                        T.C. Memo. 2005-77



                      UNITED STATES TAX COURT



                 LETANTIA BUSSELL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15462-02.              Filed April 7, 2005.


     Letantia Bussell, pro se.1

     Ron S. Chun, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:   Petitioner petitioned the Court to redetermine

a $464,930 deficiency in her 1996 Federal income tax and a




     1
       Petitioner filed her petition pro se on Sept. 30, 2002,
and represented herself at trial. Robert L. Kaufman entered the
case on Oct. 29, 2002, but withdrew on July 25, 2003. Jonathan
A. Brod entered the case on July 16, 2003, but withdrew on Oct.
30, 2003.
                                 - 2 -

related $348,697 fraud penalty under section 6663(a).2    Following

respondent’s concession of an adjustment alleged in his amended

answer, we must decide the following four issues as to 1996:

     1.    Whether respondent arbitrarily or erroneously determined

that petitioner failed to report dividend income of $1,149,048.

We hold that he did not.

     2.    Whether petitioner is liable for the fraud penalty under

section 6663(a), and, if so, whether section 6501(c)(1) applies

to annul the 3-year period of limitations under section 6501(a).

We hold that she is and that section 6501(c)(1) annuls the 3-year

period of limitations.

     3.    Whether respondent’s determination is barred by judicial

estoppel.     We hold that it is not.

     4.    Whether petitioner is entitled to relief under section

6015.     We hold that she is not.

                           FINDINGS OF FACT

I.   Overview

     The parties submitted to the Court stipulated facts and

related exhibits.    We find those stipulated facts accordingly and

incorporate those facts and exhibits herein.   The Court also

deemed admitted certain matters pursuant to Rule 91(f).    We

incorporate herein by this reference those matters deemed


     2
       Unless otherwise indicated, section references are to the
Internal Revenue Code applicable to the relevant years, and Rule
references are to the Tax Court Rules of Practice and Procedure.
                               - 3 -

admitted under Rule 91(f).   Petitioner resided in Los Angeles,

California, when her petition was filed in this Court.

      Petitioner is a well-educated, intelligent, and highly

motivated individual.   She is deeply involved in every aspect of

her business affairs and, as of 1992, had substantial experience

with business, finance, corporations, lawyers, and accountants.

She timely filed a 1996 joint Federal income tax return (1996

return) with her husband, John Bussell (Bussell).   She married

Bussell in 1972, and they remained married until he took his own

life in 2002, near the completion of his and petitioner’s

criminal trial discussed infra.

      Petitioner is a licensed physician and is board certified in

dermatology.   She opened her dermatology practice (dermatology

practice) in March 1979, in Beverly Hills, California.   In 1981,

she formed a wholly owned corporation, Letantia Bussell M.D.,

Inc., and that corporation operated the dermatology practice from

then until 1991.   While the dermatology practice was operated by

Letantia Bussell M.D., Inc., petitioner received most if not all

of the net income generated by that practice as either wages or

distributions from the corporation.

II.   Formation of Nominee Corporations

      In 1991, petitioner instructed her attorneys, Jeffrey

Sherman (Sherman) and Robert Beaudry (Beaudry), to terminate

Letantia Bussell M.D., Inc., and in its stead to form a medical
                                - 4 -

management corporation and two other medical corporations

(collectively, the three corporations) in which petitioner would

ostensibly own no interest.    Pursuant to petitioner’s

instructions, the attorneys formed the three corporations without

any apparent ownership by petitioner but with the apparent

ownership by third-party nominees.      Petitioner in fact owned each

of the three corporations.    Petitioner caused the three

corporations to be formed with the express intent of defrauding

creditors, including respondent, by concealing her assets and

income during a bankruptcy that she would file in connection with

a scheme (bankruptcy scheme) to maximize retention of her assets.

This income included income derived from the dermatology

practice.

     The medical management corporation, BBL Medical Management,

Inc. (BBL), was incorporated in California in June 1992.     It

operated the dermatology practice under the name “Beverly Hills

Dermatology Consultants, A Medical Group”.     BBL received all of

the income earned in the dermatology practice, employed the

dermatology practice’s medical staff, and collected moneys due to

the dermatology practice from insurance companies and patients.

BBL also paid the dermatology practice’s business expenses and

purchased its supplies.

     Petitioner was advised by Beaudry that BBL should be owned

`by a third-party nominee in order to conceal petitioner’s actual

ownership of BBL.   Petitioner selected Assieh Ghassemi
                                 - 5 -

(Ghassemi), an employee and bookkeeper of the dermatology

practice since 1983, as BBL’s apparent owner, president, and

chief executive officer (CEO).    Ghassemi signed BBL’s

incorporation documents at the request of petitioner and Bussell

(collectively, the Bussells) but had no duties or

responsibilities as BBL’s owner, president, or CEO.    Ghassemi’s

sole function was to sign blank checks drawn on a BBL account

when they were presented to her by either of the Bussells.

(Bussell was BBL’s president and secretary.)    In August 1995, BBL

was replaced as the operator of the dermatology practice by a

fourth corporation, Beverly Hills Management, Inc., but BBL was

neither terminated nor liquidated at that time.    On November 15,

1995, BBL’s board of directors met and adopted a resolution

authorizing Bussell to open for BBL a bank account with Paine

Webber (the Paine Webber account, described infra).       On

January 16, 1996, Bussell opened up the Paine account in the name

of BBL.

     Petitioner formed the second of the three corporations,

Beverly Hills Dermatology Medical Corp. (BHDMC), in California in

February 1993.   Beaudry advised petitioner that BHDMC should be

owned by a third-party doctor, and petitioner asked her friend

Marilyn Lange, M.D. (Lange), to assist her with respect to BHDMC.

At petitioner’s request, Lange served as BHDMC’s apparent, but
                                - 6 -

not actual, owner and director.    The Bussells gave BHDMC’s

incorporation documents to Lange, and she signed them.     Lange had

no involvement in the daily operations of BHDMC and opened no

corporate bank accounts for BHDMC.      Lange’s name was used as the

signatory on a BHDMC bank account, and her name was signed on

checks drawn from this account without either her actual

signature or her consent to the signing of her name.     Lange had

no involvement in the banking of BHDMC, and she did not have any

financial interest in BHDMC.

       The third of the three corporations was LB Bussell Medical

Corp. (LBB), incorporated in California in June 1992.     From 1993

to 1996, petitioner was identified as an employee of LBB, and it

paid her all of the wages that she received during those years.

At the beginning of 1994, petitioner became the sole shareholder

of LBB in form as well as in substance.

