                  T.C. Summary Opinion 2011-135



                      UNITED STATES TAX COURT



     RACHEL N. JONES, f.k.a. RACHEL N. PACE, Petitioner, AND
                     JOHN PACE, Intervenor v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8553-10S.               Filed December 5, 2011.



     Jessica C. Piedra, for petitioner.

     John Pace, pro se.

     Evan H. Kaploe, for respondent.



     WELLS, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.1   Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and


     1
      Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended.
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this opinion shall not be treated as precedent for any other

case.

     In a final notice of determination dated January 21, 2010,

respondent denied petitioner’s claim for section 6015 relief from

joint and several liability arising from the 2007 joint Federal

income tax return filed by petitioner and intervenor.    Intervenor

opposes allowing petitioner any section 6015 relief.    We must

decide whether petitioner is entitled to relief from joint and

several liability under section 6015.

                              Background

     Some of the facts and certain exhibits have been stipulated.

The parties’ stipulations of facts are incorporated in this

opinion by reference and are found accordingly.    At the time the

petition was filed, petitioner and intervenor were both residents

of Missouri.

     Petitioner and intervenor (sometimes referred to as the

couple) were married during 2003.    Petitioner was a

schoolteacher, and intervenor was employed as a car salesman.

Intervenor also operated a lawn mowing business in his spare

time.   The couple had joint checking and savings accounts into

which petitioner occasionally made deposits and on which she

wrote checks.   For the most part, intervenor maintained control

over the couple’s finances.    He instructed petitioner how much

she should spend when she went shopping, and he paid all of the
                               - 3 -

couple’s bills and checked the balances in their accounts.

Intervenor normally used the Internet to access the couple’s bank

accounts, and he refused to give petitioner the passwords to the

accounts.

     Intervenor spent a lot of time at work and frequently went

out with his friends in the evenings.   Intervenor’s not always

informing petitioner of his whereabouts led to a number of

arguments.   During some of those arguments intervenor would yell

and curse at petitioner.   On two occasions petitioner initiated

physical contact with intervenor during these arguments by

covering his mouth with her hand.   On one of those occasions

intervenor responded by putting his hand on petitioner’s throat

and pointing at her face while he screamed at her not to touch

him again.   However, intervenor and petitioner are in agreement

that intervenor did not attempt to choke petitioner and that

intervenor never struck petitioner or used other physical

violence during their marriage.

     The couple had apparently accumulated some debt.    Both

petitioner and intervenor had school loans, which they

consolidated.   They also had credit card debt.   Additionally,

intervenor’s father had used intervenor’s Social Security number

to apply in intervenor’s name for a credit card which he

apparently used without intervenor’s permission.
                                - 4 -

     At some point during 2007 intervenor decided that the couple

should make a hardship withdrawal from his section 401(k)

retirement plan account (401(k) plan) of $22,000.     The 401(k)

plan was funded by contributions from intervenor with matching

contributions from his employer.    Petitioner understood that they

were making the withdrawal to pay some of their debts.      The

401(k) plan was in intervenor’s name; but because petitioner was

a beneficiary, she also had to sign the request for the hardship

withdrawal.    At intervenor’s urging, petitioner did sign the

request, and the couple withdrew $22,000 from the 401(k) plan.

The couple used that money to make student loan payments, to pay

some of their credit card debt, to pay some of the debt

intervenor’s father had accumulated in intervenor’s name, and to

do some renovations on their home.

     As a result of the hardship withdrawal, the couple owed

income tax on the amount withdrawn, and they owed a 10-percent

additional tax for early withdrawal pursuant to section 72(t).

The couple timely filed a joint Form 1040, U.S. Individual Income

Tax Return, for their 2007 tax year.      On their joint return, they

reported income tax due of $8,136.      That tax liability was

largely due to the taxes associated with the couple’s withdrawal

of funds from intervenor’s 401(k) plan.      The couple did not pay

the tax due.    Before filing their joint return, the couple had
                                 - 5 -

agreed that intervenor would be responsible for the tax

liability.

     During 2008, the couple went through divorce proceedings,

and they were officially divorced on November 17, 2008.

