TAX COURT OPINION

Case: Ronald Collis
Docket Number: 12663-09S
Judge: Armen
Opinion Type: summary
Filed: 07/12/2010
Pages: 12

Suumt~T i - 's'r7 A -2_M J► T .C . Summary Opinion .2010-9 1 UNITED STATES TAX COUR T RONALD COLLIS, Petitioner v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 12663-09S . Filed July 12, 20 1 0 . Ronald . Collis, pro se . Jeffrey A . Schlei , for respondent . ARMEN, Special Trial Judge : This case .was heard pursuant to the provisions of-section 7463 of the . Internal Revenue ode in effect when the petition was filed .' Pursuant to secti n 7463(b), the decision to be entered is not reviewable biy an y 1 Unless otherwise indicated, all . subsequentsectjion references are to the Internal Revenue Code, as amendedd, and all Rule references are. to the-Tax Court Rules of Practice and Procedure . SERVED JUL 12 2010 2 - other court, and this opinion shall not be treated as precedent for any other case . In a final notice of determination respondent denied petitioner's claim for section 6015 relief regarding joint and several . liability arising from the 2006 joint Federal income tax return filed by petitioner and Christine Collis (Ms . Collis) . According to that notice, petitioner was not eligible for relief . under section 6015(b), (c), or (f) . The issue for decision is whether petitioner is entitled to relief from joint and several liability under section 6015 . Background Some of the facts have been stipulated, and they are s o found . We incorporate by reference the parties' stipulation of facts and accompanying exhibits . Petitioner resided in the Stat e of California when the petition was filed . . Petitioner pled guilty to nine counts of embezzlement and went to prison on January 7, 2007 .2 After petitioner went to prison, he and .his then-wife, Ms . Collis, separated . While incarcerated . and sometime before January 22, 2007, petitione r wrote Ms . Collis a letter . that stated in part : "You can als o file our tax return electronically and will have about $6,000 7- 2 The .record includes the IRS Appeals Transmittal and Case Memo, which states that Ms . Collis learned at this time that this .was not petitioner's first offense of embezzlement, a matter that petitioner did not deny upon cross-examination at trial . - 3 - 10 . days after filing ." Petitioner told Ms . Collis to ha e th e return prepared and where .the-tax .information was locate in their home . Using all of the information received from petition r, Ms . . Collis filed a . joint return on February 7, 20 .07, reporti g $16,806 in wages and $151 .of income tax withheld . The return failed to :report the following amounts attributable to petitioner : Wages of $40,502 ;. interest income of $76 ; nd income tax withheld of $4,614 . The return also'fai'led to repo t wages of $658 attributable to Ms . Collis . !Because the return did . not, report. the additional'income, petitioner and Ms . Collis qualified for . an earned income credit and an additional child tax credit to which they would not have been entitled if the additional income had been reported .-The return claimed a refund of $5,5 3 . When petitioner was released f from custody in Septefnber 2007 , he contacted the Internal Revenue Service (IRS) to inqulire .abou t the filing of-his 2006 Federal income tax return . The IRS sen t petitioner an .account transcript indicating that the return had been filed and had reported .$16,806 .of income . P.etitidner sent a letter to the IRS dated September :26, 2007, in .which h' state d that he did not sign the 2006 return and that the return underreported his in6ome .3 . 3 Although the letter refers to the 2007 Federal income-tax return, the Court .assumes that reference was to the 20 6 Federa l . .) (continued . 4 _ On March 24, 2008, the IRS issued a .notice of .propose d changes . On May 16, 2008, petitioner,submitted a', Form 8857 , Request for Innocent Spouse Relief . On his Form 8857 petitione r states that he holds a master's degree in business administration with a focus on accounting and has taught Federal taxation at the college level . Petitioner also testified at trial that he was a tax manager at a certified public accountant (C .P .A .) firm and had his own C .P .A . firm for 23 years ., In a notice of deficiency dated June 30, 2008, respondent determined that petitioner and Ms . Collis had . unreported income and disallowed the earned income credit and the additional chil d tax credit . Petitioner did not file a petition in this Court i n .respect of the notice of deficiency, ostensibly because he was dealing at that time with the IRS''Innocent Spouse . Division, and Appeals Office . Respondent issued a Final Appeals Determination (final determination) on March 19, 2009, denying petitioner's request for relief 'under section 6015(b), (c), and (f) . The final, determination denied petitioner's request on the basis that relief is not allowed on tax owed on petitioner',s own income an d 'petitioner did not show it,would be,unfair to hold him .responsible . The evaluation of the Appeals Officer (AO) reveal s 3( . . .continued) income tax return that was filed in 2007 . _ 5 _ that