                  T.C. Summary Opinion 2005-145



                     UNITED STATES TAX COURT



                 ANN MARIE BRIGHT, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3839-04S.             Filed October 4, 2005.



     Ann Marie Bright, pro se.

     Robert V. Boeshaar, for respondent.



     CARLUZZO, Special Trial Judge:   This case was heard pursuant

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

effect at the time the petition was filed.1    The decision to be




     1
        This opinion supplements a bench opinion rendered on Oct.
22, 2004. Unless otherwise indicated, subsequent section
references are to the Internal Revenue Code as amended. Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 2 -

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

should not be cited as authority.

     In a final notice of determination, dated December 18, 2003,

respondent denied petitioner’s claim for section 6015(f) relief

from her unpaid 1995 Federal income tax liability.     In a timely

petition, filed March 3, 2004, petitioner requests this Court to

review respondent’s determination.      Our jurisdiction to do so is

established by section 6015(e), see Ewing v. Commissioner,

118 T.C. 494, 496-497 (2002), and we review respondent’s

determination for abuse of discretion, see Butler v.

Commissioner, 114 T.C. 276, 292-293 (2000).

     The issue for decision is whether respondent’s failure to

relieve petitioner from an unpaid Federal income tax liability

reported on a 1995 joint Federal income tax return is an abuse of

discretion.

Background

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

the time the petition was filed in this case, petitioner resided

in Camano Island, Washington.

     Petitioner, a high school graduate with 2 years of college

education, married Jessie Bright (petitioner’s former spouse) in

1978.   They have one child, a son, born in 1981.
                                 - 3 -

     Petitioner was employed as an office manager during 1995,

and appropriate amounts of Federal income tax were withheld from

her wages from that employment.    Her former spouse was a self-

employed construction contractor during 1995.       He made no

estimated quarterly tax payments with respect to his self-

employment income earned that year.

     Petitioner and her former spouse maintained a joint checking

account throughout their marriage.       Petitioner’s former spouse

controlled their personal finances and directed the payment of

all of the household expenses, which from time to time included

payments to respondent in accordance with installment agreements

in effect for different years.    Petitioner was given a fixed

amount each month by her former spouse with which to purchase

groceries for the family.    Petitioner did not have access to the

household checking account without the knowledge of her former

spouse.    In addition, petitioner’s former spouse maintained a

separate checking account for his construction business.

Petitioner did not have access to the business checking account.

     Petitioner and her former spouse filed joint Federal income

tax returns during their marriage.       Petitioner’s former spouse

was responsible for the preparation and filing of the joint

returns.    Their joint returns typically were untimely, and the

tax reported on those returns typically was not fully paid with

the return.    Before 1995, petitioner’s former spouse negotiated
                               - 4 -

installment agreements for the payment of amounts reported on

delinquent Federal income tax returns, and the tax liabilities

for years prior to 1995 ultimately were satisfied through these

installment agreements or otherwise.

     Petitioner’s 1995 joint Federal income tax return was filed

on March 21, 1997.   Taking into account the Federal income tax

liability reported on the return and prepayment credits

consisting entirely of petitioner’s income tax withholdings, the

return shows a balance due of $3,751 that was not paid with the

return.2   At the time she signed the 1995 return, petitioner knew

that the tax liability reported on the return had not fully been

paid.

     During the marriage, petitioner’s former spouse began to

abuse alcohol and drugs.   During the final years of the marriage,

petitioner’s former spouse became abusive towards her, and at

times petitioner feared for her safety.    In June 1997, the years

of substance abuse culminated in a violent episode that prompted

petitioner to call the police in order to have her former spouse

removed from the marital residence.    The resultant police

report noted petitioner’s former spouse’s substance abuse and




     2
        The unpaid balance consists of the sec. 1401 self-
employment tax and sec. 1 income tax on the self-employment
income of petitioner’s former spouse.
                                - 5 -

petitioner’s concern that her former spouse might harm her or

her son.

     The potential for violence and her concerns for the safety

of herself and her son led to petitioner’s decision to move, with

her son, from the marital residence.    When she advised her former

spouse of her intention to do so, she and her son were forced

from the marital residence without notice and with only a minimal

number of personal possessions.    At that time, petitioner and her

son moved to Washington State to live with petitioner’s daughter.

     Petitioner and her former spouse were divorced in August

1998.    The divorce decree ordered, in pertinent part, that

petitioner’s former spouse pay child support and the then-

outstanding 1995 Federal income tax liability.3

     Since the divorce, petitioner’s former spouse has been more

than $4,900 in arrears on his child support obligation.    In

addition, petitioner’s former spouse did not pay the outstanding

1995 tax liability, despite the fact that he provided petitioner

with a copy of an offer in compromise that he claimed he had made

with respect to that liability.




