Diana Van Arsdalen, f.k.a. Diana Murray v. Commissioner

123 T.C. No. 7UNITED STATES TAX COURT
DIANA VAN ARSDALEN, f.k.a. DIANA MURRAY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1195-04. Filed July 22, 2004.
P filed with the Court a petition for
determination of relief from joint and several
liability on a joint return. R issued to P’s former
spouse (M) a notice of filing petition and right to
intervene (the notice). See Rule 325, Tax Court Rules
of Practice and Procedure. P filed with the Court a
motion to strike the notice insofar as the notice
stated that M would be permitted to intervene solely to
challenge P’s entitlement to relief under sec. 6015,
I.R.C. M lodged with the Court a notice of
intervention which stated that M intended to support
P’s claim for relief under sec. 6015(f), I.R.C. R
opposed P’s motion to strike.
Held: Neither sec. 6015, I.R.C., nor Rule 325,
Tax Court Rules of Practice and Procedure, precludes a
nonelecting spouse from intervening in a proceeding
before the Court for the purpose of supporting the
electing spouse’s claim for relief.
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Held, further: P’s motion to strike will be
granted in that the restrictive language in R’s notice
is deemed stricken, and M’s notice of intervention will
be filed.
Jack Barry Schiffman, for petitioner.
Emly B. Berndt, for respondent.
OPINION
DAWSON, Judge: This case was assigned to Chief Special
Trial Judge Peter J. Panuthos, pursuant to the provisions of
section 7443A(b)(5) and Rules 180, 181, and 183.1 The Court
agrees with and adopts the opinion of the Chief Special Trial
Judge, which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
PANUTHOS, Chief Special Trial Judge: This matter is before
the Court on petitioner’s motion to strike. As explained in
detail below, we shall grant petitioner’s motion.
Background
Petitioner filed joint Federal income tax returns with her
then husband, Stanley David Murray (Mr. Murray), for the taxable
years 1992 to 1996.
1
Section references are to sections of the Internal Revenue
Code, as amended, and Rule references are to the Tax Court Rules
of Practice and Procedure.
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On January 18, 2002, respondent issued to petitioner a
notice of determination denying her claim for relief from joint
and several liability for the taxable years 1992 to 1995. The
notice stated that petitioner was denied relief under section
6015(f). On October 23, 2003, respondent issued to petitioner a
notice of determination denying her claim for relief from joint
and several liability for the taxable years 1992 to 1996. The
notice stated that petitioner was denied relief under section
6015(b), (c), and (f). On January 21, 2004, petitioner filed
with the Court a petition for determination of relief from joint
and several liability on a joint return challenging respondent’s
notice of determination dated October 23, 2003.2
On March 8, 2004, respondent filed with the Court a notice
of filing petition and right to intervene (the notice). The
notice stated that respondent had informed Mr. Murray of the
filing of the petition and of his right to intervene in the case.
The notice stated in pertinent part: “Under T.C. Rule 325(b),
Stanley D. Murray has a right to intervene in this matter for the
sole purpose of challenging petitioner’s entitlement to relief
from joint and several liability.”
On March 15, 2004, petitioner filed a Motion to strike the
notice on the ground that respondent “misinterprets and/or
misconstrues Tax Court Rule 325(b)” insofar as the notice stated
2
At the time the petition was filed, petitioner resided in
Scottsdale, Arizona.
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that Mr. Murray would be permitted to intervene in the case for
the sole purpose of challenging petitioner’s entitlement to
relief from joint and several liability.3
On April 1, 2004, Mr. Murray lodged with the Court a notice
of intervention. In the notice of intervention, Mr. Murray
stated that he “seeks to intervene for the sole purpose of
offering evidence in support of the Petitioner’s right and
entitlement to equitable relief under IRC section 6015(f) and
will not be offering any evidence to challenge Petitioner’s right
to equitable relief under IRC section 6015(f).”
This matter was called for hearing at the Court’s motions
session held in Washington, D.C. Counsel for respondent appeared
at the hearing and offered argument in opposition to petitioner’s
Motion to strike. Although no appearance was entered by or on
behalf of petitioner at the hearing, petitioner filed with the
Court a written statement pursuant to Rule 50(c).
