TAX COURT OPINION

Case: Eric L. Dyson & Marilyn D. Dyson
Docket Number: 629-10S
Judge: Carluzzo
Opinion Type: bench
Filed: 11/29/2011
Pages: 7

UNITED STATES TAX COURT 20217 Washington, D.C. ERIC L. & MARILYN D. DYSON, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) .) ) ) Docket No. 629-10S Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is O R D E R ORDERED that the Clerk of the Court shall transmit the the transcript of herewith to petitioners and to respondent a copy of pages of Special Trial Judge Lewis R. Carluzzo at Los Angeles, California, on October 27, 2011, containing his oral opinion rendered at the conclusion of trial. the trial of the above case before findings of fact and In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. November 29, 2011 i @flVED NOV 29 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 Special Trial Judge Lewis R. Carluzzo October 27, 2011 Dyson v. Commissioner Docket No. 629-10S 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 f act and opinion . This proceeding for the redetermination of a deficiency is conducted as a Small Tax Case pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of Practice and Procedure. - This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure . Unless otherwise noted, subsequent section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended,.in effect for 2007; Rule references are to the Tax Court Rules of Practice and Procedure. Eric L. Dyson (Mr. Dyson) and Marilyn D. Dyson (Ms . Dyson) appeared pro sese . Sameera Hasan appeared on·behalf of respondent. In a notice of deficiency dated October 13, 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 2009, respondent determined a $4,850 deficiency in petitioners' 2007 Federal income tax (the notice). The parties have resolved all of the issues arising from the adjustments made in the notice. The issue for decision is whether Ms. Dyson is entitled to section 6015(c) relief from the income tax liability that will result from the deficiency that will be redetermined in this case. Some of the facts have been stipulated and are so found. At the time the petition was filed, petitioners resided at separate addresses in California. Petitioners were married in 1999; they separated and have lived apart at least since September 2009. For each year of their marriage, including the year in issue here, and perhaps up until at least 2009, they filed a join Federal income tax return, which with exception of the help of a friend in a year or two, they prepared themselves. Over the years, Ms. Dyson assumed more responsibility in preparing the return than Mr. Dyson. During 2007 Mr. Dyson was the sole proprietor of a business involved in the manufacture and distribution of what he describes as "collectable" items. The income and deductions attributable to this 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 business are reported on a Schedule C, Income and Profit or Loss from Business, included with petitioners ' 2007 Federal inc'ome tax return, and the deficiency determined in the notice arises completely from the disallowances of deductions claimed on that Schedule C (the disputed deductions). Although not entirely certain, it appears that the disputed deductions were disallowed for lack of substantiation. See sections 274(d) and 6001, and the regulations promulgated pursuant to those sections. In general, spouses "may make a single return jointly of income taxes" . Sec . 6013 (a) . Like most decisions, an individual's decision to file a joint return with the individual's spouse has consequences. One consequence to the individual is the assumption of an income tax liability arising from items not ,otherwise attributable to the individual. This is so because if for any given year a joint return is made by spouses, then with respect to that year "the tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several." Sec. 6013(d) (3); see sec. 1. 6013 -4 (b) , Income Tax Regs . " [J] oint and several liability" for the tax shown on a joint Federal income tax return means that although the tax may be 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 collected only once, each spouse is entirely responsible for the payment of the unpaid portions of the tax without apportionment between them. Cluck v. Commissioner, 105 T.C. 324, 326 n.4 (1995); Pesch v. Commissioner, 78 T.C. 100 (1982). In turn, this means that the Commissioner may, as he sees fit, collect the tax from either one. Cf. Pesch v. Commissioner, supra. Section 6015 provides various ways that a taxpayer/spouse may get relief from the joint and several income tax liability resulting from a joint return. Only one of those exceptions need be discussed here. Subject to a variety of conditions, section 6015(c) applies to."taxpayers no longer married.or taxpayers legally separated or taxpayers not living together". At the time Ms. Dyson's request for section 6015(c) relief was made, she and Mr. Dyson were not living together. Furthermore,. except for the extent of her knowledge at the time she signed the 2007 joint return, the- parties agree that she has satisfied all other requirements for relief under that section. As Mr. Dyson's spouse, Ms. Dyson had.a general idea of what his business was about, and more likely than not was kept informed about the financial 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 status of the business, but she did not participate in the operation or management of the business, and she did not have routine access to any books and records that Mr. Dyson might have maintained in connection with his business. Nevertheless, according to Mr. Dyson, at the time Ms. Dyson signed the return she knew about the disputed deductions because she participated in the preparation of the return. Ms. Dyson readily admits to her role in preparing the return and the knowledge of the items shown on that return, but she claims that she was not aware of the factual circumstances.giving rise to the disallowances of the disputed deductions. Nothing submitted demonstrates that she did, and respondent agrees with Ms. Dyson. .After careful consideration, we are satisfied that the evidence submitted would not support a finding that at the time Ms. Dyson signed the 200.7 return she had actual knowledge of the factual circumstances that resulted in the disallowances of the disputed deductions. See King v. Commissioner, 116 T.C. 198, 205 (2001) ("thus in determining whether petitioner had actual knowledge of an improperly deducted item on the return, more is required than petitioner's knowledge that 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 8 deduction appears on the return"); see also sec. 1. 6015 -3 (c) (2) (B) (1) and (2 ) , Income Tax Regs . Because the parties agree that petitioner otherwise is eligible to make a section 6015(c) election, she is entitled to the relief it provides. To reflect the forgoing, decision will be entered under Rule 155. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 8:11 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888