Block v. Comm'r of Internal Revenue

• Citation: 120 T.C. 62,120 T.C. No. 4
• Decision Date: 23 January 2003
• Docket Number: No. 5676–02.,5676–02.
• Parties: Evelyn B. BLOCK, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: United States Tax Court

120 T.C. 62

120 T.C. No. 4

Evelyn B. BLOCK, Petitioner

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 5676–02.

United States Tax Court.

Jan. 23, 2003.

Taxpayer petitioned for review of IRS' denial of her request for innocent spouse relief. Taxpayer moved to amend her petition to claim the statute of limitation barred assessment. The Tax Court, Ruwe, J., held that: (1) Court lacked jurisdiction under a stand alone petition over issue of limitations period, and (2) taxpayer's proposed amendment to the petition was improper.

Motion denied.

Barry A. Furman, for petitioner.

James N. Beyer, for respondent.

OPINION

RUWE, J.

P requested relief from joint and several income tax liability pursuant to sec. 6015, I.R.C., regarding taxes that had been previously assessed for the taxable years 1983 and 1984. R issued a notice of determination denying P's request, and pursuant to sec. 6015(e), I.R.C., P filed a timely petition seeking review of R's determination. Thereafter, P moved to amend her petition pursuant to Rule 41(a), Tax Court Rules of Practice and Procedure, in order to claim that “The statute of limitation bars the assessment of the underlying income tax liabilities for 1983 and 1984.” R opposed the amendment, arguing that sec. 6015(e), I.R.C., grants this Court jurisdiction to determine whether R's denial of relief from joint and several tax liability, as provided in sec. 6015, I.R.C., was erroneous. R argues that since the expiration of the period of limitations to assess the underlying tax is not a ground for relief under sec. 6015, I.R.C., this Court is without jurisdiction to determine the issue.

Held: Our jurisdiction under sec. 6015(e), I.R.C, is limited to reviewing R's denial of relief available under sec. 6015, I.R.C., from an otherwise existing joint and several tax liability. In an action brought under sec. 6015(e), I.R.C., we lack jurisdiction over whether the underlying assessment was barred by the statute of limitations.

Held, further, Since the Court is without jurisdiction to decide whether the expiration of the period of limitations bars the assessment of the underlying tax liability, the proposed amendment to the petition is improper, and P's motion for leave to amend is denied.

This matter is before the Court on petitioner's motion for leave to amend petition pursuant to Rule 41(a).¹ Petitioner timely filed her petition with this Court pursuant to section 6015(e) seeking relief from her previously assessed joint and several income tax liabilities for 1983 and 1984. ² The petition was filed after respondent issued a “Notice of Determination” denying her request for relief.³

Section 6015(e) “allows a spouse who has requested relief to petition the Commissioner's denial of relief, or to petition the Commissioner's failure to make a timely determination. Such cases are referred to as ‘stand alone’ cases, in that they are independent of any deficiency proceeding.” Ewing v. Commissioner, 118 T.C. 494, 497, 2002 WL 1150775 (2002) (quoting Fernandez v. Commissioner, 114 T.C. 324, 329, 2000 WL 565108 (2000)). ⁴

Petitioner seeks to amend the petition to include the following paragraph: “The statute of limitation bars the assessment of the underlying income tax liabilities for 1983 and 1984.” Petitioner claims the bar of the statute of limitations on assessment as an affirmative legal defense against the underlying assessment.⁵

In Robinson v. Commissioner, 57 T.C. 735, 737, 1972 WL 2524 (1972), we held that “The statute of limitations is a defense in bar and not a plea to the jurisdiction of this Court.” See Badger Materials, Inc. v. Commissioner, 40 T.C. 1061, 1963 WL 1445 (1963). Section 7459(e) provides:

SEC. 7459(e). Effect of Decision That Tax Is Barred by Limitation.—If the assessment or collection of any tax is barred by any statute of limitations, the decision of the Tax Court to that effect shall be considered as its decision that there is no deficiency in respect of such tax.⁶

See Genesis Oil & Gas v. Commissioner, 93 T.C. 562, 1989 WL 131640 (1989); Rodgers v. Commissioner, 57 T.C. 711, 1972 WL 2526 (1972). For the reasons stated below, we deny petitioner's motion to amend the petition. ⁷

Rule 41(a) provides that leave to amend “shall be given freely when justice so requires.” In exercising its discretion, the Court may deny petitioner's motion for leave to amend if permitting an amended petition would be futile. Klamath–Lake Pharm. Association v. Klamath Med. Serv. Bureau, 701 F.2d 1276, 1293 (9th Cir.1983); Estate of Ravetti v. Commissioner, T.C. Memo.1992–697.

Petitioner contends that once this Court's jurisdiction has been properly invoked under section 6015(e), we also have jurisdiction to decide whether the period of limitations for assessing tax has expired. Respondent opposes petitioner's motion contending that when the Court's jurisdiction is based on section 6015(e), the Court's jurisdiction is limited to whether the taxpayer is entitled to relief from an existing joint and several liability on the basis of the specific relief provisions contained in section 6015.

It is axiomatic that we are a Court of limited jurisdiction and may exercise our power only to the extent authorized by Congress. Gati v. Commissioner, 113 T.C. 132, 133, 1999 WL 601010 (1999); Naftel v. Commissioner, 85 T.C. 527, 529, 1985 WL 15396 (1985). In her “stand alone” petition, petitioner invoked our jurisdiction pursuant to section 6015(e) to review the Commissioner's denial of her request for relief from joint and several liability. Section 6015(e)(1) provides in pertinent part:

SEC. 6015(e). Petition for Review by Tax Court.—

(1) In general.—In the case of an individual against whom a deficiency has been asserted and who elects to have subsection (b) or (c) apply—

(A) In general.—In addition to any other remedy provided by law, 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—* * * [Emphasis added.]

We agree with respondent that the plain language of section 6015(e)(1) limits our jurisdiction to review the Commissioner's denial of the specific relief contemplated under section 6015.⁸ See Ewing v. Commissioner, supra at 499; Butler v. Commissioner, 114 T.C. 276, 290, 2000 WL 502841 (2000); Brown v. Commissioner, T.C. Memo.2002–187 (jurisdiction limited to relief contemplated under section 6015). Petitioner's amendment would allow her to go beyond the specific relief contemplated by section 6015 and question the viability of the tax liabilities from which she seeks relief. As previously stated, a finding that the period of limitations has expired is a complete legal bar to the assessment of the unpaid tax liability. See sec. 7459(e); Genesis Oil & Gas v. Commissioner, supra; Whirlpool Corp. v. Commissioner, 61 T.C. 182, 1973 WL 2673 (1973).

Section 6015 provides qualifying taxpayers with three distinct avenues of relief from joint and several tax liability. Section 6015(b) requires that the return from which the electing taxpayer seeks relief shows “an understatement of tax attributable to erroneous items of one individual filing the joint return”. Sec. 6015(b)(1)(B). In addition, the electing taxpayer must show that “taking into account all the facts and circumstances, it is inequitable to hold the other individual liable for the deficiency in tax for such taxable year attributable to such understatement”. Sec. 6015(b)(1)(D). Thus, a prerequisite to seeking relief under section 6015(b) is the existence of a tax deficiency.

In a similar vein, a taxpayer may seek relief pursuant to section 6015(c) for an “individual's liability for any deficiency which is assessed with respect to the return”. Sec. 6015(c)(1). The electing taxpayer bears the burden of proving “the portion of any deficiency allocable to such individual.” Sec. 6015(c)(2). With respect to the allocation of the deficiency, section 6015(d)(1) instructs that

The portion of any deficiency on a joint return allocated to an individual shall be the amount which bears the same ratio to such deficiency as the net amount of items taken into account in computing the deficiency and allocable to the individual under paragraph (3) bears to the net amount of all items taken into account in computing the deficiency.

Section 6015(c) clearly contemplates the existence of a joint tax deficiency from which relief is sought.

Section 6015(f) grants equitable relief to taxpayers who cannot otherwise qualify under subsections (b) or (c). However, this avenue requires the existence of an “unpaid tax or any deficiency”. Sec. 6015(f)(1).⁹ Section 6015(f) presupposes the existence of a deficiency or unpaid tax liability. Thus, section 6015(f) does not provide a platform upon which a taxpayer can prevail by merely using the strictly legal argument that the assessment of the underlying liability is barred. When a taxpayer disputes the Commissioner's determination regarding relief sought pursuant to section 6015(f), the issue we have jurisdiction to address in a “stand alone” petition under section 6015(e) is whether the Commissioner erroneously denied equitable relief from an existing joint and several tax liability.

In support of her motion, petitioner cites our opinion in Neely v. Commissioner, 115 T.C. 287, 2000 WL 1424832 (2000). In Neely, a taxpayer invoked our jurisdiction by filing a petition pursuant to section 7436 seeking to review the Commissioner's adverse determination of worker classification. One of the issues raised by the taxpayer in the petition was whether the assessment of taxes related to the Commissioner's determination of worker classification was barred by the period of limitations. Id. at 289. The Commissioner argued that we lacked jurisdiction to address matters relating to the period of limitations on assessments in the worker classification context. We disagreed and explained that ...