TAX COURT OPINION

Case: DeLana Prosperie Brown
Docket Number: 4026-10
Judge: Haines
Opinion Type: bench
Filed: 03/17/2011
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 DELANA PROSPERIE BROWN, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ) ) ORDER Docket No. 4026-10 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 and to respondent a copy of transcript of Phoenix, Arizona on March 4, 2011, containing his oral of fact and opinion rendered at the trial of this case before Judge Haines at the pages of the the conclusion of the trial. findings In accordance with the oral findings of fact and opinion, decision will be entered for petitioner. (Signed) Harry A. Haines Judge Dated: Washington, D.C. March 17, 2011 0ERVED APR - 4 2011 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 3 Bench Opinion by Senior Judge Harry A. Haines March 4, 2011 DeLana Prosperie Brown v. Commissioner Docket No. 4026-10 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. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. At the time of filing of her petition, petitioner resided in Mesa, Arizona. In 2000, petitioner worked at a medical clinic as a registered nurse. Petitioner's husband at the time, Dr. David P. Brown, who I will refer to as Dr. Brown, operated the medical clinic. Petitioner filed a joint federal income tax return for 2000 with Dr. Brown. There were no wages paid to petitioner for her work at the medical clinic. The return reported a total tax liability due and owed of $27,419. The unpaid tax liability was primarily attributable to Dr. Brown's self-employment income. Petitioner has stipulated to the fact that she was aware of the unpaid tax liability when she signed the return. At trial, petitioner conceded that she was Heritage Reporting Corporation (202) 628-4888 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 4 also aware of additional unpaid tax liabilities from previous years belonging to Dr. Brown. Petitioner anticipated that the unpaid tax liabilities would be resolved by either an offer in compromise or an installment agreement with the Internal Revenue Service, who I will refer to as IRS. On March 20, 2008, petitioner and Dr. Brown entered into a legal separation agreement that required Dr. Brown to pay all unpaid tax liabilities due to the IRS. Dr. Brown's obligation was subsequently confirmed in a divorce proceeding. Petitioner's current monthly income is approximately $6,700, and her monthly expenses are approximately $6,300. On November 19, 2008, the IRS received petitioner's Form 8857, Request for Innocent Spouse Relief, with regard to the.2000 tax year. Petitioner argued that the IRS had not attempted to collect from Dr. Brown and that she had paid her fair share of the tax liability in question. The payments toward the unpaid tax liability for 2000 have almost entirely come from petitioner's tax refunds. The refund for 2001 that was applied toward the 2000 unpaid tax liability was from a jointly filed return with Dr. Brown but with taxes Heritage Reporting Corporation (202) 628-4888 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 5 withheld from petitioner's income. Total refunds applied to date are in excess of $20,000. On November 19, 2009, the IRS issued its notice of determination denying petitioner's request for relief. In response, petitioner filed a petition with this Court requesting relief from joint and several liability under § 6015(f) in connection with her joint income tax return for 2000. Unless otherwise indicated, all section ' references are to the Internal Revenue Code, as | amended, and all Rule references are to the Tax Court Rules of Practice and Procedure. Relief may be granted from joint and several liability under § 6015(f) if "(1) taking into account all of the facts and circumstances it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either); (2) relief is not available to such individual under subsection (b) or (c) . " This Court has jurisdiction to determine whether a taxpayer is entitled to equitable relief under § 6015(f), § 6015(e) (1) (A). See also Farmer v. Commissioner, T.C. Memo. 2007-74. Our determination is made in a trial de novo. Porter v. Commissioner, 130 T.C. 115, 117 (2008). Heritage Reporting Corporation (202) 628-4888 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 6 The Commissioner prescribed procedures in Rev. Proc. 2003-61, 3003-2(c) (]B), 296 that IRS personnel must use to determine whether a requesting spouse qualifies for relief under § 6015(f). Rev. Proc. 2003-61, sec. 4.01, 2003-2(c) (B) at 297 list threshold conditions which must be satisfied before the Commissioner will consider a request for relief under § 6015(f). The threshold conditions have been met. Rev. Proc. 2003-61, sec. 4.03, 2003-2(c) (]B) at 298 provides that once the threshold conditions have been satisfied equitable relief may be granted under § 6015(f) if taking into account all facts and circumstances it is inequitable to hold the requesting spouse liable. Rev. Proc. 2003-61, sec. 4.03 lists several factors that the Commissioner and ultimately this Court may consider in determining whether to grant equitable relief under § 6015(f). No single factor is determinative. All factors are to be considered and weighed appropriately, and the listing of