T.C. Memo. 2019-145
UNITED STATES TAX COURT
JANE M. LASSEK, Petitioner, AND MICHAEL E. SMITH, Intervenor v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 25395-16. Filed October 28, 2019.
Albert B. Kerkhove and Howard N. Kaplan, for petitioner.
Michael E. Smith, pro se.
Britton G. Wilson and Douglas S. Polsky, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PARIS, Judge: Pursuant to section 6015(e)(1),1 petitioner seeks review of
respondent’s determination that she is not entitled to relief from joint and several
1 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect at all relevant times. -2-
[*2] liability under section 6015(b), (c), or (f) for 2011 and 2012 with respect to
joint Federal income tax returns that she filed with her former spouse, intervenor.
Respondent concedes and petitioner agrees that she is entitled to relief from joint
and several liability under section 6015(c) for 2011. However, intervenor opposes
relief. The Court holds that petitioner is entitled to relief under section 6015(c) for
2011 and is not entitled to relief under section 6015(b), (c), or (f) for 2012.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The first
stipulation of facts and the exhibits submitted therewith are incorporated herein by
this reference. The stipulation of facts and the exhibits replicate the administrative
record at the time of the determination.2 Petitioner resided in Nebraska when she
2 The Court held trial in this case before the enactment of sec. 6015(e)(7), which provides:
(7) Standard and scope of review.--Any review of a determination made under this section shall be reviewed de novo by the Tax Court and shall be based upon--
(A) the administrative record established at the time of the determination, and
(B) any additional newly discovered or previously unavailable evidence.
This provision is effective for “petitions or requests filed or pending on or after the (continued...) -3-
[*3] timely filed her petition; intervenor resided in Nebraska when he intervened
in this case.
Background
Petitioner and intervenor were married in 1989. The couple owned a house
in Council Bluffs, Iowa. Intervenor filed for divorce in August 2013, and their
divorce became final on December 16, 2013. During their marriage they had one
son, who during the years in issue attended school in Annapolis, Maryland.
Petitioner has no formal education in business, finance, or accounting but
has taken some college classes toward a psychology degree. Petitioner worked for
a telephone company for over 38 years, including the years in issue, and
participated in the company’s section 401(k) retirement plan.
Intervenor attended a trade school and worked for the same telephone
company for 33 years, including the years in issue. Intervenor also participated in
the telephone company’s section 401(k) retirement plan.
2 (...continued) date of enactment of this Act.” Taxpayer First Act, Pub. L. No. 116-25, sec. 1203(b), 133 Stat. at 988 (2019). Because the trial evidence was merely cumulative of what was already included in the administrative record and previously unavailable evidence of petitioner’s current financial status, sec. 6015(e)(7) does not affect the outcome of this case. As a result, the Court has not addressed the effect of sec. 6015(e)(7). -4-
[*4] Throughout their marriage petitioner and intervenor maintained a joint bank
account that was used to pay the mortgage, insurance, and utilities for the family
home; groceries; and other household necessities. Their telephone company
salaries were automatically deposited into the joint bank account. Intervenor also
maintained a separate bank account. Intervenor had a hobby of buying cars, fixing
them, and selling them, and he used his separate bank account and credit cards to
fund his hobby.
Throughout their marriage and until August 2012 intervenor managed their
personal finances by paying bills, managing their joint bank account and his
separate bank account, and preparing and filing their Federal income tax returns.
Before August 2012 intervenor had unilaterally secured a line of credit on their
family home. Petitioner did not discover the debt until she and intervenor applied
for a second mortgage and were required to pay off the line of credit first. In
August 2012 petitioner took over managing their joint bank account after she
received several unexpected overdraft notices from their financial institution.
Through her employment at the telephone company petitioner received a
discount on their household phone bill. Petitioner also gave intervenor cash to
deposit into his separate bank account, from which the phone bill was
automatically paid each month. Before 2012 petitioner discovered that her -5-
[*5] discount was suspended after three instances of nonpayment because of
insufficient funds in intervenor’s separate account.
