Lantz v. Comm'r of Internal Revenue

Decision Date07 April 2009
Docket NumberNo. 25078–06.,25078–06.
Citation132 T.C. No. 8,132 T.C. 131
PartiesCathy Marie LANTZ, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
CourtU.S. Tax Court

132 T.C. 131
132 T.C. No. 8

Cathy Marie LANTZ, Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 25078–06.

United States Tax Court.

April 7, 2009.


Held Invalid

26 C.F.R. § 1.6015–5(b).

[132 T.C. 131]

P sought relief under sec. 6015(f), I.R.C., from joint income tax liability for 1999. R denied relief on the basis that P did not request relief within 2 years of R's first collection action. Consequently, R did not reach the substantive issues of the claim. Both parties argue the validity of sec. 1.6015–5(b)(1), Income Tax Regs., which applies the 2–year limitations period to sec. 6015(f), I.R.C.

Held: Sec. 1.6015–5(b)(1), Income Tax Regs., is an invalid interpretation of sec. 6015(f), I.R.C., and further proceedings are required to determine the validity of P's claim for relief.

Paul M. Kohlhoff and Robert B. Nadler, for petitioner.

Timothy S. Sinnott, for respondent.

OPINION
GOEKE, Judge.

Petitioner brought this case under section 6015 1 seeking review of respondent's denial of relief from joint income tax liability for 1999. Respondent denied relief solely because petitioner did not request relief from joint tax liability within 2 years of the time respondent took a collection action against petitioner for the joint tax liability. Both parties have argued the validity of section 1.6015–5(b)(1), Income Tax Regs., which provides a 2–year limitations period after a collection action for request for relief under section 6015(f). For the reasons explained herein, we find the regulation to be inconsistent with and to be an impermissible interpretation of the statute.

Background

At the time the petition was filed, petitioner resided in Indiana.

During 1999 petitioner was married to Dr. Richard M. Chentnik, a dentist. Petitioner did not work outside the home in 1999.

Petitioner and Dr. Chentnik timely filed a joint Form 1040, U.S. Individual Income Tax Return, for the tax year 1999. The return reflected tax of $112,291.11 and an estimated tax

[132 T.C. 132]

penalty of $2,070.60. Included with the return was a payment of $115,550, resulting in a credit of $1,188.29, which was transferred to a Form 941, Employer's Quarterly Federal Tax Return, of Dr. Chentnik for 1985.

Dr. Chentnik was arrested on June 8, 2000, and subsequently convicted of Medicare fraud. As a result of the conviction he was sentenced to Federal prison and incarcerated in Terre Haute, Indiana. He was incarcerated throughout 2003 and was released from prison to a halfway house in August 2004.

In the summer of 2002 petitioner moved to Logansport, Indiana, where she resided throughout 2003.

As a result of the Medicare fraud, respondent determined that the joint income tax liability for 1999 was understated. When no petition was filed after the issuance of a notice of deficiency, respondent assessed the following amounts against petitioner and Dr. Chentnik on August 12, 2002:

+---------------------------+
                ¦Item ¦Amount ¦
                +------------------+--------¦
                ¦Income tax ¦$656,111¦
                +------------------+--------¦
                ¦Sec. 6662 penalty ¦131,222 ¦
                +------------------+--------¦
                ¦Interest ¦140,778 ¦
                +---------------------------+
                

Another result of Dr. Chentnik's Medicare fraud was the seizure of his assets in April 2000 by U.S. Marshals. As a result of the seizure, the U.S. Marshals Service transmitted a check in the amount of $2,592,022.68 to the center for Medicare and Medicaid services in November 2003.

On May 11, 2003, respondent issued separate letters to petitioner and Dr. Chentnik at the Logansport address, advising them that respondent was proposing a levy action to collect their joint income tax liability for 1999. Respondent considers the letter to petitioner to be a collection action, and we agree. These letters conformed with the notice requirements of section 6330. Although Dr. Chentnik was in prison, he advised petitioner that he would communicate with respondent regarding these notices, which he did. As a result of Dr. Chentnik's communications with respondent's Appeals Office, on February 9, 2004, two notices of determination were issued solely to Dr. Chentnik. In these notices of determination the Appeals Office determined that the joint account of petitioner and Dr. Chentnik should be moved into

[132 T.C. 133]

currently noncollectible status because “the taxpayer's financial condition reflects that the account is noncollectible at this time. Therefore, serving a levy would cause undue hardship for the taxpayer at this time.”

