t c no united_states tax_court connie a washington petitioner v commissioner of internal revenue respondent docket no filed date p and her then husband h filed a joint federal_income_tax return for showing tax owed they did not pay the tax with the return r garnished p’s wages and applied p’s overpayments of tax from and to the unpaid tax_liability p requested relief under sec_6015 i r c r denied p’s request for relief p then filed a petition in this court seeking a review of r’s determination and requesting pursuant to sec_6015 i r c a refund of her garnished wages and the overpayments of tax from and r asserts that even if p is entitled to relief under sec_6015 i r c sec_6015 i r c does not apply to the portion of the tax_liability that was paid on or before date held p is entitled to relief under sec_6015 i r c r’s denial of such relief was an abuse_of_discretion held further p is entitled to a refund of her wages garnished in date and the overpayment_of_tax for which were applied to the unpaid tax_liability sec_6015 i r c applies to the full amount of any preexisting tax_liability for a particular taxable_year if any of that liability remains unpaid as of the date of enactment and not just to portions of tax_liability that remain unpaid after date the date of enactment of internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_740 51_fedclaims_49 followed held further pursuant to sec_6015 i r c p’s refund is limited to the time restraints for filing refund claims under sec_6511 i r c connie a washington pro_se james r rich for respondent jacobs judge respondent determined that petitioner is not entitled to relief from joint liability for tax under sec_6015 for with respect to a joint_return filed with kenneth washington petitioner filed a petition under sec_6015 seeking review of respondent’s determination the issues for decision are whether respondent’s denial of petitioner’s request for relief pursuant to sec_6015 was an abuse_of_discretion and if so whether petitioner is entitled to a refund of all amounts paid applied toward the tax shown as owed on the joint_return unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and attached exhibits are incorporated herein by this reference a background petitioner resided in beaufort south carolina on the date the petition in this case was filed petitioner and her former spouse kenneth washington mr washington were married in petitioner and mr washington permanently separated in they were divorced in during their marriage petitioner and mr washington had two children who at the time of trial in this case were ages and petitioner is a high school graduate at all relevant times she was employed as a government purchasing agent with the marine corps air station petitioner has been employed by the federal government for approximately years at all relevant times mr washington was a self-employed carpenter mr washington did not discuss his business or financial dealings with petitioner b the unpaid tax_liability on date petitioner and mr washington jointly filed a form_1040 u s individual_income_tax_return for the joint_return that was prepared by a tax_return_preparer petitioner provided her form_w-2 wage and income statement to the tax_return_preparer and signed the joint_return petitioner had no other involvement in the preparation of the joint_return on the joint_return petitioner and mr washington reported wages of dollar_figure attributable to petitioner’s employment as a federal purchasing agent and self-employment_income of dollar_figure attributable to mr washington’s carpentry business after applying the dollar_figure withholding from petitioner’s wages there remained a dollar_figure balance due for the unpaid tax_liability the unpaid tax_liability was not paid when the joint_return was filed no discussions took place between petitioner and mr washington about the preparation or filing of the joint_return nor did they discuss the payment of tax owed petitioner believed that because the unpaid balance of the tax shown on the joint_return resulted from mr washington’s failure to pay estimated_tax on his business earnings he alone was responsible for the payment of and would pay the tax owed petitioner and mr washington were divorced in petitioner received no assets from the dissolution of the marriage petitioner was given custody of the two children mr washington did not pay spousal or child_support to petitioner the divorce decree was silent as to whether petitioner or mr washington should pay the unpaid tax_liability petitioner and her children reside in a small rental house petitioner is the sole provider she has the use of an automobile but does not own it c collection action on the unpaid tax_liability petitioner claimed a filing_status of married_filing_separately on her and federal_income_tax returns and head-of-household on her returns on her and federal_income_tax returns petitioner reported overpayments of tax she requested refunds of those overpayments the overpayments of tax were not refunded to petitioner instead the overpayments were applied to the unpaid tax_liability as follows dollar_figure from applied date dollar_figure from applied date dollar_figure from applied date dollar_figure from applied date dollar_figure from applied date and dollar_figure from applied date in addition to the aforementioned overpayments of tax for years subsequent to respondent’s records reflect that on date and date there were payments of dollar_figure and dollar_figure respectively applied to the unpaid tax_liability the dollar_figure payment resulted from the garnishment of petitioner’s wages the record is silent as to the source for the dollar_figure payment an overpayment_of_tax with interest of dollar_figure from was also applied to the tax_liability the internal_revenue_service irs issued to the defense accounting office a notice_of_levy on wages salary and other income form 668-w c the notice_of_levy dated date and signed by revenue_officer barbara whalen revenue_officer whalen seeking to garnish petitioner’s wages the notice_of_levy showed that petitioner and mr washington were liable for unpaid taxes and additions totaling dollar_figure of which dollar_figure of unpaid tax and dollar_figure of statutory additions related to the remaining amount was attributable to dollar_figure dollar_figure dollar_figure and a civil penalty for dollar_figure mr washington’s name and address were typed below name and address of taxpayer on the notice_of_levy however his name and address were crossed out and petitioner’s name and address were inserted on date petitioner received a letter from the defense finance and accounting service informing her that another notice_of_levy had been issued on petitioner’s wages the letter stated that her wages would be subject_to garnishment until the dollar_figure debt was collected petitioner was instructed to complete and return part sec_3 and of the notice_of_levy she was informed that failure to do so would result in her receiving a biweekly check in the amount of dollar_figure the personal_exemption amount with the remainder approximately dollar_figure being forwarded to the irs on date in a letter to the irs problem resolution office petitioner requested that the levy be released and that her account be placed on an uncollectible status in her letter petitioner enclosed a copy of form 433-a collection information statement for individuals and stated i do not owe these taxes my ex-husband does here is my situation my husband and i are divorced i have filed my taxes every year in which every year my federal refund is taken by the irs when we were married i filed jointly with him not knowing that it would affect my credit status like this he had a business and it failed and these taxes belong to him not me in accordance with the wage levy if my wages are garnished because of this it would cause an economical hardship on me and my children on date dollar_figure attributable to the garnishment of petitioner’s wages was applied to the unpaid tax_liability on date petitioner met with revenue_officer whalen in a followup letter to revenue_officer whalen dated date petitioner again pleaded financial hardship for herself and her family and inquired if anything could be done to place her account on an uncollectible status she also requested that the penalties and interest assessed against her be abated reiterating that the taxes owed were attributable to her former husband on date petitioner received a second letter from her employer’s accounting department informing her that yet another irs notice_of_levy for dollar_figure had been received the notice_of_levy was signed by revenue_officer whalen as with the first notice_of_levy below name and address of taxpayer mr washington’s name and address were typed in and crossed out and petitioner’s name and address were inserted of the total amount sought dollar_figure of unpaid tax and dollar_figure of statutory additions related to the remaining dollar_figure related to again petitioner was instructed to complete the notice_of_levy and was informed that failure to do so would result in her receiving a biweekly check of dollar_figure and the remainder approximately dollar_figure being forwarded to the irs petitioner again met with revenue_officer whalen in a letter to revenue_officer whalen dated date petitioner submitted the information that revenue office whalen had requested at their prior meeting in the letter petitioner stated as i stated in our last meeting and letters that i have sent certified to you and the problem resolutions officer i cannot afford my pay to be garnished for over dollar_figure every weeks a payment of dollar_figure every two weeks is not feasible for myself and my children to live on this deduction would cause a serious hardship financially on me i have cooperated as much as i could and told you i wasn’t responsible for the amount being owed i have filed my taxes faithfully every year only to have my taxes taken for something i was not responsible for i feel that this is not fair or should be my responsibility again if you need anymore additional information i would be more than happy to help you out my status has not changed from the last time we have met again please don’t garnish my check because this is the only income my family and i have to survive on on date revenue_officer whalen issued a form 668-d release_of_levy release of property from levy releasing petitioner’s wages from levy d summary of assessments and credits form_4340 certificate of assessments payments and other specified matters form_4340 dated date lists the following with respect to petitioner’s taxable_year adjusted_gross_income - dollar_figure taxable_income - dollar_figure assessment payment assessment explanation other debits credit date 23c rac date