                        T.C. Memo. 2009-26



                      UNITED STATES TAX COURT



                  DIANE S. HARRIS, Petitioner,
              AND CHARLES M. HARRIS, Intervenor v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 26684-06.               Filed February 5, 2009.



     Diane S. Harris, pro se.

     Charles M. Harris, pro se.

     Jeanne Gramling, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     WELLS, Judge:   This case arises from a request for relief

pursuant to section 6015(f)1 with respect to petitioner’s joint


     1
      All section references are to the Internal Revenue Code in
effect at all relevant times. All Rule references are to the Tax
                                                   (continued...)
                                - 2 -

income tax liabilities for 2000 and 2003.     Respondent determined

that petitioner was not entitled to relief from joint and several

liability under section 6015(f).    Petitioner timely filed a

petition with the Court.    The issue for decision is whether

petitioner is entitled to equitable relief under section 6015(f).

                           FINDINGS OF FACT

     Some of the facts and certain exhibits have been stipulated.

The stipulation of facts received into evidence is incorporated

herein by reference, and those facts are so found.    At the time

the petition was filed, petitioner resided in North Carolina.

Petitioner’s former husband, Charles M. Harris (Mr. Harris),

intervened in this action pursuant to Rule 325(b).    At the time

Mr. Harris filed his notice of intervention, he resided in North

Carolina.

     Petitioner and Mr. Harris, both college graduates, were

married in June 1981 and lived together until their separation

during February 2005.   Their divorce was finalized in June 2006.

They have five children.    Mr. Harris has custody of the minor

children.

     During 2000 and 2003 petitioner worked for Scott Medical

Group as an office manager, and Mr. Harris worked from




     1
      (...continued)
Court Rules of Practice and Procedure.
                               - 3 -

home as a self-employed insurance salesman.   Petitioner was not

involved in any way with Mr. Harris’s insurance business.

     Petitioner and Mr. Harris filed for bankruptcy twice, once

during 1985 and once during 2004.   During 2002 they refinanced

their home to pay existing Federal income tax liabilities.

During February 2005 their home was sold in a foreclosure sale.

     On October 17, 2001, petitioner and Mr. Harris signed and

filed a joint Federal income tax return for tax year 2000 (2000

joint return),2 reflecting an unpaid income tax liability of

$7,172.   On August 18, 2004, petitioner and Mr. Harris filed a

joint Federal income tax return for tax year 2003 (2003 joint

return),3 reflecting an unpaid income tax liability of $5,518.

Petitioner and Mr. Harris did not remit payment with their 2000

and 2003 joint returns.



     2
      The 2000 joint return was prepared by Thomas, Judy &
Tucker, a C.P.A. firm.
     3
      The 2003 joint return was prepared by Mr. Harris, using
computer software. Petitioner did not sign the 2003 joint
return, which necessarily implicates issues regarding whether she
filed a joint return and whether she is entitled to relief under
sec. 6015(f). Raymond v. Commissioner, 119 T.C. 191 (2002); see
sec. 1.6015-4(a), Income Tax Regs. (the filing of a joint return
is a prerequisite to sec. 6015 relief).
     The Court finds that petitioner intended to and did file a
joint return with Mr. Harris. She has not renounced the 2003
joint return and she provided her Forms W-2, Wage and Tax
Statement, and canceled checks to Mr. Harris. See Ziegler v.
Commissioner, T.C. Memo. 2003-282 (the Court assumed that the
taxpayer conceded the filing of a joint return or ratified the
joint return that the nonrequesting spouse filed where she
continued to assert her entitlement to sec. 6015(f) relief).
                               - 4 -

     On March 8, 2006, petitioner timely filed Form 8857, Request

for Innocent Spouse Relief (request for relief).     On April 19,

2006, petitioner submitted a Form 12510, Questionnaire for

Requesting Spouse (questionnaire).     Petitioner stated on her

questionnaire that she always filed joint returns while married

to Mr. Harris, and that she provided Mr. Harris with her Forms

W-2 and canceled checks from her individual checking account for

the years in issue.   Petitioner also reported on her

questionnaire monthly income of $1,650 and monthly expenses of

$2,095.