According to the terms of their marital settlement and joint

legal custody agreement (marital settlement agreement),

intervenor agreed to pay the couple’s tax liability.

     However, the Internal Revenue Service (IRS) subsequently

offset petitioner’s 2008 tax refund of $3,428 against the

couple’s 2007 joint liability.    Because the IRS used petitioner’s

refund to pay part of the liability intervenor had assumed under

the terms of the marital settlement agreement, the couple agreed

that intervenor would reimburse petitioner by paying some of her

bills.   Intervenor is currently paying off petitioner’s

undergraduate student loans.   Intervenor is not obligated to pay

off petitioner’s undergraduate student loans under the terms of

the marital settlement agreement.    Intervenor has entered into an

installment agreement with the IRS under which he is currently

paying off the couple’s tax liability.

     Since her divorce, petitioner has remarried.   Petitioner is

not currently experiencing any economic hardship, nor is she

suffering from any mental or physical health problems.

     Petitioner timely filed a Form 8857, Request for Innocent

Spouse Relief, on April 16, 2009.    On January 21, 2010, the IRS
                               - 6 -

issued petitioner a final Appeals determination, which denied her

request for relief from joint and several liability.   Petitioner

timely filed her petition in this Court.

                            Discussion

     In general, spouses filing a joint return are jointly and

severally liable for the accuracy of the return and for the full

tax liability.   Sec. 6013(d)(3); 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.

     A taxpayer 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 the taxpayer

liable for any unpaid tax or deficiency and the taxpayer does not

qualify for relief under section 6015(b) or (c).2   We have

jurisdiction to review respondent’s denial of petitioner’s

request for equitable relief under section 6015(f).    See sec.

6015(e)(1).   We apply a de novo standard of review and a de novo

scope of review.   Porter v. Commissioner, 132 T.C. 203, 210

(2009); Porter v. Commissioner, 130 T.C. 115 (2008).    The



     2
      Relief pursuant to sec. 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, as the parties agree, relief
under sec. 6015(b) and (c) is not available to petitioner.
                                 - 7 -

requesting spouse bears the burden of proof.    Porter v.

Commissioner, 132 T.C. at 210.

     As directed by section 6015(f), the Commissioner has

prescribed procedures for determining whether a taxpayer

qualifies for relief from joint and several liability.      These

procedures are set forth in Rev. Proc. 2003-61, 2003-2 C.B. 296.

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

conditions (threshold conditions) that must be satisfied before

the Commissioner will consider a request for relief under section

6015(f).   Respondent concedes that petitioner satisfies the first

six threshold conditions but contends that petitioner does not

satisfy the seventh.

     The seventh threshold condition requires that the income tax

liability from which the requesting spouse seeks relief be

attributable to an item of the nonrequesting spouse, unless one

of several exceptions applies.    Rev. Proc. 2003-61, sec. 4.01.

The 401(k) plan was in intervenor’s name, and it was administered

by his employer.   The 401(k) plan was funded with contributions

from intervenor and matching contributions from his employer.       We

are not persuaded by respondent’s argument that the fact that

petitioner, as a beneficiary, also had to sign to agree to the

hardship withdrawal negates intervenor’s ownership of the 401(k)

plan.   Moreover, respondent’s Appeals Office conceded that

petitioner had satisfied all seven threshold conditions.
                                - 8 -

Accordingly, we conclude that all the threshold conditions have

been satisfied.

     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.    The parties agree that petitioner

does not satisfy the requirements of Rev. Proc. 2003-61, sec.

4.02, because she will not suffer economic hardship if she is not

granted relief.

     Where, as here, a taxpayer fails 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.    Rev. Proc. 2003-61, sec.

4.03, provides a nonexhaustive list of factors to consider when

determining whether to grant equitable relief under section

6015(f).   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

foregoing factors to the facts and circumstances of the instant

case.
                                - 9 -

     The parties agree that the first factor, marital status,

weighs in favor of granting relief because petitioner is now

divorced.

     The parties stipulated that petitioner is not suffering

economic hardship.   Accordingly, the second factor weighs against

granting relief.

