Dutton v. Comm'r of Internal Revenue , No. 17802–02.
| Decision Date | 11 February 2004 |
| Docket Number | No. 17802–02. |
| Citation | 122 T.C. No. 7,122 T.C. 133 |
| Parties | Joseph DUTTON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
John R. McCabe, for petitioner.
Patrick W. Lucas, for respondent.
P submitted a request for relief from joint and several liability. P subsequently submitted an offer in compromise, which R accepted. Before the offer was accepted, R sent P a letter explaining that it was proposed that P be granted relief under sec. 6015(c), I.R.C., and that P would be entitled to a refund. After accepting the offer, R sent P a notice of determination denying relief from joint and several liability under former sec. 6013(e), I .R.C., and sec. 6015(b), (c), and (f), I.R.C. P petitioned the Court under sec. 6015(e)(1), I.R.C. P argues that the statement that P would be entitled to a refund resulted in a mutual mistake of material fact or misrepresentation sufficient for the offer in compromise to be set aside. For the first time in his answering brief, P argues that the doctrine of equitable estoppel applies.
Held: There was no mutual mistake or misrepresentation sufficient to cause the offer in compromise to be set aside. P's equitable estoppel argument is not considered because it was not timely raised.
This matter is before the Court on the issue of whether petitioner is barred from seeking relief from joint and several liability under former section 6013(e) 1 and section 6015 for the years 1986 and 1987 because he entered into an offer in compromise with respondent for those years. We hold that the offer in compromise is valid and petitioner is barred from seeking relief from joint and several liability.
The parties submitted the issue fully stipulated. The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioner's mailing address was in Yorba Linda, California, at the time he filed his petition.
On September 3, 1999, petitioner submitted a Form 8857, Request for Innocent Spouse Relief, requesting relief from joint and several liability for the taxable years 1984, 1985, and 1986.
On April 24, 2001, petitioner submitted an amended Form 656, Offer in Compromise, wherein he offered to compromise all income tax liabilities, including any interest, penalties, additions to tax, and additional amounts required by law, for the years 1986, 1987, and 1993 through 1999.2 Petitioner's offer was to pay $6,000 at a rate of $250 per month. Petitioner's offer in compromise was based on doubt as to collectibility, not on doubt as to liability or the promotion of effective tax administration. The Form 656 states that “Once the IRS accepts the offer in writing, I/we have no right to contest, in court or otherwise, the amount of the tax liability.” The form provides that the offer in compromise may be withdrawn at any time before the Commissioner accepts the offer. Petitioner was represented by Carlton V. Phillips, Jr. (Mr. Phillips), during the offer in compromise proceedings.
By letter dated May 7, 2001, D. Zukle (Mr. Zukle), an Internal Revenue Service (IRS) manager, informed petitioner that for 1986 and 1987 it was being proposed that he be granted partial relief from joint and several liability under section 6015(c), but that relief under other provisions would be denied in full. In the letter, Mr. Zukle stated that he believed that no additional payments would be due and, that to the best of his knowledge, after the recommended relief was granted, petitioner would be entitled to refunds for 1986 and 1987.
On June 20, 2001, a Form 2848, Power of Attorney and Declaration of Representative, was signed by petitioner and his current counsel, John R. McCabe (Mr. McCabe). Mr. McCabe was retained to assist petitioner in his claim for relief from joint and several liability. On July 9, 2001, Mr. McCabe sent a letter to Mr. Zukle regarding petitioner's entitlement to relief from joint and several liability. The letter stated that an IRS employee reviewing petitioner's claim had referenced section 6015(c) and checked a form stating that there would be no refund of the disputed debt. In another letter to Mr. Zukle, dated July 23, 2001, Mr. McCabe stated that he had recently discussed petitioner's claim for relief with an “Innocent Spouse Coordinator” and had been told that there is no refund provision when a claim is approved under section 6015(c).
By letter to petitioner dated July 25, 2001, respondent accepted the offer in compromise of $6,000, subject to the conditions and provisions stated on the Form 656. The letter listed petitioner's total account balance, as of April 30, 2001, for the years 1986, 1987, and 1993 through 1999 as $185,962. Balances of $37,162 and $84,124 were shown for 1986 and 1987, respectively. The letter was signed on respondent's behalf by Mark Jaramillo (Mr. Jaramillo), Steve Turner, and K. Vega. Mr. Jaramillo also sent a copy of the acceptance letter to Mr. Phillips on July 25, 2001. Petitioner has completed the payment plan for his offer in compromise, and copies of TXMODA transcripts 3 for the year 1986 and 1987 show a balance due of zero.
