TAX COURT OPINION

Case: Leslie C. White
Docket Number: 5344-06
Judge: Colvin
Opinion Type: bench
Filed: 04/09/2008
Pages: 10

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 LESLIE C . WHIT E Petitioner, * V . Docket No . 5344-06 COMMISSIONER OF INTERNAL REVENUE Respondent . * * ORDE R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial of the above case before Judge Joseph R . Goeke at Salt Lake City, Utah, on February 27, 2008, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed ) Joseph Robert Goeke Judge DATED : Washington, D .C . April 9, 2008 SERVED APR 16 2008 3 1 Bench Opinion by Judge Joseph Robert Goeke 2 February 27, 200 8 3 Leslie C . White v . Commissioner Docket No . 5344-0 6 4 THE COURT : The Court has decided to render oral 5 findings of fact and opinion in this case and the following 6 represents the Court ' s oral findings of fact and opinion . 7 The oral findings of fact and opinion shall not be relied 8 upon as precedent in any other case . 9 This bench opinion is made pursuant to th e 10 authority granted by section 7459 ( b) of the Internal Revenue 11 Code and Rule 152 of the Tax Court Rules of Practice and 12 Procedure . Hereinafter section references are to the 13 Internal Revenue Code . 14 This case came to trial before the Court in Salt 15 Lake City on February 26, 2008 . Petitioner represente d 16 herself and Respondent was represented by Inga Plucinski . 17 The parties submitted a stipulation of facts with attached 18 exhibits and the Petitioner testified at the trial . 19 The issue before the Court in this case is whether 20 the Petitioner can successfully challenge Respondent' s 21 determination that Petitioner does not qualify for relief 22 from joint and several liability on a joint return for the 23 years 1999, 2000 and 2001 under section 6015 ( f) . The Court 24 must determine whether Respondent abused his discretion in 25 denying relief to the Petitioner . Heritage Reporting Corporation (202) 628-4888 4 1 The Petitioner resided in the state of Utah at the 2 time she filed the petition in this case . The Petitione r 3 and Wendel White married on October 12, 1999 . The y 4 separated on or about October 27, 2003 . Petitioner filed 5 for divorce from Mr . White and the divorce became final on 6 or about April 12, 2005 . 7 In the decree of divorce and judgment which was 8 rendered by the Third Judicial District Court of Salt Lake 9 County in the State of Utah in Case Number 054100227 th e 10 court ordered in paragraph 2 of its order and decree of 11 divorce that the Petitioner and Mr . White were to equally 12 pay debts to the Internal Revenue Service . 13 Petitioner and Mr . White filed a joint federal 14 income tax return for 1999 in April 2000 . On their 1999 15 return they reported tax due of $5,199 and withholdings of 16 $1,288 . With the return Petitioner and Mr . White sent a 17 payment of $200 . Petitioner and Mr . White did not pay the 18 remaining taxes due . Respondent did not audit the 199 9 19 return and did not assert a deficiency in tax against the 20 Petitioner Mr . White for 1999 . 21 In March 2001 the Internal Revenue Service sent to 22 the Petitioner Mr . White a collection due process notic e 23 under section 6330 for the remaining income tax due for 24 1999 . Neither the Petitioner nor Mr . White requested a 25 hearing pursuant to section 6330 relative to the 199 9 Heritage Reporting Corporation (202) 628-4888 5 1 notice . 2 Petitioner and Mr . White also filed a join t 3 federal income tax return for 2000 in October of 2002 . On 4 their 2000 joint return they reported a tax due of $5,606 5 and withholdings of $1,876 .51 . They did not pay the tax 6 shown as due on the 2000 joint return . Once agai n 7 Respondent did not audit the 2000 return and did not assert 8 or assess a deficiency in tax against the Petitioner and Mr . 9 White for 2000 . 10 Petitioner and Mr . White also filed a joint return 11 for 2001 in April of 2002 . On the 2001 joint return the y 12 reported a tax due of $4,384 and withholdings of $3,419 .37 . 13 They did not pay the tax shown as due on the 2001 return . 14 Respondent did not audit the 2001 return and did not assert 15 or assess a deficiency in tax against the Petitioner and Mr . 16 White for 2001 . 