                  T.C. Summary Opinion 2005-41



                     UNITED STATES TAX COURT



               FRANCENIA M. GRIFFIN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4517-04S.               Filed April 13, 2005.


     Francenia M. Griffin, pro se.

     Roberta Shumway, for respondent.



     GOLDBERG, Special Trial Judge:     This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.    The decision to be

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

should not be cited as authority.    Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the years in issue.
                              - 2 -

     Respondent determined that petitioner is not entitled to

relief from joint and several liability for tax under section

6015(f) for tax years 1992, 1993, 1994, 1995, 1996, 1997, and

1998 with respect to joint returns filed with Graylyne Griffin.

Petitioner filed a petition under section 6015(e)(1) seeking

review of respondent’s determination.

     The issue for decision is whether respondent’s denial of

petitioner’s request for relief pursuant to section 6015 was an

abuse of discretion.

                           Background

     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.   Petitioner resided in San

Antonio, Texas, on the date the petition was filed in this case.

     Petitioner and her former spouse, Graylyne H. Griffin (Mr.

Griffin), were married in 1981.   From the time that they were

first married, petitioner and Mr. Griffin usually filed their

Federal income tax returns jointly.   During their marriage,

between 1996 and 1998, petitioner obtained an associate’s degree

in applied science at Saint Phillips College.   Since obtaining an

associate’s degree, petitioner has been employed as a certified

occupational therapy assistant.   Petitioner and Mr. Griffin

ceased living together on March 12, 2001.   Petitioner’s and Mr.
                               - 3 -

Griffin’s divorce was finalized on November 17, 2003.   The

divorce decree provides in relevant part:

          FEDERAL INCOME TAX
          IT IS ORDERED AND DECREED that GRAYLYNE GRIFFIN and
     FRANCENIA GRIFFIN shall be equally responsible for all
     federal income tax liabilities of the parties from the date
     of marriage through December 31, 2001, and each party shall
     timely pay 50 percent of any deficiencies, assessments,
     penalties, or interest due thereon and shall indemnify and
     hold the other party and his or her property harmless from
     50 percent of such liabilities unless such additional tax,
     penalty, and/or interest resulted from a party’s omission of
     taxable income or claim of erroneous deductions. In such
     case, the portion of the tax, penalty, and/or interest
     relating to the omitted income or claims of erroneous
     deductions shall be paid by the party who earned the omitted
     income or proffered the claim for an erroneous deduction.
     The parties agree that nothing contained herein shall be
     construed as or is intended as a waiver of any rights that a
     party has under the “Innocent Spouse” provisions of the
     Internal Revenue Code.

          IT IS ORDERED AND DECREED that if a refund is made for
     overpayment of taxes for any year during the parties’
     marriage through December 31 of 2001, each party shall be
     entitled to one-half of the refund, and the party receiving
     the refund check is designated a constructive trustee for
     the benefit of the other party, to the extent of one-half of
     the total amount of the refund, and shall pay to the other
     party one-half of the total amount of the refund check
     within five days of receipt of the refund check. Either
     party is ORDERED to endorse a refund check on presentation
     by the other party.

     Petitioner and Mr. Griffin did not timely file their joint

Federal income tax returns for tax years 1992, 1993, 1994, 1995,

1996, 1997, and 1998.   Petitioner knew that neither she nor Mr.

Griffin had filed Federal income tax returns for this period of

time.
                                  - 4 -

     Petitioner and Mr. Griffin filed a voluntary petition in the

U.S. Bankruptcy Court, Western District of Texas, San Antonio

Division, under Chapter 13 on August 3, 1999.       After they filed

for bankruptcy in 1999, petitioner and Mr. Griffin learned that

their bankruptcy proceeding would be dismissed unless they became

current in the filings of their Federal income tax returns.         Due

to the threatened dismissal of their bankruptcy proceeding,

petitioner contacted an enrolled agent to assist her in preparing

joint Federal income tax returns for the 1992 through 1998 tax

years.

     On December 15, 1999, petitioner and Mr. Griffin filed their

1992, 1993, 1994, 1995, 1996, 1997, and 1998 joint Federal income

tax returns.      Their joint Federal income tax returns for the

taxable years 1992 through 1998, inclusive, show the following:

     Taxable                      Federal Income       Amount
      Year         Total Tax       Tax Withheld         Owed
                                                       1
         1992       $7,118            $1,901            $5,435
                                                         2
         1993        4,697             2,474               2,304
         1994        2,751             2,436                  315
         1995        5,149             4,201                  948
                                                            3
         1996        4,699             4,051                  659
                                                        4
         1997        6,250             2,619              3,756
                                                        5
         1998        1,866               821              1,088
     1
       Includes   $218 for estimated tax penalty.
     2
       Includes   $81 for estimated tax penalty.
     3
       Includes   $11 for estimated tax penalty.
     4
       Includes   $125 for estimated tax penalty.
     5
       Includes   $43 for estimated tax penalty.

The amounts of taxes shown as due on petitioner’s and Mr.

Griffin’s joint Federal income tax returns for tax years 1992
                                - 5 -

through 1998 were not paid.    At the time petitioner signed the

1992 through 1998 Forms 1040, U.S. Individual Income Tax Return,

she knew that the balances due would not be paid because she and

Mr. Griffin were in bankruptcy and had no funds with which to pay

the taxes.   There are still currently balances due on

petitioner’s and Mr. Griffin’s joint Federal income tax

liabilities for the 1992 through 1998 tax years.

     Petitioner was not employed during the 1992 through 1998 tax

years, except for a period of approximately 2 weeks to 2 months.

Petitioner reported no income attributable to services she

performed on the Forms 1040 she and Mr. Griffin filed for the

1992 through 1998 tax years.

     Petitioner had actual knowledge that Mr. Griffin earned

income during the 1992 through 1998 tax years.    Petitioner was

not abused by Mr. Griffin.    No assets were transferred between

petitioner and Mr. Griffin as part of a fraudulent scheme, and no

disqualified assets were transferred to petitioner by Mr.

Griffin.

     On April 11, 2003, petitioner filed a Form 8857, Request for

Innocent Spouse Relief, with respondent, requesting innocent

spouse relief with respect to the 1992 through 1998 tax years.

On December 19, 2003, respondent sent petitioner a letter

advising her of the determination denying relief from liability

on the 1992 through 1998 joint returns.    On March 10, 2004,
                              - 6 -

petitioner filed a petition with this Court for review of

respondent’s determination denying her request for relief from

joint and several liability with respect to the 1992 through 1998

tax years.

                           Discussion

     As a general rule, spouses making joint Federal income tax

returns are jointly and severally liable for all taxes shown on

the return or found to be owing.   Sec. 6013(d)(3).   In certain

situations, however, a joint return filer can avoid such joint

and several liability by qualifying for relief therefrom under

section 6015.1

     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 is

applicable to the present situation because even though all but

one of the liabilities at issue arose before July 22, 1998, those

liabilities remained unpaid as of such date.



     1
      Sec. 6015 was enacted as part of the Internal Revenue
Service Restructuring and Reform Act of 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).
                              - 7 -

     Section 6015 significantly relaxed the requirements for

relief from joint liability by providing three avenues for

obtaining relief to a taxpayer who has filed a joint return:    (1)

Section 6015(b) provides full or apportioned 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) (potentially the broadest of

the three avenues and the avenue directly at issue in this case)

confers upon the Secretary discretion to grant equitable relief

for taxpayers who otherwise do not qualify for relief under

section 6015(b) or (c).

     Petitioner requested relief under section 6015 from

liability for the payment of the taxes reported on the 1992,

1993, 1994, 1995, 1996, 1997, and 1998 joint returns that were

not paid when the returns were filed.   Respondent treated

petitioner’s request for relief under section 6015 as an election

under section 6015(b), (c), and (f), and determined that

petitioner was not entitled to the requested relief.

     If a taxpayer’s request for relief under section 6015 is

denied, the taxpayer may petition this Court, pursuant to section

6015(e)(1), for a review of such determination.   Section
                                 - 8 -

6015(e)(1)(A)2 provides that a taxpayer against whom a deficiency

has been asserted who elects to have section 6015(b) or (c) apply

may petition this Court “to determine the appropriate relief

available to the individual” under section 6015, including relief

under section 6015(f).     Fernandez v. Commissioner, 114 T.C. 324,

330-331 (2000).

