DocketNumber: No. 17021-02
Citation Numbers: 126 T.C. 47, 2006 U.S. Tax Ct. LEXIS 4, 126 T.C. No. 4
Judges: \"Goeke, Joseph Robert\"
Filed Date: 1/19/2006
Status: Precedential
Modified Date: 1/13/2023
2006 U.S. Tax Ct. LEXIS 4">*4 P resides in a community property State. P and H filed joint tax returns for 1982, 1983, and 1984. P and H paid the reported tax liabilities. Additional tax liabilities -- i.e., understatements -- arose that were attributable to erroneous items of H (H's understatements). The parties agree that P is entitled to
126 T.C. 47">*48 OPINION
GOEKE, Judge: Respondent determined that petitioner is entitled to relief under
The parties submitted this case fully stipulated under
On July 26, 2002, respondent sent petitioner a Notice of Determination Concerning Your Request2006 U.S. Tax Ct. LEXIS 4">*6 for Relief from Joint and Several Liability Under
Tax Period(s) | Amount of relief you requested | Amount of relief we could allow | Amount of tax remaining |
12/31/1982 | $ 314 | ($ 621) | -0- |
12/31/1983 | 80,081 | 54,208 | -0- |
12/31/1984 | 132,606 | 132,601 | -0- |
On November 1, 2002, the date the petition was filed, petitioner resided in Anaheim, California. 2006 U.S. Tax Ct. LEXIS 4">*7 2 In her petition, petitioner, through her attorney, alleged that The Commissioner has apparently determined to allow Petitioner's request in full, but the Notice [of determination] does not expressly state that Petitioner's request is allowed in full, and the Notice [of determination] contains various erroneous amounts and calculations which misstate and miscalculate the amounts of relief for which Petitioner is eligible under this Court may hear the case and determine (i) that Petitioner is entitled to relief from all joint and several liability on the joint returns of Petitioner and her spouse for each of the 1982, 1983, and 1984 tax years, in the full amount of such liability that was unpaid as of July 22, 1998, and (ii) that Petitioner is further entitled to relief from all joint and several liability for interest, penalties, and other amounts attributable to such unpaid (as of July 22, 1998) liability, and (iii) that the Court grant such other and further relief to which Petitioner may be entitled.
2006 U.S. Tax Ct. LEXIS 4">*9 At trial, on January 5, 2004, the parties made a joint motion for leave to submit case under Tax Court
The parties agree that petitioner is entitled to
Petitioner and Mr. Ordlock (the Ordlocks) filed joint Federal income tax returns for the taxable years 1982, 1983, and 1984. On their returns they reported Federal income tax owed for each year. Respondent made numerous assessments for penalties, additional amounts of tax owed, and interest for the years in issue. The information most relevant to the refund issue presented includes the payments and credits applied to the Ordlocks' 1982, 1983, and 1984 taxable years, which were made from "community property" assets as defined in
The Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, for the Ordlocks' 1982 taxable year does not list their adjusted gross income or taxable income. However, the Ordlocks' 1982 tax return was filed on June 22, 1983, and reported $ 23,569 of Federal income tax owed. From April 15, 1983, through May 7, 2003, the Ordlocks made numerous payments, and respondent applied an overpayment credit to their 1982 tax liability. The payments and credits totaled $ 142,882.67.
The Ordlocks received an extension of time until August 15, 1984, to file their 1983 return. On June 6, 1984, the Ordlocks filed their 1983 return reporting $ 105,571 of Federal income tax owed. The Form 4340 for the Ordlocks' 1983 taxable year shows their adjusted gross income was $ 544,739 and taxable income was $ 400,852. From2006 U.S. Tax Ct. LEXIS 4">*11 April 15, 1984, through May 5, 1998, the Ordlocks made numerous payments, and respondent applied overpayment credits to the Ordlocks' 1983 tax liability. The payments and credits totaled $ 293,626.95.
The Ordlocks received an extension of time to file their 1984 tax return until August 15, 1985. The Ordlocks reported $ 92,787 of Federal tax income owed for 1984 on their return, which was filed May 5, 1985. The Form 4340 for the Ordlocks' 1984 taxable year shows their adjusted gross income was $ 489,194 and taxable income was $ 436,822. From April 15, 1985, through May 9, 2002, the Ordlocks made payments and respondent applied overpayment credits to their 1984 tax liability. The payments and credits totaled $ 95,645.31.
