Diana Van Arsdalen, f.k.a. Diana Murray v. Commissioner ( 2004 )


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    123 T.C. No. 7
    UNITED STATES TAX COURT
    DIANA VAN ARSDALEN, f.k.a. DIANA MURRAY, Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent
    Docket No. 1195-04.               Filed July 22, 2004.
    P filed with the Court a petition for
    determination of relief from joint and several
    liability on a joint return. R issued to P’s former
    spouse (M) a notice of filing petition and right to
    intervene (the notice). See Rule 325, Tax Court Rules
    of Practice and Procedure. P filed with the Court a
    motion to strike the notice insofar as the notice
    stated that M would be permitted to intervene solely to
    challenge P’s entitlement to relief under sec. 6015,
    I.R.C. M lodged with the Court a notice of
    intervention which stated that M intended to support
    P’s claim for relief under sec. 6015(f), I.R.C. R
    opposed P’s motion to strike.
    Held: Neither sec. 6015, I.R.C., nor Rule 325,
    Tax Court Rules of Practice and Procedure, precludes a
    nonelecting spouse from intervening in a proceeding
    before the Court for the purpose of supporting the
    electing spouse’s claim for relief.
    - 2 -
    Held, further: P’s motion to strike will be
    granted in that the restrictive language in R’s notice
    is deemed stricken, and M’s notice of intervention will
    be filed.
    Jack Barry Schiffman, for petitioner.
    Emly B. Berndt, for respondent.
    OPINION
    DAWSON, Judge:   This case was assigned to Chief Special
    Trial Judge Peter J. Panuthos, pursuant to the provisions of
    section 7443A(b)(5) and Rules 180, 181, and 183.1    The Court
    agrees with and adopts the opinion of the Chief Special Trial
    Judge, which is set forth below.
    OPINION OF THE SPECIAL TRIAL JUDGE
    PANUTHOS, Chief Special Trial Judge:     This matter is before
    the Court on petitioner’s motion to strike.    As explained in
    detail below, we shall grant petitioner’s motion.
    Background
    Petitioner filed joint Federal income tax returns with her
    then husband, Stanley David Murray (Mr. Murray), for the taxable
    years 1992 to 1996.
    1
    Section references are to sections of the Internal Revenue
    Code, as amended, and Rule references are to the Tax Court Rules
    of Practice and Procedure.
    - 3 -
    On January 18, 2002, respondent issued to petitioner a
    notice of determination denying her claim for relief from joint
    and several liability for the taxable years 1992 to 1995.    The
    notice stated that petitioner was denied relief under section
    6015(f).   On October 23, 2003, respondent issued to petitioner a
    notice of determination denying her claim for relief from joint
    and several liability for the taxable years 1992 to 1996.    The
    notice stated that petitioner was denied relief under section
    6015(b), (c), and (f).   On January 21, 2004, petitioner filed
    with the Court a petition for determination of relief from joint
    and several liability on a joint return challenging respondent’s
    notice of determination dated October 23, 2003.2
    On March 8, 2004, respondent filed with the Court a notice
    of filing petition and right to intervene (the notice).   The
    notice stated that respondent had informed Mr. Murray of the
    filing of the petition and of his right to intervene in the case.
    The notice stated in pertinent part: “Under T.C. Rule 325(b),
    Stanley D. Murray has a right to intervene in this matter for the
    sole purpose of challenging petitioner’s entitlement to relief
    from joint and several liability.”
    On March 15, 2004, petitioner filed a Motion to strike the
    notice on the ground that respondent “misinterprets and/or
    misconstrues Tax Court Rule 325(b)” insofar as the notice stated
    2
    At the time the petition was filed, petitioner resided in
    Scottsdale, Arizona.
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    that Mr. Murray would be permitted to intervene in the case for
    the sole purpose of challenging petitioner’s entitlement to
    relief from joint and several liability.3
    On April 1, 2004, Mr. Murray lodged with the Court a notice
    of intervention.    In the notice of intervention, Mr. Murray
    stated that he “seeks to intervene for the sole purpose of
    offering evidence in support of the Petitioner’s right and
    entitlement to equitable relief under IRC section 6015(f) and
    will not be offering any evidence to challenge Petitioner’s right
    to equitable relief under IRC section 6015(f).”
    This matter was called for hearing at the Court’s motions
    session held in Washington, D.C.    Counsel for respondent appeared
    at the hearing and offered argument in opposition to petitioner’s
    Motion to strike.    Although no appearance was entered by or on
    behalf of petitioner at the hearing, petitioner filed with the
    Court a written statement pursuant to Rule 50(c).
