TAX COURT OPINION

Case: Jeffrey K. Jackson, Petitioner, and Kathleen H. Jackson, Intervenor
Docket Number: 23869-09S
Judge: Carluzzo
Opinion Type: bench
Filed: 12/27/2011
Pages: 8

UNITED STATES TAX COURT 20217 Washington, D.C. Docket No. 23869-09S JEFFREY K. JACKSON, Petitioner, and KATHLEEN H. JACKSON, . Intervenor, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) O R D 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 the transcript of herewith to petitioner and to respondent a copy of pages of Special Trial Judge Lewis R. Carluzzo at Fresno, California, on November 17, 2011, containing his oral opinion rendered at the conclusion of trial. the above case before the trial of the findings of fact and In accordance with the oral findings of fact and opinion, filed January 10, 2011, decision will be entered for and the stipulation of settlement between petitioner and respondent, respondent with respect and penalty, and for petitioner with respect to relief from the deficiency and penalty under I.R.C. section 6015 (c) . to the determination of to his entitlement the deficiency Dated: Washington, D.C. December 27, 2011 (Signed) Lewis R. Carluzzo Special Trial Judge SERVED DEC 2 8 2011 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 3 Bench Opinion by Special Trial Judge Lewis R. Carluzzo Jackson v. Commissioner Docket No. 23869-09S November 17, 2011 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, which shall not be relied upon as precedent in any other case. This proceeding for the redetermination of a deficiency is conducted as a small tax case pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of Practice & Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice & Procedure. Unless otherwise noted, subsequent section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for 2007. Rule references are to the Tax Court Rules of Practice & Procedure. Jeffery K. Jackson OMr. Jackson) appeared pro se, as did Kathleen H. Jackson OMs. Jackson) after her attorney was withdrawn with her consent immediately before trial. Matthew A. Williams appeared on behalf of Heritage Reporting Corporation (202) 628-4888 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 4 Respondent. In the notice of deficiency dated July 20, 2009, Respondent determined a deficiency in, and imposed a section 6662(a) penalty with respect to, the 2007 federal income tax of Mr. Jackson and Ms. Jackson (the notice). Ms. Jackson did not petition this Court in response to the notice, and the deficiency, penalty, and presumably related amounts apparently were assessed as to her in due course. Mr. Jackson, who commenced this case in response to the notice, does not challenge the adjustments made in the notice or the imposition of the penalty. Instead, he seeks relief from the deficiency (and related amounts) pursuant to section 6015. Respondent now agrees that he is entitled to such relief pursuant to section 6015(c). Their agreement is reflected in a stipulation of settlement filed January 10, 2011. Ms. Jackson intervened in this case in order to challenge Petitioner's entitlement to section 6015 relief. See sec. 6015(e) (4); Rule 325. The issue for decision is whether Petitioner is entitled to section 6015(c) relief from the deficiency (and related amounts) determined in the notice. The resolution of the issue depends on whether Mr. Jackson had actual knowledge of the item giving rise to the deficiency at the relevant time. Some of the facts have been stipulated and.are so Heritage Reporting Corporation (202) 628-4888 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 5 found. At the time the petition was filed, Petitioner resided in California. During 2007, Ms. Jackson maintained a retirement account with Charles Schwab & Company, Inc. (Charles Schwab) (the retirement account). At some point towards the end of that year, she was considering whether she should withdraw $90,000 from the retirement account in order to invest in a real estate transaction. She discussed her intentions with Mr. Jackson, who advised her that she should 'do what she wanted to do'. Believing the transaction would have no current federal income tax consequences, Ms. Jackson decided to go through with the transaction, and on December 20, 2007, instructed Charles Schwab to make the necessary $90,000 distribution to her (the distribution). Apparently she was mistaken as to the federal income tax consequences of the distribution. In a form 1099-R, distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc., issued to Petitioner at her business address, Charles Schwab shows the entire distribution to be taxable. Mr. Jackson and Ms. Jackson, at the time married but since divorced, elected to file a joint 2007 federal income tax return (the joint return). The distribution is not included in the income reported on the joint return. Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 · The deficiency determined in the notice is attributable entirely to the omission of this item of income. In general, spouses 'may make a single return jointly of income taxes'. Sec. 6013(a). If for any given year a joint return is made by spouses, then with respect to that year, 'the tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several'. Sec. 6013(d) (3); see sec. 1.6013-4 (b), Income Tax Regs. Joint and several liability for the tax shown on a joint federal income tax return means that although the tax may be collected only once, each spouse is entirely responsible for the payment of the unpaid portions of the tax without apportionment between them. Cluck v. Commissioner, 105 TC 324, 326 n. 4 (1995); Pesch v. Commissioner, 87 TC 100 (1982); Grubich v. Commissioner, TC Memo 1993-194. Section 6015 provides various ways that a taxpayer/spouse may get relief from the joint and several income tax liability resulting from a joint return, only one 21, of which need be discussed here. Subject to a variety of 22 23 24 25 conditions, section 6015(c) applies to 'taxpayers no longer married or taxpayers legally separated or taxpayers not living together'. At the time Mr. Jackson's request for section Heritage Reporting Corporation (202) 628-4888 7 6015(c) relief was made, he and Ms. Jackson were divorced. Furthermore, except for the extent of his knowledge at the time he signed or reviewed a joint return, it is clear, if only from his agreement with Respondent, that Mr. Jackson has satisfied all other requirements for relief under that section, and we focus our attention only on what he knew or didn't know about the distribution at the time he signed or reviewed the joint return. According to Ms. Jackson, Petitioner knew about the distribution and that knowledge makes him ineligible for section 6015(c) relief. In support of her position in this regard, she points to their conversation in late 2007 regarding her intentions to enter into the transaction, and also to a series of after-the-fact E-mails involving Petitioner in which the tax consequences of the distribution are addressed. Normally the burden of proof rests with ,Respondent to 'demonstrate' that an individual making a section 6015(c) election had actual knowledge of the item giving rise to a deficiency (or portion of a deficiency) so as to deny relief to that individual for such deficiency (or portion). Sec. 6015(c) (3) (C). Here, Respondent apparently agrees that Petitioner did not have actual knowledge of the distribution at the relevant time. Nevertheless, to give meaning to 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 Heritage Reporting Corporation (202) 628-4888 8 Ms. Jackson's right to intervene, we consider it appropriate to consider whether the evidence offered by her effectively 'demonstrates' that Mr. Jackson had actual knowledge of the distribution at the time he signed or reviewed the joint return. After all, although not routine in cases litigated in this Court, we recognize that the burden of proof placed on one party can be satisfied by evidence offered by other than that party. See, e.g., United States v. Brown, 53 F.3d 312, 314 (11th Cir. 1995); United States v. Ortiz-Rengifo, 832 F.2d 722, 726 (2nd Cir. 1987). Accordingly, we would not be reluctant to deny section 6015(c) relief to a requesting spouse if evidence offered by an intervenor rather than the Commissioner demonstrated that such relief was unavailable because of the requesting spouse's actual knowledge of the item giving rise to the deficiency. This, however, is not that case, and we agree with Respondent. The evidence presented by Ms. Jackson might show that Mr. Jackson had reason to know about the distribution. See, e.g., Price v. Commissioner 887 F.2d 959 (9th Cir. 1989); King v. Commissioner, 116 TC 198, 204 (2001). But even if it does, a requesting spouse's 'reason to know' of the item is not sufficient to deny relief under section 6015(c). Actual knowledge must be shown. Sec. 6015(c) (3) (C); Charlton v. Commissioner, 114 TC 333, 341 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 Heritage Reporting Corporation (202) 628-4888 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 (2000); Martin v. Commissioner, TC Memo 2000-346. Mr. Jackson, of course, knew of the retirement account and acknowledges that he had a discussion with Ms. Jackson about her intentions to request a distribution from the account in connection with a planned real estate transaction. He maintains, however, that he did not know about the distribution until after the joint return was filed. The only evidence suggesting the contrary has been submitted by Ms. Jackson. After careful consideration of that evidence, however, we are not persuaded that it would support a finding that at the time Mr. Jackson reviewed or signed the 2007 return he had actual knowledge of the distribution. Because it is clear that he is otherwise eligible to make a section 6015(c) election, he is entitled to the relief it provides. To reflect the foregoing, decision will be entered in accordance with the above-referenced stipulation of settlement. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 12:08 p.m., the bench opinion in the above-entitled matter was concluded.) // // Heritage Reporting Corporation (202) 628-4888