Jenean Dyan Simmons v. Comm'r , 2009 Tax Ct. Summary LEXIS 7 ( 2009 )

T.C. Summary Opinion 2009-6
UNITED STATES TAX COURT
JENEAN DYAN SIMMONS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10353-07S. Filed January 8, 2009.
Jenean Dyan Simmons, pro se.
Julie A. Jebe, for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect when the petition was filed.1 Pursuant to section
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect at relevant
times, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent
for any other case.
The central issue in this case is whether petitioner is
entitled to relief from joint and several liability for 1988
under section 6015(b) rather than under section 6015(c). Related
to that issue is a determination of whether a refund is due
petitioner under section 6015(g).
Background
Some of the facts have been stipulated, and they are so
found. We incorporate by reference the parties’ stipulation of
facts and accompanying exhibits.
At the time she filed the petition, Jenean Dyan Simmons
resided in Illinois.
Petitioner and her now ex-husband married in 1969 and
divorced in the 1990s. During the taxable year at issue (1988)
and for some time thereafter, petitioner, although primarily a
homemaker, worked as a secretary in her then husband’s
independent insurance sales business. Her role at the company
was solely clerical: She filled out insurance applications and
submitted them to carriers. Petitioner was not paid for this
work but instead received a biweekly allowance ($50) from her ex-
husband with which to purchase groceries and other household
items.
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The record reveals that petitioner’s ex-husband had some
real estate dealings on the side, unconnected with his insurance
business. The transactions were conducted in his name alone,
without petitioner’s knowledge or consent.
Petitioner and her ex-husband late filed a joint Federal
income tax return for 1988, reporting zero tax due. The return
–-prepared by a professional accountant at the direction of
petitioner’s ex-husband–-was subsequently examined and the amount
of tax revised. The $14,418 due stemmed from the real estate
transactions executed solely by petitioner’s ex-husband and
omitted from the late-filed return. The tax due was assessed in
May 1992.
Respondent levied on petitioner’s wages at various places of
employment in order to collect the outstanding liability,
presumably because petitioner’s ex-husband had suffered severe
health problems and a bankruptcy.
Petitioner filed a Form 8857, Request for Innocent Spouse
Relief, for 1988 on November 12, 2002.2 Although this request
was ultimately granted, respondent initially denied the request
as untimely. See, e.g., sec. 6015(b)(1)(E). Petitioner refiled
2
Although petitioner may have made a request for relief
under sec. 6013(e) in 1994, the first complete and definitive
request for innocent spouse relief and claim included in the
record was the Form 8857 filed in 2002.
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her request on April 15, 2006,3 and, in early 2007, petitioner
was granted full and complete relief from the 1988 liability
under section 6015(c). Respondent denied petitioner’s request
for relief under section 6015(b), determining that she “knew or
had reason to know” of her husband’s business dealings giving
rise to the understatement because petitioner signed the return
and had been employed by her ex-husband’s insurance business.
Because petitioner already paid some portion of the 1988
liability before being granted relief, she requested a refund of
the amount paid.4 Respondent denied the request as refunds are
not permitted when relief is granted under section 6015(c). See
sec. 6015(g)(3); cf. sec. 6015(g)(1) (permitting the possibility
of refund when relief is granted under sec. 6015(b)).
The central issue before us is whether petitioner is
entitled to relief from joint and several liability under section
6015(b). Because we decide that she is, we must also address
whether a refund is due petitioner under section 6015(g).
3
In 2004, this Court held that it was inequitable to
require that a taxpayer file a request for innocent spouse relief
within 2 years of the beginning of collection activity when the
collection notice did not inform the taxpayer of his or her right
to seek innocent spouse relief. See McGee v. Commissioner, 123
T.C. 314 (2004).
4
Petitioner requested a refund of $21,237.68.
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Discussion
A. Relief From Joint and Several Liability
Section 6015 applies to any liability for tax arising after
July 22, 1998, and to any liability for tax arising on or before
July 22, 1998, but remaining unpaid as of such date. Internal
Revenue Service Restructuring and Reform Act of 1998 (RRA 1998),
Pub. L. 105-206, sec. 3201(g), 112 Stat. 740. Except as
otherwise provided in section 6015, the taxpayer bears the burden
of proving his or her entitlement to relief under section 6015.
Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), affd.
101 Fed. Appx. 34 (6th Cir. 2004).
Generally, married taxpayers may elect to file a joint
Federal income tax return. Sec. 6013(a). After making the
election, each spouse is jointly and severally liable for the
entire tax due. Sec. 6013(d)(3); see sec. 1.6013-4(b), Income
Tax Regs. Section 6015 provides three avenues for relief from
that liability (often referred to as innocent spouse relief) to a
taxpayer who has filed a joint return: (1) Section 6015(b)
allows relief for understatements of tax attributable to certain
erroneous items on a return; (2) section 6015(c) provides relief
for a portion of an understatement of tax to taxpayers who are
separated or divorced; and (3) section 6015(f) more broadly
confers on the Secretary discretion to grant equitable relief to
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taxpayers who otherwise do not qualify under section 6015(b) or
(c). See also sec. 6015(e).
