TAX COURT OPINION

Case: Joylyn Dawn-Marie Bello, Petitioner and Adebayo Bello, Intervenor
Docket Number: 9967-18S
Judge: Guy
Opinion Type: bench
Filed: 12/10/2019
Pages: 14

RMM UNITED STATES TAX COURT WASHINGTON, DC 20217 JOYLYN DAWN-MARIE BELLO, PETITIONER, AND ADEBAYO BELLO, INTERVENOR, v. ) ) ) ) ) Docket No. 9967-18S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) 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 petitioner, intervenor, and to respondent a copy of the pages of the transcript of the trial in the above-captioned case before Special Trial Judge Daniel A. Guy, Jr., at Atlanta, Georgia, on October 23, 2019, 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 facts and opinion, a decision will be entered for petitioner. (Signed) Daniel A. Guy, Jr. Special Trial Judge Date: Washington, D.C. December 10, 2019 SERVED Dec 11 2019 Bench Opinion by Special Trial Judge Daniel A. Guy, Jr. 3 October 23, 2019 Joylyn Dawn-Marie Bello, Petitioner, and Adebayo Bello, Intervenor v. Commissioner Docket No. 9967-18S THE COURT: The Court has decided to render oral findings of fact and opinion in this stand-alone spousal relief case, and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This bench opinion is rendered pursuant Internal 1 2 3 4 5 6 7 8 9 10 11 12 13 Revenue Code section 7459(b) of the Internal Revenue Code 14 of 1986 as amended and Rule 152 of the Tax Court Rules of 15 Practice and Procedure. Hereinafter in this bench 16 OPinion, section references are to the Internal Revenue 17 Code of 1986 as amended and in effect at all relevant 18 times, and rule references are to the Tax Court Rules of 19 Practice and Procedure. 20 Respondent issued a final determination letter 21 to petitioner denying her claim for relief from joint and 22 several liability in respect of underpayments of tax 23 reported due on joint amended Federal income tax returns 24 25 for the taxable years 2010 and 2011 (years in issue). Petitioner filed these joint returns with Adebayo Bello her now former spouse. Petitioner filed a timely petition for review with the Court. Adebayo Bello 4 (intervenor) exercised his right to intervene in this action under section 6015(e)(4) and Rule 325(b), and he enjoys the rights of a party in this case. See Tipton v. Commissioner, 127 T.C. 214, 217 (2006). Both petitioner and intervenor resided in Georgia at the time the petition was filed. Petitioner and intervenor appeared at trial pro se. Jason P. Oppenheim appeared on behalf of respondent. The Court permitted Erin A. Schaffer and Kseniya N. 1 2 3 4 5 6 7 8 9 10 11 12 Kuprovska to participate in the trial of this case on 13 behalf of respondent. 14 15 In his pre-trial memorandum, and as confirmed at the start of the trial, respondent has reconsidered and 16 now asserts that petitioner is entitled to full relief 17 18 19 20 21 from joint and several liability under section 6015(f) for the years in issue. Intervenor opposes granting any relief to petitioner. Background The following background facts are drawn from 22 the parties' stipulation of facts, the administrative 23 record, and newly discovered presented at trial. 24 Petitioner and intervenor were married in 1996 25 and they have two children. They were separated in 2014 cr ners and divorced in April of 2015. 5 Petitioner earned a bachelor's degree in 1988 and a master's degree in health policy in 1993. She was gainfully employed until 2001 when the couple's second child was born. Petitioner did not have any paid employment between 2009 and 2015, and she did not earn any income during the years at issue. Beginning in 2011 petitioner began to experience health problems. Her condition worsened over time and she 1 2 3 4 5 6 7 8 9 10 was eventually diagnosed as suffering from Pyodermar an 11 autoimmune disease which occasionally causes large painful 12 13 14 15 sores to develop on her legs. Intervenor earned a bachelor's degree with a dual major in accounting and economics in 1987. From 1988 to 2000 he worked as a and accountant and as a finance and 16 cash management specialist. In 2000 he began working in 17 the information technology (IT) field as a programmer. 18 Since 2000 he has worked both as an employee and as an 19 independent contractor and he organized a single member 20 21 22 limited liability company in connection with his IT contract work. Intervenor maintained a separate bank account 23 where he deposited his earnings and other receipts. The 24 couple also maintained a joint bank account and intervenor 25 deposited funds to this account on a monthly basis so that , ct nets Petitioner could pay household expenses. Finances were a sore point in the marriage, and petitioner and intervenor eventually found themselves in financial distress. 