Corson v. Comm'r of Internal Revenue, No. 27181–85.

CourtU.S. Tax Court
Writing for the CourtNIMS
Citation114 T.C. No. 24,114 T.C. 354
Docket NumberNo. 27181–85.
Decision Date18 May 2000
PartiesThomas CORSON and Judith Corson, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

114 T.C. 354
114 T.C. No. 24

Thomas CORSON and Judith Corson, Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 27181–85.

United States Tax Court.

May 18, 2000.


Taxpayers, husband and wife who filed joint return, petitioned for redetermination of deficiencies and separately entered into stipulations with IRS. Husband refused to sign stipulated decision based on IRS granting wife complete relief from joint and several taxation. IRS moved for entry of decision. The Tax Court, Nims, J., held that spouse not electing innocent spouse relief should have been afforded opportunity to litigate decision granting such relief to wife.

Motion denied.

[114 T.C. 354]

Ps T and J filed a joint Federal income tax return for the taxable year 1981, and R issued a notice of deficiency for taxes, additions to tax, and interest related thereto. Ps filed a joint petition for redetermination with this Court, and J later amended the petition to assert a claim for innocent spouse relief. Subsequently, J and R entered into a stipulation in which J conceded liability for the deficiencies determined by R but preserved her right to pursue innocent spouse relief. T and R then signed a similar stipulation settling all issues pertaining to T's tax liabilities for the 1981 year. At a later date, J and R also executed a stipulated settlement granting J complete relief from joint and several liability pursuant to sec. 6015(c), I.R.C. When T thereafter refused to sign a stipulated decision based on these agreements, R filed a motion for entry of decision. T contends that provisions of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.L. 105–206, sec. 3201, 112 Stat. 685, 734, confer upon him, as the nonelecting spouse, a right to litigate in challenge of a decision by R to grant relief under sec. 6015, I.R.C., to the electing spouse.Held: T, the nonelecting spouse, should be afforded an opportunity to litigate the decision by R to grant relief from joint and several liability to J, the electing spouse.Held, further, respondent's motion for entry of decision will be denied.Stephen Benda, for petitioner Thomas Corson.

Arthur A. Oshiro, for petitioner Judith Corson.

Robert H. Schorman, Jr., for respondent.

[114 T.C. 355]

OPINION
NIMS, J.

This matter is before the Court on respondent's motion for entry of decision. Broadly stated, the issue to be resolved is whether objection by petitioner Thomas Corson to respondent's settlement with petitioner Judith Corson, granting her relief under section 6015(c) from joint and several liability, provides sufficient basis for the Court to deny respondent's motion for entry of decision. As more narrowly framed by the contentions of the parties, the question raised is whether provisions of the Internal Revenue Service Restructuring and Reform Act of 1998 (Restructuring Act), Pub.L. 105–206, sec. 3201, 112 Stat. 685, 734, confer upon the spouse not seeking relief from joint and several liability rights that make such a denial appropriate.

Unless otherwise indicated, all section references are to sections of the Internal Revenue Code in effect for the relevant years, and all Rule references are to the Tax Court Rules of Practice and Procedure.

Background

Thomas and Judith Corson filed a joint Federal income tax return for their 1981 taxable year. (For convenience, Thomas Corson and Judith Corson will hereinafter be referred to collectively as petitioners and individually as Thomas and Judith, respectively.) Petitioners subsequently separated in 1983 and divorced in 1984. A joint notice of deficiency was issued by respondent to petitioners on April 12, 1985, determining a tax deficiency of $21,711 and additions to tax pursuant to section 6653(a)(1) and (2). Respondent further determined that the deficiency constituted a substantial underpayment attributable to tax motivated transactions, thus rendering applicable the provisions for increased interest under section 6621(d). The $21,711 deficiency resulted largely from disallowance of losses relating to petitioners' investments in one of a group of tax shelter limited partnerships. In July of 1985, petitioners filed with this Court a joint petition contesting the notice of deficiency. Both at that time resided in the State of California.

