T.C. Memo. 2009-231
UNITED STATES TAX COURT
RICHARD A. MOLSBEE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16565-07. Filed October 8, 2009.
Richard A. Molsbee, pro se.
Miriam C. Dillard, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
WELLS, Judge: Petitioner seeks review of respondent’s
determination that petitioner is not entitled to relief pursuant
to section 6015(b) and (f)1 with respect to petitioner’s joint
income tax liabilities for taxable years 1993, 1994, and 1995.
1
All section references are to the Internal Revenue Code in
effect at all relevant times.
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We must decide: (1) Whether petitioner is precluded from raising
the issue of relief from joint and several liability for the
taxable years in issue by reason of the doctrine of res judicata
as set forth in section 6015(g)(2) and section 1.6015-1(e),
Income Tax Regs.; and (2) alternatively, if the Court finds that
petitioner is not so barred, whether petitioner is entitled to
relief under section 6015(b) or (f).
FINDINGS OF FACT
Some of the facts and certain exhibits have been stipulated.
The stipulation of facts received into evidence is incorporated
herein by reference, and those facts are so found.
At the time the petition was filed, petitioner resided in
Florida.
During the years in issue and at all relevant times,
petitioner and Brenda Molsbee (Mrs. Molsbee) were married and
living together, except during the time that Mrs. Molsbee was
incarcerated. Mrs. Molsbee was released from incarceration in
early 2005.
Petitioner submitted for the years in issue a Form 8857,
Request for Innocent Spouse Relief, that respondent received on
January 13, 2004 (2004 request for relief). On April 13, 2004,
respondent sent to petitioner and Mrs. Molsbee a notice of
deficiency for the years in issue (notice of deficiency). On
July 13, 2004, petitioner and Mrs. Molsbee filed a petition in
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the Tax Court disputing the notice of deficiency, and the case
was docketed at docket No. 12287-04 (the previous case).
In the previous case, petitioner and Mrs. Molsbee sought a
redetermination of the deficiencies respondent determined for the
years in issue. Monica Miller (Ms. Miller) represented
respondent in the previous case. Neither petitioner nor Mrs.
Molsbee was represented by counsel in the previous case.
On November 23, 2005, respondent filed a motion for
partial summary judgment in the previous case (partial summary
judgment motion). Petitioner and Mrs. Molsbee raised the issue
of section 6015 relief from joint and several liability in their
response to the partial summary judgment motion, stating that
“Richard A. Molsbee has no knowledge of money not reported and
asks the Court to declare him an innocent spouse status.”
In the previous case, Ms. Miller engaged in settlement
discussions with petitioner and with Mrs. Molsbee. As part of
those discussions, Ms. Miller had a telephone conversation with
petitioner regarding whether the facts supported petitioner’s
being granted relief from joint and several liability for the
years in issue. Ms. Miller explained to petitioner why
respondent felt that petitioner would not be entitled to relief
from joint and several liability, stating that petitioner
received checks from Mrs. Molsbee’s companies and had substantial
improvements made to his residence during the years in issue.
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On December 12, 2005, Ms. Miller sent a letter to
petitioner and Mrs. Molsbee, enclosing a proposed decision, a
proposed stipulation of settled issues, a proposed stipulation of
facts and exhibits, and three boxes of exhibits. Ms. Miller
stated in the December 12, 2005, letter: “Please note that the
decision concedes that Mr. Molsbee is not liable for the fraud
additions.” On December 20, 2005, Ms. Miller sent a letter to
petitioner and Mrs. Molsbee, enclosing a proposed decision. On
December 20, 2005, the Court denied respondent’s motion for
partial summary judgment.
Petitioner, Mrs. Molsbee, and Ms. Miller signed a stipulated
decision in the previous case (decision). The decision states,
in bold and underlined text, that the fraud penalties apply to
Mrs. Molsbee only and that petitioner and Mrs. Molsbee are liable
for the deficiencies. The Court entered the decision on January
5, 2006, and the decision was not vacated or appealed.
At the time she signed the decision, Mrs. Molsbee was aware
of the possibility of section 6015 relief from joint and several
liability because of her belief that her business partner’s
husband had been granted such relief.
