SCOTUS Reports

Tag: I.R.C. § 6015

  • Chavis v. Commissioner, 158 T.C. No. 8 (2022): Trust Fund Recovery Penalties and Collection Due Process Procedures

    Chavis v. Commissioner, 158 T. C. No. 8 (U. S. Tax Ct. 2022)

    In Chavis v. Commissioner, the U. S. Tax Court upheld the IRS’s decision to sustain a tax lien against Angela M. Chavis for trust fund recovery penalties (TFRPs) assessed due to her corporation’s failure to pay payroll taxes. The court ruled that Chavis could not challenge her underlying liability at the collection due process (CDP) hearing because she had a prior opportunity to contest it. Additionally, the court affirmed that ‘innocent spouse’ relief was unavailable for TFRP liabilities, and upheld the IRS’s decision not to place her account in ‘currently not collectible’ status, emphasizing the procedural limitations in CDP hearings and the distinct nature of TFRP liabilities from joint income tax liabilities.

    Parties

    Angela M. Chavis, Petitioner, pro se; Commissioner of Internal Revenue, Respondent, represented by Catherine S. Tyson.

    Facts

    Angela M. Chavis and her then-husband were officers of Oasys Information Systems, Inc. , a corporation that withheld payroll taxes from its employees but failed to pay those taxes to the government during 2011-2014. The IRS issued Chavis a Letter 1153, Notice of Trust Fund Recovery Penalty, proposing to assess TFRPs against her and her husband under I. R. C. § 6672. Chavis received the letter but did not challenge the proposed assessment. Subsequently, the IRS assessed TFRPs totaling $146,682 against Chavis. In an effort to collect this liability, the IRS issued Chavis a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing. Chavis requested a collection due process (CDP) hearing, during which she sought to challenge her underlying liability, requested innocent spouse relief under I. R. C. § 6015, and asked for her account to be placed in ‘currently not collectible’ status and for the lien to be withdrawn. The IRS denied these requests, leading to Chavis’s petition to the U. S. Tax Court.

    Procedural History

    The IRS issued a Letter 1153 to Chavis, which she received but did not challenge. After assessing TFRPs, the IRS issued a Letter 3172, prompting Chavis to request a CDP hearing. The settlement officer (SO) reviewed Chavis’s requests during the CDP hearing and denied them, leading to a notice of determination sustaining the lien filing. Chavis timely petitioned the U. S. Tax Court, which reviewed the case under the summary judgment standard. The court applied an abuse of discretion standard of review to the IRS’s actions since Chavis’s underlying liability was not properly at issue.

    Issue(s)

    Whether Chavis, having received a prior opportunity to challenge her TFRP liability upon receipt of the Letter 1153, was entitled to challenge her underlying tax liability at the CDP hearing or in the U. S. Tax Court?

    Whether Chavis was eligible for ‘innocent spouse’ relief under I. R. C. § 6015 for her TFRP liability?

    Whether the IRS abused its discretion in sustaining the collection action against Chavis?

    Rule(s) of Law

    I. R. C. § 6330(c)(2)(B) states that a taxpayer may challenge the existence or amount of her underlying tax liability in a CDP case only if she did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute it.

    I. R. C. § 6672(a) provides that any person required to collect, truthfully account for, and pay over payroll taxes, who willfully fails to do so, shall be liable for a penalty equal to the total amount of the tax evaded or not accounted for and paid over.

    I. R. C. § 6015 provides relief from joint and several liability on joint returns, but this relief applies only to liabilities shown on (or should have been shown on) a joint federal income tax return.

    Holding

    The U. S. Tax Court held that Chavis was not entitled to challenge her underlying TFRP liability at the CDP hearing or in the court because she had a prior opportunity to dispute it upon receipt of the Letter 1153. The court also held that Chavis was not eligible for ‘innocent spouse’ relief under I. R. C. § 6015 because her TFRP liability did not arise from any liability shown on a joint federal income tax return. Finally, the court held that the IRS did not abuse its discretion in sustaining the collection action against Chavis.

    Reasoning

    The court’s reasoning was based on the statutory framework governing TFRPs and CDP hearings. The court noted that TFRPs are ‘assessable penalties’ not subject to deficiency procedures, but taxpayers have the opportunity to dispute their liability by appealing a Letter 1153. Since Chavis received the Letter 1153 and did not appeal, she was precluded from challenging her underlying liability at the CDP hearing. Regarding ‘innocent spouse’ relief, the court interpreted I. R. C. § 6015 to apply only to liabilities arising from joint federal income tax returns, not TFRPs. The court upheld the IRS’s decision to deny CNC status and lien withdrawal, finding that the settlement officer properly calculated Chavis’s ability to pay and that Chavis failed to provide evidence supporting her claims. The court emphasized that the IRS’s actions were not arbitrary, capricious, or without sound basis in fact or law, thus not constituting an abuse of discretion.

    Disposition

    The U. S. Tax Court granted the IRS’s motion for summary judgment, sustaining the notice of determination and upholding the tax lien filing against Chavis.

    Significance/Impact

    Chavis v. Commissioner reinforces the procedural limitations on challenging underlying liabilities in CDP hearings when a prior opportunity to dispute existed. It clarifies that ‘innocent spouse’ relief under I. R. C. § 6015 does not extend to TFRP liabilities, which are distinct from joint income tax liabilities. The decision also underscores the IRS’s discretion in determining collection alternatives based on the taxpayer’s financial situation and adherence to administrative procedures. This case is significant for practitioners and taxpayers dealing with TFRPs, as it highlights the importance of timely challenging proposed assessments and understanding the scope of relief available in CDP proceedings.

  • DelPonte v. Commissioner, 158 T.C. No. 7 (2022): Authority of IRS Chief Counsel in Innocent Spouse Relief Claims

    DelPonte v. Commissioner, 158 T. C. No. 7 (2022)

    In a landmark ruling, the U. S. Tax Court clarified that the IRS Chief Counsel has the authority to accept or reject innocent spouse relief determinations made by the Cincinnati Centralized Innocent Spouse Operation (CCISO) when such claims are raised as affirmative defenses in deficiency proceedings. This decision reaffirms the Chief Counsel’s discretion in litigation matters, impacting how innocent spouse relief is handled in Tax Court cases.

