                  T.C. Summary Opinion 2003-110



                     UNITED STATES TAX COURT



                SARAH JOAN BARBER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11384-01S.                Filed August 6, 2003.



     Sarah Joan Barber, pro se.

     Vicki L. Miller, for respondent.



     COUVILLION, Special Trial Judge:    This case was heard

pursuant to section 7463 of the Internal Revenue Code in effect

at the time the petition was filed.1    The decision to be entered

is not reviewable by any other court, and this opinion should not

be cited as authority.


     1
          Unless otherwise indicated, subsequent section
references are to the Internal Revenue Code as amended. Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 2 -


     In the notice of determination, respondent denied petitioner

relief from joint liability for her 1987 Federal income tax under

section 6015(f).    The sole issue for decision is whether this

denial was an abuse of respondent’s discretion.

     Some of the facts were stipulated.     Those facts, with the

annexed exhibits, are so found and are made part hereof.

Petitioner’s legal residence at the time the petition was filed

was Kansas City, Missouri.

     Petitioner married James Bradley Barber (Mr. Barber) in

January 1983.   Mr. Barber testified at trial but did not

intervene in the proceeding, nor did he object to petitioner’s

claim for relief.    Petitioner and Mr. Barber had one son, born in

1989.   They divorced in December 1998.

     During the year at issue, petitioner was employed by

American City Business Journals (ACBJ) in the human resources

department.   In 1988, petitioner’s employment with ACBJ was

terminated when the company relocated its offices to North

Carolina.   Thereafter, she was a homemaker and primary caretaker

of her son but occasionally had jobs outside the home.     In 1987

and subsequent years, Mr. Barber was self-employed as a painter

and paperhanger.

     Petitioner and Mr. Barber experienced financial difficulties

during their marriage, particularly after their son was born, and

petitioner was no longer employed.      Their money was often spent,
                               - 3 -


as Mr. Barber described, “putting water on the biggest fire.”

They were often behind on their bills.   Nevertheless, at the time

of their divorce in 1998, petitioner and Mr. Barber had

accumulated $8,015.19 in equity in their home.   Both petitioner

and Mr. Barber participated in managing the family’s finances by

discussing which bills were due, which would be paid, which would

wait, and what their spending limits were.

     Petitioner described her marriage to Mr. Barber as an

abusive relationship.   Police were called to the couple’s

residence during arguments in 1994 and 1995.   However, petitioner

never filed any charges on these incidents.    Petitioner was not

allowed to have her own checking account, but, as described

later, she had access to a checking account.   Petitioner also

stated that, toward the end of their marriage, she was not

allowed to drive a car.   Mr. Barber disputed the characterization

of their relationship as abusive but admitted to arguments

between them.   He admitted illegal drug use and accused

petitioner of the same behavior.

     Petitioner provided occasional unpaid assistance to Mr.

Barber in his painting and paperhanging business (the business).

She was expected to keep expense records for the business;

however, the task proved difficult because Mr. Barber did not

keep close track of his receipts and taking care of their son was

demanding.   Sometimes Mr. Barber gave petitioner checks from his
                               - 4 -


paperhanging or construction jobs to pay household or business

bills.   Petitioner deposited these checks in a bank account in

the name of Mr. Barber or his business, for which she was an

authorized cosignatory.   Other times, Mr. Barber cashed checks

for paperhanging and construction jobs at the banks of the

drawers.   Petitioner did not know what happened to the money from

those transactions.

     In the early years of their marriage, petitioner filed

Federal income tax returns as “married filing separately.”    At a

certain point, at the behest of Mr. Barber, she stopped filing

separately in order that the two of them could jointly file, but

thereafter no returns were filed for a period of years.   The

reasons given by petitioner and Mr. Barber for not filing

included poor record keeping for Mr. Barber’s business, financial

difficulties, and marital and personal stress.

     In the early 1990s, the Internal Revenue Service (IRS)

contacted petitioner and Mr. Barber about their 1987 through 1991

years for which no returns had been filed.   The IRS prepared

joint returns for those years, including the year at issue.

Petitioner and Mr. Barber met with an IRS examiner in connection

with these returns.   Petitioner later regretted her decision to

file joint returns because, as she stated, during most of those

years, she had earned little or no income.   The 1987 through 1991
                               - 5 -


returns were filed in April 1993.   Petitioner and Mr. Barber

later filed joint returns for 1992, 1993, and 1994.