petitioner stated in a conference call that he agre d to a joint return and that he knew Ms . Collis was having the leturn . prepared . The AO therefore concluded'that petitioner colsented to the filing of .a joint return . .The IRS tax examiner wh o initially reviewed petitioner's-request also found that petitioner intended to file 'a joint return . In addition , the ta x examiner concluded that , petitioner . participated in the preparation of the return because he told Ms . Collis where to find the Forms W-2, .Wage and Tax Statement, and other relevant tax documents . At trial petitioner argued,that the 2006 Federal i come tax return filed on-February 7, 2007, was not a ~ , but if joint retu r it was a joint return that the deficiency should be all,cate d between himself and Ms . Collis . Respondent contends that a joint return was filed nd that petitioner is not entitled to relief under section 6015 . Discussio n A predicate to relief under section 6015 is that : join t Federal income .tax return was filed . Sec . 6015(a)(1), (b) (1) (A) , (c)(1) . Accordingly, if the Court should find that petitioner did not file a joint return, we would be .required to diny petitioner's claim for relief under'section 6015 . Ray~ond v . Commissioner , 119 T .C . 191, 194-197-(2002) 6 - Generally, married taxpayers may elect to file a joint Federal income tax return . Sec . 6013(a) . In general, a'join t return must be signed by both spouses ., Sec . 1 .6013-1(a)(2) , Income Tax Regs . However,, where both spouses intend to file a joint return, the failure of one spouse to sign the return will not preclude -its treatment as a joint return . Estate of Campbell v . Commissioner , 56 T .C . 1, .12 (1971) . . This is so even when the purported signature of the nonsigning spouse is signed ; by another, provided the couple had the intent to file jointly . Heim v . Commissioner , 27 T .C ., 270, 273-274 (195.6), affd . 251 F .2d 44 (8th Cir . 1958) ; Magee v- . Commissioner , T .C . Memo . 2005-263 . Whether or not the .nonsigning spouse intended to file .a joint return is a question of .fact . Estate of Campbell v . Commissioner , supra at 12 ; Federbush v . Commissioner , 34 T .C . 740, 755-758 (1960), affd :. per curiam 325 F .2d 1 (2d= .Cir . 1963) ; Heim v . Commissioner , supra at 273 . Although petitioner did not sign the return that was filed on February 7, 2007, the facts indicate that petitioner intended to file a joint return with Ms . Collis . Petitioner . sent a letter to Ms . Collis sometime before January=22, 2007, which lette r stated that she could file the tax return electronically . I n addition, petitioner directed Ms . Collis to have the retur n prepared and told her where the tax documents were located in their home . . Therefore, we are satisfied that petitioner intended to file , and thus did file , a joint Federal income tax r turn fo r - 7 - 2006 . After electing . to. file a joint Federal income tax return, each spouse is jointly and severally liable for the enti e tax due . Sec . 6013(d)(3) Butler v . Commissioner , 114 T .C . 276, 282 (2000) . If certain requirements .are met,'however, an i dividual may be relieved .of joint and several liability under se tion 6015 .: Except as otherwise provided in section 6015, thi taxpaye r bears the burden of proof to show his or her entitlement to, relief . Rule :l42 (a) ; Alt v . Comm issioner , 119 T . C . 306J . 311 ( 2002 ), af.fd . 101 Fed . Appx . 34 (6th Cir . . 2004)' . There are three types of . relief available under seitio n 6015 . In-general, section 6015 ( b) provides full or app rtione d relief . from joint and several liability, section 6015(c provide s proportionate tax relief to divorced or separated taxpa yers, an d in certain circumstances section 6015(f) provides equitabl e relief from joint and several liability if relief is~not available -under' subsection (b) -or (c ) A . Section 6015(b) Under section 601 .5(b), a requesting spouse may belrelieve d of joint and several liability from an understatement f tax to the extent that the understatement'was attributable to the nonrequesting spouse . The understatement-on petitione 's joint return for 2006 is almost entirely attributable to his unreported income of $40,578 . With respect to the remaining unreported income of $658 attributable to, Ms . Collis, petitioner must establish, inter alia, that he did not know and had no reason to know that there was an understatement . See sec . 6015(b)(1')(C) . A spouse seeking relief knows of an understatement of tax if he or she knows or has reason to know of the . transaction that' gave rise to the understatement . Guth v . Commissioner , 897 F .2d 441, 444 (9th Cir . 1990), affg . T .C . Memo . 1987-522 ; Cheshire if . Commissioner , 115 T .C . 183, 192-193 (2000), affd . 282 F .3d 326 (5th Cir . 