Roman v. Comm'r of Internal Revenue
| Docket Number | 10878-16,7671-17 |
| Decision Date | 28 November 2023 |
| Parties | LUMINITA ROMAN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent GABRIEL L. ROMAN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
Luminita Roman, pro se in Docket No. 10878-16.
Gabriel L. Roman, pro se in Docket No. 7671-17.
Andrea M. Faldermeyer, Christine A. Fukushima, and Alexander D DeVitis, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
In these consolidated cases, petitioners, Luminita Roman and Gabriel L. Roman (collectively, the Romans), challenge the Commissioner of Internal Revenue's determinations that they had deficiencies in income tax for their 2013 taxable years. After concessions made by the parties,[1] five issues remain for our decision.
First, we must decide whether a payment of $700,000 made in 2013 pursuant to a settlement agreement to which both Mr. Roman and Ms. Roman were parties is excludable from the Romans' gross income under section 104(a)(2).[2] The Romans argue that the settlement proceeds were paid on account of personal physical injuries or physical sickness. The Commissioner disagrees. As we will explain below, we agree with the Commissioner.
Second, given our conclusion on the first issue, we must also decide whether the $700,000 payment made under the agreement should be allocated to both Mr. Roman and Ms. Roman, even though it was paid only to Ms. Roman. As we discuss below, we find that the income should be allocated 50/50 between the Romans.
Third, given our conclusions on the first two issues, we must decide whether Ms. Roman should be treated as having earned an additional $350,000 for services rendered to Mr. Roman. On this issue, we conclude that no additional income should be attributed to Ms. Roman.
Fourth, we must determine whether Ms. Roman is liable for an accuracy-related penalty under section 6662 for an underpayment attributable to a substantial understatement of income tax for the 2013 taxable year. On this point, we find for the Commissioner.
Finally, we must determine whether Mr. Roman is liable for a failure to timely file addition to tax under section 6651(a)(1) for the 2013 taxable year. On this point, we find for the Commissioner.
The parties have filed a First Stipulation of Facts, amended twice, and Second, Third, and Fourth Stipulations of Facts all with attached Exhibits. We incorporate the parties' Stipulations of Facts and the attached Exhibits by this reference. We held a consolidated trial of these cases at the Court's Los Angeles, California, Special Trial Session, on April 24, 2023. The Romans each resided in California when they timely filed their respective Petitions to commence these cases.
Mr. Roman is an individual deemed by the Social Security Administration to be permanently disabled and has been diagnosed with various conditions, including, among others, major depression, paranoia, and prostate cancer. Mr. Roman also underwent spine surgery in July 2010. Mr. Roman receives benefits under Medi-Cal, the State of California's Medicaid program.
Mr. Roman and Ms. Roman were married until 2004. After their marriage ended, the Romans continued living together, with Ms. Roman serving as Mr. Roman's live-in-care provider under California's In-Home Supportive Services program. Ms. Roman received compensation from the State of California's Department of Social Services for providing care to Mr. Roman.
Mr. Roman also receives government low-income rental housing assistance. During the period relevant here, Ms. Roman was authorized to reside with Mr. Roman under the rental assistance program.
The Jefferson at Hollywood Apartments (Apartments) is an apartment complex in Los Angeles, California. Mr. Roman executed a lease agreement to move into the Apartments on October 5, 2010. Mr. Roman also executed a Caregiver Addendum and Affidavit along with the lease, which allowed Ms. Roman to reside in the apartment with him as his "live-in caregiver." The Romans moved into the Apartments after Mr. Roman signed the lease. At that time, the Apartments was owned by Jefferson at Hollywood, LP (Jefferson), and managed by Greystar Real Estate Partners, LLC (Greystar).
Shortly after moving to the Apartments, the Romans began making various complaints to Jefferson and Greystar about the property, including expressing concerns about noise and harassment and submitting requests for accommodations in connection with Mr. Roman's disabilities. Various legal actions ensued.