    Parties

    Michelle DelPonte, the petitioner, sought innocent spouse relief from joint tax liabilities with her former husband, William Goddard. The respondent was the Commissioner of Internal Revenue. DelPonte was the petitioner throughout the proceedings in the Tax Court, while the Commissioner defended the IRS’s position.

    Facts

    Michelle DelPonte and William Goddard, who were married, filed joint tax returns for the years 1999, 2000, and 2001. During their marriage, Goddard, a lawyer, engaged in aggressive tax-avoidance schemes, resulting in significant tax deficiencies assessed by the IRS. DelPonte, unaware of these schemes and the subsequent notices of deficiency, was jointly and severally liable for the taxes due to the joint filing status. After their separation, Goddard filed petitions on DelPonte’s behalf, asserting innocent spouse relief under I. R. C. § 6015(c). DelPonte only became aware of these proceedings in 2010 and subsequently sought relief from the IRS. The Cincinnati Centralized Innocent Spouse Operation (CCISO) concluded that DelPonte was entitled to relief, but the IRS’s Chief Counsel sought further information before making a final determination. DelPonte then moved for entry of decision, arguing that CCISO’s determination should be final.

    Procedural History

    The IRS issued notices of deficiency to Goddard’s law firm, which were not communicated to DelPonte. Goddard filed petitions asserting innocent spouse relief on DelPonte’s behalf without her knowledge. DelPonte, upon learning of the proceedings in 2010, ratified the petitions and sought innocent spouse relief. The Chief Counsel referred her request to CCISO, which determined she was entitled to relief but did not issue a final determination letter. Instead, CCISO communicated its findings to the Chief Counsel, who requested additional information. DelPonte moved for entry of decision based on CCISO’s determination. The Tax Court denied her motion, affirming the Chief Counsel’s authority to decide on the matter.

    Issue(s)

    Whether the IRS Chief Counsel has the authority to accept or reject a determination by the Cincinnati Centralized Innocent Spouse Operation (CCISO) regarding innocent spouse relief when such relief is raised as an affirmative defense in a deficiency proceeding in the Tax Court?

    Rule(s) of Law

    The authority of the Chief Counsel to represent the IRS in Tax Court cases is derived from I. R. C. § 7803(b)(2)(D), which delegates such duties to the Chief Counsel as prescribed by the Secretary, including representation in Tax Court. General Counsel Order No. 4 further delegates to the Chief Counsel the authority to decide whether and how to defend, prosecute, settle, or abandon claims or defenses in Tax Court cases. I. R. C. § 6015 provides for innocent spouse relief, allowing a spouse to seek relief from joint and several liability under certain conditions.

    Holding

    The Tax Court held that the Chief Counsel has the final authority to accept or reject CCISO’s determination of innocent spouse relief when such relief is raised as an affirmative defense in a deficiency proceeding. The court affirmed that the Chief Counsel’s discretion in litigation matters extends to deciding whether to adopt CCISO’s recommendations.

    Reasoning

    The court’s reasoning was rooted in the statutory and regulatory framework governing the IRS and Tax Court proceedings. The court emphasized that the Chief Counsel’s role in representing the IRS in Tax Court cases, as per I. R. C. § 7803(b)(2)(D) and General Counsel Order No. 4, includes the discretion to settle or litigate issues raised in deficiency proceedings. The court rejected DelPonte’s argument that CCISO’s determination should be binding, noting that CCISO’s role is advisory in deficiency cases. The court also addressed DelPonte’s fairness arguments, stating that the statutory scheme does not allow for altering the Chief Counsel’s authority in the name of equity. The court further clarified that the Chief Counsel’s guidance to attorneys, as seen in various notices, consistently used advisory language (‘should’ rather than ‘must’) when referring to CCISO’s determinations, reinforcing the discretionary nature of the Chief Counsel’s authority. The court also noted the procedural differences between deficiency cases and other avenues for seeking innocent spouse relief, such as stand-alone petitions or collection due process (CDP) hearings, and found that these differences did not justify altering the Chief Counsel’s authority.

    Disposition

    The Tax Court denied DelPonte’s motion for entry of decision, affirming that the Chief Counsel retains the authority to decide whether to accept or reject CCISO’s determination of innocent spouse relief in deficiency proceedings.

    Significance/Impact

    This decision clarifies the division of authority within the IRS regarding innocent spouse relief claims raised in deficiency proceedings. It reinforces the Chief Counsel’s role in litigation and decision-making in Tax Court cases, potentially affecting how taxpayers and their legal representatives approach such claims. The ruling may lead to more consistent handling of innocent spouse relief claims across different types of proceedings, ensuring that the Chief Counsel’s discretion is respected in deficiency cases. However, it also highlights the challenges faced by spouses who seek relief after being unaware of their joint liabilities, prompting potential future legislative or regulatory changes to address these issues more equitably.

  • DelPonte v. Commissioner, 158 T.C. No. 7 (2022): Authority in Innocent-Spouse Relief Determinations in Deficiency Cases

    DelPonte v. Commissioner, 158 T. C. No. 7 (2022)

    In DelPonte v. Commissioner, the U. S. Tax Court clarified that in deficiency proceedings where innocent-spouse relief is raised as an affirmative defense, the IRS Chief Counsel, not the Cincinnati Centralized Innocent Spouse Operation (CCISO), has the final authority to grant or deny relief. This ruling ensures that the IRS maintains consistent control over litigation decisions, impacting how taxpayers pursue innocent-spouse relief in Tax Court deficiency cases.

    Parties

    Michelle DelPonte, as the Petitioner, sought innocent-spouse relief against the Respondent, Commissioner of Internal Revenue, in multiple deficiency proceedings before the U. S. Tax Court. The cases were consolidated under docket numbers 1144-05, 1334-06, 20679-09, 20680-09, and 20681-09.