Intervenor maintained several credit cards. Petitioner was an authorized
card holder on intervenor’s American Express account. Petitioner primarily used
the American Express credit card to buy groceries, gas, and other household
necessities. Intervenor used the American Express credit card to buy airline
tickets for himself, petitioner, and their son and to pay for hotel rooms and food
while on their trips. In 2011 petitioner and intervenor took a trip together to
Annapolis to visit their son, and intervenor took other trips to Annapolis and
Las Vegas without petitioner. In 2012 petitioner and intervenor took a trip
together and each took a trip individually to Annapolis to visit their son.
Intervenor also used the American Express credit card to buy cars and car parts for
his hobby.
In 2011 and 2012 intervenor regularly gambled on Friday nights at one or
more of the casinos in Council Bluffs, Iowa.
Tax Liabilities
2011 Understatement
In 2011 petitioner took a $15,000 distribution from her section 401(k)
retirement plan account. Unknown to petitioner, intervenor also took a $46,477 -6-
[*6] distribution from his section 401(k) retirement plan account. Petitioner
deposited her distribution into the joint bank account; intervenor did not deposit
his distribution into the joint bank account.
Petitioner provided intervenor with her 2011 Form W-2, Wage and Tax
Statement, and her 2011 Form 1099-R, Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Intervenor
then prepared their 2011 Form 1040, U.S. Individual Income Tax Return, using
tax preparation software and filed their return electronically on April 16, 2012.
Faced with a pending due date, intervenor electronically filed the joint return
before petitioner had an opportunity to review it. The 2011 joint return correctly
reported petitioner’s section 401(k) distribution as taxable but incorrectly reported
intervenor’s section 401(k) distribution as nontaxable, resulting in an
understatement.
On September 3, 2013, respondent issued petitioner and intervenor a notice
of deficiency for 2011 determining a deficiency of $14,996 and an accuracy-
related penalty of $3,026. The deficiency arose from intervenor’s failure to report
his $46,477 distribution as taxable and overreporting income tax withheld of $136
on petitioner’s wage income or distribution. They did not petition the Court for a
deficiency redetermination. Respondent subsequently assessed the deficiency and -7-
[*7] the accuracy-related penalty and proceeded with collection action. Petitioner
concedes that she is liable for the overreported income tax withheld.
2012 Underpayment
In 2012 petitioner took an $11,000 taxable distribution from her section
401(k) retirement plan account, and intervenor took a $23,510 distribution from
his section 401(k) retirement plan account, $23,461 of which was taxable.
Petitioner provided intervenor her 2012 Forms W-2 and 1099-R. Intervenor then
prepared their 2012 Form 1040 reporting tax owed of $5,448.3 Petitioner and
intervenor signed their 2012 joint return on April 15, 2013, and timely filed it
without remitting a payment. When they filed the 2012 joint return, they did not
discuss how their tax liability would be paid.
Petitioner’s Request for Administrative Relief
On August 21, 2014, respondent issued petitioner a Letter 1058, Final
Notice of Intent to Levy and Notice of Your Right to a Hearing, for the 2011 and
2012 tax liabilities (levy notice).4 In response to the levy notice petitioner timely
3 The tax owed ($5,448) equals the total tax ($21,871) minus the total payments ($16,487) plus an estimated tax penalty ($64). 4 Respondent proposed collecting by levy the assessed balances of $18,602.88 for 2011 and $5,523.57 for 2012, which amounts included interest and penalties. -8-
[*8] filed a Form 12153, Request for a Collection Due Process or Equivalent
Hearing. As part of her reason for disagreeing with the proposed levy, petitioner
checked the box for “My Spouse is Responsible” and filed a Form 8857, Request
for Innocent Spouse Relief, requesting relief from joint and several liability under
section 6015(b), (c), and (f) for 2011 and 2012.
