                        T.C. Memo. 2004-79



                      UNITED STATES TAX COURT



               RENEE TRUPIN D’AUNAY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 10066-00.            Filed March 22, 2004.



     Renee Trupin D’Aunay, pro se.

     Scott E. Fink and Donald A. Glasel, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     COHEN, Judge:   This proceeding was commenced under section

6015 for review of respondent’s determination that petitioner is

not entitled to relief from joint and several liability with

respect to joint returns filed with Barry Trupin (Trupin) for

1982 through 1986.   Unless otherwise indicated, all section
                                - 2 -

references are to the Internal Revenue Code, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

                           FINDINGS OF FACT

Petitioner’s Background and Lifestyle

     Petitioner attended the University of Oklahoma, where she

received an undergraduate degree in interior design and painting.

In 1971, she received a masters in art history.      Petitioner

married Trupin on September 23, 1982, after executing an

antenuptial agreement.   Petitioner and Trupin executed a

separation agreement on April 23, 1993.       The separation agreement

provided in part:

          The parties acknowledge that there are certain tax
     deficiency claims pending against them with respect to
     joint Federal income tax returns filed by them.
     Notwithstanding anything to the contrary contained
     herein, the Husband hereby assumes responsibility for
     any and all potential liabilities, including, but not
     limited to, penalties, interest and expenses arising
     out of such claims and he hereby agrees to hold the
     Wife harmless from and to indemnify the Wife against
     the same.

The separation agreement contained a mutual release of any debts

or obligations between Trupin and petitioner other than those set

forth in the separation agreement.      Petitioner married Brice

D’Aunay (D’Aunay) in France on June 5, 1993.

     Trupin was the chairman of the board of Rothschild Reserve

International (RRI) and controlled various subsidiary and

affiliated corporations.    Petitioner was an employee and/or

senior vice president of RRI from 1979 to 1984.      RRI structured
                                 - 3 -

and sold limited partnerships for tax advantages.    As senior vice

president of RRI, petitioner worked with investors and their

banks to obtain letters of credit, which were then discounted.

     After her marriage to Trupin, petitioner spent substantial

amounts of time furnishing and arranging for repair and painting

of various residences acquired by Trupin or corporations owned or

controlled by him.   Petitioner knew that the decorating

expenditures were paid by Trupin’s corporations.    Although

petitioner was not regularly employed in the office of RRI after

1983, she received salaries from Trupin’s corporations as

follows:

           RRI                    1983        $102,392.00
                                  1984          52,532.60

           Prudential American    1984          50,000.00
             Realty Corp.

     No income tax was withheld from petitioner’s income from RRI

or Prudential American Realty Corp. (Prudential).

     During 1982 through 1986, petitioner and Trupin enjoyed a

lavish lifestyle, accumulating, through the use of the

corporations owned and controlled by Trupin, elaborate houses,

furnishings, automobiles, art, and jewelry.    They made extensive

personal use of a 105-foot yacht, known as Tara T, that was owned

and controlled by a corporation.    The yacht had a crew of five

during 1982 through 1986.   Corporate credit cards were used to

pay personal expenses of petitioner and Trupin.
                               - 4 -

     Petitioner and Trupin filed joint Federal income tax returns

for 1982 through 1986.   They reported taxable income of $36,648,

$56,181, $72,755, none, and none, on those returns, respectively.

On the tax returns, a “W” was placed next to items to signify

that the item was attributable to petitioner.   On the 1982 and

1983 returns, a “W” was placed next to losses of $152,073 and

$223,155, respectively, from American National Associates 367

(ANA 367).

     Trupin’s tax shelter business began a rapid decline as a

result of changes in the tax law in 1986.   In a letter dated

July 15, 1987, in relation to a requested extension of time to

file RRI’s tax return for the year ended October 31, 1986, RRI’s

accountants represented:

          The extension requested is for the fiscal year
     ended October 31, 1986. Through 1985 the taxpayer’s
     organization employed approximately 50 people in the
     headquarter’s office which included 12-15 accounting
     and financial personnel. After 1985, the Rothschild
     organization has had no sales whatsoever of its
     products i.e., commercial real estate and leased
     computer equipment, from which it had previously
     derived its income. In fact, it is estimated that
     losses of $2,000,000 to $5,000,000 may have been
     realized, virtually eliminating the corporation’s
     equity. Because of the sudden decimation of the
     taxpayer’s business, only three part time (out of 50
     full time) personnel remain to handle the
     administration of the corporation’s business.

