BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT OCTOBER 6, 2009 ITEM B1 FRANCHISE AND PERSONAL INCOME TAX HEARING APPEAL OF BARBARA BLADEN PORTER (No. 424104) AGAINST PROPOSED ASSESSMENT OF ADDITIONAL TAX Reported by: Beverly D. Toms CSR No. 1662 1 1 2 P R E S E N T 3 For the Board Betty T. Yee of Equalization: Chairwoman 4 Jerome E. Horton 5 Vice-Chair 6 Bill Leonard Member 7 Michelle Steel 8 Member 9 Marcy Jo Mandel Appearing for John Chiang 10 State Controller (per Government Code 11 Section 7.9) 12 Diane Olson Chief, Board 13 Proceedings Division 14 For Board of Amy Kelly 15 Equalization Staff: Appeals 16 Linda Frenklak Appeals 17 18 For Franchise Tax Mark McEvilly 19 Tax Counsel: Tax Counsel 20 Kathleen Cooke 21 Tax Counsel 22 For Appellant: William E. Taggart, Jr. Attorney at Law 23 24 ---oOo--- 25 26 27 28 2 1 Sacramento, California 2 October 6, 2009 3 ---oOo--- 4 MS. YEE:. Thank you very much. We are on item 5 B1, Barbara Bladen Porter. Ms. Kelly, will you 6 introduce the case. 7 MS. KELLY: Good morning, Madam Chair, Linda 8 Frenklak will introduce the case this morning. 9 MS. YEE: Great. Thank you. Good morning. 10 MS. FRENKLAK: Good morning, Madam Chairwoman 11 and Members of the Board. The issues in this appeal are 12 whether Appellant is barred by the doctrine of res 13 judicata from seeking innocent spouse relief. 14 Alternatively, if res judicata does not apply, 15 whether appellant has demonstrated that she is entitled 16 to innocent spouse relief. 17 MS. YEE: Thank you very much. Good morning, 18 sir. 19 MR. TAGGART: Good morning -- 20 MS. YEE: If you could introduce yourself for 21 the record. You have ten minutes for your presentation. 22 MR. TAGGART: -- Madam Chairwoman and Board 23 Members, I'm William Taggart. I'm representing Barbara 24 Porter in this appeal. 25 MS. YEE: Okay. Please proceed. 26 MR. TAGGART: I have only six points I want to 27 make. I'll make them very quickly because it's a 28 complex subject. 3 1 First of all, with respect to the computation 2 of the Franchise Tax Board of the liability, if c relief 3 is granted, the record is very clear that Barbara Porter 4 had $180 in dividend -- or interest income in 1994. 5 If you take her interest income and her salary, 6 do a married filing separate return for her, take a 7 standard deduction, the California tax State liability 8 comes out 1357 and her withholding was 1355. 9 The FTB erroneously allocated 50 percent of the 10 total dividends and interest income in making its 11 computation of tax liability. 12 Second question, which was one of the questions 13 that was addressed, is the material participation issue. 14 The only evidence of any participation by Barbara Porter 15 in the appeal of the 1994 assessment was her purported 16 signature on the appeal document in response to an 17 inquiry from the Franchise Tax Board because the 18 original appeal document was submitted only with her 19 husband's signature. 20 Barbara Porter has signed a declaration under 21 penalty of perjury that she didn't even know about the 22 appeal. Signature, whether it was her signature or was 23 a signature by her husband of her name with her 24 knowledge and consent or without her knowledge and 25 consent may be technically participation but it cannot 26 be meaningful participation within the meaning of that 27 phrase in both 6015 and 18533. 28 The question of res judicata has been raised 4 1 in -- discussed extensively in the materials prepared 2 for the Board and I think a little background is 3 important. 4 The amendment that -- to the innocent spouse 5 relief in 1998 by Congress was a great idea that was 6 complicated a great deal because of the political 7 process results in legislation. 8 There were two bills passed, one by the House 9 and one by the Senate. 6015 was cobbled together out of 10 those completely disparate bills and there are a lot of 11 rough edges in the Federal legislation was passed. 12 California Legislature adopted verbatim practically. 13 But trying to modify the expanded innocent spouse relief 14 into an administrative process for the administration of 15 income tax laws that is different than Federal law. 16 And as a consequence there are some rough edges 17 in California's legislation, itself, because the 18 administrative process is for the collection -- or for 19 the assessment and collection of income tax in a joint 20 return are different in California in some fundamental 21 procedural ways than they are at the Federal level. 22 As a consequence there are some rough edges. 23 Before you get to the main point there's one 24 other point that I want to address in -- that's 25 referenced in the staff's materials. And that is the 26 extended discussion of Reg. section 1.615-5(b)(1). This 27 is the two-year statute of limitations, application to 28 equitable relief. And the same material is covered 5 1 extensively in Rev. Prop. 2003-61. This is discussed 2 over approximately three pages in the staff's 3 preparation report. 4 The reason it's important to focus on that is 5 those precise provisions of both revenue procedure and 6 the regulations under 6015 were struck down by the Tax 7 Court in a decision, Lance versus Commissioner, that was 8 decided in April of this year. 9 If you want the citation it's 132 Tax Court, TC 10 number 8. It was a reviewed decision. There were 11 dissents and there were concurring opinions. 12 The importance of that case is that it is the 13 first time that the Tax Court has clearly recognized 14 that in enacting 6015(b) and 6015(f) that when Congress 15 said inequitable it was introducing for the first time 16 into the Internal Revenue the concept of equity. 17 That same language is carried over into 18533. 18 Page 17 of the decision in Lance I'd like to 19 read to you some material. We do not believe that 20 Congress intended the circumvention of the analysis 21 required by Section 6015(f) that results from the 22 restrictions of Section of 6015(b) -- (5)(b)(1) -- 23 that's the income tax regulations. 24 In subsection f Congress designed a general 25 remedy to meet inequitable situations not specifically 26 addressed in subsections b and c. 27 The general nature of the remedy in subsection 28 f implies an intent to address difficult marital 6 1 circumstances too subject to variation or more 2 specificity. 3 The secretary's adoption of the very timing 4 rule that Congress had imposed on sections b and c but 5 had specifically omitted from subsection f runs directly 6 contrary to the nature of the relief provided by 7 Congress, the same relief that was adopted by the 8 California Legislature. And then there is a footnote 9 that I'd also like to read, which is a quotation of 10 legislative history. 11 "The conferees intend that such authority be 12 used where taking into account all of the facts and 13 circumstances it is inequitable to hold an individual 14 liable for all or part of any unpaid tax or deficiency 15 arising from a joint return." 