                  T.C. Summary Opinion 2011-126



                     UNITED STATES TAX COURT



     NATALIYA I. ZHYROVA, Petitioner, AND DAVID S. THOMPSON,
                           Intervenor v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3203-10S.               Filed October 24, 2011.



     Nataliya I. Zhyrova, pro se.

     Douglas A. Greenberg, for intervenor.

     Lesley A. Hale, for respondent.



     DEAN, Special Trial Judge:     This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect when the petition was filed.       Pursuant to

section 7463(b), the decision to be entered is not reviewable by

any other court, and this opinion shall not be treated as

precedent for any other case.   Unless otherwise indicated,
                              - 2 -

subsequent section references are to the Internal Revenue Code as

amended, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

     This case arises from petitioner’s request for relief from

joint and several liability under section 6015 with respect to

understatements of Federal income tax for 2006 and 2007.     In

separate preliminary determinations respondent denied petitioner

relief from joint and several liability under section 6015(b),

(c), and (f) for 2006 and determined that petitioner qualified

for relief from joint and several liability under section 6015(c)

and (f) for 2007;1 intervenor disagrees.2   The issues for

decision are whether petitioner is entitled to:   (1) Relief under

section 6015(b), (c), or (f) for 2006; and (2) relief under

section 6015(c) or (f) for 2007.

     Because neither petitioner nor intervenor is entirely

credible and the record is full of he-said-she-said arguments,

the Court will cobble together the truth as best we can.




     1
      At trial petitioner stated that she disagreed with
respondent’s preliminary determination for 2007 because when she
received a letter from the Internal Revenue Service informing her
that intervenor disagreed with the preliminary determination to
grant petitioner relief for 2007, she thought the letter meant
that the IRS had reversed its decision.
     2
      Intervenor objected to respondent’s preliminary
determinations for both 2006 and 2007 in his notice of
intervention filed with the Court.
                                - 3 -

                             Background

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

The stipulation of facts, the second stipulation of facts, and

the attached exhibits are incorporated herein by reference.

Petitioner resided in California when she filed her petition.

     Petitioner emigrated from Russia to the United States in

2002.    Petitioner earned two master’s degrees and worked for 18

years as an engineer in Russia.    She then worked for 10 years as

an accountant for the Russian Government before coming to the

United States.    In 2002 petitioner enrolled in English, tax, and

accounting classes in the United States.     She earned an associate

of arts certificate in accounting from a community college in

California.    Petitioner began working for H&R Block as a tax

preparer in 2004 and continued to be employed there as of the

time of trial.    Petitioner has also been an accountant for Contra

Costa County since 2007.

     Petitioner met intervenor in 2003, and the couple married in

August 2004.    Petitioner and intervenor each had their own bank

accounts at separate credit unions.     Petitioner maintained an

account at Patelco Credit Union (Patelco),3 into which she

deposited her paychecks.    Intervenor maintained multiple accounts



     3
      Petitioner’s bank account at Patelco was a separate account
in the sense that intervenor’s name was not listed on the
account. Petitioner’s son was listed as a joint owner of the
Patelco account.
                                - 4 -

at Meriwest Credit Union (Meriwest) and an account at

Commonwealth Central Credit Union (Commonwealth).         Intervenor

deposited his Social Security Administration (SSA) benefits into

the Commonwealth account.   Intervenor maintained an account at

Wells Fargo Bank NA (Wells Fargo) from which mortgage payments

were made.

     In 2005 petitioner and intervenor signed a master account

application for the Meriwest account with an account number

ending in 4830, which lists petitioner as a joint owner of

intervenor’s basic checking and regular savings accounts.

     Petitioner prepared the couple’s 2006 and 2007 joint Federal

income tax returns.   The returns reported, inter alia, the

following:

          Category                       2006            2007

     Wages                          $14,917            $31,719
     Individual retirement
       account distributions             4,000            -0-
     SSA benefits                        9,156          13,705
     Taxable SSA benefits                 -0-            3,286
     Adjusted gross income              19,093          35,005
     Earned income credit                2,385              35
     Refund                              3,249           1,193

A Form SSA-1099, Social Security Benefit Statement, addressed to

intervenor accompanied the 2006 return.         The Form SSA-1099

reports benefits paid of $23,307, benefits repaid of $14,151, and

net benefits of $9,156.   The 2006 tax refund was deposited into

petitioner’s Patelco account.   The Form SSA-1099 issued to

intervenor for 2007 reports benefits paid of $17,894, benefits
                               - 5 -

repaid of $4,189, and net benefits of $13,705.    The 2007 refund

was deposited into petitioner’s Patelco account.