Discussion
Section 6013(d)(3) provides that if a husband and wife file
a joint Federal income tax return, “the tax shall be computed on
the aggregate income and the liability with respect to the tax
shall be joint and several.” However, section 6015(a) provides
3
On Mar. 16, 2004, the Court denied petitioner’s motion to
strike. On Mar. 18, 2004, petitioner filed a motion to vacate
the Court’s Order denying her motion to strike. By Order dated
Mar. 31, 2004, we granted petitioner’s motion to vacate, vacated
and set aside our order denying petitioner’s motion to strike,
and set petitioner’s motion to strike for hearing.
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that, notwithstanding section 6013(d)(3), an individual who has
made a joint return may elect to seek relief from joint and
several liability arising from that return. See Cheshire v.
Commissioner, 115 T.C. 183, 188-189 (2000), affd. 282 F.3d 326(5th Cir. 2002).
Congress vested the Tax Court with jurisdiction to review
the Commissioner’s denial of a taxpayer’s election to claim
relief from joint and several liability on a joint return under
specified circumstances. See King v. Commissioner, 115 T.C. 118,
121-122 (2000); Corson v. Commissioner, 114 T.C. 354, 363-364
(2000). A taxpayer may seek relief from joint and several
liability on a joint return by raising the matter as an
affirmative defense in a petition for redetermination invoking
the Court’s deficiency jurisdiction under section 6213(a). See
Butler v. Commissioner, 114 T.C. 276, 287-289 (2000). In
addition, a taxpayer may file a so-called stand-alone petition
seeking relief from joint and several liability on a joint return
where the Commissioner has issued a final determination denying
the taxpayer’s claim for such relief or the Commissioner has
failed to rule on the taxpayer’s claim within 6 months of its
filing. See sec. 6015(e)(1); Mora v. Commissioner, 117 T.C. 279(2001); Fernandez v. Commissioner, 114 T.C. 324, 329 (2000).
Finally, a taxpayer may request relief from joint and several
liability on a joint return in a petition for review of a lien or
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levy action. See secs. 6320(c), 6330(c)(2)(A)(i). The petition
in this case was filed as a stand-alone petition.
Section 6015(e)(4) provides that the nonelecting or “other
spouse” is entitled to notice of a stand-alone proceeding
involving a claim for relief under section 6015. The section
provides in pertinent part that the “Tax Court shall establish
rules which provide the individual filing a joint return but not
making the election * * * with adequate notice and an opportunity
to become a party to a proceeding”.
Before adopting formal Rules as directed in section
6015(e)(4), we addressed the scope of a nonelecting spouse’s
right to intervene in a section 6015 case in both Corson v.
Commissioner, supra, and King v. Commissioner, supra. We will
briefly summarize those Opinions before proceeding with our
analysis.
In Corson the taxpayers filed with the Court a joint
petition for redetermination challenging a joint notice of
deficiency for the taxable year 1981. After obtaining separate
counsel, the electing spouse filed an amendment to the petition
asserting her entitlement to relief from joint and several
liability under former section 6013(e). After both taxpayers
entered into separate stipulations with the Commissioner
conceding a specific tax deficiency and the application of
increased interest under section 6621(c), the Commissioner
entered into a further stipulation with the electing spouse
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granting her relief from joint and several liability under
section 6015(c). Upon learning of the second stipulation, the
nonelecting spouse declined to execute a stipulated decision for
submission to the Court, prompting the Commissioner to file a
motion for entry of decision. In denying the Commissioner’s
motion, the Court stated:
Section 6015(e)(1) is structured so that
administrative consideration (or failure to rule) will
precede any court action when innocent spouse status is
raised in a stand-alone petition. Section 6015(g)(2),
in turn, contemplates an opportunity for the
nonelecting spouse to participate at the administrative
level. Section 6015(e)(4) then speaks of a similar
chance for participation should the matter move from an
administrative to a judicial forum. Hence, as a
general premise, we believe that these subsections,
when read together, reveal a concern on the part of the
lawmakers with fairness to the nonelecting spouse and
with providing him or her an opportunity to be heard on
innocent spouse issues. Presumably, the purpose of
affording to the nonelecting spouse an opportunity to
be heard first in administrative proceedings and then
in judicial proceedings is to ensure that innocent
spouse relief is granted on the merits after taking
into account all relevant evidence. After all, easing
the standards for obtaining relief is not equivalent to
giving relief where unwarranted. [Corson v.
