t c memo united_states tax_court ronna joan robertson petitioner v commissioner of internal revenue respondent docket no filed date ronna joan robertson pro_se guy h glaser for respondent memorandum findings_of_fact and opinion gerber judge in a notice_of_deficiency addressed to petitioner respondent determined deficiencies and additions to tax as follows additions to tax_year deficiency sec_6651 a sec_6654 a dollar_figure dollar_figure dollar_figure big_number - after concessions the issues for our consideration are whether petitioner is entitled to any schedule a itemized_deductions for the taxable years and whether petitioner is liable for additional tax under section in and for premature distributions of dollar_figure and dollar_figure respectively from individual_retirement_accounts and whether petitioner is liable for additions to tax under sec_6651 for and or under sec_6654 for findings_of_fact petitioner resided pincite georgia circle placentia california during the tax years at issue and at the time her petition was filed petitioner was born on date petitioner was employed as a flight attendant for trans world airlines twa from date until she voluntarily left in date during the and taxable years petitioner maintained a joint checking account at first interstate bank with her sister alexandra robertson and her mother joanne robertson ' during trial petitioner conceded all of the unreported income issues set forth in the two notices of deficiency unless otherwise indicated section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure the stipulation of facts and exhibits attached thereto are incorporated herein by this reference petitioner filed federal_income_tax returns for the taxable years prior to but she did not file federal_income_tax returns for the taxable years ended date or petitioner did however file an extension with the internal_revenue_service irs for the taxable_year petitioner chose not to file or federal_income_tax returns because she ran out of money and was employed only part-time during those years petitioner also decided not to file tax returns for those years in protest over a dispute she was having with the irs concerning some fica overwithholding by her former employer twa for the taxable_year in november of either or petitioner consulted mr henschel a tax attorney about filing a federal_income_tax return for the year during the taxable_year petitioner received dollar_figure in taxable_distributions from two qualified_individual retirement accounts ira’s and during the taxable_year petitioner received another taxable_distribution in the amount of dollar_figure from one of her qualified ira’s no portion of the or distributions was rolled over into another plan or account was made on or after the date on which petitioner attained the age of was made to petitioner after attaining the age of years or was made pursuant to a gualified domestic_relations_order petitioner did not incur any qualified_higher_education_expenses in or and was not a first-time home buyer in q4e- either or petitioner was aware that the withdrawals from her qualified ira’s would be taxable to her but she withdrew the money in order to subsist and to help her family for the taxable_year transworld mortgage corp issued petitioner and her sister adrianna a form_1098 mortgage interest statement reporting the payment of dollar_figure in deductible mortgage interest for the taxable_year transworld mortgage corp issued petitioner and adrianna a form_1098 mortgage interest statement reporting the payment of dollar_figure in deductible mortgage interest after the trial the record remained open to give petitioner an opportunity to submit additional evidence in order to substantiate certain additional schedule a itemized_deductions petitioner submitted documentation regarding medical_expenses real_property_taxes automobile fees corporate organizational_expenses and interest_expenses specifically in and various doctors were paid dollar_figure and dollar_figure respectively from a joint checking account that petitioner maintained with her mother and her sister petitioner paid dollar_figure and dollar_figure in and respectively in real_property_taxes in and respectively payments of dollar_figure and dollar_figure were made to the california department of motor vehicles dmv for registration fees and smog certification fees petitioner also paid the california dmv dollar_figure in for an automobile sales - - license petitioner paid dollar_figure in for expenses relating to a delaware corporation of which she was a shareholder finally petitioner paid interest of dollar_figure and dollar_figure in and respectively on a personal loan for an automobile opinion we must decide whether petitioner is entitled to any schedule a itemized_deductions for the and taxable years is liable for additional tax under sec_72 and is liable for any additions to tax under sec_6651 or sec_6654 a i schedule a itemized_deductions deductions are a matter of legislative grace and petitioner bears the burden of proving that she is entitled to the deductions she is claiming see rule a 503_us_79 292_us_435 taxpayers are required to maintain records that are sufficient to enable the commissioner to determine their correct_tax liability see sec_6001 43_tc_824 sec_1_6001-1 income_tax regs moreover a taxpayer who is claiming a deduction bears the burden of substantiating the amount and purpose of the item claimed see 