    Facts

    Michelle DelPonte was married to William Goddard, who filed joint tax returns with her for the tax years 1999, 2000, and 2001. Goddard, a lawyer involved in tax-avoidance strategies, received notices of deficiency from the IRS for these years, leading to joint and several liability for DelPonte. Unbeknownst to DelPonte, Goddard filed petitions on her behalf asserting innocent-spouse relief under I. R. C. § 6015. DelPonte learned of the deficiency proceedings in 2010, after which she hired her own counsel and ratified the petitions. The IRS’s Office of Chief Counsel referred her claim to the CCISO, which determined she was entitled to relief under § 6015(c). However, the Chief Counsel sought further information and did not accept CCISO’s determination, leading DelPonte to move for entry of decision granting her relief.

    Procedural History

    The IRS issued notices of deficiency to Goddard’s law firm in 2004, 2005, and 2009, which led to petitions being filed in the U. S. Tax Court. DelPonte, unaware of these proceedings until 2010, ratified the petitions and sought innocent-spouse relief. The Office of Chief Counsel referred the claim to the CCISO, which concluded DelPonte was entitled to relief under § 6015(c). Despite this, the Chief Counsel requested additional information and did not accept CCISO’s determination. DelPonte moved for entry of decision, which the court treated as a motion for partial summary judgment on the issue of her entitlement to innocent-spouse relief. The court denied the motion, holding that the Chief Counsel has final authority in deficiency cases.

    Issue(s)

    Whether, in a deficiency proceeding where innocent-spouse relief is raised as an affirmative defense, the IRS Chief Counsel or the CCISO has the final authority to grant or deny relief under I. R. C. § 6015?

    Rule(s) of Law

    The Internal Revenue Code § 7803 authorizes the Commissioner to administer the internal revenue laws, with the Chief Counsel responsible for representing the Commissioner in cases before the Tax Court. Delegation orders allow the Chief Counsel to decide whether to defend, settle, or abandon claims in Tax Court cases. The Internal Revenue Manual (IRM) outlines procedures for processing innocent-spouse relief claims, but specifies that in deficiency cases, the Chief Counsel retains jurisdiction over the matter.

    Holding

    The U. S. Tax Court held that in deficiency proceedings where innocent-spouse relief is raised as an affirmative defense, the IRS Chief Counsel, not the CCISO, has the final authority to grant or deny relief under I. R. C. § 6015.

    Reasoning

    The court’s reasoning centered on the statutory authority granted to the Chief Counsel under § 7803 and the delegation orders, which give the Chief Counsel the power to make litigation decisions in Tax Court cases. The court analyzed the historical context of innocent-spouse relief, noting that such relief was sought in deficiency proceedings before the current administrative processes existed. The court rejected DelPonte’s argument that CCISO determinations should be binding, citing the discretionary language in Chief Counsel notices and the IRM, which indicate that CCISO’s role is advisory in deficiency cases. The court also addressed DelPonte’s fairness argument, finding it unpersuasive due to the statutory framework that assigns litigation authority to the Chief Counsel.

    Disposition

    The court denied DelPonte’s motion for entry of decision, affirming that the Chief Counsel has the final authority in deficiency cases to grant or deny innocent-spouse relief.

    Significance/Impact

    The DelPonte decision clarifies the roles of the Chief Counsel and CCISO in deficiency proceedings involving innocent-spouse relief, ensuring that the IRS maintains consistent control over litigation decisions. This ruling may impact how taxpayers pursue innocent-spouse relief in Tax Court deficiency cases, emphasizing the importance of the Chief Counsel’s role in such proceedings. The decision reinforces the statutory framework and delegation orders governing the IRS’s internal operations, potentially affecting the procedural strategies of taxpayers seeking relief under I. R. C. § 6015 in deficiency cases.

  • DelPonte v. Commissioner, 158 T.C. No. 7 (2022): Authority of IRS Chief Counsel in Innocent Spouse Relief Cases

    DelPonte v. Commissioner, 158 T. C. No. 7 (U. S. Tax Ct. 2022)

    In DelPonte v. Commissioner, the U. S. Tax Court clarified that the IRS Chief Counsel has final authority over innocent spouse relief claims raised for the first time in deficiency proceedings. Michelle DelPonte sought relief from joint tax liabilities from returns filed with her ex-husband, but the court denied her motion for decision based on a favorable determination by the IRS’s Cincinnati Centralized Innocent Spouse Operation (CCISO), ruling that Chief Counsel’s attorneys have the discretion to concede or settle such issues.

    Parties

    Michelle DelPonte, Petitioner, represented by Alvah Lavar Taylor, Jonathan T. Amitrano, and Lisa O. Nelson. Commissioner of Internal Revenue, Respondent, represented by Benjamin R. Poor and Paul Colleran.

    Facts

    Michelle DelPonte and William Goddard were married and filed joint tax returns for the years 1999, 2000, and 2001. During their marriage, Goddard, a lawyer, was involved in aggressive tax-avoidance schemes, leading to IRS notices of deficiency for those years. DelPonte was unaware of these deficiencies until 2010, as Goddard had filed petitions on her behalf without her knowledge, asserting innocent-spouse relief under I. R. C. § 6015. DelPonte subsequently ratified these petitions and sought innocent-spouse relief. The IRS’s Cincinnati Centralized Innocent Spouse Operation (CCISO) concluded she was eligible for relief under § 6015(c). However, the Office of Chief Counsel requested further information and did not accept CCISO’s determination, prompting DelPonte to move for entry of decision based on CCISO’s favorable determination.

    Procedural History

    Goddard filed petitions on DelPonte’s behalf in response to IRS notices of deficiency for the tax years 1999, 2000, and 2001, asserting innocent-spouse relief. DelPonte became aware of these proceedings in 2010, ratified the petitions, and sought relief under § 6015. The Office of Chief Counsel referred her request to CCISO, which determined she was entitled to relief under § 6015(c). Despite this, the Chief Counsel’s office sought additional information and did not concede the issue. DelPonte moved for entry of decision based on CCISO’s determination, but the Tax Court treated this as a motion for partial summary judgment on the issue of her entitlement to § 6015(c) relief.

    Issue(s)

    Whether the IRS Chief Counsel has final authority to concede or settle innocent-spouse relief claims raised as an affirmative defense for the first time in a deficiency proceeding.

