Fernandez v. Comm'r of Internal Revenue

Decision Date10 May 2000
Docket NumberNo. 16710–99.,16710–99.
Citation114 T.C. No. 21,114 T.C. 324
PartiesDiane FERNANDEZ, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

Taxpayer petitioned for review of IRS' denial of her request for innocent spouse relief. IRS moved to dismiss for lack of jurisdiction and to strike certain allegations of facts raised in taxpayer's petition. The Tax Court, Cohen, Chief Judge, adopted the decision of Panuthos, Chief Special Trial J., which held that Court had jurisdiction to review request for equitable innocent spouse relief.

Motions denied.

IRS acquiesced to decision, 2000 WL 33910968.

Francine K. Cardella, for petitioner.

Rose E. Gole, for respondent.

OPINION

COHEN, Chief J.

P submitted a request to R for innocent spouse relief pursuant to sec. 6015(b), (c), and (f), I.R.C. R mailed to P a determination which denied the requested relief. P filed a timely petition with the Court pursuant to sec. 6015(e), I.R.C. P seeks review of R's denial of relief under sec. 6015(b), (c), and (f), I.R.C. R moved to dismiss for lack of jurisdiction and to strike as to sec. 6015(f), I .R.C. R further moved to strike certain allegations of fact raised by P in the petition.

Held: We have jurisdiction to review a request for innocent spouse relief under sec. 6015(f), I.R.C., when P makes a requisite election under sec. 6015(b) and/or (c), I.R.C., and files a timely petition with the Tax Court pursuant to sec. 6015(e), I.R.C. See Butler v. Commissioner, 114 T.C. ––––, (2000). Accordingly, R's motion to dismiss for lack of jurisdiction and to strike is denied. Held, further, allegations of fact raised in the petition are relevant to P's request for innocent spouse relief. R's motion to strike P's allegations of fact is denied.

This case was assigned to Chief Special Trial Judge Peter J. Panuthos pursuant to the provisions of section 7443A(b)(5). Unless otherwise indicated, section references are to the Internal Revenue Code as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure. The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

PANUTHOS, Chief J.

This matter is before the Court on respondent's motion to dismiss for lack of jurisdiction and to strike. The issues for decision are: (1) Whether this Court has jurisdiction to review the denial of a request for innocent spouse relief pursuant to section 6015(f); and (2) whether certain allegations of fact asserted in the petition are relevant to petitioner's request for innocent spouse relief.

Background

In March 1999, petitioner submitted to respondent a request for relief from joint and several liability for taxable year 1988 under section 6015(b), (c), and (f). In a letter dated July 27, 1999, respondent denied the requested relief.1 The determination letter advised that petitioner was not entitled to relief and included the following explanation: “Because the taxpayer Diane Fernandez had actual and constructive knowledge of the Capital Gains and the tax underpayment. In addition, the petitioning spouse received a significant financial benefit when she received sales proceeds of $19,532.13 in tax year 1988.”

On October 28, 1999, petitioner filed a timely petition with this Court pursuant to section 6015(e) to review respondent's denial of relief. Petitioner asserts entitlement to relief under section 6015(b), (c), and (f). The petition sets forth several bases of error by respondent and alleges facts in support of such bases. Two of such allegations of fact are:

5. The facts upon which the petitioner relies, as the basis of the petitioner's case, are as follows:

* * *

B. The Petitioner was not in control of the marital finances, which were one of the governing factors in the preparation of the 1988 jointly filed income tax return.

C. The sale of the house in question was owned exclusively by the Petitioner's former spouse. The Petitioner had neither a proprietary nor a financial interest in the house which was sold which caused the underpayment of the income tax assessed.

Respondent filed an answer to the petition and subsequently filed a motion to dismiss for lack of jurisdiction and to strike as to relief sought under section 6015(f). Respondent further moved to strike the allegations of fact contained in paragraphs 5.B. and 5.C. of the petition. At the time of filing the petition, petitioner resided in Elmhurst, New York.

