Rogers v. Comm'r of Internal Revenue

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-3358
FRANCES L. ROGERS,
Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
____________________
Appeal from the United States Tax Court.
No. 15306-15 — Kathleen Kerrigan, Judge.
____________________
ARGUED OCTOBER 29, 2018 — DECIDED NOVEMBER 19, 2018
____________________
Before BAUER, EASTERBROOK, and SCUDDER, Circuit Judges.
SCUDDER, Circuit Judge. A married couple’s choice to file a
joint federal income tax return results in both individuals as-
suming full liability for any owed tax. Frances Rogers and her
husband John did so for 2004. When the Internal Revenue Ser-
vice subsequently found the return deficient, the Rogerses
pushed back, ultimately took the IRS to trial, and lost. Frances
Rogers, a former teacher with an MBA, doctorate, and law de-
gree, attended the trial. Three years later, and facing a sub-
stantial tax deficiency and related penalties, Mrs. Rogers
2 No. 17-3358
sought so-called innocent spouse relief under the Internal
Revenue Code. The Tax Court rejected the claim, finding that
Mrs. Rogers’s meaningful participation in the trial precluded
her from after-the-fact seeking to avoid responsibility for
those liabilities.
The IRS brought its concerns with the 2004 tax return to
the Rogerses’ attention through the issuance of a notice of de-
ficiency in December 2009. The notice informed them that
they owed an additional $488,177 in income taxes and un-
derreporting penalties of $138,732. Mrs. Rogers and her hus-
band responded by challenging the Service’s position in Tax
Court.
In 2012 a trial ensued to resolve the disputed tax liability.
John Rogers, a Harvard-educated tax lawyer, represented
himself and his wife at trial. For her part, and although not
testifying at trial or otherwise presenting oral argument,
Frances Rogers attended the entire trial and sat at the table
reserved for taxpayer petitioners.
In July 2014 the Tax Court ruled in the IRS’s favor and or-
dered the Rogerses to pay an income tax deficiency of
$207,942 and related penalties of $77,868. Congress has made
that liability joint and several. See 26 U.S.C. § 6013(d). On ap-
peal we affirmed the Tax Court’s decision. See Rogers v.
Comm’r, No. 15-3678, slip op. (7th Cir. Nov. 3, 2016). At no
point during the proceedings in the Tax Court did Mrs. Rog-
ers (or her husband as her counsel) raise an innocent spouse
claim under 26 U.S.C. § 6015.
In June 2015—three years after the trial that ended with
the adverse ruling—Mrs. Rogers petitioned the Tax Court for
innocent spouse relief under 26 U.S.C. § 6015(b) and (f). But
No.17-3358 3
Congress has chosen to permit such relief only if the peti-
tioner has not “participated meaningfully in [the] prior pro-
ceeding”—here the 2012 trial. Id. at § 6015(g)(2). In this way,
Congress has implemented a variation of res judicata applica-
ble to claims for innocent spouse relief pursued after a prior
proceeding has reached finality and resolved a taxpayer’s lia-
bility.
While the Internal Revenue Code does not delineate what
constitutes meaningful participation for purposes of innocent
spouse relief, courts evaluate the totality of circumstances to
measure the extent of a taxpayer’s involvement and engage-
ment in the prior proceeding. See Haag v. Shulman, 683 F.3d
26, 31 (1st Cir. 2012). Whether Mrs. Rogers meaningfully par-
ticipated in the 2012 trial is a question of fact, which we re-
view for clear error. See Freda v. Comm’r, 656 F.3d 570, 573 (7th
Cir. 2011).
The Tax Court held that Mrs. Rogers failed to carry her
burden of demonstrating she qualified for innocent spouse re-
lief. The bottom line for the Tax Court was that Mrs. Rogers’s
contention that she lacked knowledge of business and finan-
cial matters, including complex tax matters, and otherwise
did not understand what transpired during the 2012 trial
lacked credibility. Section 6015(g)(2), the Tax Court reasoned,
does not afford innocent spouse relief to individuals who
feign ignorance or choose to remain willfully blind to their
own tax predicament. Nor, the Tax Court underscored, did
Congress intend to afford such relief to someone like Mrs.
Rogers who had every opportunity to raise her claim during
the 2012 trial.
On appeal Mrs. Rogers contends that a disclosure viola-
tion by the IRS should have precluded the Tax Court from
4 No. 17-3358
considering the Commissioner’s argument that she was
barred from seeking innocent spouse relief. As Mrs. Rogers
would have it, the IRS was bound under provisions in its In-
ternal Revenue Manual to notify her before the 2012 trial of
her right to request innocent spouse relief. That it failed to do
so, she contends, means that the Tax Court should not have
permitted the Service to invoke the meaningful participation
bar in § 6015(g)(2).
We cannot agree. Even assuming that Mrs. Rogers could
establish that she did not receive a particular disclosure, she
has identified no authority that a disclosure shortcoming pre-
cluded the Service from taking the position that she was not
entitled to innocent spouse relief. See Matter of Carlson, 126
F.3d 915, 922 (7th Cir. 1997) (explaining that the “[p]rocedures
in the Internal Revenue Manual are intended to aid in the in-
ternal administration of the IRS; they do not confer rights on
taxpayers”). This argument need not detain us further.
Mrs. Rogers’s position on the merits fares no better. In re-
viewing her petition for innocent spouse relief, the Tax Court
found substantial portions of her testimony to defy reality
and lack credibility. The Tax Court did not its mince its words
on this score:
 “Despite having an M.B.A. and a J.D. and having com-
pleted multiple courses in taxation petitioner contends
that she has ‘no understanding’ of items and transac-
tions reported on their joint returns, which were the
subject of the 2004 deficiency case.”
 “On her Form 8857 and in her testimony petitioner
portrays herself as having a near complete lack of
knowledge or sophistication with respect to business
No.17-3358 5
and financial matters. For example, she states that be-
fore 2009 she ‘was not capable of understanding a
checking account or credit card statement’ and that she
still ‘is unable to understand basic financial state-
ments.’”
 “Petitioner’s testimony about the extent of her igno-
rance is not credible.”
 “We do not find it credible that she was unaware of the
legal implications of being a named party in the 2004
deficiency case.”
 “If, as she contends, she truly had ‘no idea’ about the
matters being considered, then she could and should
have consulted with her attorney to clarify any misun-
derstanding.” Instead, “[s]he chose to do nothing.”
The Tax Court stood on solid ground when rejecting Mrs.
Rogers’s position. See Frierdich v. Comm’r, 925 F.2d 180, 185
(7th Cir. 1991) (explaining that the Tax Court is not required
to accept a taxpayer’s testimony as absolute fact). Credibility
matters. This principle applies with particular force where, as
here, the taxpayer’s testimony is self-serving and at odds with
her education and experience.
The Tax Court also found that Mrs. Rogers’s participation
through her counsel, an experienced tax attorney, in the prior
Tax Court proceedings indicated she participated meaning-
fully. Based on our review of the record, we cannot say any of
these findings reflect clear error.
Accordingly, we AFFIRM.