Kosola v. Comm'r

T.C. Memo. 2010-34
UNITED STATES TAX COURT
DANIKA K. KOSOLA, Petitioner
AND JASON A. KOSOLA, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16020-06. Filed February 23, 2010.
Jan R. Pierce, for petitioner.
Jason A. Kosola, pro se.
Nhi T. Luu, 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
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6015(f)1 with respect to liabilities reported on petitioner’s
2000 and 2001 joint Federal income tax returns. Respondent
determined petitioner was not entitled to relief. Petitioner
timely petitioned the Court seeking review of respondent’s
determination. The sole issue for decision is whether petitioner
is entitled to relief under section 6015(f).
FINDINGS OF FACT
Some of the facts have been stipulated. The stipulation of
facts is incorporated herein by this reference. Many of the
remaining facts are drawn from petitioner’s testimony at trial,
which we found to be credible.2 Petitioner resided in Oregon
when her petition was filed.
Background
Petitioner and intervenor met in 1997 in Park City, Utah,
and began living together shortly thereafter. Their relationship
was troubled from the beginning, and in January 1999 petitioner
briefly moved out of the home they shared. During this
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
2
In his reply brief, respondent calls our attention to
several alleged inconsistencies in petitioner’s statements with
respect to whether joint Federal income tax returns were filed
for petitioner and intervenor for 2000 and 2001, whether
petitioner saw the returns before they were filed or knew of the
underpayments reported on the returns, and whether petitioner and
intervenor had a joint checking account during the years at
issue. We do not find convincing respondent’s allegation that
petitioner made inconsistent statements.
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separation, intervenor broke into the apartment petitioner was
renting, tore petitioner’s clothing, vandalized her schoolwork,
CDs, and other possessions, and urinated on her bed. Around the
same time, intervenor was arrested for assaulting petitioner
after an incident in which he hit petitioner, put her in a
headlock, and refused to let her out of his truck.
Despite these incidents the couple reconciled, and in
February or March 1999 petitioner discovered she was pregnant
with intervenor’s child. The child was born in November 1999,
and the couple married on August 27, 2000.
At the beginning of the marriage, intervenor owned a
painting business. Intervenor maintained a separate checking
account for the business in 2000 and 2001. Petitioner did not
participate in intervenor’s business and had no access to the
separate checking account or to intervenor’s business records.
In 2001 petitioner and intervenor moved from Utah to Oregon, and
intervenor began working for Hansen Architectural Systems.
Petitioner had a high school education during the relevant period
and rarely worked outside the home. In 2000 petitioner earned no
income; in 2001 petitioner earned wages of $1,297 and nonemployee
compensation of $1,290.
Petitioner and intervenor opened a joint bank account around
the time they moved to Oregon in 2001. The account statements
were mailed to the couple’s home; petitioner had access to the
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statements and sometimes reviewed them. Intervenor continued to
maintain a separate business account throughout the marriage, and
he paid the couple’s bills and managed the couple’s finances.
The couple lived a modest lifestyle in 2000 and 2001 and did not
take expensive vacations, buy expensive jewelry, or purchase
other luxuries.
Petitioner occasionally asked intervenor whether he was
paying his taxes, and intervenor assured her he was. In fact,
intervenor did not file timely Federal income tax returns for
2000 or 2001. On or about April 3, 2003, intervenor untimely
filed joint Federal income tax returns for 2000 and 2001. The
returns showed balances due of $14,6603 and $1,726 for 2000 and
2001, respectively. Intervenor did not pay the taxes shown as
due on the returns. On April 28, 2003, the Internal Revenue
Service (IRS) assessed the amounts shown on the returns.
Petitioner did not review or sign the joint returns;
intervenor simply signed petitioner’s name without discussing the
returns with her. The parties agree, however, that the returns
were valid joint Federal income tax returns.
Intervenor continued to abuse petitioner physically and
emotionally throughout their marriage. On one occasion,
intervenor shoved petitioner while she was holding their son. On
3
Of the $14,660 of tax reported as due on the 2000 return,
$9,246, or 63 percent, was self-employment tax attributable to
intervenor’s business income.
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another occasion petitioner was holding her keys and intervenor
squeezed her hand so hard that she fell to the ground and the
keys cut her hand.4 Petitioner sought and was granted a
restraining order after the latter incident. Petitioner and
intervenor separated in 2004 and were divorced on March 31, 2005.
