                        T.C. Memo. 2001-69



                      UNITED STATES TAX COURT



      DAVID R. BRADEN AND SHARON F. BRADEN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9459-98.                     Filed March 22, 2001.



     Sharon F. Braden, pro se.

     Thomas E. Crowe, for petitioner David R. Braden.

     Fred E. Green, Jr., for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     MARVEL, Judge:   Respondent determined a deficiency in

petitioners’ Federal income tax of $16,525 and an accuracy-
                               - 2 -

related penalty under section 6662(a)1 of $2,072 for the taxable

year 1995.

     After concessions,2 the only issue for decision3 is whether

David R. Braden is entitled to relief from liability under

section 6015(b)(1) for the income tax deficiency determined by

respondent with respect to petitioners’ jointly filed Federal

income tax return for 1995.   References to petitioner refer to

David R. Braden, and references to Ms. Braden refer to Sharon F.

Braden.4

                        FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts is incorporated herein by this




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
     2
      Petitioner Sharon F. Braden and respondent filed a
stipulation of settled issues in which Ms. Braden conceded she is
liable for a deficiency in income tax for taxable year 1995 in
the amount of $16,525, and respondent conceded that Ms. Braden is
not liable for the accuracy-related penalty under sec. 6662(a)
for 1995. Respondent also conceded the sec. 6662(a) penalty with
respect to petitioner David R. Braden.
     3
      The only other issues raised in the notice of deficiency
are computational.
     4
      Following petitioners’ divorce, Ms. Braden changed her name
to Sharon Mueller. Since Ms. Braden has not moved to change the
caption in this case to reflect her new surname, however, we
refer to her in this opinion as Ms. Braden.
                                - 3 -

reference.   At the time the petition was filed, petitioner

resided in Las Vegas, Nevada.

     Petitioners were married in October 1981.   During 1995, they

resided with their minor child, two other children,5 and a

grandchild in Las Vegas, Nevada.   Petitioners filed a joint

Federal income tax return for 1995.

     Petitioner attended college for 3 years, majoring in animal

science.   While in college, petitioner did not take any courses

in the fields of finance or business.   Petitioner became a police

officer and, in approximately 1984, took a position with the Las

Vegas Police Department, where he was employed throughout 1995.

     Ms. Braden graduated from high school and attended one

semester of college.   During 1995, she maintained petitioners’

household and took care of the children.   During the course of

petitioners’ marriage, Ms. Braden was responsible for paying

petitioners’ bills from funds supplied by petitioner and managing

their financial affairs.   Petitioner deposited his payroll checks

directly into a joint checking account maintained by petitioners

at Network Federal Credit Union; Ms. Braden used this account to

pay petitioners’ bills.




     5
      The relationship of these children to petitioners does not
appear in the record.
                               - 4 -



     Petitioner did not review petitioners’ bills or bank

statements and only rarely discussed finances with Ms. Braden or

paid a bill himself.

     In approximately August 1995, petitioners moved into a newly

constructed house.   Ms. Braden’s father, who had been diagnosed

with terminal cancer several months earlier, moved into

petitioners’ new home with them and remained with them until his

death in September 1995.

     Ms. Braden and her brother were the heirs of their deceased

father; Ms. Braden was appointed executrix of her father’s

estate.   As executrix, Ms. Braden met with the estate’s probate

counsel regarding estate matters.   Petitioner sometimes attended

these meetings but did not assist Ms. Braden in performing her

duties as executrix.

     At some point during 1995, Ms. Braden received distributions

from several individual retirement accounts (IRA’s) owned by her

father at the time of his death.    Although petitioner was aware

that Ms. Braden had received the distributions, he did not know

that the distributions came from IRA’s or that the distributions

were taxable for Federal income tax purposes.   He believed that

the distributions simply represented nontaxable distributions

from the estate of Ms. Braden’s father.   His belief was based on

conversations he had with Ms. Braden, the estate’s probate

counsel, and a retired Internal Revenue Service (IRS) special
                                - 5 -

agent.   At a meeting held shortly after Ms. Braden’s father died,

the estate’s probate counsel told petitioners there would be no

tax on the distributions because inheritances under $650,000 were

exempt from tax.   The retired IRS special agent, whom petitioner

had met at a class on financial crimes investigations, also told

petitioner, in response to petitioner’s question regarding the

taxability of an inheritance, that inheritances under $650,000

were exempt from tax.

