TAX COURT OPINION

Case: Jo Anna Lencioni
Docket Number: 23895-18
Judge: Goeke
Opinion Type: bench
Filed: 01/22/2020
Pages: 10

UNITED STATES TAX COURT WASHINGTON, DC 20217 DRC JO ANNA LENCIONI, Petitioner(s), v. ) ) ) ) ) Docket No. 23895-18. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) 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 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 Francisco, California 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 petitioner. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. January 22, 2020 SERVED Jan 22 2020 Bench Opinion by Judge Joseph Robert Goeke January 10, 2020 3 Jo Anna Lencioni v. Commissioner of Internal Revenue Docket No. 23895-18 THE COURT: 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 opinion is rendered pursuant to Rule 152 of the Tax Court Rules of Practice and Procedure, and Internal Revenue Code section 7459(b). Section references 1 2 3 4 5 6 7 8 9 10 11 12 13 herein after in this bench opinion are to the Internal 14 Revenue Code in effect for the taxable year 2014. 15 The record in this case consists of .the 16 testimony of the Petitioner and the facts as stipulated by 17 18 19 the parties, including exhibits. The Petitioner resided in California at the time she filed her petition in this case. On August 30th, 2018 20 Respondent's Office of Appeals issued a final Appeals 21 determination with respect to Petitioner's request for 22 innocent spouse relief for 2014, and Petitioner timely 23 Petitioned this court after receiving said final 24 determination. Accordingly we have jurisdiction and our 25 review is based upon a de novo analysis of the facts of 973}406-2250|operations@escribesmet|www.escdbersaet 4 1 2 3 4 5 6 7 8 9 the case. on October 25th, 2014 Petitioner's spouse, Edward P. Lencioni passed away. Until he had passed away the Petitioner had been married to Mr. Lencioni for many years. During his life he suffered from alcoholism. On April 15th, 2015 the Petitioner filed a joint individual income tax return with Mr. Lencioni, deceased, for 2014. On this income tax return she reported her wages in the amount of $32,380 of which $2,475 was 10 withheld for Federal Income Tax. Also on the 2014 joint 11 Federal Income Tax Return, she reported that her spouse 12 13 14 15 16 17 18 19 received self-employment income in the amount of $28,637 and Social Security benefits in the amount of $17,209. There were no estimated tax payments made for the 2014 taxable year. The Petitioner did not have any knowledge of her husband's failure to pay estimated tax relative to the income he earned in 2014 prior to his death. The 2014 joint Federal Income Tax Return reported an underpayment of tax in the amount of $7,348. 20 Petitioner did not have sufficient cash or other assets 21 available to pay this tax liability. 22 On July 5, 2017 the IRS Service Center in 23 Cincinnati, Ohio received Petitioner's Form 8857, Request 24 for Innocent Spouse Relief and accompanying attachments. 25 On September 7, 2017 the Service Center issued a cribers 73)4062250|operations@esciber net|www4scribersmet preliminary determination denying Petitioner's request innocent spouse relief. On October 10, 2017 the IRS 5 for received Petitioner's Form 12509, Innocent Spouse Statement of Disagreement, which was forwarded to Respondent's Office of Appeals, which reviewed Petitioner's request for innocent spouse relief for 2014. The Petitioner has only a high school education. Regarding her current financial situation, Petitioner's 2018 Federal Income Tax Return reflects wages in the 1 2 3 4 5 6 7 8 9 10 amount of $54,142 and tax due in the amount of $5,207, and 11 Federal withholding the amount of $5,981, and an 12 13 14 15 overpayment in tax in the amount of $774. The Petitioner and Mr. Lencioni filed joint Income Tax Returns for the years 2009, 2011, 2012, and 2013. These returns reported overpayments of income tax. 16 After the filing of these returns Respondent assessed 17 additional taxes on Petitioner's joint account for each 18 19 20 21 22 23 24 year. Petitioner testified credibly that she was not aware of these assessments by Respondent, and Respondent granted Petitioner innocent spouse relief pursuant to section 6015(c) for the understatements of income tax for the years 2009, 2011, 2012, and 2013. Respondent's Appeals Office determined that relief should not be granted to the Petitioner because she 25 failed to establish that she had any reasonable belief ) 9733406-2250|operationseescribers.net|www.escribers.net 6 that her husband would pay the income tax due for 2014, especially because he was deceased at the time the return was filed. The Appeals Office also determined that the Petitioner failed to establish she would suffer economic hardship, given her current wages, and that she was not tax compliant for the year 2015. Based on her testimony and the record as a whole, we believe that Petitioner was tax compliant for the years after 2014, and we disagree with the 1 2 3 4 5 6 7 8 9 10 determination that the Petitioner would not suffer economic hardship should she be faced to pay the Ewcaà liabilities in question, given the amount of the liabilities and the fact that Petitioner's income is not 11 12 13 14 extravagant, considering the cost of living in-44w.,J.asa-1- 15 where she lives. 