                         T.C. Memo. 2011-205



                       UNITED STATES TAX COURT



    VICTORIA STENNETT-BAILEY, Petitioner, AND CASMAS BAILEY,
                          Intervenor v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1934-10.                 Filed August 22, 2011.



     Victoria Stennett-Bailey, pro se.

     Casmas Bailey, pro se.

     Marissa J. Savit, for respondent.



                         MEMORANDUM OPINION


     HALPERN, JUDGE:    This case arises from a request by

petitioner of the Internal Revenue Service (IRS) for equitable

relief from joint and several liability for Federal income tax

for petitioner’s 2006 taxable (calendar) year (2006).   The IRS
                                - 2 -

denied the request, and petitioner brought this action protesting

that denial.   We have jurisdiction to determine the appropriate

relief (if any) available to petitioner.   See sec. 6015(e)(1);1

Pullins v. Commissioner, 136 T.C. __, __ (2011) (slip op. at 10).

Both the scope and standard of our review are de novo.    Pullins

v. Commissioner, supra at __ (slip op. at 11).    Petitioner bears

the burden of proof.   See Rule 142(a); Pullins v. Commissioner,

supra at __ (slip op. at 11).

     Intervenor, petitioner’s husband (Mr. Bailey), objects to

the relief sought by petitioner, but since he neither executed

the stipulation of facts that respondent prepared for his

signature, appeared at trial (although he appeared earlier, at

calendar call), nor filed a brief in this case, we assume he has

declined to prosecute his objection.    We shall dismiss this case

with respect to him for failure to prosecute.    See Rule 123(b);

Tipton v. Commissioner, 127 T.C. 214, 218 (2006).

     For the reasons that follow, we determine that petitioner is

not entitled to equitable relief from joint and several liability

for 2006.




     1
      Unless otherwise noted, section references are to the
Internal Revenue Code as currently in effect, and Rule references
are to the Tax Court Rules of Practice and Procedure.
                                - 3 -

                              Background

     Some facts have been stipulated and are so found.      The

stipulation of facts, with accompanying exhibits, is incorporated

herein by this reference.

     At the time the petition was filed, petitioner resided in

New York State.

     In October 2007, petitioner and Mr. Bailey made a joint

return of Federal income tax (return) for 2006.      They signed the

return on October 12, 2007.    The return shows total tax of

$29,245, a withholding credit of $5,220, a credit for Federal

telephone excise tax of $60, an estimated tax penalty of $314,

and an amount owed of $24,279 (unpaid tax).    No payment

accompanied the return.

     Petitioner applied to the IRS for equitable relief from

joint and several liability for 2006 by submitting to it a Form

8857, Request for Innocent Spouse Relief, dated November 5, 2008

(request).   In response to the request, the IRS made a

preliminary determination to deny the request on the ground that

petitioner had not shown that it would be unfair to hold her

responsible for the unpaid tax.    The IRS stated:    “You did not

prove, [sic] that at the time you signed the return, you had

reason to believe the tax would be paid.    Also, the documentation

you provided does not prove economic hardship.”      Petitioner

disagreed with the IRS’ preliminary determination, but,
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thereafter, the IRS finalized its determination, stating:    “The

information we have available does not show you meet the

requirements for relief.   You did not show it would be unfair to

hold you responsible.”

     During 2006 and throughout the administrative proceeding in

this case, petitioner and Mr. Bailey were married.

     We conducted a trial in this case.   At the conclusion of the

trial, we set a schedule for both opening and answering briefs.

We instructed petitioner as to the importance of submitting

briefs to assist us in considering the evidence in this case

since, among other things, the stipulated exhibits comprise

hundreds if not more than a thousand pages.   We directed her to

Rule 151(e), which addresses the form and content of briefs, and

we emphasized the importance of complying with the rule.    Rule

151(e)(3) provides that an opening brief shall contain proposed

findings of fact, in the form of numbered, concise statements of

essential facts (“and not a recital of testimony nor a discussion

or argument relating to the evidence or the law”) supported by

“references to the pages of the transcript or the exhibits or

other sources relied upon to support the statement.”   While

petitioner’s opening brief does consist in part of numbered,

relatively concise statements of fact, it fails to provide the

required references to the trial transcript, the exhibits, or the

stipulation.   In his answering brief, respondent objects to many
                                - 5 -

of petitioner’s proposed findings of fact as not being supported

by evidence in the record.    Respondent asks us to strike those

portions of petitioner’s opening brief that do not comply with

the Rules.   We shall not do so, but to the extent that we cannot

easily verify petitioner’s proposed findings of fact (aided in

part by respondent’s answering brief), we disregard them.