     Ms. Braden also received interest earned on certain accounts

owned by her father at his death, but the interest income was not

reported on petitioners’ 1995 return.    Petitioner did not know

that part of the distributions received by Ms. Braden consisted

of interest income.6    Petitioner believed that all of the funds

distributed to Ms. Braden as a result of her father’s death were

simply an inheritance from Ms. Braden’s father.7

     Ms. Braden used approximately $10,000 of the distributions

she received as a result of her father’s death to pay her

father’s hospital bills and gave half of the remaining money to


     6
      We infer from the record as a whole that the accounts
generating the omitted interest belonged to Ms. Braden’s father
before his death and that the omitted interest was part of the
distributions made to Ms. Braden as a result of his death.
     7
      Although respondent claims that petitioner did not assert
that he is entitled to relief from joint and several liability
with respect to the omitted interest income, petitioner
consistently took the position throughout the case that he
believed the distributions Ms. Braden received as a result of her
father’s death were a part of her nontaxable inheritance.
                               - 6 -

her brother.   Ms. Braden spent the balance of the distributions

to construct a block wall at petitioners’ home and to purchase

furniture, furnishings, a big-screen television, a computer, a

hot tub, and landscaping for petitioners’ home, a cruise for

herself and her sister-in-law, and stereos for the four children

who were living with petitioners at the time.   Ms. Braden also

used some of the money to help purchase two cars--a Toyota Avalon

for which she paid approximately $15,000 and a Toyota Tercel for

which she paid approximately $11,000.   Petitioner contributed to

the purchase of the cars by trading in a 1995 Chevrolet pickup

truck that he had purchased new; the trade-in value was credited

against the purchase price of one or both of the cars.

     In May 1996, petitioners separated.   Petitioner moved out of

the family home; Ms. Braden remained in the home.   Petitioner

continued to deposit his payroll checks into the joint account.

Ms. Braden was supposed to pay the mortgage and utilities for the

family home but did not do so for a period of approximately 4

months.   The delinquency, which petitioner did not discover until

the family home was about to be sold, was remedied with funds

from petitioner and from the sale of the family home.

     In July 1997, petitioners divorced.   In connection with the

divorce, petitioners sold their home.   Petitioner retained no

part of the sale proceeds.   Ms. Braden retained the furniture and

furnishings she purchased with the distributed funds, as well as
                               - 7 -

other property acquired during petitioners’ marriage, with the

exception of a big-screen television and VCR, a vacuum cleaner, a

couch and matching chair, and a computer and desk that petitioner

received as part of petitioners’ divorce settlement.

     Before petitioners separated, petitioner prepared

petitioners’ 1995 joint Federal income tax return.    He did not

report the distributions attributable to Ms. Braden’s father as

income on that return because he believed the funds to be

nontaxable.   Petitioner did not know the distributions consisted

of IRA withdrawals and interest income, nor did he know the

proper characterization of the distributions for Federal income

tax purposes until he was contacted by respondent’s agent.

     In the notice of deficiency, respondent determined that Ms.

Braden received distributions from the IRA’s of her deceased

father, the taxable portion of which totaled $61,681.    After

allowing a $5,000 death benefit exclusion, respondent determined

that petitioners failed to report $56,681 of the IRA

distributions as income on their 1995 joint return.    Respondent

also determined that petitioners failed to report interest income

of $754 on their 1995 joint return.

                              OPINION

A.   Statutory Framework

     Section 6013(a) authorizes spouses to elect to file a

joint Federal income tax return.   If they elect to do so, the tax
                                - 8 -

required to be shown on the return is computed on their combined

income, expenses, and credits, and their liability for the tax is

joint and several.    See sec. 6013(d)(3).

       In 1971, Congress enacted section 6013(e) to ameliorate

perceived inequities resulting from the imposition of joint and

several liability in certain circumstances.    See S. Rept. 91-1537

(1970), 1971-1 C.B. 606.    Section 6013(e), as originally enacted,

offered relief from joint and several liability only in cases

involving omitted income where the spouse seeking relief could

prove that he or she met the strict requirements of subsection

(e).

       In 1984, section 6013(e) was amended to permit a spouse to

seek relief from joint and several liability in cases where an

understatement of tax resulted from erroneous deductions claimed

on a joint tax return.    See Deficit Reduction Act of 1984, Pub.

