DocketNumber: No. 27181-85
Judges: "Nims, Arthur L."
Filed Date: 5/18/2000
Status: Precedential
Modified Date: 11/14/2024
2000 U.S. Tax Ct. LEXIS 30">*30 An order denying respondent's motion will be issued.
Ps T and J filed a joint Federal income tax return for the
taxable year 1981, and R issued a notice of deficiency for
taxes, additions to tax, and interest related thereto. Ps filed
a joint petition for redetermination with this Court, and J
later amended the petition to assert a claim for innocent spouse
relief. Subsequently, J and R entered into a stipulation in
which J conceded liability for the deficiencies determined by R
but preserved her right to pursue innocent spouse relief. T and
R then signed a similar stipulation settling all issues
pertaining to T's tax liabilities for the 1981 year. At a later
date, J and R also executed a stipulated settlement granting J
complete relief from joint and several liability pursuant to
stipulated decision based on these agreements, R filed a motion
for entry of decision. T contends that provisions of the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 2000 U.S. Tax Ct. LEXIS 30">*31 3201, 112 Stat. 685, 734, confer upon
him, as the nonelecting spouse, a right to litigate in challenge
of a decision by R to grant relief under
the electing spouse.
HELD: T, the nonelecting spouse, should be afforded an
opportunity to litigate the decision by R to grant relief from
joint and several liability to J, the electing spouse.
HELD, FURTHER, respondent's motion for entry of decision
will be denied.
114 T.C. 354">*355 OPINION
NIMS, JUDGE: This matter is before the Court on respondent's motion for entry of decision. Broadly stated, the issue to be resolved is whether objection by petitioner Thomas Corson to respondent's settlement with petitioner Judith Corson, granting her relief under
Unless otherwise indicated, all section references are to sections of the Internal Revenue Code in effect for the relevant years, and all Rule references are to the Tax Court Rules of Practice and Procedure.
BACKGROUND
Thomas and Judith Corson filed a joint Federal income tax return for their 1981 taxable year. (For convenience, Thomas Corson and Judith Corson will hereinafter be referred to collectively as petitioners and individually as Thomas and Judith, respectively.) Petitioners subsequently separated in 1983 and divorced in 1984. A joint notice of deficiency was issued by respondent to petitioners on April 12, 1985, determining a tax deficiency of $ 21,711 and additions to tax pursuant to section 6653(a)(1) and (2). Respondent further determined that the deficiency constituted a substantial underpayment attributable to tax motivated transactions, thus rendering applicable the provisions for increased interest under section2000 U.S. Tax Ct. LEXIS 30">*33 6621(d). The $ 21,711 deficiency resulted largely from disallowance of losses relating to petitioners' investments in one of a group of tax shelter limited partnerships. In July of 1985, petitioners filed with this Court a joint petition contesting the notice of deficiency. Both at that time resided in the State of California.
A test case involving the group of tax shelter partnerships was thereafter litigated, and investment losses were held to be nondeductible. See
On June 11, 1996, Judith, now represented by separate counsel, filed a motion to amend the 1985 petition to assert her entitlement to innocent spouse relief under former
114 T.C. 354">*357 Then, in November of 1996, Judith and respondent entered into a stipulation resolving all issues with2000 U.S. Tax Ct. LEXIS 30">*34 respect to Judith except that of innocent spouse relief. The settlement stated that, without considering the innocent spouse provisions of
In early 1998, respondent's Appeals Office began consideration of Judith's claim for innocent spouse relief. A letter to Judith dated July 8, 1998, communicated, in part, the following:
This letter is to inform you that all the facts and
circumstances that serve as the basis for your claim for IRC
6013(e) "Innocent Spouse" relief were carefully considered. In
addition, this office served notice of the claim on Thomas
Corson, and requested that he furnish any information relevant
to a determination as to whether or not such relief would be
appropriate. In response, Mr. Corson has furnished information
that must be given due consideration in this matter.
The Appeals officer then concluded: "It would2000 U.S. Tax Ct. LEXIS 30">*35 be my recommendation that the requirements of the law are not met and that Innocent Spouse relief could not be approved."
On July 22, 1998, the Restructuring Act was enacted. The statute, among other things, revised and expanded the relief available to spouses filing joint returns, and Judith's attorney informed the Appeals officer that Judith elected to have the newly promulgated
Then, in November of 1998, Thomas and respondent entered into a stipulation settling all issues with respect to Thomas. Like the earlier settlement with Judith, this stipulation reflected that an income tax deficiency of $ 21,711 was due from Thomas for the 1981 taxable year, with increased interest under section 6621(c), but that he was not liable for additions to tax under section 6653(a)(1) or (2).
Also in late 1998, respondent's Appeals Office denied Judith's request for complete relief from joint and several liability, and the case was released to the jurisdiction of the Internal Revenue Service District Counsel. The matter was thereafter calendared for trial beginning on May 17, 1999, in Los Angeles, California. 2000 U.S. Tax Ct. LEXIS 30">*36 Prior to the scheduled court appearance, Judith and respondent entered into a stipulation of settlement agreeing that Judith qualified for relief under
DISCUSSION
As a general rule,
Prior to the enactment of the Restructuring Act,
Cases. --
(1) In general. -- Under regulations prescribed by the
Secretary, if --
114 T.C. 354">*358 (A) a joint return has been made under this
section for a taxable year,
(B) on such return there is a substantial
understatement of tax attributable to grossly
erroneous items of one spouse,
(C) the other spouse establishes that in signing
the return he or she did not know, and had no reason
to know, that there was such substantial
understatement, and
(D) taking into account all the facts and
circumstances, it is inequitable to hold the other
spouse liable for the deficiency in tax for such
taxable year attributable to such substantial
understatement,
then the other spouse shall be relieved of liability for
tax (including2000 U.S. Tax Ct. LEXIS 30">*38 interest, penalties, and other amounts) for
such taxable year to the extent such liability is
attributable to such substantial understatement.
