TAX COURT OPINION

Case: Robert A. Jamison & Holly J. Jamison
Docket Number: 8255-17S
Judge: Goeke
Opinion Type: bench
Filed: 04/04/2018
Pages: 14

UNITED STATES TAX COURT WASHINGTON, DC 20217 PA ROBERT A. JAMISON & HOLLY J. JAMISON, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) Docket No. 8255-17S. ) ) ) ) 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at San Antonio, Texas 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. April 4, 2018 SERVE APR 0 6 2018 Bench Opinion by Judge Joseph Robert Goeke March 23, 2018 Robert A. Jamison & Holly J. Jamison v. Commissioner of 3 Internal Revenue Docket No. 8255-17S 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 opinion shall not be relied upon as precedent in any other case. This case was heard pursuant to the provisions of Internal Revenue Code Section 7463 in effect when the 1 2 3 4 5 6 7 8 9 10 11 12 13 petition was filed. Pursuant to Section 7463(b) the 14 decision to be entered is not reviewable by any other 15 16 17 18 court, pes.i-ed- Hereinafter, section references are to the Internal Revenue Code unless noted when they are to treasury regulations. This opinion is rendered pursuant to Rule 152 of the Tax Court Rules of Practice and 19 Procedure, and Section 7459(b). Hereinafter rule 20 references are to the Tax Court Rules of Practice and 21 Procedure. 22 This case was tried in San Antonio, Texas on 23 March 19th, 2018. Certain facts and exhibits were 24 25 stipulated, and both the petitioners testified. Petitioners timely filed a joint Federal Income cribers p73)406-2250|operations@escribersnetlwww.escribersnet 4 Tax Return for 2014 in October of 2015. The IRS discovered a distribution of $17,328 from Mr. Jamison's Thrift Savings Plan account, and $908 of Texas Unemployment Compensation were omitted from the 2014 joint Federal Income Tax Return. As a result, the IRS issued a notice of deficiency for 2014 and the petitioners timely petitioned this court upon receipt of the notice of deficiency. At trial and in the post-trial memoranda submitted by the petitioners, the income and the 10% addition for an early retirement distribution under section 72(t) were not disputed by petitioners. What is disputed is the addition to tax under section 6662(a) e anà And the question whether Ms. Jamison is an innocent spouse under section 6015(b), (c), or (f). We will first address the addition to tax. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Section 6664(c)(1) provides an exception to the imposition 18 of the accuracy related penalty if the taxpayer 19 establishes that there was reasonable cause, or the 20 taxpayer acted in good faithdrespect to the underpayment. 21 Circumstances indicating that a taxpayer acted with 22 23 24 25 reasonable cause and good faith include whether there was an honest misunderstanding of the law, and that the taxpayer's position was reasonable in light of the facts and circumstances. Treas Regs section 1.6664-1(b)(1). (973)406-2250|operations@escribers.net]www.escribers.net 5 Reliance upon a return preparer can be a basis for a good faith failure to report income if the reliance was based upon a competent return preparer who was provided all the information in question. In the present case, it is clear that the petitioners simply overlooked certain income items which are now the basis for the deficiency. Therefore the petitioners cannot argue that they reasonably relied upon H&R Block. While we will address questions about Ms. 1 2 3 4 5 6 7 8 9 10 Jamison's knowledge of the omitted income in the context 11 of her applying for innocent spouse relief. There's no 12 basis to find that the addition to tax should not be 13 applicable to the petitioners, based on the standard 14 analysis required by section 6664(c). 15 . The key factual issues from this case are 16 whether Ms. Jamison was abused to the extent that she was 17 unable to question the error er the tax returny And 18 whether she had reason to know of the erroneous omissions 19 of the Thrift Savings Plan income and the Unemployment 20 Compensation. 