Whether petitioner is entitled to a refund 4 under
Petitioner contends that
The crux of this dispute is the application of the last sentence of (1) In general. -- Except as provided in paragraphs (2) and (3), notwithstanding any other law or rule of law (other than section 6511, 6512(b), 7121, or 7122), credit or refund shall be allowed or made to the extent attributable to the application of this section.
Petitioner's position does not focus on taxable income for the taxable years at issue, but rather on the ownership of the payments made on the joint tax liabilities over the subsequent 20 years. Petitioner asserts that
The question here is whether Congress has given us a "clear and unequivocal" intent to supplant community property law regarding payments of the type made on the Ordlocks' joint tax liability.
Our analysis begins with the language of the statute.
Congress enacted
We first2006 U.S. Tax Ct. LEXIS 4">*16 address whether a credit or refund under (2) Special rules. -- For purposes of paragraph (1) -- (A) the determination of the spouse to whom items of gross income (other than gross income from property) are attributable shall be made without regard to community property laws * * *
The House version, Internal Revenue Service Restructuring and Reform Act of 1997, H. R. 2676, 105th Cong., 1st Sess. sec. 321 (1997), of the community property laws exclusion for
The Joint Committee's explanation of the Senate's change is as follows: Items are generally allocated between spouses in the same manner as they would have been allocated had the spouses filed separate returns. The Secretary may prescribe other methods of allocation by regulation. The allocation of items is to be accomplished without regard to community property laws.
It is also noteworthy that the Senate amendments added equitable relief from joint and several liability. This is significant because equitable relief is not based on separate income computations, which were the grist of the community property waiver under former
After
In 1998, (3) Applicable rules. -- (A) Allowance of credit or refund. -- Except as provided in subparagraph (B), notwithstanding any other law or rule of law (other than section 6512(b), 7121, or 7122), credit or refund shall be allowed or made to the extent attributable to the application of subsection (b) or (f). (1) In general. -- Except as provided in paragraphs (2) and (3), notwithstanding any other law or rule of law (other than section 6511, 6512(b), 7121, or 7122), credit or refund shall be allowed or made to the extent attributable to the application of this section.
The House conference report indicates that the reason for the 2000 technical correction was as follows: Allowance of refunds. -- The current placement in the statute * * * may inappropriately suggest that the provision applies only to the United States Tax Court, whereas it was intended to apply administratively and in all courts. The bill clarifies this by moving the provision to its own subsection. [H. Conf. Rept. 106-1033, at 1023 (2000),
Similar to the language modifying "determination" in the current version of
Respondent argues that pursuant to
The phrase "notwithstanding any other law or rule of law" should not always be read literally.
At this point, an excerpt from 126 T.C. 47">*57 Another significant ingredient is reflected in the judicial attitude in respect of the interplay between Federal laws and State community property laws. This attitude is set forth in the following statement by the Supreme Court in Because domestic relations are preeminently matters of state law, we have consistently recognized that Congress, when it passes general legislation, rarely intends to displace state authority in this area. See, e.g., In light of the foregoing approach, the Supreme Court has decreed that Federal law supplants community property law only where the congressional intent to accomplish such a result is clear and unequivocal.
In addressing the question of whether there is "clear and unequivocal" congressional intent to supplant established reference to State law, the legislative history of the predecessor of
In 1998, the refund authority in
Given this history, we see an intent to create refund authority tied specifically to a determination of relief from joint and several tax liability. However, we see no explicit intent to supplement that relief by revisiting the nature of prior payments under State community property laws. Had Congress intended courts to interpret
If spouses file separate returns and only one spouse is liable for unpaid taxes, the Internal Revenue Service can collect out of community assets. See
We must avoid an interpretation of
As stated previously, another problem with petitioner's position is the lack of legislative direction regarding how to divide the assets between spouses in community property States for collection purposes. If we adopt petitioner's interpretation of
In addition, petitioner's approach would lead to a very complex factual analysis to trace the acquisition of the assets used to make over 20 years of tax payments. It is likely that a married couple will continue to acquire assets throughout their relationship. Tracing the acquisition of those assets to ascertain what assets should be attributed to which spouse is an administrative nightmare that would2006 U.S. Tax Ct. LEXIS 4">*28 severely impede collection and lead to layers of judicial interpretation and analysis. We think Congress did not intend to create such a difficult factual issue in adopting
Petitioner suggests that our holding today will frustrate congressional intent by effectively denying
The Ordlocks remained married in California. They continued to accumulate assets and make payments on their joint tax liabilities for 1982, 1983, and 1984 for over two decades. If Mr. Ordlock had been personally liable to a nongovernment creditor, the community assets would have been a potential source of payment to that creditor.
The question is whether Congress intended to place the Commissioner at a disadvantage concerning liabilities such2006 U.S. Tax Ct. LEXIS 4">*29 as Mr. Ordlock's. As we have stated, we see no evidence of such congressional intent, nor do we see petitioner's position as advantageous to tax administration given the problems discussed previously. The nature of a marital community in California is to generally allow the individual debts of the spouses to be collected out of community assets.
"Any determination" in
The phrase "notwithstanding any other law or rule of law" in
126 T.C. 47">*61 Accordingly, petitioner is not entitled to a refund of an overpayment attributable to payments made from community property.
To reflect the foregoing and concessions by respondent,
Decision will be entered under
Reviewed by the Court.
GERBER, COHEN, HALPERN, CHIECHI, THORNTON, HAINES, WHERRY, KROUPA, and HOLMES, JJ., agree with this majority opinion.
LARO, J., dissents.
2006 U.S. Tax Ct. LEXIS 4">*32 Date | Explanation | Amount |
04/15/1983 | Withholding & excess FICA | $ 55,535.00 |
08/07/1996 | Miscellaneous payment | 99.00 |
09/06/1996 | Miscellaneous payment | 99.00 |
10/08/1996 | Miscellaneous payment | 99.00 |
11/07/1996 | Miscellaneous payment | 99.00 |
12/09/1996 | Miscellaneous payment | 99.00 |
01/08/1997 | Miscellaneous payment | 99.00 |
02/05/1997 | Miscellaneous payment | 99.00 |
03/05/1997 | Miscellaneous payment | 99.00 |
04/07/1997 | Miscellaneous payment | 99.00 |
04/15/1997 | Overpayment credit applied | 7,558.91 |
2006 U.S. Tax Ct. LEXIS 4">*33 05/05/1997 | Miscellaneous payment | 99.00 |
06/11/1997 | Miscellaneous payment | 99.00 |
07/01/1997 | Miscellaneous payment | 99.00 |
08/04/1997 | Miscellaneous payment | 99.00 |
09/04/1997 | Miscellaneous payment | 99.00 |
10/07/1997 | Miscellaneous payment | 99.00 |
10/30/1997 | Miscellaneous payment | 99.00 |
12/09/1997 | Miscellaneous payment | 99.00 |
01/08/1998 | Miscellaneous payment | 99.00 |
02/12/1998 | Payment | 99.00 |
02/26/1998 | Subsequent payment - levy | 1,500.09 |
03/03/1998 | Subsequent payment - levy | 7,865.46 |
2006 U.S. Tax Ct. LEXIS 4">*34 03/06/1998 | Subsequent miscellaneous payment | 198.00 |
03/11/1998 | Subsequent payment - levy 1 | 2,485.97 |
126 T.C. 47">*62 03/16/1998 | Subsequent payment - levy | 3,577.06 |
03/16/1998 | Subsequent payment - levy | 8,695.83 |
03/16/1998 | Subsequent payment - levy | 1,905.46 |
03/19/1998 | Subsequent payment | 77.36 |
03/23/1998 | Subsequent payment - levy | 15.00 |
04/08/1998 | Subsequent miscellaneous payment | 99.00 |
04/14/1998 | Subsequent payment - levy | 44,567.80 |
2006 U.S. Tax Ct. LEXIS 4">*35 05/05/1998 | Subsequent miscellaneous payment | 99.00 |
06/04/0998 | Subsequent miscellaneous payment | 99.00 |
07/07/1998 | Subsequent miscellaneous payment | 99.00 |
08/06/1998 | Subsequent miscellaneous payment | 601.98 |
08/06/1998 | Subsequent miscellaneous payment | 99.00 |
09/10/1998 | Subsequent miscellaneous payment | 99.00 |
10/06/1998 | Subsequent miscellaneous payment | 99.00 |
11/04/1998 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*36 12/04/1998 | Subsequent miscellaneous payment | 99.00 |
01/07/1999 | Subsequent miscellaneous payment | 99.00 |
02/03/1999 | Subsequent miscellaneous payment | 99.00 |
03/03/1999 | Subsequent miscellaneous payment | 99.00 |
05/06/1999 | Subsequent miscellaneous payment | 99.00 |
06/08/1999 | Subsequent miscellaneous payment | 99.00 |
07/08/1999 | Subsequent miscellaneous payment | 99.00 |
08/06/1999 | Subsequent miscellaneous payment | 99.00 |
09/08/1999 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*37 11/04/1999 | Subsequent miscellaneous payment | 99.00 |
