                        T.C. Memo. 2009-231



                      UNITED STATES TAX COURT



                RICHARD A. MOLSBEE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16565-07.                 Filed October 8, 2009.



     Richard A. Molsbee, pro se.

     Miriam C. Dillard, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     WELLS, Judge:   Petitioner seeks review of respondent’s

determination that petitioner is not entitled to relief pursuant

to section 6015(b) and (f)1 with respect to petitioner’s joint

income tax liabilities for taxable years 1993, 1994, and 1995.


     1
      All section references are to the Internal Revenue Code in
effect at all relevant times.
                                -2-

We must decide:   (1) Whether petitioner is precluded from raising

the issue of relief from joint and several liability for the

taxable years in issue by reason of the doctrine of res judicata

as set forth in section 6015(g)(2) and section 1.6015-1(e),

Income Tax Regs.; and (2) alternatively, if the Court finds that

petitioner is not so barred, whether petitioner is entitled to

relief under section 6015(b) or (f).

                         FINDINGS OF FACT

     Some of the facts and certain exhibits have been stipulated.

The stipulation of facts received into evidence is incorporated

herein by reference, and those facts are so found.

     At the time the petition was filed, petitioner resided in

Florida.

     During the years in issue and at all relevant times,

petitioner and Brenda Molsbee (Mrs. Molsbee) were married and

living together, except during the time that Mrs. Molsbee was

incarcerated.   Mrs. Molsbee was released from incarceration in

early 2005.

     Petitioner submitted for the years in issue a Form 8857,

Request for Innocent Spouse Relief, that respondent received on

January 13, 2004 (2004 request for relief).   On April 13, 2004,

respondent sent to petitioner and Mrs. Molsbee a notice of

deficiency for the years in issue (notice of deficiency).    On

July 13, 2004, petitioner and Mrs. Molsbee filed a petition in
                                -3-

the Tax Court disputing the notice of deficiency, and the case

was docketed at docket No. 12287-04 (the previous case).

     In the previous case, petitioner and Mrs. Molsbee sought a

redetermination of the deficiencies respondent determined for the

years in issue.   Monica Miller (Ms. Miller) represented

respondent in the previous case.   Neither petitioner nor Mrs.

Molsbee was represented by counsel in the previous case.

     On November 23, 2005, respondent filed a motion for

partial summary judgment in the previous case (partial summary

judgment motion).   Petitioner and Mrs. Molsbee raised the issue

of section 6015 relief from joint and several liability in their

response to the partial summary judgment motion, stating that

“Richard A. Molsbee has no knowledge of money not reported and

asks the Court to declare him an innocent spouse status.”

     In the previous case, Ms. Miller engaged in settlement

discussions with petitioner and with Mrs. Molsbee.   As part of

those discussions, Ms. Miller had a telephone conversation with

petitioner regarding whether the facts supported petitioner’s

being granted relief from joint and several liability for the

years in issue.   Ms. Miller explained to petitioner why

respondent felt that petitioner would not be entitled to relief

from joint and several liability, stating that petitioner

received checks from Mrs. Molsbee’s companies and had substantial

improvements made to his residence during the years in issue.
                                -4-

     On December 12, 2005, Ms. Miller sent a letter to

petitioner and Mrs. Molsbee, enclosing a proposed decision, a

proposed stipulation of settled issues, a proposed stipulation of

facts and exhibits, and three boxes of exhibits.   Ms. Miller

stated in the December 12, 2005, letter:    “Please note that the

decision concedes that Mr. Molsbee is not liable for the fraud

additions.”   On December 20, 2005, Ms. Miller sent a letter to

petitioner and Mrs. Molsbee, enclosing a proposed decision.     On

December 20, 2005, the Court denied respondent’s motion for

partial summary judgment.

     Petitioner, Mrs. Molsbee, and Ms. Miller signed a stipulated

decision in the previous case (decision).   The decision states,

in bold and underlined text, that the fraud penalties apply to

Mrs. Molsbee only and that petitioner and Mrs. Molsbee are liable

for the deficiencies.   The Court entered the decision on January

5, 2006, and the decision was not vacated or appealed.

     At the time she signed the decision, Mrs. Molsbee was aware

of the possibility of section 6015 relief from joint and several

liability because of her belief that her business partner’s

husband had been granted such relief.

