                            T.C. Summary Opinion 2014-52



                            UNITED STATES TAX COURT



     KIMBERLY G. ZELASKO, Petitioner, AND MICHAEL E. ZELASKO,
    Intervenor v. COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 22893-12S.                            Filed June 11, 2014.



      Leonard W. Stauffenger, for petitioner.

      David V. Difiore, for intervenor.

      Katherine Lee Kosar, for respondent.



                                 SUMMARY OPINION


      GUY, Special Trial Judge: This case was heard pursuant to the provisions

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


      1
          Unless otherwise indicated, all section references are to the Internal
                                                                           (continued...)
                                        -2-

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

shall not be treated as precedent for any other case.

      On June 15, 2012, the Internal Revenue Service (IRS) Office of Appeals

(Appeals Office) issued to petitioner a Notice of Determination Concerning

Collection Action(s) Under Section 6330 and Your Request for Relief From Joint

and Several Liability Under Section 6015. The Appeals Office determined that

(1) it was appropriate to proceed with a proposed levy action to collect tax due

from petitioner for the taxable year 2007, and (2) petitioner was not eligible for

relief from joint and several liability under section 6015 for that year. On

September 13, 2012, petitioner filed with the Court a petition challenging so much

of the notice of determination as denied her claim for spousal relief under section

6015. Intervenor, petitioner’s former spouse, filed a timely notice of intervention

pursuant to section 6015(e)(4).

      Because the petition was filed within the 90-day period prescribed in section

6015(e)(1), we have jurisdiction to review the Appeals Office determination




      1
       (...continued)
Revenue Code, as amended and in effect at all relevant times, and all Rule
references are to the Tax Court Rules of Practice and Procedure. Monetary
amounts are rounded to the nearest dollar.
                                         -3-

denying petitioner relief under section 6015.2 See Raymond v. Commissioner, 119

T.C. 191, 194 (2002). Petitioner’s eligibility for spousal relief is the sole issue for

decision.

                                     Background

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

facts and the accompanying exhibits are incorporated herein by this reference.

Petitioner resided in Ohio at the time the petition was filed.

      Petitioner and intervenor are the parents of two children. They were

married throughout 2007, began living separate and apart in the first half of 2008,

and were divorced in March 2010.3

I. Petitioner’s Employment

      During 2007 petitioner was employed as a registered nurse in the intensive

care unit at Robinson Memorial Hospital (Robinson Memorial). She earned




      2
        Although petitioner does not dispute so much of the notice of
determination as concerns the proposed levy action, we note that we lack
jurisdiction to consider that matter because the petition herein was not filed within
the 30-day period prescribed in sec. 6330(d)(1). See Gray v. Commissioner, 138
T.C. 295 (2012), aff’d, 723 F.3d 790 (7th Cir. 2013).
      3
       The record does not reflect the date that petitioner and intervenor were
married.
                                        -4-

$42,577 in wages that year and was credited with Federal and State income tax

withholding of $4,357 and $1,393, respectively.

II. Intervenor’s Employment

      During 2007 intervenor received nonemployee compensation of $59,077 for

work he performed as an insurance consultant for Equity One Exteriors, Inc.

(Equity One).

III. Household Finances

      Petitioner maintained a personal checking account at Huntington National

Bank (Huntington). Petitioner deposited her paychecks in the Huntington account,

and she testified that she paid all household expenses, including groceries,

monthly mortgage payments, and utility expenses, from that account.

      Petitioner stated that, although she was aware that intervenor was employed

during 2007, she did not know how much he was paid for his work or the amount,

if any, of his employment-related expenses.

      Intervenor testified that he did not maintain a bank account during 2007 and

that he either cashed his paychecks or deposited them in petitioner’s Huntington

account. He further testified that he routinely paid a portion of the household

expenses and that petitioner had unrestricted access to a safe in the couple’s home

where he stored cash.
                                        -5-

      Petitioner denied that intervenor gave her any money to pay household

expenses or that the couple had a safe where intervenor stored cash.

IV. Joint Tax Return for 2007

      The parties do not dispute that petitioner and intervenor filed a joint Form

1040, U.S. Individual Income Tax Return, for 2007. The return was filed

electronically on April 7, 2008. Remarkably, however, neither petitioner nor

intervenor would admit at trial to having prepared and filed the return.

      The wages that petitioner earned from Robinson Memorial during 2007 are

reported on the return, and deductions for State and local taxes, mortgage interest,

gifts to charities, and unreimbursed employee business expenses attributable to

petitioner’s work as a registered nurse are claimed on Schedule A, Itemized

Deductions. Intervenor’s nonemployee compensation of $59,077 from Equity One

is omitted from the return.

      The return included a claim for a refund in respect of an overpayment of

$5,384. The IRS processed the return, and the $5,384 refund was electronically

deposited in petitioner’s Huntington account. Petitioner used the refund to pay

household expenses. Intervenor did not receive any of the refund.

      Petitioner testified that she provided her tax records for 2007 to intervenor

with the expectation that he would prepare and file a tax return on her behalf and
                                         -6-

that her filing status would be married filing separately. She further testified that

intervenor subsequently assured her that a proper return had been filed and that no

tax was due for 2007. Petitioner stated that she was not aware until sometime in

2009 that a joint return for 2007 had been filed or that a tax deficiency had been

determined for that year.

      Intervenor testified that he did not file the joint return for 2007. He further

testified that he did not receive a Form 1099-MISC, Miscellaneous Income, from

Equity One.4

V. Notice of Deficiency

      On September 28, 2009, respondent mailed to petitioner and intervenor a

joint notice of deficiency for 2007 determining a tax deficiency of $16,653 and an

accuracy-related penalty of $3,331. The explanation of adjustments attached to

the notice of deficiency shows that respondent included intervenor’s nonemployee

compensation from Equity One in gross income, accounted for certain

computational adjustments, and computed the deficiency on increased taxable




      4
        Although the parties do not dispute that Equity One issued a Form 1099-
MISC to intervenor for 2007, a copy of the Form 1099-MISC was not made a part
of the record, and there is no objective evidence as to when it was issued to
intervenor or the address to which it was sent.
                                           -7-

income of $56,001.5 The tax deficiency of $16,653 comprises additional income

tax of $8,306 and self-employment tax of $8,347.6

      Neither petitioner nor intervenor filed a petition for redetermination with the

Court challenging the notice of deficiency. Consequently, the IRS entered

assessments against petitioner for the tax deficiency and the accuracy-related

penalty determined in the notice of deficiency, along with statutory interest.

VI. Separation and Divorce

      As previously mentioned, petitioner and intervenor separated sometime in

the first half of 2008, and they were divorced on March 18, 2010. The record

includes a copy of the portion of the couple’s divorce decree which addresses their

tax matters. It states in relevant part:

      The parties shall file amended tax returns (Federal, State and local)
      for their 2007 income taxes. It is anticipated that such amended
      filing, with appropriate income corrections, will reduce the parties’
      2007 federal tax liability, (currently at approximately $21,355), as
      well as the 2007 State of Ohio tax liability (in the approximate
      amount of $73.46). Upon filing of the amended returns, and with all


      5
       Respondent allowed a deduction for self-employment tax of $4,174 but
reduced the deduction for miscellaneous items of $5,808 claimed on Schedule A
by $1,098.
      6
        Although the increased taxable income resulted in the elimination of the
additional child tax credit of $1,027 claimed on the return under sec. 24(d),
respondent increased the child tax credit under sec. 24(a) by a like amount
resulting in a wash as to that item.
                                        -8-

      appropriate corrections made, the parties shall equally divide and
      equally and promptly pay any outstanding tax liabilities for said tax
      year 2007. If the amended returns result in any tax refunds, the
      parties shall equally divide such refunds. Said amended tax returns
      shall be filed no later than May 1, 2010. If either party refuses to
      cooperate in such amended tax filing, and the tax filing is
      appropriately and legally prepared, he or she shall be liable for the
      full amount of the current outstanding tax obligations for tax year
      2007 (indemnifying and holding the other party harmless thereon).

      Petitioner testified that she contacted intervenor on several occasions to

attempt to prepare and file an amended tax return for 2007 but he would not

cooperate. Because she lacked information regarding intervenor’s income and

employment-related expenses, a fact that intervenor admitted at trial, petitioner

was unable to prepare the amended return on her own.

      Although intervenor testified that he filed an amended return for 2007, the

IRS had no record of receiving an amended return. Intervenor further testified that

he submitted an offer-in-compromise to the IRS in respect of his tax liability for

2007 but his offer was denied.