          The corporation, in the last six months, had to
     abandon its offices at 888 Seventh Avenue, and has
     moved twice. In the chaos of multiple moves with
     minimum personnel, hundreds of transfiles were loaded
     and placed in storage. The task of locating and
     retrieving needed information in order to properly file
                                - 5 -

       a return is an exceedingly laborious one. In 1986 the
       corporation was terminating its involvement in
       approximately 400 leasing transactions which must be
       properly analyzed.

Petitioner was aware that Trupin had cashflow problems in 1987.

Petitioner was also aware that 1986 tax law changes had adversely

affected the viability of Trupin’s tax shelter businesses.     She

signed a letter dated October 31, 1984, resigning as an officer

of The Rothschild Collection, Ltd.; yet, on August 6, 1987,

petitioner executed, as president, a Certificate of Amendment of

the Certificate of Incorporation of The Rothschild Collection,

Ltd.

       Notwithstanding financial difficulties resulting from the

decline of Trupin’s tax shelter businesses, petitioner continued

much of the lifestyle that she had previously enjoyed, driving

one or more Rolls Royce automobiles; acquiring residential

properties and a boat; and dealing in antiques, art, and jewelry

as set forth below.    Beginning in 1986, petitioner and Trupin

maintained separate residences.    They continued to cooperate,

however, with respect to the disposition of assets and,

ultimately, in transferring assets outside of the United States,

as set forth below.    Petitioner did not file a Federal income tax

return for any year from 1987 through 2001.

       In 1986, Trupin purchased a home in Tortola, British Virgin

Islands (Tortola), for petitioner for $150,000.    In 1988, Trupin

and petitioner began incorporating companies outside the United
                               - 6 -

States.   On April 21, 1988, petitioner created Blue Lotus

Holdings Ltd. (Blue Lotus) in the British Virgin Islands.     Trupin

paid $1,500 for the formation of Blue Lotus.   There was no

business purpose for the formation of Blue Lotus.   Blue Lotus was

subsequently used as an alter ego of petitioner for, among other

things, holding title to her residence and for selling artwork

and other items at Sotheby’s in New York City, New York.

     In December 1988, petitioner purchased a Regal 360 Commodore

boat, named Black Lotus, for $140,000.   Trupin paid $35,000 as a

downpayment on the boat.   Petitioner financed the balance of the

boat, providing false financial information to the lender.    The

boat was stored in the Virgin Islands.   As of December 1988,

petitioner owned a Rolls Royce Silver Spur and a 1988 Jeep

Wrangler.

     Between September 5, 1989, and October 24, 1994, petitioner

received at least $958,538 from Trupin as proceeds from the

disposition of residences and other assets owned by Trupin or

corporations controlled by Trupin.

IRS Assessments

     The first letter of proposed deficiency, which allowed

Trupin and petitioner an opportunity for administrative review in

the Internal Revenue Service (IRS) Office of Appeals, for 1982

and 1983 was mailed on September 5, 1990.   The first letter of

proposed deficiency, which allowed Trupin and petitioner an
                               - 7 -

opportunity for administrative review in the IRS Office of

Appeals, for 1984 was mailed on March 6, 1991.

     On June 19, 1992, and October 8, 1992, respondent sent

notices of deficiency to petitioner and Trupin for 1982 through

1986.   For 1982 through 1986, respondent determined deficiencies

of $503,139, $443,704, $1,265,273, $2,939,540, and $215,003,

respectively, and additions to tax pursuant to section 6661 of

$125,785, $110,926, $316,318, $734,885, and $53,751,

respectively.   In the notices of deficiency for 1982 through

1986, respondent determined that petitioner and Trupin received

additional income from their unreimbursed personal use of the

corporate yacht of $706,077, $603,012, $941,859, $663,312, and

$765,000, respectively.

     In the notice of deficiency for 1982 and 1983, respondent

disallowed the partnership losses from petitioner’s investment in

ANA 367 of $152,073 and $223,155, respectively, and investment

interest expenses in 1983 for ANA 367 of $107,260.

