Evelyn B. Block v. Commissioner

120 T.C. No. 4UNITED 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.
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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.
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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...)
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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...)
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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).
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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)).
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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).
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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”.
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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.
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“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.
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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
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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.