Section 6015(c) relief (which petitioner was granted) allows
for proportionate tax relief (if a timely election is made)
through allocation of the deficiency between individuals who
filed a joint return and are no longer married, are legally
separated, or have been living apart for a 12-month period.
Generally, this avenue of relief allows a spouse to elect to be
treated as if a separate return had been filed. Rowe v.
Commissioner, T.C. Memo. 2001-325. Here, the entire
understatement was attributable to petitioner’s ex-husband.
Although respondent chose to grant petitioner relief under
section 6015(c) for 1988, relief under section 6015(b) would have
been more appropriate. Section 6015(b) provides full or
apportioned relief from joint and several liability for tax
(including interest, penalties, and other amounts) to the extent
that such liability is attributable to an understatement of tax.
To be eligible for relief, the requesting spouse must establish
that in signing the return, he or she “did not know, and had no
reason to know” of the understatement. Sec. 6015(b)(1)(C), (2).
Petitioner sufficiently established both that she had no
knowledge of the understatement and that she had no reason to
know of the understatement, for 1988.
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Although petitioner did sign the joint return, she had no
involvement with its preparation, and was not privy to any of the
details that comprised the return. She signed the return simply
because she was married during the taxable year. Further, the
fact that she worked at her ex-husband’s insurance company
filling out insurance applications does not dictate that she had
reason to know of his unrelated real estate activities, or that
she knew (or had reason to know) of those real estate activities
sufficiently to say that she should have known about the
understatement of tax stemming from them. Petitioner was not
paid for her work at the insurance agency, nor was she given
meaningful access to (much less a say in) her family’s financial
affairs; petitioner’s ex-husband merely gave her a modest
allowance. Petitioner did not know about the understatement, nor
did she have reason to. Respondent’s refusal to grant relief
under section 6015(b) was inappropriate under the circumstances.
B. The Refund Amount
Section 6015(g) governs the allowance of credits and refunds
in cases where a taxpayer is granted relief under section 6015.
Any refund available to a taxpayer is subject to limitations
imposed by section 6511, 6512(b), 7121, or 7122. The only
limitation applicable to this case is section 6511.5
5
Sec. 6512(b) limits the amount of a refund in a
deficiency proceeding, sec. 7121 applies to cases involving
(continued...)
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Section 6511 generally limits the amount of a refund to
amounts paid within 3 years from the time the return is filed or
2 years from the time the tax was paid, whichever period expires
later. Section 6511(b)(2)(B) provides that if a claim is not
filed within the 3-year period specified in section 6511(a), any
refund should not exceed the amount of tax paid in the 2 years
immediately preceding the filing of the refund claim.
A claim for a tax refund must inform the IRS that a claim
for a refund is being asserted, detail the ground for the refund,
and provide sufficient facts so the IRS can adequately examine
the merits of the claim. See, e.g., Washington v. Commissioner,
120 T.C. 137, 160 (2003) (citing Chicago Milwaukee Corp. v.
United States, 40 F.3d 373, 375 (Fed. Cir. 1994)); see also sec.
301.6402-2(b)(1), Proced. & Admin. Regs. In this case,
petitioner’s refund claim was made at the time she filed the
first Form 8857 on November 12, 2002. Accordingly, any potential
refund would be limited to payments made on or after November 12,
2000.
At trial, respondent argued that any refund to petitioner
should be limited to payments made up until the date of her
request for innocent spouse relief, i.e., November 12, 2002.
That said, respondent acknowledged on brief that it would be more
5
(...continued)
closing agreements, and sec. 7122 applies to cases involving
compromises.
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appropriate to refund payments made during the 2 years preceding-
-as well as all payments made after-–the filing of petitioner’s
request for innocent spouse relief. See, e.g., Washington v.
Commissioner, supra at 162; Rivera v. Commissioner, T.C. Memo.
2005-33. Therefore, any amounts paid by petitioner after
November 12, 2000, on the 1988 liability should be eligible for a
refund.
Given our holding that petitioner is eligible for relief
under section 6015(b), petitioner is entitled to a refund
pursuant to section 6015(g).
At trial, respondent stated that petitioner would be
entitled to a refund of $5,342. In contrast, in posttrial
briefs, respondent stated that petitioner had provided “copies of
additional checks not previously considered by respondent” and
that, on the basis of this information, petitioner would be
entitled to a refund of $3,779. The Court does not understand
why petitioner’s refund would have decreased in view of the fact
that respondent conceded that payments from a longer time period
are eligible for refund and that petitioner provided respondent
with additional documentation. But it is clear that a refund is
due petitioner.
Conclusion
For the reasons discussed above, petitioner is entitled to
relief from joint and several liability for 1988 under section
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6015(b). Accordingly, petitioner is entitled to a refund under
section 6015(g).
To reflect the proper amount of that refund,
Decision will be entered
under Rule 155.