Court Opinion

ID: 4336379
Source: CourtListenerOpinion
Date Created: 2018-11-14 02:48:07.355811+00
Date Added: 2024-06-11T14:48:08.777845
License: Public Domain

T.C. Summary Opinion 2007-40

                      UNITED STATES TAX COURT

              ANNETTE D. GOODE-PARKER, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 4740-03S.                Filed March 13, 2007.

     Annette D. Goode-Parker, pro se.

     Hans F. Famularo, for respondent.

     HOLMES, Judge:   When Marvin Parker prepared a 1996 joint tax

return for himself and his wife, he didn’t notice that he had

failed to add the tax on their taxable income to the self-

employment tax on his earnings.   This led him to report less than

$10,000 in total tax rather than the correct amount of more than

$28,000.   His wife, Annette Goode-Parker, didn’t notice either,

and they were surprised when the IRS caught the mistake and
                                - 2 -

assessed the correct amount.    The couple later separated, and Ms.

Goode-Parker has petitioned for innocent spouse relief.    Whether

we have jurisdiction turns on whether the Commissioner’s

correction of the couple’s mistake was the assertion of a

deficiency.1

                             Background

     The marriage of Annette Goode-Parker and Marvin Parker began

in 1984.    Both were recent graduates of Howard University’s

School of Law, and they started their life together by moving to

southern California.    In 1989, after working at a law firm and

then the Equal Employment Opportunity Commission, Ms. Goode-

Parker began her current career as a legal analyst in the

California Department of Justice, specializing in consumer and

antitrust law.    Although she did not testify at length about her

husband’s employment, she did say that in 1992 or 1993 he left

his “regular job” to open a solo practice.

     Her husband’s new practice was not immediately successful,

and the resulting financial stress began fracturing their

marriage.   They soon found themselves battling the foreclosure of

their home.    They lost that fight and in 1995 moved into a

condominium.

     1
       Ms. Goode-Parker chose to have her case tried as a small
tax case under section 7463 of the Internal Revenue Code.
(Section citations are all to that Code.) That means that our
decision is not reviewable by any other court, nor may it be
treated as precedent in any other case.
                                - 3 -

     The couple’s financial problems worsened after Mr. Parker

made a mistake while preparing their 1996 return--a mistake that

has understandably caused Ms. Goode-Parker much pain and anxiety.

What happened was this:    Her husband correctly completed all of

the schedules and filled in the Form 1040 perfectly through line

38, the end of the “Tax Computation” section, where he properly

reported $18,650 as tax.   His mistake occurred when he skipped

the “Credits” section, lines 39-44.     The Parkers did not have any

credits in 1996, but line 44 instructs the preparer to subtract

any credits from the tax reported on line 38.    Mr. Parker should

have subtracted zero from $18,650--the amount of tax he had

entered on line 38--and written $18,650 on line 44.    Instead, he

left it blank.   He then correctly completed lines 45 through 50,

the “Other Taxes” section, by reporting $9,796 in self-employment

taxes from his law practice on line 45.    The end of the “Other

Taxes” section, line 51, instructs the preparer to compute his

“total tax” by adding lines 44 through 50.    The Parkers’ return

had only one number on lines 44 through 50--$9,796--which they

reported as their total tax.   This was wrong--the total tax

should have been $9,796 + $18,650, or $28,446.

     When the Parkers’ return got to the IRS Service Center, it

was put through a quick review by what one witness called the
                                 - 4 -

“purple pencil people.”2    It was one of these people who caught

and corrected the Parkers’ mistake.      The Commissioner then

assessed the correct amount of tax--$28,446--in the IRS’s

records.     Because there was a balance due, the Commissioner began

trying to collect, unencumbered by the Code’s current due process

requirements.3    First, he filed a Federal tax lien on the

Parkers’ condominium in March 1998.      Then, in November 1998, he

levied on Ms. Goode-Parker’s bank account.     We specifically find

that she is credible in saying that this was the first she knew

of her and her husband’s tax trouble.     She promptly contacted the

IRS, and for the next three years made monthly payments of $50.

     In September 2000, the strains on the Parkers’ marriage

became very great:    They still resided in the same condo, but

began living separate lives and keeping to different rooms.      In

February 2002, Ms. Goode-Parker filed a Form 8857, requesting

innocent spouse relief from the Parkers’ joint 1996 tax

liability.    In November 2002, before the Commissioner made his

determination, the Parkers separated in the traditional sense.

     2
       An IRS supervisor, though not himself a purple pencil
person, credibly testified that as part of his duties he
proofreads returns processed by the purple pencil people, and
that the purpose of purple pencil people is to point out patent
problems on returns with a purple pencil.
     3
       The collection due process requirements in sections 6320
and 6330 became effective for collection actions begun on or
after January 19, 1999. Internal Revenue Service Restructuring
and Reform Act of 1998, Pub. L. 105-206, sec. 3401(d), 112 Stat.
750.
                                - 5 -

This was not by choice--they had again fallen behind on their

mortgage payments, so the mortgagee bank foreclosed on and sold

their condo.   The bank’s senior lien was satisfied, and, because

there were proceeds left over, so was the Federal tax lien (which

was junior to the mortgage).4   IRS records confirm that the

Parkers’ 1996 tax liability was paid in full by November 25,

2002.