In seeking relief from joint and several liability for 2011 and 2012
petitioner explained that she was not involved in preparing the returns other than
providing her tax documents. Petitioner further explained that she did not review
the joint returns before they were filed because intervenor “never asked * * * [her]
to” and that she had no knowledge of the erroneous items on them.
Petitioner and intervenor’s marital settlement agreement dated July 26,
2013, did not address any division of responsibility for debt, including any
potential tax liabilities. The December 16, 2013, decree of dissolution stated that
“[t]he parties have divided their debts and assets to their mutual satisfaction” and
further that “there are no marital debts to be divided”. The decree of dissolution
did not address division of responsibility for any potential tax liabilities. On June
5, 2015, petitioner and intervenor sold their house in a short sale under threat of
foreclosure. -9-
[*9] On July 1, 2015, respondent made a preliminary determination that
petitioner was entitled to partial relief for 2011 under section 6015(f).
Respondent’s determination proposed to grant petitioner relief of $17,995 and
deny relief of $163 with respect to the 2011 tax liability.5 On July 1, 2015,
respondent also made a preliminary determination that petitioner was entitled to
partial relief for 2012 under section 6015(f). Respondent determined that
petitioner should be granted relief of $4,897 and denied relief of $487 with respect
to the 2012 tax liability.6
On July 16, 2015, intervenor submitted a letter to respondent appealing the
preliminary determinations. Intervenor stated in his letter that petitioner was
aware of the distributions and received a substantial benefit because the
distributions were used to pay for the mortgage on the family home, vacations, and
other household items.
On August 10, 2015, petitioner’s request for relief for 2011 and 2012 was
referred to the Internal Revenue Service Office of Appeals (Appeals) in
5 These amounts do not add up to the 2011 assessed balance ($18,602.88) but rather the deficiency ($14,996) and the accuracy-related penalty ($3,026) plus the overreported withholding ($136). 6 These amounts do not add up to the 2012 assessed balance ($5,523.57) but rather the reported tax owed on the return ($5,448) minus the estimated tax penalty ($64). - 10 -
[*10] Covington, Kentucky. On January 22, 2016, petitioner’s request was
transferred to Appeals in Omaha, Nebraska, to offer petitioner a face-to-face
meeting.
On January 28, 2016, petitioner executed a declaration, subsequently
providing it to Appeals to refute intervenor’s claims. Petitioner explained in her
declaration that she had obtained account transcripts and discovered the 2011 tax
liability arose from intervenor’s incorrectly reported section 401(k) distribution
and the 2012 tax liability from an underpayment of tax. Petitioner requested relief
from the portion of the 2012 underpayment attributable to intervenor’s income.
On March 7, 2016, Appeals received a letter from intervenor wherein he
disagreed with petitioner’s declaration and provided copies of his: section 401(k)
retirement plan account statement, Federal direct plus loan for parents account
statement, and American Express credit card statements for 2011 and 2012. In his
letter intervenor argued that petitioner should be responsible for the tax liability
because he was responsible for credit card debt incurred during the marriage.
On March 24, 2016, petitioner executed a second declaration and
subsequently provided it to Appeals refuting intervenor’s claims from his July 16,
2015, letter. Petitioner stated that she did not receive a substantial benefit from
intervenor’s distributions because her distributions and salary were deposited into - 11 -
[*11] the joint bank account and were used to pay for household expenses, the
mortgage on the family home, and vacations. Petitioner also maintained that she
was unaware that intervenor took a section 401(k) retirement plan distribution in
2011.
On Form 8857 petitioner reported total monthly income of $5,044 and total
monthly expenses of $5,800. As of the time of trial petitioner’s financial situation
had improved and she conceded that she can pay her reasonable living expenses
without economic hardship even if she is denied relief from joint and several
liability.
On September 9, 2016, Appeals issued petitioner a final Appeals
determination denying relief from joint and several liability under section 6015(c)
for 2011 and 2012. Appeals denied relief for 2011 because petitioner “knew, or
had reason to know, of the income or deductions that caused the additional tax”.