Commissioner, supra at 365.]
Although we did not attempt to determine “the precise contours of
the rights granted to a nonelecting spouse under section
6015(e),” our denial of the Commissioner’s motion for entry of
decision had the effect of allowing the nonelecting spouse his
day in Court. Id.
In King v. Commissioner, supra, the Court described the
circumstances under which a nonelecting spouse would be permitted
to intervene in respect of an electing spouse’s claim for relief
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under section 6015. In King, the Commissioner issued separate
notices of deficiency to the taxpayers, but only the electing
spouse filed a petition for redetermination with the Court. The
sole issue raised in the electing spouse’s petition was her claim
for relief from joint and several liability under former section
6013(e). While the case was pending, Congress repealed former
section 6013(e) and enacted section 6015. Thereafter, the
Commissioner filed with the Court a report stating that the
Commissioner concluded that the electing spouse qualified for
relief under section 6015(b). The report further stated that the
nonelecting spouse objected to relief and that the Commissioner
believed that the nonelecting spouse should be notified of the
action and be given an opportunity to participate in the
proceeding. After the Court directed service of a copy of the
petition and a copy of the Court’s then-interim Rule 325 on the
nonelecting spouse, the nonelecting spouse filed with the Court a
motion for leave to file notice of intervention (embodying notice
of intervention). The Court subsequently granted the nonelecting
spouse’s motion, stating:
We hold that whenever, in the course of any
proceeding before the Court, a taxpayer raises a claim
for relief from joint liability under section 6015, and
the other spouse (or former spouse) is not a party to
the case, the Commissioner must serve notice of the
claim on the other individual who filed the joint
return for the year(s) in issue. The notice shall
advise such other individual of his or her opportunity
to file a notice of intervention for the sole purpose
of challenging the petitioning individual’s entitlement
to relief from joint liability pursuant to section
6015. Such notice shall include a copy of Interim Rule
325. The Commissioner shall at the same time file with
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the Court a certification of such notice or, in a
stand-alone case brought under sec. 6015(e)(1)(A),
state in the answer that such notice has been provided.
See Interim Rule 324(a)(2). Any intervention shall be
made in accordance with the provisions of Interim Rule
325(b). [King v. Commissioner, 115 T.C. at 125.]
After the filing of the Corson and King Opinions, the Court
adopted new Rule 325,4 which states:
RULE 325. NOTICE AND INTERVENTION
(a) Notice: On or before 60 days from the date of
the service of the petition, the Commissioner shall
serve notice of the filing of the petition on the other
individual filing the joint return and shall
simultaneously file with the Court a copy of the notice
with an attached certificate of service. The notice
shall advise the other individual of the right to
intervene by filing a notice of intervention with the
Court not later than 60 days after the date of service
on the other individual.
(b) Intervention: If the other individual filing
the joint return desires to intervene, then such
individual shall file a notice of intervention with the
Court not later than 60 days after service of the
notice by the Commissioner of the filing of the
petition, unless the Court directs otherwise. All new
matters of claim or defense in a notice of intervention
shall be deemed denied. [Fn. ref. omitted.]