of transaction reversal reversal return filed tax assessed dollar_figure withholding credit excess fica dollar_figure failure_to_pay_tax penalty dollar_figure interest assessed dollar_figure overpaid credit applied dollar_figure interest overpayment credit dollar_figure federal_tax_lien fees collection costs dollar_figure subsequent payment dollar_figure overpaid credit applied dollar_figure legal bankruptcy suit legal bankruptcy suit pending the last entry on the form_4340 certificate of assessments payments and other specified matters was date petitioner maintains that the form_4340 does not reflect overpayments of dollar_figure and dollar_figure from her and federal_income_tax returns and a rebate check of dollar_figure in that were applied toward the outstanding balance pending legal bankruptcy suit no longer pending overpaid credit applied dollar_figure overpaid credit applied dollar_figure overpaid credit applied dollar_figure overpaid credit applied dollar_figure subsequent payment miscellaneous payment dollar_figure - -- overpaid credit applied dollar_figure failure_to_pay_tax penalty dollar_figure interest assessed dollar_figure legal bankruptcy suit pending1 notice of balance due notice_of_intent_to_levy notice_of_intent_to_levy assessed items balance due dollar_figure the entries of and reflect bankruptcy suits filed by petitioner and mr washington which were subsequently discharged on the entry reflects the legal proceeding commenced in this court by petitioner e petitioner’s request for relief from joint liability for tax under sec_6015 on or about date respondent received from petitioner multiple forms request for innocent spouse relief in which she sought relief from joint liability for the years through attached to that form was a letter dated date in which petitioner requested tax refunds for each year together with interest petitioner stated that her credit had been impaired as a result of the irs liens she requested that the liens be removed and that she be relieved of all liability for taxes interest penalties and other accruing amounts although petitioner stated in her claim for relief that she was seeking relief with respect to the tax years respondent treated petitioner’s claim as one for on date respondent issued to petitioner a notice_of_determination concerning relief from joint_and_several_liability under internal_revenue_code sec_6015 notice_of_determination in the notice_of_determination respondent determined that petitioner was not entitled to relief from joint liability under sec_6015 c or f with respect to the tax_liability the following explanation was given you do not qualify for relief under sec_6015 or sec_6015 because your request is a request for relief for an underpayment_of_tax and not an understatement_of_tax only internal_revenue_code sec_6015 allows for relief in certain underpayment situations you do not qualify for relief for the underpayment under sec_6015 for tax_year because you had knowledge that the tax underpayment was not being paid when the return was filed you have not shown that your former husband intended to pay the balance due at the time or had the ability to pay the balance due at that time you have also not shown that it would be inequitable to hold you liable for the balance due from the jointly filed income_tax return on date petitioner timely filed a petition in this court seeking a review of respondent’s determination as of the date of trial the assessed but unpaid tax_liability consisting mainly of interest was dollar_figure to dollar_figure opinion as a general_rule spouses filing joint federal_income_tax returns are jointly and severally liable for all taxes due sec_6013 however under certain circumstances sec_6015 provides relief from this general_rule sec_6015 applies to any liability for tax arising after date and to any liability for tax arising on or before date but remaining unpaid as of such date internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_685 sec_6015 does not apply if the tax was paid in full on or before date brown v commissioner tcmemo_2002_187 sec_6015 significantly relaxed the requirements for relief from joint liability by providing three avenues for obtaining relief to a taxpayer who has filed a joint_return sec_6015 which is similar to former sec_6013 provides relief with respect to understatements of tax attributable to certain erroneous items on the return sec_6015 provides relief for a portion of an understatement_of_tax for taxpayers who are separated or divorced and sec_6015 potentially the broadest of the three avenues and the avenue directly at issue in sec_6015 was enacted as part of the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_685 prior to the enactment of sec_6015 relief from the imposition of joint_and_several_liability for spouses filing joint returns was available under sec_6013 this case confers upon the secretary discretion to grant equitable relief for taxpayers who otherwise do not qualify for relief under sec_6015 or c petitioner requested relief under sec_6015 from liability for the payment of the tax reported on the joint_return that was not paid when the return was filed respondent treated petitioner’s request for relief under sec_6015 as an election under sec_6015 c and f and determined that petitioner was not entitled to the requested relief if a taxpayer’s request for relief under sec_6015 is denied the taxpayer may petition this court pursuant to sec_6015 for a review of such determination our jurisdiction in cases brought under sec_6015 encompasses a review of respondent’s determination with respect to all relief afforded by sec_6015 118_tc_494 114_tc_324 114_tc_276 with regard to the case herein petitioner seeks equitable relief under sec_6015 and requests the refund of all amounts paid applied toward the unpaid tax reported on the joint_return to prevail petitioner first must prove that respondent’s denial of equitable relief from joint liability under sec_6015 was an abuse_of_discretion 118_tc_106 115_tc_183 affd 282_f3d_326 5th cir butler v commissioner supra a whether petitioner is entitled to equitable relief sec_6015 provides sec_6015 equitable relief --under procedures prescribed by the secretary if-- taking into account all the facts and circumstances it is inequitable to hold the individual liable for any unpaid tax or any deficiency or any portion of either and relief is not available to such individual under subsection b or c the secretary may relieve such individual of such liability sec_6015 provides a spouse relief from joint liability for an understatement as defined in sec_6662 of tax attributable to erroneous items of the other spouse with regard to the case herein petitioner does not seek relief from an understatement_of_tax but rather from that portion shown on the joint_return that was not paid when the return was filed because there is no understatement_of_tax for relief is not available to petitioner under sec_6015 sec_6015 provides relief from joint liability for spouses who filed a joint_return if they are no longer married are sec_6662 defines an understatement as the excess of the amount of tax required to be shown on the return over the tax imposed which is shown on the return reduced by any rebate legally_separated or have lived apart for a 12-month_period such spouses may elect to be treated for purposes of determining tax_liability as if separate returns had been filed sec_6015 provides proportionate relief for any deficiency which is assessed with respect to the return relief is not available under sec_6015 with respect to an unpaid liability for tax reported on the return as noted in this case petitioner is seeking relief of the amount reflected as the balance due on the joint_return because there is no deficiency for relief is not available to petitioner under sec_6015 consequently the only avenue for relief available to petitioner is sec_6015 as directed by sec_6015 the commissioner has prescribed guidelines in revproc_2000_15 2000_1_cb_447 that the commissioner will consider in determining whether an individual qualifies for relief under sec_6015 section dollar_figure of revproc_2000_15 c b pincite lists seven conditions threshold conditions which must be satisfied before the commissioner will consider a request for relief under sec_6015 respondent agrees that in this case those threshold conditions are satisfied section dollar_figure of revproc_2000_15 c b pincite lists factors that the commissioner will consider in deciding whether to grant equitable relief under sec_6015 sec_4 of revproc_2000_15 c b pincite lists the following six factors that the commissioner will consider as weighing in favor of granting relief for an unpaid liability the requesting spouse is separated or divorced from the nonrequesting spouse the requesting spouse would suffer economic hardship if relief is denied the requesting spouse was abused by the nonrequesting spouse the requesting spouse did not know or have reason to know that the reported liability would be unpaid at the time the return was signed the nonrequesting spouse has a legal_obligation pursuant to a divorce decree or agreement to pay the unpaid liability and the unpaid liability is attributable to the nonrequesting spouse sec_4 of revproc_2000_15 c b pincite lists the following six factors that the secretary will consider as weighing against granting relief for an unpaid liability the unpaid liability is attributable to the requesting spouse the requesting spouse knew or had reason to know that the reported liability would be unpaid at the time the return was signed the requesting spouse significantly benefited beyond normal support from the unpaid liability the requesting spouse will not suffer economic hardship if relief is denied the requesting spouse has not made a good_faith effort to comply with federal_income_tax laws in the tax years following the tax_year to which the request for relief relates and the requesting spouse has a legal_obligation pursuant to a divorce decree or agreement to pay the unpaid liability in addition revproc_2000_15 sec_4 c b pincite states no single factor will be determinative of whether equitable relief will or will not be granted in any particular case rather all factors will be considered and weighed appropriately furthermore the list of aforementioned factors is not intended to be exhaustive in deciding whether respondent’s determination that petitioner is not entitled to relief under sec_6015 was an abuse_of_discretion we consider evidence relating to all the facts and circumstances with regard to the case herein respondent acknowledges that the following two factors weigh in favor of granting relief to petitioner petitioner is divorced and the liability for which relief is sought is attributable to petitioner’s former