TAX COURT OPINION

Case: Joseph Francis Farmer
Docket Number: 1117-20S
Judge: Carluzzo
Opinion Type: bench
Filed: 01/19/2022
Pages: 10

United States Tax Court Washington, DC 20217 JOSEPH FRANCIS FARMER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 1117-20S. 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 the parties a copy of the pages of the transcript of the trial in this case before Chief Special Trial Judge Lewis R. Carluzzo at Phoenix, Arizona, containing his oral finds of fact and opinion rendered December 17, 2021, during the trial session at which the case was heard. In accordance with the oral finding of fact and opinion, decision will be entered for respondent. (Signed) Lewis R. Carluzzo Chief Special Trial Judge Served 01/19/22 1 2 3 4 5 6 7 8 9 10 11 12 13 3 Bench Opinion by Judge Lewis R. Carluzzo December 17, 2021 Joseph Francis Farmer v. Commissioner Docket No. 1117-20S 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 (bench opinion). Unless otherwise noted, section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and Rule references are to the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) 14 and Rule 152. 15 16 17 18 19 20 This section 6015(e) proceeding is a small tax case subject to the provisions of section 7463 and Rules 170 through 174. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority, and pursuant to section 7463(b) the decision entered in this case shall not be treated as precedent for any other case. 21 Joseph Francis Farmer appeared pro se. Inga C. 22 23 24 25 Plucinski-Holbrook appeared on behalf of respondent. In final notices of determination respondent denied petitioner's claims for section 6015 relief with respect to his outstanding 2015 and 2016 Federal income 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 tax liabilities. 4 The issue for decision is whether petitioner is entitled to relief from joint and several liability under section 6015(b), (c), or (f) for 2015 and/or 2016 (years at issue). Some of the facts have been stipulated and are so found. At the time the petition was filed, petitioner lived in Arizona. Petitioner and Patricia A. Farmer, then husband and wife, filed joint Federal income tax returns for the years at issue. In notices of deficiency dated March 20, 2017 and July 18, 2018, respondent determined deficiencies in petitioner's 2015 and 2016 Federal income tax, respectively. The deficiencies determined in the notices of deficiency are due to omitted income items attributable to petitioner. Neither petitioner nor Ms. Farmer petitioned this Court in response to the notices of deficiency, and the deficiencies and related amounts were assessed in due course. Petitioner and Ms. Farmer were divorced by Decree of Dissolution of [non-covenant] Marriage with Minor Children, dated September 21, 2018, issued by the Superior Court of the State of Arizona. According to the decree, "2015 Federal taxes shall abide by federal jurisdiction due to [petitioner's former spouse] claiming 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 innocent spouse." According to the decree, along with 5 many other provisions that it includes, petitioner and his former spouse "reached a full agreement on the issues." The position advanced by petitioner in this case, and his presentation at trial suggests that the divorce proceedings and his relationship with his former spouse were less than cordial. In February of 2018 and February of 2019, Ms. Farmer applied for relief from joint and several liability under section 6015 for 2015 and 2016, respectively. Respondent mailed notices to petitioner addressed to his last known address informing him of Ms. Farmer's requests. In August of 2018 and March of 2020, respondent granted Ms. Farmer's requests for relief for 2015 and 2016, respectively. In March of 2019 petitioner submitted a form to respondent opposing Ms. Farmer's request for relief for 2016. Apparently, petitioner did not receive notice of Ms. Farmer's request for relief for 2015, and therefore did not have the opportunity to oppose the relief requested. From his presentation at trial, however, we are convinced that he would have opposed the relief she was granted had he been given the opportunity 23 to do so. 24 25 On or around March 27, 2019, respondent received petitioner's Form 8857, Request for Innocent Spouse Relief 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 (the form), requesting relief from joint and several 6 liability for 2015 and 2016. Petitioner's focus on the form appears to be directed to disputing Ms. Farmer's entitlement to the relief granted to her by respondent rather than the relief he, himself was seeking. Respondent determined that petitioner was not entitled to relief from joint and several liability under section 6015(b), (c), or (f) for the years at issue primarily on the undisputed ground that the items of omitted income giving rise to the tax liabilities were attributable to him. In general, married taxpayers may elect to file a joint Federal income tax return. Sec. 6013(a). After making the election for a year, each spouse is jointly and severally liable for the entire Federal income tax liability assessed for that year, whether as reported on the joint return or subsequently determined to be due. Sec. 6013(d)(3); see sec. 1.6013-4(b), Income Tax Regs. Subject to various conditions and in a variety of ways set forth in section 6015, an individual who has made a joint return with his or her spouse for a year may seek relief from the joint and several liability arising from that 23 joint return. 24 25 Three types of relief are available under section 6015. In general, subsection (b)(1) provides full 1 2 3 4 5 6 7 8 9 or apportioned relief from joint and several liability, 7 subsection (c) provides proportionate tax relief to divorced or separated taxpayers, and subsection (f) provides equitable relief from joint and several liability if relief is not available under subsection (b) or (c). Except as provided in section 6015(c)(3)(C), the burden of proof is upon the taxpayer to establish entitlement to section 6015 relief. See Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311, aff'd, 101 Fed. Appx. 34 10 (6th Cir. 2004). 