Appeals denied relief for 2012 because “relief * * * [was] not allowed on tax * * *
[petitioner owed on her] own income or deductions”. The final Appeals
determination did not address petitioner’s requests for relief under section 6015(b)
or (f). Before trial respondent conceded that the Appeals officer applied the
incorrect standard under section 6015(c) for 2011. - 12 -
[*12] OPINION
Generally, married taxpayers may elect to file joint Federal income tax
returns. Sec. 6013. Section 6013(d)(3) provides that if a joint return is filed each
spouse is jointly and severally liable for the entire tax due for that year. Section
6015, however, provides exceptions to the general rule of joint and several
liability in limited circumstances. Alt v. Commissioner, 119 T.C. 306, 311 (2002),
aff’d, 101 F. App’x 34 (6th Cir. 2004).
I. Relief Under Section 6015(c) for 2011
One of the above-mentioned limited circumstances is set forth in section
6015(c). Upon the taxpayer’s election of its application, section 6015(c) limits a
spouse’s liability to the portion of the deficiency properly allocable to that spouse
under section 6015(d). In general, an item that gives rise to a deficiency on a joint
Federal income tax return will be allocated to each individual who files the joint
return in the same manner as that item would have been allocated had those
individuals filed separate returns. Sec. 6015(d)(3)(A).
Before trial respondent conceded petitioner’s entitlement to relief under
section 6015(c) for 2011. The concession contemplates a section 6015(d)
allocation as stated in the preliminary determination dated July 1, 2015. See supra - 13 -
[*13] p. 9. Petitioner agrees with the section 6015(d) allocation. However,
intervenor challenges petitioner’s entitlement to section 6015(c) relief for 2011.
Intervenor contends petitioner knew about intervenor’s 2011 section 401(k)
retirement plan distribution and her knowledge of it disqualifies her from section
6015(c) relief. He also contends that petitioner may have had “reason to know”
about the understatement of tax shown on the return. See, e.g., Price v.
Commissioner, 887 F.2d 959, 965 (9th Cir. 1989); King v. Commissioner, 116
T.C. 198, 204 (2001). But a requesting spouse’s “reason to know” of the item is
not sufficient to deny relief under section 6015(c). If, as here, all of the other
requirements of that section have been satisfied, then, as relevant here, the burden
of proof is shifted to the Commissioner and relief is denied to the requesting
spouse only if the Commissioner “demonstrates that * * * [the requesting spouse]
had actual knowledge, at the time such individual signed the return, of any item
giving rise to a deficiency”. Sec. 6015(c)(3)(C); see Charlton v. Commissioner,
114 T.C. 333, 341 (2000); Martin v. Commissioner, T.C. Memo. 2000-346, slip
op. at 12-13.
An issue arises where the burden of proof shifts to the Commissioner in
cases when the Commissioner favors granting relief and the nonrequesting spouse
intervenes to oppose it. The Court has previously resolved this issue of burden - 14 -
[*14] shifting by deciding the case on a preponderance of the evidence as
presented by all three parties. See Hollimon v. Commissioner, T.C. Memo. 2015-
157; Pounds v. Commissioner, T.C. Memo. 2011-202; Knight v. Commissioner,
T.C. Memo. 2010-242; McDaniel v. Commissioner, T.C. Memo. 2009-137.
To determine whether the requesting spouse had actual knowledge, the
Court looks to the surrounding facts and circumstances for “an actual and clear
awareness (as opposed to reason to know)” of the items giving rise to the
deficiency. Cheshire v. Commissioner, 115 T.C. 183, 195 (2000), aff’d, 282 F.3d
326 (5th Cir. 2002). The Court reviews de novo the administrative record
established at the time of the determination.