     Respondent mailed petitioner and intervenor a CP 2000 notice

(CP Notice I) proposing an increase in tax of $1,622 for 2006

because the income and payment information the Internal Revenue

Service (IRS) had on file did not match the entries on the

couple’s 2006 joint return.   The income and payments that did not

match were intervenor’s SSA benefits and repayment of SSA

benefits and cancellation of debt (COD) income from two credit

card companies reported to the IRS on Forms 1099-C, Cancellation

of Debt.   The tax increase is the difference between the couple’s

claimed earned income credit (EIC) and the amount as corrected by

the IRS.

     Step A, option 3, “I Do Not Agree with Any of the Changes”,

is marked on the response form that accompanied CP Notice I.     It

is clear that option 1, “I Agree with All Changes”, was marked

and that the form was signed with two signatures and dated in the

appropriate spaces under option 1.     Both the box next to option 1

and the accompanying signatures and dates were obliterated before

the form was returned to the IRS.    Under Step B of the response

form, option 3, “I’d like to request a payment plan to pay the

tax I owe”, was also marked and obliterated before the form was

returned to the IRS.   Under Step C, Contact Information, only

intervenor’s signature is present.
                               - 6 -

     Respondent mailed petitioner and intervenor a notice of

deficiency for 2006 that determined a deficiency of $1,622.

Neither petitioner nor intervenor responded to the notice of

deficiency; therefore, respondent assessed the income tax

deficiency for 2006.

     Respondent mailed petitioner and intervenor a CP 2000 notice

(CP Notice II) proposing a tax increase of $1,679 for 2007

because the income and payment information the IRS had on file

did not match the entries on the couple’s 2007 joint return.    The

income and payments that did not match were intervenor’s:    (1)

SSA benefits and repayment of SSA benefits; (2) Form W-2 income

and “other income” from Taylor V. Ross (Ross); (3) interest

income from Wells Fargo and Meriwest; and (4) taxable retirement

income from Meriwest.   Neither petitioner nor intervenor

responded to CP Notice II.

     Respondent mailed petitioner and intervenor a notice of

deficiency for 2007 that determined a deficiency of $1,679.

Neither petitioner nor intervenor responded to the notice of

deficiency; therefore, respondent assessed the income tax

deficiency for 2007.

       Petitioner submitted Form 8857, Request for Innocent

Spouse Relief, to respondent for tax years 2006 and 2007.

Petitioner checked “no” as her answer to the questions pertaining

to being a victim of spousal abuse and whether she suffered any
                                - 7 -

mental or physical problems when the returns were signed.

Petitioner also answered that she did not know that intervenor

had not given her all of the information needed to prepare the

couple’s tax returns correctly.    Petitioner listed her monthly

income as $3,794 and her monthly expenses as $3,703.    Five

hundred dollars of petitioner’s monthly income is listed as

gifts.

     Respondent mailed petitioner a preliminary determination for

2006 proposing to deny relief under section 6015 (b), (c), and

(f) because “relief is not allowed on tax you owe on your own

income or deductions.”    Petitioner requested a hearing with the

IRS Appeals Office (Appeals) on Form 12509, Statement of

Disagreement, for 2006.    Petitioner did not receive a final

determination for 2006.

     Respondent mailed petitioner a preliminary determination for

2007 proposing to grant relief under section 6015(c) and (f).

Intervenor filed Form 12509 with the IRS disagreeing with its

determination that petitioner should be granted relief under

section 6015(c) and (f).    Petitioner requested a hearing with

Appeals on Form 12509 for 2007 because no action had been taken

on her account.   Petitioner did not receive a final determination

for 2007.   Petitioner timely filed a petition with the Court

disagreeing with respondent’s preliminary determinations for both
                                - 8 -

2006 and 2007 after receiving no communication from the IRS for 6

months.    Intervenor then filed a notice of intervention.

     Petitioner and intervenor legally separated in July 2008.

At the time of trial they were still in the process of finalizing

their divorce.

                             Discussion

     Generally, married taxpayers may elect to file a joint

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

election, each spouse is jointly and severally liable for the

entire tax due for that year.    Sec. 6013(d)(3); Butler v.

Commissioner, 114 T.C. 276, 282 (2000).       In certain

circumstances, however, a spouse who has filed a joint return may

seek relief from joint and several liability under procedures set

forth in section 6015.    Sec. 6015(a).