     On August 3, 1992, a petition was filed in this Court at

docket No. 17389-92 on behalf of Trupin and petitioner contesting

their Federal income tax liabilities for 1982 and 1983.   On

December 3, 1992, another petition on behalf of petitioner and

Trupin was filed in this Court at docket No. 26819-92 contesting

liabilities determined for 1984, 1985, and 1986.   On June 1,

1993, a stipulation of settled issues was filed with respect to
                                - 8 -

certain adjustments at issue at docket No. 26819-92.    On

December 28, 1993, an Order of Dismissal and Decision was entered

in each case.   In December 1995, petitioner, through counsel,

filed motions for leave to file motions to vacate decisions,

contending that the petitions were not filed with her authority

or consent.   On November 19, 1996, petitioner’s oral motions to

withdraw her motions for leave to file motions to vacate

decisions were granted.    Thus, without regard to her claims under

section 6015, the liability of petitioner and Trupin for the

deficiencies for the years in issue was established by decisions

now final.

     As a result of the decisions entered against petitioner and

Trupin in 1993, deficiencies, penalties, and additions to tax

were assessed against petitioner and Trupin.    (As of June 9,

2003, the balances owing were $764,662.23 for 1982; $2,125,829.90

for 1983; $3,812,646.14 for 1984; $7,923,698.68 for 1985; and

$527,321.23 for 1986.)

Petitioner’s Conduct

     In April 1993, 75 pieces of crated material were held in

storage in Pennsylvania in the name of petitioner.    The crated

material had been removed from mansions previously owned by

Trupin’s entities and used or intended as residences of

petitioner and Trupin.    In April 1993, at Trupin’s request,
                                - 9 -

petitioner caused approximately 65 crates to be shipped to Trupin

in Vancouver, Canada.

     From October 1986 through June 1994, petitioner and/or

Trupin lent a concert grand piano and two stools worth $1 million

to the Museum of Fine Arts in Boston.   On June 22, 1994,

petitioner requested that the piano be removed from the Museum of

Fine Arts and shipped to Trupin in Washington State.

     On December 15, 1986, petitioner purchased property in

Claverack, New York (Claverack property), without a mortgage.     On

June 12, 1992, title to the Claverack property was transferred to

Blue Lotus.   Various items of furniture, collectibles, and other

valuable property were stored in crates and containers in or on

the Claverack property.   On June 15, 1995, the IRS seized the

Claverack property and its contents as part of its collection

efforts with respect to the amounts owed by petitioner and Trupin

for 1982 through 1986.    On June 27, 1995, the IRS changed all of

the locks on the Claverack property and placed on the property

notification that the seizure had occurred.   Thereafter,

petitioner illegally entered the Claverack property and removed

paintings and other items.   She was indicted as a result.   In

February 1997, petitioner entered into a plea agreement in the

U.S. District Court for the Northern District of New York, in

which she pleaded guilty to a violation of section 7212(b), to
                                - 10 -

wit, the forcible rescue of seized property.      In the plea

agreement, petitioner agreed to the following:

          6. The defendant is pleading guilty because she
     is in fact guilty of the charge contained in Count One
     of Indictment 96-CR-361. In pleading guilty to this
     count, the defendant acknowledges that, if she elected
     to go to trial, the United States would prove, beyond a
     reasonable doubt, all of the facts set forth in
     paragraph 7, and further acknowledges that those facts
     would support her conviction on the charge contained in
     Count One of Indictment 96-CR-361. The defendant also
     specifically admits the following facts as true, and
     declares these facts to be true under the penalties of
     perjury to Title 18, United States Code, Section 1746:

          7.   Statement of Relevant Facts:

               On or about June 27, 1995, in the Northern
          District of New York, the defendant Renee V.
          Trupin also known as Renee Daunay and Renee
          Virginia Cornelius did unlawfully, knowingly and
          forcibly rescue and cause to be rescue property
          that had been seized by the Internal Revenue
          Service. Specifically, the defendant entered
          buildings and real property located at One Block
          Lane, Claverack, New York, knowing that property
          had been seized by the United States.

               At all times, the defendant acted knowingly,
          intentionally, willfully and not by mistake or
          other innocent reason.