16 17 18 19 This case is focused on the knowledge issue, as determined by the Appeals Office, and whether Petitioner should be denied relief because she had reason to know that the taxes would not be paid. Section 6015(f) 20 Provides equitable relief if the requesting spouse is not 21 qualified under section 6015(b) or (c). The standards for 22 applying equitable relief under section 6015(f) are set 23 forth in Revenue Procedure 2013-34, which is generally 24 accepted as the proper starting point for the analysis of 25 the application of section 6015(f). Pullins v. (9733406-2250|opentionseescibers.net[www.escribersnet 7 Commissioner, 136 T.C. 432 (2011). The Petitioner bears the burden of proof to establish she is entitled to relief under section 6015(f). There are certain threshold conditions for relief in Revenue Procedure 2013-34 and the parties agree that Petitioner meets these threshold conditions. So we turn to section 4.02 of Revenue Procedure 2013-34, which Provides that if certain conditions are satisfied, Respondent will grant expedited streamlined relief. The key condition for us to analyze is whether the Petitioner knew or had reason to know that the nonrequesting spouse would not or could not pay the . underpayment of tax reported on the joint Income Tax 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Return. Given the death of Petitioner's spouse, she does 15 16 17 18 not qualify for this streamlined relief and the parties agree to this circumstance. We next move to the analysis if streamline relief is not applicable. The following factors are 19 weighed in determining whether to grant equitable relief. 20 21 1) The taxpayer's marital status, 2) Whether the requesting spouse will suffer economic hardship, 3) 22 Whether the requesting spouse knew or had reason to know 23 that the nonrequesting spouse could not pay the tax 24 liability at the time of the filing of the return, 4) 25 Whether either spouse had a legal obligation to pay the cribers $73)406-2250|operationseesoibersmet|wwviescrbrsmet 8 liability, 5) Whether the requesting spouse received a significant benefit beyond normal support, 6) Whether the requesting spouse had complied with income tax laws in the years following, and 7) The mental and physical health of the requesting spouse, section 4.03 of Rev. Proc. 2013-34. Under the Revenue Procedure no one of these factors a majority of the factors controls. It is clearly a facts and circumstances test. As stated previously, the key issue in this case is whether because Petitioner's 1 2 3 4 5 6 7 8 9 10 spouse was deceased at the time the joint return was 11 12 13 filed, she is disqualified from relief because of her knowledge that the taxes wouldn't be paid. Respondent relies upon several cases for the 14 proposition that a spouse filing the return after her or 15 his spouse had been deceased will not be granted relief 16 when the return reflects unpaid taxes. Primarily, 17 Respondent relies upon Haggerty v. Commissioner, T.C. Memo 18 2011-284. This case did find that a spouse who had filed 19 a return after her husband's death was not eligible for 20 relief under section 6015. Since that spouse, like the 21 22 spouse in the present case, prepared the joint return and filed it, she was aware that the underpayment would not be 23 paid. 24 In the Haggerty case, the Court also found, 25 however, that the requesting spouse had benefited from the cribes (973)406.2250|operations®escribersnet|www.escribersnet 9 failure of her husband to properly pay the tax liability for the year in question. That is not the same factual situation we have before us in the present case. While there's no abuse in the physical sense of the Petitioner in the present case, she was subject to verbal abuse if she sought any information about the financial obligations of the family from her husband, and his alcoholism made it difficult for her to discuss any of these problems with him during his lifetime. As we said previously, we believe the case turns on the analysis of the knowledge requirement, and the unique situation we have here where the return in question 1 2 3 4 5 6 7 8 9 10 11 12 13 was filed after the nonrequesting spouse had passed away. 14 Under section 4.03(2)(c)(ii) of the Revenue Procedure, if 15 16 17 18 the requesting spouse knew hec or had reason to know that the other spouse could not pay the tax, generally this factor is negative to the taxpayer. Oftentimes, this is the most important factor for the Court to analyze, 19 especially in cases involving the application of 6015(f). 20 Clearly, in the present case, when the return 21 was filed the Petitioner knew her deceased husband could 22 not pay the tax liability. However, until his death she 23 had no knowledge he was not current on his tax 24 obligations, including his estimated tax payments for the 25 first three quarters of 2014. She might have sought Cribers 973)406-2250|operations@escribersawt|www.eScribers.net 10 1 2 3 4 5 6 7 8 9 professional Income Tax assistance upon his death, and attempted to address his failure to pay estimated tax after his death in October of 2014. However, she had limited funds and it does not appear that it would have made any difference in this case had she sought such professional advice, because her spouse had left her no assets nor any cash to pay the tax liability. His failure to make timely estimated tax payments created the problem she faced upon his death. She might also have filed 10 married filing single, but given California's community 11 property laws, the unpaid liability would likely have 12 continued to be a problem and her filing separate from him 13 would have still left a tax liability owed by his estate. 14 15 We see no scheme to avoid the payment of tax behind her decision to file a joint return. Rather, just 16 her attempt to comply with the tax filing obligation of 17 herself and her deceased husband. We find it credible 18 that for the years before his death and during 2014 she 19 was unable to have a discussion with her deceased husband 20 21 22 concerning taxes because of his alcoholism. The IRS found this position to be credible for the years prior to 2014 by granting the Petitioner 23 innocent spouse relief. 24 Based upon the facts and circumstances of this 25 specific case, we find that the Petitioner qualifies as an cribers (973)406-2250|operations@escribermetlwww.escribermet innocent spouse under section 6015(f). A decision will accordingly be entered for the 11 Petitioner. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 10:27 a.m., the above-entitled matter was concluded.) 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 cribers 973)4062250|operations@esalbersaet|www.escribersnet