     On May 12, 2006, respondent issued his preliminary

determinations on petitioner’s request for relief.     Respondent

denied the request for relief on the grounds that petitioner knew

or had reason to know that the tax would not be paid at the time

the 2000 and 2003 joint returns were filed.     Respondent also

determined that there was no documentation of marital abuse, no

claim of poor mental or physical health, and no additional legal

obligation for Mr. Harris to pay the tax.4




     4
      The divorce decree did not impose any obligation on
petitioner or Mr. Harris to pay any outstanding Federal income or
other tax liabilities. Nor is there any other document relating
to that divorce, such as a property settlement, that imposed any
legal obligation on petitioner or Mr. Harris to pay any such
liabilities.
                              - 5 -

     Petitioner disagreed with respondent’s preliminary

determination, and she requested that her case be forwarded to

the Office of Appeals for reconsideration.   On July 31, 2006,

Appeals Officer Jean S. Palmer (Appeals Officer Palmer) sent the

following preliminary determination to petitioner:

     As part of my preliminary analysis of your case,
     I’ve listed factors I believe have a bearing on
     whether or not you are entitled to relief. These
     factors and my evaluation of each are listed below.

     1. Is the tax you are requesting relief from
     attributable to your former spouse?
     Part of the income is attributable to Mr. Harris.
     To the extent the income is attributable to him,
     this factor is in your favor.

     2. Did you know or have reason to know that the
     tax would not be paid at the time you signed the
     returns? Did you reasonably believe that the tax
     would be paid by your former spouse? . . . .
     In reviewing your history, I find you and Mr.
     Harris did not full[sic] pay your 1995, 1996, 1997
     or 1998 tax returns. Based on this, I do not
     believe you reasonably believed the taxes would
     be paid. . . This factor is not in your favor.

     3. Will you suffer a financial/economic hardship
     if relief is not granted?
     Based on the information in the administrative
     file and third party reporting documents, I do
     not believe you would suffer an economic hardship.
     The income of all parties in your home must be
     included. Additionally your expenses are out of
     line with allowable expenses. This factor is
     not in your favor.

     4. Have you made a good faith effort to comply
     with federal income tax laws in the subsequent
     years?
     I find you have filed timely in subsequent years.
     This factor is in your favor.
                                   - 6 -

     Based on the information provided to date, I am
     unable to recommend relief of the joint tax
     liabilities. However, before I make a final
     determination, I’d like to consider any additional
     information you may want considered.

     If you have any additional information you’d like
     me to consider, please mail it to me at the
     address shown above.

     *            *           *            *      *

     If I don’t hear from you by 14 Aug 2006, I will
     issue a final determination letter on the basis
     of the information presented in the administrative
     file.

     Petitioner provided no further information to substantiate

her expenses relating to her shared living arrangement.      On

September 21, 2006, Appeals Officer Palmer issued to petitioner a

final determination letter sustaining her preliminary

determinations.       On December 26, 2006, petitioner timely filed a

petition with the Court.5

     At the time of trial, petitioner had two jobs.      She worked

full time for Digestive Health Care, earning $11 an hour, and

part time for Kmart, earning $8 an hour.       Her monthly net income

totaled $1,700.

     As of June 25, 2007, the unpaid balances due for tax years

2000 and 2003 were $12,406.99 and $7,887.28, respectively.




     5
      By order of the Court, petitioner filed an amended petition
on Feb. 12, 2007. Petitioner had not paid the required filing
fee, and the document she submitted did not comply with the Rules
of the Court as to the form and content of a proper petition.
                                 - 7 -

                                OPINION

I.   Joint and Several Liability and Section 6015 Relief

     Section 6013(d)(3) provides that if a joint return is filed,

the tax is computed on the taxpayers’ aggregate income, and

liability for the resulting tax is joint and several.      See also

sec. 1.6013-4(b), Income Tax Regs.       However, pursuant to section

6015, a taxpayer may be relieved from joint and several liability

in certain circumstances.

     Petitioner may be relieved from joint and several liability

pursuant to section 6015(f) if, taking into account all the facts

and circumstances, it would be inequitable to hold her liable for

any unpaid tax or deficiency and she does not qualify for relief

under section 6015(b) or (c).

     Relief pursuant to section 6015(b) or (c) is premised on the

existence of a deficiency or an understatement of tax.      Sec.

6015(b)(1)(B), (c)(1); Block v. Commissioner, 120 T.C. 62, 65-66

(2003).    The instant case involves an underpayment of a properly

reported liability.   Therefore, relief under section 6015(b) and

(c) is not available to petitioner.

     The Commissioner has issued revenue procedures listing the

factors to be considered in considering relief under section

6015(f).   Rev. Proc. 2003-61, 2003-2 C.B. 296, modifying and
                                 - 8 -

superseding Rev. Proc. 2000-15, 2000-1 C.B. 447.6     We have

applied those factors in considering whether relief is warranted

under section 6015(f).    See Beatty v. Commissioner, T.C. Memo.

2007-167.   In the instant case, we considered all of the relevant

facts and circumstances including all factors argued by the

parties.    See sec. 6015(f).

     Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at 297, sets

forth seven threshold conditions that individuals seeking relief

under section 6015(f) must satisfy.      Respondent concedes that

petitioner satisfies each of the seven threshold conditions.

     Additionally, Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at

298, sets forth circumstances in which relief will ordinarily be

granted under section 6015(f) with respect to an underpayment of

a properly reported liability.    To qualify for relief under Rev.

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

seeking relief must:    (1) No longer be married to, be legally

separated from, or not have been a member of the same household

of the other spouse at any time during the 12-month period ending

on the date of the request for relief; (2) have had no knowledge

or reason to know when the spouse seeking relief signed the




     6
      The guidelines set forth in Rev. Proc. 2003-61, 2003-2 C.B.
296, are effective for requests for relief filed, as in the
instant case, on or after Nov. 1, 2003. Id., sec. 7, 2003-2 C.B.
at 299.
                               - 9 -

returns that the other spouse would not pay the tax liability;

and (3) suffer economic hardship if relief is not granted.

     Respondent concedes that petitioner and Mr. Harris were

living apart during the 12-month period ending on the date of

petitioner’s request for relief.   The parties dispute only

whether petitioner had knowledge or reason to know that Mr.

Harris would not pay the reported tax liability and whether

petitioner would suffer economic hardship if relief were not

granted.

     As to the knowledge factor, respondent contends that

petitioner knew or should have known that Mr. Harris would not

pay the reported liabilities in issue.   Petitioner maintains that

she first learned of the unpaid tax liabilities in February 2005,

when respondent mailed notices of Federal tax liens for the years

2000 and 2003.7   Mr. Harris maintains that he had prior

conversations with petitioner concerning the unpaid liabilities.

     Petitioner and Mr. Harris have a lengthy history of failing

to pay their reported Federal income tax liabilities.      For

instance, overpayments due upon the filing of their 1999, 2001,

and 2002 joint returns were transferred to unpaid tax balances

for tax years 1995 through 1997.   Moreover, in 2002 petitioner



     7
      Petitioner claims that Mr. Harris opened most of the mail.
As a consequence, petitioner maintains, she was “not aware of any
notices or warnings that may have been delivered” to their
residence before their separation.
                              - 10 -

and Mr. Harris refinanced their home in order to pay their

Federal income tax obligations.   Additionally, they filed for

bankruptcy in 1984 and 2004, and shortly after their separation,

they lost their home in a bank foreclosure sale.

     Under the foregoing facts and circumstances, we conclude

that petitioner should have known that Mr. Harris would not pay

the liabilities reported on their 2000 and 2003 joint returns.

Consequently, we conclude that petitioner does not qualify under

the knowledge factor and do not address the third element in the

context of Rev. Proc. 2003-61, sec. 4.02.

     Where, as here, petitioner failed to qualify under Rev.

Proc. 2003-61, sec. 4.02, relief may be granted under Rev. Proc.

2003-61, sec. 4.03, 2003-2 C.B. at 298.    A nonexhaustive list of

factors to be considered when determining whether to grant

equitable relief under section 6015(f) is contained in Rev. Proc.

2003-61, sec. 4.03.   Those factors are:   (1) Marital status; (2)

economic hardship; (3) whether the spouse seeking relief knew or

had reason to know that the other spouse would not pay the income

tax liability; (4) the other spouse’s legal obligation to pay the

tax liability; (5) whether the spouse seeking relief obtained a

significant benefit from the nonpayment of the tax liability; and

(6) whether the spouse seeking relief complied with Federal

income tax laws.   We address below the application of the
                                - 11 -

foregoing factors to the facts and circumstances of the instant

case.

II.   Marital Status

        Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(i), 2003-2 C.B. at

298, consideration is given to whether the spouse seeking relief

is separated or divorced from his or her spouse.      Petitioner and

Mr. Harris were separated during February 2005, petitioner filed

her claim for relief during March 2006, and they were divorced in

June 2006.     The marital status factor favors relief.

III. Economic Hardship

        Generally, economic hardship exists if collection of the tax

liability will cause the spouse seeking relief to be unable to

pay his or her reasonable basic living expenses.       Butner v.

Commissioner, T.C. Memo. 2007-136.       The following nonexclusive

factors to be considered in determining whether the spouse

seeking relief can pay reasonable basic living expenses are set

forth in section 301.6343-1(b)(4), Proced. and Admin. Regs.:       (1)

The age, employment status and history, ability to earn, and

number of dependents of the spouse seeking relief; (2) an amount

reasonably necessary for food, clothing, housing, medical

expenses, transportation, current tax payments, and expenses

necessary to the production of income for the spouse seeking

relief; (3) the cost of living in the geographic area of the

spouse seeking relief; (4) the amount of property available to
                              - 12 -

satisfy the expenses of the spouse seeking relief; (5) any

extraordinary circumstances; e.g., special education expenses, a

medical catastrophe, or a natural disaster; and (6) any other

factor bearing on economic hardship.

