                         T.C. Memo. 2005-9



                      UNITED STATES TAX COURT



   KIRSTEN NELSON, a.k.a. KIRSTEN E. HILLSTROM, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18144-02.              Filed January 25, 2005.



     Kirsten Nelson, a.k.a. Kirsten E. Hillstrom, pro se.

     Patricia Christiansen, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:   This case arises from petitioner’s request

for relief from joint and several liability under section 6015

for 1992.1   The issues for decision are:    (1) Whether petitioner


     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended. Amounts are rounded to
the nearest dollar.
                                - 2 -

is entitled to relief under section 6015(b) or (c); and (2)

whether respondent abused his discretion in denying petitioner’s

request for equitable relief under section 6015(f).

                          FINDINGS OF FACT

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.

     At the time the petition in this case was filed, petitioner

was a resident of Colorado Springs, Colorado.

     Petitioner was married to Charles V. Moore (Mr. Moore) when

they jointly filed a Federal income tax return for 1992 (1992

joint return).   Petitioner’s income for 1992 was $14,553, and her

withholding was $1,282.   Mr. Moore’s income in 1992 was $39,064,

and his withholding was $334.   The tax liability shown on the

1992 joint return was $7,267, and the net tax due after

subtracting credits and withholdings was $5,172.   The $5,172 net

tax due was not paid when the 1992 joint return was filed.

     Petitioner and Mr. Moore divorced in 1994.

     Respondent applied petitioner’s overpayments from her tax

returns for 1993-2000, totaling $10,494, as offsets against

unpaid tax liabilities for 1987 and 1990-92.    As relevant here,

on March 24, 1997, respondent began applying overpayments from

petitioner’s tax accounts to the balance owed on the joint

liability for 1992.   On April 5, 1999, respondent also applied
                               - 3 -

petitioner’s tax overpayment for the taxable year 1998, in the

amount of $469, to the outstanding 1992 tax liability.

Respondent notified petitioner each time her overpayments were

applied as payments toward her joint liability.    The notices

provided to petitioner in connection with respondent’s

application of her overpayments to her 1992 joint income tax

liability are not included in respondent’s administrative file

for this case.

     At the time petitioner’s 1998 overpayment was applied to her

1992 joint liability, it was standard practice to send IRS letter

285C, titled Refund/Overpayment Applied to Account, to notify a

taxpayer that his or her overpayment had been applied as an

offset to a prior liability.   None of the paragraphs in this

letter advise a taxpayer of his or her right to relief under

I.R.C. § 6015(f).

     Petitioner was informed of her right to file a claim for

relief from joint and several liability for 1992 by respondent’s

employee, Mr. Fish, in a telephone conversation on April 13,

2001.   On July 3, 2001, respondent received Form 8857, Request

for Innocent Spouse Relief (And Separation of Liability and

Equitable Relief), from petitioner.    A portion of petitioner’s

and Mr. Moore’s joint liability for 1992 remained unpaid at that

time.
                              - 4 -

     On March 6, 2002, respondent sent petitioner a letter

(preliminary determination letter) in which respondent

preliminarily determined that petitioner was not entitled to

relief under section 6015(b), (c), or (f).   In the preliminary

determination letter, respondent stated in part:

     We received your request more than two years after the date
     we began collection activity. IRC Sections 6015(b)(1)(E),
     6015(c)(3)(B) and 6015(f) require innocent spouse claims to
     be filed no later than two years after the start of
     collection activity after July 22, 1998. The date of the
     collection activity on your account, after the enactment of
     IRC Section 6015 was April 05, 1999.

     On September 17, 2002, respondent issued a Notice of

Determination Concerning Your Request for Relief from Joint and

Several Liability under Section 6015 (notice of determination),

denying petitioner relief from joint and several liability under

section 6015(b), (c), and (f) for 1992.   In the notice of

determination, respondent stated:

     We did not find you eligible for relief under Section
     6015(b). Section 6015(b) allows us to provide relief for an
     understatement of tax due to an erroneous item reported by
     the other spouse.

     We did not find you eligible for relief under Section
     6015(c). Section 6015(c) allows us to separate the tax
     liability that we can link to each spouse and divide the
     liability according to each spouse’s responsibility.

     We did not find you eligible for relief under Section
     6015(f). Section 6015(f) may allow us to provide equitable
     relief when you don’t qualify for relief under either
     Section 6015(b) or 6015(c). You may receive equitable
     relief when holding you responsible for the tax liability
     would be unfair or inequitable, given your particular
     circumstances. * * *
                                - 5 -

     On November 18, 2002, and January 13, 2003, petitioner filed

a timely petition and an amended petition, respectively, with the

Court.    Petitioner contends that she is entitled to relief from

joint and several liability under section 6015(b) and (c), and

that respondent abused his discretion in denying her equitable

relief under section 6015(f) for 1992.    Accordingly, petitioner

contends that she is entitled to a refund of the overpayments of

her income tax liabilities that respondent withheld and used to

partially offset the liability associated with the 1992 joint

return.