12/06/1999 | Subsequent miscellaneous payment | 99.00 |
126 T.C. 47">*63 01/05/2000 | Subsequent miscellaneous payment | 99.00 |
02/09/2000 | Subsequent miscellaneous payment | 99.00 |
03/03/2000 | Subsequent miscellaneous payment | 99.00 |
04/04/2000 | Subsequent miscellaneous payment | 99.00 |
05/04/2000 | Subsequent miscellaneous payment | 99.00 |
06/06/2000 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*38 07/07/2000 | Subsequent miscellaneous payment | 99.00 |
08/08/2000 | Subsequent miscellaneous payment | 273.00 |
08/08/2000 | Subsequent miscellaneous payment | 99.00 |
09/06/2000 | Subsequent miscellaneous payment | 99.00 |
10/06/2000 | Subsequent miscellaneous payment | 99.00 |
11/08/2000 | Subsequent miscellaneous payment | 99.00 |
12/04/2000 | Subsequent miscellaneous payment | 99.00 |
01/04/2001 | Subsequent miscellaneous payment | 99.00 |
02/02/2001 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*39 03/05/2001 | Subsequent miscellaneous payment | 99.00 |
04/04/2001 | Subsequent miscellaneous payment | 99.00 |
05/04/2001 | Subsequent miscellaneous payment | 99.00 |
06/05/2001 | Subsequent miscellaneous payment | 99.00 |
07/06/2001 | Subsequent miscellaneous payment | 99.00 |
08/03/2001 | Subsequent miscellaneous payment | 99.00 |
08/06/2001 | Subsequent miscellaneous payment | 204.75 |
09/06/2001 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*40 10/05/2001 | Subsequent miscellaneous payment | 99.00 |
11/06/2001 | Subsequent miscellaneous payment | 99.00 |
12/05/2001 | Subsequent miscellaneous payment | 99.00 |
126 T.C. 47">*64 01/02/2002 | Subsequent miscellaneous payment | 99.00 |
02/04/2002 | Subsequent miscellaneous payment | 99.00 |
03/01/2002 | Subsequent miscellaneous payment | 99.00 |
04/05/2002 | Subsequent miscellaneous payment | 99.00 |
05/03/2002 | Subsequent miscellaneous payment | 99.00 |
06/05/2002 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*41 07/02/2002 | Subsequent miscellaneous payment | 99.00 |
08/02/2002 | Subsequent miscellaneous payment | 99.00 |
09/03/2002 | Subsequent miscellaneous payment | 99.00 |
10/02/2002 | Subsequent miscellaneous payment | 99.00 |
11/--/2002 2 | Subsequent miscellaneous payment | 99.00 |
12/11/2002 | Subsequent miscellaneous payment | 99.00 |
01/10/2003 | Subsequent miscellaneous payment | 99.00 |
02/07/2003 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*42 03/06/2003 | Subsequent miscellaneous payment | 99.00 |
04/04/2003 | Subsequent miscellaneous payment | 99.00 |
05/07/2003 | Subsequent miscellaneous payment | 99.00 |
Total | 142,882.67 |
Date | Explanation | Amount |
04/15/1991 | Overpayment credit applied | $ 4,228.00 |
2006 U.S. Tax Ct. LEXIS 4">*43 04/15/1984 | Withholding and excess FICA | 67,463.00 |
06/06/1984 | Return filed and tax paid | 35,958.45 |
126 T.C. 47">*65 04/15/1992 | Overpayment credit applied | 4,921.00 |
06/16/1995 | Subsequent miscellaneous payment | 98.00 |
08/07/1995 | Subsequent miscellaneous payment | 250.00 |
07/06/1995 | Subsequent miscellaneous payment | 98.00 |
08/10/1995 | Subsequent miscellaneous payment | 98.00 |
09/06/1995 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*44 10/10/1995 | Subsequent miscellaneous payment | 99.00 |
11/08/1995 | Subsequent miscellaneous payment | 99.00 |
12/06/1995 | Subsequent miscellaneous payment | 99.00 |
01/09/1996 | Subsequent miscellaneous payment | 99.00 |
02/06/1996 | Subsequent miscellaneous payment | 99.00 |
03/04/1996 | Subsequent miscellaneous payment | 99.00 |
04/09/1996 | Subsequent miscellaneous payment | 99.00 |
05/03/1996 | Subsequent miscellaneous payment | 99.00 |