     3
        The copy of the divorce decree that petitioner initially
provided to respondent at the time of her request for innocent
spouse relief did not contain the provision which obligated
petitioner’s former spouse to pay the outstanding 1995 Federal
tax liability. However, a copy of the divorce decree which
included this provision was subsequently provided to respondent.
                               - 6 -

     Following her divorce, petitioner’s Federal income tax

returns were timely filed.   With the exception of 2001, all of

the taxes shown on those returns were paid timely.4

     By letter dated April 1, 2002, respondent notified

petitioner that the 1995 tax liability remained unpaid.

     On April 6, 2002, petitioner submitted to respondent a Form

8857, Request for Innocent Spouse Relief, in which she requested

section 6015 relief from the unpaid portion of her 1995 Federal

income tax liability.   According to the form, petitioner seeks

only “equitable relief” from that liability.   On a questionnaire

submitted after her request, petitioner listed her total monthly

income and living expenses as $3,000 and $2,968, respectively.5

     On November 15, 2002, respondent sent a preliminary letter

to petitioner notifying her that she was not entitled to relief

under section 6015.   In December 2002, petitioner submitted

to respondent a Form 12509, Statement of Disagreement.    On



     4
        Petitioner testified, and the record does not reflect
otherwise, that she entered into an installment agreement with
the IRS with respect to her unpaid taxes for the 2001 tax year.
As a result of this installment agreement, petitioner’s 2001 tax
liability was paid in full in March 2003.
     5
        In a subsequent submission to respondent, petitioner
listed her total monthly income and living expenses as $3,181 and
$3,024, respectively. Petitioner also provided copies of several
medical bills for herself and her son which totaled $1,051. On
the basis of petitioner’s 2002 tax return and the limited
information she provided, respondent determined that petitioner’s
total monthly income and allowable living expenses were $3,734
and $3,436, respectively.
                                 - 7 -

December 18, 2003, respondent issued a notice of determination

advising petitioner that she was not entitled to relief under

section 6015.

Discussion

     In general, section 6013(a) allows a husband and wife to

elect to file a joint Federal income tax return.    If for any year

spouses elect to file a joint return, then each spouse is charged

with the knowledge of the information reported on the return, and

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. at 282.

     Subject to various conditions and in a variety of ways, an

individual who has made a joint return may elect to seek relief

from the joint and several liability arising from that joint

return.   Sec. 6015.   Petitioner seeks relief from liabilities

reported on the 1995 joint return that she filed with her former

spouse.   Consequently, she is entitled to relief only as provided

in section 6015(f), see Washington v. Commissioner, 120 T.C. 137,

146-147 (2003), which allows relief from joint and several

liability if the individual is not entitled to relief under other

provisions of section 6015 and “it is inequitable to hold the

individual liable for any unpaid tax or any deficiency (or any

portion of either)”, sec. 6015(f)(1).
                                - 8 -

     We review respondent’s denial of equitable relief after a

trial de novo and under an abuse of discretion standard.     Ewing

v. Commissioner, 122 T.C. at 35-44; Butler v. Commissioner,

supra.   Petitioner bears the burden of proving that respondent’s

denial of her request for section 6015(f) relief is an abuse of

discretion.    See Rule 142(a); Washington v. Commissioner, supra

at 146; Jonson v. Commissioner, 118 T.C. 106, 125 (2002), affd.

353 F.3d 1181 (10th Cir. 2003).    Petitioner must demonstrate that

respondent exercised his discretion arbitrarily, capriciously, or

without sound basis in fact or law.     See Jonson v. Commissioner,

supra; Cheshire v. Commissioner, 115 T.C. 183, 198 (2000), affd.

282 F.3d 326 (5th Cir. 2002).   The Court’s review is not limited

to respondent’s administrative record.     Ewing v. Commissioner,

supra at 44.

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

prescribed procedures and factors IRS employees use to determine

whether a spouse qualifies for relief under that section.    At the

time that petitioner requested relief under section 6015(f),

those procedures were set forth in Rev. Proc. 2000-15, 2000-1

C.B. 447. (Subsequent modification of these procedures by Rev.

Proc. 2003-61, 2003-2 C.B. 296, does not affect the resolution of

this case.)

     Certain threshold conditions must be satisfied before the

Commissioner will consider a request for relief under section
                               - 9 -

6015(f).   See Rev. Proc. 2000-15, sec. 4.01, 2000-1 C.B. at 448.

