Section 6015 - An individual taxpayer was entitled to equitable relief as an innocent spouse with respect to an addition to tax and interest imposed on a tax underpayment that resulted from an overstatement of withheld tax. The overstated withholding credit was attributable to the taxpayer's former husband because he prepared the return and wrongfully reported the overstated withholding; thus, a threshold condition for considering whether innocent spouse relief may be granted on the basis equitable considerations was satisfied. Equitable relief was appropriate because the taxpayer was separated from her former husband at the time relief was requested, a property settlement provided that the former husband would pay any additional tax liabilities for the tax year at issue, and the taxpayer received no significant benefit as a result of the unpaid tax liability attributable to the overstated withholding. Although the taxpayer was granted innocent spouse relief with respect to the unpaid addition to tax and interest assessed on the underpayment, she was not entitled to a refund of withholding from her salary or the portion of a payment made by her former husband toward the unpaid tax liability to which she contributed. Payments made with a joint return and joint payments are not eligible for refund on the basis of equitable innocent spouse relief.


[T.C. Summary Opinion 2008-119]


Docket No. 12663-06S . Filed September 9, 2008.

Jane Frances Schwind, f.k.a. Jane Frances Skolnick v. Commissioner.

[ Code Sec. 6015]


Tax Court: Summary opinion: Innocent spouse relief: Equitable relief: Payments made with joint return and joint payments. --


GOLDBERG, Special Trial Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect when the petition was filed. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case. Unless otherwise indicated, subsequent section references are to the Internal Revenue Code as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.



This case arises from a request for relief from joint and several liability under section 6015(f) with respect to petitioner's unpaid joint tax liability for 2003. No notice of deficiency was issued. The issues for decision are whether petitioner is entitled to relief from joint and several liability under section 6015(f) and whether she is entitled to a refund of amounts paid towards the liability under section 6015(g)(1). 1





Background



Some of the facts have been stipulated and are so found. The stipulation of facts and the exhibits received into evidence are incorporated herein by reference. When the petition was filed, petitioner resided in Maryland.



In September 2001 petitioner married David Skolnick (Mr. Skolnick). Petitioner worked and continues to work as a registered nurse. Mr. Skolnick was employed as an engineer by Zeta Associates, Inc. (Zeta), until June 2003 when his employer terminated his employment, but he found new employment by the end of 2003.



On December 13, 2003, Mr. Skolnick sold his stock holdings in Zeta for $99,899.91; no Federal income tax was withheld. Around March 2004 Mr. Skolnick deposited the check for the stock proceeds into his and petitioner's joint checking account. Although the joint account was used to deposit their paychecks and to pay household bills, petitioner was not allowed to open or to review the account statements.



Around April 2004 Mr. Skolnick prepared and electronically filed a joint Form 1040, U.S. Individual Income Tax Return, for 2003. Petitioner's participation in the preparation of the Form 1040 was limited to providing Mr. Skolnick with her "W-2s". But petitioner was allowed to review the Form 1040 after Mr. Skolnick had filed it. Among other things, Mr. Skolnick reported the following:





Description Amount

Taxable income (line 40) $205,171

Total tax (line 60) 41,482

Withholdings (line 61) 66,332

Excess Social Security 1,831

Overpayment 26,681





Third-party-payor records, however, showed withholdings totaling $36,331 ($3,795 was withheld on petitioner's wages and $32,536 was withheld on Mr. Skolnick's wages). Respondent determined that the Skolnicks had overstated their withholdings by $30,001, and he reduced their "Payments" by that amount. In May 2005 respondent issued a Notice CP2000, reflecting a "Proposed Balance Due" of $31,656.



In the interim Mr. Skolnick had left the marital home in January 2005. Petitioner left the marital home in March 2005. Mr. Skolnick and petitioner instituted divorce proceedings in 2005; the divorce was finalized in February 2006. In January 2006 petitioner and Mr. Skolnick entered into a "Property And Support Settlement Agreement" (property settlement). In pertinent part, the property settlement provides:



[t]he parties agree that they have potential joint tax liability for 2003 for at least [$31,656 * * * Mr. Skolnick paid $31,656 to the Internal Revenue Service (IRS), and petitioner paid half of the amount to him as her share of the liability. If there are additional tax liabilities for 2003, Mr. Skolnick agrees to pay them. If the IRS determines that any part of the 2003 tax liability is not due and refunds it, the parties agree to split it. If penalties or interest for 2003 are refunded, the parties agree that Mr. Skolnick is entitled to it].



While the divorce was pending, petitioner submitted a Form 8857, Request for Innocent Spouse Relief (And Separation of Liability and Equitable Relief), to the IRS in June 2005. 2 In August 2005 she submitted a Form 12510, Questionnaire for Requesting Spouse. The IRS issued a preliminary determination in November 2005. It denied relief under section 6015(b), (c), and (f), reasoning:



Information contained in your case indicates that you had knowledge and/or reason to know of the item that gave rise to the tax deficiency. There was too much withholding claimed on the return and you did not review the return. You failed your duty of inquiry at the time of filing.



Petitioner appealed to the Appeals Office (Appeals) in December 2005. Appeals issued a notice of determination on March 30, 2006. It states that relief was denied because the item "leading to the understatement was not attributable" to Mr. Skolnick.



In the interim Mr. Skolnick had made a $31,656 payment on behalf of himself and petitioner in January 2006. On February 6, 2006, the IRS determined that petitioner and Mr. Skolnick were liable for a $3,000 addition to tax under section 6651(a)(2), plus interest. According to the notice of determination, the unpaid balance of income tax due from petitioner was $4,367.17 as of March 30, 2006. The amount of relief of 2003 income tax petitioner sought was $30,001.





Discussion




I. Burden of Proof


Except as otherwise provided in section 6015, petitioner bears the burden of proof with respect to her entitlement to relief from joint and several liability. See Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004).




II. Joint and Several Liability and Section 6015(f) Relief


Section 6013(d)(3) provides that if a joint return is filed, the tax is computed on the taxpayers' aggregate income, and liability for the resulting tax is joint and several. See also sec. 1.6013-4(b), Income Tax Regs. But the IRS may relieve a taxpayer from joint and several liability under section 6015 in certain circumstances. An individual may be relieved from joint and several liability under section 6015(f) if, taking into account all the facts and circumstances, it is inequitable to hold the taxpayer liable for any unpaid tax or deficiency and he does not qualify for relief under section 6015(b) or (c).



To guide IRS employees in exercising their discretion, the Commissioner has issued revenue procedures that list the factors they should consider. The Court also uses the factors when reviewing the IRS's denial of relief. See Washington v. Commissioner, 120 T.C. 137, 147-152 (2003); Rev. Proc. 2003-61, 2003-2 C.B. 296, modifying and superseding Rev. Proc. 2000-15, 2000-1 C.B. 447.




III. Rev. Proc. 2003-61, Sec. 4.01: Seven Threshold Conditions for Relief


Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at 297, begins with a list of seven threshold conditions that a taxpayer must satisfy in order to qualify for equitable relief. The Court will not recite them all since the only factor at issue is the so-called attribution factor. Rev. Proc. 2003-61, sec. 4.01(7), 2003-2 C.B. at 297, provides that the tax liability from which the requesting spouse seeks relief must be attributable to the nonrequesting spouse unless certain exceptions apply which are not relevant here.



Petitioner contends that the claimed $30,001 of excess withholdings is attributable to Mr. Skolnick because he overstated their withheld amounts when he prepared and electronically filed their Form 1040.



Respondent contends that petitioner's request for relief seems to be based on the assumption that the overstated withholding credits are directly related to Mr. Skolnick's stock sale. According to respondent, Appeals determined that that was not the case: the overstated withholdings could have been a math error, a "typo when the electronic return was computed using whatever computer software was used[,] * * * an inflated number pulled out of the air," or any one of a number of explanations.



The Appeals officer's "Case Activity Record" states that the understatement was "caused by reporting withholding in relation to a 1099B. There was no withholding on the 1099B." The record further states: "She argues it was due to the 1099b. * * * [I told her] it had not been filed. I stated that there is nothing on the 1099b so that is just a guess." The record also states that he explained that withholding is "normally considered a joint and several liability because it normally cannot be allocated." The officer's "workpapers" state that the item was not attributable to either spouse because they had claimed too much withholding. Further, her arguments that the item should be attributed to Mr. Skolnick because he claimed the withholding in relation to a Form 1099 were "without merit and it would be inequitable to attribute the disallowed withholding to the NRS based upon an assumption."



The Court is not persuaded by respondent's arguments. In deciding the issue of to whom inaccurate, false, or "phony" deductions or credits are attributable, the Court has attributed such deductions or credits to the spouse who wrongfully reported or claimed the item (with certain exceptions not applicable here). See Lawson v. Commissioner, T.C. Memo. 1994-286 (spouse who mischaracterized stock sale as an ordinary loss rather than a capital loss was attributed the item); Gill v. Commissioner, T.C. Memo. 1993-274 (phony Schedule A deductions were attributed to spouse who prepared the return and claimed the items); Perry v. Commissioner, T.C. Memo. 1992-258 (phony Schedule C deductions were attributed to spouse who claimed the items); Davis v. Commissioner, T.C. Memo. 1992-240 (phony Schedule A deduction was attributed to spouse who claimed it), affd. without published opinion 26 F.3d 130 (9th Cir. 1994); see also Belk v. Commissioner, 93 T.C. 434, 437 (1989) (clerical mistake, i.e., claiming a $15,000 deduction rather than a $1,500 loss, was attributed to spouse who claimed the deduction). 3



On the basis of the foregoing, the Court finds that the overstated withholding credits are attributable to Mr. Skolnick --he prepared the return and wrongfully reported the overstated amounts. 4 Therefore, the Court also finds that petitioner has satisfied the seventh threshold condition of Rev. Proc. 2003-61, sec. 4.01.




IV. Rev. Proc. 2003-61, Sec. 4.02: Circumstances Ordinarily Allowing for Relief


Where the requesting spouse satisfies the threshold conditions of Rev. Proc. 2003-61, sec. 4.01, then Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at 298, sets forth the circumstances in which the IRS will ordinarily grant relief under section 6015(f) with respect to an underpayment of a properly reported liability. To qualify for relief under Rev. Proc. 2003-61, sec. 4.02, the requesting spouse must: (1) No longer be married to, be legally separated from, or have not been a member of the same household as the nonrequesting spouse at any time during the 12-month period ending on the date of the request for relief; (2) have had no knowledge or reason to know when she signed the return that the nonrequesting spouse would not pay the tax liability; and (3) suffer economic hardship if relief is not granted.



Petitioner was not divorced or legally separated from Mr. Skolnick when she requested relief. Additionally, petitioner and Mr. Skolnick resided together within the 6-month period preceding her request: she testified that he moved out in January 2005, while her Form 8857 is dated June 11, 2005. Thus, she fails requirement 1, and the Court need not discuss the others. Accordingly, petitioner does not qualify for relief under Rev. Proc. 2003-61, sec. 4.02.




V. Rev. Proc. 2003-61, Sec. 4.03: Other Factors


Where the requesting spouse fails to qualify for relief under Rev. Proc. 2003-61, sec. 4.02, the IRS may nevertheless grant relief under Rev. Proc. 2003-61, sec. 4.03, 2003-2 C.B. at 298. The Court's analysis with respect to the nonexhaustive list of factors contained in Rev. Proc. 2003-61, sec. 4.03 is described below.



