T.C. Summary Opinion 2008-76
UNITED STATES TAX COURT
ROSALYN MAPP FRETTY, Petitioner AND
RANDOLPH MAPP, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7335-05S. Filed June 30, 2008.
Rosalyn Mapp Fretty, pro se.
Randolph Mapp, pro se.
James H. Brunson, III, for respondent.
ARMEN, Special Trial Judge:1 This case was heard pursuant
to the provisions of section 7463 of the Internal Revenue Code in
1
This case was submitted to Special Trial Judge Carleton
D. Powell, who died on Aug. 23, 2007, after the trial. By order
dated Mar. 11, 2008, Chief Judge Colvin reassigned this case to
Special Trial Judge Robert N. Armen, Jr. without objection of the
parties.
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effect when the petition was filed.2 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent
for any other case.
The issues for decision are whether petitioner is entitled
to relief from joint and several liability pursuant to section
6015(c) or section 6015(f) for the taxable years 2000 and 2002.
Background
Some of the facts have been stipulated, and they are so
found. We incorporate by reference the parties’ stipulations of
facts and the accompanying exhibits.
At the time the petition was filed, Rosalyn Mapp Fretty
(petitioner) resided in Georgia.
Petitioner married Randolph Mapp, intervenor (Mr. Mapp), in
1980 and divorced him in 2003 because of his issues with
“drinking and women”.3 Petitioner is employed as a registered
nurse and has taxes regularly withheld from her wages. Mr. Mapp
is a self-employed truck driver and reports his income and
2
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code of 1986 as amended,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
3
We find it worth noting that Mr. Mapp almost missed
appearing at trial because he was so tardy. He is behind on both
his alimony payments to petitioner and payments to the IRS.
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expenses on Schedule C, Profit or Loss From Business. He is also
a Pentecostal minister.
During the taxable years 2000 and 2002, petitioner and Mr.
Mapp were still married, and they filed the joint Federal income
tax returns from which petitioner now seeks to be relieved of
joint and several liability.
Although petitioner knew that Mr. Mapp generally earned
approximately $100,000 per year before expenses, she never saw
paychecks, check stubs, expense logs, or any paperwork related to
Mr. Mapp’s trucking business. Petitioner signed both years’
returns believing Mr. Mapp would pay any amounts due. She did
not carefully examine the returns she signed, trusting
(erroneously, in retrospect) that her husband was handling their
financial affairs properly.
Taxable Year 2000
It is clear from the record that the deficiency for the
taxable year 2000 stemmed from Mr. Mapp’s failure to report the
income shown on a particular Form 1099-MISC, Miscellaneous Income
(Form 1099).
In 2000, Mr. Mapp did work for two trucking companies with
similar names: Cornerstone Transportation, Atlanta and
Cornerstone Transportation, South Carolina. Each corporate
entity issued him a separate Form 1099. When a representative of
H&R Block prepared the couple’s tax return, she neglected to
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include the income shown on the second Cornerstone Transportation
Form 1099, believing it to be a duplicate. Mr. Mapp, whose
exclusive dealings with the tax preparer did not include
petitioner, did not correct the error in the hope that it would
go unnoticed, and did not advise petitioner of the error.
Although petitioner signed the 2000 joint return, she did
not examine it closely, and she was not aware of the omission.
A notice of deficiency was issued when the IRS discovered
the error.
Taxable Year 2002
After withholdings of $5,200 from petitioner’s wages,
petitioner and Mr. Mapp reported a balance due of $3,490 for the
taxable year 2002. The balance due was attributable to Mr.
Mapp’s failure to make sufficient estimated tax payments in
respect of his income. They did not submit payment with the
return. No notice of deficiency was issued for 2002.
Mr. Mapp promised petitioner that he would pay any tax due
for both years because the amounts due essentially resulted from
his business activities. Further, Mr. Mapp was expressly
required to pay the outstanding tax liabilities pursuant to the
couple’s marital settlement agreement. Later, however, Mr. Mapp
decided he no longer wished to be responsible for those debts,
stopped making payments on the installment agreement previously
negotiated with the IRS, and moved out of state.
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Petitioner filed a Form 8857, Request for Innocent Spouse
Relief, in the fall of 2003. Respondent denied the request and
issued petitioner a notice of determination denying her relief
for both the 2000 and 2002 taxable years.
Petitioner filed her petition with this Court, seeking
relief under section 6015(c) or section 6015(f). Mr. Mapp
exercised his right to intervene pursuant to Rule 325(b).
Discussion
Section 6015 Relief
Generally, married taxpayers may elect to file a Federal
income tax return jointly. Sec. 6013(a). Each spouse filing a
joint return is jointly and severally liable for the accuracy of
the return and the entire tax due. Sec. 6013(d)(3). Under
certain circumstances, however, section 6015 provides relief from
joint liability. Section 6015 applies to any liability for tax
arising after July 22, 1998, and to any liability for tax arising
on or before July 22, 1998, remaining unpaid as of such date.
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3201(g), 112 Stat. 740.
In general terms, there are three avenues of relief under
section 6015: (1) Section 6015(b) provides relief with respect
to certain erroneous items on the return; (2) section 6015(c)
provides for a separation of liability for divorced or separated
taxpayers; and (3) section 6015(f) more broadly confers on the
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Secretary discretion to grant equitable relief for taxpayers who
otherwise do not qualify for relief under either subsection (b)
or (c). A prerequisite for relief under section 6015(b) or (c)
is the existence of an “understatement of tax” or a tax
deficiency. Sec. 6015(b)(1)(B), (c)(1); Block v. Commissioner,
120 T.C. 62, 65-66 (2003). Except as otherwise provided in
section 6015, the requesting spouse bears the burden of proof.
See, e.g., sec. 6015(b)(2); see also Rule 142(a).
Section 6015(b)
Under section 6015(b), the Court may grant a taxpayer full
or apportioned relief from joint and several liability for an
understatement of tax on a joint return if, among other
requirements, the taxpayer establishes that she “did not know,
and had no reason to know” that the other spouse understated that
spouse’s tax liability on the return. Sec. 6015(b)(1)(C), (2).
As petitioner requests consideration only under 6015(c) and
6015(f), we will limit our analysis to those subsections.
Section 6015(c)
Relief is not available to petitioner for the 2002 taxable
year under section 6015(c) as there was no understatement of tax
for that year. However, there was a tax deficiency for the 2000
taxable year, and we hold that relief is appropriate for that
year.
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An election under section 6015(c) treats the former spouses
as if they had filed separate returns, and each spouse’s
liability is limited to that portion of the deficiency properly
allocable to the electing spouse. See sec. 6015(c)(1), (d)(3);
see also Rowe v. Commissioner, T.C. Memo. 2001-325. Petitioner,
with the help of Mr. Mapp’s testimony, convinced us that the
entire deficiency for 2000 was allocable to Mr. Mapp, and not to
petitioner. See sec. 6015(c); sec. 1.6015-3(d)(3), Income Tax
Regs. (stating that the electing spouse has the burden to
establish the proper allocation and that none of the applicable
limitations apply).
Under section 6015(c), a requesting spouse may elect to
allocate a deficiency if the following four conditions are met:
(1) A joint return was filed; (2) at the time of the election,
the requesting spouse is no longer married to the nonrequesting
spouse;4 (3) the requesting spouse elects the application of
section 6015(c) no later than 2 years after the date on which
collection activities have begun; and (4) the deficiency remains
unpaid. Petitioner meets all of these conditions.
Relief under section 6015(c) is not permitted if the
Secretary is able to demonstrate that the requesting spouse had
4
This condition is also satisfied if the couple is legally
separated or the requesting spouse and the nonrequesting spouse
have not been members of the same household at any time during
the 12-month period ending on the date the election was filed.
See sec. 6015(c)(3)(A)(i).
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actual knowledge of “any item giving rise to a deficiency” which
is not allocable to the requesting spouse. Sec. 6015(c)(3)(C).
In other words, it is respondent’s burden in this case to
establish that petitioner had actual knowledge of the error on
the 2000 tax return. Both petitioner and Mr. Mapp credibly
testified that petitioner had no knowledge of the error.
Respondent emphasized at trial that petitioner should have
known that something was amiss when an amount less than Mr.
Mapp’s normal income was reported and that because she should
have known, she actually did know. Whether she should have known
about the omitted income is a question irrelevant to our
analysis, and we remain unconvinced that petitioner actually knew
of the error.
We hold that petitioner is entitled to relief for the 2000
taxable year under section 6015(c).
Section 6015(f)
A taxpayer is entitled to relief from joint and several
liability under section 6015(f) only if “relief is not available
to such individual under subsection (b) or (c)”. Sec. 6015(f).
Because relief under section 6015(b) or (c) is not authorized for
an underpayment of tax, petitioner is not eligible for relief
under either 6015(b) or 6015(c) for 2002. The Court reviews the
Commissioner’s denial of section 6015(f) relief under an abuse of
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discretion standard. Butler v. Commissioner, 114 T.C. 276,
287-292 (2000).
Section 6015(f)(1) provides that a taxpayer may be relieved
from joint and several liability if it is determined, after
considering all the facts and circumstances, that it is
inequitable to hold the taxpayer liable for the unpaid tax or
deficiency.
Rev. Proc. 2003-61,5 sec. 4.01, 2003-2 C.B. 296, 297, sets
forth seven threshold conditions that the requesting spouse must
satisfy before the Commissioner will consider a request for
relief under section 6015(f). Petitioner has satisfied those
threshold conditions, and respondent does not seriously contend
otherwise.
Where the requesting spouse satisfies the threshold
conditions of Rev. Proc. 2003-61, sec. 4.01, Rev. Proc. 2003-61,
sec. 4.02, 2003-2 C.B. at 298, sets forth the circumstances in
which the Secretary will ordinarily grant relief under section
6015(f) with respect to the underpayment of a properly reported
liability. See Rev. Proc. 2003-61, sec. 4.02(1), 2003-2 C.B. at
298. Because the record does not clearly demonstrate that
petitioner would suffer financial hardship if equitable relief
were not granted, see Rev. Proc. 2003-61, sec. 4.02(1)(c), we
5
Rev. Proc. 2003-61, 2003-2 C.B. 296, supersedes Rev.
Proc. 2000-15, 2000-1 C.B. 447, and is effective as to requests
for relief filed on or after Nov. 1, 2003.
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continue our analysis under the framework set out in Rev. Proc.
2003-61, sec. 4.03, 2003-2 C.B. at 298-299.
Rev. Proc. 2003-61, sec. 4.03, lists several factors to be
evaluated for requests for relief under section 6015 for spouses
who filed a joint return (and have met the threshold conditions
for relief under section 6015(f)) but do not qualify for relief
under Rev. Proc. 2003-61, sec. 4.02. The nonexclusive list of
factors to be considered includes: (1) Marital status; (2)
economic hardship; (3) no knowledge or reason to know of the item
giving rise to the deficiency; (4) whether the nonrequesting
spouse had a legal obligation to pay the liability; (5) whether
the requesting spouse benefited significantly from the item
giving rise to the deficiency; and (6) whether the requesting
spouse has made a good faith attempt to comply with the tax laws
in subsequent years. Id. sec. 4.03(2)(a). No single factor will
be determinative of whether equitable relief will be granted in
any particular case. Id. sec. 4.03(2). Further, all relevant
factors should be considered, even if not listed in the Revenue
Procedure. See id.
We do not analyze in depth all of the factors enumerated but
rather touch on some of the more important ones that inform our
decision.
Petitioner is divorced from Mr. Mapp, and she has made a
good faith attempt to comply with the tax laws. See id. sec.
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4.03(2)(a)(i), (vi). Mr. Mapp had a legal obligation to pay the
outstanding tax liability pursuant to their marital settlement
agreement. See id. sec. 4.03(2)(a)(iv). Further, we are
convinced that petitioner did not know, and had no reason to
know, at the time she signed the return for 2002 that Mr. Mapp
would not pay the tax liability as he had promised. See id. sec.
4.03(2)(a)(iii).
After reviewing all of the facts and circumstances in this
case, we decide that respondent abused his discretion in denying
petitioner’s request for equitable relief for 2002.
Conclusion
On the basis of petitioner’s credible testimony, supported
by Mr. Mapp, as well as the entire record, we hold that
petitioner is entitled to relief from joint and several liability
for 2000 under section 6015(c) and for 2002 under section
6015(f). Accordingly,
Decision will be entered
for petitioner.