Susan K. Kaufman, Petitioner

T .C . Memo . 2010-8 9 UNITED .,STATES, TAX COURT SUSAN K . KAUFMAN, Petitioner v COMMISSIONER OF INTERNAL, REVENUE, Responden t Docket No . 25619-07L .

Filed April 27, 2010 .

R filed a notice of Federal tax lien and issued final notices of intent . to levy to .collect .unpaid joint tax liabilities of P and P's husband . Prior tothe .collection due process ..-hearing', P,'s .husband died and his estate-paid .

the liabilities . At the .CDP hearing P sought innocen t spouse, relief under sec . 6015, I . R .,C and,requested a refuhd .`-R denied P innocent spouse relief and issued her a notice of determination sustaining, .the-collection actions . P filed a petition with the Court, which.P claims to be a ,petition, for review _of R's ,denial of innocent spouse relief .

T_I_1 A ._ 7l/ ..

. .._ .L :L- - - --- ------ )ouse petition .

Held , further, P. is not entitled to relief under sec .

6015(b)' or'(c), I .R .C ., because there was no . understatemen t of tax .

Held , further , P cannot be treated as the payor of the joint tax liabilities .

SERVED APB 7 2010 Held , further , P is not entitled to relief under sec .

6015(f), I .R .C ., because she did not pay the liabilities .

Hakim Ben Adjoua , for petitioner .

Terry Serena and Emily J . Giometti , for respondent .

MEMORANDUM OPINION

NIMS, Judge : This matter is before the Court o n respondent's motion to dismiss on grounds of mootness pursuant t o Rule 53 . Unless otherwise indicated, all section references ar e to the Internal Revenue Code, and all Rule' references are to the Tax Court Rules of Practice and Procedure .

.. Background Petitioner resided in Ohio at the time she filed her petition .

On September 28 ., 2005, respondent separately notified` petitioner and Mr .'Kaufman (the Kaufmans) that he had filed`a, notice of- Federal-tax lien (NFTL) fortheir unpaid joint tax, liabilities from 2001 through 2004 On November 1, 2005, respondent ° issued to' petitioner anotice of intent to levy fo r the Kaufmans' 2001 through 2003 joint tax years . Respondent also issued-to Mr . Kaufman a notice of intent to levy for . those sam e joint tax years and for his 2000 individual tax year .

On November .2, '2005;, .¢ the Kaufmans requested aface-to-face - collection due process ..(CDP-)=hearing in response to=the NFTL-and notices of int-ent to levy . ' (levy . notices) .

.

.In .their.-CDP hearing request the Kaufmans `sought-a`release of the' tax, liens and- abatement . of penalties and' interest . The Kaufmans alsoproposed collection alternatives and allegedthat :the amounts of"tax assessed were incorrect and that R, respondent had failed to comply with .the-applicable legal-and .procedural°requirements .'4, Petitioner did not request . innocent' spouse relief under section ' 6015 in'the'CDP,hearing request ."' Mr- . Kaufman died ' in April 20'06- before the `hearing was conducted . -, On- May '31, 2007, . `Mr .

.Kaufman' s estate paid the = United States $1,101,200 .74 in satisfaction of allof'his Federal-income tax liabilities .' As= 'a -result, respondent ~ issued a certificate of release `of the -Federal tax ' .lien covering 'the Kaufmans' 20-0 1 through 2004 ' j oint . :tax years .°' a Petitioner's CDP hearing was held on July 25, 2007 . At the, hearing petitioner did not discuss'the issues'"presented in'the CDP' hearing -request but .instead' raised 'the'-'i'ssue of section 6015- innocent spouse . relief ."

''On -October 10,",2007, respondent issLied -to .petitioner a notice ,of determination (Notice) . .`.- The . Notice . was entitled "NOTICE OF-DETERMINATION~CONCERNING'COLLECTION ACTION(S) UNDER - SECTION 6320`and/or 6330"abut in`addition .to the subject matter '4- suggested by the,title, .also'discussed petitioner's request fo r innocent spouse relief . In the Notice respondent denie d petitioner, relief under section 6015(b), (c), ., or (f) and determined 'that the NFTL filing and levy notices wer e appropriate . On November 7, 2007, petitioner timely filed- a .petition with this Court in response to .the'Notice .

Discussio n Respondent contends that-the petition is for review .off .

respondent ' s determination to proceed with collection .