                  *    *    *     *      *    *    *

          17. The defendant hereby agrees to pay
     restitution to all persons and entities who suffered a
     monetary loss as a result of the defendant’s
     misconduct, whether or not embraced in the counts of
     the defendant’s conviction, and whether or not the
     defendant derived any direct financial benefit
     therefrom. The defendant specifically agrees to
     surrender, assign, and transfer those three paintings
     removed from the premises at One Block Lane, Claverack,
     New York to the Internal Revenue Service and
     acknowledges that the sentencing Court may include an
     order of restitution in an amount greater than that set
                              - 11 -

     forth herein depending upon the proof available at the
     time of sentencing.

     Also in 1995, the IRS levied on proceeds from the sale of

paintings that had been consigned to Sotheby’s.   In March 1995,

Blue Lotus instituted a wrongful levy action in the U.S. District

Court for the Southern District of New York to recover the

proceeds seized by the IRS from the sale of the paintings

consigned to Sotheby’s.   In February 1996, Blue Lotus instituted

a wrongful levy action in the U.S. District Court for the

Northern District of New York, alleging that Blue Lotus was the

rightful owner of the Claverack property.    During the course of

the district court litigation, D’Aunay represented that he and

his brother were the owners of Blue Lotus.   D’Aunay also gave

misleading testimony about his relationship to petitioner.    After

the U.S. District Court for the Southern District of New York

expressed doubts as to the credibility of D’Aunay, Blue Lotus

agreed to dismissal of both wrongful levy suits with prejudice.

In relation to dismissal of the litigation in the U.S. District

Court for the Northern District of New York, the parties

stipulated and the court ordered:

          This dismissal shall operate as an adjudication on
     the merits that the plaintiff Blue Lotus Holdings
     Limited, Inc. is the alter ego and nominee of Renee
     Trupin, a/k/a Renee Virginia Cornelius, a/k/a Renee
     Daunay.

     On February 12, 1999, petitioner filed a Form 8857, Request

for Innocent Spouse Relief.   The determination that is the basis
                              - 12 -

of this case was set forth in a Notice of Determination

Concerning Relief From Joint and Several Liability Under Section

6015 dated June 29, 2000.   The stated reason for the

determination denying relief was as follows:   “You had actual

knowledge or should have known of the tax deficiency items.    You

participated in a fraudulent scheme to transfer assets between

spouses.   It would not be inequitable to hold you liable

considering all facts and circumstances.”   Material attached to

the determination explained petitioner’s employment by RRI and

Prudential, which led to the conclusion that she had knowledge of

the tax liabilities; her execution of a separation agreement

signed April 15, 1993, acknowledging claims of tax deficiencies

then pending; the liquidation of assets by petitioner and Trupin

through Sotheby’s and through Blue Lotus, as petitioner’s

nominee; false testimony of petitioner’s then husband, D’Aunay;

transfers of assets to Canada and otherwise as a means of placing

the proceeds of sale beyond the reach of collection by the IRS;

conviction of petitioner of “forcible rescue of seized property”;

and other conclusions regarding petitioner’s lack of credibility.

     During the course of discovery in this case, petitioner

refused to answer questions concerning assets that were

transferred to her and/or that petitioner owned since 1980 and

her annual net worth for each year since 1980.   She refused to

disclose any residence other than her mother’s address in Tulsa,
                              - 13 -

Oklahoma, that she used for mailings in this case.    Petitioner

did so despite the Court’s admonishment that her failure to

respond more fully to respondent’s discovery requests could

result in sanctions against her.   After various hearings and

status reports, on December 2, 2002, respondent’s motion to

impose sanctions for failure to comply with Court-ordered

discovery was granted:

     in that petitioner is prohibited from presenting
     documentary or testimonial evidence in this proceeding,
     which is the subject matter of respondent’s discovery
     requests, that has not otherwise been provided to
     respondent as of the date of this Order, * * * relating
     to the assets that petitioner has owned since 1980 and
     her annual net worth for each year since 1980.

     At the time of trial of this case in June 2003, petitioner

refused to answer questions concerning her residence at the time

that she filed the petition, her current residence, and property

owned by petitioner or her husband, D’Aunay.    As a result, and

after several warnings by the Court, petitioner did not present

any reliable evidence of her current financial situation insofar

as that situation is relevant to considerations of equity, as

discussed below.