As of the trial date, petitioner was living with her father
in Chula Vista, California. Petitioner’s only source of income
as of the date of trial was unemployment benefits, her only asset
of significant value was a car for which she was making monthly
loan payments, and she testified that she had monthly expenses of
$1,525, not including rent, food, clothing, and personal care
items.5
In the summer of 2003 petitioner learned for the first time
that intervenor had not timely filed joint returns for the couple
for 2000 and 2001 and that there was a balance due with respect
to each year. On or about July 13, 2005, petitioner signed a
Form 8857, Request for Innocent Spouse Relief, for 2000 and 2001.
The IRS received the Form 8857 on July 21, 2005. The tax
liabilities from which petitioner sought relief under section
4
Intervenor, who testified at trial, does not deny that he
abused petitioner. He suggested, however, that petitioner was
abusive toward him as well and that all of the incidents were
“two-way incidents”.
5
Petitioner testified that she had the following monthly
expenses: Automobile payment, $350; automobile insurance, $105;
credit card payments, $350; child support payment, $491; cellular
phone payment, $79; and student loan payment, $150.
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6015 were underpayments of taxes reported on the couple’s 2000
and 2001 joint Federal income tax returns. Petitioner also
completed a Form 12510, Questionnaire for Requesting Spouse, on
or about August 30, 2005. On the Form 12510, petitioner stated
that she had “all access” to the couple’s joint checking account
and sometimes reviewed monthly bank statements but did not
balance the checkbook. Petitioner also reported that she earned
$2,400 and spent $2,360 per month.
On November 17, 2005, the IRS issued a preliminary
determination denying petitioner’s request for relief under
section 6015. On December 4, 2005, petitioner completed and
signed a Form 12509, Statement of Disagreement, in which she
formally disagreed with the IRS’ preliminary determination.
Because petitioner disagreed with the IRS’ preliminary
determination, petitioner’s request for section 6015(f) relief
was forwarded to the IRS’ Office of Appeals for consideration.
On February 1, 2006, petitioner’s request for relief was assigned
to Appeals Officer Roland Banks (Mr. Banks). Over the next few
months, Mr. Banks reviewed petitioner’s request and spoke to
petitioner and intervenor.
On or about June 15, 2006, petitioner received an undated
Notice of Determination Concerning Your Request for Relief Under
the Equitable Relief Provision of Section 6015(f) (notice of
determination). The notice of determination stated that the
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Office of Appeals had denied petitioner’s request for relief
under section 6015(f) for 2000 and 2001. According to the notice
of determination, the tax liabilities for which petitioner
remained liable, including penalties and accrued interest through
May 18, 2006, were $26,375.14 and $2,272.70 for 2000 and 2001,
respectively.
The notice of determination was accompanied by an Appeals
case memorandum (memorandum), which included a check-the-box
analysis of petitioner’s request for section 6015(f) relief and a
brief narrative. In the check-the-box portion of the memorandum,
the Office of Appeals concluded that petitioner failed to
establish that it was reasonable for her to believe that
intervenor would pay the reported liability. The Office of
Appeals made no determination with respect to whether petitioner
would face economic hardship if respondent denied her request for
relief. In the narrative portion of the memorandum, the Office
of Appeals concluded: “The testimony given by the * * *
[intervenor] was credible and gave a more accurate account of the
events leading up to underpayment [sic] than that offered by
* * * [petitioner].”6
6
The analysis contained in the notice of determination and
memorandum was superficial, summary, and incomplete. The
memorandum concluded, for example, that petitioner knew the taxes
for 2000 and 2001 would not be paid when she signed the returns
in 2003; in fact, petitioner never signed the 2000 or 2001 joint
Federal income tax returns. Moreover, the memorandum concluded
(continued...)
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The IRS applied the following credits to petitioner and
intervenor’s joint Federal income tax liabilities (including
penalties and interest): (1) An overpayment credit of $530.43
from intervenor’s 2004 taxable year, which was applied on April
15, 2005; (2) an overpayment credit of $1,187.15 and accrued
interest of $5.85 from intervenor’s 2006 taxable year, which were
applied on April 15, 2007; and (3) an overpayment credit of
$1,337.79 and accrued interest of $559.37 from intervenor’s 2007
taxable year, which were applied on April 15, 2008. As a result
the 2001 Federal income tax liability has been satisfied. The
2000 joint Federal income tax liability remains unpaid.