     On the 1987 joint return, the year at issue, petitioner

reported her income of $18,923 from ACBJ.    Mr. Barber reported

self-employment income of $6,798 from his business.    The tax due

was $3,442, which included $835 in self-employment tax.    After

subtracting $1,746 in Federal income tax withholdings, the 1987

return reflected a balance due of $1,696.    No payments were

submitted with the 1987 through 1991 returns.    Petitioner and Mr.

Barber initially intended to execute and pay their delinquent

taxes through an installment agreement with the IRS; however,

they did not follow through with that intention.

     Petitioner and Mr. Barber first separated in early 1995.

The couple reconciled in July 1995 through February or March

1996.   Thereafter petitioner instituted divorce proceedings.     A

final decree of divorce was issued in December 1998.    The divorce

decree included a provision placing responsibility for the

payment of past tax debts on Mr. Barber.    The decree ordered:


     that the Respondent [Mr. Barber] assume responsibility for
     the entire debt currently due and owing to the Internal
     Revenue Service in the approximate sum of $30,000. The
     Respondent shall assume said debt and shall indemnify and
     hold harmless the Petitioner from his failure to pay same.

In exchange for this provision, petitioner did not make any claim

to her share of the couple’s equity in the marital home or to
                                - 6 -

obtain any of the vehicles Mr. Barber had.    Petitioner was named

the primary physical custodian of their son.    Mr. Barber was

ordered to pay child support.   After an initial delinquency on

the child support obligation, Mr. Barber subsequently became

current with his payments.

     As of the time of the trial of this case, Mr. Barber had not

filed Federal income tax returns since the last joint return

filed with petitioner for the year 1994.    In addition, in order

to avoid levy actions, he no longer used a checking account.     He

stated that he “jointly owns” a 1998 Ford pickup truck with a

friend.   Mr. Barber makes all the payments on the vehicle loan

and exclusively drives the truck, which is registered in

Oklahoma.   Since May 2001, he has served as court-appointed

guardian for his grandmother’s lake property.    The property was

to be sold with the proceeds to be used for nursing home care.

     Mr. Barber admitted liability for the joint tax debt with

petitioner for the year in question.    However, since the divorce,

Mr. Barber made no payments toward the joint tax debts with

petitioner nor made significant efforts to settle their unpaid

tax liabilities.   He described himself as “overwhelmed” and the

situation as “hopeless”.   Asked about the possibility of entering

into an installment agreement, he stated:    “Well, I’d consider

it, but I’m reluctant to enter into an agreement that I may not

be able to keep and that will never substantially reduce my tax
                                   - 7 -

burden.”       Petitioner has taken no legal action against Mr. Barber

to enforce the divorce decree making him responsible for their

unpaid taxes.

       After the divorce, petitioner earned wages on which Federal

income taxes were withheld.       She resumed filing separate returns

in 1995.       Her 1995, 1996, and 1997 returns had overpayments of

$130, $2,155, and $1,730, respectively, which respondent applied

to the joint debt for 1987.       The application of these

overpayments occurred prior to July 22, 1998.       Her 1998 return,

filed in October 1999, showed an overpayment of $1,675, $920.05

of which was also applied to the 1987 debt during the week of

November 21-27, 1999.       The remainder of the 1998 overpayment was

applied to her 1988 tax debt.       The applied overpayments, totaling

$4,935.05, along with petitioner’s 1987 withholding, another

payment by levy, and an additional overpayment from the 1994

joint return, satisfied the amount due from 1987, including all

taxes, interest, and penalties assessed for that year.

       In 1999, petitioner engaged the assistance of Leonard E.

Goldammer, an enrolled agent authorized to practice before the

IRS.       In May 2000, on petitioner’s behalf, Mr. Goldammer filed

with the IRS a Form 8857, Request for Innocent Spouse Relief, for

the years 1987 through 1993.2      As part of her request for relief,


       2
               Mr. Goldammer simultaneously filed Forms 843, Claim for
                                                        (continued...)
                               - 8 -

petitioner sought a refund of $4,935.05, the amount of her

overpayments from the years 1995, 1996, 1997, and part of 1998

that respondent had applied to her joint liability for 1987.

Respondent issued a determination letter in June 2001 denying

petitioner’s request for relief for 1987 under section 6015(f)

because, at the time the request for relief from joint liability

was made, the tax liability for 1987 had already been fully

satisfied.   At the time of trial, respondent had made no

determination as to the other periods, 1988 through 1993.