     On May 15, 2006, petitioner filed another Form 8857 for the

years in issue (2006 request for relief).   Petitioner checked the

boxes indicating that he was not divorced, separated, or living
                                 -5-

apart from Mrs. Molsbee, and he did not check the box to request

“Separation of Liability”.

     Respondent determined that petitioner is not entitled

to relief from joint and several liability under section 6015

for the years in issue and, on April 15, 2007, sent petitioner

the notice of determination.

     During the years in issue, petitioner and Mrs. Molsbee

had $225,679 of construction work performed on their personal

residence (residence).    Petitioner knew that the funds for the

construction work on the residence came from Mrs. Molsbee’s

company.   The construction work resulted in the size of their

residence almost tripling, from 1,800 square feet to 5,000 square

feet.   The residence is situated on 13 acres of land and worth

approximately $625,000.

     During the years in issue, petitioner performed work for

Mrs. Molsbee’s company, for which he was compensated.    During the

years in issue, Mrs. Molsbee paid petitioner’s living expenses

and petitioner acquired a Chevrolet truck.    During 1994,

petitioner acquired a new bass boat.    Petitioner has a high

school diploma and has a captain’s license and a pilot’s license.

Mrs. Molsbee has an associate’s degree and is licensed as a real

estate broker and real estate appraiser.

     During the years in issue, petitioner and Mrs. Molsbee

maintained a joint checking account, from which petitioner’s and
                                  -6-

Mrs. Molsbee’s living expenses were paid.    Petitioner and Mrs.

Molsbee both had access to the joint checking account, and Mrs.

Molsbee handled the household finances.

     Petitioner was raised in a household where his mother

handled the finances, so he thought that Mrs. Molsbee should do

so also.   Petitioner continues to choose that Mrs. Molsbee handle

the household finances, and she continues to do so.    Petitioner

has not been abused by Mrs. Molsbee.

     Petitioner did not allege or submit any evidence as to

personal physical or mental health problems.    Petitioner

performed physical labor during the years in issue.    Petitioner

did not submit evidence of current household income and expenses.

                              OPINION

Section 6015(g)(2)

     We must first decide whether petitioner is precluded from

raising the issue of relief from joint and several liability for

the years in issue by the doctrine of res judicata as set forth

in section 6015(g)(2) and section 1.6015-1(e), Income Tax Regs.

     Under the judicial doctrine of res judicata, when a

court of competent jurisdiction enters a final judgment on the

merits of a cause of action, the parties to the action are bound

by every matter that was or could have been offered and received

to sustain or defeat the claim.     Commissioner v. Sunnen, 333 U.S.

591, 597 (1948); see Gustafson v. Commissioner, 97 T.C. 85, 91
                                  -7-

(1991).   The doctrine of res judicata “serves to promote judicial

economy and the repose of disputes” by precluding repetitious

lawsuits.     Gustafson v. Commissioner, supra at 91.   Because

Federal income taxes are determined on an annual basis, each year

is a separate cause of action, and res judicata is applied to bar

subsequent proceedings involving the same tax year.      Commissioner

v. Sunnen, supra at 597-598; Calcutt v. Commissioner, 91 T.C. 14,

21 (1988).

     Section 6015(g)(2) modifies the common law doctrine of res

judicata with regard to claims for relief from joint and several

liability.    Section 6015(g)(2) provides:

     SEC. 6015(g). Credits and Refunds.--

     *          *        *        *          *      *         *

          (2) Res judicata.--In the case of any election
     under subsection (b) or (c) or of any request for
     equitable relief under subsection (f), if a decision of
     a court in any prior proceeding for the same taxable
     year has become final, such decision shall be
     conclusive except with respect to the qualification of
     the individual for relief which was not an issue in
     such proceeding. The exception contained in the
     preceding sentence shall not apply if the court
     determines that the individual participated
     meaningfully in such prior proceeding.

     Under common law principles of res judicata, a taxpayer who

was a party to a prior proceeding for the same taxable year would

be barred from seeking relief from joint and several liability

whether or not the claim had been raised as an issue in the prior

proceeding.    Section 6015(g)(2) alters that result by providing:
                                  -8-

     an individual cannot make an election under section
     6015(b) or (c) for any taxable year that is the
     subject of a final court decision, unless the
     individual’s qualification for relief under section
     6015(b) or (c) was not an issue in the prior court
     proceeding and the individual did not participate
     meaningfully in the prior proceeding. * * * [Vetrano
     v. Commissioner, 116 T.C. 272, 278 (2001).]

