Opinion
11350-18
01-24-2024
KIRAN RAWAT, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, Respondent AND RAGHVENDRA SINGH, INTERVENOR, Petitioner
ORDER
Joseph H. Gale Judge
This is a "stand-alone" case brought under section 6015(e) in which we must determine whether petitioner Kiran Rawat (Ms. Rawat) is entitled to relief from joint and several liability under section 6015 (innocent spouse relief) for the taxable years 1998 through 2002 and 2010. Pending before the Court is respondent's Motion for Partial Summary Judgment and the Declaration of Sharyn M. Ortega in Support of Motion for Partial Summary Judgment (collectively, Motion). Therein, respondent moves for partial summary adjudication in his favor as to three issues: namely, whether Ms. Rawat (1) is barred from seeking section 6015 relief for 1998, 1999, 2001, and 2002 by the application of res judicata; (2) is ineligible for section 6015 relief for 2000 because she did not file a joint return for that year; and (3) is ineligible for relief under section 6015(b) and (c) for 2010 because she filed her claim for such relief more than two years after respondent had begun collection activity for that year.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
"Stand-alone" cases brought under section 6015(e) are referred to as such because the only issue for adjudication is whether the taxpayer is entitled to relief from joint and several liability under section 6015, and the cases "are independent of any deficiency proceeding." Davidson v. Commissioner, 144 T.C. 273, 273-74 (2015).
Ms. Rawat untimely filed a Response to Motion for Partial Summary Judgment opposing respondent's Motion, which we have considered. To date, intervenor Raghvendra Singh (Mr. Singh), who has intervened in support of (rather than in opposition to) Ms. Rawat's claim, has not filed a response to the Motion.
By failing to respond to the Motion, Mr. Singh has waived his right to contest it, see Milnes v. Commissioner, T.C. Memo. 2003-62, 2003 WL 725036, at *3, and the assertions made therein, see Heinemann v. Satterberg, 731 F.3d 914, 917 (9th Cir. 2013); Craven v. Commissioner, T.C. Memo. 2017-23, 2017 WL 417239, at *4; Medairy v. Commissioner, T.C. Memo. 2015-16, 2015 WL 393019, at *3; Holland v. Commissioner, T.C. Memo. 2013-205, 2013 WL 4606147, at *4.
The purpose of summary judgment is to expedite litigation and avoid unnecessary and expensive trials. See FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). We may grant summary judgment with respect to all or any part of the legal issues in controversy where there is no genuine dispute of material fact and a decision may be rendered as a matter of law. See Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The burden is on the moving party to demonstrate that no genuine dispute as to any material fact remains and that he is entitled to judgment as a matter of law. See Sundstrand Corp. v. Commissioner, 98 T.C. at 520; see also Celotex Corp. v. Catrett, 477 U.S. 317, 323- 24 (1986).
In deciding whether to grant summary judgment, we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party. See Sundstrand Corp. v. Commissioner, 98 T.C. at 520; see also Anderson, 477 U.S. at 255. However, where the moving party properly makes and supports a motion for summary judgment, the nonmoving party "may not rest upon the mere allegations or denials of such party's pleading," but rather "such party's response, by affidavits or declarations or . . . otherwise . . ., must set forth specific facts showing that there is a genuine dispute for trial." Rule 121(d); Rauenhorst v. Commissioner, 119 T.C. 157, 175 (2002); King v. Commissioner, 87 T.C. 1213, 1216- 17 (1986); see also Celotex Corp., 477 U.S. at 324 (1986); Anderson, 477 U.S. at 249- 52; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) ("When the moving party has carried its burden . . ., its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.") (footnote and citations omitted).
"If the moving party has sustained its initial burden . . ., the burden of producing substantial evidence to demonstrate the existence of a genuine dispute as to a material fact shifts to the opposing party." 11 James Wm. Moore, Moore's Federal Practice - Civil § 56.41[1][a] (2021) (collecting cases); see also 10A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure - Civil § 2727.2 (4th ed. 2021) ("If the summary-judgment movant makes out a prima facie case that would entitle him to a judgment as a matter of law if uncontroverted at trial, summary judgment will be granted unless the opposing party offers some competent evidence that could be presented at trial showing that there is a genuine dispute as to a material fact.") (collecting cases).
For the reasons that follow, we conclude that each of the three issues presented in respondent's Motion involves no genuine dispute of material fact and may appropriately be adjudicated summarily. Moreover, we conclude that respondent is entitled to a ruling in his favor as to each of the issues. Accordingly, we will grant respondent's Motion.
Background
The following facts are based on the parties' pleadings, the records in the cases that Ms. Rawat and Mr. Singh have previously brought before the Court (of which we take notice pursuant to Rule 201 of the Federal Rules of Evidence), and the parties' motion papers, including the exhibits attached thereto. At the time the Petition and Notice of Intervention were filed, Ms. Rawat and Mr. Singh resided in California.
Ms. Rawat and Mr. Singh have previously filed joint petitions with this Court at Docket Nos. 11063-09, 1633-13, 12426-13, 25457-14, 9087-15, 6093-16, and 5123-17.
Absent a stipulation to the contrary, appeal in the instant case lies with the U.S. Court of Appeals for the Ninth Circuit, which has held that a nonrequesting spouse, such as Mr. Singh, lacks standing to appeal a determination of innocent spouse relief by this Court, notwithstanding the statutory right of intervention granted by section 6015(e)(4), "because his tax liability would remain the same whether or not . . . [the Court of Appeals] were to affirm or reverse the Tax Court's determination." See Baranowicz v. Commissioner, 432 F.3d 972, 976 (9th Cir. 2005), dismissing appeal from T.C. Memo. 2003-274.
Prior deficiency proceeding and taxable years 1998 through 2002
Ms. Rawat and Mr. Singh filed joint Federal income tax returns for 1998, 1999, 2001, and 2002. However, each elected married filing separate filing status on the federal income tax return that he or she filed for 2000.