In his correspondence with the Appeals Office, Dr. Chentnik advised that the Appeals officer should communicate with him directly, and he requested a form to seek relief for petitioner. He characterized petitioner as “the innocent spouse” in his correspondence with respondent. Dr. Chentnik died in a halfway house in October 2004.

Petitioner relied upon Dr. Chentnik to resolve the 1999 income tax issue and took no independent action regarding the collection letters from respondent until her income tax overpayment for 2005 was applied against the 1999 tax liability. After communicating with representatives from the Internal Revenue Service (IRS), petitioner filed Form 8857, Request for Innocent Spouse Relief, on June 23, 2006. Petitioner dated the Form 8857 June 9, 2006. In July 2006 respondent notified petitioner that relief for the year 2005 was not needed because she did not file a joint return for that year. On July 6, 2006, respondent issued a preliminary determination denying petitioner relief for 1999 because her claim was filed more than 2 years after the first collection action taken against her. Petitioner protested this determination, and her claim was assigned to an Appeals officer. The Appeals officer determined that petitioner is not entitled to relief under section 6015 because she did not file a claim within 2 years of the first collection activity. Because respondent denied petitioner's claim as untimely, the substantive merits of her claim were never addressed. Respondent issued a notice of determination denying petitioner's claim for relief on September 7, 2006. Petitioner then timely filed a petition in this Court.

Discussion
1. Joint Liability

In general, taxpayers filing joint Federal income tax returns are each responsible for the accuracy of their return and are jointly and severally liable for the entire tax liability due for the year of the return. Sec. 6013(d)(3). In certain circumstances, however, a spouse may obtain relief from joint

[132 T.C. 134]

and several liability by satisfying the requirements of section 6015.

Section 6015(a)(1) provides that a spouse who made a joint return may elect to seek relief from joint and several liability under section 6015(b) (dealing with relief from liability for an understatement of tax with respect to a joint return). Section 6015(a)(2) provides that a spouse who is eligible to do so may elect to limit that spouse's liability for any deficiency with respect to a joint return under section 6015(c). Relief from joint and several liability under section 6015(b) and/or (c) is available only with respect to a deficiency for the year for which relief is sought. Sec. 6015(b)(1)(D) and (c)(1). Also, to qualify for relief under section 6015(b) or (c), the requesting spouse must make an election not later than 2 years after the Commissioner has begun a collection action. Sec. 6015(b)(1)(E) and (c)(3)(B). If relief is not available under either section 6015(b) or (c), an individual may seek equitable relief under section 6015(f), which we find is the basis of petitioner's claim. Petitioner's request for relief was submitted to respondent over 2 years after the May 11, 2003, collection action, and section 6015(b) and (c) is unavailable to her.

Section 6015(f) does not impose the 2–year limitations period. However, a 2–year limitations period for requesting relief under section 6015(f) was included in Notice 98–61, sec. 3.01(3), 1998–2 C .B. 756, 757, and subsequently in Rev. Proc.2000–15, 2000–1 C.B. 447; Rev. Proc.2003–61, 2003–2 C.B. 296; and section 1.6015–5, Income Tax Regs.

2. Rulemaking Under Section 6015

Revenue Procedure 2000–15, supra, was published on January 31, 2000, to provide guidance for taxpayers seeking relief from Federal tax liability under section 6015(f). Rev. Proc.2000–15, sec. 4.01, 2000–1 C.B. at 448, sets forth seven general requirements that must be satisfied for any request for equitable relief under section 6015(f) to be considered by the Commissioner: (1) The requesting spouse filed a joint return for the year for which relief is sought; (2) relief is not available to the requesting spouse under section 6015(b) or (c); (3) the application for relief is no later than 2 years after the date of the Commissioner's first collection activity after July

[132 T.C. 135]

22, 1998; (4) except where an exception applies, the liability remains unpaid; (5) no assets were transferred between spouses as part of a fraudulent scheme; (6) no disqualified assets were transferred to the requesting spouse by the nonrequesting spouse; and (7) the requesting spouse did not file the return with fraudulent intent.

Rev. Proc.2003–61, supra, published on August 11, 2003, adds the threshold requirement that absent enumerated exceptions, the liability from which relief is sought must be attributable to an item of the nonrequesting spouse. Rev. Proc.2003–61, supra, omits requirement No. 4 of Rev. Proc.2000–15, supra, from its list of threshold requirements, revises the “knowledge or reason to know” factor for determining whether to grant equitable relief, and broadens the availability of refunds if equitable relief is granted under section 6015(f).