factors is not intended to be exhaustive. Timely filing of the petition is not an issue in this case. See Washington v. Commissioner, 120 T.C. 137, 148 (2003); Johnson v. Commissioner, supra at 125. Our analysis of the relevant facts and Heritage Reporting Corporation (202) 628-4888 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 7 circumstances is set forth below. In analyzing such factors as the taxpayer's marital status, whether the taxpayer would suffer hardship and whether the taxpayer has complied with income tax laws in subsequent years, our inquiry is directed to the taxpayer's status at the time of trial. A. Marital Status. Petitioner is divorced from Dr. Brown. B. Economic Hardship. This factor favors relief if payment of the owed tax would cause the requesting spouse to suffer economic hardship. Rev. Proc. 2003-61, sec. 4.03-2(a) (ii), 2003-2(c) (B) at 298. The Commissioner considers the taxpayer to suffer economic hardship if payment of the tax would prevent the taxpayer from meeting reasonable basic living expenses. Section 301.6343-1(b) (4) (i), Procedure and Administrative Regs., Rev. Proc. 2003- 61, sec. 4.021(c), 4.03-2(A) (1) or 2(A) (2), and 2003- 2(c) (lB) at 298. The record does not indicate that petitioner would experience economic hardship from paying the tax. Petitioner's average monthly income is $6,700, and her average monthly expenses are $6,300. Accordingly, this factor favors respondent. Heritage Reporting Corporation (202) 628-4888 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 C. Knowledge or Reason to Know. With regard to an income tax liability resulting from a deficiency, we are less likely to grant relief under § 6015(f) if the requesting spouse knew or had reason to 8 know of the item giving rise to the deficiency. At trial, petitioner conceded that at the time she signed I the tax return for 2000 she believed that the unpaid liability would be resolved by either an offer in compromise or an installment agreement. Further, petitioner conceded that she was aware that by signing a joint return she was jointly and severally liable for the tax liability of her spouse. Accordingly, this factor favors respondent. D. The Non-Requesting Spouse's Legal Obligation to Pay. The legal obligation factor asks whether the non-requesting spouse has an obligation to pay the outstanding liability pursuant to a divorce decree or a separation agreement. The separation agreement and subsequent divorce provides that Dr. Brown is obligated to pay the outstanding liability. Accordingly, this factor favors petitioner. E. Significant Benefit. Receipt by the requesting spouse, either directly or indirectly, of a significant benefit in excess of normal support from the unpaid liability or the item giving rise to the Heritage Reporting Corporation (202) 628-4888 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 9 deficiency weighs against relief. Lack of significant benefit beyond normal support weighs in favor of relief. Normal support is measured by the circumstances of the particular parties. Estate of Crock v. Commissioner, 93 T.C. 672, 678-679 (1989). The unpaid tax liability was a result of underwithholding for Dr. Brown's self-employment income. Such income was the primary household income for the year at issue. Despite petitioner working for Dr. Brown's clinic as a registered nurse in 2000, petitioner was not paid by the medical clinic. We conclude that petitioner did not significantly benefit beyond the receipt of normal support from the unpaid liability, and this factor favors petitioner. F. Compliance With Income Tax Laws. This factor asks whether the requesting spouse has made a good effort to comply with tax laws for years subsequent to the year in which relief is desired. Petitioner has complied with income tax laws, and her refunds over the years have been the only monies paid to reduce the outstanding liability for 2000, which refunds have exceeded $20,000 in amounts. Accordingly, this factor favors petitioner. G. Conclusion. The factors favoring relief are that Dr. Brown is obligated to pay the outstanding Heritage Reporting Corporation (202) 628-4888 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 10 tax liability, petitioner has not received a significant benefit from the nonpayment of tax, and she has complied.with income tax laws, which has resulted in substantial reduction of the outstanding tax liability for 2000. Factors against relief are petitioner's failure to show economic hardship and her inability to demonstrate that she had no reason to know of items giving rise to the deficiencies. On the basis of the above, we findl that petitioner has carried her burden of proving that she is entitled to relief from joint and several liability under § 6015(f). In reaching our holdings here, we have considered all arguments made, and to the extent not mentioned above, we conclude that they are moot, irrelevant or without merit. To reflect the foregoing, decision will be entered granting relief to petitioner pursuant to § 6015(f) from the remaining income tax liability for 2000. This concludes the Court's oral findings of fact and opinion. (Whereupon, at 10:45 a.m., the bench opinion in the above-entitled matter was concluded.) // Heritage Reporting Corporation (202) 628-4888