VII. Collection Activity and Petitioner’s Request for Spousal Relief

      On December 20, 2010, respondent mailed to petitioner and intervenor a

Final Notice of Intent to Levy and Notice of Your Right to a Hearing in respect of

their unpaid tax liability for 2007. On January 14, 2011, petitioner submitted to

the IRS a Form 8857, Request for Innocent Spouse Relief, seeking relief from
                                        -9-

joint and several liability for the taxable years 2007 and 2008.7 On January 19,

2011, petitioner submitted to the IRS a Form 12153, Request for a Collection Due

Process or Equivalent Hearing, indicating that she was seeking spousal relief.

      Petitioner’s statements in the Form 8857 are largely consistent with her

testimony at trial, and she asserted therein that intervenor should be solely

responsible for any income tax attributable to his nonemployee compensation.

Petitioner reported that she has a college degree in nursing, she was not a victim of

spousal abuse or domestic violence during 2007, she did not incur any large

expenses during the period in question, and she did not have a medical or physical

health problem at the time the return for 2007 was filed or at the time she

submitted the Form 8857. Petitioner included with the Form 8857 a schedule

showing that her monthly expenses exceeded her monthly income by $188.

      Petitioner testified that she will suffer economic hardship if she is denied

spousal relief for 2007. At the time of trial she was earning approximately

$42,000 to $45,000 per year, and she provided support for her 12-year-old

daughter who was living with her and attending public school. Although

intervenor was obliged to make child support payments of $200 per month to


      7
       Although petitioner’s Form 8857 includes a request for spousal relief for
the taxable year 2008, that matter is not before the Court in this proceeding.
                                         - 10 -

petitioner, she testified that he often failed to do so. Petitioner did not present any

objective evidence at trial in respect of her monthly expenses.

      Petitioner testified that she has been in compliance with her Federal income

tax obligations for all years after 2007. Petitioner’s account transcript for 2007

indicates that she had an overpayment of $6,590 for the taxable year 2009, and on

April 15, 2010, respondent applied that amount to her account for 2007.

VIII. Administrative Proceedings

      Petitioner’s claim for spousal relief and her request for review of the

proposed levy action initially were assigned to different IRS units. The unit

considering her claim for spousal relief made a preliminary determination in

March 2011 to grant partial relief. However, that decision was never finalized,

and the matter was referred to the Appeals Office for consideration in conjunction

with petitioner’s request for review of the proposed levy action.

      On September 28, 2011, intervenor submitted to the IRS a Form 12509,

Statement of Disagreement, alleging that he shared all of his earnings with

petitioner and that he and petitioner should share equal responsibility for any

unpaid income tax for 2007.

      The administrative proceeding concluded when the Appeals Office issued to

petitioner the notice of determination upon which the petition in this case is based.
                                        - 11 -

                                     Discussion

      Generally, married taxpayers may elect to file a joint Federal income tax

return. Sec. 6013(a). After making the election, each spouse is jointly and

severally liable for the entire tax due. Sec. 6013(d)(3); Butler v. Commissioner,

114 T.C. 276, 282 (2000). If certain requirements are met, however, an individual

may be relieved of joint and several liability under section 6015.

      The Court applies a de novo scope and standard of review in deciding

whether a taxpayer is entitled to relief under section 6015. See Wilson v.

Commissioner, 705 F.3d 980, 993-994 (9th Cir. 2013), aff’g T.C. Memo. 2010-

134; Porter v. Commissioner, 132 T.C. 203, 210 (2009). Except as otherwise

provided in section 6015, the taxpayer (requesting spouse) bears the burden of

proving entitlement to relief. Rule 142(a); Porter v. Commissioner, 132 T.C. at

210; Alt v. Commissioner, 119 T.C. 306, 311 (2002), aff’d, 101 Fed. Appx. 34

(6th Cir. 2004).

      Three forms of relief are available under section 6015. In general, section

6015(b) provides full or apportioned relief from joint and several liability for

understatements of tax on a return, section 6015(c) provides apportioned relief in

respect of a deficiency to taxpayers who are divorced or separated, and in certain
                                          - 12 -

circumstances section 6015(f) provides equitable relief from joint and several

liability if relief is not available under subsection (b) or (c).