65_tc_87 affd per curiam 540_f2d_821 5th cir sec_1_6001-1 income_tax regs a medical and dental expenses sec_213 permits a deduction for expenses paid during the taxable_year for medical_care of the taxpayer his or her spouse or a dependent as defined in sec_152 to the extent such expenses exceed percent of adjusted_gross_income and to the extent such expenses are not_compensated_for_by_insurance_or_otherwise petitioner claims that she is entitled to medical expense deductions of dollar_figure and dollar_figure for the and taxable years respectively during and petitioner maintained a joint bank account at first interstate bank with her mother joanne robertson and her sister alexandra robertson petitioner submitted into evidence numerous canceled checks from this joint bank account payable for medical and dental expenses in and for the years in issue only one check--check number dated date in the amount of dollar_figure--bears petitioner’s signature the remainder of the checks submitted by petitioner bear the signature of either petitioner’s mother or petitioner’s sister a strong indicator that these payments were not made for expenses_incurred by petitioner while deductions are permitted for medical_expenses paid for a dependent petitioner has not produced any evidence that her mother or her sister was her dependent during the taxable years at issue - more important however is the fact that all of the checks submitted by petitioner were issued from a joint bank account petitioner has failed to produce any evidence describing the contributions or deposits made by petitioner petitioner’s mother and petitioner’s sister to the joint bank account thus it is unclear which of the joint account holders actually paid for these medical_expenses accordingly petitioner has not shown entitlement to medical and dental deductions for or b real_property_taxes sec_164 provides that taxpayers are entitled toa deduction for real_property_taxes paid during the taxable_year during and petitioner resided in and owned a home pincite georgia circle placentia california ’ and paid real_property_taxes of dollar_figure and dollar_figure in and respectively accordingly petitioner is entitled to deduct these amounts as real_property_taxes on her and federal_income_tax returns c personal_property_taxes sec_164 permits deductions for state and local property taxes under sec_164 property taxes are respondent states in his brief that this house was jointly owned by petitioner and other members of petitioner’s immediate_family including her sisters and mother there is no evidence of this in the record however - - defined as an ad valorem tax that is imposed on an annual basis in respect of personal_property thus an ad valorem auto license fee is deductible as a personal_property_tax whereas an annual flat registration fee is not deductible see sec_164 mann v commissioner tcmemo_1975_74 sec_1 c income_tax regs in and respectively petitioner and or her family members paid dollar_figure and dollar_figure in fees to the california dmv for the registration and licensing of four different vehicles the record does not indicate what portion of these fees was an annual flat registration fee respondent however conceded that all of these dmv registration fees are ad_valorem_taxes after respondent’s concession the only remaining issue regarding these dmv registration fees is whether they were imposed on petitioner generally personal_property_taxes are only deductible by the taxpayer upon whom they are imposed see sec_1_164-1 income_tax regs thus in order to be entitled to these deductions petitioner bears the burden of establishing ownership of the vehicles in question see rule a during and only two of the cars for which petitioner is attempting to deduct dmv registration fees were actually petitioner also contends that she is entitled to deduct smog certification expenses and driver’s license renewal fees these expenses however are not ad valorem fees and are therefore not deductible by petitioner - registered in petitioner’s name the pontiac and the pontiac thus only the fees paid for the pontiac dollar_figure in and dollar_figure in and the pontiac dollar_figure in and dollar_figure in may be allowed as deductions by petitioner accordingly petitioner is entitled to deductions of dollar_figure and dollar_figure for the and tax years respectively for personal_property_taxes d automobile sales license sec_162 generally allows a taxpayer to deduct all ordinary and necessary expenses_incurred during the taxable_year in carrying_on_a_trade_or_business an expense is ordinary if it is considered to be normal usual or customary in the context of the particular business out of which it arose see 308_us_488 a taxpayer’s general statement that his or her expenses were incurred in pursuit of a trade_or_business normally is not sufficient to establish that the expenses had a reasonably direct relationship to that trade_or_business see 50_tc_177 affd per curiam 409_f2d_1359 2d cir during the trial petitioner alluded to the fact that she worked part-time for a used car dealer petitioner contends that she is therefore entitled to deduct the dollar_figure that she paid to the california dmv for an automobile sales license petitioner however has failed to present any evidence establishing that a -- - license was required under california law in short petitioner has failed to substantiate her claim for a deduction and accordingly no