In a recent case of first impression, the U.S. Tax Court held that in “stand alone” innocent spouse cases under I.R.C. section 6015(e)(1) the Court has discretion to allow the petitioner to withdraw the petition without entering a decision because petition does not invoke the Court’s deficiency jurisdiction. The taxpayer filed a Form 8857, Request for Innocent Spouse Relief, seeking relief from joint and several liability for 2007 and 2008. The IRS denied relief. The taxpayer timely petitioned, but later filed a motion to dismiss, seeking to voluntarily withdraw the petition. The IRS did not object.
Typically cases before the Tax Court involve petitions to redetermine deficiencies under I.R.C. section 6213. When the Court’s jurisdiction to redetermine a deficiency is invoked I.R.C. section 7459(d) provides:
“If a petition for a redetermination of a deficiency has been filed by the taxpayer, a decision of the Tax Court dismissing the proceeding shall be considered as its decision that the deficiency is the amount determined by the Secretary. An order specifying such amount shall be entered in the records of the Tax Court unless the Tax Court cannot determine such amount from the record in the proceeding, or unless the dismissal is for lack of jurisdiction.”
Essentially this means that a taxpayer cannot withdraw a petition in cases brought under I.R.C. 6213 in order to avoid a decision.
Congress has expanded Tax Court jurisdiction to cases that do not require a redetermination of a deficiency. These include collection due process actions and stand alone innocent spouse cases. Previously the Tax Court held that a taxpayer can withdraw their petition when challenging the validity of a lien because there was no deficiency involved. In determining that the taxpayer could withdraw the petition, the Court looked to Federal Rule of Civil Procedure rule 41(a), which allows voluntary dismissal under certain circumstances.
In holding that the petitioner could withdraw her petition, the Tax Court distinguished its opinion in Vetrano v. Comm’r. In that case the petitioner invoked innocent spouse as an affirmative defense in a deficiency case. In that scenario, under I.R.C. section 7459(d), the Court must enter a decision.
One important effect the Davidson decision has is that by withdrawing the petition, I.R.C. section 6015(g)(2), which makes the Court’s decision on innocent spouse res judicata, does not apply. The withdrawal has the same result as if the case was never brought. Despite this, the petitioner could not reinstitute the case before the Tax Court because the time to petition had now expired.
JONATHAN KALINISKI – For more information please contact Jonathan Kalinski at email@example.com. Mr. Kalinski is a former trial attorney with the IRS Office of Chief Counsel litigating Tax Court cases and advising IRS Revenue Agents and Revenue Officers on a variety of complex tax matters. Jonathan received his LL.M. in taxation from New York University and served as an Attorney-Adviser to the United States Tax Court. He is a tax attorney at Hochman, Salkin, Rettig, Toscher & Perez, P.C. and represents clients throughout the United States and elsewhere involving federal and state, civil and criminal tax controversies and tax litigation. Additional information is available at http://www.taxlitigator.com.
Davidson v. Comm’r, 144 T.C. No. 13 (2015)
Id. at pg. 3
Estate of Ming v. Comm’r, 62 T.C. 51 (1974)
Wagner v. Comm’r, 118 T.C. 330 (2002)
Vetrano v. Comm’r, 116 T.C. 272, 280 (2001)
Davidson v. Comm’r, 144 T.C. No. 14, 10 (2015)