I. Section 6015(b)

      To be eligible for relief under section 6015(b), the requesting spouse must

establish, inter alia, that the understatement of tax is attributable to erroneous

items of the nonrequesting spouse and, in signing the return, the requesting spouse

“did not know, and had no reason to know” of the understatement of tax. Sec.

6015(b)(1)(B) and (C). In cases involving omitted income, the requesting spouse

normally will have reason to know of an understatement if she had knowledge of

the transaction giving rise to the income. See Greer v. Commissioner, 595 F.3d

338, 346 (6th Cir. 2010), aff’g T.C. Memo. 2009-20; Cheshire v. Commissioner,

115 T.C. 183, 192-193 (2000), aff’d, 282 F.3d 326, 332-334 (5th Cir. 2002).

      The understatement of tax on the joint return for 2007 is attributable to the

omission of nonemployee compensation that intervenor received from Equity One.

Petitioner admittedly was aware that intervenor was compensated for work he

performed for Equity One during 2007, and she knew that “Some of his jobs were

cash jobs.” Therefore, even if petitioner was unaware of the exact amount that

intervenor earned during 2007, she had reason to know of the omitted income and

is not eligible for relief under section 6015(b).
                                        - 13 -

II. Section 6015(c)

      Under section 6015(c), a divorced or separated spouse may elect to limit

liability for a deficiency on a joint return to the portion allocable to him or her. A

taxpayer can make a valid election only if: (1) the taxpayer is divorced or is

legally separated from his or her spouse; (2) the taxpayer makes a timely election;

and (3) the Secretary does not demonstrate that the taxpayer had actual knowledge

at the time the taxpayer signed the return of an item giving rise to a deficiency or a

specific portion thereof. Sec. 6015(c)(3)(A), (B), and (C); see Cheshire v.

Commissioner, 115 T.C. at 195; Stergios v. Commissioner, T.C. Memo. 2009-15.

      Petitioner and intervenor were divorced at the time she submitted her claim

for spousal relief, and respondent does not dispute that her election for relief was

timely. Respondent asserts, however, that petitioner’s request for relief under

section 6015(c) is invalid because, at the time the joint return was filed, she had

actual knowledge of intervenor’s nonemployee compensation.

      The rules pertaining to a requesting spouse’s actual knowledge are set forth

in section 1.6015-3(c)(2), Income Tax Regs. See Cheshire v. Commissioner, 115

T.C. at 195 (the knowledge standard for purpose of section 6015(c)(3)(C) is an

actual and clear awareness of the existence of the item giving rise to the

deficiency). In the case of omitted income, knowledge of the item includes
                                       - 14 -

knowledge of the receipt of the income. Sec. 1.6015-3(c)(2)(i)(A), Income Tax

Regs. If a requesting spouse had actual knowledge of only a portion of an

erroneous item (including omitted income), then relief is not available for that

portion of the erroneous item. Sec. 1.6015-3(c)(2)(ii), Income Tax Regs. We do

not infer actual knowledge from a mere reason to know of the omitted income.

Sec. 1.6015-3(c)(2)(iii), Income Tax Regs.; see McDaniel v. Commissioner, T.C.

Memo. 2009-137.

      Although we conclude that petitioner had reason to know that intervenor

earned nonemployee compensation during 2007, we are not persuaded on this

record that she had an actual and clear awareness that Equity One paid him a total

of $59,077. The evidentiary record comes up well short of providing the Court

with a complete and accurate picture of the Zelaskos’ finances during 2007.

Neither petitioner’s testimony that intervenor shared none of his earnings with her,

nor intervenor’s testimony that he shared all with petitioner, impressed the Court

as completely candid and forthright, and there are no bank records that would

corroborate either story. The truth undoubtedly lies somewhere between the two

extremes. Considering all of the circumstances, we conclude that petitioner had

actual knowledge that intervenor earned at least $20,000 of nonemployee

compensation during 2007. It follows that petitioner’s section 6015(c) election is
                                        - 15 -

invalid in respect of so much of the deficiency as is attributable to $20,000 of

intervenor’s nonemployee compensation that was omitted from the joint return.

See sec. 1.6015-3(c)(4), Example (4)(iii), Income Tax Regs. (where the requesting

spouse knew that the nonrequesting spouse had income from his business but did

not know the exact amount, her section 6015(c) election was valid except insofar

as she knew the minimum amount of his earnings from the business).