Intervenor argues that petitioner was aware of his 2011 section 401(k)
retirement plan distribution because intervenor used it to pay the mortgage and
household expenses for the family home and vacations. However, the record does
not support intervenor’s position. Neither does it establish that petitioner had
actual knowledge or a clear awareness at the time of filing their 2011 return on
April 16, 2012, that intervenor took a distribution in 2011 or that his distribution
was used to pay those household expenses. Although the return reported both
distributions in full, it did not report intervenor’s section 401(k) distribution as
taxable. The record does not establish that petitioner and intervenor discussed the - 15 -
[*15] items reported on the joint return or that petitioner had a meaningful
opportunity to review the return before it was electronically filed.
The Court concludes that petitioner did not have actual knowledge of
intervenor’s 2011 section 401(k) retirement plan distribution, the item resulting in
the understatement of income. Therefore, petitioner is entitled to relief from joint
and several liability under section 6015(c) for 2011.7
II. Relief Under Section 6015(f) for 2012
Section 6015(f) grants the Commissioner discretion to relieve an individual
from joint and several liability where relief is not available under section 6015(b)
or (c) if, taking into account all the facts and circumstances, it is inequitable to
hold the individual liable for any unpaid tax or deficiency. Section 6015(b)
and (c) applies only in the case of “an understatement of tax” or “any deficiency”
in tax and does not apply in the case of an underpayment of tax reported on a joint
return. Sec. 6015(b)(1)(B), (c)(1). When a liability arises from an underpayment
of tax reported as due on a joint return, relief is available only under section
6015(f). See sec. 6015(b)(1)(B), (c)(1), (f)(1); Hopkins v. Commissioner, 121
7 Because petitioner conceded that she is not entitled to relief for the overreported withholding for 2011 and the Court finds that she is entitled to relief under sec. 6015(c), the Court will not address her requests for relief under sec. 6015(b) and (f) for 2011. - 16 -
[*16] T.C. 73, 88 (2003). Here, the 2012 liability is the result of an underpayment,
and petitioner seeks relief under section 6015(f).
As directed by section 6015(f), the Commissioner has prescribed procedures
to determine whether a requesting spouse is entitled to equitable relief from joint
and several liability. Those procedures are set forth in Rev. Proc. 2013-34, sec. 4,
2013-43 I.R.B. 397, 399. Although the Court considers those procedures when
reviewing the Commissioner’s determination, the Court is not bound by them.
Pullins v. Commissioner, 136 T.C. 432, 438-439 (2011); Rogers v. Commissioner,
T.C. Memo. 2018-53, at *112. The Court’s determination ultimately rests on an
evaluation of all the facts and circumstances. Porter v. Commissioner, 132 T.C.
at 210.
Pursuant to Rev. Proc. 2013-34, sec. 4, the Commissioner conducts a
multistep analysis when determining whether a requesting spouse is entitled to
equitable relief under section 6015(f). Rev. Proc. 2013-34, supra, categorizes the
requirements for relief as threshold or mandatory requirements, streamlined
elements, and equitable factors. A requesting spouse must satisfy each threshold
requirement to be considered for relief. See Rev. Proc. 2013-34, sec. 4.01, 2013-
43 I.R.B. at 399. If the requesting spouse meets the threshold requirements, the
Commissioner will grant equitable relief if the requesting spouse meets each - 17 -
[*17] streamlined element. See id. sec. 4.02, 2013-43 I.R.B. at 400. Otherwise,
the Commissioner will evaluate the equitable factors to determine whether
equitable relief is appropriate. See id. sec. 4.03, 2013-43 I.R.B. at 400.
A. Threshold Requirements
The requesting spouse must meet seven threshold requirements to be
considered for relief under section 6015(f). Rev. Proc. 2013-34, sec. 4.01. The
parties agree, and the Court finds, that petitioner meets the threshold requirements
for 2012.
B. Streamlined Elements
If the threshold requirements are satisfied, Rev. Proc. 2013-34, sec. 4.02,
describes circumstances in which the Commissioner will make a streamlined
determination granting equitable relief under section 6015(f). To be eligible for a
streamlined determination, the requesting spouse must establish that she will
suffer economic hardship if relief is not granted under guidelines provided in Rev.
