Court Opinion

ID: 9913356
Source: CourtListenerOpinion
Date Created: 2023-12-27 20:01:32.391108+00
Date Added: 2024-06-11T13:08:42.693969
License: Public Domain

United States Tax Court

                               T.C. Memo. 2023-153

                                FANNIE WRIGHT,
                                   Petitioner

                                           v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                      __________

Docket No. 21509-18.                                      Filed December 27, 2023.

                                      __________

Joseph A. DiRuzzo III and Daniel M. Lader, for petitioner.

Derek P. Richman and Daniel C. Munce, for respondent.

         MEMORANDUM FINDINGS OF FACT AND OPINION

        GALE, Judge: This proceeding was commenced under section
6015 1 for review of the Internal Revenue Service’s (IRS) determination
that petitioner is not entitled to relief from joint and several liability
with respect to joint federal income tax returns filed in her name for
taxable years 2013–15 (years at issue). The issues for decision are
whether petitioner is entitled to (1) relief under section 6015(b), (c), or (f)
for 2013 and 2014 and (2) relief under section 6015(f) for 2015.

                               FINDINGS OF FACT

      Some of the facts are stipulated and are so found. The parties’
Joint First Stipulation of Facts and the Exhibits attached thereto are

       1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C., in effect at all relevant times, and Rule references are to the Tax
Court Rules of Practice and Procedure.

                                  Served 12/27/23
                                        2

[*2] incorporated herein by this reference. Petitioner resided in Florida
when she filed her Petition.

I.     Petitioner’s spouse and their income

      Petitioner and her husband, Willie J. Wright (Mr. Wright or
nonrequesting spouse), were married in 1973. The Wrights remained
married until Mr. Wright’s death in August 2016. All of his assets
passed to petitioner. 2

       During the years at issue Mr. Wright was employed as a butcher
at a supermarket, earning wage income from which federal income tax
was withheld. Petitioner completed a one-year licensed practical nurse
(LPN) program and passed her LPN certification exam in the early
1980s. She worked as an LPN until she suffered an injury at the
workplace which caused her to cease working on May 29, 2012.
Petitioner received Social Security disability benefits as a result of the
injury. This Social Security income was the only income petitioner
received for the years at issue, with the possible exception of certain
nominal amounts of interest.

II.    Tax returns and examination

       For each year at issue, a joint federal income tax return was
electronically filed in the names of petitioner and Mr. Wright. Each
return was prepared by a paid return preparer and contains the
electronic signatures of petitioner and Mr. Wright.

       A.      2013

       On April 15, 2014, a joint federal income tax return was filed in
the names of petitioner and Mr. Wright.              Petitioner received
approximately $18,881 in Social Security income in 2013. The joint
return reported the nonrequesting spouse’s wages and withholdings but
did not report petitioner’s Social Security income and a nominal amount
of interest income. The Wrights received a refund of $3,278 for 2013
because the withholdings from the nonrequesting spouse’s wages
exceeded the reported tax liability.

       In August 2015 respondent issued the Wrights a notice of
deficiency for 2013 which determined a deficiency of $2,460. The

        2 This finding is derived from Exhibits 20-R and 21-R, which are within our

scope of review. See infra note 4.
                                    3

[*3] deficiency resulted from the omission of petitioner’s Social Security
income and $14 of interest income, both of which were reported to
respondent by means of third-party information returns.

       The Wrights subsequently executed Form 5564, Notice of
Deficiency—Waiver, on which they consented to the assessment of the
deficiency. Petitioner and Mr. Wright each signed the waiver. The 2013
deficiency was thereafter assessed.

      B.     2014

       On April 15, 2015, a joint federal income tax return for 2014 was
filed in the names of petitioner and Mr. Wright. Petitioner received
$17,723 in Social Security disability income in 2014. The joint return
reported the nonrequesting spouse’s wages and withholdings but did not
report petitioner’s Social Security income and a nominal amount of
interest income. The Wrights received a refund of $3,056 for 2014
because withholdings from the nonrequesting spouse’s wages exceeded
the reported tax liability.

       In August 2016 respondent issued to the Wrights a notice of
deficiency that determined a deficiency of $2,310 for 2014. The 2014
deficiency resulted from the omission of petitioner’s Social Security
income and $34 of interest income. The Wrights did not file a petition
with this Court for redetermination of the 2014 deficiency or otherwise
respond to the notice. The 2014 deficiency was thereafter assessed.

      C.     2015

       On April 15, 2016, a joint federal income tax return for tax year
2015 was filed in the names of petitioner and Mr. Wright. Petitioner
received $18,023 in Social Security income for 2015 which was reported
on that year’s joint return along with the nonrequesting spouse’s wages
and withholdings. Of the $42,543 of taxable income reported, $7,334, or
17.2%, is attributable to petitioner.

