Opinion
12982-20
04-26-2022
SYDNEY ANN CHANEY THOMAS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Emin Toro, Judge
This innocent spouse case was tried on April 4, 2022, during the Court's San Francisco, California, trial session. On the date of trial, the parties filed a Stipulation of Facts and a Supplemental Stipulation of Facts. The Stipulation of Facts includes the administrative file compiled by the IRS when it denied Ms. Thomas's claim for innocent spouse relief.
At trial, Ms. Thomas presented testimony and the Court received exhibits into evidence. The Commissioner stated objections with respect to relevance, hearsay, and / or I.R.C. § 6015(e)(7) for five of the exhibits. Ms. Thomas indicated a potential concern with respect to a sixth exhibit. The challenged exhibits and associated objections are listed in the chart below.
| Objection(s) | Included in the Administrative Record? | |
| Exhibit 6-J, p. 10 14 | Hearsay (R) | Yes |
| Exhibit 6-J, p. 15 18 | Relevance (R) | Yes |
| Exhibit 6-J, p. 29 | Relevance (R) | Yes |
| Exhibit 13-R | No | |
| Exhibit 29-P | Hearsay (R) | Yes |
| Exhibit 31-P | No |
| Exhibit 32-P | Hearsay, Relevance (R) | No |
| Exhibit 33-P | Relevance (R) | No |
The pinpoint citations to Exhibit 6-J refer to the page numbers printed at the bottom of each page of the exhibit (e.g., "Page 10/32").
The Court received the exhibits and took the parties' objections under advisement. The Court indicated to the parties that it would welcome briefing on the points they raised.
On further consideration, the Court believes that it would advance the orderly resolution of this case to treat each of the exhibits listed above as admitted in full. But, given the novelty and complexity of certain of the relevant issues, the Court invites the parties to advise the Court if they disagree with the ruling. Moreover, our ruling is without prejudice to the parties' ability to file motions to have an exhibit stricken from the record. Any motions to strike filed with the Court must be accompanied by appropriate memoranda setting out the reasons why the relevant exhibits should be stricken from the record either in whole or in part.
To assist the parties should they decide to file such motions, the Court lays out below some preliminary considerations with respect to the governing standards and their potential applicability to each of the relevant exhibits. The Court notes that, given the novelty and complexity of certain issues, Ms. Thomas's presentation on these issues may benefit from the assistance of counsel (pro bono or otherwise).
Standard and Scope of Review
On July 1, 2019, the Taxpayer First Act was signed into law as Public Law No. 116-25. As relevant here, section 1203 of that Act amended I.R.C. § 6015, Relief from Joint and Several Liability on Joint Return, by adding paragraph (e)(7), which provides as follows:
(7) STANDARD AND SCOPE OF REVIEW - Any review of a determination made under this section shall be reviewed de novo by the Tax Court and shall be based upon-
(A) the administrative record established at the time of the determination, and
(B) any additional newly discovered or previously unavailable evidence.
Taxpayer First Act, Pub. L. No. 116-25, sec. 1203(a)(1), 133 Stat. 988 (2019). Section 1203(b) of the Act provides that "[t]he amendments made by this section shall apply to petitions or requests filed or pending on or after the date of the enactment of this Act." Id. at sec. 1203(b); see also Sutherland v. Commissioner, 155 T.C. 95, 104 (2020) (concluding that paragraph (e)(7) applies to petitions filed with the Court on or after July 1, 2019).
Paragraph (e)(7) applies in this case because the petition was filed on November 9, 2020. Accordingly, we review the IRS's determination de novo "based upon the administrative record established at the time of the determination" and "any newly discovered or previously unavailable evidence." I.R.C. § 6015(e)(7). Where relevant, we discuss the implications of the provision for the individual exhibits below.
I.R.C. § 6015(e)(7) does not define the administrative record for purposes of an innocent spouse determination. Cf. Treas. Reg. § 301.7623-3(e)(1) and (2) (describing the administrative record for a whistleblower determination); Treas. Reg. § 301.6330-1(f), Q&A-F4 (describing the administrative record for a collection due process hearing).
Exhibit 6-J, p. 10-14, and Exhibit 29-P, Letters of Support
Exhibit 6-J, pages 10-14, and Exhibit 29-P consist of three letters (two of which are notarized) written by friends of Ms. Thomas. As the parties agree, Ms. Thomas submitted the letters to the IRS in support of her request for innocent spouse relief, and therefore they are part of the administrative record.
