T.C. Summary Opinion 2004-9
UNITED STATES TAX COURT
MARY K. MALONE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18842-02S. Filed February 3, 2004.
Mary K. Malone, pro se.
Steven W. LaBounty, for respondent.
COHEN, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
at the time that the petition was filed. The decision to be
entered is not reviewable by any other Court, and this opinion
should not be cited as authority. Unless otherwise indicated,
all section references are to the Internal Revenue Code in effect
for the year in issue.
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This case was commenced in response to a final notice
denying petitioner’s request for relief under section 6015(f)
with respect to unpaid taxes on a joint return filed by
petitioner and her former spouse for 1998.
Background
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner and Mark D. Malone (Malone) were married on
August 12, 1978. In February 1999, petitioner filed a petition
seeking dissolution of her marriage to Malone. A Stipulation
executed by petitioner and Malone in July 1999 included the
following paragraph:
(e) Tax Returns: Mark’s attorney shall convey to
Mary’s attorney the 1998 joint income tax returns
prepared by Vercamp & Malone, CPAs. Mary and her
counsel shall promptly review said returns upon receipt
of same and Mary shall execute said joint returns.
A Judgment & Decree of Dissolution of Marriage (the decree) was
filed December 26, 2000, in the Circuit Court of Phelps County,
Missouri. The decree included the following provision:
1998 TAX LIABILITY
The Court finds that Petitioner had $2,418.00
intercepted from her 1999 tax refund to apply to joint
taxes for 1998, of which Petitioner’s income was
approximately 5 percent of adjusted gross income.
* * * [Malone] is ordered to pay back to Petitioner
95 percent of said amount, in the amount of $2,297.10
by December 1, 2000. If the parties receive a refund
for tax year 1998, state and/or federal, then any
refund shall be the sole and separate property of * * *
[Malone].
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On January 5, 2001, Malone reimbursed petitioner the sum of
$2,297.10.
On or about August 22, 1999, petitioner and Malone filed a
Form 1040, U.S. Individual Income Tax Return, for 1998. The
Form 1040 reported various items of income, including $7,133.49
of wages paid to petitioner from Suncliff Greenhouse & Nursery.
The return reported total tax of $35,888, payments of $30,393,
and a balance of $6,696. The balance shown was not paid when the
return was filed. After the return was processed, a penalty for
failure to make estimated tax payments and a penalty for failure
to pay the tax reported on the return were assessed.
Subsequently, in addition to the setoff described in the decree,
petitioner’s overpayment of her 2000 income tax in the amount of
$1,991 and a rebate of $300 due to petitioner in 2001 were setoff
against the unpaid 1998 liability. The remaining unpaid balance
of the 1998 liability, including interest and penalties, was paid
by Malone after commencement of this case.
On or about July 21, 2001, petitioner executed a Form 8857,
Request for Innocent Spouse Relief, with respect to the liability
for 1998. In an attachment to the form, petitioner stated that
she did not sign the 1998 income tax return. In a Form 886-A,
Innocent Spouse Questionnaire, petitioner again asserted that she
did not sign the 1998 return.
Petitioner’s claim for relief was considered by a
representative of the Internal Revenue Service. The
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representative considered factors including marital status,
economic hardship, and the amount of the liability attributable
to petitioner and to Malone and weighed factors in favor of
relief and factors against relief. The representative concluded
that, despite her denial, petitioner did sign the return. Relief
was denied on the ground that petitioner did not establish that
she believed the taxes would be paid at the time that the return
was filed.
In the petition in this case, petitioner alleged: “I did
not sign the 1998 income tax return and did not see the return
until divorce proceedings commenced. At that time, I was
reluctantly provided a copy of the return. I should not be held
responsible.”
Discussion
At the time of trial, petitioner testified that she did not
recall signing the 1998 return. Malone and another witness
testified that petitioner had signed the return, and comparisons
of the signatures lead us to conclude that she in fact signed the
return. If the return had not been a joint return, petitioner
would not be entitled to relief under section 6015(f). Raymond
v. Commissioner, 119 T.C. 191, 195-197 (2002). Thus, by the time
of trial, petitioner was faced with a dilemma as to whether she
did or did not contend that the return for 1998 was a joint
return.
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With respect to the relief that she requests, petitioner
bears the burden of proof. Alt v. Commissioner, 119 T.C. 306,
311 (2002); Jonson v. Commissioner, 118 T.C. 106, 113 (2002),
affd. 353 F.3d 1181 (10th Cir. 2003). We review the
determination to deny relief under section 6015(f) under an abuse
of discretion standard. See Ewing v. Commissioner, 122 T.C. ___
(2004); Washington v. Commissioner, 120 T.C. 137, 146 (2003).
Petitioner must show that respondent’s action in denying relief
was arbitrary, capricious, or without sound basis in fact.
Jonson v. Commissioner, supra at 125.
As directed by section 6015(f), the Commissioner has
prescribed procedures to determine whether a taxpayer qualifies
for relief from joint and several liability under section
6015(f). These procedures are set forth in Rev. Proc. 2000-15,
2000-1 C.B. 447. The Court has upheld the use of these
procedures in reviewing a negative determination. See Washington
v. Commissioner, supra at 147; Jonson v. Commissioner, supra at
125.
Because of the dearth of evidence in the record on the
conditions and circumstances specified in Rev. Proc. 2000-15,
sec. 4.03, 2000-1 C.B. at 448, we need not address all the
factors that are listed there. It appears that the unpaid
liability was not attributable or attributed by the examiner to
petitioner. Although the decree specified Malone’s obligation to
reimburse petitioner with respect to the setoff of her 1999
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overpayment against the 1998 joint liability, it was silent as to
subsequent payments. The key consideration here, and the basis
for the negative determination, is that petitioner has not shown
that she did not know or have reason to know that the reported
liability would be unpaid at the time that the return was signed.
See Feldman v. Commissioner, T.C. Memo. 2003-201.
Unfortunately for petitioner, her denials that she had
signed the 1998 return, her lack of recollection of signing the
return, and the express terms of the July 1999 Stipulation and
the December 2000 decree undermine her claim. The decree
specifically refers to the application of petitioner’s 1999 tax
refund to the 1998 liability, which indicates that petitioner had
actual or constructive knowledge that an unpaid liability
existed. During her testimony, petitioner’s only explanation of
these circumstances was “I was not informed or advised.”
Upon consideration of the entire record, we cannot conclude
that there was an abuse of discretion in denying petitioner
relief under section 6015(f).
Decision will be entered
for respondent.