A. Marital Status



The IRS will take into consideration whether the requesting spouse is divorced or separated (whether legally separated or living apart) from the nonrequesting spouse. Rev. Proc. 2003-61, sec. 4.03(2)(a)(i), 2003-2 C.B. at 298.



Petitioner and Mr. Skolnick were separated, i.e., living apart, when she requested relief. This factor weighs in favor of relief. See id.; cf. Nihiser v. Commissioner, T.C. Memo. 2008-135 (living apart under Rev. Proc. 2000-15 weighs in favor of relief); Beatty v. Commissioner, T.C. Memo. 2007-167 (remaining married or residing together is a neutral factor under Rev. Proc. 2003-61); Butner v. Commissioner, T.C. Memo. 2007-136 (same under Rev. Proc. 2000-15).



B. Economic Hardship



The IRS will take into consideration whether the requesting spouse will suffer economic hardship if relief is not granted. Rev. Proc. 2003-61, sec. 4.03(2)(a)(ii), 2003-2 C.B. at 298. Generally, economic hardship exists if collection of the tax liability will cause the taxpayer to be unable to pay reasonable basic living expenses. Butner v. Commissioner, supra.



In determining a reasonable amount for basic living expenses, the Court considers, among other things: (1) The taxpayer's age, employment status and history, ability to earn, and number of dependents; (2) an amount reasonably necessary for food, clothing, housing, medical expenses, transportation, current tax payments, and expenses necessary to the taxpayer's production of income; (3) the cost of living in the taxpayer's geographic area; (4) the amount of property available to satisfy the taxpayer's expenses; (5) any extraordinary circumstances; i.e., special education expenses, a medical catastrophe, or a natural disaster; and (6) any other factor bearing on economic hardship. See sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.



The IRS has issued guidelines for allowable expenses. 5 "Necessary expenses are those that meet the necessary expense test; i.e., 'they must provide for a taxpayer and his or her family's health and welfare and/or the production of income' and they must be reasonable." Schulman v. Commissioner, T.C. Memo. 2002-129 n.6. There are three types of necessary expenses: (1) Those based on national standards; i.e., food, housekeeping supplies, clothing, and personal care products and services; (2) those based on local standards; i.e., housing, utilities, and transportation; and (3) other expenses, which are not based on national or local standards. Id.



Petitioner testified that she estimated the expenses on her Form 12510 for herself and her two children. With the exception of the $1,435 for monthly rent, she has not substantiated her expenses; i.e., by providing receipts or statements. Therefore, the Court will use the national and local standards.



The monthly national standard allows a family of three:





Expenditure Amount

Food $626

Housekeeping supplies 61

Apparel & services 209

Personal care products &
services 58

Miscellaneous 197

Out-of-pocket health care 171

Total 1,322





Petitioner is allowed $217 as operating costs for her automobile (local standard). The Court has determined total expenditures of $2,974, while she claimed net wages of $3,088. Petitioner's net wages exceed her expenditures by $114. Although petitioner is supporting two children, she is gainfully employed as a nurse --earning approximately $60,000 a year. In addition, there is no information in the record as to the costs of her children's private school tuition or the value of any assets that could be used to satisfy the liability (she testified that she has since moved and is making payments on a home). The Court also notes that petitioner may seek to enforce the terms of the property settlement against Mr. Skolnick for the additional penalties and interest. Consequently, the Court finds that petitioner has not shown that she will suffer economic hardship if she is not relieved of the liability. See Monsour v. Commissioner, T.C. Memo. 2004-190 (requesting spouse must prove that the expenses qualify and that they are reasonable). This factor weighs against granting relief. See Banderas v. Commissioner, T.C. Memo. 2007-129 (lack of economic hardship weighs against relief under Rev. Proc. 2003-61); cf. Butner v. Commissioner, supra (same under Rev. Proc. 2000-15).



C. Knowledge or Reason To Know



The IRS will also consider whether the requesting spouse did not know or had no reason to know that the nonrequesting spouse would not pay the liability. Rev. Proc. 2003-61, sec. 4.03(2)(a)(iii)(A), 2003-2 C.B. at 298. As is relevant here, the IRS will consider any deceit or evasiveness of the nonrequesting spouse, the requesting spouse's involvement in the household's finances, and any lavish or unusual expenditures compared with past spending levels in determining whether the requesting spouse had reason to know of the underpayment (the factors specified in Price v. Commissioner, 887 F.2d 959, 965 (9th Cir. 1989)). Id. sec. 4.03(2)(a)(iii)(C).



Typically, in the case of a reported but unpaid liability, the relevant knowledge is whether the taxpayer knew or had reason to know when the return was signed that the tax would not be paid. See Washington v. Commissioner, 120 T.C. at 151; see also Feldman v. Commissioner, T.C. Memo. 2003-201, affd. 152 Fed. Appx. 622 (9th Cir. 2005). The general rule for unpaid liabilities is that the requesting spouse must establish that: (1) When she signed the return, she had no knowledge or reason to know that the tax reported on the return would not be paid; and (2) it was reasonable for her to believe that the nonrequesting spouse would pay the tax shown due. See Morello v. Commissioner, T.C. Memo. 2004-181; Ogonoski v. Commissioner, T.C. Memo. 2004-52; Collier v. Commissioner, T.C. Memo. 2002-144.



Petitioner testified that: (1) Mr. Skolnick prepared and electronically filed the return; (2) she was not present when he filed it; (3) she was able to review the return but only after he filed it; and (4) she does not recall signing a signature page. 6



The Appeals officer's "Case Activity Record" states: "Knowledge --The NRS e-filed the return. The RS did not review." His workpapers merely state that she did not review the return for accuracy, "she would also be charged with constructive knowledge of the item", and since the "withholding was reported on the return, she has actual knowledge of the item."



Petitioner and Mr. Skolnick's Form 1040 showed an overpayment for 2003 on account of overstated withholdings --not taxes due. Petitioner was not alerted to the fact that there was a $31,165 "Proposed Balance Due" until she received the Notice CP2000 in May 2005. Moreover, with respect to the Price factors, petitioner's involvement in their finances was insufficient to put her in a position to have reason to know that the Form 1040 contained overstated withholdings when she signed it. There is no evidence that their expenditures were unusual or extravagant or that their overall standard of living significantly improved during 2003 to put petitioner on notice that Mr. Skolnick overstated their withholdings.



Arguably, weighing against petitioner is the officer's conclusion that "the 2003 refund was way out of line with prior years. This should have triggered something." Although the 2002 and 2003 returns are not in evidence, respondent represented that $10,743.61 of the claimed $26,681 overpayment for 2003 was applied to their joint liability for 2002. 7



Without the 2002 and 2003 returns, the Court is hesitant to agree with the officer's conclusion that the claimed $26,681 refund for 2003 "should have triggered something." There is nothing in the record establishing what that $10,743.61 liability for 2002 consists of (i.e., a deficiency, interest, or penalties). In addition, 2002 was the first year that the Skolnicks had filed a joint return; thus, there was no real filing history by which petitioner could have tested the 2003 refund for accuracy. The January 2006 property settlement indicates they were going to claim a $2,047.03 overpayment for 2002 by January 31, 2006, which corroborates petitioner's testimony that she did not learn about the issues with the 2002 return until after the issues with the 2003 return had come to light. On the basis of the evidence in the record, it does not appear that "the 2003 refund was way out of line with prior years" such that petitioner should have had reason to know that Mr. Skolnick had overstated their withholdings for 2003.



On the basis of the foregoing, the Court finds that this factor is neutral. See, e.g., Alpha Med., Inc. v. Commissioner, 172 F.3d 942 (6th Cir. 1999) (a factor favoring neither party is neutral), revg. T.C. Memo. 1997-464.



D. Nonrequesting Spouse's Legal Obligation



The IRS will also consider whether the nonrequesting spouse has a legal obligation to pay the outstanding income tax liability pursuant to a divorce decree or agreement. See Rev. Proc. 2003-61, sec. 4.03(2)(a)(iv), 2003-2 C.B. at 298. But if the requesting spouse knew or had reason to know when the agreement was entered into that the nonrequesting spouse would not pay the liability, then this factor will not weigh in favor of relief. Id.



The property settlement provides that Mr. Skolnick agreed to pay any additional liabilities for 2003. There is nothing in the record indicating that petitioner knew or should have known when she entered into the agreement that Mr. Skolnick would not pay the liability --he paid his half of the $31,656 liability when they entered into the agreement in January 2006, and respondent did not determine the addition to tax until February 2006. This factor weighs in favor of relief. See id.; see also Magee v. Commissioner, T.C. Memo. 2005-263 (applying Rev. Proc. 2003-61); cf. Billings v. Commissioner, T.C. Memo. 2007-234 (applying Rev. Proc. 2000-15).



E. Significant Benefit



The IRS will consider whether the requesting spouse received significant benefit beyond normal support as a result of the unpaid tax liability. Rev. Proc. 2003-61, sec. 4.03(2)(a)(v), 2003-2 C.B. at 299.



On petitioner's Form 12510, she claimed that she believed that the refund was used to pay the Skolnicks' household expenses. There is no evidence indicating that she received significant benefit as a result of the unpaid tax liability. Therefore, the Court concludes that this factor weighs in favor of relief. See Magee v. Commissioner, T.C. Memo. 2007-136 (lack of significant benefit weighs in favor of relief under Rev. Proc. 2003-61); cf. Butner v. Commissioner, supra (lack of significant benefit weighed in favor of relief under former section 6013(e) notwithstanding that Rev. Proc. 2000-15 stated that it was neutral).



F. Compliance With Federal Tax Laws



The IRS will take into consideration whether the requesting spouse has made a good faith effort to comply with the Federal tax laws in the succeeding years. See Rev. Proc. 2003-61, sec. 4.03(2)(a)(vi), 2003-2 C.B. at 299.



This factor is neutral because no evidence or argument was presented as to the issue. See Knorr v. Commissioner, T.C. Memo. 2004-212.



G. Abuse



The IRS will also consider whether the nonrequesting spouse abused the requesting spouse. See Rev. Proc. 2003-61, sec. 4.03(2)(b)(i), 2003-2 C.B. at 299. The presence of abuse is a factor favoring relief, and a history of abuse may mitigate the requesting spouse's knowledge or reason to know. Id.



Petitioner testified that Mr. Skolnick was "not necessarily physically abusive." Therefore, this factor is neutral. Id. (the presence of abuse weighs in favor of relief while lack of abuse does not weigh against relief); see also Magee v. Commissioner, supra (lack of abuse is a neutral factor under Rev. Proc. 2003-61); cf. Butner v. Commissioner, supra (same under Rev. Proc. 2000-15).



H. Mental or Physical Health



The IRS will take into consideration whether the requesting spouse was in poor mental or physical health on the date she signed the return or at the time relief was requested. See Rev. Proc. 2003-61, sec. 4.03(2)(b)(ii), 2003-2 C.B. at 299.



There is no evidence in the record that petitioner's mental or physical health was poor; therefore, this factor is neutral. See id.; see also Magee v. Commissioner, supra.



I. Conclusion: Weight of the Factors



Petitioner has presented a strong case for relief from joint and several liability. Three factors weigh in favor of relief, one, economic hardship, weighs against relief, and four factors are neutral. While the economic hardship factor weighs against her, it does not outweigh the other factors. Accordingly, petitioner is entitled to relief under section 6015(f).




