Jennifer A. Soler ( 2022 )

United States Tax Court
T.C. Memo. 2022-78JENNIFER A. SOLER,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 18639-19. Filed July 18, 2022.
—————
Michael A. Raiken and E. Martin Davidoff, for petitioner.
Brian E. Salisbury, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
MARVEL, Judge: This case arises from petitioner’s request for
relief from joint and several liability under section 6015 with respect to
tax years 2012, 2013, 2014, and 2015. The issue for decision is whether
petitioner is entitled to relief under section 6015(b) or (f). 1
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The
stipulated facts and facts drawn from the stipulated exhibits, which
include the administrative record in this case, are incorporated herein
by this reference. Petitioner, Jennifer A. Soler, resided in New Jersey
when she petitioned this Court.
1 Unless otherwise indicated, all statutory references are to the Internal
Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references
are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant
times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Served 07/18/22
2
[*2] Mrs. Soler is married to and resides with her husband, Carlos
Soler, the nonrequesting spouse. Mr. and Mrs. Soler have been married
for over 25 years, have two children together, and have never been
legally separated.
Mrs. Soler is the primary income earner for her household. At the
time of trial, Mrs. Soler was employed as a manager and earned an
annual salary of $160,000. She has a two-year associate’s degree in
fashion design and worked as a clothing designer during the 2012
through 2015 tax years. Mr. Soler has a bachelor’s degree in accounting
and was primarily a stay-at-home father during the 2012 through 2015
tax years. Mr. Soler also operated a consulting business during tax
years 2012, 2013, and 2014 and a real estate business during tax years
2013 and 2014.
I. Tax returns and examination
The Solers timely and jointly filed Form 1040, U.S. Individual
Income Tax Return, for each year at issue. The returns were prepared
by Mr. Soler and were signed by both Mr. and Mrs. Soler.
Mr. Soler reported the income and expenses of his consulting and
real estate businesses on separate Schedules C, Profit or Loss From
Business. For tax year 2012 the consulting Schedule C reported gross
receipts of $16,340 and a net loss of $8,109. For tax year 2013 the
consulting Schedule C reported no gross receipts and a net loss of $5,103,
and the real estate Schedule C reported no gross receipts and a net loss
of $7,420. For tax year 2014 the combined Schedules C reported no gross
receipts, but Mr. Soler reported a net Schedule C profit of $1,762 on his
Schedule SE, Self-Employment Tax.
On April 29, 2015, the Internal Revenue Service (IRS) informed
Mr. and Mrs. Soler via letter that their 2012 income tax return was
being examined. The letter identified issues with the Schedule C gross
receipts and with various deductions for reported expenses. An IRS
Revenue Agent (RA) scheduled an initial interview with Mr. Soler on
May 14, 2015. When the RA arrived at the Solers’ apartment for the
interview, Mrs. Soler answered the door, told the agent that Mr. Soler
was ill, and requested that the meeting be rescheduled. On May 20,
2015, the RA and Mr. Soler rescheduled the initial interview for May 29,
2015. During that conversation, Mr. Soler asked whether Mrs. Soler
was required to be present at the interview, and the RA told Mr. Soler
that she was welcome but not obligated to be there.
3
[*3] On June 10, 2015, the RA mailed separate letters to Mr. and Mrs.
Soler informing them that their 2013 income tax return was also being
examined. However, the letter addressed to Mr. Soler was later
returned as undeliverable. On August 12, 2015, the RA opened an
examination of the Solers’ 2014 return.
On November 13, 2015, respondent mailed separate letters and
Forms 4549–A, Income Tax Examination Changes, to Mr. and Mrs.
Soler for the 2012, 2013, and 2014 tax years. Respondent later issued a
notice of deficiency to Mr. and Mrs. Soler for tax years 2012, 2013, and
2014 that determined a deficiency in tax and a section 6662 accuracy-
related penalty for each year. The Solers did not dispute the notice of
deficiency by filing a petition with this Court, and respondent assessed
the proposed deficiencies and penalties.
