Nonelecting spouse may intervene in support of innocent spouse relief.

Recently, the Tax Court ruled that a nonelecting spouse can intervene in support of the other spouse's claim for relief from joint and several liability.

Facts

P filed joint returns with her then spouse, M, for tax years 1992-1996.The 1RS issued a determination notice denying her claim for relief from joint and several liability for those years, under Sec. 6015(b), (c) and (f). P filed a Tax Court petition challenging the notice. The IRS then filed a notice stating that it had informed M of the petition and of his right to intervene, which stated: "Under T.C. Rule 325(b), [M] has a fight to intervene in this matter for the sole purpose of challenging petitioner's entitlement to relief from joint and several liability." However, M's subsequent notice of intervention 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)." (Emphasis added).

Analysis

Congress vested the Tax Court with jurisdiction to review the IRS's denial of a taxpayer's election to claim relief from joint and several liability under specified circumstances; see King, 115 TC 118 (2000) and Corson, 114 TC 354 (2000). One method of seeking review is a so-called stand alone petition seeking relief when the IRS has issued a final determination denying the taxpayer's claim or has riffled to rule on the taxpayer's claim within six months of its filing; see Sec. 6015(e)(1); Mora, 117 TC 279 (2001); and Fernandez, 114 TC 324 (2000). Under Sec. 6015(e) (4), the nonelecting or "other spouse" is entitled to notice of a standalone proceeding. It provides 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 Sec. 6015(e)(4), the Tax Court addressed the scope of a non-electing spouse's right to intervene in a Sec. 6015 case in both Corson and King. After the filing of the Corson and King opinions, the Tax Court adopted new Rule 325. In sum, it provides that the Service has to (1) notify the non-electing spouse of the filing of a petition claiming relief under Sec. 6015 and (2) inform that spouse of his or her right to intervene in the case. Notably, it does not impose any substantive restriction oil the nonelecting spouse's right to intervene in support of an electing spouse's relief claim.

In addition, there is no direct support in Sec. 6015 or its legislative history for the proposition that a nonelecting spouse's ability to intervene is limited to challenging an electing spouse's entitlement to relief. Moreover, new Rule 325 and the notes thereto are neutral on the point.

Contrary to the Service's argument, permitting a nonelecting spouse to intervene for the purpose of supporting an electing spouse's relief claim under Sec. 6015 is consistent with both prior practice and principles governing intervention under the Federal Rules of Civil Procedure (FRCP). Rule 24(a) provides intervention "...when a statute of the United States confers an unconditional right to intervene...."

Sec. 6015(e)(4) confers on a nonelecting spouse an unconditional statutory right to intervene within the meaning of Rule 24(a)(1). It also directs the Tax 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 it to impose any significant substantive conditions in respect of a nonelecting spouse's right to intervene. Consequently, the Tax Court prescribed intervention procedures in new Rule 325 and did so without imposing substantive conditions on the nonelecting spouse/intervenor.

Consistent with the preceding discussion, the portion of the IRS notice that states that M may intervene in this case only for the purpose of opposing P's relief claim is incorrect. Accordingly, P's motion to strike that restrictive language in the notice is granted; M can file his notice of intervention.

REFLECTIONS: In this case, the taxpayer filed a stand-alone petition for review. However, the Tax Court can review a claim for relief from joint and several liability in other ways (e.g., as an affirmative defense in a Tax Court deficiency petition under Sec. 6213(a) or in a petition for review of a lien or levy action). The Tax Court's application of Rule 325 appears to apply in all these Cases.

DIANA VAN ARSDALEN, 123 TC NO. 7

(2004)