    Rule(s) of Law

    The Commissioner of Internal Revenue has broad powers to administer the internal revenue laws, including making determinations about innocent-spouse relief under I. R. C. § 6015. The Chief Counsel is authorized to represent the Commissioner in cases before the Tax Court and has the discretion to decide whether and how to defend, prosecute, settle, or abandon claims or defenses in Tax Court proceedings. See I. R. C. § 7803; General Counsel Order No. 4; IRM 30. 2. 2-. 6.

    Holding

    The Tax Court held that where innocent-spouse relief is raised as an affirmative defense for the first time in a deficiency proceeding, the IRS Chief Counsel’s attorneys have final authority to concede or settle the issue with the petitioner. DelPonte’s motion for entry of decision was denied.

    Reasoning

    The court’s reasoning was based on the statutory and regulatory framework governing the roles of the Commissioner and the Chief Counsel. The court noted that the Chief Counsel has the authority to make litigation decisions, including whether to concede or settle claims in Tax Court cases. The court reviewed the delegation of authority from the Commissioner to CCISO and from the Chief Counsel to his attorneys, concluding that the Chief Counsel’s attorneys have the discretion to accept or reject CCISO’s determinations in deficiency cases. The court also considered DelPonte’s arguments regarding fairness and horizontal equity but found them unpersuasive, as the statutory scheme did not support such an interpretation. The court emphasized that the Chief Counsel’s authority to make litigation decisions was consistent with the historical practice of handling innocent-spouse claims in deficiency proceedings.

    Disposition

    The Tax Court denied DelPonte’s motion for entry of decision, affirming the authority of the Chief Counsel’s attorneys to make final determinations regarding innocent-spouse relief claims in deficiency proceedings.

    Significance/Impact

    DelPonte v. Commissioner clarifies the authority of the IRS Chief Counsel in handling innocent-spouse relief claims in deficiency proceedings. The decision underscores the discretion of Chief Counsel’s attorneys to make final litigation decisions, which can impact the outcome of such claims. This ruling may affect how taxpayers approach innocent-spouse relief in deficiency cases, as it emphasizes the importance of engaging with the Chief Counsel’s office rather than relying solely on determinations made by other IRS units like CCISO. The case also highlights the procedural differences in seeking innocent-spouse relief across different IRS processes, potentially influencing future legislative or regulatory changes to ensure more equitable treatment of taxpayers seeking relief.

  • DelPonte v. Commissioner, 158 T.C. No. 7 (2022): Authority of IRS Counsel in Innocent Spouse Relief

    DelPonte v. Commissioner, 158 T. C. No. 7 (2022)

    In DelPonte v. Commissioner, the U. S. Tax Court ruled that IRS Chief Counsel retains the authority to concede or settle innocent-spouse relief claims raised as an affirmative defense in deficiency proceedings, not the IRS’s Cincinnati Centralized Innocent Spouse Operation (CCISO). This decision clarifies the roles within the IRS regarding innocent-spouse relief when it is first raised in Tax Court, impacting how such claims are processed and potentially resolved.

    Parties

    Michelle DelPonte, the petitioner, sought innocent-spouse relief in deficiency proceedings against the Commissioner of Internal Revenue, the respondent. DelPonte was the petitioner throughout the litigation in the Tax Court.

    Facts

    Michelle DelPonte, formerly Michelle Goddard, was married to William Goddard. During their marriage, they filed joint tax returns for the years 1999, 2000, and 2001. Goddard, a lawyer, engaged in tax-avoidance schemes with his business partner David Greenberg, leading to IRS notices of deficiency issued to the couple. DelPonte was unaware of these notices until November 2010. Goddard had filed petitions on her behalf, claiming innocent-spouse relief under I. R. C. § 6015(c), without her knowledge. Upon discovering the litigation, DelPonte hired her own legal representation and ratified the petitions. The IRS’s Cincinnati Centralized Innocent Spouse Operation (CCISO) reviewed DelPonte’s request for relief and determined she was entitled to it. However, the IRS’s Chief Counsel sought further information and did not accept CCISO’s determination, prompting DelPonte to move for entry of decision granting her relief.

    Procedural History

    DelPonte’s case began with deficiency notices issued to her and Goddard for the tax years in question. Goddard filed petitions on her behalf, asserting innocent-spouse relief. DelPonte later ratified these petitions. The IRS referred her claim to CCISO, which concluded she was entitled to relief under § 6015(c). Despite this, the IRS Chief Counsel sought additional information and did not adopt CCISO’s conclusion. DelPonte then moved for entry of decision in her favor based on CCISO’s determination. The Tax Court treated this motion as one for partial summary judgment.

    Issue(s)

    Whether the IRS Chief Counsel has the authority to concede or settle an innocent-spouse relief claim raised as an affirmative defense in a deficiency proceeding, or whether such authority lies with the Cincinnati Centralized Innocent Spouse Operation (CCISO).

    Rule(s) of Law

    The Commissioner of Internal Revenue, through delegation to the Chief Counsel, has the authority to administer and enforce internal revenue laws, including making determinations about innocent-spouse relief under I. R. C. § 6015. The Chief Counsel Notice CC-2009-021 instructs attorneys to request CCISO’s determination on innocent-spouse relief claims raised for the first time in deficiency proceedings, but such determinations are advisory, not binding.

    Holding

    The Tax Court held that the IRS Chief Counsel has the authority to concede or settle innocent-spouse relief claims raised as an affirmative defense in deficiency proceedings, and that CCISO’s determinations are not binding on the Chief Counsel.

    Reasoning

    The court’s reasoning centered on the statutory and regulatory framework governing the IRS’s authority. The court noted that the Commissioner’s broad powers to administer the tax laws are delegated to the Chief Counsel in cases pending before the Tax Court. The court reviewed the history of innocent-spouse relief, noting that such claims have been raised as defenses in deficiency proceedings long before the current administrative processes were established. The court analyzed Chief Counsel Notices and the Internal Revenue Manual (IRM), concluding that while CCISO provides determinations on innocent-spouse relief, these are advisory in nature when the claim is first raised in a deficiency case. The court rejected DelPonte’s argument that principles of fairness required CCISO’s determinations to be binding, stating that the statutory scheme clearly allocates authority to the Chief Counsel in such litigation contexts. The court also considered and dismissed the possibility that Chief Counsel Notice CC-2009-021 constituted a redelegation of authority to CCISO, as CCISO is not within the Office of the Chief Counsel. The court’s decision emphasized the distinction between administrative determinations and litigation decisions, affirming the Chief Counsel’s discretion in the latter.