                              OPINION

     Generally, married taxpayers may elect to file a joint

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

election, each spouse generally is jointly and severally liable

for the entire tax due for that taxable year.    Sec. 6013(d)(3).
                                - 14 -

A spouse (requesting spouse) may, however, seek relief from joint

and several liability by following procedures established in

section 6015.   Sec. 6015(a).   A requesting spouse may request

relief from liability under section 6015(b) or, if eligible, may

allocate liability according to provisions under section 6015(c).

Sec. 6015(a).   If relief is not available under section 6015(b)

or (c), an individual may seek equitable relief under section

6015(f).

Section 6015(b) Analysis

     Section 6015(b) provides, in pertinent part, as follows:

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

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

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

                     (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; * * *

                  *    *    *     *      *   *   *
                              - 15 -

          then the other individual shall be relieved of
          liability for tax (including interest, penalties,
          and other amounts) for such taxable year to the
          extent such liability is attributable to such
          understatement.

     The requirements of section 6015(b)(1) are stated in the

conjunctive.   Accordingly, a failure to meet any one of them

prevents a requesting spouse from qualifying for the relief

offered therein.   Alt v. Commissioner, 119 T.C. 306, 313 (2002).

     Respondent argues, and we agree, that petitioner has failed

to satisfy the requirements of subparagraphs (C) and (D) of

section 6015(b)(1).   Petitioner was well aware of the business

activities of Trupin and was a participant in the expenditure of

funds far exceeding any amounts ever reported on a joint tax

return with Trupin.   Petitioner also knew that she had

significant earnings during the years in issue and that no income

tax was withheld from her earnings.    Petitioner’s response is

that, although she does not recall specifically what occurred,

she may have been shown only the signature page of the tax

returns, and told to sign, and the returns were too complicated

for her to understand.

     Taxpayers seeking to prove that they had no knowledge or

reason to know of an item giving rise to an understatement of tax

must demonstrate, at a minimum, that they have fulfilled a “duty

of inquiry” with respect to determining whether their correct tax

liability was reported on the return for the year for which they
                              - 16 -

seek relief.   Stevens v. Commissioner, 872 F.2d 1499, 1505 (11th

Cir. 1989), affg, T.C. Memo. 1988-63; Butler v. Commissioner, 114

T.C. 276, 284 (2000).   When taxpayers fail to fulfill their duty

of inquiry, they are ordinarily charged with constructive

knowledge of any understatements on their returns.    See Hayman v.

Commissioner, 992 F.2d 1256, 1262 (2d Cir. 1993), affg. T.C.

Memo. 1992-228; Crowley v. Commissioner, T.C. Memo. 1995-551,

affd. without published opinion sub nom. Cockrell v.

Commissioner, 116 F.3d 1472 (2d Cir. 1997); Cohen v.

Commissioner, T.C. Memo. 1987-537 (the provisions providing

relief from joint and several liability are “designed to protect

the innocent, not the intentionally ignorant”).    Petitioner has

not satisfied her burden here.

     Moreover, on the entire record of petitioner’s enjoyment of

the fruits of the consistent pattern of underpayment of taxes and

of her subsequent efforts to defeat collection efforts of the

IRS, we cannot conclude that it would be inequitable to hold her

liable for the deficiencies in tax in issue in this case.   She is

not entitled to relief under section 6015(b).

Section 6015(c) Analysis

     Section 6015(c) allows a taxpayer, who is eligible and so

elects, to limit his or her liability to the portion of a

deficiency that is properly allocable to the taxpayer as provided

in section 6015(d).   Sec. 6015(c)(1).   Under section
                               - 17 -

6015(d)(3)(A), generally, any items that give rise to a

deficiency on a joint return shall be allocated to the individual

filing the return in the same manner as they would have been

allocated if the individual had filed a separate return for the

taxable year.

       Under section 6015(c)(4)(A), the portion of the deficiency

for which the electing spouse is liable is increased by the value

of any disqualified asset transferred to the taxpayer.     The term

“disqualified asset” means any property or right to property

transferred to the taxpayer making the election under section

6015(c) by the other individual filing the joint return if the

principal purpose of the transfer was the avoidance of tax or

payment of tax.    Sec. 6015(c)(4)(B)(i).

       Under section 6015(c)(4)(B)(ii), there is a presumption that

any asset transfer that occurs after the date that is 1 year

before the first letter of proposed deficiency is sent by the IRS

has as its principal purpose the avoidance of tax or payment of

tax.