2002j . Petitioner did not provide any evidence or testimony demonstrating that . he did not know and had no reason . to know of,Ms . Collis' unreported income.; thus, he .:has failed to satisfy section 6015(b)(1)(C) . Therefore, petitioner does no t ,qualify for relief from joint and several liability under section 6015(b) . B . Section 6015(c ) Under section 6015(c), if the requesting . spouse is no longer married to,(cid:127)is,legally separated from, or was not a member of the same household as the 'spouse with whom he filed the joint . return ;for the 12-month period .before the request was filed, th e requesting spouse may elect to limit his liability for a zdeficiency to that portion . of the liability which is properly allocable to him under .section 6.015(d) . At the time petitioner filed his request on May 16, 2008,, he and Ms . Collis had not been - 9 members of the same household . since petitioner . was incar erate d in January 2007 . Therefore, petitioner was eligible to elec t relief under section 6015(c) when he filed his request . . Generally, .items giving rise .to a deficiency on a j bin t return are allocated between spouses as if separate ret u rns ha d been filed . Sec . 6015(d)(3)(A) ; seet'also sec . 1 .6015-3( d) (2) , Income-Tax Regs . Under the flush . language of section 60'15(a) , any allocation under .section 6015(d)(3) is made without community property laws . Charlton v Commissioner , T . C 2001-76 . Erroneous items of income-are allocated to thel spouse who was the . source of the . income . Sec .-1 .60 .15-3(d)(2)(111) , Income Tax Regs . An erroneous item that .would otherwi s allocated to the nonrequesting spouse'is-allocated to the requesting spouse to the ex-tent that the requesting spoltas e received a tax .beneft .on the joint return . Sec . 1 .60-1 5- 3(d) .(2)(i), Income Tax Regs . Petitioner was the source of the unreported incom, o f $40,578 ; because such income is allocable to him, peti .ioner is not entitled to section6015(c) relief . with . respect to tha t income . See sec . 1 .6015-3(d)(2)(iii), Income .Tax' Regs The remaining unreported income of $658 was earned by Ms . Collis and is, thus, allocable to her . See id Allocation of the earned income credit is not . permitted because petitioner .receved a tax - 10 - .benefit on the joint return from the erroneous item . See sec . 1 .6015-3(d)(2)(i) ., Income Tax Regs . Although .$6-58 of the unreported income is allocable to Ms . Collis, under section 6015(c)(3)(C) apportionment of the liability does not . apply if the .Commissioner(cid:127)"demonstrates that an individual making-an election under this subsection had actual .knowledge, at the time such individual signed the return, of any item giving rise to .a deficiency (or portion thereof) which is not allocable .to such individual" . This Court .has defined actual knowledge as "an actual and clear awareness (as opposed to reason to know) of the existence . of an item which .gives rise to the deficiency (or portion thereof) . In the case of omitted income (such as the situation involved herein), the electing'spouse mus t have an actual and clear awareness of the omitted income ." . . Cheshire v . Co mm issioner , supra at 195 . When one spouse requests',relief under section 6015(c), the . burden of. proving the spouse's actual knowledge of an item is on the Commissioner .. Sec . 6015(c)(3)(C) . Respondent has not presented any evidence demonstrating that °petitioner had actual knowledge of the unreported income attributable to Ms . Collis . See sec . 6015(c)(3)(C) . Therefore, ,petitioner is entitled-to section 6015(c) relief with respect t o the $658 of unreported . income attributable to Ms . .Collis . C . Section 6015(f ) Section 6015(f) permits relief from joint and severl liability where "it is inequitable to .hold the individual liable for any-unpaid tax or a°deficiency (or any portion of either)" . Sec . 6015(f)(1) . We review de novo--petitioner's entitlement t o equitable relief under section 6015(f) . See Porter v . Commissioner , 132 T .C . 203, 210 (200 .9) . .Pursuant to section 6015(f), the Commissioner has prescribe d revenue procedure guidelines to help IRS employees deterjmin e .whether a . requesting spouse is entitled to relief from joint an d several liability . See Rev . Proc . 2003-61, 2003-2 C .B . 296 , modifying and.superseding Rev . Proc . 2000-15, 2000-1 C .B . 447 . The Court consults these guide lines . when reviewing the iRS', denial of relief . See Washington v . Commissioner , 120 T .C . 137 , 147-152 (2003) . According to Rev . Proc . 2003-61 , sec . 4 .01 , 2003-2 C .B . a t 297-298, a requesting spouse must satisfy threshold condition s which include, inter alia, that the income tax liabili t y from which the requesting spouse seeks relief be attributably e to a n item of the nonrequesting spouse, unless one of the enumerated exceptions applies .. The remaining portion of the liab i lity from which petitioner was not relieved under . section 6015(c) is attributable to petitioner . In addition , none of the exception s . enumerated in the revenue procedure applies to petitioner . Accordingly, petitioner is not entitled to relief from join t 12 and several liability under section 6015(f) . Conclusio n We have considered all of the arguments made by the parties, and,, to the extent that we have not specifically addressed them, .we conclude that they are . without merit . To reflect the foregoing, Decision will be entere d under Rule 155 .