TAX COURT OPINION

Case: Nicholle Starr Yarian, Petitioner and Brett Hallmark, Intervenor
Docket Number: 13522-14S
Judge: Carluzzo
Opinion Type: bench
Filed: 05/05/2015
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 SD NICHOLLE STARR YARIAN, PETITIONER ) ) AND BRETT HALLMARK, INTERVENOR, ) ) ) ) Docket No. 13522-14S Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ORDER Pursuant to the determination of the Court as set forth in its bench opinion rendered on April 17, 2015, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner, to intervenor, and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Lewis R. Carluzzo at Denver, Colorado, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. May 5, 2015 SERVED May 06 2015 Capital Reporting Company 3 1 Bench Opinion by Special Trial Judge Lewis R. 2 Carluzzo 3 April 17, 2015 4 Nicholle Starr Yarian, Petitioner and Brett Hallmark, 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Intervenor Docket No. 13522-14S 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) and Rule 152. This Section 6015(e) proceeding is a small tax case subject to the provisions of Section 7463 and Rules 170 through 175. Pursuant to Section 7463(b), the decision entered in this case shall not be treated as precedent for any other case. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority. Nicholle Starr Yarian appeared on her own 866.488.DEPO www.CapitalReportingCompany.com Capital.ReportingCompany 4 1 behalf. Brett Hallmark appeared on his own behalf. 2 Matthew K. Henderson appeared on behalf of 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 respondent. In a letter dated March 20, 2014, respondent notified petitioner that her request for Section 6015 relief for 2008 and 2009 was denied (notice). Petitioner timely petitioned this Court in response to the notice. She was living in Colorado at the time, as was intervenor. They were married in 2006 and divorced in 2010. "The income tax has made more liars out of the American people than golf has." Will Rogers, Illiterate Digest, 1924. It is unclear whether Mr. Rogers intended this statement to be a criticism of the federal income tax system, the American people, or the game of golf, but his observation is clearly applicable here. The income tax liabilities from which petitioner seeks Section 6015 relief were assessed in due course upon her failure to petition this Court in response to a notice deficiency issued to her on 22 March 2, 2014, in which deficiencies in her 2008 and 23 24 25 2009 federal income taxes were determined and the fraud penalty for each year was imposed. See Sections 6213(a), (c) and 6663. 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 The notice of deficiency, in turn, was issued after respondent's examinations, prompted by a contact from intervenor, of what purport to be petitioner's and intervenor's joint federal income tax returns for the years in issue (joint returns). The circumstances surrounding the preparation and filing of the joint returns are, with understatement acknowledged, less than clear. Petitioner and intervenor testified at trial and both unequivocally 10 denied preparing and/or submitting either return. 11 Obviously, one of them did, and sadly the above- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 referenced quote has application at least to that individual. Even more disturbing is the fact that the untruthful testimony was given under oath and penalties of perjury. It is clear, however, that petitioner and intervenor intended to file a joint federal income tax return for each year in issue, each claiming as assumption that the other had done so. Furthermore, both admitted to the obligation to file a federal income tax return for each year in issue, and neither claimed to have otherwise done so. Respondent's treatment of the returns through the examination phase and his consideration of petitioner's request for Section 6015 relief shows that respondent initially considered that both 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 returns were valid. We do not share respondent's recent concern with respect to the validity of the 2009 return, and we proceed, if only on the strength of petitioner's and intervenor's clear intentions, as 5. though petitioner's claim for Section 6015 relief 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 related to joint and several income tax liabilities that are attributable to valid joint federal income tax returns. See Section 6013. Set against this background, we turn our attention to the relief petitioner seeks from this Court in this proceeding. In general, married taxpayers may elect to file a joint federal income tax return. See Section 6013(a). After making the election, each spouse is jointly and severally liable for the entire amount of tax reported on the return, as well as for the liability of any deficiency subsequently determined, even if all of the items giving rise to the tax liability is allocable to only one of them. See Section 6013(d)(3); Cheshire