III.    Petitioner’s Tax Liabilities

       In 1991, petitioner received notice from respondent that she

potentially owed $1.2 million in Federal income taxes for 1983,

1984, 1986, and 1987.    Petitioner met with Sherman to discuss

these taxes sometime before December 20, 1991, when respondent

issued to her a notice of deficiency for those 4 years.

Petitioner, represented by Sherman, petitioned this Court as to

that notice of deficiency.    The resulting case, docket No.

6156-92, was ultimately settled pursuant to a stipulated decision
                               - 7 -

filed on June 25, 1993.   As of March 1995, petitioner’s unpaid

tax liabilities arising from that case had grown to approximately

$1 million, a sum which remained unpaid as of May 17, 2002.

IV.   The Bankruptcy Scheme

      The Bussells met with Sherman in 1991 to discuss the

Bussells’ outstanding tax and nontax liabilities.   In late 1991

or early 1992, Sherman introduced the Bussells to Beaudry, and

the four of them met in petitioner’s livingroom and discussed

both the Bussells’ liabilities and aspects of petitioner’s

finances.   During initial meetings with petitioner, Beaudry

suggested a two-step scheme to defraud her creditors.    (In later

meetings with petitioner, as discussed infra, Beaudry expanded on

this suggestion as a method for petitioner also to accomplish her

objective of evading Federal income taxes on her income as well

as the income of entities that included at least BBL.)   Under the

first step, the Bussells would change title to their assets and

form nominee corporations; i.e., corporations that ostensibly

would be owned by someone other than the Bussells but which in

fact would be owned by one or both of the Bussells.   Those

corporations would then realize the income earned by the

dermatology practice in a fashion that would not allow that

income to be attributed to petitioner.   Under the second step,

the Bussells would declare bankruptcy to discharge their

creditors’ claims.   Beaudry finalized these suggestions in a
                                - 8 -

written analysis of petitioner’s assets and liabilities,

concluding with a series of recommendations.    Petitioner asked

specific questions as to the bankruptcy scheme, e.g., who would

be involved in it, what would it cost, and what were the

advantages and disadvantages of certain decisions, and she

expressly approved the bankruptcy scheme’s purpose of defrauding

creditors.    Petitioner was an active participant in formulating

most, if not all, of the details of the bankruptcy scheme.

     After petitioner approved the bankruptcy scheme, Beaudry

usually met with Bussell regarding the scheme’s administrative

details.    Beaudry would contact petitioner the day of the

meeting, or soon thereafter, to inform her of the matter that had

been addressed and to confirm that she agreed with the decisions

made.   All of the decisions made regarding the dermatology

practice were expressly approved by petitioner, and only

recommendations approved by petitioner were implemented.

V.   Concealment of Assets

     On May 26, 1993, with the consent of petitioner, Beaudry

formed a shell corporation, Syntex Financial Corp. (Syntex), in

the British Virgin Islands.    Also around that time, the Bussells

traveled to Zurich, Switzerland, with a personal friend, a German

citizen named Gerd Kusch (Kusch).    There, they opened a bank

account at Swiss Bank Corp. in the name of Syntex (Syntex

account).    Kusch was named in form as the “investment advisor”
                               - 9 -

for the Syntex account, but he had no duties or responsibilities

in that capacity, and he never signed any documents authorizing

the transfer of funds from that account.   The Bussells (and not

Syntex) were the actual owners of the Syntex account, and they

exercised control over the account.

     In 1993, at Bussell’s request, Beaudry transferred funds

from Bussell’s pension plan into the Syntex account.   Petitioner

was aware of this transfer, and before (but in connection with)

this transfer she was advised by Beaudry that the transfer was a

premature distribution from a pension plan, that it was required

to be reported as such on her joint 1993 Federal income tax

return (1993 return), and that the failure to report it as such

was a crime.   The Bussells did not report this transfer on the

1993 return.

     During 1996, the Bussells maintained another, personal bank

account at Swiss Bank Corp. (personal Swiss bank account).    The

Bussells failed to report the personal Swiss bank account on

their 1996 return.   They also failed to report the Syntex account

on their personal Federal income tax returns for 1993, 1994,

1995, and 1996.

     Petitioner used multiple post office boxes in an attempt to

conceal her ownership of BBL and BHDMC, as well as her

relationship with other entities and financial accounts.   During

the relevant years, the Bussells opened at least eight personal
                              - 10 -

bank accounts, using false Social Security numbers to conceal

their identities.

VI.   Concealment of Income

      Pursuant to the bankruptcy scheme, petitioner caused

approximately $1,149,048 of income earned by the dermatology

practice from 1993, 1994, and 1995 to be accumulated in a BBL

account at Sanwa Bank (Sanwa account), and she did not cause any

of those funds (with the exception of a check in payment of a

$51.96 check printing fee) to be withdrawn from that account

until January 1996, after her bankruptcy case was discharged.    In

January 1996, she caused the balance of the Sanwa account

($1,149,048) to be transferred to the personal Swiss bank

account.

      Petitioner caused the Sanwa account to be opened on May 14,

1993, as a non-interest-bearing account to hide further the

existence of the account, and it was opened using the names of

Kusch and petitioner’s patient Josephine Isaacs (Isaacs) as

signatories in order to hide further petitioner’s actual

ownership interest in the Sanwa account.   Neither Kusch nor

Isaacs signed the bank’s signature card, and neither Kusch nor

Isaacs authorized another individual to sign for him or her.    The

Bussells retained possession and control of the checkbooks and

bank statements for the Sanwa account.
                                  - 11 -

       Implementation of the bankruptcy scheme caused an immediate

and dramatic drop in petitioner’s reported wage income from the

dermatology practice.       In 1991, petitioner reported wage income

of $720,000 from the dermatology practice.       In 1992, her reported

wage income was $500,000.       In 1993, after implementation of the

bankruptcy scheme, her reported wage income for 1993, 1994, and

1995 dropped to $84,000, $98,000, and $85,000, respectively.

Before implementing the bankruptcy scheme, petitioner had

received virtually all of the dermatology practice’s net income

as wages and/or distributions from Letantia Bussell M.D., Inc.

After implementing the bankruptcy scheme, petitioner reported

only the income that she received as an “employee” of LBB.

Despite knowing that it was a crime to do so, petitioner omitted

from the 1996 return the $1,149,048 that she caused in that year

to be transferred from BBL’s Sanwa account to the personal Swiss

bank account.3      BBL had sufficient earnings and profits to

characterize the $1,149,048 transfer as a dividend to petitioner.