21 Regarding the first question, the Jamison's 22 marriage of over 20 years was clearly very contentious, 23 but Ms. Jamison was not intimidated by her husband. She 24 was actively involved in the family finances and was key Kee-n Ñ 25 to protect her interest in Mr. Jamison's retirement. She Cribers (973)406-2250|operations@escribersJtetlwww.escribers.net 6 1 2 3 4 5 6 7 8 9 waived her rights to allow the Thrift Savings Plan withdrawal and we find based upon the entire record that she knew about the withdrawal. She was also itúporLauL regarding Mr. Jamison's inS runed Unemployment Compensation in that she suggested that he apply for the compensation. Mr. and Mrs. Jamison cooperated together regarding family finances and the payment of family bills. They also worked together in the preparation of the joint return by H&R Block, at least 10 they agreed to meet and sign the return at the offices of 11 H&R Block. 12 Ms. Jamison signed the form TSP70 releasing the 13 Thrift Savings Plan amount on July 30th, 2014. She knew 14 15 16 that this waiver would result in Mr. Jamison's receipt of a distribution from the Thrift Savings account. By 2014 the Jamison's rocky marriage was 17 deteriorating further and she was taking steps to protect 18 19 20 21 22 23 24 her financial interest in her husband's military pension and other assets. She would not leave their home, because she had been advised it would jeopardize her right to the home in any subsequent divorce proceeding. In May 2014 there was a particularly ugly incident involving a firearm, which Mr. Jamison waived about in the presence of Mrs. Jamison. As a result of her 25 contacting authorities, he was placed in 72-hour (973) 406-2250 ] operations@escribers.net } www.escnbers.net 7 1 2 3 4 5 6 7 8 9 10 11 12 protective custody because he threatened suicide. Within weeks after this ugly incident, however, the family took a trip together to a wedding. And this seems to be consistent with their general practice of fighting, and yet maintaining a relationship. When in October 2015 Mr. and Mrs. Jamison met at H&R Block's parking lot to sign their joint return for 2014, Ms. Jamison was not in fear of Mr. Jamison but rather was the party who arranged the meeting and was primarily responsible for providing the information to H&R Block. She did not notice that the Thrift Savings Plan income received by Mr. Jamison had been omitted from the return. 13 Nor did she notice that the employment compensation was 14 not reported on the return. 15 Married taxpayers may elect to file joint 16 Federal Income Tax Returns, and after making this 17 Melection each spouse is 43eneret-1+y jointly, and severely 18 liable for the entire tax for the taxable year in 19 question. Section 6013(a), (d)(3). A requesting spouse, 20 however, may seek relief from this joint liability under 21 Section 6015(b), Section bO15(c) or Section 6015(f). 76 22 23 24 25 Petitioners timely filed a petition with this court contesting the notice of deficiency. And this court has jurisdiction to review Ms. Jamison's claim for relief under Section 6213(a) becauseasome claim is an affirmative 6 SvCh (973) 406-2250| operations@escribers.net I www.escribers.net 8 defense to the deficiency asserted against Ms. Jamison. In the present case Mr. Jamison and the IRS oppose Ms. Jamison's request for relief. Section 6015(b)(1) provides frem relief from joint and severable liability or tax on a joint return if five requirements are met. Only two of those requirements remain in dispute. The first involves whether the individual seeking relief from the joint return establishes that in signing the return he or she did not know and had no reason to know that there was an understatement of tax. The second factor which remains in dispute is 1 2 3 4 5 6 7 8 9 10 11 12 whether, under all the facts and circumstances, it would 13 14 15 be inequitable to hold the requesting spouse r-e4èeved-frem the understatement of tax. Similar to 6015(b) respondent does not dispute that Ms. Jamison meets the requirements 16 of Section 6015(c), except for Section 6015(c)(3)(C) which 17 18 reads as follows: If the secretary demonstrates that an individual 19 making an election under this subjection had actual 20 knowledge at the time such individual signed the return of 21 any item giving rise to a deficiency of* portion thereof(cid:0)540 22 which is not allocable to such individual under See44en Subsede 23 (d), such election shall not apply to such deficiency hr 24 portio . This subparagraph shall now apply when the 25 individual with.actual knowledge establishes that such (973)406-2250|operations@escribers.net|www.escribers.net 9 individual signed the return under duress. The actual knowledge limitation for Section 6015(c) relief will not apply if the requesting spouse establishes that she was the victim of domestic abuse prior to the time the return was signed l that as a result of the prior abuse the requesting spouse did not