The Commissioner objects to the letters on the grounds that the statements in them are hearsay. Tax Court proceedings generally are conducted in accordance with the Federal Rules of Evidence. See I.R.C. § 7453; Rule 143, Tax Court Rules of Practice and Procedure. In general, the exclusionary rule in Rule 802 of the Federal Rules of Evidence (the "rule against hearsay") provides that hearsay is not admissible. By its terms, however, the exclusionary rule applies unless a federal statute, the Federal Rules of Evidence, or a rule prescribed by the Supreme Court "provides otherwise." Fed.R.Evid. 802. It would appear that, by requiring that we review innocent spouse cases "based upon . . . the administrative record," I.R.C. § 6015(e)(7) "provides otherwise" for purposes of this case. We recognize, however, that paragraph (e)(7) is a new provision that our Court has not yet analyzed in depth in the context of evidentiary matters, and we would welcome the parties' views on this point.
In Marino v. Commissioner, T.C. Memo. 2021-130, at *21, the Court held that we review the administrative record in a whistleblower case "without regard to whether it might include evidence that would be inadmissible as hearsay in a trial de novo."
We further recognize that a party might wish to challenge the veracity of hearsay materials included in the administrative record. Rule 806 of the Federal Rules of Evidence describes various methods for undertaking such a challenge. The Court appreciates that the opportunities for employing these or similar methods in an innocent spouse administrative proceeding might well be limited. Accordingly, the Court would welcome views from the parties on how, consistent with I.R.C. § 6015(e)(7), portions of the administrative record such as the letters at issue here might be subject to further inquiry in a judicial proceeding seeking review of the Commissioner's determination not to grant relief under I.R.C. § 6015. Could a party here, for example, have called the authors of the letters as witnesses as contemplated by Rule 806 of the Federal Rules of Evidence?
Exhibit 6-J, p. 15-18, Real Estate Records
Exhibit 6-J, pages 15-18, consists of documents related to an alleged attempt to sell Ms. Thomas's primary residence in 2018. Because Ms. Thomas provided the documents to the IRS during its consideration of her request for innocent spouse relief in 2019, they are part of the administrative record. The Commissioner objects to the documents on the basis of relevance.
As an initial matter, in light of I.R.C. § 6015(e)(7)'s requirement that we review this case "based upon the administrative record established at the time of the determination," it would appear that any document included in the administrative record should be admitted into evidence for the Court's consideration during its de novo review. But we would welcome the parties' views on any alternative readings of the statute.
Additionally, the documents in question contain information about Ms. Thomas's primary residence that tends to show its value, a fact that is of consequence in determining "if it is inequitable to hold [Ms. Thomas] liable for any unpaid tax . . . ." I.R.C. § 6015(f)(1)(A); see also Rev. Proc. 2013-34, 2013-43 I.R.B. 397 (stating that the extent to which the requesting spouse will suffer economic hardship if relief is not granted is a factor in determining whether relief should be granted). Accordingly, we view the documents as satisfying the relevance standard, although the age of the documents may be a factor in determining the weight that we should give them. See Fed. R. Evid. 401 (stating that evidence is relevant if "it has any tendency to make a fact more or less probable" and "the fact is of consequence in determining the action"); see also Sage v. Commissioner, 154 T.C. 270, 279 (2020) ("The relevance bar is a low one.").
Exhibit 6-J, p. 29, Berkeley Employment Contract
Exhibit 6-J, page 29, is an unsigned employment contract offering Ms. Thomas temporary work as an instructor at U.C. Berkeley Extension for a one-day course in 2015. Because Ms. Thomas provided the contract to the IRS during its consideration of her request for innocent spouse relief, it is part of the administrative record. The Commissioner objects to the contract on the basis of relevance.
As discussed above, as an initial matter, in light of I.R.C. § 6015(e)(7)'s requirement that we review this case based on the administrative record, it would appear that any document included in the administrative record should be admitted into evidence for the Court's consideration. But, again, we would welcome the parties' views on any alternative readings of the statute.
Additionally, the employment contract tends to show Ms. Thomas's employment history and future prospects, facts that are of consequence in determining "if it is inequitable to hold [Ms. Thomas] liable for any unpaid tax . . . ." I.R.C. § 6015(f)(1)(A); see also Rev. Proc. 2013-34, 2013-43 I.R.B. 397. Accordingly, we view the contract as satisfying the standard for relevance, although, again, the age of the document may be a factor in determining the weight we should give it. See Fed. R. Evid. 401.
