Estate of Edward Wenner v. Commissioner ( 2001 )

116 T.C. No. 22
UNITED STATES TAX COURT
ESTATE OF EDWARD WENNER, DECEASED, MERLYN WENNER RUDDELL,
KATE WENNER EISNER AND JANN S. WENNER, CO-EXECUTORS,
AND DALLAS CLARK, f.k.a. DOROTHY E. WENNER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12611-99. Filed May 14, 2001.
Ps petitioned the Court for a review of R’s
determination not to abate interest under sec. 6404.
In the petition C, one of the Ps, raised a claim for
relief from joint liability on a joint return pursuant
to sec. 6015 (sec. 6015 claim).
R moved to strike the sec. 6015 claim, asserting
the Court lacked jurisdiction to determine such a claim
in a sec. 6404 proceeding.
Held: C’s sec. 6015 claim is an affirmative
defense in a matter properly before the Court. In such
circumstances, we require no additional statutory
jurisdiction to address and determine C’s claim for
sec. 6015 relief.
Michael L. Sandford, for petitioners.
Michael P. Breton, Bradford A. Johnson, and Gary Slavett,
for respondent.
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OPINION
LARO, Judge: Petitioners petitioned the Court to review
respondent’s determination not to abate interest pursuant to
section 6404.1 Petitioner Dallas Clark also alleges in the
petition that she should be relieved from joint liability as to
Federal income tax returns which she filed with her now deceased
husband for the relevant years. We must decide whether the Court
has jurisdiction to decide Ms. Clark’s claim as to joint
liability. We hold that we have jurisdiction.
Background
Edward Wenner died in 1988. On or about March 1990 Kate
Wenner Eisner, acting for the estate, and Ms. Clark executed a
Form 870-P, Agreement to Assessment and Collection of Deficiency
in Tax for Partnership Adjustments. On September 29, 1997,
respondent sent to Edward (then deceased) and Dorothy Wenner
(now Ms. Clark) notices of changes to their 1982, 1983, and 1984
joint Federal income tax returns. Those changes resulted from an
examination of those returns and the related partnership returns.
Respondent increased the amount of tax for each of the years and
claimed interest in the following amounts:
1
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years in issue.
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Year Increase in Tax Interest Charged
1982 $5,410 $22,290.18
1983 5,763 20,992.39
1984 366 821.45
On or about February 12, 1998, Ms. Clark, on behalf of all
petitioners, paid respondent the $11,539 in taxes specified in
the notices.
Sometime after receiving the September 29, 1997, notices,
petitioners requested that respondent abate the interest charged.
On January 20, 1999, respondent notified Ms. Clark that the claim
for abatement of interest under section 6404(e) was disallowed.
On July 16, 1999, petitioners filed a timely petition for Review
of Denial of Request for Abatement of Interest. In that petition
Ms. Clark also requested she be relieved from joint liability as
to the relevant years.
Respondent moved to strike Ms. Clark’s claim for relief from
joint liability from the petition. Respondent asserts that the
Court lacks jurisdiction with regard to that claim. Petitioners
opposed that motion. Respondent responded stating in part:
“After a diligent search of our records, respondent has
determined that no claim or election for relief under I.R.C. §
6015 (b) or (c) was filed by petitioner Ms. Clark, f.k.a. Dorothy
E. Wenner, with the Internal Revenue Service in accordance with
normal procedures.”
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Discussion
This is a matter of first impression. The issue we must
decide is whether we have jurisdiction to decide an affirmative
defense under section 6015 pled in a section 6404 petition for
judicial review of respondent’s determination not to abate
interest. We first turn to this Court’s jurisdiction.
Referring to this Court, the Court of Appeals for the
Seventh Circuit recently noted “[the Tax Court], like all Federal
Courts, is a court of limited jurisdiction.” Flight Attendants
Against UAL Offset v. Commissioner, 165 F.3d 572, 578 (7th Cir.
1999). The Tax Court has specialized jurisdiction and may
exercise it only to the extent authorized by Congress. See
Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The question of
the Court’s jurisdiction is fundamental and must be addressed
when raised by a party. See id. at 530. The Court’s jurisdiction
to review respondent’s determination whether to abate interest is
now found in section 6404(i) (formerly designated as section
6404(g)). That section, so far as is relevant, provides:
(i) Review of Denial of Request for Abatement of
Interest. –-
(1) In general.--The Tax Court shall have
jurisdiction over any action brought by a taxpayer who
meets the requirements referred to in section
7430(c)(4)(A)(ii) to determine whether the Secretary’s
failure to abate interest under this section was an
abuse of discretion, and may order an abatement, if
such action is brought within 180 days after the date
of the mailing of the Secretary’s final determination
not to abate such interest. [Emphasis added.]
Section 6404(i) clearly grants the Court jurisdiction to
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review the Commissioner’s failure to abate interest under all
subsections of section 6404. See Woodral v. Commissioner, 112
T.C. 19, 22-23 (1999). However, the only explicit jurisdiction
given to the Court under this section is a jurisdiction to
determine whether the Secretary’s failure to abate interest under
section 6404 was an abuse of discretion. The Court may order an
abatement of interest where we have determined that the Secretary
has abused his discretion.
There are two primary jurisdictional predicates for this
Court to review a claim for relief from joint and several
liability. First, a claim may be raised as an affirmative
defense in a petition for redetermination of a deficiency filed
pursuant to section 6213(a). See Butler v. Commissioner, 114
T.C. 276 (2000); Charlton v. Commissioner, 114 T.C. 333 (2000).
In a deficiency proceeding, we consider all the facts and
circumstances relevant to ascertaining the correct amount of the
deficiency, including affirmative defenses. See secs. 6213 and
6214; Butler v. Commissioner, supra at 287; Woods v.
Commissioner, 92 T.C. 776, 784-785 (1989); Naftel v.
Commissioner, 85 T.C. 527, 533 (1985).
The second jurisdictional predicate is found in section
6015(e). This section enables an electing spouse to petition for
review of an administrative determination (or failure to make a
determination) regarding relief from liability as a stand alone
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matter, independent of any deficiency proceeding. See Fernandez
v. Commissioner, 114 T.C. 324 (2000).
The essence of Ms. Clark’s argument is that she is entitled
to raise her entitlement to section 6015 relief as an affirmative
defense in a section 6404 action. Ms. Clark asserts that there
is sufficient jurisdictional predicate for this Court to
determine her substantive claim. Historically we have
characterized a claim for relief from joint liability as an
affirmative defense that must be set forth in the pleadings. See
Butler v. Commissioner, supra at 287-288.
In Neely v. Commissioner, 115 T.C. 287 (2000), an analogous
case, we held that we had jurisdiction to decide an affirmative
defense raised by the petitioner in a section 7436 case
(Proceedings for Determination of Employment Status). Section
7436, like section 6404, allows judicial review of a
determination of the respondent. In that case we reasoned:
The statute of limitations set forth in section 6501
constitutes a defense at bar (i.e., an affirmative
defense) that may be raised by the taxpayer in response
to a determination made by the Commissioner. See Rule
39; Genesis Oil & Gas, Ltd. v. Commissioner, [93 T.C.
562 (1989)] supra at 564. 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. See Genesis Oil
& Gas, Ltd. v. Commissioner, supra at 564. Rather,
“When such a defense in bar is properly raised, we must
pass upon the merits of the issue after receiving
evidence with respect thereto”. Badger Materials, Inc.
v. Commissioner, [40 T.C. 1061 (1963)] supra at 1063.
Accordingly, we hold that where the parties are
properly before the Court in an action brought under
section 7436, the Court possesses jurisdiction to
address issues relating to the period of limitations
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under section 6501 that are properly raised by the
parties.
In this case, our jurisdiction over the parties under
section 7436 was invoked through petitioner’s timely filed
petition seeking review of respondent’s notice of
determination. When petitioner pleaded as an affirmative
defense in his petition that respondent’s determination as
to worker classification was barred by expiration of the 3-
year period of limitations under section 6501(a), we
required no additional jurisdiction to address such issue.
* * *
Id. at 292-293.
As a stand alone proceeding, the Court has no jurisdiction
to consider a request for relief from joint liability on a joint
return under section 6015 unless the following three requirements
are met: (1) The taxpayer has filed a timely election pursuant
to section 6015, (2) respondent has notified the taxpayer that
respondent has denied the taxpayer’s request for relief under
that section, and (3) the taxpayer has timely petitioned this
Court for relief under section 6015(e)(1). See sec. 6015. The
record here discloses that none of the procedural requirements
for our jurisdiction under section 6015(e) has been satisfied.
However, we can find no compelling reason to distinguish the
logic and reasoning of this Court in Neely v. Commissioner,
supra. An entitlement to the statutory relief provided by
section 6015 is no less a defense to respondent’s determination
than the statutory relief provided by section 6501(a) in the
Neely case. There, as in the instant case, an affirmative
defense was pleaded in a matter properly before the Court.
Petitioner’s petition under section 6404 is properly before the
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Court, and we hold we require no additional jurisdiction to
address Ms. Clark’s claim for section 6015 relief.2 Consequently
we shall deny respondent’s motion to strike paragraph 16 from the
petition and paragraph 2 of petitioners’ prayer for relief.
To reflect the foregoing,
An appropriate order will
be issued.
2
We, however, do not have jurisdiction over the correctness
of the underlying deficiency determination in the instant
proceeding.