                         T.C. Memo. 2009-40



                       UNITED STATES TAX COURT



                    ALINA KARP, Petitioner,
                AND ORRIN E. KARP, Intervenor v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 26617-06.               Filed February 18, 2009.



     Dennis G. Harkavy, for petitioner.

     Orrin E. Karp, pro se.

     Steven M. Roth, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     VASQUEZ, Judge:    Pursuant to section 6015(e),1 petitioner

seeks review of respondent’s determination with respect to her



     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code.
                                - 2 -

request for section 6015 relief from joint income tax liabilities

for the tax years 2000, 2001, and 2003.      Respondent determined

that petitioner was entitled to partial relief pursuant to

section 6015(c) and denied relief pursuant to section 6015(b) and

(f).    Petitioner seeks review of respondent’s denial of relief

pursuant to section 6015(b), (c), and (f).

       If the Court determines that petitioner is entitled to

relief pursuant to section 6015(b) or (f), then petitioner seeks

a refund of community property proceeds (the proceeds from the

sale of her family home) used to satisfy the joint income tax

liabilities.

                          FINDINGS OF FACT

       Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated by this reference.

       Petitioner resided in California when the petition was

filed.    Petitioner’s former spouse, Orrin Karp (Mr. Karp),

intervened.

       Petitioner and Mr. Karp were married on March 30, 1993.

During their marriage Mr. Karp worked in the commercial real

estate business.    Petitioner worked as a legal secretary until

approximately June 1994 and did not work outside the home for the

rest of their marriage.    Petitioner and Mr. Karp separated on

April 29, 2004, and were divorced on March 29, 2007.
                               - 3 -

     During their marriage the couple lived in a home originally

purchased by Mr. Karp as separate property.   Mr. Karp used his

separate funds as a downpayment in purchasing the house and in

making significant improvements to the house.   On December 2,

1993, Mr. Karp quitclaimed his separate property interest in the

house to petitioner and himself as community property.     This

house thereby became the community property of petitioner and Mr.

Karp.

     Petitioner and Mr. Karp did not initially file tax returns

for 1995 through 2002.   The Internal Revenue Service (IRS)

contacted petitioner and Mr. Karp about their failure to file tax

returns.   Petitioner and Mr. Karp, with an accountant’s

assistance, filed delinquent tax returns for years 1995 through

2001.

     Approximately 1 year after the 1995 through 2001 returns

were filed, petitioner and Mr. Karp were contacted by and met

with an IRS collection officer.   Petitioner and Mr. Karp then

hired a different accountant to prepare amended returns for 1995

through 2001.   After the amended returns were filed, the IRS

audited them.   The IRS questioned some of the business deductions

and other deductions claimed on their amended joint returns.      The

IRS sent notices of deficiency to petitioner and Mr. Karp on

October 17, 2005, for their 2000 return and on October 31, 2005,

for their 2001 return.
                               - 4 -

     Petitioner and Mr. Karp timely filed their 2003 joint income

tax return.   The IRS disallowed certain expenses claimed on

Schedule C, Profit or Loss from Business, such as commissions and

fees paid to others.   On November 7, 2005, the IRS sent

petitioner and Mr. Karp a notice of deficiency regarding their

2003 tax return.

     The years in issue before this Court are 2000, 2001, and

2003, and the following amounts include tax, penalties, and

interest that had accrued as of July 10, 2006.   For 2000 there is

an underpayment2 of $42,820.22 and an understatement3 of

$110,064.24; part of this understatement resulted from a math

error made by petitioner and Mr. Karp.   For 2001 there is an

understatement of $6,285.53.   For 2003 there is an understatement

of $130,804.33.

     On July 10, 2006, petitioner’s outstanding tax liabilities

(including the underpayment for 2000 and understatements for

2000, 2001, and 2003) were paid from the proceeds of the sale of

petitioner’s and Mr. Karp’s family home.