L. 98-369, sec. 424, 98 Stat. 494, 801; H. Conf. Rept. 98-861, at

1119 (1984), 1984-3 C.B. (Vol. 2) 1, 373.    Section 6013(e)(1), as

amended, provided that a spouse could be relieved of joint and

several liability if the spouse proved that:    (1) A joint return

was filed; (2) the return contained a substantial understatement

of tax attributable to grossly erroneous items of the other

spouse; (3) in signing the return, the spouse seeking relief did

not know, and had no reason to know, of the substantial

understatement; and (4) under the circumstances it would be
                                - 9 -

inequitable to hold the spouse seeking relief liable for the

substantial understatement.

     Many taxpayers tried unsuccessfully to obtain relief under

section 6013(e), even after it was amended in 1984.    In order to

make relief from joint and several liability more accessible,

Congress, in 1998, repealed section 6013(e) and enacted section

6015.    See Internal Revenue Service Restructuring and Reform Act

of 1998, Pub. L. 105-206, sec. 3201(a), 112 Stat. 734; H. Conf.

Rept. 105-599, at 249 (1998).    Section 6015 provides several

avenues of relief, one of which is section 6015(b)(1).    See

Cheshire v. Commissioner, 115 T.C. 183, 189 (2000).    Although

some of the provisions of section 6015 have no analog in former

section 6013(e), section 6015(b)(1) is similar to former section

6013(e)(1).    In analyzing section 6015(b)(1), we may look to

cases interpreting former section 6013(e)(1) for guidance.      See

Cheshire v. Commissioner, supra; Butler v. Commissioner, 114 T.C.

276, 283 (2000).

     Petitioner seeks relief under section 6015(b)(1) from joint

and several liability for the deficiency determined by respondent

with respect to the IRA and interest distributions (collectively,

the distributions) received by Ms. Braden during 1995.8



     8
      Petitioner originally sought relief under former sec.
6013(e). The parties subsequently stipulated that “the innocent
spouse issue in this case is governed by” sec. 6015. Petitioner
abandoned his argument under sec. 6015(c) at trial.
                               - 10 -

Section 6015(b)(1) provides:

          (1) In general.-–Under procedures prescribed by
     the Secretary, if–-


               (A) a joint return has been made for a
          taxable year;

               (B) on such return there is an understatement
          of tax attributable to erroneous items of 1
          individual filing the joint return;

               (C) the other individual filing the joint
          return establishes that in signing the return
          he or she did not know, and had no reason to
          know, that there was such understatement;

               (D) taking into account all the facts and
          circumstances, it is inequitable to hold the
          other individual liable for the deficiency in tax
          for such taxable year attributable to such
          understatement; and

               (E) the other individual elects (in such form
          as the Secretary may prescribe) the benefits of
          this subsection not later than the date which
          is 2 years after the date the Secretary has begun
          collection activities with respect to the individual
          making the election,

     then the other individual shall be relieved of liability
     for tax (including interest, penalties, and other
     amounts) for such taxable year to the extent such
     liability is attributable to such understatement.

A taxpayer must satisfy each requirement under subparagraphs (A)

through (E) to be entitled to relief under section 6015(b)(1).

     There is no dispute that petitioner satisfies subparagraphs

(A), (B), and (E).   Petitioner made a joint return with Ms.

Braden, there is an understatement of tax attributable to

erroneous items of Ms. Braden, and respondent does not dispute
                               - 11 -

that petitioner made a qualifying election as required by section

6015(b)(1)(E).   Respondent contends, however, that the

requirements of subparagraphs (C) and (D) have not been met.

B.   The No Knowledge of the Understatement Requirement
     of Section 6015(b)(1)(C)

     Petitioner’s case is appealable to the Court of Appeals for

the Ninth Circuit.    In omitted income cases under former section

6013(e)(1), the Court of Appeals for the Ninth Circuit and the

Tax Court have applied similar standards to decide whether the no

knowledge of the understatement requirement was met.   See Guth v.

Commissioner, 897 F.2d 441, 444 (9th Cir. 1990), affg. T.C. Memo.

1987-522.    In cases applying former section 6013(e)(1), we have

examined the facts and circumstances to ascertain whether a

taxpayer seeking relief from joint and several liability either

knew of the understatement or had reason to know of the

understatement at the time he or she signed the subject return.