2006 U.S. Tax Ct. LEXIS 4">*45 06/05/1996 | Subsequent miscellaneous payment | 99.00 |
06/13/1996 | Subsequent payment - Federal tax lien | 78,177.66 |
07/08/1996 | Subsequent miscellaneous payment | 99.00 |
03/03/1998 | Subsequent miscellaneous payment | 100,488.28 |
05/05/1998 | Subsequent miscellaneous payment | 757.56 |
Total | 293,626.95 |
Date | Explanation | Amount |
04/15/1985 | Withholding & excess FICA | $ 52,351.00 |
2006 U.S. Tax Ct. LEXIS 4">*46 04/15/1985 | Subsequent payment | 20,000.00 |
05/22/1985 | Payment with return | 22,594.00 |
10/07/1998 | Subsequent miscellaneous payment | 99.00 |
126 T.C. 47">*66 09/03/2001 | Overpaid credit applied | 600.00 |
05/09/2002 | Overpaid credit applied | 1.31 |
Total | 95,645.31 |
* * *
CONCURRENCE OF JUDGE THORNTON
THORNTON, J., concurring: I agree with the majority opinion and write to append additional views in support of it.
"[D]omestic relations are preeminently matters of state law".
The predecessor of
2006 U.S. Tax Ct. LEXIS 4">*49 126 T.C. 47">*67 In 1997, in expanding the relief available under former
The first appearance of what is now the flush language of
Rather than choose between them, the conference agreement incorporated2006 U.S. Tax Ct. LEXIS 4">*51 both the House version of expanded relief 126 T.C. 47">*68 from joint and several liability (currently in
As previously noted, this stated purpose was consistent with the longstanding provision of
In sum, the legislative history lends strong support to the view that in enacting
The question arises whether
Before a taxpayer may be allowed a refund or credit, there must be a determination that the taxpayer has made an overpayment. See
2006 U.S. Tax Ct. LEXIS 4">*56 Accordingly, inasmuch as there can be no determination as to whether an individual is entitled to a refund or credit unless there is first a determination whether the individual has an overpayment, and inasmuch as it cannot be determined "under"
2006 U.S. Tax Ct. LEXIS 4">*57 This conclusion is consistent with the proposed regulations, which had been published when petitioner applied for relief, and the final regulations. 6 The proposed and the final regulations state: "In determining whether relief is available" under
2006 U.S. Tax Ct. LEXIS 4">*58 The preamble accompanying the issuance of the final regulations under
2006 U.S. Tax Ct. LEXIS 4">*60 GERBER, COHEN, HALPERN, CHIECHI, HAINES, WHERRY, and KROUPA, JJ., agree with this concurring opinion.
DISSENT OF JUDGE VASQUEZ
VASQUEZ, J., dissenting: I respectfully disagree with the majority opinion's holdings primarily because I believe they are contrary to the controlling statute and legislative intent.
In interpreting
The flush language at the end of
A
Thus, the flush language of
Contrary to the view of the majority, the evolution of former
The Court should not ignore (1) this statutory change eliminating the language modifying and limiting the term "determination" 2006 U.S. Tax Ct. LEXIS 4">*65 in former
On December 21, 2000, Congress moved the provisions of former
The only exceptions to this phrase are
The majority holds that "notwithstanding any other law or rule of law (other than
Domestic relations are preeminently matters of State law, and the Supreme Court has consistently recognized that Congress, rarely intends to displace State authority in this area.
The plain and precise language of
Although not discussed in detail by the majority, majority op. pp. 7 n. 5, 18, respondent relies on
Stolle was a District Court order that dealt with the relationship between Federal tax liens and community property held in a revocable trust.