       In respondent’s posttrial brief, respondent concedes that

the entire deficiencies for 1984 through 1986 are allocable to

Trupin under section 6015(d)(3)(A).     In addition, respondent

concedes that $881,103 and $985,314 are allocable to Trupin in

1982 and 1983, respectively.    Respondent contends, however, and

we agree, that the disallowed losses from petitioner’s investment
                                - 18 -

in ANA 367, as reported on the joint returns for 1982 and 1983 as

petitioner’s item, are allocable to petitioner.

     As to 1984 and 1985, however, respondent argues that the

amounts allocable to petitioner should be increased to reflect

the tax benefit that petitioner received from items allocated to

Trupin to the extent that those items gave rise to a tax benefit

for petitioner, i.e., deductions reducing petitioner’s earned

income.    Sec. 6015(d)(3)(B); Hopkins v. Commissioner, 121 T.C.

73, 83-85 (2003).     Respondent also traces various assets that

were transferred to petitioner by Trupin within the period for

which transfers are presumed to have as their principal purpose

the avoidance of tax or payment of tax and other transfers that

respondent has shown to have as a principal purpose the avoidance

of tax or payment of tax.

     Petitioner’s only response to the detailed analysis in

respondent’s brief of transfers reflected in the stipulation is

that Trupin was repaying loans to her.     Petitioner’s explanation

is unpersuasive.     She has stipulated that her net worth as of

December 31, 1981, did not exceed $250,000.     Because she refused

to provide information concerning her assets in response to

Court-ordered discovery, she was prohibited from presenting

documentary or testimonial evidence relating to the assets that

she owned since 1980 or her annual net worth for each year since

1980.     All pre-existing debts owed by Trupin to petitioner were
                                - 19 -

released in the separation agreement executed April 23, 1993.     In

any event, under the circumstances, there was no reasonable

explanation of the source of funds that petitioner would have

used to lend money to Trupin.    We cannot conclude that the

amounts that she received from Trupin were repayments of bona

fide loans.   The presumption of section 6015(c)(4)(B)(ii), as

well as the entire record in this case, leads us to conclude that

those transfers made between September 5, 1989, and October 24,

1994, totaling $958,538 were for tax-avoidance purposes and that

the portions of the deficiency for which petitioner is liable

should be increased by the amount of those transfers.

     Respondent also argues that other transfers occurring

between January 1, 1986, and September 5, 1989, were made for the

avoidance of tax or payment of tax.      To the extent that payments

were made with respect to acquisitions of property outside of the

United States, we agree with respondent.     Thus, the purchase of

real property in Tortola, the formation of Blue Lotus, and the

acquisition of Black Lotus, for which Trupin provided a total of

$186,500, appear by the preponderance of the evidence to create

disqualified assets.

     With respect to other transfers, however, the purpose is

ambiguous.    For example, respondent asserts that transfers to

petitioner and her mother totaling $136,700 between April 21,

1988, and August 7, 1989, the payment of $20,000 toward the
                              - 20 -

purchase of a Rolls Royce in 1987, and $11,706 in proceeds from

sales of collectibles through Sotheby’s should also be treated as

transfers for the purpose of avoiding tax.    We are unwilling,

however, to carry the inference to all transfers to petitioner by

Trupin during the period of their marriage.    We are not persuaded

that the items listed in this paragraph increase petitioner’s

liability under section 6015(c)(4)(A).

     Respondent also argues that petitioner is disqualified from

relief under section 6015(c)(3)(C) to the extent that she had

actual knowledge of the facts concerning disallowed deductions

for 1982 and omitted income for all of the years in issue.

Respondent acknowledges the burden to prove actual knowledge by a

preponderance of the evidence on this issue.    Culver v.

Commissioner, 116 T.C. 189, 196 (2001); see Cheshire v.

Commissioner, 115 T.C. 183, 196-197 (2000), affd. 282 F.3d 326

(5th Cir. 2002).

     Petitioner was actively involved in RRI’s tax shelter

business as an employee and as an officer and was well aware of

the investments giving rise to the disallowed deductions for

1982.   See Crowley v. Commissioner, T.C. Memo. 1995-551.    With

respect to the unreported income from constructive dividends

during the later years, petitioner was well aware that she and

Trupin used the yacht for personal purposes, that the yacht was

owned by a corporation owned or controlled by Trupin, and that
                                - 21 -

the corporation was not reimbursed for personal use of the yacht.