See Bokum v. Commissioner, 94 T.C. 126, 152-154 (1990), affd. 992

F.2d 1132 (11th Cir. 1993).   If a taxpayer asserted that he did

not have reason to know of an understatement within the meaning

of section 6013(e)(1)(C), we have examined the taxpayer’s

knowledge of the transaction giving rise to the omitted income.

See id.     We make the same analysis under section 6015(b)(1)(C).

See Cheshire v. Commissioner, supra at 192-193.

     The gist of petitioner’s argument is that he did not know or

have reason to know that the distributions his wife received
                               - 12 -

consisted of IRA withdrawals and interest income.    Petitioner

argues, in effect, that (1) he did not have actual knowledge of

the understatement and (2) he did not have sufficient knowledge

of the underlying transaction to give him reason to know of the

understatement.

     We are satisfied from our review of the record in this case

that petitioner did not have actual knowledge of the

understatement, or of the transactions that produced the omitted

income giving rise to the understatement, when he prepared and

filed petitioners’ joint return for 1995.    In fact, respondent

has not argued that petitioner knew of the understatement.

Respondent argues only that, because petitioner knew that Ms.

Braden had received the distributions as a result of her father’s

death, petitioner had knowledge of the transaction giving rise to

the understatement and, therefore, he knew or had reason to know

of the understatement within the meaning of section

6015(b)(1)(C).    We reject respondent’s argument based on our

review of the facts and applicable law.

     A taxpayer has reason to know of an understatement if a

reasonably prudent taxpayer in his position at the time he signed

the return could be expected to know that the return contained

the understatement.    See Price v. Commissioner, 887 F.2d 959, 965

(9th Cir. 1989), revg. an Oral Opinion of this Court; Stevens v.

Commissioner, 872 F.2d 1499, 1505 (11th Cir. 1989), affg. T.C.
                               - 13 -

Memo. 1988-63; Winnett v. Commissioner, 96 T.C. 802, 812 (1991);

Bokum v. Commissioner, supra at 138; Flynn v. Commissioner, 93

T.C. 355 (1989); Terzian v. Commissioner, 72 T.C. 1164 (1979).

Factors to consider in analyzing whether a taxpayer seeking

relief from joint and several liability had reason to know of the

understatement include:    (1) The taxpayer’s level of education;

(2) the taxpayer’s involvement in the family’s business and

financial affairs; (3) the presence of expenditures that appear

lavish or unusual when compared to the family’s past levels of

income, standard of living, and spending patterns; and (4) the

culpable spouse’s evasiveness and deceit concerning the couple’s

finances.   See Price v. Commissioner, supra at 965 (citing

Stevens v. Commissioner, supra at 1505); Varney v. Commissioner,

T.C. Memo. 1991-14.    “The question we must ask is whether

petitioner’s active and knowledgeable participation in the

subject transaction(s) rose to a level where he * * * had reason

to know of the * * * understatement.”    Pulliam v. Commissioner,

T.C. Memo. 1994-609.

     Applying the factors used to determine whether a taxpayer

had reason to know of the understatement confirms that petitioner

did not have constructive knowledge of the underlying transaction

or of the understatement resulting from the transaction.      There

is nothing in the record to support a conclusion that petitioner,

a high school graduate with 3 years of college education, had any
                              - 14 -

involvement with, or knowledge of, the financial affairs of Ms.

Braden’s father prior to the father’s death.   After the father’s

death, petitioner knew only that Ms. Braden was entitled to

receive, and did receive, an inheritance.   Petitioner’s

involvement with petitioners’ joint financial affairs generally

was limited to depositing his paycheck in a joint account with

Ms. Braden.   Ms. Braden paid most of petitioners’ bills and

managed their financial affairs.   Ms. Braden, the executrix of

her father’s estate, also handled the financial matters flowing

from her father’s death.   Although Ms. Braden certainly was in a

position to know that the distributions came from her father’s

IRA’s, the record does not contain any evidence that she or

anyone else told petitioner that the distributions consisted of

IRA withdrawals and interest income or gave him any reason to

conclude the distributions were taxable.9   There were no lavish

or unusual expenditures following the receipt of the

distributions that were inconsistent with petitioner’s belief

that Ms. Braden had received a nontaxable inheritance from her

father’s estate.   Moreover, although petitioner inquired about



     9
      Respondent relies upon our decision in McCoy v.
Commissioner, 57 T.C. 732 (1972), for the proposition that where
both spouses are “innocent” neither spouse is entitled to relief
under former sec. 6013(e). We reject respondent’s argument based
on McCoy. The evidence in this case supports a conclusion that
Ms. Braden, by reason of her position as executrix and
beneficiary of the IRA’s, likely knew or had reason to know that
the accounts from which the distributions were made were IRA’s.
                              - 15 -

the tax consequences of the distributions on at least two

occasions, the information he received confirmed his belief that

the distributions were part of Ms. Braden’s nontaxable

inheritance.

