First Tax Court Opinions Mentioning Section 6015(e)(7)

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On October 10, 2019, Christine wrote about the provision added to the innocent spouse section by the Taxpayer First Act and the discussion of that section during the Fall ABA Tax Section meeting.  Christine’s post highlights some of the issues concerning this section that we have discussed before, here with links to two posts by Carl that came out when the language in the statute first appeared.  The new provision concerns and confuses those of us practicing in this area and Christine provides a link to the first response on IRC 6015(e)(7) filed by the IRS in the Tax Court.  If you haven’t read Christine’s post or the earlier posts on this issue, you might want to do that as background to the new information presented today. 

On October 15, 2019, the Tax Court issued two innocent spouse opinions — one relieving the taxpayer (Kruja, under (c)), the other not (Sleeth, under (f)).  These are the first two opinions that even mention section 6015(e)(7), adopted by the Taxpayer First Act.  Carl Smith noticed the opinions and sent a message to the rest of us on the blog team.  Most of what follows is taken from Carl’s email as he discusses what two Tax Court judges said about the new provision in each case.  There have been two other opinions concerning 6015 relief issued after the Taxpayer First Act added subsection (e)(7) on July 1, but these opinions did not mention subsection (e)(7): Ogden v. Commissioner, T.C. Memo. 2019-88 (issued 7/15/19), and Welwood v. Commissioner, T.C. Memo. 2019-113 (issued 9/4/19). Thus, today’s opinions are the first to even acknowledge the new subsection’s application to currently-pending Tax Court cases.

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In Kruja v. Commissioner, T.C. Memo 2019-136 the court said: 

Because the trial evidence was merely cumulative of what was already included in the administrative record, section 6015(e)(7) does not affect the outcome of this case. As a result, we have not addressed the effect of section 6015(e)(7).

In Sleeth v. Commissioner, T.C. Memo 2019-138 the court said:

We decide this case pursuant to section 6015(e)(7) as the administrative record has been stipulated into evidence and the testimony taken at trial was not available in the administrative record.

In Kruja the taxpayer was unrepresented.  The taxpayer appears to have resided in Arizona at the time of filing her petition.  In Sleeth the taxpayer was represented by counsel.  The taxpayer lived in Alabama at the time of filing her petition.  In both cases the husband intervened.  Sleeth is a rare case in which the petitioning spouse loses after an intervention.

Sleeth’s statement that the testimony “was not available in the administrative record” could mean that everything on which testimony was taken in Tax Court was newly discovered or previously unavailable at the time the determination was made.  However, I seriously doubt that is the case if one carefully read through the testimony. I hope Judge Goeke is making a ruling that anything testified to at trial (regardless of whether it is newly discovered or previously unavailable at the time the determination was made) is admissible as part of what the Tax Court reviews.  That would be a readoption of Porter I’s holding of a de novo scope of Tax Court record. See Porter v. Commissioner, 130 T.C. 115 (2008) (en banc).  But, I seriously doubt that is what Judge Goeke intends to say.

Thanks for Carl for finding these opinions and providing his insight.  As you can see from these opinions the new provision applies to innocent spouse cases already tried as well as those pending.  Since the first two opinions do not require a retrial, reopening the record or additional briefs, perhaps that pattern will follow in decisions to come.  Anyone with a pending innocent spouse case needs to pay careful attention to this issue and develop the record accordingly.

Comments

  1. Lavar Taylor says

    For those of you in Southern California, I’m moderating a panel titled “Emerging Issues Before the United States Tax Court” at the UCLA Tax Controversy Institute next Tuesday, October 22, at the Beverly Hills Hotel, in, of all places, Beverly Hills. The panel, which will include Judge Cohen and a representative from Chief Counsel’s Office, will be discussing this issue, among others. Hope to see you there if you are in SoCal.

    • After we published the post, the court posted today an opinion in Jones, T.C. Memo. 2019-139, in which a California resident, represented by Lavar Taylor, was denied 6015(f) relief. Footnote 2 of the opinion reads:

      “2 We note that at trial, in addition to receiving into evidence the stipulation
      of facts (which did not delineate what constituted the administrative record at the
      time of the notice of determination), the Court received (1) the testimonies of
      petitioner, her ex-husband Noah Pike, and three additional witnesses for petitioner
      without objection from respondent’s counsel and (2) four additional exhibits
      proffered by petitioner. The trial took place and the record was closed before the
      President signed into law the Taxpayer First Act (TFA), Pub. L. No. 116-25, 133
      Stat. 981 (2019), on July 1, 2019. TFA sec. 1203, 133 Stat. at 988, amended sec.
      6015(e) by adding paragraph (7), which provides for the standard and scope of
      Tax Court review. Specifically, paragraph (7) provides that “[a]ny review of a
      determination made under this section [sec. 6015] shall be reviewed de novo by
      the Tax Court and shall be based upon–(A) the administrative record established
      at the time of the determination, and (B) any additional newly discovered or
      previously unavailable evidence.” According to TFA sec. 1203(b), this provision
      applies “to petitions or requests filed or pending on or after the date of the
      enactment of this Act.”
      It would thus seem that the effective date provision calls on us to apply sec.
      6015(e)(7) to cases tried before that section was enacted, which would include this
      case. Suffice it to say, however, sec. 6015(e)(7) would not change our ultimate
      finding set forth below as to whether petitioner is entitled to relief under sec.
      6015(f) from the underpayments of tax for the years at issue. In other words, even
      allowing petitioner to present her case to the fullest extent and considering all of
      the evidence presented, we find that she is not entitled to sec. 6015(f) relief for the
      years at issue.”

      Lavar will no doubt be a good person to moderate this panel.

  2. First, I should say we love Lavar – he spoke at our last Bankruptcy Academy seminar in San Francisco on tax remedies in bankruptcy, and got the highest ratings (along with Dennis Brager, Esq. in So. Ca.).

    A controversy in one of my cases is, granted the bankruptcy courts hold that the BK court has jurisdiction to address tax liability issues, does the Tax Court have jurisdiction to address whether a tax, or more specifically a tax penalty, has been discharged in bankruptcy?

    The IRS, in the case I have open on my desk, argues that the Tax Court does not have jurisdiction to adjudicate the discharge of penalties in a prior bankruptcy case. If not, then I will dismiss my Tax Court petition and take it back to the bankruptcy court. If it does, then I will look to the tax court to settle whether the penalty liability was discharged in the bankruptcy (I argue that it satisfies all rules for dischargeability of penalties under 11 U.S.C. § 523(a)(7)). it will be less expensive for my client to have the matter addressed by the Tax Court).

    – Morgan King
    LawPublishing.pro

    • The Tax Court has jurisdiction to determine if a liability has been discharged in bankruptcy if the case is pending in Tax Court under the collection due process procedures.

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