    Disposition

    The Tax Court denied DelPonte’s motion for entry of decision, affirming the Chief Counsel’s authority to decide whether to concede or settle her innocent-spouse relief claim.

    Significance/Impact

    This case clarifies the delineation of authority within the IRS regarding innocent-spouse relief claims raised in deficiency proceedings. It reinforces the Chief Counsel’s role in litigation decisions, potentially affecting how taxpayers approach such claims and the procedural steps they must follow. The decision may influence future cases where innocent-spouse relief is sought in deficiency proceedings, emphasizing the need for taxpayers to engage with the Chief Counsel directly when such relief is contested. The ruling also highlights the advisory nature of CCISO’s role in deficiency cases, which could impact the strategic considerations of both taxpayers and IRS attorneys in handling these claims.

  • DelPonte v. Commissioner, 158 T.C. No. 7 (2022): Authority of IRS Counsel in Innocent Spouse Relief Claims

    DelPonte v. Commissioner, 158 T. C. No. 7 (2022)

    In DelPonte v. Commissioner, the U. S. Tax Court clarified the authority of IRS counsel in handling innocent-spouse relief claims raised as affirmative defenses in deficiency proceedings. The court ruled that IRS counsel retains final authority to settle or litigate such claims, even after the Cincinnati Centralized Innocent Spouse Operation (CCISO) recommends relief. This decision underscores the procedural distinctions between different avenues for seeking innocent-spouse relief and their implications for taxpayers.

    Parties

    Michelle DelPonte, as Petitioner, sought innocent-spouse relief from joint tax liabilities with her ex-husband, William Goddard. The Commissioner of Internal Revenue, as Respondent, contested the relief through IRS counsel.

    Facts

    Michelle DelPonte and William Goddard, who were married, filed joint tax returns for the years 1999, 2000, and 2001. During their marriage, Goddard engaged in aggressive tax-avoidance strategies, leading to IRS notices of deficiency for those years. DelPonte was unaware of these deficiencies until 2010, despite Goddard filing petitions on her behalf asserting innocent-spouse relief under I. R. C. § 6015. In April 2011, DelPonte’s claim for innocent-spouse relief was referred by IRS Chief Counsel to CCISO, which concluded she was entitled to relief under § 6015(c). However, IRS counsel sought additional information before making a final determination, which DelPonte refused to provide, instead moving for entry of decision granting her relief.

    Procedural History

    DelPonte’s case was part of a larger set of deficiency proceedings involving Goddard and his business partner, David Greenberg. The Tax Court bifurcated the litigation in 2010 to first address the deficiency amounts and then DelPonte’s innocent-spouse relief. In May 2018, the Tax Court upheld the deficiencies but severed DelPonte’s cases in January 2020. DelPonte moved for entry of decision based on CCISO’s recommendation, which the court treated as a motion for partial summary judgment.

    Issue(s)

    Whether IRS counsel has final authority to concede or settle innocent-spouse relief claims raised as affirmative defenses in deficiency proceedings, or whether such authority resides with CCISO.

    Rule(s) of Law

    The Internal Revenue Code § 7803(b)(2)(D) grants the Chief Counsel authority to represent the Commissioner in cases before the Tax Court, including the power to decide whether to defend, settle, or abandon claims. IRS delegation orders and the Internal Revenue Manual (IRM) outline the procedures for handling innocent-spouse relief claims in different contexts.

    Holding

    The Tax Court held that in deficiency proceedings where innocent-spouse relief is raised as an affirmative defense, IRS counsel retains final authority to concede or settle the issue with the petitioner, not CCISO.

    Reasoning

    The court reasoned that the statutory framework and delegation orders grant IRS counsel the power to make litigation decisions in Tax Court proceedings. The court analyzed the history of innocent-spouse relief and the different procedural paths available to taxpayers, noting that requests raised in deficiency cases are part of the court’s broader jurisdiction to redetermine deficiencies. The court interpreted Chief Counsel notices and the IRM, concluding that CCISO’s role in such cases is advisory, and IRS counsel retains discretion to adopt or reject CCISO’s recommendations. The court rejected DelPonte’s arguments based on fairness, stating that it could not alter the statutory scheme to ensure equal treatment across different relief paths.

    Disposition

    The Tax Court denied DelPonte’s motion for entry of decision, affirming that IRS counsel has the final authority to handle innocent-spouse relief claims in deficiency proceedings.

    Significance/Impact

    DelPonte v. Commissioner clarifies the procedural roles within the IRS concerning innocent-spouse relief in deficiency cases. The decision may impact how taxpayers approach their relief strategies, particularly those who first seek relief in deficiency proceedings. It reinforces the importance of understanding the procedural nuances of seeking relief under different IRS mechanisms and could influence future legislative or regulatory adjustments to ensure more equitable treatment across all innocent-spouse relief pathways.

  • Gina C. Lewis v. Commissioner of Internal Revenue, 158 T.C. No. 3 (2022): Qualified Offers and Innocent Spouse Relief Under I.R.C. §§ 7430 and 6015

    Gina C. Lewis v. Commissioner of Internal Revenue, 158 T. C. No. 3 (U. S. Tax Court 2022)

    In a ruling on litigation costs under I. R. C. § 7430, the U. S. Tax Court clarified that a qualified offer must fully resolve a taxpayer’s liability without reservations. Gina Lewis’s offer, which conceded tax and penalties but reserved the right to claim innocent spouse relief under I. R. C. § 6015, was deemed not a qualified offer. Consequently, the court denied her request for litigation costs, emphasizing the need for clarity in offers and the substantial justification of the IRS’s position.