Exhibit 13-R. Ms. Thomas's Blog
Exhibit 13-R consists of a series of posts from Ms. Thomas's personal blog. The first post is dated November 2, 2016, and the final post is dated January 5, 2022.
At trial, Ms. Thomas expressed some concerns about the admissibility of the blog posts. The contents of the posts are relevant to the case before us because they contain information about Ms. Thomas's assets, lifestyle, and business, as well as her relationship with her husband. See Fed. R. Evid. 401. Additionally, the posts are not hearsay because they constitute admissions by a party opponent. See Fed. R. Evid. 801(d)(2)(A). However, we are interested in the views of the parties on the application of I.R.C. § 6015(e)(7) to the blog posts. We list below some questions that might be relevant to this analysis:
1. Are the blog posts "newly discovered or previously unavailable evidence"?
2. In making that determination, what is the importance (if any) of the fact that some of the blog posts were publicly available via Internet search during the IRS innocent spouse administrative proceeding?
3. If the Commissioner did not "discover" the blog posts until after the administrative proceeding was complete, is that sufficient to allow the blog posts into evidence at trial?
4. Should the phrase "newly discovered evidence" be given its ordinary meaning (e.g., evidence that was not "found out" before a relevant time) or should it be viewed as a term of art? See, e.g., Discover, OED.com, https://www.oed.com/view/Entry/54005?redirectedFrom=discover& (last visited April 14, 2022); see also Discover, Mirriam-Webster.com, https://www.merriam-webster.com/dictionary/discover (last visited April 14, 2022) (defining "discover" in relevant part to mean "to obtain sight or knowledge of for the first time" or to "find out").
5. If the phrase is viewed as a term of art, is its meaning different from the ordinary meaning of the phrase? See, e.g., Black's Law Dictionary (11th ed. 2019) (defining "newly discovered evidence" as "[e]vidence existing at the time of a motion or trial but then unknown to a party, who, upon later discovering it, may assert it as grounds for reconsideration or a new trial") (citing Fed.R.Civ.P. 60(b)).
6. Should Federal Rule of Civil Procedure 60(b)(2) inform our interpretation of the term "newly discovered evidence" in I.R.C. § 6015(e)(7)? That rule provides that "[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding" based on "newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b)." Fed.R.Civ.P. 60(b)(2) (emphasis added).
7. If Federal Rule of Civil Procedure 60(b)(2) should inform our interpretation of the term "newly discovered evidence" in I.R.C. § 6015(e)(7), what is the import of the qualifying language used in that rule and italicized above?
8. Relatedly, should this Court's interpretation of the term "newly discovered evidence" in other contexts inform our interpretation of the same term in I.R.C. § 6015(e)(7)? See, e.g. Estate of Quick v. Commissioner, 110 T.C. 440, 441 (1998) (applying the term "newly discovered evidence" in the context of a motion to reconsider pursuant to Rule 161, Tax Court Rules of Practice and Procedure); Fairmont Aluminum Co. v. Commissioner, 22 T.C. 1377, 1383-84 (1954) (same, regarding a motion for new trial pursuant to Rule 162, Tax Court Rules of Practice and Procedure); Rule 1(b), Tax Court Rules of Practice and Procedure ("Where in any instance there is no applicable rule of procedure, the Court . . . may prescribe the procedure, giving particular weight to the Federal Rules of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand.").
9. Does the "newly discovered evidence" standard mean that the same evidence could be admissible if offered by one party but inadmissible if offered by the other? For example, might the older blog posts be admissible if the Commissioner offers them (because they existed at the time of the administrative proceeding but were "then unknown" to (or had not been "found out" by) the Commissioner), but not if the petitioner offers them (because she knew of them at the time of the administrative proceeding)? And if the one party is allowed to offer "newly discovered evidence," how can the other party rebut that evidence in a manner consistent with I.R.C. § 6015(e)(7)?
Exhibit 31-P, Bankruptcy Records
Exhibit 31-P is an undated Chapter 13 Standing Trustee's Final Report and Account for a bankruptcy case filed by Ms. Thomas.