    Discussion
    Section 6013(d)(3) provides that if a husband and wife file
    a joint Federal income tax return, “the tax shall be computed on
    the aggregate income and the liability with respect to the tax
    shall be joint and several.”    However, section 6015(a) provides
    3
    On Mar. 16, 2004, the Court denied petitioner’s motion to
    strike. On Mar. 18, 2004, petitioner filed a motion to vacate
    the Court’s Order denying her motion to strike. By Order dated
    Mar. 31, 2004, we granted petitioner’s motion to vacate, vacated
    and set aside our order denying petitioner’s motion to strike,
    and set petitioner’s motion to strike for hearing.
    - 5 -
    that, notwithstanding section 6013(d)(3), an individual who has
    made a joint return may elect to seek relief from joint and
    several liability arising from that return.   See Cheshire v.
    Commissioner, 
    115 T.C. 183
    , 188-189 (2000), affd. 
    282 F.3d 326
    (5th Cir. 2002).
    Congress vested the Tax Court with jurisdiction to review
    the Commissioner’s denial of a taxpayer’s election to claim
    relief from joint and several liability on a joint return under
    specified circumstances.   See King v. Commissioner, 
    115 T.C. 118
    ,
    121-122 (2000); Corson v. Commissioner, 
    114 T.C. 354
    , 363-364
    (2000).   A taxpayer may seek relief from joint and several
    liability on a joint return by raising the matter as an
    affirmative defense in a petition for redetermination invoking
    the Court’s deficiency jurisdiction under section 6213(a).     See
    Butler v. Commissioner, 
    114 T.C. 276
    , 287-289 (2000).     In
    addition, a taxpayer may file a so-called stand-alone petition
    seeking relief from joint and several liability on a joint return
    where the Commissioner has issued a final determination denying
    the taxpayer’s claim for such relief or the Commissioner has
    failed to rule on the taxpayer’s claim within 6 months of its
    filing.   See sec. 6015(e)(1); Mora v. Commissioner, 
    117 T.C. 279
    (2001); Fernandez v. Commissioner, 
    114 T.C. 324
    , 329 (2000).
    Finally, a taxpayer may request relief from joint and several
    liability on a joint return in a petition for review of a lien or
    - 6 -
    levy action.   See secs. 6320(c), 6330(c)(2)(A)(i).   The petition
    in this case was filed as a stand-alone petition.
    Section 6015(e)(4) provides that the nonelecting or “other
    spouse” is entitled to notice of a stand-alone proceeding
    involving a claim for relief under section 6015.    The section
    provides in pertinent part that the “Tax Court shall establish
    rules which provide the individual filing a joint return but not
    making the election * * * with adequate notice and an opportunity
    to become a party to a proceeding”.
    Before adopting formal Rules as directed in section
    6015(e)(4), we addressed the scope of a nonelecting spouse’s
    right to intervene in a section 6015 case in both Corson v.
    Commissioner, supra, and King v. Commissioner, supra.    We will
    briefly summarize those Opinions before proceeding with our
    analysis.
    In Corson the taxpayers filed with the Court a joint
    petition for redetermination challenging a joint notice of
    deficiency for the taxable year 1981.   After obtaining separate
    counsel, the electing spouse filed an amendment to the petition
    asserting her entitlement to relief from joint and several
    liability under former section 6013(e).   After both taxpayers
    entered into separate stipulations with the Commissioner
    conceding a specific tax deficiency and the application of
    increased interest under section 6621(c), the Commissioner
    entered into a further stipulation with the electing spouse
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    granting her relief from joint and several liability under
    section 6015(c).   Upon learning of the second stipulation, the
    nonelecting spouse declined to execute a stipulated decision for
    submission to the Court, prompting the Commissioner to file a
    motion for entry of decision.   In denying the Commissioner’s
    motion, the Court stated:
    Section 6015(e)(1) is structured so that
    administrative consideration (or failure to rule) will
    precede any court action when innocent spouse status is
    raised in a stand-alone petition. Section 6015(g)(2),
    in turn, contemplates an opportunity for the
    nonelecting spouse to participate at the administrative
    level. Section 6015(e)(4) then speaks of a similar
    chance for participation should the matter move from an
    administrative to a judicial forum. Hence, as a
    general premise, we believe that these subsections,
    when read together, reveal a concern on the part of the
    lawmakers with fairness to the nonelecting spouse and
    with providing him or her an opportunity to be heard on
    innocent spouse issues. Presumably, the purpose of
    affording to the nonelecting spouse an opportunity to
    be heard first in administrative proceedings and then
    in judicial proceedings is to ensure that innocent
    spouse relief is granted on the merits after taking
    into account all relevant evidence. After all, easing
    the standards for obtaining relief is not equivalent to
    giving relief where unwarranted. [Corson v.