     While this was going on, the Commissioner was still

reviewing Ms. Goode-Parker’s innocent spouse claim, but in

December 2002 he finally denied her relief because she had filed

her request more than two years after the first collection

activity had begun, back in 1998.   She responded by filing a

petition with this Court challenging the Commissioner’s

determination.   The Commissioner moved for summary judgment, but

we denied his motion in light of McGee v. Commissioner, 123 T.C.
314 (2004).5

     4
       Ms. Goode-Parker argues that under section
6015(e)(1)(B)(i) the Commissioner was prohibited from collecting
while her innocent spouse case was pending. Section
6015(e)(1)(B)(i), however, restricts only the Commissioner’s
power to collect unpaid taxes by “levy or proceeding in court”--
he may still file a lien. Beery v. Commissioner, 122 T.C. 184,
189-190 (2004); see sec. 1.6015-7(c)(4)(i) and (ii), Income Tax
Regs.
     5
       We held in McGee that the Commissioner must tell people
subject to joint liability for unpaid taxes of their right to
relief under section 6015 whenever he sends them a collection-
related notice. McGee v. Commissioner, 123 T.C. 314, 319 (2004).
The Commissioner conceded that the notices he sent to the Parkers
in collecting their 1996 tax debt didn’t include such a notice.
                              - 6 -

     The Commissioner then revisited Ms. Goode-Parker’s case to

decide it on the merits, but again rejected it.   He denied relief

under section 6015(b) and (c) because he found that she had

reason to know of the items causing the understatement of tax.

And he also denied relief under section 6015(f) because he found

that she did not reasonably believe, when she signed the return,

that the tax would be paid in a reasonable amount of time;

because she did not establish that paying the tax would cause her

economic hardship; and because a portion of the unpaid tax was

attributable to her.

     Ms. Goode-Parker seeks review of this revised determination.

Trial was held in Los Angeles, and she resided in California when

she filed her petition.

                           Discussion

     This is one of a large number of cases affected first by the

Ninth Circuit’s opinion in Commissioner v. Ewing, 439 F.3d 1009

(9th Cir. 2006), revg. 118 T.C. 494 (2002), vacating 122 T.C. 32

(2004), and then by this Court’s opinion in Billings v.

Commissioner, 127 T.C. 7 (2006).   These cases both held that the

Tax Court’s jurisdiction to review the Commissioner’s innocent

spouse determinations requires that a deficiency have been

asserted against the taxpayer seeking relief.   To understand what

this means requires a little background:   Section 6013(a) lets

married couples choose to file their Federal tax return jointly,
                               - 7 -

but if they do, both spouses are then responsible for the

return’s accuracy and both are generally liable for the entire

tax due under section 6013(d)(3).      Butler v. Commissioner, 114
T.C. 276, 282 (2000).   In some cases, however, section 6015 can

relieve one spouse from this joint liability.     This relief comes

in three varieties:   Relief under section 6015(b) requires an

“understatement;” relief under section 6015(c) requires a

“deficiency;”6 but relief under section 6015(f) requires only

that the requesting spouse be “liable for any unpaid tax or any

deficiency.”   Therefore, if the liability is neither an

“understatement” nor a “deficiency,” only relief under subsection

(f) is possible.   See Hopkins v. Commissioner, 121 T.C. 73, 87-88

(2003).

     Section 6015(e) gave us jurisdiction to review the

Commissioner’s innocent spouse determinations under all three

     6
       The use of “understatement” and “deficiency” in different
subsections of section 6015 seems to reflect their different
origins. Subsection (b) is a modification of the old innocent
spouse section, section 6013(e), that Congress repealed when it
enacted section 6015. The requirement that there be an “under-
statement” is common to both the old and new sections. See
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3201(a), 112 Stat. 734; Butler v.
Commissioner, 114 T.C. 276, 283 (2000); H. Conf. Rept. 105-599,
at 249 (1998), 1998-3 C.B. 747, 1003. Subsections (c) and (f)
were major expansions of innocent spouse relief, and in those
subsections Congress used “deficiency” instead of
“understatement.” Cheshire v. Commissioner, 115 T.C. 183, 189
(2000), affd. 282 F.3d 326 (5th Cir. 2002); H. Conf. Rept.
105-599, supra at 249, 1998-3 C.B. at 1003.
                                 - 8 -

subsections in “the case of an individual against whom a

deficiency has been asserted.”    But see Tax Relief and Health

Care Act of 2006, Pub. L. 109-432, div. C, sec. 408(a), 120 Stat.

