                            T.C. Memo. 2012-288



                      UNITED STATES TAX COURT



GLENELL HENSON, JR., Petitioner AND STEPHANIE A. HENSON, Intervenor
      v. COMMISSIONER OF INTERNAL REVENUE, Respondent



    Docket No. 14304-10.                        Filed October 10, 2012.


    Ray Cody Mayo, Jr., for petitioner.

    W. Deryl Medlin, for intervenor.

    Marshall R. Jones and John W. Sheffield III, for respondent.
                                           -2-

[*2]            MEMORANDUM FINDINGS OF FACT AND OPINION


        VASQUEZ, Judge: Pursuant to section 6015(e)(1),1 petitioner seeks review

of respondent’s determination that he is not entitled to relief from joint and several

liability under section 6015(f) with respect to his Federal income tax liability for

2003.

                                  FINDINGS OF FACT

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

facts and the accompanying exhibits are incorporated herein by this reference.

        Pursuant to section 6015(e)(4) and Rule 325, petitioner’s former spouse,

Stephanie Henson (intervenor), intervened as a party in this case to oppose his

request for relief. Petitioner resided in Louisiana at the time he filed the petition.

Intervenor also resided in Louisiana at the time she filed the notice of intervention.

I.      Petitioner’s Background

        Petitioner attended three years of college at Louisiana State University

(LSU) in Baton Rouge, Louisiana.2 He developed a successful career as an

        1
         Unless otherwise indicated, all section references are to the Internal
Revenue Code, as amended, and Rule references are to the Tax Court Rules of
Practice and Procedure.
        2
            The record is unclear as to whether petitioner received a degree from
                                                                           (continued...)
                                        -3-

[*3] engineer with Kansas City Southern Railroad (KCS Railroad) in Shreveport,

Louisiana, rising in the ranks to upper level management. In 2003 he had an annual

salary of approximately $60,000. By 2007 he was grossing around $140,000 as one

of three supervisors managing KCS Railroad’s Shreveport operations. KCS

Railroad withheld Federal income tax from his wages.3

II.    Intervenor’s Background

       Intervenor received a bachelor of science degree from LSU in Baton Rouge,

Louisiana, and a medical degree from LSU Medical Center in Shreveport,

Louisiana. Following medical school, she entered a three-year residency program in

pediatrics at LSU Medical Center. She was an employee whose wages were

reported on Form W-2, Wage and Tax Statement, during her residency. After

completing her residency in mid-1998, she became an independent contractor with a

hospital, Willis Knighton Medical Center. The hospital provided her with a Form

1099-MISC, Miscellaneous Income, that reported that she had received

nonemployee compensation, but the hospital did not withhold taxes from her

       2
           (...continued)
LSU.
       3
         Petitioner believes that the withholding each year during the term of his
marriage was sufficient to cover his Federal income tax liability. He is not asking
the Court for relief from joint and several liability for any unpaid tax liability
attributable to his own income.
                                          -4-

[*4] income. In 2002 she began her own medical practice. On the recommendation

of another doctor, she hired a local attorney to form Henson Pediatric Health Care

(HPHC).

       HPHC is organized as a limited liability company under State law and is

disregarded for Federal income tax purposes. From 2002 until 2008 HPHC

employed a nurse, a medical assistant, and a receptionist. HPHC withheld Federal

income tax from their wages. Intervenor was not listed as an employee of HPHC

during this time and consequently did not have Federal income tax withheld from

her income.4 At the end of 2008, on the advice of an Internal Revenue Service

(IRS) agent, intervenor added herself to the employee roster and HPHC began

withholding tax from her wages.5

III.   Petitioner’s Relationship With Intervenor

       Petitioner and intervenor first met in 1988 on a date arranged by their

friends. They got married in 1998 and had two children together, a son and a


       4
         Apart from 2003, in which intervenor reported income of $105,376 on
Schedule C, Profit or Loss From Business, the record does not reflect her income
for any other year.
       5
          Intervenor testified that she has not filed tax returns for 2008, 2009, and
2010 because they are extensive and expensive to prepare. She does not know
whether the wage withholding is sufficient to cover her Federal income tax
liabilities.
                                          -5-

[*5] daughter. They lived a fairly normal lifestyle together, but their marriage was

rocky. Petitioner had on several occasions struck intervenor over disagreements on

marital issues.6 In February 2008 the marriage began to fall apart. The then vice

president of KCS Railroad offered petitioner an executive position at the company’s

headquarters in Kansas City.7 The position came with one major drawback--

petitioner would have to leave Shreveport. Intervenor’s medical practice was based

in Shreveport, and she refused to start her practice over.

      The tension between petitioner and intervenor built up over the following

months and erupted in a major altercation one Saturday evening in November 2008.

Petitioner was arrested the following day on battery charges. On November 16,

2008, petitioner and intervenor separated. Soon thereafter, petitioner called the then

vice president of KCS Railroad and rejected the February job offer,8 opting to stay

in Shreveport to work things out with intervenor. That never happened.