VII.       Petitioner’s Bankruptcy and Ensuing Events

       On March 7, 1995, petitioner filed a petition for chapter 7

bankruptcy, seeking (with Bussell) to discharge tax and nontax

liabilities totaling approximately $4.7 million.        Of this amount,


       3
       Although BBL was replaced by Beverly Hills Management in
August 1995 as the operator of the dermatology practice, BBL
remained the named owner of the Sanwa account until January 1996.
As of the later time, BBL was also the named owner of the Paine
Webber account.
                               - 12 -

over $1 million was Federal taxes owed to respondent.   In August

1995, petitioner was granted a discharge, and her bankruptcy case

was closed.

     Before January 1, 1996, no withdrawals or transfers were

made from, and no checks were drawn on, the Sanwa account, except

for a $51.96 check written for check printing fees.   On or about

December 21, 1995, petitioner met with Beaudry and Sherman to

discuss a plan to transfer the full balance of the Sanwa account,

all of which was attributable to BBL’s operation of the

dermatology practice, from the Sanwa account to her personal

account by way of a series of offshore accounts to conceal the

transfer.

     In January 1996, Bussell forged Kusch’s signature without

his permission on a single $1,149,048 check drawn on the Sanwa

account and made payable to Paine Webber, leaving the Sanwa

account with a zero balance.   This check was deposited into the

Paine Webber account.    The Paine Webber account was a brokerage

account maintained by a New York, New York, office of Paine

Webber.    Bussell opened the Paine Webber account in the name of

BBL on January 16, 1996, and petitioner signed as a witness on

documents used to open the account.

     Bussell, in his capacity as an officer of BBL, was the only

person authorized to withdraw funds from the Paine Webber

account.    Within 1 month of its creation, all funds in the Paine
                               - 13 -

Webber account were removed from that account by way of a single

check in the amount of $1,151,627 payable to “Global Capital

Enterprises, Inc.”.4   This check was hand-delivered by Bussell to

Beaudry, who deposited it into an offshore bank account (CITCO

account) maintained in the Netherlands Antilles by an entity

named CITCO Banking Corp.   The purpose of making the Paine Webber

check payable to Global Capital Enterprises, Inc., and then

depositing that check into the CITCO account was to conceal the

location of the funds.   Pursuant to petitioner’s instructions,

Beaudry then transferred the funds from the CITCO account to the

Syntex account by way of two separate transfers of $820,000 and

$331,616.5   These transfers were made separately because

petitioner was concerned about the security of the transfers.

     On March 25, 1996, Beaudry made the first transfer, of

$820,000, from the CITCO account to a Medifor, Ltd. account in

Hong Kong (Medifor account).   In April 1996, Beaudry instructed

an entity named TrustNet Group to obtain a cashier’s check for

$820,000, payable to Syntex.   This cashier’s check was deposited

into the Syntex account on or about April 9, 1996.   Bussell then




     4
       The $2,579 difference between the $1,149,048 deposited
into the Sanwa account and the withdrawn $1,151,627 was
presumably attributed to income earned on the deposited funds.
     5
       We note the $11 discrepancy between $1,151,627 and the sum
of $820,000 and $331,616 ($1,151,616).
                              - 14 -

transferred $820,000, from the Syntex account to the personal

Swiss bank account.

     On May 31, 1996, Beaudry made a second wire transfer, of

$331,616, from the CITCO account to the Medifor account.   Beaudry

then transferred $309,010 from the Medifor account to the Syntex

account.   On or about June 11, 1996, Bussell transferred $309,010

from the Syntex account to the personal Swiss bank account.

Approximately 1 month after the second transfer, the Bussells

made another trip to Zurich, Switzerland.

     After these transfers into the Syntex account took place,

Kusch was notified by Swiss Bank Corp. about the transfers.     He

then went to Swiss Bank Corp. on October 21, 1996, and formally

resigned as the Syntex account’s investment advisor.

VIII.   Failure To File Tax Returns

     For most of the relevant years, the accounting and

bookkeeping services for the Bussells and BBL were performed by

Steve Berson (Berson).   Berson knew that BBL was profitable and

was required to file Federal income tax returns for 1992, 1993,

1994, and 1995.   Berson prepared a draft 1993 Federal income tax

return for BBL that reported a tax liability.   Bussell directed

Berson not to finalize or file that return.   Berson notified

petitioner of this decision and the fact that BBL was in a

delinquent filing status.   Petitioner did not want to pay any tax

on BBL’s income, and Berson was instructed to file false Federal
                              - 15 -

income tax returns for BBL.   Berson refused, and he was fired as

BBL’s accountant.

     Petitioner told Beaudry in 1997 that she did not want BBL to

pay any tax on its income and instructed him and Sherman to

create a scheme whereby BBL could avoid paying taxes on its

income for 1993, 1994, and 1995.   Angry that Bussell, Beaudry,

and Sherman had not come up with a workable scheme to underreport

BBL’s income, petitioner took an active and personal role in

discussing and developing alternatives to filing truthful Federal

income tax returns for BBL.   She discussed various alternatives

with Beaudry and Sherman, including overstating deductions and/or

generating a false bad investment loss in a subsequent year and

carrying it back to offset the tax liability in prior years.    She

ultimately decided to understate BBL’s gross receipts by a total

of $1,201,974 on its returns for 1993, 1994, and 1995, knowing

that this understatement would cause BBL’s income to match the

$1.1 million reported to respondent on Forms 1099 as BBL’s income

for those years.

     In October 1997, Rob S. Janpanah (Janpanah) was hired to

prepare BBL’s delinquent Federal income tax returns in lieu of

Berson.   Janpanah prepared BBL’s returns for 1993, 1994, and

1995, using accounting records provided by Sherman which differed

materially from those created by Berson.   Those returns

underreported BBL’s gross receipts by $600,180, $475,667, and
                              - 16 -

$126,127, respectively (or, in other words, a total of

$1,201,974).

IX.   The Criminal Proceeding of the Bussells and Sherman

      On July 5, 2000, the Bussells and Sherman were indicted for

various counts related to bankruptcy fraud and attempted tax

evasion.   Petitioner, in particular, was indicted for:   (1) One

count under 18 U.S.C. sec. 371 of conspiracy; (2) three counts

under 18 U.S.C. secs. 2 and 152(1) of concealing assets in

bankruptcy; (3) two counts under 18 U.S.C. secs. 2 and 152(3) of

making a false declaration and statement in bankruptcy; (4) one

count under 18 U.S.C. sec. 152(2) of making a false oath and

account in relation to a case under title 11; (4) one count under

section 7201 and 18 U.S.C. sec. 2 of attempted evasion of the

payment of tax for 1983, 1984, 1986, and 1987; and (5) one count

under section 7201 and 18 U.S.C. sec. 2 of attempted evasion of

the assessment of tax for 1996.   The conspiracy count related to

the Bussells’ conspiring with Sherman and Beaudry to form the

three corporations to conceal the Bussells’ assets and to make

false statements as to the Bussells’ bankruptcy.   The conspiracy

count in relevant part alleged that the Bussells, aided by

Sherman and Beaudry, made false statements in the Bussells’

bankruptcy proceeding when they failed to disclose the Bussells’

beneficial ownership of BBL and BHDMC.   Two of the three counts

of concealing assets related to the substance of this allegation.
                              - 17 -

The tax evasion count for 1983, 1984, 1986, and 1987 alleged in

relevant part that the Bussells attempted to evade the payment of

$353,394 of Federal income taxes for those years by knowingly and

fraudulently concealing their assets inclusive of their

beneficial ownership interests in BBL and BHDMC.    The tax evasion

count for 1996 alleged that petitioner operated the dermatology

practice through a three-tier structure, including BBL; that the

Bussells effectively managed and controlled BBL through nominee

owners; that the Bussells failed to report the $1,149,048 at

issue as income on the 1996 return; and that the Bussells had

1996 tax due and owing to the United States.

     The Bussells’ criminal trial began on November 20, 2001, and

ended on February 6, 2002.   The trial resulted in petitioner’s

conviction of five of the counts related to bankruptcy fraud and

the single count under section 7201 related to the attempted

evasion of $353,394 of Federal income taxes for 1983, 1984, 1986,

and 1987.   Petitioner’s convictions are currently on appeal.

X.   Petitioner’s Failure To Cooperate With the Court

     Rule 91(a) requires that all parties stipulate all facts and

documents to the fullest extent possible.   On November 18, 2003,

the Court reiterated the importance of this Rule when we ordered

the parties to stipulate to the greatest extent possible.   On or

about November 26, 2003, respondent sent petitioner a proposed

stipulation of facts with exhibits (stipulation).   Petitioner
                               - 18 -

refused to stipulate a single fact or document in the

stipulation.    Many of the facts stated in the stipulation were

foundational and indisputable.    For instance, the first three

stipulations were:    (1) “Petitioner is Letantia Bussell, whose

residence address was 2285 Worthing Lane, Los Angeles, California

90077, on the date the petition was filed”; (2) “The statutory

notice of deficiency upon which this case is based was mailed to

the Petitioner on June 28, 2002.    Attached and marked as Exhibit

1J is a true and correct copy of said notice”; and (3)

“Petitioner, Letantia Bussell, was married to John Bussell during

taxable years 1983 through 2002”.    Most of the documents in the

stipulation were public and business records regarding the three

corporations.

     Respondent sent petitioner two supplemental stipulations of

fact in March 2004 which contained other facts and more public

and business records relating to BBL (supplemental stipulations I

and II).    These records had been prepared and maintained by

Berson.    Petitioner refused to stipulate a single fact or

document contained in supplemental stipulations I and II.

     On March 5, 2004, respondent moved the Court under Rule

91(f)(1) to order petitioner to show cause why the matters

included in the stipulation should not be established as fact.

Respondent did not include with this motion any of the matters

addressed in supplemental stipulations I and II.    The Court
                              - 19 -

granted this motion and on March 9, 2004, ordered petitioner to

file a response by March 18, 2004, showing cause why the matters

included within the stipulation should not be established as

fact.   Petitioner did not file her response until April 6, 2004.

     On April 19, 2004, the Court held a pretrial hearing on our

order to show cause.   At this hearing, the Court found that

petitioner had substantially failed to stipulate as required by

Rule 91(f) and by the Court’s order of November 18, 2003.   The

Court went through some of the disputed stipulations on the

record, attempting to resolve legitimately disputed issues.

Petitioner made repeated meritless objections with no legal

foundation.   The hearing concluded with petitioner’s stipulating

11 out of 369 paragraphs in the stipulation.   Because petitioner

had refused to stipulate, the Court moved the trial date to

April 26, 2004, and again ordered the parties to stipulate the

fullest extent possible as required by Rule 91(a).

     On April 22, 2004, the parties were back before the Court

because petitioner refused to stipulate to business and public

records, particularly those prepared by Berson.   At this hearing,

the Court again went through some of the stipulations with the

parties, at which time petitioner stipulated an additional 19

paragraphs of the stipulation.   The parties were ordered to

continue the stipulation process in private.
                              - 20 -

      The very next day, April 23, 2004, petitioner moved the

Court to withdraw any agreement that she had made as to the

stipulation, portions of which she had initialed but not signed,

as well as to oral stipulations she had made to the Court during

the pretrial hearings on April 19 and 22, 2004.     At a pretrial

hearing on April 26, 2004, the rescheduled date of the trial,

petitioner filed a written motion to be relieved of all of the

stipulations reached during the pretrial hearings and the

weeklong meetings with respondent.     Petitioner stated that she

had reviewed the stipulation and supplemental stipulations I and

II.   She refused to sign any of them because, she asserted, she

lacked “personal knowledge” of the documents.     She alleged

further that she had been under “duress” when she had expressed

any agreement that she had made.

      Respondent spent the remainder of the Court’s time on

April 26, 2004, attempting to move into evidence approximately

106 public and business records which petitioner refused to

stipulate.   Nearly all of the exhibits were admitted into

evidence by the Court in the course of a 4-hour hearing.      During

this hearing, petitioner was given another opportunity to

stipulate some or all of the documents.     She refused.   As a

result of petitioner’s intransigence, the trial was continued to

a special trial session of the Court on September 20, 2004.       At

the conclusion of the hearing, the Court ordered both parties to
                               - 21 -

file memoranda on or before June 10, 2004, regarding the Court’s

order to show cause.   Petitioner did not file her memorandum with

the Court until July 26, 2004.   On July 26, 2004, the Court made

absolute in part and discharged in part the order, deeming some

records admitted over petitioner’s evidentiary objection.

     When the case finally came to trial, the Court spent more

time admitting documents which petitioner could and should have

stipulated.   On September 22, 2004, respondent spent

approximately 45 minutes examining Berson, moving into evidence

over 20 business records which petitioner had refused to

stipulate.    These documents were moved into evidence either with

no objection from petitioner, or over meritless objections wholly

lacking in legal foundation.

