TAX COURT OPINION

Case: Enrique Padilla, Jr., Petitioner and Lori-Ann Demopoulos, Intervenor
Docket Number: 733-17
Judge: Kerrigan
Opinion Type: bench
Filed: 03/22/2018
Pages: 11

UNITED STATES TAX COURT WASHINGTON, DC 20217 ENRIQUE PADILLA, JR., PETITIONER AND LORIANN DEMOPOULOS, INTERVENOR, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent SR 733-17. ) ) ) ) ) Docket No. ) ) ) ) ORD 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, intervenor, and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Kathleen Kerrigan at Los Angeles, California on February 28, 2018, containing her oral findings of fact and opinion rendered at the conclusion of 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) Kathleen Kerrigan Judge Dated: Washington, D.C. March 22, 2018 SERVED Mar262018 3 1 2 3 4 -5 6 7 8 9 10 11 Bench Opinion by Judge Kathleen Kerrigan February 28, 2018 Enrique Padilla, Jr., Petitioner and Lori-Ann Demopoulos, Intervenor v. Commissioner of Internal Revenue Docket No. 733-17 The Court has decided to render in this case the following as its oral Findings of Facts and Opinion, which shall not be relied upon as precedent in any other case. i This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Rule 152 of the Tax Court Rules of Practice and 12 Procedure. 13 14 15 This proceeding was commenced under section 6015 for review of respondent's determination that petitioner is not entitled to relief from joint and several liability 16 in connection with a Federal income tax return filed for 17 18 19 tax year 2014. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect at 20 all relevant times, and all Rule references are to the Tax 21 Court Rules of Practice and Procedure. The issue for 22 23 24 25 consideration is whether petitioner is entitled to relief under section 6015(f). The parties agree that petitioner is not entitled to relief under section 6015(b) or (c). Trial in this case was conducted in Los Angeles, BEE!E (973)406-2250|operationseescrisersnet|www.escribers.net 1 California, on February 26, 2018. Petitioner was 4 2 3 4 5 6 7 8 9 10 11 represented by Isai.Bismark Cortez. Respondent was represented by Mark A. Nelson. Intervenor, represented herself. The parties' Stipulation of Facts was admitted into evidence along with the attached exhibits. We find the following facts: Findings Petitioner resided in California when he timel3 filed his petitioner. Intèrvenor resided in Maine at the time the petition was filed in this case. Petitioner and intervenor were married on 12 December 29, 2006. On June 5, 2017, petitioner commencec 13 a divorce action with the Superior Court of California, 14 County of Los Angeles. The divorce has not been 15 16 17 18 finalized. Petitioner and intervenor filed joint Federal income tax returns for tax years 2010, 2011, and 2013. H&R Block assisted petitioner and intervenor with their 19 2013 tax return. 20 21 22 For tax year 2014, intervenor filed a joint income tax return on behalf of herself and petitioner. The date on this return is January 16, 2015. I Intervenor 23 used H&R Block to assist with the filing of the 2014 24 25 income tax return. The 2014 joint return eported tax of $5,704 and claimed credit for withholding ïn the amount cf 5 1 2 3 4 5 6 7 8 9 $20,430 for a net refund of $14,726. The refund was directly deposited into a bank account held solely in the name of intervenor on February 23, 2015. Petitioner filed an income tax return for tax year 2014, electing a filing status of married filing separately. Respondent received petitioner's income tax return on April 18, 2015, and treated it as timely filed. Petitioner's 2014 tax return reported tax of $9,413 and claimed credit for withholding in the amount of $11,418 10 with a net refund claimed of $9,012. 11 12 On March 26, 2015 intervenor traveled from Maine to Bellflower, California and stayed in a Budget Inn with 13 petitioner. Intervenor was arrested on March 31, 2015 and 14 15 an emergency protective order was issued. Intervenor was released without being charged. On May 8, 2015, 16 petitioner filed Form DV-115, Request to Continue Court 17 Hearing and Reissue Temporary Restraining Order and Form 18 DV-116, Notice of New Hearing and Order of Reissuance, 19 with the Superior Court of California, County of Los 20 Angeles. A hearing did not occur and the restraining 21 22 order expired. On September 14, 2015, respondent issued I 23 petitioner and intervenor Internal Revenue Service (IRS) 24 Notices CP22A, notifying them that they owed unpaid income 25 tax liabilities for tax year 