     Section 6015(b) provides a spouse relief from joint

liability for an “understatement” (as defined in section

6662(d)(2)(A)) of tax attributable to erroneous items of the

other spouse.3    With regard to the present case, petitioner does

not seek relief from an understatement of tax but rather from the

taxes shown on the 1992, 1993, 1994, 1995, 1996, 1997, and 1998

returns that were not paid when the returns were filed.    Because

there is no understatement of tax for 1992, 1993, 1994, 1995,

1996, 1997, and 1998, relief is not available to petitioner under



     2
          SEC. 6015(e).    Petition For Review By Tax Court.--

               (1) In general.--In the case of an individual
          against whom a deficiency has been asserted and who
          elects to have subsection (b) or (c) apply–-

                       (A) In general.--In addition to any other
                  remedy provided by law, the individual may
                  petition the Tax Court (and the Tax Court shall
                  have jurisdiction) to determine the appropriate
                  relief available to the individual under this
                  section if such petition is filed--
     3
      Sec. 6662(d)(2)(A) defines an understatement as the excess
of the amount of tax required to be shown on the return over the
tax imposed which is shown on the return, reduced by any rebate.
                                 - 9 -

section 6015(b).   See Washington v. Commissioner, 120 T.C. 137,

146-147 (2003); see also Hopkins v. Commissioner, 121 T.C. 73, 88

(2003).

     Section 6015(c) provides relief from joint liability for

spouses who filed a joint return if they are no longer married,

are legally separated, or have lived apart for a 12-month period.

Such spouses may elect to be treated, for purposes of determining

tax liability, as if separate returns had been filed.    Section

6015(c)(1) provides proportionate relief for any “deficiency

which is assessed with respect to the return”.    Relief is not

available under section 6015(c) with respect to an unpaid

liability for tax reported on the return.    As noted, in the

present case, petitioner is seeking relief of the amounts

reflected as due on the 1992, 1993, 1994, 1995, 1996, 1997, and

1998 joint returns.   Because there is no “deficiency” for 1992,

1993, 1994, 1995, 1996, 1997, and 1998, relief is not available

to petitioner under section 6015(c).     See Washington v.

Commissioner, supra; see also Hopkins v. Commissioner, supra.

     Therefore, the only opportunity for relief available to

petitioner is section 6015(f).    Section 6015(f) provides as

follows:

          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
                              - 10 -

           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. 2003-61, 2003-32 I.R.B. 296,4

that the Commissioner will consider in determining whether an

individual qualifies for relief under section 6015(f).   Section

4.01 of Rev. Proc. 2003-61, 2003-32 I.R.B. at 297, lists seven

conditions (threshold conditions) which must be satisfied before

the Commissioner will consider a request for relief under section

6015(f).   Respondent agrees that in the present case these

threshold conditions are satisfied.

     Section 4.03(2) of Rev. Proc. 2003-61, 2003-32 I.R.B. at

298, lists nonexclusive factors that the Commissioner will

consider in determining whether, taking into account all the

facts and circumstances, it is inequitable to hold the requesting

spouse liable for all or part of the unpaid income tax liability

or deficiency, and full or partial equitable relief under section



     4
      This revenue procedure superseded Rev. Proc. 2000-15, 2000-
1 C.B. 447, and is effective either for requests for relief filed
on or after Nov. 1, 2003, or for requests for which no
preliminary determination letter was issued as of Nov. 1, 2003.
In the present case, the request for relief was still pending as
of Nov. 1, 2003, and the preliminary determination letter was
issued on Dec. 19, 2003; therefore, Rev. Proc. 2003-61, 2003-32
I.R.B. 296 is applicable in the present situation.
                               - 11 -

6015(f) should be granted.    Such factors that may be relevant to

whether the Service will grant equitable relief are stated in

section 4.03 of Rev. Proc. 2003-61, 2003-32 I.R.B. 296, as

follows:

     (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 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.
                               - 12 -

     (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.

(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.

     To prevail under section 6015(f), petitioner must show that

respondent’s denial of equitable relief from joint liability

under section 6015(f) was an abuse of discretion.    Washington v.

Commissioner, 120 T.C. 137 (2003); Jonson v. Commissioner, 118

T.C. 106, 125 (2002) (citing Butler v. Commissioner, 114 T.C.

276, 292 (2000)), affd. 353 F.3d 1181 (10th Cir. 2003).    Action

constitutes an abuse of discretion under this standard where it

is arbitrary, capricious, or without sound basis in fact or law.

Woodral v. Commissioner, 112 T.C. 19, 23 (1999).    The question of

whether respondent’s determination was arbitrary, capricious, or
                              - 13 -

without sound basis in fact is a question of fact.   Cheshire v.

Commissioner, 115 T.C. 183, 198 (2000), affd. 282 F.3d 326 (5th

Cir. 2002).   In deciding whether respondent’s determination, that

petitioner is not entitled to relief under section 6015(f), was

an abuse of discretion, we consider evidence relating to all the

facts and circumstances.

     Respondent acknowledges that the following factors weigh in

favor of granting relief to petitioner:   (1) Marital status--

although still married to Mr. Griffin, petitioner and Mr. Griffin

were in the process of a divorce and had ceased living together

on March 12, 2001; and (2) Compliance with Income Tax Laws--the

examiner determined and respondent agrees that petitioner has

complied with Federal income tax laws since her divorce was

finalized.

     Respondent contends:   (1) Petitioner would not suffer

economic hardship if the Service does not grant relief from the

income tax liabilities; (2) petitioner did not have a reasonable

belief that any portion of the underpayments would be paid at the

time she signed the applicable returns; (3) the nonrequesting

spouse was legally liable for only one-half of the pre-1999 joint

Federal income tax liabilities; (4) petitioner obtained an

associate’s degree during tax years 1992 through 1998; therefore,

petitioner gained a significant benefit during such time; and (5)

petitioner was not abused by her former husband.   Respondent
                              - 14 -

asserts that these factors weigh against granting relief to

petitioner.   We now address each of these factors separately.

1.   Economic Hardship

     Respondent contends that petitioner offered no evidence to

show that she would suffer an economic hardship if relief were

denied.   Respondent asserts that pursuant to section 301.6343-

1(b)(4)(ii), Proced. & Admin. Regs., an economic hardship exists

if satisfaction of a levy will cause a taxpayer to be unable to

pay his/her reasonable basic living expenses.   Respondent

maintains that respondent’s collection activity would not leave

petitioner unable to pay her basic living expenses.5   In


     5
      Sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.,
provides:

     (ii) Information from taxpayer. In determining a reasonable
     amount for basic living expenses the director will consider
     any information provided by the taxpayer including–-

           (A) The taxpayer’s age, employment status and history,
           ability to earn, number of dependents, and status as a
           dependent of someone else;

           (B) The amount reasonably necessary for food, clothing,
           housing, (including utilities, home-owner insurance,
           home-owner dues, and the like), medical expenses
           (including health insurance), transportation, current
           tax payments (including federal, state, and local),
           alimony, child support, or other court-ordered
           payments, and expenses necessary to the taxpayer’s
           production of income (such as dues for a trade union or
           professional organization, or child care payments which
           allow the taxpayer to be gainfully employed);

           (C) The cost of living in the geographic area in which
           the taxpayer resides;
                                                    (continued...)
                                - 15 -

addition, respondent asserts that petitioner provided no

documentation to contradict the analysis performed by the

examiner or to demonstrate an economic hardship.

     The examiner performed an analysis of petitioner’s income

and reasonable basic living expense.     During the applicable

period of time, petitioner earned wages of $2,700 per month and

received $718 per month in child support, for total monthly

income of $3,418.   Petitioner identified her necessary monthly

living expenses of approximately $3,000 per month.     Based on

these facts, the examiner found that petitioner would not suffer

economic hardship if relief were not granted.     Petitioner did not

supply any evidence at trial to contradict the above facts or the

finding of the examiner; therefore, we find that petitioner will

not suffer economic hardship if relief is not granted.     This

factor favors denying relief.

2.   Knowledge or Reason To Know

     In the case of an income tax liability that was properly

reported but not paid, the fact that the requesting spouse did


     5
      (...continued)
          (D) The amount of property exempt from levy which is
          available to pay the taxpayer’s expenses;

           (E) Any extraordinary circumstances such as special
           education expenses, a medical catastrophe, or natural
           disaster; and

           (F) Any other factor that the taxpayer claims bears on
           economic hardship and brings to the attention of the
           director.
                                - 16 -

not know and had no reason to know that the liability would not

be paid is a factor weighing in favor of granting relief.    Rev.