In 2009, the Internal Revenue Service (IRS) issued to Ms. Rawat and Mr. Singh jointly a notice of deficiency, therein determining deficiencies and civil fraud penalties under section 6663(a) for 1998, 1999, 2001, and 2002. The majority of the adjustments in the notice of deficiency consisted of unreported Schedule C, Profit or Loss from Business, gross receipts and the disallowance of certain Schedule C deductions claimed for alleged business expenses relating to a nurse staffing business operated by Mr. Singh during the years at issue. On May 11, 2009, Ms. Rawat and Mr. Singh filed a joint petition for redetermination of the foregoing deficiencies and penalties, and the case was docketed at No. 11063-09 (prior deficiency proceeding). Both Ms. Rawat and Mr. Singh signed the petition. In addition to each of the taxable years raised in the notice of deficiency, the petition also raised the 2000 taxable year, which was subsequently placed at issue, but only as to Mr. Singh. Neither the petition nor the reply filed to the answer requested innocent spouse relief on behalf of Ms. Rawat.
Respondent also determined a deficiency and civil fraud penalty under section 6663(a) for the 1997 taxable year but that year is not relevant to the instant Motion.
In view of the fact that no notice of deficiency had been issued to Ms. Rawat for 2000, the Court granted respondent's motion to dismiss her from the case for lack of jurisdiction as to that year.
We note, however, that the petition did state the following: "All controversy is because of the business by Raghvendra Singh. Therefore, Kiran Rawat's liability should be considered zero". In our view the foregoing statements reflect an assertion-albeit an incorrect one, as a matter of law-that because the deficiencies determined in the notice of deficiency predominantly arose from adjustments relating to Mr. Singh's business activities, he should be found solely liable for them, notwithstanding the fact that he and Ms. Rawat filed joint returns for 1998, 1999, 2001, and 2002. What the statements do not reflect, and what the petition does not include, are assertions that would be indicative of a claim for innocent spouse relief, such as that Ms. Rawat was not aware of Mr. Singh's business activities, that Ms. Rawat did not know or have reason to know that the income arising from such activities was omitted from the joint returns, or that Ms. Rawat did not receive a significant benefit from the income derived from such activities, etc. Accordingly, we conclude, as did this Court in the prior deficiency proceeding and the U.S. Court of Appeals for the Ninth Circuit on appeal, that, even when construed liberally in view of Mr. Singh and Ms. Rawat's pro se status, the petition failed to raise Ms. Rawat's entitlement to innocent spouse relief as an issue in the case.
Thereafter, the case was set for trial. The IRS filed a pretrial memorandum advising the Court, inter alia, that the parties likely would file a joint motion for continuance "to give the petitioner Raghvendra Singh the ability to pursue collection alternatives and for petitioner Kiran Rawat to pursue innocent spouse relief which, if agreement is reached in those areas, would moot the need for a trial in this case". However, IRS counsel also therein advised the Court that he had not received any communication from Ms. Rawat. The IRS subsequently filed a motion for continuance requesting that the case be continued "to allow petitioner Raghvendra Singh time to work with respondent's collection personnel" in pursuit of a possible collection settlement, "and to work on a possible separate resolution of the case with petitioner Kiran Rawat." The motion for continuance advised that, while Mr. Singh was not opposed to the granting of the motion, IRS counsel had been unable to contact Ms. Rawat to ascertain her position. The Court granted the continuance.
When the case was subsequently set for trial, IRS counsel attempted to discuss with Ms. Rawat the possibility of granting her innocent spouse relief. The foregoing efforts included attempting to contact her by telephone several times and having her served with documents by a process server at her place of employment. However, Ms. Rawat was uncooperative in these efforts and never contacted IRS counsel.
In her Response to respondent's Motion for Partial Summary Judgment, Ms. Rawat does not dispute (or even address) respondent's assertions regarding the pretrial efforts of IRS counsel in the prior deficiency proceeding to discuss the possibility of granting her innocent spouse relief. In view of Ms. Rawat's failure to dispute the assertions in her Response, and the absence of any evidence to the contrary, we consider the assertions established for purposes of respondent's Motion. See Heinemann v. Satterberg, 731 F.3d 914, 917 (9th Cir. 2013).
In a pretrial memorandum prepared in connection with the second trial setting, the IRS advised the Court that it might file a motion to dismiss the case based on the following:
After being continued in an attempt to settle/resolve all outstanding issues, petitioners have chosen not to work with respondent to
determine if an Offer in Compromise (in the case of Raghvendra Singh) or innocent spouse relief (in the case of Kiran Rawat) will resolve the case without need for trial. In fact at the time of the drafting of this trial memo, petitioner Rawat had made no attempts to meet with respondent to work on a stipulation of facts.
When the case was called for trial, IRS counsel and Mr. Singh each entered an appearance. Counsel for the IRS advised that Mr. Singh had requested a continuance, and that the IRS was opposed on the ground that the case had previously been continued "because the government wanted to explore with Ms. Rawat if she would even like to pursue an innocent spouse claim", but, "as it turns out, [she] was uncooperative":
The transcript is not clear as to whether Ms. Rawat was in the courtroom when the case was called, and we accordingly resolve this ambiguity in her favor by assuming for purposes of respondent's Motion that she was not present.
She did not call me despite several attempts. I had a process server personally serve paperwork on her at her place of employment. On Thursday she still did not call me. So we have that issue. It's not in the pleading then, therefore, that she has raised an innocent spouse claim, so I think it would be highly prejudicial to the government if the Court were to allow her to pursue it without at least pleading [the issue]".