On May 15, 2006, petitioner filed another Form 8857 for the
years in issue (2006 request for relief). Petitioner checked the
boxes indicating that he was not divorced, separated, or living
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apart from Mrs. Molsbee, and he did not check the box to request
“Separation of Liability”.
Respondent determined that petitioner is not entitled
to relief from joint and several liability under section 6015
for the years in issue and, on April 15, 2007, sent petitioner
the notice of determination.
During the years in issue, petitioner and Mrs. Molsbee
had $225,679 of construction work performed on their personal
residence (residence). Petitioner knew that the funds for the
construction work on the residence came from Mrs. Molsbee’s
company. The construction work resulted in the size of their
residence almost tripling, from 1,800 square feet to 5,000 square
feet. The residence is situated on 13 acres of land and worth
approximately $625,000.
During the years in issue, petitioner performed work for
Mrs. Molsbee’s company, for which he was compensated. During the
years in issue, Mrs. Molsbee paid petitioner’s living expenses
and petitioner acquired a Chevrolet truck. During 1994,
petitioner acquired a new bass boat. Petitioner has a high
school diploma and has a captain’s license and a pilot’s license.
Mrs. Molsbee has an associate’s degree and is licensed as a real
estate broker and real estate appraiser.
During the years in issue, petitioner and Mrs. Molsbee
maintained a joint checking account, from which petitioner’s and
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Mrs. Molsbee’s living expenses were paid. Petitioner and Mrs.
Molsbee both had access to the joint checking account, and Mrs.
Molsbee handled the household finances.
Petitioner was raised in a household where his mother
handled the finances, so he thought that Mrs. Molsbee should do
so also. Petitioner continues to choose that Mrs. Molsbee handle
the household finances, and she continues to do so. Petitioner
has not been abused by Mrs. Molsbee.
Petitioner did not allege or submit any evidence as to
personal physical or mental health problems. Petitioner
performed physical labor during the years in issue. Petitioner
did not submit evidence of current household income and expenses.
OPINION
Section 6015(g)(2)
We must first decide whether petitioner is precluded from
raising the issue of relief from joint and several liability for
the years in issue by the doctrine of res judicata as set forth
in section 6015(g)(2) and section 1.6015-1(e), Income Tax Regs.
Under the judicial doctrine of res judicata, when a
court of competent jurisdiction enters a final judgment on the
merits of a cause of action, the parties to the action are bound
by every matter that was or could have been offered and received
to sustain or defeat the claim. Commissioner v. Sunnen, 333 U.S.
591, 597 (1948); see Gustafson v. Commissioner, 97 T.C. 85, 91
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(1991). The doctrine of res judicata “serves to promote judicial
economy and the repose of disputes” by precluding repetitious
lawsuits. Gustafson v. Commissioner, supra at 91. Because
Federal income taxes are determined on an annual basis, each year
is a separate cause of action, and res judicata is applied to bar
subsequent proceedings involving the same tax year. Commissioner
v. Sunnen, supra at 597-598; Calcutt v. Commissioner, 91 T.C. 14,
21 (1988).
Section 6015(g)(2) modifies the common law doctrine of res
judicata with regard to claims for relief from joint and several
liability. Section 6015(g)(2) provides:
SEC. 6015(g). Credits and Refunds.--
* * * * * * *
(2) Res judicata.--In the case of any election
under subsection (b) or (c) or of any request for
equitable relief under subsection (f), if a decision of
a court in any prior proceeding for the same taxable
year has become final, such decision shall be
conclusive except with respect to the qualification of
the individual for relief which was not an issue in
such proceeding. The exception contained in the
preceding sentence shall not apply if the court
determines that the individual participated
meaningfully in such prior proceeding.
Under common law principles of res judicata, a taxpayer who
was a party to a prior proceeding for the same taxable year would
be barred from seeking relief from joint and several liability
whether or not the claim had been raised as an issue in the prior
proceeding. Section 6015(g)(2) alters that result by providing:
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an individual cannot make an election under section
6015(b) or (c) for any taxable year that is the
subject of a final court decision, unless the
individual’s qualification for relief under section
6015(b) or (c) was not an issue in the prior court
proceeding and the individual did not participate
meaningfully in the prior proceeding. * * * [Vetrano
v. Commissioner, 116 T.C. 272, 278 (2001).]