The IRS performed an income-matching examination of the
Solers’ 2015 tax return and determined that the 2015 return failed to
include in income distributions from Mr. and Mrs. Soler’s qualified
retirement accounts of $6,000 and $23,000, respectively. Respondent
issued a notice of deficiency to Mr. and Mrs. Soler for the 2015 tax year
determining a deficiency in tax and a section 6662 accuracy-related
penalty. The Solers did not petition the Court with respect to this notice,
and respondent assessed the proposed deficiency and penalty.
II. Request for relief
On February 20, 2018, respondent received a timely Form 8857,
Request for Innocent Spouse Relief, from Mrs. Soler, requesting relief
from joint and several liability for tax years 2012, 2013, 2014, and 2015
pursuant to section 6015(b), (c), and (f). In her request for relief Mrs.
Soler claimed that she was unaware of any income tax liabilities until
the IRS began levying against her wages. Mrs. Soler also claimed that
she believed Mr. Soler was unemployed during the years at issue and
had no income. 2
In her request for relief, Mrs. Soler stated that neither she nor
any member of her family was a victim of spousal abuse or domestic
violence during any of the years at issue and that she was not suffering
any physical or mental health problems when the returns were filed or
when she filed her request for relief. Mrs. Soler also stated that she and
2 Mrs. Soler also stated that, as a result of the levy, she would begin filing
separately from Mr. Soler, but she continued to file joint returns with Mr. Soler for tax
years 2016, 2017, 2018, 2019, and 2020.
4
[*4] Mr. Soler were experiencing ongoing financial stress and were in
the midst of a bankruptcy proceeding during the years at issue. 3
On May 25, 2018, respondent issued a preliminary determination
to Mrs. Soler denying her request for section 6015 relief for all years
included in the request. On June 19, 2018, Mrs. Soler submitted Form
12509, Innocent Spouse Statement of Disagreement, appealing
respondent’s preliminary determination, and her case was assigned to
the IRS Office of Appeals (Appeals). 4 Mrs. Soler appended a letter to
her Form 12509, in which she disagreed with three of the preliminary
determination’s conclusions: (1) that she had knowledge or reason to
know of the items that caused the understatements of tax; (2) that she
would not experience financial hardship if relief were denied; and
(3) that it would not be unfair to hold her liable for the unpaid liabilities.
In her letter to Appeals, Mrs. Soler acknowledged that she was
aware that her income was not enough to pay all of the household
expenses during the years at issue. However, she believed the gap
between her income and the family’s expenses was being bridged by gifts
from Mr. Soler’s mother. Mrs. Soler argued that she relied on Mr. Soler
to handle all of the family finances and tax returns, and she did not have
any reason to believe that there was an issue until the IRS began levying
against her wages. Mrs. Soler submitted some household bills and bank
statements in support of her contention that she would experience
financial hardship if relief was not granted. However, the bank
statements, which are for Mrs. Soler’s personal checking account from
October 29, 2014, through December 29, 2015, showed that Mrs. Soler
regularly paid household bills from the account.
Appeals issued a final notice of determination to Mrs. Soler on
July 10, 2019, denying her request for relief. Appeals determined that
Mrs. Soler did not qualify for relief under section 6015(b) because she
had knowledge or reason to know of the understatements of tax when
she signed the returns. Appeals further determined that Mrs. Soler did
not qualify for relief under section 6015(c) because she did not meet the
3Mr. and Mrs. Soler filed a voluntary petition for chapter 13 bankruptcy on
July 20, 2011. The U.S. Bankruptcy Court of New Jersey confirmed the bankruptcy
plan on October 7, 2011, and entered a discharge order approximately five years later
on October 24, 2016.
4 On July 1, 2019, the IRS Office of Appeals was renamed the IRS Independent
Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001, 133 Stat. 981,
983 (2019). We will use the name in effect at the times relevant to this case, i.e., the
Office of Appeals or Appeals.
5
[*5] marital status requirement. Lastly, Appeals determined that,
although Mrs. Soler met the threshold requirements for relief under
section 6015(f), no relief would be granted because Mrs. Soler did not
meet the requirements for streamlined relief, she had knowledge or
reason to know of the understatements of tax when the returns were
filed, and she did not demonstrate that she would experience economic
hardship if relief was not granted.
