T.C. Summary Opinion 2011-63
UNITED STATES TAX COURT
PAMELA ANNETTE WHITLEY, Petitioner,
AND JACK G. WOODS, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24236-09S. Filed June 1, 2011.
Pamela Annette Whitley, pro se.
Jack G. Woods, pro se.
Amber N. Becton, for respondent.
RUWE, Judge: This case was heard pursuant to the provisions
of section 74631 of the Internal Revenue Code in effect when the
petition was filed. Pursuant to section 7463(b), the decision to
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended.
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be entered is not reviewable by any other court, and this opinion
shall not be treated as precedent for any other case.
The only issue is whether petitioner is entitled to spousal
relief under section 6015(f) regarding her joint tax liabilities
for 2003 and 2004.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference.
At the time the petition was filed, petitioner resided in
Tennessee.
Petitioner and intervenor (herein sometimes referred to as
the taxpayers) timely filed joint Federal income tax returns for
taxable years 2003 and 2004. Petitioner prepared the returns for
both years. For taxable year 2003 the taxpayers filed a Schedule
C, Profit or Loss From Business, for petitioner on which they
reported income of $13,546 and claimed expenses of $68,302,
resulting in a net loss of $54,756. The taxpayers also filed a
Schedule C-EZ, Net Profit From Business, for intervenor on which
they reported income of $18,272 and claimed no expenses.
Petitioner and intervenor also reported early distributions from
their qualified retirement plans of $1,542 and $1,049,
respectively, for 2003.
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With their 2004 return the taxpayers filed a Schedule C for
petitioner on which they claimed expenses of $28,243 and a net
loss of $29,959. Respondent audited the taxpayers’ 2003 and 2004
returns and issued them a statutory notice of deficiency with
respect to their income tax liabilities for those years. In the
notice of deficiency respondent disallowed part of the Schedule C
expenses, exemptions, and itemized deductions the taxpayers
claimed for 2003 and 2004. The disallowed deductions for both
years were attributable to petitioner’s Schedules C. Respondent
also determined that the taxpayers were liable for the accuracy-
related penalty under section 6662 for the 2003 and 2004 taxable
years, as well as additional tax on early distributions from
qualified retirement plans under section 72(t) for 2003.
Petitioner and intervenor did not file a petition to the Court in
response to the notice of deficiency.
Subsequently, on January 10, 2007, following her bankruptcy
attorney’s advice, petitioner informed the Internal Revenue
Service (IRS) that she was going to file for bankruptcy and
requested that the IRS place a lien on her residence in
Knoxville, Tennessee, which she owned jointly with intervenor.
Petitioner believed that if a lien were placed on the home before
she filed for bankruptcy, any eventual sale would lead to the
satisfaction of her income tax liabilities for 2003 and 2004. On
February 2, 2007, petitioner filed a chapter 7 bankruptcy
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petition. On April 25, 2007, the IRS filed a proof of claim
listing $11,235.21 in unsecured priority claims for tax years
2002, 2003, and 2004 and $2,453.92 in unsecured general claims
for penalties. As part of petitioner’s bankruptcy proceeding,
the jointly owned residence was sold. The residence was the only
significant asset in the bankruptcy estate. After the
outstanding mortgage on the property and the administrative
expenses associated with the sale were paid, the proceeds were
divided equally between petitioner’s bankruptcy estate and
intervenor. The IRS was to receive $2,630.14 for its unsecured
priority claim as a distribution from the bankruptcy trustee.
On June 19, 2007, an order of discharge was entered in
petitioner’s bankruptcy case. Petitioner and intervenor divorced
in July 2007.
On October 10, 2008, petitioner submitted to respondent a
Form 8857, Request for Innocent Spouse Relief, in which she
requested relief from joint tax liabilities for 2003 and 2004.
Respondent issued petitioner a preliminary determination, dated
June 10, 2009, that she was not entitled to relief from the joint
liabilities as an innocent spouse. In response to respondent’s
preliminary determination, petitioner filed a statement of
disagreement with respondent. On July 16, 2009, respondent
issued a final Appeals determination denying petitioner’s request
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for relief. On October 13, 2009, petitioner filed a petition
with this Court.
