Court Opinion

ID: 4337409
Source: CourtListenerOpinion
Date Created: 2018-11-14 03:21:03.682937+00
Date Added: 2024-06-11T14:20:39.650316
License: Public Domain

T.C. Summary Opinion 2009-6

                     UNITED STATES TAX COURT

               JENEAN DYAN SIMMONS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 10353-07S.             Filed January 8, 2009.

     Jenean Dyan Simmons, pro se.

     Julie A. Jebe, for respondent.

     ARMEN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed.1   Pursuant to section

     1
        Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect at relevant
times, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 2 -

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case.

     The central issue in this case is whether petitioner is

entitled to relief from joint and several liability for 1988

under section 6015(b) rather than under section 6015(c).      Related

to that issue is a determination of whether a refund is due

petitioner under section 6015(g).

                              Background

     Some of the facts have been stipulated, and they are so

found.   We incorporate by reference the parties’ stipulation of

facts and accompanying exhibits.

     At the time she filed the petition, Jenean Dyan Simmons

resided in Illinois.

     Petitioner and her now ex-husband married in 1969 and

divorced in the 1990s.   During the taxable year at issue (1988)

and for some time thereafter, petitioner, although primarily a

homemaker, worked as a secretary in her then husband’s

independent insurance sales business.      Her role at the company

was solely clerical:   She filled out insurance applications and

submitted them to carriers.    Petitioner was not paid for this

work but instead received a biweekly allowance ($50) from her ex-

husband with which to purchase groceries and other household

items.
                               - 3 -

     The record reveals that petitioner’s ex-husband had some

real estate dealings on the side, unconnected with his insurance

business.   The transactions were conducted in his name alone,

without petitioner’s knowledge or consent.

     Petitioner and her ex-husband late filed a joint Federal

income tax return for 1988, reporting zero tax due.   The return

–-prepared by a professional accountant at the direction of

petitioner’s ex-husband–-was subsequently examined and the amount

of tax revised.   The $14,418 due stemmed from the real estate

transactions executed solely by petitioner’s ex-husband and

omitted from the late-filed return.    The tax due was assessed in

May 1992.

     Respondent levied on petitioner’s wages at various places of

employment in order to collect the outstanding liability,

presumably because petitioner’s ex-husband had suffered severe

health problems and a bankruptcy.

     Petitioner filed a Form 8857, Request for Innocent Spouse

Relief, for 1988 on November 12, 2002.2   Although this request

was ultimately granted, respondent initially denied the request

as untimely.   See, e.g., sec. 6015(b)(1)(E).   Petitioner refiled

     2
        Although petitioner may have made a request for relief
under sec. 6013(e) in 1994, the first complete and definitive
request for innocent spouse relief and claim included in the
record was the Form 8857 filed in 2002.
                               - 4 -

her request on April 15, 2006,3 and, in early 2007, petitioner

was granted full and complete relief from the 1988 liability

under section 6015(c).   Respondent denied petitioner’s request

for relief under section 6015(b), determining that she “knew or

had reason to know” of her husband’s business dealings giving

rise to the understatement because petitioner signed the return

and had been employed by her ex-husband’s insurance business.

     Because petitioner already paid some portion of the 1988

liability before being granted relief, she requested a refund of

the amount paid.4   Respondent denied the request as refunds are

not permitted when relief is granted under section 6015(c).     See

sec. 6015(g)(3); cf. sec. 6015(g)(1) (permitting the possibility

of refund when relief is granted under sec. 6015(b)).

     The central issue before us is whether petitioner is

entitled to relief from joint and several liability under section

6015(b).   Because we decide that she is, we must also address

whether a refund is due petitioner under section 6015(g).

     3
        In 2004, this Court held that it was inequitable to
require that a taxpayer file a request for innocent spouse relief
within 2 years of the beginning of collection activity when the
collection notice did not inform the taxpayer of his or her right
to seek innocent spouse relief. See McGee v. Commissioner, 123
T.C. 314 (2004).
     4
         Petitioner requested a refund of $21,237.68.
                               - 5 -

                             Discussion

A.   Relief From Joint and Several Liability

      Section 6015 applies to any liability for tax arising after

July 22, 1998, and to any liability for tax arising on or before

July 22, 1998, but remaining unpaid as of such date.      Internal

Revenue Service Restructuring and Reform Act of 1998 (RRA 1998),

Pub. L. 105-206, sec. 3201(g), 112 Stat. 740.      Except as

otherwise provided in section 6015, the taxpayer bears the burden

of proving his or her entitlement to relief under section 6015.

Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), affd.

101 Fed. Appx. 34 (6th Cir. 2004).

      Generally, married taxpayers may elect to file a joint

Federal income tax return.   Sec. 6013(a).     After making the

election, each spouse is jointly and severally liable for the

entire tax due.   Sec. 6013(d)(3); see sec. 1.6013-4(b), Income

Tax Regs.   Section 6015 provides three avenues for relief from

that liability (often referred to as innocent spouse relief) to a

taxpayer who has filed a joint return:    (1) Section 6015(b)

allows relief for understatements of tax attributable to certain

erroneous items on a return; (2) section 6015(c) provides relief

for a portion of an understatement of tax to taxpayers who are

separated or divorced; and (3) section 6015(f) more broadly

confers on the Secretary discretion to grant equitable relief to
                                 - 6 -

taxpayers who otherwise do not qualify under section 6015(b) or

(c).    See also sec. 6015(e).

