                                  T.C. Memo. 2012-195



                         UNITED STATES TAX COURT



                    NEIL J. YOSINSKI, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 6645-10.                            Filed July 12, 2012.



      Neil J. Yosinski, pro se.

      Michael T. Garrett, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      JACOBS, Judge: Petitioner filed a petition in this Court asking us to review

respondent’s determination denying his request for relief under section 6015 with

respect to Federal income tax for 2006. The amount of the relief requested equaled

the sum of (1) the reported tax on petitioner and his then wife’s joint income tax
                                         -2-

return for 2006 (reported tax), and (2) the tax owed on unreported income

(unreported tax). Most of the reported tax is attributable to petitioner’s receipt of

distributions from his individual retirement account (IRA); substantially all of the

unreported tax stems from the gain attributable to petitioner’s sale of securities. In

denying petitioner’s request for section 6015 relief, respondent asserted that section

6015 relief is not allowed for tax attributable to the requesting spouse’s own

income. For the reasons discussed infra, we sustain respondent’s determination.

      Unless otherwise indicated, all section references are to the Internal Revenue

Code in effect at all relevant times and all Rule references are to the Tax Court

Rules of Practice and Procedure.

                                FINDINGS OF FACT

      Some of the facts have been stipulated. The stipulated facts and

accompanying exhibits are incorporated herein by this reference. At the time the

petition was filed, petitioner resided in Colorado.

      Petitioner and Colleen Gloceri Yosinski (Colleen Gloceri) had been married

for 25 years before the date of their divorce, February 13, 2007. They began living

apart in August 2005. During 2006 they had four dependent children.
                                          -3-

      Petitioner and Colleen Gloceri filed a joint Federal income tax return for

2006. On that return, they reported the following:

      1. $167,433 as the taxable amount of $442,131 of IRA distributions;

      2. $1,255 as taxable wages;

      3. $46 as taxable interest;

      4. a capital loss of $3,000;

      5. total income of $167,014;

      6. tax of $27,505;

      7. an additional tax pursuant to section 72(t) of $16,743;

      8. total tax of $44,248;

      9. federal income tax withheld of $20;

      10. credit for federal telephone excise tax paid of $60; and

      11. an amount owed (including a $2,093 estimated tax penalty) of

$46,261.1

      Petitioner was the breadwinner of the family. He worked as an electrical

engineer in the research and development department of Agilent Technologies. In

the spring of 2005 he voluntarily separated from Agilent Technologies, anticipating


      1
          All tax owed for 2006, plus interest, was paid in October 2011. See infra p.
7.
                                         -4-

he and his family would live on his retirement savings. He estimated his net worth

to be “just under $2 million” at the time he left Agilent Technologies.

      Colleen Gloceri was a stay-at-home mom. She had no substantial source of

income. During 2006 she worked part time at J.C. Penney, earning $1,255.

      In connection with the divorce, the District Court, El Paso County, Colorado

(Colorado district court), ordered petitioner to make monthly spousal maintenance

and child support payments to Colleen Gloceri.2 At this time petitioner was no

longer employed. Consequently, the Colorado district court anticipated that

petitioner would have to withdraw funds from his retirement accounts to make these

payments and support himself. Further, petitioner was required to pay the couple’s

marital debts and approximately $50,000 to Colleen Gloceri for the purpose of

completing construction on the marital house.3 To meet his obligations, and after

consulting with a financial adviser, petitioner rolled over three retirement (section

401 (k)) accounts into a single IRA. During 2006 he withdrew approximately




      2
        Petitioner refused to stipulate a complete copy of the divorce hearing
transcript.
      3
       Petitioner, Colleen Gloceri, and their children moved into the marital house
in 2001 and continuously lived there before the issuance of a Certificate of
Occupancy in 2011. The marital house was sold in October 2011. See infra p. 7.
                                          -5-

$442,000 from the IRA. A portion of the amounts withdrawn (distributions) was

given to Colleen Gloceri; petitioner retained the amount not given to Colleen

Gloceri. No income tax was withheld from the distributions. The distributions were

subject to taxation, as well as the section 72(t) additional tax, because they were not

made pursuant to a qualified domestic relations order. See secs. 414(p)(1),

72(t)(2)(c).

      Petitioner and Colleen Gloceri’s separation and subsequent divorce was

acrimonious. Each battled the other every step of the way throughout the divorce

proceedings. Each had a restraining order against the other; each filed police reports

and contempt charges against the other. Indeed, five years after their divorce

petitioner and Colleen Gloceri are still litigating financial matters in the Colorado

court system.

