                    T.C. Summary Opinion 2002-137



                       UNITED STATES TAX COURT



         IRWIN I. SKOLLER AND MARSHA SKOLLER, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17225-99S.              Filed October 17, 2002.


     Irwin I. Skoller, pro se.
     Sandy Freund, Kevin Weber, Robert Sontz, Dan Kvarta, and

Gerard Campbell (specially recognized), for petitioner Marsha

Skoller.

     Robert W. Mopsick, for respondent.



     POWELL, Special Trial Judge:    This case was heard pursuant

to the provisions of section 74631 of the Internal Revenue Code



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

in effect at the time the petition was filed.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.

     Respondent determined a deficiency of $5,804 in petitioners’

1994 Federal income tax and an accuracy-related penalty under

section 6662(a) of $1,161.   The issues are (1) whether

petitioners may claim a business bad debt deduction under section

166; (2) whether petitioners are liable for the accuracy-related

penalty under section 6662(a); and (3) whether petitioner Marsha

Skoller (Ms. Skoller) is entitled to relief from joint and

several liability under section 6015.2   Petitioners resided in

Freehold, New Jersey, at the time the petition was filed.

     Petitioners married on September 2, 1963, and separated in

May of 2000.   Petitioner Irwin I. Skoller (Mr. Skoller) is an

attorney with an LL.M. in taxation from New York University

School of Law.   Ms. Skoller has a high school diploma.   Since

1983, Mr. Skoller has operated a tax consulting and accounting

business as a sole proprietor.    Ms. Skoller worked in Mr.

Skoller’s office part time as an administrative assistant.    In

addition to providing general office assistance, her duties

included reconciling the bank statements, making deposits, and



     2
        Respondent concedes that Ms. Skoller is eligible for
separate tax liability under sec. 6015(c). This issue remained
for trial because Mr. Skoller objected. See Corson v.
Commissioner, 114 T.C. 354 (2000).
                               - 3 -

drafting checks at Mr. Skoller’s direction.    In 1994, Ms. Skoller

left her employment at Mr. Skoller’s office and started a typing

business in her home.

     In 1985, Mr. Skoller and Samuel L. Sachs formed Princeton

Residential Associates Limited Partnership (PRA).   PRA was a real

estate venture in the business of purchasing residential real

estate in East Windsor and West Windsor, New Jersey, for rental

and resale.   Mr. Skoller solicited clients from his tax practice

to participate in the real estate venture.

     In 1985 or early 1986, Mr. Skoller borrowed $60,000 to

advance to PRA.   Over the course of PRA’s existence, the

residential real estate market values in New Jersey declined.

The values of PRA’s homes fell below their purchase prices, and

PRA did not have equity in its assets.   As a result, no outside

lenders would provide loans to PRA.    In 1994, PRA sold its last

house and apparently ceased doing business.

     Mr. Skoller prepared petitioners’ joint 1994 Federal income

tax return.   He reported the income and expenses from his tax

practice on Schedule C, Profit or Loss from Business.   On that

Schedule C, petitioners claimed a $96,211 business bad debt

deduction for amounts allegedly lent to PRA.   The return also

reflected wage income earned by Ms. Skoller, capital gains, a

separate Schedule C from Ms. Skoller’s typing service, and a

Schedule E, Income or Loss From Partnerships & S Corporations,
                               - 4 -

reporting losses from partnerships other than PRA.    Ms. Skoller

signed the return but did not examine or question it.

     Petitioners appeared at trial pro se with respect to the

business bad debt deduction and accuracy-related penalty issues.

However, Ms. Skoller retained counsel with respect to the section

6015 relief from joint and several liability issue.    After trial,

notwithstanding the small tax case status, the Court directed the

parties to file briefs.   See Rule 177(c).   Respondent filed a

brief that addressed all of the issues.   Ms. Skoller filed a

brief addressing only the section 6015 relief from joint and

several liability.   Mr. Skoller did not file a brief.

                             Discussion

     The failure to discuss in brief an issue that was previously

raised results in the abandonment of that issue.    See Calcutt v.