Proc. 2003-61, sec. 4.03(2)(a)(iii).     By contrast, the fact that

the requesting spouse knew or had reason to know that the

reported liability would go unpaid is a factor weighing against

relief.   Id.

     The examiner determined that petitioner did not satisfy this

condition in favor of granting relief because petitioner did not

have a reasonable belief that any portion of the underpayments

would be paid at the time she signed the returns.    Petitioner

stipulated that at the time she signed the 1992, 1993, 1994,

1995, 1996, 1997, and 1998 Forms 1040, she knew there were

balances due for each of the tax years and she knew that the

balances due would not be paid because she and Mr. Griffin were

in bankruptcy and had no funds with which to pay the taxes.

Thus, we find that petitioner knew or had reason to know that the

reported liabilities would not be paid.    This factor favors

denying relief to petitioner.

3. Requesting Spouse’s Legal Obligation

     Petitioner’s divorce decree specifically states:

     [petitioner and Mr. Griffin] shall be equally responsible
     for all federal income tax liabilities of the parties from
     the date of marriage through December 31, 2001, and each
     party shall timely pay 50 percent of any deficiencies,
     assessments, penalties, or interest due thereon and shall
     indemnify and hold the other party and his or her property
     harmless from 50 percent of such liabilities unless such
     additional tax, penalty, and/or interest resulted from a
                              - 17 -

     party’s omission of taxable income or claim of erroneous
     deductions...

Respondent contends that the fact that petitioner has a legal

obligation under the divorce decree to pay the unpaid tax

liabilities weighs against granting relief to petitioner.    Rev.

Proc. 2003-61, sec. 4.03(2)(a)(iv), indicates that if Mr. Griffin

had a legal obligation under the divorce decree to pay the tax

liabilities, then that fact would weigh in favor of granting

relief to petitioner.   Likewise, if the divorce decree had placed

the obligation to pay the taxes on petitioner, then that fact

would weigh against granting relief to petitioner as indicated in

Rev. Proc. 2003-61, sec. 4.03(2)(a)(iv).    In the present case,

the divorce decree established that each party was liable for 50

percent of the liabilities.   Therefore, this is a neutral factor.

However, the fact that the divorce decree established that each

party was liable for 50 percent of the liabilities does indicate

that petitioner had a reasonable belief that such liabilities

would not be paid in full by Mr. Griffin.

4.   Significant Benefit

     The examiner determined that petitioner did not

significantly benefit from the underpayments and thus found that

this factor favored granting relief to petitioner.     However, at

trial, respondent argued that petitioner’s obtaining an

associate’s degree was a significant benefit.    During the period

from 1992 to 1998, petitioner did obtain an associate’s degree.
                               - 18 -

Respondent noted that, since obtaining the degree, petitioner has

been gainfully employed as a certified occupational respiratory

therapist and that such degree has enhanced petitioner’s

employment opportunities.    We find that in today’s society it is

normal for one spouse to work while the other attends educational

training; i.e., college.    Therefore, we find that petitioner

obtaining an associate’s degree was not beyond normal support,

and the examiner was correct in concluding that this factor

favors granting relief to petitioner.

5.   Abuse

     Petitioner stipulated that she was not abused by Mr. Griffin

or otherwise coerced into executing the 1992, 1993, 1994, 1995,

1996, 1997, and 1998 joint returns.     Lack of spousal abuse is a

factor listed in section 4.03(2)(b)(1) of Rev. Proc. 2003-61 that

will weigh in favor of equitable relief if found, but will not

weigh against equitable relief if not present in a case.

Therefore, this factor is neutral.

                             Conclusion

      In the present case the factors that weigh against granting

relief to petitioner outweigh those factors favoring relief.

Therefore, under these facts and circumstances, we hold that

respondent did not abuse his discretion in denying equitable

relief to petitioner under section 6015(f).
                            - 19 -

    Reviewed and adopted as the report of the Small Tax Case

Division.


                                  Decision will be entered

                             for respondent.
