T.C. Summary Opinion 2006-171
UNITED STATES TAX COURT
PHILIP IRA MAGGIO, JR., Petitioner, AND
BRENDA S. STRINGER, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2041-05S. Filed October 24, 2006.
Philip Ira Maggio, Jr., pro se.
Brenda S. Stringer, pro se.
A. Gary Begun, for respondent.
COUVILLION, Special Trial Judge: This case was heard
pursuant to section 7463 in effect when the petition was filed.1
1
Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue.
All Rule references are to the Tax Court Rules of Practice and
Procedure.
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The decision to be entered is not reviewable by any other court,
and this opinion should not be cited as authority.
For 2002, the year at issue, petitioner was married to
Brenda S. Maggio. They filed a joint Federal income tax return
for the year at issue. In the examination of the return for
2002, petitioner’s spouse agreed to a deficiency of $27,847 in
tax. Petitioner, however, did not agree to the proposed
deficiency. Accordingly, a notice of deficiency was issued
solely to him for the deficiency of $27,847. No notice of
deficiency was issued to petitioner’s spouse because of her prior
concession of the deficiency.
In his petition to this Court, petitioner does not challenge
the deficiency and seeks only relief from joint liability under
section 6015. At trial, petitioner and respondent filed a
Stipulation of Settled Issues wherein petitioner conceded the
deficiency of $27,847. Respondent, in turn, conceded that
petitioner was entitled to relief from joint liability for the
year at issue under section 6015(c). Thus, there is no
justiciable issue between petitioner and respondent. The sole
issue is the intervention filed by petitioner’s former spouse,
Brenda S. Stringer, who opposes the granting of section 6015
relief to petitioner.
Some of the facts were stipulated and are so found. The
stipulation of facts and the accompanying exhibits are
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incorporated herein by reference. At the time the petition was
filed, petitioner’s legal residence was Brownstown, Michigan.
Intervenor resided in Flat Rock, Michigan, at the time of the
filing of the Notice of Intervention.
Petitioner and intervenor married on or about February 14,
1989. During part of the year at issue, petitioner and
intervenor were married and living together. They did not,
however, reside together during the entire year. They legally
separated sometime in August 2002, and their divorce was
finalized on May 22, 2003. Neither the divorce decree nor the
marital separation agreement allocates or addresses
responsibility for payment of debts.
Petitioner was employed as a maintenance supervisor by
Daimler-Chrysler during the year at issue. He received taxable
wages of $124,799 in 2002. Intervenor operated a real estate
appraisal business during this time. She received $72,855 in
nonemployee compensation for her work as an appraiser.
Despite their recent divorce, petitioner and intervenor
mutually agreed to file jointly a Form 1040, U.S. Individual
Income Tax Return, for 2002. The return was prepared, as it had
been done frequently in the past, by petitioner. He reported the
income from his employment with Daimler-Chrysler and reported the
income and expenses of intervenor’s business activity on a
Schedule C, Profit or Loss From Business. Petitioner relied on
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receipts and documents provided to him by intervenor when he
prepared the Schedule C of her business activity. The real
estate appraisal business realized $72,885 of gross income during
2002. Based on the receipts provided to him, the activity
realized a net loss of $1,582 for 2002. The record is unclear
whether intervenor reviewed the return after it was prepared, or
whether she was even given an opportunity to review the return.
Due to either an error by petitioner or a glitch in the
Turbo Tax software for the year in which the return was prepared,
the return was selected by the IRS for examination.2 Petitioner
was unable to meet with the revenue agent at the scheduled time;
however, intervenor met the agent alone. Intervenor failed to
substantiate any of the claimed expenses related to her business
because she was unable to locate the paperwork that petitioner
used as a basis for these claims. Consequently, all of the
claimed 2002 expenses of the real estate activity were
disallowed. See infra note 3. Intervenor agreed with the
agent’s determination, signed an agreement as to the audit
liability, and was assessed.