Respondent agrees that petitioner satisfies these threshold

conditions for the year under consideration, and we focus our

attention on other parts of the controlling revenue procedure.

     Rev. Proc. 2000-15, sec. 4.02, 2000-1 C.B. at 448, describes

the circumstances under which the Commissioner will “ordinarily”

grant equitable relief in cases where a liability reported on a

joint return is unpaid.   Rev. Proc. 2000-15, sec. 4.02(1)

provides that equitable relief will ordinarily be granted if all

of the following elements are satisfied:

          (a) At the time relief is requested, the
    requesting spouse is no longer married to, or is legally
    separated from, the nonrequesting spouse * * *;

          (b) At the time the return was signed, the
    requesting spouse had no knowledge or reason to know
    that the tax would not be paid. The requesting spouse
    must establish that it was reasonable for the requesting
    spouse to believe that the nonrequesting spouse would
    pay the reported liability. * * *; and

          (c) The requesting spouse will suffer economic
    hardship if relief is not granted. For purposes of this
    section, the determination of whether a requesting
    spouse will suffer economic hardship will be made by the
    Commissioner or the Commissioner’s delegate, and will be
    based on rules similar to those provided in § 301.6343-
    1(b)(4) of the Regulations on Procedure and
    Administration.

     Respondent concedes that petitioner satisfies the first

requirement but argues that petitioner does not qualify for

relief under Rev. Proc. 2000-15, sec. 4.02 because she:
                               - 10 -

(1) Knew or had reason to know at the time that she signed the

return that the liability reported on the joint return for 1995

would not be paid; and (2) has not demonstrated that she will

suffer economic hardship if relief is not granted.

     The relevant knowledge in the case of a reported but unpaid

liability is whether when the return was signed, the taxpayer

knew or had reason to know “that the tax would not be paid.”      Id.

sec. 4.02(1)(b).   Accordingly, we must consider whether, “taking

into account all the facts and circumstances”, petitioner knew or

had reason to know that her former spouse would not pay the taxes

on his self-employment income shown as due on the tax return for

the taxable year in issue.   See sec. 6015(f)(1).

     Petitioner contends that she had no knowledge that the

unpaid 1995 joint tax liability would not be paid by her former

spouse.   Petitioner did know that there was income tax due for

the taxable year in issue when she signed the tax return.

However, petitioner testified that her former spouse had a

pattern of “filing late, paying late, but having payment

agreements with the IRS.”    Petitioner further testified that when

she signed the 1995 joint return “there was no reason for me to

think otherwise at that time that the [1995] taxes would not be

paid in a similar fashion, that we would get an installment

agreement and that that would be how those taxes would be paid.”

Having observed petitioner’s demeanor at trial, we find her
                               - 11 -

testimony to be credible.    In addition, petitioner’s testimony is

corroborated by the fact that her former spouse did pay the tax

balances due as reported on the couple’s jointly filed income tax

returns.   Accordingly, we conclude that petitioner had no

knowledge that her former spouse would not pay, albeit at some

later date, the tax due with their 1995 return.

     Petitioner further claims that she had no reason to know

that her former spouse would not pay the 1995 tax liability.       She

points out that her former spouse was responsible for paying the

household expenses, including installment payments to the IRS.

Petitioner’s access to the joint checking account was through her

former spouse.   Additionally, petitioner had no access to her

former spouse’s separate business checking account.      It was

petitioner’s former spouse’s practice to file their joint tax

return late, to make no payment with the return, and to enter

into an installment agreement with the IRS.      Although petitioner

signed the 1995 tax return in March 1997 and was aware of the tax

due, petitioner had no reason to believe that her former spouse

would not pay the tax liability.   In fact, petitioner’s former

spouse handled the tax matters with the IRS and had paid any

taxes due for years prior to 1995.      Contrary to respondent’s

position, we conclude that petitioner did not have reason to know

that the income tax for the taxable year in issue would not be

paid by her former spouse.
                                - 12 -

     Economic hardship for purposes of the revenue procedure is

determined by using rules similar to those under section

301.6343-1(b)(4), Proced. & Admin. Regs., and generally involves

an inability to pay reasonable basic living expenses.     Rev. Proc.

2000-15, sec. 4.02.   This regulation provides that the

Commissioner will consider any information offered by the

taxpayer that is relevant to the determination, including, but

not limited to, the taxpayer’s age, ability to earn, and

responsibility for dependents and the amount reasonably necessary

for basic living expenses.   See sec. 301.6343-1(b)(4)(ii),

Proced. & Admin. Regs.

     Petitioner provided insufficient evidence to support a

finding of economic hardship.    Petitioner provided no evidence as

to her basic monthly living expenses other than two lists of her

monthly expenses which totaled $2,968 and $3,024, respectively,

and copies of several medical bills which totaled $1,051.

Assuming, without finding, that all of the expenses petitioner

claimed (e.g., expenses relating to her adult son) qualify as

basic living expenses within the meaning of section 301.6343-

1(b)(4), Proced. & Admin. Regs., petitioner provided no evidence

as to the amount of her claimed monthly living expenses.

Additionally, at the time of the trial in this case, petitioner

was earning approximately $42,000 a year.   Other than the three

medical bills (two of which were for petitioner’s son),
                              - 13 -

petitioner introduced no evidence of her basic living expenses or

other current debts that would show she could not pay her current

reasonable basic living expenses.    Accordingly, petitioner has

failed to establish that she will suffer economic hardship if

equitable relief is not granted.    The Court concludes that

petitioner has not satisfied this element.    Therefore, the Court

concludes that petitioner fails to qualify for relief under Rev.

Proc. 2000-15, sec. 4.02.

     If the requesting spouse satisfies the threshold conditions

of Rev. Proc. 2000-15, sec. 4.01, but does not qualify for relief

under Rev. Proc. 2000-15, sec. 4.02, the Commissioner looks to

Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 448, to determine

whether the taxpayer should be granted equitable relief.

     Rev. Proc. 2000-15, sec. 4.03(1), lists the following six

factors weighing in favor of granting relief for an unpaid

liability:   (1) The requesting spouse is separated or divorced

from the nonrequesting spouse; (2) the requesting spouse will

suffer economic hardship if relief is denied; (3) the requesting

spouse was abused by the nonrequesting spouse; (4) the requesting

spouse did not know or have reason to know that the reported

liability would not be paid; (5) the nonrequesting spouse has a

legal obligation pursuant to a divorce decree or agreement to pay

the unpaid liability; and (6) the unpaid liability is

attributable to the nonrequesting spouse.    Rev. Proc. 2000-15,
                              - 14 -

sec. 4.03(2), 2000-1 C.B. at 449, lists the following six factors

weighing against granting relief for an unpaid liability:     (1)

The unpaid liability is attributable to the requesting spouse;

(2) the requesting spouse knew or had reason to know at the time

the return was signed that the reported liability would be

unpaid; (3) the requesting spouse significantly benefited (beyond

normal support) from the unpaid liability; (4) the requesting

spouse will not suffer economic hardship if relief is denied;

(5) the requesting spouse has not made a good faith effort to

comply with Federal income tax laws in the tax years following

the tax year to which the request for relief relates; and (6) the

requesting spouse has a legal obligation pursuant to a divorce

decree or agreement to pay the unpaid liability.   This list is

not exhaustive, no single factor is determinative, and all

factors should be considered and weighed appropriately.   Rev.

Proc. 2000-15, sec. 4.03.

     As we view the matter, the factors in favor of granting

petitioner relief outweigh the factors against granting

petitioner relief.   Petitioner is divorced from her former

spouse.   Respondent concedes that petitioner was abused by

her former spouse during the marriage.   As discussed above,

petitioner did not know or have reason to know that the reported

1995 tax liability would not be paid by her former spouse.
                               - 15 -

Additionally, petitioner’s former spouse has a legal obligation

pursuant to their divorce decree to pay the unpaid 1995 tax

liability.    The record does not reflect that petitioner

benefitted beyond normal support from the unpaid tax liability.

Petitioner has also made a good faith effort to comply with

Federal tax laws in the tax years following the tax year to which

the request for relief relates.    Finally, the unpaid 1995 tax

liability is attributable to the self-employment income of

petitioner’s former spouse.    The only factor not weighing in

favor of granting petitioner equitable relief is that, as

discussed above, she will not suffer economic hardship if relief

is denied.

     Petitioner has presented a strong case for relief from joint

liability under the factors promulgated by the Commissioner in

Rev. Proc. 2000-15, sec. 4.03.    All of the factors except one,

economic hardship, weigh in favor of granting relief to

petitioner.   While the economic hardship factor weighs against

petitioner, it does not outweigh the positive factors.

Furthermore, denying relief entirely on the basis of that one

factor would elevate that factor to the status of determinative.

We are unwilling to proceed by doing so.    Accordingly, we hold

that petitioner is entitled to relief under section 6015(f) and

that respondent’s failure to grant that relief was an abuse of

discretion.
                            - 16 -

    Reviewed and adopted as the report of the Small Tax Case

Division.

    To reflect the foregoing,


                                       Decision will be entered

                                  for petitioner.
