Domulewicz v. Commissioner

OPINION

HOLMES, Judge : Suzanne Vance Fain filed this case when the Commissioner refused to grant her innocent-spouse relief from her unpaid tax liability for 1999 .

Her case was already on a trial calendar when Commissioner's counsel realized that the IRS had not notified her husband of his right to intervene . That turned out to be impossible--he was dead .

We are called to plug a small but noticeable gap in the tax law--is a nonrequesting spouse's right to intervene extinguished by death or does it instead pass to a successor-in-interest ?

Background According to the pleadings already filed in this case, the Fains filed a joint tax return for 1999 . It showed that they owed about $15,000, but neither Fain paid . The couple later separated, and eventually the Commissioner began to try to collect the unpaid tax .

In February 2006, Suzanne filed a request for innocent- spouse relief under section 60151 with the Commissioner . He denied it in September 2006, and Suzanne filed a petition seekin g review with this Court . Section 6015(e)(4) required us to issue rules that provide nonrequesting spouses "with adequate notic e

and an opportunity to become a party ." Our Court's Rule 325-- which we promulgated to answer that section's call--requires the IRS to serve notice that a petition has been filed "on the other individual filing the joint return" no later than 60 days from the date that the petition itself was served . The Commissioner overlooked this obligation here until the case was already on a trial calendar . Then he learned that Robert Fain had died in 2002 .

Discussion The first question we have to answer is whether Robert' s right to intervene survives his death . There's no clear answer in the Code or regulations, so we rely on analogy, some background principles of law, and a nod to reasonableness . We start with the language of section 6015(e)(4), which gives a nonrequesting spouse the unconditional right to "become a party ."

We have already held that this means that he has a right to intervene within the meaning of rule 24(a)(1) of the Federal Rules of Civil Procedure .

Van Arsdalen v . Commissioner , 123 T .C .

135, 143 (2004) . And it is generally the case that a right to intervene passes to a decedent's estate . See, e .g ., Salt River Pima-Maricopa Indian Cmty . v . United States , 231 Ct . Cl . 1033 (1982) . An estate's right to intervene in some cases does not, of course, imply a general rule that all rights to intervene sur- vive death . But Franklin observed long ago that nothing in life is certain but death and taxes .

And the Internal Revenue Code makes sure that taxes survive even death .

Sec . 6901(a)(1)(A)(i), (h) . The survival of a decedent ' s tax liability means that as a practical matter his heirs or beneficiaries may be affected by the outcome of an innocent-spouse case .

The opportunity to intervene is an opportunity to protect those interests , because granting innocent-spouse relief will make the estate of the nonrequesting spouse the only source of payment for any unpaid tax the deceased has left behind .

Turning to the Code again , we find that it also states, as a general rule , that any person acting for another person in a fiduciary capacity shall assume the powers , rights, duties, and privileges of that person with respect to taxes, sec . 6903, and that the word " fiduciary" includes executors and administrators, sec . 7701 (a) (6) .

We have already applied these sections to allow executors and administrators to seek innocent - spouse relief, e .g ., Jonson v . Commissioner , 118 T .C . 106 (2002 ) ( estate of deceased spouse able to request relief under section 6015 ), affd . 353 F .3d 1181, 1184 ( 10th Cir . 2003 ), and the Commissioner himself has ruled likewise , Rev . Rul . 2003 - 36, 2003-1 C . B . 849 . Construing the Code to allow executors and administrators to intervene to oppose relief seems equally justified .

We finally note that allowing intervention is reasonable be- cause it likely will increase the probability that we'll reach the right result in any particular case . This is why we've con- strued the right of a living spouse to intervene not just to op- pose a petition, e .g ., King v . Commissioner , 115 T .C . 118, 125 (2000), but also to support it, e .g ., Van Arsdalen , 123 T .C . at 142 .

We note that this is our construction of a statutory right, and should not be confused with the issue of whether someone who is jointly liable on a tax debt has constitutional standing to challenge the Commissioner's decision to let another taxpayer off the hook for that debt . The Ninth Circuit--the circuit to which this case would be appealed because Suzanne was a Nevada resident when she filed her petition--has held that a nonrequesting spouse lacks standing to challenge on appeal our decision to grant innocent-spouse relief precisely because the spouse's liability would remain the same whether or not relief was granted, Baranowicz v . Commissioner , 432 F .3d 972, 975 (9th Cir . 2005), affg . T .C . Memo . 2003-274, and we are not faced with that issue here .

The last question is what the Commissioner should do when neither he nor the requesting spouse has any idea whether there is an estate and whether it has a personal representative . While there may well be circumstances in which the Court's discretion points in another direction , in this case we agree with the Commissioner that it is appropriate to use an analogy to our long-followed procedure in deficiency cases . That procedure, as described in Nordstrom v . Commissioner , 50 T .C . 30, 32 (1968), is to file an order requiring both partie s to furnish the Tax Court, insofar as ascertainable and to the best of their abilities , the names and addresses of the heirs at law of the decedent, under the law of the jurisdiction wherein the decedent was a resident when his death occurre d and for the Court to then notify the heirs .

Id .

We think this is the most reasonable procedure in the absence of a statute or regulation providing differently . To enable the parties to search for heirs, this case will be continued, And an appropriate order wil l be issued .