                  T.C. Summary Opinion 2005-160



                     UNITED STATES TAX COURT



JOYCE A. SIDDONS, Petitioner, AND RICHARD J. SIDDONS, Intervenor
         v. COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1188-04S.               Filed November 3, 2005.


     Joyce A. Siddons, pro se.

     Timothy S. Sinnott, for respondent.




     COUVILLION, Special Trial Judge:   This case was heard

pursuant to section 7463 in effect when the petition was filed.1

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority.


     1
      Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
                                   - 2 -

        This case arises from petitioner’s election to seek relief

from joint and several liability for Federal income tax for the

year 1998 under section 6015(b), (c), and (f).       Respondent

determined that petitioner is not entitled to relief.       The issue

for decision is whether petitioner is relieved of any liability

for tax for 1998 under section 6015(b), (c), or (f).2

        Some of the facts were stipulated.    Those facts, with the

exhibits annexed thereto, are so found and made part hereof.

Petitioner’s legal residence at the time the petition was filed

was Jasper, Indiana.

        During the year at issue, petitioner was married to Richard

Siddons (intervenor).3      Petitioner and intervenor were married in

1982.       They separated several times for short periods of time

during their marriage and were divorced on May 29, 2002.

     Petitioner has been employed full time as a cleaning person

for a restaurant known as Chicken Place for at least 14 years.

In 1998, intervenor owned and operated a small painting business


        2
      Petitioner and her former husband also filed their 1997
Federal Income tax return timely showing a balance due. The
unpaid liability was fully satisfied by offsetting the parties’
1999 and 2000 Federal income tax overpayments and is not an issue
in this case. Although petitioner made reference at trial to
being entitled to a “refund” for this collection of unpaid
liability, a request was not included in her petition and is thus
not before the Court.
        3
      Although intervenor appeared at the calendar call of this
case, he was unable to appear at trial due to a medical
condition. Moreover, intervenor was excused from appearing by
the Court.
                                - 3 -

called Hoosier Painting that specialized in painting interiors

and exteriors of residential homes.

      Petitioner and intervenor filed their 1998 joint Federal

income tax return timely.    The return reported wages from

petitioner’s employment of $14,456 and a credit for withheld

Federal income tax of $1,372.    The return also included a

Schedule C, Profit or Loss From Business, for intervenor’s

painting business.    That activity reflected a net profit of

$33,740.    The tax shown on the return was $7,563, which included

$4,767 of self-employment tax from intervenor’s trade or business

activity.

     The return was prepared and filed by a certified public

accountant and was signed by both parties.    Respondent agrees

that the unpaid liability is solely attributable to intervenor’s

income.

     Petitioner filed Form 8857, Request for Innocent Spouse

Relief, with the Internal Revenue Service (IRS) on or about

November 4, 2002.    The IRS subsequently denied relief, and

petitioner filed a timely petition in this Court.    Petitioner’s

sole position is that she is entitled to relief from joint

liability under section 6015.    Respondent, pursuant to Rule 325

and King v. Commissioner, 115 T.C. 118 (2000), served notice of

this proceeding on intervenor, who filed a Notice of Intervention

on April 19, 2004.    However, in his intervention, intervenor did
                                - 4 -

not state his reasons for objecting to petitioner’s claim for

relief.   Moreover, intervenor was excused from testifying at the

trial.4

     Generally, spouses filing joint Federal income tax returns

are jointly and severally liable for the taxes due thereon.    Sec.

6013(d)(3).   Under certain circumstances, however, section 6015

provides relief from this general rule.5   Section 6015 applies to

any liability for tax arising after July 22, 1998, and to any

liability for tax arising on or before July 22, 1998, but

remaining unpaid as of such date.   Internal Revenue Service

Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.

3201(g), 112 Stat. 740.

     Section 6015 provides three avenues for relief to a taxpayer

who has filed a joint return:   (1) Section 6015(b) allows relief

for understatements of tax attributable to certain erroneous

items on the return; (2) section 6015(c) provides relief for a

portion of an understatement of tax for taxpayers who are

separated or divorced; and (3) section 6015(f) more broadly

confers on the Secretary discretion to grant equitable relief for



     4
      See supra note 3.
     5
      Sec. 6015 was enacted as part of the Internal Revenue
Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L.
105-206, sec. 3201, 112 Stat. 734. Prior to the enactment of
sec. 6015, relief from the imposition of joint and several
liability for spouses filing joint returns was available under
sec. 6013(e).
                                - 5 -

taxpayers who otherwise do not qualify under section 6015(b) or

(c).

       A requisite to granting relief under section 6015(b) or (c)

is the existence of a tax deficiency.    Sec. 6015(b)(1)(B) and

(c)(1); Block v. Commissioner, 120 T.C. 62, 66 (2003).    If there

is no deficiency for the year for which relief is sought, relief

from joint and several liability is not available under section

6015(b) or (c).    Washington v. Commissioner, 120 T.C. 137, 147-

148 (2003); Block v. Commissioner, supra.     In this case, for the

year in question, there is an underpayment of tax arising from a

filed income tax return on which the tax shown on the return was

not paid.    There is no deficiency arising from the issuance by

respondent of a notice of deficiency.    Therefore, because there

is no deficiency, but merely an underpayment of tax, petitioner

is not entitled to relief under section 6015(b) or (c).    To that

extent, therefore, respondent is sustained.

       However, petitioner falls under the equitable relief

provision of section 6015(f).    Section 6015(f) provides, in part,

that a taxpayer may be relieved from joint and several liability

if it is determined that, taking into account all the facts and

circumstances, it is inequitable to hold the taxpayer liable for

the unpaid tax, and relief is not available under section 6015(b)

or (c).    Because petitioner is not eligible for relief under

section 6015(b) or (c), she satisfies the second requirement of
                               - 6 -

section 6015(f).   We review respondent’s denial of relief under

section 6015(f) to determine whether respondent abused his

discretion.   Jonson v. Commissioner, 118 T.C. 106, 125 (2002),

affd. 353 F.3d 1181 (10th Cir. 2003).

     Pursuant to section 6015(f), the Commissioner has prescribed

guidelines in Rev. Proc. 2000-15, sec. 4.01, 2000-1 C.B. 447,

448, for determining whether an individual qualifies for

equitable relief from joint and several liability.6   Rev. Proc.

2000-15, sec. 4.01, 2000-1 C.B. at 448, sets forth seven

threshold conditions that must be satisfied before the Secretary

will consider any request for equitable relief pursuant to

section 6015(f).   In this case, respondent agrees that petitioner

has satisfied the seven threshold conditions.

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

that equitable relief will ordinarily be granted if the seven

threshold conditions and each of the following three elements are

satisfied (three element test):

          (a) At the time relief is requested, 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



     6
      Rev. Proc. 2003-61 does not apply to this case because,
although it supersedes Rev. Proc. 2000-15, 2000-1 C.B. 447, for
requests still pending on Nov. 1, 2003, for which no preliminary
determination letter had been issued as of Nov. 1, 2003,
respondent issued the preliminary determination letter to
petitioner on July 31, 2003. Rev. Proc. 2000-15, supra,
therefore, applies here.
                               - 7 -

     during the 12-month period ending on the date relief was
     requested (first element);

          (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. If a
     requesting spouse would otherwise qualify for relief under
     this section, except for the fact that the requesting spouse
     had no knowledge or reason to know of only a portion of the
     unpaid liability, then the requesting spouse may be granted
     relief only to the extent that the liability is attributable
     to such portion (second element); 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 (third element).

Respondent concedes that petitioner satisfied the first element

because her divorce from intervenor was finalized before she

filed her petition for relief from joint and several liability.

In addition, respondent concedes that petitioner would suffer

economic hardship if she were required to pay the remaining

liability and, therefore, satisfies the third element.   The

parties, however, dispute whether petitioner has satisfied the

second element, whether petitioner did not know or have reason to

know when the requesting spouse signed the return that the tax

would not be paid.   Accordingly, the issue for the Court is

whether petitioner established that it was reasonable for her to

believe that intervenor would pay the reported liability.      Wiest
                               - 8 -

v. Commissioner, T.C. Memo. 2003-91; Rev. Proc. 2000-15, sec.

4.02, 2000-1 C.B. at 448.

     Respondent argues that petitioner could not have reasonably

believed intervenor would pay the tax due because she and

intervenor already had an unpaid liability for the taxable year

1997;7 however, petitioner testified, and the Court agrees, she

was unaware of the unpaid liability from 1997 at the time she

signed the 1998 return.   Petitioner testified that, although

intervenor sometimes “spent money foolishly”, he told her he had

enough money from the proceeds of his painting business to cover

the 1998 tax liability.

     The Court finds that petitioner had virtually no involvement

with intervenor’s business.   She had a high school education and

no further business or bookkeeping training.   An accountant

maintained intervenor’s books and took care of his business

expenses.   Although petitioner was an authorized signatory on

intervenor’s business account, she testified this was only to

enable her to sometimes pay their mortgage note out of the

business account because intervenor did not draw a regular

salary.   The extent of her knowledge of intervenor’s business

dealings was that the account held enough to pay the mortgage.



     7
      The unpaid liability from taxable year 1997 was fully
satisfied in 2001 through the offsetting by respondent of
overpayments from petitioner and intervenor’s 1999 and 2000
Federal income taxes. See supra note 2.
                               - 9 -

Furthermore, intervenor had already made an estimated tax payment

of $1,400 to cover the self-employment taxes for the year 1998.

Petitioner had no reason to believe that there were insufficient

funds to cover the income tax liability, or that there were

insufficient funds for intervenor to pay the tax.

     Petitioner contends she relied on intervenor’s assurance

that he would pay the 1998 tax liability.   Absent any conflicting

evidence or testimony, the Court finds petitioner’s testimony

credible and holds that it was reasonable for her to believe that

intervenor would pay the reported liability.   Wiest v.

Commissioner, supra.   Therefore, petitioner has satisfied the

second element and qualifies for relief under section 6015(f).8

Respondent abused his discretion in denying her claim for relief,

and petitioner, therefore, is relieved of the entire amount of

the liability.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                         Decision will be entered

                                    for petitioner.



     8
      Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 447, 448,
provides a facts and circumstances test whereby a taxpayer may
also qualify for relief under sec. 6015(f) (facts and
circumstances test). Although respondent and petitioner
addressed at trial many of the factors discussed in the facts and
circumstances test, it is not necessary for the Court to address
them because they are examined only when a taxpayer fails to
satisfy the three-element test.