Mrs. Soler timely petitioned this Court on October 15, 2019. We
held trial on October 25, 2021.
OPINION
Generally, married taxpayers who elect to file a joint federal
income tax return are jointly and severally liable for the entire tax
liability due on that return. § 6013(d)(3); Butler v. Commissioner, 114
T.C. 276, 282 (2000). In certain circumstances, however, section 6015
allows a taxpayer who filed a joint return to qualify for relief from joint
and several liability.
Section 6015 provides three avenues to relief from joint and
several liability: (1) full or partial relief under subsection (b) (general
relief provision applicable to all joint filers); (2) proportionate relief
under subsection (c) (dealing with spouses who are no longer married,
legally separated, or no longer living together); and (3) if relief is not
available to the taxpayer under either subsection (b) or (c), equitable
relief under subsection (f) (equitable relief).
This Court has jurisdiction to determine the appropriate relief
available to a requesting spouse under section 6015(b), (c), and (f). See
§ 6015(e)(1)(A). We apply a de novo standard of review to any
determination made by the Commissioner under section 6015.
§ 6015(e)(7); see Porter v. Commissioner, 132 T.C. 203, 210 (2009),
superseded in part by statute, Taxpayer First Act § 1203, 133 Stat.
at 988. Our scope of review, however, is limited to the administrative
record established at the time of the Commissioner’s determination and
any newly discovered or previously unavailable evidence. § 6015(e)(7). 5
The taxpayer requesting relief under section 6015 generally bears the
5 Subsection (e)(7) was added to section 6015 by Taxpayer First Act § 1203, 133
Stat. at 988, and applies to section 6015 petitions filed on or after July 1, 2019. See
Sutherland v. Commissioner, 155 T.C. 95, 96–97, 105 (2020). Mrs. Soler petitioned
this Court on October 15, 2019. Accordingly, section 6015(e)(7) defines both the
standard and scope of review in this case.
6
[*6] burden of proving that he or she is entitled to relief. See Rule
142(a); Porter, 132 T.C. at 210.
Mrs. Soler has requested relief from joint and several liability
under section 6015(b) and (f). 6 We will address each claim in turn.
I. Section 6015(b)
To be entitled to relief under section 6015(b), a taxpayer
requesting relief must satisfy each of the following requirements: (1) a
joint return was filed for the year(s) at issue; (2) the return(s) contain
an understatement of tax attributable to an erroneous item of the
nonrequesting spouse; (3) at the time of signing the return, the
requesting spouse did not know and had no reason to know of the
understatement; (4) taking into account all the facts and circumstances,
it is inequitable to hold the requesting spouse liable for the deficiency in
tax attributable to the understatement; and (5) the requesting spouse’s
claim for relief is timely. § 6015(b)(1); Alt v. Commissioner, 119 T.C.
306, 313 (2002), aff’d, 101 F. App’x 34 (6th Cir. 2004).
The only requirements that are disputed by the parties are
whether Mrs. Soler had knowledge or reason to know of the
understatements at the time she signed the returns for the years at
issue and whether it is inequitable to hold her liable for the deficiency.
Mrs. Soler and the nonrequesting spouse filed a joint return for each
year at issue, and the portions of the deficiencies that arise from the
Schedule C businesses in tax years 2012 through 2014 and from Mr.
Soler’s retirement account distribution in 2015 are attributable to the
nonrequesting spouse.
To be eligible for relief under section 6015(b), the requesting
spouse must establish that he or she did not know and had no reason to
know of the understatement on the return at the time he or she signed
it. A taxpayer has knowledge or reason to know of an understatement
if he or she actually knew of the understatement or if a reasonable
6 In her initial request to the IRS, Mrs. Soler requested relief under section
6015(b), (c), and (f) and stated, in support of her request for relief under subparagraph
(c), that she and Mr. Soler were not living together at that time. However, Mrs. Soler
has since abandoned her argument under section 6015(c). Because Mrs. Soler has
abandoned her argument under section 6015(c), and because she remains married to
and resides with Mr. Soler, we conclude that she is not eligible for relief under section
6015(c).