3061 (effective Dec. 20, 2006) (granting jurisdiction to review

innocent spouse determinations under section 6015(f) regardless

of whether there is a deficiency asserted).      And this is where

the parties’ views in this case conflict most sharply.      The

Commissioner argues that the Parkers’ error did not create either

an “understatement” or a “deficiency,” and so there can be no

relief for Ms. Goode-Parker under either subsection (b) or (c),

and no jurisdiction in this Court.       Ms. Goode-Parker disagrees--

in her view, what she and her husband committed was a simple math

error, and math errors can give rise to deficiencies.7

     We begin our analysis by noting that neither section

6015(c)--the section that requires there be a “deficiency”--nor

section 6015(e)--the section giving us jurisdiction to review the

Commissioner’s innocent spouse determinations--defines

“deficiency.”   But section 6211(a) does, as the “amount by which

     7
       When the Commissioner finds a “mathematical or clerical
error” on a return, he is entitled to assess what he thinks is
the right amount, but has to send a notice to the taxpayer
involved. See sec. 6213(b)(1). A taxpayer who disagrees with
the Commissioner may demand an immediate abatement of the
assessment; the Commissioner can then continue the fight by
issuing a notice of deficiency. Sec. 6213(b)(2)(A). Here,
because he does not classify errors of the kind that Mr. Parker
made as “mathematical or clerical,” the Commissioner assessed the
$28,446 as the tax shown on the return. See sec. 6201(a).
                               - 9 -

the tax imposed * * * exceeds * * * the amount shown as the tax

by the taxpayer upon his return.”   Section 6015(b)--the section

requiring there to be an “understatement”--incorporates section

6662(d)(2)(A)’s definition of “understatement” as “the excess of-

-(i) the amount of tax required to be shown on the return for the

taxable year, over (ii) the amount of the tax imposed which is

shown on the return.”   Sec. 6662(d)(2)(A).

     Whether there is an “understatement” or “deficiency” thus

turns on what tax is “shown” on a return with an error like the

one on the Parkers’ 1996 Form 1040.    Is the “tax shown” the

amount that the Parkers entered on line 51 as their “total tax,”

or is it the amount entered in the IRS’s records after the

“purple pencil people” noticed that the Parkers’ income tax and

self-employment tax, though both shown on the return, had not

been added?   The Commissioner argues that the tax “shown on the

return” was all the tax shown on any line of the return even if

not totaled up at the end.   If he’s right, there is no deficiency

(and no understatement either) because the tax imposed and the

tax shown on the return are equal, which makes the difference

between the two zero.   Ms. Goode-Parker disagrees.   She contends

that her husband’s mistake created both an understatement and a

deficiency because his mistake was a “mathematical error.”

     We look to section 6213(g), which lists a number of
                                 - 10 -

different errors that are “mathematical or clerical.”       The type

of error that seems most like the one here is “an error in

addition, subtraction, multiplication or division shown on any

return.”   Sec. 6213(g)(2)(A).    But we cannot agree with Ms.

Goode-Parker that the mistake on her 1996 return was such an

error, because a mistaken failure to add is not the same as “an

error in addition.”   As we recently explained in Huffman v.

Commissioner, 126 T.C. 322, 344-345 (2006), there is a

distinction between a “mathematical error” and omitting a step

that requires math.   A “mathematical error” occurs when someone

multiplies when he should have divided or when his computation

produces an erroneous result. Id.     In this case, Mr. Parker

didn’t botch the addition, he just skipped a step that required

addition, and under Huffman that is not the same thing.       See id.

This admittedly very subtle point means that Ms. Goode-Parker’s

liability is neither an understatement nor a deficiency, because

her return showed all the tax imposed.8

     That leaves Ms. Goode-Parker able to seek relief only under

section 6015(f).   But we held in Billings that we do not have

jurisdiction over nondeficiency section 6015(f) cases.       We

     8
       The parties did not argue whether Mr. Parker’s mistake
might be a clerical error under section 6213(g)(2)(C), because it
was “an entry on a return of an item which is inconsistent with
another entry of the same or another item on such return.”
Whether tax computations are “items” is unclear, and we leave any
definitive holding to another day.
                              - 11 -

reasoned that when Congress added the phrase “against whom a

deficiency has been asserted” to section 6015(e), it removed our

jurisdiction.   Billings, 127 T.C. 16-17.    The recent amendment

to section 6015(e) restores our jurisdiction over cases like Ms.

Goode-Parker’s by inserting the phrase "or in the case of an

individual who requests equitable relief under subsection (f)" in

section 6015(e).   Tax Relief and Health Care Act of 2006, Pub. L.

109-432, div. C, sec. 408(a), 120 Stat. 3061.     But this amendment

doesn’t help her, because it is effective only for liabilities

remaining unpaid after its date of enactment, which was December

20, 2006. Id. sec. 408(c), 120 Stat. 3062.    Her tax liability

was paid in full by November 2002, and so

                                    An order will be entered

                               dismissing the case for lack of

                               jurisdiction.