OPINION
I. Section 6015(f)
In general, married taxpayers who file a joint Federal
income tax return are jointly and severally liable for the tax
reported or reportable on the return. Sec. 6013(d)(3); Butler v.
Commissioner, 114 T.C. 276, 282 (2000). Under section 6015,
however, a spouse may obtain relief from joint and several
liability in certain circumstances. Section 6015(a)(1) provides
6
(...continued)
that petitioner had not established she would face economic
hardship if her request for relief were denied, but there is no
indication that the Office of Appeals conducted a meaningful
analysis of petitioner’s financial situation. Finally, some of
the analysis contained in the memorandum apparently came from
another taxpayer’s case and was simply cut from the other
taxpayer’s document and pasted into the memorandum without
changing the other taxpayer’s name.
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that a spouse who has made a joint return may seek relief from
joint and several liability under section 6015(b) (dealing with
relief from liability for an understatement of tax on a joint
return). Section 6015(a)(2) provides that an eligible spouse may
elect to limit his or her liability for a deficiency with respect
to a joint return under section 6015(c) (dealing with relief from
joint and several liability for taxpayers who are no longer
married or who are legally separated or no longer living
together). If relief is not available under section 6015(b) or
(c), an individual may seek equitable relief under section
6015(f). Section 6015(f) provides:
SEC. 6015(f). Equitable Relief.--Under procedures
prescribed by the Secretary, if--
(1) taking into account all the facts and
circumstances, it is inequitable to hold the
individual liable for any unpaid tax or any
deficiency (or any portion of either); and
(2) relief is not available to such
individual under subsection (b) or (c),
the Secretary may relieve such individual of such
liability.
Petitioner contends she is entitled to relief from joint and
several liability under section 6015(f).
II. Jurisdiction
The Tax Court is a court of limited jurisdiction, and it may
exercise its jurisdiction only to the extent authorized by
Congress. See sec. 7442; Moore v. Commissioner, 114 T.C. 171,
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175 (2000); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). Our
jurisdiction to review petitioner’s request for equitable relief
is conferred by section 6015(e), which allows a spouse who has
sought relief under section 6015(b), (c), or (f) to contest the
Commissioner’s denial of relief by timely filing a petition in
the Tax Court. Before December 20, 2006, section 6015(e)(1)
provided that we had jurisdiction to review the Commissioner’s
denial of relief under section 6015 “In the case of an individual
against whom a deficiency has been asserted and who elects to
have subsection (b) or (c) apply”. Thus, in Billings v.
Commissioner, 127 T.C. 7, 16-17 (2006), we held that former
section 6015(e)(1) did not provide us with jurisdiction to review
a nondeficiency, stand-alone petition. Soon after our decision
in Billings, Congress amended section 6015(e)(1) to provide that
this Court has jurisdiction over nondeficiency, stand-alone
petitions and added to that section the words “or in the case of
an individual who requests equitable relief under subsection
(f)”. See Tax Relief and Health Care Act of 2006, Pub. L. 109-
432, div. C, sec. 408(a), 120 Stat. 3061; Kollar v. Commissioner,
131 T.C. __, __ (2008) (slip. op. at 5-6). The amendment applies
to tax liabilities arising or remaining unpaid on or after
December 20, 2006. Kollar v. Commissioner, supra at __ (slip.
op. at 6). Some part of petitioner’s tax liability for each of
the years 2000 and 2001 remained unpaid on December 20, 2006.
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Accordingly, we have jurisdiction to review petitioner’s request
for equitable relief.
III. The Standard and Scope of Review
In cases brought under section 6015(f) we apply a de novo
standard of review as well as a de novo scope of review. Porter
v. Commissioner, 132 T.C. __, __ (2009) (slip. op. at 12).7
Petitioner bears the burden of proving that she is entitled to
relief under section 6015(f). See id.; see also Rule 142(a).
IV. Rev. Proc. 2003-61
The Commissioner evaluates requests for section 6015(f)
relief filed on or after November 1, 2003, using procedures set
forth in Rev. Proc. 2003-61, 2003-2 C.B. 296. Porter v.
Commissioner, supra at __ (slip. op. at 12) (citing Banderas v.