    Parties

    Gina C. Lewis, the Petitioner, filed a petition against the Commissioner of Internal Revenue, the Respondent, in the U. S. Tax Court. Throughout the litigation, Lewis was represented by Steve Milgrom, and the Commissioner was represented by Vincent A. Gonzalez and Emma S. Warner.

    Facts

    Gina C. Lewis and her former spouse, Tim S. Lewis, filed joint federal income tax returns for the tax years 2008, 2009, and 2010. The IRS audited these returns and proposed adjustments and penalties. On December 28, 2016, Lewis submitted a letter to the IRS, designating it as a qualified offer under I. R. C. § 7430(g). In this offer, she conceded 100% of the tax and penalties proposed by the IRS but reserved the right to claim relief from joint and several liability under I. R. C. § 6015. The IRS did not accept Lewis’s offer and later issued a notice of deficiency. Lewis filed a petition in the Tax Court claiming relief under I. R. C. § 6015. Despite Lewis not providing the required Form 8857 or other documentation to support her claim for innocent spouse relief, the Commissioner eventually conceded that Lewis was entitled to relief under I. R. C. § 6015(c) after settling with Tim S. Lewis. Lewis objected to the Commissioner’s motion for entry of decision, arguing it was a tactic to avoid an award of litigation costs. She subsequently moved for litigation costs under I. R. C. § 7430.

    Procedural History

    After the IRS audit and issuance of a notice of deficiency for the tax years 2008, 2009, and 2010, Gina C. Lewis filed a timely petition in the U. S. Tax Court. In her amended petition, she elected benefits under I. R. C. § 6015(b) and (c). The Commissioner responded by indicating that he would review her request for innocent spouse relief. Despite requests from the Commissioner, Lewis did not provide Form 8857 or supporting documentation. After settling with Tim S. Lewis, the Commissioner conceded that Gina C. Lewis was entitled to relief under I. R. C. § 6015(c) and moved for entry of decision reflecting no liabilities for the years in issue. Lewis objected to this motion and moved for litigation costs under I. R. C. § 7430. The Tax Court denied her motion for litigation costs.

    Issue(s)

    Whether an offer that reserves the right to claim relief from joint and several liability under I. R. C. § 6015 qualifies as a “qualified offer” under I. R. C. § 7430(g)(1)(B)?

    Whether the Commissioner’s position in the proceeding was substantially justified under I. R. C. § 7430(c)(4)(B)(i)?

    Rule(s) of Law

    Under I. R. C. § 7430(g)(1), a qualified offer must be a written offer made during the qualified offer period, specify the offered amount of the taxpayer’s liability (determined without regard to interest), be designated as a qualified offer, and remain open for a specified period. Treasury Regulation § 301. 7430-7(c)(3) further requires that the specified amount must be an amount that, if accepted, would fully resolve the taxpayer’s liability for the type and years at issue. I. R. C. § 6015 provides relief from joint and several liability for spouses filing joint returns, allowing relief from the underlying tax liability, not just collection.

    Holding

    The U. S. Tax Court held that Gina C. Lewis’s offer was not a qualified offer under I. R. C. § 7430(g)(1)(B) because it reserved the right to claim relief under I. R. C. § 6015, failing to specify an amount that would fully resolve her liability. Additionally, the court held that the Commissioner’s position was substantially justified under I. R. C. § 7430(c)(4)(B)(i) due to Lewis’s failure to provide the required documentation for innocent spouse relief.

    Reasoning

    The court reasoned that Lewis’s offer did not meet the requirements of a qualified offer because it did not specify the offered amount of her liability as required by I. R. C. § 7430(g)(1)(B) and Treasury Regulation § 301. 7430-7(c)(3). The court emphasized that I. R. C. § 6015 provides relief from liability, not just collection, and thus Lewis’s reservation of the right to claim such relief affected her liability. The court rejected Lewis’s argument that her offer should be considered without regard to the potential application of I. R. C. § 6015, noting that her offer explicitly reserved the right to claim relief under this section. The court also found that the Commissioner’s position was substantially justified because Lewis did not provide the required Form 8857 or other documentation to support her claim for innocent spouse relief, and the Commissioner’s ultimate concession was based on a settlement with Lewis’s former spouse, not on documentation provided by Lewis.

    Disposition

    The U. S. Tax Court denied Gina C. Lewis’s motion for litigation costs under I. R. C. § 7430.

    Significance/Impact

    This decision clarifies the requirements for a qualified offer under I. R. C. § 7430(g), emphasizing that such an offer must fully resolve the taxpayer’s liability without reservations. It also underscores the importance of providing necessary documentation when seeking innocent spouse relief under I. R. C. § 6015. The ruling impacts how taxpayers structure their offers to the IRS and highlights the Commissioner’s discretion to require documentation before making a determination on innocent spouse relief. The decision may influence future litigation involving qualified offers and innocent spouse relief, reinforcing the need for clear and comprehensive offers in tax disputes.

  • Davidson v. Comm’r, 144 T.C. 273 (2015): Voluntary Dismissal in Stand-Alone Section 6015 Cases

    Davidson v. Comm’r, 144 T. C. 273 (2015)

    In a significant ruling, the U. S. Tax Court granted Lana Joan Davidson’s motion to dismiss her stand-alone petition challenging the denial of innocent spouse relief under I. R. C. § 6015. The court held it had discretion to allow withdrawal of the petition in such cases, distinguishing them from deficiency cases where a decision must be entered upon dismissal. This decision clarifies the procedural treatment of stand-alone petitions and their implications for future claims under Section 6015.

    Parties

    Lana Joan Davidson, the petitioner, proceeded pro se. The respondent was the Commissioner of Internal Revenue, represented by Bradley C. Plovan.

    Facts

    Lana Joan Davidson filed a Form 8857 with the Internal Revenue Service (IRS), requesting innocent spouse relief from joint and several income tax liabilities for the tax years 2007 and 2008 under I. R. C. § 6015. On February 22, 2013, the IRS issued a final determination denying Davidson’s request for relief. Subsequently, Davidson filed a timely petition in the U. S. Tax Court to review the IRS’s final determination. At the time of filing, Davidson resided in Maryland. After the Commissioner filed an answer, Davidson moved to dismiss the case, seeking to withdraw her petition voluntarily. The Commissioner did not object to the motion.