16 Now, all of that has very limited relevance to 17 this particular case because this particular case should 18 be viewed strictly as a 18533(c) case, an allocation of 19 tax liability. The equivalent provision is 6015(c). 20 This is referenced in the staff's analysis and there's 21 a -- actually a very brief statement that describes 22 precisely Barbara Porter's situation. It's at page 20, 23 lines 22 to 24, where an electing party has actual 24 knowledge of an income source but no knowledge of the 25 financial gain, the elective -- the electing party may 26 still qualify for separate liability election relief, 27 citing Martin versus Commissioner, which was a TC memo 28 decision. 7 1 There was a question asked -- the reason this 2 is relevant, there was a question asked by staff whether 3 the Appellant should address the question whether this 4 should be analyzed as an income case or a deduction 5 case. The answer to that question is it's analyzed as 6 neither because there is no difference in the analysis 7 under 6015(c) as distinguished from 16 -- 18533(c) as 8 distinguished between 18533(b) or (f). Income and 9 deductions are analyzed in the same manner because the 10 question is whether a particular tax item should be 11 allocated to one spouse or the other spouse. 12 The other point that is important is that 13 equity has no relevance under 6015(c). It's simply an 14 election and therefore the equitable provisions apply. 15 However, they apply only in 18533(b) and 18533(f). 16 Now, the reason this is important is Barbara 17 Porter clearly knew of her husband's sale of his family 18 property. He sold a half interest in some property in 19 Corte Madera and it was his family property. He 20 disposed of it. She knew about it. She thought he had 21 filed a return for 1995. He did not. 22 It was later discovered. A return was filed. 23 It was audited. Came up on appeal and they lost and a 24 tax was assessed. 25 The adjustment and the deficiency that was 26 created out of that was a situation where Barbara Porter 27 knew of the transaction. She knew not of the financial 28 or the tax consequences of the transaction. And all the 8 1 way through the entire processes, liability was 2 assessed, her husband died and the Franchise Tax Board 3 came around on collection. 4 And we have a clear 6015(c) case. The statute 5 of limitations issues don't apply. And there was no 6 material participation in the underlying proceeding that 7 excludes her from relief. 8 Nothing further. 9 MS. YEE: Thank you very much, Mr. Taggart. 10 You'll have five minutes on rebuttal. Franchise Tax 11 Board. 12 MR. McEVILLY: Yes, good morning, Madam 13 Chairwoman and Members of your Board. I am Mark 14 McEvilly from the Franchise Tax Board. And to my right 15 also appearing for Franchise Tax Board is Kathleen 16 Cooke. 17 The issue, as you know, is whether Appellant 18 has demonstrated entitlement to tax relief as an 19 innocent spouse. Appellant and her deceased spouse 20 failed to file a California return for the 1994 tax 21 year. Respondent began an audit after it was learned 22 that the couple had filed a 1994 Federal return in 23 August of 1995 that reported over $410,000 in Federal 24 adjusted gross income. 25 During the audit Respondent received a Power of 26 Attorney from Melanie Nance that was signed by Appellant 27 and her deceased spouse. The signature was dated 28 January 5, 2001. As a result of the -- of the audit 9 1 Respondent issued an assessment for a tax amount of 2 $54,931 plus a delinquent filing penalty. 3 Appellant and her -- and her spouse protested 4 against the assessment and submitted a signed California 5 return that maintained that the correct tax was $28,832. 6 The difference between the two amounts on the return was 7 the result of the difference between gain as reported by 8 the Appellant and their spouse and the gain as 9 calculated at audit. 10 The couple filed an appeal from the assessment 11 eventually with your Board, in appeal number 237222, and 12 your Board upheld Respondent in a May 25, 2004 decision, 13 and the tax became final and collectible. 14 In December of 2006 Appellant filed a timely 15 election for innocent spouse relief with Respondent, 16 stating that the additional tax rose mostly from the 17 gain income realized upon the sale of land in Corte 18 Madera, California. 19 Appellant stated that the land was the sole and 20 separate property of her deceased spouse and that tax 21 liability attributable to the sale should be allocated 22 to her spouse. 23 Alternatively, Appellant maintained that she 24 should receive equitable innocent spouse relief. This 25 appeal was filed disputing Respondent's denial of 26 Appellant's claim for innocent spouse relief. 27 Appellant is not entitled to innocent spouse 28 relief. Innocent spouse relief is an exception to the 10 1 general rule that a husband and wife are jointly and 2 severally liable for joint tax liabilities such as the 3 present 1994 tax liability. 4 As an exception to the general rule the party 5 electing relief has the burden of showing they -- they 6 meet the statutory requirements for relief. 7 The three provisions for relief under Revenue 8 and Taxation Code Section 18533 are Subsection b, 9 Subsection c and Subsection f. 10 Before we go to those three subsections it 11 should be noted Revenue and Taxation Code Section 12 18533(e)(3)(B) applicable for the year involved bars 13 relief to Appellant under Subsections b and c. That 14 Subsection e reads, "In the case of any election under 15 subdivision b or c if a decision of the Board in any 16 prior proceeding for the same taxable year has become 17 final, that decision shall be conclusive, except with 18 respect to the qualification of the individual for 19 relief that was not in issue in that proceeding." 20 Now, admittedly the innocent spouse issue was 21 not before your Board in the prior appeal. But the 22 next -- the next sentence of this Subsection e reads, 23 "The exception contained in the preceding sentence," in 24 other words that it be -- it be required that it was 25 actually a subject in the prior appeal -- "The exception 26 contained in the preceding sentence does not apply if 27 the Board determines that the individual participated 28 meaningfully in the prior proceeding. 11 1 In the case of innocent spouse cases, Section 2 18533(e) incorporates for an innocent spouse purposes 3 the -- the concept of res judicata. 4 Thus if your Board determines that the taxpayer 5 has participated meaningfully in a prior proceeding 6 before your Board where the same relief could have been 7 sought, then any final determination in that appeal is 8 going to be conclusive. 9 Appellant was a participant in appeal number 10 237222 and is therefore barred for relief by Section 11 18533(e) from innocent spouse relief under b -- 12 Subsections b or c. 13 Clearly, Appellant had an opportunity to 14 participate in the previous appeal as provided by your 15 Board. And it was incumbent upon Appellant to choose 16 her level of participation. 