     The issue for decision is whether respondent’s denial of

relief from joint liability to petitioner for her 1987 Federal

income tax under section 6015(f) was an abuse of discretion.

Petitioner bears the burden of proof on this issue.   Rule

142(a).3   In deciding whether petitioner has carried her burden

of proof, witness credibility is an important consideration.    See

Ishizaki v. Commissioner, T.C. Memo. 2001-318.   The Court is not

required to accept petitioner’s uncorroborated or self-serving

testimony.   Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).


     2
      (...continued)
Refund and Request for Abatement, for 1995 through 1998.
     3
          Although sec. 7491(a) may apply in specified
circumstances to place the burden on the Commissioner, the
examination of petitioner’s 1987 return began before the
effective date of that section. See also Jonson v. Commissioner,
118 T.C. 106, 126 (2002) (a taxpayer bears the burden of proving
that respondent abused respondent’s discretion in denying relief
under sec. 6015(f)); Mellen v. Commissioner, T.C. Memo. 2002-280.
                                - 9 -

Further, the Commissioner’s exercise of discretion is entitled to

due deference; in order to prevail, the taxpayer must demonstrate

that, in not granting relief, the Commissioner exercised his

discretion arbitrarily, capriciously, or without sound basis in

fact or law.    Woodral v. Commissioner, 112 T.C. 19, 23 (1999);

Mailman v. Commissioner, 91 T.C. 1079, 1082-1084 (1988).

     Generally, spouses filing joint Federal income tax returns

are jointly and severally liable for all taxes due.    Sec.

6013(d)(3).    Under certain circumstances, however, section 6015

provides relief from this general rule.4   Section 6015 applies to

any liability for tax arising after July 22, 1998, and to any

liability for tax arising on or before July 22, 1998, but

remaining unpaid as of such date.    Internal Revenue Service

Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.

3201(g), 112 Stat. 740.   Section 6015 does not apply if the tax

was paid in full on or before July 22, 1998.    Brown v.

Commissioner, T.C. Memo. 2002-187.

     Section 6015 significantly relaxed the requirements for

relief from joint liability by providing three avenues for relief

to a taxpayer who has filed a joint return: (1) Section 6015(b)


     4
          Sec. 6015 was enacted as part of the Internal Revenue
Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L.
105-206, sec. 3201, 112 Stat. 734. Prior to the enactment of
sec. 6015, relief from the imposition of joint and several
liability for spouses filing joint returns was available under
sec. 6013(e).
                                - 10 -

provides relief with respect to understatements of tax

attributable to certain erroneous items on the return; (2)

section 6015(c) provides relief for a portion of an

understatement of tax for taxpayers who are separated or

divorced; and (3) section 6015(f) more broadly confers on the

Secretary discretion to grant equitable relief for taxpayers who

otherwise do not qualify for relief under section 6015(b) or (c).

     Petitioner was not eligible for relief under section 6015(b)

or (c).   Therefore, her petition falls under the equitable relief

provision in 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.


As directed by section 6015(f), the Commissioner has prescribed

guidelines in Rev. Proc. 2000-15, 2000-1 C.B. 447, 448, that the

Commissioner will consider in determining whether an individual

qualifies for relief under section 6015(f).    Rev. Proc. 2000-15,

sec. 4.01, lists seven threshold conditions which must be
                                - 11 -

satisfied before the Commissioner will consider a request for

relief under section 6015(f).    These conditions are:


          (1) The requesting spouse filed a joint return for the
     taxable year for which relief is sought;

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

          (3) The requesting spouse applies for relief no later
     than two years after the date of the Service’s first
     collection activity after July 22, 1998, with respect to the
     requesting spouse;

          (4) Except as provided in the next sentence, the
     liability remains unpaid. A requesting spouse is eligible
     to be considered for relief in the form of a refund of
     liabilities for: (a) amounts paid on or after July 22, 1998,
     and on or before April 15, 1999; and (b) installment
     payments, made after July 22, 1998, pursuant to an
     installment agreement entered into with the Service and with
     respect to which an individual is not in default, that are
     made after the claim for relief is requested;

          (5) No assets were transferred between the spouses
     filing the joint return as part of a fraudulent scheme by
     such spouses;

          (6) There were no disqualified assets transferred to
     the requesting spouse by the nonrequesting spouse. If there
     were disqualified assets transferred to the requesting
     spouse by the nonrequesting spouse, relief will be available
     only to the extent that the liability exceeds the value of
     such disqualified assets. For this purpose, the term
     “disqualified asset” has the meaning given such term by
     section 6015(c)(4)(B); and

          (7) The requesting spouse did not file the return with
     fraudulent intent.

Rev. Proc. 2000-15, section 4.01, supra.
                              - 12 -

     Respondent’s position is that petitioner did not meet all of

the seven threshold conditions described above, so respondent

denied petitioner relief.   In particular, respondent relies on

condition 4 quoted above, which, in part, states that the tax

liability for which relief is sought “remains unpaid”.

Respondent argues that, since the last payment that was applied

to petitioner’s 1987 tax liability was made in November 1999, and

since that payment fully satisfied the 1987 tax liability, there

was no amount that remained “unpaid” at the time petitioner filed

her claim for relief under section 6015 in May 2000.

     The Court disagrees with respondent.   In Washington v.

Commissioner, 120 T.C. 137 (2003), this Court held that, subject

to the limitations on refunds set forth in sections 6511,

6512(b), 7121, and 7122, section 6015 applies to the full amount

of any pre-existing tax liability for a particular taxable year

if any portion of that liability remains unpaid as of the date of

enactment of section 6015, July 22, 1998, and not just to the

portion of the tax liability remaining unpaid after July 22,

1998.   Moreover, neither section 6015 nor Rev. Proc. 2000-15

provides that a spouse is precluded from applying for relief

under section 6015 if the tax liability has been fully satisfied

at the time the application for relief is filed.   In petitioner's

case, a portion of her 1987 tax liability did remain unpaid after
                               - 13 -

July 22, 1998.   The Court, therefore, considers petitioner's

entitlement to relief under Rev. Proc. 2000-15, sec. 4.02, supra.

     If a requesting spouse satisfies all of the applicable

threshold conditions, Rev. Proc. 2000-15, sec. 4.01, provides

that such spouse may be entitled to relief under section 6015(f)

if, taking into account all of the facts and circumstances, the

IRS determines that it would be inequitable to hold the

requesting spouse liable for such liability.   Where a liability

reported on a joint return is unpaid, Rev. Proc. 2000-14, sec.

4.02, provides the circumstances under which equitable relief

under section 6015(f) will ordinarily be granted.    Where, as

here, a taxpayer does not qualify for relief under section 4.02,

the IRS may still grant relief under section 4.03.    Rev. Proc.

2000-15, sec. 4.03, supra, provides a partial list of positive

and negative factors that will be taken into account in

determining whether full or partial relief will be granted under

section 6015(f).    No single factor is to be determinative in any

particular case; all factors are to be considered and weighed

appropriately, and the list of factors is not intended to be

exhaustive.   Collier v. Commissioner, T.C. Memo. 2002-144; Rev.

Proc. 2000-15, sec. 4.03.

     Rev. Proc. 2000-15, sec. 4.03(a), supra, sets forth positive

factors that weigh in favor of relief.   As pertinent here, that

section provides:
                              - 14 -



          (1) Factors weighing in favor of relief. The factors
     weighing in favor of relief include, but are not limited to,
     the following:

          (a) Marital status. The requesting spouse is * * *
     divorced from the nonrequesting spouse.

          (b) Economic hardship. The requesting spouse would
     suffer economic hardship (within the meaning of section
     4.02(1)(c) of this revenue procedure) if relief from
     liability is not granted.

          (c) Abuse. The requesting spouse was abused by the
     nonrequesting spouse, but such abuse did not amount to
     duress.

          (d) No knowledge or reason to know. In the case of a
     liability that was properly reported but not paid, the
     requesting spouse did not know and had no reason to know
     that the liability would not be paid. * * *

          (e) Nonrequesting spouse’s legal obligation. The
     nonrequesting spouse has a legal obligation pursuant to a
     divorce decree or agreement to pay the outstanding
     liability. This will not be a factor weighing in favor of
     relief if the requesting spouse knew or had reason to know,
     at the time the divorce decree or agreement was entered
     into, that the nonrequesting spouse would not pay the
     liability.

          (f) Attributable to nonrequesting spouse. The
     liability for which relief is sought is solely attributable
     to the nonrequesting spouse.