                               OPINION

I.   Dividend Income

     We decide whether respondent arbitrarily or erroneously

determined that petitioner failed to recognize $1,149,048 in

dividend income for 1996.   Gross income includes any dividend

received, whether or not formally declared, when distributed by a

corporation to the beneficial owner of the corporation.    See sec.

61(a)(7); Loftin & Woodard, Inc. v. United States, 577 F.2d 1206,

1214 (5th Cir. 1978); Walker v. Commissioner, 544 F.2d 419 (9th

Cir. 1976), revg. T.C. Memo. 1972-223; Dean v. Commissioner,

57 T.C. 32, 40 (1971).   A constructive dividend exists where a
                               - 22 -

taxpayer controls a corporation and uses its funds for personal

purposes.   Yelencsics v. Commissioner, 74 T.C. 1513, 1532-1533

(1980).    Petitioner bears the burden of proving that respondent’s

determination in the notice of deficiency is arbitrary or

erroneous; respondent is presumed correct once he has put forth

some evidence as to the source of petitioner’s income.    See Rule

142(a); Welch v. Helvering, 290 U.S. 111 (1933); Palmer v. United

States, 116 F.3d 1309, 1313 (9th Cir. 1997); Weimerskirch v.

Commissioner, 596 F.2d 358 (9th Cir. 1979), revg. 67 T.C. 672

(1977).6

     As a threshold matter, respondent must support his

determination by showing an income source beneficially owned by

petitioner.    Weimerskirch v. Commissioner, supra.   “‘Beneficial

ownership is marked by command over property or enjoyment of its

economic benefits.’”    Cordes v. Commissioner, T.C. Memo. 1994-377



     6
        Sec. 7491(a) was added to the Internal Revenue Code by
the Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, effective for
court proceedings arising from examinations commencing after July
22, 1998. Sec. 7491(a)(1) provides that the burden of proof
shifts to the Commissioner in specified circumstances. We
conclude that sec. 7491(a) does not apply to the unreported
income issue in this case. Petitioner has not in this proceeding
presented “credible evidence” on that issue. See Higbee v.
Commissioner,116 T.C. 438, 442 (2001)’ see also Blodgett v.
Commissioner, 394 F.3d 1030 (8th Cir. 2005), affg. T.C. Memo.
2003-212. Nor has she proven that she complied with the
requirements of sec. 7491 (a)(2)(A) and (B) to substantiate
items, to maintain required records, and to cooperate fully with
respondent’s reasonable requests. See Weaver v. Commissioner,
121 T.C. 273, 275 (2003).
                              - 23 -

(quoting Cepeda v. Commissioner, T.C. Memo. 1994-62); see also

Walker v. Commissioner, supra.   Respondent has shown the

requisite source of income for 1996 by establishing that

petitioner during that year received the $1,149,048 from BBL’s

Sanwa account.   Respondent has also established that petitioner

was the beneficial owner of BBL and its only shareholder in fact.

     We view the $1,149,048 transfer from the Sanwa account to

the personal Swiss bank account as a dividend to petitioner,

BBL’s only beneficial and true owner.   Although petitioner was

not BBL’s ostensible shareholder, she was its beneficial, and

only actual, shareholder.   BBL’s ostensible shareholder,

Ghassemi, had no control of BBL, exercised no daily management

functions, had no personal sums of money at risk in BBL, and was

BBL’s owner, president, and CEO in name only.   In fact, the only

function that Ghassemi served with respect to BBL was to sign the

necessary corporate paperwork and blank checks as presented to

her by the Bussells.   Ghassemi even acknowledged at trial that

petitioner was “the boss” and that she (Ghassemi) signed any

document which either of the Bussells presented to her.

     Any lingering doubt as to the true owner of BBL is dispelled

by its unique history.   From 1981 to 1991, the dermatology

practice was operated by a single professional corporation which

passed on most if not all of its profits to petitioner.     In 1992,

with the looming threat of unpaid taxes from the 1980s,
                                - 24 -

petitioner abruptly and drastically altered her corporate

structure.     Her old professional corporation was scrapped and was

replaced by three nominee corporations in an arrangement which

even her tax attorney admitted, while testifying under oath,

illegally attempted to disguise petitioner’s earnings from the

provision of her medical services.       These corporations were

formed with the express purpose of defrauding petitioner’s

creditors, including respondent, and petitioner actively

participated in this bankruptcy scheme, frequently asking

specific questions as to it and making minute tactical decisions

regarding the concealment of her assets and income.       Petitioner

even boasted at one time that “I worked too damn hard for this

money to lose it to taxes”.

     Petitioner invites the Court to disregard the existence of

BBL and conclude that its $1,149,048 of income, which is all

attributable to 1993, 1994, and 1995, is, if at all, actually

taxable in those 3 nonnotice years.       We decline petitioner’s

invitation.    Petitioner purposely chose the corporate form and

actions of BBL, and she may not now argue against them.       See

Higgins v. Smith, 308 U.S. 473, 477 (1940).       Even if she could

challenge the existence of BBL in this proceeding, the record

before us convinces us that BBL was in fact a bona fide

corporation.    BBL owned assets in its name, it held board

meetings, and it employed the dermatology practice’s medical
                              - 25 -

staff.   It also received all of the income earned in the

dermatology practice, collected moneys due to the dermatology

practice from insurance companies and patients, paid the

dermatology practice’s business expenses, and purchased the

dermatology practice’s supplies.

     In sum, respondent has established a source for the

$1,149,048 in determined unreported income, he has shown that

petitioner beneficially owned BBL and that BBL had $1,149,048 of

undistributed earnings and profits at the start of 1996, and he

has demonstrated the steps by which petitioner converted the

$1,149,048 of BBL’s earnings and profits from BBL to her personal

accounts in 1996.   Petitioner, in turn, has put forth no

probative evidence to the contrary, leading to the inference that

such evidence if produced would have been unfavorable to her.

See, e.g., Wichita Terminal Elevator Co. v. Commissioner, 6 T.C.

1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947); see also

McKay v. Commissioner, 89 T.C. 1063, 1069 (1987) (failure of

witness to testify to fact peculiarly within his knowledge

suggests that testimony would have been unfavorable), affd. 886

F.2d 1237 (9th Cir. 1989).   We hold that respondent determined

correctly in the notice of deficiency that petitioner had

unreported dividend income of $1,149,048 for 1996.
                                 - 26 -

II.   Fraud

      We decide whether petitioner is liable for the fraud penalty

determined by respondent under section 6663(a).7     Respondent must

prove that determination by clear and convincing evidence.       See

sec. 7454(a); Rule 142(b); Rowlee v. Commissioner, 80 T.C. 1111,

1113 (1983).     Respondent must prove that petitioner fraudulently

intended to underpay her tax.     See Powell v. Granquist, 252 F.2d

56 (9th Cir. 1958); Miller v. Commissioner, 94 T.C. 316, 332-333

(1990).     Respondent may meet his burden through affirmative

evidence because fraud is never imputed or presumed.      Beaver v.