challenge or question the treatment of any item on the return for fear of retaliation by the non-requesting spouse. Treas Reg Section 1.6015-3(c)(2)(v). We will next discuss Section 6015(f), which involves an analysis of Ms. Jamison's knowledge as well as 1 2 3 4 5 6 7 8 9 10 11 12 other factors. Section 6015(f) provides equitable relief 13 from joint and severable liability if taking into account 14 all facts and circumstances it is inequitable to hold the 15 requesting spouse liable for any unpaid tax, or any 16 deficiency and relief is not available under subsections 17 18 (b) or (c). Respondent does not dispute that Ms. Jamison 19 meets all the threshold requirements in Rev. Proc. 2013- 20 34. So this court must consider whether Ms. Jamison is 21 entitled to relief under the streamline provisions of the 22 Revenue Procedure. In order to obtain relief under the 23 24 25 streamline provisions Ms. Jamison must satisfy three factors. The first being that she's not married to Mr. Jamison any longer. The second being that she will suffer cribers (973)406-2250loperations@escribers.net|www.escribers.net 10 1 2 3 4 5 6 7 8 9 economic hardship if the relief is not granted, and the third being that she did not have reason to know of the omission of income. Because petitions are separated she is considered to have met the first requirement. We will address the economic hardship question and we will also discuss the knowledge requirement in the context of that same requirement with respect to both subsections (b) and (c). Similar to the treasury regulation, Revenue Procedure 2013-34 Section 4.02(3)(a) 10 provides an exception to the knowledge requirement in the 11 12 13 14 15 16 case of abuse which might cause Ms. Jamison to have been intimidated and unable to exercise the knowledge that she obtained about the omitted income. Ms. Jamison's economic situation based upon the information she produced at trial does not cause us to find economic hardship in this situation. Her lifestyle 17 will likely suffer if she has to pay all or part of the 18 tax liability in question. But this is not economic 19 hardship as required by the Revenue Procedure, and as we 20 believe the law requires. 21 22 23 24 In analyzing the knowledge requirement in all three of the subsections that are in play under Section 6015 we find that the knowledge requirement in Section 6015(c) is the most favorable to Ms. Jamison. And we will 25 analyze the circumstances of the case in light of that (973)406-2250loperations@escribers.net|www.escribers.net 11 1 2 3 4 5 6 7 8 9 10 11 12 13 provision. The case before us is very similar to Cheshire v. Commissioner, 115 T.C. 183 (2000), aff'd 282 F.3d 326 (5th Cir. 2002). In a concurring opinion e Cheshire, Judge Thornton provides a description of the application of the knowledge requirement under Section 6015(c)(3)(C) as it would apply to circumstances very similar to the present case. Judge Thornton, on page 200 of 115 T.C. states as follows: "No relief is available under Section 6015(c)(3)(C) if the Commissioner shows that the spouse seeking relief had actual knowledge of any item giving rise to the deficiency or portion thereoÑ. The majority 14 appropriately construes this statutory language to 15 16 requirgment in the case of omitted income actual and clear awareness of the admitted income. Thus, I believe the 17 majority opinion inherently rejects respondent's argument 18 that actual knowledge of an 'item' means actual knowledge 19 merely of the event or transaction giving rise to the 20 deficiency. This result comports with the ameliorative 21 purposes of Section 6015(c). It is also consistent with 22 the statutory framework. In particular, if a spouse 23 qualifies under Section 6015(c), the relief provided under 24 6015(d) is an allocation between spouses of the 'items', 25 giving rise to the deficiency. In this context, an 'item' f973)406-2250|operations@escribers.net|www.esaibers.net 12 1 2 3 4 5 6 7 8 9 clearly signifies the item of omitted income, not the underlying event or transaction. The majority opinion harmonizes with the legislative history. The relevant Senate and conference reports state that Section 6015(c) provides no relief if the Commissioner proves that the spouse seeking relief had 'actual knowledge that an item on a return is incorrect.' What does it mean for an 'item on a return' (as opposed to the tax treatment of such an item) to be 'incorrect'? In 10 the context of omitted income and in the light of the 11 Section 61 provisions defining gross income as reference 12 13 14 15 16 17 to various 'items', it most likely means that gross income from a particular source such as a pension is incorrectly reported (by virtue of either understatement or omission) on the return. The other statements of legislative purpose cited by the dissent evince no clear consensus about any other standard of general applicability and 18 dictate no contrary result. 