     What constitutes sufficient knowledge of the transaction in

this case can best be illustrated by comparing our decisions in

Cheshire v. Commissioner, 115 T.C. 183 (2000) (applying section

6015), and Varney v. Commissioner, supra (applying section

6013(e)).   Both cases involved distributions to the taxpayer’s

spouse from retirement accounts in which the taxpayer’s spouse

owned an interest.

     In Cheshire, the taxpayer had been informed by her husband

that he was contemplating retirement and was eligible to receive

a substantial sum of money from his retirement plan.   The

taxpayer knew that her husband subsequently received the

distribution from his retirement plan.    In fact, the taxpayer’s

husband showed the taxpayer the deposit slip reflecting the

deposit of the retirement plan distribution and discussed with

her the purposes for which the distribution would be used.     See

Cheshire v. Commissioner, supra at 193.    On these facts we

concluded the taxpayer had actual knowledge of the underlying

transaction that produced the omitted income and, therefore, the

taxpayer knew or had reason to know of the understatement.
                              - 16 -

Consequently, she did not satisfy the no knowledge of the

understatement requirement of section 6015(b)(1)(C).   See id.

     In Varney v. Commissioner, supra, we reached the opposite

conclusion under former section 6013(e)(1)(C).    The distributions

in Varney were from an IRA belonging to the taxpayer’s deceased

spouse, which the spouse had opened prior to her marriage to the

taxpayer.   After the taxpayer’s spouse learned that she had

terminal cancer, the spouse withdrew the funds in her IRA and

deposited them into a joint account with the taxpayer.   When the

taxpayer asked his spouse about the large deposit into their

joint account, his spouse told him that the funds were part of

the savings she had accumulated over the years.   The taxpayer

knew only that the funds came from his spouse’s savings; he did

not know that the funds were distributed from his spouse’s IRA.

In deciding whether the taxpayer met the section 6013(e)(1)(C)

requirement, we examined whether the taxpayer was aware of the

underlying transaction that produced the omitted income.     We

concluded that, since the taxpayer had satisfied his duty of

inquiry and did not know that the funds received were the result

of a distribution from his spouse’s IRA, the taxpayer did not

have actual or constructive knowledge of the transaction

generating the understatement.   We held that the taxpayer
                               - 17 -

satisfied the no knowledge of the understatement requirement of

former section 6013(e)(1)(C) on these facts.10

     As in Varney v. Commissioner, T.C. Memo. 1991-14, the

essence of the transaction in this case is that the distributions

came from IRA’s.    Knowledge of the distributions’ composition is

what enables a taxpayer to ascertain the proper tax treatment of

the distributions.    See secs. 61(4), 72, 408.   Unaware that the

distributions consisted of IRA withdrawals and interest income,

petitioner concluded that the distributions represented an

inheritance excludable from income for Federal income tax

purposes.    See sec. 102(a) (“Gross income does not include the

value of property acquired by gift, bequest, devise, or

inheritance.”).    Petitioner did not know the essential facts of

the transaction that define its character for Federal income tax

purposes.    See Varney v. Commissioner, supra; see also Hillman v.

Commissioner, T.C. Memo. 1993-151 (a taxpayer must have

sufficient knowledge of transaction to permit him to inquire as

to its appropriate tax treatment); cf. Cheshire v. Commissioner,

supra.    Since petitioner did not know that the distributions

consisted of IRA withdrawals and interest income and, after

satisfying his duty of inquiry, reasonably believed the


     10
      In Varney v. Commissioner, T.C. Memo. 1991-14, we
ultimately concluded that the taxpayer was not entitled to be
relieved of joint and several liability for the deficiency
because the taxpayer did not prove he satisfied former sec.
6013(e)(1)(D).
                               - 18 -

distributions were a nontaxable inheritance from Ms. Braden’s

father, we conclude that petitioner did not have sufficient

knowledge of the transaction generating the understatement to

give him knowledge or reason to know of the understatement.

     We hold that petitioner has satisfied the no knowledge of

the understatement requirement of section 6015(b)(1)(C).