Commissioner, T.C. Memo. 2007-129). Rev. Proc. 2003-61, supra,
supersedes Rev. Proc. 2000-15, 2000-1 C.B. 447, and is effective
for petitioner’s request for relief, which was filed after
November 1, 2003. Rev. Proc. 2003-61, secs. 6 and 7, 2003-2 C.B.
at 299.
7
Respondent disagrees with our recent holding in Porter v.
Commissioner, 132 T.C. __, __ (2009) (slip. op. at 12).
Respondent argues that the appropriate standard of review in sec.
6015(f) cases is abuse of discretion and the scope of review
should be limited to the administrative record. We decline to
revisit our holding in Porter v. Commissioner, supra, at this
time. We note, however, that respondent’s determination was so
superficial and incomplete, see supra note 6, that we might well
have concluded that respondent abused his discretion if the
appropriate standard of review were abuse of discretion as
respondent contends.
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A. Section 4.01: The Threshold Requirements
Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at 297-298, sets
forth seven threshold conditions a requesting spouse must satisfy
to be eligible to submit a request for relief under section
6015(f): (1) The taxpayer filed joint Federal income tax returns
for the taxable year or years for which relief is sought; (2) the
taxpayer does not qualify for relief under section 6015(b) or
(c); (3) the taxpayer applies for relief no later than 2 years
after the date of the Commissioner’s first collection activity
after July 22, 1998, with respect to the taxpayer;8 (4) no assets
were transferred between the spouses filing the joint returns as
part of a fraudulent scheme by such spouses; (5) there were no
disqualified assets transferred to the taxpayer by the
nonrequesting spouse; (6) the taxpayer did not file the returns
with fraudulent intent; and (7) the liability from which relief
is sought is attributable to an item of the nonrequesting spouse.
Respondent concedes, and we agree, that petitioner satisfies all
of the threshold conditions.
B. Section 4.02: The Safe Harbor Requirements
If a requesting spouse fulfills the threshold requirements
of Rev. Proc. 2003-61, sec. 4.01, the Commissioner ordinarily
will grant relief from joint and several liability with respect
8
This Court has invalidated the 2-year limitation. Lantz v.
Commissioner, 132 T.C. ___ (2009), on appeal (7th Cir., Sept. 21,
2009); see Olson v. Commissioner, T.C. Memo. 2009-294 n.10.
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to underpayments on a joint Federal income tax return, provided
all of the following additional requirements are satisfied: (1)
On the date of the request for relief, the requesting spouse is
no longer married to, or is legally separated from, the
nonrequesting spouse; (2) on the date the requesting spouse
signed the joint return, the requesting spouse did not know, and
had no reason to know, that the nonrequesting spouse would not
pay the tax liability; and (3) the requesting spouse will suffer
economic hardship if the Commissioner does not grant relief.
Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at 298.
Respondent concedes that petitioner was divorced from
intervenor on the date she requested relief under section
6015(f). However, respondent contends that petitioner has not
established that she had no knowledge or reason to know, on the
date the 2000 and 2001 joint Federal income tax returns were
signed, that the underpayments reported on those returns would
not be paid or that she would face economic hardship if her
request for relief were denied. Accordingly, respondent argues
that petitioner has not satisfied the Rev. Proc. 2003-61, sec.
4.02, safe harbor requirements. We disagree.
1. Knowledge or Reason To Know
Respondent observes that this case boils down to a question
of witness credibility and that we are under no obligation to
accept self-serving, uncorroborated testimony. See Ishizaki v.
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Commissioner, T.C. Memo. 2001-318 (citing Tokarski v.
Commissioner, 87 T.C. 74, 77 (1986)). Respondent contends that
petitioner’s trial testimony was inconsistent with statements she
made earlier on Forms 8857 and 12510 and that petitioner has
therefore failed to establish that she did not know, and had no
reason to know, that the underpayments reported on her 2000 and
2001 joint Federal income tax returns would not be paid. We find
respondent’s argument unpersuasive. Indeed, the statements
respondent highlighted as examples of petitioner’s supposedly
inconsistent testimony are, in fact, consistent.
On the basis of the record before us, we conclude that
petitioner did not know, and had no reason to know, that the
underpayments reported on her 2000 and 2001 joint Federal income
tax returns would not be paid. Petitioner asked intervenor
whether he had paid the couple’s taxes, and he assured her
everything was fine. Petitioner neither signed nor reviewed the
2000 and 2001 joint Federal income tax returns; intervenor signed
petitioner’s name and submitted the returns without her
knowledge.9
Even if petitioner had reviewed the returns, she would not
have known or had reason to know that the liabilities reported on
the returns would not be paid. Although petitioner had access to
9
In reaching this conclusion, we specifically find that
intervenor’s testimony on these disputed factual issues is not
credible.