17 In May 2003 Respondent sent to the Petitioner and 18 Mr . White a collection due process notice under section 6330 19 for 2000 and 2001 . The Internal Revenue Service record s 20 show that this notice was not claimed by either the 21 Petitioner or Mr . White . 22 Petitioner filed a request for relief from joint 23 and several liability on the joint federal income ta x 24 returns for 1999, 2000 and 2001 in June 2005 . Respondent 25 maintains that Petitioner ' s request was untimely because it Heritage Reporting Corporatio n (202) 628-4888 6 1 was made more than two years after Petitioner and Mr . White 2 were issued collection due process notices for the year s 3 1999, 2000 and 2001 . Respondent argues in the alternative 4 that even if Petitioner's request for relief is considered 5 timely, Respondent has correctly denied the relief because 6 Petitioner does not meet the criteria for equitable relief 7 under section 6015(f) for the years 1999, 2000 and 2001 . 8 Petitioner counters that she should be full y 9 relieved from the liability for the unpaid income taxes and 10 additions to tax for 1999, 2000 and 2001 because Mr . White 11 had insufficient withholdings and she believes hi s 12 underwithholding is the cause of the underpayment of tax . 13 Respondent counters that an analysis of the joint 14 income and withholdings for the years in issue demonstrates 15 that Petitioner also was underwithheld, and the parties have 16 stipulated to that effect . 17 At trial Petitioner testified and her testimony 18 demonstrates that at the time the returns were filed for the 19 years 2000 and 2001 she did not have a reasonabl e 20 expectation that the taxes would be paid by Mr . White . The 21 year 1999 was early in their marriage and it is unclea r 22 whether she realized the taxes would not be paid for that 23 year . 24 After Respondent denied Petitioner's request for 25 relief under section 6015(f) she timely filed a petition for Heritage Reporting Corporatio n (202) 628-4888 7 1 review of that determination before this Court . With 2 certain exceptions, a husband and wife may elect to file a 3 joint return based upon their aggregate taxable income . 4 Section 6013(a) . The election to file a joint retur n 5 renders both spouses jointly and severally liable for the 6 tax due for the year in which the election was made . 7 Section 6013(d)(3) . Section 6015 provides three avenues of 8 relief from joint and several liability from a tax liabilit y 9 from a joint return . Section 6015 ( b) and (c) ,.6 not apply (310 V 10 in this case because they are only available when Respondent 11 has proposed a deficiency, and no deficiency has bee n 12 determined for any of the years at issue in this case . 13 Section 6015(f) permits equitable relief for an 1-4 underpayment of income tax shown on a joint income ta x 15 return . The legislative history of section 6015 provides 16 that Congress intended for the Secretary to exercis e 17 discretion in granting equitable relief if a requesting 18 spouse "does not know and had no reason to know that the 19 funds intended for payment of tax were instead taken by the 20 other spouse for such other spouse's benefit ." H .R . Conf . 21 Rep . No . 105-599, at 254 (1998) . 22 Congress also intended for the Secretary to 23 exercise the equitable relief authority under sectio n 24 6015(f) in other situations if "taking into account all the 25 facts and circumstances, it is inequitable to hold an Heritage Reporting Corporatio n (202) 628-4888 8 1 individual liable for all or part of any unpaid tax or 2 deficiency arising from a joint return ." Id . 3 The Secretary has prescribed procedures to use for 4 determinations under section 6015, and specifically unde r 5 section 6015(f) in cases involving requests for equitable 6 relief . For requests filed on or after November 1, 2003 , 7 the procedures are found in Revenue Procedure 2003-61, 2003- 8 2c .B .296 . A requesting spouse such as the Petitioner mus t 9 satisfy seven threshold conditions to be eligible to submit 10 a request for equitable relief under section 6015(f) . 11 Section 4 .01 of Rev . Proc . 2003-61 . 12 Respondent asserts that Petitioner does not meet 13 two of these seven threshold conditions . Responden t 14 maintains that Petitioner's request is untimely because it 15 was made more than two years after the first collectio n 16 activity . Respondent also maintains that the underpayment 17 of tax at issue is not attributable solely to Mr . White but 18 a portion of it is also attributable to the Petitioner . 