       The joint return reported a tax liability of $5,456. Petitioner’s
attributable portion of the tax liability is $941. Petitioner additionally
incurred a health care individual responsibility payment liability of
$954. Taking the health care individual responsibility payment into
account, the total tax liability for 2015 was $6,410, with $1,895 being
attributable to petitioner. A significant portion of this liability was
satisfied by $5,088 of withholdings from Mr. Wright’s wages, but there
remained a $1,322 underpayment of tax.
                                           4

[*4] III.     Petitioner’s request for relief

      Respondent received petitioner’s Form 8857, Request for
Innocent Spouse Relief, in January 2017. Respondent issued a
preliminary determination denying petitioner’s request for innocent
spouse relief for the years at issue in June 2017.        Petitioner
subsequently submitted Form 12509, Innocent Spouse Statement of
Disagreement, to appeal the preliminary determination. Her case was
assigned to the IRS Office of Appeals. 3

        In August 2018 Appeals issued a Letter 3288, Final Appeals
Determination (final determination), sustaining the denial of relief
under section 6015(b), (c), and (f) for 2013 and 2014, and the denial of
relief under section 6015(f) for 2015. The final determination explained
that the denial of innocent spouse relief was due to the fact that the
understatements of tax for 2013 and 2014 and the underpayment of tax
for 2015 resulted from items of income solely attributable to petitioner.

                                     OPINION

        Generally, married taxpayers who elect to file a joint federal
income tax return are jointly and severally liable for the entire tax
liability due on that return. § 6013(d)(3); Butler v. Commissioner, 114
T.C. 276, 282 (2000). A spouse may seek relief from this joint and
several liability under section 6015(b) or, if eligible, may allocate
liability under section 6015(c). If relief is not available under subsection
(b) or (c), a requesting spouse may seek equitable relief under
subsection (f).

I.      Basis for jurisdiction

      This is a so-called stand-alone case wherein petitioner seeks
review under section 6015, independent of any deficiency proceeding, of
respondent’s denial of relief from joint and several liability. Section
6015(e)(1)(A) gives us jurisdiction to determine the appropriate relief
available to a requesting spouse under section 6015(b), (c), and (f).

      Petitioner’s principal contention is that she did not intend or
authorize a joint return to be filed on her behalf for any of the years at

        3 On July 1, 2019, the IRS Office of Appeals was renamed the IRS Independent

Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001, 133 Stat. 981,
983 (2019). We will use the name in effect at the times relevant to this case, i.e., the
Office of Appeals or Appeals.
                                         5

[*5] issue. She maintains that Mr. Wright misled or deceived her and
filed joint returns without her knowledge or consent. Accordingly, she
contends, the joint returns for the years at issue are invalid. From this
premise she first argues that we lack jurisdiction over this case.
However, petitioner mistakenly conflates the grant of jurisdiction to
review innocent spouse relief determinations in section 6015(e) with the
conditions that she must satisfy to obtain such relief. “The predicates
for our jurisdiction in a stand-alone proceeding under section 6015 are a
claim by a taxpayer, a final determination, and a timely petition.”
Gormeley v. Commissioner, T.C. Memo. 2009-252, slip op. at 7. The
filing of a joint return is a condition for relief under section 6015.
§ 6015(b)(1), (c)(1); Raymond v. Commissioner, 119 T.C. 191, 195 (2002).
Petitioner’s argument has been made to this Court before, and we found
that “the filing of a joint return is a condition for relief under section
6015 but not for our review of the denial of a claim for relief.” See
Abdelhadi v. Commissioner, T.C. Memo. 2018-183, at *6 (citing
Gormeley, T.C. Memo. 2009-252). Our jurisdiction to hear this case is
clear.

II.    Standard and scope of review

       We apply a de novo standard of review to any determination made
by the Commissioner under section 6015. Porter v. Commissioner, 132
T.C. 203, 210 (2009), superseded in part by statute, Taxpayer First Act
§ 1203, 133 Stat. at 988. Under the law applicable to this case, we will
also employ a de novo scope of review. 4 The taxpayer requesting relief
under section 6015 generally bears the burden of proving that he or she
is entitled to relief. See Rule 142(a); Porter, 132 T.C. at 210.