Respondent issued to petitioner a notice of deficiency on
November 5, 2004, for the additional tax liability. On February
1, 2005, petitioner filed a timely petition with this Court
2
Petitioner contends that the Turbo Tax software for taxable
year 2002 contained a glitch that prompted him to enter some
items of income and expenses in multiple places.
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seeking relief from liability under section 6015. Pursuant to
Rule 325, respondent mailed a Letter of Notice and Right to
Intervene on March 8, 2005, to intervenor. On April 29, 2005,
intervenor filed a Notice of Intervention with this Court.
Between the time of the filing of the petition with this
Court and the date of trial, respondent met with petitioner
regarding his claimed relief from joint liability under section
6015. Based on that meeting and consideration of all the facts
and circumstances, respondent agreed that petitioner was entitled
to relief under section 6015(c) and that no deficiency was due
from him.
Generally, married taxpayers may elect to file a joint
Federal income tax return. Sec. 6013(a). After making the
election, each spouse is jointly and severally liable for the
entire tax due. Sec. 6013(d)(3); Cheshire v. Commissioner, 115
T.C. 183, 188 (2000), affd. 282 F.3d 326 (5th Cir. 2002).
Relief from joint and several liability is available to
certain taxpayers under section 6015. Section 6015(c) provides
proportionate relief by limiting liability to the portion of the
deficiency that is properly allocable to each taxpayer as
provided in section 6015(d). Under section 6015(d)(3)(A),
generally, items that give rise to a deficiency on a joint
return, e.g., Schedule C expenses, shall be allocated to the
individual filing the return in the same manner as it would have
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been allocated if the individual had filed a separate return for
the taxable year.
A taxpayer is eligible to elect relief under section 6015(c)
if, at the time the election is filed, the taxpayer is no longer
married to or is legally separated from the individual with whom
the taxpayer filed the joint return to which the election
relates. Sec. 6015(c)(3)(A)(i)(I). The election under section
6015(c) may be made at any time after a deficiency for such year
is asserted and no later than 2 years after the date on which the
Commissioner has begun collection activities with respect to the
taxpayer making the election. Sec. 6015(c)(3)(B). Petitioner
and intervenor were divorced on May 22, 2003, and petitioner’s
election was made soon after his receipt of the notice of
deficiency. Therefore, petitioner was entitled to seek relief
under section 6015(c) to limit his liability for the 2002 tax
deficiency.
Relief under section 6015(c) is not available if petitioner
had actual knowledge of the item giving rise to the deficiency.
Sec. 6015(c)(3)(c); King v. Commissioner, 116 T.C. 198, 203
(2001). The “knowledge standard” for purposes of section
6015(c)(3)(C) “‘is an actual and clear awareness (as opposed to
reason to know) of the existence of an item which gives rise to
the deficiency (or portion thereof).’” King v. Commissioner,
supra at 203 (quoting Cheshire v. Commissioner, supra at 195).
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Respondent agreed that petitioner was entitled to relief
under section 6015(c). Intervenor filed her notice of
intervention for the purpose of objecting to respondent’s
granting petitioner relief under section 6015. If intervenor
offers sufficient evidence to show that petitioner had “actual
knowledge” of the correct income and expenses associated with the
real estate appraisal business, then petitioner is not entitled
to relief under section 6015(c).
Intervenor’s testimony that petitioner inflated some of her
Schedule C expenses and completely fabricated others is not
corroborated by other testimony or evidence.3 The record and
petitioner’s testimony satisfy the Court that petitioner relied
on the records presented by intervenor to substantiate the
expenses and resulting losses associated with her real estate
appraisal business. The record contains no facts that show error
in respondent’s position, and the Court concludes that petitioner
did not have actual knowledge of the factual circumstances
regarding intervenor’s Schedule C expenses. Intervenor’s
testimony does not sway the Court. The Court sustains
respondent’s determination that petitioner is entitled to relief
from joint and several liability under section 6015(c).
3
Petitioner contends that, subsequent to filing the return,
he returned all receipts and documents given to him regarding the
real estate appraisal business. Intervenor, however, asserts
that she was unable to locate these items because they were not
given back to her or never existed.
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Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for petitioner.