A test case involving the group of tax shelter partnerships was thereafter litigated, and investment losses were held to be nondeductible. See

[114 T.C. 356]

Krause v. Commissioner, 99 T.C. 132, 1992 WL 178601 (1992), affd. sub nom. Hildebrand v. Commissioner, 28 F.3d 1024 (10th Cir.1994). Following this decision and based on its results, settlement negotiations were initiated with parties in related suits.

On June 11, 1996, Judith, now represented by separate counsel, filed a motion to amend the 1985 petition to assert her entitlement to innocent spouse relief under former section 6013(e). The motion was served on attorneys for respondent and for Thomas, and neither raised an objection. The Court granted Judith's motion and filed the amendment on June 18, 1996.

[114 T.C. 357]

Then, in November of 1996, Judith and respondent entered into a stipulation resolving all issues with respect to Judith except that of innocent spouse relief. The settlement stated that, without considering the innocent spouse provisions of section 6013(e), an income tax deficiency of $21,711 was due from Judith for the 1981 taxable year, with increased interest under section 6621(c) (formerly section 6621(d)), but she was not liable for additions to tax under section 6653(a)(1) or (2).

In early 1998, respondent's Appeals Office began consideration of Judith's claim for innocent spouse relief. A letter to Judith dated July 8, 1998, communicated, in part, the following:

This letter is to inform you that all the facts and circumstances that serve as the basis for your claim for IRC 6013(e) “Innocent Spouse” relief were carefully considered. In addition, this office served notice of the claim on Thomas Corson, and requested that he furnish any information relevant to a determination as to whether or not such relief would be appropriate. In response, Mr. Corson has furnished information that must be given due consideration in this matter.

The Appeals officer then concluded: “It would be my recommendation that the requirements of the law are not met and that Innocent Spouse relief could not be approved.”

On July 22, 1998, the Restructuring Act was enacted. The statute, among other things, revised and expanded the relief available to spouses filing joint returns, and Judith's attorney informed the Appeals officer that Judith elected to have the newly promulgated section 6015(c) applied for purposes of resolving her still-pending claim for relief.

Then, in November of 1998, Thomas and respondent entered into a stipulation settling all issues with respect to Thomas. Like the earlier settlement with Judith, this stipulation reflected that an income tax deficiency of $21,711 was due from Thomas for the 1981 taxable year, with increased interest under section 6621(c), but that he was not liable for additions to tax under section 6653(a)(1) or (2).

Also in late 1998, respondent's Appeals Office denied Judith's request for complete relief from joint and several liability, and the case was released to the jurisdiction of the Internal Revenue Service District Counsel. The matter was thereafter calendared for trial beginning on May 17, 1999, in Los Angeles, California. Prior to the scheduled court appearance, Judith and respondent entered into a stipulation of settlement agreeing that Judith qualified for relief under section 6015(c) and was not liable for any deficiencies, additions to tax, or interest in connection with the 1981 taxable year. When Thomas subsequently refused to sign a stipulated decision based on this agreement with Judith and his own previous settlement, respondent on June 7, 1999, filed the motion for entry of decision that is the subject of the instant controversy.

Discussion
I. Statutory Provisions and Case Law

As a general rule, section 6013(d)(3) provides that “if a joint return is made, the tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several .” An exception to such joint and several liability exists, however, for spouses able to satisfy the statutory requirements for what has traditionally been termed “innocent spouse” relief.

A. Prior Innocent Spouse Law

Prior to the enactment of the Restructuring Act, section 6013(e) governed the granting or denial of claims for innocent spouse relief. Section 6013(e) read in part as follows:

SEC. 6013(e). Spouse Relieved of Liability in Certain Cases.—

(1) In general.—Under regulations prescribed by the Secretary, if—

[114 T.C. 358]

(A) a joint return has been made under this section for a taxable year,

(B) on such return there is a substantial understatement of tax attributable to grossly erroneous items of one spouse,

(C) the other spouse establishes that in signing the return he or she did not know, and had no reason to know, that there was such substantial understatement, and

(D) taking into account all the facts and circumstances, it is inequitable to hold the other spouse liable for the deficiency in tax for such taxable year attributable to such substantial understatement,

then the other spouse shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent such liability is attributable to such substantial understatement.