VI. Petitioner's Refund Claim


Petitioner has requested a refund of amounts paid towards the 2003 tax liability.



In pertinent part, section 6015(g)(1) provides that a refund shall be allowed to the extent it is attributable to the operation of section 6015 except to the extent that it may be affected by other specified sections.



Rev. Proc. 2003-61, sec. 4.04(2), 2003-2 C.B. at 299, provides that in a case involving an underpayment of income tax, a requesting spouse is eligible for a refund of separate payments made after July 22, 1998, if she establishes that she provided the funds used to make the payment for which she seeks a refund. But a requesting spouse is not eligible for refunds of payments made with the joint return, joint payments, or payments that the nonrequesting spouse made. Id.



Respondent has represented that petitioner and Mr. Skolnick's 2003 return was timely filed; the filing date is deemed to be April 15, 2004. See sec. 6513(a). On April 15, 2004, petitioner paid $3,795 in the form of withholdings. See sec. 6513(b)(1) (certain withheld amounts are paid on the 15th day of the 4th month following the close of the taxable year). Her withholdings constitute a payment made with the joint return; consequently, she is not eligible for a refund with respect to that payment. See Rev. Proc. 2003-61, sec. 4.04(2); cf. Rosenthal v. Commissioner, T.C. Memo. 2004-89. In January 2006 Mr. Skolnick submitted a $31,656 payment, of which petitioner paid half. 8 The January 2006 payment encompasses a $31,656 joint payment and in part a payment made by a nonrequesting spouse. Consequently, petitioner is not eligible for a refund with respect to the January 2006 payment. See Rev. Proc. 2003-61, sec. 4.04(2); cf. Rosenthal v. Commissioner, supra.



In conclusion, the Court holds that petitioner is entitled to relief from joint and several liability under section 6015(f) with respect to the unpaid addition to tax under section 6651(a)(2) and interest for 2003. But petitioner is not entitled to any refund for 2003.



To reflect the foregoing,



An appropriate decision will be entered.


1 Although petitioner requested relief under sec. 6015(b), (c), or (f), her liability results from an underpayment of tax on account of overstated withholdings, not an understatement of tax (as defined by sec. 6662(d)(2)(A)) or a deficiency (defined by sec. 6211). See sec. 6015(b)(3), (c)(1). Thus, petitioner is not entitled to relief under sec. 6015(b) or (c), and the Court's review is limited to sec. 6015(f).

2 Mr. Skolnick was notified that petitioner was seeking relief from joint and several liability and that he had a right to intervene in the matter. He did not respond to letters from the IRS or exercise his right to intervene in petitioner's Tax Court case.

3 Although these cases arose under former sec. 6013(e), the Court has determined that cases interpreting similar terms under sec. 6013(e) remain instructive in its analysis. See Alt v. Commissioner, 119 T.C. 306, 314 (2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004); Juell v. Commissioner, T.C. Memo. 2007-219; Becherer v. Commissioner, T.C. Memo. 2004-282. The terms "attributable to an item of the individual with whom the requesting spouse filed the joint return ('the nonrequesting spouse')" of Rev. Proc. 2003-61, sec. 4.01(7), 2003-2 C.B. 296, 297, is similar to the terms "attributable to grossly erroneous items of one spouse" of sec. 6013(e). The analysis for attributing items to one spouse or the other is essentially the same.

4 In addition, there is a strong implication that Mr. Skolnick was the culpable person since he: (1) Accepted responsibility for any additional liabilities in their property settlement; and (2) has not contested petitioner's assertions or otherwise intervened in the matter, see supra note 2.

5 The guidelines are published on the IRS's Web site at http://www.irs.gov/individuals/article/0,,id=96543,00.html (last visited May 30, 2008). The amount listed as the national or local standard is effective as of Oct. 1, 2007.

6 Whether petitioner failed to sign the 2003 Form 1040 necessarily implicates issues regarding whether she filed a joint return and whether she is entitled to relief under sec. 6015(f). See sec. 1.6015-4(a), Income Tax Regs. (the filing of a joint return is a prerequisite to sec. 6015 relief). The Court finds that petitioner intended to and did file a joint return with Mr. Skolnick because she has not otherwise renounced the 2003 Form 1040 and she provided her "W-2s" to Mr. Skolnick. See Heim v. Commissioner, 27 T.C. 270, 273 (1956), affd. 251 F.2d 44 (8th Cir. 1958); Gudenschwager v. Commissioner, T.C. Memo. 1989-6; sec. 1.6013-1(a)(2), Income Tax Regs.; see also Ziegler v. Commissioner, T.C. Memo. 2003-282 (the Court assumed that the taxpayer conceded the filing of a joint return or ratified the joint return that the nonrequesting spouse filed because she continued to assert her entitlement to sec. 6015(f) relief).

7 At trial respondent asserted that he did not include a copy of the 2003 return because it was not part of the administrative record, although he could have obtained one.

8 Petitioner's Form 8857, received by the IRS on June 20, 2005, is a claim for a refund. See Washington v. Commissioner, 120 T.C. 137, 161-162 (2003). Her petition, filed on July 3, 2006, also includes a refund claim. Petitioner's refund claims are timely with respect to both payments. See sec. 6511(a) (a claim for credit or refund of an overpayment of any tax shall be filed by the taxpayer within: (1) 3 years from the time the return was filed, or (2) 2 years from the time the tax was paid, whichever period expires later).

Equitable relief. --Innocent Spouse Relief: Equitable relief

The IRS has provided guidance for individuals seeking equitable relief from tax liabilities under the innocent spouse provisions of Code Secs. 66(c) or 6015(f). The guidance enumerates the threshold conditions that must be satisfied for any request for equitable relief to be considered, sets forth the criteria under which relief will ordinarily be granted, and includes a nonexclusive list of factors that are to be considered in determining whether it would be inequitable to hold a requesting spouse jointly and severally liable for a deficiency or for an unpaid liability. Those factors also apply in determining whether to relieve a spouse of tax liability resulting from the operation of the community property laws. Rev. Proc. 2000-15, 2000-1 CB 447, is superseded.


[Full Text --Rev. Proc. 2003-61]




SECTION 1. PURPOSE AND SCOPE

01. Purpose. This revenue procedure provides guidance for a taxpayer seeking equitable relief from income tax liability under section 66(c) or section 6015(f) of the Internal Revenue Code (a "requesting spouse"). Section 4.01 of this revenue procedure provides the threshold requirements for any request for equitable relief. Section 4.02 of this revenue procedure sets forth the conditions under which the Internal Revenue Service ordinarily will grant equitable relief under section 6015(f) from an underpayment of income tax reported on a joint return. Section 4.03 of this revenue procedure provides a nonexclusive list of factors for consideration in determining whether relief should be granted under section 6015(f) because it would be inequitable to hold a requesting spouse jointly and severally liable for an underpayment of income tax on a joint return where the conditions of section 4.02 are not met, or for a deficiency. The factors in section 4.03 also will apply in determining whether to relieve a spouse from income tax liability resulting from the operation of community property law under the equitable relief provision of section 66(c).

.02 Scope. This revenue procedure applies to spouses who request either equitable relief from joint and several liability under section 6015(f), or equitable relief under section 66(c) from income tax liability resulting from the operation of community property law.



SECTION 2. BACKGROUND

.01 Section 6013(d)(3) provides that married taxpayers who file a joint return under section 6013 will be jointly and severally liable for the income tax arising from that joint return. For purposes of section 6013(d)(3) and this revenue procedure, the term "tax" includes penalties, additions to tax, and interest. See sections 6601(e)(1) and 6665(a)(2).

.02 Section 3201(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112 Stat. 685, 734 (RRA), enacted section 6015, which provides relief in certain circumstances from the joint and several liability imposed by section 6013(d)(3). Section 6015(b) and (c) specifies two sets of circumstances under which relief from joint and several liability is available. If relief is not available under section 6015(b) or (c), section 6015(f) authorizes the Secretary to grant equitable relief if, taking into account all the facts and circumstances, the Secretary determines that it is inequitable to hold a requesting spouse liable for any unpaid tax or any deficiency (or any portion of either). Section 66(c) provides relief from income tax liability resulting from the operation of community property law to taxpayers domiciled in a community property state who do not file a joint return. Section 3201(b) of RRA amended section 66(c) to add an equitable relief provision similar to section 6015(f).

.03 Section 6015 provides relief only from joint and several liability arising from a joint return. If an individual signs a joint return under duress, the election to file jointly is not valid and there is no valid joint return. The individual is not jointly and severally liable for any income tax liabilities arising from that return. Therefore, section 6015 does not apply.

.04 Under section 6015(b) and (c), relief is available only from a proposed or assessed deficiency. Section 6015(b) and (c) does not authorize relief from an underpayment of income tax reported on a joint return. Section 66(c) and section 6015(f) permit equitable relief for an underpayment of income tax. The legislative history of section 6015 provides that Congress intended for the Secretary to exercise discretion in granting equitable relief if a requesting spouse "does not know, and had no reason to know, that funds intended for the payment of tax were instead taken by the other spouse for such other spouse's benefit." H.R. Conf. Rep. No. 105-599, at 254 (1998). Congress also intended for the Secretary to exercise the equitable relief authority under section 6015(f) in other situations if, "taking into account all the facts and circumstances, it is inequitable to hold an individual liable for all or part of any unpaid tax or deficiency arising from a joint return." Id.



SECTION 3. CHANGES

This revenue procedure supersedes Rev. Proc. 2000-15, changing the following:

.01 Section 4.01 of this revenue procedure adds a new threshold requirement under section 4.01(7).

.02 Section 4.03(2)(a)(iii) of this revenue procedure revises the weight given to the knowledge or reason to know factor.

.03 Section 4.04 of this revenue procedure broadens the availability of refunds if equitable relief is granted under section 66(c) or section 6015(f).



SECTION 4. GENERAL CONDITIONS FOR RELIEF

.01 Eligibility for equitable relief. A requesting spouse must satisfy all of the following threshold conditions to be eligible to submit a request for equitable relief under section 6015(f). With the exception of conditions (1) and (2), a requesting spouse must satisfy all of the following threshold conditions to be eligible to submit a request for equitable relief under section 66(c). The Service may relieve a requesting spouse who satisfies all the applicable threshold conditions set forth below of all or part of the income tax liability under section 66(c) or section 6015(f), if, taking into account all the facts and circumstances, the Service determines that it would be inequitable to hold the requesting spouse liable for the income tax liability. The threshold conditions are as follows:

(1) The requesting spouse filed a joint return for the taxable year for which he or she seeks relief.

(2) Relief is not available to the requesting spouse under section 6015(b) or (c).

(3) The requesting spouse applies for relief no later than two years after the date of the Service's first collection activity after July 22, 1998, with respect to the requesting spouse. See Treas. Reg. §1.6015-5(b)(2)(i) for the definition of collection activity.

(4) No assets were transferred between the spouses as part of a fraudulent scheme by the spouses.

(5) The nonrequesting spouse did not transfer disqualified assets to the requesting spouse. If the nonrequesting spouse transferred disqualified assets to the requesting spouse, relief will be available only to the extent that the income tax liability exceeds the value of the disqualified assets. For this purpose, the term "disqualified asset" has the meaning given the term by section 6015(c)(4)(B).

