                          T.C. Memo. 2004-61



                      UNITED STATES TAX COURT



     JULIE C. NICHOLS, n.k.a. JULIE C. AMREIN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8227-02.              Filed March 11, 2004.



     Julie C. Nichols, pro se.

     James A. Kutten, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   Respondent determined a deficiency of $99,672

in petitioner’s Federal income tax for 1998, which was

subsequently reduced by respondent’s concession to $63,344.

After concessions, the issue for decision is whether petitioner

is entitled to relief from joint and several liability under

section 6015(b) or (c).
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     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue.

                          FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in Washington, Missouri, at the time that she

filed her petition.

     Petitioner married James M. Nichols (Nichols) on

November 19, 1988.    Petitioner and Nichols separated in March

2000 and were divorced on January 17, 2001.

     Nichols was a member of a group of 12 individuals who won

the Connecticut State Lottery drawing on October 28, 1987.

Nichols’s portion of the lottery prize was $756,540, payable over

20 years in annual installments of $37,827.    At the time that she

married Nichols, petitioner knew that Nichols had won a lottery

and received approximately $30,000 per year in lottery proceeds.

     On August 21, 1997, petitioner executed a Certificate of

Marital Status that was to be attached as exhibit “B” to a

Lottery Prize Assignment Agreement between Nichols and Woodbridge

Sterling Capital, LLC.    Petitioner inserted her name, address,

and Social Security number on the Certificate of Marital Status

and dated it and signed it before a notary public.    The

Certificate of Marital Status expressly stated:

          I consent to my spouse entering into the
     Assignment and furthermore to the application to a
                                - 3 -

     Court of competent jurisdiction for an appropriate
     order assigning the lottery prize payments to
     Woodbridge Sterling Capital, LLC, or its assigns, in
     accordance with the terms of the Assignment.

The Certificate of Marital Status was thereafter attached to a

Lottery Prize Assignment Agreement dated September 18, 1997,

between Nichols and Woodbridge Sterling Capital, LLC.   Judicial

approval of the lottery assignment was obtained on April 8, 1998.

The sum of $250,000 was paid to Nichols for the assignment during

1998.   Petitioner and Nichols filed a joint Federal income tax

return for 1998 but did not report the sale of the lottery rights

on that tax return.

     The petition in this case, filed by counsel on July 3, 2002,

asserted:

     I disagree that I should be liable for any portion of
     the deficiency, as I did not know, or had no reason to
     know, of my former husband’s receipt of such proceeds
     and his failure to report the same. Facts supporting
     my position are more thoroughly described in my
     statement in support of Form 8857, Request for Innocent
     Spouse Relief, attached hereto as Exhibit A, which I
     have filed along with Form 8857.

The attached Form 8857, Request for Innocent Spouse Relief,

prepared by counsel, specifically disclaimed a request for

equitable relief by inserting an “X” to indicate “No” in response

to the question:

     Do you have   an Underpayment of Tax (that is, tax that
     is properly   shown on your return but not paid) or
     another tax   liability that qualifies for Equitable
     Relief (see   page 4)?
                                 - 4 -

The attachment to the petition and to the Form 8857 repeated

petitioner’s denial of knowledge of the sale of the lottery

proceeds and referred to her limited education, her disability as

a result of a 1995 automobile accident, her use of medications,

her lack of involvement in financial affairs during her marriage

to Nichols, her lack of participation in preparation of the 1998

tax return, and Nichols’s subsequent imprisonment as a result of

an unrelated matter.   Among the allegations were the following:

          14. I did not discover that James had actually
     sold his lottery rights until January 15, 2002. This
     information was given to me by a mutual acquaintance
     who was James’ former business partner. Even as of
     this date, I still am not certain as to when (or even
     if) James sold his lottery rights.

                 *     *    *     *       *   *   *

          22. When I allegedly signed the ‘98 return, I had
     no knowledge or reason to know of the alleged sale of
     James’ lottery rights and, even if I had, I would not
     have possessed the mental capacity to even notice that
     such proceeds were not reported on the ‘98 return or
     even that they should have been reported.