Rev. Proc. 2000-15, sec. 4.03(2), sets forth negative factors

that weigh against relief.   As pertinent here, that section

provides:


          (2) Factors weighing against relief. The factors
     weighing against relief include, but are not limited to, the
     following:
                              - 15 -

          (a) Attributable to the requesting spouse. The unpaid
     liability * * * is attributable to the requesting spouse.

          (b) Knowledge, or reason to know. A requesting spouse
     knew or had reason to know * * * that the reported liability
     would be unpaid at the time the return was signed. This is
     an extremely strong factor weighing against relief. * * *

          (c) Significant benefit. The requesting spouse has
     significantly benefitted (beyond normal support) from the
     unpaid liability * * *.

          (d) Lack of economic hardship. The requesting spouse
     will not experience economic hardship (within the meaning of
     section 4.02(1)(c) of this revenue procedure) if relief from
     the liability is not granted.

          (e) Noncompliance with federal income tax laws. The
     requesting spouse has not made a good faith effort to comply
     with federal income tax laws in the tax years following the
     tax year or years to which the request for relief relates.

          (f) Requesting spouse’s legal obligation. The
     requesting spouse has a legal obligation pursuant to a
     divorce decree or agreement to pay the liability.


In deciding whether respondent’s determination that petitioner is

not entitled to relief under section 6015(f) was an abuse of

discretion, the Court considers evidence relating to all the

facts and circumstances.   Washington v. Commissioner, supra.

     On this record, the Court finds that the facts and

circumstances weigh against granting relief to petitioner for the

year 1987.   Most importantly, petitioner knew or had reason to

know, at the time the return was signed in 1993, that the

liability reported for 1987 would be unpaid.     Butler v.

Commissioner, 114 T.C. 276 (2000).     Petitioner and Mr. Barber
                               - 16 -

both participated in the preparation of the return.      They both

signed the jurat on the return yet remitted no payment on the

balance due at the time of filing.      Petitioner was involved in

the family finances and the record keeping for Mr. Barber’s

business; she participated in the decision not to pay the taxes.

Rev. Proc. 2000-15, section 4.03(2)(b) provides that knowledge

that the liability would be unpaid is “an extremely strong factor

weighing against relief”.   Her knowledge that the reported

liability would be unpaid also negates two positive factors

weighing in favor of relief:   the “no knowledge or reason to

know” factor and the “legal obligation” factor.      Rev. Proc. 2000-

15, sec. 4.03(1)(d) and (e), 2000-1 C.B. at 449.

     Further weighing against relief, roughly half of the unpaid

liability is attributable to petitioner.      To be a factor weighing

in favor of relief, the liability must be “solely” attributable

to the nonrequesting spouse.   Id. sec. 4.03(1)(f).     By contrast,

the unpaid liability being attributable (but not solely so) to

the requesting spouse weighs against relief.      Id. sec.

4.03(2)(a).   Moreover, the Court did not find petitioner’s

allegation of abuse by Mr. Barber to be credible, and petitioner

did not establish economic hardship.5     Given these facts and


     5
          Rev. Proc. 2000-15, sec. 4.02(1)(c), 2000-1 C.B. 447,
448, provides that the determination of whether a requesting
spouse will suffer economic hardship will be made by the
                                                   (continued...)
                             - 17 -

circumstances, petitioner does not present the unusually strong

case in favor of equitable relief despite her knowledge that the

liability would be unpaid, as contemplated by Rev. Proc. 2000-15,

sec. 4.03(2)(b), 2000-1 C.B. at 449.   The Court holds that

respondent committed no abuse of discretion in denying section

6015(f) relief to petitioner for the year 1987.6

     Reviewed and adopted as the report of the Small Tax Case

Division.



                                         Decision will be entered

                                   for respondent.




     5
      (...continued)
Commissioner or the Commissioner’s delegate and will be based on
rules similar to those provided in sec. 301.6343-1(b)(4), Proced.
& Admin. Regs. Such regulation provides that the Commissioner
will consider any information provided by the taxpayer that is
relevant to the determination, including, but not limited to, the
taxpayer’s age, ability to earn, responsibility for dependents,
and the amount reasonably necessary for basic living expenses.
Petitioner presented insufficient evidence to support a finding
of economic hardship. She did not provide documentation of her
expenses; she has been employed, and Mr. Barber was providing
child support payments.
     6
          The Court makes no findings regarding the applicability
of the factors listed in Rev. Proc. 2000-15, supra, to any other
year.
