Ewing v. Comm'r of Internal Revenue , No. 1940–01.

Decision Date28 January 2004
Docket NumberNo. 1940–01.
Citation122 T.C. 32,122 T.C. No. 2
PartiesGwendolyn A. EWING, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
CourtU.S. Tax Court


Karen L. Hawkins, for petitioner.

Thomas M. Rohall, for respondent.


After submitting an application to and receiving an adverse determination from respondent (R), petitioner (P) petitioned this Court to seek our determination whether she is entitled to relief from joint liability under sec. 6015(f), I.R.C.

R contends that: (1) In making our determination, we may not consider evidence introduced at trial which was not included in the administrative record; and (2) whether or not our review is limited to R's administrative record, P is not entitled to equitable relief under sec. 6015(f), I.R.C.

Held: Our determination whether P is entitled to relief under sec. 6015(f), I.R.C., is made in a trial de novo; thus, we may consider matter raised at trial which was not included in the administrative record.

Held, further, P is entitled to equitable relief under sec. 6015(f), I.R.C.

Respondent determined that petitioner is not entitled to relief from joint liability for tax under section 6015(f) for 1995. Petitioner filed a petition under section 6015(e)(1) seeking our determination whether she is entitled to relief under section 6015(f).

The issues for decision are: 1

1. Whether, in determining petitioner's eligibility for relief under section 6015(f), we may consider evidence introduced at trial which was not included in the administrative record. We hold that we may.

2. Whether petitioner is entitled to relief from joint liability for tax under section 6015(f). We hold that she is.

Section references are to the Internal Revenue Code in effect for the applicable years. Rule references are to the Tax Court Rules of Practice and Procedure.


Some of the facts have been stipulated and are so found.

A. Petitioner and Petitioner's Husband1. Petitioner

Petitioner resided in Martinez, California, when she filed her petition. She married Richard Wiwi (Mr. Wiwi) on September 9, 1995. At the time of trial, they were still married and living together.

Petitioner is a licensed clinical laboratory scientist. In 1995, she worked full time for the Blood Bank of Alameda/Contra Costa Counties as a medical technologist and was eligible for various employee benefits (not described further in the record). Later in 1995, the blood bank changed her position to part time. From 1997 to 1999, petitioner was employed in two temporary medical technologist positions, and she received no employee benefits.

2. Petitioner's Husband

In 1995, Mr. Wiwi was the sole proprietor of a financial services business. He was licensed to trade securities and sell insurance. Petitioner knew about his business, but she did not know how much he earned. He concealed from her the fact that he had prior financial obligations, including unpaid income tax for 1993 and 1994.

3. Petitioner and Her Husband's 1995 Tax Return

Taxes in the amount of $10,862 were withheld from petitioner's wages in 1995. Mr. Wiwi made no estimated tax payments to the United States and was not subject to withholding in 1995. Petitioner and Mr. Wiwi filed a joint Federal income tax return for 1995. On that return, they reported Federal income tax withheld on petitioner's wages of $10,862 and additional tax due of $6,220. However, they paid only $1,620 with their return; petitioner paid $1,069, and Mr. Wiwi paid $551. As a result of withholding and the payment with the return, petitioner paid an amount equal to the tax on her income, but Mr. Wiwi paid less than the tax due on his income.

Mr. Wiwi told petitioner (and she reasonably believed) that he would pay the unpaid 1995 tax as provided in a proposed installment agreement that he submitted with their 1995 income tax return. Mr. Wiwi failed to pay the remaining 1995 tax, but he concealed that fact from petitioner until 1998. Early in 1999, he filed an offer in compromise in which he said he could not pay the unpaid tax for 1995.

4. Petitioner's Finances

Petitioner and Mr. Wiwi have always kept their finances separate. Petitioner paid her own expenses (including Federal income tax on her income) beginning before they were married and continuing until the time of trial. Petitioner paid at least half of their household expenses from the date they were married until 1997. Mr. Wiwi began having medical problems in 1996. He lost his license to sell securities in 1997, and his income decreased dramatically. Since 1997, petitioner has worked at several temporary jobs and paid all of her and about 80 percent of Mr. Wiwi's expenses. Petitioner's total monthly household expenses on behalf of herself and Mr. Wiwi in 1997 and 1998 (including rent, utilities, transportation, food, clothing, and medical insurance) were about $2,800.

Petitioner had about $5,000 in her savings account in 1996 and $13,500 at the time of trial. She received wages of $65,792 in 1997, $65,338 in 1998, $66,315 in 2000, and $79,000 in 2002.2

Mr. Wiwi's medical condition worsened, which prevented him from working in 2000. He had hip replacement surgery in 2000 and 2001.