          23. I did not know, nor did I have reason to
     know, of James’ failure to report the income from the
     alleged sale of his lottery rights on the ‘98 return.

                                OPINION

     After this case was set for trial, counsel who filed the

petition on behalf of petitioner moved to withdraw.   Petitioner

did not object, and the motion to withdraw was granted.   During

trial, as discussed below, it became apparent that petitioner’s

execution of the Certificate of Marital Status, as an incident to
                                - 5 -

Nichols’s sale of his lottery proceeds, established that

petitioner knew or had reason to know of the sale of his lottery

rights.    Because the testimony of petitioner with respect to

other aspects of her claim suggested that equitable relief under

section 6015(f) might have been the better course for her to

pursue, the Court allowed the parties, after trial, to address

whether petitioner should be allowed to amend her petition to

seek relief under section 6015(f).      Respondent filed a memorandum

setting forth respondent’s position that petitioner should not be

allowed to amend her petition, even though respondent argued that

a subsequent claim for relief under section 6015(f) would be

barred by res judicata and application of section 6015(g)(2).

Though invited to do so, petitioner did not make a motion to

amend her petition.    As a result, the only issues in this case

are petitioner’s eligibility for relief under section 6015(b) and

(c).

       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 the taxable year of the joint return.     Sec.

6013(d)(3).    A spouse may, however, seek relief from joint and

several liability by following procedures established in section

6015.
                                 - 6 -

     Under section 6015(b), a taxpayer may be relieved from

liability on a joint return if, among other things:

          SEC. 6015(b). Procedures For Relief From
     Liability Applicable to All Joint Filers.--

               (1) In general.--Under procedures prescribed
          by the Secretary, if-–

                 *      *   *     *      *   *   *

                    (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;

     Section 6015(c) limits the liability of a taxpayer, such as

petitioner, who is no longer married and who makes the

appropriate election.   Section 6015(c) provides:

          SEC. 6015(c). Procedures To Limit Liability for
     Taxpayers No Longer Married or Taxpayers Legally
     Separated or Not Living Together.--

                 *      *   *     *      *   *   *

               (3) Election.--

                 *      *   *     *      *   *   *

                    (C) Election not valid with respect to
               certain deficiencies.--If the Secretary
               demonstrates that an individual making an
               election under this subsection had actual
               knowledge, at the time such individual signed
               the return, of any item giving rise to a
               deficiency (or portion thereof) which is not
               allocable to such individual under subsection
               (d), such election shall not apply to such
               deficiency (or portion). This subparagraph
               shall not apply where the individual with
               actual knowledge establishes that such
               individual signed the return under duress.
                               - 7 -

     In view of petitioner’s admitted execution of the

Certificate of Marital Status, which expressly referred to

Nichols’s Lottery Prize Assignment Agreement, we cannot conclude

that she did not know or have reason to know that there was an

understatement on a tax return that did not report the proceeds

of the sale of the lottery rights.

     Moreover, respondent has established that petitioner had

actual knowledge of the item giving rise to the deficiency at the

time that she signed the return.   Although petitioner disavows

involvement with the transaction and with the return preparation,

she has not established that she signed the return under duress.

Petitioner testified:

          It was not uncommon for me to take paper from my
     ex-husband’s business during our marriage. I would
     take them next to Cheryl Coleman, who was a realtor,
     and she would notarize statements. I never read the
     statements I was filing. I would make deposits at his
     bank. This was the only involvement I had with his
     business.

Petitioner’s argument that she did not read what she was signing

is unpersuasive and unavailing.    She was articulate in presenting

her case at the time of trial, and she was obviously able to

function in a normal manner despite her claimed medical

disabilities.   She cannot be excused from the implications of the

Certificate of Marital Status, and she has not satisfied the

requirements for relief from joint and several liability.
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             Decision will be entered

        for respondent.