(6) The requesting spouse did not file or fail to file the return with fraudulent intent.

(7) The income tax liability from which the requesting spouse seeks relief is attributable to an item of the individual with whom the requesting spouse filed the joint return (the "nonrequesting spouse"), unless one of the following exceptions applies:

(a) Attribution solely due to the operation of community property law. If an item is attributable or partially attributable to the requesting spouse solely due to the operation of community property law, then for purposes of this revenue procedure, that item (or portion thereof) will be considered to be attributable to the nonrequesting spouse.

(b) Nominal ownership. If the item is titled in the name of the requesting spouse, the item is presumptively attributable to the requesting spouse. This presumption is rebuttable. For example, H opens an individual retirement account (IRA) in W's name and forges W's signature on the IRA in 1998. Thereafter, H makes contributions to the IRA and in 2002 takes a taxable distribution from the IRA. H and W file a joint return for the 2002 taxable year, but do not report the taxable distribution on their joint return. The Service later proposes a deficiency relating to the taxable IRA distribution and assesses the deficiency against H and W. W requests relief from joint and several liability under section 6015. W establishes that W did not contribute to the IRA, sign paperwork relating to the IRA, or otherwise act as if W were the owner of the IRA. W thereby rebutted the presumption that the IRA is attributable to W.

(c) Misappropriation of funds. If the requesting spouse did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by the nonrequesting spouse for the nonrequesting spouse's benefit, the Service will consider granting equitable relief although the underpayment may be attributable in part or in full to an item of the requesting spouse. The Service will consider relief in this case only to the extent that the funds intended for the payment of tax were taken by the nonrequesting spouse.

(d) Abuse not amounting to duress. If the requesting spouse establishes that he or she was the victim of abuse prior to the time the return was signed, and that, as a result of the prior abuse, the requesting spouse did not challenge the treatment of any items on the return for fear of the nonrequesting spouse's retaliation, the Service will consider granting equitable relief although the deficiency or underpayment may be attributable in part or in full to an item of the requesting spouse.

.02 Circumstances under which the Service ordinarily will grant equitable relief under section 6015(f) with respect to underpayments on joint returns.

(1) If an income tax liability reported on a joint return is unpaid, the Service ordinarily will grant equitable relief under section 6015(f) (subject to the limitations of paragraph (2) below) in cases in which all of the following elements are satisfied:

(a) On the date of the request for relief, the requesting spouse is no longer married to, or is legally separated from, the nonrequesting spouse, or has not been a member of the same household as the nonrequesting spouse at any time during the 12-month period ending on the date of the request for relief.

(b) On the date the requesting spouse signed the joint return, the requesting spouse had no knowledge or reason to know that the nonrequesting spouse would not pay the income tax liability. The requesting spouse must establish that it was reasonable for the requesting spouse to believe that the nonrequesting spouse would pay the reported income tax liability. If a requesting spouse would otherwise qualify for relief under this section, except for the fact that the requesting spouse's lack of knowledge or reason to know relates only to a portion of the unpaid income tax liability, then the requesting spouse may receive relief to the extent that the income tax liability is attributable to that portion.

(c) The requesting spouse will suffer economic hardship if the Service does not grant relief. For purposes of this revenue procedure, the Service will base its determination of whether the requesting spouse will suffer economic hardship on rules similar to those provided in Treas. Reg. §301.6343-1(b)(4). After the requesting spouse is deceased, there can be no economic hardship. See Jonson v. Commissioner, 118 T.C. 106, 126 (2002), appeal docketed, No. 02-9009 (10th Cir. May 24, 2002) (taxpayer appeal filed on other grounds).

(2) Relief under this section 4.02 is subject to the following limitation: If the Service adjusts the joint return to reflect an understatement of income tax, relief will be available only to the extent of the income tax liability shown on the joint return prior to the Service's adjustment.

.03 Factors for determining whether to grant equitable relief.

(1) Applicability. This section 4.03 applies to requesting spouses who did not file a joint return in a community property state, who request relief under section 66(c), and satisfy the applicable threshold conditions of section 4.01. This section 4.03 also applies to requesting spouses who filed a joint return, request relief under section 6015, and satisfy the threshold conditions of section 4.01, but do not qualify for relief under section 4.02.

(2) Factors. The following is a nonexclusive list of factors that the Service will consider in determining whether, taking into account all the facts and circumstances, it is inequitable to hold the requesting spouse liable for all or part of the unpaid income tax liability or deficiency, and full or partial equitable relief under section 66(c) or section 6015(f) should be granted. No single factor will be determinative of whether to grant equitable relief in any particular case. Rather, the Service will consider and weigh all relevant factors, regardless of whether the factor is listed in this section 4.03.

(a) Factors that may be relevant to whether the Service will grant equitable relief include, but are not limited to, the following:

(i) Marital status. Whether the requesting spouse is separated (whether legally separated or living apart) or divorced from the nonrequesting spouse. A temporary absence, such as an absence due to incarceration, illness, business, vacation, military service, or education, shall not be considered separation for purposes of this revenue procedure if it can be reasonably expected that the absent spouse will return to a household maintained in anticipation of his or her return. See Treas. Reg. §1.6015-3(b)(3)(i) for the definition of a temporary absence.

(ii) Economic hardship. Whether the requesting spouse would suffer economic hardship (within the meaning of section 4.02(1)(c) of this revenue procedure) if the Service does not grant relief from the income tax liability.

(iii) Knowledge or reason to know.

(A) Underpayment cases. In the case of an income tax liability that was properly reported but not paid, whether the requesting spouse did not know and had no reason to know that the nonrequesting spouse would not pay the income tax liability.

(B) Deficiency cases. In the case of an income tax liability that arose from a deficiency, whether the requesting spouse did not know and had no reason to know of the item giving rise to the deficiency. Reason to know of the item giving rise to the deficiency will not be weighed more heavily than other factors. Actual knowledge of the item giving rise to the deficiency, however, is a strong factor weighing against relief. This strong factor may be overcome if the factors in favor of equitable relief are particularly compelling. In those limited situations, it may be appropriate to grant relief under section 66(c) or section 6015(f) even though the requesting spouse had actual knowledge of the item giving rise to the deficiency.

(C) Reason to know. For purposes of (A) and (B) above, in determining whether the requesting spouse had reason to know, the Service will consider the requesting spouse's level of education, any deceit or evasiveness of the nonrequesting spouse, the requesting spouse's degree of involvement in the activity generating the income tax liability, the requesting spouse's involvement in business and household financial matters, the requesting spouse's business or financial expertise, and any lavish or unusual expenditures compared with past spending levels.

(iv) Nonrequesting spouse's legal obligation. Whether the nonrequesting spouse has a legal obligation to pay the outstanding income tax liability pursuant to a divorce decree or agreement. This factor will not weigh in favor of relief if the requesting spouse knew or had reason to know, when entering into the divorce decree or agreement, that the nonrequesting spouse would not pay the income tax liability.

(v) Significant benefit. Whether the requesting spouse received significant benefit (beyond normal support) from the unpaid income tax liability or item giving rise to the deficiency. See Treas. Reg. §1.6015-2(d).

(vi) Compliance with income tax laws. Whether the requesting spouse has made a good faith effort to comply with income tax laws in the taxable years following the taxable year or years to which the request for relief relates. (b) Factors that, if present in a case, will weigh in favor of equitable relief, but will not weigh against equitable relief if not present in a case, include, but are not limited to, the following:

(i) Abuse. Whether the nonrequesting spouse abused the requesting spouse. The presence of abuse is a factor favoring relief. A history of abuse by the nonrequesting spouse may mitigate a requesting spouse's knowledge or reason to know.

(ii) Mental or physical health. Whether the requesting spouse was in poor mental or physical health on the date the requesting spouse signed the return or at the time the requesting spouse requested relief. The Service will consider the nature, extent, and duration of illness when weighing this factor.

.04 Refunds.

(1) Deficiency cases. In a case involving a deficiency, a requesting spouse is eligible for a refund of certain payments made pursuant to an installment agreement that the requesting spouse entered into with the Service, if the requesting spouse has not defaulted on the installment agreement. Only installment payments made after the date the requesting spouse filed the request for relief are eligible for refund. Additionally, the requesting spouse must establish that he or she provided the funds for which he or she seeks a refund. For purposes of this revenue procedure, a requesting spouse is not in default if the Service did not issue a notice of default to the requesting spouse or take any action to terminate the installment agreement.

(2) Underpayment cases. In a case involving an underpayment of income tax, a requesting spouse is eligible for a refund of separate payments that he or she made after July 22, 1998, if the requesting spouse establishes that he or she provided the funds used to make the payment for which he or she seeks a refund. A requesting spouse is not eligible for refunds of payments made with the joint return, joint payments, or payments that the nonrequesting spouse made.

(3) Other limitations. The availability of refunds is subject to the refund limitations of section 6511.



SECTION 5. PROCEDURE

A requesting spouse seeking equitable relief under section 66(c) or section 6015(f) must file Form 8857, Request for Innocent Spouse Relief (and Separation of Liability, and Equitable Relief), or other similar statement signed under penalties of perjury, within two years of the first collection activity against the requesting spouse. See Treas. Reg. §1.6015-5(b)(2)(i) for the definition of collection activity.



SECTION 6. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2000-15, 2000-1 C.B. 447, is superseded.



SECTION 7. EFFECTIVE DATE

This revenue procedure is effective for requests for relief filed on or after November 1, 2003. In addition, this revenue procedure is effective for requests for relief pending on November 1, 2003, for which no preliminary determination letter has been issued as of November 1, 2003.



DRAFTING INFORMATION

The principal author of this revenue procedure is Robin M. Tuczak of the Office of Associate Chief Counsel, Procedure and Administration (Administrative Provisions and Judicial Practice Division). For further information regarding this revenue procedure, contact Ms. Tuczak at (202) 622-4940 (not a toll-free call).

Rev. Proc. 2003-61, 2003-2 CB 296.

A widow was not entitled to innocent spouse relief from tax liens that attached to community property that had belonged to her and her late husband. Their deficiencies arose from joint returns on which the husband claimed false deductions. Thus, he was jointly and severally liable for the entire amount of the deficiencies, and state (California) law permitted a creditor to reach the entire community property in order to satisfy a debt owed by one spouse. Moreover, the government was not attempting to collect against the widow personally; it was merely pursuing liens that arose against her husband. Innocent spouse relief did not prevent the government from collecting against community property in accordance with state law.

H. Stolle, DC Calif., 2000-1 USTC ¶50,329.

An individual was eligible for equitable innocent spouse relief under Code Sec. 6015(f) in connection with her joint income tax liability that arose from her former husband's illegal drug income. The income was reported on the return for the year in question, which was prior to the enactment of Code Sec. 6015(f), but was only partially paid. In a case of first impression, the court ruled that the new innocent spouse provisions of Code Sec. 6015(f) applied retroactively to the entire liability basis, rather than to just the liability for the unpaid portion.