husband respondent contends petitioner knew or had reason to know that her income_tax was not paid at the time the return was filed petitioner was not abused by her former husband petitioner’s former husband did not have a legal_obligation under the divorce decree to pay the unpaid tax_liability and petitioner would not experience an economic hardship if she is not relieved from the liability respondent asserts that these factors weigh against granting relief to petitioner we disagree with respondent’s contentions we now address each of these factors separately requesting spouse’s legal_obligation factor petitioner’s divorce decree does not place the legal_obligation to pay the unpaid tax_liability on either petitioner or her former husband respondent contends that the fact that mr washington does not have a legal_obligation under the divorce decree to pay the unpaid tax_liability weighs against granting relief to petitioner respondent’s contention is flawed sec_4 e of revproc_2000_15 c b pincite indicates that if mr washington had a legal_obligation under the divorce decree to pay the tax_liability then that fact would weigh in favor of granting relief to petitioner likewise if the divorce decree had placed the obligation to pay the tax on petitioner then that fact would weigh against granting relief to petitioner as indicated in sec_4 f of revproc_2000_ c b pincite but here the divorce decree did not establish whose petitioner’s or mr washington’s obligation it was to pay the unpaid tax_liability therefore this is a neutral factor abuse factor petitioner does not assert that she was abused by mr washington or otherwise coerced into executing the joint_return however in response to questioning by respondent’s counsel at trial petitioner testified that she had lodged a complaint with the police with respect to her former husband’s treatment of her respondent contends that the fact that petitioner has proffered no evidence that her former husband threatened forced or coerced petitioner into executing the joint_return weighs against granting relief to petitioner we disagree lack of spousal abuse is not a factor listed in sec_4 of revproc_2000_15 c b pincite that weighs against granting equitable relief therefore this factor is neutral economic hardship factor respondent contends that petitioner offered no evidence to show that she would suffer an economic hardship if relief were denied respondent asserts that pursuant to sec_301 b ii proced admin regs an economic hardship exists if satisfaction of a levy will cause a taxpayer to be unable to pay his her reasonable basic living_expenses respondent maintains that respondent’s collection activity did not leave petitioner unable to pay her basic living_expenses in addition respondent sec_301_6343-1 proced admin regs provides factors that will be considered in determining whether satisfaction of the levy will cause an individual taxpayer economic hardship because she will be unable to pay her reasonable living_expenses these factors include the taxpayer’s age her employment status and history her ability to earn the number of dependents any extraordinary circumstances and any other factor that the taxpayer claims bears on economic hardship and brings to the attention of the director asserts that petitioner provided no documentation to demonstrate an economic hardship we disagree petitioner received no assets upon the dissolution of her marriage she does not own a house does not take any vacations and although she possesses an automobile she does not own it the irs lien for the tax_liability harms petitioner’s credit rating and limits her ability to obtain a loan petitioner receives no spousal or child_support from her former husband to the contrary she is the sole provider for her two children petitioner’s wages are her only source_of_income and provide a near poverty level existence for her and her two children respondent’s levy against petitioner’s wages had it not been released would have resulted in her receiving approximately dollar_figure biweekly to support herself and her two children a monthly income of dollar_figure is substantially below the poverty level for a family of three and is insufficient to pay rent and other basic living_expenses for petitioner and her two children based on the record before us and petitioner’s credible testimony we are persuaded that petitioner will suffer great economic hardship if she is not relieved of the liability the poverty guidelines for the contiguous states and the district of columbia for a family of three is dollar_figure u s dept of health and human services the hhs poverty guidelines fed reg date knowledge or reason to know factor in the case of a liability that was reported but not paid the fact that the requesting spouse did not know and had no reason to know that the liability would not be paid is a factor weighing in favor of granting relief revproc_2000_15 sec_4 d c b pincite by contrast the fact that the requesting spouse knew or had reason to know that the reported liability would be unpaid is a strong factor weighing against relief revproc_2000_15 sec_4 b c b pincite respondent contends that petitioner did not prove that she did not know or did not have reason to know that the unpaid tax_liability would not be paid at the time the return was filed we disagree petitioner filed a joint_return for with her former husband upon the advice of the tax_return_preparer she was under the impression that she was required to file a joint_return because she was married at the time petitioner provided her form_w-2 to the tax_return_preparer the tax_return_preparer provided her the joint tax_return for signature and she signed the return no discussions took place between petitioner and mr washington about the preparation and subsequent filing of the joint_return or about the payment of any_tax owed petitioner credibly testified that she believed mr washington would pay the tax owed since it resulted from his business operations during petitioner’s marriage to mr washington petitioner paid the tax on her wages through withholding and mr washington paid the taxes attributable to his business mr washington controlled all aspects of his business and he conducted his business affairs without any assistance or involvement from petitioner the record and petitioner’s credible testimony demonstrate that petitioner had no knowledge of or involvement in her former husband’s business we found petitioner to be credible after having observed her appearance and demeanor at trial we conclude that petitioner had no knowledge or reason to know at the time the returns were signed that the reported liability would not be paid_by mr washington assuming arguendo that petitioner had reason to know that the reported tax_liability would not be paid other factors in favor of granting petitioner equitable relief are unusually strong in this case and when the factors in favor of equitable relief are unusually strong it may be appropriate to grant relief under sec_6015 in limited situations where the requesting spouse knew or had reason to know that the liability would not be paid revproc_2000_15 sec_4 b c b pincite thus even if petitioner knew or had reason to know that the reported liability would not be paid on the basis of all the facts and circumstances of this case we find that compelling reasons existed for respondent to grant petitioner equitable relief significant benefit and noncompliance respondent did not address the significant benefit factor and the noncompliance with federal_law factor we however shall do so and after due consideration we find that neither of these factors weighs against granting relief to petitioner petitioner did not significantly benefit either during or after the marriage from the unpaid tax_liability during the marriage petitioner did not receive expensive jewelry drive a luxurious car wear designer clothes take expensive vacations or even own a home petitioner received no assets from the dissolution of the marriage moreover since the divorce she has received no spousal or child_support petitioner rents a small house drives an automobile that she does not own and does not take vacations with respect to compliance with federal tax laws petitioner has always filed timely federal_income_tax returns petitioner is not late or in arrears on any of her separate tax obligations indeed petitioner has overpaid her taxes each year since and it is these overpayments for which petitioner seeks a refund because they were applied to the unpaid tax_liability conclusion no factors weigh against granting relief to petitioner to the contrary all factors either weigh in favor of granting relief to petitioner or are neutral consequently taking into account all the facts and circumstances we conclude that respondent’s denial of relief under sec_6015 was an abuse_of_discretion and that it would be inequitable to hold petitioner liable for the unpaid tax_liability see ferrarese v commissioner tcmemo_2002_249 august v commissioner tcmemo_2002_201 foley v commissioner tcmemo_1995_16 klimenko v commissioner tcmemo_1993_340 hillman v commissioner tcmemo_1993_151 b whether petitioner is entitled to refunds for amounts paid on or before date since we have concluded that it would be inequitable to hold petitioner liable for the unpaid tax_liability we now must decide whether petitioner is entitled to the refund of amounts paid on applied to the unpaid tax_liability cases deciding whether a taxpayer was entitled to equitable relief under sec_6013 are helpful in deciding whether a taxpayer is entitled to relief under sec_6015 292_f3d_800 d c cir subsection f has no statutory antecedent as a stand alone provision but has roots in the equity test of former subparagraph b d carried forward into subparagraph b d affg tcmemo_2002_332 in 282_f3d_326 ndollar_figure 5th cir affg 115_tc_183 the u s court_of_appeals for the fifth circuit stated because the wording of sec_6015 is virtually identical to that of former sec_6013 case law construing former sec_6013 is helpful in determining whether the commissioner abused his discretion in denying equitable relief to appellant under current sec_6015 see butler v commissioner t c pincite applying the sec_6013 standard to a sec_6015 inquiry because ‘the language of sec_6015 does not differ significantly from the language of former sec_6013’ positions of the parties petitioner contends that she is entitled to a refund of all amounts paid applied on the unpaid tax_liability including those made on or before date the date sec_6015 was enacted payments made or applied on or before date include petitioner’s overpayments of tax for the years and in the following amounts dollar_figure for applied date dollar_figure for applied date dollar_figure for applied date dollar_figure for applied