2014. (973)406-2250|operationseescribersnetlwww.escribersnet On September 28, 2015, petitioner filed Form 8857, Request for Relief from Joint and Several Liability. On December 16, 2016, respondent issued a notice of determination denying petitioner's request for relief frcm 6 joint and several liability. Opinion Generally, married taxpayers may elect to file a joint Federal income tax return. Sec. 6013(a). After this election is made, each spouse is jointly and severally liable for the entire tax due for that taxable year. Sec. 6013(d)(3). Section 6015 provides a spouse 1 2 3 4 5 6 7 8 9 10 11 12 with three alternatives for relief from joint and severa] 13 14 15 16 17 18 19 20 21 22 23 24 liability: (1) full or partial relief under subsection (b), (2) proportionate relief under subsection (c), and (3) if relief is not available under subsection (b) or (c), equitable relief under subsection (f). This Court has jurisdiction to review respondent's denial of petitioner's request for equitable relief under section 6015(b), (c), and (f). See Sec. 6015(e)(1). We apply a de novo standard of review as well as a de novo scope of review. See Porter v. Commissioner, 132 T.C. 203, 210 (2009). Except as otherpise provided in section 6015, the taxpayer bears the burden of proving that he or she is entitled to section 6015 relief. Rule 25 142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), (973)406-2250{operationseescrazersnet|www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 aff'd, 101 Fed. App'x 34 (6th Cir. 2004). Section 6015(f) provides alternative relief for a requesting spouse who does not qualify under section 6015(b) or (c). Sec. 6015(f)(2); Porter v. Commissioner, 132 T.C. at 206. The parties agree that petitioner is not entitled to relief under section 6015(b) or (c). Section 6015(f)(1) permits relief from joint and several liability if it would be inequitable to hold the requesting spouse liable for any unpaid tax or any deficiency. Under section 6015(f) the Secretary may grant equitable relief to a requesting spouse on the basis of the: facts and circumstances. Petitioner bears the burden of proving that he is entitled to equitable relief under section 6015(f). See Rule 142(a); Porter v. Commissioner, 132 T.C. at 210. The Commissioner issued Rev. Proc. 2013-34, 2013-43 I.R.B. 397, superseding Rev. Proc. 2003-61, 2003-2 18 C.B. 296, to provide guidance for determining whether a 19 20 taxpayer is entitled to equitable relief from joint and several liability. Rev. Proc. 2013-34, supra, is 21 effective for all requests for equitable relief pending on 22 or after September 16, 2013, including those before a 23 Federal court. Id. Sec. 7, 2013-43 I.R.B. at 403. While 24 the Court may consider the guidance set forth in Rev. 25 Proc. 2013-34, supra, we are not bound by it; our } (973)406-2250|operationseescriaersnet|www.escribers.net determination ultimately rests on an evaluation of all the facts and circumstances. See Pullins v. Commissioner, 136 T.C. 432; 438-439 (2011); Johnson v. Commissioner, T.C. 8 Memo. 2014-240, at *10. Rev. Proc. 2013-34, supra, provides a three-step analysis for evaluating a request for equitable relief. The first step consists of seven threshold conditions that must be met: (1) the requesting spouse filed a joint return for the taxable year for which he or she seeks relief; (2) relief is not available to the requesting spouse under section 6015(b) or (c); (3) the claim for relief is timely filed; (4) no assets were transferred between the spouses as part of a fraudulent scheme by the spouses; (5) the nonrequesting spouse did not transfer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 disqualified assets to the requesting spouse; (6) the 16 requesting spouse did not knowingly participate in the 17 18 filing of a fraudulent joint return; and (7) absent certain enumerated exceptions, the tax liability from 19 which the requesting spouse seeks relief is attributable 20 21 22 to an item of the nonrequesting spouse. Id. Sec. 4.01, , 2013-43 I.R.B. at 399-400. These seven requirements are stated in the conjunctive, and respondent contends that 23 petitioner does not satisfy all of the threshold 24 25 requirements. The first threshold requirement.is that a valid (973)406-2250|operationseescribers.net|www.escribers.net 9 1 2 3 4 5 6 7 8 9 10 11 joint return was filed, and the sixth threshold requirement is that the requesting spouse did not knowingly participate in the filing of a fraudulent joint return. Petitioner contends that intervenor filed a fraudulent joint return without his consent. The parties gave conflicting evidence on the factual issues of whether petitioner consented to and participated in intervenor's filing of the 2014 joint return. Petitioner and intervenor had a volatile relationship which resulted in periods of them not livinc together. According to intervenor's testimony, she and 12 petitioner agreed that she would keep the Federal income 13 tax refund and he would keep the state income tax refund. 