deduction is allowed for her automobile sales license bk interest_expense sec_163 provides a deduction for interest_paid or incurred on indebtedness within the taxable_year not all interest incurred however is deductible in date petitioner borrowed dollar_figure to purchase a pontiac grand prix at a 5-percent interest rate in and petitioner paid dollar_figure and dollar_figure respectively of interest on this loan petitioner also paid dollar_figure and dollar_figure of mortgage interest during the and taxable years respectively sec_163 denies taxpayers a deduction for personal_interest paid_or_accrued during the taxable_year unless it fits within certain narrowly prescribed categories the interest_paid by petitioner on her personal car loan during and is personal in nature and does not fall into one of the excepted categories accordingly petitioner is not entitled to deduct the interest_paid on her personal car loan sec_163 h d however allows a deduction for interest on a qualified_residence respondent concedes that petitioner is entitled to deductions for the interest_paid on the mortgage for petitioner’s home during the and taxable years accordingly petitioner is entitled to deduct the mortgage interest_paid in and f delaware corporation startup expenses petitioner contends that she is allowed to deduct delaware corporation startup expenses and submitted documentation concerning a corporation known as worldly connections inc the documentation submitted indicates that in date petitioner paid dollar_figure for delaware state filing fees registered agent fees a corporate kit and basic mail forwarding service petitioner also remitted an additional dollar_figure in date for advanced payment of agent fees and renewal filing fees sec_248 permits a corporation to elect to amortize on its corporation income_tax return its organizational_expenditures over a period of months or more from the month in which the corporation began business the term organizational_expenditures is defined to mean any expenditure that is incident to the creation of the corporation chargeable to a capital_account and of a character that if expended incident to the creation of a corporation having a limited life would be amortizable over such life sec_248 organizational costs that are paid_by the shareholder of a corporation do not normally qualify for amortization under sec_248 but instead must be capitalized as part of the shareholder’s stock basis cf eg deputy v du pont supra 397_us_572 397_us_580 accordingly the organizational_expenses of worldly connections inc paid_by petitioner are not deductible on petitioner’s federal_income_tax return similarly to the extent that petitioner paid any additional expenses for worldly connections inc during the taxable_year out of her own pocket eg dollar_figure these expenses should also be considered contributions of capital and are nondeductible to petitioner on her individual federal_income_tax return see deputy v du pont supra il sec_72 tax sec_72 imposes an additional 10-percent tax on the amount of an early distribution from a qualified retirement account as defined in sec_4974 see sec_72 sec_72 provides for certain exceptions to the imposition of this 10-percent tax petitioner received a dollar_figure distribution in anda dollar_figure distribution in from her ira’s which are qualified_retirement_plans under sec_4974 petitioner testified that she withdrew the money from her ira’s to provide for her own subsistence and that of her family this is not one of the exceptions set forth in sec_72 and petitioner has failed to present evidence that would trigger any of the - - statutory exceptions to the imposition of the 10-percent tax accordingly petitioner is liable for the 10-percent additional tax on the dollar_figure and dollar_figure early distributions under sec_72 tit additions to tax under sec_665l1 a and a we now address whether petitioner is liable for additions to tax under sec_665l1 a for the and taxable years and under sec_6654 for the taxable_year petitioner bears the burden of proving respondent’s determination is in error see rule a sec_6012 requires the filing of income_tax returns sec_6072 sets forth the due_date and sec_6651 a imposes an addition_to_tax for failure_to_file a return timely pursuant to sec_6651 the addition_to_tax for failure to timely file a required income_tax return is imposed unless it is shown that such failure is due to reasonable_cause and not due to willful neglect petitioner regularly filed federal_income_tax returns up to and through the taxable_year sometime in or petitioner consulted with a tax attorney regarding the filing of her tax_return for the taxable_year subsequently petitioner timely filed a request with the irs seeking an extension of time to file her federal_income_tax return thus it is clear that petitioner knew of her obligation to file tax returns petitioner stated that the reason she did not file federal_income_tax returns for the and taxable years was because she ran out of money inability to pay however does not relieve a taxpayer of his or her obligation to properly and timely file an income_tax return see bowden v commissioner tcmemo_1996_318 taxpayer’s alleged inability to pay tax was not reasonable_cause for late filing petitioner also stated that she did not file her federal_income_tax returns in protest over a dispute with the irs concerning fica overwithholding by her former employer twa for the