                        T.C. Memo. 2004-54



                      UNITED STATES TAX COURT



                 JEANINE T. FOOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7073-02.              Filed March 8, 2004.


     Jeanine T. Foor, pro se.

     Kevin W. Coy, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   This matter is before the Court pursuant to a

petition filed under section 6015(e)(1).1    The issue for decision

is whether petitioner is entitled to relief from joint and

several liability under section 6015(b), (c), or (f) for unpaid


     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended.
                               - 2 -

taxes for years 1983, 1984, 1985, 1987, 1990, and 1991.   With

respect to the claim for relief under section 6015(b) and (c), we

hold that petitioner is not entitled to relief because there were

no understatements of tax.   However, with respect to petitioner’s

claim for equitable relief under section 6015(f), we hold that

respondent’s denial of relief was an abuse of discretion and that

it would be inequitable to hold petitioner liable for the unpaid

taxes.

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   Petitioner resided in

Tustin, California, at the time she filed her petition.

     Petitioner and Darrell T. Foor (Mr. Foor) were married on

March 23, 1983, and separated on May 1, 1989.    They filed joint

Federal income tax returns for the years 1983 through 1991.   For

the years 1983, 1984, 1985, 1987, 1990, and 1991, petitioner and

Mr. Foor did not fully pay the tax liabilities reported on their

returns.   No deficiencies were determined or assessed against

either petitioner or Mr. Foor for these years.   Petitioner had a

deficiency for 1988.   Petitioner and Mr. Foor were divorced in

1996.

     On March 10, 2000, petitioner filed a Form 8857, Request for

Innocent Spouse Relief (And Separation of Liability and Equitable
                               - 3 -

Relief), requesting relief from joint and several liability for

the years 1983 through 1996.   In her Form 8857 and responses to

information requests from respondent, petitioner stated that Mr.

Foor was an alcoholic, he frequently lost his job and was in

trouble for alcohol-related incidents, he made false deposits

into their joint bank account to obtain money from the bank, his

actions left petitioner without enough money to pay the bills,

and petitioner believed that he claimed extra dependents on tax

documents so that less money would be withheld from his wages.

Additionally, petitioner stated that she cared for her disabled

mother from 1985 until her mother’s death in 1989 and her mother

contributed one-half of the monthly rent and helped buy food

because there was not enough money.

     On December 28, 2001, respondent issued a notice of final

determination to petitioner informing her that she was not

entitled to relief from joint and several liability under section

6015(b), (c), or (f) for the years 1983, 1984, 1985, 1987, 1990,

and 1991.   Respondent granted petitioner relief under section

6015(c) for the 1988 deficiency.   Respondent did not address

petitioner’s entitlement to relief for 1986 and 1989 because

there were no outstanding tax liabilities for those years.

Additionally, respondent did not address petitioner’s entitlement

to relief for the years 1992 through 1996 because joint returns

were not filed for those years.    Respondent’s determinations were
                              - 4 -

based on the conclusions of two revenue agents, Ann Hoel and Al

Petroff (Mr. Petroff).

     In analyzing petitioner’s entitlement to equitable relief

under section 6015(f), the revenue agents determined:   (1)

Petitioner was divorced at the time she requested relief; (2)

petitioner would suffer economic hardship if relief was not

granted; (3) petitioner did not significantly benefit from the

unpaid tax liabilities; (4) petitioner had made a good faith

effort to comply with the Federal income tax laws in the tax

years following the years at issue; and (5) there were no

perceptible asset transfers between petitioner and Mr. Foor.     The

agents determined that petitioner knew or had reason to know that

the tax liabilities would not be paid and that the liabilities

were not solely attributable to Mr. Foor.   The revenue agents

noted that petitioner was responsible for at least a portion of

the underpayments because of inadequate withholding.

     Petitioner filed a petition under section 6015(e)(1) seeking

review of respondent’s determinations for the taxable years 1983,

1984, 1985, 1987, 1990, and 1991.   The petition lists section

6015(b), (c), and (f) and alleges that it would be inequitable to

hold petitioner responsible for the unpaid taxes.

                             OPINION

     This case involves unpaid taxes for the years in issue.

Because no understatements of tax or deficiencies are involved,
                                   - 5 -

petitioner is not entitled to relief under section 6015(b) or

(c).       See sec. 6015(b)(1) and (c)(1); Washington v. Commissioner,

120 T.C. 137, 146-147 (2003).      Therefore, our review is limited

to section 6015(f), which permits in certain circumstances relief

from joint and several liability for unpaid taxes.      Ewing v.

Commissioner, 118 T.C. 494, 497 (2002).

       Section 6015(f) permits the Secretary to relieve a spouse of

liability if, taking into account all the facts and

circumstances, it is inequitable to hold the spouse liable for

any unpaid tax or any deficiency (or any portion of either) and

relief is not available under section 6015(b) or (c).      The denial

of equitable relief is reviewed under an abuse of discretion

standard.      Washington v. Commissioner, supra at 146.   In deciding

whether the determination was an abuse of discretion, we consider

evidence relating to all the facts and circumstances.       Id. at

148.

       Rev. Proc. 2000-15, 2000-1 C.B. 447, contains guidelines

that will be considered in determining whether an individual

qualifies for relief under section 6015(f).2      Rev. Proc. 2000-15,

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

that must be satisfied before the Commissioner will consider a


       2
      On Aug. 11, 2003, the Commissioner issued Rev. Proc. 2003-
61, 2003-32 I.R.B. 296, which supersedes Rev. Proc. 2000-15,
2000-1 C.B. 447, effective for requests for relief filed on or
after Nov. 1, 2003.
                               - 6 -

request for relief under section 6015(f).   Respondent agrees that

the threshold conditions are satisfied in this case.

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

that, in cases where a liability reported on a joint return is

unpaid, relief under section 6015(f) will ordinarily be granted

if the following three elements are satisfied:    (1) 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 during the 12-month period ending on the date

relief was requested; (2) at the time the return was signed, the

requesting spouse had no knowledge or reason to know that the tax

would not be paid; and (3) the requesting spouse will suffer

economic hardship if relief is not granted.    Relief under Rev.

Proc. 2000-15, sec. 4.02, 2000-1 C.B. at 448, is available only

to the extent that the unpaid liability is allocable to the

nonrequesting spouse.   Id. sec. 4.02(2)(b).

     If relief is not available under Rev. Proc. 2000-15, sec.

4.02, then Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 448,

provides factors that the Commissioner will consider in deciding

whether to grant relief under section 6015(f).    Rev. Proc. 2000-

15, sec. 4.03(1), 2000-1 C.B. at 448-449, lists the following six

factors weighing in favor of granting relief for an unpaid

liability:   (1) The requesting spouse is separated or divorced
                              - 7 -

from the nonrequesting spouse; (2) the requesting spouse would

suffer economic hardship if relief is denied; (3) the requesting

spouse was abused by the nonrequesting spouse; (4) the requesting

spouse did not know or have reason to know that the reported

liability would not be paid; (5) the nonrequesting spouse has a

legal obligation pursuant to a divorce decree or agreement to pay

the unpaid liability; and (6) the unpaid liability is

attributable to the nonrequesting spouse.   Rev. Proc. 2000-15,

sec. 4.03(2), 2000-1 C.B. at 449, lists the following six factors

weighing against granting relief for an unpaid liability:    (1)

The unpaid liability is attributable to the requesting spouse;

(2) the requesting spouse knew or had reason to know that the

reported liability would be unpaid at the time the return was

signed; (3) the requesting spouse significantly benefited (beyond

normal support) from the unpaid liability; (4) the requesting

spouse will not suffer economic hardship if relief is denied; (5)

the requesting spouse has not made a good faith effort to comply

with Federal income tax laws in the tax years following the tax

year to which the request for relief relates; and (6) the

requesting spouse has a legal obligation pursuant to a divorce

decree or agreement to pay the unpaid liability.    This list is

not exhaustive, no single factor is determinative, and all

factors should be considered and weighed appropriately.    Rev.

Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 448-449.
                               - 8 -

     In the instant case, the revenue agents found that almost

all of factors listed in Rev. Proc. 2000-15, secs. 4.02 and 4.03,

either weighed in petitioner’s favor or were not applicable.

Despite the abundance of positive factors, petitioner’s claim for

equitable relief was denied.   On brief, respondent argues that

petitioner knew or had reason to know at the time the returns

were filed that the tax liabilities would not be paid.   The

revenue agents’ reports indicate that relief was not granted

because they believed that petitioner was equally responsible for

the underpayments because of inadequate withholding.