7
[*7] person in similar circumstances would have known of the
understatement. Treas. Reg. § 1.6015-2(c).
A. Actual knowledge
A spouse lacks actual knowledge if she is unaware of the
circumstances that gave rise to the error on the tax return. See Bokum
v. Commissioner, 94 T.C. 126, 145–46 (1990), aff’d, 992 F.2d 1132 (11th
Cir. 1993). In the case of omitted income, actual knowledge generally
means knowledge of receipt of the income. Treas. Reg. §§ 1.6015-2(c),
1.6015-3(c)(2)(i)(A). In the case of erroneous deductions, actual
knowledge means knowledge of the facts that made the item not
allowable as a deduction. Treas. Reg. §§ 1.6015-2(c), 1.6015-3(c)(2)(i)(B);
see also Price v. Commissioner, 887 F.2d 959, 963 n.9 (9th Cir. 1989).
The parties do not dispute that Mrs. Soler lacked actual
knowledge of the understatements to the extent that they relate to items
attributable to the nonrequesting spouse. Mrs. Soler credibly testified
that she did not know the details of Mr. Soler’s businesses and did not
participate in them. We will therefore turn our discussion to whether
Mrs. Soler had reason to know of the understatements.
B. Reason to know
A taxpayer has reason to know of an understatement if a
reasonable person in similar circumstances could be expected to know
that there was an understatement or that further investigation was
warranted. Butler, 114 T.C. at 283; Treas. Reg. § 1.6015-2(c). In
determining whether a requesting spouse had reason to know of an
understatement, we consider all of the facts and circumstances,
including the requesting spouse’s level of education, the requesting
spouse’s level of involvement in the family’s business and financial
affairs, the presence of unusual or lavish expenses compared to the
family’s past level of income and expenditures, and the nonrequesting
spouse’s level of evasiveness or deceit regarding the family’s finances.
Price v. Commissioner, 887 F.2d at 965; see also Treas. Reg.
§ 1.6015-2(c).
Because the relief provisions of section 6015 are “designed to
protect the innocent, not the intentionally ignorant,” Dickey v.
Commissioner, T.C. Memo. 1985-478, 50 T.C.M. (CCH) 1041, 1046, the
reason to know test establishes a duty of inquiry on the part of the
requesting spouse, Stevens v. Commissioner, 872 F.2d 1499, 1505 (11th
Cir. 1989), aff’g T.C. Memo. 1988-63; Butler, 114 T.C. at 283–84. A
8
[*8] spouse who does not fulfill this duty may be charged with
constructive knowledge of the understatement. Price v. Commissioner,
887 F.2d at 965; Porter, 132 T.C. at 212. The duty of inquiry arises when
a spouse is aware of sufficient facts to place him or her on notice that an
understatement may exist. Price v. Commissioner, 887 F.2d at 965.
A requesting spouse cannot satisfy the lack of knowledge
requirement simply by claiming that he or she did not review the return
at issue before signing it. A taxpayer who signs a return is generally
charged with constructive knowledge of its contents. Porter, 132 T.C.
at 211.
Mrs. Soler contends that she did not have reason to know of the
understatements on the dates she signed the returns. In her view she
was an unsophisticated taxpayer who entrusted the family finances to
Mr. Soler and did not participate in the Schedule C businesses. She
further argues that Mr. Soler hid the existence of the bank accounts that
he used for his Schedule C ventures and she, therefore, was not aware
of enough facts to be put on notice that the understatements might exist.
Accordingly, she contends that a reasonable person in her position would
not have inquired any further into the returns than she did.