Respondent argues that petitioner's case is therefore moo t because .Mr . .Kaufman's estate fully paid the tax liabilitie s covered by the NFTL and-levy notices . See Greene -Thapedi .v .

Commissioner , 126 T .C . 1, 7 (2006) .

Petitioner contends that her petition-is-for review o f respondent's denial of innocent spouse relief under section 6015 ; and thus seeks a refund of the joint=tax liabilities paid by the .

estate .

Although the Notice is entitled as ,a determinatio n concerning respondent's collection actions,~the issue of innocen t spouse relief was properly raised at the CDP hearing and the Notice addressed petitioner's request for innocent spouse„relief .

Therefore, the Notice was respondent's final determinatio n regarding petitioner's entitlement to innocent spouse relief .

See Wright v-. Commissioner , 571 F .,3d 215, 220 (2d Cir . 2009) , vacating and remanding T .C . Memo . 20 .06-273 . Since the petition was marked as a "Petition for Determination of Relief from Joint and Several Liability on a Joint Return", we will accordingly treat it as a request : for, review of respondent's denial of innocent spouse relief .

As an innocent spouse petition, petitioner's case is not moot . However, .even when . all factual inferences are read in favor of petitioner,, . no issues of material fact remain and a decision may thus be rendered as a ,matter of law . -See Rule 121(b) ; Sundstrand Corp . v . Commissioner , 98 T .C . . 518, 520 (1992) affd . 17 F .3d .965 (7th Cir . 1994) ; Dahlstrom v .

Commissioner , 85 T .C . 812, 821 (19 .85) ; . Jacklin v . Commissioner ,

1 .6013-4(b), Income Tax Regs . Three types of relief from join t 'Petitioner's counsel also erroneously argued that petitioner's refund claim is authorized by the Internal Revenue Service's Publication 971, Innocent Spouse Relief, and that our decision in Greene-Thapedi v . Commissioner , 126 T .C . 1, 7 (2006), was reversed and remanded in part in Greene-Thapedi v . United States , 100 AFTR 2d 2007-6513 (N .D .'Ill . 2007), vacated 549 F .3d 530 (7th Cir . 2008) .

and several liability are available under section 6015 . -Section 6015(b) requires the Commissioner to grant relief ,from joint liability if the-taxpayer did not know and had no reason'to know that there was an' understatement when she signed the joint return . Section 6015(c) allows for proportionate relief to the taxpayer-for the portion of a deficiency that would have been allocable to the taxpayer's .spouse if the spouses had filed separate returns . Section 6015(f) provides equitable relief in certain circumstances when relief is not available under section 6015(b) or (c) .

We have jurisdiction to review the Commissioner ' :s⁴ denial of relief, under section 6015 (b) (c), or (f) . .- See sec . 6015(e) .

For . tax liabilities remaining unpaid on December 20, 2006, we have jurisdiction to review the denial of equitable relief under section-6015(f) even when no deficiency has been asserted ., See' Tax Relief-and Health Care Act of 2006, Pub . L . 109-432, div . C, sec . 408(a), 120 Stat . 3061 .

Petitioner, however, is'not entitled-to a refund under any provision-of-section 6015 . Petitioner cannot obtain a refund under section 6015(c) because that is strictly' prohibited by section 6015(g)(3) . Petitioner is not entitled to a refund-under section 6015,(b) because she cannot obtain innocent spouse relief under that provision since respondent asserted no deficiency, .

Assuming for the sake of argument that petitioner is entitled to,, .section 6015(f) relief petitioner .is nevertheless not entitled to a refund because,sheTdid noteprovide the funds,used .to pay the joint tax liabilities ; Mr . Kaufm'an's estate did . Cf . Ordlock v .

Commissioner , .126 T .C, .' '47 (20,06) 533 F .3d 1'136- (9th Cir .

2008) (holding-tha t, a(cid:127) taxpayer entitled to,innocent spouse relief was not entitled to-,a refund of,, joint -tax -liabilities' . usin g community property assets ,of the marital . estate) Rosenthal, v:

Commissioner , .T .,C .. Memo . 2004-89 -(" .Italso :must be <shown that th e payments were not, made, with the joint return,and were not joint spouse made .") . ' Petitioner argues that she should be' `tteated, . ashaving paid t the tax herself because she was the administrator and sole- beneficiary . of . Mr . `Kaufman'.s> estate .