date and dollar_figure for applied date in addition petitioner contends that she is entitled to a refund of her levied wages of over dollar_figure petitioner asserts that dollar_figure was taken on two separate occasions--in june of and march of a refund of overpayments from her tax returns dollar_figure for dollar_figure for and dollar_figure for and a dollar_figure rebate in respondent concedes that if we find that petitioner qualifies for relief under sec_6015 she is entitled to a refund of the dollar_figure overpayment of her taxes that was applied to the unpaid tax_liability respondent asserts however that petitioner is not entitled to a refund of any additional_amounts because they were either paid applied on or before date or they were not applied to the tax_liability the statute sec_6015 governs the allowance of credits and refunds in cases where a taxpayer is granted relief under sec_6015 that section provides sec_6015 credits and refunds -- in general --except as provided in paragraphs and notwithstanding any other law or rule_of law other than sec_6511 sec_6512 sec_7121 or sec_7122 credit or refund shall be allowed or made to the extent attributable to the application of this section res_judicata --in the case of any election under subsection b or c if a decision of a court in any prior proceeding for the same taxable_year has become final such decision shall be conclusive except with respect to the qualification of the individual for relief which was not an issue in such proceeding the exception contained in the preceding sentence shall not apply if the court determines that the individual participated meaningfully in such prior proceeding credit and refund not allowed under subsection c --no credit or refund shall be allowed as a result of an election under subsection c the exception in sec_6015 does not apply because there have been no prior proceedings related to petitioner’s tax_year nor does the exception in sec_6015 apply because we have found that petitioner is entitled to relief under sec_6015 not under sec_6015 thus any refund available to petitioner is limited to the extent attributable to the application of sec_6015 and subject_to any limitation imposed by sec_6511 sec_6512 sec_7121 or sec_7122 a refund to the extent attributable to the application of sec_6015 in general sec_6015 allows a credit or refund to the extent attributable to the application of this section sec_6015 applies to any liability for tax arising after the date of the enactment of this act date and any liability for tax arising on or before such date but remaining unpaid as of such date rra sec_3201 112_stat_740 respondent interprets the term remaining unpaid so as to limit the benefits of sec_6015 in this case to the portion of the tax_liability that remained uncollected as of date the date of enactment of sec_6015 we disagree with respondent’s interpretation while the issue involved herein is one of first impression in this court we are mindful that it has been addressed by the united_states court of federal claims in 51_fedclaims_49 in flores the court granted relief under sec_6015 with respect to the taxpayer’s entire tax_liability including the portion of the tax_liability that was paid on or before date on date respondent adopted regulations under sec_6015 that support respondent’s position see sec_1_6015-8 income_tax regs the regulations however are applicable for all elections or requests for relief filed on or after date sec_1_6015-9 income_tax regs thus the regulations do not apply to petitioner’s request for relief which was filed before that date we agree with the analysis of the court of federal claims in flores we shall not engage in a detailed discussion of that analysis rather we confine ourselves to a summary of our conclusions as to respondent’s arguments with some augmentation of the analysis of the court of federal claims specifically at issue in this case as well as in flores is whether a tax_liability remaining unpaid as of the date of enactment of sec_6015 ie date refers to the entire amount of the tax_liability for the year if any portion thereof has not been collected by date or only that portion of the tax_liability that has not been collected by date respondent asserts that flores v united_states supra was wrongly decided because its holding renders the word remaining excessive thereby violating ‘a cardinal principle of statutory construction’ that ‘a statute ought upon the whole to be so construed that if it can be prevented no clause sentence or word shall be superfluous void or insignificant’ 534_us_19 quoting 533_us_167 respondent asserts that the use of the word remaining preceding unpaid implies that part or all of the liability has not been paid and remains to be paid this implication merely reflects that the liability in question has not been paid in full in this regard we have held that a taxpayer is not entitled to relief under sec_6015 if the liability was paid in full on or before date 115_tc_582 affd 21_fedappx_160 4th cir brown v commissioner tcmemo_2002_187 for the reasons set forth below we do not agree with respondent’s position that only the portion of tax remaining uncollected on date is subject_to the provisions of sec_6015 in interpreting a statute courts are guided by principles of statutory construction including the following unless otherwise defined words will be interpreted as taking their ordinary contemporary and common meaning and unless the statute otherwise dictates where congress uses terms that have acquired a settled meaning under the common_law a court must infer that congress means to incorporate the established meaning of the terms moreover we are mindful that sec_6015 was designed to correct perceived deficiencies and inequities and it is well settled law that curative legislation should be liberally construed to effectuate its remedial purpose flores v united_states supra pincite the precise definition of the word remain varies somewhat depending on its context according to webster’s third new international dictionary the word remain as a verb can mean to be a part not destroyed taken away or used up be still extant present or available be left when the rest is gone the word remain can also mean to be something yet to be shown done or treated remain also can mean to stay in the same place or with the same person or group finally remain can mean to continue unchanged in form condition status or quantity continue to be or stand respondent asserts that the word remaining is used throughout the internal_revenue_code almost exclusively to mean that portion which is left over from the whole we agree that the word remaining often refers to what is left ie the remaining amount eg sec_72 sec_74 sec_170 sec_172 sec_401 sec_414 sec_671 sec_864 and sec_865 refer to the remaining portion and sec_169 and sec_194 see also sec_25 the remaining principal sec_6861 any remaining portion sec_451 a qualified_prize or remaining portion thereof sec_148 the remaining balance sec_6340 the remaining balance of such liability sec_263a any part of the remaining equity_interest sec_408a all remaining amounts sec_904 the remaining amount sec_996 the remaining 17th of such amount sec_565 all the remaining earnings_and_profits sec_732 to the extent of any basis remaining after the allocation such remaining basis sec_1250 the remaining gain not recognized on the transaction sec_4254 the remaining items not included in any such group sec_1082 all other remaining property sec_1250 the remaining property sec_1272 all remaining payments sec_4943 the remaining holdings sec_7507 to the extent of the remaining assets sec_47 sec_147 the remaining term sec_42 the remaining compliance_period sec_412 the remaining amortization period sec_192 the average remaining continued refer to the number of months remaining in the period dollar_figure continued working life sec_418b the average of the remaining expected lives sec_404 the remaining future service sec_447 i c the remaining taxable years sec_7702a the remaining period sec_1274 sec_9509 remaining periods to maturity sec_542 the remaining maturity sec_4980 the remaining participants sec_5123 remaining partners sec_7444 the remaining judges sec_7448 any remaining dependent_child or children sec_8002 the remaining members sec_7702b any remaining limitation d c c see eg sec_667 each of the taxable years remaining after the application of subparagraph b sec_667 any of the three taxable years remaining after application of subsection b b sec_178 the period of the term of the lease remaining on the date of its acquisition sec_401 any amount remaining in such separate_account sec_832 the amount if any remaining which was added to the account any amounts remaining in such reserve the entire amount remaining in such account sec_847 the entire amount remaining in such special loss discount account sec_6342 the amount remaining after applying paragraph the amount if any remaining after applying paragraphs and sec_7652 any amounts remaining sec_732 to the extent of any basis remaining after the allocation sec_7518 any amount of a withdrawal remaining after the application of the preceding sentence sec_404 total current and accumulated earnings or profits remaining after adjustment for its contribution deductible sec_414 any other plan remaining after the spin-off sec_469 deduction or credit remaining after the application of subparagraphs a and b sec_847 any special estimated_tax payment remaining after the credit sec_593 treated as remaining in such reserve sec_7518 treated as remaining in a capital_construction_fund at the close of any taxable_year sec_1368 treatment of remainder --any portion of the distribution remaining after the application of paragraph sec_2056a a property remaining in a qualified_domestic_trust on the date of the death sec d the partner or partners remaining after death or withdrawal of a member sec_6342 any surplus proceeds remaining after the continued there are other sections however where the word remaining is used in a different context as a copula12 or linking verb when used as a copula the word remaining links the word that precedes it to the word that follows it eg the income remaining undistributed in those sections the word remaining means that the preceding word continues to be unchanged in the form condition or status described by the word that follows we believe that within the context of the effective date provisions of sec_6015 a tax_liability remaining unpaid on or after date means that the liability continues to be unpaid after date the applicability of sec_6015 to the issue before us thus turns on the meaning of the word unpaid the primary definition continued application of subsection a sec_7608 such proceeds or the balance of such proceeds remaining at the time sec_9008 moneys