    Procedural History

    Davidson’s petition was filed as a stand-alone case under I. R. C. § 6015(e)(1), challenging the IRS’s final determination denying her innocent spouse relief. After the Commissioner filed an answer, Davidson filed a motion to dismiss the petition. The court considered whether it had the authority to dismiss the case without entering a decision, given the nature of the petition. The court reviewed its jurisdiction and discretion, referencing prior cases such as Wagner v. Commissioner and Vetrano v. Commissioner, and ultimately granted Davidson’s motion to dismiss.

    Issue(s)

    Whether the U. S. Tax Court has discretion to allow a petitioner to withdraw a stand-alone petition filed under I. R. C. § 6015(e)(1) and dismiss the case without entering a decision.

    Rule(s) of Law

    I. R. C. § 6015(e)(1) allows a spouse to petition the Tax Court for review of the Commissioner’s denial of innocent spouse relief. I. R. C. § 7459(d) mandates that a decision must be entered upon dismissal in cases where the court’s jurisdiction to redetermine a deficiency has been invoked. The court also considered Federal Rule of Civil Procedure 41(a)(2), which allows for the voluntary dismissal of an action by court order, subject to the court’s discretion.

    Holding

    The U. S. Tax Court held that it has discretion to allow a petitioner to withdraw a stand-alone petition filed under I. R. C. § 6015(e)(1) and dismiss the case without entering a decision, as such cases do not invoke the court’s jurisdiction to redetermine a deficiency.

    Reasoning

    The court distinguished this case from Vetrano v. Commissioner, where the petition invoked the court’s jurisdiction to redetermine a deficiency, necessitating a decision upon dismissal under I. R. C. § 7459(d). In contrast, Davidson’s petition was a stand-alone case under I. R. C. § 6015(e)(1), where the only issue was the entitlement to innocent spouse relief. The court found that I. R. C. § 6015(g)(2), which limits future claims based on prior proceedings, did not apply because dismissal of a stand-alone petition would treat the case as if it were never brought. The court exercised its discretion under principles analogous to Federal Rule of Civil Procedure 41(a)(2), allowing Davidson to withdraw her petition and dismissing the case. This decision was influenced by the absence of any objection from the Commissioner and the equitable considerations of allowing withdrawal in stand-alone petitions.

    Disposition

    The U. S. Tax Court granted Davidson’s motion to dismiss, allowing her to withdraw her stand-alone petition and dismissing the case.

    Significance/Impact

    This decision clarifies the procedural treatment of stand-alone petitions under I. R. C. § 6015(e)(1), affirming the court’s discretion to allow withdrawal and dismissal without prejudice. It distinguishes these cases from deficiency cases where a decision must be entered upon dismissal. The ruling provides guidance on the application of I. R. C. § 6015(g)(2) and the implications of voluntary dismissal for future claims. Practically, it affects the strategies available to taxpayers seeking innocent spouse relief, as it underscores the importance of timely filing and the potential to withdraw a petition without prejudicing future claims.

  • Koprowski v. Commissioner, 138 T.C. 54 (2012): Res Judicata and Innocent Spouse Relief

    Koprowski v. Commissioner, 138 T. C. 54 (U. S. Tax Court 2012)

    In Koprowski v. Commissioner, the U. S. Tax Court ruled that res judicata barred Eugene Koprowski from seeking innocent spouse relief from a 2006 joint tax liability previously litigated in a small tax case. The court emphasized that decisions in small tax cases are final and preclude relitigation of claims, even those not fully adjudicated in the initial proceedings, unless specific statutory exceptions are met. This decision underscores the binding nature of small tax case judgments and the limited exceptions to res judicata in tax law.

    Parties

    Eugene Koprowski, the petitioner, sought innocent spouse relief from joint and several tax liability for the year 2006. The respondent was the Commissioner of Internal Revenue. Koprowski had previously been a petitioner in a deficiency case alongside his wife, Wendy Koprowski, against the same respondent.

    Facts

    Eugene and Wendy Koprowski filed a joint federal income tax return for 2006. The IRS determined a deficiency due to unreported distributions from Wendy’s father’s estate, asserting these distributions were taxable income. The Koprowskis challenged this deficiency in the U. S. Tax Court, electing to proceed under small tax case procedures. During this litigation, Eugene Koprowski raised the defense of innocent spouse relief. The parties ultimately withdrew their cross-motions for summary judgment and stipulated to the deficiency, leading to a decision entered by the court on November 9, 2009. While the deficiency case was pending, Eugene Koprowski filed a Form 8857 requesting innocent spouse relief, which the IRS denied in May 2010. He then filed a petition challenging this denial, leading to the case at hand.

    Procedural History

    The Koprowskis filed a deficiency petition against the Commissioner in January 2009, electing small tax case procedures. They filed motions and cross-motions for summary judgment, with Eugene asserting an innocent spouse defense. These motions were withdrawn, and the parties stipulated to the deficiency, resulting in a decision entered on November 9, 2009. Eugene subsequently filed for innocent spouse relief, which the IRS denied. He then filed a petition challenging this denial, and the Commissioner moved for summary judgment on grounds of res judicata.

    Issue(s)

    Whether res judicata bars Eugene Koprowski from seeking innocent spouse relief under I. R. C. § 6015 for the 2006 tax year, given the prior litigation and decision in the deficiency case?

    Whether the statutory exception in I. R. C. § 6015(g)(2) applies to allow Koprowski to overcome res judicata?

    Rule(s) of Law

    Res judicata, or claim preclusion, bars relitigation of a claim that has been finally adjudicated on the merits. I. R. C. § 7463(b) states that decisions in small tax cases are final and not subject to review by any other court. I. R. C. § 6015(g)(2) provides an exception to res judicata for innocent spouse relief claims if the issue was not raised in the prior proceeding and the individual did not participate meaningfully in that proceeding.

    Holding

    The U. S. Tax Court held that res judicata barred Eugene Koprowski from relitigating the 2006 tax liability, including his claim for innocent spouse relief under I. R. C. § 6015. The court further held that the statutory exception under I. R. C. § 6015(g)(2) did not apply because Koprowski’s innocent spouse claim was raised in the prior deficiency case, and he had meaningfully participated in those proceedings.