      6
          Petitioner admitted to hitting intervenor in a “couple of incidents”.
      7
         While the record is unclear as to the details of the executive position,
petitioner testified that KCS Railroad was going to make him a millionaire.
      8
        Petitioner’s position with KCS Railroad in Shreveport was transferred to
Kansas City; petitioner accepted a lower level position with a combined salary,
bonus, and retirement pay cut of $101,000.
                                         -6-

[*6] Petitioner and intervenor were divorced on July 30, 2009. The divorce decree

conferred joint custody of the children to petitioner and intervenor but did not

provide for payment of alimony or child support or contain any provision regarding

payment of Federal income tax liabilities. There was no property settlement. In

August 2010 petitioner and intervenor’s home went into foreclosure. Petitioner

voluntarily relinquished his interest in the home to intervenor, who refinanced the

home in her name only. In September 2010 petitioner accepted a new position with

KCS Railroad and moved to Overland Park, Kansas, where he currently resides.9

Intervenor continues to operate her medical practice in Shreveport, Louisiana.

IV.   Control of Financial Matters

      A.     The Bank Accounts

      Petitioner and intervenor shared a personal joint checking account (joint

account). Petitioner’s salary from KCS Railroad was directly deposited into the

joint account. He and intervenor at all times during their marriage had full and

uninterrupted access to the joint account.




      9
         Overland Park is just outside Kansas City, where KCS Railroad is
headquartered. The record does not reflect petitioner’s current position or salary--it
is unclear whether this is the same position he had earlier turned down.
                                        -7-

[*7] Intervenor had separate business accounts10 and would periodically transfer

money from these accounts to the joint account. The transfers generally occurred on

a Wednesday, the same day that Medicaid direct-deposited reimbursement claims

from HPHC into the business accounts. Intervenor gave petitioner a debit card for

the business accounts--the same debit card that she gave to her medical assistant.11

      Petitioner was authorized to write checks on the business accounts, but he

chose not to write a single check, nor did he use the debit card even once. Bank

statements for the business accounts were delivered to HPHC; intervenor would

later bring them to the home. Petitioner reviewed the check registers and bank

statements only at the time the tax returns were prepared. He had no control over

the billing, accounting, or payroll functions of HPHC and the corresponding

deposits into the business accounts. Intervenor determined the amounts and

frequency of the transfers from the business accounts to the joint account.




      10
          Intervenor had a business checking account and a separate payroll account.
The record does not reflect any meaningful differences between the two accounts.
All references to business accounts include both accounts.
      11
         The medical assistant also served as the office manager and used the card
to buy supplies.
                                          -8-

[*8] B.      The Household Bills

      Each month petitioner and intervenor gathered all of the bills and placed them

in a stack. They jointly decided which bills to pay and jointly handled writing the

checks and mailing the envelopes. In addition to recurring expenses for utilities and

household purchases, they had two big-ticket items: a home mortgage with a

monthly payment of $3,100 and a note on the truck intervenor used with a monthly

payment of $800.12 They made all of the important money decisions together.

      C.     The Tax Returns

      Both petitioner and intervenor participated in the preparation of their tax

returns.13 Generally, they created initial drafts of tax returns on their laptop

computer using TurboTax software. They reviewed the drafts together and took the

drafts and other supporting documents to an accountant.14 They later met with




      12
          Petitioner was released from liability on the home mortgage when
intervenor refinanced the home in her name. It is unclear whether he remains liable
on the truck note.
      13
        We cannot determine from the record their relative contributions, nor can
we determine whether the returns for every year were prepared in the same manner.
      14
         Petitioner and intervenor changed accountants several times during their
marriage.
                                           -9-

[*9] the accountant at his office to discuss their returns. They both signed the final

completed tax returns. They never completed the tax preparation in time to file

timely returns, nor did they ever pay in full the tax shown due on the returns.

V.    A History of Tax Noncompliance

      Petitioner and intervenor’s history of tax noncompliance dates back to the

early years of their marriage.15 They filed their joint 2000 tax return late, on June

17, 2002, reporting a tax liability of $43,950, but apart from wage withholding of

$8,339 on petitioner’s salary, they failed to pay the tax shown due. They filed their

joint 2001 tax return late, on July 8, 2002, reporting a tax liability of $37,635, but

apart from wage withholding of $8,593 on petitioner’s salary, they failed to pay the

tax shown due. They filed their joint 2002 return late, on November 24, 2003,

reporting a tax liability of $18,097, but apart from wage withholding of $8,172 on

petitioner’s salary, they once again failed to pay the tax shown due.

      Petitioner and intervenor began to receive letters and collection notices from

the IRS16 and eventually realized that their tax problems would not take care of

      15
           We cannot determine from the record whether petitioner and intervenor
timely filed their 1998 or 1999 tax return. They presumably have unpaid tax
liabilities attributable to these years, which were included in petitioner’s request for
relief from joint and several liability.
      16
           The record reflects that they received notices of intent to levy on
                                                                            (continued...)
                                         - 10 -

[*10] themselves. They talked it over and decided to meet with the IRS. Petitioner

initially met with Kayla Lettow, a revenue officer with respondent’s collections

department in Shreveport, and later he and intervenor had a joint meeting with

Revenue Officer Lettow. On February 11, 2005, petitioner and intervenor entered

into an installment agreement under which they would make monthly payments of

$1,700 towards their tax liabilities.

