TAX COURT OPINION

Case: Aileen Borges
Docket Number: 25204-13
Judge: Buch
Opinion Type: bench
Filed: 06/02/2014
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 AILEEN BORGES, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 25204-13. ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to both petitioner and respondent a copy of the pages of the transcript of the trial in this case that contain the oral findings of fact and opinion that was rendered at the trial session at Miami, Florida. . In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. June 2, 2014 SERVED JUN - 4 2014 Capital Reporting Company 3 1 2 Bench Opinion by Judge Ronald L. Buch May 21, 2014 3 Aileen Borges v. Commissioner 4 5 Docket No. 25204-13 THE COURT: The following represents the 6 Court's Oral Findings of Fact and Opinion. The Oral 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Findings of Fact and Opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code section 7459(b) and Rule 152(a) of the Tax Court Rules of Practice and Procedure. Any section references are to the Internal Revenue Code or the Treasury Regulations in effect during the year at issue, and any Rule references are to the Tax Court Rules of Practice and Procedure. This proceeding was commenced under section 6015 for the review of respondent's determination that Ms. Borges is not entitled to relief from joint and several liability with respect to the underpayment of federal income tax reported joint Form 1040, U.S. Individual Income Tax Return filed for 2008. FACTS The Borgeses married in Cuba in 1998 and 25 moved to the U.S. sometime thereafter. During 2008 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 Mrs. Borges worked as a janitor in a medical center 2 3 4 5 6 owned by her husband. Mr. Borges operated a catering business out of the Borges' home. Although Mrs. Borges did not participate in the catering business, she observed its operations in the home. When it came time to prepare ehe- taxes the Borgeses provided %eß 7 all of their information to their return preparer, 8 Carlos Perez. Mr. Perez prepared the joint Federal 9 income tax return for Mr. and Mrs. Borges. On the 10 11 12 2008 return the Borgeses reported on separate Schedule C the income from both Mrs. Borges' janitorial work and Mr. Borges' catering business. 13 Mrs. Borges signed the return as instructed but did 14 15 16 17 18 19 20 21 22 23 not review and was unfamiliar with its contents. Respondent issued a notice of deficiency to the Borgeses with principal adjustments relating to omitted dividend income and to the Schedule C businesses. The omitted dividend income apparently related to checks that both Mr. and Mrs. Borges cashed. In addition to the tax, the IRS determined that fraud penalties applied. The Borgeses signed a locq Form 4549 accepting the IRS's adjustments. In esse- the Borgeses separated and have lived separately 24 until recently. Mr. Borges moved back in with Mrs. 25 Borges due to financial difficulty. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 On July 25, 2012 the IRS issued a notice of intent to levy to Mrs. Borges. On August 3, 2012 the IRS issued a notice of Federal tax lien. On August 28, 2012 Mrs. Borges filed a Form 8857, request for innocent spouse relief. On July 30, 2013 the IRS issued a final determination denying Mrs. Borges' relief under 6015. DISCUSSION Generally, married taxpayers may elect to file a joint Federal income tax return. Section 6013(a). After making the election each spouse is jointly and severally liable for the entire tax due for that year. Sections 6013(d)(3), Butler v. Commissioner, 114 T.C. 276, 282 (2000). In certain circumstances, however, a spouse who has filed a joint return may seek relief from joint and several liability under procedures set forth in section 6015. See section 6015(a). Under section 6015(b) a taxpayer seeking relief from joint and several liability must meet five conditions*. (1) a joint return was filed for the taxable year; (2) there was a-understatement of tax attributable to an erroneous item of the taxpayer's spouse; (3) at the time of signing the return the spouse seeking relief did not know and did 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 6 1 2 3 4 5 6 7 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. A taxpayer 8 must satisfy all five requirements to qualify for 9 relief. See Alt v. Commissioner, 119 T.C. 306, 313 (2002). 10 11 Here Mrs. Borges filed a joint return with 12 Mr. Borges for 2008. A portion of the understatement 13 14 15 16 17 18 19 20 21 22 23 24 25 is attributable to the adjustments respondent made to cdOJmd e4eém deductions relating to Mr. Borges' catering business in which Mrs. Borges did not participate. Although she was aware of the business, the business was reported on the return. It is clear that she was unfamiliar with the finances of the business. Mrs. Borges did not know and had no reason to know at the time that she signed the return that the income or expenses claimed for the catering business were incorrect. Respondent mailed the notice of intent to levy on July 25, 2012 and Mrs. Borges filed her request for relief under section 6015 on August 28, 2012. Therefore, Mrs. Borges requested relief within 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company two years of the first collection activity. See section 1.6015-5(b)(2) Income Tax Regs., defining the collection activity to include a notice of intent to 7 levy. FINDINGS We conclude that based on the facts and circumstances it would be inequitable to hold Mrs. Borges liable for the understatement attributable to 1 2 3 4 5 6 7 8 9 Mr. Borges' catering business in which she did not 10 11 12 13 14 15 16 17 18 participate. Therefore, Mrs. Borges is entitled to relief under section 6015(b) for the portion of the liability attributable to Mr. Borges' catering business. Regarding the dividend income that was omitted from the return Mrs. Borges was aware of the check cashing. She knew or had reason to know of that understatement. We have considered all other arguments made by the parties and to the extent not discussed we conclude that that arguments are moot, 19 without merit or irrelevant. This concludes the Court's Oral Findings of Fact and Opinion in this matter. (Whereupon, at 9:11 a.m., the above- entitled matter was concluded.) 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com