Respondent objects to Exhibit 31-P by invoking I.R.C. § 6015(e)(7). Exhibit 31-P is not part of the administrative record and presumably was publicly available during the IRS innocent spouse administrative proceeding. Additionally, the IRS appears to have been aware of Ms. Thomas's bankruptcy case at the time that it made its determination. The document therefore might not constitute "previously unavailable evidence" within the meaning of I.R.C. § 6015(e)(7). Depending on the answers to the questions listed above with respect to Exhibit 13-R and the knowledge of the parties concerning this particular document at the time of the administrative proceeding, the document might qualify as "newly discovered evidence." We would welcome the parties' views on these points.
In this connection, we note that the parties have stipulated that Ms. Thomas filed her petition for Chapter 13 bankruptcy in the U.S. Bankruptcy Court, California Northern Bankruptcy Court, in 2018. The parties have also stipulated to certain documents related to the bankruptcy case. Specifically, Exhibit 11-J is a copy of Petitioner's Summary of Assets and Liabilities filed with the bankruptcy court on December 12, 2018. Exhibit 12-J is a copy of the Bankruptcy Court's closing sheet, which shows that the case was dismissed for failure to make plan payments. These exhibits do not appear to have been part of the administrative record, but respondent did not object to the admission of these documents. The information in Exhibit 31-P appears to be generally consistent with the information in Exhibits 11-J and 12-J, with some minor discrepancies, so the Court is interested in understanding why some documents related to the bankruptcy proceeding should be admitted but others should not.
Exhibit 32-P, News Article
Exhibit 32-P is a 2013 local news article that describes the murder of two teenagers by their father in a community a few hours from the Thomas home. Ms. Thomas told the IRS about the incident in a written statement attached to her request for innocent spouse relief, stating that her husband would tell her and her children that the father described in the article was "his hero for having gone through with it." But Ms. Thomas did not provide the article to the IRS, and therefore it is not included in the administrative record.
The Commissioner objects to the article on the grounds of relevance and hearsay. We address the two objections in turn.
Relevance. In an innocent spouse cases such as this one, our analysis is informed by Revenue Procedure 2013-34, 2013-43 I.R.B. 397, and the factors set out therein. "[T]he Court consults those same factors when reviewing the IRS's denial of relief." See Pullins v. Commissioner, 136 T.C. 432, 438 (2011) (discussing the Revenue Procedure's predecessor). But we are not bound by them. Minton v. Commissioner, T.C. Memo. 2018-15, at *12 (collecting authorities). Whether or not Ms. Thomas was abused by her husband and fearful of him before his death is a significant consideration under the Revenue Procedure. Ms. Thomas has pointed to her husband's alleged statements about the incident described in the article as abusive and as one reason she feared him. Although, as respondent points out, the article does not prove that Mr. Thomas made the statements that Ms. Thomas attributes to him, it tends to show that the incident described in the article was known to the community in which Ms. Thomas and her husband lived making it more probable that it was known to them as well. The article also provides context for the statements made by Ms. Thomas in submissions to the IRS. In our view, this is sufficient to satisfy the "low bar" standard for relevance. See Fed. R. Evid. 401; Sage, 154 T.C. at 279.
Hearsay. The Federal Rules of Evidence define "hearsay" as a statement that (1) is made outside of the current trial, and (2) is offered in evidence to prove the truth of the matter asserted in the statement. Fed.R.Evid. 801(c). We view the article as falling outside this definition because Ms. Thomas offers it to show that the incident it reports was known to her and her husband and not to prove that the contents of the article are true. See id.
Exhibit 33-P, Land Rover Invoice
Exhibit 33-P is an invoice that shows the results of an inspection of Ms. Thomas's Land Rover and recommends further work be performed. The invoice is dated September 10, 2021, and was not part of the administrative record.
The Commissioner objects to the invoice on the grounds of relevance. But the value of Ms. Thomas's Land Rover is relevant to our analysis of the "economic hardship" factor of Revenue Procedure 2013-34. Evidence showing that the Land Rover is in need of repairs tends to show its value. In our view, therefore, the invoice satisfies the "low bar" standard for relevance. See Fed. R. Evid. 401; Sage, 154 T.C. at 279.
Upon due consideration, it is hereby
ORDERED that Exhibits 6-J, 13-R, 29-P, 31-P, 32-P, and 33-P are each admitted into evidence without prejudice to the parties' ability to file motions to strike. It is further
ORDERED that the parties must file any such motions to strike on or before May 23, 2022. It is further
ORDERED that, if either party files a motion to strike, any motion for leave to file an amicus brief in support or opposition must be filed on or before June 13, 2022. The proposed amicus brief must be lodged at the time the motion is filed.