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the couple’s joint checking account and bank statements,
petitioner had, at best, an incomplete picture of her and
intervenor’s financial situation. Intervenor was responsible for
paying bills, balancing the couple’s checkbook, and managing the
couple’s finances. Moreover, petitioner was not involved in
intervenor’s business and had no access to intervenor’s business
checking account. Thus, even if petitioner had reviewed the 2000
and 2001 joint Federal income tax returns and seen that there was
a balance due, she would not have known, or had reason to know,
that intervenor would not pay the tax liabilities. Finally, the
couple lived a modest lifestyle during the time at issue and did
not make any lavish purchases that should have caused petitioner
to suspect intervenor had not paid the couple’s tax liabilities.
2. Economic Hardship
In determining whether a requesting spouse will suffer
economic hardship if the Commissioner denies his or her request
for section 6015(f) relief, Rev. Proc. 2003-61, sec. 4.02,
directs the Commissioner to base his decision on rules similar to
those found in section 301.6343-1(b)(4), Proced. & Admin. Regs.,
which provides that an economic hardship exists if an individual
is unable to pay reasonable basic living expenses. In
determining a reasonable amount for basic living expenses, the
Commissioner shall consider information provided by the taxpayer,
including: (1) The taxpayer’s age, employment status and
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history, ability to earn, number of dependents, and status as a
dependent of someone else; (2) the amount reasonably necessary
for food, clothing, housing, utilities, medical expenses,
transportation, child support, and other necessities; (3) the
cost of living in the geographical area in which the taxpayer
lives; (4) the amount of property available to pay the taxpayer’s
expenses; (5) any extraordinary expenses, including educational
expenses; and (6) any other factor that the taxpayer claims bears
on economic hardship and brings to the Commissioner’s attention.
Sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.
Respondent argues that petitioner has failed to establish
she would suffer economic hardship if her request for relief were
denied because she failed to substantiate her income and
expenses. Although we are not required to accept petitioner’s
uncorroborated testimony, see Ishizaki v. Commissioner, supra,
neither are we required to reject petitioner’s testimony if we
find it credible, see, e.g., Washington v. Commissioner, 120 T.C.
137, 150 (2003).
Petitioner testified that she was unemployed and had never
earned more than $14 per hour even when she was employed. She
further testified that her only source of income as of the date
of trial was unemployment benefits and her only asset of
significant value was a car for which she was making monthly loan
payments. Moreover, petitioner testified that she had expenses
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of $1,525 per month, not including food, clothing, housekeeping
supplies, personal care, and other necessities. Finally,
petitioner testified that she was not paying rent to her father
as of the trial date but that she hoped to begin paying rent as
soon as she could find a job and that she moved in with her
father only because she could not survive financially in Oregon.
Although much of petitioner’s testimony, including her monthly
expenses, was unsubstantiated, we find her testimony to be
honest, forthright, and credible. Thus, we conclude on the basis
of petitioner’s testimony that petitioner would face economic
hardship if her request for relief under section 6015(f) were
denied.
In summary, we conclude petitioner has satisfied the Rev.
Proc. 2003-61, sec. 4.02, safe harbor requirements and is
therefore entitled to equitable relief under section 6015(f).
C. Section 4.03: Factors for Determining Whether To Grant
Equitable Relief
Although we conclude that petitioner qualifies under the
safe harbor of Rev. Proc. 2003-61, sec. 4.02, because respondent
based his determination on the factors enumerated in Rev. Proc.
2003-61, sec. 4.03, 2003-2 C.B. at 298-299, we shall also review
whether petitioner qualifies for equitable relief under Rev.
Proc. 2003-61, sec. 4.03.
If a requesting spouse satisfies the threshold requirements
of Rev. Proc. 2003-61, sec. 4.01, but fails to satisfy one or
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more of the safe harbor requirements of Rev. Proc. 2003-61, sec.
4.02, the Commissioner may still grant relief under section
6015(f) on the basis of a variety of factors. Rev. Proc. 2003-
61, sec. 4.03(1). The following list is not exclusive, and no
single factor is determinative:
(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. * * *
(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.
