                        T.C. Memo. 2010-80



                     UNITED STATES TAX COURT



                  JOHN SCHEPERS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4409-08.               Filed April 19, 2010.



     Thomas Brever, for petitioner.

     Blaine Holiday, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     MORRISON, Judge:   Petitioner John Schepers (Schepers) asked

respondent to grant him relief from his joint income tax

liability for the tax year 2001.   Respondent determined that he

is not entitled to relief, and we agree.
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                          FINDINGS OF FACT

     At the time he filed the petition, Schepers resided in

Minnesota.

     Schepers married Deborah Schepers in 1995.   For the tax year

2000, the Scheperses filed a timely joint income tax return.

     During 2001 Schepers was an administrator for the University

of Minnesota.   His wife operated an electronic discovery firm.

Schepers held a master’s degree in business administration.      His

wife held a law degree.

     In November 2002 Schepers and his wife separated.

     In July 2004 Schepers filed a 2001 tax return.   He filed

separately.   The return reported that he had a tax liability of

$12,621 and that he claimed a refund of $7,027.

     Schepers’ wife did not file a tax return for 2001.    The

Internal Revenue Service (IRS) prepared for her a substitute

return based on her income and issued her a deficiency notice.

Schepers’ wife did not respond to the deficiency notice.    As a

result, the IRS assessed $168,660.89 in tax and penalties.

     The Scheperses were divorced in December 2005.   As part of

their divorce agreement, they jointly filed an amended 2001 tax

return that included both of their incomes.   The filing of the

return was a voluntary act on the part of Schepers.   The return,

filed in March 2006, reflected a tax liability of $101,755.

Respondent assessed an additional tax of $89,134 on the
                                - 3 -

Scheperses’ joint account, plus penalties and interest.1    The

Scheperses each agreed to be responsible for one-half of the

actual tax, penalties, and interest.     This agreement was a legal

obligation.

     In November 2006 Schepers filed a request for innocent

spouse relief with the IRS.   He requested relief only for the

one-half of the tax liability that had been allocated to his ex-

wife by their agreement.   In December 2007 the IRS denied his

request.   Schepers contested the denial by filing a petition with

this Court.   A trial was held, at which Schepers testified.

Facts were stipulated by the parties.    We adopt the stipulated

facts.

                               OPINION

     In general, spouses who file a joint Federal income tax

return are jointly and severally liable for the full amount of

the tax liability shown or required to be shown on the return.

Sec. 6013(d)(3); Butler v. Commissioner, 114 T.C. 276, 282

(2000).    If certain requirements are met, however, an individual

may be relieved of joint and several liability under section

6015.



     1
      Although the record contains no evidence regarding the
additional tax, it appears the IRS abated the assessment against
Schepers’ ex-wife resulting from the notice of deficiency, as the
additional tax is the difference between the amount of tax
reported by Schepers on his original return ($12,621) and the
amount of tax reported on the joint return ($101,755).
                                   - 4 -

       A spouse who has filed a request for innocent spouse relief

may be relieved from joint and several tax liability under

section 6015(f)2 if, taking into account all the facts and

circumstances, it is inequitable to hold the spouse liable.3        The

requesting spouse generally bears the burden of proof.         See Rule

142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), affd. 101

Fed. Appx. 34 (6th Cir. 2004).      It is uncontested that Schepers

satisfies the threshold conditions of Rev. Proc. 2003-61, sec.

4.01, 2003-2 C.B. 296, 297-298.      But Schepers fails to qualify

for relief under Rev. Proc. 2003-61, sec. 4.02A, 2003-2 C.B. at

298 (because, as we explain later, Schepers had reason to know

that the 2001 liability would not be paid by his ex-wife).        Under

these circumstances, Schepers is entitled to relief only if he

satisfies the alternative facts-and-circumstances test that is

set forth in Rev. Proc. 2003-61, sec. 4.03, 2003-2 C.B. at 298-

299.       See Nihiser v. Commissioner, T.C. Memo. 2008-135.    Under

this test, we look to a “nonexclusive list of factors” to

determine whether “it is inequitable to hold the requesting

spouse liable”:       (1) Whether the requesting spouse is separated

or divorced from the nonrequesting spouse; (2) whether the



       2
      All section references are to the Internal Revenue Code,
and all Rule references are to the Tax Court Rules of Practice
and Procedure, unless otherwise indicated.
       3
      The parties stipulated that the Scheperses filed a joint
return on Mar. 6, 2006. But cf. sec. 6013(b)(2)(A).
                                 - 5 -

requesting spouse would suffer economic hardship if not granted

relief; (3) whether the requesting spouse knew or had reason to

know that the other spouse would not pay the liability; (4)

whether the nonrequesting spouse had a legal obligation to pay

the outstanding tax liability pursuant to a divorce decree or

agreement; (5) whether the requesting spouse received a

significant benefit from nonpayment of the tax liability, and (6)

whether the requesting spouse has made a good-faith effort to

comply with the tax laws for the tax years following the year to

which the request for such relief relates.     Rev. Proc. 2003-61,

sec. 4.03(2).    We consider all relevant facts and circumstances

in determining whether the taxpayer is entitled to innocent

spouse relief.    Porter v. Commissioner, 132 T.C. ___, ___ (2009)

(slip. op. at 12-13).    We may consider evidence that was admitted

into evidence at trial whether or not it was included in the

administrative record.      Porter v. Commissioner, 130 T.C. 115, 117

(2008).   In determining whether relief is justified, we give no

deference to respondent’s determination that Schepers was not

entitled to relief.   See Porter v. Commissioner, 132 T.C. at ___

(slip op. at 12).

1.   Rev. Proc. 2003-61 Section 4.03 Factors

     a.    Marital Status

     Schepers was divorced from his wife in December 2005.     This

factor weighs in favor of relief.
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     b.   Economic Hardship

     Schepers has not demonstrated that he would suffer economic

hardship if he were to pay the one-half of the tax liability

attributed by the agreement to his ex-wife.    Schepers has a

monthly budget surplus of $648.    Schepers argues that if he is

required to pay the one-half of the tax liability, he will need

to work until he is 75 years old, and this is without computing

the accrual of interest and penalties.    Respondent argues that

the period of limitations on collecting tax assessments is 10

years from the date of assessment and that therefore he will not

be collecting tax from Schepers beyond the year 2016.    We agree

with respondent on this point.    It is likely that collection

efforts will be confined to this 10-year period.    Taking into

account his circumstances, we find that Schepers has failed to

demonstrate that he will suffer economic hardship if he pays the

liability in question.   This factor weighs against relief.

     c.   Knowledge or Reason To Know

     At the time he signed the joint return, Schepers knew that

his ex-wife was thinking about declaring bankruptcy, that their

home had been lost to foreclosure, and that neither he nor his

ex-wife had the funds to pay the tax liability reflected on the

joint return.   Schepers argues that he thought his ex-wife had

the potential to earn money and therefore could have eventually

paid the tax debt (which he argues would survive against his ex-
                               - 7 -

wife as a nondischargeable debt even after bankruptcy).    But the

question here is not whether Schepers knew that his wife would

ever pay the taxes, but whether the taxes would be paid within a

reasonably prompt time after the filing of the joint return.    See

Banderas v. Commissioner, T.C. Memo. 2007-129.     Any payments by

his ex-wife would be substantially delayed by the bankruptcy

proceeding.   Payments would also be delayed by her having to earn

the money to pay the tax liability.    The record reflects that in

2005 Scheper’s ex-wife was earning only $20,000.    Under the

circumstances, we find that Schepers knew or had reason to know

his ex-wife would not pay the tax liability.   (And, for the

purposes of applying a similar test in Rev. Proc. 2003-61, sec.

4.02(1)(b) (under second element of safe harbor provision,

“requesting spouse must establish that it was reasonable * * * to

believe that the nonrequesting spouse would pay”), it was

unreasonable for Schepers to believe that his ex-wife would pay

the income tax liability.)

     d.   Nonrequesting Spouse’s Legal Obligation

     Schepers’ ex-wife agreed to pay the one-half of the tax

obligation from which Schepers seeks relief.   But Schepers knew

that his ex-wife could not pay the amount.   See Rev. Proc. 2003-

61, sec. 4.03(2)(a)(iv) (“This factor will not weigh in favor of

relief if the requesting spouse knew or had reason to know, when

entering into the divorce decree or agreement, that the
                                - 8 -

nonrequesting spouse would not pay the income tax liability.”).

This factor is neutral:   it weighs neither for nor against

relieving Schepers of the joint liability.   See Stolkin v.

Commissioner, T.C. Memo. 2008-211.

     e.   Significant Benefit

     Schepers did not benefit significantly from his ex-wife’s

failure to pay her one-half share of the joint income tax

liability.   Therefore, this factor weighs in favor of relief.

See Ewing v. Commissioner, 122 T.C. 32, 45 (2004) (the lack of

significant benefit by the taxpayer seeking relief from joint and

several liability is a factor that favors granting relief under

section 6015(f)), vacated 439 F.3d 1009 (9th Cir. 2006).

     f.   Noncompliance With Income Tax Laws

     Schepers timely filed tax returns for 2000, 2002, and 2003.

This favorable record of compliance is negated by the fact that

he filed his 2004 income tax return late, on April 16, 2006.

Thus, this factor is negative.4

2.   Schepers Is Not Entitled to Relief

     Of the factors listed in Rev. Proc. 2003-61 sec. 4.03, two

factors support relief (divorced marital status, lack of

significant benefit), one factor is neutral (nonrequesting

spouse’s legal obligation), and three factors weigh against

relief (economic hardship, knowledge that payment will not be


     4
      His original 2001 return was filed late, on July 6, 2004.
                              - 9 -

made, noncompliance with income tax laws).    Taking into account

these factors, Schepers is not entitled to relief from joint

liability under the circumstances.


                                           Decision will be entered

                                      for respondent.
