Holman v. Comm'r of Internal Revenue, No. 13558–06.

CourtUnited States Tax Court
Writing for the CourtHAINES
Citation132 T.C. No. 11,132 T.C. 203
PartiesSuzanne L. PORTER a.k.a. Suzanne L. Holman, Petitioner v. COMMISSIONER of INTERNAL REVENUE, Respondent.
Decision Date23 April 2009
Docket NumberNo. 13558–06.

132 T.C. 203
132 T.C. No. 11

Suzanne L. PORTER a.k.a. Suzanne L. Holman, Petitioner
v.
COMMISSIONER of INTERNAL REVENUE, Respondent.

No. 13558–06.

United States Tax Court.

April 23, 2009.


[132 T.C. 203]

P applied for relief from joint and several liability for additional tax under sec. 72(t), I.R.C., related to a distribution her husband received from his individual retirement account. R denied P's application for relief. P petitioned this Court to seek our determination whether she is entitled to relief under sec. 6015(f), I.R.C.

Held: In determining whether P is entitled to equitable relief under sec. 6015(f), I.R.C., we apply a de novo standard of review, not an abuse of discretion standard of review.

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

Suzanne L. Porter a.k.a. Suzanne L. Holman, pro se.

Kelly R. Morrison–Lee and Ann M. Welhaf, for respondent.

HAINES, Judge.

Respondent determined that petitioner is not entitled to relief from joint and several income tax liability for 2003 with respect to an early distribution from her ex-husband's individual retirement account (IRA).1 In Porter v. Commissioner, 130 T.C. 115, 117, 2008 WL 2065189 (2008), we held that in determining whether petitioner is entitled to relief under section 6015(f), we conduct a trial de novo and we may consider evidence introduced at trial which was not included in the administrative record. We then denied respondent's motion in limine seeking to limit petitioner's right to introduce evidence outside the administrative record. The issues remaining for decision are: (1) Whether in determining petitioner's eligibility for relief under section 6015(f) we use a de novo standard of review or review for abuse of discretion; and (2)

[132 T.C. 204]

whether petitioner is entitled to equitable relief under section 6015(f).

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts, the exhibits attached thereto, and the stipulation of settled issues are incorporated herein by this reference. At the time she filed her petition, petitioner resided in Maryland.

Petitioner holds a bachelor of science degree in business administration from the University of Maryland. In 1994 she married John S. Porter. Together, they had two children. Sometime in 2002 petitioner was wrongfully discharged from her job with the Federal Government. Before returning to Government employment petitioner was employed as a bus driver.

Petitioner was not aware of Mr. Porter's finances during 2003. They maintained separate checking accounts and credit cards. Petitioner did not review the monthly bank statements, nor did she pick up the daily mail. Mr. Porter was responsible for the home mortgage and car insurance payments. Petitioner was responsible for paying all other home expenses, including groceries, which she paid for with her credit cards.

During 2003 petitioner received $24,285 in wages and unemployment compensation. During 2003 Mr. Porter earned $12,765 in nonemployee compensation. He also received a $10,700 distribution from his IRA. Petitioner did not know of the distribution at the time it was made because Mr. Porter refused to tell petitioner about his income for 2003.

Before 2003 Mr. Porter was responsible for filing the couple's tax returns. He also prepared the couple's 2003 joint Form 1040, U.S. Individual Income Tax Return. The return reported Mr. Porter's IRA distribution and petitioner's wages and unemployment compensation. Mr. Porter's nonemployee compensation was not reported on the return. He gave the return to petitioner to sign on April 15, 2004, the day it was due. Because Mr. Porter was pressuring her to sign the return quickly so he could get it to the post office, petitioner reviewed the return in haste, ensuring that her own income was properly reported. Six days after petitioner signed the

[132 T.C. 205]

return, on April 21, 2004, she and Mr. Porter legally separated.2

On June 20, 2005, respondent issued petitioner and Mr. Porter statutory notices of deficiency for 2003. Respondent adjusted their 2003 income to include $12,765 in nonemployee compensation attributable to Mr. Porter. Respondent also adjusted their 2003 income tax to include 10–percent additional tax of $1,070 with respect to Mr. Porter's IRA distribution pursuant to section 72(t)(1). Neither petitioner nor Mr. Porter petitioned this Court for redetermination of the deficiency.

In subsequent years petitioner has complied with all income tax laws. After their separation petitioner discovered that Mr. Porter had not filed their joint Federal income tax return for 2002. Petitioner promptly filed her own return for 2002, choosing married-filing-separately status.

On December 1, 2005, petitioner filed a Form 8857, Request for Innocent Spouse Relief. On June 14, 2006, respondent's Appeals officer issued a final determination regarding petitioner's request for relief. The Appeals officer determined that pursuant to section 6015(c) petitioner was entitled to relief from joint and several liability with respect to the $12,765 in unreported nonemployee compensation. However, petitioner was denied relief under section 6015(b), (c), and (f) from the 10–percent additional tax of $1,070 on Mr. Porter's IRA distribution. The Appeals officer determined that petitioner knew or had reason to know the 10–percent additional tax was not reported on the couple's return. On January 31, 2007, as a result of debt from her marriage, petitioner filed for bankruptcy.3

Mr. Porter did not intervene in this case, though he was given the opportunity to do so under section 6015(e)(4). See Van Arsdalen v. Commissioner, 123 T.C. 135, 143, 2004 WL 1632736 (2004).

[132 T.C. 206]

Rather, respondent called him as a witness at trial. He had not previously participated in petitioner's administrative hearing.

OPINION
I. Section 6015(f)

Petitioner contends that under section 6015(f) she qualifies for relief from joint and several liability for the 10–percent additional tax on Mr. Porter's early distribution from his IRA. When a husband and wife file a joint Federal income tax return, they generally are jointly and severally liable for the tax due. Sec. 6013(d)(3); Butler v. Commissioner, 114 T.C. 276, 282, 2000 WL 502841 (2000). However, a spouse may qualify for relief from joint and several liability under section 6015(b), (c), or (f) if various requirements are met. The parties stipulated that petitioner does not qualify for relief from joint and several liability on the 10–percent additional tax under section 6015(b) or (c).

A taxpayer qualifies for relief under section 6015(f) if relief is not available under section 6015(b) or (c) and, in the light of the facts and circumstances, it is inequitable to hold the taxpayer liable for the tax or deficiency. This Court has jurisdiction to determine whether a taxpayer is entitled to equitable relief under section 6015(f). Sec. 6015(e)(1)(A). Our determination is made in a trial de novo. Porter v. Commissioner, 130 T.C. at 117. Therefore, we may consider evidence introduced at trial which was not included in the administrative record. Both parties submitted evidence at trial which was not available to respondent's Appeals officer.

II. The Standard of Review

We have generally reviewed the Commissioner's denial of relief under section 6015(f) for abuse of discretion.4 See Jonson v. Commissioner, 118 T.C. 106, 125, 2002 WL 199830 (2002), affd. 353 F.3d 1181 (10th Cir.2003); Butler v. Commissioner, supra; cf. Wiener v. Commissioner, T.C. Memo.2008–230 (abuse of discretion standard not applied where notice of determination did

[132 T.C. 207]

not recite any analysis or factual determinations to review). In their concurring opinions in Porter v. Commissioner, supra at 142–146, Judges Goeke and Wherry contended that our existing precedent with respect to the standard of review in section 6015(f) cases is no longer applicable in the light of the 2006 amendments to section 6015. Judge Wherry urged the Court to adopt a de novo standard of review when the merits of this case would be decided.5 Id. at 144.

Congress enacted section 6015 as part of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.L. 105–206, sec. 3201, 112 Stat. 734.6 Section 6015(f) provides that the Commissioner “may” grant relief under certain circumstances, suggesting a grant of relief is discretionary. In its original form section 6015(e) granted us jurisdiction to determine appropriate relief under section 6015(b) and (c) but was silent as to our jurisdiction under section 6015(f). In Butler v. Commissioner, supra, we considered whether we had jurisdiction to review the Commissioner's denial of equitable relief under section 6015(f) or whether the granting of relief was committed solely to agency discretion.

In the absence of any clear guidance from Congress, we held that we had jurisdiction to review the Commissioner's determinations but should review for abuse of discretion because of the discretionary language in section 6015(f). Butler v. Commissioner, supra; see Porter v. Commissioner, supra at 143 (Goeke, J. concurring). Under the statutory framework provided by Congress at the time, our adoption of an abuse of discretion standard was appropriate. Porter v. Commissioner, supra at 143 (Goeke, J. concurring).

Our assertion of jurisdiction over cases brought under section 6015(e) and (f) by individuals against whom no deficiency had been asserted was reversed by the U.S. Courts of Appeals for the Eighth Circuit and for the Ninth Circuit. See Bartman v. Commissioner, 446 F.3d 785, 787 (8th Cir.2006), affg. in part and vacating in part T.C. Memo.2004–93; Commissioner v. Ewing, 439 F.3d 1009 (9th Cir.2006), revg. 118 T.C. 494, 2002 WL 1150775 (2002) and vacating 112 T.C. 32, (2004); see also

[132 T.C. 208]

Billings v. Commissioner, 127 T.C. 7, 2006 WL 2059399 (2006). However, in 2006 Congress amended section 6015(e)(1) to...

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  • Wilson v. Comm'r of Internal Revenue, 10–72754.
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    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
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    ...that the Tax Court's decisions in Porter v. Commissioner (Porter I), 130 T.C. 115 (2008), and Porter v. Commissioner (Porter II), 132 T.C. 203 (2009), established that the Tax Court should proceed de novo when reviewing § 6015(f) claims for innocent spouse. After conducting a de novo review......
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    ...Both the scope and standard of review in cases requesting relief from joint and several liability are de novo. Porter v. Commissioner, 132 T.C. 203, 210 (2009). Rev. Proc. 2013-34, 2013-43 I.R.B. 397, modifying and superseding Rev. Proc. 2003-61, 2003-2 C.B. 296, sets forth a three-step pro......
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    • February 13, 2012
    ...to which appeal would normally lie, if that Court of Appeals has ruled with respect to the identical issue"); Porter v. Commissioner, 132 T.C. 203, 220 (2009) ("This case is appealable * * * to the * * * Fourth Circuit. Under the rule laid down in Golsen * * * we abide by that court's prece......
  • Wilson v. Comm'r of Internal Revenue, No. 10–72754.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • January 15, 2013
    ...that the Tax Court's decisions in Porter v. Commissioner (Porter I), 130 T.C. 115 (2008), and Porter v. Commissioner (Porter II), 132 T.C. 203 (2009), established that the Tax Court should proceed de novo when reviewing § 6015(f) claims for innocent spouse. After conducting a de novo review......
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