The section then went on to impose an additional requirement that the understatement exceed a specified percentage of the innocent spouse's income in order for relief to be available. See
Taxpayers desiring to claim entitlement to the relief afforded by
Against this statutory and procedural background, the question of whether one spouse had a right to challenge by litigation the Commissioner's decision to grant relief to the other spouse was answered in the negative. See
In deciding
A similar viewpoint was taken by the Court of Appeals for the Ninth Circuit, to which appeal in the instant case would normally lie. See
Consequently, under prior law it is clear that Thomas's objection here would not furnish grounds for denying respondent's motion. We thus turn to whether changes wrought by the Restructuring Act demand a different result.
B. PRESENT INNOCENT SPOUSE2000 U.S. Tax Ct. LEXIS 30">*41 LAW
The Restructuring Act revised and expanded the relief available to joint filers by striking subsection (e) from
Whereas
Subsections (a), (e), and (g) of
RETURN.
(a) In General. -- Notwithstanding
(1) an individual who has made a joint return may
elect to seek relief under the procedures prescribed under
subsection (b); and
(2) if such individual is eligible to elect the
application of subsection (c), such individual may, in
addition to any election under paragraph (1), elect to
limit such individual's liability for any deficiency with
respect to such joint return in the manner prescribed under
subsection (c).
Any determination under this section shall be made without
regard to community2000 U.S. Tax Ct. LEXIS 30">*43 property laws.
* * * * * * *
(e) Petition for Review by Tax Court. --
(1) In general. -- In the case of an individual who
elects to have subsection (b) or (c) apply --
(A) In general. -- 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 during the 90-day period beginning
on the date on which the Secretary mails by certified
or registered mail a notice to such individual of the
Secretary's determination of relief available to the
individual. Notwithstanding the preceding sentence, an
individual may file such petition at any time after
the date which is 6 months after the date such
election is filed with the Secretary and before the
2000 U.S. Tax Ct. LEXIS 30">*44 close of such 90-day period.
* * * * * * *
(4) Notice to other spouse. -- The Tax Court shall
establish rules which provide the individual filing a joint
return but not making the 114 T.C. 354">*361 election under subsection (b) or
(c) with adequate notice and an opportunity to become a
party to a proceeding under either such subsection.
* * * * * * *
(g) Regulations. -- The Secretary shall prescribe such
regulations as are necessary to carry out the provisions of this
section, including --
* * * * * * *
(2) regulations providing the opportunity for an
individual to have 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.
Additionally, the Restructuring Act directed the Secretary to develop, 2000 U.S. Tax Ct. LEXIS 30">*45 within 180 days from the date of enactment, a form for use by taxpayers in applying for relief under
To date, this Court has established
The primary basis for Thomas' objection to respondent's motion for entry of decision is that
Thomas further asserts that he was denied an opportunity to meaningfully participate in the administrative process, as is required under
Conversely, respondent and Judith contend that the Restructuring Act does not confer upon the nonelecting spouse an independent right to litigate or contest a grant of relief under
With respect to
We conclude, for the reasons explained below, that concerns raised by promulgation of the Restructuring Act counsel us to deny respondent's motion for entry of decision.
As indicated above, the ultimate issue in this case is whether Thomas' objection is a sufficient basis for denial of respondent's motion. In addressing this question, we must determine what bearing, if any, the Restructuring Act has on the right of a nonelecting spouse to litigate a grant of
Under present law, there exist at least two jurisdictional bases upon which this Court may review a claim for relief from joint and several liability. Such a claim may be raised as an affirmative defense in a petition for redetermination of a deficiency filed pursuant to
Subsequent to the statute's enactment, we held in
A second basis upon which we may exercise jurisdiction to2000 U.S. Tax Ct. LEXIS 30">*50 decide entitlement to relief from joint and several liability is that established in
Here, Judith's claim for innocent spouse relief was raised as an amendment to petitioners' original petition for deficiency 114 T.C. 354">*364 redetermination. Although no subsequent filing was made to substitute a claim for relief under
As a threshold matter, we note that "All concessions, including stipulated settlement agreements, are subject to the Court's discretionary review" and2000 U.S. Tax Ct. LEXIS 30">*51 may be rejected in the interests of justice.
In the context of a stand2000 U.S. Tax Ct. LEXIS 30">*52 alone proceeding, the right to which the nonelecting spouse is entitled by the terms of
While we do not have before us a case for determining the precise contours of the rights granted to a nonelecting spouse under
114 T.C. 354">*366 To reflect the foregoing,
An order denying respondent's motion will be issued.
Estate of Silvio Ravetti v. United States ( 1994 )
ra-hildebrand-and-dorothy-a-hildebrand-wahl-v-commissioner-of-internal ( 1994 )
Catherine Nunez v. Cir ( 2015 )
Ronald Arthur Raschke and Susannah Juliette Raschke, ... ( 2014 )
KLING v. COMMISSIONER ( 2001 )
EXEMPTION TRUST v. COMMISSIONER ( 2001 )
Michael Vetrano and Patricia Vetrano v. Commissioner ( 2001 )
Barbara Drake v. Commissioner ( 2004 )
Kathy A. King v. Commissioner ( 2000 )
Livingston v. Commissioner ( 2000 )
Peter D. Adkison v. Commissioner ( 2007 )
Kelly Sue Tipton, and Darren L. Darilek, Intervenor v. ... ( 2006 )
Suzanne L. Porter, a.k.a. Suzanne L. Holman v. Commissioner ( 2008 )