taxable_year the existence of a dispute or protest with the irs does not constitute reasonable_cause for not timely filing one’s returns for subsequent years see 25_tc_934 affd per curiam 243_f2d_635 d c cir taxpayer’s dispute with irs concerning liability for prior tax years was not reasonable_cause for not filing for year in guestion the fact that petitioner lacked the ability to pay the tax_liability and the fact that petitioner was in disagreement with the commissioner concerning a prior taxable_year do not constitute reasonable_cause for failing to file federal_income_tax returns for the and tax years accordingly - - petitioner is liable for additions to tax under sec_6651 a sec_6654 requires the imposition of an addition_to_tax in the case of any underpayment of estimated_tax by an individual see 33_tc_1071 sec_6654 provides exceptions to the imposition of additions to tax under sec_6654 petitioner bears the burden of proving that one of these exceptions is applicable petitioner introduced no evidence as to the applicability of the exceptions provided under sec_6654 accordingly petitioner is liable for the addition_to_tax under sec_6654 to reflect the foregoing decision will be entered under rule


leonard w harbin petitioner and bernice nalls intervenor v commissioner of internal revenue respondent docket no filed date p filed a petition seeking relief from joint_and_several_liability under sec_6015 i r c r contends that p is barred under sec_6015 i r c from seeking relief because p was involved and participated in the prior deficiency pro- ceeding p contends that he did not participate meaningfully in the prior deficiency proceeding p’s attorney in the prior deficiency proceeding also represented p’s former spouse in that proceeding p’s attorney had a conflict of interest while representing p in the prior deficiency proceeding held p did not participate meaningfully in the prior deficiency pro- ceeding p is therefore not barred under sec_6015 i r c from claiming relief from joint_and_several_liability andrew r roberson and patty c liu for petitioner bernice nalls pro_se gorica b djuraskovic for respondent kroupa judge this case arises from a petition for relief from joint_and_several_liability under sec_6015 after respondent issued a final notice_of_determination con- cerning your request for relief from joint_and_several_liability under sec_6015 denying petitioner relief from deficiencies for and years at issue petitioner argues that he is entitled to relief under sec_6015 from liability for the portions of the deficiencies for the years at issue that are attributable to his former wife’s intervenor gambling activities deficiencies at issue we must decide whether petitioner is barred from obtaining any relief from liability under sec_6015 and whether petitioner is entitled to relief from liability under sec_6015 c or f for the deficiencies at issue we hold he is not barred and further hold that he is entitled to relief under sec_6015 all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated verdate 0ct date jkt po frm fmt sfmt v files harbin sheila united_states tax_court reports findings_of_fact some of the facts have been stipulated and are so found we incorporate the stipulation of facts and the accompanying exhibits by this reference petitioner and intervenor were married in the 1990s and divorced in intervenor gambled at casinos and played the lottery during their marriage intervenor maintained cal- endars and diaries related to her gambling activities for the years at issue in addition intervenor retained some of the receipts related to her gambling activities petitioner prepared and filed a joint federal_income_tax return for petitioner and intervenor for each of the years at issue he gathered documents for purposes of substantiating intervenor’s gambling winnings and losses that they reported on the returns they reported all of her dollar_figure of gambling winnings for and dollar_figure for they also reported the corresponding gambling_losses of dollar_figure for and dollar_figure for petitioner reviewed the gam- bling records that he understood intervenor kept and he also discussed with intervenor her gambling winnings and losses when preparing the returns petitioner did not know or have reason to know at the time each return was prepared that intervenor’s gambling_losses were inaccurately reported respondent began in an examination for the years at issue and focused primarily on whether the claimed deduc- tions for certain rental expenses and intervenor’s gambling_losses were allowable intervenor stopped cooperating during the examination and provided the examiner with documents different from those she had provided petitioner respondent issued a deficiency_notice to petitioner and intervenor for the years at issue the deficiency case was docketed at docket no prior deficiency case petitioner was over years old and was retired at the time of the prior deficiency case james e caldwell mr caldwell represented both petitioner and intervenor in the prior deficiency case he signed all of the filings with the exception of the petition and the amended petition respondent corresponded with requested docu- ments from and attempted to schedule meetings with mr caldwell not petitioner verdate 0ct date jkt po frm fmt sfmt v files harbin sheila harbin v commissioner petitioner depended on intervenor to contest the defi- ciencies at issue it was intervenor who engaged in the gam- bling activities that gave rise to the deficiencies at issue and she was the one with personal knowledge about the winnings and losses associated with the gambling activities it also was intervenor who was responsible for maintaining and pro- viding information regarding the gambling activities the parties executed a stipulated decision that petitioner and intervenor owed deficiencies and accuracy-related pen- alties for the years at issue neither petitioner nor intervenor requested relief under sec_6015 during the prior defi- ciency case for either year at issue no party to the prior deficiency case filed a notice of appeal and the decision of the tax_court became final on date see sec_7481 sec_7483 while the prior deficiency case was going forward mr caldwell also represented petitioner and intervenor in their contentious divorce mr caldwell represented both petitioner and intervenor in the prior deficiency case and the divorce proceeding until the divorce was finalized shortly before trial in the prior deficiency case petitioner’s and intervenor’s financial interests and interests in the allocation of liability for the deficiencies at issue were adverse in the prior defi- ciency case mr caldwell’s joint representation of petitioner and intervenor in the prior deficiency case created a conflict of interest mr caldwell did not explain the advantages and risks of joint representation to petitioner mr caldwell failed to dis- close the conflict of interest to petitioner he never asked petitioner to waive the conflict of interest and petitioner never did mr caldwell proceeded with the joint representa- tion of petitioner and intervenor despite the conflict of interest respondent applied an overpayment credit for to peti- tioner’s unpaid tax_liability for petitioner contested respondent’s action specifically petitioner contested that he owed the deficiencies at issue petitioner requested relief under sec_6015 from the deficiencies at issue petitioner followed numerous formali- ties including submitting a form_8857 request for innocent spouse relief petitioner also submitted a form questionnaire for requesting spouse and an 18-page fac- verdate 0ct date jkt po frm fmt sfmt v files harbin sheila united_states tax_court reports simile from intervenor petitioner was years old and retired at the time he sought innocent spouse relief respondent sent a preliminary determination_letter pro- posing to deny petitioner’s claim for relief under sec_6015 c and f petitioner filed a form statement of disagreement with an attached statement explaining why he believed he was entitled to relief he also contacted respondent’s innocent spouse call unit approximately months later he received a letter from respondent sustaining the preliminary determination to deny relief under sec_6015 c or f yet the cover sheet referenced only relief sought under sec_6015 throughout all this cor- respondence between petitioner and respondent there was no mention of petitioner’s claim’s being barred by sec_6015 and res_judicata the deficiency examination began in petitioner’s petition under sec_6015 was filed on date respondent issued a final notice_of_determination con- cerning your request for relief from joint_and_several_liability denying petitioner’s request for innocent spouse relief under sec_6015 for the years at issue petitioner had sought relief under sec_6015 c and f yet the determination_letter stated that petitioner was denied relief under sec_6015 and did not reference subsection c or f respondent denied petitioner relief under sec_6015 stating petitioner knew of his wife’s gambling winnings and losses mr caldwell petitioner’s counsel at the time prepared the petition contesting the denial of relief under sec_6015 on date respondent informed mr caldwell of his conflict of interest resulting from his representation of both petitioner and intervenor in the prior deficiency case mr caldwell had apparently never encountered such a situation and was unaware of any ethical violations or issues mr caldwell withdrew from representing petitioner this court allowed petitioner leave to amend his petition to request relief under sec_6015 and f respondent had still not asserted that petitioner’s claim was barred by sec_6015 and res_judicata respondent filed a motion for summary_judgment asking that petitioner be barred by res_judicata under section verdate 0ct date jkt po frm fmt sfmt v files harbin sheila harbin v commissioner respondent’s counsel requested additional g because he participated meaningfully in the prior deficiency case the court denied respondent’s motion information about the gambling_losses and activities but never raised res_judicata as a defense until years after petitioner had requested relief under sec_6015 we held a trial in chicago illinois in date to decide whether petitioner is barred from relief opinion petitioner seeks to be relieved from joint liability regarding the deficiencies at issue petitioner participated in the prior deficiency case for the years at issue in that he prepared the tax returns for those years and started negotiating with respondent when the audit began petitioner hired an attorney who represented him as well as intervenor in the prior deficiency case and in their contentious divorce pro- ceedings at the same time while their interests were adverse respondent argues that res_judicata bars petitioner’s claim for relief under sec_6015 we disagree