Court Opinion

ID: 4334198
Source: CourtListenerOpinion
Date Created: 2018-11-14 01:33:51.826798+00
Date Added: 2024-06-11T14:47:49.823955
License: Public Domain

120 T.C. No. 4

                UNITED STATES TAX COURT

            EVELYN B. BLOCK, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5676-02.            Filed January 23, 2003.

     P requested relief from joint and several income
tax liability pursuant to sec. 6015, I.R.C., regarding
taxes that had been previously assessed for the taxable
years 1983 and 1984. R issued a notice of
determination denying P’s request, and pursuant to sec.
6015(e), I.R.C., P filed a timely petition seeking
review of R’s determination. Thereafter, P moved to
amend her petition pursuant to Rule 41(a), Tax Court
Rules of Practice and Procedure, in order to claim that
“The statute of limitation bars the assessment of the
underlying income tax liabilities for 1983 and 1984.”
R opposed the amendment, arguing that sec. 6015(e),
I.R.C., grants this Court jurisdiction to determine
whether R’s denial of relief from joint and several tax
liability, as provided in sec. 6015, I.R.C., was
erroneous. R argues that since the expiration of the
period of limitations to assess the underlying tax is
not a ground for relief under sec. 6015, I.R.C., this
Court is without jurisdiction to determine the issue.
                               - 2 -

          Held: Our jurisdiction under sec. 6015(e), I.R.C,
     is limited to reviewing R’s denial of relief available
     under sec. 6015, I.R.C., from an otherwise existing
     joint and several tax liability. In an action brought
     under sec. 6015(e), I.R.C., we lack jurisdiction over
     whether the underlying assessment was barred by the
     statute of limitations.

          Held, further, Since the Court is without
     jurisdiction to decide whether the expiration of the
     period of limitations bars the assessment of the
     underlying tax liability, the proposed amendment to the
     petition is improper, and P’s motion for leave to amend
     is denied.

     Barry A. Furman, for petitioner.

     James N. Beyer, for respondent.

                              OPINION

     RUWE, Judge:   This matter is before the Court on

petitioner’s motion for leave to amend petition pursuant to Rule

41(a).1   Petitioner timely filed her petition with this Court

pursuant to section 6015(e) seeking relief from her previously

assessed joint and several income tax liabilities for 1983 and

     1
      All Rule references are to the Tax Court Rules of Practice
and Procedure, and unless otherwise indicated, all section
references are to the Internal Revenue Code in effect for the
years at issue.
                               - 3 -

1984.2   The petition was filed after respondent issued a “Notice

of Determination” denying her request for relief.3

     Section 6015(e) “allows a spouse who has requested relief to

petition the Commissioner’s denial of relief, or to petition the

Commissioner’s failure to make a timely determination.   Such

cases are referred to as ‘stand alone’ cases, in that they are

independent of any deficiency proceeding.”   Ewing v.

Commissioner, 118 T.C. 494, 497 (2002) (quoting Fernandez v.

Commissioner, 114 T.C. 324, 329 (2000)).4

     Petitioner seeks to amend the petition to include the

following paragraph:   “The statute of limitation bars the

assessment of the underlying income tax liabilities for 1983 and

1984.”   Petitioner claims the bar of the statute of limitations

on assessment as an affirmative legal defense against the

underlying assessment.5

     2
      The parties allege that deficiencies were previously
assessed pursuant to the partnership provisions contained in
secs. 6221 through 6234.
     3
      Petitioner seeks relief from joint and several liability
pursuant to sec. 6015(b) or 6015(f). She does not contend that
she is entitled to separate liability relief under sec. 6015(c).
     4
      A claim for relief from joint and several liability may
also be raised as an affirmative defense in a timely petition
based on a notice of deficiency. Butler v. Commissioner, 114
T.C. 276, 287-288 (2000). The petition in the instant case was
not based upon a notice of deficiency.
     5
      In Petitioner’s Motion for Leave to Amend Petition,
petitioner argues:
                                                   (continued...)
                               - 4 -

     In Robinson v. Commissioner, 57 T.C. 735, 737 (1972), we

held that “The statute of limitations is a defense in bar and not

a plea to the jurisdiction of this Court.”   See Badger Materials,

Inc. v. Commissioner, 40 T.C. 1061 (1963).   Section 7459(e)

provides:

              SEC. 7459(e). Effect of Decision That Tax Is
         Barred by Limitation.--If the assessment or
         collection of any tax is barred by any statute of
         limitations, the decision of the Tax Court to that
         effect shall be considered as its decision that
         there is no deficiency in respect of such tax.[6]

     5
      (...continued)
             3. Petitioner proposes to amend her Petition
        to raise the affirmative defense of statute of
        limitations. The proposed Amendment to Petition
        accompanies this Motion.

              4. The Court has jurisdiction to decide
         whether the statutes of limitations on the
         underlying joint and several liabilities have
         expired. The Court has held that “once our
         jurisdiction has been properly invoked in a case,
         we require no additional jurisdiction to render a
         decision with respect to such an affirmative
         defense [statute of limitations].” Genesis Oil &
         Gas, Ltd. v. Commissioner, 93 T.C. 562, 564
         (1989).

              5. In Neely v. Commissioner, 115 T.C. 287
         (2000), an analogous case, the Court held that it
         had jurisdiction to decide an affirmative defense
         raised by the petitioner in a section 7436 case
         (Proceedings for Determination of Employment
         Status).

     6
      “If the Tax Court finds that the assessment or collection
of a tax is barred by the statute of limitations, such a finding
constitutes a decision that there is no deficiency with respect
to such tax.” Whirlpool Corp. v. Commissioner, 61 T.C. 182, 184
                                                   (continued...)
                               - 5 -

See Genesis Oil & Gas v. Commissioner, 93 T.C. 562 (1989);

Rodgers v. Commissioner, 57 T.C. 711 (1972).   For the reasons

stated below, we deny petitioner’s motion to amend the petition.7

     Rule 41(a) provides that leave to amend “shall be given

freely when justice so requires.”   In exercising its discretion,

the Court may deny petitioner’s motion for leave to amend if

permitting an amended petition would be futile.   Klamath-Lake

Pharm. Association v. Klamath Med. Serv. Bureau, 701 F.2d 1276,

1293 (9th Cir. 1983); Estate of Ravetti v. Commissioner, T.C.

Memo. 1992-697.

     Petitioner contends that once this Court’s jurisdiction has

been properly invoked under section 6015(e), we also have

jurisdiction to decide whether the period of limitations for

assessing tax has expired.   Respondent opposes petitioner’s

motion contending that when the Court’s jurisdiction is based on

section 6015(e), the Court’s jurisdiction is limited to whether

the taxpayer is entitled to relief from an existing joint and

several liability on the basis of the specific relief provisions

contained in section 6015.

     6
      (...continued)
(1973).
     7
      Petitioner has not alleged in her petition or proposed
amendment that the expiration of the period of limitations is a
“factor” to be considered in deciding whether she is entitled to
equitable relief under sec. 6015(f).
                                - 6 -

     It is axiomatic that we are a Court of limited jurisdiction

and may exercise our power only to the extent authorized by

Congress.   Gati v. Commissioner, 113 T.C. 132, 133 (1999); Naftel

v. Commissioner, 85 T.C. 527, 529 (1985).    In her “stand alone”

petition, petitioner invoked our jurisdiction pursuant to section

6015(e) to review the Commissioner’s denial of her request for

relief from joint and several liability.    Section 6015(e)(1)

provides in pertinent part:

     SEC. 6015(e).   Petition for Review by Tax Court.--

          (1) In general.--In the case of an individual
     against whom a deficiency has been asserted and who
     elects to have subsection (b) or (c) apply--

                 (A) In general.--In addition to any other
            remedy provided by law, the individual may
            petition the Tax Court (and the Tax Court shall
            have jurisdiction) to determine the appropriate
            relief available to the individual under this
            section if such petition is filed--* * * [Emphasis
            added.]