Commissioner, 84 T.C. 716, 721 (1985).    Mr. Skoller is an

attorney and surely understood the importance of complying with

directives from the Court.   Thus, we deem that petitioners have

abandoned the business bad debt deduction and section 6662(a)

accuracy-related penalty issues.3   Additionally, we deem that Mr.


     3
        We note, however, that it is clear that, to the extent
Mr. Skoller advanced funds to PRA (an issue that we need not
decide), the advance was a contribution to capital and not a bona
fide debt. “A * * * contribution to capital shall not be
considered a debt for purposes of section 166.” Sec. 1.166-1(c),
Income Tax Regs. Mr. Skoller testified that “the money was given
to Princeton Residential Associates. It was part of my capital
contribution at that time.” Furthermore, it appears that PRA may
                                                   (continued...)
                                 - 5 -

Skoller has abandoned his opposition to granting relief from

joint and several liability to Ms. Skoller.    Because respondent

concedes that Ms. Skoller is eligible for separate tax liability

under section 6015(c), the only issue remaining is whether Ms.

Skoller is entitled to relief under section 6015(b) or (f).

     A requesting spouse may elect relief from joint and several

liability under section 6015.4    There are three types of relief

available:   (1) Section 6015(b)(1) provides for full relief from

joint and several liability; (2) section 6015(c) provides for

separate tax liability available to divorced or separated

taxpayers; and (3) section 6015(f) provides for equitable relief




     3
      (...continued)
have suffered losses over its duration, and there was no showing
that Mr. Skoller had any basis in his interest in PRA by 1994 to
allow a deduction for an operating loss during 1994. See secs.
702, 704(d).

     With respect to the sec. 6662(a) accuracy-related penalty,
Mr. Skoller never addressed this issue at trial. An attorney
specializing in taxation law is held to a higher standard of
care. Tippin v. Commissioner, 104 T.C. 518, 534 (1995). Given
that the evidence contradicting the characterization as a
business bad debt was overwhelming, coupled with Mr. Skoller’s
tax experience, we find his conduct nothing but negligent. Mr.
Skoller failed to keep adequate records to substantiate the
alleged $96,211 business bad debt deduction. He surely knew of
the importance of maintaining adequate records in support of a
position taken on a Federal income tax return. See sec. 6001;
sec. 1.6001-1(a), Income Tax Regs.
     4
        Sec. 6015 applies to any liability for tax arising before
July 22, 1998, but remaining unpaid as of that date. H. Conf.
Rept. 105-599, at 255 (1998), 1998-3 C.B. 747, 1009. Ms.
Skoller’s liability for tax arose in 1994 and remains unpaid.
                                 - 6 -

from joint and several liability if section 6015(b) and (c) is

unavailable.

     Section 6015(b) provides in part:

     SEC. 6015.    RELIEF FROM JOINT AND SEVERAL LIABILITY ON JOINT
                   RETURN.

          (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 one
                  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; and

                       (E) the other individual elects (in such form
                  as the Secretary may prescribe) the benefits of
                  this subsection not later than the date which is 2
                  years after the date the Secretary has begun
                  collection activities with respect to the
                  individual making the election,

          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.
          [Emphasis added.]
                                - 7 -

     These requirements are expressed in the conjunctive, and

thus, a requesting spouse must satisfy all requirements of

section 6015(b)(1).   Subparagraphs (A), (B), and (E) are not in

dispute.   The parties disagree only as to whether Ms. Skoller

satisfies the requirements of subparagraphs (C) and (D).

     Subparagraph (C) requires that the requesting spouse “not

know, and [have] no reason to know, that there was [an]

understatement” of tax.   Sec. 6015(b)(1)(C).     There are two

aspects of section 6015(b)(1)(C).5      First, “where a spouse

seeking relief has actual knowledge of the underlying transaction

* * * innocent spouse relief is denied.”      Cheshire v.

Commissioner, 115 T.C. 183, 192-193 (2000), affd. 282 F.3d 326

(5th Cir. 2002).   For purposes here, we are willing to assume

that Ms. Skoller did not have actual knowledge of the underlying

transaction.

