted income for 2011. Based upon the record of trial, it is also clear that the income tax refund received as a result of the joint federal income tax return for 2011 was 25 all deposited into a checking account controlled by 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 Mrs. Darlin and that she used those funds to pay the 2 3 4 5 6 7 8 9 10 11 12 13 expenses for herself and her children. Respondent also determined that Mrs. Darlin was entitled to relief under section 6015(c), but that was a moot point in this case, as all the taxes involved had been paid pursuant to the credit which was taken from Mrs. Darlin's- 2013 tax return to satisfy the outstanding liability. This credit is in fact what Mrs. Darlin now seeks to have refunded. The credit amounted to $1,072. Given our determination that Mrs. Darlin had actual knowledge of the omitted income in 2011, our determination would differ somewhat from 14 Respondent's, but that difference makes no bearing on 15 16 17 18 19 20 21 22 23 24 25 the outcome of the case, as we will explain. As stated previously, Mrs. Darlin seeks relief under section 6015. Section 6015 provides several alternatives for relief from joint and several income tax liability. As previously addressed, Respondent determined that Mrs. Darlin was not entitled to relief under section 6015(b). Section 6015(b)(1) sets forth four procedures for determination regarding whether a taxpayer is entitled to relief from joint and several income tax liability. First, a joint return must .866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 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 have been made for the taxable year. Second, there must be an understatement of tax on that return attributable to one of the joint filers. Third, the other individual, who is not the person attributable to the unreported income, must establish that in signing the return, they did not know or had no reason to know that there was an understatement. Fourth, taking into account all the facts and circumstances, it is inequitable to hold the party who was not responsible for the underlying omission of income liable for the deficiency in tax. The final requirement is that the election to be relieved of joint liability be initiated within two years from the date the Secretary begins collection. That is not at issue in this case. However, as stated, based upon our findings of fact, Mrs. Darlin does not qualify for the application of section 6015(b), because she well knew that Mr. Darlin had income from the Texas Department of Corrections in 2011, and a cursory review of the income tax return would have revealed to her that he had not included that income, and that when she signed the return, the return was incorrect. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Section 6015(e) authorizes the review of Respondent's determination denying relief from joint liability, and Mrs. Darlin has timely filed such a request. Therefore, we do have jurisdiction to consider her case under that section. Section 6015(g) authorizes a payment of a refund under certain circumstances if in fact·a party is relieved of joint liability. However, no such relief is available under section 6015(g)(3) if the basis for the relief from joint liability is under subsection (c). Since the application of subsection (c) would not provide the relief Mrs. Darlin seeks in the present case, it's not necessary for us to determine whether she is entitled to relief from liability under subsection (c), and we do not deem it appropriate for us to analyze the application of that section. However, we do agree that subsection 6015(b) does not apply and that the only basis on which Mrs. Darlin might be granted relief would be subsection 6015(b) or the application of subsection 6015(f), because, as we stated, we found that she 24 well knew her husband had income that was omitted 25 from the 2011 income tax return, she is not entitled 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 to equitable relief under subsection 6015(f), and that would not be a basis to provide her a refund of the tax liability which was paid based upon the allocation of a credit for her 2013 separate federal income tax return. Given these findings and the clear application of th.e Internal Revenue Code provisions described, the result in this case is clearly a decision for Respondent, upholding Respondent's 10 denial of a refund to Mrs. Darlin for relief from her joint and several income tax liability with her husband for the year 2011. Such a decision will be entered. This concludes the Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 11:06 a.m., the above- entitled matter was concluded.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitaIReportingCompany.com