      By the end of 2005 petitioner and intervenor had yet to file their 2003 tax

return; and apart from wage withholding on petitioner’s salary, they had made no

payments towards their 2003 tax liability. On March 13, 2006, respondent prepared

a substitute for return for petitioner’s 2003 tax year using married filing separately

status on the basis of information returns filed by KCS Railroad. On June 12, 2006,

respondent mailed petitioner a notice of deficiency showing a tax liability of

$10,191 and a withholding credit of $7,234 and determining a deficiency of $2,957,

plus interest and penalties.17




      16
      (...continued)
September 30, 2002, and October 25, 2004.
      17
         The substitute for return and the notice of deficiency were in petitioner’s
name only; there is no evidence in the record that any substitute for return was
prepared for intervenor.
                                        - 11 -

[*11] On September 15, 2006, petitioner filed a petition with the Court for

redetermination of the deficiency. Petitioner’s case was dismissed on February 4,

2008, on the Court’s order granting respondent’s motion to dismiss for lack of

prosecution. On March 3, 2008, petitioner and intervenor filed their 2003 tax return

late. They continued to elect joint filing status. They reported income of $166,571

and a tax liability of $34,130 on the return; but apart from the $7,234 of wage

withholding on petitioner’s salary, they failed to pay the tax shown due.

      On March 24, 2008, petitioner and intervenor were no longer in installment

agreement status.18 Sometime thereafter, the IRS began garnishing petitioner’s

wages. For eight months the IRS garnished his entire salary except for $779 each

month.

      Petitioner and intervenor failed to comply with the Federal income tax laws

for most of the remaining years of their marriage. They filed their joint 2004, 2005,

2006, and 2007 returns late; and apart from a few inadequate payments




      18
           While no explanation for this change was provided to the Court, petitioner
testified that he and intervenor continued to make payments to the IRS until they
separated in November 2008.
                                          - 12 -

[*12] intervenor made in 2004 and 200519 and petitioner’s wage withholding each

year, they failed to pay the taxes shown due on the returns.

VI.   Request for Innocent Spouse Relief

      On March 6, 2009, petitioner filed with the IRS Form 8857, Request for

Innocent Spouse Relief. Petitioner’s request covered 1998 to 2007. On August 10,

2009, the IRS sent intervenor Letter 3284C, inviting her to respond to petitioner’s

request. She responded to the IRS by submitting a completed Form 12508,

Questionnaire for Non-Requesting Spouse, objecting to petitioner’s request. On

May 20, 2010, respondent sent petitioner Letter 4475C, Final Determination,

denying his request for innocent spouse relief. On June 22, 2010, petitioner filed a

timely petition with the Court seeking review of respondent’s determination that he

is not entitled to relief from joint and several liability under section 6015(f) with

respect to his Federal income tax liability for 2003 only.20


      19
         Intervenor made three estimated tax payments of $5,000 in 2004, a
miscellaneous payment of $5,000 in early 2005 that was credited to 2004, and one
estimated tax payment of $5,000 in 2005.
      20
          Respondent denied petitioner’s request for innocent spouse relief for all
years. The final determination for 2003 stated that petitioner did not show that it
would be unfair to hold him responsible--he had reason to know that the tax liability
for 2003 would not be paid, and the documentation he provided did not prove
economic hardship. The final determination for the other years was not introduced
into evidence. Petitioner’s counsel asserted in his opening statement that the other
                                                                         (continued...)
                                          - 13 -

[*13]                                  OPINION

        In general, a spouse who files a joint Federal income tax return is jointly and

severally liable for the entire tax liability. Sec. 6013(d)(3). However, a spouse may

be relieved from joint and several liability under section 6015(f) if: (1) taking into

account all the facts and circumstances, it would be inequitable to hold him liable

for any unpaid tax; and (2) relief is not available to the spouse under section 6015(b)

or (c).21 The Commissioner has published revenue procedures listing the factors the

Commissioner normally considers in determining whether section 6015(f) relief

should be granted. See Rev. Proc. 2003-61, 2003-2 C.B. 296, superseding Rev.

Proc. 2000-15, 2000-1 C.B. 447. We consider these factors in the light of the

attendant facts and circumstances, but we are not bound by them. See Sriram v.

Commissioner, T.C. Memo. 2012-91.

        In determining whether petitioner is entitled to section 6015(f) relief we

apply a de novo standard of review as well as a de novo scope of review. See



        20
         (...continued)
years are not before the Court “because of the Lantz case [discussed infra] and the
timing of the collection” and that “there is a good chance that the prevailing party in
this case, would ultimately prevail in what the other years [sic], after that Lantz
issue was resolved with the Government”.
        21
         The parties all agree that petitioner is not eligible for relief under sec.
6015(b) or (c).
                                          - 14 -

[*14] Porter v. Commissioner, 132 T.C. 203 (2009) (Porter II); Porter v.

Commissioner, 130 T.C. 115 (2008) (Porter I). Petitioner bears the burden of

proving that he is entitled to relief. See Rule 142(a); Alt v. Commissioner, 119 T.C.

306, 311 (2002), aff’d, 101 Fed. Appx. 34 (6th Cir. 2004).

A.    Threshold Conditions for Granting Relief

      In order for the Commissioner to determine that a taxpayer is eligible for

section 6015(f) relief, the requesting spouse must satisfy the following threshold

conditions: (1) he filed a joint return for the taxable year for which he seeks relief;

(2) relief is not available to him under section 6015(b) or (c); (3) no assets were

transferred between the spouses as part of a fraudulent scheme by the spouses; (4)

the nonrequesting spouse did not transfer disqualified assets to him; (5) he did not

file or fail to file the returns with fraudulent intent; and (6) with enumerated

exceptions, the income tax liability from which he seeks relief is attributable to an

item of the nonrequesting spouse.22 Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at

      22
         Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. 296, 297-298, also lists a
seventh threshold condition: “The requesting spouse applies for relief no later than
two years after the date of the Service’s first collection activity after July 22, 1998,
with respect to the requesting spouse.” In Lantz v. Commissioner, 132 T.C. 131
(2009), rev’d, 607 F.3d 479 (7th Cir. 2010), we held that the two-year deadline
imposed by sec. 1.6015-5(b)(1), Income Tax Regs., is an invalid interpretation of
sec. 6015(f). After the U.S. Court of Appeals for the Seventh Circuit reversed
Lantz, we reconsidered the matter but did not change our position. See Hall v.
                                                                            (continued...)
                                         - 15 -

[*15] 297-298. Respondent concedes that petitioner has met all of the threshold

conditions.

B.     Safe Harbor: Circumstances Under Which Relief Is Ordinarily Granted

       When the threshold conditions have been met, the Commissioner will

ordinarily grant relief with respect to an underpayment of tax if the requesting

spouse meets the requirements set forth under Rev. Proc. 2003-61, sec. 4.02, 2003-

2 C.B. at 298. To qualify for relief under Rev. Proc. 2003-61, sec. 4.02, all of the

following elements must be satisfied: (1) on the date of the request for relief the

requesting spouse is no longer married to, or is legally separated from, the

nonrequesting spouse, or has not been a member of the same household as the

nonrequesting spouse at any time during the 12-month period ending on the date of

the request for relief; (2) on the date the requesting spouse signed the return he had

no knowledge or reason to know that the nonrequesting spouse would not pay the

income tax liability; and (3) the requesting spouse will suffer economic hardship if

relief is not granted.


       22
         (...continued)
Commissioner, 135 T.C. 374 (2010). In Notice 2011-70, 2011-32 I.R.B. 135, the
IRS changed its position and will now consider requests for equitable relief under
sec. 6015(f) if the period of limitation on collection of tax provided by sec. 6502 or
the period of limitation on credits or refunds provided in sec. 6511 remains open for
the tax years at issue.
                                         - 16 -

[*16] Petitioner contends in his opening brief that he meets all of the safe harbor

provisions of Rev. Proc. 2003-61, sec. 4.02, but he concedes that the Court would

have to take an “expanded view” of the hardship requirement. He further concedes

that he has sufficient income to pay the 2003 tax liability over time. Petitioner

argues that “the controversy is bigger than the year at issue” and that we should

consider the total unpaid tax liabilities in the Form 8857--an amount exceeding

$500,000.23

      Petitioner bears the burden of proving that he will suffer economic hardship if

we do not grant him relief from joint and several liability. See Rule 142(a); Alt v.

Commissioner, 119 T.C. at 311. A requesting spouse suffers economic hardship if

paying the tax liability would prevent him from paying his reasonable basic living

expenses.24 Alioto v. Commissioner, T.C. Memo. 2008-185; Butner v.


      23
           In the light of petitioner’s argument, we do not view his statement that he
has sufficient wherewithal to pay the 2003 tax liability as a concession that he fails
to satisfy the hardship requirement.
      24
          In determining a reasonable amount for basic living expenses, the
Commissioner shall consider information provided by the taxpayer, including: (1)
the taxpayer’s age, employment status and history, ability to earn, number of
dependents, and status as a dependent; (2) the amount reasonably necessary for
food, clothing, housing, utilities, medical expenses, transportation, child support,
and other necessities; (3) the cost of living in the geographical area in which the
taxpayer lives; (4) the amount of property available to pay the taxpayer’s expenses;
(5) any extraordinary expenses, including educational expenses; and (6) any other
                                                                           (continued...)
                                          - 17 -

[*17] Commissioner, T.C. Memo. 2007-136; sec. 301.6343-1(b)(4)(i), Proced. &

Admin. Regs.; Rev. Proc. 2003-61, sec. 4.02(1)(c), 4.03(2)(a)(ii), 2003-2 C.B. at

298. A hypothetical hardship is insufficient to justify relief. Pullins v.

Commissioner, 136 T.C. 432, 446 (2011). Petitioner must demonstrate that

imposing joint and several liability is “‘inequitable in present terms’, see Von

Kalinowski v. Commissioner, T.C. Memo. 2001-21, and poses a present economic

hardship”, see Pullins v. Commissioner, 136 T.C. at 446. We have “consistently

looked beyond the taxable year at issue to apply subsection (f)”, Hall v.

Commissioner, 135 T.C. 374, 380 (2010), and we evaluate petitioner’s financial

situation and prospects as of the time of trial, see Pullins v. Commissioner, 136 T.C.

at 446-447.

      Petitioner’s financial situation fluctuated wildly in the years leading up to the

trial. Petitioner earned approximately $140,000 in 2007 as a supervisor with KCS

Railroad. In late 2008 he took a voluntary demotion to a lower level position

with KCS Railroad and a commensurate pay cut of $101,000.25 In 2009 he

reported on the Form 8857 a salary of $6,666.67 per month ($80,000 per year).

      24
         (...continued)
factor that the taxpayer claims bears on economic hardship and brings to the
Commissioner’s attention. Sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.
      25
           The record does not reflect his exact salary after the pay cut.
                                          - 18 -

[*18] On this same form he reported monthly expenses of $1,931.63, leaving him

with $4,735.04 of disposable income per month ($56,820.48 per year). In 2010 he

was relieved of a $3,100 monthly mortgage liability in the aftermath of the divorce.

That same year he received a promotion with KCS Railroad and moved near their

Kansas City headquarters.

       Petitioner did not introduce into the record any evidence as to his financial

situation at the time of the trial. We cannot determine his present income and

expenses nor his present solvency.26 Petitioner’s divorce judgment does not

obligate him to pay alimony or child support. He has years of experience with KCS

Railroad and the prospect of further career advancement.

       Taking into account the foregoing, we find that petitioner has at most

advanced an argument for a hypothetical hardship and has not met his burden of

proving a present economic hardship. His monthly income greatly exceeded his

monthly expenses two years before trial, and his present disposable monthly income

and financial solvency are mere speculation. We cannot say that denying

petitioner’s request for relief from joint and several liability for 2003 would cause

him to be unable to pay his basic reasonable living expenses. See Pullins v.


       26
           The record does not reflect petitioner’s assets or liabilities, other than the
tax liabilities attributable to the years not at issue.
                                          - 19 -

[*19] Commissioner, 136 T.C. at 447 (no economic hardship despite the taxpayer’s

disability and modest income where her household had “a monthly budget surplus

and some ability to pay the tax debt” and she introduced no evidence of her assets at

trial); Alt v. Commissioner, 119 T.C. at 314 (no economic hardship in paying tax

liabilities exceeding $1 million where the taxpayer and her spouse had a combined

salary exceeding $150,000); Karam v. Commissioner, T.C. Memo. 2011-230 (no

economic hardship where the taxpayer could meet her basic living expenses while

making periodic payments towards her tax liabilities); Pugsley v. Commissioner,

T.C. Memo. 2010-255 (no economic hardship where the taxpayer had disposable

income which she could use to make periodic payments towards her tax liabilities,

even where she did not have the means to pay off her entire tax liability at once);

Stolkin v. Commissioner, T.C. Memo. 2008-211 (no economic hardship where the

taxpayer had disposable income to pay towards her tax liability; nonrequesting

spouse’s monthly income and expenses were irrelevant). Thus, petitioner is not

entitled to relief under the criteria set forth in Rev. Proc. 2003-61, sec. 4.02.

C.    Factors Used To Determine Whether Relief Will Be Granted

      Where, as here, a requesting spouse meets the threshold conditions but fails

to qualify for relief under Rev. Proc. 2003-61, sec. 4.02, a determination to grant
                                         - 20 -

[*20] relief may nevertheless be made under the criteria set forth in Rev. Proc.

2003-61, sec. 4.03, 2003-2 C.B. at 298-299. Rev. Proc. 2003-61, sec. 4.03,

provides a nonexclusive list of factors the Commissioner will consider in making

that determination: (1) whether the requesting spouse is separated or divorced from

the nonrequesting spouse (marital status factor); (2) whether the requesting spouse

would suffer economic hardship if not granted relief (economic hardship factor); (3)

whether, at the time he or she signed the joint return, the requesting spouse knew or

had reason to know that the nonrequesting spouse would not pay the income tax

liability (knowledge factor); (4) whether the nonrequesting spouse has a legal

obligation to pay the outstanding tax liability pursuant to a divorce decree or

agreement (legal obligation factor); (5) whether the requesting spouse received a

significant benefit from the unpaid income tax liability (significant benefit factor);

and (6) whether the requesting spouse has made a good-faith effort to comply with

the Federal income tax laws for the taxable years following the taxable year or years

to which the request for relief relates (compliance factor).

      The Commissioner may consider two other factors that, if present in a case,

will weigh in favor of granting relief: (1) whether the nonrequesting spouse

abused the requesting spouse (abuse factor); and (2) whether the requesting spouse
                                         - 21 -

[*21] was in poor mental or physical health at the time he or she signed the return or

at the time he or she requested relief (mental or physical health factor). Id. sec.

4.03(2)(b), 2003-2 C.B. at 299. The absence of either factor will not weigh against

granting relief. Id.

      In making our determination under section 6015(f), we shall consider the

factors set forth in Rev. Proc. 2003-61, sec. 4.03, and any other relevant factors.