Discussion
Petitioner’s only argument is that she in entitled to
equitable relief under section 6015(f) because the IRS should
have filed a lien against her residence before she filed for
bankruptcy. She alleges that had that been done, all or most of
her unpaid tax liabilities would have been satisfied. Petitioner
contends that respondent made affirmative misrepresentations to
her regarding the existence of a tax lien on her home before its
sale in bankruptcy and that those misrepresentations led to her
home being sold by the bankruptcy trustee without her tax
liabilities being fully satisfied. Petitioner argues that she is
entitled to equitable relief because she requested that the IRS
place a lien on her home before it was sold in bankruptcy and the
IRS incorrectly assured her that one had been put in place before
the sale.2 Petitioner contends that as a result of respondent’s
misrepresentations her tax liabilities were not satisfied by the
sale and, therefore, respondent should be equitably estopped from
collecting the liabilities. We must decide whether petitioner is
2
At trial and on brief, petitioner did not contend that she
meets the requirements to qualify as an innocent spouse under
sec. 6015(b) or (c) or make any other argument for equitable
relief.
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relieved from liability for the understatements of tax by
equitable estoppel.
Equitable estoppel is a judicial doctrine that precludes a
party from denying his or her own acts or representations which
induced another to act to his or her detriment. Hofstetter v.
Commissioner, 98 T.C. 695, 700 (1992); Graff v. Commissioner, 74
T.C. 743, 761 (1980), affd. 673 F.2d 784 (5th Cir. 1982). It is
well settled that the Government may not be estopped “on the same
terms as any other litigant.” Office of Personnel Management v.
Richmond, 496 U.S. 414, 419 (1990); Heckler v. Cmty. Health
Servs. Inc., 467 U.S. 51, 60 (1984). Equitable estoppel should
be applied “against the Government with utmost caution and
restraint”. Schuster v. Commissioner, 312 F.2d 311,(9th Cir.
1962), affg. in part and revg. in part 32 T.C. 998 (1959). Any
successful attempt to invoke equitable estoppel against the
Commissioner must outweigh the policy consideration in favor of
“an efficient collection of the public revenue”. Id.
In order to invoke the doctrine of equitable estoppel
against the Government, petitioner must satisfy the following
conditions: “(1) A false representation or wrongful, misleading
silence by the party against whom the opposing party seeks to
invoke the doctrine; (2) an error in a statement of fact and not
in an opinion or statement of law; (3) ignorance of the true
facts; (4) reasonable reliance on the acts or statements of the
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one against whom estoppel is claimed; and (5) adverse effects of
the acts or statement of the one against whom estoppel is
claimed.” Norfolk S. Corp. v. Commissioner, 104 T.C. 13, 60
(1995), affd. 140 F.3d 240 (4th Cir. 1998); see also Miller v.
Commissioner, T.C. Memo. 2001-55.
In addition, estoppel requires at least a minimum showing of
some affirmative misconduct by a Government agent. United States
v. Guy, 978 F.2d 934, 937 (6th Cir. 1992). To establish
affirmative misconduct, the party claiming equitable estoppel
against the Government must establish “‘more than mere
negligence, delay, inaction, or failure to follow an internal
agency guideline’”. Fisher v. Peters, 249 F.3d 433, 445 (6th
Cir. 2001) (quoting Ingalls Shipbuilding, Inc. v. Office of
Workers’ Comp. Programs, U.S. Dept. of Labor, 976 F.2d 934, 938
(5th Cir. 1992)).
Even if the Court were to accept petitioner’s testimony as
to respondent’s misrepresentations regarding the status of the
lien, we conclude that petitioner has not established the
elements necessary for estoppel because she failed to show that
respondent’s misrepresentations amounted to affirmative
misconduct. It is well settled that a Government agent’s
providing inaccurate information does not constitute affirmative
misconduct. See Socop-Gonzalez v. INS, 272 F.3d 1176, 1184 (9th
Cir. 2001) (negligently providing misinformation or incorrect
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advice is not affirmative misconduct); United States v. Manning,
787 F.2d 431, 437 (8th Cir. 1986).
On the basis of the foregoing, we hold that the doctrine of
equitable estoppel cannot be invoked to relieve petitioner from
liability for the understatements of tax for the years at issue.
To reflect the foregoing,
Decision will be entered
for respondent.