    Commissioner, supra at 365.]
    Although we did not attempt to determine “the precise contours of
    the rights granted to a nonelecting spouse under section
    6015(e),” our denial of the Commissioner’s motion for entry of
    decision had the effect of allowing the nonelecting spouse his
    day in Court.   Id.
    In King v. Commissioner, supra, the Court described the
    circumstances under which a nonelecting spouse would be permitted
    to intervene in respect of an electing spouse’s claim for relief
    - 8 -
    under section 6015.   In King, the Commissioner issued separate
    notices of deficiency to the taxpayers, but only the electing
    spouse filed a petition for redetermination with the Court.    The
    sole issue raised in the electing spouse’s petition was her claim
    for relief from joint and several liability under former section
    6013(e).   While the case was pending, Congress repealed former
    section 6013(e) and enacted section 6015.   Thereafter, the
    Commissioner filed with the Court a report stating that the
    Commissioner concluded that the electing spouse qualified for
    relief under section 6015(b).   The report further stated that the
    nonelecting spouse objected to relief and that the Commissioner
    believed that the nonelecting spouse should be notified of the
    action and be given an opportunity to participate in the
    proceeding.   After the Court directed service of a copy of the
    petition and a copy of the Court’s then-interim Rule 325 on the
    nonelecting spouse, the nonelecting spouse filed with the Court a
    motion for leave to file notice of intervention (embodying notice
    of intervention).   The Court subsequently granted the nonelecting
    spouse’s motion, stating:
    We hold that whenever, in the course of any
    proceeding before the Court, a taxpayer raises a claim
    for relief from joint liability under section 6015, and
    the other spouse (or former spouse) is not a party to
    the case, the Commissioner must serve notice of the
    claim on the other individual who filed the joint
    return for the year(s) in issue. The notice shall
    advise such other individual of his or her opportunity
    to file a notice of intervention for the sole purpose
    of challenging the petitioning individual’s entitlement
    to relief from joint liability pursuant to section
    6015. Such notice shall include a copy of Interim Rule
    325. The Commissioner shall at the same time file with
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    the Court a certification of such notice or, in a
    stand-alone case brought under sec. 6015(e)(1)(A),
    state in the answer that such notice has been provided.
    See Interim Rule 324(a)(2). Any intervention shall be
    made in accordance with the provisions of Interim Rule
    325(b). [King v. Commissioner, 115 T.C. at 125.]
    After the filing of the Corson and King Opinions, the Court
    adopted new Rule 325,4 which states:
    RULE 325.   NOTICE AND INTERVENTION
    (a) Notice: On or before 60 days from the date of
    the service of the petition, the Commissioner shall
    serve notice of the filing of the petition on the other
    individual filing the joint return and shall
    simultaneously file with the Court a copy of the notice
    with an attached certificate of service. The notice
    shall advise the other individual of the right to
    intervene by filing a notice of intervention with the
    Court not later than 60 days after the date of service
    on the other individual.
    (b) Intervention: If the other individual filing
    the joint return desires to intervene, then such
    individual shall file a notice of intervention with the
    Court not later than 60 days after service of the
    notice by the Commissioner of the filing of the
    petition, unless the Court directs otherwise. All new
    matters of claim or defense in a notice of intervention
    shall be deemed denied. [Fn. ref. omitted.]
    In sum, new Rule 325 provides that the Commissioner shall provide
    the nonelecting spouse with notice of the filing of a petition
    claiming relief under section 6015 and inform the nonelecting
    4
    On June 30, 2003, the Court adopted amendments to its Rules
    of Practice and Procedure, including new Rule 325. However, like
    sec. 6015, new Rule 325 is effective with respect to actions for
    determination of relief from joint and several liability on a
    joint return commenced with respect to any liability for tax
    arising after July 22, 1998, and any liability for tax arising on
    or before such date but remaining unpaid as of such date. See
    
    120 T.C. 479
    , 714 n.1.