we first explain how res_judicata applies in joint and sev- eral liability tax cases then we explain our holding res judi- cata requires that when a court of competent jurisdiction enters a final judgment on the merits of a cause of action the parties to the action are bound by that decision as to all matters that were or could have been litigated and decided in the proceedings 333_us_591 the doctrine serves to promote judicial economy by precluding repetitious lawsuits gustafson v commissioner 97_tc_85 federal income taxes are determined annually with each year a separate cause of action res judi- cata is applied to bar subsequent proceedings involving the same tax_year commissioner v sunnen supra pincite res_judicata would bar a party to a prior proceeding for the same tax_year from seeking relief from joint_and_several_liability regardless of whether the claim had been raised in the prior proceeding 116_tc_272 the common_law doctrine_of res_judicata how- ever is limited by sec_6015 res_judicata will bar a taxpayer from requesting relief from joint_and_several_liability only if such relief was an issue in the prior pro- verdate 0ct date jkt po frm fmt sfmt v files harbin sheila united_states tax_court reports ceeding or the court decides that the taxpayer partici- pated meaningfully in the prior proceeding sec_6015 see 134_tc_156 vetrano v commissioner supra pincite sec_1_6015-1 income_tax regs put more simply a taxpayer that participated mean- ingfully in a prior proceeding is barred from requesting relief under sec_6015 for the same taxable_year after the deci- sion of the court has become final see vetrano v commis- sioner supra pincite relief from joint_and_several_liability was not an issue in the prior deficiency case accordingly petitioner will be barred under sec_6015 from requesting relief under sec_6015 only if he participated meaningfully in the prior deficiency case we now turn our attention to this issue the requesting spouse bears the burden of proving that he or she did not participate meaningfully in the prior pro- ceeding see diehl v commissioner supra pincite meaning- ful participation has not been defined in statutes or by the courts see id this court has looked to the totality of the facts and circumstances to determine whether a taxpayer has participated meaningfully in a prior proceeding see id we have previously indicated that exercising exclusive control_over the handling of the prior proceeding having a high level of participation in the prior proceeding eg signing court documents and participating in settlement negotiations and having the opportunity to raise a claim for relief from joint_and_several_liability in the prior proceeding are all probative of meaningful participation under sec_6015 see id 121_tc_43 huynh v commissioner tcmemo_2006_180 affd 276_fedappx_634 9th cir here intervenor not petitioner effectively exercised exclu- sive control_over the prior deficiency case as it related to the deficiencies at issue the deficiencies at issue stemmed from intervenor’s gambling activities consequently intervenor was the one with personal knowledge of the winnings and losses from the gambling activities this knowledge was crit- ical to contesting the deficiencies at issue it was also inter- venor who maintained and provided all of the documentation relating to the gambling activities accordingly petitioner depended on intervenor to contest the deficiencies at issue verdate 0ct date jkt po frm fmt sfmt v files harbin sheila harbin v commissioner petitioner did not have a high level of participation in the prior deficiency case petitioner was over years old and was retired at the time of the prior deficiency case he participated in the prior deficiency case through mr caldwell’s representation mr caldwell represented peti- tioner from the beginning of the prior deficiency case until its conclusion mr caldwell signed all of the filings with the exception of the petition and the amended petition respondent communicated solely with mr caldwell in the development and resolution of the controversy petitioner’s opportunity to raise a claim for relief from joint_and_several_liability in the prior deficiency case was obscured and obstructed by mr caldwell’s continued concurrent rep- resentation of petitioner and intervenor whose interests were adverse petitioner and intervenor were also involved in a concurrently pending contentious divorce proceeding and both of them were represented by mr caldwell mr caldwell’s joint representation of petitioner and inter- venor involved an actual conflict of interest petitioner had a viable claim for relief from joint_and_several_liability under sec_6015 with respect to the deficiencies at issue dis- cussed infra during the prior deficiency case petitioner’s claim was directly adverse to the interest of intervenor who was contesting the deficiencies at issue mr caldwell never obtained informed written consent waiving the conflict of interest as required under this court’s rules see rule g moreover mr caldwell did not disclose the conflict of interest to petitioner instead he pro- ceeded with the representation despite the conflict of interest we believe this materially limited mr caldwell’s ability to represent petitioner’s interest in bringing a claim for relief from joint_and_several_liability finally petitioner was not informed of his opportunity to and consequently did not raise a claim for relief from