The Tax Court in Brief – February 13th – February 17th, 2023
Freeman Law's "The Tax Court in Brief" covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.
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Tax Litigation: The Week of February 13th, 2022, through February 17th, 2023
- Kemegue v. Comm'r, T.C. Summary Opin. 2023-5| February 13, 2023 | Carluzzo, J. | Dkt. No. 8987-20S
- Trice v. Comm'r, T.C. Memo. 2023-15| February 13, 2023 | Gustafson, J. | Dkt. No. 20398-19
- Cattail Holdings, LLC v. Comm'r, T.C. Memo. 2023-17| February 14, 2023 | Lauber, J. | Dkt. No. 27209-21
- Patrinicola v. Comm'r, T.C. Memo. 2023-16| February 14, 2023 | Goeke, J. | Dkt. No. 498-19
Thomas v. Comm'r, 160 T.C. No. 4| February 13, 2023 | Toro, J. | Dkt. No. 12982-20
Summary: This is a case of first impression concerning the meaning of "newly discovered or previously unavailable evidence" as contemplated by I.R.C. § 6015(e)(7)(B): "Any review of a determination made under this section 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."
Sydney Ann Chaney Thomas (Ms. Thomas) and her husband filed joint federal income tax returns for 2012, 2013, and 2014, but did not pay the full amounts of tax shown on those returns. After her husband's death, Ms. Thomas sought relief from joint and several liability pursuant to I.R.C. § 6015(f) (innocent spouse relief. The IRS denied the request, and Ms. Chaney petitioned the Tax Court seeking a determination under I.R.C. § 6015(e) (relief from joint and several liability on joint return). At trial, the IRS proposed to introduce into evidence certain posts from Ms. Thomas's personal blog that reflected information about Ms. Thomas's assets, lifestyle, business, and her relationship with her husband. But, the posts were not part of the administrative record. The IRS learned of the posts only after Ms. Thomas filed her petition with the Tax Court. She objected to the admission of the posts and ultimately moved to strike them from the record wherein the posts were conditionally admitted, pending further review. Ms. Thomas contended that the posts were not "newly discovered or previously unavailable evidence" as contemplated by I.R.C. § 6015(e)(7)(B). The IRS opposed the motion, arguing that the blog posts were "newly discovered" and "previously unavailable evidence" under I.R.C. § 6015(e)(7)(B).
Key Issues: Under I.R.C. § 6015(e)(7)(B), were Ms. Thomas's blog posts "newly discovered or previously unavailable evidence" when the posts existed before the closing of the administrative record but not discovered by the IRS until the administrative record had closed?
Primary Holdings: The posts are "newly discovered" evidence within the meaning of I.R.C. § 6015(e)(7)(B) and as such were properly admitted. Motion to strike denied. The meaning of "newly discovered" as of 2019 (when section 6015(e)(7) was enacted) was "recently obtained sight or knowledge of for the first time." The evidence in issue met that definition.
Key Points of Law:
Joint Liability for Spouses. Married couples may elect to file a joint federal income tax return for a taxable year. I.R.C. § 6013. When they do, their tax for that year is based on their aggregate income and deductions, and their liability for any tax due is joint and several, i.e., they are each individually liable, regardless of their respective earnings. I.R.C. § 6013(d)(3).
Innocent Spouse Relief. A spouse who has made a joint return may seek relief from joint and several liability under the procedures established in section 6015. Generally, section 6015(f) permits the IRS to relieve a requesting spouse of some or all of the outstanding joint liability if, taking into account all of the facts and circumstances, it is inequitable to hold that spouse liable for any unpaid tax. A requesting spouse who is dissatisfied with the IRS's decision about the requested relief "may petition [the Tax Court] . . . to determine the appropriate relief available to the individual under [section 6015]." I.R.C. § 6015(e)(1)(A).
Scope of Review – Section 6015(e)(7). In 2019, a new paragraph (7) was added to section 6015(e): "(7) Standard and scope of review.—Any review of a determination made under this section 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." I.R.C. § 6015(e)(7).
"Additional Newly Discovered or Previously Unavailable Evidence." "In statutory interpretation disputes, a court's proper starting point lies in a careful examination of the ordinary meaning and structure of the law itself. Where . . . that examination yields a clear answer, judges must stop." Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356, 2364 (2019) (internal citations omitted). And, when the statute does not define a term, the courts "ask what that term's 'ordinary, contemporary, common meaning' was when Congress enacted" the relevant provision. Id. at 2362 (quoting Perrin v. United States, 444 U.S. 37, 42 (1979)). The word "newly" generally is defined to mean "recently" or "lately." And, the word "discover" generally means "to obtain sight or knowledge of for the first time." The Federal Rules of Civil Procedure, Rule 60(b)(2)—which requires a reasonable diligence standard for admission of new evidence—is not applicable to section 6015(e)(7)(B), especially since Congress chose a de novo standard of review in section 6015(e) when the court considers a case for the first time following a relatively limited administrative proceeding.
Insights: This Trice opinion regards a matter of statutory interpretation of a Code section enacted by Congress in 2019. Given the de novo review under section 6015(e)—i.e., a standard of review that is to give no deference to underlying proceeding—the Tax Court found that "additional newly discovered or previously unavailable evidence," as used in section 6015(e)(7)(B), means evidence that may have existed during the administrative phase of the innocent spouse relief tax matter but was not actually discovered by the IRS or the taxpayer until the administrative phase had closed. Thus, those seeking innocent spouse relief under section 6015 are wise to disclose to their counsel (if any) all social media posts that may be used against the spouse who is requesting equitable or legal relief from joint and several tax liability.
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