remaining in the account moneys so remaining sec_9038 that portion of any unexpended balance remaining in the candidate’s accounts copulas are verbs that link a predicate adjective noun etc to the subject i curme a grammar of the english language par copulas often indicate a state continuance in a state or entrance into a state id par the verb remain is among the most common copulas and indicates a continuance in a state ii curme a grammar of the english language par b see eg sec_411 benefits shall be treated as remaining constant sec_9704 the expenses accrued and remaining unpaid sec_4942 the amount of such income remaining undistributed at the beginning of such second or succeeding taxable_year sec_7448 any accrued annuity remaining unpaid of unpaid is not paid webster’s third new international dictionary the word paid is a form of the word pay which is a general term usually lacking particular connotation id the word paid can mean gave a recompense made payment or discharged an obligation it can be synonymous with compensated remunerated satisfied reimbursed indemnified recompensed or repaid id we believe that when used to describe the continuing state of a liability for tax in the provision under consideration the word paid means satisfied and that the word unpaid means not satisfied id a liability for tax remaining unpaid as of the effective date is a liability for tax that continues to be unsatisfied as of the applicable_date a liability is not satisfied until it is paid in full id ergo a liability remains unsatisfied or unpaid until it is paid in full other provisions of sec_6015 indicate that congress intended the expanded relief provided by sec_6015 to apply retroactively to the entire preexisting liability rather than to the portion of a preexisting liability that had been uncollected as of the date of enactment flores v united_states fed cl pincite for example sec_6015 provides that if a spouse elects and qualifies for relief under that section then the spouse shall be relieved of liability for tax including interest penalties and other_amounts for such taxable_year to the extent such liability is attributable to such understatement emphasis supplied that language clearly relieves the spouse of all liability for the taxable_year attributable to the understatement it suggests that congress intended that the provision should apply to the entire taxable_year and the entire tax_liabilities associated therewith flores v united_states supra pincite further there is solid precedent in decisions that treat an income_tax_liability for a particular year as being unitary and ‘paid’ only when fully collected id see eg 70_f2d_629 2d cir the entire tax_liability is unitary and not discharged until paid in full see also 362_us_145 income_tax is imposed on a unitary basis that precludes suits based on partial payment we see no reason why rra sec_3201 should not be similarly interpreted particularly in light of the court’s obligation to construe liberally the innocent spouse amendments as curative legislation flores v united_states supra pincite further we note that sec_6015 provides that if it is inequitable to hold the individual liable for any unpaid tax the secretary may relieve such individual of such liability the legislative_history indicates that unpaid tax referred to in sec_6015 does not refer to the amount that is not paid when relief is requested rather it refers to a tax reported on the return but not paid with the return the senate amendment would have permitted the separate liability election sec_6015 to apply in situations where the tax shown on a joint_return is not paid with the return s rept 1998_3_cb_537 the conference committee report h conf rept 1998_3_cb_747 explained that although the conference agreement did not include that portion of the senate amendment the conferees intended that the secretary consider using the grant of authority to provide equitable relief sec_6015 to avoid the inequitable treatment of spouses in situations where tax was shown on the joint_return but not paid with the return thus it is clear from the legislative_history that the term unpaid tax in sec_6015 includes a tax that was shown on a joint_return but not paid with the return sec_6015 permits a refund where relief from liability for unpaid tax is granted under sec_6015 if the word unpaid has the meaning urged by respondent then a taxpayer seeking equitable relief under sec_6015 for an unpaid tax could obtain relief only for that portion of the tax that has not been collected and would not be permitted any refund of tax such an interpretation would conflict with the legislative_history furthermore sec_6015 is very specific with respect to the limitations placed on a refund sec_6015 specifically provides that no refunds can be made with respect to relief granted under sec_6015 there is no such restriction for relief for an unpaid tax granted under sec_6015 respondent contends that the court’s holding in flores v united_states supra leads to a result that congress did not intend respondent notes that a taxpayer who paid the entire liability would not be entitled to relief respondent asserts that only under a strained interpretation could congress have intended this result therefore respondent contends congress’s intent must have been to allow relief only with respect to amounts that remain uncollected after date we disagree congress obviously had to set a cutoff for claims for relief under sec_6015 otherwise claims for refunds could go back for decades we believe that congress wanted to grant the broadest relief while providing for certainty in the settlement of tax_refund claims in setting the cutoff for claims for relief congress treated claims related to liabilities for taxes that were satisfied as of the date of enactment as settled as of that date sec_6015 relief is available for all claims related to tax_liabilities that were not settled as of date further the disparity in the treatment of taxpayers who have paid the liability in full as of date and those who have partially paid is somewhat mitigated in that a refund available under sec_6015 may be limited by sec_6511 sec_6512 sec_7121 or sec_7122 b limitations of sec_6511 respondent argues that should this court follow the holding in flores v united_states supra then petitioner’s refund for amounts paid on the unpaid tax_liability would be limited by sec_6015 and sec_6511 sec_6015 provides in pertinent part that notwithstanding any other law or rule_of law other than sec_6511 sec_6512 sec_7121 or sec_7122 credit or refund shall be allowed or made to the extent attributable to the application of this section since we have held that sec_6015 applies to the entire liability and that petitioner is entitled to relief with respect to the entire liability the only limitations on the refund are those set forth in sec_6511 sec_6512 sec_7121 and sec_7122 the only limitation applicable in this case is section dollar_figure as relevant to this case sec_6511 requires that a claim for credit or refund of an overpayment of any_tax in respect of which the taxpayer is required to file a return must be filed within years from the time the return was filed or years from the time the tax was paid whichever of such periods expires later sec_6512 limits the amount of a refund in a deficiency proceeding sec_7121 applies to cases involving closing agreements and sec_7122 applies to cases involving compromises a claim for a tax_refund must inform the irs that a claim for a tax_refund is being asserted detail each claimed ground for the refund and provide sufficient facts so that the irs can adequately examine the merits of the claim see 40_f3d_373 fed cir 618_fsupp_621 e d pa affd sub nom colonial tire serv of west chester inc v united_states 787_f2d_581 3d cir sec_301_6402-2 proced admin regsdollar_figure this includes refund claims that are submitted in federal_income_tax returns in accordance with sec_301 a proced admin regs see eg 8_f3d_1169 7th cir amended tax_return lacked statement of necessary factual basis for refund as required under sec_301_6402-2 proced admin regs 27_fedclaims_235 sec_301_6402-2 proced admin regs provides no refund_or_credit will be allowed after the expiration of the statutory period of limitation applicable to the filing of a claim therefor except upon one or more of the grounds set forth in a claim filed before the expiration of such period the claim must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the commissioner of the exact basis thereof the statement of the grounds and facts must be verified by a written declaration that it is made under the penalties of perjury a claim which does not comply with this paragraph will not be considered for any purpose as a claim_for_refund_or_credit in this case the basis of petitioner’s claim for a refund of amounts applied to the unpaid tax_liability is petitioner’s claim for relief under sec_6015 petitioner’s and tax returns which were timely filed on or before date could not have adequately notified the irs of the basis of petitioner’s claim for a refund because the returns were filed before sec_6015 was enacted on date further since petitioner did not submit her tax_return to the court we cannot discern whether that return adequately notified the irs of her claim for relief under sec_6015 for refund of the overpayment respondent contends that petitioner’s claim for relief under sec_6015 was filed on date when petitioner filed form_8857 since date is more than years after the filing of the joint return respondent further contends that petitioner’s refund is limited to the amounts paid applied within the 2-year period preceding petitioner’s filing form_8857 respondent concludes therefore that petitioner’s refund is limited to amounts paid applied on or after date ie petitioner is entitled to a refund only for payments of dollar_figure and dollar_figure made after date we disagree with respondent’s contention that petitioner filed her claim for relief on june the joint return was filed date years after that date is date we believe such refund claim was filed earlier than that date in a letter to revenue_officer whalen dated date petitioner pleaded financial hardship and asked whether anything could be done to place her account on an uncollectible status moreover she requested that the penalties and interest assessed against her be abated reiterating that the taxes were attributable to her former husband’s business another letter to revenue_officer whalen dated date referenced earlier meetings indicating that petitioner’s discussions with revenue_officer whalen were ongoing in that letter petitioner stated that garnishment of her wages would cause her a serious financial hardship and asked to be relieved of the tax_liability she specifically stated i have filed my taxes