DocketNumber： Docket No. 11600-14S.
Citation Numbers： 2016 T.C. Summary Opinion 2, 2016 Tax Ct. Summary LEXIS 1
Filed Date： 1/11/2016
Status： Non-Precedential
Modified Date： 4/17/2021
Decision will be entered for respondent.
PUGH,
Petitioner (Mr. Elbe) seeks review under section 6015(e)(1) of respondent's determination that he is not entitled to relief from joint and several liability for taxable year 2011 with respect to unpaid tax of $3,9112 that was reported on the joint Federal income tax return he filed with intervenor (Mrs. Elbe), his former spouse.
The issue for decision is whether Mr. Elbe is entitled to equitable relief from joint and several liability under section 6015(f).
Some of the facts have been stipulated and are so found. The stipulation of facts and the accompanying*2 exhibits are incorporated herein by this reference. Mr. and Mrs. Elbe both resided in the State of Arkansas at the time the petition was filed.
Mr. and Mrs. Elbe married on June 18, 1983, and remained married in 2011. In 2011 Mr. Elbe was employed as a technician by the home security company ADT, and Mrs. Elbe was unemployed as she had been for at least the previous 10 years. During the first half of 2011 Mrs. Elbe moved out of the marital home, moved in with a friend, and filed for divorce. At or around the time she moved out of the marital home, Mrs. Elbe deposited a Social Security benefits payment (benefits payment) of $57,168 directly into her personal bank account to which Mr. Elbe did not have access.
Around April 16, 2012, Mr. Elbe used TurboTax to prepare and submit a joint 2011 Federal tax return (joint return). The joint return reported wages of $52,443, taxable interest of $62, a taxable refund of $1,098, and gross and taxable Social Security benefits of $57,168 and $38,459, respectively. The joint return reported total Federal income tax owed of $9,414, tax withheld of $3,550, and tax due of $5,864. All Federal income tax credited and withheld on the joint return was credited*3 or withheld from Mr. Elbe's wages. No Federal income tax was withheld from the benefits payment, and Mr. Elbe did not include any additional payment with the joint return. Although Mr. Elbe knew that Mrs. Elbe had received the benefits payment and no tax had been withheld, he chose to file jointly because he understood that this would reduce their tax liability.
Mr. Elbe was unable to secure Mrs. Elbe's signature on the joint return on April 16, 2015, and filed the joint return on that date without her signature. The joint return was rejected because it lacked Mrs. Elbe's signature. At a deposition on May 25, 2012, taken as part of the Elbes' divorce proceedings, Mrs. Elbe signed the joint return. Mr. Elbe then resubmitted the joint return to the Internal Revenue Service (IRS). At the May 25 deposition Mrs. Elbe stated that she did not have money to pay the full tax owed nor did she intend to pay any tax unless Mr. Elbe also paid part of the remaining liability.
At trial Mr. Elbe testified that he did not see or read Mrs. Elbe's deposition transcript before resubmitting the joint return nor had his attorney told him about Mrs. Elbe's statements although he had access to the deposition*4 transcript soon after it was taken. Mr. Elbe also testified that he did not know how Mrs. Elbe spent the benefits payment or how much money she had left to pay the tax liability. He also acknowledged that Mrs. Elbe had not indicated to him that she intended to pay the tax liability or that she had the money to do so.
On July 30, 2012, respondent sent Mr. and Mrs. Elbe a notice of balance due for the taxable year 2011 of $6,831 (the $5,864 reported on the return but not paid plus failure to file and failure to pay penalties and interest).
Mr. and Mrs. Elbe divorced on October 24, 2012. The divorce decree, entered on December 20, 2012, stated that Mr. Elbe was to sell a 2011 Chevrolet Colorado pickup truck and that any profits were to be used toward their 2011 tax liability. Mr. Elbe testified that he sold the truck and received a check from the dealership for $2,030 representing the proceeds from the sale after satisfaction of an outstanding loan from the dealership that was secured by the truck.3*5
On November 19, 2012, Mr. Elbe filed a Form 8857, Request for Innocent Spouse Relief. In March 2013 respondent's Cincinnati Centralized Innocent Spouse Operation (CCISO) issued a preliminary determination that Mr. Elbe was entitled to partial equitable relief of $3,911, the tax attributable to Mrs. Elbe's benefits payment, and was liable for the remaining unpaid tax of $1,953. On April 8, 2013, Mr. Elbe sent the IRS a payment for the $1,953, leaving $3,911 to be paid by Mrs. Elbe. On April 25, 2013, Mrs. Elbe appealed CCISO's preliminary determination. On April 24, 2014, the IRS Appeals Office reversed CCISO's preliminary determination and issued a final notice of determination to Mr. Elbe denying relief from joint and several liability for the remaining $3,911 of tax owed.
On May 21, 2014, Mr. Elbe filed a petition with this Court seeking review of respondent's determination. Pursuant to section 6015(e)(4) and Rule 325, Mrs. Elbe filed a timely notice of intervention to oppose Mr. Elbe's request for relief.