6 The couple's marital relationship deteriorated as their financial standing worsened and there were occasional physical altercations. Petitioner was intimidated by intervenor and was afraid to question him about financial matters. Petitioner and intervenor had routinely filed joint Federal income tax returns during their marriage. Intervenor normally arranged to have joint tax returns completed by a tax return preparer and made sure that the returns were timely filed. Beginning in 2009, however, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 because he lacked the funds needed to pay taxes that were 15 due, intervenor decided not to file tax returns for the 16 next several years. Petitioner and intervenor accrued 17 18 19 significant unpaid tax liabilities for the taxable years 2009 to 2013. The Internal Revenue Service (IRS) later 20 determined that petitioner and intervenor owed Federal 21 22 23 income tax for the taxable years 2010 and 2011. In June 2014 petitioner and intervenor filed amended Federal income tax returns for 2010 and 2011 reporting additional 24 income from intervenor's business activities resulting in 25 additional tax due of $5,038 and $9,935, respectively. a nets Respondent in turn assessed late filing penalties and 7 interest. Petitioner knew when she signed the amended income tax returns at issue that intervenor was not in a position to pay the tax that was due. In November 2014 intervenor (and possibly petitioner) entered into an installment agreement to pay the outstanding tax liabilities for 2009 to 2013. At the time of trial most of the tax due for 2010 remained unpaid, while all but $48 1 2 3 4 5 6 7 8 9 10 of the tax due for 2011 had been paid. Although 11 12 13 14 15 intervenor paid most of the tax due for 2011, the IRS applied a refund of $3,610 due to petitioner for the taxable year 2016 to offset a portion of the tax due for that year. Petitioner and intervenor separated in October 16 2014 and their marriage with the entry of a Final 17 Judgement and Decree of Divorce of April 8, 2015. The 18 divorce decree provides in relevant part that: (1) 19 neither party is obliged to pay or receive alimony for the 20 other; (2) each party is responsible for their own health 21 insurance; (3) the parties shall equally divide 22 intervenor's retirement savings accounts (which totaled 23 less than $50,000); and (4) the parties are equally 24 responsible for all Federal and state tax liabilities for 25 all years in which filed a joint tax return. a ner s On August 2, 2017, petitioner submitted to the 8 IRS a Form 8857, Request for Innocent Spouse Relief, for the years in issue. On October 16, 2017, intervenor submitted to the IRS a Form 12508, Questionnaire for Non- Requesting Spouse, opposing petitioner's request for relief. Petitioner indicated in form 8857 that her 1 2 3 4 5 6 7 8 monthly income was limited to child support payments form 9 10 11 12 13 14 15 intervenor, that her monthly living expenses exceeded her income, and that she is enrolled in Medicaid for health care services. Respondent acknowledges that petitioner has been in compliance with her tax obligations after the years in 1ssue. There is no evidence that petitioner lived an 16 overly lavish lifestyle or that she received a substantial 17 benefit from the failure to pay tax. Although intervenor 18 does not appear to have lived a lavish lifestyle either, 19 he was primarily responsible for the couple's finances and 20 made some expenditures that exceeded the family's 21 22 23 financial means. Discussion Generally, married taxpayers may elect to file a 24 joint Federal income tax return. Sec. 6013(a). After 25 making the election, each spouse is jointly and severally liable for the entire tax due. Sec. 6013(d)(3). If certain requirements are met, however, a requesting spouse may be relieved of joint and several liability under 9 section 6015. As if relevant here, section 6015(f) provided that the Commissioner may provide relief to a requesting spouse from joint and several liability if relief is not available under subsection (b) or (c) and taking into account all of the facts and circumstances, it would be inequitable to hold the requesting spouse liable for all or a portion of the unpaid tax. Relief is not available to petitioner under section 6015(b) or (c) in this case because the amounts due for the years in issue are attributable to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 underpayments of tax as opposed to understatements of tax 16 17 18 or tax deficiencies. Section 6015(e)(7) provided that the Court's review of a determination made under that section shall be 19 reviewed de novo and shall be based upon the 20 administrative record established at the time of the 21 determination and any additional newly discovered or 22 previously unavailable evidence. Petitioner, the 23 requesting spouse, bears the burden of proving entitlement 24 25 to relief. Rule 142(a); Porter v. Commissioner, 132 T.C. 203,210 (2009). In Rev. Proc. 2013-34, 2013-43 IRB 397, the 10 Commissioner prescribed a nonexclusive list of factors that are considered in determining whether equitable relief should be granted to a requesting spouse. Although the Court consults these guidelines when reviewing the Commissioner's denial of relief, see Washington v. Commissioner, 120 T.C. 137, 147-152 (2003), the Court is not bound by them inasmuch as our analysis and determination ultimately turn on an evaluation of all the facts and circumstances, see Pullins v. Commissioner, 136 T.C. 432, 438-439 (2011). Rev. Proc. 2013-34, sec. 4.01 sets forth threshold conditions that must be satisfied before the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Commissioner will consider a request for equitable relief 15 under section 6015(f). There is no dispute that 16 petitioner satisfies the threshold conditions. 