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United States v. Boynton

February 1, 2007


The opinion of the court was delivered by: Hayes, Judge


I. Background

On December 9, 2005, the United States filed the above-captioned action to reduce to judgment federal income tax assessments for the 1982 tax year against Defendants Warren K. Boynton ("Mr. Boynton") and Susan M. Boynton ("Ms. Boynton"). In its Complaint, the United States seeks to reduce to judgment assessments, penalties and interest totaling $13,364,973.63 as of August 31, 2005. (Compl. ¶ 9.) Defendants' federal income tax liabilities for the 1982 tax year were previously adjudicated on a petition to the United States Tax Court, which entered judgment against Defendants on September 22 1993. See Cramer v. Comm'r, 101 T.C. 225 (1993) (consolidating petitions of Warren K. and Susi M. Boynton,*fn1 among others, and entering decision for the Commissioner of Internal Revenue). The judgment was affirmed by the Ninth Circuit on September 11, 1995. See Cramer v. Comm'r, 64 F.3d 1406 (9th Cir. 1995). As Mr. Boynton and Ms. Boynton filed a joint income tax return in 1982, they were found to be jointly and severally liable for the full amount due. See id. at 1410. The United States has been collecting on the assessments for more than 10 years. (Decl. Justin S. Kim ("Kim Decl."), Ex. 1.) According to the United States, this action to reduce the assessments to judgment was filed in order to extend the statute of limitations under 26 U.S.C. § 6502(a) (imposing a 10-year period of limitations on collection after assessment unless "a timely proceeding in court for the collection of a tax is commenced"). (Mem. Supp. Mot. Summ. J. at 1-2.)

On March 1, 2006, this Court entered a stipulated Judgment against Mr. Boynton for the full amount sought by the Complaint. (D.E. 4.) On October 30, 2006, the United States filed its Motion for Summary Judgment against Ms. Boynton. (D.E. 20.) Ms. Boynton filed a Response in Opposition to the Motion on December 21, 2006 (D.E. 22) and the United States filed its Reply on December 29, 2006 (D.E. 23). On January 8, 2007, this Court heard oral argument from counsel for both remaining parties.

II. Legal Standard

Summary judgment is appropriate under Federal Rule of Civil Procedure 56 where the moving party demonstrates the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. See Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute over a material fact is genuine if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

III. Discussion

The United States seeks summary judgment against Ms. Boynton for the federal income tax assessments for the 1982 tax year. Ms. Boynton concedes that there can be no dispute as to the amount due, as the amount was determined by the Tax Court and affirmed by the Ninth Circuit. See Cramer v. Comm'r, 101 T.C. 225 (1993), aff'd, 64 F.3d 1406 (9th Cir. 1995). However, Ms. Boynton contends that there exists a genuine issue of fact as to whether she is eligible for relief from liability as an "innocent spouse," pursuant to 26 U.S.C. § 6015.*fn2

The innocent spouse exemption, codified at 26 U.S.C. § 6015, "was ... developed in an effort to offer some protection to a spouse who, through no fault of their own, did not have any knowledge of the incorrect tax reporting of the other spouse." In re French, 242 B.R. 369, 376 (Bankr. N.D. Ohio 1999). More specifically, § 6015 encompasses three types of relief, each with their own specific requirements: (1) subsection (b) provides full or apportioned relief from joint and several liability; (2) subsection (c) provides proportionate tax relief to divorced or separated taxpayers; and, (3) subsection (f) provides equitable relief from joint and several liability in certain circumstances if relief from neither subsection (b) nor subsection (c) is available. See 26 U.S.C. § 6015.*fn3 Ms. Boynton contends that she is entitled to relief under each of these three subsections.

The United States responds that summary judgment is appropriate for three independent reasons: (1) this Court lacks jurisdiction to adjudicate relief under § 6015 or to review the Commissioner's determination of whether to grant or deny relief under § 6015; (2) Ms. Boynton has failed to exhaust her administrative remedies under § 6015; and, (3) Ms. Boynton's request for relief under § 6015 is untimely.

In this case, the Court's analysis begins and ends with jurisdiction. "The district courts of the United States ... are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute." Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 125 S.Ct. 2611, 2616-17 (2005) (quotation omitted).

In order to address the United States' claim that this Court lacks jurisdiction to consider Ms. Boynton's § 6015 claim, it is first necessary to consider the statutory scheme for innocent spouse relief. Although not a model of clarity, § 6015 and the related regulations envision a process whereby a person claiming innocent spouse relief first does so with the Secretary of the Treasury ("Secretary"), pursuant to procedures established by the Secretary. Section 6015 repeatedly states that its provisions are to be effectuated "[u]nder procedures prescribed by the Secretary." 26 U.S.C. §§ 6015(b)(1) & 6015(f); see also § 6015(d)(3)(B) ("[u]nder rules prescribed by the Secretary"); § 6015(h) ("The Secretary shall prescribe such regulations as are necessary to carry out the provisions of this section...."). Among the procedures prescribed by the Secretary is the requirement that in order to elect the application of any of the three types of relief provided by § 6015 (i.e., subsections (b), (c) and (f)), "a requesting spouse must file Form 8857 or other similar statement with the Internal Revenue Service no later than two years from the date of the first collection activity against the requesting spouse after July 22, 1998, with respect to the joint tax liability." 26 C.F.R. § 1.6015-5(b).*fn4

Section 6015 also contains provisions for judicial review of the Secretary's § 6015 determinations: "In addition to any other remedy provided by law, the individual may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief available to the individual under this section...." 26 U.S.C. § 6015(e)(1)(A). Only the Court of Appeals may then review the decisions of the Tax Court. See 26 U.S.C. § 7482(a)(1) ("The United States Courts of Appeals ... shall have exclusive jurisdiction to review the decisions of the Tax Court...."); cf. Pietromonaco v. Comm'r, 3 F.3d 1342, 1344 (9th Cir. 1993) ("We review for clear error the Tax Court's determination that Mrs. Capehart was not entitled to innocent spouse relief under §§ 6015(b) and (c).").

Section 6015 expressly contemplates District Court jurisdiction in only one instance: when the taxpayer files a refund suit in District Court (as authorized by 26 U.S.C. §§ 6532 and 7422) while a § 6015 petition is pending with the Tax Court. See 26 U.S.C. § 6015(e)(3).*fn5 In that instance, the Tax Court is divested of jurisdiction to decide the § 6015 petition. See 26 U.S.C. § 6015(e)(3)(A). By contrast, in an action such as the instant one, where the United States initiates a suit to reduce ...

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