Docket No. 11063-09, Entry No. 30, Transcript of Sep. 26, 2011 (Recall), at pp. 3-5 (Oct. 24, 2011). As noted supra note 11, we assume for purposes of respondent's Motion that Ms. Rawat was not present in the courtroom at the time that IRS counsel made the foregoing assertions regarding her lack of cooperation in pursuing any innocent spouse claim. However, these same assertions appear in respondent's Motion in the instant case, and, as noted supra p. 4 note 10, Ms. Rawat has not disputed them in her Response. We therefore consider them established for purposes of respondent's Motion.
At the time that IRS counsel made the foregoing representations to the Court, Mr. Singh did not challenge them. The Court thereafter sustained respondent's objections to Mr. Singh's request for a continuance and to Ms. Rawat's and Mr. Singh's request to untimely raise at trial the issue of Ms. Rawat's entitlement to innocent spouse relief, ruling that both issues were "off the table."
Docket No. 11063-09, Entry No. 30, Transcript of Sep. 26, 2011 (Recall), at pp. 4-5 (Oct. 14, 2011).
A trial ensued over two days. Ms. Rawat entered an appearance on both days and signed the first and second stipulations of fact as well as a pretrial memorandum. During trial Ms. Rawat was offered an opportunity to cross-examine the revenue agent who testified on behalf of the IRS but declined.
Ms. Rawat also testified at the trial, and her testimony comprised over 30 pages of the trial transcript. She testified that at the time of trial she and Mr. Singh were married but had been legally separated since 2005. Ms. Rawat also testified that at the time of trial she was working as a registered nurse, that by such work she had earned wages of approximately $200,000 per year from 2003 to 2010, and that, other than for 2000 (for which she filed a separate return), she had provided her Form W-2, Wage and Tax Statement, to Mr. Singh for purposes of filing a return each year. She testified that her employer had withheld income taxes from her wages. She testified that she could remember having received the notice of deficiency from which the case had arisen, that she had not read it, and that instead she had given it to Mr. Singh because she assumed it was "related to his business." Ms. Rawat testified that during the relevant period she was aware of Mr. Singh's nurse staffing business for which the notice had made certain Schedule C adjustments at issue, that she had delivered invoices to Mr. Singh's customers, and that on occasion she had worked nursing shifts on behalf of the business. Ms. Rawat also testified that Mr. Singh had paid some nurses who had worked for his nurse staffing business in cash and that she believed he may have bought cars for some nurses. She testified that Mr. Singh had never issued to her a Form W-2 or Form 1099 for the services that she had rendered to his nurse staffing business, but that she believed he had issued Forms 1099 to other nurses who worked for him. She also testified that on occasion Mr. Singh borrowed cash from her to pay nurses working for his nurse staffing business and that on such occasions she knew he would not repay her.
See Docket No. 11063-09, Entry No. 33, Transcript of Sep. 28, 2011 (Vol. 2), at pp. 174-207 (Oct. 24, 2011).
After IRS counsel had completed his questioning of Ms. Rawat, she was asked whether she wished to provide any testimony to the Court in her capacity as a party to the case. In response she provided the following direct testimony:
Yes, I want to say something and that's why am I getting pulled in this kind of things. I came to this country to pursue my dreams, to take care of the people which I'm doing so. I've never did anything wrong.
I work my work and I get paid and I go home. I have nothing to do these kind of these, and these things are not for me. Now I don't work that much as I used to just because of this because of my income or whatever I do. I think for me, they're coming after me personally even though I'm not party to any of these and this not my doing.
During the IRS counsel's questioning of Mr. Singh, Ms. Rawat sought leave of the Court, which was granted, to make a statement with respect to certain exhibits that had been proffered by the IRS. At that time Ms. Rawat identified a series of checks included within the exhibit as having been issued to her.
The Court subsequently entered a decision in the case, holding, inter alia, that Ms. Rawat and Mr. Singh were jointly and severally liable for deficiencies for 1998, 1999, 2001, and 2002. In a motion to vacate or revise pursuant to Rule 162, signed by both Ms. Rawat and Mr. Singh, they requested, for the first time in the proceeding, that Ms. Rawat be afforded innocent spouse relief on the basis that she "did not know any understatement in the Taxes" and was "legally separated from Raghvendra Singh in 2005." Ms. Rawat and Mr. Singh asserted in the motion to vacate that "[t]here is no ruling on this issue and until now, this issue was moot as there was no Tax assessed against Petitioners."
Before entering a decision in the case, the Court had issued a bench opinion. See Docket No. 11063-09, Entry No. 32, Transcript of October 7, 2011 (Bench Op.), at pp. 1-19 (Oct. 14, 2011). In response, Ms. Rawat and Mr. Singh filed a motion to revise opinion under Rule 162. The motion was signed by both Ms. Rawat and Mr. Singh and did not request innocent spouse relief on behalf of Ms. Rawat.
The Court denied the motion to vacate. Ms. Rawat and Mr. Singh appealed the case to the U.S. Court of Appeals for the Ninth Circuit, which affirmed this Court's decision and declined to "consider Singh and Rawat's request for innocent spouse relief because the argument was raised for the first time in a post-trial motion to alter or amend the judgment, and Singh and Rawat fail to present any valid reason for not presenting the argument at trial." Singh v. Commissioner, 713 Fed.Appx. 643 (Mem) (9th Cir. 2018).
2010 federal income tax liability
Ms. Rawat and Mr. Singh filed a joint federal income tax return for 2010. In 2012, the IRS issued to them jointly a notice of deficiency, therein determining a deficiency and section 6662(a) accuracy-related penalty for 2010 and two other years not relevant to the instant Motion. Ms. Rawat and Mr. Singh failed to timely petition this Court for redetermination, and the IRS thereafter assessed the liabilities. On July 24, 2015, the IRS applied, pursuant to section 6402, an overpayment claimed by Ms. Rawat and Mr. Singh for the 2008 taxable year against a portion of the foregoing liability for 2010.