    - 10 -
    spouse of his or her right to intervene in the case.5   Notably,
    new Rule 325 does not by its terms impose any substantive
    restriction on the nonelecting spouse’s right to intervene in
    support of a claim for relief by an electing spouse.6
    As previously discussed, petitioner contends that the notice
    that respondent issued to Mr. Murray should be stricken because
    it is inconsistent with Rule 325.   Respondent counters that the
    restrictive language in the disputed notice conforms with: (1)
    The Court’s express statement in King v. Commissioner, supra at
    124-125, that intervention should be for the sole purpose of
    challenging the electing spouse’s entitlement to relief; (2) the
    Court’s general approach to intervention as articulated in Estate
    of Proctor v. Commissioner, 
    T.C. Memo. 1994-208
    ; and (3) the
    approach under rule 24 of the Federal Rules of Civil Procedure.
    5
    It is worth noting that sec. 6015(h)(2) (formerly sec.
    6015(g)) directs the Secretary to prescribe regulations providing
    a nonelecting spouse with “notice of, and an opportunity to
    participate in, any administrative proceeding with respect to an
    election made under subsection (b) or (c) by the other individual
    filing the joint return.” Pursuant to this directive, the
    Secretary issued sec. 1.6015-6(a)(1), Income Tax Regs., which
    states in pertinent part that, upon receipt of a claim for relief
    under sec. 6015, the Internal Revenue Service must notify the
    nonelecting spouse and “provide the nonrequesting spouse with an
    opportunity to submit any information that should be considered
    in determining whether the requesting spouse should be granted
    relief from joint and several liability.”
    6
    The Note to new Rule 325 likewise does not restrict a
    nonelecting spouse’s right to intervene by stating that such
    intervention is permitted solely for the purpose of challenging
    the electing spouse’s entitlement to relief. See 
    120 T.C. 714
    -
    715.
    - 11 -
    There is no direct support in the plain language of section
    6015 or its legislative history for the proposition that a
    nonelecting spouse’s ability to intervene in a section 6015 case
    is limited to challenging the electing spouse’s entitlement to
    relief.   Moreover, new Rule 325 and the Notes thereto are neutral
    on the point.7
    As we stated in Corson v. Commissioner, 
    114 T.C. 354
     (2000),
    and King v. Commissioner, 
    115 T.C. 118
     (2000), a nonelecting
    spouse may intervene in a proceeding before the Court for the
    purpose of opposing the electing spouse’s claim for relief.     It
    is clear that in both Corson and King the nonelecting spouse
    opposed the claim for relief.     Accordingly, any language
    suggesting that a right of intervention is limited to challenging
    a claim for relief must be read in the context of the facts of
    those cases.     In any event,   it is a certainty that Congress did
    not intend for relief to be granted under section 6015 where
    otherwise unwarranted.     Corson v. Commissioner, supra at 365.     On
    the other hand, considering that section 6015 was enacted to
    provide taxpayer relief, it is equally certain that Congress did
    not intend for relief to be denied where otherwise warranted.      In
    this regard, we believe that justice requires that the
    7
    The Notes of new Rule 325 include a citation of King v.
    Commissioner, 
    115 T.C. 118
     (2000), for the limited proposition
    that the Commissioner is expected to serve a notice of filing
    petition and right to intervene in a stand-alone, deficiency, or
    other proceeding in which a claim for sec. 6015 relief has been
    raised as an affirmative defense. See 
    120 T.C. 715
    .
    - 12 -
    nonelecting spouse be permitted to intervene in administrative
    and judicial proceedings under section 6015 for the purpose of
    submitting any information, be it favorable or antithetical, that
    is relevant to the determination whether the electing spouse is
    entitled to relief from joint and several liability.
    Contrary to respondent’s position, we conclude that
    permitting a nonelecting spouse to intervene for the purpose of
    supporting an electing spouse’s claim for relief under section
    6015 is consistent with both our prior practice and principles
    governing intervention under the Federal Rules of Civil
    Procedure.
    Rule 24(a) of the Federal Rules of Civil Procedure provides:
    Rule 24. Intervention
    (a) Intervention of Right. Upon timely application
    anyone shall be permitted to intervene in an action:
    (1) when a statute of the United States confers an
    unconditional right to intervene; or (2) when the
    applicant claims an interest relating to the property
    or transaction which is the subject of the action and
    the applicant is so situated that the disposition of
    the action may as a practical matter impair or impede
    the applicant’s ability to protect that interest,
    unless the applicant’s interest is adequately
    represented by existing parties.
