Coggin v. Comm'r of Internal Revenue

• Decision Date: 08 December 2021
• Docket Number: 21580-19
• Parties: ALICE J. COGGIN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: United States Tax Court

157 T.C. No. 12

ALICE J. COGGIN, Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 21580-19

United States Tax Court

December 8, 2021

P filed amended tax returns for years 2001-09, and claimed refunds with respect to years 2001-07. P's claimed refunds were rejected by the IRS for years 2003, 2004, and 2007, and P subsequently filed a complaint in the U.S. District Court seeking refunds for years 2001-07. The Government, as defendant, filed a counterclaim against P seeking to reduce P's remaining balances due for years 2002-09 to judgment.

By order, the District Court granted summary judgment in favor of the Government, dismissing P's refund claims; however, the District Court retained jurisdiction over the Government's counterclaim. As a defense to the Government's counterclaim, P now seeks innocent spouse relief under I.R.C. sec. 6015 for years 2001-09, and has brought a petition before this Court seeking such relief. R answered P's petition and has filed a motion to dismiss for lack of jurisdiction.

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Held: Where, as here, a District Court acquires jurisdiction in a suit for refund, it acquires jurisdiction over the entire liability for that tax year including the taxpayer's claim for recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected. Accordingly, R's motion to dismiss for lack of jurisdiction will be granted as to years 2001-07 and denied as to years 2008 and 2009.

Brian C. Bernhardt, for petitioner.

Olivia H. Rembach and Ashley M. Bender, for respondent.

OPINION

WEILER, JUDGE:

This case is before the Court on respondent's motion to dismiss for lack of jurisdiction. We will grant respondent's motion in part and deny it in part for the reasons outlined below.

Background

The following recitation of facts is drawn from the allegations in the pleadings, respondent's motion to dismiss for lack of jurisdiction, petitioner Alice J. Coggin's written response, and supporting exhibits.^[1] These facts are stated

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solely for the purpose of ruling on respondent's motion to dismiss for lack of jurisdiction. When this petition was filed, Ms. Coggin resided in North Carolina.

I. Ms. Coggin's Tax Return

Ms. Coggin married her husband, Phillip Ray Coggin, Sr., in 1950, and they remained married until his death on May 13, 2011. Each spouse owned a 50% interest in an S corporation. During their marriage Mr. Coggin untimely filed Forms 1040, U.S. Individual Income Tax Return, for years 2001-09 (joint returns).^[2] For years 2001-07, Mr. Coggin made untimely full payments of the tax liabilities with the tax returns but did not pay any penalties, additions to tax, or interest. Mr. Coggin made a partial payment for year 2008 and made no payments for year 2009. As a result, the outstanding tax liabilities, penalties, and additions to tax for all relevant years were assessed against both spouses.

Ms. Coggin first learned about the joint returns and tax liabilities arising from them only weeks before her husband's death. At the advice of her attorney Ms. Coggin subsequently filed individual Forms 1040 for tax years 2001-09 (separate returns) on which she reported her 50% shares of the income from the S corporation. On those returns she elected "married filing separately" status. The separate returns for years 2001-07 reported that Ms. Coggin was entitled to

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refunds for those years.^[3] The separate returns did not claim innocent spouse status or discuss section 6015. For years 2003, 2004, and 2007 the Internal Revenue Service (IRS) mailed to Ms. Coggin notices of disallowance pursuant to section 6532(a), disallowing the claims on the separate returns. The notice of disallowance for year 2007 was mailed in February 2014, and the notices of disallowance for years 2003 and 2004 were mailed in March 2017.

II. Ms. Coggin's Tax Refund Action in the District Court

In February 2016 two years after the notice of disallowance for year 2007 was mailed, Ms. Coggin filed a complaint against the United States in the U.S. District Court for the Middle District of North Carolina seeking tax refunds for years 2007 and 2009. She later filed first and second amended complaints that sought a refund for year 2007 only. She then, in July 2017, filed a third (and ultimately operative) amended complaint that sought refunds for years 2001-07.^[4]Ms. Coggin's refund suit in the District Court alleged that her husband had signed her name to the joint returns without her knowledge or consent, the joint returns were thus invalid, and she was entitled to refunds on the basis of the separate

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returns. Her pleadings do not mention her innocent spouse status or refer to relief under section 6015.

III. The United States' Counterclaim

In its answer to Ms. Coggin's third amended complaint the United States included a counterclaim in the District Court "to reduce * * * [Ms. Coggin's] liabilities for the 2002 through 2009 tax years" to judgment.^[5] In her September 2017 answer to the United States' counterclaim, Ms. Coggin does not raise an innocent spouse defense but instead relies on her separate returns and alleges she is "entitled to refunds as set forth * * * in her Third Amended Complaint". She alleges that certain correspondence of her representative in April 2011 constituted an "informal claim" and that she perfected that informal claim by mailing her separate returns to the IRS in August 2013. Ms. Coggin alleges that the IRS' failure to accept her separate returns and allow the claimed refunds was error.^[6]

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As of September 2017 Ms. Coggin's complaint in the District Court sought a tax refund for years 2001-07, while the United States' counterclaim sought a judgment against Ms. Coggin for remaining balances due for years 2002-09.

IV. The Government's Motion for Summary Judgment

In April 2018 the United States moved for summary judgment in the District Court regarding Ms. Coggin's refund claims for years 2001-07.^[7] In July 2018 the District Court granted the United States' motion for summary judgment. In the July 2018 order the District Court discussed the jurisdictional requirements for a refund suit, held that the joint returns filed for years 2001-07 were valid, and dismissed Ms. Coggin's refund claims, stating: "It is ORDERED that the United States motion for summary judgment, Doc. 47, is GRANTED and the plaintiff's claims are dismissed. The defendant's counterclaims will proceed to trial". The District Court further stated: "The Court has not evaluated and makes no ruling on whether the innocent spouse exception relieves Ms. Coggin of liability from the defendant's counterclaim for [tax], penalties and interest". The District Court has

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not entered a final appealable order or judgment as to Ms. Coggin's refund claims; nor does the District Court's order address years 2008 and 2009.^[8]

On or about October 19, 2018, after the District Court's ruling on respondent's motion for summary judgment, Ms. Coggin submitted to the IRS Form 8857, Request for Innocent Spouse Relief, ^[9] under section 6015 for years 2001-09.^[10] A few days later Ms. Coggin filed a motion to stay the proceeding with the District Court, asking the District Court to "stay this action until such time as Plaintiff's Request for Innocent Spouse Relief * * * has been fully processed in

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the Internal Revenue Service and, as may be applicable, litigated in the United States Tax Court". This was Ms. Coggin's first mention of innocent spouse status in the District Court case. In January 2019 the District Court (through a Magistrate Judge) granted Ms. Coggin's motion for stay, stating:

[T]he Court finds first that a stay is warranted under 26 USC § 6015(e)(1)(B), which provides that no proceeding in court shall be prosecuted against an individual requesting relief under § 6015(b), (c), or (f). Defendant's counterclaims are now being prosecuted in this Court, and the United States has not presented any case or analysis to show that § 6015(e)(1)(B) would not apply here. Moreover, even if that provision did not specifically apply here, the Court finds that * * * its equitable authority should be exercised to stay this proceeding while the Innocent Spouse defense is litigated. ** *

** * [T]his case will be stayed pending resolution of Ms. Coggin's Innocent Spouse defense through the

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