III.   Scope of section 6015(e)(1)(A) jurisdiction

        Petitioner also contends that because she did not consent to the
filing of joint returns on her behalf for the years at issue, the returns are
invalid, respondent’s assessments for those years “are void and a
nullity,” and she is not liable for them. Petitioner’s attempt to have us

        4 Section 6015(e)(7), prescribing the standard and scope of review for our

review of determinations under section 6015, is inapplicable in this case.
Subsection (e)(7) was added to section 6015 by Taxpayer First Act § 1203 and applies
to section 6015 petitions filed on or after July 1, 2019. See Sutherland v.
Commissioner, 155 T.C. 95, 96–97, 105 (2020). The Petition in this case was filed on
October 31, 2018. Accordingly, we entered an Order after the release of Sutherland in
which we explained that this case would be governed by the broad scope of review
contemplated by Porter, 132 T.C. at 206–10.
                                           6

[*6] nullify the assessments for the years at issue goes beyond the
jurisdiction conferred on us by section 6015(e)(1)(A). Our jurisdiction in
a stand-alone section 6015 case is limited to determining whether the
requesting spouse is entitled to relief from an existing liability under the
terms of section 6015(b), (c), or (f). It does not extend to determining
whether the liability from which petitioner seeks relief is itself correct.
See Block v. Commissioner, 120 T.C. 62, 68 (2003) (“[O]ur jurisdiction in
a ‘stand alone’ case brought pursuant to section 6015(e) is limited to
reviewing [the Commissioner’s] denial of relief from an existing joint
and several liability under subsections (b), (c), and (f) of section 6015.”);
see also Abdelhadi, T.C. Memo. 2018-183. Regardless of whether
petitioner consented to having joint returns filed on her behalf, we lack
jurisdiction to review that claim in this proceeding insofar as it might
bear on the correctness of the assessments. 5

IV.    Conditions for section 6015 relief

       We turn now to whether petitioner qualifies for relief under
section 6015. The conditions for relief respectively applicable under
section 6015(b) and (f) are conjunctive. Failure to satisfy any one of the
requirements prevents petitioner from qualifying for relief. See Alt
v. Commissioner, 119 T.C. 306, 313 (2002) (noting the conjunctive nature
of the threshold requirements under section 6015(b)), aff’d, 101 F. App’x
34 (6th Cir. 2004); Rev. Proc. 2013-34, 2013-43 I.R.B. 397 (setting forth
the seven threshold conditions that a taxpayer must satisfy before the
Commissioner will consider granting equitable relief), modifying and
superseding Rev. Proc. 2003-61, 2003-2 C.B. 296. In the case of relief
under section 6015(c), if it is determined that a deficiency is entirely
allocable to the requesting spouse, the Court need not consider any other
factor. Francel v. Commissioner, T.C. Memo. 2019-35, at *45–46
(declining to determine whether disqualified assets were transferred
under section 6015(c)(4) because it had already been determined the
deficiencies were allocable to the requesting spouse). As discussed infra,

         5 While we lack jurisdiction to review the validity of the assessments for the

years at issue, we note with respect to 2013 that after respondent issued a notice of
deficiency for that year, petitioner executed Form 5564 consenting to the assessment
of a deficiency premised upon her joint filing status. For 2014 petitioner failed to
petition this Court with respect to a notice of deficiency issued to her for that year
premised upon her joint filing status. The assessment for 2015 was based upon a
liability reported as due on a joint return filed for that year. See § 6201(a)(1).
Petitioner is presumably entitled to challenge the existence or amount of that liability
in a section 6330 proceeding in the event respondent seeks to collect it. See
Montgomery v. Commissioner, 122 T.C. 1 (2004).
                                     7

[*7] petitioner has failed to show that the liabilities at issue are not
attributable to her.

      A.     Relief under section 6015(b)

       To be entitled to relief under section 6015(b), a taxpayer must
satisfy each of the following requirements: (1) a joint return was filed for
the year(s) at issue; (2) the return(s) contain an understatement of tax
attributable to an erroneous item of the nonrequesting spouse; (3) at the
time of signing the return, the requesting spouse did not know and had
no reason to know of the understatement; (4) taking into account all the
facts and circumstances, it is inequitable to hold the requesting spouse
liable for the deficiency in tax attributable to the understatement; and
(5) the requesting spouse’s claim for relief is timely. § 6015(b)(1); Alt,
119 T.C. at 313.

        Petitioner has not met her burden to show that the
understatements in tax for 2013 and 2014 are attributable to
Mr. Wright. The parties declined to present facts or arguments
concerning to whom the interest income is attributable, and the notice
is redacted so that we are unable to make the determination. Petitioner
having failed to show the interest income is attributable to Mr. Wright,
it follows it is attributable to her. Thus, the 2013 and 2014 deficiencies
are entirely attributable to petitioner, consisting of her Social Security
benefits and the interest income. She accordingly is ineligible for relief
on that basis alone, and we will sustain Appeals’ determination denying
relief under section 6015(b).

      B.     Relief under section 6015(c)

        Under section 6015(c), if the requesting spouse is no longer
married to or is legally separated from the spouse with whom she filed
the joint return, he or she may elect to limit liability for a deficiency as
provided in section 6015(d). § 6015(c)(1), (3); see also Hopkins
v. Commissioner, 121 T.C. 73, 80 (2003) (“The purpose of section 6015(c)
is to allocate the tax liability between the individuals who filed a joint
return in approximately the same way it would have been had the
individuals filed separately.”). A requesting spouse is no longer married
if she is widowed. See Rosenthal v. Commissioner, T.C. Memo. 2004-89,
slip op. at 20 n.10.

