1991 U.S. Tax Ct. LEXIS 104">*104 Ps jointly filed income tax returns for years A, B, and C. On Ps' return for year C they reported a loss attributable to depreciation on a computer leasing transaction. Ps then jointly filed a Form 1045 (Application for Tentative Refund) to carry the net operating loss from year C to years A and B and to claim overpayment of tax in years A and B. R determined income tax deficiencies and additions to tax for years A, B, and C. P husband conceded all deficiencies and additions to tax determined by R, and P wife contends that she is entitled to relief as an innocent spouse. R contends that P wife is precluded from seeking innocent spouse relief for years A and B because
97 T.C. 606">*607 OPINION
Petitioners moved 1991 U.S. Tax Ct. LEXIS 104">*105 for partial summary judgment on the question of whether the facts here meet a specific requirement of
1991 U.S. Tax Ct. LEXIS 104">*106 We find that the use of summary judgment is appropriate in the setting of this case. See Rule 121(b). The burden of 97 T.C. 606">*608 proof is upon petitioners with respect to the issue under consideration.
The facts have been fully stipulated and there is no disagreement concerning the facts necessary to address this controversy. Petitioners timely executed and filed joint Federal income tax returns for their 1981, 1982, and 1983 taxable years. On each return, petitioners reported the filing status "Married Filing Joint Return." Although petitioners' 1981 and 1982 returns had underpayments as filed, respondent did not question the items reported.
Petitioners, on their 1983 return, reported a $ 900,525 depreciation loss concerning a computer equipment leasing transaction. After applying the loss against items for 1983, petitioners reflected an unused net operating loss in the amount of $ 836,205. On February 27, 1984, respondent received a Form 1045 seeking to carry back the 1983 net operating loss deduction to petitioners' 1981 and 1982 returns. The Form 1045 contained the amount to be carried back1991 U.S. Tax Ct. LEXIS 104">*107 from 1983 and certain computations regarding the 1981 and 1982 taxable years. Respondent, on March 26, 1984, allowed petitioners' claim by crediting their unpaid 1981 and 1982 liabilities resulting from their timely filed but underpaid 1981 and 1982 returns.
Respondent, on January 23, 1990, determined deficiencies in petitioners' 1981 through 1985 income tax liabilities. The 1983, 1984, and 1985 deficiencies were substantially attributable to disallowance of petitioners' claimed losses from the computer leasing transaction. The 1981 and 1982 years were included in the notice of deficiency solely due to the disallowance of the carryback loss deduction and respondent's prior tentative allowance of credits for unpaid liabilities for 1981 and 1982.
Petitioners alleged that respondent erred in disallowing their computer leasing losses and petitioner wife alleged that she was an innocent spouse. Subsequently, petitioner husband conceded all adjustments and deficiencies determined by respondent, including additions to tax under 97 T.C. 606">*609 sections 6653(a)(1) and (2) and 6661, and increased interest under section 6621(c).
With this background, respondent argues that petitioners' 1991 U.S. Tax Ct. LEXIS 104">*108 1981 and 1982 income tax returns were accepted as filed by respondent, and accordingly no substantial understatement exists with respect to them. In essence, respondent is attempting to make a dichotomy between the returns and ancillary documents by arguing that the Form 1045 does not constitute a return within the meaning of
The operative language of (1) In general. -- Under regulations prescribed by the Secretary, if -- (A) (B)
The statutory requirement that any return be jointly executed or filed is not troublesome here because all documents under consideration were signed by both petitioners. 1991 U.S. Tax Ct. LEXIS 104">*109 The troublesome aspect of this controversy involves the language "on such return there is a substantial understatement of tax attributable to grossly erroneous items of one spouse." Respondent interprets the quoted language as referring to petitioners' 1981 and 1982 joint income tax returns. Respondent specifically excludes the Form 1045 from his interpretation of the quoted language. Respondent argues that a Form 1045 is not a tax return, but it is "merely an
A taxpayer is precluded from filing two returns for one taxable year. 2 Moreover, every document which a taxpayer 97 T.C. 606">*610 files containing computations and tax information is not a return. The question of whether a particular document is a return has been considered in various contexts.
In the setting of this case, petitioners did not intend that the Form 1045 constitute a return for 1981, 1982, or 1983. Petitioners had already timely filed joint returns for each of the subject years. Rather, petitioners intended to modify their 1981 and 1982 returns by seeking the carryback of the net 1991 U.S. Tax Ct. LEXIS 104">*111 operating loss deduction from 1983 and reducing the amount of tax liability. Although the Form 1045, standing alone, might not be a return, it was intended to modify and, in that regard, did become an intrinsic part of petitioners' 1981 and 1982 returns. We think that relationship, resulting from the merger of the jointly executed Form 1045 and the 1981 and 1982 joint returns, satisfies the "on such return" language of
Petitioners argue and we note that there is no definition of a return in (1) Return. -- The term "return" means any tax or information return, declaration of estimated tax, or claim for refund required by, or provided for or permitted under, the provisions of this title which is filed with the Secretary by, on behalf of, 1991 U.S. Tax Ct. LEXIS 104">*112 or with respect to any person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists which are supplemental to, or part of, the return so filed.
By way of analogy, we have held that additions to tax apply to taxable years which predate the effective date of such additions where taxpayers filed claims for refunds for such years pertaining to taxable years occurring after the effective date. See
We reasoned in It is inconceivable to us, however, that Congress intended to leave a gap for those who would place a valuation overstatement on a return for a year after the effective date of section 6659, carry back the claimed benefit of the overstatement to prior years, and obtain a refund of taxes for the prior years free of the risk of the sanction obviously intended to deter such overstatements.
1991 U.S. Tax Ct. LEXIS 104">*115 In the same vein, petitioners' 1983 joint return contained the questioned item from which the net operating loss deduction had sprung. One might also reasonably argue that the entry on the 1983 return meets the "on such return" requirement because that return was the one which actually generated the loss, refund, and eventual deficiency determination by respondent.
Moreover, incongruity and a less uniform application of the innocent spouse provisions would result if taxpayers were to be treated differently because of a technical difference in the type of document involved. Here, respondent has determined additions to tax for negligence for the 1981 and 1982 years based upon the claim made vis-a-vis the Form 1045. Any 1981 or 1982 income tax liability and additions to tax should not be handled differently from those for 1983 in the setting of this case.
Our focus in this case is whether petitioner wife should be afforded relief from tax liability because she is an innocent spouse within the meaning of
To reflect the foregoing,
1. The parties addressed the issue in a more limited fashion as one concerning whether the Form 1045 is a "return" within the meaning of
Section references are to the Internal Revenue Code of 1954 as in effect and amended for the taxable years under consideration. Rule references are to this Court's Rules of Practice and Procedure.↩
2. See discussion in M. Saltzman, IRS Practice and Procedure, par. 4.02[3] (2d ed. 1991).↩
3. We in no way intend to extend our reasoning to other possible applications of the use of the term "return."↩
4. See also
5. Respondent also argues that an amended return may not be a return within the meaning of