We agree with respondent that the plain language of section

6015(e)(1) limits our jurisdiction to review the Commissioner’s

denial of the specific relief contemplated under section 6015.8

See Ewing v. Commissioner, supra at 499; Butler v. Commissioner,

114 T.C. 276, 290 (2000); Brown v. Commissioner, T.C. Memo. 2002-

     8
      “The plain meaning of legislation should be conclusive,
except in the ‘rare cases [in which] the literal application of a
statute will produce a result demonstrably at odds with the
intentions of its drafters.’” United States v. Ron Pair Enters.,
Inc., 489 U.S. 235, 242 (1989) (quoting Griffin v. Oceanic
Contractors, Inc., 458 U.S. 564, 571 (1982)).
                                 - 7 -

187 (jurisdiction limited to relief contemplated under section

6015).    Petitioner’s amendment would allow her to go beyond the

specific relief contemplated by section 6015 and question the

viability of the tax liabilities from which she seeks relief.        As

previously stated, a finding that the period of limitations has

expired is a complete legal bar to the assessment of the unpaid

tax liability.    See sec. 7459(e); Genesis Oil & Gas v.

Commissioner, supra; Whirlpool Corp. v. Commissioner, 61 T.C. 182

(1973).

     Section 6015 provides qualifying taxpayers with three

distinct avenues of relief from joint and several tax liability.

Section 6015(b) requires that the return from which the electing

taxpayer seeks relief shows “an understatement of tax

attributable to erroneous items of one individual filing the

joint return”.    Sec. 6015(b)(1)(B).    In addition, the electing

taxpayer must show that “taking into account all the facts and

circumstances, it is inequitable to hold the other individual

liable for the deficiency in tax for such taxable year

attributable to such understatement”.      Sec. 6015(b)(1)(D).   Thus,

a prerequisite to seeking relief under section 6015(b) is the

existence of a tax deficiency.

     In a similar vein, a taxpayer may seek relief pursuant to

section 6015(c) for an “individual’s liability for any deficiency

which is assessed with respect to the return”.      Sec. 6015(c)(1).
                               - 8 -

The electing taxpayer bears the burden of proving “the portion of

any deficiency allocable to such individual.”    Sec. 6015(c)(2).

With respect to the allocation of the deficiency, section

6015(d)(1) instructs that

         The portion of any deficiency on a joint return
         allocated to an individual shall be the amount
         which bears the same ratio to such deficiency as
         the net amount of items taken into account in
         computing the deficiency and allocable to the
         individual under paragraph (3) bears to the net
         amount of all items taken into account in
         computing the deficiency.

Section 6015(c) clearly contemplates the existence of a joint tax

deficiency from which relief is sought.

     Section 6015(f) grants equitable relief to taxpayers who

cannot otherwise qualify under subsections (b) or (c).      However,

this avenue requires the existence of an “unpaid tax or any

deficiency”.   Sec. 6015(f)(1).9   Section 6015(f) presupposes the

existence of a deficiency or unpaid tax liability.    Thus, section

6015(f) does not provide a platform upon which a taxpayer can

prevail by merely using the strictly legal argument that the

     9
      In Fernandez v. Commissioner, 114 T.C. 324 (2000), and
Butler v. Commissioner, 114 T.C. 276 (2000), we held that this
Court has jurisdiction to review denials of requests for relief
from joint and several liability pursuant to sec. 6015(f) in both
deficiency and “stand alone” proceedings. Ewing v. Commissioner,
118 T.C. 494 (2002). In Ewing, we held that this Court has
jurisdiction, despite the absence of an asserted deficiency, to
determine whether a taxpayer is entitled to equitable relief
pursuant to sec. 6015(f). This holding was predicated upon the
language of sec. 6015(f)(1) providing for equitable relief from
“any unpaid tax or any deficiency”.
                                - 9 -

assessment of the underlying liability is barred.    When a

taxpayer disputes the Commissioner’s determination regarding

relief sought pursuant to section 6015(f), the issue we have

jurisdiction to address in a “stand alone” petition under section

6015(e) is whether the Commissioner erroneously denied equitable

relief from an existing joint and several tax liability.