v. Commissioner, 115 T.C. 183, 188 (2000) aff'd. 282 F.3d 326 (5th Cir. 2002); Butler v. Commissioner, 114 T.C. 276, 282 (2000); see Sec. 1.6013-4(b), Income Tax Regs. Subject to various conditions and in a variety of ways, an individual who has made a joint return may elect to seek relief from the joint and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 several liability arising from that joint return pursuant to Section 6015. There are three types of relief available under that section. In general and 4 with respect to a deficiency, Section 6015(b)(1) 5 6 7 8 9 10 11 12 13 provides full or apportioned relief from joint and several liability and Section 6015(c) provides proportionate tax relief to divorced or separated taxpayers. Lastly, Section 6015(f) provides equitable relief from joint and several liability in certain circumstances if relief is not available under Section 6015(b) or (c). A spouse or former spouse requesting relief under any or all of these subsections generally has the burden of proof. 14 McClelland v. Commissioner, T. C. Memo. 2005-121; Sec. 15 16 17 18 19 20 21 22 23 24 25 1.6015-3(d)(3), Income Tax Regs. Under Section 6015 (c) , however, the Commissioner has the burden to show actual knowledge of an item giving rise to a deficiency if a taxpayer otherwise qualifies for relief under that section. See Sec. 6015(c)(3)(C). In proceedings such as this one, we consider, de novo, a taxpayer's entitlement to Section 6015 relief. See Porter v. Commissioner, 132 T. C. 203 (2009) ; Porter v. Commissioner, 130 T. C. 115 (2008). De novo review contemplates consideration of the evidence presented at trial and takes into 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 account the burden of proof imposed upon each party as briefly mentioned above. We'll start with the burdens of proof applicable here. Simply put, for all practical purposes, intervenor bears no burden of proof in this proceeding. After all, his income tax liabilities for the years in issue are not affected by the outcome of this proceeding. His role in this proceeding is best described as a "spoiler". To the extent that his evidence is taken into account, it is weighed in the consideration of whether the burdens of proof imposed upon the other parties have been satisfied. For reasons to be discussed later in this bench opinion, respondent's burden of proof under Section 6015(c)(3)(C) has no application here. Otherwise, petitioner bears the burden of proof to establish she is entitled to relief under Section 6015(b), (c) and/or (f). Rule 142; Section 6015(c) (2); Alt v. Commissioner, 119 T.C. 306, 311 (2002) aff'd 101 Fed. Appx. 34 (6th Cir. 2004). To qualify for relief under Section 6015(b), a taxpayer must show, among other things, that the taxpayer "did not know, and had no reason to know" that there was an understatement of tax on the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 joint return giving rise to the deficiency. Section 6015(b)(1)(C). Taking into account all of the evidence submitted, we reject petitioner's claim that she had no knowledge of the understatements of tax giving rise to the deficiencies from which she now seeks relief. That being so, petitioner is not entitled to relief under Section 6015(b). Because petitioner is no longer married to intervenor, she would be eligible for relief under Section 6015(c) from the portion of the tax liability attributable to intervenor. The burden of proof to establish that portion, however, is upon her, see Section 6015(c)(2). The portion of the liability attributable to the fraud penalty is hers alone, and from the evidence submitted it could not be determined what portion, if any, of the deficiencies for the years in issue should be attributable to intervenor. Petitioner has failed to establish that she is entitled to any relief under Section 6015(c). That being so, respondent's burden under that section is moot. Lastly, we consider whether petitioner is entitled to relief under Section 6015(f). In response to a taxpayer's request for Section 6015(f) relief, respondent takes into account a number of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 factors set forth in his publications. See Rev. Proc. 2013-34, 2013 I.R.B. 397, modifying and superseding Rev. Proc. 2003-61, 2003 C.B. 296. It is not unusual to see those factors also taken into account in the many opinions of this Court addressing a taxpayer's entitlement to relief under that section. We need not follow that practice here. 8 Suffice it to note that it would be hardly 9 inequitable to hold petitioner liable for income tax 10 11 12 13 14 liabilities consented to, even if only by implication, arising from fraudulent federal income tax returns. Petitioner is not entitled to relief under Section 6015(f). It follows that the decision pé this case 15 will be entered for respondent. This concludes the Court's bench opinion in this case. . (Whereupon, at 10:36 a.m., the above- entitled matter was concluded.) 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com