faithfully every year only to have my taxes taken for something i was not responsible for on date petitioner filed form_8857 in which she sought relief from joint liability for the years petitioner requested tax refunds with interest for each of the years in a letter she attached to the form_8857 we are satisfied that petitioner’s letters of date and date constitute a request for relief within the purview of sec_6015 the ongoing nature of petitioner’s request and the proximity of the date letter to the date enactment_date of sec_6015 lead us to conclude that petitioner requested relief as of the date of enactment of sec_6015 ie date the form_8857 sent by the irs to petitioner was the result of petitioner’s prior written and oral requests for relief from liability for the tax_liability further since refunds are included in the relief provided under sec_6015 we believe that a request for relief under sec_6015 encompasses a request for a refund of tax to the extent permitted under sec_6015 we find therefore that petitioner requested a refund of amounts paid applied on the unpaid tax_liability as of date consequently petitioner is entitled to all amounts paid applied on or after date the irs credited petitioner’s and overpayments against the tax_liability as follows dollar_figure for applied date dollar_figure for applied date dollar_figure for applied date dollar_figure for applied date dollar_figure for applied date and dollar_figure for applied date as a result claims for refund for the and overpayments would have to have been filed by the following dates taxable_year of overpayment date applied to liability last date for filing refund date date date date date date date date date date date date to conclude we hold that petitioner is entitled to a refund of her overpayments in addition she is entitled to a dollar_figure refund of wages garnished on date a final note in her brief petitioner indicates that wages of dollar_figure garnished in date overpayments from her and tax returns dollar_figure for and dollar_figure for and a dollar_figure rebate from were applied to her tax_liability since neither petitioner’s tax_liability nor any of those payments were mentioned in petitioner’s request for relief under sec_6015 they are not now properly before usdollar_figure to reflect the foregoing decision will be entered under rule petitioner must file a separate request for relief with respect to the tax_liability


tcmemo_2003_249 united_states tax_court james christian jensen petitioner v commissioner of internal revenue respondent docket no filed date james christian jensen pro_se paul k voelker for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined a dollar_figure deficiency in and a dollar_figure accuracy-related_penalty under sec_6662 a on petitioner’s federal_income_tax for 1all section references are to the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure the issues remaining for decision are is petitioner required to include in his gross_income for the year at issue certain distributions from his retirement_plan retirement_plan distributions that he received during that year we hold that he is is petitioner entitled for the year at issue to a deduction for a claimed loss with respect to his radiology practice we hold that he is not is petitioner liable for the year at issue for the percent additional tax under sec_72 with respect to his retirement_plan distributions that he received during that year we hold that he is is petitioner liable for the year at issue for the accuracy-related_penalty under sec_6662 we hold that he is findings_of_fact many of the facts have been stipulated and are so found at the time he filed the petition in this case petitioner resided in henderson nevada during petitioner received from vanguard fiduciary trust co vanguard two retirement_plan distributions in the amounts of dollar_figure dollar_figure retirement_plan distribution and dollar_figure dollar_figure retirement_plan distribution respectively vanguard issued to petitioner form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc form 1099-r with respect to each of those distributions on date petitioner deposited the dollar_figure retire- ment plan distribution that he received from vanguard into a certificate of deposit in his name at american savings bank in honolulu hawaii bank we shall refer to that certificate of deposit as petitioner’s american savings bank cd on march and date the bank credited petitioner’s american savings bank cd with interest of dollar_figure and dollar_figure respec- tively on date petitioner withdrew the entire balance of dollar_figure from petitioner’s american savings bank cd for an undisclosed period of time petitioner who received a medical degree operated a radiology practice on date that practice was closed petitioner timely filed form 1040ez income_tax return for single and joint filers with no dependents return for his taxable_year that return reported no income and no tax_liability and claimed no prepayment_credits respondent issued a notice_of_deficiency notice to peti- 2the actual amount that petitioner deposited into peti- tioner’s american savings bank cd was dollar_figure one of the forms 1099-r that vanguard issued to petitioner for showed a retirement_plan distribution of dollar_figure the record does not explain the 89-cent discrepancy between the dollar_figure deposited into the american savings bank cd and the dollar_figure retirement_plan distribution shown in form 1099-r issued to petitioner tioner with respect to his taxable_year in that notice respondent determined inter alia that petitioner is required to include in his gross_income the two retirement_plan distributions totaling dollar_figure that he received from vanguard during that year respondent also determined in the notice that petitioner is liable for the 10-percent additional tax under sec_72 with respect to those distributions respondent further determined in the notice that petitioner is liable for the accuracy-related_penalty under sec_6662 opinion respondent does not dispute that sec_7491 applies in the instant case with respect to sec_7491 respondent maintains that petitioner has not complied with sec_7491 and that therefore the burden_of_proof with respect to respondent’s deficiency determination for the year at issue does not shift to respondent on the instant record we agree with respondent with respect to sec_7491 respondent has the burden of production with respect to the accuracy-related_penalty under sec_6662 that respondent determined in the notice petitioner failed to report as part of his gross_income for the two retirement_plan distributions that he received from vanguard during that year on the instant record we find 3we note that petitioner concedes that he received certain dividend income during the year at issue that respondent has satisfied respondent’s burden of production with respect to that penalty we turn first to the two retirement_plan distributions that petitioner received during and that he did not report as income for that year it is petitioner’s position that he was not required to report those distributions as income for the year at issue because he timely transferred or rolled over those distributions into an eligible_retirement_plan in support of his position petitioner relies on his testimony and two exhib- its we are unwilling to accept that evidence as establishing petitioner’s position regarding his retirement_plan distribu- tions petitioner’s testimony was general conclusory vague and uncorroborated in this connection petitioner could not even recall what happened to the dollar_figure that he withdrew from petitioner’s american savings bank cd on date as for the two exhibits on which petitioner relies those exhibits show only that on date petitioner purchased from the bank a certificate of deposit in the amount of dollar_figure and that on date he withdrew that amount as well as interest credited thereto the record contains no evidence as to what 4although not altogether clear petitioner may be arguing that he rolled over only the dollar_figure retirement_plan distribu- tion and not the dollar_figure retirement_plan distribution because the record is not altogether clear on this point we shall proceed on the assumption that both of those distributions are at issue in this case happened to the dollar_figure that petitioner withdrew from peti- tioner’s american savings bank cd on date on the record before us we find that petitioner has failed to carry his burden of establishing that he timely transferred or rolled over the retirement_plan distributions in question into an eligible_retirement_plan on that record we sustain respon- dent’s determination to include those distributions in peti- tioner’s gross_income for the year at issue we turn next to petitioner’s claim that he is entitled for to a deduction for a claimed loss with respect to his radiology practice although we are satisfied from the record that petitioner’s radiology practice was closed on date no reliable evidence in the record explains why that practice was closed in fact the record does not even establish whether petitioner carried on his radiology practice in corporate form in partnership form with one or more other physicians or as a sole_proprietor in addition much of the documentation on which petitioner relies to support his claimed loss for relates to years other than on the record before us we find that petitioner has failed to carry his burden of establishing that he 5one of the documents upon which petitioner relies to sup- port his claimed loss for the year at issue is a self-serving uncorroborated document prepared by petitioner in which he listed various items that he contends were related to his radiol- ogy practice and various dollar amounts with respect to such items is entitled for the year at issue to a deduction for his claimed loss with respect to his radiology practice we turn now to the 10-percent additional tax under sec_72 that respondent determined for the year at issue with respect to the retirement_plan distributions that petitioner received from vanguard during that year petitioner acknowledges that if the court were to find that he must include those distri- butions in his gross_income for the year at issue he is liable for the 10-percent additional tax under sec_72 we have found that petitioner is required to include in his gross_income for the year at issue the retirement_plan distributions in question on the record before us we find that petitioner is liable for the 10-percent additional tax we turn finally to the accuracy-related_penalty under sec_6662 petitioner acknowledges that if the court were to find that he must include the retirement_plan distributions in question in his gross_income for the year at issue and that he is not entitled to a deduction for his claimed loss with respect to his radiology practice he is liable for the accuracy-related_penalty under sec_6662 we have found that petitioner is required to include in his gross_income for the year at issue those distributions and that he is not entitled for that year to any such deduction on the record before us we find that petitioner is liable for the year at issue for the accuracy- related penalty we have considered all of the contentions and arguments of petitioner that are not discussed herein and we find them to be without merit and or irrelevant to reflect the foregoing and the concessions of the parties decision will be entered under rule