     2
        An “underpayment” is the taxpayer’s failure to pay the
tax shown as due on a return. It may be determined by
subtracting the amount of the tax actually paid by the taxpayer
from the amount of tax reported on the return.
     3
        An “understatement”, generally equated with a
“deficiency”, is the taxpayer’s failure to correctly report on a
return the amount of tax due. It may be determined by
subtracting the amount of the tax imposed which is shown on the
return from the amount of the tax required to be shown on the
return. Secs. 6015(b)(3), 6662(d)(2)(A), 6211(a).
                                 - 5 -

     On August 23, 2005, petitioner filed Form 8857, Request for

Innocent Spouse Relief.   Petitioner requested section 6015 relief

from the underpayment for 2000 and the understatements for 2000,

2001, and 2003.   Respondent awarded and denied section 6015

relief to petitioner as follows:

     •   2000 Underpayment:    Respondent denied section 6015(f)

         relief on September 22, 2006.

     •   2000 Understatement:    Respondent awarded partial

         section 6015(c) relief and denied section 6015(b)

         relief on September 22, 2006.   Respondent’s award of

         partial section 6015(c) relief was for the portion of

         the understatement that was not due to a math error on

         petitioner’s part.

     •   2001 Understatement:    Respondent awarded full section

         6015(c) relief and denied section 6015(b) relief on

         September 25, 2006.

     •   2003 Understatement:    Respondent awarded full section

         6015(c) relief and denied section 6015(b) relief on

         September 25, 2006.

     On December 26, 2006, petitioner filed her petition with

this Court to review respondent’s determination with respect to

her request for section 6015 relief for 2000, 2001, and 2003.

Petitioner alleges that the tax liabilities for these years were

satisfied using the proceeds from the sale of community property
                               - 6 -

(petitioner’s former family home).     If petitioner is entitled to

section 6015(b) or (f) relief, then petitioner seeks a refund of

her share of the community property proceeds used to satisfy the

joint income tax liabilities for 2000, 2001, and 2003.

                              OPINION

     Section 6015(g)(3) precludes a refund in the case of section

6015(c) relief.   Accordingly, we look to section 6015(b) and (f)

to determine whether petitioner is entitled to such relief.      Even

if petitioner is otherwise entitled to section 6015(b) or (f)

relief, Ordlock v. Commissioner, 126 T.C. 47 (2006), affd. 533

F.3d 1136 (2008), is the controlling precedent, and a refund is

precluded.

     Mr. Karp deeded the family home to petitioner and himself as

community property.   Subsequently, the family home was sold, and

the proceeds were used to pay the joint tax liabilities of

petitioner and Mr. Karp.   Petitioner has asked for a review of

her eligibility for section 6015 relief and has asked for a

refund of the family home proceeds.

     We have faced a similar factual scenario before.    In Ordlock

v. Commissioner, supra, payments of joint income tax liabilities

were made using community property and the separate property of

the taxpayer.   The taxpayer had sought innocent spouse relief

from the IRS and was granted section 6015(b) relief.    Afterward,

the taxpayer sought in this Court a refund of payments made using
                                   - 7 -

community property assets.    In Ordlock, the Commissioner conceded

that the taxpayer was entitled to a refund of the payments made

from her separate property.   In denying her request for a refund

of the payments made from community property, we stated:       “The

nature of a marital community in California is to generally allow

the individual debts of the spouses to be collected out of

community assets.”    Id. at 59.    “If Mr. Ordlock had been

personally liable to a nongovernment creditor, the community

assets would have been a potential source of payment to that

creditor.”    Id.

     Even if petitioner is entitled to section 6015(b) or (f)

relief, petitioner could not be refunded the amounts paid from

community property.   Petitioner has not alleged that any part of

the payments was made from separate property of petitioner or

intervenor.   In Ordlock, we held that section 6015 did not

preempt community property law so as to allow for the refund of

payments made from community property.     Our decision was affirmed

by the U.S. Court of Appeals for the Ninth Circuit, 533 F.3d 1136

(2008).   In the absence of stipulation to the contrary, any

appeal of this case would be to that Court of Appeals.

Therefore, we are precluded from refunding to petitioner any of

her community property used to pay the 2000, 2001, and 2003 tax

liabilities, even if she were otherwise eligible for section

6015(b) or (f) relief.
                                 - 8 -

     Accordingly, since we are precluded from providing

petitioner a refund, we are unable to grant her relief under

section 6015(b), (c), or (f).

     To reflect the foregoing,


                                          Decision will be entered

                                     for respondent.