                               OPINION

     Generally, married taxpayers may elect to file jointly a

Federal income tax return.   Sec. 6013(a).   After making the

election, each spouse is jointly and severally liable for the

entire tax due.   Sec. 6013(d)(3).   A spouse (requesting spouse)

may, however, seek relief from joint and several liability under

section 6015(b), or, if eligible, may allocate liability

according to provisions under section 6015(c).    Sec. 6015(a).   If

relief is not available under section 6015(b) or (c), an

individual may seek equitable relief under section 6015(f).

      A requirement to granting relief under section 6015(b) or

(c) is the existence of a tax deficiency.    Sec. 6015(b)(1)(B) and
                               - 6 -

(c)(1)2; Block v. Commissioner, 120 T.C. 62, 66 (2003).

Consequently, if there is no deficiency for the year for which

relief is sought, relief from joint and several liability is not

available under either subsection.     See Washington v.

Commissioner, 120 T.C. 137, 146-47 (2003); see also Hopkins v.

Commissioner, 121 T.C. 73, 88 (2003); Block v. Commissioner,

supra; Ewing v. Commissioner, 118 T.C. 494, 497-498 n.4 (2002).




     2
         Sec. 6015(b) and (c) provides in part:

          SEC. 6015(b). Procedures for Relief from Liability
     Applicable to All Joint Filers.--

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

                *    *    *    *       *   *    *

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

                     *    *    *       *   *    *

          (c). Procedures to Limit Liability for Taxpayers No
     Longer Married or Taxpayers Legally Separated or Not Living
     Together.--

                (1) In General.--Except as provided in this
           subsection, if an individual who has made a joint
           return for any taxable year elects the application of
           this subsection, the individual’s liability for any
           deficiency which is assessed with respect to the return
           shall not exceed the portion of such deficiency
           properly allocable to the individual under subsection
           (d).
                               - 7 -

     No deficiency exists in the present case.   Rather, there is

an underpayment of tax.   When petitioner and Mr. Moore filed

their 1992 joint return, they did not remit any payment.

Therefore, we hold petitioner is not entitled to relief under

section 6015(b) or (c).

     We have jurisdiction to review the Commissioner’s denial of

a requesting spouse’s request for equitable relief under section

6015(f).   Jonson v. Commissioner, 118 T.C. 106, 125 (2002), affd.

353 F.3d 1181 (10th Cir. 2003); Butler v. Commissioner, 114 T.C.

276, 292 (2000).   We review such denial of relief to decide

whether respondent abused his discretion by acting arbitrarily,

capriciously, or without sound basis in fact.    Jonson v.

Commissioner, supra; Butler v. Commissioner, supra.

     Section 6015(f) authorizes the Commissioner to grant

equitable relief 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) * * *

     On the basis of the record before us we find that the denial

was based solely on the ground given in the preliminary

determination letter; i.e., petitioner’s request for relief was

not made within 2 years of respondent’s first collection activity

taken after July 22, 1998.   There is no evidence that respondent
                                - 8 -

ever analyzed the facts and circumstances in denying petitioner’s

request for section 6015(f) relief.     Unlike the preliminary

determination letter, the notice of determination gave no reason

for denying petitioner relief under section 6015.

       Under the Internal Revenue Service Restructuring and Reform

Act of 1998 (RRA 1998), sec. 3501(b), Pub. L. 105-206, 112 Stat.

770, the Commissioner must include a description of the

taxpayers’ rights under section 6015 in collection-related

notices.    Withholding petitioner’s refund and using it to

partially offset her unpaid joint liability from 1992 was a

“collection action”.    McGee v. Commissioner, 123 T.C. 314, 319

(2004); Campbell v. Commissioner, 121 T.C. 290, 292 (2003).

       In a similar case, McGee, the collection-related notice of

an offset did not inform the requesting spouse of her right to

apply for relief under section 6015.     We held it was an abuse of

discretion for the Commissioner to deny the requesting spouse’s

request for relief under section 6015(f) by applying the 2-year

limitation period in Rev. Proc. 2000-15, sec. 5, 2000-1 C.B. 447,

499.    McGee v. Commissioner, supra at 319-320.

       Respondent notified petitioner that her refunds were being

applied as offsets for her 1992 joint liability.     There is no

evidence that respondent informed petitioner of her potential

right to relief under section 6015 until she was informed of her

right to file a request for relief by Mr. Fish on April 13, 2001.
                                 - 9 -

Respondent failed to inform petitioner of her right to apply for

relief under section 6015 as required by RRA 1998 sec. 3501(b),

112 Stat. 770.   Therefore, we hold that respondent abused his

discretion when he denied petitioner’s request for relief under

section 6015(f) by applying the 2-year limitation period of Rev.

Proc. 2000-15, sec. 5, 2000-1 C.B. 447, 449.    McGee v.

Commissioner, supra.

     In reaching our holding herein, we have considered all

arguments made, and, to the extent not mentioned above, we

conclude that they are moot, irrelevant, or without merit.

     To reflect the foregoing,


                                               An appropriate

                                         order will be issued.