In 2000, petitioner liquidated an individual retirement account (IRA) and used the proceeds (about $20,000) as part of a $33,000 downpayment to buy a $333,000 residence for Mr. Wiwi and herself. The monthly mortgage payment was about the same as their previous rent payments. At the time of trial, petitioner had a section 401(k) retirement account with the American Red Cross. The record does not indicate the value of that account.

B. Petitioner's Request for Relief From Joint Tax Liability

On February 2, 1999, petitioner filed Form 8857, Request for Innocent Spouse Relief (And Separation of Liability and Equitable Relief), in which she sought relief from joint liability for a portion of the amount of the unpaid tax liability shown on the 1995 joint return. On June 6, 1999, respondent sent petitioner a letter which said that respondent had preliminarily determined that petitioner was not entitled to relief under section 6015(f).

An Appeals officer met with petitioner's representative for 3 hours on November 18, 1999, and for 2 hours on September 21, 2000. Respondent determined on October 31, 2000, that petitioner was not entitled to equitable relief under section 6015(f) for 1995. Respondent's only stated reasons were: “You had knowledge of the liability, and you are still married and living with the nonrequesting spouse.” Exhibit 10–R, which includes the materials assembled by the examining agent and the Appeals officer in response to petitioner's claim for equitable relief, is respondent's administrative file (the administrative file) for this case. Petitioner timely filed a petition in this Court.


A. Whether We Are Limited to Respondent's Administrative Record in Making Our Determination1. Respondent's Position

Respondent contends that, in making our determination under section 6015(f), we may not consider evidence introduced at trial which was not included in the administrative record. More specifically, respondent contends that, pursuant to the Administrative Procedure Act (APA), 5 U.S.C. secs. 551–559, 701–706 (2000), and cases decided thereunder, this Court may consider only the administrative record (the record rule) in making our determination in this case.3 See Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973); United States v. Carlo Bianchi & Co., 373 U.S. 709, 715, 83 S.Ct. 1409, 10 L.Ed.2d 652 (1963). We disagree. As discussed next, our holding herein is based on more than 75 years of well-established interpretative history and practice before this Court.

2. Our Jurisdiction To Determine Whether the Taxpayer Qualifies for Relief Under Section 6015(f)

Section 6015(f) 4authorizes the Secretary to prescribe procedures under which, taking into account all the facts and circumstances, the Secretary may determine that it is inequitable to hold an individual jointly liable for tax. Section 6015(e)(1)(A) 5provides our jurisdiction in section 6015 cases. Section 6015(e)(1)(A) provides that a taxpayer against whom a deficiency has been asserted and who elects to have section 6015(b) or (c) apply may petition this Court “to determine the appropriate relief available to the individual” under section 6015, including relief under section 6015(f). Fernandez v. Commissioner, 114 T.C. 324, 330–331, 2000 WL 565108 (2000). To prevail under section 6015(f), petitioner must show that respondent's denial of equitable relief from joint liability under section 6015(f) was an abuse of discretion. Jonson v. Commissioner, 118 T.C. 106, 125, 2002 WL 199830 (2002); Cheshire v. Commissioner, 115 T.C. 183, 198, 2000 WL 1227132 (2000), affd. 282 F.3d 326 (5th Cir.2002); Butler v. Commissioner, 114 T.C. 276, 292, 2000 WL 502841 (2000).

3. Determinations and Redeterminations by This Court

Section 6015(e)(1)(A), which authorizes this Court to determine the appropriate relief available under section 6015, is similar to our deficiency jurisdiction in section 6213, which provides that taxpayers who receive a notice of deficiency may petition this Court for a redetermination of the deficiency. Sec. 6213(a).

It is well established that the APA does not apply to deficiency cases in this Court; that is, cases arising under sections 6213 or 6214 in which we may redetermine the taxpayer's tax liability. O'Dwyer v. Commissioner, 266 F.2d 575, 580 (4th Cir.1959), affg. 28 T.C. 698, 1957 WL 1088 (1957); Nappi v. Commissioner, 58 T.C. 282, 284, 1972 WL 2538 (1972). 6 In contrast, respondent contends that the APA applies to our proceedings under section 6015(f). As discussed next, we find no convincing reason to treat our determinations under section 6015(f) and section 6213(a) differently for purposes of applicability of the APA.

We make redeterminations under section 6213(a) de novo. O'Dwyer v. Commissioner, supra at 580; ...

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