Consequently, petitioner remains jointly and severally liable for so much of the

deficiency (self-employment tax and income tax) and the accuracy-related penalty

as is attributable to $20,000 of omitted nonemployee compensation.8

      Petitioner’s section 6015(c) election is valid, however, in respect of the

$39,077 balance of intervenor’s nonemployee compensation. We turn to the

question of the proper allocation of the portion of the deficiency and the accuracy-

related penalty under section 6662(a) attributable to the omission of $39,077 of

intervenor’s income from the joint return.




      8
        We expect the parties to compute the exact amount of petitioner’s joint and
several liability under Rule 155. Respondent must also account for the application
of petitioner’s tax refund of $6,590 for 2009 to her account for 2007.
                                        - 16 -

III. Allocation of the Deficiency

      Generally, a spouse who is eligible for relief under section 6015(c) is

allocated a portion of the joint return deficiency in proportion to the net amount of

items taken into account in computing the deficiency that is allocable to the

electing spouse. Sec. 6015(d)(1); see Hopkins v. Commissioner, 121 T.C. 73, 81

(2003). As an exception to this general rule, disallowed credits and taxes other

than income and alternative minimum tax (e.g., self-employment tax) are treated

separately in making this allocation, rather than being aggregated with all other

items to which the deficiency is attributable. Sec. 6015(d)(2). Aside from these

exceptions, any item giving rise to a deficiency on a joint return generally shall be

allocated to the individuals filing the joint return in the manner in which it would

have been allocated if the individuals had filed separate returns. Sec.

6015(d)(3)(A); see Hopkins v. Commissioner, 121 T.C. at 82-83.

      Erroneously omitted items of income normally are allocated to the spouse

who was the source of the income. Sec. 1.6015-3(d)(2)(iii), Income Tax Regs. An

exception arises, however, in respect of an item (in this context a disallowed

deduction or credit) that otherwise would be allocated to the nonrequesting spouse

to the extent that the requesting spouse received a tax benefit as a result of the

item on the joint return. Sec. 6015(d)(3)(B); sec. 1.6015-3(d)(2)(i), Income Tax
                                        - 17 -

Regs.; see Mora v. Commissioner, 117 T.C. 279, 293-294 (2001). Accuracy-

related or fraud penalties are allocable to the spouse whose item generated the

penalty. Sec. 1.6015-3(d)(4)(i)(B)(5), (iv)(B), Income Tax Regs.

      A. Tax Benefit

      As mentioned above, a tax benefit arises within the meaning of section

6015(d)(3)(B) if the requesting spouse reduces the amount of his or her tax by

claiming an erroneous deduction or credit. See sec. 1.6015-3(d)(5), Example

(5)(ii), Income Tax Regs. The omission of intervenor’s nonemployee

compensation from gross income on the joint return did not provide a tax benefit

of this sort to petitioner. Although the omission of intervenor’s nonemployee

compensation artificially inflated the amount of the additional child tax credit

reported on the joint return, see sec. 24(d), the disallowance of the additional child

tax credit in the notice of deficiency was wholly offset by an increase in the child

tax credit under section 24(a), resulting in a wash as to those items.

      B. Self-Employment Tax and Income Tax

      Although section 6015(d)(2) requires a separate allocation in respect of the

portion of a deficiency attributable to self-employment tax, so much of the

deficiency as is attributable to $39,077 of intervenor’s omitted nonemployee

compensation is allocated solely to intervenor whether the self-employment tax
                                         - 18 -

and the income tax portions of the deficiency are considered separately or

together. In short, in accordance with section 6015(d)(3)(A), intervenor’s omitted

income is allocated to intervenor as it would have been allocated if he had filed a

separate return for 2007. In the absence of an exception to the general rule, the

portion of the deficiency attributable to that item likewise is allocated to

intervenor. Sec. 6015(d)(1).

      C. Accuracy-Related Penalty

      Consistent with the preceding discussion, the portion of the accuracy-related

penalty attributable to $39,077 of intervenor’s omitted nonemployee compensation

also is allocated to intervenor. Sec. 1.6015-3(d)(4)(iv)(B), Income Tax Regs.