14 15 16 She further testified that she received the information to file the 2014 joint return from petitioner. Petitioner contends that intervenor stole a copy of his Form W-2, 17 Wage and Tax Statement, in March 2015 when she visited 18 him. Intervenor had already received the refund at that 19 point. Intervenor contends that she used part of the 20 21 22 refund to pay for her visit to California. There were inconsistencies in both petitioner's and intervenor's testimony. Petitioner did not meet his burden of proof to 23 show that he did not knowingly participate in the filing 24 of a fraudulent return. 25 Respondent contends that the seventh threshold } cribers (973)406-2250|operationseescribersnet|www.escribers.net 10 requirement is not met. Respondent contends that the income tax liability from which the requesting spouse seeks relief is not attributable to an item of the nonrequesting spouse or an underpayment resulting from the nonrequesting spouse's income. The underpayment of tax in this case is attributable to petitioner's overstated withholdings. For the seventh threshold condition, Rev. Proc. 2013-34, supra, provides that the Commissioner may still consider granting relief regardless of whether the understatement or deficiency is attributable to the requesting spouse if, among other things, abuse or fraud has been committed by the nonrequesting spbuse. See Id. Sec. 4.01(7)(d),(e) 2013-43 I.R.B. at 400. Petitioner contends that intervenor committed fraud in filing the 2014 joint return and obtaining the claimed refund. The fraud exception applies "if the requesting spouse establishes that the nonrequesting spouse's fraud is the reason for the erroneous item." Id. Sec. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 4.01(7)(e), 2013-43 I.R.B. at 400. On the basis of the 21 22 23 record before us we cannot conclude that intervenor acted fraudulently. The parties gave conflicting testimony as to circumstances surrounding the filing of the joint 24 return. Both parties' testimony was inconsistent. 25 Petitioner did not establish by adequate evidence that (973)406-2250loperationseescrbersnet|www.escribers.net 11 1 2 3 4 5 6 7 8 9 intervenor filed the joint income tax return without petitioner's knowledge. The abuse exception applies "[if] the requesting spouse establishes that he * * * was the victim of abuse prior to the time the return was filed, and that, as a result of prior abuse, the requesting spouse was not able to challenge the treatment of any items on the return * * * for fear of the nonrequesting spouse's retaliation." Id. Sec. 4.01(7)(d). Petitioner asserted that interveno 10 attacked him during her March visit and intervenor 11 12 13 14 asserted that petitioner attacked her. Both parties testified that there were problems during their marriage and that they spent time apart. The Court does not treat allegations of abuses 15 lightly, but will not accept a taxpayer's uncorroborated 16 or nonspecific abuse claims at face value. See e.g. 17 Pullins v. Commissioner, 136 T.C. at 454; Agudelo v. 18 Commissioner, T.C. Memo. 2015-124 at *21-*22. Petitioner 19 and intervenor accused each other of abuse and from the 20 evidence it is unclear if abuse resulted in a fraudulent 21 22 23 24 25 tax return. Petitioner did not establish a causal relationship between the alleged abuse and, the over reporting of the withholding on the joint tax return for . 2014. See Gaitan v. Commissioner, T.C. Memo.2012-3. On the record before us, we find the abuse exception does not (973)406-2250|operationseescrkers.net|www.escribers.net 12 apply. We conclude that the seventh threshold conditicn under Rev. Proc. 2013-34, supra, is not met. Petitioner has not carried his burden of proving that he should be entitled to equitable relief under section 6015(f). A decision will be entered sustaining respondent's determination that petitioner is not entitled to relief from joint and several liability for the joint income ta» return filed for him for 2014. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 11:50 a.m., the aaove-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 (973)406-2250]operationseescribersmet|www.esedbersaet