In sum, new Rule 325 provides that the Commissioner shall provide
the nonelecting spouse with notice of the filing of a petition
claiming relief under section 6015 and inform the nonelecting
4
On June 30, 2003, the Court adopted amendments to its Rules
of Practice and Procedure, including new Rule 325. However, like
sec. 6015, new Rule 325 is effective with respect to actions for
determination of relief from joint and several liability on a
joint return commenced with respect to any liability for tax
arising after July 22, 1998, and any liability for tax arising on
or before such date but remaining unpaid as of such date. See
120 T.C. 479, 714 n.1.
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spouse of his or her right to intervene in the case.5 Notably,
new Rule 325 does not by its terms impose any substantive
restriction on the nonelecting spouse’s right to intervene in
support of a claim for relief by an electing spouse.6
As previously discussed, petitioner contends that the notice
that respondent issued to Mr. Murray should be stricken because
it is inconsistent with Rule 325. Respondent counters that the
restrictive language in the disputed notice conforms with: (1)
The Court’s express statement in King v. Commissioner, supra at
124-125, that intervention should be for the sole purpose of
challenging the electing spouse’s entitlement to relief; (2) the
Court’s general approach to intervention as articulated in Estate
of Proctor v. Commissioner, T.C. Memo. 1994-208; and (3) the
approach under rule 24 of the Federal Rules of Civil Procedure.
5
It is worth noting that sec. 6015(h)(2) (formerly sec.
6015(g)) directs the Secretary to prescribe regulations providing
a nonelecting spouse with “notice of, and an opportunity to
participate in, any administrative proceeding with respect to an
election made under subsection (b) or (c) by the other individual
filing the joint return.” Pursuant to this directive, the
Secretary issued sec. 1.6015-6(a)(1), Income Tax Regs., which
states in pertinent part that, upon receipt of a claim for relief
under sec. 6015, the Internal Revenue Service must notify the
nonelecting spouse and “provide the nonrequesting spouse with an
opportunity to submit any information that should be considered
in determining whether the requesting spouse should be granted
relief from joint and several liability.”
6
The Note to new Rule 325 likewise does not restrict a
nonelecting spouse’s right to intervene by stating that such
intervention is permitted solely for the purpose of challenging
the electing spouse’s entitlement to relief. See 120 T.C. 714-
715.
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There is no direct support in the plain language of section
6015 or its legislative history for the proposition that a
nonelecting spouse’s ability to intervene in a section 6015 case
is limited to challenging the electing spouse’s entitlement to
relief. Moreover, new Rule 325 and the Notes thereto are neutral
on the point.7
As we stated in Corson v. Commissioner, 114 T.C. 354 (2000),
and King v. Commissioner, 115 T.C. 118 (2000), a nonelecting
spouse may intervene in a proceeding before the Court for the
purpose of opposing the electing spouse’s claim for relief. It
is clear that in both Corson and King the nonelecting spouse
opposed the claim for relief. Accordingly, any language
suggesting that a right of intervention is limited to challenging
a claim for relief must be read in the context of the facts of
those cases. In any event, it is a certainty that Congress did
not intend for relief to be granted under section 6015 where
otherwise unwarranted. Corson v. Commissioner, supra at 365. On
the other hand, considering that section 6015 was enacted to
provide taxpayer relief, it is equally certain that Congress did
not intend for relief to be denied where otherwise warranted. In
this regard, we believe that justice requires that the
7
The Notes of new Rule 325 include a citation of King v.
Commissioner, 115 T.C. 118 (2000), for the limited proposition
that the Commissioner is expected to serve a notice of filing
petition and right to intervene in a stand-alone, deficiency, or
other proceeding in which a claim for sec. 6015 relief has been
raised as an affirmative defense. See 120 T.C. 715.
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nonelecting spouse be permitted to intervene in administrative
and judicial proceedings under section 6015 for the purpose of
submitting any information, be it favorable or antithetical, that
is relevant to the determination whether the electing spouse is
entitled to relief from joint and several liability.
Contrary to respondent’s position, we conclude that
permitting a nonelecting spouse to intervene for the purpose of
supporting an electing spouse’s claim for relief under section
6015 is consistent with both our prior practice and principles
governing intervention under the Federal Rules of Civil
Procedure.
Rule 24(a) of the Federal Rules of Civil Procedure provides:
Rule 24. Intervention
(a) Intervention of Right. Upon timely application
anyone shall be permitted to intervene in an action:
(1) when a statute of the United States confers an
unconditional right to intervene; or (2) when the
applicant claims an interest relating to the property
or transaction which is the subject of the action and
the applicant is so situated that the disposition of
the action may as a practical matter impair or impede
the applicant’s ability to protect that interest,
unless the applicant’s interest is adequately
represented by existing parties.