19 Here the question is whether Ms. Cheshire had 20 actual knowledge of -the gross income from the pension that 21 gave rise to the deficiency. Clearly she did. Whether 22 23 24 she believed the pension proceeds distribution was nontaxable in whole or in part on the ground that it was used to pay down a mortgage or under some other mistaken 25 theory is immaterial." cribers (973) 406-2250| operations@escribers.net I www.escribers.net We believe that this language and the analysis 13 of both the Court of Appeals and the Tax Court in Cheshire v. Commissioner bars relief to Ms. Jamison on the knowledge requirement in 6015(b), (c), and (f). She knew about the items of income. And the abuse she suffered in her marriage did not cause her to be intimidated or in fear that raising the omitted income when the joint return was filed would result in retaliation against her. Rather both she and her husband simply omitted this income. While he is primarily responsible, because he received the Form 1099 in question, she did know about the items of income. And based upon Cheshire, she had 1 2 3 4 5 6 7 8 9 10 11 12 13 sufficient knowledge that she's not eligible for relief 14 15 16 17 18 under subsections (b), (c), and (f). At least not under subsections (b) and (c). We note that under subsection (f) further analysis is required. We will review the general factors applicable under subsection (f) because we find that Ms. Jamison does 19 not meet the streamline provisions of the Revenue 20 Procedure, nor is she entitled to relief under subsections 21 22 23 24 (b) and (c). The first factor listed in the Revenue Procedure is marital status. Given the fact that Mr. and Mrs. Jamison lived apart when the return was filed, and have 25 lived apart since 2015, this factor weighs in favor of (973)406-2250loperations@escribersnet|www.escribersnet 14 1 2 3 4 5 6 7 8 9 relief. The next factor is economic hardship, and we've previously found that the liability in question would not cause economic hardship, as we understand that term to be defined in the Revenue Procedure and the case law. Regarding the reason to know, we clearly have stated that we find Ms. Jamison had knowledge of the omitted items of income. Involving the abuse, we found that although there was -- the relationship was abusive, and in many 10 respects abusive on both sides, the abuse was not such 11 that Ms. Jamison was intimidated when she signed the joint 12 Federal Income Tax Return for 201 . We do not find that 13 14 this factor weighs in favor of relief. Another factor is whether there was a legal 15 obligation on the part of either one of the spouses to pay 16 17 the underlying tax. That is not applicable here, because there was no state decree in place. The question of 18 significant benefit is a close question, because it is 19 20 clear that the income in question did benefit Ms. Jamison and her family. We don't find it was an extraordinary 21 benefit, but it was the type of benefit she generally 22 anticipated from Mr. Jamison's income as he provided a 23 24 significant amount of support to -her family throughout 2014 and 2015. Therefore we find this factor to be 25 neutral. (973)406-2250|operations@escribers.net|www.escribers.net She has been in compliance with Income Tax Laws 15 in subsequent years. And we find this factor weighs in her favor. She testified credibly that her mental health has been under stress and that she sees a counselor. We find that that factor does weigh in favor of granting relief. Analyzing all factors and giving the appropriate weight to the knowledge factor, we find that relief is not appropriate in the present case. See Hall v. Commissioner, T.C. Memo 2015-221. And Hudgins v. 1 2 3 4 5 6 7 8 9 10 Commissioner, T.C. Memo 2012-260. Based upon this opinion respondent's position is sustained and a decision will be entered for respondent. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 10:28 a.m., the above-entitled matter was concluded.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (973)406-2250|operations@escribers.net|www.escribers.net