To the extent petitioner 'is arguing that she isl' entitled t a`refund because her capacity as administrator ; gives her .standing to sue' on- behalf of the estate ; ,her .argument (cid:127)is irrelevant . A s administrator, petitioner .merely stands .in the shoes o'f` Mr Kaufman . See Estate of Jayne v . Commissioner , 61 T .C =744 75 0 (1974)°; . . Mr . Kaufman's estate has no `claim- for a' refund because Mr . Kaufman was the . one . responsible ,for the' underpayment =of' taxe s and .is .therefore' not-an -innocent` spouse :. , Furthermore, the,-denia l of section 6015(f) reliefwouldnot cause the estateeconomic , hardship because .Mr ., Kaufman-,is deceased :- 4 See Jonson~ v .

Commissioner , 118 T .C . 106, 126 ( 2002 ), affd . 353 F .3d 1181 `(10th Cir . . 2003) ; Rev . .Prot . 2003-61, sec . i 4 .02 (1) ( c) , 2003 - 2 C .B . 296, 298 .

#, ; .To the extent petitioner is arguing that we should look .

through the .estate, that position is without . basis . .in law . It-i s well settled that an estate is a separate entity for Federal tax purposes. . See . Hartley v . Commissioner , 295-U .S . 216 218-(1935 ) Biewer v ;-Commissioner, 341 F .2d 394, 396 (6th Cir . 1965), affg. .-

(1929)'. The same is also true under Ohio probate law . See In'r e Estate of Gamble , 8 Ohio, Misc . 314, 322 (Prob . Ct . 1966) .

ignore the existence of the estate, as petitioner asks us to do, .

would require us to overrule long-standing Federal law an d completely disregard Ohio State-law .- We decline to do so .

Although we are aware that the Court of Appeals .for the` Sixth Circuit stated in DeNiro v . United States , 561 F .2d 653 , 657 (6th Cir . 1977), that "one other than the'actual payer-o f tax may have standing to sue for a refund", the Court of Appeals' later clarified in Estate ofFink .v .- United States , 852 F .2d 153, 155, ;(6th Cir . 1988), that DeNiro "addressed a situation where a corporation paid .. the tax liability . of its controlling shareholder and the transaction was treated as-the distribution of a .

constructive dividend used to pay the tax liability . Unlike DeNiro , there can be no constructive distribution to petitioner .

.Under Ohio law,,- ..the-decedent's personal property is delivered t o the distributees after payment of theiestate',stdebts,- and lega l and beneficial ownership of the personal property vests in th e .distributees ; .only upon that delivery ., : Cent . Natl -Bank,-.Sav .` .& Trust Co . v . Gilchrist , 154 N .E . 811,'8l², .(Ohio Ct . App1926) .

The U .S . Government held a lien on the assets of the estate due .

to Mr . Kaufman's unpaid tax liabilities (which includes his 2000 individual tax liability) . See sec . 6321 . Because petitioner is the residuary beneficiary of the estate, her claim to th e estate's assets is subordinate to those of the estate's creditors because, as the Ohio Supreme Court explained, "`A residuary devisee or legatee is presumed in law to be in the position of the last lienholder,, after all prior lawful claims and charges have been satisfied outof the estate .'" See Estate of Tessmer v . Commissioner , T .C . Memo . 1994-401 (quoting YMCA v . Davis , 140 N .E . 114, 114 (Ohio 1922Y, affd . 264 U .S, . 47 (1924)) . If we treated petitioner as having received a constructive distributio n from Mr . Kaufman's estate, we .would impermissibly elevate her residuary claim ahead of the lien held by the Government : ..

Furthermore, . the creation of a constructive distribution would be pointless because petitioner would not have been able t o pay the Kaufmans' joint tax liabilities using the proceeds of a premature distribution . . The Government's lien would have followed such a distribution into petitioner's ;.hands . See United States v . Bess , 357.. U .S .m° :51, 57 (1958) .

x Accordingly, we, hold that petitioner is not=entitled to innocent spouse relief under section 6015(b), (c), or (f) .

To reflect the foregoing, An appropriate order and decision will be entered .

41. T .C . 191 (1963°) ; Boykin v . Commissioner , 16`B .T .A_ 477, 479 .
79. T .C . 340, 344 (1982) . We will therefore treat respondent's motion to-dismiss aswa motion for summary judgment under Rule 121 .- Petitioner will suffer .no prejudice since petitioner's counsel responded to respondent's motion to dismiss as if it-were a motion for summary judgment . ' Spouses filing a joint -return are jointly and :severally liable for the entire tax liability . Sec . . 6013`(d)(3) ;-see sec . .