17 It was not Respondent's nor your Board's choice 18 as to whether Appellant would participate in any 19 particular level of participation. 20 She and her spouse chose not to have an oral 21 hearing before your Board. Your Board first had 22 received an appeal letter from Bill Porter, the deceased 23 spouse of Appellant. Your Board did not accept that 24 appeal as an appeal by Appellant because her signature 25 was not on the appeal letter. 26 As I believe is standard practice by your 27 Board's personnel, the letter was sent back to the 28 Porters asking if Mrs. Porter wanted to be included in 12 1 the appeal that her signature needed to be on the appeal 2 letter. 3 Your Board received her signature on the appeal 4 letter as requested by your Board and she was joined in 5 the appeal. 6 Now, in Vitrano versus Commissioner, as a Tax 7 Court memorandum case, it addressed the participated 8 meaningfully concept. It said, "Stated differently, an 9 individual who participated meaningfully in a court 10 proceeding is precluded from electing relief under 11 sections -- Federal Section 6015(b) or (c) for the same 12 taxable year after the decision of the Court becomes 13 final, whether or not the individual's qualification for 14 relief under 6050 -- 6015(b) or (c) was an issue in the 15 prior proceeding. 16 The important question is whether the taxpayer 17 had an opportunity to participate, an opportunity to 18 raise that issue at an earlier setting as in your 19 Board's earlier appeal provided to Appellant. 20 Appellant has also not demonstrated entitlement to 21 relief under Sections b, c or f. For relief under 22 Subsection b, Appellant must demonstrate that she had no 23 knowledge or reason to know of the understatement and 24 must show that the facts and circumstances supported her 25 receiving relief. 26 The additional tax amount involved arose mostly 27 from the failure to report any portions of the proceeds 28 of a sale of land for $599,000. It was California real 13 1 estate. 2 Appellant and her spouse signed the deed as 3 part of the sale. The title company documents addressed 4 to Appellant and her spouse stated that the payment had 5 been wired to, quote, "your account," end of quote, and 6 that the 10 -- and the 1099 issued as a result of the 7 payment by the payor was issued jointly in the names of 8 Appellant and her spouse. 9 It was clear that Appellant had reason to know 10 that the amount received was not reported on a return 11 since no return had been filed As to facts and 12 circumstances, the Appellant has offered no evidence 13 that the equities demand that she receive relief. While 14 Appellant has alluded to her spouse's diminished 15 capacity, she has offered nothing to prove such 16 diminished capacity. 17 Indeed, her spouse's irrevocable trust that 18 left her five California parcels, stock interest and all 19 shares in an oil company was executed by her spouse a 20 little more than ten days prior to his death, in 2006. 21 While Appellant and her spouse had sold two Bay 22 Area properties just before they left California in 1993 23 for almost $800,000 total, Respondent has not been able 24 to determine when the couple sold two other properties 25 in San Francisco. 26 Finally, while Appellant has indicated she is 27 virtually without income, Respondent has learned that 28 Appellant's Federal adjusted gross income for 2006, 2007 14 1 and 2008 was over $100,000 for 2006 and almost $200,000 2 in 2007, and almost $300,000 in 2008. That is indicated 3 in a -- an exhibit that Respondent provided to your 4 Board today. 5 Relief is unavailable to Appellant under 6 Subsection c because she had actual knowledge of the 7 item giving rise to the 1994 deficiency, the sale of the 8 Corte Madera land. And I believe Appellant -- 9 Appellant's representative has made that admission of 10 the knowledge. 11 The person making the election under 18533(c) 12 has the burden first of establishing his or her portion 13 of deficiency. That's the threshold prior to going and 14 reviewing Respondent's demonstration of actual 15 knowledge. 16 Appellant has provided nothing that would 17 support a conclusion she had no portion of the 18 understated amount. The statutory language provided -- 19 provides that any election shall not apply to any item 20 of deficiency that Respondent can demonstrate the 21 elector, Appellant, had actual knowledge of at the time 22 the return was filed. 23 Actual knowledge was explained in -- in Federal 24 regulation as knowledge of an item means knowledge of 25 the receipt or expenditure. It does not mean knowledge 26 of the proper tax treatment of that item or how it was 27 actually reported on the return. 28 This knowledge standard is consistent with the 15 1 knowledge standard adopted by United States Tax Court 2 and other courts, see Cheshire versus Commissioner, 115 3 TC number 15. 4 MS. OLSON: Time has expired. 5 MS. YEE: Mr. McEvilly, do you have much 6 further? Or do you want to wait? 7 MR. McEVILLY: A little bit, yeah. 8 MS. YEE: Okay. Why don't you continue and 9 then we'll give you additional time. 10 MR. McEVILLY: In the present case, Appellant 11 participated in the sale of land that resulted in the 12 major portion of the deficiency. Appellant has admitted 13 to signing the transfer documents. The fact that 14 Appellant participated in the transfer of the property 15 and signed the transaction documents clearly shows 16 Appellant had knowledge of the item. 17 As noted in appeal -- in your prior appeal 18 before your Board, Appellant signed the deed, received 19 the payment in conjunction with her now deceased spouse 20 and actually reported the sale on a return submitted 21 that was not accepted by Respondent, that was submitted 22 during Respondent's audit that underreported the -- the 23 gain by treating it differently. 24 There is no question that Appellant had actual 25 knowledge of the item of deficiency. Appellant -- 26 finally, Appellant has not demonstrated entitlement to 27 equitable relief under 18533(f). There is no economic 28 hardship. Appellant has had substantial income in the 16 1 past three years, refused to provide information to 2 Respondent or your Board that would show otherwise. 3 Appellant had knowledge of the item giving rise 4 to the deficiency. 5 Finally, it is Respondent's understanding from 6 information revealed by Appellant's audit 7 representative, Melanie Nance, that the California land 8 sold in 1994 did not qualify for originally claimed like 9 kind exchange under IRC Section 1031 because the gain 10 was reinvested in Mexican property that passed to 11 Appellant upon her spouse's death. 12 Appellant has not demonstrated entitlement to 13 innocent spouse relief and is precluded by 18533(e) from 14 even receiving relief because of a prior appeal before 15 your Board. 16 Thank you. 17 MS. YEE: Thank you very much, Mr. McEvilly. 18 Mr. Taggart, you have at least five minutes for 19 rebuttal. 20 MR. TAGGART: I hope that I won't take five 21 minutes and I hope that there are some questions if 22 there is anything of interest. 23 First of all, I object to the gross 24 misrepresentation of the facts. Nothing has ever been 25 withheld from the Franchise Tax Board regarding Barbara 26 Porter. Communications with Barbara Porter are 27 difficult because as far as I know she's only back in 28 the United States no more than once a year for the last 17 1 five years, at least. 2 I have met her briefly only once. All of the 3 communications that I have had with her, except for one 4 brief meeting, are all by facsimile transmissions into 5 Mexico. So, it's difficult to respond to questions. 6 And of course this is a very old and cold case. 7 There is no question that Barbara Porter has a 8 substantial amount of income still flowing through her. 9 She succeeded to the income interest in the family trust 10 of her husband, but that's all she succeeded to, except 11 I believe she inherited the property in Mexico in which 12 she resides. 13 Her husband was a wealthy man. She was a 14 writer. And she is living comfortably in Mexico. This 15 liability arose out of a transaction involving his 16 family's property. Her only participation in the sale 17 of the property that resulted in the adjustment, and I 18 think it was in fact a disqualified 1031 exchange that 19 Mr. Porter attempted to take advantage of. There is 20 also a question of the charitable contribution to the 21 town of Corte Madera. I don't know the details of that, 22 but there was a substantial adjustment even to the 23 return that they filed, and which they admitted a 24 substantial liability. 25 Barbara Porter's participation in the appeal of 26 the proposed assessment was limited to her consent. 27 Whether she knew about it or not she certainly if she'd 28 been asked would have agreed to sign the appeal because 18 1 it was her husband's issue, it was his property and I 2 don't think she knew about it, that's what she said, she 3 didn't know about it at all. But it doesn't really make 4 any difference because if he had asked her to sign the 5 appeal so he could go ahead with it, she would have. 6 But that is not material participation. 7 The other point that is very important, the 8 issue could not have been raised at the appeal. The 9 18533(c) relief, the separate election relief, could not 10 have been raised in the appeal because William Porter 11 had not yet died. 12 Any innocent spouse relief that could have been 13 claimed in the appeal would have had to have been 14 relayed -- based on 18533(b) or 18533(f). 15 Now, the Tax Court has not yet addressed, to my 16 knowledge, the question of -- the precise question on 17 the material participation in a prior proceeding where 18 you didn't even have a right to raise the relief. And I 19 don't think it really is appropriate for this Board to 20 attempt to construe 18533(e)(3)(B) as it applies to this 21 very technical issue because both 6015(g)(2), which is 22 parallel, and 18533(e)(3)(B) are probably impossible to 23 really understand in all of the configurations of 24 innocent spouse requests. 25 But this is not the one to attempt to construe 26 it. The issue is really was there material 27 participation. There could not have been material 28 participation. And this should be analyzed strictly as 19 1 a 18533(c) case that arose after the tax liability had 2 been determined and it's very clear on the record that 3 the tax liability is entirely attributable to separate 4 items of the deceased spouse. 5 Nothing further. 6 MS. YEE: Thank you, Mr. Taggart. Questions? 7 Discussion, Members? 8 MS. STEEL: Question. 9 MS. YEE: Ms. Steel. 10 MS. STEEL: We had a Board hearing on 2004. 11 Why she didn't ask at that time for innocent spouse 12 relief? 13 MR. TAGGART: I believe in 2004 Mr. Porter had 14 not yet died. That was the appeal that came up -- 15 MS. STEEL: So, he died, that's the only reason 16 she came back? 17 MR. TAGGART: I'm sorry? 18 MS. STEEL: She could have gone to ask innocent 19 spouse relief during 2004 Board hearing. And she never 20 asked anything about it. And now -- 21 MR. TAGGART: She didn't know anything about 22 that Board hearing. She -- she didn't know anything 23 about that. All she did -- 24 MS. STEEL: Well, she signed the paperworks for 25 the appeal. 26 MR. TAGGART: She signed the letter in response 27 to a request for your Board. But -- 28 MS. STEEL: But she didn't -- 20 1 MR. TAGGART: -- I don't think she signed it. 2 MS. STEEL: -- she didn't have a clue about the 3 Board hearing, that -- 4 MR. TAGGART: No, no, she didn't have a clue 5 about it. Her husband signed that letter and 6 basically -- if she'd been asked there's no question 7 that she would have signed the letter because it was his 8 appeal of his tax issues. 9 But she didn't come and appear and raise 10 innocent spouse relief because he was dealing with it. 11 MS. STEEL: What you are saying is on the 12 paperworks that whatever signed by -- I mean, her name 13 was signed -- was signed by her husband, so she didn't 14 know anything about the Board hearing; she didn't know 15 anything about tax things and she -- she didn't have a 16 clue anything? 17 MR. TAGGART: She -- she knew about the 18 underlying transaction back in 1994. 19 MS. STEEL: Right. 20 MR. TAGGART: She knew that a issue arose in 21 2001 because of apparent -- the apparent non-filing of a 22 1994 tax return. She knew about the hiring of the 23 enrolled agent in Mexico that -- and I think the Power 24 of Attorney which was filed by the FTB today, if you 25 look at the signature and compare it to the signature on 26 the appeal to this Board, I think that was actually 27 signed by William Porter. But that's really not the 28 issue, because she knew about that. It was signed with 21 1 her knowledge and consent. 2 The appeal was probably signed without her 3 knowledge and consent, but it really doesn't make any 4 difference because if he had asked her and said, "I've 5 got to file this to take the appeal up," she would have 6 signed it. 7 But there is no reason at that point in time to 8 raise innocent spouse relief because he is dealing with 9 the tax issue, and the issue that is before you now, 10 relief under 6015(c) couldn't have been raised at that 11 point in time because he had not yet died. 12 MS. YEE: Okay, let me take a shot and then I 13 want to go to Ms. Mandel. 14 MS. MANDEL: Okay. 15 MS. YEE: So, Mr. Taggart, you are -- you have 16 argued that the Appellant had no meaningful 17 participation in the prior matter. And I guess I just 18 want to go to Franchise Tax Board and let me -- 19 everything that at least suggests that there's 20 sufficient evidence to support that she did participate 21 meaningfully, and I'm sure there are questions about 22 degree. But -- but I want to follow up with a question 23 after the Franchise Tax Board answers, and that is -- 24 oh, and furthermore, Mr. Taggart, you are arguing that 25 the death of the Appellant's spouse, Mr. Porter, changed 26 her qualifications for relief, and that was what -- 27 MR. TAGGART: That she could not have qualified 28 for innocent spouse relief under c -- 22 1 MS. YEE: c, prior to -- 2 MR. TAGGART: -- because he's still alive. 3 MS. YEE: Okay. 4 MR. TAGGART: The only basis for relief is b or 5 f. Once the spouse dies or there's a divorce or a 6 separation or whatever else, then and only then can you 7 make the separate election. 8 MS. YEE: I mean, I seem to recall that there 9 was other evidence that suggested that Ms. Porter 10 actually certainly knew about the prior matter and maybe 11 you can expand on that a little bit. 12 MR. McEVILLY: What counsel is saying is that 13 her -- that she would have signed had she been asked. 14 There's no question that she signed a Power -- signed 15 the Power of Attorney. 16 MS. YEE: Right. 17 MR. McEVILLY: And under the fiduciary duties 18 of a Power of Attorney, the -- the fiduciary would have 19 notified her as to the ongoing tax matters. 20 She was aware of the tax matter. The question 21 of whether or not she signed, she constructively -- if 22 she -- if she would have allowed her husband, who was an 23 eminent attorney, a graduate of Stanford law, to carry 24 the appeal for her, she was represented. To now come 25 back years after the appeal was decided by your Board 26 and say that, oh, no, she really didn't participate, you 27 know, it opens a door for every situation before your 28 Board for a spouse to come in later and say, "Oh, no, I 23 1 really didn't participate." 2 That is why your Board staff has been -- and 3 since I've been practicing with Franchise Tax Board, 4 began asking for the signature of the other spouse and 5 not letting just one party on a proposed assessment, 6 let's say the husband, or the wife, sign and initiate an 7 appeal for both parties. 8 Your Board staff mails the appeal letter back 9 as a matter of their procedure to request a copy of the 10 signature -- the other spouse sign the appeal letter to 11 join them in the appeal. That's what occurred here. 12 Now, years later we're being told, well, no, 13 she wasn't aware, she didn't know. Well, she -- you 14 know, at what point in time do you abscond from your 15 duty to be aware and take part in proceedings? 16 She was aware that there was a tax liability. 17 There was an audit initiated. There was a filing of the 18 Federal return, no filing of the State return. It came 19 to our audit attention. We initiated an audit. During 20 the audit they -- submitted and prepared by the enrolled 21 agent -- submitted a 540 NR that calculated the gain 22 differently. 23 All that was before your Board. And your Board 24 found that she did -- your Board did not find that she 25 had not participated in the entire matter. Your Board 26 treated it after gaining a signature -- treated it as an 27 appeal by her. 28 So, I don't know if I've answered entirely your 24 1 question, but I'd be willing to -- 2 MS. YEE: No. No, that -- that is what I'm 3 looking for. 4 Ms. Mandel, and then, Mr. Taggart, we'll give 5 you an opportunity. 6 MS. MANDEL: Okay, when I walked in this 7 morning I thought we were going to talk about whether 8 the -- the signature was genuine on the appeal, but as I 9 understand it there's two ways for the prior appeal not 10 to govern. One is -- one would have been the meaningful 11 participation signature issue, if she never signed it, 12 wasn't her signature, didn't know anything about the 13 prior appeal, and there was some dispute about -- at 14 that time about simply signing -- whether simply signing 15 the appeal should count as meaningful participation and 16 that it wasn't just participating or opportunity to 17 participate, but meaningful participation. I think 18 you've talked about that some. 19 But I thought the other point was one that Mr. 20 Taggart's been making and I haven't -- if FTB addressed 21 it I haven't quite heard it, which was that the -- that 22 even so, if the relief that she's seeking today could 23 not have been sought at the time of the prior appeal, 24 that she would be entitled to bring that innocent spouse 25 claim. Am I -- is that -- that's what you're saying, 26 Mr. Taggart. And that's -- 27 MR. TAGGART: That -- that is correct. 28 MS. MANDEL: Okay. And what he's -- and you 25 1 can tell me if that -- if you disagree with that as a 2 general premise, but then what he's further saying is 3 that the -- leave aside the equitable f relief claim, 4 he's really pitching today, it sounds like, for the 5 separate allocation, separate election. Because this 6 was his separate property and so his separate gain. 7 And then he started with a dispute about how 8 you would have calculated the separate liability. And 9 he's saying that -- that without a legal separation, 10 divorce or death of the spouse to whom the income is 11 attributable that Ms. Bladen Porter could not have 12 previously raised that claim. And that's what he seems 13 to be pushing today, and I haven't heard you really 14 address that point. Or if you did, I missed it. 15 So could you -- 16 MR. McEVILLY: I think what I -- what I heard 17 counsel say was -- I think what he said was that she 18 couldn't claim relief under c but could have claimed 19 relief under b or f. 20 MS. MANDEL: In the prior case. 21 MR. McEVILLY: In the -- in the prior case. In 22 the prior case, relief under c -- you know, this is 23 because it's -- it's an exception to the joint tax 24 liability. 25 MS. MANDEL: Right. 26 MR. McEVILLY: You know -- 27 MS. MANDEL: So if she could have claimed b or 28 f in the prior case, which is what Ms. Steel was driving 26 1 at, how come she didn't raise innocent spouse -- so she 2 could -- if she could have claimed b or f relief but did 3 not, can -- can she come back today and claim -- what 4 are we left with -- c -- 5 MS. YEE: C. 6 MS. MANDEL: -- the separate election because 7 he was -- the spouse was alive at the time and -- and 8 the death has intervened. 9 So, can you address -- 10 MR. McEVIILLY: Yes, the limitation under the 11 subsection e is as to b and c, limits b and c. At the 12 Federal level participated meaningfully has been 13 addressed as I cited the Vitrano case and it talked 14 about the opportunity to be heard. Opportunity to 15 participate. 16 In other words, you can't go through a 17 proceeding, not raise the issue, let it become final, in 18 a separate proceeding later say, well, I -- 19 MS. MANDEL: Okay, I heard that part. Sorry to 20 cut you off. 21 MR. McEVILLY: All right. 22 MS. MANDEL: I heard that part but what he's 23 talking about today is c, and so the question would be 24 for c, does there have to be death, divorce, legal 25 separation before she can even raise it so that she 26 could not have raised it before, whether -- 27 MR. McEVILLY: The short answer, yes, you 28 have -- there has to be death, separation -- legal 27 1 separation or separated 12 months. You have to live 2 apart for 12 months -- 3 MS. MANDEL: Okay. 4 MR. McEVILLY: -- before you can -- you can 5 raise c. 6 MS. MANDEL: So she could not have raised c in 7 a prior case -- 8 MR. McEVILLY: Unless she had, as happens with 9 many spouses, it becomes a form between the parties and 10 they separate and -- and then raise it. 11 MS. MANDEL: Okay. But they -- but they 12 didn't. 13 MR. McEVILLY: Right. That is because it's a 14 joint liability and despite the fact it's separate 15 property we all report separate -- we don't all, some of 16 us report separate income. 17 MS. MANDEL: Yeah. No, I -- I understand. I'm 18 trying to track down what could she do today. You're 19 saying, oh, she could have done it back then if they had 20 gotten so mad at the each other that they -- over this 21 tax thing that they separated and -- and got separate 22 counsel and pursued it separately and -- and all of 23 that. 24 But in the regular -- he's -- he's saying she 25 couldn't raise it because he was alive. Are you saying 26 they have to separate or -- I'm just -- are you saying 27 she's precluded from raising it now because she could 28 have done if then to by separating from her husband? 28 1 MR. McEVILLY: Under Subsection e -- under 2 Subsection e, yes, I'm sorry. 3 MS. MANDEL: So, Subsection e -- so you're 4 saying Subsection e as long -- as long as she 5 meaningfully participated she's out? Even if it -- 6 MR. McEVILLY: That's correct. 7 MS. MANDEL: Even if she could not have raised 8 it because he was still alive? 9 MR. McEVILLY: That's correct. 10 MS. MANDEL: Wow. 11 MR. TAGGART: The FTB is attempting to construe 12 18533(e)(3)(B) in a manner that in effect says if there 13 was knowledge of the hearing or the prior decision, 14 however it comes about, and you should understand that 15 18533(e)(3)(B) was a copy of 6015(g)(2), which was the 16 Congress's attempt to modify the res judicata provisions 17 to cover the many different ways that prior disputes can 18 occur, because you can have a prior tax proceeding that 19 has nothing to do with innocent spouse and you have it 20 all decided and then down the road the innocent spouse 21 comes up, there just -- there are a lot of things in 22 there and was simply copied in without any consideration 23 of it and the FTB is asking this Board to say if there 24 was a prior proceeding you're in effect barred from 25 raising innocent spouse relief. 26 Now, there's a very subtle point in -- in all 27 of this, which is the reason I wanted -- two of them, 28 actually. One is in a very technical sense c could have 29 1 been raised by Barbara Porter in the prior proceeding by 2 coming in and saying, "If my husband had died we can 3 raise it under f and treat this as if a c case as if he 4 died, but that's a ridiculous provision because -- and 5 that's why I referred to the Lance case because all of 6 the regulations and rulings that have been promulgated 7 have treated 6015(f) as a statutory application of 8 equity. 9 And in Lance for the First time the Tax Court 10 has said, no, equity means equity. And you look at all 11 all of the So in that technical sense any aspect of the 12 requirements under b and c -- because you never get to f 13 unless you fall out of b and c, any of those 14 requirements can be raised. 15 The other point that I wanted to address is the 16 reference to Bill Porter representing Barbara Porter in 17 the proceedings before this Board because he was an 18 eminent Stanford law grad. and attorney. The Devore 19 case addresses that very issue and which preceded all of 20 this, and that was the case where an attorney 21 represented a husband and wife throughout the Tax Court 22 proceedings, lost and after the fact the husband came 23 along and said, "I never talked to him, I didn't know 24 anything about it," and raised innocent spouse relief 25 even though he had been represented by counsel. 26 Bill Porter's representation of Barbara Porter 27 in the proceedings before this Board, he certainly was 28 qualified to do it, but he was so badly conflicted that 30 1 he would have been breaching rules of professional 2 conduct if in fact he was representing her as her 3 attorney. 4 And that is a red herring in terms of the prior 5 proceedings before this Board. If she was going to be 6 represented by this Board it could not have been by 7 William Porter as her attorney. He could have, as he 8 did, represent her because she agreed that he could take 9 his own issues to this Board because they were his tax 10 issues. 11 Thank you. I'm sorry for taking so long. 12 MS. YEE: Thank you, Mr. Taggart. 13 Mr. Horton. 14 MR. HORTON: You know, it seems to me that 15 the -- the issue is an issue of whether or not res -- 16 res judicata actually applies. And then the innocent -- 17 if it does, then the innocent spouse is not an issue. 18 And so, this all seems to be a condition subsequent to 19 the death of her husband. And so, prior to his death 20 was there active participation or not. 21 It seems that the Franchise Tax Board is 22 claiming that there was meaningful participation and has 23 delineated a number of ways where there was. It seems 24 that the Appellant has acknowledged that even if the 25 signature was not a valid signature, it was yet to be 26 determined, that the taxpayer would have participated. 27 Seem -- seemingly alluding to it there's a relationship 28 between the husband and wife that is implied 31 1 understanding that they participate, they have knowledge 2 of each other's transaction, and they respect each other 3 to that level to say that there is no question that she 4 would have signed if asked. 5 So, I'm having a problem just getting past the 6 first step before we get to the innocent spouse issue. 7 MR. TAGGART: I think you're confusing two 8 different participations. 9 One was in the preparation of the 1994 return 10 by the enrolled agent in Mexico that Barbara Porter was 11 aware of that and did consent to the -- her signature on 12 the Power of Attorney that resulted in the filing of 13 that return. 14 There is nothing in the record that indicates 15 she had any knowledge of proceedings before this Board 16 except for her signature on the appeal letter that was 17 sent back to William Porter and that was very clearly 18 signed by William Porter. And what I conceded, and I 19 think that is correct, that that could certainly be 20 deemed participation because she -- if she'd been asked 21 she would have -- no, she already agreed to the filing 22 of the amended return. If he had told her an issue came 23 up with respect to that amended return and he was 24 appealing it to this Board, just as she had agreed to 25 the Power of Attorney, she would have agreed that he can 26 proceed with his appeal with the Board. 27 But it is still her issue, and that is probably 28 technically participation. But it is certainly not 32 1 material participation under any case that has been 2 decided because that is the only contact with this -- 3 the appeal to this Board. 4 MR. HORTON: So you're alleging she -- she 5 never signed a document. But yet she would have. 6 MR. TAGGART: I think if you compare the 7 signatures you will see that the only two documents she 8 signed were the deed back in 1994 and she signed the 9 affidavit that was submitted to this Board. The other 10 three signatures that have been submitted to this Board 11 I think are very clearly William Porter's signature of 12 her name on things. 13 But -- well, I didn't address this, but this is 14 not a forgery. Anything -- whether it's signed with 15 consent -- knowledge and consent or without knowledge 16 and consent but you would have done it is still not a 17 forgery unless it is signed in perpetration of some 18 fraud, either on the person that -- or on somebody else. 19 And so, it doesn't make any difference that she 20 would have signed it or actually signed it. She didn't 21 meaningfully participate. 22 MS. YEE: Ms. Mandel. 23 MS. MANDEL: And you're saying that she didn't 24 meaningfully participate in the appeal because all she 25 did was sign a document at -- or have it signed if she 26 would have signed it at her husband's request and you 27 believe that there's cases that say mere signing of 28 something at your spouse's request is not sufficient for 33 1 meaningful participation because it's not just 2 participation. 3 Does the -- does the Federal system have a -- 4 because I take it most of these cases that address 5 meaningful participation are not California but 6 Federal -- does the Federal system have a system of a 7 nonappearance calendar type of thing like we have here? 8 Do you -- I mean, I'm not familiar with them having a 9 nonappearance -- 10 MR. TAGGART: It would be -- I think that the 11 closest thing to that would be a stipulated Tax Court 12 decision where you go through all the process and 13 prepare it -- 14 MS. MANDEL: Right. Okay. 15 MR. TAGGART: -- and -- and enter into it. And 16 I think that that would be the equivalent and -- 17 MS. MANDEL: And are there cases in this -- on 18 this issue out of stipulated -- because part of what 19 Mr. McEvilly said was -- was, you know, we have a large 20 nonappearance practice here. And if someone signs the 21 documents to be a participant in an appeal, then how are 22 we going to distinguish if they've meaningfully 23 participated or not when something is on a nonappearance 24 calendar, particularly if maybe that's the only document 25 in the appeal. 26 I -- I'm just curious. 27 MR. TAGGART: I can tell you how that is 28 addressed in Federal practice extensively because 34 1 counsel for the government in any case where there is 2 joint representation requires counsel sign off that in 3 fact there is a waiver of conflicts letter. 4 MS. MANDEL: Counsel sign off, you mean IRS 5 District counsel sign off or -- 6 MR. TAGGART: No, counsel -- private counsel -- 7 MS. MANDEL: Yeah, private. 8 MR. TAGGART: -- sign off, and if it is an 9 unrepresented party because I have -- I've gone in on a 10 pro bono calendar -- 11 MS. MANDEL: Right. Right. 12 MR. TAGGART: -- and appeared for them, the Tax 13 Court will not proceed with a hearing on a -- where a 14 husband is there, or wife is there, saying, "I'm 15 representing both parties," because it doesn't really 16 make any difference who is the purported innocent 17 spouse. 18 And a signature on a stipulated decision will 19 not be accepted by the Tax Court without questioning on 20 that very point to make sure that things like do or 21 don't happen again. 22 So there is -- in the Federal practice there's 23 a very extensive procedure to make sure that decisions 24 don't get entered that are detrimental to a spouse in 25 the absence of knowledge and participation. 26 MS. MANDEL: Did you have something to add, Ms. 27 Kelly? 28 MS. YEE: Ms. Kelly. 35 1 MS. KELLY: I was just going to note that it 2 sounds like the procedure is very similar to what we do, 3 which is when we have an NOA to both parties, husband 4 and wife, and the appeal comes in just with one 5 signature, as Board Proceedings Division did here, they 6 correspond with the Appellant and ask if the other 7 person wants to join the appeal. And if they do, we 8 need their signature. So it's a very similar -- it's a 9 similar process. 10 MR. TAGGART: Could -- could I go a little 11 further with that, because it seems to be important to 12 this Board, and that is the cases that are cited by the 13 Franchise Tax Board in the proceeding are cases in which 14 the spouse went through the trial before the Tax Court, 15 appeared at trial and in some cases testified, and then 16 attempted to raise innocent spouse claims after the 17 fact. 18 MS. MANDEL: Then one would think there is no 19 question that that kind of spouse participated 20 meaningfully. 21 MR. TAGGART: Well, that -- 22 MS. MANDEL: If they testified. 23 MR. TAGGART: -- it has been argued and -- 24 MS. MANDEL: Right. 25 MR. TAGGART: -- there's -- you know, how 26 meaningful is participation when you don't know what's 27 going on. 28 MS. YEE: Okay. Other questions, Members? 36 1 MR. HORTON: Just -- 2 MS. YEE: Mr. Horton, please. 3 MR. HORTON: Sure. I know this has been 4 answered, but did the Appellant sign the tax returns, in 5 question? 6 MR. TAGGART: You're talking about the 1994 -- 7 MR. HORTON: Yes. 8 MR. TAGGART: -- return? 9 MR. HORTON: Yes. 10 MR. TAGGART: I don't believe that the 11 Appellant did. She agreed that she did in one of the 12 declarations that was filed without looking at her 13 signature because she was aware of the preparation and 14 the submission of the return by the enrolled agent in 15 Mexico. 16 But if you look at the signature it would 17 probably be not hers. But it was certainly signed with 18 her knowledge and consent. 19 MR. HORTON: There was no forgery on -- on the 20 tax returns. 21 MR. TAGGART: I don't think -- I don't think 22 any of these rise to the level of -- 23 MR. HORTON: No fraud. 24 MR. TAGGART: No fraud. 25 MR. HORTON: She knew about it? 26 MR. TAGGART: She knew about the preparation of 27 the 1994 return, yes. The assessment is the rejection 28 of that return and an additional amount. 37 1 MR. HORTON: On the return were their reporting 2 income commingled? It was a joint return? 3 MR. TAGGART: It was a joint return, yes. 4 Just -- and I think the entire deficiency arose out of 5 the treatment of this particular sale. I think 6 everything else in the return was accepted as filed and 7 the substantial liability was simply the change in the 8 treatment of the sale of the Corte Madera property. 9 MR. HORTON: Subsequent to -- to the death of 10 her husband has there been any benefits deriving from 11 this? 12 MR. TAGGART: From -- 13 MR. HORTON: The relationship. I mean, did 14 she -- 15 MR. TAGGART: She -- she -- 16 MR. HORTON: -- now assume all -- 17 MR. TAGGART: She succeeded -- 18 MR. HORTON: -- everything. 19 MR. TAGGART: She succeeded to her -- her 20 husband's income interest in the family trust. 21 MR. HORTON: So is this particular piece of 22 property in dispute? 23 MR. TAGGART: This particular property was sold 24 and I suspect some of the proceeds were probably added 25 to -- I don't know where -- where the money went. The 26 sale -- 27 MR. HORTON: Did she get any of the money? 28 MR. TAGGART: No. It was -- it was his money. 38 1 It was his property. 2 MR. HORTON: The money went to -- to his 3 relatives or -- 4 MR. TAGGART: Well, it went -- 5 MR. HORTON: -- someone other than her? 6 MR. TAGGART: It went into his family trust to 7 the extent that they didn't spend it. And -- 8 MR. HORTON: Who controls the trust? 9 MR. TAGGART: His brother. 10 MR. HORTON: She has no benefit from the trust? 11 MR. TAGGART: She has an income interest in the 12 trust. 13 MR. HORTON: Okay. 14 MS. YEE: Okay. I guess -- we've had a lot of 15 discussion about the meaningful participation and the 16 doctrine of res judicata, but I guess I'm -- I'm still 17 focused on -- even if that issue weren't resolved, the 18 fact that we are looking at the relief under Subdivision 19 c, we still have a knowledge test that has to be met. 20 And I'm having a hard time really understanding why the 21 Appellant wouldn't have had knowledge of the transaction 22 giving rise to the deficiency. 23 MR. TAGGART: Because the knowledge under c is 24 completely different than the knowledge that the FTB 25 alluded to applicable under b and f --- 26 MS. YEE: F. 27 MR. TAGGART: -- to the extent it's applying b. 28 You have to understand that f -- you get to f whenever 39 1 you're not under b or c. 2 MS. YEE: Right. 3 MR. TAGGART: So you really need to look at the 4 knowledge under b and the knowledge under c, and for the 5 separate election purposes all you need to show is that 6 it was his item in this case, and you didn't know that 7 there was an understatement of tax attributable to that 8 item. 9 The fact that you knew it was a taxable event 10 and it had financial consequences and tax consequences 11 if it was his, the fact that you knew about it doesn't 12 disqualify you from relief because relief is entirely 13 based on taking all of the items in that joint return 14 and saying these are his and these are hers, and each 15 one is obligated to pay their tax liability except to 16 the extent that there are fraudulent transfers of the 17 property. 18 But it's not the knowledge of the item giving 19 rise to the understatement, which I believe is the 20 language in b -- actually, it is -- if you have 21 knowledge of the item but don't know it is -- gives rise 22 to an understatement, you can qualify under c. You 23 can't under b if you knew or should have known about the 24 item creating an understatement. 25 MS. MANDEL: So, is it because it doesn't have 26 the "should have known" that she does -- she has no 27 obligation in signing that return to ask any questions? 28 MR. TAGGART: She -- she knew about the 40 1 transaction. She thought all of the transaction 2 reported -- all of hers were properly reported. She 3 thought all of his were properly reported and the tax 4 liability that's attributable to his items, which 5 produced the understatement. 6 She's not disqualified from relief under c if 7 there is a divorce, dissolution or her separation 8 because it is an separate item allocation. 9 MS. MANDEL: Right. But on the knowledge she 10 can be sort of blissfully ignorant of where he gets his 11 money and what its impact is? 12 MR. TAGGART: Oh, no, no, she can't be 13 blissfully ignorant of finances, but if she knows that 14 there are these items and these are his and these are 15 hers and they are reported, and the understatement of 16 tax is attributable to his items -- 17 MS. MANDEL: So she just has to be able to say, 18 "I didn't know that he did his math wrong and didn't 19 calculate the gain correctly," or something like that? 20 MR. TAGGART: Right. 21 MS. MANDEL: And FTB says, no, that's not 22 right. 23 MR. TAGGART: I think that is -- I think that's 24 a very simple statement of it. 25 MS. YEE: Mr. -- okay. 26 Mr. McEvilly. 27 MR. McEVILLY: Yeah, I noted in my delivery 28 actual -- quote, actual knowledge, end of quote, was 41 1 explained in proposed IRC Regulation 66FR3888, knowledge 2 of an item means knowledge of the receipt or 3 expenditure. It does not mean knowledge of the proper 4 tax treatment of the item or how or whether it was 5 actually reported on the return. This knowledge 6 standard is consistent with the knowledge standard 7 adopted by the Tax Court and other Courts, and it's -- 8 and then the reg. cites Cheshire versus Commissioner, 9 115 T. C. number 15. 10 So the reg.'s looking at actual Tax Court 11 discussion as to what was actual knowledge. So it means 12 knowledge of the receipt or expenditure. 13 If you know you evidence the $599,000 then 14 you're charged with actual knowledge. If you didn't 15 know but you -- she knew that he spent $599,000 on 16 Mexican property she would be charged with knowledge of 17 that $599,000. And that's -- that's the crux of it. 18 She knew -- there's -- you know, the definition 19 provided by counsel I would disagree with. I -- you 20 know, these briefs submitted to your Board discuss 21 actual knowledge. All we have to do is look at the fact 22 that can you have a 1099 that was issued to her. 23 The -- the payor, Pacific Escrow, issued a 24 letter saying, "We are wiring the money to your -- your 25 account." And it was addressed to both of the Porters. 26 So, there's no -- there's no doubt that there 27 was actual knowledge. 28 Can -- can I go astray a bit? I think there 42 1 was some discussion as to there wouldn't be any innocent 2 spouse relief available under -- in the old case that 3 was heard before your Board. And I think that -- that's 4 too broadly stated. There would be relief available. 5 Equitable relief is available to married -- 6 married couples. The marriage -- continuing marriage is 7 only a factor. It's not a negative factor. Divorce is 8 a positive factor to receiving equitable relief. 9 You know, if you're not divorced it doesn't 10 weigh against you. It does not weigh against you. 11 And Franchise Tax Board has had these cases 12 where the individual -- the husband has embezzled, the 13 wife absolutely did not know, the husband goes away to 14 prison, and there's no doubt she did not know. 15 So, there -- in the prior proceeding equitable 16 relief would have been available. She was not barred 17 from all -- all relief. 18 And e only -- e, Subsection e, only addresses b 19 and c. It doesn't -- it doesn't forbid, you know, 20 relief under f. 21 MS. YEE: Okay. Other questions, Members? 22 Hearing none, is there a motion? 23 MS. MANDEL: Take the matter under submission. 24 MS. YEE: We have a motion by Ms. Mandel to 25 take this matter under submission. 26 Second by Mr. Horton. 27 Without objection, that motion carries. 28 Thank you very much, Mr. Taggart. 43 1 MR. TAGGART: Thank you. 2 MS. YEE: We will discuss your matter later 3 today and send you written notice of our decision. 4 Thank you. 5 They say only in tax law do we hear divorce as 6 a positive. 7 ---oOo--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 44 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 October 6, 2009 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding 44 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: November 24, 2009. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 28 45