    Thus, rule 24(a) of the Federal Rules of Civil Procedure permits
    intervention as a matter of right if there is an unconditional
    statutory right to intervene or if the applicant has a cognizable
    interest in the property or transaction in dispute and his or her
    interest is not adequately represented by the existing parties to
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    the action.    See, e.g., United States v. Mississippi, 
    958 F.2d 112
     (5th Cir. 1992).
    The answer to respondent’s argument is that section
    6015(e)(4) confers on a nonelecting spouse an unconditional
    statutory right to intervene within the meaning of rule 24(a)(1)
    of the Federal Rules of Civil Procedure.   Section 6015(e)(4)
    directs the Court to “establish rules which provide the
    individual filing a joint return but not making the election * *
    * with adequate notice and an opportunity to become a party to a
    proceeding”.   The statutory language does not authorize the Court
    to impose any significant substantive conditions in respect of
    the nonelecting spouse’s right to intervene.   Consequently, the
    Court prescribed the procedures for intervention within new Rule
    325 and did so without imposing any substantive conditions on the
    nonelecting spouse/intervenor.
    Our holding that section 6015(e)(4) confers an unconditional
    statutory right to intervene within the meaning of rule 24(a)(1)
    of the Federal Rules of Civil Procedure is consistent with the
    holdings of courts reviewing   analogous statutes.   See Bhd. of
    R.R. Trainmen v. Baltimore & O.R. Co., 
    331 U.S. 519
     (1947)
    (holding that 49 U.S.C. sec. 17(11) authorized the representative
    of railroad employees to intervene as a matter of right in a suit
    involving an order of the Interstate Commerce Commission);8
    8
    49 U.S.C. sec. 17(11) provided in pertinent part:
    (continued...)
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    O’Keefe v. N.Y. City Bd. of Elections, 
    246 F. Supp. 978
     (S.D.N.Y.
    1965) (holding that 28 U.S.C. sec. 2403(a) authorized the United
    States to intervene as a matter of right in an action challenging
    the constitutionality of the Voting Rights Act of 1965).9   But
    see United States v. Mississippi, 
    supra
     (holding that 20 U.S.C.
    sec. 1717 did not provide an association with the unconditional
    right to intervene in a school desegregation case);10 7C Wright &
    Miller, Federal Practice & Procedure, sec. 1906, at 245 (2d ed.
    1986) (suggesting that section 7424 does not provide the United
    States with an unconditional right to intervene in cases
    8
    (...continued)
    “Representatives of employees of a carrier, duly designated as
    such, may intervene and be heard in any proceeding arising under
    this Act affecting such employees.”
    9
    28 U.S.C. sec. 2403(a) provided in pertinent part:
    In any action, suit or proceeding in a court of the
    United States to which the United States or any agency,
    officer or employee thereof is not a party, wherein the
    constitutionality of any Act of Congress affecting the
    public interest is drawn in question, the court shall
    certify such fact to the Attorney General, and shall
    permit the United States to intervene for presentation
    of evidence * * * and for argument on the question of
    constitutionality.
    10
    20 U.S.C. sec. 1717 provided in pertinent part:
    A parent or guardian of a child * * * transported
    to a public school in accordance with a court order * *
    * may seek to reopen or intervene in the further
    implementation of such court order, currently in
    effect, if the time or distance of travel is so great
    as to risk the health of the student or significantly
    impinge on his or her educational process.
    - 15 -
    involving a tax lien inasmuch as the provision recognizes that
    the application to intervene may be denied).11
    Consistent with the preceding discussion, we hold that the
    portion of respondent’s notice which states that Mr. Murray may
    intervene in this case only for the purpose of opposing
    petitioner’s claim for relief is incorrect.       Accordingly, we
    shall grant petitioner’s motion to strike in that the restrictive
    language in respondent’s notice, filed March 8, 2004, shall be
    deemed stricken.     Further, the Court will direct that Mr.
    Murray’s notice of intervention be filed.
    To reflect the foregoing,
    An order will be issued
    granting petitioner’s motion
    to strike and directing that
    the notice of intervention,
    lodged April 1, 2004, be filed.
    11
    Sec. 7424 provides in pertinent part:
    If the United States is not a party to a civil
    action or suit, the United States may intervene in such
    action or suit to assert any lien arising under this
    title on the property which is the subject of such
    action or suit. * * * In any case in which the
    application of the United States to intervene is
    denied, the adjudication in such civil action or suit
    shall have no effect upon such lien.