Huynh v. Comm'r ( 2006 )

T.C. Memo. 2006-180
UNITED STATES TAX COURT
KHEN T. HUYNH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24719-04. Filed August 29, 2006.
Khen T. Huynh, pro se.
Michael S. Hensley, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
SWIFT, Judge: Petitioner seeks review of respondent’s
notices of determination denying petitioner relief under section
6015 from joint liability for tax deficiencies for 1996 and 1997
of $1,552 and $1,515, respectively. Respondent’s determinations
as to the deficiencies were sustained in a final decision in
Huynh v. Commissioner, T.C. Summary Opinion 2001-131.
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Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
The issue for decision is whether petitioner under section
6015(g)(2) is barred from obtaining relief from joint liability
for the tax deficiencies which were sustained in Huynh v.
Commissioner, supra.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
At the time the petition was filed, petitioner resided in
San Diego, California.
From 1979 through 1997, petitioner worked for the County of
San Diego Department of Social Services as an eligibility
technician, reviewing the eligibility of those seeking social
service benefits. Petitioner speaks and reads English.
In May of 1996, petitioner’s husband (Hong), who apparently
possesses numerous college and graduate degrees, including a law
degree, was laid off from his job. Hong had purchased insurance
coverage which provided, among other things, that in the event
Hong became unemployed the insurers would make payments on some
portion of the outstanding balance due on his 11 credit cards.
When Hong became unemployed, the insurers began making
monthly payments on his credit cards. At the end of 1996, Hong’s
credit cards reflected a total outstanding balance of $91,333.
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In 1996 and 1997, the insurers paid $9,719 and $9,631,
respectively, to the credit card companies on Hong’s behalf.
For 1996 and 1997, petitioner prepared her and Hong’s joint
Federal income tax returns. On their tax returns, petitioner and
Hong, apparently under the impression that these amounts did not
constitute taxable income, did not report the above insurance
payments that had been made on Hong’s behalf.
Upon audit for 1996 and 1997, respondent determined that the
insurance payments constituted taxable income. In connection
with respondent’s audit, Hong explained to petitioner that
respondent’s adjustments were related to the taxability of the
insurance payments made on his behalf.
On December 15, 1998, and October 13, 1999, respectively,
respondent’s notices of deficiency relating to petitioner and
Hong’s 1996 and 1997 joint Federal income tax returns were mailed
to petitioner and Hong.
With regard to the notice of deficiency for each year,
petitioner and Hong jointly filed petitions with the Tax Court to
redetermine the deficiencies, and petitioner read and signed both
petitions. The two cases were consolidated for trial.
Prior to the trial, petitioner and Hong attended meetings
with respondent’s Appeals Office and meetings with counsel for
respondent. Petitioner spoke and participated in these meetings,
and petitioner signed various documents including a stipulation
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of settled issues, a power of attorney, and stipulations of
facts.
At the trial in Huynh v. Commissioner, supra, petitioner
testified and stated that she knew that Hong had credit card
insurance to cover a portion of his credit card debt if he should
become unemployed and that in 1996 and 1997 she knew Hong was
unemployed. Petitioner also signed a trial brief, a reply brief,
and a motion for leave to file a reply brief.
On August 30, 2001, the Tax Court filed its opinion in
Huynh, sustaining respondent’s tax deficiencies against
petitioner and Hong.
In March and April of 2002, petitioner requested section
6015 relief from joint liability for 1996 and 1997 with regard to
the above tax deficiencies that had been sustained by the Court.
Respondent denied petitioner’s claims for section 6015 relief,
and petitioner filed the instant action.
OPINION
Spouses filing joint Federal income tax returns generally
are jointly liable for all taxes due. Sec. 6013(d)(3). However,
under certain circumstances, a spouse may be relieved of
liability on a joint return. Sec. 6015.
Even after a final opinion has been filed by a court in
litigation involving joint filers’ Federal income tax liability,
the opinion may not be conclusive with respect to a requesting
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spouse where section 6015 relief was not an issue in the court
litigation. Sec. 6015(g)(2). The requesting spouse shall be
barred from obtaining section 6015 relief, however, if the court
determines that he or she participated meaningfully in the prior
litigation. Id.; see Thurner v. Commissioner, 121 T.C. 43, 51-52
(2003); Vetrano v. Commissioner, 116 T.C. 272, 278 (2001); sec.
1.6015-1(e), Income Tax Regs.
Under section 6015(g)(2), the requesting spouse bears the
burden of proof to show, by a preponderance of the evidence, that
he or she did not meaningfully participate in the prior
litigation. Monsour v. Commissioner, T.C. Memo. 2004-190.
Generally, where a court of competent jurisdiction enters a
final judgment on the merits of a cause of action, the parties in
the prior litigation are bound by every matter that was or that
could have been offered and received to sustain or defeat the
claim. Commissioner v. Sunnen, 333 U.S. 591, 597 (1948).
Section 6015(g)(2), however, modifies this common law doctrine of
res judicata with regard to claims under section 6015 for relief
from joint liability.
Court cases have not yet clearly defined “meaningful
participation” in all respects, although we have indicated that
“merely [complying]” with a spouse’s instructions to sign various
pleadings and other documents filed in prior litigation is not
conclusive of meaningful participation, Thurner v. Commissioner,
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supra at 53, but signing court documents and participating in
settlement negotiations are indicators of meaningful
participation; id.; Monsour v. Commissioner, supra.
In Trent v. Commissioner, T.C. Memo. 2002-285, we suggested
that a taxpayer who participated in meetings with an Appeals
officer and who voluntarily signed a decision document generally
would be regarded as having participated meaningfully, regardless
of whether the taxpayer was represented by counsel.1
The legislative history of section 6015 does not provide any
significant guidance as to the definition of “meaningful
participation.”
Petitioner argues that she did not meaningfully participate
in Huynh v. Commissioner, T.C. Summary Opinion 2001-131. She
claims that during the litigation in Huynh she had only minimal
knowledge of the underlying basis for the tax deficiencies, that
she signed various administrative and Court documents merely
under Hong’s direction, and that her testimony therein consisted
solely of “nervous” responses to the Court’s “leading questions”.
Respondent counters that petitioner could have raised the
instant issue of relief from joint liability in Huynh and that
petitioner’s ability to read and understand the documents she
signed, her participation in the pretrial meetings, and her
1
It may be noted that the effective date of sec. 6015 is
not a mitigating factor in the present case, as it was in Trent
v. Commissioner, T.C. Memo. 2002-285.
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testimony at trial all indicate that petitioner participated
meaningfully.
We agree with respondent. In Huynh, petitioner signed all
documents, participated in pretrial preparations and settlement
negotiations, and testified at trial.
Petitioner may have signed some documents under the
direction of Hong. Petitioner, however, reads English. She
prepared her and Hong’s joint Federal income tax returns. She
was present at meetings with respondent’s Appeals Office, as well
as at pretrial meetings with respondent’s counsel, and at trial.
In Huynh, petitioner was not formally represented by
counsel. Hong, however, has a law degree, and petitioner has
introduced no evidence that Hong did not allow her the
opportunity to raise therein her innocent spouse claim.
We conclude that petitioner meaningfully participated in
Huynh and that petitioner therefore is barred under section
6015(g)(2) from obtaining any relief from joint liability for
1996 and 1997.
For the reasons stated, we shall sustain respondent’s
determination to deny relief from joint liability.
To reflect the foregoing,
Decision will be entered
for respondent.