* * * * * * *
(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
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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.
Rev. Proc. 2003-61, sec. 4.03(2)(a).
(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.
Rev. Proc. 2003-61, sec. 4.03(2)(b).
We now consider each of the factors discussed above.
1. Marital Status
Respondent concedes that petitioner was divorced when she
filed her request for relief. This factor favors petitioner.
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2. Economic Hardship
For the reasons discussed above, see supra pp. 16-18, we
believe petitioner would face economic hardship if her request
for relief under section 6015(f) were denied. This factor favors
petitioner.
3. Knowledge or Reason To Know
Rev. Proc. 2003-61, sec. 4.03, lists six factors to be
considered when determining whether a requesting spouse had
knowledge or reason to know that a deficiency or underpayment
reported on a joint Federal income tax return would not be paid:
(1) The requesting spouse’s level of education; (2) any deceit or
evasiveness of the nonrequesting spouse; (3) the requesting
spouse’s degree of involvement in the activity generating the
income tax liability; (4) the requesting spouse’s involvement in
business and household financial matters; (5) the requesting
spouse’s business or financial expertise; and (6) any
expenditures that are lavish or unusual compared with past
spending levels. All six factors favor petitioner. Petitioner
has a high school education.10 Intervenor was deceitful to
petitioner; when she inquired whether he was paying the couple’s
taxes, he assured her everything was fine. Petitioner had no
involvement in intervenor’s business, and she did not have access
10
Although petitioner has taken some college courses, none
of the courses was in accounting, business, or finance.
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to his business records or his business checking account.
Petitioner, who had no business or financial expertise, was only
minimally involved in household financial matters, and intervenor
handled the couple’s finances. Finally, the couple did not make
any lavish or unusual purchases during the relevant period. As a
result, we conclude this factor favors petitioner.
4. Nonrequesting Spouse’s Legal Obligation
Petitioner and intervenor’s divorce decree provides for the
distribution of various debts but does not list the tax
liabilities as a debt of the marriage, nor does it assign
responsibility for paying the tax liabilities. Under the
circumstances, this factor is neutral.
5. Significant Benefit
There is no evidence that petitioner significantly
benefited, beyond ordinary support, from the underpayment of tax.
This factor favors petitioner.
6. Compliance With Federal Income Tax Laws
Petitioner has made a good-faith effort to comply with
Federal income tax laws in the years following the years to which
her request for relief relates. This factor favors petitioner.
7. Abuse
Petitioner contends, and intervenor does not deny, that
intervenor abused petitioner physically and emotionally before,
during, and after their marriage. This factor favors petitioner.
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8. Mental or Physical Health
There is no suggestion in the record that petitioner was in
poor mental or physical health on the date the returns were
filed, at the time she requested relief, or at any other relevant
time. This factor is neutral.
In summary, six of the eight factors favor granting relief
and two are neutral. The factors as a whole overwhelmingly favor
granting petitioner relief under section 6015(f). Accordingly,
we conclude that petitioner is entitled to relief from joint and
several liability under section 6015(f).
V. Conclusion
On the basis of the foregoing, we conclude that petitioner
satisfied the threshold conditions of Rev. Proc. 2003-61, sec.
4.01, and the safe harbor requirements of Rev. Proc. 2003-61,
sec. 4.02, because she established: (1) She was divorced from
intervenor when she filed her request for relief; (2) she did not
know, and had no reason to know, that the tax liabilities
reported on the 2000 and 2001 returns would not be paid; and (3)
she would suffer economic hardship if her request for relief were
not granted. Alternatively, even if we were to conclude that
petitioner did not satisfy the requirements of the safe harbor,
our analysis of the factors set forth in Rev. Proc. 2003-61, sec.
4.03, overwhelmingly favors granting petitioner’s request for
equitable relief under section 6015(f). We therefore hold that
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petitioner is entitled to relief from joint and several liability
under section 6015(f).
Although our holding encompasses the 2001 tax liability,
paid in full after respondent issued his notice of determination,
from overpayment credits of intervenor, we note that our holding
will not result in a refund for petitioner. Petitioner did not
claim a refund for 2001, nor did she prove that she is entitled
to one.
We have considered the parties’ remaining arguments for
results contrary to those discussed herein, and to the extent not
discussed above, we conclude those arguments are irrelevant,
moot, or without merit.
To reflect the foregoing,
Decision will be entered for
petitioner.