See Docket No. 1633-13, Order of Dismissal (Apr. 3, 2013); Docket No. 12426-13, Order of Dismissal (Aug. 8, 2013); Docket No. 25457-14, Order of Dismissal (Feb. 11, 2015). The U.S. Court of Appeals for the Ninth Circuit affirmed each of the foregoing dismissals, finding that Ms. Rawat and Mr. Singh had failed to file a timely petition for redetermination with respect to the notice of deficiency and that this Court had properly concluded that it lacked jurisdiction. See Singh v. Commissioner, 631 Fed.Appx. 457, 458-59 (9th Cir. 2015). See also Docket No. 9087-15, Order of Dismissal (Sep. 30, 2015), appeal dismissed, No. 15-73688, Order (9th Cir. Apr. 13, 2016).
Pending requests for innocent spouse relief
On July 8, 2017, Ms. Rawat mailed to respondent a Form 8857, Request for Innocent Spouse Relief, requesting innocent spouse relief for 1998 through 2002. On or about February 27, 2018, respondent issued Ms. Rawat a Letter 3657C, advising that her claims for relief under section 6015(b), (c), and (f) for 1998 through 2002 were not considered because a court had entered a final decision covering those years.
On August 31, 2017, Ms. Rawat faxed to respondent another Form 8857, requesting innocent spouse relief for 2010. On May 8, 2018, respondent issued to Ms. Rawat a final determination denying her claim for relief under section 6015(b), (c), and (f) for 2010.
Ms. Rawat timely petitioned this Court under section 6015(e) for a determination of the appropriate relief available to her under section 6015 for 1998 through 2002 and 2010. Among other things, the Petition asserts:
The Petition also sought review with respect to other taxable years which were dismissed from the case for lack of jurisdiction.
IRS assessed Taxes due to business of my spouse Raghvendra Singh. As I did not and do not know anything about his business, I did not and was and is unable to make any argument about the issues. IRS never communicated with me before Trial. Accordingly, innocent spouse relief should be granted.
As noted supra p. 4 note 10, Ms. Rawat's Response does not dispute the assertions in respondent's Motion regarding the pretrial efforts of his counsel in the prior deficiency case to discuss the possibility of granting her innocent spouse relief. Moreover, her Response does not repeat her contention in the Petition that the IRS never communicated with her before trial in the prior deficiency proceeding. In view of the foregoing, we deem Ms. Rawat to have abandoned the aforementioned contention. See Bishay v. Commissioner, T.C. Memo. 2015-105, 2015 WL 3505310, *2 n.5 (deeming taxpayer to have abandoned a certain contention where he did not repeat it in his response to the Commissioner's motion for summary judgment), aff'd, 2017 WL 11453028 (1st Cir. 2017); Carothers v. Commissioner, T.C. Memo. 2013-165, 2013 WL 3387850, at *2 n.2 (same). Furthermore, it is well established that the nonmoving party cannot rebut a properly supported motion for summary judgment "by relying on mere allegations in the pleadings to show that there is a triable issue." 10A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure - Civil § 2727.2 (4th ed. 2021) (collecting cases); see also 11 James Wm. Moore, Moore's Federal Practice - Civil § 56.41[1][c] (2021) ("Merely restating a pleading, submitting new pleadings, or making bald assertions in a legal memorandum, or even in an affidavit, will not enable the nonmovant to withstand a properly supported summary judgment motion.") (collecting cases). Ms. Rawat has failed to support the aforementioned contention with any corroborating evidence. Accordingly, even if we had not deemed her to have abandoned it, her unsupported allegation in the Petition would be insufficient to create a dispute of material fact.
Discussion
Married taxpayers may elect to file a joint federal income tax return. § 6013(a). After making this election each spouse is jointly and severally liable for the entire tax due for that year. § 6013(d)(3); Butler v. Commissioner, 114 T.C. 276, 282 (2000). In certain circumstances, however, a spouse who has filed a joint return may seek relief from joint and several liability under procedures set forth in section 6015. § 6015(a).
A requesting spouse may request relief from liability under section 6015(b) or, if eligible, may allocate liability according to provisions under section 6015(c). § 6015(a). If relief is not available under section 6015(b) or (c), an individual may seek equitable relief under section 6015(f). Unless otherwise provided in section 6015, the taxpayer bears the burden of proving his entitlement to such relief. Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), aff'd, 101 Fed.Appx. 34 (6th Cir. 2004).
I. Whether Ms. Rawat is barred from seeking innocent spouse relief for 1998, 1999, 2001, and 2002 by the application of res judicata
Respondent argues in his Motion that Ms. Rawat is barred under the doctrine of res judicata from seeking innocent spouse relief for 1998, 1999, 2001, and 2002 by the decision previously entered by this Court, and affirmed by the U.S. Court of Appeals for the Ninth Circuit, in the prior deficiency proceeding for those taxable years. For the reasons that follow, we agree with respondent.
When a court of competent jurisdiction enters a final judgment on the merits of a cause of action, the doctrine of res judicata, if properly and timely invoked, binds the parties to the judgment as to all matters that were or could have been litigated and decided in the proceedings. See Commissioner v. Sunnen, 333 U.S. 591, 597 (1948). The doctrine promotes judicial economy by precluding repetitious lawsuits. See ibid. Federal income taxes are determined annually, with each year being a separate cause of action; res judicata is applied to bar subsequent proceedings involving the same taxable year. See id. at 597-98. Common law principles of res judicata generally bar a party to a prior proceeding for the same taxable year from seeking innocent spouse relief, regardless of whether the party raised the claim in the prior proceeding. Vetrano v. Commissioner, 116 T.C. 272, 280 (2001). However, because res judicata is an affirmative defense that must be pleaded in the answer, the Commissioner bears the burden of proving that the doctrine applies to preclude any innocent spouse claim. See Rules 39, 142(a); Calcutt v. Commissioner, 91 T.C. 14, 20-21 (1988).
Under the U.S. Supreme Court's explication of res judicata in Commissioner v. Sunnen, 333 U.S. at 597-98, four conditions must be met to preclude relitigation of a claim: (1) the parties in each action must be identical (or at least be in privity); (2) a court of competent jurisdiction must have rendered the first judgment; (3) the prior action must have resulted in a final judgment on the merits; and (4) the same cause of action or claim must be involved in both suits. Koprowski v. Commissioner, 138 T.C. 54, 62 (2012). Once these conditions are met, each party is prohibited from raising any claim or defense that was or could have been raised as part of the litigation over the cause of action in the prior case. Ibid. With respect to Ms. Rawat's federal income tax liabilities for the 1998, 1999, 2001, and 2002 taxable years (i.e., the years for which she now seeks innocent spouse relief), we find that those four conditions are met here.
First, in the prior deficiency proceeding Ms. Rawat was a petitioner, and the Commissioner of Internal Revenue was the respondent. In this case Ms. Rawat is again the petitioner, and the Commissioner is again the respondent. Thus, the parties are identical. See id. at 62-63.
Second, in the prior deficiency proceeding Ms. Rawat and Mr. Singh filed their deficiency case in the only court authorized under section 6213(a) to hear such cases; that is, this Court. We therefore had jurisdiction. See id. at 63.
Third, the prior deficiency proceeding concluded with an entry of decision by this Court. Our decision was a judgment on the merits of Ms. Rawat's and Mr. Singh's joint and several liability for 1998, 1999, 2001, and 2002, and that decision was affirmed by the U.S. Court of Appeals for the Ninth Circuit in a final judgment on such merits. See Singh v. Commissioner, 713 Fed.Appx. 643 (Mem) (9th Cir. 2018). The prior deficiency proceeding accordingly resulted in a final judgment on the merits. See Koprowski v. Commissioner, 138 T.C. at 63.
Fourth, and finally, in the instant case Ms. Rawat seeks innocent spouse relief from the very liabilities (i.e., the 1998, 1999, 2001, and 2002 joint income tax liabilities) as to which this Court in the prior deficiency proceeding determined that she was jointly and severally liable. Consequently, the claims are identical. See ibid.
Since the four conditions are met, Ms. Rawat's innocent spouse claim is barred by res judicata unless she can invoke some exception to its application. See ibid. In some cases section 6015(g)(2), which limits the common law doctrine of res judicata as it applies to claims innocent spouse relief, provides such an exception.
Under section 6015(g)(2), a requesting spouse may avoid the preclusive effect of res judicata from a prior proceeding if he can show (1) that his innocent spouse claim was not at issue in such proceeding and (2) that he did not "participate[] meaningfully" in that proceeding. See id. at 65; Haag v. Commissioner, T.C. Memo. 2011-87, 2011 WL 1485631, at *8, aff'd, Haag v. Shulman, 683 F.3d 26 (1st Cir. 2012); see also Treas. Reg. § 1.6015-1(e) (providing that res judicata applies "if relief under section 6015 was at issue in the prior proceeding, or if the requesting spouse meaningfully participated in that proceeding and could have raised relief under section 6015"). The requesting spouse bears the burden of proving, by a preponderance of the evidence, that he did not participate meaningfully in the prior proceeding. See Deihl v. Commissioner, 134 T.C. 156, 162 (2010); Rogers v. Commissioner, T.C. Memo. 2017-130, 2017 WL 2839748, at *5, aff'd, 908 F.3d 1094 (2018); Monsour v. Commissioner, T.C. Memo. 2004-190, 2004 WL 1895068, at *11.
By his Motion respondent argues on the following bases that Ms. Rawat participated meaningfully in the prior deficiency proceeding: (1) Ms. Rawat and Mr. Singh jointly petitioned for redetermination; (2) the IRS mailed correspondence, including trial exhibits, to both Ms. Rawat and Mr. Singh; (3) the IRS "made extraordinary efforts to reach out to petitioner [i.e., Ms. Rawat] individually to explore the possibility of innocent spouse relief prior to trial-even using a process server to deliver documents to her directly at her place of employment-efforts that petitioner rebuffed"; (4) Ms. Rawat signed the first and second stipulations of fact and other documents in the case; (5) Ms. Rawat testified at length during trial; and (6) the testimony of Ms. Rawat, "an educated person", demonstrates that she "knew about and was involved with the nursing staffing business", which many of the adjustments in the notice of deficiency concerned.
In her Response, after noting that, "for res judicata to apply, the requesting spouse . . . must have meaningfully participated in the prior court proceeding and . . . [have been able to raise at that time] relief under section 6015", Ms. Rawat asserts: "Petitioner Rawat will show at trial that was not the case." In support of her contention that she did not participate meaningfully in the prior deficiency proceeding and could not have raised innocent spouse relief, Ms. Rawat first argues, incorrectly, that she "was unable to raise relief under section 6015" in the prior deficiency proceeding because this Court "did not have the jurisdiction on innocent spouse relief until innocent spouse relief was denied." Second, Ms. Rawat argues that "[t]he Court of Appeal[s] stated that Singh and Rawat both did not offer any evidence for expenses, [sic] thus both did not participate actively." Finally, after noting that in the prior deficiency proceeding "innocent spouse relief was neither prayed or considered, nor decided", Ms. Rawat argues: "Therefore, Res Judicata does not apply to the innocent spouse relief for these and many other reasons, to be introduced at trial."
This Court has jurisdiction to determine a taxpayer's entitlement to innocent spouse relief where it is raised as an affirmative defense in a petition filed pursuant to section 6213(a) for redetermination of a deficiency. See Corson v. Commissioner, 114 T.C. 354, 363 (2000); Butler v. Commissioner, 114 T.C. 276, 287-92 (2000). In a deficiency proceeding we may take into account all facts and circumstances relevant to ascertaining the correct amount of the deficiency, including affirmative defenses. See §§ 6213 and 6214; Corson v. Commissioner, 114 T.C. at 363; Butler v. Commissioner, 114 T.C. at 287; Naftel v. Commissioner, 85 T.C. 527, 533 (1985). Thus, if Ms. Rawat had timely raised innocent spouse relief as an affirmative defense in the pleadings in the prior deficiency proceeding, this Court would have had jurisdiction to make a determination as to her entitlement to such relief. Accordingly, we do not further discuss Ms. Rawat's jurisdictional argument.
The foregoing sentence appears to be a reference to the Court of Appeals' holding in the prior deficiency proceeding that this Court "did not clearly err in finding that Singh and Rawat were not entitled to various alleged business deductions because they failed to offer evidence that clearly showed a right to the claimed deductions." Singh v. Commissioner, 713 Fed.Appx. at 644. We are not persuaded by Ms. Rawat's argument that, because she and Mr. Singh failed to carry their evidentiary burden with respect to the various claimed business expenses at issue in the prior deficiency proceeding, they did not meaningfully participate in the proceeding. Accordingly, we do not further discuss it.
For the reasons that follow, we agree with respondent that there is no genuine dispute as to whether Ms. Rawat participated meaningfully in the prior deficiency proceeding and could have raised innocent spouse relief.
Due to the failure of Ms. Rawat and Mr. Singh to timely plead an affirmative defense of innocent spouse relief on Ms. Rawat's behalf in the prior deficiency proceeding, such a claim was not placed at issue for adjudication for any of the 1998, 1999, 2001, or 2002 taxable years. Nevertheless, for each of the aforementioned taxable years, Ms. Rawat and Mr. Singh filed joint returns for which the IRS had determined there were understatements of tax, and collection activities had not begun. See § 6015(a), (b)(1)(A), (B), (E), (c)(1), (3)(B). Moreover, at the time of trial in the prior deficiency proceeding, Ms. Rawat and Mr. Singh were legally separated. See § 6015(c)(3)(A)(i)(I). Accordingly, there were no statutory impediments to Ms. Rawat's ability to request relief from joint and several liability under section 6015(b), (c), or (f) in the prior deficiency proceeding. Consequently, if she had timely pleaded a claim for such relief, she could have raised her entitlement to it as an issue.
As noted supra p. 7, Ms. Rawat first asserted a claim for innocent spouse relief in the prior deficiency proceeding after this Court entered its decision.
Ms. Rawat testified to that effect at the trial in the prior deficiency proceeding. We treat that testimony as an admission of that fact for purposes of the instant Motion. Thus, there was no statutory impediment to Ms. Rawat's seeking innocent spouse under section 6015(c) in that proceeding.
That leaves only the question of whether, for purposes of section 6015(g)(2), Ms. Rawat participated meaningfully in the prior deficiency proceeding. As we have previously observed, neither section 6015(g)(2) nor the accompanying regulations defines what constitutes meaningful participation in a prior proceeding, and the legislative history does not provide guidance as to the proper definition. See Deihl v. Commissioner, 134 T.C. at 162. In determining whether a taxpayer has participated meaningfully in a prior proceeding, this Court and others have therefore looked to "the totality of circumstances to measure the extent of a taxpayer's involvement and engagement in the prior proceeding." Rogers v. Commissioner, 908 F.3d at 1096; Haag v. Shulman, 683 F.3d at 31; Harbin v. Commissioner, 137 T.C. 93, 98 (2011); Michael I. Saltzman & Leslie Book, IRS Practice & Procedure, ¶ 7C.06[4][b] (Feb. 2021) ("Courts analyzing the term have focused on the degree of control or engagement with the prior litigation.").
For the reasons that follow, we find that respondent has made-at the very least-a prima facie showing that Ms. Rawat participated meaningfully in the prior deficiency proceeding and could have raised innocent spouse relief. First and foremost, the record establishes that, before trial in the prior deficiency proceeding, IRS counsel made repeated attempts to contact Ms. Rawat-both by telephone and by service of documents-to discuss with her the possibility of granting her innocent spouse relief, but that she rebuffed those efforts. Indeed, the record establishes that Ms. Rawat was afforded every opportunity to timely raise an innocent spouse claim before trial, but instead failed to raise such a claim until the filing of a post-trial motion to vacate. The U.S. Court of Appeals for the Ninth Circuit noted this fact in declining to consider her claim on appeal, finding that she and Mr. Singh "fail[ed] to present any valid reason for not presenting the argument at trial." Singh v. Commissioner, 713 Fed.Appx. 643, 644 (Mem) (9th Cir. 2018). As this Court has previously observed, section 6015 relief "was not designed to protect willful blindness or to encourage the deliberate cultivation of ignorance", Friedman v. Commissioner, 53 F.3d 523, 525 (2d Cir. 1995), aff'g in part, rev'g in part T.C. Memo. 1993-549, and "[b]y the same token section 6015(g)(2) was not designed to provide a second chance at relief for a litigant who had the wherewithal and the opportunity to raise a claim in a prior proceeding", Rogers v. Commissioner, T.C. Memo. 2017-130, 2017 WL 2839748, at *7. In our view the undisputed facts of this case give rise to precisely the type of administrative and judicial economy concerns Congress sought to address in the innocent spouse arena; namely, that a taxpayer should generally be limited to a single opportunity to resolve section 6015 claims. See Vetrano v. Commissioner, 116 T.C. at 279 (reviewing the relevant legislative history and concluding that "Congress expressed the view that taxpayers should be limited to a single administrative and judicial process to resolve issues under section 6015"); see also H. Conf. Rept. 106-1033, at 1022-23 (2000).