To the extent of these items, therefore, respondent has proven

that petitioner had actual knowledge disqualifying her from

relief under section 6015(c).

     Aside from her overall denials and disclaimers, petitioner

has given us no reason to reject respondent’s allocations of

amounts for which petitioner is not entitled to relief under

section 6015(c).   Except as set forth above with respect to

transfers before September 5, 1989, she is not entitled to relief

beyond the concessions made by respondent in the posttrial brief.

Section 6015(f) Analysis

     Section 6015(f) provides an additional opportunity for

relief to those taxpayers who do not otherwise meet the

requirements of subsection (b) or (c) of section 6015.

Specifically, section 6015(f) gives respondent the discretion to

grant equitable relief from joint and several liability if

“taking into account all the facts and circumstances, it is

inequitable to hold the individual liable for any unpaid tax”.

     We have jurisdiction to review respondent’s denial of

petitioner’s request for equitable relief under section 6015(f).

Jonson v. Commissioner, 118 T.C. 106, 125 (2002), affd. 353 F.3d

1181 (10th Cir. 2003); Butler v. Commissioner, 114 T.C. at 292.

We review such denial of relief to decide whether respondent

abused his discretion by acting arbitrarily, capriciously, or

without sound basis in fact.    Jonson v. Commissioner, supra at
                              - 22 -

125; Butler v. Commissioner, supra at 292.    The review of

respondent’s denial of petitioner’s request for relief under

section 6015(f) is a question of fact.   Cheshire v. Commissioner,

supra at 198.   Petitioner bears the burden of proving that

respondent abused his discretion.   Washington v. Commissioner,

120 T.C. 137, 146 (2003); see also Alt v. Commissioner, 119 T.C.

at 311 (“Except as otherwise provided in section 6015, petitioner

bears the burden of proof.”); Jonson v. Commissioner, supra at

113 (same).

     As directed by section 6015(f), respondent has prescribed

procedures to use in determining whether a relief-seeking spouse

qualifies for relief under section 6015(f).   At the time that

petitioner filed her petition in this case, those procedures were

found in Rev. Proc. 2000-15, 2000-1 C.B. 447.   Rev. Proc. 2000-

15, sec. 4.01, 2000-1 C.B. at 448, lists seven threshold

conditions that must be satisfied before respondent will consider

a request for relief under section 6015(f).   The threshold

conditions include the following:

          (5) No assets were transferred between the spouses
     filing the joint return as part of a fraudulent scheme
     by such spouses;

          (6) There were no disqualified assets transferred
     to the requesting spouse by the nonrequesting spouse.
     If there were disqualified assets transferred to the
     requesting spouse by the nonrequesting spouse, relief
     will be available only to the extent that the liability
     exceeds the value of such disqualified assets. For
     this purpose, the term “disqualified asset” has the
     meaning given such term by section 6015(c)(4)(B); * *
     *
                              - 23 -

Id.   A requesting spouse must satisfy all seven threshold

conditions before respondent will consider his or her request for

equitable relief under section 6015(f).     Id.   We have upheld the

use of these procedures in reviewing a negative determination.

See Washington v. Commissioner, supra at 147; Jonson v.

Commissioner, supra at 125.

      As indicated above with reference to section 6015(b),

considering the facts and circumstances in this case, we cannot

conclude that it would be inequitable to hold petitioner liable

for the deficiencies resulting from her filing joint returns with

Trupin for the years in issue.   A fortiori, we cannot conclude

that denial of relief was an abuse of discretion, i.e.,

arbitrary, capricious, or without sound basis in fact.     See Ewing

v. Commissioner, 122 T.C. 32, 39 (2004).

      Petitioner’s predicament has resulted from the activities in

which she engaged with her former husband, Trupin, exacerbated by

her activities with her husband, D’Aunay.

      (It may occur to the reader that petitioner could or should

make an offer in compromise under section 7122.     Her refusal to

provide financial information to the IRS, however, also precludes

that avenue of relief.)

      To take account of respondent’s concessions of the extent to

which petitioner may be relieved from liability under section

6015(c),
- 24 -

          Decision will be entered

     under Rule 155.
