In Uncategorized on 05/02/2016 at 16:46

Judge Gale extends the mantle of equity to Joseph Patrick Boyle, 2016 T. C. Memo. 87, filed 5/2/16. And JP has a sad tale to tell.

All he wants is to be excused nonfiling and nonpaying for one year, and some abatement of interest on the tax he admittedly owes.

JP was a cartridge seller and a cartridge refiller, the kind that you print with, not the kind you shoot with.

He left the bookkeeping, bill paying and checkwriting to spouse Patricia J. Patricia J. may have had a gambling problem; for the year at issue, she had their MFJ return prepared and had PJ sign, as was their custom for many years. All the income was PJ’s.


Patricia J. never filed the return or sent in a check to pay the tax due shown thereon. PJ discovered this fact years later, sent in the return, but didn’t pay the tax.

IRS only notified PJ about this omission after he sent in the return.

PJ admits he owes. But between the time the return was due and the time PJ discovered it hadn’t been filed, Patricia J., to whom he entrusted his financial affairs, had died “as a result of breast, spine, and liver cancer.” 2016 T. C. Memo. 87, at p. 4.

PJ only wanted penalties and interest removed, and an installment agreement to pay his back taxes.

IRS just gave PJ innocent spousery on account of Patricia J.’s gambling activities, claiming that Section 6015(f) equitable innocent spousery is available only for underpayments, not taxes or interest. And the income is all JP’s, not Patricia J.’s.

Judge Gale blows that off: “We have rejected respondent’s position and held that we have jurisdiction under section 6015(e)(1) to review the Commissioner’s denial of equitable relief under section 6015(f) from additions to tax and interest.  See Kollar v. Commissioner, 131 T.C. 191, 196-197 (2008); see also Cheshire v. Commissioner, 115 T.C. 183 (2000), aff’d, 282 F.3d 326 (5th Cir. 2002); Knorr v. Commissioner, T.C. Memo. 2004-212; Demirjian v. Commissioner, T.C. Memo. 2004-22; Rowe v. Commissioner, T.C. Memo. 2001-325. We therefore consider petitioner’s claim that he is entitled to relief under section 6015(f) from the interest and additions to tax….” 2016 T. C. Memo. 87, at pp. 8-9.

The cases are here for your next memo of law.

“However, petitioner is not seeking relief from the underpayment; he is seeking relief from the additions to tax and interest triggered by Mrs. Boyle’s failure to timely file and pay after deceiving petitioner in that regard.  In these circumstances, treating the attribution condition as an absolute bar to relief runs counter to our mandate under section 6015(e)(1)(A) ‘to determine the appropriate relief available’ to petitioner.” 2016 T. C. Memo. 87, at p. 10.

So Judge Gale considers. True, all the income is JP’s, but the attribution of income bar is not inflexible. Patricia J. deceived JP, and he had no reason to question her assertion. By Judge Gale, that’s analogous to fraud.

Most factors are neutral, but the fraud and the relatively small amount of the penalties and interest JP is seeking to remove don’t give him a big bonus.

And as for future compliance after the year at issue, PJ faced a cascade of unpaid taxes shortly after Patricia J. died and he had to struggle with cleaning up the mess. He tried in good faith, says Judge Gale.

“All of the Rev. Proc. 2013-34, sec. 4.03 equitable factors are neutral here except petitioner’s lack of a significant benefit and knowledge or reason to know of the understatement.  And the latter factor weighs very heavily in petitioner’s favor.  Petitioner is not seeking relief from the income tax itself, which is attributable entirely to his income.  He seeks relief from the failure to file and pay additions to tax.  Petitioner did not know and had no reason to know the facts that gave rise to those liabilities; to the contrary, he was misled by his spouse’s actions and therefore reasonably believed that his return had been filed and his tax paid.  We accordingly conclude that it would be inequitable to hold him liable for the unpaid section 6651(a)(1) and (2) additions to tax….” 2016 T. C. Memo. 87, at p. 21.

As for interest, Judge Gale lets PJ off for the time between when the return was due and when he found out it hadn’t been filed. But after that, PJ owes interest.



Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: