Baumann v. Commissioner, Dkt. No. 8554-01.
| Decision Date | 22 February 2005 |
| Docket Number | Dkt. No. 8554-01. |
| Citation | 89 T.C.M. 790 |
| Parties | Stanley K. and Tomi L. Baumann v. Commissioner. |
| Court | U.S. Tax Court |
Frederick J. O'Laughlin, for petitioner Stanley K. Baumann.
Tomi L. Baumann, pro se.
William F. Castor, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
This case arises from a request for relief from joint and several liability under section 6015(f)1 in connection with petitioners' deficiency proceeding. Although the nonrequesting spouse, petitioner Stanley K. Baumann (Stanley), did not object when the requesting spouse, petitioner Tomi L. Baumann (Tomi), amended the deficiency petition to include the claim for relief under section 6015, Stanley now objects after respondent determined that Tomi qualifies for relief. Stanley objects by arguing that, despite Stanley's being allowed to participate in respondent's determination whether Tomi qualified for relief, respondent nonetheless abused his discretion in granting relief under section 6015(f) because respondent did not examine all the facts and circumstances as required under section 6015(f). The issue for decision is whether respondent abused his discretion in granting Tomi relief from joint and several liability under section 6015(f). We hold that he did not.
Petitioners, while married, timely filed their joint Federal income tax return for 1998. Respondent sent a joint notice of deficiency to petitioners on April 4, 2001, in which respondent determined an income tax deficiency against petitioners of $11,756 for 1998 and an accuracy-related penalty of $2,351 under section 6662(a). The deficiency was attributable to respondent's disallowing gambling losses in excess of gambling income under section 165(d) instead of allowing Stanley to claim his gambling losses against income from his drywall construction business.
Petitioners timely filed a petition contesting respondent's determination in the deficiency notice. At the time petitioners filed their joint petition, petitioners resided in Oklahoma City, Oklahoma. Attorney Frederick J. O'Laughlin (counsel) represented both petitioners in the deficiency proceeding.
Respondent filed a motion for summary judgment (summary judgment motion) on May 7, 2002, involving all issues set forth in the deficiency notice. Respondent asserted in the summary judgment motion that petitioners were not entitled, as a matter of law, to deduct gambling losses in excess of gambling income under section 165(d). On the date petitioners were ordered to file a response to respondent's summary judgment motion, petitioners' counsel filed a motion to withdraw as counsel for Tomi, because petitioners had since divorced and their divorce created a conflict of interest. Along with the motion to withdraw, counsel filed, on behalf of both petitioners, a response to respondent's summary judgment motion. The Court granted counsel's motion for leave to withdraw as counsel for Tomi.
While the deficiency proceeding was pending, Tomi filed2 a Form 8857, Request for Innocent Spouse Relief, seeking relief from liability for the deficiency and accuracy-related penalty for taxable year 1998, the year at issue.3 Tomi attached a Form 12150, Questionnaire for Requesting Spouse, on which Tomi stated that she filed the return for 1998 relying on the advice of her return preparer (who happened to be petitioners' counsel) and that she was unfamiliar with the tax laws.4
Once Examining Officer Lori Sperle (examining officer) of respondent's Oklahoma City office received Tomi's innocent spouse case from respondent's Cincinnati Centralized Innocent Spouse Operation (CCISO), the examining officer sent two letters to Stanley notifying him that Tomi had filed a claim for relief under section 6015. One letter, entitled "Letter to Non-Requesting Spouse," was dated April 25, 2003, and another letter was dated May 16, 2003. The letters notified Stanley that Tomi had filed a request for relief from joint and several liability and notified Stanley that he could take part in the proceeding by providing information for respondent to consider in making a relief determination. The letters also requested that Stanley complete an enclosed Form 12508, Innocent Spouse Information Request (information request), to provide any information Stanley wanted respondent to consider in making the relief determination.
Stanley completed the information request and submitted it to respondent on June 26, 2003. Stanley also submitted a sworn statement on the same date asserting that Tomi was not entitled to relief because she had full knowledge of, and she benefited from, the gambling activity.