     Petitioner argues that Mr. Foor had complete control over

their finances during the years in issue.   She claims that he

assured her that the balances were paid and that he intercepted

any correspondence from respondent.    Petitioner contends that she

did not discover the unpaid balances until after the marriage was

dissolved.

     Petitioner credibly testified that she believed that Mr.

Foor would pay their tax liabilities.   Despite this belief, we

cannot say that the revenue agents acted unreasonably in

determining that petitioner had reason to know at the time the

returns were signed that the tax liabilities would not be paid.

Petitioner signed the returns for all years in issue, and these

returns showed a balance due after allowance for the Federal

income taxes withheld during the years.   Thus, she should have
                               - 9 -

known that further payments were required to satisfy each year’s

liability.   The administrative record indicates that petitioner

knew that her husband was not having enough tax withheld, was

claiming extra exemptions, and was using the money to support his

drinking problem.   In written responses to the revenue agents’

questions, petitioner stated that Mr. Foor frequently lost jobs

and was in trouble for alcohol-related incidents, he made false

deposits in their joint checking account to obtain money from the

bank, and petitioner did not have enough money to pay the bills.

Petitioner’s allegations indicate that she lacked the funds

necessary to pay the tax liabilities and that she was aware that

Mr. Foor’s financial situation was the same or worse.   We believe

that the revenue agents could reasonably have concluded that

petitioner had reason to know that the taxes would not be paid at

the time she signed the returns.

     Our finding above precludes relief under Rev. Proc. 2000-15,

sec. 4.02.   However, with respect to Rev. Proc. 2000-15, sec.

4.03, petitioner’s reason to know is the only negative factor

that respondent specifically argues on brief justifies the denial

of equitable relief.   Although this is a strong factor weighing

against relief, it is not determinative.   Washington v.

Commissioner, 120 T.C. at 150-151; Rev. Proc. 2000-15, sec.

4.03(1)(d), 2000-1 C.B. at 449. Respondent admits that petitioner

is divorced, will suffer economic hardship if relief is not
                              - 10 -

granted, and had to deal with various problems associated with

Mr. Foor’s alcoholism and her mother’s illness.   Respondent

further admits that petitioner did not significantly benefit from

the unpaid taxes and has made a good faith effort to comply with

the Federal income tax laws in the years following the years at

issue, and there were no perceptible asset transfers between

petitioner and Mr. Foor.

     The revenue agents’ workpapers reflect that an additional

reason that equitable relief was not granted was that they

believed petitioner’s withholding was inadequate and did not

cover her share of the tax liabilities.   At trial, Mr. Petroff

testified that he reviewed the tax returns and Forms W-2, Wage

and Tax Statement, for 1988, 1990, and 1992 in making this

determination, but that he did not review the returns or Forms W-

2 for any earlier years.   The years in issue are 1983, 1984,

1985, 1987, 1990, and 1991.   Thus, Mr. Petroff’s determination

that petitioner’s wages were underwithheld for the other 5 years

in issue was based on his assumption that there was a continuous

pattern of inadequate withholding.

     Mr. Petroff also testified that a requesting spouse cannot

be relieved of liability for tax attributable to her own income

under the rules for relief from joint and several liability.

Petitioner’s information submissions to the revenue agents and

her testimony reflect that she believed that her withholding was
                              - 11 -

adequate to pay her tax liabilities, and she also testified that

if she had filed with a status of single, her withholding would

have exceeded her tax liabilities.     The evidence in the record

indicates that she informed Mr. Petroff that she believed her

withholding was adequate to pay her tax liabilities.

     Although a requesting spouse is not entitled to relief under

Rev. Proc. 2000-15, sec. 4.02, for unpaid taxes attributable to

her, this does not foreclose her eligibility for equitable

relief.   Rev. Proc. 2000-15, sec. 4.03, applies to requesting

spouses who satisfy the threshold conditions of Rev. Proc. 2000-

15, sec. 4.01, but do not qualify for relief under Rev. Proc.