Mrs. Stolle's entitlement to
Respondent relies on We have held before that, by granting creditors recourse against the whole community estate on debts of only one spouse, California law "implicitly" establishes that spouse's "interest" in the whole of the community property, at least to a degree sufficient for the IRS to impose tax liens under the Internal Revenue Code. * * * [
2006 U.S. Tax Ct. LEXIS 4">*72 McIntyre is distinguishable from this case. First, McIntyre deals with ERISA and not
Even if
Thus, I believe
The legislative history regarding refunds pursuant to
The legislative history of The Committee believes that a system based on separate liabilities will provide better protection for innocent spouses than the current system. The Committee generally believes that an electing2006 U.S. Tax Ct. LEXIS 4">*74 spouse's liability should be satisfied by the payment of the tax attributable to that spouse's income and that an election to limit a spouse's liability to that amount is appropriate. [S. Rept. 105-174, supra at 55,
To obtain a refund pursuant to
In
If, in a community property State, an electing spouse who is entitled to
This is how the refund was calculated in Washington. In Washington, the taxpayer was employed as a Federal purchasing agent.
The record consists solely of the Forms 4340, Certificate2006 U.S. Tax Ct. LEXIS 4">*77 of Assessments, Payments and Other Specific Matters, for Bayard M. and Lois Ordlock for 1982, 1983, and 1984, which do not show how much petitioner paid towards Mr. Ordlock's understatements without regard to community property laws. To decide whether petitioner has made an overpayment, I would hold -- as the parties agree -- that the Court needs additional evidence of the amounts petitioner paid without regard to community property laws toward Mr. Ordlock's understatements. See
The majority basically holds that disregarding community property law, for purposes of
Collection is independent from the determination of whether a taxpayer is an "innocent spouse" and the amount of the refund a taxpayer is entitled to upon a finding that he/she is an innocent spouse. Respondent's collection rights are not at issue in this case. This leads to my next point.
The majority opines that if California community property laws are disregarded to determine the amount of petitioner's refund,2006 U.S. Tax Ct. LEXIS 4">*79 the Court will be left "with no law or resource to define the [source of] ownership of the payments made" on the tax liabilities for the years in issue. Majority op. pp. 15, 17, 19. If the Court disregarded community property laws when determining the amount of
The majority concludes that if community property laws were disregarded for purposes of
The first problem with this conclusion is the implication2006 U.S. Tax Ct. LEXIS 4">*80 that taxpayers who remain married should be denied the benefits provided by
The second problem is that the same potential abuse is available to taxpayers in common law States. Taxpayers in common law States can structure their payments so that the ownership and/or economic source of ownership is attributable to the spouse requesting (or who has obtained) relief under
The third problem is that taxpayers in community property States can structure their future payments and continue to enjoy a jointly financed lifestyle (i.e., the majority opinion does not prevent this abuse). As respondent2006 U.S. Tax Ct. LEXIS 4">*81 concedes, petitioner is entitled to a refund of the amounts paid with her separate property. Taxpayers in community property States can pay the tax liability attributable to the nonelecting 126 T.C. 47">*83 spouse with separate property of the electing spouse and then seek a refund of these amounts.
The majority concludes that "petitioner's approach would lead to a very complex factual analysis to trace" the assets used to make the payments and would lead to "an administrative nightmare that would severely impede collection". Majority op. p. 19.
The fact that tracing may be complex is not a sufficient reason to disregard the plain language of the statute. Contrary to the majority's suggestion that this would burden respondent, my proposal, supra, is that the burden of proof would be on petitioner as to this issue (i.e., to prove the economic source of ownership of the payment).
I believe that the majority gives too little consideration to the text of
We can presume that when Congress enacted
I believe that
Respectfully, I dissent.
SWIFT, WELLS, COLVIN, and FOLEY, JJ., agree with this dissenting opinion.
DISSENT OF JUDGE MARVEL
MARVEL, J., dissenting: I agree with the majority's statement that "The crux of this dispute is the application of the last sentence of
As the majority correctly points out, Congress in 1998 enacted
The last sentence of
Under well-recognized principles of statutory interpretation, if a statute does not define a term, that term is given its ordinary and commonly accepted meaning. See
The majority nevertheless concludes that a decision as to whether a taxpayer is entitled to a refund under
Former
The majority points out that the Internal Revenue Service (Service) has the right to collect an unpaid tax liability from community property even if spouses file separate returns and only one spouse is liable for unpaid taxes. Majority op. pp. 17-18. The majority contends that, under petitioner's
The issue before us involves petitioner's claimed right to a refund of some portion of the tax payments made with community property. The issue is not whether the Service has a right to collect an unpaid Federal tax liability out of community property. Under California law, a creditor is entitled to collect an unpaid debt out of community property even if the debt is owed solely by one spouse. See
Although I disagree with the analysis and conclusion of the majority regarding the proper interpretation of
126 T.C. 47">*88 If community property law is disregarded and if the taxpayer can establish that he or she has satisfied the refund requirements set forth in
If we disregard community property law in making our determination under
The majority opinion deprives taxpayers in community property States who are otherwise entitled to relief under
2006 U.S. Tax Ct. LEXIS 4">*94 In light of the majority opinion, Congress should revisit
COLVIN, FOLEY, and GALE JJ., agree with this dissenting opinion.