      Petitioner claims that she will be unable to pay reasonable,

basic living expenses if relief is not granted.    While we are

sympathetic to petitioner’s plea, we conclude that petitioner has

not met her burden of proving economic hardship.    Petitioner did

not offer any information substantiating her reported living

expenses, and her testimony concerning her shared living

arrangement with John Mitchell was evasive and inconsistent with

her testimony regarding her financial responsibilities.    The lack

of substantiation is particularly noteworthy in the light of

petitioner’s assertion that her expenses exceeded her income.

      Petitioner has failed to show that she would suffer economic

hardship, as that term is defined in section 301.6343-1(b)(4)(i),

Proced. & Admin. Regs., if she were required to pay the joint tax

liabilities.   Accordingly, the economic hardship factor weighs

against relief.

IV.   Knowledge or Reason To Know

      Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(iii)(A), 2003-2

C.B. at 298, consideration is given to whether the spouse seeking

relief knew or had reason to know that the other spouse would not

pay the liability.   In the case of a properly reported but unpaid
                                - 13 -

liability, the relevant knowledge is whether the spouse seeking

relief knew or had reason to know when the returns were signed

that the tax would not be paid.    See Washington v. Commissioner,

120 T.C. 137, 151 (2003).   The Court has found supra in

respondent’s favor on the knowledge factor.      Therefore, the

knowledge factor weighs against relief.      See Beatty v.

Commissioner, T.C. Memo. 2007-167 (applying Rev. Proc. 2003-61,

supra, and finding that knowledge or reason to know weighed

against relief); see also Fox v. Commissioner, T.C. Memo. 2006-

22.

V.    Legal Obligation of Other Spouse

      Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(iv), 2003-2 C.B.

at 298, consideration is given to whether the other spouse has a

legal obligation to pay the outstanding income tax liability

pursuant to a divorce decree or an agreement.      The legal

obligation factor would weigh in favor of petitioner if Mr.

Harris were under such an obligation.      However, there was no

agreement imposing a legal obligation on Mr. Harris to pay the

outstanding income tax liabilities.      Accordingly, the legal

obligation factor is neutral.    See Washington v. Commissioner,

supra at 148-149.

VI.   Significant Benefit

      Under Rev. Proc. 2003-61, sec. 4.03(a)(v), 2003-2 C.B. at

299, consideration is given to whether the spouse seeking relief
                              - 14 -

significantly benefited (beyond normal support) from the unpaid

income tax liability.   If so, the significant benefit factor

weighs against granting equitable relief.   The facts and

circumstances in the instant case show, and respondent concedes,

that petitioner did not receive any significant benefit, beyond

normal support, from the failure to pay the tax.   Accordingly,

the significant benefit factor weighs in favor of relief.

VII. Petitioner’s Compliance With Federal Income Tax Laws

     Under Rev. Proc. 2003-61, sec. 4.03(a)(vi), 2003-2 C.B. at

299, consideration is given as to whether the spouse seeking

relief is in compliance with her income tax obligations.

Respondent concedes that petitioner is in compliance with those

obligations.   The Federal income tax law compliance factor favors

relief.   See Chou v. Commissioner, T.C. Memo. 2007-102.

     Additionally, Rev. Proc. 2003-61, sec. 4.03(2)(b), 2003-2

C.B. at 299, lists two positive factors to consider:    (1) Whether

the spouse seeking relief was abused by the other spouse; and (2)

whether the spouse seeking relief was in poor mental or physical

health when signing the returns or requesting relief.

     As to the abuse factor, Mr. Harris did not abuse petitioner.

Accordingly, the abuse factor does not weigh in petitioner’s

favor.
                              - 15 -

      As to the physical health factor, at trial petitioner

admitted to abusing alcohol following her separation from Mr.

Harris.   Indeed, petitioner’s problems with alcohol were

sufficiently serious to require treatment.   The physical health

factor favors relief.

     In sum, on the basis of our examination of the entire record

before us, there are factors in favor of relief and against

relief.   Considering our discussion above of the knowledge factor

and the economic hardship factor, we are not persuaded that

petitioner has carried her burden of proof to show that she is

entitled to relief under section 6015(f) with respect to the tax

liabilities for 2000 and 2003.

     We have considered all of the contentions and arguments of

the parties that are not discussed herein, and we conclude that

they are without merit, irrelevant, or moot.

     To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.