Section 1.6015-1(e), Income Tax Regs., provides the following:

          (e) Res judicata and collateral estoppel.--A
     requesting spouse is barred from relief from joint and
     several liability under section 6015 by res judicata
     for any tax year for which a court of competent
     jurisdiction has rendered a final decision on the
     requesting spouse’s tax liability 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. A requesting spouse has not meaningfully
     participated in a prior proceeding if, due to the
     effective date of section 6015, relief under section
     6015 was not available in that proceeding. Also, any
     final decisions rendered by a court of competent
     jurisdiction regarding issues relevant to section 6015
     are conclusive and the requesting spouse may be
     collaterally estopped from relitigating those issues.

     There is no dispute that the traditional prerequisites for

the application of the doctrine of res judicata are present.

Petitioner was a party to the previous case in the Tax Court,

which was a deficiency action that petitioner and Mrs. Molsbee

brought to dispute the deficiencies respondent determined for

their taxable years 1993, 1994, and 1995, the same taxable years

in issue in the instant case.   The Tax Court proceeding was

initiated on July 13, 2004, well after the July 22, 1998,

effective date of section 6015.    Petitioner raised his claim for

relief from joint and several liability under section 6015 as a
                                -9-

defense in the previous case.   The decision in the previous case

is final.   Accordingly, the only question remaining is whether

the exception to the principle of res judicata in section

6015(g)(2) applies.

     Petitioner was aware of the possibility of relief from

joint and several liability at least 6 months before the petition

was filed in the previous case, as evidenced by the fact that

during January 2004, he initially filed the 2004 request for

relief.   At trial, Mrs. Molsbee admitted that the issue of

petitioner’s eligibility for relief from joint and several

liability was raised in the previous case.   Also, in his reply,

petitioner admits that he and Mrs. Molsbee raised the issue of

relief from joint and several liability in the previous case in

their response to the Commissioner’s partial summary judgment

motion.

     Petitioner and Mrs. Molsbee, in their response to the

partial summary judgment motion in the previous case,

specifically requested that petitioner be granted section 6015

relief, alleging that petitioner had no knowledge of the

unreported funds.   Indeed, Mrs. Molsbee admitted that, at the

time she signed the stipulated decision in the previous case, she

was aware of the possibility of relief from joint and several

liability because of her belief that her business partner’s

husband had been granted relief.   Moreover, petitioner discussed
                               -10-

the issue with respondent’s counsel in the previous case.   While

petitioner disputes that he spoke to Ms. Miller,2 we accept Ms.

Miller’s testimony that petitioner engaged in settlement

discussions with her.   Ms. Miller testified that she explained to

petitioner that he would not be entitled to relief from joint and

several liability because he received checks from Mrs. Molsbee’s

companies and had substantial improvements made to his residence

during the years in issue.   Additionally, the stipulated decision

in the previous case explicitly states that the fraud penalties

apply to Mrs. Molsbee only and that petitioner and Mrs. Molsbee

are liable for the deficiencies.   We conclude on the basis of the

record that section 6015 relief was raised as an issue in the

previous case and that petitioner meaningfully participated in

the previous case.3

     On the basis of the foregoing, we hold that petitioner is

barred under section 6015(g)(2) from raising the issue of section



     2
      Petitioner did admit that he spoke with one female employee
of respondent concerning the tax liabilities for the years in
issue.
     3
      This case does not present the type of special
circumstances that may overcome the bar of res judicata, such as
those present in the case of Trent v. Commissioner, T.C. Memo.
2002-285. In Trent, the taxpayer was precluded by an apparent
misunderstanding on her part and on the part of an Appeals
officer from raising her claim to relief from joint liability in
the prior proceeding. Petitioner was not so precluded, and
indeed, after raising the issue, entered into a stipulated
decision that both he and Mrs. Molsbee are liable for the
deficiencies set forth in the decision.
                                 -11-

6015 relief.   We therefore need not reach the issue of whether

petitioner qualifies for relief under section 6015(b) or (f).     We

have considered all of the issues raised by the parties, and, to

the extent they are not discussed herein, we conclude that they

are without merit, unnecessary to reach, or moot.

     To reflect the foregoing,


                                             Decision will be entered

                                        for respondent.