Mr. Roman filed the first lawsuit against Jefferson and Greystar in the U.S. District Court for the Central District of California on April 22, 2011. Mr. Roman sought "injunctive relief and damages" from Jefferson and Greystar "for discrimination, harassment, intimidation and retaliation, in the rental of housing based on [his] disability." The complaint asserted:
This action arises under the Federal Fair Housing Amendments Act of 1988, the California Fair Employment and Housing Act, the California Unruh Civil Rights Act, the California Disabled Person Act, the California Unfair Business Practice Act, the FIRST AMENDMENT to the U.S. Constitution and also alleges negligence, slander and libel, invasion of privacy, constructive eviction, breach of implied covenant of quiet enjoyment, nuisance and intentional infliction of emotional distress.
The District Court dismissed Mr. Roman's complaint in its entirety in July 2011. Specifically, the District Court dismissed his federal law claims for failure to state a claim upon which relief can be granted and declined to exercise supplemental jurisdiction over his state law claims. Mr. Roman appealed this ruling to the U.S. Court of Appeals for the Ninth Circuit. The Ninth Circuit affirmed the District Court's decision in October 2012, and the U.S. Supreme Court denied certiorari in May 2013.
The next lawsuit against Jefferson and Greystar was filed by Ms. Roman in Los Angeles Superior Court on January 18, 2012. It alleged violations of various provisions of the California Penal Code relating to intercepted communications, negligence, and violations of a common law right of privacy. In the complaint, Ms. Roman asserted that Jefferson and Greystar "installed and/or caused to be installed certain wire-tapping, eavesdropping and bugging equipment in its employees' or agents' telephone lines" and that her calls to Jefferson and Greystar "were recorded monitored and/or eavesdropped upon without [her] knowledge or consent." Ms. Roman subsequently amended the complaint to allege only violations of a single provision of the California Penal Code, § 632.7 (West 2012).
On May 23, 2012, the Superior Court sustained Jefferson's and Greystar's demurrer to Ms. Roman's amended complaint without granting her leave to amend her complaint. Ms. Roman appealed the ruling to sustain the demurrer to the Court of Appeal for the State of California. However, because such an order did not grant appeal rights, the Court of Appeal ordered Jefferson and Greystar to obtain a dismissal order for the lawsuit from the Superior Court and supply it to the Court of Appeal. The Superior Court subsequently dismissed the case on July 10, 2013. Ms. Roman appealed the Superior Court's dismissal.
The next legal move came from Jefferson, which on October 3, 2012, filed an unlawful detainer action against Mr. Roman in Los Angeles Superior Court. The unlawful detainer action was based upon a 60-day notice to terminate Mr. Roman's tenancy at the Apartments. The Superior Court dismissed the case against Mr. Roman in January 2013. Jefferson appealed the Superior Court's dismissal of the unlawful detainer, and Mr. Roman filed a cross-appeal as to the Superior Court's award of attorney's fees, which Mr. Roman claimed were inadequate.
The Romans also filed a discrimination complaint against Jefferson with the California Department of Fair Employment and Housing (DFEH) on November 23, 2012. The Romans alleged in their complaint that the 60-day notice to terminate residency and the related unlawful detainer action (discussed above) were intended to retaliate against them for their claims of discrimination regarding Mr. Roman's disabilities. In its response, Jefferson denied the Romans' allegations of discrimination and alleged that the 60-day notice to terminate residency was based on lease violations concerning noise and the Romans' conduct.
While the various legal actions described above were pending, Jefferson sought to sell the Apartments. In the first quarter of 2013, Jefferson retained the firm Cushman & Wakefield to help find a buyer for the property and negotiate its sale. In June 2013, BRE Properties (BRE) was selected as the buyer for the Apartments. At the time, BRE was engaged in litigation with the Romans, in which the Romans alleged that BRE discriminated against them on account of Mr. Roman's disabilities when they attempted to rent a unit at one of BRE's other properties in 2009.[3]
BRE discovered that the Romans lived in the Apartments before closing on the purchase of the Apartments. After making this discovery, BRE insisted that Jefferson either reduce the price of the property or ensure that, before the sale, the Romans vacate the property and release any claims against the property. At one point, BRE indicated that it would reduce its offer to purchase the property by $1 million if the Romans remained at the Apartments. At...
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