Mrs. Soler has not carried her burden of proving that she lacked
reason to know of the understatements. Mrs. Soler is college educated,
was the primary income earner for her household during the years at
issue, and had some regular involvement in the household finances. On
the dates she signed the returns for 2012 through 2014, Mrs. Soler
believed that Mr. Soler did not work and had no income. As a result, the
mere attachment of Schedules C to the 2012, 2013, and 2014 returns
would raise questions about the validity of the returns in the mind of a
reasonably prudent person in Mrs. Soler’s position. This is particularly
true in view of the fact that Mrs. Soler knew that her income alone was
not sufficient to pay all of her family’s routine expenses. 7 Additionally,
the Schedules C that Mr. Soler completed showed net losses for tax years
2012 and 2013. The Solers were experiencing financial stress during
the years at issue and were in the middle of a chapter 13 bankruptcy
proceeding. Under those circumstances, a reasonably prudent person
would certainly inquire about the loss-generating activity. Indeed, Mrs.
Soler testified that, had she looked at the returns and noticed the
7 Although Mrs. Soler has claimed that Mr. Soler’s mother was providing
monetary gifts to the family to pay expenses that her income could not cover, there is
no documentation to support this claim in the administrative record.
9
[*9] reported losses, she would have asked her husband about them.
However, even if Mrs. Soler did not actually review the returns, she is
nonetheless charged with constructive knowledge of their contents
because she signed them. Because Mrs. Soler did not fulfill her duty of
inquiry, we conclude that she had reason to know of the
understatements on the 2012, 2013, and 2014 tax returns.
Unlike the 2012, 2013, and 2014 understatements, the 2015
understatement arises from a failure to report as income on their 2015
tax return distributions that Mr. and Mrs. Soler took from their
retirement accounts in 2015. Mrs. Soler claims that she did not review
the 2015 return before signing it and was not aware that it contained an
understatement. However, at the time Mrs. Soler signed the 2015 tax
return, the IRS was examining the returns for 2012 through 2014 and
had issued proposed adjustments for those years. Although Mrs. Soler
chose not to participate in the audit, she admittedly knew that it was
happening and even briefly spoke to the examining RA in May 2015. It
is difficult to conceive of a more conspicuous notice that an
understatement may exist or that some inquiry into the validity of a tax
return is warranted than an audit of and proposed adjustment to the
immediately preceding three years of tax returns. Because Mrs. Soler
unreasonably and inexplicably failed to review the 2015 return, we
conclude that she had reason to know of the understatement contained
therein.
II. Section 6015(f)
Section 6015(f) allows for relief from joint and several liability in
cases where no relief is available under subparagraph (b) or (c) if, taking
into account all facts and circumstances, it would be inequitable to hold
the requesting spouse jointly and severally liable. § 6015(f)(1). Having
found that Mrs. Soler is not eligible for relief under section 6015(b) or
(c), we turn our inquiry to whether it would be inequitable to hold her
liable for the tax due.
The IRS evaluates eligibility for relief under section 6015(f) using
the framework set forth in Rev. Proc. 2013-34, 2013-43 I.R.B. 397,
modifying and superseding Rev. Proc. 2003-61, 2003-2 C.B. 296.
Although we are not bound by the eligibility guidelines set forth in Rev.
Proc. 2013-34, the Court considers the same factors when reviewing a
taxpayer’s claim for relief under section 6015. See Pullins v.
Commissioner, 136 T.C. 432, 438–39 (2011). Rev. Proc. 2013-34, § 4.01,
2013-43 I.R.B. at 399–400, establishes several threshold conditions that
10
[*10] the requesting spouse must satisfy to be considered for equitable
relief: (1) a joint return was filed for the year(s) at issue; (2) the tax
liability from which the requesting spouse seeks relief is attributable in
full or in part to an item of the nonrequesting spouse; (3) relief is not
available to the requesting spouse under section 6015(b) or (c); (4) no
assets were transferred between the spouses as part of a fraudulent
scheme; (5) the nonrequesting spouse did not transfer disqualified
assets (as defined by section 6015(c)(4)(B)) to the requesting spouse;
(6) the requesting spouse did not knowingly participate in the filing of a
fraudulent joint return; and (7) the claim for relief is timely filed. The
parties agree that Mrs. Soler satisfies these threshold conditions.
Once a taxpayer has satisfied the threshold conditions, we will
consider whether the requesting spouse is eligible for streamlined relief
or, if not, whether he or she qualifies under the full facts and
circumstances test. Rev. Proc. 2013-34, §§ 4.02 and 4.03, 2013-43 I.R.B.
at 400–03.