Proc. 2013-34, sec. 4.02(2). Id. sec. 4.03(2)(b), 2013-43 I.R.B. at 401. Petitioner
conceded at trial that she would not suffer economic hardship if relief is not
granted. Therefore, petitioner is ineligible for a streamlined determination, in
accordance with Rev. Proc. 2013-34, sec. 4.02. - 18 -
[*18] C. Equitable Factors
Rev. Proc. 2013-34, sec. 4.03, “applies to a requesting spouse who requests
relief under * * * section 6015(f), and who satisfies the threshold conditions of
section 4.01, but does not qualify for streamlined determinations granting relief
under section 4.02.” Id. sec. 4.03(1). Rev. Proc. 2013-34, sec. 4.03(2), lists the
following seven nonexclusive factors to be considered in determining whether,
taking into account all the facts and circumstances, equitable relief under section
6015(f) should be granted: (1) the current marital status of the spouses,
(2) whether the requesting spouse will suffer any economic hardship if relief is not
granted, (3) whether the requesting spouse knew or had reason to know of the item
giving rise to the underpayment, (4) whether either spouse has a legal obligation to
pay the outstanding Federal income tax liability, (5) whether the requesting spouse
significantly benefited from the underpayment, (6) whether the requesting spouse
has made a good faith effort to comply with the income tax laws in the years
following the years for which relief is sought, and (7) whether the requesting
spouse was in poor mental or physical health when the returns in issue were filed,
when the request for relief was made, or at the time of trial. See Pullins v.
Commissioner, 136 T.C. at 454. - 19 -
[*19] In making a determination under section 6015(f), the Court considers the
enumerated factors as well as any other relevant factors. No single factor is
dispositive, and “[t]he degree of importance of each factor varies depending on the
requesting spouse’s facts and circumstances.” Rev. Proc. 2013-34, sec. 4.03(2);
see Pullins v. Commissioner, 136 T.C. at 448; Hall v. Commissioner, T.C. Memo.
2014-171, at *38.
1. Marital Status
If the requesting spouse is no longer married to the nonrequesting spouse,
this factor will weigh in favor of granting relief. See Rev. Proc. 2013-34, sec.
4.03(2)(a). If the requesting spouse is still married to the nonrequesting spouse,
this factor is neutral. Id. As petitioner and intervenor were divorced before
respondent’s final determination, this factor favors petitioner.
2. Economic Hardship
Economic hardship exists if satisfaction of the tax liability, in whole or in
part, would result in the requesting spouse’s being unable to meet his or her
reasonable basic living expenses. Id. sec. 403(2)(b). If denying relief from joint
and several liability will not cause the requesting spouse to suffer economic
hardship, this factor will be neutral. Id. Petitioner concedes that she will not
suffer economic hardship if she is denied relief for 2012. This factor is neutral. - 20 -
[*20] 3. Knowledge
In an underpayment case knowledge exists when the requesting spouse
knew or had reason to know the nonrequesting spouse would not or could not pay
the tax liability when the joint return was filed or at a reasonable time thereafter.
Id. sec. 4.03(2)(c)(ii). This factor will weigh in favor of relief if the requesting
spouse reasonably expected the nonrequesting spouse to pay the tax liability
reported on the return. Id. This factor will weigh against relief if, on the basis of
the facts and circumstances, it was not reasonable for the requesting spouse to
believe the nonrequesting spouse would or could pay the tax liability reported on
the return. Id. For example, if before the return was filed, the requesting spouse
knew of the nonrequesting spouse’s prior bankruptcies, financial difficulties, or
other issues with the Internal Revenue Service or other creditors, or was otherwise
aware of difficulties in timely paying bills, then this factor will generally weigh
against relief. Id.
Petitioner was aware of intervenor’s difficulties in timely paying bills and
other financial difficulties when she signed the 2012 joint return--April 15, 2013.