     Under section 6015(a) a spouse may seek relief from joint

and several liability under section 6015(b) or, if eligible, may

allocate liability according to provisions set forth in section

6015(c).    If a taxpayer does not qualify for relief under either

section 6015(b) or (c), the taxpayer may seek equitable relief

under section 6015(f).

     Where an individual elects to have section 6015(b) or (c)

apply, or in the case of an individual who requests equitable

relief under section 6015(f), section 6015(e) gives jurisdiction
                               - 9 -

to the Court “to determine the appropriate relief available to

the individual under this section”.

I.   Burden of Proof

     Except as otherwise provided in section 6015, the taxpayer

bears the burden of proving that he or she is entitled to section

6015 relief.   Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311

(2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004).    Under

subsections (b) and (c) a taxpayer need only persuade the Court

by a preponderance of the evidence.    Stergios v. Commissioner,

T.C. Memo. 2009-15; see also McClelland v. Commissioner, T.C.

Memo. 2005-121.

     Under subsection (b) the taxpayer must prove to the Court

that he or she had no knowledge or reason to know of the

understatement and meets the other requirements of the

subsection.

     Under subsection (c) the taxpayer must prove to the Court

that he or she meets the subsection’s requirements.    If the

taxpayer does not so prove or if the Commissioner proves to the

Court that any one of the three exceptions for which he bears the

burden of proof applies, relief will be denied.    See sec.

6015(c)(3)(A)(ii), (C), (d)(3)(C).

     Generally, in subsection (c) cases where the taxpayer

challenges the Commissioner’s denial of relief, the allocation of

the burden of proof is placed upon the adverse parties.     This
                                - 10 -

allocation becomes more difficult when the Commissioner favors

granting relief and the nonrequesting spouse intervenes to oppose

granting relief.   Stergios v. Commissioner, supra; see sec.

6015(e)(4); Rule 325; see also King v. Commissioner, 115 T.C. 118

(2000); Corson v. Commissioner, 114 T.C. 354, 363 (2000)

(nonrequesting spouse’s right to intervene the same in both

stand-alone and affirmative defense cases).    In cases where the

Commissioner is no longer an adverse party to the taxpayer and

the intervenor opposes relief on the basis of any of the three

exceptions mentioned above, it is possible that the burden of

proof would be shifted to the intervenor.    See Stergios v.

Commissioner, supra.     The Court need not decide who has the

burden of proof under subsection (c) because both parties

introduced evidence and we shall decide the issues by a

preponderance of the evidence.    See id.

II.   2006

      Section 6015(b) provides relief from joint and several

liability for tax (including interest, penalties, and other

amounts) to the extent that such liability is attributable to an

understatement of tax.    To be eligible for relief, the requesting

spouse must satisfy the following five elements of section

6015(b)(1):

           (A) A joint return has been made for a
      taxable year;
                               - 11 -

            (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 * * * [makes a valid
       election] * * *.

The only elements at issue for 2006 are subparagraphs (B) and

(C).

       A.   Erroneous Items

       There are two erroneous items4 attributable to one

individual filing the return--COD income and SSA benefits.    Both

of these items are attributable to intervenor.    The COD income

resulted from the cancellation of credit card debt intervenor

incurred before he met and married petitioner.    The SSA benefits

are also attributable to intervenor.    The unreported taxable SSA

benefits resulted from the COD income not being reported on the

2006 return.    Petitioner satisfies the subparagraph (B) element.




       4
        See sec. 1.6015-1(h)(4), Income Tax Regs., Erroneous item.
                              - 12 -

     B.   Reason To Know

     Under subparagraph (C) petitioner must also prove that she

did not know or had no reason to know that there was an

understatement on the 2006 return.     The record contains no

evidence establishing that petitioner had actual knowledge that

the couple’s 2006 return contained an understatement when she

signed it.   Therefore, the Court’s analysis is governed by

whether petitioner had reason to know of the understatement when

she signed the 2006 return.

     In the Ninth Circuit5 the requesting spouse has reason to

know of an understatement “if a reasonably prudent taxpayer in

her position at the time she signed the return could be expected

to know that the return contained the substantial

understatement.”6   Price v. Commissioner, 887 F.2d 959, 965 (9th

Cir. 1989) (and cases cited thereat); see also Pietromonaco v.

Commissioner, 3 F.3d 1342, 1345 (9th Cir. 1993) (extending the




     5
      But for sec. 7463(b), an appeal would lie with the Court of
Appeals for the Ninth Circuit. See sec. 7482(b)(1)(A).
Therefore, the Court follows the law of that circuit. See Golsen
v. Commissioner, 54 T.C. 742, 757 (1970), affd. 445 F.2d 985
(10th Cir. 1971).
     6
      The Court has employed a similar test: whether a
reasonably prudent taxpayer in the requesting spouse’s position,
when the requesting spouse signed the return, could be expected
to know that the return contained an understatement or that
further investigation was warranted. Haltom v. Commissioner,
T.C. Memo. 2005-209 (and cases cited therein).
                              - 13 -

Price test from deduction to omission of income cases), revg.