19 Respondent goes on to maintain that presuming Petitioner's 20 request was timely it would not be unequitable to sustain 21 Petitioner's joint liability in this case for the years at 22 issue taking into account all the facts and circumstances of 23 the case . 24 Under paragraph 4 .02 of Rev . Proc . 2003-6 1 25 Respondent will ordinarily grant equitable relief under Heritage Reporting Corporatio n (202) 628-4888 9 1 section 6015(f) if three conditions are satisfied . Those 2 conditions are : on the date of the request for relief the 3 requesting spouse is no longer married or has obtained a 4 legal separation from the non-requesting spouse and has not 5 lived with the non-requesting spouse at any time during the 6 12-month period ending on the date of the request fo r 7 relief . Petitioner meets this criteria . 8 The second criteria is that on the date th e 9 requesting spouse signed the joint return the requesting 10 spouse had no knowledge or reason to know that the non- 11 requesting spouse would not pay the income tax liability . 12 Petitioner does not meet this criteria for at least the 13 years 2000 and 2001 . And it is uncertain whether it was 14 reasonable for the Petitioner to believe that Mr . White 15 would pay the reported income tax liability for 1999 . 16 The third criteria is that the requesting spouse 17 will suffer economic hardship if the Service does not grant 18 relief . Petitioner has established that she would suffe r 19 this hardship . And we find that this provision is favorable 20 to the Petitioner . 21 Taxpayers who do not qualify for relief under 22 section 4 .02 may qualify for relief under section 4 .03 of 23 Rev . Proc . 2003-61 . Among the factors to be considered are 24 the current marital status of the requesting and non- 25 requesting spouses . This factor is favorable to the Heritage Reporting Corporation (202) 628-4888 1 0 1 Petitioner because she has obtained a divorce from Mr . 2 White . 3 Whether collection will result in economi c 4 hardship to the Petitioner . Once again this factor is 5 favorable to the Petitioner . 6 The requesting spouse's knowledge or reason to 7 know of the tax liability . For the reasons stated above, 8 this factor is unfavorable to the Petitioner for 2000 an d 9 2001 and Petitioner has failed to establish that this factor 10 is clearly favorable to the Petitioner for 1999 . 11 For the non-requesting spouse, legal obligation to 12 pay the tax liability . This factor is negative to the 13 Petitioner because Petitioner pursuant to the decree of 14 divorce has an obligation to pay half the tax liability 15 herself . 16 Whether Petitioner received a significant benefit 17 from the non-payment of tax . This factor appears to be 18 favorable to the Petitioner . 19 The Petitioner's compliance with income tax laws 20 is the next factor . And this factor is favorable to her as 21 she has attempted to comply and timely file income ta x 22 returns after the years in dispute . 23 The last factor is whether Petitioner was subject 24 to abuse from Mr . White . And this factor appears to b e 25 neutral as there is no evidence of such abuse . Heritage Reporting Corporation (202) 628-4888 1 1 1 Weighing all these factors we are forced t o 2 sustain Respondent's determination as we cannot find an 3 abuse of discretion since there are numerous unfavorabl e 4 factors to the Petitioner, primarily her legal obligation to 5 pay the tax and her knowledge that the income taxes would 6 not be paid for two of the three years in question, and the 7 unlikelihood that the taxes would be paid for 1999 whic h 8 makes it improbable that the Petitioner should not have at 9 least suspected the taxes would not be paid for that year . 10 We also have found that the Petitioner woul d 11 suffer economic hardship . But this factor alone does no t 12 overcome the negative factors to the Petitioner and does not 13 allow us to find an abuse of discretion by Respondent . 14 Therefore, a decision will be entered for Respondent . 15 This concludes the Court's oral findings of fact 16 and opinion in this case . 17 (Whereupon, at 8 :44 a .m ., the bench opinion in the 18 above-entitled matter was concluded . ) 19 20 // 2 1 22 23 24 25 // Heritage Reporting Corporation (202) 628-4888