Commissioner, 55 T.C. 85, 92 (1970).      Whether fraud exists in a

given situation is a factual determination that must be made

after reviewing the particular facts and circumstances of the

case.     DiLeo v. Commissioner, 96 T.C. 858, 874 (1991), affd.

959 F.2d 16 (2d Cir. 1992).


      7
          In relevant part, sec. 6663 provides:

      SEC. 6663.    IMPOSITION OF FRAUD PENALTY.

           (a) Imposition of Penalty.--If any part of any
      underpayment of tax required to be shown on a return is
      due to fraud, there shall be added to the tax an amount
      equal to 75 percent of the portion of the underpayment
      which is attributable to fraud.

           (b) Determination of Portion Attributable to
      Fraud.--If the Secretary establishes that any portion
      of an underpayment is attributable to fraud, the entire
      underpayment shall be treated as attributable to fraud,
      except with respect to any portion of the underpayment
      which the taxpayer establishes (by a preponderance of
      the evidence) is not attributable to fraud.
                                 - 27 -

     A.    Underpayment of Tax

     Petitioner did not report or pay income tax on the

$1,149,048 of income received as a dividend from BBL in 1996.

She does not contest this, instead arguing that the money was in

fact stolen by Beaudry and that she therefore should not have to

pay tax on it.   This argument is not supported by credible

evidence in the record.    We are clearly convinced on the record

before us that petitioner was the only actual shareholder of BBL

and that she caused the $1,149,048 to be transferred in 1996 from

BBL to her personal accounts.     We conclude that petitioner

received those funds as a dividend from BBL in 1996 and that her

failure to pay taxes on that dividend resulted in an underpayment

of her 1996 Federal income tax.

     B.    Intent To Evade Tax

     Fraud requires a clear and convincing showing that the

taxpayer intended to evade a tax known or believed to be owing by

conduct intended to conceal, mislead, or otherwise prevent the

collection of tax.     Stoltzfus v. United States, 398 F.2d 1002,

1004 (3d Cir. 1968).    This intent may be proven by circumstantial

evidence because direct proof of a taxpayer’s intent is rarely

available.   Reasonable inferences may be drawn from the relevant

facts.    See Spies v. United States, 317 U.S. 492, 499 (1943);

Stephenson v. Commissioner, 79 T.C. 995 (1982), affd. 748 F.2d

331 (6th Cir. 1984).
                                - 28 -

     Courts have relied on certain indicia (badges) of fraud in

deciding whether a taxpayer had the requisite fraudulent intent.

These badges include:   (1) Understating income, (2) maintaining

inadequate records, (3) failing to file tax returns, (4) giving

implausible or inconsistent explanations of behavior,

(5) concealing assets, (6) failing to cooperate with tax

authorities, (7) engaging in illegal activities, (8) attempting

to conceal illegal activities, and (9) dealing in cash.

Recklitis v. Commissioner, 91 T.C. 874, 910 (1988); see also

Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986),

affg. T.C. Memo. 1984-601.    These badges are nonexclusive.

Niedringhaus v. Commissioner, 99 T.C. 202, 211 (1992).        The

taxpayer’s education and business background are also relevant to

the determination of fraud.     Id.   Bearing these general

principles in mind, we turn to the indicia of fraud that are

relevant to the instant case.    The presence of several badges is

persuasive circumstantial evidence of fraud.      Beaver v.

Commissioner, supra at 93.

     1.   Understating Income

     Understating income is indicative of fraudulent intent.

Bradford v. Commissioner, supra.

     Petitioner understated the 1996 gross income.     The existence

of that understatement was clearly and convincingly established

by respondent at trial, where respondent showed that BBL’s income
                                - 29 -

from the dermatology practice was distributed to petitioner in

1996 in the form of a dividend.    Petitioner did not report, and

paid no tax on, this dividend in 1996.

     This factor weighs against petitioner.

     2.    Maintaining Inadequate Records

     Lack of records is indicative of fraudulent intent.    Id.

     Petitioner maintained inadequate records.   She kept few

personal records of the bankruptcy scheme or the transactions

surrounding the transfer of the $1,149,048 from the Sanwa account

to the personal Swiss bank account.

     This factor weighs against petitioner.

     3.    Failing To File Tax Return

     Failing to file tax returns is indicative of fraudulent

intent.   Id.

     Although petitioner filed the 1996 return timely, that

action is negated by the fact that she intentionally omitted from

that return her receipt of the $1,149,048 from BBL and attempted

to conceal her receipt of those funds by filing untimely,

incorrect, and fraudulent tax returns for BBL for 1992, 1993,

1994, and 1995.

     This factor is neutral.

     4.    Giving Implausible or Inconsistent Explanations of
           Behavior

     Giving implausible or inconsistent explanations of behavior

is indicative of fraud.   Id.
                               - 30 -

     Petitioner’s explanations of her behavior were implausible

and/or inconsistent.    She testified that she lacked any financial

or tax expertise whatsoever.   We find that she has possessed both

types of expertise since at least 1991.    Two of her attorneys

even testified to that effect.   Beaudry testified that petitioner

was very competent in financial matters and was intimately

involved in the bankruptcy scheme and her plan to evade taxes.

Jonathan A. Brod, another of her attorneys whom she called to

testify, described petitioner as someone who thought she was

financially astute and knowledgeable in tax matters.    He

testified that she asked him an average of 60 questions a week

during the time that he represented her.

     This factor weighs against petitioner.

     5.   Concealing Assets

     Concealing assets is indicative of fraud.    Id.

     Petitioner purposely undertook efforts to conceal her

assets, and she purposely established the elaborate bankruptcy

scheme to conceal her ultimate receipt of the income from the

dermatology practice.   In fact, the bankruptcy scheme continued

to evolve over the years in both complexity and sophistication as

petitioner asked her attorneys to hide more of her income.    What

was originally conceived as an attempt to defraud her creditors

in bankruptcy evolved into a series of international transactions

whereby petitioner attempted to avoid paying Federal taxes
                               - 31 -

altogether because, she stated, she “worked too damn hard for

this money to lose it to taxes”.    When her attorneys could not

find a legal way to accomplish her goal, she became angry and

instructed them to falsify BBL’s returns so that she could

underreport its income and hers.

