David Bruce Billings, (2006)

Docket Number: 6148-03

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David Bruce Billings, (2006)

127 T.C. No. 2

UNITED STATES TAX COURT DAVID BRUCE BILLINGS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 6148-03. Filed July 25, 2006.

P's wife did not report embezzlement income on their joint 1999 return. After she was caught, P and she filed an amended tax return that reported the embezzlement income. P then applied for relief from joint and several liability under IRC sec. 6015(f). The Commissioner issued a notice of determination denying his request, and P filed a petition under sec. 6015(e) to review the Commissioner's determination. P and R stipulated that no relief is available under IRC sec. 6015(b) and (c). Held: Upon reconsideration, we no longer adhere to our prior holding that sec. 6015(e) gives us jurisdiction over such nondeficiency stand-alone petitions. Ewing v. Commissioner, 118 T.C. 494 (2002), revd. 439 F.3d 1009 (9th Cir. 2006), no longer followed.

Patrick Wiesner, for petitioner.

Vicki L. Miller, for respondent.

OPINION HOLMES, Judge: In 1999, Rosalee Billings began embezzling money from her employer. She kept her husband in the dark about her embezzlement and didn't report the ill-gotten income on their joint return. After she was caught in 2000, she confessed her theft to him, and together they signed an amended joint return that reported the stolen income and showed a hefty increase in the tax owed. He asked the Commissioner to be relieved of joint liability for the increased tax, but his request was refused because he knew about the embezzled income when he signed the amended return, and also knew that the increased tax shown on that amended return was not going to be paid.

Billings began his case in our Court by filing a 'nondeficiency stand-alone' petition--'nondeficiency' because the IRS accepted his amended return as filed and asserted no deficiency against him, and 'stand-alone' because his claim for innocent spouse relief was made under section 6015 and not as part of a deficiency action or in response to an IRS decision to begin collecting his tax debt through liens or levies. The particular part of section 6015 under which he seeks relief is section 6015(f).1 This subsection is the only one available to spouses against whom the IRS has not asserted a deficiency. In Ewing v. Commissioner, 118 T.C. 494 (2002) (Ewing I),2 we held that the Tax Court had jurisdiction over nondeficiency stand-alone petitions like Billings's. The Ninth Circuit has now reversed us, Commissioner v. Ewing, 439 F.3d 1009 (9th Cir. 2006), revg. Ewing I, 118 T.C. 494, vacating 122 T.C. 32 (2004); the Eighth Circuit has adopted the Ninth Circuit's position, Bartman v. Commissioner, 446 F.3d 785, 787 (8th Cir. 2006), affg. in part, vacating in part T.C. Memo. 2004-93; and the Second Circuit has questioned our decision, see Maier v. Commissioner, 360 F.3d 361, 363 n.1 (2d Cir. 2004), affg. 119 T.C. 267 (2002).

Billings's case is one of the large number of nondeficiency stand-alone cases that began accumulating on our docket while Ewing I was on appeal. We now revisit the question of whether we have jurisdiction to review the Commissioner's decisions to deny relief under section 6015(f) when there is no deficiency but tax went unpaid.

Background David Billings was well into a 30-year career at General Motors when he married Rosalee in 1996. Rosalee herself was a payroll clerk at South Kansas City Electric Company. The Billingses kept two checking accounts, and while both were jointly held, David and Rosalee each kept almost exclusive control over one of them. In 1999, Rosalee began to transfer money from the Electric Company's payroll account into the checking account that she controlled and into which she had her own pay directly deposited.

Rosalee kept her embezzlement secret from her husband and she did not report on their 1999 return the nearly $40,000 that she had stolen. The Electric Company discovered the embezzlement in December 2000, fired her, and then notified the authorities. She told her husband what she had done and hired a lawyer, Patrick Wiesner. (Wiesner also represented David in this case and before the IRS.) In his capacity as Rosalee's lawyer, Wiesner advised her to report the embezzlement income to the IRS on an amended return. He told her that if she did, a sentencing judge would probably be more lenient and might even depart from the U.S. Sentencing Guidelines. But section 1.6013-1(a)(1) of the income tax regulations created a problem. It prohibits spouses who have already filed a joint return for a particular year from filing amended returns changing their status to married-filing-separately once the deadline to file returns has passed. The due date for the Billingses' 1999 tax year--April 15, 2000--was long past, and so Wiesner told David (whether in Wiesner's capacity as Rosalee's lawyer or as David's is unclear) that David also had to sign the amended ...

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