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa gsemasek gl-149415-13 uilc date date to kristen i nygren attorney small_business self-employed from blaise g dusenberry senior technician reviewer procedure administration subject penalty for aiding_and_abetting understatements of income_tax this chief_counsel_advice responds to your request for assistance dated date this advice may not be used or cited as precedent legend p s --------------------------------- ------------------------------------------- issue whether p is liable for the sec_6701 penalty for aiding_and_abetting understatements of tax_liability for returns on which his clients claimed incorrect depreciation_deductions in accordance with a written s which had been furnished by p conclusion yes when p furnished to clients a s that mischaracterized components of 39-year depreciable_property as property with a shorter useful_life eg 5-year_property p aided in the preparation or presentation of the returns of clients who understated tax_liability through claiming excessive deductions for depreciation p knew that the s would be used in connection with a material matter under the internal revenue laws and that when gl-149415-13 his client relied upon such study to claim a depreciation deduction this would result in the client understating tax_liability consequently there is a dollar_figure penalty for each client’s return that understated tax_liability by virtue of claiming excessive_depreciation deductions based on the s facts p is a tax consultant-engineer who furnishes an analysis of a taxpayer’s assets in order to determine the classification of articles of property for purposes of depreciation_deductions for a fee p analyzes a taxpayer’s assets and prepares a s which is aimed at identifying assets among a taxpayer’s property that could be classified as tangible_personal_property and other tangible_property sec_1245 property and land improvements the s re-characterizes components of 39-year depreciable_property eg a building to 5-year 7-year or 15-year depreciable_property the result of the s which p specially prepares based on the particular types of assets owned or used by the taxpayer details the cost of each component of a building new or otherwise and the number of years it can be depreciated on the taxpayer’s returns p does not prepare returns or furnish the irs with copies of the s rather p furnishes the completed s to his clients who use them in preparing form sec_1040 or forms the irs determined that the s incorrectly reclassifies property in order to accelerate or front-load depreciation_deductions during the first years the property is placed_in_service thereby creating larger tax losses for p’s clients the irs considers the portions of the s categorizing certain structural_components as year property to be the most egregious misrepresentations concerning the classification of property for tax purposes you requested our views on whether p is liable for a dollar_figure penalty for each taxpayer’s return upon which an excessive_depreciation deduction was claimed as a consequence of following the conclusions in the s law and analysis sec_6701 imposes a penalty on a person who aids or abets another person in the understatement of that person’s tax_liability it states any person- who aids or assists in procures or advises with respect to the preparation or presentation of any portion of a return affidavit claim or other document who knows or has reason to believe that such portion will be used in connection with any material matter arising under the internal revenue laws and who knows that such portion if so used would result in an understatement of the liability for tax of another person sec_168 includes classifications of property for purposes of determining depreciation_deductions gl-149415-13 shall pay a penalty with respect to each such document in the amount determined under subsection b the penalty amount under subsection b is dollar_figure and if the return affidavit claim or other document pertains to the tax_liability of corporation the amount is dollar_figure the extent to which a person may be liable for the penalty is limited by sec_6701 which reads if any person is subject_to a penalty under subsection a with respect to any document relating to any taxpayer for any taxable_period or where there is no taxable_period any taxable_event such person shall not be subject_to a penalty under subsection a with respect to any other document relating to such taxpayer for such taxable_period or event the structure of sec_6701 requires the service to identify what documents the person liable for the penalty helped prepare or present and which also meet the criteria set out in sec_6701 and 977_f2d_1318 9th cir sec_6701 requires that the person or entity to be penalized must aid or assist in procure or advise with respect to the preparation or presentation of any portion of a return affidavit claim or other document mitchell f 2d pincite the penalty for aiding_and_abetting an understatement_of_tax liability is imposed with respect to each document identified in sec_6701 that further meets the criteria under paragraphs and of subsection a mitchell f 2d pincite berger v united_states u s dist lexis d conn the statute plainly imposes a penalty as to each document through which the plaintiff aided or assisted in the understatement of a tax_liability s the written s satisfy the elements of a sec_6701 penalty p prepared and furnished to each of his clients a detailed s consequently the s fall within the requirements of sec_6701 the s also meet the criteria of sec_6701 and p knew that they would be used in connection with the preparation of individual and corporate tax returns thus p knew or had reason to believe that his clients both individual and corporate taxpayers would use the s as guidance in claiming depreciation_deductions on returns a material matter under the internal revenue laws and that the s would if so used result in understatements of tax_liability of other persons thus each s is a document that supports a penalty in an amount determined under sec_6701 to the extent the s related to the tax_liability of a corporation the penalty amount is dollar_figure per s furnished for s furnished to taxpayers other than corporations the penalty equals dollar_figure per s furnished sec_6701 note that the service would also need to comply with sec_6751 before assessing the sec_6701 penalty the immediate supervisor of the revenue_agent who initially recommended pursuing the penalty would need to approve the penalty in writing gl-149415-13 returns of individuals and corporations you also asked whether p is liable for a dollar_figure penalty for each of the five years a client used the s to prepare his tax_return and claim an excessive_depreciation deduction this raises the question of whether p aided or assisted in the preparation or presentation of his client’s tax returns each of p’s clients had to file a form_1040 or with the irs in order to claim a deduction for depreciation p aided or assisted in the preparation of each individual or corporate tax_return upon which a client claimed a depreciation deduction in an incorrect amount by virtue of misclassifying personal or real_property in accordance with the s the purpose behind p’s review analysis and classification of a client’s articles of property was to assist his client in preparing and filing a tax_return that included a depreciation deduction exceeding the allowable_amount under the code and thereby understating taxable_income by furnishing a s to a client that classified certain real_property as personal_property with purported useful_life of only years p aided or assisted his clients in the preparation of incorrect returns for different tax periods as a result he is liable for one penalty for each of the years for which a return was filed with the irs claiming an excessive deduction for depreciation in regard to p’s individual clients the penalty on p would be dollar_figure dollar_figure for each of the understatements reflected in separate tax returns and for corporate clients the penalty is dollar_figure per return these facts are analogous to those in mitchell in which a tax_shelter_organizer reviewed and signed tax returns for an s_corporation and k-1 forms for each of the shareholders which showed their purported shares of deductions and credits although mitchell clearly aided in the preparation or presentation of the s_corporation returns the court found that sec_6701 was satisfied with respect to other documents as well mitchell’s aiding also pertains to portions of all investors’ individual tax returns because each investor incorporates the tax information contained on the form k-1 supplied by mitchell into his or her u s individual tax returns thus mitchell aided in the preparation or presentation of documents that relate to the returns of persons mitchell f 2d pincite just like the investors in mitchell every client of p incorporated onto his or its tax_return a claim for a depreciation deduction that was directly tied to the misclassified property included in the s p aided in the preparation or presentation of the tax returns of his clients an individual taxpayer receiving net profits loss from a trade_or_business can claim a deduction for depreciation on schedule c and a taxpayer who receives net rental income may claim a depreciation deduction on schedule e form_1040 schedule c part ii line13 schedule e line the returns of corporate taxpayers include spaces upon which the taxpayer can claim depreciation deduction u s_corporation income_tax return form_1120 line u s income_tax return for an s_corporation form_1120s line14 gl-149415-13 the opinion in berger v united_states supra is distinguishable from the present case in berger the government sought to impose a penalty under sec_6701 based solely upon the plaintiff’s filing of false forms application_for determination for employee_benefit_plan with the irs each form related to a separate corporation that claimed tax benefits for more than one year in reliance on a false form_5300 the court held that the