     Petitioner’s handling of the Sanwa account displays yet more

evidence of her fraudulent intent.      For the 3 years that the

account was in existence, petitioner made not one transfer,

withdrawal, or other transaction that might have brought the

account to the attention of respondent.      She wrote only one check

on the account for the expense of printing checks for the

account.    When the account had served its fraudulent purpose, it

was closed with one large transfer of funds to an offshore

account.    These transactions, taken together, constitute a

methodical and sophisticated attempt to conceal income and

assets.

     This factor weighs against petitioner.

     6.    Failing To Cooperate With Tax Authorities

     Failure to cooperate with tax authorities is indicative of

fraud.    Id.

     Petitioner has been uncooperative with both respondent and

this Court as to the matter at hand.      She failed on numerous

occasions to respond timely to requests from respondent.      She

flouted Rule 91(f) and the Court’s order of November 18, 2003,
                               - 32 -

requiring the parties to stipulate all facts and exhibits which

should not fairly be in dispute.    She refused to stipulate even

her address or marital status until the Court questioned her on

the record, and then she moved to have that stipulation set

aside.    She was consistently late in her filings, e.g., missing

Court deadlines by weeks and months.

     Petitioner’s dilatory tactics and lack of cooperation cannot

be excused by the fact that she was proceeding pro se.    Litigants

are presumed to know the tax laws and the Rules, even when

proceeding pro se.    See Faretta v. California, 422 U.S. 806, 835

n.46 (1975).

     This factor weighs against petitioner.

     7.    Engaging in Illegal Activities

     Engaging in illegal activities is indicative of fraud.

Bradford v. Commissioner, 796 F.2d 303 (9th Cir. 1986).

     Petitioner engaged in illegal activities to defraud

respondent and her other creditors.     In fact, she was convicted

of five counts of bankruptcy fraud and one count under section

7201 of willfully attempting to evade and defeat the payment of

$353,394 of Federal income taxes for 1983, 1984, 1986, and 1987.

     This factor weighs against petitioner.
                                  - 33 -

     8.    Attempting To Conceal Illegal Activities

     Attempting to conceal illegal activities is indicative of

fraud.    Id.

     Petitioner went to great lengths to conceal her illegal

activities.     Those efforts included taking part in the bankruptcy

scheme, concealing her beneficial ownership in certain entities

connected therewith, and using offshore bank accounts.

     This factor weighs against petitioner.

     9.    Other Considerations

     Petitioner is well educated and intelligent.     She also is

deeply involved in every aspect of her business affairs and has

substantial experience with business, finance, corporations,

lawyers, and accountants.

     10.    Conclusion

     Our analysis above concludes that seven of the eight factors

weigh against petitioner and that the remaining factor is

neutral.    On the basis of our detailed review of the facts and

circumstances of this case, in conjunction with our analysis of

the eight factors mentioned above and our “other considerations”,

we conclude that respondent has clearly and convincingly proven

that petitioner filed her 1996 return intending to conceal,

mislead, or otherwise prevent the collection of tax.
                              - 34 -

     C.   Portion of Understatement Attributable to Fraud

     Respondent has proven clearly and convincingly that a

portion of petitioner’s understatement is attributable to fraud.

Thus, the whole understatement is considered attributable to

fraud, except to the extent that petitioner proves otherwise.

     Petitioner testified that she was the victim of her scheming

attorneys, who, she says, stole the $1,149,048 at issue.    The

evidence shows to the contrary; i.e., that petitioner was

proactively involved in these transactions and that the

$1,149,048 reached her personal accounts.   The evidence shows

that petitioner sought out her attorneys to evade her payment of

her prior tax debts, that she gave her attorneys a broad

directive to devise a scheme that would allow her to evade paying

taxes, and that she actively questioned her attorneys on the

progress of the scheme.   Her own handwritten notes show that she

was involved in tactical decisions such as where to send the BBL

money and how to ensure its safety in transit.   Her attorneys

painted a consistent picture of her as a knowledgeable and

proactive participant in her financial affairs, and having seen

her testify, the Court finds their testimony credible.

     Petitioner is not ignorant of financial affairs.    The Court

finds her testimony that she had no involvement in this scheme

incredible, considering her demonstrated knowledge and her

proactive demeanor at the trial.   Petitioner has failed to meet
                                  - 35 -

her burden of showing that any portion of the underpayment was

not attributable to fraud.

       D.   Period of Limitations Under Section 6501(c)

       After a return is filed, the Commissioner generally has 3

years within which to assess a deficiency in a civil tax case.

Sec. 6501(a).    However, in the case of a false or fraudulent

return that is filed with the intent to evade tax, the tax may be

assessed at any time.       Sec. 6501(c).   Since we conclude that

petitioner’s 1996 return was such a return, we also conclude that

the period for assessment remains open.        Id.; see also Considine

v. United States, 683 F.2d 1285, 1288 (9th Cir. 1982).

III.    Judicial Estoppel

       Petitioner argues that the Court should reject respondent’s

determination on the basis of judicial estoppel.        We disagree.

Under the equitable doctrine of judicial estoppel, a court in its

discretion may preclude a party from asserting a position

contrary to a position that the party affirmatively persuaded

that or another court to accept in the same or a previous

judicial proceeding.    Huddleston v. Commissioner, 100 T.C. 17, 26

(1993); see also New Hampshire v. Maine, 532 U.S. 742 (2001);

Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782-783

(9th Cir. 2001).    Factors that courts may consider in deciding

whether to apply judicial estoppel include:        (1) Whether a

party’s later position is “clearly inconsistent” with its earlier
                               - 36 -

position, (2) whether the party has succeeded in persuading a

court to accept that party’s earlier position, and (3) whether

the party seeking to assert an inconsistent position would derive

an unfair advantage or impose an unfair detriment on the opposing

party if not estopped.    New Hampshire v. Maine, supra at

750-751.   A party requesting the application of judicial estoppel

has the burden of proving that the doctrine should be applied.

See Rule 142(a)(1).

     Petitioner argues in her brief that respondent has taken a

position that is contrary to a position taken by the United

States in her criminal case.   She has not, however, persuaded us

that such is so.   In her brief, petitioner does not identify with

any specificity any particular position that she contends is

inconsistent between the criminal case and the proceeding here.

She asserts broadly that the United States argued in the criminal

case that BBL was not formed for a valid business purpose and

that BBL did not engage in any business activity.   Contrary to

this assertion, however, the First Superseding Indictment states

specifically as to the 1986 tax evasion charge that the United

States’ position in the criminal case was that:   (1) Petitioner

operated the dermatology practice through a three-tier structure,

including BBL, (2) the Bussells effectively managed and

controlled BBL through nominee owners, (3) the Bussells failed to

report the $1,149,048 at issue herein as income on the joint 1996
                              - 37 -

return, and (4) the Bussells had a 1996 tax due and owing to the

United States.   In addition, the First Superseding Indictment

indicates as to the other counts that the United States’ position

as to those counts did not involve nor require a finding that BBL

was not formed for a valid business purpose or that BBL did not

engage in any business activity.   We decline on the basis of the

record before us to conclude that respondent’s position here is

clearly inconsistent with the United States’ position in the

criminal case, that respondent is a party who succeeded in

persuading the criminal court to accept an earlier contrary

position, or that respondent is a party seeking to assert an

inconsistent position in this case and would derive an unfair

advantage or impose an unfair detriment on the opposing party if

not estopped.

IV.   Section 6015 Relief

      Petitioner in her petition alleged as an affirmative defense

that she was entitled to relief under section 6015 from joint and

several liability (joint liability) as to her 1996 Federal income

tax return.   See, e.g., Butler v. Commissioner, 114 T.C. 276,

287-289 (2000) (a taxpayer may seek relief from joint liability

on a joint return by raising the matter as an affirmative defense

in a petition for a redetermination of a deficiency filed under

section 6213).   Spouses filing a joint Federal income tax return

are generally jointly liable for the tax shown on the return or
                               - 38 -

found to be owing.    Sec. 6013(d)(3); Butler v. Commissioner,

supra at 282.    In certain cases, however, an individual filing a

joint return may avoid joint liability for tax (including

interest, penalties, and other amounts) by qualifying for relief

under section 6015.    The three types of relief prescribed in that

section are:    (1) Full or apportioned relief under section

6015(b) (full/apportioned relief), (2) proportionate relief under

section 6015(c) (proportionate relief), and (3) equitable relief

under section 6015(f) (equitable relief).    Except as otherwise

provided in section 6015, petitioner bears the burden of proving

her claim for relief under that section.    See Alt v.

Commissioner, 119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34

(6th Cir. 2004); see also Rule 142(a)(1).

     Petitioner neither in her petition nor in her brief

specifies which of the three types of relief she is seeking under

section 6015.    She alleges in her petition without further

explanation that she has commenced this proceeding under sections

6015 and 6213.    She argues in her brief that she is entitled to

relief under section 6015 because (1) she did not in 1996

exercise dominion and control over the funds at issue and (2) she

was not aware when she signed her 1996 return that Bussell in

1996 had exercised dominion and control over those funds.      We

address each of the three types of relief seriatim bearing in

mind this allegation and argument.
                                - 39 -

     A.      Full/Apportioned Relief

     Section 6015(b) provides full/apportioned relief from joint

liability on a joint return to the extent that the liability is

attributable to an understatement of tax.     To be eligible for

this relief, a requesting spouse needs to satisfy the following

five elements of section 6015(b)(1):

             (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 [timely] elects (in such
     form as the Secretary may prescribe) the benefits of
     this subsection * * *.

The requesting spouse’s failure to meet any one of these

requirements prevents him or her from qualifying for

full/apportioned relief.     Alt v. Commissioner, supra at 313.

     Respondent concedes that the requirements of subparagraphs

(A) and (E) have been met and argues that petitioner does not

meet the requirements set forth in the remaining three

subparagraphs.     On the basis of our findings, we agree with

respondent that petitioner does not qualify for full/apportioned
                               - 40 -

relief.   Contrary to petitioner’s argument, we find both that the

understatement as to the 1996 return is attributable to her and

that she knew of this understatement when she filed that 1996

return.   We conclude that petitioner cannot carry her burden as

to subparagraphs (B) and (C) and that she does not qualify for

full/apportioned relief.8

     B.    Proportionate Relief

     Section 6015(c) provides proportionate relief from joint

liability on a joint return.   Petitioner bears the burden of

proving the portion of any deficiency which is allocable to her.

Sec. 6015(c)(2).   Where petitioner had actual knowledge of the

omitted income underlying the deficiency, she is not entitled to

proportionate relief.   See Cheshire v. Commissioner, 115 T.C. 183

(2000), affd. 282 F.3d 326 (5th Cir. 2002).

     Because we find that petitioner had direct and actual

knowledge of the omitted income, we conclude that she is not

entitled to proportionate relief.

     C.    Equitable Relief

     Section 6015(f) gives the Commissioner discretion to grant

equitable relief to any individual who files a joint return and

who is not entitled to either full/apportioned relief or

proportionate relief.   Because we have held that petitioner is

not entitled to either full/apportioned relief or proportionate

     8
       This conclusion makes it unnecessary for us to address
subpar. (D).
                              - 41 -

relief for 1996, we consider whether she is entitled to equitable

relief for that year.

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

prescribed guidelines under which a taxpayer may qualify for

equitable relief.   See Rev. Proc. 2003-61, 2003-2 C.B. 296.9

Under these guidelines, a taxpayer such as petitioner must meet

seven threshold conditions before the Commissioner will consider

her request for equitable relief.   See id., sec. 4.01, 2003-2

C.B. at 297.   One of these conditions is that the requesting

spouse not have filed the joint return with fraudulent intent.

Id., sec. 4.01(6), 2003-2 C.B. at 297; cf. Rev. Proc. 2000-15,

sec. 4.01(7), 2000-1 C.B. 447, 448 (same condition).   Because we

find that petitioner did file her 1996 return with fraudulent

intent, we conclude that she does not qualify for equitable

relief.




     9
       Rev. Proc. 2003-61, 2003-2 C.B. 296, superseded Rev. Proc.
2000-15, 2000-1 C.B. 447, effective for requests for relief filed
on or after Nov. 1, 2003, and for requests for such relief which
were pending on, and for which no preliminary determination
letter had been issued as of, that date. In that petitioner
claimed in her petition that she qualified for relief under sec.
6015 and that claim was still pending on Nov. 1, 2003, we
conclude that this case is controlled by Rev. Proc. 2003-61,
supra. We note, however, that our result would be the same under
either of these revenue procedures.
                              - 42 -

     All of the parties’ arguments have been considered.   We have

rejected those arguments not discussed herein as meritless.10



                                        An appropriate order will

                                   be issued.




     10
       Following the trial of this case, respondent moved the
Court to impose a penalty against petitioner under sec.
6673(a)(1). We shall resolve that motion at a later date.