Sections 1.6015–0 through 1.6015–9, Income Tax Regs., were published on July 17, 2002 (effective July 18, 2002), pursuant to a mandate from Congress to promulgate regulations pertaining to section 6015 in general under section 6015(h) and procedures concerning requests for equitable relief under section 6015(f) in...

To continue reading

Request your trial
29 cases
  • Mannella v. Comm'r of Internal Revenue
    • United States
    • U.S. Court of Appeals — Third Circuit
    • 19 Enero 2011
    ...the two-year regulatory deadline under subsection 6015(f) was invalid, a conclusion that it based on its prior decision in Lantz v. Commissioner, 132 T.C. 131 (2009).3 Consequently, the Court concluded that Denise's subsection (f) claim was timely and it denied the Commissioner summary judg......
  • Pullins v. Comm'r of Internal Revenue , 23793–08.
    • United States
    • U.S. Tax Court
    • 5 Mayo 2011
    ...case would be appealed to the U.S. Court of Appeals for the Eighth Circuit. Held: We will follow our holding in Lantz v. Commissioner, 132 T.C. 131, 2009 WL 928241 (2009), revd. 607 F.3d 479 (7th Cir.2010)—i.e., that the 2–year deadline imposed by 26 C.F.R. sec. 1.6015–5(b)(1), Income Tax R......
  • Knudsen v. Comm'r
    • United States
    • U.S. Tax Court
    • 1 Abril 2013
    ...1.6015-5(b)(1), Income Tax Regs. (two-year deadline). The two-year deadline is the same rule that was the subject of Lantz v. Commissioner, 132 T.C. 131 (2009), rev'd, 607 F.3d 479 (7th Cir. 2010), and itsprogeny. This Court in Lantz invalidated the regulation setting forth the two-year dea......
  • Jones v. Comm'r of Internal Revenue, 10–1985.
    • United States
    • U.S. Court of Appeals — Fourth Circuit
    • 13 Junio 2011
    ...Court, however, the Tax Court ruled that Regulation § 1.6015–5(b)(1) was invalid for the reasons it had given earlier in Lantz v. Commissioner, 132 T.C. 131 (2009). The court thus granted Octavia Jones relief from all tax liability in excess of $450. The Commissioner of Internal Revenue app......
  • Request a trial to view additional results
1 firm's commentaries
  • IRS Removes Two-Year Deadline for Requesting Equitable Innocent Spouse Relief
    • United States
    • Mondaq United States
    • 20 Marzo 2012
    ...no such limitation. Case law background The first case to focus attention on the two-year limitation period in the regulations was Lantz, 132 T.C. 131 (2009), where the taxpayer's husband was convicted of mail fraud and owed approximately $1 million in taxes, which he said that he would set......
3 books & journal articles
  • Two Easy Fixes That Could Expand Eligibility for § 6015 Relief from Joint & Several Liability (even While Retaining Current Rigorous Qualification Vetting)
    • United States
    • California Lawyers Association California Tax Lawyer (CLA) No. 27-2, August 2018
    • Invalid date
    ...such payment." The Taxpayer First Act does not address § 6015(b) or (c).32. 467 U.S. 837 (1984).33. 607 F.3rd 479 (7th Cir. 2010), rev'g 132 T.C. 131 (2009).34. 631 F.3rd 115 (3rd Cir. 2011), rev'g 132 T.C. 196 (2009).35. 642 F.3rd 459 (4th Cir. 2011).36. National Taxpayer Advocate Blog, Ma......
  • Individual taxation report: recent developments.
    • United States
    • The Tax Adviser Vol. 41 No. 11, November 2010
    • 1 Noviembre 2010
    ...amplifying and clarifying CC-2009-012 (4/17/09). (66) Lantz, 132 T.C 131 (2009). (67) Lantz, No. 09-3345 (7th Cir. 6/8/10), rev'g 132 T.C. 131. (68) Coulter, No. 10-680 (2d Cir.), appeal docketed February 12, 2010; Mannella, No. 10-1308 (3d Cir.), brief filed May 10, 2010. (69) Hall, 135 T.......
  • Deadline for equitable innocent spouse claims again upheld.
    • United States
    • The Tax Adviser Vol. 42 No. 3, March 2011
    • 1 Marzo 2011
    ...held that the two-year regulatory deadline under Sec. 6015(f) was invalid, a conclusion that it based on its prior decision in Lantz, 132 T.C. 131 (2009), rev'd, 607 F.3d 479 (7th Cir. In Lantz, the Tax Court held that by explicitly creating a two-year limitation period in Secs. 6015 (b) an......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT