Tax Court Holds That Blog Posts Were Properly Admitted in Innocent Spouse Case

(Parker Tax Publishing March 2023)

In a case of first impression, the Tax Court denied a taxpayer's motion to strike personal blog posts introduced into evidence by the IRS which were relevant to the ultimate disposition of the taxpayer's claim for relief from joint and several liability under Code Sec. 6015(f). The court found that the blog posts were "newly discovered" and "previously unavailable evidence" under Code Sec. 6015(e)(7)(B). Thomas v. Comm'r, 160 T.C. No. 4 (2023).

Background

Sydney Thomas (Thomas) and her husband, Tracy, filed joint federal income tax returns for the years 2012, 2013, and 2014. Some of the tax shown as due on those returns remains unpaid.

Tracy died in 2016. After his death, Thomas asked the IRS for relief from the unpaid joint and several liabilities for 2012, 2013, and 2014 pursuant to Code Sec. 6015(f). The IRS denied that request on September 8, 2020. On November 9, 2020, Thomas petitioned the Tax Court pursuant to Code Sec. 6015(e) to determine the appropriate relief available to her under Code Sec. 6015(f).

At the trial, the IRS proposed to introduce into evidence a series of posts from Thomas's personal blog (i.e., Exhibit 13-R). The first post included in Exhibit 13-R is dated November 2, 2016, and the final post is dated January 5, 2022. The contents of the posts are relevant because they reflect information about Thomas's assets, lifestyle, and business, as well as her relationship with Tracy. Thomas discussed the blog during her direct testimony, and, although the IRS did not directly question Thomas about specific blog posts during cross-examination, some of the IRS's cross-examination questions relied on matters addressed in the blog posts.

Thomas objected to admitting Exhibit 13-R. On April 26, 2022, the Tax Court issued an order addressing Exhibit 13-R. The Court concluded "that it would advance the orderly resolution of this case to treat [Exhibit 13-R and certain other exhibits with respect to which there is no longer a dispute] as admitted in full." Thomas, who to that point had represented herself pro bono, obtained legal counsel, who filed a motion to strike. The IRS objected to the motion.

A spouse who has made a joint return may seek relief from joint and several liability under the procedures established in Code Sec. 6015. Code Sec. 6015(f) permits the IRS to relieve a requesting spouse of some or all of the outstanding joint liability if, taking into account all of the facts and circumstances, it is inequitable to hold that spouse liable for any unpaid tax. Under Code Sec. 6015(e), a requesting spouse who is dissatisfied with the IRS's decision about the requested relief may petition the Tax Court to determine the appropriate relief available to the individual under Code Sec. 6015.

The Taxpayer First Act, enacted in 2019, amended Code Sec. 6015(e) by adding a new paragraph (7). Code Sec. 6015(e)(7) provides that any review of a determination made under Code Sec. 6015 will be reviewed de novo by the Tax Court and will be based upon (1) the administrative record established at the time of the determination and (2) any "additional newly discovered or previously available evidence."

The parties agreed that Thomas's blog posts were not part of the administrative record and that they were relevant to the disposition of the case. Given their relevance, the Tax Court had to determine whether it should strike the blog posts pursuant to Code Sec. 6015(e)(7). The Tax Court therefore considered, as a matter of first impression, the meaning of the phrase "any additional newly discovered...evidence."

Thomas sought to strike the portions of Exhibit 13-R covering blog posts that existed before September 8, 2020, the date on which the IRS denied Thomas's request for relief. In Thomas's view, the pre-September 8, 2020, blog posts were publicly available, and the IRS could have found them through an internet search of her name. Thus, they were not "previously unavailable." Thomas asked the Tax Court to conclude that the posts were also not "newly discovered." She contended that the court should interpret the term by reference to Rule 60(b)(2) of the Federal Rules of Civil Procedure (FRCP 60(b)(2)). 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." Applying the standard established by FRCP 60(b)(2), Thomas contended that the IRS did not exercise reasonable diligence in this case.