Generally, married taxpayers may elect to file a joint Federal income tax return. Sec. 6013(a).*6 After making this election, each spouse generally is jointly and severally liable for the entire tax due for that taxable year. Sec. 6013(d)(3);
Section 6015(f)(1) gives the Commissioner discretion to grant equitable relief from joint and several liability if "taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion or either)".
This Court has jurisdiction to review respondent's denial of Mr. Elbe's request for equitable relief under section 6015(f).
The Commissioner has outlined procedures for determining whether a requesting spouse qualifies for equitable relief under section 6015(f) from joint and several liability. These procedures, set forth in
When the threshold conditions have been met, the guidelines allow a requesting spouse to qualify for a streamlined determination of relief under section 6015(f) if all of the following conditions are met: (1) the requesting spouse is divorced from the nonrequesting spouse, is legally separated from the nonrequesting spouse under State law, is a widow or widower and is not an heir to the nonrequesting spouse's estate that would have sufficient assets to pay the tax liability, or has not been a member of the same household as the nonrequesting spouse at any time during the 12-month period ending on the date the IRS makes its determination; (2) the requesting spouse will suffer economic hardship if relief is not granted; and (3) in an underpayment case such as this, the requesting spouse had no knowledge or reason to know when the return was filed that the nonrequesting spouse would not or could not pay the tax liability reported on the joint tax return.
Mr. Elbe fails to qualify for a streamlined determination of relief. In his request for relief Mr. Elbe did not indicate that he will suffer economic hardship*9 if relief is not granted. Mr. Elbe also had reason to know Mrs. Elbe would not and could not pay the tax liability, as will be discussed below.
Where, as here, a requesting spouse meets the threshold conditions but fails to qualify for relief under the guidelines for a streamlined determination, the requesting spouse still may be eligible for equitable relief if, taking into account all the facts and circumstances, it would be inequitable to hold the requesting spouse liable for the underpayment.
We consult these guidelines when reviewing the Commissioner's denial of relief, but we are not bound by them as our analysis and determination ultimately turn*10 on an evaluation of all the facts and circumstances.
The first factor is whether Mr. Elbe had knowledge or reason to know, as of the date the return was filed, that Mrs. Elbe would not or could not pay the income tax liability.
This factor weighs in favor of relief if Mr. Elbe meets his burden of establishing that he reasonably expected Mrs. Elbe to pay the tax liability reported on the joint return.
This factor weighs against relief if it was not reasonable for Mr. Elbe to believe that Mrs. Elbe would or could pay the tax liability shown as due on the return.
Mr. Elbe argues that Mrs. Elbe should be solely liable because she received a large benefits payment and should have elected to have tax withheld from that payment. He also argues that*12 Mrs. Elbe could pay the tax owed. But at the time he prepared the joint return he knew that no tax had been withheld from her benefits payment. He acknowledged in his testimony that he did not know how she used the benefits payment or how much of it remained at the time he initially submitted the joint return or at the time he resubmitted the joint return. He fails to explain why he believed Mrs. Elbe would pay the tax owed on the benefits payment after no tax had been withheld. Mr. Elbe, not Mrs. Elbe, handled household finances. Mr. Elbe also knew that Mrs. Elbe had not worked in over 10 years and had no regular income to sustain her after the benefits payment was spent. We accept that Mr. Elbe did not know about Mrs. Elbe's statements in the May 25, 2012, deposition, but Mrs. Elbe also gave Mr. Elbe no basis to believe that she would or could pay the tax owed on her benefits, a fact Mr. Elbe confirmed in his testimony. On the basis of these facts, the Court concludes that it was not reasonable for Mr. Elbe to believe Mrs. Elbe would or could pay the tax liability. Therefore, this factor weighs against relief.
We also consider whether Mr. Elbe will suffer economic hardship if relief*13 is not granted.
In addition to the factors above, we also consider the following facts in weighing Mr. Elbe's claim. At the time Mr. Elbe filed the joint return, he understood that he would benefit by filing jointly. Additionally, while we do not wade into the domestic dispute between Mr. and Mrs. Elbe regarding the sale of the 2011 truck, and the*14 record does not show how the net proceeds from the truck sale were used, we cannot ignore that the divorce decree, entered after Mr. Elbe filed the joint return showing income tax owed, and after the IRS sent the notice of tax owed, required that these funds be used to pay the 2011 tax liability. This provision thus indicates that at least some of the tax liability that remained was to be shared between the parties. These facts weigh against relief.
Mr. Elbe knew, or had reason to know, that Mrs. Elbe would not and could not pay the tax liability reported on their 2011 joint return. We also hold that the facts overall also weigh against granting Mr. Elbe relief from joint and several liability under section 6015(f). We therefore sustain respondent's determination that Mr. Elbe is not entitled to relief from joint and several liability for taxable year 2011.
We have considered all arguments made and facts presented in reaching our decision and, to the extent not discussed above, we conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
1. Unless otherwise indicated, section references are to the Internal Revenue Code of 1986 as amended, in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. All monetary amounts are rounded to the nearest dollar.↩
3. The parties dispute the circumstances of the sale. That dispute is pending in Arkansas State court and is beyond our jurisdiction. We consider the truck sale relevant only in that the proceeds were to be used to pay the Elbes' 2011 tax liability, which is before us.