T.C. Memo. 1991-361 and T.C. Memo. 1991-472.

     With respect to omission of income cases, in deciding

whether the requesting spouse had reason to know of the

understatement when he or she signed the return, courts also

consider whether the requesting spouse was aware of the

circumstances of the transactions that gave rise to the

understatement, not the tax consequences.   Wiksell v.

Commissioner, T.C. Memo. 1994-99, revd. on other grounds 90 F.3d

1459 (9th Cir. 1996); see also Bokum v. Commissioner, 94 T.C.

126, 145-146 (1990) (a “taxpayer claiming innocent spouse status

must establish that he or she is unaware of the circumstances

that give rise to * * * [the understatement, not merely the tax

consequences]”), affd. 992 F.2d 1132 (11th Cir. 1993); Korchak v.

Commissioner, T.C. Memo. 2006-185 (applying the knowledge of the

circumstances of the transactions test in the context of a claim

for relief under section 6015).

     To decide whether the requesting spouse was aware of the

circumstances of the transactions that gave rise to the

understatement, the Court of Appeals for the Ninth Circuit

examines factors including:   (1) The requesting spouse’s

education level; (2) the requesting spouse’s involvement in the

couple’s business and financial affairs; (3) the presence of

expenditures that appear lavish or unusual when compared to past
                                - 14 -

income levels, standard of living, and spending patterns; and (4)

the “culpable” spouse’s evasiveness and deceit concerning

finances.7    Pietromonaco v. Commissioner, supra at 1345; Price v.

Commissioner, supra at 965.

             1.   Intervenor’s COD Income

      Petitioner’s and intervenor’s financial lives overlapped,

but neither was completely honest with the other when it came to

money or many other facets of their lives.      Petitioner did not

open mail addressed to intervenor.       Petitioner found one opened

statement from a credit counseling program that outlined

intervenor’s creditors and account balances.      When petitioner

questioned intervenor about the debt, intervenor responded that

his ex-wife had incurred charges on his credit cards.      He told

petitioner it was none of her business and that he would handle

it.   The Court concludes that when petitioner asked intervenor

for his tax documents to prepare the couple’s 2006 return,

intervenor did not provide her with a Form 1099-C reporting the

COD income.




      7
      The Court has employed similar factors: (1) The requesting
spouse’s education level and his or her business knowledge and
experience; (2) the requesting spouse’s participation in business
affairs or bookkeeping; (3) the nonrequesting spouse’s openness
about the couple’s income and business transactions; (4) the
presence of unusual or lavish expenditures; and (5) whether the
couple’s standard of living improved significantly during the
years in issue. Laird v. Commissioner, T.C. Memo. 1994-564.
                               - 15 -

     Petitioner has a certificate in accounting and has taken tax

classes at H&R Block.   She paid a portion of the couple’s bills

and household finances from her Patelco account.   She also

prepared the couple’s joint tax returns.   There is nothing in the

record to indicate that there were any lavish or unusual

expenditures made by either petitioner or intervenor.   Petitioner

did accuse intervenor of opening a credit card account in her

name without her permission.   Each accused the other of

additional financial misdeeds.8

     Although petitioner does have an accounting background and

has taken some tax classes, the Court does not believe that

petitioner’s education, when combined with the other factors,

would make her cognizant of intervenor’s COD income simply

because she was aware that he had credit card debt.   A reasonably

prudent taxpayer in petitioner’s position at the signing of the

return would not have known that intervenor had COD income simply

because he had engaged a credit counseling agency to assist him



     8
      Petitioner wrote a check from one Meriwest account for
$4,600 after allegedly finding the checkbook in intervenor’s car.
Petitioner deposited the check into an account that she owned
with her daughter at another bank. Petitioner wrote on the
check’s memo line that it was for her 55th birthday party, but
she admitted at trial that that was not the purpose of the check.
Petitioner wrote the check in retaliation for intervenor’s
alleged credit card fraud (he opened a credit card account in
petitioner’s name) and alleged extramarital affair. Intervenor
was unaware that petitioner had written and cashed the check
until after the funds had been transferred to her and her
daughter’s account.
                                - 16 -

with his credit card debt.     Petitioner did not have reason to

know about intervenor’s COD income; therefore, petitioner

satisfies the element under subparagraph (C) as to intervenor’s

COD income.

            2.    Increase in Taxable SSA Benefits

     Petitioner was aware that intervenor had received SSA

benefits.     Intervenor’s taxable SSA benefits are an erroneous

item because intervenor failed to provide petitioner with the

requisite information concerning his COD income.     At trial

petitioner made it clear by stating more than once that the

reason the taxable portion of the SSA benefits had increased was

that the couple’s taxable income had increased by the amount of

intervenor’s unreported COD income.      The Court concludes that had

petitioner known about the COD income when completing the

couple’s return, she would have included it in the couple’s 2006

income and in the computation for the taxable portion of

intervenor’s SSA benefits.

     Petitioner did not have reason to know of the increase in

the taxable portion of intervenor’s SSA benefits; therefore,

petitioner satisfies the element under subparagraph (C) as to the

increase in the taxable portion of intervenor’s SSA benefits.

     The Court notes that the deficiency for 2006 resulted from

respondent’s disallowance of the EIC.     But for intervenor’s
                                - 17 -

erroneous items, the claimed EIC would not have been overstated.9

The claimed EIC is the consequence, rather than the cause, of the

omission of intervenor’s COD income from the couple’s gross

income and the increase of his taxable SSA benefits for 2006.

     Petitioner satisfies both of the elements in issue under

section 6015(b).    Therefore, petitioner is entitled to relief

under section 6015(b) for 2006.10

III. 2007

     Respondent proposed to grant petitioner relief under section

6015(c) and (f) for 2007.    Intervenor disagrees with respondent’s

determination.

     A.     Relief Under Section 6015(c)

     Section 6015(c) allows proportionate tax relief (if a timely

election is made) through allocation of the deficiency between

individuals who filed a joint return and are no longer married,

are legally separated, or have been living apart for a 12-month

period.     Petitioner and intervenor were legally separated on July

1, 2008.

     Relief granted under subsection (c) will be allocated under

subsection (d).    Section 6015(d)(3)(A) provides that items giving


     9
      Even if the Court were to view the EIC as an erroneous
item, it, too, would be attributable to intervenor because it was
his unreported income that created the overstated EIC.
     10
      Because we hold that petitioner is entitled to relief
under sec. 6015(b), there is no need to discuss potential relief
under sec. 6015(c) or (f) for 2006.
                              - 18 -

rise to a deficiency on a joint return are to be allocated

between spouses as if separate returns had been filed.    The

requesting spouse is liable only for his or her proportionate

share of the deficiency that results from the allocation.     Sec.

6015(d)(1).   Where, as here, the joint return omits items of

income, those items are allocated to the spouse who was the

source of the income.   Sec. 1.6015-3(d)(2)(iii), Income Tax Regs.

     To the extent that an item giving rise to a deficiency

provided a tax benefit on the joint return to a requesting

spouse, however, that item shall be allocated to the requesting

spouse in computing his or her share of the deficiency.11    Sec.

6015(d)(3)(B); sec. 1.6015-3(d)(2)(i), Income Tax Regs.     Any

allocation under section 6015(d)(3) is made without regard to

community property laws.   Charlton v. Commissioner, T.C. Memo.

2001-76.

     Relief under subsection (c) is not available if the

requesting spouse had actual knowledge, at the time the return

was signed, of any item giving rise to a deficiency (or portion

thereof) that is not allocable to such individual.   Sec.

6015(c)(3)(C); Hopkins v. Commissioner, 121 T.C. 73, 86 (2003);


     11
      Petitioner and intervenor claimed an EIC of $35 on their
2007 return, and respondent disallowed the entire amount.
Allocation of the claimed EIC for 2007 to intervenor is not
permitted because the dependent claimed for the EIC was
petitioner’s son. See sec. 6015(d)(2)(A), (3)(A); see also sec.
1.6015-3(d)(2)(i), Income Tax Regs.
                               - 19 -

Cheshire v. Commissioner, 115 T.C. 183, 193-194 (2000), affd. 282

F.3d 326 (5th Cir. 2002).    The actual knowledge standard is

narrower than the reason to know standard of subsection (b) or

(f).    McDaniel v. Commissioner, T.C. Memo. 2009-137; see also S.

Rept. 105-174, at 59 (1998), 1998-3 C.B. 537, 595 (“[A]ctual

knowledge must be established by the evidence and shall not be

inferred based on indications that the electing spouse had a

reason to know.”).

       The knowledge requirement under section 6015(c)(3)(C) does

not require the requesting spouse to possess actual knowledge of

the tax consequences stemming from the item giving rise to the

deficiency.    Hopkins v. Commissioner, supra at 86; Cheshire v.

Commissioner, supra at 194; sec. 1.6015-3(c)(2), Income Tax Regs.

Rather, the statute mandates only a showing that the requesting

spouse actually knew of the item on the return that gave rise to

the deficiency (or portion thereof), without regard to whether he

or she knew of the tax consequences.    Mitchell v. Commissioner,

292 F.3d 800, 805 (D.C. Cir. 2002), affg. T.C. Memo. 2000-332;

Cheshire v. Commissioner, supra.    The Court will examine each of

the items of unreported income in turn to decide whether

petitioner had actual knowledge of the items that gave rise to

the deficiency for 2007.
                               - 20 -

          1.    Ross Income

     Intervenor earned wage income of $266 and other income of

$266 from Ross for 2007.   It is not clear from the record that

petitioner had actual knowledge of intervenor’s employment at

Ross in 2007.   There are no payroll deposits from Ross in the

Meriwest accounts for 2007.    Petitioner testified that she helped

intervenor find other work in 2007.     In that process petitioner

reviewed intervenor’s résumé and was aware that intervenor had

worked at Ross in the past.    No evidence was presented that

established petitioner was aware that intervenor earned any

income from Ross for 2007.    Therefore, petitioner did not have

actual knowledge of the wage income and other income intervenor

earned from Ross for 2007.

          2.    Interest Income From Wells Fargo and Meriwest

     Intervenor earned de minimis amounts of interest income from

Wells Fargo, $26, and Meriwest, $46, for 2007.    Petitioner was

aware that intervenor’s mortgage was held by Wells Fargo, but she

had no access to the account or its statements.    Other than her

knowledge of the existence of the Wells Fargo account, no

evidence was presented that petitioner had actual knowledge of

the unreported Wells Fargo interest for 2007.

     Petitioner was also aware that intervenor maintained

accounts at Meriwest; she was listed as a joint owner of two of

the Meriwest accounts and had access to the account statements.
                                 - 21 -

Petitioner’s testimony about her knowledge and examination of the

account statements was both contradictory and self-serving.      She

testified that she knew about the Meriwest accounts in 2006 “when

* * * [they were] open” and later testified that she did not know

about the Meriwest accounts until 2010.      Petitioner also

testified that the account statements were addressed to

intervenor and that she did not open mail that was not addressed

to her.   On cross-examination petitioner testified that she could

not find intervenor’s SSA benefit deposits in the Meriwest

account statements, stating:      “But for me it was puzzle where

this money came [from], because I didn’t see them on Meriwest

account.”

      The Court concludes that petitioner not only had access to

the Meriwest account statements but also reviewed those

statements.      Thus, petitioner had actual knowledge of the

unreported interest income from the Meriwest accounts for 2007.

            3.     Increase in the Taxable Portion of Intervenor’s
                   SSA Benefits

     Intervenor earned SSA benefits of $17,894 in 2007 and repaid

SSA benefits of $4,189.      Intervenor’s net SSA benefits for 2007

were $13,705.      Petitioner was aware that intervenor was paid SSA

benefits in 2007 and included the benefits when she prepared the

couple’s 2007 joint Federal income tax return, on which they

reported taxable SSA benefits of $3,286.      Petitioner did have

actual knowledge of intervenor’s taxable SSA benefits of $3,286
                                - 22 -

for 2007, and that amount cannot be allocated entirely to

intervenor.

     But “‘[W]here an electing spouse has actual knowledge of an

income source, but no knowledge of the amount of the financial

gain, the electing spouse may still qualify for relief under

section 6015(c).’”     Zoglman v. Commissioner, T.C. Memo. 2003-268

(quoting Rowe v. Commissioner, T.C. Memo. 2001-325); sec. 1.6015-

3(c)(4), Example (4)(iii), Income Tax Regs.    The increase in

intervenor’s taxable SSA benefits resulted from unreported income

attributable to intervenor.    As the Court has found above,

petitioner was unaware of the Ross income and the Wells Fargo

interest income.     The Court discusses infra pp. 25-29 why

petitioner is not liable for the portion of the deficiency

attributable to the tax on Meriwest interest income but is

jointly and severally liable for the unreported taxable

retirement income.    For the items of unreported income of which

petitioner had no actual knowledge, the Ross income, the Wells

Fargo interest income, and the Meriwest interest income, the

Court holds that she is not liable for the portion of the

deficiency attributable to the increase of taxable SSA benefits

due to those items.    Petitioner did have actual knowledge of the
                                - 23 -

increase in taxable SSA benefits attributable to intervenor’s

unreported taxable retirement income.12

            4.    Taxable Retirement Income

     According to the Meriwest account statements, $10,01613 was

transferred from intervenor’s individual retirement account (IRA)

to the couple’s joint savings account in 2007.    The joint savings

account had a zero balance before the transfer of the IRA funds.

The transfer was made in March 2007.     Withdrawals were made from

the joint checking account in March, April, May, June, and July

2007.     There was no activity on the account for the remainder of

the year.     As we have found above, petitioner had access to and

reviewed the Meriwest account statements.     Therefore, petitioner

had actual knowledge of the transfer of the IRA funds into the

couple’s joint savings account.

     Petitioner did not have actual knowledge of intervenor’s

wage and other income from Ross, intervenor’s interest income

from Wells Fargo, or the increase in intervenor’s taxable SSA

benefits attributable to these items of unreported income and the

Meriwest interest income.    Therefore, petitioner is entitled to




     12
      We leave the computation of the actual amount of taxable
SSA benefits and the tax thereon for which petitioner is liable
to the parties under Rule 155.
     13
      Respondent listed $10,346 as the amount of the unreported
taxable retirement income for 2007. No explanation was provided
for the discrepancy.
                                 - 24 -

relief under section 6015(c) for the portion of the deficiency

attributable to these items of income.

     B.   Equitable Relief Under Section 6015(f)

     A taxpayer is entitled to relief under subsection (f) if,

taking into account all of the facts and circumstances, it would

be inequitable to hold the taxpayer liable for any unpaid tax or

deficiency.   Sec. 6015(f)(1).    Both the scope and standard of our

review in cases requesting equitable relief from joint and

several income tax liability are de novo.     Porter v.

Commissioner, 132 T.C. 203 (2009).

     Rev. Proc. 2003-61, sec. 4.01(1)-(7), 2003-2 C.B. 296, 297,

sets out seven threshold conditions that a requesting spouse must

meet before the Commissioner will consider a request for relief

under subsection (f).   There is no dispute that petitioner meets

the threshold requirements for the items discussed below.

     Rev. Proc. 2003-61, sec. 4.03(2), 2003-2 C.B. at 298, sets

forth a nonexclusive list of factors to be evaluated in requests

for relief under section 6015 for spouses who have met the

threshold conditions.   The factors are:   (1) Marital status, (2)

economic hardship, (3) knowledge or reason to know of the item

giving rise to the deficiency, (4) any legal obligation of the

nonrequesting spouse to pay the tax liability pursuant to a

divorce decree or agreement, (5) significant benefit received by

the requesting spouse, (6) the requesting spouse’s compliance
                                - 25 -

with income tax laws following the year for which relief is

requested, (7) spousal abuse, and (8) the requesting spouse’s

mental or physical health at the time the return was filed or

relief was requested.

     The items for decision under subsection (f) are the

unreported Meriwest interest income and the unreported taxable

retirement income for 2007.14   The Court will discuss each item

in turn.

           1.   Meriwest Interest Income

     The unreported Meriwest interest income was $46 for 2007.

This amount is far too small to find that petitioner received a

significant benefit from its exclusion.       Considering the factors

the Commissioner weighs in matters such as this, see Rev. Proc.

2003-61, sec. 4.03(2), the Court concludes that it would be

inequitable to hold petitioner jointly and severally liable for

the portion of the deficiency attributable to the unreported

Meriwest interest income for 2007.       Little would be gained by

burdening this opinion with a discussion of each factor in the

revenue procedure.   See sec. 7463(a) (last sentence).




     14
      Because we hold that petitioner is liable for the tax due
on the unreported taxable retirement income under sec. 6015(f),
there is no need to discuss whether petitioner could be relieved
of the tax liability for the increased taxable portion of
intervenor’s SSA benefits attributable to the unreported taxable
retirement income under sec. 6015(f).
                                - 26 -

            2.    Taxable Retirement Income

       The Court will examine all of the relevant factors listed in

the revenue procedure to decide whether petitioner should be

relieved of joint and several liability for tax attributable to

the unreported taxable retirement income for 2007.

       We look to petitioner’s marital status at the time of trial

in applying de novo review.    See Wilson v. Commissioner, T.C.

Memo. 2010-134.    Petitioner and intervenor were legally separated

at the time of trial.    This factor weighs in favor of granting

relief.

       Generally, economic hardship exists if collection of the tax

liability will cause the taxpayer to be unable to pay reasonable

basic living expenses.     Butner v. Commissioner, T.C. Memo. 2007-

136.

       Petitioner listed her monthly gross pay on Form 8857 as

$3,294.    She also listed $500 of gifts as part of her monthly

income, which brought the total to $3,794.    Petitioner listed her

monthly expenses as $3,703.    Petitioner testified that the $500

was a one-time gift from her daughter, not a monthly gift.

Petitioner is a tax return preparer with several years of

experience completing tax returns and other tax forms.    Her

testimony that the $500 a month she receives in gifts was a one-

time occurrence is self-serving, and the Court does not have to

accept it as the truth.    See Tokarski v. Commissioner, 87 T.C.
                                 - 27 -

74, 77 (1986).    Collection of the liability would not keep

petitioner from paying her basic living expenses.     This factor

weighs against granting petitioner relief.

     Actual knowledge of the income giving rise to the deficiency

weighs strongly against granting relief.     See Rev. Proc. 2003-61,

sec. 4.03(2)(a)(iii)(B).     Such knowledge may be overcome only if

the factors in favor of granting relief are “particularly

compelling.”     Id.   As found above, petitioner did have actual

knowledge of the unreported taxable retirement income for 2007.

Although petitioner could not access the funds in intervenor’s

IRA, the funds were transferred into the couple’s joint checking

account, to which petitioner did have access.     Petitioner also

had access to and reviewed the account statements for all of the

Meriwest accounts.     This factor weighs against granting relief.

     Petitioner and intervenor’s separation agreement does not

make any allocation of the couple’s tax debt.     Therefore, this

factor is neutral.

     Petitioner did deposit both of the refund checks for the

years in issue into her Patelco account.     Petitioner testified

that she and intervenor discussed that the refunds would be used

to pay household bills and that the refunds were used as such.

The Court concludes that the refunds were used to pay household

bills.   No evidence was presented that petitioner received a

significant benefit beyond normal support as a result of the
                               - 28 -

unpaid tax liability.   Therefore, the Court concludes that this

factor weighs in favor of granting relief.   See Magee v.

Commissioner, T.C. Memo. 2005-263 (lack of significant benefit

weighs in favor of granting relief under Rev. Proc. 2003-61,

supra).

     Petitioner has been in compliance with Federal tax laws.

She filed as a head of household for 2008 and fully paid her tax

liability.15   Therefore, this factor weighs in favor of granting

relief.

     The factors of abuse and mental or physical health will

favor granting relief if present but will not weigh against

granting relief if not present.   See Rev. Proc. 2003-61, sec.

4.03(2)(b), 2003-2 C.B. at 299.   There was no evidence that

petitioner was abused or that she suffered from any mental or

physical health problems.   Therefore, the factors of abuse and

mental or physical health are neutral.

     The factors of economic hardship and petitioner’s actual

knowledge of the unreported taxable retirement income weigh

against granting petitioner relief under subsection (f) for this

item of income.   The remaining factors are not compelling enough

to overcome petitioner’s actual knowledge of the unreported




     15
      No evidence was presented that petitioner has not
continued to be in compliance with her Federal tax obligations.
                                - 29 -

taxable retirement income.     See Rev. Proc. 2003-61, sec.

4.03(2)(a)(iii)(B).

      Therefore, it is not inequitable to hold petitioner jointly

and severally liable for the portion of the deficiency

attributable to the unreported taxable retirement income for

2007.

IV.   Conclusion

        After review of all of the evidence, the Court concludes

that petitioner is entitled to relief under section 6015(b) for

2006 and under section 6015(c) for 2007 for the portion of the

deficiency attributable to intervenor’s Ross income and Wells

Fargo interest income and the portion of the increase in

intervenor’s taxable SSA benefits attributable to these items of

income and the Meriwest interest income.     Petitioner is also

entitled to relief under section 6015(f) for 2007 for the portion

of the deficiency attributable to intervenor’s Meriwest interest

income.     Petitioner is not entitled to relief under section

6015(c) or (f) for the tax due on the unreported taxable

retirement income for 2007.     Petitioner is also not entitled to

relief from liability for the portion of the deficiency

attributable to the increase in intervenor’s taxable portion of

SSA benefits for 2007 due to the retirement income.     Petitioner

cannot allocate the EIC for 2007 because her son was the

dependent claimed for the credit.
                                - 30 -

     We have considered all of the parties’ arguments, and, to

the extent not addressed herein, we conclude that they are moot,

irrelevant, or without merit.

     To reflect the foregoing,


                                          Decision will be entered

                                     under Rule 155.