       Under section 6015(d), a portion of the deficiency is allocable to
the electing spouse if the erroneously reported items giving rise to that
portion of the deficiency are allocable to the electing spouse.
                                     8

[*8] § 6015(d)(1). An item is allocated to the individuals filing the joint
return “in the same manner as it would have been allocated if the
individuals had filed separate returns for the taxable year.”
§ 6015(d)(3)(A).

       The deficiencies for the years at issue are entirely traceable to
petitioner’s Social Security benefits and to the unreported interest
income that she has failed to show is attributable to Mr. Wright. Had
she filed a separate return in the first instance, the Social Security
income would have been properly reported on petitioner’s return.
Allocating the 2013 and 2014 deficiencies as prescribed by section
6015(d) would, therefore, provide petitioner no relief. We will sustain
Appeals’ determination denying section 6015(c) relief to petitioner.

      C.     Relief under section 6015(f)

       Section 6015(f) provides alternative relief for a requesting spouse
who does not qualify under section 6015(b) or (c). And section 6015(f) is
the sole avenue for relief with respect to 2015, as there is no deficiency
for that year but only an underpayment of tax. See Hopkins, 121 T.C.
at 88. Section 6015(f)(1) permits relief from joint and several liability if
it would be inequitable to hold the requesting spouse liable for any
unpaid tax or deficiency. Under section 6015(f) the Secretary may grant
equitable relief to a requesting spouse on the basis of the facts and
circumstances. Petitioner bears the burden of proving that she is
entitled to equitable relief under section 6015(f). See Rule 142(a); Porter,
132 T.C. at 210.

       The Commissioner has specified in Rev. Proc. 2013-34 the
procedures governing equitable relief. Although we are not bound by
Rev. Proc. 2013-34, and our determination ultimately rests on an
evaluation of all the facts and circumstances, we will analyze
petitioner’s request under the guidelines set forth therein to ascertain
whether she satisfies the requirements for relief. See Pullins v.
Commissioner, 136 T.C. 432, 438–39 (2011); Johnson v. Commissioner,
T.C. Memo. 2014-240, at *10.

      Rev. Proc. 2013-34, § 4.01, 2013-43 I.R.B. at 399–400, sets forth
seven threshold conditions that must be satisfied before the requesting
spouse will be eligible for equitable relief under section 6015(f). The
threshold conditions are as follows: (1) the requesting spouse filed a joint
return for the taxable year for which he or she seeks relief, (2) relief is
not available under section 6015(b) or (c), (3) the claim for relief is
                                    9

[*9] timely, (4) no assets were transferred between the spouses as part
of a fraudulent scheme, (5) the nonrequesting spouse did not transfer
disqualified assets to the requesting spouse, (6) the requesting spouse
did not knowingly participate in the filing of a fraudulent return, and
(7) the tax liability from which the requesting spouse seeks relief is
attributable to an item of the nonrequesting spouse. Rev. Proc. 2013-34,
§ 4.01. Several exceptions to the requirement that the tax liability be
attributable to the nonrequesting spouse exist, but none is relevant to
petitioner’s case. Id. § 4.01(7).

        Appeals denied equitable relief on the basis that the
understatements of tax for 2013 and 2014 and the underpayment of tax
for 2015 all result from items of income that are attributable to
petitioner. The Wrights received tax refunds for 2013 and 2014 because
the nonrequesting spouse’s wage withholdings exceeded the tax
liabilities derived from those wages. For 2015 respondent indicated at
trial and in his briefs that the only payments petitioner and her husband
made with respect to 2015 were Mr. Wright’s withholdings and that the
withholdings exceeded his share of the liability.

       The tax liabilities petitioner seeks relief from are solely
attributable to her income. Petitioner has failed to satisfy the seventh
of the threshold requirements set forth in Rev. Proc. 2013-34, “and is
therefore ineligible to request section 6015(f) relief.” See Johnson, T.C.
Memo. 2014-240, at *14. We will sustain Appeals’ determination
denying petitioner relief under section 6015(f).

V.    Conclusion

       Taking into consideration all the facts and circumstances, we
conclude that petitioner is not entitled to innocent spouse relief under
section 6015 for 2013, 2014, or 2015. We conclude that it would not be
inequitable to deny relief because the income is attributable to the
requesting spouse.

       We have considered all of the parties’ arguments and, to the
extent they are not addressed herein, we find them to be moot,
irrelevant, or without merit.

      To reflect the foregoing,

      Decision will be entered for respondent.