      The 2006 joint income tax return was prepared by an accountant hired by

petitioner. As shown supra p. 3, the tax reported on the return stems mostly

from income attributable to petitioner.

      In addition to the reported tax, respondent determined, using information from

third party payors, that petitioner and Colleen Gloceri failed to report gain from the

sale by petitioner of $32,637 in Agilent Technologies securities and the receipt of

$37 in taxable interest by Colleen Gloceri. This determination resulted in an
                                          -6-

assessed tax deficiency of $9,332, an assessed accuracy-related penalty under

section 6662 of $1,866, and related interest on December 1, 2008.

      Petitioner filed a Form 8857, Request for Innocent Spouse Relief, dated

December 1, 2008, and a related collection information statement; petitioner’s

submission was received by respondent on February 25, 2009.4 On July 21, 2009,

respondent sent petitioner a preliminary determination notice informing him that he

was not entitled to the relief requested for 2006. On August 16, 2009, petitioner,

through his representative, sent respondent a letter disputing respondent’s

determination. A conference between one of respondent’s Appeals officers and

petitioner’s representative was held on December 3, 2009. During that conference

the Appeals officer informed petitioner’s representative that petitioner was not

entitled to the relief sought. The Appeals officer sent a followup letter to petitioner’s

representative the next day, and on January 14, 2010, the Appeals team manager sent

petitioner a final Appeals determination notice formally denying petitioner’s request

for relief under section 6015 for 2006.

      Respondent determined that petitioner was not entitled to relief under section

6015 because substantially all the self-reported 2006 income tax liability was


      4
       The reason for the nearly two-month delay between the dating of Form 8857
and the receipt of the form by respondent is not contained in the record.
                                          -7-

attributable to distributions from petitioner’s IRA, an asset over which petitioner had

sole custody and control. Moreover, respondent determined petitioner was not

entitled to relief for the $9,332 assessed deficiency because that deficiency was

primarily attributable to petitioner’s sale of Agilent Technologies stock.

      On March 17, 2010, petitioner filed a petition in this Court. Thereafter,

Colleen Gloceri filed a request for relief under section 6015 for 2006. At the time of

trial (November 29, 2011), respondent had preliminarily agreed to grant Colleen

Gloceri’s request for section 6015 relief. Petitioner acknowledged that he was “well

aware of the tax liability and how it occurred.” But he asserts that there is a

“fairness issue” because respondent had not attempted to collect any tax from

Colleen Gloceri.

      At the time of their separation petitioner and Colleen Gloceri were in the

process of completing the construction of the marital house. Construction was

approximately 97% completed when petitioner and Colleen Gloceri separated.

Completion was delayed by the parties’ bickering, but the construction was finished

in 2011. In October 2011 the marital house was sold for $690,000. Because

respondent had an outstanding lien against the marital house with respect to

petitioner and Colleen Gloceri’s unpaid tax liability for 2006, the liability at issue

was fully paid from the proceeds. After paying off respondent’s lien and other
                                           -8-

expenses related to the sale of the marital house, petitioner received approximately

$224,000 in proceeds. Colleen Gloceri also received a portion of the proceeds; the

exact amount she received is not set forth in the record.

                                        OPINION

      Married couples may choose to file their Federal income tax returns jointly.

Sec. 6013(a). Couples filing joint returns are jointly and severally liable for the taxes

shown to be due thereon or subsequently determined to be due. Sec. 6013(d)(3).

Section 6015 provides relief from liability for filers of joint returns under three

subsections: (b), (c), and (f).

      Section 6015(b) provides relief where there is an understatement of tax

attributable to erroneous items 5 of one individual filing the joint return (the

nonrequesting spouse) and the other individual filing the joint return (the requesting

spouse) establishes that he/she did not know, and had no reason to know, that there

was such an understatement. Under section 6015(c) the tax liability may be

      5
          Sec. 1.6015-1(h)(4), Income Tax Regs., defines an erroneous item as:

      [A]ny item resulting in an understatement or deficiency in tax to the extent
      that such item is omitted from, or improperly reported (including improperly
      characterized) on an individual income tax return. For example, unreported
      income from an investment asset resulting in an understatement or
      deficiency in tax is an erroneous item. Similarly, ordinary income that is
      improperly reported as capital gain resulting in an understatement or
      deficiency in tax is also an erroneous item. * * *
                                          -9-

apportioned between former or legally separated spouses. A spouse requesting

section 6015(c) relief is not entitled to relief if he/she had actual knowledge, at

the time he/she signed the return, of any item giving rise to a deficiency (or portion

thereof).6 Under section 6015(b) and (c) relief is available only from an

understatement or deficiency and not with respect to an underpayment of income

tax reported on a joint return. Hopkins v. Commissioner, 121 T.C. 73, 88

(2003).