       Section 6015(c) relief (which petitioner was granted) allows

for proportionate tax relief (if a timely election is made)

through allocation of the deficiency between individuals who

filed a joint return and are no longer married, are legally

separated, or have been living apart for a 12-month period.

Generally, this avenue of relief allows a spouse to elect to be

treated as if a separate return had been filed.       Rowe v.

Commissioner, T.C. Memo. 2001-325.       Here, the entire

understatement was attributable to petitioner’s ex-husband.

       Although respondent chose to grant petitioner relief under

section 6015(c) for 1988, relief under section 6015(b) would have

been more appropriate.    Section 6015(b) provides full or

apportioned relief from joint and several liability for tax

(including interest, penalties, and other amounts) to the extent

that such liability is attributable to an understatement of tax.

To be eligible for relief, the requesting spouse must establish

that in signing the return, he or she “did not know, and had no

reason to know” of the understatement.      Sec. 6015(b)(1)(C), (2).

Petitioner sufficiently established both that she had no

knowledge of the understatement and that she had no reason to

know of the understatement, for 1988.
                               - 7 -

      Although petitioner did sign the joint return, she had no

involvement with its preparation, and was not privy to any of the

details that comprised the return.     She signed the return simply

because she was married during the taxable year.    Further, the

fact that she worked at her ex-husband’s insurance company

filling out insurance applications does not dictate that she had

reason to know of his unrelated real estate activities, or that

she knew (or had reason to know) of those real estate activities

sufficiently to say that she should have known about the

understatement of tax stemming from them.    Petitioner was not

paid for her work at the insurance agency, nor was she given

meaningful access to (much less a say in) her family’s financial

affairs; petitioner’s ex-husband merely gave her a modest

allowance.   Petitioner did not know about the understatement, nor

did she have reason to.   Respondent’s refusal to grant relief

under section 6015(b) was inappropriate under the circumstances.

B.   The Refund Amount

      Section 6015(g) governs the allowance of credits and refunds

in cases where a taxpayer is granted relief under section 6015.

Any refund available to a taxpayer is subject to limitations

imposed by section 6511, 6512(b), 7121, or 7122.    The only

limitation applicable to this case is section 6511.5

      5
        Sec. 6512(b) limits the amount of a refund in a
deficiency proceeding, sec. 7121 applies to cases involving
                                                   (continued...)
                               - 8 -

     Section 6511 generally limits the amount of a refund to

amounts paid within 3 years from the time the return is filed or

2 years from the time the tax was paid, whichever period expires

later.   Section 6511(b)(2)(B) provides that if a claim is not

filed within the 3-year period specified in section 6511(a), any

refund should not exceed the amount of tax paid in the 2 years

immediately preceding the filing of the refund claim.

     A claim for a tax refund must inform the IRS that a claim

for a refund is being asserted, detail the ground for the refund,

and provide sufficient facts so the IRS can adequately examine

the merits of the claim.   See, e.g., Washington v. Commissioner,

120 T.C. 137, 160 (2003) (citing Chicago Milwaukee Corp. v.

United States, 40 F.3d 373, 375 (Fed. Cir. 1994)); see also sec.

301.6402-2(b)(1), Proced. & Admin. Regs.   In this case,

petitioner’s refund claim was made at the time she filed the

first Form 8857 on November 12, 2002.   Accordingly, any potential

refund would be limited to payments made on or after November 12,

2000.

     At trial, respondent argued that any refund to petitioner

should be limited to payments made up until the date of her

request for innocent spouse relief, i.e., November 12, 2002.

That said, respondent acknowledged on brief that it would be more

     5
     (...continued)
closing agreements, and sec. 7122 applies to cases involving
compromises.
                                 - 9 -

appropriate to refund payments made during the 2 years preceding-

-as well as all payments made after-–the filing of petitioner’s

request for innocent spouse relief.      See, e.g., Washington v.

Commissioner, supra at 162; Rivera v. Commissioner, T.C. Memo.

2005-33.   Therefore, any amounts paid by petitioner after

November 12, 2000, on the 1988 liability should be eligible for a

refund.

     Given our holding that petitioner is eligible for relief

under section 6015(b), petitioner is entitled to a refund

pursuant to section 6015(g).

     At trial, respondent stated that petitioner would be

entitled to a refund of $5,342.    In contrast, in posttrial

briefs, respondent stated that petitioner had provided “copies of

additional checks not previously considered by respondent” and

that, on the basis of this information, petitioner would be

entitled to a refund of $3,779.    The Court does not understand

why petitioner’s refund would have decreased in view of the fact

that respondent conceded that payments from a longer time period

are eligible for refund and that petitioner provided respondent

with additional documentation.    But it is clear that a refund is

due petitioner.

                            Conclusion

     For the reasons discussed above, petitioner is entitled to

relief from joint and several liability for 1988 under section
                              - 10 -

6015(b).   Accordingly, petitioner is entitled to a refund under

section 6015(g).

     To reflect the proper amount of that refund,

                                         Decision will be entered

                                    under Rule 155.