Second, the record in the prior deficiency proceeding demonstrates that Ms. Rawat's participation was extensive: She entered an appearance on both days of trial, testified on matters of substance, and in doing so demonstrated an understanding of issues relating to federal income tax, such as proper Form W-2 wage reporting and what might necessitate the issuance of a Form 1099. Additionally, she sought leave of the Court during the IRS's questioning of Mr. Singh in order to identify certain checks within an exhibit as having been issued to her, further dispelling any notion that she was not fully engaged during the trial. Moreover, Ms. Rawat signed the petition and numerous other significant filings in the prior deficiency proceeding, including the first and second stipulations of fact, the pretrial memorandum, and two post-trial motions, including the post-trial motion to vacate wherein she and Mr. Singh first asserted a claim of innocent spouse relief on Ms. Rawat's behalf.
Finally, we also find significant Ms. Rawat's level of education, apparent professional and financial success, and her knowledge of Mr. Singh's Schedule C activities that gave rise to the deficiencies in the case, particularly her testimony that he paid some nurses in cash. In sum, while Ms. Rawat has attempted to paint herself as an unsophisticated naïf, the record establishes otherwise.
As noted supra p. 6, during her testimony Ms. Rawat testified that she earned wages from 2003 to 2010 of approximately $200,000 per year, that on occasion Mr. Singh borrowed cash from her to pay nurses working for his nurse registry business, and that on such occasions she knew he would not repay her.
In view of respondent's prima facie showing, Ms. Rawat "may not rest upon the mere allegations or denials" of her Petition, but rather by her Response must set forth specific facts, by affidavits or declarations or otherwise, "showing that there is a genuine dispute for trial." Rule 121(d); Rauenhorst v. Commissioner, 119 T.C. 157, 175 (2002) ("Summary assertions and conclusory allegations are simply not enough evidence to raise a genuine issue of material fact."); King v. Commissioner, 87 T.C. 1213, 1217 (1986) (holding that, where taxpayer supported his motion for summary judgment with a sworn affidavit asserting specific facts concerning a certain transaction in dispute, and the Commissioner failed to allege any facts to support his general allegation that the transaction was a sham, the Commissioner had not demonstrated that there was a genuine issue for trial) ("To hold otherwise would be to render the requirements of Rule 121(d) meaningless."); Spinner v. Commissioner, T.C. Memo. 2017-87, 2017 WL 2294631, at *2 ("[O]pponents to a motion for summary judgment must submit affidavits or other documents demonstrating a genuine issue for trial."); Neth v. Commissioner, T.C. Memo. 2010-95, 2010 WL 1767179, at *1 (holding that allegations made in a taxpayer's petition "are inadequate to create a genuine issue for trial" and that, as an opponent of summary judgment, a taxpayer "is obliged to submit affidavits or other documents demonstrating a genuine issue for trial").
As noted supra p. 11, Ms. Rawat asserts in her Response that she did not participate meaningfully in the prior deficiency proceeding and could not have raised innocent spouse relief as a claim in such proceeding; however, rather than setting forth specific facts in support of the foregoing assertion, Ms. Rawat states that she "will show at trial that was not the case." It is well established that conclusory assertions supported only by allusions to evidence that the nonmoving party is unwilling to disclose before trial are insufficient to satisfy his obligations under Rule 121(d) and do not give rise to a genuine dispute of fact that will preclude summary judgment. See Parkinson v. Commissioner, 647 F.2d 875, 876 (9th Cir. 1981), aff'g T.C. Memo. 1979-319; see also Neely v. St. Paul Fire and Marine Ins. Co., 584 F.2d 341, 344 (9th Cir. 1978) ("An opposing party's mere hope that further evidence may develop prior to trial is an insufficient basis upon which to justify denial of the motion."); Chapman v. Rudd Paint & Varnish Co., 409 F.2d 635, 643 (9th Cir. 1969) ("One against whom a motion for summary judgment is filed is therefore under a duty to show that he can produce evidence at the trial, and is not entitled to a denial of that motion upon the unsubstantiated hope that he can produce such evidence at the trial."). Thus, Ms. Rawat's stated intention to make the necessary evidentiary showing at trial is insufficient to rebut the prima facie showing respondent has made by his Motion for the application of res judicata.
As also noted supra p. 11, Ms. Rawat additionally argues that, because the issue of her entitlement to "innocent spouse relief was neither prayed or considered, nor decided" in the prior deficiency proceeding, "Res Judicata does not apply to the innocent spouse relief". However, as the authorities discussed supra pp. 9-10 establish, Ms. Rawat's argument is wrong as a matter of law: In a case involving federal income tax, the doctrine of res judicata, where properly and timely invoked, as has been here, binds the parties to the judgment as to all matters that were or could have been litigated and decided in the prior proceeding for the taxable year at issue, including innocent spouse relief, unless the taxpayer establishes by a preponderance of the evidence that the exception set forth in section 6015(g)(2) applies. By her Response Ms. Rawat has failed to come forward with evidence setting forth specific facts to show that there is a genuine dispute as to whether she participated meaningfully in the prior deficiency proceeding and could have raised innocent spouse relief. Consequently, she has failed to show that there are any material facts in dispute that would prevent the Court from granting partial summary adjudication in respondent's favor on the issue presented.