By notice of determination dated August 12, 2002, respondent determined that petitioner was not entitled to relief from joint and several liability under section 6013(e) and section 6015(b), (c), and (f) for the years 1986 and 1987.4 The notice listed Al Petroff as a contact person and was signed by Jon S. Leo, Appeals Team Manager. Petitioner filed a petition under section 6015(e)(1) seeking a review of respondent's determination for the years 1986 and 1987.
Petitioner argues that the offer in compromise should be set aside and he should be allowed to seek relief from joint and several liability under section 6013(e) and section 6015(b), (c), and (f) for the years 1986 and 1987. Respondent argues that the offer in compromise should not be set aside and, as a matter of law, petitioner is not entitled to relief. The issue we must decide is whether petitioner is barred from seeking relief from joint and several liability because the offer in compromise was accepted or whether the offer can be rescinded on the basis of a mutual mistake or a misrepresentation.
As an initial matter, we address petitioner's argument as it pertains to section 6013(e). The petition in this case was filed pursuant to section 6015(e)(1). Section 6015(e)(1) provides jurisdiction to decide the appropriate relief available to the taxpayer under section 6015. There is no provision in the Internal Revenue Code that allows us to grant relief under section 6013(e) to a taxpayer who files a petition under section 6015(e). Brown v. Commissioner, T.C. Memo.2002–187. Thus, we do not consider petitioner's claim for relief under section 6013(e).
Section 6015 was enacted on July 22, 1998, as part of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.L. 105–206, sec. 3201(a), 112 Stat. 734. It was given retroactive effect with respect to any liability for tax remaining unpaid as of July 22, 1998. Id. sec. 3201(g)(1), 112 Stat. 740.
Section 6015 provides three avenues of relief from joint and several liability. Section 6015(b) provides relief similar to that available under former section 6013(e), and also allows a spouse to be relieved from a portion of an understatement of tax. Section 6015(c) generally provides for an allocation of liability for deficiencies as if the spouses had filed separate returns. Section 6015(f) allows for equitable relief in situations where relief is unavailable under section 6015(b) or (c).
Section 6015(g) governs the allowance of credits and refunds in cases where the taxpayer is granted relief under section 6015. Except as provided otherwise in section 6015(g) and in sections 6511, 6512(b), 7121, and 7122, credit or refund is allowed or made to the extent attributable to the application of section 6015. Sec. 6015(g)(1). No refund or credit is allowed under section 6015(c). Sec. 6015(g)(3).
Petitioner's claim for relief is under section 6015(b), (c), and (f) and includes tax liabilities that were covered by the offer in compromise. Petitioner has completed the payment plan under the accepted offer. Respondent argues that the accepted offer precludes petitioner from asserting a claim for relief under section 6015.
Section 7122 governs offers in compromise. Section 7122(a) authorizes the Commissioner to compromise a taxpayer's outstanding liabilities. Taxpayers generally submit an offer in compromise according to procedures, and in the form and manner, prescribed by the Commissioner. Sec. 301.7122–1T(c)(1), Temporary Proced. & Admin. Regs., 64 Fed.Reg. 39025 (July 21, 1999). 5 An offer in compromise may be withdrawn by the taxpayer or his representative at any time before acceptance of the offer. Sec. 301.7122–1T(c)(3), Temporary Proced. & Admin. Regs., supra. The offer is considered withdrawn when the Commissioner receives written notification of the withdrawal of the offer by personal delivery or certified mail, or when the Commissioner issues a letter confirming the taxpayer's intent to withdraw the offer. Id. Generally, an acceptance of an offer in compromise will conclusively settle the liability of the taxpayer specified in the offer, absent fraud or mutual mistake. Estate of Jones v. Commissioner, 795 F.2d 566, 574 (6th Cir.1986), affg. T.C. Memo.1984–53; Timms v. United States, 678 F.2d 831, 833 (9th Cir.1982); sec. 301.7122–1T(d)(5), Temporary Proced. & Admin. Regs, supra. In order to reopen the case, the mistake must be mutual and “of material fact sufficient to cause the offer agreement to be reformed or set aside”. Sec. 301.7122–1T(d)(5), Temporary Proced. & Admin. Regs., supra.6
An accepted offer in compromise is properly analyzed as a...
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