T.C. Memo. 2008-156
UNITED STATES TAX COURT
ROXANNE M. TOPPI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent*
Docket No. 6808-05. Filed June 19, 2008.
Roxanne M. Toppi, pro se.
Jason M. Kuratnick, for respondent.
SUPPLEMENTAL MEMORANDUM OPINION
WELLS, Judge: Petitioner seeks review of respondent’s
determination denying her request for relief pursuant to section
____________________
*This Memorandum Opinion supplements Toppi v. Commissioner,
T.C. Memo. 2006-182.
- 2 -
6015(f)1 regarding taxable years 1995 through 2001. Petitioner
commenced the case after receiving a final notice denying her
request for relief under section 6015(f). The case was tried on
April 3, 2006, and the parties filed their briefs on June 19 and
July 26, 2006. On July 25, 2006, this Court issued its Opinion
in Billings v. Commissioner, 127 T.C. 7 (2006), holding that the
Court does not have jurisdiction to review the Commissioner’s
denial of relief under section 6015(f) in a case where no
deficiency has been asserted. Our holding in Billings was in
accordance with the opinions of the Courts of Appeals for the
Eighth and Ninth Circuits in Bartman v. Commissioner, 446 F.3d
785 (8th Cir. 2006), affg. in part and vacating in part T.C.
Memo. 2004-93, and Commissioner v. Ewing, 439 F.3d 1009 (9th Cir.
2006), revg. 118 T.C. 494 (2002), vacating 122 T.C. 32 (2004),
respectively. On the basis of Billings, we filed on August 29,
2006, our initial opinion, Toppi v. Commissioner, T.C. Memo.
2006-182 (Toppi I). In Toppi I we held that we lacked
jurisdiction to consider petitioner’s case. However, we did not
enter the decision.
The Tax Relief and Health Care Act of 2006, Pub. L. 109-432,
div. C, sec. 408, 120 Stat. 3061, amended section 6015(e)(1) to
provide that this Court may review the Commissioner’s denial of
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended.
- 3 -
relief under section 6015(f) in cases where no deficiency has
been asserted. The legislative amendment applies “with respect
to liability for taxes arising or remaining unpaid on or after
the date of the enactment of this Act.” Id. sec. 408(c), 120
Stat. 3062. The date of enactment was December 20, 2006. See
120 Stat. 2922. Petitioner’s liabilities for each of 1997, 1998,
and 1999 remained unpaid as of December 20, 2006. Accordingly,
we now have jurisdiction to consider those taxable years and will
decide the case on the basis of the record laid before us at the
April 3, 2006, trial.
Petitioner’s liabilities for each of 1995, 1996, 2000, and
2001 did not remain unpaid as of December 20, 2006. We do not
have jurisdiction to consider those taxable years as they are
subject to the earlier version of section 6015 and our holding in
Billings. See Bock v. Commissioner, T.C. Memo. 2007-41.
Accordingly, the petition, insofar as it seeks relief from
liabilities for taxable years 1995, 1996, 2000, and 2001, will be
dismissed for lack of jurisdiction.
Background
We adopt the findings of fact in Toppi I. For convenience
and clarity, we repeat here the facts necessary to understand the
discussion that follows and find additional facts as necessary to
decide the case. At the time of filing the petition, petitioner
resided in Franklinville, New Jersey.
- 4 -
Petitioner and David J. Toppi (Mr. Toppi) were married on
May 24, 1986, and divorced on June 11, 2002. Except for 5 years
following the birth of their son, petitioner worked as a
receptionist for several different employers while Mr. Toppi
tried to establish a practice as a chiropractor. Petitioner was
not involved with Mr. Toppi’s chiropractic practice. During
1994 or 1995 when petitioner’s son was 5 years old, Mr. Toppi
approached petitioner and asked her to return to work because
his “business was in trouble.”
Petitioner and Mr. Toppi received mail at their home
address in Franklinville, New Jersey. Petitioner regularly, but
not always, opened and read the mail. At approximately the same
time that Mr. Toppi asked petitioner to return to work,
petitioner discovered that Mr. Toppi had failed to pay numerous
household bills. Petitioner and Mr. Toppi opened a joint
checking account from which petitioner began to pay household
bills. Petitioner continued to pay household bills from the
joint checking account until she and Mr. Toppi divorced on
June 11, 2002.
On several occasions Mr. Toppi told petitioner that they
should request an extension to file their joint tax return
because he did not have enough money to pay the taxes.
Petitioner and Mr. Toppi requested an extension from April 15
- 5 -
until August 15, 1995, to file their 1994 tax return. On
August 21, 1995, respondent received petitioner’s and Mr.
Toppi’s joint 1994 income tax return reporting a tax liability
of $8,515 and a withholding credit of $598. To satisfy their
1994 tax liability, petitioner and Mr. Toppi made monthly
payments from June 5, 1996, through March 6, 1998. The final
payment on March 6, 1998, satisfied petitioner’s and Mr. Toppi’s
tax liability for 1994 including additions to tax and statutory
interest.
On April 15, 1996, respondent received petitioner’s and
Mr. Toppi’s joint 1995 tax return reporting a tax liability of
$17,117 and a withholding credit of $1,332. To satisfy their
1995 tax liability, petitioner and Mr. Toppi made monthly
payments from March 6, 1998, through July 14, 2003. The final
payment on July 14, 2003, satisfied petitioner’s and Mr. Toppi’s
tax liability for 1995 including additions to tax and statutory
interest.
Petitioner and Mr. Toppi requested an extension from April
15 until August 15, 1997, to file their joint 1996 tax return
and subsequently requested another extension to file until
October 15, 1997. On October 20, 1997, respondent received
petitioner’s and Mr. Toppi’s joint 1996 tax return reporting a
tax liability of $15,813 and a withholding credit of $1,253.
- 6 -
The withholding credit was attributable to petitioner. On
June 28, 1999, respondent sent petitioner and Mr. Toppi a notice
of intent to levy because they had defaulted on their
installment agreement for taxable year 1996. By February 14,
2006, petitioner and Mr. Toppi satisfied their 1996 tax
liability including additions to tax and statutory interest.
Petitioner and Mr. Toppi requested an extension from
April 15 until August 15, 1998, to file their joint 1997 tax
return. Despite receiving an extension, petitioner and
Mr. Toppi filed their return untimely on July 30, 1999,
reporting a tax liability of $10,200 and a withholding credit of
$1,045. The withholding credit was attributable to petitioner.
Petitioner and Mr. Toppi have made no other payments on their
1997 tax liability except Mr. Toppi’s single payment of $600.
On August 2, 1999, petitioner and Mr. Toppi untimely filed
their joint 1998 tax return reporting a tax liability of
$8,513.29 and a withholding credit of $2,050.03, of which $389
was attributable to petitioner. Petitioner and Mr. Toppi have
not made any further payments on their 1998 tax liability.
On October 22, 2000, petitioner and Mr. Toppi untimely
filed their joint 1999 tax return reporting a tax liability of
$7,437.52 and a withholding credit of $4,904.49, of which $1,884
was attributable to petitioner. Petitioner and Mr. Toppi have
not made any further payments on their 1999 tax liability.
- 7 -
On August 3, 2001, petitioner and Mr. Toppi signed a Form
900, Tax Collection Waiver, extending the period of limitations
for collection of their 1996, 1997, 1998, and 1999 tax
liabilities. On June 25, 2004, respondent received petitioner’s
Form 8857, Request for Innocent Spouse Relief, and Form 12510,
Questionnaire for Requesting Spouse, for tax years 1995 through
2001.2 On December 8, 2004, respondent’s Appeals Office sent
petitioner a letter requesting any additional information that
petitioner would have respondent consider in determining whether
petitioner was entitled to section 6015(f) relief for the years
in issue. On January 27, 2005, respondent’s Appeals Office sent
petitioner a notice of determination denying petitioner’s
request for relief pursuant to section 6015(f) for taxable years
1995 through 2001. Petitioner timely petitioned this Court.
Discussion
The Commissioner has discretion, pursuant to section
6015(f), to grant relief from joint and several liability where
relief is not available under section 6015(b) or (c) if the
facts and circumstances indicate that it would be inequitable to
hold the requesting spouse liable for the deficiency.
2
The record does not demonstrate that petitioner and Mr.
Toppi have any tax liabilities for 2000 and 2001. Additionally,
petitioner and Mr. Toppi satisfied their 1995 tax liability on
July 14, 2003, and their 1996 tax liability by Feb. 14, 2006.
- 8 -
Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. 296, 298,3
provides a set of circumstances under which relief normally will
be granted. They pertain to: (1) Marital status; (2) knowledge
or reason to know; and (3) economic hardship. Respondent
concedes the first requirement; petitioner was not married to
Mr. Toppi when she requested relief. However, respondent argues
that petitioner fails to meet the other two requirements of Rev.
Proc. 2003-61, sec. 4.02.
In an underpayment case the knowledge element depends upon
whether, at the time the return was signed, the requesting
spouse knew or had reason to know that the nonrequesting spouse
would not pay the income tax liability. Merendino v.
Commissioner, T.C. Memo. 2006-2; Rev. Proc. 2003-61, sec.
4.02(1)(b). During the administrative proceedings petitioner
claimed that she did not know the Federal income tax returns for
the taxable years 1996 through 1999 reported balances due and,
therefore, at the time she signed the returns she did not know
or have reason to know that the tax liabilities would not be
paid. Petitioner signed the returns for taxable years 1996
3
Rev. Proc. 2003-61, 2003-2 C.B. 296, which superseded Rev.
Proc. 2000-15, 2000-1 C.B. 447, is effective for requests for
relief filed on or after Nov. 1, 2003. Rev. Proc. 2003-61, sec.
7, 2003-2 C.B. at 299. Petitioner’s request for relief was filed
on June 25, 2004. Therefore, we consider the denial of relief on
the basis of the factors of Rev. Proc. 2003-61, supra.
- 9 -
through 1999. Accordingly, petitioner is charged with
constructive knowledge of the amounts shown on the returns as
tax due. See George v. Commissioner, T.C. Memo. 2004-261;
Castle v. Commissioner, T.C. Memo. 2002-142.
Petitioner’s and Mr. Toppi’s 1994 Federal income tax return
reported an unpaid tax liability. At the time of filing,
petitioner and Mr. Toppi did not remit full payment. Likewise,
when petitioner and Mr. Toppi filed their 1995 Federal income
tax return, they did not remit full payment. On June 5, 1996,
petitioner and Mr. Toppi entered into an installment agreement
to satisfy the outstanding tax liability for 1994.
Petitioner and Mr. Toppi requested two extensions to file
their 1996 Federal income tax return. Additionally, petitioner
and Mr. Toppi requested an extension to file their 1997 tax
return. Mr. Toppi told petitioner that they were requesting
extensions for these years, as well as others, because they did
not have sufficient funds to pay the taxes due.
Petitioner and Mr. Toppi received statements from
respondent and notices of intent to levy regarding the
outstanding liabilities. On June 28, 1999, respondent sent Mr.
Toppi and petitioner a notice of intent to levy because they
defaulted on an installment agreement concerning their
outstanding tax liability for taxable year 1996.
- 10 -
When Mr. Toppi asked petitioner to return to work, he told
petitioner that his “business was in trouble.” At approximately
the same time, petitioner discovered that Mr. Toppi had failed
to pay numerous household bills. Additionally, Mr. Toppi told
petitioner on several occasions that they should request an
extension to file their joint tax return because he did not have
enough money to pay the taxes. Accordingly, we hold that
petitioner knew or should have known that the tax returns for
1997 through 1999 reported unpaid liabilities and that Mr. Toppi
would not pay those liabilities.
In determining whether a requesting spouse will suffer
economic hardship if not granted equitable relief, Rev. Proc.
2003-61, sec 4.02(1)(c), refers to section 301.6343-1(b)(4),
Proced. & Admin. Regs. Generally, a taxpayer would experience
economic hardship if he or she were unable to pay reasonable
basic living expenses. Sec. 301.6343-1(b)(4)(i), Proced. &
Admin. Regs. It is the taxpayer’s burden to show both that the
taxpayer’s expenses qualify as basic living expenses and that
those expenses are reasonable. Monsour v. Commissioner, T.C.
Memo. 2004-190.
Petitioner failed to present any information regarding her
economic situation. Petitioner did not disclose her average
monthly income and expenses on the Form 12510 respondent
- 11 -
received on June 25, 2004. Respondent provided opportunities
for petitioner to supplement the record. Petitioner did not
avail herself of those opportunities, nor did she do so at
trial. Accordingly, we hold that petitioner has failed to
demonstrate that she would suffer economic hardship if not
granted relief from joint and several liability.
Rev. Proc. 2003-61, sec. 4.03(2), 2003-2 C.B. 298, provides
a nonexclusive list of factors that the Internal Revenue Service
will consider when determining whether to grant relief. The
factors are: (1) Marital status; (2) economic hardship; (3)
knowledge or reason to know that the nonrequesting spouse would
not pay the liability; (4) nonrequesting spouse’s legal
obligation; (5) significant benefit; and (6) compliance with
income tax laws. Id.
The first factor is whether the couple is still married.
See Rev. Proc. 2003-61, sec. 4.03(2)(a)(i). As stated above
petitioner and Mr. Toppi were divorced at the time of
respondent’s determination, which weighs in favor of granting
relief.
The second factor is whether the requesting spouse will
suffer economic hardship if relief from joint and several
liability is not granted. See Rev. Proc. 2003-61, sec.
4.03(2)(a)(ii). The test under this section is the same as the
- 12 -
test under Rev. Proc. 2003-61, sec. 4.02(1)(c). As discussed
above petitioner has failed to demonstrate that she would suffer
economic hardship if required to pay the outstanding liability,
which weighs against relief.
The third factor is whether petitioner had knowledge or
reason to know, at the time she signed the returns, that the
income tax liabilities on the returns would not be paid. See
Rev. Proc. 2003-61, sec. 4.03(2)(a)(iii). The test under this
section is the same as under Rev. Proc. 2003-61, sec.
4.02(1)(b). As discussed above petitioner knew or had reason to
know that the tax liabilities would not be paid, which weighs
against relief.
The fourth factor is the legal obligation to pay. See Rev.
Proc. 2003-61, sec. 4.03(2)(a)(iv). Neither petitioner nor Mr.
Toppi has an obligation to pay the outstanding liability
pursuant to a divorce decree. The factor under this section is
neutral as to whether to grant or deny relief.
The fifth factor is whether the requesting spouse has
significantly benefited from the unpaid liability. See Rev.
Proc. 2003-61, sec. 4.03(2)(a)(v). Petitioner did not benefit
significantly from the couple’s failure to pay the income tax
liabilities for the years in issue, which weighs in favor of
relief.
- 13 -
The sixth factor is whether the requesting spouse has made
a good faith effort to comply with Federal income tax laws in
the tax years after the years in issue. See Rev. Proc. 2003-61,
sec. 4.03(2)(a)(vi). Respondent conceded that petitioner is in
compliance with Federal income tax laws for tax years after
1999, which weighs in favor of granting relief.
Additionally, Rev. Proc. 2003-61, sec. 4.03(2)(b), 2003-2
C.B. at 299, sets forth two factors which favor equitable relief
if present but have no effect if not present. They are: (1)
Whether the nonrequesting spouse abused the requesting spouse;
and (2) whether the requesting spouse was in poor mental or
physical health when signing the return or requesting relief.
As to the first factor of Rev. Proc. 2003-61, sec.
4.03(2)(b), Mr. Toppi did not abuse petitioner. As to the
second factor, petitioner neither argued nor showed that she was
in poor health when she signed the returns or requested relief.
Neither factor weighs in favor of granting or denying relief;
i.e., the factor is neutral.
In sum, the record does not demonstrate that it would be
inequitable to deny petitioner relief. Petitioner had knowledge
or reason to know that Mr. Toppi would not pay the liabilities
reported on the returns.
- 14 -
Petitioner has also failed to prove that she will suffer
economic hardship if relief is not granted. See sec. 301.6343-
1(b)(4), Proced. & Admin. Regs. (defining economic hardship as
causing the taxpayer to be unable to pay his or her basic living
expenses). Accordingly, we conclude that respondent properly
denied petitioner relief under section 6015(f).
We have considered all of petitioner’s contentions. To the
extent not addressed herein, those contentions are without merit
or unnecessary to reach.
To reflect the foregoing,
An appropriate order and
decision will be entered.