2000-15, sec. 4.02.   See Washington v. Commissioner, supra at

151; Collier v. Commissioner, T.C. Memo. 2002-144.     Additionally,

Rev. Proc. 2000-15, sec. 4.03(2)(a), 2000-1 C.B. at 449, provides

that whether an unpaid liability is attributable to the

requesting spouse is a factor to consider.     Thus, Mr. Petroff’s

testimony indicates that he may have incorrectly applied the

revenue procedure in this case.3   Mr. Petroff’s testimony and

workpapers indicate that a significant reason for denying relief

     3
      Rev. Proc. 2003-61, 2003-32 I.R.B. 296, which supersedes
Rev. Proc. 2000-15, 2000-1 C.B. 447, effective for requests for
relief filed on or after Nov. 1, 2003, added an additional
threshold condition for relief, subject to certain exceptions,
that the income tax liability from which the requesting spouse
seeks relief must be attributable to an item of the nonrequesting
spouse. Rev. Proc. 2003-61, supra, does not apply in this case
because petitioner’s request for relief was filed before the
effective date.
                             - 12 -

was his determination that the underpayments were not solely

attributable to Mr. Foor.

     On brief, respondent does not address Mr. Petroff’s

incorrect statement that a taxpayer is not eligible for equitable

relief for unpaid taxes that are attributable to her.    Respondent

has not specifically argued on brief that this is a reason for

upholding the revenue agents’ determinations.4   In light of

petitioner’s testimony, respondent’s failure to specifically

argue this point, Mr. Petroff’s incorrect belief that petitioner

is not eligible for equitable relief for liabilities attributable

to her, and Mr. Petroff’s admission that he was not able to

review petitioner’s Forms W-2 for 5 of the 6 years in issue, we

conclude that no weight should be given to this factor.

     At trial, petitioner’s testimony was consistent with her

assertions in the Form 8857, her responses to information

requests from respondent, and the statements outlined in the

revenue agents’ workpapers regarding Mr. Foor’s detrimental

actions and petitioner’s economic hardship and lack of

significant benefit from the unpaid taxes.   Respondent has not

challenged petitioner’s truthfulness on these matters, and his


     4
      The evidence in the record, including the revenue agents’
reports, does not adequately disclose the exact amounts, if any,
by which petitioner’s taxes were underwithheld. The record
reflects that any taxes on petitioner’s wages that were
underwithheld would represent only a relatively small proportion
of the underpayments for the years in issue.
                                - 13 -

only argument against granting equitable relief is that

petitioner knew or had reason to know that the taxes would not be

paid.

     When the factors in favor of equitable relief are unusually

strong, it may be appropriate to grant relief under section

6015(f) in limited situations where the requesting spouse knew or

had reason to know that the liability would not be paid.

Washington v. Commissioner, supra at 151; Rev. Proc. 2000-15,

sec. 4.03(2)(b), 2000-1 C.B. at 449.      Additionally, we have

previously considered the fact that a taxpayer did not

significantly benefit from the unpaid liability as a factor in

favor of granting relief to that taxpayer.       Ewing v.

Commissioner, 122 T.C. ___, ___ (2004) (slip op. at 22-23);

Ferrarese v. Commissioner, T.C. Memo. 2002-249; Rowe v.

Commissioner, T.C. Memo. 2001-325.       The factors listed in Rev.

Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 448-449, are not

exhaustive, and all facts and circumstances must be taken into

account in determining whether it would be inequitable to hold a

requesting spouse liable.     Ewing v. Commissioner, 122 T.C. at ___

(slip op. at 28).

        Petitioner presented a strong case during her dealings with

respondent and at trial for equitable relief from joint and

several liability under the factors promulgated by the

Commissioner in Rev. Proc. 2000-15, supra, and other relevant
                              - 14 -

factors.   Although we do not find fault with the determination

that petitioner had reason to know that the reported tax

liabilities would not be paid, on the basis of the particular

facts and circumstances involved, we find that compelling reasons

existed to grant equitable relief.     Petitioner is divorced, she

will suffer economic hardship if relief is not granted, she did

not significantly benefit from the unpaid taxes, and there were

several other factors known to respondent at the time of the

determination that weighed in favor of granting relief.

Consequently, we hold that respondent’s denial of equitable

relief was an abuse of discretion and that it would be

inequitable to hold petitioner liable for the unpaid tax

liabilities for the years in issue.


                                           Decision will be entered

                                      for petitioner.