Thus, rule 24(a) of the Federal Rules of Civil Procedure permits
intervention as a matter of right if there is an unconditional
statutory right to intervene or if the applicant has a cognizable
interest in the property or transaction in dispute and his or her
interest is not adequately represented by the existing parties to
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the action. See, e.g., United States v. Mississippi, 958 F.2d
112 (5th Cir. 1992).
The answer to respondent’s argument is that section
6015(e)(4) confers on a nonelecting spouse an unconditional
statutory right to intervene within the meaning of rule 24(a)(1)
of the Federal Rules of Civil Procedure. Section 6015(e)(4)
directs the Court to “establish rules which provide the
individual filing a joint return but not making the election * *
* with adequate notice and an opportunity to become a party to a
proceeding”. The statutory language does not authorize the Court
to impose any significant substantive conditions in respect of
the nonelecting spouse’s right to intervene. Consequently, the
Court prescribed the procedures for intervention within new Rule
325 and did so without imposing any substantive conditions on the
nonelecting spouse/intervenor.
Our holding that section 6015(e)(4) confers an unconditional
statutory right to intervene within the meaning of rule 24(a)(1)
of the Federal Rules of Civil Procedure is consistent with the
holdings of courts reviewing analogous statutes. See Bhd. of
R.R. Trainmen v. Baltimore & O.R. Co., 331 U.S. 519 (1947)
(holding that 49 U.S.C. sec. 17(11) authorized the representative
of railroad employees to intervene as a matter of right in a suit
involving an order of the Interstate Commerce Commission);8
8
49 U.S.C. sec. 17(11) provided in pertinent part:
(continued...)
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O’Keefe v. N.Y. City Bd. of Elections, 246 F. Supp. 978 (S.D.N.Y.
1965) (holding that 28 U.S.C. sec. 2403(a) authorized the United
States to intervene as a matter of right in an action challenging
the constitutionality of the Voting Rights Act of 1965).9 But
see United States v. Mississippi, supra (holding that 20 U.S.C.
sec. 1717 did not provide an association with the unconditional
right to intervene in a school desegregation case);10 7C Wright &
Miller, Federal Practice & Procedure, sec. 1906, at 245 (2d ed.
1986) (suggesting that section 7424 does not provide the United
States with an unconditional right to intervene in cases
8
(...continued)
“Representatives of employees of a carrier, duly designated as
such, may intervene and be heard in any proceeding arising under
this Act affecting such employees.”
9
28 U.S.C. sec. 2403(a) provided in pertinent part:
In any action, suit or proceeding in a court of the
United States to which the United States or any agency,
officer or employee thereof is not a party, wherein the
constitutionality of any Act of Congress affecting the
public interest is drawn in question, the court shall
certify such fact to the Attorney General, and shall
permit the United States to intervene for presentation
of evidence * * * and for argument on the question of
constitutionality.
10
20 U.S.C. sec. 1717 provided in pertinent part:
A parent or guardian of a child * * * transported
to a public school in accordance with a court order * *
* may seek to reopen or intervene in the further
implementation of such court order, currently in
effect, if the time or distance of travel is so great
as to risk the health of the student or significantly
impinge on his or her educational process.
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involving a tax lien inasmuch as the provision recognizes that
the application to intervene may be denied).11
Consistent with the preceding discussion, we hold that the
portion of respondent’s notice which states that Mr. Murray may
intervene in this case only for the purpose of opposing
petitioner’s claim for relief is incorrect. Accordingly, we
shall grant petitioner’s motion to strike in that the restrictive
language in respondent’s notice, filed March 8, 2004, shall be
deemed stricken. Further, the Court will direct that Mr.
Murray’s notice of intervention be filed.
To reflect the foregoing,
An order will be issued
granting petitioner’s motion
to strike and directing that
the notice of intervention,
lodged April 1, 2004, be filed.
11
Sec. 7424 provides in pertinent part:
If the United States is not a party to a civil
action or suit, the United States may intervene in such
action or suit to assert any lien arising under this
title on the property which is the subject of such
action or suit. * * * In any case in which the
application of the United States to intervene is
denied, the adjudication in such civil action or suit
shall have no effect upon such lien.