The section then went on to impose an additional requirement that the understatement exceed a specified percentage of the innocent spouse's income in order for relief to be available. See sec. 6013(e)(4). Section...

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56 practice notes
  • C.I.R. v. Neal, No. 06-14357.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • February 10, 2009
    ...at *6. "Identical issues before a single tribunal should receive similar treatment." Ewing, 122 T.C. at 43 (quoting Corson v. Comm'r, 114 T.C. 354, 364, 2000 WL 637480 Finally, and of particular import here, the Tax Court explained why the APA's record rule—limiting a reviewing court to the......
  • Porter v. Commissioner of Internal Revenue, 130 T.C. No. 10 (U.S.T.C. 5/15/2008), No. 13558-06.
    • United States
    • U.S. Tax Court
    • May 15, 2008
    ...as this case. Rule 325; Ewing v. Commissioner, 122 T.C. at 43; King v. Commissioner, 115 T.C. 118, 122-123 (2000); Corson v. Commissioner, 114 T.C. 354, 365 (2000). That Congress provided for intervention by nonrequesting spouses suggests Congress intended that we conduct trials de novo und......
  • Porter v. Comm'r of Internal Revenue, No. 13558–06.
    • United States
    • United States Tax Court
    • May 15, 2008
    ...325; Ewing v. Commissioner, 122 T.C. at 43; King v. Commissioner, 115 T.C. 118, 122–123, 2000 WL 1131914 (2000); Corson v. Commissioner, 114 T.C. 354, 365, 2000 WL 637480 (2000). That Congress provided for intervention by nonrequesting spouses suggests Congress intended that we conduct tria......
  • Ewing v. Commissioner of Internal Revenue, Docket No. 1940-01 (U.S.T.C. 1/28/2004), Docket No. 1940-01.
    • United States
    • United States Tax Court
    • January 28, 2004
    ...a taxpayer requests relief from joint and several liability that are independent of any deficiency proceeding). Corson v. Commissioner, 114 T.C. 354, 364 (2000). Similarly, we believe taxpayers should have the same opportunity to have a trial de novo relating to entitlement to relief under ......
  • Request a trial to view additional results
56 cases
  • C.I.R. v. Neal, No. 06-14357.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • February 10, 2009
    ...at *6. "Identical issues before a single tribunal should receive similar treatment." Ewing, 122 T.C. at 43 (quoting Corson v. Comm'r, 114 T.C. 354, 364, 2000 WL 637480 Finally, and of particular import here, the Tax Court explained why the APA's record rule—limiting a reviewing court to the......
  • Porter v. Commissioner of Internal Revenue, 130 T.C. No. 10 (U.S.T.C. 5/15/2008), No. 13558-06.
    • United States
    • U.S. Tax Court
    • May 15, 2008
    ...as this case. Rule 325; Ewing v. Commissioner, 122 T.C. at 43; King v. Commissioner, 115 T.C. 118, 122-123 (2000); Corson v. Commissioner, 114 T.C. 354, 365 (2000). That Congress provided for intervention by nonrequesting spouses suggests Congress intended that we conduct trials de novo und......
  • Porter v. Comm'r of Internal Revenue, No. 13558–06.
    • United States
    • United States Tax Court
    • May 15, 2008
    ...325; Ewing v. Commissioner, 122 T.C. at 43; King v. Commissioner, 115 T.C. 118, 122–123, 2000 WL 1131914 (2000); Corson v. Commissioner, 114 T.C. 354, 365, 2000 WL 637480 (2000). That Congress provided for intervention by nonrequesting spouses suggests Congress intended that we conduct tria......
  • Ewing v. Commissioner of Internal Revenue, Docket No. 1940-01 (U.S.T.C. 1/28/2004), Docket No. 1940-01.
    • United States
    • United States Tax Court
    • January 28, 2004
    ...a taxpayer requests relief from joint and several liability that are independent of any deficiency proceeding). Corson v. Commissioner, 114 T.C. 354, 364 (2000). Similarly, we believe taxpayers should have the same opportunity to have a trial de novo relating to entitlement to relief under ......
  • Request a trial to view additional results

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