The IRS maintained that none of Exhibit 13-R should be stricken. In the IRS's view, all of Thomas's blog posts were "newly discovered" by the IRS after the administrative proceedings concluded. The IRS urged the court to give the term "newly discovered" its ordinary meaning. And the IRS contended that it prevailed under the ordinary meaning of the phrase because it did not become aware of the blog materials until after Thomas brought this case. In the IRS's view, several considerations favor its reading of the statute. First, the IRS said that its role in resolving claims for relief under Code Sec. 6015 is that of an arbiter, not an advocate. Thus, the IRS does not have a duty to gather evidence to defeat a request for relief. Second, because the taxpayer has the burden at the administrative stage to establish that relief is appropriate, if the IRS concludes that the taxpayer has failed to meet that burden, the IRS said it would be a waste of resources for it to gather additional evidence simply to refute an inadequate claim. Third, because the relationship between the IRS and a requesting spouse does not become adversarial until a Tax Court proceeding begins, any responsibility for the IRS to collect additional information should not arise until then. Fourth, the statutory requirement that the court's decision be based on "the administrative record established at the time of the determination" under Code Sec. 6015(e)(7)(A) represents an effort to ensure that requesting spouses exhaust their administrative remedies before coming to the Tax Court. Since no exhaustion requirement applies to the IRS, it argued that it should be permitted to look for additional evidence once the case is in court rather than being required to undertake such efforts earlier on pain of losing the right to do so. Moreover, since the evidence at issue here was within the requesting spouse's control, the IRS said that factor weighed in favor of the evidence being left in the record. Taxpayers, the IRS maintained, should not be incentivized to hide information from the IRS during the administrative phase.

Analysis

The Tax Court held that the blog posts from Thomas's personal blog were "newly discovered" within the meaning of Code Sec. 6015(e)(7)(B) and as such were properly admitted. The court found that the ordinary meaning of "newly discovered" as of 2019 was "recently obtained sight or knowledge of for the first time." Applied to this case, the court found that the phrase "newly discovered evidence" encompassed the blog posts that Thomas sought to strike. The court noted that the IRS discovered the posts by searching the internet after Thomas filed her petition. There was no evidence that the IRS obtained the blog posts any sooner and Thomas made no argument to that effect. Therefore, the court concluded that the relevant portions of Exhibit 13-R were admissible as "newly discovered evidence" for purposes of the Tax Court's review of Thomas's innocent spouse claim.

The court did not agree with Thomas's interpretation of Code Sec. 6015(e)(7)(B). The court noted that as used in FRCP 60(b)(2), the reasonable diligence language qualifies what "newly discovered evidence" courts may review when considering a motion for a new trial. In other words, the language does not define the phrase "newly discovered evidence" as Thomas asserted; rather, the court found that it acts as an additional (and external) limitation on the meaning of that phrase. The court noted that Code Sec. 6015(e)(7)(B) contains no such qualifier. Moreover, the court observed that FRCP 60(b)(2) was widely known and available as a model when Congress drafted Code Sec. 6015(e)(7)(B), but Congress did not choose to include a reasonable diligence standard in the statute.

Furthermore, the court found that nearby text in Code Sec. 6015(e)(7)(B) suggested a conclusion contrary to the one Thomas urged. In the court's view, not only does Code Sec. 6015(e)(7)(B) lack a limiting qualifier; it includes an expanding one, permitting the consideration of "any additional" newly discovered evidence. Thus, even if the phrase "newly discovered evidence" were by itself open to a more limited interpretation, the court found that Congress's use of the phrase "any additional" would counsel against adopting a limiting interpretation not presented by the text. The court also found additional support for its reading in the structure of Code Sec. 6015(e)(7), which grants the Tax Court de novo review of innocent spouse determinations. A de novo standard of review suggested to that court that it should construe its authority to consider information outside the administrative record broadly rather than narrowly, because limiting the evidence we can consider inhibits our ability to evaluate a case's merits.

Finally, the court noted that Code Sec. 6015(e)(7)(B) applies in a context different from that of FRCP 60(b)(2). Most notably, parties to a motion for relief from a judgment or order under FRCP 60(b)(2) have had a prior opportunity to conduct discovery, introduce evidence at trial, and prosecute their case before a court. In this situation, the court reasoned that a reasonable diligence requirement makes perfect sense, because the parties have already had their chance to persuade the court. But the court said that in the context of Code Sec. 6015(e)(7), the Tax Court considers a case for the first time following a relatively limited administrative proceeding. The court concluded that the more permissive rule in Code Sec. 6015(e)(7) is appropriate in these circumstances.

For a discussion of innocent spouse relief, see Parker Tax 260,560.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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