The examining officer sent neither Tomi nor Stanley a preliminary determination letter for 1998.5
The Court held a hearing on respondent's summary judgment motion on September 23, 2002. At the hearing, respondent notified the Court and petitioners that respondent was converting the summary judgment motion into a motion for partial summary judgment. Respondent was not moving for summary judgment as to the accuracy-related penalty under section 6662. In addition, respondent notified the Court that Tomi had filed a claim for relief under section 6015 and that the summary judgment motion did not include Tomi's request for relief under section 6015.
The Court granted respondent's motion as to the $11,756 deficiency but denied the motion as to the accuracy-related penalty in an Order dated March 14, 2003. The Court did not specifically mention Tomi's request for relief under section 6015 in the Order, but the Court restored the case to the general docket for trial or other disposition.
On May 19, 2003, Tomi filed a pleading entitled a motion for leave to file an amendment to the petition, which motion embodied an amendment to the petition in which Tomi claimed relief under section 6015. A copy of the motion and the proposed amendment was served on Stanley through his counsel and on respondent. Neither respondent nor Stanley objected to the motion to amend the petition. The Court granted the motion to amend the petition to add Tomi's claim under section 6015 on June 19, 2003.
Appeals Officer Robert Baty (Appeals Officer Baty) of respondent's Oklahoma City office received the administrative innocent spouse case file on October 17, 2003. The administrative file included the correspondence between petitioners and the examining officer, the record of the examining officer's interview with Tomi, and the examining officer's work papers.
The administrative file included the information request that Stanley submitted and included the divorce decree ordering Stanley to pay, and to hold Tomi harmless from, their joint Federal income tax liabilities through and including 2001, which includes petitioners' joint income tax liability for 1998.
The examining officer's work papers included records of the innocent spouse determination interview the examining officer conducted with Tomi on September 12, 2003. The examining officer's work papers show that the examining officer determined that Tomi was not entitled to relief under section 6015(b) or (c) because Tomi had actual knowledge of the gambling activity and Tomi's lack of knowing the tax consequences was no defense.6 The examining officer also determined that, even though five factors weighed in favor of granting Tomi relief under section 6015(f), Tomi was not entitled to relief under section 6015(f) because Tomi had knowledge of the gambling activity. The five factors weighing in favor of section 6015(f) relief included petitioners' divorce, Tomi would face economic hardship if relief were not granted, petitioners' divorce decree stated that Stanley was responsible for the 1998 income tax liability, the entire deficiency was attributable to Stanley, and Tomi was current with all her Federal tax obligations while Stanley was not.
After reviewing the administrative file, Appeals Officer Baty had a conference with Tomi on December 3, 2003, during which Tomi detailed the abuse she allegedly suffered from Stanley. Tomi provided information and documents to substantiate that Stanley physically assaulted her numerous times, that Stanley had threatened Tomi's life with a shotgun during the divorce action, that he had tried to burn their house while she and her children were inside, that he was charged with arson, that he was taken to a psychiatric hospital after he attempted suicide with a shotgun, and that he had threatened the life of her older son (from a previous marriage).
After the conference, Appeals Officer Baty obtained third-party information that confirmed the information Tomi provided him during the conference. Appeals Officer Baty verified the information by accessing the Oklahoma State Courts Network's (OSCN) Web site and locating relevant court documents. Appeals Officer Baty verified through court documents that Tomi filed for divorce from Stanley, that Tomi filed a petition for a protective order based on domestic abuse, and that a temporary protective order was issued. The Appeals officer also verified that the State of Oklahoma filed an information against Stanley for fourth degree felony arson and issued an arrest warrant against him shortly after Tomi filed for divorce. The court records also showed that Stanley subsequently pleaded guilty to misdemeanor arson and received a 1-year suspended sentence.
The administrative file also included a certified copy of an Oklahoma City Police Department Crime Report that described a domestic disturbance call made to the police from Tomi's residence reporting to the police that Stanley had threatened suicide with a shotgun, and that the police confiscated the shotgun. This police crime report was dated 1 day before Stanley's involuntary commitment to Griffin Memorial Hospital in...
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