Indeed, petitioner took over managing the joint bank account in August 2012,
eight months before signing the 2012 joint return, because she had received
several overdraft notices. Before 2012 petitioner and intervenor applied for a - 21 -
[*21] second mortgage, and petitioner discovered that intervenor had unilaterally
taken out a line of credit on the family home. Additionally, before August 2012
petitioner’s employee discount from the telephone company was suspended
because intervenor had failed to keep sufficient funds in his separate bank account
to pay their phone bill.
Because petitioner was aware of intervenor’s financial difficulties and
previous failures to pay bills, she could not reasonably have expected intervenor to
pay the tax liability reported on their 2012 joint return. Additionally, because
petitioner had taken over managing their joint bank account, she would have been
in a better position to know whether they could or would pay the 2012 tax liability
or needed to set up an installment agreement to pay the tax. This factor weighs
against granting relief.
4. Legal Obligation
This factor favors relief where the nonrequesting spouse has the sole
obligation to pay an outstanding Federal tax liability under a binding divorce
decree or other legally binding agreement. Rev. Proc. 2013-34, sec. 4.03(2)(d),
2013-43 I.R.B. at 402. This factor is neutral where both spouses have such an
obligation or the divorce decree or agreement is silent as to any such obligation. - 22 -
[*22] Id. Petitioner and intervenor’s divorce decree is silent on this point.
Accordingly, this factor is neutral.
5. Significant Benefit
Under this factor the Court considers whether the requesting spouse
received a significant benefit, beyond normal support, from the underpayment. Id.
sec. 4.03(2)(e). Normal support is measured by the circumstances of the particular
parties. Porter v. Commissioner, 132 T.C. at 212. Benefits in excess of normal
support carry less weight, however, where the nonrequesting spouse controlled the
household or business finances, making this factor neutral. Rev. Proc. 2013-34,
sec. 4.03(2)(e). This factor will weigh in favor of granting relief if the
nonrequesting spouse significantly benefited from the unpaid tax and the
requesting spouse had little or no benefit or the nonrequesting spouse enjoyed the
benefit to the requesting spouse’s detriment. Id.
Petitioner did not receive a significant benefit beyond normal support from
the underpayment in 2012. However, intervenor enjoyed the benefit of the unpaid
tax to petitioner’s detriment. Intervenor spent significant funds to buy cars and car
parts for his car hobby. He also regularly spent Fridays in 2012 gambling. This
factor favors petitioner. - 23 -
[*23] 6. Compliance
The parties agree that petitioner is currently in compliance with her Federal
income tax obligations. Therefore, this factor favors petitioner.
7. Health
This factor may weigh in favor of relief if the requesting spouse was in poor
mental or physical health when the tax returns in issue were filed, when the
request for relief was made, or at the time of trial. Id. sec. 4.03(2)(g), 2013-43
I.R.B. at 403; see also Pullins v. Commissioner, 136 T.C. at 454. If the requesting
spouse was in neither poor physical nor poor mental health, this factor is neutral.
Rev. Proc. 2013-34, sec. 4.03(2)(g). The parties agree that petitioner was not in
poor physical or poor mental health at any of those times. Thus, this factor is
neutral.
D. Conclusion on Section 6015(f) Relief for 2012
Although many of the factors for equitable relief either favor petitioner or
are neutral, petitioner could not reasonably believe that intervenor would or could
pay the tax liability reported on their 2012 return. The knowledge factor weighs
too heavily against her for the Court to allow relief for 2012. Weighing all the
facts and circumstances, the Court concludes that petitioner is not entitled to relief
from joint and several liability under section 6015(f) for 2012. - 24 -
[*24] III. Conclusion
Petitioner is entitled to relief under section 6015(c) for 2011 but is not
entitled to relief under section 6015(b), (c), and (f) for 2012.
The Court has considered all the other arguments of the parties, and to the
extent not discussed above, finds those arguments to be irrelevant, moot, or
without merit.
To reflect the foregoing,
An appropriate decision
will be entered.