1. Unless otherwise indicated, all section references are to the Internal Revenue Code as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. We note that petitioner's petition was postmarked Oct. 24, 2002, and was therefore timely.↩
3. We note that the issue of whether petitioner is entitled to a refund was not specifically raised in the petition but was subsequently raised and briefed by the parties.↩
4. The parties' filings address neither when the period of limitations under
5. This is not the first instance this issue has arisen in Federal tax litigation. See
6. The California Supreme Court in
7. Community property rights are equal regardless of which spouse acquires the property. The following describes the nature of the equal ownership: The equal ownership of the community property assets and acquisitions has never been dependent upon a calculus of labor or talent. Both man and woman equally are partners in the marriage; both equally share marital property, regardless of whether or not the actual asset was earned by one or the other. For example, if the wife is a highly paid attorney and the husband is a school teacher or works primarily at home, the differential in actual earnings or earning capacity is irrelevant to the ownership rights of each. The notion of marriage as a true legal partnership extends to all the property earned by either partner during marriage. In the common law states, if a husband earns $ 60,000 a year and the wife's role is that of a homemaker, whether she has the primary responsibility of raising the couple's children or not, she will be entitled only to a statutory fraction of her husband's estate on his death, one-half to one-third in most states. During the existence of the marriage she has no direct interest in his earnings, aside from her right to support. In the community property system, on the other hand, both spouses have a continuing half ownership of the marital earnings from the beginning of the marriage and from the time of acquisition of the property. Each party in the law today is an equal agent of the partnership, binding it if acting within the scope of his or her authority and if acting for the joint benefit of the family. The California community property system adds to joint ownership the right of equal management and control. Bassett, California Community Property Law, sec. 1: 18 (2005 ed.).↩
1. The parties agree that the Mar. 11, 1998, $ 2,485.97 payment in the form of levy was made from the petitioner's separate property", as defined in
2. The exact day was illegible.↩
1. The House and Senate reports on the 1971 legislation state identically: The bill provides that the determination of the spouse to whom items of gross income, other than gross income from property, are attributable is to be made without regard to community property laws. Thus, the rules of community property are not followed with respect to earned income or income from theft or embezzlement. Income earned by a husband, for example, and omitted from a joint return, is to be attributed to the husband, even though it may constitute community property, in determining whether the wife is entitled to relief from the tax liability under this provision. * * * [H. Rept. 91-1734, at 4 (1971); S. Rept. 91-1537, at 4 (1971),
2. The Senate amendment also provided additional relief in situations where tax was shown on a return but not paid with the return. This type of relief was not included in the conference agreement. See H. Rept. 105-599, at 254 (1998),
3. A determination of relief under
4. The following discussion illustrates some of the types of issues that arise in determining the amount of tax payments for purposes of determining whether there is an overpayment: Before an overpayment can exist, a taxpayer must have "paid" the amount as tax. Not all remittances are treated as payments of tax when they are received by the Service. For example, remittances of withholding tax and estimated tax made by taxpayers before the due date of the return for the year are not considered "paid" until the due date of payment; that is, the date the return for the year is due without regard to any extension for filing the return.
5. Of course, a determination that an individual qualifies for relief from joint and several liability under
6. The final regulations under
7. The preamble to the final regulations under One commentator suggested that the regulations adopt a rule that the IRS would not look to community property as a collection source when a requesting spouse with an interest in such community property is granted relief under
1. I note that in the notice of determination respondent determined the amount of relief petitioner was entitled pursuant to
2. The court also rejected Mrs. McIntyre's argument that California community property law gave her a vested interest in half of her husband's pension benefits and the IRS could not therefore levy on this half of the pension benefits.
3.
1.
2. A community property interest is one form of joint ownership that is recognized under California law. See
3.
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Jim Stuart Brooks v. Commissioner , 2019 T.C. Summary Opinion 5 ( 2019 )