joint_and_several_liability in the prior deficiency case we find on the totality of the facts and circumstances that petitioner did not participate meaningfully in the prior defi- ciency case within the meaning of sec_6015 we petitioner’s claim for relief from joint_and_several_liability under sec_6015 was adverse to intervenor’s interest in contesting the deficiencies at issue because it required him to prove that the deficiencies at issue were attributable to erroneous items of intervenor see sec_6015 verdate 0ct date jkt po frm fmt sfmt v files harbin sheila united_states tax_court reports therefore hold that petitioner is not barred from requesting relief from joint_and_several_liability with respect to the defi- ciencies at issue we accept petitioner’s and respondent’s stipulation that if petitioner’s claim is not barred by sec_6015 then petitioner meets all the requirements under sec_6015 b and e regarding intervenor’s disallowed gambling_losses we further find for purposes of sec_6015 that petitioner did not know or have reason to know that there was an understatement_of_tax attributable to intervenor’s disallowed gambling_losses at the time he signed the returns for the years at issue the record suggests intervenor showed respondent records that she had not shown to petitioner we find this compelling we need not analyze all the facts and circumstances for relief under sec_6015 and f because of our holding regarding petitioner’s qualification for relief under sec_6015 we note however that petitioner and respondent agree that petitioner meets all the threshold conditions of revproc_2003_61 sec_4 2003_2_cb_296 we have considered all arguments the parties made in reaching our holdings and to the extent not mentioned we find them to be irrelevant or without merit to reflect the foregoing decision will be entered for petitioner f verdate 0ct date jkt po frm fmt sfmt v files harbin sheila


internal_revenue_service number release date index number ---------------------------- --------------------------------------------------------------------- ---------------------- ------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------- id no ------- ----- ----------- telephone number ---------------------- refer reply to cc psi plr-106233-15 date date legend x y a country date ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ---------------------- ------------------------------ ----------------------- ---------- ------------------- dear -------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a partnership for federal tax purposes facts the information submitted states that x was formed under the laws of country on date y and a a non-resident alien individual own all of the outstanding interests in x x represents that as of date it was a foreign_entity eligible to elect to be a partnership for u s federal tax purposes and at all times y intended x to be treated as a partnership x represents that it was not advised of the need to make an election for u s federal_income_tax purposes to be treated as a partnership as a result x failed to timely file a form_8832 entity classification election electing to be treated as a partnership for u s federal tax purposes effective date x represents that y consistently filed u s tax returns treating x as a partnership x also represents that granting relief will not prejudice the interests of the government and that hindsight is not involved in seeking relief to file a late election x further plr-106233-15 represents that such relief would not result in a lower tax_liability in the aggregate for all years to which the request applies as the owners of x properly reported the net_income of x on their respective returns finally x represents that it acted reasonably and in good_faith law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single member having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and no more than months after the date the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that the term regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic_extension of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for the regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when a taxpayer provides evidence to plr-106233-15 establish to the satisfaction of the commissioner that the taxpayer acted reasonable and in good_faith and granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 accordingly x is granted an extension of time of one hundred twenty days from the date of this letter to file form_8832 with the appropriate service_center to elect to be treated as a partnership for federal tax purposes effective date a copy of this letter is attached for that purpose this ruling is contingent on the owners of x filing within days of this letter all required returns for all open years consistent with the requested relief to the extent appropriate these returns must include but are not limited to form_8865 information_return of u s persons with respect to certain foreign_partnerships such that the forms and returns reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except as expressly set forth herein no opinion is expressed or implied concerning the federal tax consequences any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely associate chief_counsel passthroughs special industries by david r haglund david r haglund branch chief branch passthroughs special industries enclosures copy of letter copy for purposes