Moreover, in her answering brief, petitioner fails to comply with

the requirement of Rule 151(e) that she identify by number the

statements of proposed findings of fact made by respondent in his

opening brief to which she objects, setting forth her reasons for

objecting.   She merely makes statements of general rebuttal to

many of respondent’s proposed findings; e.g., with respect to

respondent’s proposed findings relevant to whether she knew or

should have known about the 2006 underpayment of tax:    “I signed

the return with knowledge of the tax liability.    However, this

does not prove that I knew that the tax liability would not be

paid by the [sic] Mr[.] Bailey, who had enough liquid assets to

meet his tax obligation.”    Accordingly, we conclude that

respondent’s proposed findings of fact are correct except to the

extent that petitioner objects to a particular proposed finding

and identifies evidence (or we can identify evidence) supporting

the objection.   See, e.g., Jonson v. Commissioner, 118 T.C. 106,

108 n.4 (2002), affd. 353 F.3d 1181 (10th Cir. 2003).
                                  - 6 -

                              Discussion

I.   Introduction

      As a general rule, spouses making a joint Federal income tax

return are jointly and severally liable for all taxes shown on

the return or found to be owing.     Sec. 6013(d)(3).   In certain

situations, however, a joint return filer can avoid such joint

and several liability by qualifying for relief therefrom under

section 6015.   There are three types of relief available under

section 6015:   (1) Full or apportioned relief under section

6015(b), (2) proportionate tax relief for divorced or separated

taxpayers under section 6015(c), and (3) equitable relief under

section 6015(f), when relief is unavailable under either section

6015(b) or (c).     Petitioner’s only claim is that she is entitled

to equitable relief under section 6015(f).

      Section 6015(f) provides:

           SEC. 6015(f). Equitable Relief.--Under procedures
      prescribed by the Secretary, if--

                (1) taking into account all the facts and
           circumstances, it is inequitable to hold the individual
           liable for any unpaid tax or any deficiency (or any
           portion of either); and

                (2) relief is not available to such individual
           under subsection (b) or (c),

      the Secretary may relieve such individual of such liability.

      The parties agree that petitioner is eligible to be

considered for equitable relief under section 6015(f) because

relief is not available to petitioner under section 6015(b) or
                                   - 7 -

(c).    They disagree, however, as to whether she has shown her

entitlement to that relief.

II.    Revenue Procedure (Rev. Proc.) 2003-61

       A.   Introduction

       In accord with the statutory provision that relief is to be

granted under section 6015(f) following “procedures prescribed by

the Secretary,” the Commissioner has issued revenue procedures to

guide its employees in determining whether a taxpayer is entitled

to relief from joint and several liability.      See Rev. Proc. 2003-

61, 2003-2 C.B. 296, modifying and superseding Rev. Proc. 2000-

15, 2000-1 C.B. 447.       Rev. Proc. 2003-61, supra, lists the

factors that IRS employees should consider, and the Court

consults those same factors when reviewing the IRS’ denial of

relief.     Pullins v. Commissioner, supra at __ (slip op. at 11).

       Rev. Proc. 2003-61, supra, provides a three-step analysis

for IRS employees to follow in evaluating requests for relief:

Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at 297 (section 4.01),

lists seven threshold conditions that must be met before the IRS

will grant any relief; Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B.

at 298 (section 4.02), lists circumstances in which the IRS will

ordinarily grant relief as to liabilities that were reported on a

return (the unpaid tax at issue in this case); and Rev. Proc.

2003-61, sec. 4.03, 2003-2 C.B. at 298 (section 4.03), sets out

eight nonexclusive factors that the IRS will consider in
                                  - 8 -

determining whether equitable relief should be granted.     See Rev.

Proc. 2003-61, secs. 4.01-4.03, 2003-2 C.B. at 297-298.      In

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

states:     “No single factor will be determinative of whether

equitable relief will or will not be granted in any particular

case.     Rather, the Service will consider and weigh all relevant

factors, regardless of whether the factor is listed in * * *

section 4.03.”

     B.     Section 4.01:   Threshold Conditions

     Respondent concedes that petitioner meets the threshold

conditions set forth in section 4.01.

     C.     Section 4.02:   Circumstances Ordinarily Allowing Relief

             1.   Introduction

     Section 4.02 provides three conditions that, if satisfied,

will ordinarily qualify a requesting spouse for relief by the IRS

from liability for an underpayment of a properly reported

liability.     The conditions are:

          (a) 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.

          (b) On the date the requesting spouse signed the
     joint return, the requesting spouse had no knowledge or
     reason to know that the nonrequesting spouse would not
     pay the income tax liability. The requesting spouse
     must establish that it was reasonable for the
     requesting spouse to believe that the nonrequesting
                               - 9 -

     spouse would pay the reported income tax liability.
     * * *

          (c) The requesting spouse will suffer economic
     hardship if the Service does not grant relief. * * *

Rev. Proc. 2003-61, sec. 4.02(1), 2003-2 C.B. at 298.

          2.   Divorced, Separated, or Living Apart

     Petitioner concedes that she is still married to Mr. Bailey,

and she makes no argument that they are legally separated.     She

testified that Mr. Bailey moved out of their marital residence

(which she owns) in November 2006.     Respondent concedes that when

the request was made Mr. Bailey had been absent from that

residence for more than 12 months.     Nevertheless, respondent

argues, that absence was temporary and, thus, does not qualify as

an absence for determining whether petitioner and Mr. Bailey were

not members of the same household.     See sec. 1.6015-3(b)(3),

Income Tax Regs.; Rev. Proc. 2003-61, sec. 4.03(2)(a)(i).

Indeed, petitioner testified at trial:     “[U]ntil today I always

thought Mr. Bailey was going to move back in the home.     He was

picking up groceries.   He was doing things.    He said he needed

time away from the home, and I believed him.”     On brief,

petitioner contradicts her testimony as to the duration of her

belief, claiming, without any support from the record, that her

belief that he would return to the marital home “was brief and

fleeting.”   Nevertheless, given Mr. Bailey’s approximately 2-year

absence from their marital home when petitioner made the request
                                - 10 -

in November 2008, we think it not unreasonable to value

experience over hope and find that it was reasonable then to

believe that he would not return.     We conclude that his absence

was, thus, not temporary, and he had not been a member of her

household for at least 12 months when she made the request.

Petitioner satisfies the first condition.

          3.     Knowledge or Reason To Know

     Petitioner and Mr. Bailey signed the return on October 12,

2007, and she concedes that she signed it with knowledge of the

resulting tax liability.     She claims that that does not prove

that she knew or had reason to know that Mr. Bailey would not pay

the reported tax liability.     That is so.    But respondent proposes

that we find as facts that, on October 12, 2007, (1) Mr. Bailey

did not have an individually owned bank account, (2) petitioner

and Mr. Bailey jointly owned both an HSBC checking and an HSBC

money market account, both of which, on that date, were empty or

nearly so, and (3) when she signed the return, she knew that Mr.

Bailey had no liquid assets to draw upon to pay the reported

liability.     Because petitioner has not contradicted those

proposed findings, we find accordingly.       While on October 12,

2007, petitioner may not have known that Mr. Bailey would not pay

the reported liability, she has failed to prove that she had no

reason to know that Mr. Bailey would not pay that liability.
                                - 11 -

Indeed, the findings we have just made suggest the contrary.

Petitioner fails to satisfy the second condition.

          4.     Economic Hardship

     Economic hardship is defined as an inability to meet

reasonable basic living expenses.    Sec. 301.6343–1(b)(4), Proced.

& Admin. Regs.    In her opening brief, petitioner claims, with no

citation of the record, “that she will suffer extraordinary

financial hardship within the meaning of the * * * [Internal

Revenue Code] if she is required to pay this tax.”      She echoes

that claim in her answering brief, supported by exhibits attached

to that brief, which we detached and returned to her as ex parte

statements prohibited in a brief.    See Rule 143(c).    Respondent

emphasizes what petitioner failed to show to establish economic

hardship; to wit, she did not introduce into evidence account

statements showing the current balances in her bank accounts,

evidence of the current values of her equities in the various

properties she concedes she owns, or evidence of her current

income and personal expenses.    Respondent looks at the income and

expenses information petitioner reported in the request, which

shows equal monthly income and expenses of $7,615, and he claims

that, pursuant to his collection standards, the allowable living

expenses for a four-person household are approximately $5,725 and

that petitioner’s stated income exceeds the allowable amount.        He

also points out that petitioner admits that she drives a Lexus
                                   - 12 -

automobile, claims school expenses of $2,250 a month for sending

her children to private school, and owns a vacation home in the

Poconos (which petitioner testified had no value).       The parties

have stipulated that petitioner currently owns and operates at

least three companies involved in the rental real estate business

and, directly or through those companies, owns at least seven

properties.       Again, petitioner has failed to carry her burden of

proving that she will suffer economic hardship if we do not grant

her relief, and respondent’s arguments and the stipulations

suggest the contrary.      Petitioner fails to satisfy the third

condition.

          5.       Conclusion

     Having satisfied only the first of the three conditions set

forth in section 4.02(1), petitioner is not entitled to relief

under the circumstantial test set forth in section 4.02.

     D.   Section 4.03:      Mitigating Factors

             1.    Introduction

     Section 4.03 applies to requesting spouses who filed a joint

return, request relief under section 6015(f), and satisfy the

threshold conditions of section 4.01, but do not qualify for

relief under section 4.02.        It lists eight nonexclusive factors

to be considered in determining whether, taking into account all

the facts and circumstances, it is equitable to grant the

requesting spouse full or partial equitable relief under section
                                 - 13 -

6015(f).   The eight factors are:       (1) Marital status, (2)

knowledge or reason to know, (3) economic hardship, (4)

nonrequesting spouse’s legal obligation to pay the tax pursuant

to a divorce decree or agreement, (5) significant benefit, (6)

good-faith effort to comply with tax laws, (7) spousal abuse, and

(8) mental or physical health.       The last two factors, if present,

will weigh in favor of equitable relief, but, if not present,

will not weigh against equitable relief.        We have already

addressed the first three factors, and the first weighs in

petitioner’s favor, while the second two do not.

           2.     Legal Obligation

     This factor is neutral since petitioner and Mr. Bailey are

not divorced.

           3.     Significant Benefit

     The test here is whether petitioner received significant

benefit (beyond normal support) from the unpaid income tax

liability.      See Rev. Proc. 2003-61, sec. 4.03(2)(a)(v), 2003-2

C.B. at 299.      The unpaid tax is in substantial part due to Mr.

Bailey’s gain on his sale of real property located on Sheffield

Avenue in Brooklyn, New York.        Mr. Bailey deposited $249,838 of

his proceeds from the sale in petitioner and Mr. Bailey’s jointly

owned HSBC money market account, which had a $52 balance before

the deposit.      On March 21, 2007, petitioner withdrew $80,000 from

that account, virtually emptying the account, and deposited that
                                - 14 -

sum into her individual savings account.      At least $49,948 of the

$80,000 she withdrew came from the proceeds deposited by Mr.

Bailey.   Petitioner used the withdrawn funds to pay the mortgage

on her residence, to pay expenses of her Poconos vacation home,

to pay her children’s private school tuition, and to pay for

food, utilities, and living expenses.      Respondent suggests that

petitioner’s withdrawal prevented Mr. Bailey from paying the

unpaid tax from the sale proceeds he had received and deposited

in their joint account, deciding instead to use a portion of

those proceeds for her own benefit.      There is no evidence that

she reserved anything for taxes, although she knew her withdrawal

emptied the account and she had no assurance that Mr. Bailey had

reserved anything for taxes.    Petitioner has failed to carry her

burden of showing that she did not receive significant benefit

(beyond normal support) from the unpaid tax.      Indeed, the

evidence suggests the contrary.

          4.     Compliance With the Tax Laws

     The test here is whether petitioner has made a good-faith

effort to comply with the income tax laws following 2006, the

year here in issue.    See Rev. Proc. 2003-61, sec. 4.03(2)(a)(vi).

Petitioner does not address this factor on brief beyond claiming

that she is in full compliance.    The parties have stipulated that

petitioner did not file her 2008 Federal income tax return until

July 19, 2010.    There is no evidence that petitioner obtained an
                                - 15 -

extension of time to file that return.      Petitioner has failed to

carry her burden of proving a good-faith effort to comply with

the tax laws.   Indeed, the evidence suggests the contrary.

          5.    Spousal Abuse

     Petitioner makes no claim of spousal abuse, and this factor

is of no account.

          6.    Mental or Physical Health

     The test here is whether petitioner was in poor mental or

physical health on the date she signed the return or at the time

of the request.   See Rev. Proc. 2003-61, sec. 4.03(2)(b)(ii).      In

the request, petitioner stated that she had no physical or mental

health problems either then or when she signed the return.     In

her answering brief, she claims that, when she signed the return,

she was suffering from a host of medical ailments, including

severe headaches and mental stress.      We give credence to

petitioner’s contemporaneous statement, in the request.

Petitioner has failed to carry her burden of proving poor mental

or physical health on the date she signed the return or at the

time of the request.   This factor is of no account.

          7.    Weighing the Facts and Circumstances

     The only factor weighing in favor of relieving petitioner

from liability is her marital status.      With respect to the factor

of knowledge or reason to know that Mr. Bailey would not pay the

reported liability, our findings suggest that petitioner did have
                                 - 16 -

reason to know.      This factor weighs in favor of her retaining

liability.    Likewise with respect to economic hardship, since our

findings suggest that petitioner would not suffer economic

hardship if she were to retain liability.      And similarly with

respect to the factors of significant benefit and compliance with

the tax laws.

       Accordingly, after considering and weighing all the factors,

we find that it would not be inequitable to hold petitioner

liable for the unpaid tax.

III.    Conclusion

       To reflect the foregoing,


                                            An appropriate order of

                                       dismissal and decision will

                                       be entered.