In view of the foregoing, and considering the totality of the facts and circumstances, we find that there is no genuine dispute as to whether Ms. Rawat participated meaningfully in the prior deficiency proceeding and could have raised innocent spouse relief. See Huynh v. Commissioner, T.C. Memo. 2006-180, 2006 WL 2482903, at *1-*3 (finding that the requesting spouse participated meaningfully in prior proceeding where, inter alia, she testified that she was aware of the source of the unreported income at issue, and she signed all the documents in the case, including stipulations of settled issues and fact, and trial and reply briefs), aff'd, 276 Fed.Appx. 634 (9th Cir. 2008); see also Koprowski v. Commissioner, 138 T.C. at 65-66 (finding that the requesting spouse participated meaningfully in prior proceeding where, inter alia, he signed the petition and all other papers that he and his spouse filed with the Court); Rogers v. Commissioner, T.C. Memo. 2017-130, 2017 WL 2839748, at *6-*7 (finding that the requesting spouse participated meaningfully in prior proceeding, even though she did not sign documents or testify, where, inter alia, she was a "highly educated and accomplished professional", "attended the . . . trial, sat at petitioner's table, and listened to the arguments presented by both sides" and "had more than a fair opportunity to raise a claim for relief from joint and several liability"); Molsbee v. Commissioner, T.C. Memo. 2009-231, 2009 WL 3241340, at *4 (finding that the requesting spouse participated meaningfully in the prior proceeding where, inter alia, he discussed the possibility of such relief with counsel for the Commissioner before signing a stipulated decision with his spouse); Moore v. Commissioner, T.C. Memo. 2007-156, 2007 WL 1756331, at *5-*6 (finding that the requesting spouse participated meaningfully where, inter alia, she was contacted by counsel for the Commissioner and advised about the availability of innocent spouse relief but nevertheless settled the case at her husband's behest without amending her pleading to seek such relief); Noons v. Commissioner, T.C. Memo. 2004-243, 2004 WL 2390075, at *3-*4 (finding that the requesting spouse participated meaningfully in prior proceeding where, inter alia, he testified as the only witness); Monsour v. Commissioner, T.C. Memo. 2004-190, 2004 WL 1895068, at *12-*14 (rejecting the requesting spouse's argument that her participation in the prior proceeding was not meaningful because it primarily concerned the business activities of her husband, of which she claimed to know nothing, and "[o]nly two (2) minor items affected Petitioner directly"; "Our resolution of the question whether petitioner participated meaningfully in the case . . . does not depend on how many determinations in the notice for those years 'affected Petitioner directly.'").
Accordingly, we hold that the doctrine of res judicata applies in this case to bar Ms. Rawat from seeking section 6015 relief for 1998, 1999, 2001, and 2002, and that respondent is entitled to partial summary adjudication in his favor on this issue.
II. Whether Ms. Rawat is ineligible for innocent spouse relief for 2000 because she did not file a joint return for that year
Ms. Rawat did not file a joint return for 2000, electing instead to file for that year using married filing separate filing status. Respondent argues in his Motion that she is therefore not entitled to innocent spouse relief for that year. For the reasons that follow, we agree with respondent.
Each type of relief under section 6015 is conditioned on the filing of a joint federal income tax return. Section 6015(b)(1) applies only if "a joint return has been made for a taxable year". § 6015(b)(1)(A). The election under section 6015(c)(1) is available only to "an individual who has made a joint return for any taxable year". By contrast, section 6015(f) does not expressly condition the equitable relief allowed by that subsection on the filing of a joint return. Nevertheless, both this Court, and the U.S. Court of Appeals for the Ninth Circuit, where appeal in this case lies absent a stipulation to the contrary, have held that a joint return must have been filed in order for a taxpayer to be granted equitable relief under section 6015(f). See Raymond v. Commissioner, 119 T.C. 191, 197 (2002); see also Christensen v. Commissioner, 523 F.3d 957, 960-63 (9th Cir. 2008).
Additionally, the administrative guidelines applicable to requests for equitable relief pursuant to section 6015(f) impose a threshold condition that "[t]he requesting spouse [must have] filed a joint return for the taxable year for which he or she seeks relief." Rev. Proc. 2013-34, § 4.01(1), 2013-43 I.R.B. 397, 399.
As Ms. Rawat did not file a joint return for 2000, she is not entitled to innocent spouse relief for that year, and respondent is entitled to partial summary adjudication in his favor on this issue.
III. Whether Ms. Rawat is ineligible for innocent spouse relief under section 6015(b) or (c) for 2010 because her claim is untimely
Respondent also argues in his Motion that Ms. Rawat is not entitled to innocent spouse relief under section 6015(b) and (c) for 2010 because she filed her claim for such relief more than two years after respondent had begun collection activity for that year. For the reasons that follow, we agree with respondent.
As a procedural matter, a spouse seeking innocent spouse relief under section 6015(b) or (c) must submit a claim for relief within two years of the date on which the Secretary begins "collection activities" with respect to such spouse. See § 6015(b)(1)(E), (c)(3)(B); Tu Pham v. Commissioner, T.C. Memo. 2012-171, 2012 WL 2344773, at *3 (granting the Commissioner's cross-motion for partial summary judgment with regard to section 6015(b) and (c) relief where taxpayer filed his request more than two years after the Commissioner began collection activities). For purposes of the foregoing, "collection activities" include "an offset of an overpayment of the requesting spouse against a liability under section 6402." Treas. Reg. § 1.6015-5(b)(2)(i); see also Campbell v. Commissioner, 121 T.C. 290, 292-93 (2003).
On July 24, 2015, respondent applied, pursuant to section 6402, an overpayment for Ms. Rawat's and Mr. Singh's 2008 taxable year against a portion of their income tax liability for 2010. Thus, on that date respondent engaged, for purposes of section 6015, in a "collection activity" against Ms. Rawat. Ms. Rawat's claim for innocent spouse relief for 2010 was not submitted until August 31, 2017; that is, more than two years after the aforementioned "collection activity". Accordingly, Ms. Rawat is not entitled to innocent spouse relief under section 6015(b) or (c) for 2010, and respondent is entitled to partial summary adjudication in his favor on this issue.
The foregoing considered, it is
ORDERED that respondent's Motion for Partial Summary Judgment filed March 23, 2021, is hereby granted in that Ms. Rawat is not entitled to innocent spouse relief: (1) under section 6015 for the 1998, 1999, 2001, and 2002 taxable years due to the application of the doctrine of res judicata; (2) under section 6015 for the 2000 taxable year because she did not file a joint return for that year; and (3) under section 6015(b) and (c) for the 2010 taxable year because she filed her claim for such relief more than two years after respondent's first collection activity.