M. Flores, FedCl, 2002-1 USTC ¶50,108, 51 FedCl 49.

An individual who successfully sought equitable innocent spouse relief from joint liability for tax was entitled to a refund of her garnished wages and a tax overpayment that the IRS had applied to her unpaid tax liability for an earlier tax year. The IRS unsuccessfully contended that the benefits of Code Sec. 6015(g) were limited to the portion of the tax liability that remained uncollected as of July 22, 1998, the date of enactment of Code Sec. 6015 pursuant to the IRS Restructuring and Reform Act of 1998 (P.L. 105-206). Code Sec. 6015 applies to the full amount of any preexisting tax liability for a particular tax year if any of such liability remains unpaid as of the date of enactment. It is not limited to portions of tax liability that remain unpaid after July 22, 1998. M. Flores, FedCl, 2002-1 USTC ¶50,108, followed.

C.A. Washington, 120 TC 137, Dec. 55,120.

A bankrupt widow was not entitled to summary judgment with respect to her claim for innocent spouse relief from tax liabilities arising from joint returns that she had filed with her late husband. She failed to show that she satisfied the threshold elements for equitable relief that were listed in Notice 98-61, 1998-2 CB 758. Moreover, the parties disputed the extent to which she had been involved in her late husband's business affairs.

D.S. French, BC-DC Ohio, 2000-1 USTC ¶50,122, 242 BR 369.

The Tax Court had jurisdiction to determine whether a wife was entitled to equitable relief under Code Sec. 6015(f) even though no deficiency had been asserted. Although the amount of taxes owing was correctly indicated on the couple's joint return, the full amount owed was not paid. Relief was available under Code Sec. 6015(f), which applies where it is inequitable to hold a taxpayer liable for "any unpaid tax." The 2001 amendment (P.L. 106-554) to Code Sec. 6015(e) did not preclude Tax Court jurisdiction to review the denial of equitable relief under Code Sec. 6015(f) where no deficiency had been asserted.

G.A. Ewing, 118 TC 494, Dec. 54,766.

The estate of a wife who died while still married to, and living with, her husband was denied innocent spouse relief under Code Sec. 6015(f) from the deficiencies that arose when the IRS disallowed losses claimed on the couple's joint returns with respect to the husband's tax shelter investment. Applying the guidelines set forth in Rev. Proc. 2000-15, 2000-1 CB 447, the wife had reason to know of the items giving rise to the deficiencies and benefited from those items. In light of the fact that she was deceased, there could be no economic hardship to her personally upon the denial of equitable relief.

D.C. Jonson, 118 TC 106, Dec. 54,641. Aff'd on another issue, CA-10, 2004-1 USTC ¶50,122, 353 F3d 1181.

The Tax Court had jurisdiction to hear an argument, raised as an affirmative defense, regarding whether the wife of a deceased individual was entitled to relief from joint liability pursuant to Code Sec. 6015 when her deceased husband's estate petitioned to appeal the IRS's determination not to abate interest based upon an increase in taxes for three tax years. Although jurisdiction over the estate's suit was limited to determining whether the IRS's failure to abate interest was an abuse of discretion, the court followed its line of reasoning in U.R. Neely, Dec. 54,062 (dealing with the court's jurisdiction over issues raised as an affirmative defense), and held that no additional jurisdiction was required to address the issue of relief from joint liability.

E. Wenner Est., 116 TC 284, Dec. 54,335.

The IRS properly denied an individual's request for equitable innocent spouse relief with respect to retirement distributions and interest income that were omitted from her joint return, and the substantial understatement penalty imposed as the result of the omitted interest income. The taxpayer failed to show reasonable cause for the omissions. However, the IRS's denial of equitable relief in connection with the substantial understatement penalty imposed in connection with the retirement distributions was an abuse of discretion. The taxpayer reasonably relied on statements by her ex-husband that he consulted an accountant concerning the tax implication of the distributions.

K. Cheshire, CA-5, 2002-1 USTC ¶50,222, 282 F3d 326.

The Tax Court had jurisdiction to review the IRS's decision to deny a surgeon's wife equitable innocent spouse relief from deficiencies arising in connection with the couple's joint return. Her request for relief was not a decision that was committed to IRS discretion as a matter of law; instead, it constituted an affirmative defense that became part of the couple's deficiency proceeding. The wife was not, however, entitled to reopen the record in order to present additional evidence regarding her right to proportional relief under Code Sec. 6015(b)(2). The parties conceded that the issues under both statutes were largely identical, and she did not identify the evidence that she intended to offer or explain how it would support her claim for partial relief.

M.B. Butler, 114 TC 276, Dec. 53,869.

Followed.

D. Fernandez, 114 TC 324, Dec. 53,875 (Acq.).

F.L. Charlton, 114 TC 333, Dec. 53,879.

To the extent that an ex-wife failed to qualify for innocent spouse relief under Code Sec. 6015(b) or Code Sec. 6015(c), she was entitled to equitable relief pursuant to Code Sec. 6015(f). Not only did she not have actual knowledge of the items giving rise to the deficiencies but the record indicated that she would suffer economic hardship if relief was not grante. Further, it was clear that she did not significantly benefit, either during or after her marriage, from the items giving rise to the deficiencies.

J.A. Rowe, 82 TCM 1020, Dec. 54,582(M), TC Memo. 2001-325.

The IRS's concession under Code Sec. 6015(c) that the wife of an individual who had been convicted of tax evasion and drug trafficking was entitled to innocent spouse relief for one tax year relieved her of all liability for that year and resolved the controversy between her and the IRS. However, she sought an additional ruling regarding her entitlement to relief under Code Sec. 6015(b) because it might enhance her future efforts to recover attorneys' fees. The court refused to make that determination on the ground of mootness; such a decision would amount to an advisory opinion and would contravene the principle that courts are not to gratuitously decide complex issues that would not affect the disposition of the case.

T.R. Livingston, Sr., 79 TCM 1828, Dec. 53,837(M), TC Memo. 2000-121.

The Tax Court had jurisdiction over a married taxpayer's timely "stand alone"petition for spousal relief under Code Sec. 6015. The IRS treated the request for relief as an election under Code Secs. 6015(b), 6015(c) and 6015(f).

R.E. Alt, 119 TC 306, Dec. 54,961. Aff'd, CA-6 (unpublished opinion), 2004-1 USTC ¶50,279.

The IRS abused its discretion in denying equitable innocent spouse relief under Code Sec. 6015(f) to an individual who suffered from mental illness during the tax years at issue. The taxpayer had a limited education, was completely dependent upon her husband in regard to the filing of their tax returns and the payment of their taxes, and had no knowledge or reason to know that the income taxes would not be paid at the time she signed her return. Moreover, the taxpayer would have suffered economic hardship if equitable relief were not granted.

T.J. August 84 TCM 183, Dec. 54,841(M), TC Memo. 2002-201.

A divorced individual was not entitled to equitable innocent spouse relief under Code Sec. 6015(f) in connection with his wife's unreported pension income. The taxpayer did not establish that he would suffer economic hardship if he were held liable for all or part of the unpaid deficiency. Additionally, he received significant benefit from his wife's pension distributions. Therefore, the IRS had not abused its discretion in denying such relief or in asserting the substantial understatement component of the accuracy-related penalty.

C.A. Penfield, 84 TCM 424, Dec. 54,900(M), TC Memo. 2002-254.

A taxpayer was not entitled to relief under Code Secs. 6015(b), (c) or (f) because she failed to file a joint return for the year at issue. Code Secs. 6015(b) and (c) explicitly require that a joint return for relief to be granted. Moreover, while on its face, Code Sec. 6015(f) does not require the a joint return be filed in order for equitable relief to be granted, a threshold condition of Rev. Proc. 2000-15, 2000-1 C.B. 447, which the IRS uses to determine the availability of equitable relief, dictates that a joint return must be filed.

R.M. Raymond, 119 TC 191, Dec. 54,915.

A taxpayer failed to establish that the IRS abused its discretion in denying innocent spouse relief under Code Sec. 6015(f) by acting arbitrarily, capriciously or without sound basis in fact. Applying the guidelines set forth in Rev. Proc. 2000-15, 2000-1 CB 447, the Tax Court concluded that the taxpayer failed to carry her burden of establishing that if she were to pay the unpaid liability, she would not have a reasonable amount remaining for her basic living expenses. Moreover, the taxpayer failed to carry her burden of establishing that, other than the attribution factor, the positive factors set forth in the revenue procedure that must be considered were present in her situation or that, other than the noncompliance negative factor, the negative factors that must be considered were not present.

E.C. Mellen, 84 TCM 530, Dec. 54,931(M), TC Memo. 2002-280.

An individual was not barred by the doctrine of res judicata under Code Sec. 6015(g)(2) from litigating her entitlement to equitable relief from joint and several liability under the innocent spouse provisions of Code Sec. 6015(f)(2). In a prior Tax Court proceeding that resulted in a final determination regarding the tax year at issue, the taxpayer was precluded from raising her claim for relief from joint and several liability based on uncertainty of law. Her meeting with the Appeals officer occurred around the same time that Congress finalized Code Sec. 6015 and at least 10 days prior to its effective date. Although the Tax Court decision was entered several months later, neither the taxpayer nor the Appeals officer with whom she negotiated a settlement were aware of the new relief provisions, and the effect of res judicata on a final Tax Court decision regarding her deficiency was not discussed.

J.M. Trent, 84 TCM 554, Dec. 54,938(M), TC Memo. 2002-285.

The IRS properly denied an individual's request for innocent spouse relief with respect to delinquent taxes on her former husband's unreported earnings. The taxpayer was aware that her ex-husband had received compensation for his work driving rental trucks, but she did not report any income from that employer on the joint return that she prepared. The taxpayer was not entitled to equitable innocent spouse relief with respect to the deficiency because she knew of the omitted income, failed to establish economic hardship and failed to establish that she had not benefited from the additional income.

L.L. Brooks, 85 TCM 1465, Dec. 55,181(M), TC Memo. 2003-166.

A lawyer was not entitled to equitable innocent spouse relief from joint and several liability for tax deficiencies with respect to joint returns he filed with his former wife because he had constructive knowledge of the deficiencies. Further, because he made out a check for only a small portion of the tax shown due on the return for the subsequent year, he had actual knowledge that the liability was not paid. Moreover, the taxpayer did not show that he would suffer economic hardship if relief was denied.

M.S. Feldman, 86 TCM 50, Dec. 55,220(M), TC Memo. 2003-201.

A divorced individual was not entitled to innocent spouse relief under Code Sec. 6015(f) from her joint tax liability that was reported on separate returns. The taxpayer was aware of the joint tax liability, which resulted from her former husband's retirement plan distributions that were deposited into her daughter's bank account.

C.E. Weight, 86 TCM 98, Dec. 55,234(M), TC Memo. 2003-214.

An individual was not entitled to spousal relief under Code Sec. 6015(f) for an understatement of income resulting from deductions claimed in connection with the repair of her home. Additionally, the taxpayer was not entitled to spousal relief in connection with two additional tax years under Code Sec. 6015(b), (c) or (f) because such relief does not apply to underpayments of tax reported on joint tax returns.

M. Hopkins, 121 TC 73, Dec. 55,243.

A divorced individual was not entitled to innocent spouse relief for deficiencies resulting from an understatement of gross receipts for three restaurants owned by her husband. Relief was not available under Code Sec. 6015(f) because the taxpayer knew of the unreported gross receipts, failed to establish that she would suffer economic hardship if relief were denied, benefitted significantly from the unreported income and had a legal obligation under her divorce decree to pay half of the couple's tax liability.

F. Entezam, 86 TCM 320, Dec. 55,276(M), TC Memo. 2003-253.

A lending officer was not entitled to innocent spouse relief under to protect her from a tax understatement resulting from the couple's failure to include her husband's early pension withdrawals in income on their joint return. Because the couple's legal separation was motivated by tax-avoidance reasons, the assets transferred as part of the separation agreement were deemed "disqualified assets." As such, the taxpayer did not qualify for equitable relief from her joint and several liability because she failed to meet the seven threshold conditions of Rev. Proc. 2000-15, 2000-1 CB 447.

R.G. Ohrman, 86 TCM 499, Dec. 55,332(M), TC Memo. 2003-301. Aff'd, CA-9 (unpublished opinion), 2006-1 USTC ¶50,128, 157 FedAppx 997.

A widow was not entitled to innocent spouse relief under Code Secs. 6015(b), 6015(c) and 6015(f) from joint and several tax liability. The tax liability at issue was generated solely from the taxpayer's income. Moreover, there was no understatement nor any erroneous items from her deceased spouse. The taxpayer's deceased husband, who initially filed a separate return during the tax year at issue, filed an amended joint return to report the income of the taxpayer. The Tax Court rejected the taxpayer's argument that she was entitled to equitable relief because she was unemployed at the time the amended return was filed.

B. Wallace, 86 TCM 667, Dec. 55,364(M), TC Memo. 2003-330.

The Tax Court had jurisdiction to address an argument regarding whether an individual was entitled to relief from joint liability pursuant to Code Sec. 6015. The taxpayer originally petitioned the court for review of the IRS's determination not to abate interest under Code Sec. 6404. She then amended her pleading to include a claim for relief from joint and several liability. Because the taxpayer's appeal had been pending for more than six months without a final determination by the IRS, which satisfied Code Sec. 6015(e)(1)(a)(II), she was entitled to separately petition the court under that section.

L. Sirianni, 86 TCM 690, Dec. 55,371(M), TC Memo. 2003-336.

The Tax Court did not have jurisdiction to review an individual's equitable innocent spouse claim because the IRS had not asserted a deficiency against her. The plain language of Code Sec. 6015(e) permits Tax Court jurisdiction only if a deficiency has been asserted against the individual claiming relief.

G.A. Ewing, CA-9, 2006-1 USTC ¶50,191, 439 F3d 1009, rev'g and vac'g 122 TC 32, Dec. 55,519.

An individual taxpayer was not entitled to relief from joint and several liability from understatements reported on joint returns filed with her ex-husband. Because the tax reported on her amended returns was treated as the amount of tax reported on her original return, no deficiency was outstanding in the years for which the taxpayer sought relief. Moreover, even if the taxpayer claimed relief for the correct year, the court noted that she failed to satisfy the requirements of Code Secs. 6015(b) and 6015(c). Finally, the IRS did not abuse its discretion in denying the taxpayer relief from liability under Code Sec. 6015(f). Upon filing her first amended return, the taxpayer failed to ask her ex-husband how her income was reported. As such, she failed to fulfill her duty of inquiry, and was thus charged with constructive knowledge of her income on the first amended return.

L. Demirjian, 87 TCM 841, Dec. 55,524(M), TC Memo. 2004-22.

An individual was not entitled to innocent spouse relief under Code Sec. 6015(f) because the taxpayer knew of the understatement on her joint return and failed to establish that she would suffer economic hardship if relief were denied.

V. Doyel, 87 TCM 960, Dec. 55,540(M), TC Memo. 2004-35.

The IRS did not abuse its discretion in denying equitable innocent spouse relief to a wife who knew that her husband had a pattern of not paying the tax liabilities reported on their joint returns. By signing the returns, the wife assumed the risk that she would be called upon to pay the remaining joint liabilities, which were attributable to the husband's business activities, if the IRS sought to collect the funds from her. She failed to comply with the tax laws by continuing to help prepare, sign, and file tax returns without paying the reported liabilities on those returns.

A.C. Ogonoski, 87 TCM 1038, Dec. 55,561(M), TC Memo. 2004-52.

An individual was entitled to innocent spouse relief under Code Sec. 6015(f), relieving her of joint and several liability for delinquent taxes owed by her and her former spouse in six tax years. The revenue agent abused his discretion in denying the taxpayer relief because the taxpayer satisfied most of the factors set forth in Rev. Proc. 2004-15, 2004-1 CB 490. The overdue taxes resulted from the former spouse's failure to withhold an adequate amount of taxes. Had the taxpayer filed as single, her withholding would have exceeded her tax liability. The IRS conceded that the taxpayer would suffer undue hardship if relief was not granted and that the taxpayer did not significantly benefit from the unpaid taxes. Moreover, the taxpayer made a good faith effort to comply with the income tax laws following the years in issue.

J.T. Foor, 87 TCM 1046, Dec. 55,563(M), TC Memo. 2004-54.

A married individual was not entitled to innocent spouse relief under Code Secs. 6015(b) or (f). The taxpayer was not entitled to equitable relief because she failed to satisfy any of the six factors set forth in Rev. Proc. 2000-15, 2000-1 CB 447. The taxpayer knew of the items giving rise to the understatements, which were attributable to both her and her husband. In addition, the taxpayer failed to establish that she would suffer economic hardship if held liable for the delinquent tax.

P.J. Ellison, 87 TCM 1062, Dec. 55,567(M), TC Memo. 2004-57.

The IRS abused its discretion in denying equitable innocent spouse relief to a taxpayer who was unaware that her husband had failed to pay their taxes for one year. The wife did not significantly benefit from the tax underpayment; the deficiency was solely attributable to the husband; the wife complied with the tax laws for all of the years following the one at issue; and she lacked knowledge of the underpayment.

D.M. Keitz, 87 TCM 1118, Dec. 55,585(M), TC Memo. 2004-74.

A taxpayer was not entitled to equitable relief because she failed to satisfy any of the six factors set forth in Rev. Proc. 2000-15, 2000-1 CB 447. The taxpayer knew of the items giving rise to the understatements, which were attributable to both her and her husband. Finally, the taxpayer failed to establish that she would suffer economic hardship if held liable for the delinquent tax.

A.E. Bartak, 87 TCM 1152, Dec. 55,596(M), TC Memo. 2004-83. Aff'd, CA-9 (unpublished opinion), 2006-1 USTC ¶50,111, 158 FedAppx 43.

A widower was entitled to innocent spouse relief pursuant to Code Sec. 6015(f), allowing for a refund of taxes. Because the taxpayer satisfied a majority of the requirements in Rev. Proc. , 2000-1 CB 447, she was eligible for relief despite the fact that she paid the tax attributable to her deceased husband. Moreover, the taxpayer established that she did not have knowledge of, or benefit from, the unreported income.

C. Rosenthal, 87 TCM 1183, Dec. 55,603(M), TC Memo. 2004-89.

A teacher was not entitled to innocent spouse relief. Her request for equitable relief from underpayments from two tax years was evaluated using the factors in Rev. Proc. 2000-15, 2000-1 CB 447. Only two factors weighed in favor of relief: the taxpayer was divorced and her divorce settlement allocated the liabilities to her former husband. For three additional tax years, the IRS had already granted her request for separate liability relief, which relieved her of tax liabilities attributable to her ex-husband's tax items. She was not entitled to additional relief because she failed to show that she did not know or have reason to know of the understatements on the returns, especially in light of her advanced education and her representation by an attorney and an accountant when she filed her delinquent returns. For the last tax year at issue, relief was denied because she and her husband had filed separate returns, and their subsequent attempt to file an amended joint return was untimely.

A. Barriga, 87 TCM 1236, Dec. 55,617(M), TC Memo. 2004-102.

The IRS did not abuse its discretion in denying equitable innocent spouse relief to a taxpayer who had reason to know that her former husband would not pay the tax liabilities reported on their joint returns when she signed those returns. At the times she signed the returns, she and her former husband were plagued by financial difficulties and were in danger of losing their home in foreclosure. Furthermore, the taxpayer had lesser amounts of tax withheld from her wages than the amount that would become due on her portion of the joint income. The Tax Court applied the guidelines set forth in Rev. Proc. 2000-15, 2000-1 CB 447, and concluded that the factors weighing against granting relief outweighed those factors weighing in favor of relief.

A.L. Morello, 88 TCM 112, Dec. 55,713(M), TC Memo. 2004-181.

The IRS's decision to deny a wife Code Sec. 6015(f) relief from joint and several liability was not an abuse of discretion. She knew when the joint return was filed that she had an obligation to pay the joint liability and that some of her assets would be used to pay it. The fact that the IRS applied her subsequent year's refund to the tax liability instead of waiting for the bankruptcy court to satisfy the liability with her individual retirement account was not sufficient to qualify her for relief.

N.M. O'Neill, 88 TCM 118, Dec. 55,717(M), TC Memo. 2004-183.

The IRS's decision to deny a former spouse relief from joint and several liability was not an abuse of discretion. The taxpayer failed to present any evidence with regard to the Rev. Proc. 2000-15, sec. 4.03, threshold factors that are weighed in determining whether equitable relief should be granted.

M.A. Durham, 88 TCM 120, Dec. 55,718(M), TC Memo. 2004-184.

Applying the guidelines contained in Rev. Proc. 2000-15, 2000-1 CB 447, the court held that the taxpayer failed to carry her burden of proof in a number of areas, including the showing of economic hardship and that she did not know, and had no reason to know that the tax liability would not be paid.

M. Monsour, 88 TCM 144, Dec. 55,726(M), TC Memo. 2004-190.

The IRS did not abuse its discretion by denying innocent spouse relief under Code Sec. 6015(f) to a divorced taxpayer who sought relief from additions to tax and interest with respect to the tax liabilities reported on the joint income tax returns for the tax years at issue. The Tax Court applied the guidelines set forth in Rev. Proc. 2000-15, 2000-1 CB 447, and determined that the factors weighing against granting relief outweighed those in favor of relief.

D.H. Knorr, 88 TCM 1288, Dec. 55,752(M), TC Memo. 2004-212.

The IRS abused its discretion in denying a taxpayer's request for equitable relief as an innocent spouse under Code Sec. 6015(f). The IRS argued that under section 5 of Rev. Proc. 2000-15 the taxpayer had to make her request for equitable relief within two years of the first collection activity. Yet in notifying the taxpayer of the first collection activity --withholding a refund to offset the unpaid joint liability --the IRS failed to notify the taxpayer of her innocent spouse rights, contrary to section 3501 of the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206). The IRS asserted that for purposes of the limitations period in the revenue procedure, the offset was a collection activity; but for purposes of its obligation to inform the taxpayer of her rights, the notice of offset was not a collection-related notice. The court, however, viewed the IRS's position as incongruous and ruled that notice of the offset was a collection-related notice and that the IRS should have informed the taxpayer of her rights under Code Sec. 6015. Because the IRS failed to do so, the offset did not commence the two-year period, and the IRS's contrary interpretation of Rev. Proc. 2000-15, 2000-1 CB 447, was an abuse of discretion.

N.W. McGee, 123 TC 314, Dec. 55,781.

The IRS did not abuse its discretion by denying innocent spouse relief under Code Sec. 6015(f) to a widowed taxpayer who sought relief from joint and several liability. While the taxpayer satisfied the seven threshold conditions of Rev. Proc. 2000-15, 2000-1 CB 447 for the IRS to consider equitable relief, she knew or had reason to know that the liabilities would not be paid because her husband was deceased at the time she signed the tax returns.