Streamlined determinations granting equitable relief under
section 6015(f) are available if the requesting spouse can establish that
he or she (1) is no longer married to the nonrequesting spouse; (2) would
suffer economic hardship if relief were not granted; and (3) lacked
knowledge or reason to know of the understatement at the time the
return at issue was signed. Rev. Proc. 2013-34, § 4.02. The parties agree
that Mrs. Soler is not eligible for a streamlined determination granting
relief because she remains married to Mr. Soler.
If a requesting spouse is not eligible for streamlined relief, we will
next and finally consider the request for relief, taking into account all
the facts and circumstances. Id. §§ 4.02 and 4.03. The factors
considered include but are not limited to (1) marital status; (2) economic
hardship; (3) knowledge; (4) legal obligation to pay the tax; (5) the
amount of benefit derived from the understatement or underpayment;
(6) compliance with income tax laws; and (7) mental or physical health.
Id. § 4.03. We analyze these factors in the light of the attendant
circumstances, and no one factor is determinative. Id.; see also Pullins,
136 T.C. at 448–55.
A. Marital status
The marital status factor weighs in favor of relief when the
requesting spouse is no longer married to the nonrequesting spouse and
is neutral if the requesting spouse remains married to the
11
[*11] nonrequesting spouse. Rev. Proc. 2013-34, § 4.03(2)(a), 2013-43
I.R.B. at 400–01. Because Mrs. Soler is still married to and residing
with Mr. Soler, this factor is neutral.
B. Economic hardship
This factor weighs in favor of relief when a failure to grant relief
from joint and several liability would cause the requesting spouse to be
unable to pay reasonable basic living expenses. Id. § 4.03(2)(b), 2013-43
I.R.B. at 401. If denying relief would not cause the requesting spouse
economic hardship, this factor is neutral. Id. Generally, this factor will
not favor relief if a requesting spouse’s income is greater than 250% of
the federal poverty guidelines, unless her monthly income exceeds her
reasonable basic living expenses by $300 or less. Id. Mrs. Soler’s income
exceeds 250% of the federal poverty guidelines, and she has not shown
that her monthly income exceeds her reasonable basic living expenses
by $300 or less. This factor is neutral.
C. Knowledge or reason to know
If the requesting spouse knew or had reason to know of the items
giving rise to the understatement when the return was filed, this factor
will weigh against relief. Id. § 4.03(2)(c), 2013-43 I.R.B. at 401–02. If
the requesting spouse did not know or have reason to know of the
understatement, this factor will weigh in favor of relief. Id. If the
nonrequesting spouse was abusive or financially controlling, this factor
may weigh in favor of relief even if the requesting spouse knew or had
reason to know about the items giving rise to the understatement. Id.
1. Actual knowledge
Rev. Proc. 2013-34 is silent on actual knowledge with respect to
understatements of tax. However, we find that the regulations
applicable to knowledge under section 6015(b) and (c) provide a helpful
framework for analysis under section 6015(f). See, e.g., Butler, 114 T.C.
at 292–93 (applying the same knowledge analysis performed under
section 6015(b) to section 6015(f)); Jacobsen v. Commissioner, T.C.
Memo. 2018-115, at *27 (applying the same knowledge analysis
performed under section 6015(c) to section 6015(f)), aff’d, 950 F.3d 414(7th Cir. 2020). We accepted as credible Mrs. Soler’s testimony that she
did not participate in Mr. Soler’s Schedule C businesses and did not have
actual knowledge of his receipt of income in connection with those
businesses in 2012, 2013, and 2014. See supra p. 7.