      Petitioner requests relief from the reported tax on his and Colleen Gloceri’s

joint tax return for 2006, as well as from the deficiency (nonreported tax) stemming

from unreported income. Petitioner is not entitled to relief with respect to the

reported tax on his and Colleen Gloceri’s joint tax return for 2006 under section

6015(b) or (c). Nor is petitioner entitled to relief with respect to the nonreported tax

on the gain from the sale of the Agilent Technologies stock. However, he is entitled

to relief under section 6015(c) with respect to the nonreported tax on the $37 of

interest income attributable to Colleen Gloceri. We now decide whether petitioner

is entitled to relief with respect to the reported tax and nonreported tax on the

      6
        Sec. 1.6015-2(c), Income Tax Regs., provides that all of the facts and
circumstances are to be considered in determining whether the requesting spouse
had reason to know of an understatement. The facts and circumstances to be
considered include, but are not limited to, “the extent of the requesting spouse’s
participation in the activity that resulted in the erroneous item”.
                                          - 10 -

sale of the Agilent Technologies stock under section 6015(f). We hold he is

not.

       Section 6015(f) provides relief from an underpayment of tax or deficiency

“[u]nder procedures prescribed by the Secretary” where: (1) it is determined that,

taking into account all the facts and circumstances, it would be inequitable to hold

the requesting spouse liable for the unpaid tax or deficiency or any portion of either,

and (2) relief is not available under section 6015(b) or (c). The Internal Revenue

Service (IRS) has prescribed guidelines for determining whether a requesting spouse

qualifies for relief under section 6015(f). See Rev. Proc. 2003-61, 2003-2 C.B. 296

(effective for requests for section 6015(f) relief filed during or after 2003).7 If the

IRS denies equitable relief under section 6015(f), then pursuant to section

6015(e)(1)(A) the requesting spouse may petition this Court to determine the

appropriate relief available. We thereafter will determine whether the requesting

spouse is entitled to equitable relief applying a de novo standard of review as

well as a de novo scope of review. Porter v. Commissioner, 132 T.C. 203, 210


       7
       We have stated that the Court will consider these guidelines, but we are not
bound by them in evaluating the facts and circumstances in deciding whether
equitable relief is appropriate. See Pullins v. Commissioner, 136 T.C. 432. 438-439
(2011); Deihl v. Commissioner, T.C. Memo. 2012-176; Sriram v. Commissioner,
T.C. Memo. 2012-91.
                                          - 11 -

(2009).8 The requesting spouse bears the burden of proving his/her entitlement to the

requested relief. See Rule 142(a).

      The IRS refused to grant equitable relief to petitioner pursuant to section

6015(f). In so doing, the Appeals officer applied the factors in Rev. Proc. 2003-61,

sec. 4.01, 2003-2 C.B. at 297, which lists the following seven requirements that must

be satisfied before a request for equitable relief will be considered:

      (1) The requesting spouse filed a joint return for the taxable year for

which relief is sought.

      (2) Relief is not available under section 6015(b) or (c).

      (3) The request for relief must be timely filed.

      (A) If the request is for relief from a liability (or a portion of liability)

that remains unpaid, the request must be made before the expiration of the period

of limitations on collection of the income tax liability--e.g., generally 10 years after

the assessment of tax.

      (B) If the request is for a refund or credit of amounts paid, the      request must

be made within three years from the time the return was filed or two years from the

time the return was paid, whichever is later.


      8
       The standard of review (de novo or abuse of discretion) does not affect our
decision in this matter.
                                            - 12 -

      (4) There was no fraudulent transfer of assets between the spouses.

      (5) The nonrequesting spouse did not transfer disqualified assets to the

requesting spouse.

      (6) The requesting spouse did not knowingly participate in the filing of

a fraudulent joint return.

      (7) The income tax liability from which the requesting spouse seeks

relief is attributable (in full or in part) to an item of the nonrequesting spouse

or an underpayment resulting from the nonrequesting spouse’s income.