M.A. George, 88 TCM 456, Dec. 55,804(M), TC Memo. 2004-261.

A divorced taxpayer was not entitled to relief under Code Sec. 6015(f) because, given the taxpayer's status as an investor, it would not be inequitable to hold her liable for the deficiency.

D.J. Barnes, 88 TCM 479, Dec. 55,809(M), TC Memo. 2004-266.

A widow was not entitled to Code Sec. 6015(f) equitable relief from joint and several liability for liabilities incurred with respect to a tax shelter. The erroneous items that gave rise to the understatement of tax were attributable both to her and to her husband because she played a substantial role in managing the family's investments. Although she claimed to be concerned about the large deductions on the couple's tax returns, she made no inquiry to verify the accuracy of those items. Further, the individual's husband did not abuse or mislead her and she received a significant benefit from the understatement in the form of erroneous tax refunds. There was no evidence that she would suffer economic hardship if she were held liable for the deficiencies.

I. Capehart, 88 TCM 492, Dec. 55,811(M), TC Memo. 2004-268. Aff'd, CA-9 (unpublished opinion), 2007-1 USTC ¶50,149, 204 FedAppx 618.

An individual was denied equitable innocent spouse relief for deficiencies resulting from the failure to report five items of income, three of which were his spouse's compensation from different employers. The individual did not qualify for innocent spouse relief under Code Sec. 6015(b), (c) or (f) because he had actual knowledge of his spouse's work for the three employers, and there was no concealment creating an inequity against the individual.

T.R. Becherer, 88 TCM 617, Dec. 55,827(M), TC Memo. 2004-282.

The IRS abused its discretion in denying an individual equitable innocent spouse relief. The request for relief was filed more than two years after the IRS began to apply the taxpayer's overpayments spanning seven years to tax underpayments that arose during her marriage. The IRS notified the taxpayer of the offsets, but failed to inform the taxpayer that she might be eligible for relief under Code Sec. 6015 until more than three years after the first offset, contrary to section 3501(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206). Following N.W. McGee, (123 TC 314, Dec. 55,781), the notice of offset was a collection-related activity that triggered the IRS's obligation to notify the taxpayer of her rights. The IRS, therefore, could not summarily reject the taxpayer's request based solely on its timeliness. Relief could not be granted under Code Secs. 6015(b) or (c) because no deficiency existed.

K. Nelson, 89 TCM 685, Dec. 55,910(M), TC Memo. 2005-9.

An individual who had knowledge of her husband's gambling activities, which gave rise to tax deficiencies, was entitled to innocent spouse relief on equitable grounds. The factors weighing in favor of the relief included: (1) the taxpayer's divorce, (2) the fact that she would face economic hardship if relief were not granted, (2) the divorce decree stated that her former husband was responsible for the income tax liability, (3) the entire deficiency was attributable to him, (4) the taxpayer was current with all of her Federal tax obligations and (5) the existence of abuse.

S.K. Baumann, 89 TCM 790, Dec. 55,935(M), TC Memo. 2005-31.

A divorced individual failed to establish that the IRS abused its discretion in denying innocent spouse relief under Code Sec. 6015(f) by acting arbitrarily, capriciously or without sound basis in fact. The individual filed joint returns with her husband for a period of four years, knew that each return showed tax due resulting from underwithholding attributable to both of them, and at all times had access to the joint bank account from which the taxes were to be paid. She failed to carry her burden of proving that she had no knowledge of or reason to know that the taxes would not be paid by her husband, as he had stated. In fact, the individual filed the last joint return with her husband after the IRS had levied on their joint bank account for unpaid tax liabilities. Therefore, she clearly had actual knowledge that taxes remained unpaid when the fourth return was jointly filed. By applying the guidelines set forth in Rev. Proc. 2000-15, 2000-1 CB 447, the Tax Court concluded that the individual failed to establish economic hardship and the knowledge or reason to know factor weighed heavily against granting relief.

Y.C. Lopez, 89 TCM 810, Dec. 55,941(M).

An individual who received over $1 million in constructive dividends that she failed to report on her tax return was not entitled to relief from joint and several liability under Code Sec. 6015. The taxpayer did not qualify for full or apportioned relief because (1) the understatement was attributable to her, and (2) she knew of the understatement when she filed the return. Moreover, the taxpayer was not entitled to equitable relief because the taxpayer filed the joint tax return for the year at issue with fraudulent intent. Therefore, the taxpayer failed to qualify for equitable relief under Rev. Proc. 2003-61, 2003-2 CB 296.

L. Bussell, 89 TCM 1032, Dec. 55,987(M), TC Memo. 2005-77.

The IRS abused its discretion when it denied a divorced individual equitable innocent spouse relief for several tax years. The taxpayer did not know or have reason to know, at the time she signed the tax returns, that her ex-husband would not pay the tax liabilities. In fact, her ex-husband concealed his nonpayment of the tax liabilities and his serious gambling problem from her for many years. Moreover, those liabilities were solely attributable to the ex-husband and the couple were separated at the time she filed her request for innocent spouse relief. Further, the ex-husband had the legal obligation to pay the liabilities according to the couple's marital settlement agreement.

J.P. Levy, 89 TCM 1101, Dec. 56,004(M), TC Memo. 2005-92.

An individual was entitled to innocent spouse relief pursuant to Code Sec. 6015(f) because she satisfied a majority of the requirements in Rev. Proc. 2000-15, 2000-1 CB 447. The individual's spouse failed to have any taxes withheld on his earnings, made no estimated tax payments, did not pay the balance due on the returns at issue and concealed the nonpayment. The individual had no reason to know that her spouse failed to pay the balance due on the returns. The Tax Court held that it was reasonable and credible for the individual to believe her spouse's assertions that the tax deficiencies resulted from denial of tax shelter deductions.

R.E. Neal, 90 TCM 161, Dec. 56,124(M), TC Memo. 2005-201.

The IRS did not abuse its discretion in denying a taxpayer equitable innocent spouse relief. She failed to carry her burden of establishing any factors to weigh in favor of granting relief under Code Sec. 6015(f) and Rev. Proc. 2000-15, 2000-1 CB 447. Although she claimed that she was "hurried" when she signed the return, because she signed the return, she was held to have had constructive knowledge of the tax shown due on the return, and she should have inquired about whether the tax shown was paid. The amount of the tax shown due was large enough to put her on notice that further inquiry should have been made.

E. Simon, 90 TCM 302, Dec. 56,146(M), TC Memo. 2005-220.

An IRS Appeals officer's rejection of a spouse's request for equitable relief under Code Sec. 6015(f) did not constitute an abuse of discretion because all of the seven threshold conditions set forth in Rev. Proc. 2000-15, 2000-1 CB 447, were not satisfied. The nonrequesting husband added his wife's name on the deed of his house and transferred a boat and a car to her shortly after their tax liabilities arose and the IRS's notice of levy was received. Because the couple did not provide any logical or substantial reason for the transfer, the Appeals officer correctly concluded that the transfer had a tax-avoidance purpose and constituted a transfer of disqualified assets. In addition, the evidence showed that, at the time the requesting spouse signed the returns, she should have known that the tax for the years in question would not be paid.

D. Etkin, 90 TCM 417, Dec. 56,174(M), TC Memo. 2005-245.

Although her ex-husband may have forged her signature on a joint return, the taxpayer was not entitled to equitable innocent spouse relief. A joint return can be valid, even if signed only by one spouse, as long as both spouses intended to file jointly and the taxpayer knew or should have known about the unpaid tax liability as she had earned income for the year at issue, but failed to make estimated payments.

D.A. Magee, 90 TCM 489, Dec. 56,193(M), TC Memo. 2005-263.

The IRS did not abuse its discretion in determining that a woman was not an innocent spouse entitled to equitable relief from joint and several liability for taxes reported on a joint return but not paid. The Tax Court found that the woman met the threshold conditions for equitable relief under Section 4.02 of Rev. Proc. 2000-15, 2000-1 CB 447, but relief was not available under that section because the couple had lived together for part of the 12-month period preceding the request for relief, the woman had reason to know that the reported liability would not be paid, and she provided no evidence regarding her financial status to support her claim of economic hardship. Consideration of the factors weighing for or against equitable relief under section 4.03 of Rev. Proc. 2000-15, 2000-1 CB 447, uncovered no reason to suggest that the IRS's finding was an abuse of discretion.

P.J. Merendino, 91 TCM 646, Dec. 56,403(M), TC Memo. 2006-2.

Similarly.

J.A. Madden, 91 TCM 652, Dec. 56,405(M), TC Memo. 2006-4.

The ex-wife of a convicted drug trafficker was not entitled to innocent spouse relief in excess of the abatement of fraud penalties and related interest granted by the IRS in a notice of determination; Tax Court affirmed. The notice stated that relief was granted under "§ 6015(b)." The IRS had no authority under Code Sec. 6015(b) to grant partial relief that did not include the tax understatement, but did have authority under Code Sec. 6015(f) to grant equitable relief limited to the fraud penalty and interest. The reference to "§ 6015(b)" in the notice was not dispositive and did not prejudice the taxpayer.

N. Aranda, CA-10, 2006-1 USTC ¶50,136, 432 F3d 1140.

The IRS did not abuse its discretion when it denied a taxpayer innocent spouse relief under Code Sec. 6015(f). The taxpayer failed the safe harbor and the balancing tests set forth in Rev. Proc. 2000-15, 2000-1 CB 447, because a preponderance of the factors enumerated in that procedure weighed against relief. The taxpayer had reason to know or actually knew at the time he signed the joint returns that the tax liabilities would not be paid. In addition, the taxpayer would not suffer economic hardship if the relief were not granted because he had many assets that he could sell without undue hardship. The taxpayer also failed to show that he received no significant benefit from the tax underpayment. Finally, at least part of the tax liabilities were attributable to the taxpayer's income-producing activities.

M.R. Motsko, 91 TCM 711, Dec. 56,423(M), TC Memo. 2006-17.

The IRS did not abuse its discretion when it denied a taxpayer innocent spouse relief under Code Sec. 6015(f). The liability was due the improper reporting of a distribution from the taxpayer's husband's Code Sec. 401(k) plan prior to the couple's divorce. The taxpayer was not entitled to equitable relief under Code Sec. 6015(f) and the guidelines of Rev. Proc. 2003-61, 2003-2 CB 298, because she had knowledge of the item giving rise to the deficiency and failed to comply with tax laws in subsequent years, factors that outweighed the facts that she and her husband were divorced and that she suffered abuse.

T.J. Fox, 91 TCM 731, Dec. 56,428(M), TC Memo. 2006-22.

It was not equitable to hold a spouse, who had limited involvement in the family's finances, jointly and severally liable with respect to a tax deficiency attributable to her husband's participation in a sham straddle transaction because she did not benefit from the transaction and, given her assets and limited number of years remaining in the work force, imposing the tax liability on her would result in a severe economic hardship.

P.E. Campbell, 91 TCM 735, Dec. 56,430(M), TC Memo. 2006-24.

The IRS's denial of equitable innocent spouse relief to a requesting ex-spouse was not an abuse of discretion. The requesting spouse failed to prove that denial of such relief would subject her to economic hardship.

J.H. Krasner, 91 TCM 765, Dec. 56,437(M), TC Memo. 2006-31.