12
[*12] 2. Reason to know
A spouse has reason to know of an understatement if a reasonable
person in similar circumstances would have known that the return
contained an understatement or that further investigation was
warranted. Butler, 114 T.C. at 283; Treas. Reg. § 1.6015-2(c). The
factors we consider in evaluating whether a requesting spouse had
reason to know of an understatement include but are not limited to
(1) the requesting spouse’s level of education; (2) the requesting spouse’s
level of involvement in the activity giving rise to the understatement;
(3) any deceit or evasiveness by the nonrequesting spouse; (4) the
requesting spouse’s degree of involvement in business or household
financial matters; (5) the requesting spouse’s business or financial
expertise; and (6) any lavish or unusual expenditures compared with
past spending. Rev. Proc. 2013-34, § 4.03(2)(c)(iii), 2013-43 I.R.B. at 402.
In evaluating whether Mrs. Soler qualified for relief under section
6015(b), we concluded that she had reason to know of the
understatements for all years at issue because she failed to fulfill her
duty of inquiry. See supra pp. 7–9. That same conclusion applies here.
Consequently, we find that this factor weighs against granting relief.
D. Legal obligation
This factor weighs in favor of relief when the nonrequesting
spouse, through a divorce decree or other legally binding agreement,
bears the sole legal obligation to pay the outstanding liability. Rev. Proc.
2013-34, § 4.03(2)(d), 2013-43 I.R.B. at 402. This factor will weigh
against relief if the requesting spouse has the legal obligation to pay,
and it is neutral if the divorce decree is silent as to tax liabilities or the
spouses are not separated. Id. Because Mrs. Soler remains married to
Mr. Soler, this factor is neutral.
E. Significant benefit
This factor weighs against relief when the requesting spouse
received a benefit in excess of normal support due to the understatement
or underpayment of tax. Id. § 4.03(e), 2013-43 I.R.B. at 402. If the
requesting spouse enjoyed the benefits of a lavish lifestyle, such as
purchasing luxury items or going on expensive vacations, this factor
weighs against relief. If the requesting spouse did not receive a
significant benefit from the understatement, this factor weighs in favor
of relief. See Butner v. Commissioner, T.C. Memo. 2007-136, 93 T.C.M.
(CCH) 1290. Nothing in the record suggests that Mrs. Soler enjoyed a
13
[*13] lavish lifestyle as a result of the understatements at issue, and
respondent concedes that Mrs. Soler did not receive any benefit beyond
having her income tax reduced by the erroneous items. This factor
weighs in favor of relief.
F. Compliance with income tax laws
If the requesting spouse remains married to the nonrequesting
spouse and continues to file joint returns with the nonrequesting spouse
after filing for relief, this factor is neutral if the subsequent joint returns
comply with income tax laws, and it will weigh against relief if the
subsequent joint returns do not comply. Rev. Proc. 2013-34,
§ 4.03(2)(f)(ii), 2013-43 I.R.B. at 402–03. Mrs. Soler filed joint returns
with Mr. Soler for tax years 2016 through 2020, but the record is silent
with respect to the compliance level of those returns. We will treat this
factor as neutral.
G. Mental or physical health
This factor weighs in favor of relief if the requesting spouse was
in poor physical or mental health at the time the returns to which the
request for relief relates were filed, or at the time he or she requested
relief. Id. § 4.03(2)(g), 2013-43 I.R.B. at 403. If the requesting spouse
was not in poor mental or physical health, this factor is neutral. Id.
Mrs. Soler was not in poor mental or physical health at the time the
returns for 2012, 2013, 2014, and 2015 were filed, nor was she in poor
health when she requested relief from joint and several liability. This
factor is neutral.
III. Conclusion
After weighing the above factors and considering all of the
attendant facts and circumstances, we are not persuaded that it would
be inequitable to hold Mrs. Soler liable for the 2012, 2013, 2014, and
2015 tax liabilities. We conclude that the knowledge factor weighs
heavily against granting relief. The significant benefit factor weighs
slightly in favor of relief. While we do not base our decision on a simple
tally of the factors, we conclude that five factors are neutral, one weighs
slightly in favor of relief, and one weighs strongly against relief. After
considering all the relevant facts and circumstances, we conclude that
Mrs. Soler is not entitled to relief under section 6015(b) or (f).
14
[*14] We have considered all of the parties’ arguments and, to the
extent they are not discussed herein, find them to be irrelevant, moot,
or without merit.
Decision will be entered for respondent.