Block v. Commissioner, 120 T. C. 62 (2003)

In Block v. Comm’r, the U. S. Tax Court ruled it lacked jurisdiction to consider the statute of limitations as a defense in a petition filed under I. R. C. § 6015(e) seeking relief from joint and several tax liability. The court’s jurisdiction in such ‘stand alone’ cases is limited to reviewing the IRS’s denial of relief under § 6015, not the validity of the underlying tax assessment. This decision clarifies the scope of the Tax Court’s authority in reviewing relief from joint liability and has implications for taxpayers seeking to challenge the timeliness of tax assessments in these specific proceedings.

Parties

Evelyn B. Block, as the petitioner, filed against the Commissioner of Internal Revenue, as the respondent, in the U. S. Tax Court. Block sought review of the Commissioner’s determination denying her relief from joint and several income tax liability under I. R. C. § 6015.

Facts

Evelyn B. Block sought relief from joint and several income tax liabilities for the taxable years 1983 and 1984, previously assessed under the partnership provisions of I. R. C. §§ 6221-6234. The IRS issued a notice of determination denying Block’s request for relief under I. R. C. § 6015(b) or (f). Block timely filed a petition in the U. S. Tax Court under § 6015(e) to review the IRS’s denial. Subsequently, Block moved to amend her petition to include an affirmative defense that the statute of limitations barred the assessment of the underlying liabilities for 1983 and 1984. The IRS opposed this amendment, arguing that the Tax Court lacked jurisdiction over such a defense in a § 6015(e) ‘stand alone’ petition.

Procedural History

Block filed a timely petition in the U. S. Tax Court under I. R. C. § 6015(e) following the IRS’s notice of determination denying her request for relief from joint and several tax liability for 1983 and 1984. Block then sought to amend her petition to include a defense based on the statute of limitations. The IRS opposed this amendment, asserting that the Tax Court lacked jurisdiction over such a defense in a § 6015(e) proceeding. The Tax Court, applying a de novo standard of review, considered the motion for leave to amend and ultimately denied it, finding that it lacked jurisdiction to decide whether the underlying tax liabilities were barred by the statute of limitations.

Issue(s)

Whether the U. S. Tax Court has jurisdiction to decide if the statute of limitations bars the assessment of underlying income tax liabilities in a petition filed under I. R. C. § 6015(e) seeking relief from joint and several tax liability?

Rule(s) of Law

I. R. C. § 6015(e) provides that the Tax Court has jurisdiction to determine the appropriate relief available to an individual under § 6015 when a deficiency has been asserted and the individual elects to have § 6015(b) or (c) apply. I. R. C. § 6015(b) and (c) assume the existence of a tax deficiency or liability, and § 6015(f) provides equitable relief from an existing unpaid tax or deficiency. I. R. C. § 7459(e) states that if the assessment or collection of any tax is barred by any statute of limitations, the Tax Court’s decision to that effect is considered a decision that there is no deficiency in respect of such tax. However, the Tax Court’s jurisdiction in a ‘stand alone’ petition under § 6015(e) is limited to reviewing the IRS’s denial of relief under § 6015, not the validity of the underlying tax assessment.

Holding

The U. S. Tax Court held that it lacked jurisdiction to decide whether the statute of limitations barred the assessment of the underlying income tax liabilities for 1983 and 1984 in a petition filed under I. R. C. § 6015(e) seeking relief from joint and several tax liability. The court’s jurisdiction in such ‘stand alone’ cases is limited to reviewing the IRS’s denial of relief under § 6015(b), (c), or (f), not the validity of the underlying tax assessment.

Reasoning

The Tax Court reasoned that its jurisdiction under I. R. C. § 6015(e) is limited to reviewing the IRS’s denial of relief from an existing joint and several tax liability under § 6015(b), (c), or (f). The court emphasized that § 6015 assumes the existence of a tax deficiency or liability, not whether the underlying joint tax liability exists. The court distinguished its holding in Neely v. Commissioner, where it had jurisdiction to decide the statute of limitations issue in a preassessment proceeding under I. R. C. § 7436. In contrast, a § 6015(e) ‘stand alone’ petition does not incorporate preassessment procedures and is limited to postassessment relief. The court noted that the expiration of the period of limitations might be a ‘factor’ to consider in weighing the equities under § 6015(f), but this was not raised by the petitioner. The court concluded that the timeliness of the assessment of the underlying liability is not an independent ground for relief under § 6015, and thus, it lacked jurisdiction over the issue the petitioner sought to raise through her proposed amendment.

Disposition

The U. S. Tax Court denied Block’s motion for leave to amend her petition to include the affirmative defense that the statute of limitations barred the assessment of the underlying income tax liabilities for 1983 and 1984.

Significance/Impact

Block v. Comm’r clarifies the jurisdictional limits of the U. S. Tax Court in reviewing petitions filed under I. R. C. § 6015(e) seeking relief from joint and several tax liability. The decision establishes that the Tax Court’s jurisdiction in such ‘stand alone’ cases is limited to reviewing the IRS’s denial of relief under § 6015(b), (c), or (f), not the validity of the underlying tax assessment. This ruling has significant implications for taxpayers seeking to challenge the timeliness of tax assessments in these specific proceedings, as they must do so in a deficiency proceeding or another appropriate forum. The decision also highlights the distinction between preassessment and postassessment proceedings in the Tax Court, with different jurisdictional implications for each. Subsequent courts have followed this precedent in limiting the Tax Court’s jurisdiction in § 6015(e) cases, and practitioners must be aware of these limits when advising clients on seeking relief from joint and several tax liability.