No single factor is determinative, and all factors shall be considered and weighed

appropriately. See Pullins v. Commissioner, 136 T.C. at 448; Porter II, 132 T.C. at

214; Haigh v. Commissioner, T.C. Memo. 2009-140.

      1.     Marital Status

      Consideration is given to whether the requesting spouse is separated (whether

legally separated or living apart) or divorced from the nonrequesting spouse. Rev.

Proc. 2003-61, sec. 4.03(2)(a)(i), 2003-2 C.B. at 298. Petitioner and intervenor

separated on November 16, 2008, and were living apart at the time petitioner filed

the request for relief. Furthermore, they are now divorced and continue to live

apart. Accordingly, the marital status factor weighs in favor of relief.
                                         - 22 -

[*22] 2.     Economic Hardship

      For the reasons previously discussed, petitioner did not prove that he would

suffer economic hardship if we denied him relief from joint and several liability for

2003. Accordingly, the economic hardship factor weighs against relief.

      3.     Knowledge

      A third factor is whether the requesting spouse knew or had reason to know

that the nonrequesting spouse would not pay the tax liability. In making the

determination whether the requesting spouse had reason to know, consideration is

given to, among other things: (1) the requesting spouse’s level of education; (2) the

requesting spouse’s degree of involvement in the activity generating the income tax

liability; (3) the requesting spouse’s involvement in business and household

financial matters; (4) the requesting spouse’s business or financial expertise; and (5)

any lavish or unusual expenditures compared with past spending levels. Id. sec.

4.03(2)(a)(iii)(C).

      Before we consider and apply the above factor, we will comment on the

testimonial credibility of the two witnesses, petitioner and intervenor. In many

respects their testimony is critical to our disposition of the issue involved herein.

Their testimony boils down to a “he said/she said” situation.
                                         - 23 -

[*23] In Kropp v. Commissioner, T.C. Memo. 2000-148, we stated that “As a trier

of fact, it is our duty to listen to the testimony, observe the demeanor of the

witnesses, weigh the evidence, and determine what we believe.” In Diaz v.

Commissioner, 58 T.C. 560, 564 (1972), we observed similarly that the process of

distilling truth from the testimony of witnesses, whose demeanor we observe and

whose credibility we evaluate, is the daily grist of judicial life. We are not required

to accept testimony if it is improbable, unreasonable, or questionable. MacGuire v.

Commissioner, 450 F.2d 1239, 1244-1245 (5th Cir. 1971), aff’g T.C. Memo.

1970-89.

      We find that most of intervenor’s testimony with respect to this factor was

credible in material respects. Her testimony was relatively consistent and

reasonably detailed. By contrast, we find that some of petitioner’s testimony was

not credible or was self-serving. At times, his testimony was internally inconsistent

or inexplicably inane. We made our findings of fact accordingly.

      Petitioner admitted at trial to knowing that there is a requirement to file a

tax return and knowing that he and intervenor had not yet filed a tax return for

2003 by the time they filed their joint 2003 return late in 2008. He could

remember neither why they were late in filing the 2003 return nor whether they

had any discussions regarding the filing of the return. He admitted that at the time
                                             - 24 -

[*24] he signed the 2003 return, he knew an amount was owed to the IRS. He

further admitted that he failed to explain in the Form 8857 how he thought the

amount of tax reported on the return would be paid. Nonetheless, he testified that

he had no reason to believe that intervenor would not pay the tax liability shown on

the 2003 return attributable to her income. He provided no explanation for his belief

at trial but later argued on brief that he believed intervenor would pay the tax

liability because “an installment agreement was in place and * * * [intervenor] had

agreed to pay the liability at the time the return was filed. She continued to pay on

an installment basis until * * * [we] became separated several years after the tax

return for the year at issue was filed”.27

      On the other hand, intervenor testified that petitioner was “very aware of the

amount due” and in fact “wanted to be in control of handling” it. She testified that

petitioner realized that they needed help with their tax returns sometime between

2003 and 2006, at least two years before the filing of the 2003 return. She further

testified that they did not have enough money to pay the full amount that was due to

the IRS and thus petitioner was going to seek help from an attorney.



      27
         There is no evidence in the record that intervenor had agreed to pay the
2003 tax liability. The installment agreement predated the filing of the 2003 tax
return by more than three years.
                                          - 25 -

[*25] Petitioner is a college-educated professional with years of experience working

at KCS Railroad in both supervisory and nonsupervisory capacities. During his

marriage he was involved in household financial decisions and contributed to the

preparation of the tax returns, including the 2003 tax return. He had full and

uninterrupted access to the mail and joint account. He also had access, although

somewhat limited, to intervenor’s business accounts. Moreover, he was keenly

aware of his and intervenor’s financial difficulties28 and tax problems.29

       We find that this cumulative evidence proves that petitioner knew there was a

tax liability for 2003, knew that intervenor would have difficulty in paying the

liability, and knew or had reason to know that intervenor would not pay the liability.

We find petitioner’s argument that the installment agreement gave him a basis to

believe that intervenor would pay the 2003 tax liability unpersuasive. See Stolkin v.

Commissioner, T.C. Memo. 2008-211 (“we have consistently found that a

requesting spouse’s knowledge of the couple’s financial difficulties deprives the




       28
           Petitioner testified that at least three times during the marriage their
electricity was shut off because of nonpayment of the bill.
       29
          Petitioner testified that he discussed with intervenor calling the IRS and
trying “to get something set up” when he found out they had unpaid tax liabilities.
                                           - 26 -

[*26] requesting spouse of reason to believe that his or her ex-spouse will pay the

tax liability”). Accordingly, the knowledge factor weighs against relief.

       4.     Legal Obligation

       If the nonrequesting spouse has a legal obligation to pay the outstanding tax

liability pursuant to a divorce decree or agreement, this factor weighs in favor of

relief unless “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.” Rev. Proc. 2003-61, sec. 4.03(2)(a)(iv). Where the divorce

decree is silent, this factor is neutral. See Drayer v. Commissioner, T.C. Memo.

2010-257; Schultz v. Commissioner, T.C. Memo. 2010-233. Here, the divorce

decree did not contain any provision regarding payment of the Federal income tax

liabilities. Therefore, this factor is neutral.

       5.     Significant Benefit

       This factor weighs against the requesting spouse if he received a significant

benefit (beyond normal support) from the unpaid tax liability. Rev. Proc. 2003-61,

sec. 4.02(a)(v), 2003-2 C.B. at 299. “A significant benefit is any benefit in excess

of normal support.” Sec. 1.6015-2(d), Income Tax Regs. A significant benefit may

be direct or indirect. Id. “Normal” support is measured by the parties’

circumstances. Estate of Krock v. Commissioner, 93 T.C. 672, 678 (1989).
                                         - 27 -

[*27] Petitioner admitted that his approximately $60,000 salary ($5,000 per month)

in 2003 was insufficient to pay all of his and intervenor’s monthly bills. Intervenor

credibly testified that petitioner’s monthly take-home pay roughly paid the $3,100

mortgage. Simple math tells us that his take-home pay, after withholding for

Federal income tax, State income tax, employment tax, and other miscellaneous

amounts, may have been in the ballpark of the monthly mortgage payment. Hence,

there is no doubt that petitioner benefited from intervenor’s income.

      However, in the light of the parties’ circumstances, we find that the benefit

was just normal support. The $3,100 mortgage payments on their home are not

considered to generate a “significant benefit”. See Pullins v. Commissioner, 136

T.C. at 452. Petitioner and intervenor did not have any unusual or lavish expenses.

See Estate of Krock v. Commissioner, 93 T.C. at 679. Petitioner testified that they

were not living “the high life” and had “just normal living bills”. Intervenor testified

that they paid the monthly bills with what they had and there was never a time when

they were flush with cash and did not have to worry about monthly expenses.

      In Butner v. Commissioner, T.C. Memo. 2007-136, we stated that “we

consider the lack of significant benefit by the taxpayer seeking relief from joint
                                         - 28 -

[*28] and several liability as a factor that favors granting relief under section

6015(f).” See also Bland v. Commissioner, T.C. Memo. 2011-8; DeMattos v.

Commissioner, T.C. Memo. 2010-110. Accordingly, this factor weighs in favor of

granting relief.

       6.     Compliance

       The inquiry under this factor is whether a taxpayer has made a good-faith

effort to comply with the Federal income tax laws in the taxable years following

the year or years to which the request for relief relates. Rev. Proc. 2003-61, sec.

4.03(2)(a)(vi). Petitioner’s request for relief covers the years 1998 to 2007, and

thus we examine his compliance for the years after 2007.30 Petitioner’s counsel

asserted in his opening statement that petitioner has “paid his taxes, like he always

has” since his marriage ended and similarly argued on brief that petitioner “has

paid all the liabilities for taxes since he separated from his wife”. However, we

have combed through the record and cannot find one scintilla of evidence that

supports his contentions. We have long held that “[a]ssertions in opening

statements, in arguments, or in briefs are not evidence, and, while helpful where


       30
           As of the May 2011 trial, petitioner’s 2008 and 2009 Federal income tax
returns would have already been due. The 2010 return would not yet have been due
if he had requested an extension of time to file; however, the time to pay the tax
liability would not have been extended.
                                         - 29 -

[*29] there is sufficient evidence in support of the contentions made, cannot be

taken to supply evidence which is lacking.” Kennedy v. Commissioner, T.C.

Memo. 1958-139; see also Norton v. Commissioner, T.C. Memo. 1970-279, aff’d,

474 F.2d 608 (9th Cir. 1973). Accordingly, this factor is neutral. See Akopian v.

Commissioner, T.C. Memo. 2011-237 (finding that the compliance factor was

neutral because of the lack of evidence); Thomassen v. Commissioner, T.C. Memo.

2011-88 (same).

      7.     Abuse

      Abuse by the nonrequesting spouse favors relief. Rev. Proc. 2003-61, sec.

4.03(2)(b)(i). Claims of abuse require substantiation or specificity in allegations.

See Knorr v. Commissioner, T.C. Memo. 2004-212. Petitioner did not allege that

he was abused by intervenor. Therefore, this factor is neutral. See Rev. Proc.

2003-61, sec. 4.03(2)(b).

      8.     Mental or Physical Health

      There is no evidence that petitioner was in poor mental or physical health at

any relevant time. Thus, this factor is neutral.

D.    Notice 2012-8

      After the trial the Commissioner issued Notice 2012-8, 2012-4 I.R.B. 309, on

January 5, 2012, announcing that a proposed revenue procedure updating Rev.
                                          - 30 -

[*30] Proc. 2003-61, supra, will be forthcoming. That proposed revenue procedure,

if finalized, will revise the factors that the IRS will use to evaluate requests for

equitable relief under section 6015(f). Petitioner filed a motion to supplement his

opening brief, which neither respondent nor intervenor objected to and which the

Court granted. He argues that Notice 2012-8, supra, should control to the extent

that it clarifies Rev. Proc. 2003-61, supra.

      In Sriram v. Commissioner, T.C. Memo. 2012-91, slip op. at 9 n.7, we stated

that we would “continue to apply the factors in Rev. Proc. 2003-61, 2003-2 C.B.

296, in view of the fact that the proposed revenue procedure is not final and because

the comment period under the notice only recently closed.” See also Yosinski v.

Commissioner, T.C. Memo. 2012-195 (continuing to apply Rev. Proc. 2003-61,

supra); Deihl v. Commissioner, T.C. Memo. 2012-176 (same). In both Sriram and

Deihl we called attention to the effect, if any, of a revised factor only to the extent

we deemed it necessary for clarity, as our holding did not turn on any single factor

as revised in the proposed revenue procedure. We have carefully considered

petitioner’s arguments and likewise conclude that the outcome in this case would

not change under the proposed revenue procedure.31


      31
        Petitioner argues that under the proposed revenue procedure even though
he “may have reason to know that the intervenor was not paying the tax when due”,
                                                                      (continued...)
                                         - 31 -

[*31] E.     Conclusion

      Petitioner bears the burden of proving that he is entitled to equitable relief.

See Rule 142(a); Alt v. Commissioner, 119 T.C. at 311. If we simply counted the

number of factors for and against relief, petitioner would lose on the burden of

proof--two factors weigh in favor of relief (marital status and significant benefit

factors), two factors weigh against relief (economic hardship and knowledge

factors), and four factors are neutral (legal obligation, compliance, abuse, and

mental or physical health factors).32 See Hudgins v. Commissioner, T.C. Memo.


      31
          (...continued)
his lack of financial control mitigates his knowledge and independently favors relief.
We find that he exercised a considerable amount of financial control in the
household, and therefore the knowledge factor would continue to weigh against
relief. Petitioner argues that the proposed revenue procedure clarifies that his
compliance with the tax laws after the marriage favors relief. While we agree with
his statement that compliance with the Federal income tax laws is a factor favoring
relief, this factor would remain neutral because he offered no evidence of his
compliance. Finally, petitioner argues that under the proposed revenue procedure
no one factor controls and relief may be appropriate even if the number of factors
weighing against relief exceeds the number of factors weighing in favor. We agree
and do not believe that this would be a departure from our previous caselaw. See
Pullins v. Commissioner, 136 T.C. 432, 448 (2011) (“We analyze all relevant facts
and circumstances, with all factors considered and appropriately weighted and no
single factor determinative, in determining whether it is inequitable to hold a
taxpayer liable for a joint tax liability” (Emphasis added.)).
      32
          Under the proposed revenue procedure, petitioner would also lose if we
counted the factors. The economic hardship factor would be neutral because
petitioner has not proven that he would suffer economic hardship if we denied him
                                                                       (continued...)
                                          - 32 -

[*32] 2012-260, at *39. In section 6015(f) cases, however, we do not simply count

factors. Id. at *39-*40. Likewise, we are not bound by them. Id. at *14. The

factors are guidelines we use in evaluating all of the relevant facts and

circumstances to reach a conclusion. Id. Some of the most compelling facts in our

analysis are the findings that petitioner: (1) exercised considerable control over the

household finances and decisionmaking; (2) contributed to the preparation of the tax

returns; (3) failed to comply with the Federal income tax laws for 1998 to 2007; (4)

knew of the noncompliance beginning as early as 2002; and (5) persisted in a

pattern of noncompliance through at least 2007. Taking into account the foregoing,

and considering all the facts and circumstances, we find that petitioner has failed to

persuade us that the equities weigh in his favor. Accordingly, we conclude that

petitioner is not entitled to relief from joint and several liability under section

6015(f) for 2003.

       We have considered all arguments made in reaching our decision and, to the

extent not mentioned, we conclude that they are moot, irrelevant, or without merit.


       32
         (...continued)
relief. See Notice 2012-8, sec. 4.03(2)(b), 2012-4 I.R.B. 309. The significant
benefit factor would also be neutral, as the evidence shows that neither spouse
received a significant benefit from the unpaid tax liabilities. See id. sec. 4.03(2)(e).
The other factors would not change. Therefore, one factor would weigh in favor of
relief, one factor would weigh against relief, and six factors would be neutral.
                                  - 33 -

[*33] To reflect the foregoing,


                                                 Decision will be entered

                                           for respondent.