      In his posttrial brief respondent concedes that petitioner satisfies the first six of

the aforesaid seven requirements. However, respondent asserts that petitioner does

not satisfy the seventh requirement because the tax liability from which he seeks

relief is attributable to his own income.

      After the trial, on January 5, 2012, the Commissioner issued Notice 2012-8,

2012-4 I.R.B. 309, which announced that a proposed revenue procedure updating

Rev. Proc. 2003-61, supra, will be forthcoming. That proposed revenue procedure,

if finalized, will revise the factors that the IRS will use to evaluate requests for

equitable relief under section 6015(f). The proposed revenue procedure will retain

the aforementioned seven threshold requirements for equitable relief. It will also

provide that the granting of relief should be considered if the requesting spouse
                                          - 13 -

establishes he/she was the victim of abuse before the return was signed and did not

challenge the treatment of any items on the return, or question the payment of any

balance due reported on the return, for fear of the nonrequesting spouse’s

retaliation.9

       Petitioner asserts that he satisfied all seven threshold requirements for

equitable relief under section 6015(f), including the requirement that the income tax

liability from which he seeks relief be attributable to an item of his spouse (i.e.

Colleen Gloceri). In making this assertion, petitioner maintains that once the

Colorado district court ordered him to make monthly spousal maintenance and child

support payments to Colleen Gloceri, he was “acting as an agent to implement the

orders of the court” and thus the distributions from the IRA were not his income.

Continuing, petitioner reasons: “an IRA does not generate any income simply by its

possession, it is only generating income when it is withdrawn. Those withdrawals

were petitioned by my ex-spouse through the Court. So I am saying that is income

       9
        Petitioner contends that we should apply the provisions of the proposed
revenue procedure set forth in Notice 2012-8, 2012-4 I.R.B. 309, in determining
whether he is entitled to equitable relief under sec. 6015(f). In Sriram v.
Commissioner, T.C. Memo. 2012-91, slip op. at 9 n.7, we stated that we would
“continue to apply the factors in Rev. Proc. 2003-61, 2003-2 C.B. 296, in view of
the fact that the proposed revenue procedure is not final and because the comment
period under the notice only recently closed.” See also Diehl v. Commissioner,
T.C. Memo. 2012-176. We shall apply the factors in Rev. Proc. 2003-61, supra, in
this case.
                                         - 14 -

that is attributable to her, not attributable to me”. In his posttrial memorandum,

petitioner posits “ownership by definition conveys a free ability to use the object in

question at ones [sic] own discretion for ones [sic] own benefit”. Petitioner claims

he faced jail time if he did not make the monthly withdrawals from his IRA, which he

asserts made him a victim of abuse.

      We disagree with petitioner’s argument. All the funds used to establish the

IRA were derived from petitioner’s employer-sponsored retirement accounts, and it

is an established principle that income is taxable to the person that earns it. Lucas v.

Earl, 281 U.S. 111, 114-115 (1930).     Petitioner transferred his three section 401(k)

accounts to an IRA only after consulting with a financial adviser regarding how best

he should receive (from a tax viewpoint) structured monthly distributions.

      We have no knowledge as to the specific order of the Colorado district court.

However, as best we can determine, the Colorado district court did not specifically

order petitioner to transfer his three section 401(k) accounts into a single IRA and

make distributions therefrom. Moreover, with regard to the sale of the Agilent

Technologies securities, petitioner candidly admitted calling his broker and ordering

the sale of the securities. Petitioner’s actual knowledge of the sale of the securities

weighs heavily against granting his request for relief from the deficiency for

unreported income.
                                         - 15 -

      Petitioner asserts he did not know, and had no reason to know, that Colleen

Gloceri would not pay the couple’s reported 2006 tax liability. We are skeptical that

petitioner did not know that Colleen Gloceri would not pay the 2006 tax liability.

Colleen Gloceri had no source of substantial income, earning only a meager amount

in 2006. And there is nothing in the record to indicate that Colleen Gloceri had any

assets of substantial value in her own name.

      In conclusion, we find that (1) petitioner is not entitled to equitable relief from

joint liability under section 6015(f) for the reported and nonreported tax, but (2) he is

entitled to relief from the tax on the $37 of unreported interest income attributable to

Colleen Gloceri, pursuant to section 6015(c). In reaching these findings, we have

considered all arguments and contentions made by petitioner, and to the extent not

discussed herein, conclude that they are meritless or irrelevant.

      To reflect the foregoing,


                                                             Decision will be entered

                                                      under Rule 155.