       In support of her motion, petitioner cites our opinion in

Neely v. Commissioner, 115 T.C. 287 (2000).    In Neely, a taxpayer

invoked our jurisdiction by filing a petition pursuant to section

7436 seeking to review the Commissioner’s adverse determination

of worker classification.    One of the issues raised by the

taxpayer in the petition was whether the assessment of taxes

related to the Commissioner’s determination of worker

classification was barred by the period of limitations.       Id. at

289.    The Commissioner argued that we lacked jurisdiction to

address matters relating to the period of limitations on

assessments in the worker classification context.    We disagreed

and explained that section 7436(a) provides the Court with

jurisdiction to determine worker classification and whether a

taxpayer is entitled to “safe harbor” relief.10   Id. at 291.

With respect to the statute of limitations issue, we stated that

       10
      The statute has since been amended giving us the
jurisdiction to also determine “the proper amount of employment
tax under such determination”. Consolidated Appropriations Act,
2001, Pub. L. 106-554, sec. 314(f), 114 Stat. 2763A-643.
                                - 10 -

“Once our jurisdiction has been properly invoked in a case, we

require no additional jurisdiction to render a decision with

respect to such an affirmative defense.”    Id. at 292.   Thus, we

held that where the parties were properly before the Court in an

action brought under section 7436, the Court had jurisdiction to

decide whether the period of limitations barred an assessment

based on respondent’s worker classification determination.      Id.

at 292-293.

     Neely is distinguishable.    In Neely, we reasoned that where

the Court had jurisdiction to review the Commissioner’s

preassessment determination of worker classification, we likewise

had jurisdiction to determine whether the Commissioner was barred

from assessing employment taxes by the expiration of the period

of limitations.   Section 7436(a) granted us jurisdiction to

“determine whether such a [worker classification] determination

by the Secretary is correct”.    Like the deficiency procedures,

the procedure set forth in section 7436 provides a preassessment

forum for employment tax issues.    In a preassessment proceeding

it is logical to decide whether the proposed assessment is barred

by the statute of limitations, and it is clear that we have

jurisdiction in a deficiency proceeding to decide whether

assessment of the deficiency is barred by the statute of

limitations.   See Woods v. Commissioner, 92 T.C. 776 (1989);

Worden v. Commissioner, T.C. Memo. 1994-193; Ruff v.
                              - 11 -

Commissioner, T.C. Memo. 1990-521.     Section 7436(d)(1)

specifically provides that the “principles * * * [of the sections

governing deficiencies] shall apply to proceedings brought under

this section in the same manner as if the Secretary’s

determination described in [section 7436] subsection (a) were a

notice of deficiency.”

     In contrast to section 7436, section 6015 provides relief

from an otherwise existing joint tax liability.    The relief from

joint and several liability available in a section 6015(e) “stand

alone” petition does not incorporate preassessment procedures.

Section 6015 assumes that the electing taxpayer is to be relieved

from an existing joint tax liability, not whether the underlying

joint tax liability exists.   Section 7436, on the other hand,

concerns whether a tax liability exists.    A section 6015(e)

“stand alone” petition provides us with jurisdiction to determine

whether the postassessment relief provided in section 6015 is

appropriate.

     Petitioner has not raised, and we do not address, whether

the alleged expiration of the period of limitations on the

assessment of the underlying deficiency or liability might be a

“factor” in determining whether it would be inequitable under

section 6015(f) to deny petitioner relief.    If petitioner wishes

to argue that the alleged expiration of the period of limitations

is a “factor” to consider in weighing the equities under section
                             - 12 -

6015(f), petitioner should move this Court to amend her petition

to assert that specific allegation.    Respondent, of course, would

then be given an opportunity to challenge petitioner’s motion.

     Pursuant to the plain statutory language contained in

section 6015, our jurisdiction in a “stand alone” case brought

pursuant to section 6015(e) is limited to reviewing respondent’s

denial of relief from an existing joint and several tax liability

under subsections (b), (c), and (f) of section 6015.    The

timeliness of the assessment of the underlying liability is not

an independent ground for relief under section 6015.    We have no

jurisdiction over the issue petitioner wants to raise in her

proposed amendment to the petition.    Accordingly, her motion for

leave to amend her petition is denied.

                                      An appropriate order denying

                              petitioner’s motion for leave to

                              amend her petition will be issued.