     Nonetheless, she must still satisfy the second prong of

section 6015(b)(1)(C).    A requesting spouse has reason to know of



     5
        As part of the Internal Revenue Service Restructuring and
Reform Act of 1998, Pub. L. 105-206, sec. 3201(a), 112 Stat. 734,
Congress repealed sec. 6013(e) and enacted sec. 6015(b). The
language of sec. 6015(b)(1)(C) is similar to the language in
former sec. 6013(e)(1)(C). Both provisions require that the
requesting spouse “did not know, and had no reason to know” that
there was an understatement of tax. H. Conf. Rept. 105-599,
supra at 249, 1998-3 C.B. at 1003. Accordingly, the caselaw
interpreting the language under sec. 6013(e) will be applied in
interpreting the same language under sec. 6015(b). Butler v.
Commissioner, 114 T.C. 276, 283 (2000).
                                 - 8 -

an understatement if “a reasonably prudent person with knowledge

of the facts possessed by the person claiming * * * [relief]

should have been alerted to the possibility of a substantial

understatement.”     Flynn v. Commissioner, 93 T.C. 355, 365 (1989).

Furthermore, a “spouse seeking relief has a ‘duty of inquiry’.”

Butler v. Commissioner, 114 T.C. 276, 284 (2000) (quoting Stevens

v. Commissioner, 872 F.2d 1499, 1505 (11th Cir. 1989), affg. T.C.

Memo. 1988-63).

     Respondent argues that Ms. Skoller was put on notice

regarding petitioners’ claimed $96,211 business bad debt

deduction.   We agree.   “[A] spouse cannot obtain the benefits of

section * * * [6015] by simply turning a blind eye to–-by

preferring not to know of–-facts fully disclosed on the return,

of such a large nature as would reasonably put such spouse on

notice that further inquiry would need to be made.”     Levin v.

Commissioner, T.C. Memo. 1987-67; see also Cohen v. Commissioner,

T.C. Memo. 1987-537.

     A reasonably prudent taxpayer should have been alerted to

the possibility of an understatement on petitioners’ 1994 Federal

income tax return.    On page 1 of Form 1040, U.S. Individual

Income Tax Return, petitioners, inter alia, reported $5,052 of

income from Ms. Skoller’s wages, a capital gain of $9,734, and an

alleged $69,788 loss from Mr. Skoller’s business.    On page 2 of

Form 1040 (the page Ms. Skoller signed), petitioners reported
                               - 9 -

zero taxable income.   Given the nature of Mr. Skoller’s business,

such a large operating loss would be unusual.   A reasonable

taxpayer in Ms. Skoller’s situation would further inquire into

the explanation behind the claimed loss.   Ms. Skoller knew that

Mr. Skoller operated a professional business and that petitioners

held numerous partnership investments, but, as far as we can

tell, the two were not interrelated.   With those sources of

income, a reasonably prudent taxpayer would be suspicious of

reporting no taxable income.

     In a remarkably similar situation, where the nonrequesting

spouse was an accountant and prepared the joint return, we

observed that the antecedent of section 6015(b)(1) “is designed

to protect the innocent, not the intentionally ignorant.    Thus,

even though petitioner had no business background and was married

to an accountant, we do not think that her ‘ostrich imitation’

was reasonable.”   Cohen v. Commissioner, supra (fn. ref.

omitted.)

     Consequently, we find that Ms. Skoller had reason to know of

the understatement of tax under section 6015(b)(1)(C) and is not

entitled to relief under section 6015(b)(1).

     However, as already stated, respondent concedes that Ms.

Skoller is entitled to relief under section 6015(c).   While Mr.

Skoller originally opposed that relief, he abandoned that

position by not filing a brief.   In accordance with the positions
                             - 10 -

of the parties, we hold that Ms. Skoller is entitled to separate

tax liability under section 6015(c).6

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                      Decision will be entered

                                 under Rule 155.




     6
        We need not rule on Ms. Skoller’s claim for relief under
sec. 6015(f). Sec. 6015(f) is available only if “relief is not
available * * * under subsection (b) or (c).” Sec. 6015(f)(2).