17 18 If a requesting spouse meet the threshold conditions for relief and it not eligible for streamlined 19 relief (as is the case here), the Commissioner may grant 20 21 full or partial equitable relief after considering the following nonexclusive list of factors set for in Rev. 22 Proc. 2013-34, sec. 4.03: (1) whether the requesting 23 spouse was separated or divorced from the nonrequesting 24 spouse when the IRS makes its determination; (2) whether 25 the requesting spouse will suffer economic hardship if cr ne s 11 relief is not granted; (3) whether (in an underpayment case) on the date the joint return was filed the requesting spouse did not know and had no reason to know that the nonrequesting spouse would not or could not pay the tax liability; (4) whether the requesting or nonrequesting spouse has a legal obligation to pay the outstanding tax liability; (5) whether the requesting SPouse significantly benefitted from the unpaid income tax liability; and (6) whether the requesting spouse made a good faith effort to comply with the Federal income tax law for the taxable years following the taxable years to 1 2 3 4 5 6 7 8 9 10 11 12 which the request for relief relates. Two additional 13 factors that the Commission may consider in favor of 14 granting are whether: (1) the nonrequesting spouse abused 15 the requesting spouse, and (2) the requesting spouse was 16 in poor mental or physical health at the time the joint 17 18 return was filed or when the requesting spouse requested relief. See Rev. Proc. 2013-34, sec. 4.03(2)(c)(iv),(g). 19 The revenue procedure recognizes that the issue of abuse 20 21 22 23 24 can be relevant to the analysis of various factors and can negate the presence of certain factors. Rev. Proc. 2013- 34, sec. 3.01. 1. Marital Status Petitioner and intervenor were divorced before 25 the IRS made its determination. This factor weighs in c r oers 12 1 2 3 4 5 6 7 8 9 10 11 12 13 favor of relief. 2. Economic Hardship A requesting spouse will suffer economic hardship if payment if part or all of the tax liability "will cause the requesting spouse to be unable to pay reasonable basic living expenses." Rev. Proc. 2013-34, sec. 4.03(2)(b); see sec. 301.6343-1(b)(4)(i), Proced. & Admin. Regs. The determination as to what constitutes a reasonable amount for basic living expenses may vary with the circumstances of the individual taxpayer but will not include the maintenance of an affluent or luxurious lifestyle. Id. The record shows that petitioner will suffer economic hardship if the is required to pay any 14 part of the tax liabilities for the years in issue. This 15 16 17 18 factor weighs in favor of relief. 3. Knowledge or Reason to Know In the case of an underpayment of tax due, this factor turns on whether, as of the date the return was 19 filed or the date the requesting spouse reasonably 20 believed the return filed, the requesting spouse knew or 21 had reason to know that the nonrequesting spouse would not 22 or could not pay the tax at that time or within a 23 reasonable time after the filing of the return. Rev. 24 Proc. 2013-34, sec. 4.03(2)(c)(ii). 25 Petitioner was aware of the couple's financial difficulties and she knew or had reason to know that 13 intervenor could not pay the tax due for the taxable years 2010 and 2011 when the amended returns were filed. This factor weighs against relief. 4· Legal obligation Petitioner and intervenor shared a legal obligation under their divorce decree to pay their outstanding income tax liabilities. Rev. Proc. 2013-34, sec. 4.03(2)(d). This factor is neutral. 5. Significant Benefit This factor calls for an evaluation of whether the requesting spouse received a significant benefit, 1 2 3 4 5 6 7 8 9 10 11 12 13 beyond normal support, from the underpayment of tax. Rev. 14 Proc. 2013-34, sec. 4.03(2)(e). Normal support is 15 measured by the circumstances of the particular parties. 16 Porter v. Commissioner, 132 T.C. at 212. 17 18 Petitioner did not live an extravagant lifestyle. Although petitioner received some benefit from 19 the underpayments of tax, we cannot say on this record 20 that she received a significant benefit within the meaning 21 of the revenue procedure. This factor is neutral. 22 23 6. Compliance With Tax Laws Petitioner made a good faith effort to comply 24 with the income tax laws for taxable years after being 25 divorced from intervenor. Rev. Proc. 2013-34, sec. 4.03(2)(f)(i). This factor weighs in favor of relief. 14 7. Mental or Physical Health If the requesting spouse was in poor mental or Physical health at the time the relevant return was filed or at the time she requested relief this factor will weigh in favor of relief. Rev. Proc. 2013-34, sec. 4.03(2)(g). Petitioner was in declining physical health when the amended returns for the years in issue were filed and when she submitted her claim for relief to the IRS. 1 2 3 4 5 6 7 8 9 10 Considering all the circumstances, this factor weighs in 11 12 13 14 favor or relief. 8. Abuse Petitioner alleged in Form 8857 and testified credibly at trial that she was intimidated and abused 15 physically and mentally by intervenor. Intervenor 16 admitted that he had physical altercations with 17 petitioner, although he suggested that petitioner was 18 usually the aggressor. This factor weighs in favor of 19 relief. 20 21 22 Conclusion Although petitioner knew that intervenor was not in a position to pay the taxes reported due on the amended 23 returns for the years in issue, a careful weighing of all 24 the facts and circumstances, including petitioner's poor 25 physical health, leads the Court to conclude that it was cnoers inequitable to deny petitioner spousal relief for the 15 years 1n 1ssue. This concludes the Court's oral finding of fact and opinion. To reflect the foregoing, an appropriate decision will be entered for petitioner. (Whereupon, at 1:07 p.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 cnners