C.   The Equitable Requirement of Section 6015(b)(1)(D)

     We now turn to the final contested requirement, section

6015(b)(1)(D).    Respondent contends that, since a portion of the

funds distributed to Ms. Braden was used to purchase furniture

and furnishings for petitioners’ family home and to pay for

improvements to the home, petitioner benefited from the

understatement.   Respondent argues, therefore, that it would not

be inequitable to hold petitioner liable for the deficiency in

tax attributable to the understatement.   We disagree.

     We must evaluate all of the facts and circumstances in

deciding whether it is inequitable to hold a taxpayer liable for

the deficiency under the relief provisions of section 6015(b)(1).

See sec. 6015(b)(1)(D).   Since section 6015(b)(1)(D) is

substantially identical to former section 6013(e)(1)(D), we may

look to cases applying former section 6013(e)(1)(D) to inform our

analysis under section 6015(b)(1)(D).   See Butler v.

Commissioner, 114 T.C. 276 (2000).
                               - 19 -

     Under former section 6013(e), whether the taxpayer

significantly benefited from the omitted income was an important

factor in reaching our conclusion.      See Estate of Krock v.

Commissioner, 93 T.C. 672, 677 (1989).      Normal support was not

considered to be a significant benefit.     See sec. 1.6013-5(b),

Income Tax Regs.   In applying former section 6013(e)(1)(D), we

described normal support as a “floating standard, inasmuch as

‘one person’s luxury can be another’s necessity’”.      Klimenko v.

Commissioner, T.C. Memo. 1993-340 (quoting Sanders v. United

States, 509 F.2d 162, 168 (5th Cir. 1975)).     We examined evidence

of the taxpayer’s lifestyle, including his expenditures, and how

the omitted income was used by the taxpayer and his spouse to

decide whether a taxpayer significantly benefited from the

understatement.    See Estate of Krock v. Commissioner, supra.

     In this case, our evaluation of the evidence regarding

petitioner’s lifestyle, expenditures, and other financial matters

leads us to the conclusion that petitioner did not substantially

benefit from the understatement.   The family home was purchased

with funds supplied by petitioner.      Petitioner made a downpayment

of approximately $13,000 toward the purchase price of the house

(approximately $175,000) and supplied the funds to pay the

mortgage during petitioners’ marriage.      When the family home was

sold, petitioner retained none of the proceeds.
                              - 20 -

     Ms. Braden did not contribute any part of the downpayment,

nor did she supply the money to pay the monthly mortgage

payments.   After petitioners separated, Ms. Braden continued to

live in the family home and was supposed to pay the mortgage and

other household expenses.   She did not do so.   Arrearages owed to

the mortgage, telephone, and gas and electric companies were paid

out of proceeds from the sale of petitioners’ home, and, to the

extent that the sale proceeds were insufficient, petitioner paid

the balance.

     With part of the distributions, Ms. Braden purchased some

furniture and furnishings for the family home and paid for some

home improvements.   In the divorce settlement, Ms. Braden kept

all of petitioners’ household furniture and furnishings, with the

exception of a computer and desk, television, VCR, vacuum

cleaner, and couch and matching chair.   Both Ms. Braden and

petitioner contributed to the purchase of two cars in 1995; Ms.

Braden contributed cash, and petitioner contributed by trading in

a 1995 pickup truck that he had purchased with his own funds.

     Taking into account all the facts and circumstances, we are

satisfied that petitioner did not benefit substantially from the

understatement.   Neither petitioner’s use of the family home and

its furniture and furnishings, nor his receipt of a few items of

furniture and equipment as part of his divorce settlement

amounted to a substantial benefit, particularly when his overall
                              - 21 -

financial contribution to petitioners’ household is taken into

account.   See Klimenko v. Commissioner, supra.

     We conclude that it is inequitable to hold petitioner liable

for that part of the deficiency attributable to the distributions

received by Ms. Braden in 1995 and that, therefore, the

requirement of section 6015(b)(1)(D) is satisfied.

     Conclusion

     After carefully reviewing the record in this case, we hold

that petitioner has satisfied each of the requirements of section

6015(b)(1) and that he is entitled to be relieved of liability

for tax attributable to the distributions received by Ms. Braden

in 1995.

     To reflect the foregoing and the stipulation of settled

issues,


                                         Decision will be entered

                                    under Rule 155.