11 12 13 14 15 16 17 18 19 20 21 22 To qualify for relief pursuant to section 6015(b), the requesting spouse must establish that: (1) A joint return was filed; (2) there was an understatement of tax attributable to erroneous items of the nonrequesting spouse; (3) at the time of signing the return, the spouse seeking relief did not know and did not have reason to know of the understatement; (4) the requesting spouse sought relief within two years of the first collection activity relating to the liability; and (5) taking into account all the facts and circumstances, it is inequitable to hold the spouse seeking relief liable for the deficiency in tax attributable to the understatement. 23 Sec. 6015(b)(1). 24 25 Section 6015(c)(3) permits a requesting spouse to seek relief from joint or several liability by electing 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 to allocate to the nonrequesting spouse the portion of a 8 deficiency attributable to the nonrequesting spouse if the following conditions are satisfied: (1) A joint return was filed; (2) at the time of the election, the requesting spouse was separated or divorced from the nonrequesting spouse or had not been a member of the same household as the nonrequesting spouse at any time during the 12-month period ending on the date of the request for relief; (3) the requesting spouse sought relief within two years of the first collection activity; and (4) the requesting spouse did not have actual knowledge, at the time of signing the return, of the nonrequesting spouse's item giving rise to the deficiency. As noted above, petitioner and Ms. Farmer filed joint Federal income tax returns for the years at issue. The understatements of tax determined in the notices of deficiency for the years at issue are attributable to items of omitted income earned by and paid to petitioner. At the time that the returns were signed, petitioner knew of the omitted income and was aware that the returns did 21 not include it. 22 23 24 25 Section 6015(f) provides that a requesting spouse may be relieved of joint liability if, taking into account all the facts and circumstances, it would be inequitable to hold the requesting spouse liable for any 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 unpaid tax or deficiency or any portion thereof. See sec. 9 1.6015-4(a), Income Tax Regs. Section 6015(f) authorizes granting such equitable relief "under procedures prescribed by the Secretary." The standards followed by respondent in determining equitable relief under section 6015(f) are found in Rev. Proc. 2013-34, 2013-43 I.R.B. 397, modifying and superseding Rev. Proc. 2003-61, 2003-2 C.B. 296. The requirements for relief under Rev. Proc. 2013-34, supra, are categorized into a three-step procedure: threshold conditions, streamlined conditions, and equitable factors. To be eligible for section 6015(f) relief, the requesting spouse must satisfy the following seven threshold conditions: (1) the taxpayers filed a joint return, (2) relief is not available under section 6015(b) or (c), (3) the claim for relief is timely, (4) no assets were transferred between spouses as part of a fraudulent scheme, (5) the nonrequesting spouse did not transfer disqualified assets to the requesting spouse, (6) the requesting spouse did not knowingly participate in filing a fraudulent joint return, and (7) absent certain exceptions, the income tax liability is attributable, in full or in part, to an item of the nonrequesting spouse or an underpayment resulting from the nonrequesting spouse's income. Rev. Proc. 2013-34, sec. 4.01. Although petitioner did not expressly concede 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 that he is not entitled to section 6015 relief for either 10 year in issue, at trial he did not dispute any of the facts relied upon by respondent in the denial of his requests for section 6015 relief, and he did not argue that the Court should allow him the relief that respondent denied. Instead, he challenged the section 6015 relief that respondent has already allowed to his former spouse. According to petitioner, for various reasons including the lack of opportunity to challenge her request at the administrative level, it would be unfair to allow his former spouse to escape the joint and several liability that resulted from assessments made on the basis of the joint Federal income tax returns and subsequently determined deficiencies. Apparently, he would not consider it "unfair" to hold his former spouse responsible for the Federal income taxes attributable to his income, the technical consequences that result from the filing of a joint return, notwithstanding. After all, the divorce decree suggests that, at least with respect to 2015, petitioner knew about the relief allowed to his former spouse and agreed to it even if only in connection with the divorce proceedings. Domestic disputes can have a tendency to blur reason, and we suspect that, at least in part, influenced petitioner's approach to the situation he has found himself in with respect to his income tax liabilities for the years at issue and the position he has 11 taken in this case. Be that as it may, the record establishes that those income tax liabilities are attributable to petitioner, and that he does not come within any of the provisions that would allow for relief under section 6015. Furthermore, as we explained at trial, although we expect the explanation was not well-received, the Court is without authority to reverse or adjust the section 6015 relief respondent allowed to his former spouse. If follows that petitioner is not entitled to relief pursuant to section 6015 from the 2015 and 2016 tax liabilities, and we so hold. To reflect the foregoing, decision will be entered for respondent. This concludes the Court's bench opinion in this case. (Whereupon, at 8:21 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