In Uncategorized on 07/19/2021 at 16:00

Judge Albert G (“Scholar Al”) leads off 157 T. C. with Morris F. Garcia, Deceased, and Sharon Garcia, 157 T. C. 1, filed 7/19/21.

Seems the late Morris and Sharon owed north of $500K in back taxes, so IRS told State, which lifted their passports. At no extra charge, IRS gave the late Morris (before he became the late Morris) and Sandra substantially identical notices of the lift. They petitioned jointly, but between petition and hearing, the late Morris became so.

As not rarely happens, IRS reversed course.

“…the IRS reversed its certification of petitioners as persons owing a seriously delinquent tax debt, citing their submission of a processable offer-in-compromise of the liability referenced in the two notices. … respondent filed a motion to dismiss on the ground of mootness, contending that petitioners have received all of the relief to which they are entitled, that this Court can afford no further relief at this juncture, and that the case is therefore moot. We agree and accordingly will grant the motion.” 157 T. C. 1, at p. 3.

The tax liability arose in a year where the not-yet-late Morris and Sharon filed MFJ. So Morris and Sharon petitioned twice, alleging the OIC in the first petition; the second was closed for duplication.

“They alleged that they had filed… an amended return for [year at issue], reporting what they believed their correct tax liability to be. Urging that the IRS had improperly rejected their offer, they asked us to determine that their certifications as persons owing a seriously delinquent tax debt were erroneous. They also requested ‘declaratory relief’ to the effect that their offer-in-compromise ‘was erroneously denied in violation of * ** [their] rights.’” 157 T. C.1, at p. 5.

IRS says the OIC is still pending, that they’ve reversed the lift request to State because when a processable OIC is pending, collection is suspended, so for Sharon, as we used to say, “that’s all she wrote.”

Sharon’s trusty attorneys moved in opposition to IRS’ motion to toss, but then bailed, notwithstanding their online proclamation that “(T)hrough life, divorce, death, and taxes, you can count on partners CW and LM to be there for your legal needs.” (Names omitted).

I’m sure my readers are “hanging breathless,” awaiting the answer to whether a joint petition under Section 7345(e)(1) is OK.

Judge Scholar Al turns to Rule 34(a)(1) for the deficiency analogy, as neither Section 7345 nor any Tax Court Rule gives explicit guidance. Thereunder, each SNOD must be petitioned separately, unless issued to MFJs individually.  As for anything else, “… Rule 34(c) cross-refers to the Rules governing those actions. But these other Rules do not address the question whether spouses may file a joint petition to secure review of notices issued to them separately. The Rules governing passport certification cases follow this pattern. Rule 351 governs the commencement of such actions, and Rule 351(b) describes generally what such a petition shall contain. But neither Rule addresses the possibility of a joint filing.” 157 T. C. 1, at p. 8.

So let’s look at equity and common sense.

“It is natural for spouses to file a joint petition in these circumstances. To hold otherwise would occasion unnecessary delay and expense. Where spouses present similar questions regarding the same liability, it would be wasteful to try their cases separately. If petitioners had filed separate petitions in response to their separate notices, we would almost certainly have consolidated their cases for trial, briefing, and opinion. See Rule 141(a). The cases would thus proceed in the same manner as where a joint petition was filed, except that petitioners would have paid two filing fees and respondent would have filed additional pleadings for no good reason. Collection due process (CDP) cases present a similar paradigm. In those cases the IRS not infrequently issues married taxpayers separate notices of determination sustaining the same collection action for the same underlying liability. Rule 331(a) governs the commencement of CDP cases, and Rule 331(b) provides general guidance about the contents of such petitions. These Rules, which are virtually identical to the Rules governing passport certification cases, do not address the possibility of joint filing. But married taxpayers have routinely filed joint petitions in these circumstances, and we have never questioned the propriety of their doing so. We see no reason why different treatment should be mandated in passport certification cases.” 157 T. C. 1, at pp. 9-10. (Citations omitted).

Sharon claimed that IRS had seriously messed up the OIC and wants declaratory relief. Tax Court can’t do that. All they can do is order the passport lift unlifted, and IRS has agreed to do that.

Interesting footnote, where Judge Scholar Al wonders if a decedent can contest a passport lift. 157  T. C.1, at p. 12, footnote 4. But no ex’r or adm’r for the late Morris showed to raise the issue.


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