T.C. Memo. 2001-313
UNITED STATES TAX COURT
SYBIL M. SMITH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 144-00. Filed December 19, 2001.
William Burwell Sellers, for petitioner.
Linda J. Wise, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: This is a proceeding commenced under section
6015, based on respondent’s determination that petitioner is not
entitled to relief from joint and several liability for 1987,
1992, and 1995 with respect to joint returns filed with Hugh V.
Smith, Jr. (H. Smith). Petitioner has now conceded that she is
not entitled to relief for 1995 because she was not a party to a
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joint return for that year. Unless otherwise indicated, all
section references are to the Internal Revenue Code in effect for
the years in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Albertville, Alabama, at the time that she
filed the petition. From July 13, 1968, until March 8, 1995,
petitioner was married to H. Smith. H. Smith was a lawyer.
On October 17, 1988, petitioner and H. Smith filed a joint
Federal income tax return for 1987 on which they reported a tax
liability of $63,776. No part of that liability was paid at the
time of filing of the return. Audit of the 1987 return commenced
in January 1989.
During 1992, petitioner was employed at Bullock County
Hospital as a nurse. On August 27, 1993, petitioner and H. Smith
filed a joint Federal income tax return for 1992 on which they
reported a tax liability of $3,107. No payments were made or
credited at the time of filing of the 1992 return. On
September 20, 1993, assessments were made for the tax reported on
the return, of $69 for an estimated tax penalty, $93.21 for a
failure to pay penalty, and $95.58 for accrued interest.
Collection costs of $11 were assessed on December 27, 1993. On
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February 5, 1996, a deficiency in the amount of $2,745 was
assessed based on a defaulted notice of deficiency. No payments
were made on the 1992 account prior to July 22, 1998.
Petitioner originally sought administrative relief from the
Internal Revenue Service under prior section 6013(e). For 1987,
respondent determined that petitioner was entitled to relief from
liability with respect to a deficiency determined for that year,
but not with respect to the tax reported on the return but not
paid and penalties relating thereto. When section 6015 was
adopted in 1998 (repealing section 6013(e)), petitioner’s claim
was reconsidered under the new Code section. Petitioner, through
her counsel, was invited to supply additional information that
would be relevant under section 6015. No further information was
provided. In a notice of final determination sent October 5,
1999, respondent determined that petitioner was entitled to the
partial relief for 1987 described above. Respondent further
determined that petitioner had not shown that she met the
requirements of section 6015(b) or (c) for 1992 and that she did
not file a joint return for 1995. Petitioner had not claimed
relief under section 6015(f), and no determination was made
specifically referring to that section.
At the time of trial in May 2001, the original returns filed
by petitioner and H. Smith for 1987 and 1992 were no longer
available.
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OPINION
The above findings of fact are sparse. The record in this
case does not include either the tax returns for the years in
issue or the notices of deficiency, and, therefore, we cannot
determine the nature of the adjustments leading to the
deficiencies and unpaid taxes and whether they are solely
attributable or allocable to H. Smith.
Section 6015 provides in pertinent part as follows:
SEC. 6015. RELIEF FROM JOINT AND SEVERAL
LIABILITY ON JOINT RETURN.
* * * * * * *
(b) Procedures For Relief From Liability
Applicable to All Joint Filers.--
(1) In general.--Under procedures prescribed
by the Secretary, if-–
(A) a joint return has been made for a
taxable year;
(B) on such return there is an
understatement of tax attributable to
erroneous items of 1 individual filing the
joint return;
(C) the other individual filing the
joint return establishes that in signing the
return he or she did not know, and had no
reason to know, that there was such
understatement;
(D) taking into account all the facts
and circumstances, it is inequitable to hold
the other individual liable for the
deficiency in tax for such taxable year
attributable to such understatement; and
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(E) the other individual elects (in such
form as the Secretary may prescribe) the
benefits of this subsection not later than
the date which is 2 years after the date the
Secretary has begun collection activities
with respect to the individual making the
election,
then the other individual shall be relieved of
liability for tax (including interest, penalties,
and other amounts) for such taxable year to the
extent such liability is attributable to such
understatement.
(2) Apportionment of relief.--If an
individual who, but for paragraph (1)(C), would be
relieved of liability under paragraph (1),
establishes that in signing the return such
individual did not know, and had no reason to
know, the extent of such understatement, then such
individual shall be relieved of liability for tax
(including interest, penalties, and other amounts)
for such taxable year to the extent that such
liability is attributable to the portion of such
understatement of which such individual did not
know and had no reason to know.
(3) Understatement.--For purposes of this
subsection, the term “understatement” has the
meaning given to such term by section
6662(d)(2)(A).
(c) Procedures To Limit Liability for Taxpayers No
Longer Married or Taxpayers Legally Separated or Not
Living Together.--
(1) In general.--Except as provided in this
subsection, if an individual who has made a joint
return for any taxable year elects the application
of this subsection, the individual’s liability for
any deficiency which is assessed with respect to
the return shall not exceed the portion of such
deficiency properly allocable to the individual
under section (d).
(2) Burden of proof.--Except as provided in
subparagraph (A)(ii) or (C) of paragraph (3), each
individual who elects the application of this
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subsection shall have the burden of proof with
respect to establishing the portion of any
deficiency allocable to such individual.
(3) Election.--
(A) Individuals eligible to make
election.--
(i) In general.--An individual
shall only be eligible to elect the
application of this subsection if–-
(I) at the time such election
is filed, such individual is no
longer married to, or is legally
separated from, the individual with
whom such individual filed the
joint return to which the election
relates; or
(II) such individual was not a
member of the same household as the
individual with whom such joint
return was filed at any time during
the 12-month period ending on the
date such election is filed.
(ii) Certain taxpayers ineligible
to elect.--If the Secretary demonstrates
that assets were transferred between
individuals filing a joint return as
part of a fraudulent scheme by such
individuals, an election under this
subsection by either individual shall be
invalid (and section 6013(d)(3) shall
apply to the joint return).
(B) Time for election.--An election
under this subsection for any taxable year
may be made at any time after a deficiency
for such year is asserted but not later than
2 years after the date on which the Secretary
has begun collection activities with respect
to the individual making the election.
(C) Election not valid with respect to
certain deficiencies.--If the Secretary
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demonstrates that an individual making an
election under this subsection had actual
knowledge, at the time such individual signed
the return, of any item giving rise to a
deficiency (or portion thereof) which is not
allocable to such individual under subsection
(d), such election shall not apply to such
deficiency (or portion). This subparagraph
shall not apply where the individual with
actual knowledge establishes that such
individual signed the return under duress.
* * * * * * *
(d) Allocation of Deficiency.--For purposes of
subsection (c)--
(1) In general.--The portion of any
deficiency on a joint return allocated to an
individual shall be the amount which bears the
same ratio to such deficiency as the net amount of
items taken into account in computing the
deficiency and allocable to the individual under
paragraph (3) bears to the net amount of all items
taken into account in computing the deficiency.
(2) Separate treatment of certain items.--If
a deficiency (or portion thereof) is attributable
to–-
(A) the disallowance of a credit; or
(B) any tax (other than tax imposed by
section 1 or 55) required to be included with
the joint return;
and such item is allocated to one individual under
paragraph (3), such deficiency (or portion) shall
be allocated to such individual. Any such item
shall not be taken into account under paragraph
(1).
(3) Allocation of items giving rise to the
deficiency.--For purposes of this subsection–-
(A) In general.--Except as provided in
paragraphs (4) and (5), any item giving rise
to a deficiency on a joint return shall be
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allocated to individuals filing the return in
the same manner as it would have been
allocated if the individuals had filed
separate returns for the taxable year.
(B) Exception where other spouse
benefits.--Under rules prescribed by the
Secretary, an item otherwise allocable to an
individual under subparagraph (A) shall be
allocated to the other individual filing the
joint return to the extent the item gave rise
to a tax benefit on the joint return to the
other individual.
* * * * * * *
(f) Equitable Relief.--Under procedures prescribed
by the Secretary, if–-
(1) taking into account all the facts and
circumstances, it is inequitable to hold the
individual liable for any unpaid tax or any
deficiency (or any portion of either); and
(2) relief is not available to such
individual under subsection (b) or (c),
the Secretary may relieve such individual of such
liability. [Emphasis added.]
Petitioner requests that we find: (1) That the underpayment
for 1987 and the deficiency for 1992 are entirely attributable
and allocable to H. Smith and (2) that she was abused emotionally
and physically by a spouse who kept her ignorant of their tax
liabilities, based on her uncorroborated conclusory testimony in
response to leading questions. The unsatisfactory quality of
petitioner’s testimony is shown by the following excerpts:
Q [By petitioner’s counsel] And during the time
that you were married to Mr. Smith did he ever abuse
you emotionally or physically?
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A Yes.
Q Who handled--who primarily handled the family
finances?
A He did.
Q Did you know the balances in any bank
accounts?
A No.
Q Were you able to sign on all the accounts?
A No.
Q What accounts could you sign on?
A The one that was specific for the home bills.
Q And would you have an estimate of how much
money on a monthly basis would have been in that
account?
A He would deposit a certain amount each month,
depending on what the bills totaled.
Q And would you tell him what the bills
totaled?
A Yes.
Q Is that how it worked?
A Yes.
Q Did you have any input in any investments
that he made?
A No.
Q Did you have any investments of your own?
A No.
Q During 1987 were you employed?
A No.
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Q Were you employed during 1992?
A Yes.
Q Now, as it relates to paying taxes did you
ever have a discussion with your husband about who was
responsible for paying taxes?
A No. Not–-
Q Did you--how did you think the taxes were
going to get paid each month?
A He handled all the taxes at the end of the
year. I would--he--I just assumed that he was handling
what was owed or not owed or–-
Q Okay.
A --those items.
Q So, Ms. Smith, is it your testimony the only
financial aspect of the family when you were married to
Hugh V. Smith was that you would pay basically the
household expenses. Is that correct?
A Yes.
Q Okay. Why was it that your husband handled
all the financial matters?
A That’s what he wanted to do. That was-–
Q Okay.
A --just the way it had been for 20-some-odd
years is he handled everything but the basic home
expense.
Q Did he insist that they be done that way?
A Yes.
Q Did you have any say-so at all?
A No.
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Q Did you believe that your husband was paying
the family taxes?
A Yes.
Q Was there anything at all in just how your
husband behaved that would indicate that he didn’t have
the financial ability to pay the taxes?
A No.
Q Were you aware that he was ever negligent in
paying taxes at the time?
A At that time?
Q Yes.
A No.
Q There was nothing that made you think that he
wasn’t going to pay taxes for a year?
A No.
Q As far as you knew did he make all the tax
payments on time?
A As far as I knew.
On cross-examination, petitioner testified:
Q * * * You stated that you believed your
husband was paying taxes. What do you base your belief
on?
A Nothing was said that there were--there was
nothing told to me that bills were not being paid.
Q Did you ever ask him if he would be paying
the taxes?
A I don’t recall. I could have but I don’t
recall asking him that.
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Without any elaboration on the subject matter of petitioner’s
testimony, and based on her own words rather than her counsel’s,
we are not satisfied that her conclusions are based on facts.
Petitioner testified in a similar manner that all income
other than her salary reported on the 1992 return was
attributable to her husband and that income taxes were withheld
from her earnings during 1992. The stipulated facts, however,
contradict petitioner’s recollection of income taxes being
withheld. According to the stipulation, no payments on the 1992
liabilities were made before 1998. Any withholding from
petitioner’s wages would have been reflected as of April 1993.
In the absence of either the tax return or the notice of
deficiency for 1992, we cannot tell whether the deficiency
resulted from unreported income, from petitioner’s or H. Smith’s
income, or from disallowed deductions that were apparent on the
face of the return.
Petitioner claims that she is entitled to relief under
section 6015(b), (c), or (f) for 1992 and under section 6015(f)
for 1987. She concedes that, with respect to liabilities
reported on the return but not paid, relief is available only
under section 6015(f). Petitioner relies on the above testimony
to establish that the understatement of tax for 1992 was
attributable to H. Smith and that she had no reason to know of
the deficiency. Petitioner argues that it would be inequitable
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to hold her responsible for the understatement based on her
response to questions about vacations and jewelry and separate
accounts. She relies on the absence of the factors listed in the
statute as disqualifications, such as fraudulent intent or
transfers of property to avoid tax. Otherwise, she has not cited
any evidence from which we could conclude that respondent abused
his discretion in denying relief under section 6015(f). See
Cheshire v. Commissioner, 115 T.C. 183, 198 (2000).
Because of the gaps in the record, we need not discuss the
separate elements of each type of relief provided by section
6015. The record is insufficient for us to conclude that
petitioner is entitled to relief. At the time of trial, the
original returns that were sent to the Internal Revenue Service
were not available. Petitioner’s counsel stated at trial that
“we’ve got unsigned copies”, but the copies were not produced.
During the administrative consideration of petitioner’s claim for
relief under section 6015, petitioner was invited to present
additional information, but no further information was provided
by petitioner.
The absence of corroborative testimony or documentation in
this case is troublesome. Petitioner’s counsel claimed to have
served a subpoena duces tecum for trial on H. Smith and only
belatedly stated to the Court that the subpoena had been
disregarded. Counsel cited H. Smith’s failure to appear as
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indicative “of the fact that he is not cooperating.” Petitioner
complains in her posttrial brief that respondent would not agree
to a posttrial deposition of H. Smith, but petitioner has not
shown any reason why the record should be reopened after trial
for the purpose of receiving evidence that cannot be described as
“newly discovered”.
Petitioner argues that she had a reasonable belief that the
tax liability reported on the joint returns would be paid. Her
alleged belief, however, was based only on the absence of
knowledge that payment would not be made. She testified that she
did not inquire (or did not recall inquiring) whether or how that
amount would be paid. The liability shown on the 1987 return
exceeded $60,000. Petitioner is neither uneducated nor
unintelligent. We do not believe that she would have been
disinterested in how such a large amount would have been paid or
oblivious about the family resources from which the taxes could
have been paid.
The parties’ briefs dispute whether certain case precedents
are persuasive or distinguishable. The record, however, does not
support findings sufficient to make a comparison to the
circumstances in prior cases. Petitioner’s briefs assert facts
that are not in the record, see Rule 143(b), and petitioner seeks
to impose on respondent the burden of negating conclusory
testimony such as that quoted above. We cannot, on this record,
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attribute or allocate the items giving rise to the deficiency to
H. Smith. We cannot conclude that it would be inequitable to
hold petitioner to the consequences of filing a joint return. On
consideration of the entire record, we conclude that petitioner’s
bald assertions are not reliable. We conclude further that
petitioner is not entitled to relief with respect to the
underpayment and penalties for 1987 or the deficiency and
penalties for 1992.
To reflect the foregoing,
Decision will be entered
for respondent.