Discussion1. General

Congress enacted section 6015 in the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.L. 105–206, sec. 3201, 112 Stat. 685, 734, as a means of expanding relief to innocent spouses. See H. Conf. Rept. 105–599, at 53 (1998); S. Rept. 105–174, at 65, 68 (1998); H. Rept. 105–364 (Part I) at 60–62 (1998). Section 6015(a) provides that, if an individual has made a joint return, he or she may elect to seek relief from joint and several liability under subsection (b). In addition, such individual may elect to limit his or her liability under subsection (c) if eligible.

Section 6015(b) enumerates requirements for seeking innocent spouse relief. Specifically, section 6015(b) provides:

SEC. 6015(b). Procedures For Relief From Liability Applicable to All Joint Filers.—

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

(A) a joint return has been made for a taxable year;

(B) on such return there is an understatement of tax attributable to erroneous items of 1 individual filing the joint return;

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

(D) 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; and

(E) the other individual elects (in such form as the Secretary may prescribe) the benefits of this subsection not later than the date which is 2 years after the date the Secretary has begun collection activities with respect to the individual making the election,

then the other individual 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 understatement.

Subsection (c) of section 6015 provides an opportunity to limit liability, as follows:

SEC. 6015(c). Procedures to Limit Liability for Taxpayers No Longer Married or Taxpayers Legally Separated or Not Living Together .—

(1) In general.—Except as provided in this subsection, if an individual who has made a joint return for any taxable year elects the application of this subsection, the individual's liability for any deficiency which is assessed with respect to the return shall not exceed the portion of such deficiency properly allocable to the individual under subsection (d).

* * *

(3) Election.—

(A) Individuals eligible to make election.—

(i) In general.—An individual shall only be eligible to elect the application of this subsection if-

(I) at the time such election is filed, such individual is no longer married to, or is legally separated from, the individual with whom such individual filed the joint return to which the election relates; or

(II) such individual was not a member of the same household as the individual with whom such joint return was filed at any time during the 12–month period ending on the date such election is filed.

(ii) Certain taxpayers ineligible to elect.—If the Secretary demonstrates that assets were transferred between individuals filing a joint return as part of a fraudulent scheme by such individuals, an election under this subsection by either individual shall be invalid (and section 6013(d)(3) shall apply to the joint return).

Section 6015(f) provides an additional opportunity for relief as follows:

SEC. 6015(f). Equitable Relief.—Under procedures prescribed by the Secretary, if—

(1) taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either); and

(2) relief is not available to such individual under subsection (b) or (c), the Secretary may relieve such individual of such liability.

2. Jurisdiction

The first issue to be decided is whether this Court has jurisdiction to review a denial of a request for innocent spouse relief pursuant to section 6015(f).

The Tax Court is a court of limited jurisdiction, and we may exercise our jurisdiction only to the extent authorized by Congress. See Gati v. Commissioner, 113 T.C. 132, 133, 1999 WL 601010 (1999); Yuen v. Commissioner, 112 T.C. 123, 124, 1999 WL 148487 (1999); Bourekis v. Commissioner, 110 T.C. 20, 24, 1998 WL 7744 (1998). The question of the Court's jurisdiction is fundamental and must be addressed when raised by a party or on the Court's own motion. See Naftel v. Commissioner, 85 T.C. 527, 530, 1985 WL 15396 (1985).

A. Section 6015(e)

The petition herein has been filed pursuant to section 6015(e). Section 6015(e), as pertinent here, provides:

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

(1) In general.—In the case of an individual who elects to have subsection (b) or (c) apply—

(A) In general.—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 during the 90–day period beginning on the date on which the Secretary mails by certified or registered mail a notice to such individual of the Secretary's determination of relief available to the individual. Notwithstanding the preceding sentence, an individual may file such petition at any time after the date which is 6 months after the date such election is filed with the Secretary and before the close of such 90–day period.

* * *

(3) Applicable rules.—

(A) Allowance of credit...

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