Section 1.6015-1(e), Income Tax Regs., provides the following:
(e) Res judicata and collateral estoppel.--A
requesting spouse is barred from relief from joint and
several liability under section 6015 by res judicata
for any tax year for which a court of competent
jurisdiction has rendered a final decision on the
requesting spouse’s tax liability if relief under
section 6015 was at issue in the prior proceeding, or
if the requesting spouse meaningfully participated in
that proceeding and could have raised relief under
section 6015. A requesting spouse has not meaningfully
participated in a prior proceeding if, due to the
effective date of section 6015, relief under section
6015 was not available in that proceeding. Also, any
final decisions rendered by a court of competent
jurisdiction regarding issues relevant to section 6015
are conclusive and the requesting spouse may be
collaterally estopped from relitigating those issues.
There is no dispute that the traditional prerequisites for
the application of the doctrine of res judicata are present.
Petitioner was a party to the previous case in the Tax Court,
which was a deficiency action that petitioner and Mrs. Molsbee
brought to dispute the deficiencies respondent determined for
their taxable years 1993, 1994, and 1995, the same taxable years
in issue in the instant case. The Tax Court proceeding was
initiated on July 13, 2004, well after the July 22, 1998,
effective date of section 6015. Petitioner raised his claim for
relief from joint and several liability under section 6015 as a
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defense in the previous case. The decision in the previous case
is final. Accordingly, the only question remaining is whether
the exception to the principle of res judicata in section
6015(g)(2) applies.
Petitioner was aware of the possibility of relief from
joint and several liability at least 6 months before the petition
was filed in the previous case, as evidenced by the fact that
during January 2004, he initially filed the 2004 request for
relief. At trial, Mrs. Molsbee admitted that the issue of
petitioner’s eligibility for relief from joint and several
liability was raised in the previous case. Also, in his reply,
petitioner admits that he and Mrs. Molsbee raised the issue of
relief from joint and several liability in the previous case in
their response to the Commissioner’s partial summary judgment
motion.
Petitioner and Mrs. Molsbee, in their response to the
partial summary judgment motion in the previous case,
specifically requested that petitioner be granted section 6015
relief, alleging that petitioner had no knowledge of the
unreported funds. Indeed, Mrs. Molsbee admitted that, at the
time she signed the stipulated decision in the previous case, she
was aware of the possibility of relief from joint and several
liability because of her belief that her business partner’s
husband had been granted relief. Moreover, petitioner discussed
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the issue with respondent’s counsel in the previous case. While
petitioner disputes that he spoke to Ms. Miller,2 we accept Ms.
Miller’s testimony that petitioner engaged in settlement
discussions with her. Ms. Miller testified that she explained to
petitioner that he would not be entitled to relief from joint and
several liability because he received checks from Mrs. Molsbee’s
companies and had substantial improvements made to his residence
during the years in issue. Additionally, the stipulated decision
in the previous case explicitly states that the fraud penalties
apply to Mrs. Molsbee only and that petitioner and Mrs. Molsbee
are liable for the deficiencies. We conclude on the basis of the
record that section 6015 relief was raised as an issue in the
previous case and that petitioner meaningfully participated in
the previous case.3
On the basis of the foregoing, we hold that petitioner is
barred under section 6015(g)(2) from raising the issue of section
2
Petitioner did admit that he spoke with one female employee
of respondent concerning the tax liabilities for the years in
issue.
3
This case does not present the type of special
circumstances that may overcome the bar of res judicata, such as
those present in the case of Trent v. Commissioner, T.C. Memo.
2002-285. In Trent, the taxpayer was precluded by an apparent
misunderstanding on her part and on the part of an Appeals
officer from raising her claim to relief from joint liability in
the prior proceeding. Petitioner was not so precluded, and
indeed, after raising the issue, entered into a stipulated
decision that both he and Mrs. Molsbee are liable for the
deficiencies set forth in the decision.
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6015 relief. We therefore need not reach the issue of whether
petitioner qualifies for relief under section 6015(b) or (f). We
have considered all of the issues raised by the parties, and, to
the extent they are not discussed herein, we conclude that they
are without merit, unnecessary to reach, or moot.
To reflect the foregoing,
Decision will be entered
for respondent.