    Reasoning

    The court reasoned that res judicata applies to decisions in small tax cases under I. R. C. § 7463(b), emphasizing the finality of such decisions. The court rejected Koprowski’s argument that res judicata does not apply to small tax cases, citing statutory language and precedent indicating that such decisions are conclusive. The court also analyzed the applicability of I. R. C. § 6015(g)(2), determining that Koprowski did not meet the conditions for the exception. His innocent spouse claim was explicitly raised in the prior deficiency case, and he had meaningfully participated in that litigation, as evidenced by his signatures on filings and his active role in court proceedings. The court considered policy considerations, such as the need for finality in tax litigation, and the potential for abuse if small tax case decisions were not given preclusive effect. The court also addressed counter-arguments, such as Koprowski’s assertion that his innocent spouse claim was not adjudicated on the merits, but found these arguments unpersuasive given the broad scope of res judicata and the specific statutory framework.

    Disposition

    The court granted the Commissioner’s motion for summary judgment and sustained the IRS’s determination to deny Eugene Koprowski innocent spouse relief from the 2006 joint tax liability.

    Significance/Impact

    This case reinforces the principle that decisions in small tax cases are final and have res judicata effect, even when the full merits of a claim are not adjudicated. It clarifies the limited scope of the statutory exception to res judicata under I. R. C. § 6015(g)(2) for innocent spouse relief claims. The decision has practical implications for taxpayers considering the use of small tax case procedures, as it underscores the importance of raising all relevant claims and defenses in the initial litigation. Subsequent courts have cited Koprowski in upholding the finality of small tax case decisions and in analyzing the application of res judicata in tax cases.

  • Petrane v. Comm’r, 129 T.C. 1 (2007): Calculation of Relief Sought Under Small Tax Case Procedures

    Petrane v. Commissioner, 129 T. C. 1 (2007)

    In Petrane v. Commissioner, the U. S. Tax Court clarified the calculation of relief sought for small tax case procedures under I. R. C. § 7463(f)(1). The court ruled that the total amount of tax, interest, and penalties, including accrued but unassessed amounts, sought in the petition must be considered as of the filing date. This decision impacts how taxpayers can elect to proceed under simplified court procedures, affirming that Petrane’s case did not qualify due to exceeding the $50,000 limit.

    Parties

    Gilda A. Petrane (Petitioner) filed a petition against the Commissioner of Internal Revenue (Respondent) in the United States Tax Court.

    Facts

    Gilda A. Petrane filed a petition seeking relief from joint and several tax liabilities for tax years 1996-2000 and 2002 under I. R. C. § 6015(e). She requested to proceed under the small tax case procedures authorized by I. R. C. § 7463(f)(1). At the time of filing her petition, the amount of unpaid tax, interest, and penalties for each individual year did not exceed $50,000. However, the total amount for all years exceeded $50,000. The Commissioner moved to remove the small tax case designation, arguing the total amount of relief sought exceeded the statutory limit.

    Procedural History

    Petrane filed her petition in the U. S. Tax Court under I. R. C. § 6015(e), requesting relief from joint and several tax liabilities. She elected to proceed under the small tax case procedures of I. R. C. § 7463(f)(1). The Commissioner filed a motion to remove the small tax case designation, asserting that the total amount of relief sought exceeded $50,000. Petrane did not object to the Commissioner’s motion. The court considered the motion sua sponte, as it pertained to its jurisdiction to proceed under the small tax case procedures.

    Issue(s)

    Whether the amount of relief sought for purposes of I. R. C. § 7463(f)(1) includes the total amount of tax, interest, and penalties, including accrued but unassessed interest and penalties, for which relief is sought in the petition calculated as of the date the petition is filed.

    Rule(s) of Law

    I. R. C. § 7463(f)(1) allows a taxpayer to elect small tax case procedures for a petition filed under I. R. C. § 6015(e) if the amount of relief sought does not exceed $50,000. I. R. C. § 6015 provides relief from joint and several tax liability, including interest and penalties, under specific circumstances. The court must interpret the statutory language to determine the meaning of “amount of relief sought” and whether it includes accrued but unassessed interest and penalties.

    Holding

    The court held that the amount of relief sought for purposes of I. R. C. § 7463(f)(1) includes the total amount of tax, interest, and penalties, including accrued but unassessed interest and penalties, for which relief is sought in the petition calculated as of the date the petition is filed. Therefore, the total amount of relief Petrane sought exceeded $50,000, and her case was not eligible to be conducted under the small tax case procedures of I. R. C. § 7463.

    Reasoning

    The court reasoned that the phrase “amount of relief sought” in I. R. C. § 7463(f)(1) encompasses the total amount of paid and unpaid tax, interest, and penalties, including accrued but unassessed interest and penalties, for which relief is sought. This interpretation is supported by the relief available under I. R. C. § 6015, which includes interest and penalties as part of the tax liability. The court also determined that the $50,000 limit in I. R. C. § 7463(f)(1) refers to the total amount of relief sought in the petition rather than the amount of relief sought for each individual year. Furthermore, the court concluded that the date of filing the petition is the appropriate time to calculate the amount of relief sought, ensuring that the amount is fixed and preventing cases from exceeding the limit after proceeding under small tax case procedures. The court’s interpretation aligns with the plain language of the statute and practical considerations.

    Disposition

    The court granted the Commissioner’s motion to remove the small tax case designation, discontinued the proceedings under I. R. C. § 7463, and continued the proceedings pursuant to the court’s regular case procedures.

    Significance/Impact

    Petrane v. Commissioner clarifies the calculation of relief sought for small tax case procedures under I. R. C. § 7463(f)(1). The decision impacts how taxpayers can elect to proceed under simplified court procedures, requiring consideration of the total amount of tax, interest, and penalties, including accrued but unassessed amounts, as of the filing date. This ruling may influence future cases involving similar issues and affects the strategic choices available to taxpayers seeking relief under I. R. C. § 6015(e). It underscores the importance of precise calculation and timing in electing small tax case procedures, potentially leading to more careful planning by taxpayers and their representatives.