sec_6701 penalty was limited by the number of false forms prepared and was not calculated by the number of tax years affected berger u s dist lexis pincite that case is distinguishable from p’s conduct because the government did not argue in berger that the plaintiff had aided or assisted with respect to the preparation or presentation of the corporate returns that claimed tax benefits in reliance on the forms t he conduct allegedly warranting imposition of a sec_6701 penalty was the plaintiff’s alleged falsification of the forms id you also raised the question of whether sec_6701 quoted above applies to the facts presented here that provision precludes the irs from imposing separate sec_6701 penalties for multiple documents in the same year involving the same taxpayer 924_f2d_785 8th cir the court_of_appeals for the eighth circuit ruled that an individual who prepared returns for taxable_year with understatements of tax attributable to non-allowable investment tax_credits was subject_to the sec_6701 penalty on each of the returns but not for the carry-over returns prepared for subsequent tax years id pincite in 705_fsupp_434 n d ill the irs assessed a sec_6701 penalty against an individual for each return he prepared for taxable_year containing an incorrect investment_tax_credit and also one or more penalties for every application_for tentative refund form filed on behalf a client for an earlier or subsequent tax_year the district_court held that the irs violated sec_6701 by imposing additional penalties based on the form sec_1045 because they related to the year f_supp pincite here because the tax returns and relevant schedules of p’s clients do not claim credits or deductions that are carried over from a previous taxable_year neither emanuel nor mattingly controls the above interpretation is also consistent with sec_6701 because p will not be subjected to multiple penalties for a given client for a single taxable_period the legislative_history to sec_6701 states that the penalty was intended to apply as a civil counterpart to the criminal_penalty on aiding or assisting in the preparation or presentation of false or fraudulent_returns or other documents s rep no pincite sec_7206 is the criminal_penalty applicable to a person who willfully aids or assists in or procures counsels or advises the preparation or presentation of a return affidavit claim or other document this language is virtually the same as in sec_6701 courts have applied the criminal_penalty to all participants in a the preparer filed the form sec_1045 for those of his clients who did not use up entirely the purported investment_tax_credit in year gl-149415-13 scheme which results in the filing of a false return whether or not those parties actually prepare it 848_f2d_785 7th cir likewise sec_6701 is the civil counterpart applicable to p in connection with furnishing the s to his clients and for assisting in the preparation of tax returns reflecting understatements of tax case development hazards and other considerations gl-149415-13 this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions


internal_revenue_service p o box cincinnati oh release number release date date march department of the treasury employer_identification_number contact person - id number contact telephone number legend uil u scholarship program v number of scholarships w local newspaper x county y state z dollars dollar_figure dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request your letter indicates you will operate a scholarship program called u you will provide v scholarships per year to be used for tuition and fees at an educational_institution which has a regular faculty curriculum student body and facility you expect to award z dollars annually based on availability of funds for scholarship grants and the financial cost of attending an educational_institution letter catalog number 58263t scholarships will be publicized by counselors and teachers in local school districts you will also publicize the scholarships through local print and online media such as w you will retain complete written records of these scholarships including information obtained to evaluate the qualification of a potential recipient the identification of recipients the completed application the recipient submitted the amount of each scholarship the dates of each scholarship payment evaluation reports from the recipients eligible recipients must be high school students attending a public or private school in the x area of y and complete an application the scholarship application requests the following information school currently attending and gpa fafsa list of awards honors received list of community service activities list of work experiences family data references essays scholarships will be awarded based on the following criteria e e the applicant being resilient in overcoming adversity or obstacles the applicant being resilient in persistence and perseverance the applicant having a deep sense of purpose the applicant having an internal need desire and commitment to help others the applicant willingness to engage passions and take action by getting involved with school or community groups or activities the applicant values guide decisions and behaviors towards collective and social good the applicant is compassionate and kind the applicant seeks new challenges takes appropriate risks and pushes his her comfort zone the applicant applies him herself the applicant is driven and motivated to achieve personal goals the applicant actively seeks resources to further his her goals the applicant is a creative problem-solver the applicant does not allow circumstances to define him her letter catalog number 58263t e e the applicant is committed to learning as demonstrated by a willingness to take challenging courses excel in one or more subject areas overall academic achievement or improvement in gpa over time the applicant is inquisitive the scholarship funds will be paid directly to the school or student the recipient must provide written progress at least once a semester in the event you determine any misuse of funds you will take all reasonable and appropriate steps to recover any misused funds and delinquent reports you may create an advisory committee made up of local community leaders with educational expertise to assist in reviewing the scholarship applications this committee will present finalists to your board_of directors who will make the final_decision you will not award any grants to any substantial contributors officers or directors or to members of the family of such person or any other disqualified_individual member of the selection committee will disclose any personal knowledge of and relationship with any applicant under consideration and refrain from participation in the each - award process in a circumstance where he she would derive directly or indirectly a private benefit basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request e this determination applies only to you it may not be cited as a precedent letter catalog number 58263t e e e e you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power of - attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely steven a martin director exempt_organizations rulings and agreements letter catalog number 58263t


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi plr-153719-01 date date legend company subsidiary state a b c this letter responds to a letter dated date and subsequent correspondence requesting on behalf of company an extension of time pursuant to sec_301_9100-1 through of the procedure and administration regulations for company to elect to treat subsidiary as a qualified_subchapter_s_subsidiary under sec_1361 of the internal_revenue_code facts according to the information submitted company was incorporated on a under the laws of state company is an s_corporation on b company purchased all of the outstanding_stock of subsidiary also an s_corporation thus subsidiary became a wholly owned subsidiary of company company represents that it intended to treat subsidiary as a qualified_subchapter_s_subsidiary qsub however company failed to file timely the proper election for subsidiary to be a qsub company represents that it failed to make the election because after exercising reasonable diligence by retaining legal counsel it was not aware that a qsub election was required company and subsidiary each retained the services of an attorney for the acquisition however the attorneys serving as legal counsel for the acquisition did not advise company of the required qsub election company also represents that it was unaware of the required qsub election until c when informed by its accountant who was preparing tax returns for the year of the acquisition finally company represents that hindsight is not involved in its request for relief law analysis sec_1361 defines the term qualified_subchapter_s_subsidiary as a domestic_corporation that is not an ineligible_corporation if percent of the stock of the corporation is held by an s_corporation and the s_corporation elects to treat the corporation as a qsub the statutory provision does not however provide guidance on the manner in which the qsub election is made or the effective date of the election a taxpayer makes a qsub election for a subsidiary by filing form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center the election may be effective on the date the form_8869 is filed or up to two months and days prior to the filing of the form provided that date is not before the parent’s first taxable_year beginning after date and that the subsidiary otherwise qualifies as a qsub for the entire period for which the retroactive relief is in effect if a valid qsub election is made the subsidiary is not treated as a separate corporation and all assets liabilities and items of income deduction and credit of the qsub are treated as assets liabilities and items of income deduction and credit of the parent s_corporation sec_1_1361-3 of the income_tax regulations provides that an extension of time to make a qsub election may be available under sec_301_9100-1 and sec_301_9100-3 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied consequently company is granted an extension of time of days from the date of this letter to make an election to treat subsidiary as a qsub effective b a copy of this letter should be attached to the form_8869 filed with the service_center a copy is enclosed for that purpose except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically we express or imply no opinion concerning whether company is a valid s_corporation or whether subsidiary is a valid qsub for federal tax purposes pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to company’s authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc