Check signer was not a responsible person.

• Author: Beavers, James A.
• Position: 2016 Tax Court memorandum decision in Fitzpatrick v. Commissioner

The Tax Court held that the wife of the partial owner of a corporation that owned a restaurant, who frequently signed payroll checks for the restaurant but otherwise had little or no involvement with the restaurant's operations, was not a responsible person for purposes of the Sec. 6672 trust fund penalty.

Background

Christina Fitzpatrick was the wife of Edward Fitzpatrick. During the time at issue in her case, her primary responsibility was to take care of her son, who suffered from a rare metabolic disorder called citrullinemia and as a result was severely disabled. Because her son needed full-time care and supervision, Mrs. Fitzpatrick could not devote a significant amount of time to any business activities.

In 2004, Mr. Fitzpatrick and James Stamps decided to purchase franchise rights for Jacksonville, Fla., for a chain restaurant/wine bar called The Grape. The two were to be equal co-owners of the venture, with Stamps overseeing the business operations and Fitzgerald being a silent partner. The duo formed a corporation, Dey Corp. Inc., through which to run their restaurant.

Mrs. Fitzpatrick was not an owner of the corporation and generally had no involvement in the operations of The Grape. However, while the business was in the preopening stage, because Stamps and Mr. Fitzpatrick were out of town for training at The Grape franchise headquarters, Mrs. Fitzpatrick set up an account with a payroll service and opened a corporate bank account for Dey Corp.

Stamps oversaw the day-to-day operations of The Grape, but due to other work commitments in Trinidad, he was frequently out of town. At these times, the on-site manager of the restaurant was its general manager, Kris Chislett, with whom Stamps had constant contact when he was not in Jacksonville.

The payroll service delivered paychecks for The Grape's employees on Tuesday. During most of the time at issue, a courier delivered the paychecks to the Fitzpatricks' home, and they were picked up by an employee of The Grape or delivered to the restaurant by Mrs. Fitzpatrick. She was not responsible for and did not review the statements sent with the checks by the payroll service. Because Chislett did not work on Tuesdays, Mrs. Fitzpatrick also often signed the checks. Mrs. Fitzpatrick's other duties for The Grape included relaying electronic bank account balances to Chislett, delivering the business's mail that was sent to her private mailbox, and, at the behest of Stamps or Mr. Fitzpatrick...