The Tax Court properly found that it lacked jurisdiction to review the IRS's denial of an innocent spouse's refund claim for one tax year because no deficiency notice had been issued for that year. However, the Tax Court improperly decided that the taxpayer's refund request for another tax year was time-barred. The Tax Court lacked jurisdiction to make that determination because no deficiency notice had been issued for that year either.

T.E. Bartman, CA-8, 2006-1 USTC ¶50,298, aff'g in part and rev'g in part 87 TCM 1213, Dec. 55,608(M), TC Memo. 2004-93.

An individual was not entitled to additional innocent spouse relief from joint liability for income taxes, related penalty, additions to tax, and interest. She was not entitled to relief under Code Sec. 6015(b) because she had knowledge of interest on the home mortgages and of the various business activities of her former husband's sales business. The IRS correctly concluded that she qualified generally for relief under Code Sec. 6015(c). However, the court held that she qualified for relief with regard to the entire deficiency, not just 50 percent thereof, because the entire deficiency was attributable to her husband. The IRS incorrectly rejected her request for Code Sec. 6015(f) equitable relief as to half the income tax underpayment nominally attributable to her. The IRS abused its discretion in not granting her relief for the entire amount, and not half, of the balance of the tax underpayment and the related penalty, additions to tax, and interest. The severity of the spousal abuse she suffered during her marriage strongly favored granting her relief.

C. McKnight, 92 TCM 76, Dec. 56,576(M), TC Memo. 2006-155.

A 69-year-old research scientist was entitled to innocent spouse relief from deficiencies that resulted from her husband's investment in a tax shelter partnership. The taxpayer would have suffered economic hardship; therefore, it would have been inequitable to deny her innocent spouse relief.

H.M. Korchak, 92 TCM 199,Dec. 56,609(M), TC Memo. 2006-185.

The IRS abused its discretion in denying a divorced taxpayer innocent spouse relief under Code Sec. 6015(f); based on an application of the factors set forth in Rev. Proc. 2000-15, 2001 CB 447 (which, although superseded, applied to the IRS's determination), to hold her liable would be inequitable. All of the factors either favored the taxpayer or were neutral. The taxpayer was divorced when she sought relief and she did not significantly benefit from her former husband's underpayment of tax. Also, she would suffer economic hardship if the relief were not granted in that she had a reasonable need to retain her modest retirement account. Further, she did not know or have reason to believe that the tax at issue would not be paid. Her husband intentionally mislead her into thinking he was fulfilling their tax obligations. Also, the underpaid tax was solely attributable to her former husband. His agreement in their property settlement to pay community debt, including the taxes at issue, also favored her. Finally, the taxpayer did not participate in any wrongdoing.

D. Van Arsdalen, 93 TCM 953, Dec. 56,852(M), TC Memo. 2007-48.

The IRS abused its discretion in denying a divorced taxpayer innocent spouse relief under Code Sec. 6015(f) based on an application the factors set forth in Rev. Proc. 2000-15, 2001 CB 447 (which, although superseded by Rev. Proc. 2003-61, 2003 C.B. 296, was still applicable in this case). All of the factors either favored the taxpayer or were neutral. The taxpayer participated as a helper in her ex-husband's business, signed their joint income tax returns, and admitted that she knew their tax liabilities would not be paid. However, her ex-husband controlled the receipts from the business, she had no access to the money and she had no or little influence over the use of those funds. Thus, her knowledge that the taxes would not be paid was not fatal to her request for relief. Further, the taxpayer's debts far exceeded the value of her assets and her current income was below her expenses. The fact that she had remarried was not enough to show that she would not suffer economic hardship if she had to pay the taxes, especially since she received no support from her current husband.

L.D. Farmer, 93 TCM 1052, Dec. 56,881(M), TC Memo. 2007-74.

The IRS did not abuse its discretion in denying a taxpayer innocent spouse relief under Code Sec. 6015(f). Although all of the tax liability was attributable to her husband's business activities, the taxpayer had received significant benefit from the underpayment; she knew, or had reason to know the liability would be unpaid; and she failed to produce any evidence of economic hardship should she be held jointly liable for the unpaid taxes.

B. Ware, 93 TCM 1196, Dec. 56,924(M), TC Memo. 2007-112.

There was no abuse of discretion in the IRS's denial of equitable innocent spouse to a widow who failed to establish that the taxes at issue would be paid within a reasonable period of time and that she would suffer economic hardship if innocent spouse relief was denied. The widow alleged that at the time she signed the tax returns she believed the taxes would be paid from her husband's bankruptcy estate, from his pension funds, or from future earnings derived from her husband's return to work. Her hope that payment would eventually be made based on various contingencies was not reasonable. Furthermore, financial information submitted to the IRS Appeals officer showed excess monthly income over expenses of almost $3,000 and her court testimony, although providing generalized approximations of an updated and different financial picture, was not substantiated by any supporting documentation. Finally, the widow's shortcomings with regard to income tax delinquencies in subsequent years failed to show good faith efforts on her part.

D.A. Banderas, 93 TCM 1247, Dec. 56,943(M), TC Memo. 2007-129.

A married taxpayer was not eligible for equitable innocent spouse relief under Code Sec. 6015(f). Although the taxpayer met the threshold requirements for equitable relief, she failed to meet the conditions set out in Rev. Proc. 2000-15, 2000-1 CB 447, because she was still married to the nonrequesting spouse at the time relief was requested, she was not abused, she knew or had reason to know that the liability reported on the returns would not be paid, she was not in compliance with federal tax laws and she failed to verify that she would suffer economic hardship if relief was not granted.

T.G. Butner, 93 TCM 1290, Dec. 56,952(M), TC Memo. 2007-136.

The IRS abused its discretion in denying an individual equitable relief from joint and several liability under Code Sec. 6015(f). Most of the factors in section 4.03 of Rev. Proc. 2003-61, 2003-2 CB 296, either favored granting her relief or were of neutral impact. Although the taxpayer had constructive knowledge of the taxes due because she signed the returns, the liabilities reported on those returns were solely attributable to her husband's businesses. Further, she derived no significant benefit from the failure to pay the tax liabilities for the years at issue and she would suffer even greater economic hardship than already existed if forced to pay the outstanding tax liability.

C.K. Beatty, 93 TCM 1422, Dec. 56,984(M), TC Memo. 2007-167.

A former wife was denied innocent spouse relief with regard to tax liability related to a disallowed charitable contribution deduction because she was aware at the time the couple signed their joint return that a charitable contribution claimed on the return had not been made. She did not qualify for equitable relief under Code Sec. 6015(f) because, since no contribution was made by either spouse, the tax liability was attributable to both her and the former husband.

C.R. Schwendeman, Dec. 57,047(M), TC Memo. 2007-227.

The IRS abused its discretion in denying innocent spouse relief based on the factors set forth in Rev. Proc. 2000-15, 2001 CB 447. The IRS acted arbitrarily in using the taxpayer's knowledge at the time he signed the amended return. The husband did not significantly benefit from the embezzlement income or from not paying the taxes on that income, where the income was not significant to their life, and the husband did not have the unpaid tax money available for his personal use. The fact that the husband lacked economic hardship was not enough to justify denying relief. The parties agreed on the other factors set forth in the revenue procedure.

D.B. Billings, Dec. 57,056(M), TC Memo. 2007-234.

A former spouse was denied equitable relief for one tax year at issue, but was granted relief for the second tax year. The IRS did not abuse its discretion in denying her innocent spouse relief for the first tax year at issue because she knew of the distribution, failed to establish economic hardship, benefitted from the distribution, and, therefore, failed to act with reasonable cause and good faith in the filing of the return for that tax year. With respect to the second tax year at issue, however, the IRS abused its discretion in denying equitable relief to the individual because most of the factors in section 4.03 of Rev. Proc. 2003-61, 2003-2 CB 296, favored granting her relief, in that: the individual was divorced from her husband who had abused her throughout the marriage; she derived no significant benefit from the distribution from his IRA during that tax year; she did not sign the return; and was not aware of a tax liability until she began filing her own individual returns.

S.K. Dowell, Dec. 57,157(M), TC Memo. 2007-326.

The taxpayer was not eligible for equitable relief from liability. It was not reasonable for petitioner to rely on her husband to pay the tax, given her knowledge of their financial history. Nor did she show that she would suffer economic hardship if the relief was not granted. Several of the factors listed in section 4.03 of Rev. Proc. 2003-61 weighed against the granting of equitable relief. In particular, the court noted that no showing of hardship had been made, the taxpayer had knowledge of the items leading to the deficiency, and the divorce decree did not relieve the taxpayer of liability for the couple's taxes.

S.L. Gonce, Dec. 57,161(M), TC Memo. 2007-328.

A husband was not entitled to innocent spouse relief from income tax liabilities, interest and penalties assessed against the couple. He failed to demonstrate that the taxes at issue were understated or that he and his wife were no longer married, living together or legally separated. He did not qualify for equitable relief because he failed to demonstrate that the IRS had denied relief under Code Sec. 6015(f) or that he had petitioned the Tax Court under Code Sec. 6015(e).

W. Bucy, DC W.Va., 2007-2 USTC ¶50,822.

The IRS did not abuse its discretion by denying a married woman's claim for innocent spouse relief. Equitable relief under Code Sec. 6015(f) was not available because a wife did not provide any evidence that she would suffer economic hardship if relief was not granted, or that she did not have sufficient assets to pay the tax liability or that the burden of paying it would fall on her instead of her husband.

J.D. Dunne, Dec. 57,368(M), TC Memo. 2008-63.

The IRS abused its discretion in denying a request for equitable innocent spouse relief under Code Sec. 6015(f). With regard to the factors set out in Rev. Proc. 2000-15, 2000-1 CB 448, applicable at the time relief was requested, the IRS abused its discretion in failing to consider whether the couple was still married, whether there was abuse or if a finding of liability would impose economic hardship on the wife. Although the couple was not divorced at the time of the request and they were living in the same home, they were using separate bedrooms, so the marital status factor was deemed to favor the wife. Evidence of abuse and economic hardship was present, but the IRS failed to follow up on the evidence. Relief was proper because the only factor that ultimately weighed against the wife was her knowledge of the underpayment.

C. Nihiser, Dec. 57,445(M), TC Memo. 2008-135.

The IRS properly denied innocent spouse relief under the equitable relief rules of Code Sec. 6015(f) based on the factors presented in Rev. Proc. 2003-61. The taxpayer failed to present any evidence that she would suffer economic hardship if relief was not granted despite being given ample opportunity to do so by the IRS.

R.M. Toppi, Dec. 57,471(M), TC Memo. 2008-156.

The Office of Chief Counsel determined that an individual who had requested innocent spouse relief under Code Sec. 6015, and who had her account reduced to zero in an administrative procedure, did not have her liability abated; therefore, that liability could be reinstated. The IRS initially determined that the taxpayer was entitled to complete relief from three years of tax liability, and entered a transaction code in her file that reduced her liability account balance to zero. It was later determined that the taxpayer was, in fact, not entitled to innocent spouse relief. The taxpayer's contention that the zeroing of her account constituted an abatement of liability was incorrect. Abatement, under Code Sec. 6404, applies to a liability that is excessive, erroneous, or assessed after expiration of the limitation period. In this case, the zeroing of the taxpayer's account was a mere administrative procedure, unrelated to the abatement procedure. If the IRS chose to reinstate her liability, it could enter a new transaction code and reverse its previous grant of relief.

CCA Letter Ruling 200802030.