SCOTUS Reports

Tag: Innocent Spouse Relief

  • LaRosa v. Commissioner, 163 T.C. No. 2 (2024): Scope of Equitable Relief under I.R.C. § 6015(f) for Erroneous Refunds

    LaRosa v. Commissioner, 163 T. C. No. 2 (United States Tax Court 2024)

    The U. S. Tax Court ruled that an erroneous refund consisting solely of interest does not qualify for innocent spouse relief under I. R. C. § 6015(f). The court clarified that such relief is available only for unpaid taxes or deficiencies, not for erroneous refunds of interest. This decision limits the scope of equitable relief available to spouses seeking to avoid joint and several tax liabilities stemming from erroneous refunds.

    Parties

    Catherine L. LaRosa, Petitioner, sought relief from joint and several tax liability against the Commissioner of Internal Revenue, Respondent, in the United States Tax Court, Docket No. 10164-20.

    Facts

    Catherine and Dominick LaRosa received an erroneous refund from the Commissioner consisting solely of statutory interest for tax years 1981 and 1982. The LaRosas had previously fully satisfied their tax liabilities for those years. After a successful erroneous refund suit by the Commissioner, Mrs. LaRosa sought innocent spouse relief under I. R. C. § 6015(f), claiming that holding her liable for the erroneous refund was inequitable. The Commissioner denied her request, asserting that an erroneous refund of interest does not qualify for relief under § 6015(f).

    Procedural History

    The Commissioner initiated an erroneous refund suit under I. R. C. § 7405 against the LaRosas, which was adjudicated in the U. S. District Court for the District of Maryland, resulting in a judgment against the LaRosas. Following this, Mrs. LaRosa filed a request for innocent spouse relief with the Commissioner, which was denied. She then filed a Petition in the U. S. Tax Court seeking review of the Commissioner’s determination. The Commissioner moved to dismiss for lack of jurisdiction, arguing that an erroneous refund of interest does not qualify for innocent spouse relief under § 6015(f). The Tax Court recharacterized the motion as one for summary judgment.

    Issue(s)

    Whether an erroneous refund consisting solely of interest constitutes an unpaid tax or deficiency eligible for innocent spouse relief under I. R. C. § 6015(f)?

    Rule(s) of Law

    I. R. C. § 6015(f) allows the Commissioner to grant equitable relief from joint and several tax liability if, considering all facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or deficiency. The statute specifies that relief under § 6015(f) is available only for unpaid taxes or deficiencies, not for erroneous refunds unrelated to a recalculation of tax liability.

    Holding

    The Tax Court held that an erroneous refund consisting solely of interest does not constitute an unpaid tax or deficiency and thus is not eligible for innocent spouse relief under I. R. C. § 6015(f).

    Reasoning

    The court distinguished between rebate and nonrebate refunds, noting that only rebate refunds, which involve a recalculation of tax liability, can revive a tax liability and be recoverable through deficiency procedures. The erroneous refund in question was a nonrebate refund because it was issued due to a perceived error in calculating interest, not because of a recalculation of the LaRosas’ tax liabilities. The court rejected Mrs. LaRosa’s argument that interest should be treated as tax for the purpose of determining a rebate under § 6211, pointing out that the relevant statutory provisions do not support such treatment. The court also noted that the Tax Court has jurisdiction over cases involving requests for equitable relief under § 6015(f), but this jurisdiction does not extend to granting relief for erroneous refunds of interest.

    Disposition

    The Tax Court granted summary judgment in favor of the Commissioner, finding that Mrs. LaRosa was not eligible for innocent spouse relief under I. R. C. § 6015(f).

    Significance/Impact

    This decision clarifies the scope of innocent spouse relief under I. R. C. § 6015(f), limiting its application to unpaid taxes or deficiencies and excluding erroneous refunds of interest. It underscores the distinction between rebate and nonrebate refunds and their implications for tax liability. The ruling may impact future cases where spouses seek to avoid joint and several liability stemming from erroneous refunds, emphasizing the importance of the nature of the refund in determining eligibility for relief.

  • Frutiger v. Commissioner, 162 T.C. No. 5 (2024): Jurisdictional Nature of Filing Deadlines in Innocent Spouse Relief Cases

    Frutiger v. Commissioner, 162 T. C. No. 5 (United States Tax Court, 2024)

    The U. S. Tax Court ruled that the 90-day filing deadline for petitions seeking innocent spouse relief is jurisdictional, dismissing Paul Andrew Frutiger’s case for being filed late. This decision reinforces the strict enforcement of filing deadlines in tax disputes and underscores the importance of timely action by taxpayers seeking relief from joint tax liabilities.

    Parties

    Paul Andrew Frutiger (Petitioner) v. Commissioner of Internal Revenue (Respondent). Frutiger was the pro se petitioner at the Tax Court level.

    Facts

    On June 16, 2021, the Commissioner issued separate notices of determination to Paola Frutiger and Paul Frutiger, denying their requests for innocent spouse relief for the year 2018. Paola Frutiger filed a timely petition within 90 days of receiving her notice. Paul Frutiger, residing in California, mailed his petition 92 days after receiving his notice, which was received by the court 96 days after issuance. The court consolidated the cases of Paul and Paola Frutiger. The Commissioner moved to dismiss Paul Frutiger’s petition for lack of jurisdiction due to its untimeliness.

    Procedural History

    The Commissioner issued a Notice of Determination denying Paul Frutiger’s claim for innocent spouse relief. Frutiger filed a petition with the Tax Court 92 days after the notice was issued, which was considered untimely under I. R. C. § 6015(e)(1)(A). The Commissioner moved to dismiss the case for lack of jurisdiction. The Tax Court issued an order requesting both parties to address the timeliness of Frutiger’s petition and its jurisdictional implications.

    Issue(s)

    Whether the 90-day filing deadline in I. R. C. § 6015(e)(1)(A) for petitions seeking review of a denial of innocent spouse relief is jurisdictional?

    Rule(s) of Law

    The Tax Court’s jurisdiction is limited to what Congress provides, and filing deadlines are considered jurisdictional if Congress clearly states so. I. R. C. § 6015(e)(1)(A) states that the Tax Court shall have jurisdiction over a petition filed “not later than the close of the 90th day” after the Commissioner’s final determination.

    Holding

    The 90-day filing deadline in I. R. C. § 6015(e)(1)(A) is jurisdictional. Since Paul Frutiger failed to file his petition within this deadline, the Tax Court lacked jurisdiction to hear his case.

    Reasoning

    The court began its analysis with the statutory text of I. R. C. § 6015(e)(1)(A), which clearly links the jurisdictional grant to the 90-day filing deadline. The court distinguished this case from the Supreme Court’s decision in Boechler, P. C. v. Commissioner, where the filing deadline was found nonjurisdictional due to ambiguity in the statutory language. The court noted that the jurisdictional parenthetical in § 6015(e)(1)(A) unambiguously refers to the filing deadline as a prerequisite for jurisdiction, unlike the ambiguous reference in Boechler. The court rejected arguments by Frutiger and amicus curiae that the deadline was not clearly stated as jurisdictional, finding the text and statutory context sufficient to establish the jurisdictional nature of the deadline. The court also considered the statutory context but found it insufficient to overcome the clear statutory text.

    Disposition

    The Tax Court dismissed Paul Frutiger’s petition for lack of jurisdiction due to its untimely filing.

    Significance/Impact

    This decision reaffirms the strict enforcement of filing deadlines in tax disputes, particularly in the context of innocent spouse relief claims. It underscores the importance of timely action by taxpayers and highlights the jurisdictional nature of specific statutory deadlines. The ruling may influence future interpretations of filing deadlines in tax law and reinforces the need for clear statutory language in defining jurisdictional requirements.

  • Thomas v. Commissioner, 160 T.C. No. 4 (2023): Interpretation of ‘Newly Discovered Evidence’ Under I.R.C. § 6015(e)(7)(B)

    Thomas v. Commissioner, 160 T. C. No. 4 (U. S. Tax Ct. 2023)

    In Thomas v. Commissioner, the U. S. Tax Court ruled that blog posts discovered after an administrative proceeding could be considered ‘newly discovered evidence’ under I. R. C. § 6015(e)(7)(B), allowing their admission in court despite not being part of the initial record. This decision interprets the statute’s scope broadly, impacting how evidence is considered in innocent spouse relief cases and emphasizing the court’s de novo review authority.