     With regard to the third factor, the parties disagree about

whether petitioner knew or had reason to know intervenor would

not pay the tax liability.    Petitioner never testified that she

believed intervenor would pay the tax liability.      She and

intervenor had discussed their tax obligation before filing their

tax return; and intervenor had agreed to assume responsibility

for the debt, which he did assume as part of their marital

settlement agreement.   Petitioner did not give a direct answer to

her attorney’s question about whether petitioner believed the tax

obligation would be paid.    Rather, she responded:    “I believed

that that legal document was all I needed to not be held

responsible for it.”    We construe “that legal document” to mean

the marital settlement agreement.    The fact that the couple had

agreed that intervenor would assume responsibility for their 2007

tax liability as part of the marital settlement agreement

suggests that petitioner was aware that the tax liability would

not be paid when the couple filed their tax return.      Moreover,

petitioner bears the burden of proving that she is eligible for
                              - 10 -

relief, and she failed to testify or present other evidence that

she did not know or have reason to know that intervenor would not

pay the couple’s tax liability.   Accordingly, we conclude that

petitioner knew or had reason to know that intervenor would not

pay the couple’s tax liability at the time he filed their tax

return.   The third factor therefore weighs against granting

relief.

     As to the fourth factor, intervenor has an obligation to pay

the couple’s tax liability under the terms of the marital

settlement agreement.   At the time the couple entered into the

marital settlement agreement, petitioner had no reason to believe

that intervenor would not fulfill his obligation to pay the tax

liability.   Intervenor has two jobs and an income that would

enable him to pay the tax liability without much difficulty.

Indeed, intervenor has entered into an installment agreement with

the IRS, and he is currently paying off the couple’s tax

liability under the terms of that agreement.    Accordingly, the

fourth factor weighs in favor of granting relief.

     With regard to the fifth factor, the parties agree that

petitioner did not receive a significant benefit beyond normal

support from the unpaid income tax liability.    Accordingly, the

fifth factor weighs in favor of granting relief.

     Petitioner is in compliance with income tax laws.

Accordingly, the sixth factor weighs in favor of relief.
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     Petitioner contends that an additional factor, abuse, also

weighs in favor of granting relief.      Both petitioner and

intervenor testified that intervenor was never physically abusive

during their marriage.3     However, petitioner contends that

intervenor’s angry outbursts during their marriage, which

included cursing, show that there was a history of abuse in the

marriage.    We disagree.   Although it is clear that the couple had

a bad marriage, the couple’s frequent arguments do not rise to

the level of abuse.

     In conclusion, four of the six factors weigh in favor of

granting relief and two weigh against.

     Petitioner and intervenor have agreed that intervenor is

liable for the remaining portion of the couple’s 2007 tax

liability, and intervenor is currently paying off that liability

under the terms of an installment agreement with the IRS.       At

trial intervenor made it clear that he objected to granting

petitioner relief from joint and several liability because he had

already compensated petitioner for the portion of her 2008 tax

refund that the IRS offset against the couple’s 2007 joint tax

liability.    Intervenor is apparently concerned that granting



     3
      In her brief, petitioner contends that intervenor once
“choked” her. However, this characterization is inconsistent
with petitioner’s testimony. During her testimony petitioner was
careful to say that intervenor only put his hand on her throat.
During cross-examination she denied that she had testified that
intervenor choked her.
                              - 12 -

relief to petitioner will obligate him to pay the IRS that

amount.   However, petitioner has not contended that she is

entitled to a refund of the offset, and granting relief to

petitioner for the unpaid portion of the couple’s liability will

not obligate intervenor to pay that offset amount.      Rather,

granting petitioner relief will only affirm what intervenor has

already agreed to under the terms of the marital settlement

agreement.

     Considering all of the facts and circumstances of the case,

including the six factors listed in Rev. Proc. 2003-61, sec.

4.03, we conclude that it would be inequitable to hold petitioner

jointly and severally liable for the unpaid portion of the

couple’s tax liability.   Accordingly, we hold that petitioner is

entitled to relief under section 6015(f) for the unpaid portion

of the couple’s 2007 tax liability.

     In reaching these holdings, we have considered all the

parties’ arguments, and, to the extent not addressed herein, we

conclude that they are moot, irrelevant, or without merit.

     To reflect the foregoing,


                                           Decision will be entered

                                      for petitioner.