    Parties

    Sydney Ann Chaney Thomas (Petitioner) v. Commissioner of Internal Revenue (Respondent). The case was filed in the United States Tax Court, with Megan L. Brackney representing the Petitioner and Julie V. Skeen and Sharon Ortega representing the Respondent.

    Facts

    Sydney Ann Chaney Thomas and her late husband, Tracy A. Thomas, filed joint federal income tax returns for the years 2012, 2013, and 2014. After Tracy’s death in 2016, Sydney sought relief from joint and several liability under I. R. C. § 6015(f). The IRS denied her request on September 8, 2020, leading Sydney to petition the U. S. Tax Court on November 9, 2020. During the trial on April 4, 2022, the Commissioner introduced Exhibit 13-R, consisting of Sydney’s blog posts from November 2, 2016, to January 5, 2022, which were not part of the administrative record but were relevant to her lifestyle, assets, and relationship with her husband.

    Procedural History

    The IRS denied Sydney Thomas’s request for innocent spouse relief on September 8, 2020. Following the denial, Sydney filed a petition in the U. S. Tax Court on November 9, 2020. The trial took place on April 4, 2022, in San Francisco, where the Commissioner introduced Sydney’s blog posts as evidence. Sydney objected to their admission, arguing they were not ‘newly discovered’ under I. R. C. § 6015(e)(7)(B). The court admitted the blog posts on April 26, 2022, and subsequently denied Sydney’s motion to strike them from the record.

    Issue(s)

    Whether blog posts discovered after the administrative proceeding constitute ‘newly discovered evidence’ within the meaning of I. R. C. § 6015(e)(7)(B), allowing their admission in the U. S. Tax Court’s de novo review of an innocent spouse relief claim?

    Rule(s) of Law

    I. R. C. § 6015(e)(7) provides that the Tax Court’s review of an innocent spouse relief determination shall be conducted de novo based on the administrative record established at the time of the determination and any additional newly discovered or previously unavailable evidence. The statute does not define ‘newly discovered evidence,’ necessitating interpretation based on its ordinary meaning.

    Holding

    The U. S. Tax Court held that the blog posts from Sydney Thomas’s personal blog were ‘newly discovered evidence’ within the meaning of I. R. C. § 6015(e)(7)(B) because they were recently obtained by the Commissioner after the administrative proceedings concluded. Consequently, the blog posts were properly admitted into evidence.

    Reasoning

    The court reasoned that ‘newly discovered’ should be interpreted according to its ordinary meaning, which is ‘recently obtained sight or knowledge of for the first time. ‘ The Commissioner discovered the blog posts after the administrative proceedings, which satisfied this definition. The court rejected the petitioner’s argument that the standard from Federal Rule of Civil Procedure 60(b)(2), which includes a ‘reasonable diligence’ requirement, should apply, noting that Congress did not include such a qualifier in I. R. C. § 6015(e)(7)(B). Furthermore, the court emphasized that the use of ‘any additional’ in the statute suggested a broad interpretation, supporting the admission of evidence unknown to a participant in the administrative proceeding if offered in court. The court also noted that the de novo standard of review under § 6015(e)(7) supports a broad construction of evidence admissibility to ensure a comprehensive review of the case’s merits.

    Disposition

    The U. S. Tax Court denied Sydney Thomas’s Motion to Strike the blog posts from the record, affirming their admissibility as ‘newly discovered evidence’ under I. R. C. § 6015(e)(7)(B).

    Significance/Impact

    This decision clarifies the scope of ‘newly discovered evidence’ under I. R. C. § 6015(e)(7)(B), allowing evidence discovered after administrative proceedings to be considered in the Tax Court’s de novo review of innocent spouse relief claims. The ruling may impact how both taxpayers and the IRS approach the collection and presentation of evidence in such cases, emphasizing the importance of thorough evidence gathering post-administrative proceedings. The decision also underscores the Tax Court’s broad authority to consider evidence in its de novo review, potentially affecting the strategic considerations of parties in innocent spouse litigation.

  • 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.