IV. Section 6015(f)

      Section 6015(f) grants the Commissioner discretion to relieve an individual

from joint liability, where relief is not available under section 6015(b) or (c), if,

taking into account all the facts and circumstances, it is inequitable to hold the

individual liable for any unpaid tax or deficiency. The Commissioner recently

prescribed revised guidelines in Rev. Proc. 2013-34, 2013-43 I.R.B. 397,

modifying and superseding Rev. Proc. 2003-61, 2003-2 C.B. 296, that are

considered in determining whether it is inequitable to hold a requesting spouse
                                        - 19 -

liable for all or part of the liability for any unpaid tax or deficiency.9 Although the

Court consults these guidelines when reviewing the Commissioner’s denial of

relief, see Washington v. Commissioner, 120 T.C. 137, 147-152 (2003), we are not

bound by them inasmuch as our analysis and determination ultimately turn on an

evaluation of all the facts and circumstances, see Pullins v. Commissioner, 136

T.C. 432, 438-439 (2011); Porter v. Commissioner, 132 T.C. at 210; Hudgins v.

Commissioner, T.C. Memo. 2012-260, at *39-*40.

      A. Threshold Conditions

      Rev. Proc. 2013-34, sec. 4.01, 2013-43 I.R.B. at 399, sets forth seven

threshold conditions that must be satisfied before the Commissioner will consider

a request for equitable relief under section 6015(f). There is no dispute that

petitioner satisfies each of the seven threshold conditions.

      B. Streamlined Determinations Granting Relief

      Rev. Proc. 2013-34, sec. 4.02, 2013-43 I.R.B. at 400, sets forth elements

that a requesting spouse must satisfy to qualify for a streamlined determination




      9
        Rev. Proc. 2013-34, sec. 7, 2013-43 I.R.B. 397, 403, makes the guidelines
effective for requests for relief filed on or after September 16, 2013, and requests
for equitable relief pending on September 16, 2013, whether before the IRS, the
Office of Appeals, or a Federal court.
                                         - 20 -

under section 6015(f).10 As is relevant here, petitioner does not qualify for

streamlined relief because (as discussed above) she had reason to know of the

omitted nonemployee compensation that gave rise to the deficiency.

      C. Facts and Circumstances Analysis

      Where a requesting spouse meets the threshold conditions but fails to

qualify for streamlined relief, the Commissioner may nevertheless grant relief after

considering the following nonexclusive list of factors set forth in Rev. Proc. 2013-

34, sec. 4.03, 2013-43 I.R.B. at 400: (1) whether the requesting spouse is

separated or divorced from the nonrequesting spouse; (2) whether the requesting

spouse will suffer economic hardship if relief is not granted; (3) whether on the

date the joint return was filed the requesting spouse did not know and had no

reason to know of the item giving rise to the understatement or deficiency; (4)

whether the requesting or nonrequesting spouse has a legal obligation to pay the

      10
         Rev. Proc. 2013-34, sec. 4.02, 2013-43 I.R.B. at 400, permits relief if all
the following elements are satisfied: (1) on the date the IRS makes its
determination, the requesting spouse is no longer married to, or is legally
separated from, the nonrequesting spouse, is a widow or widower and is not an
heir to the nonrequesting spouse’s estate that would have sufficient assets to pay
the tax liability, 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
the IRS makes its determination; (2) the requesting spouse will suffer economic
hardship if relief is not granted; and (3) on the date the joint return was filed, the
requesting spouse did not know or have reason to know of the item giving rise to
the understatement or deficiency.
                                        - 21 -

tax liability pursuant to a decree of divorce or other agreement; (5) whether the

requesting spouse received a significant benefit from the unpaid income tax

liability or understatement; and (6) whether the requesting spouse has made a

good-faith effort to comply with the Federal income tax laws for the taxable years

following the taxable year(s) to which the request for relief relates. Two

additional factors that the Commissioner may consider in favor of granting relief

are whether: (1) the nonrequesting spouse abused the requesting spouse, and (2)

the requesting spouse was in poor mental or physical health at the time the joint

return was filed or when the requesting spouse requested relief. See id. sec.

4.03(2)(c)(iv), (g), 2013-43 I.R.B. at 402, 403.

             1. Marital Status

      Petitioner and intervenor were divorced at the time the IRS issued its

determination. The marital status factor weighs in favor of relief.

             2. Economic Hardship

      Economic hardship exists if satisfying the tax liability in whole or part

would cause the requesting spouse to be unable to pay reasonable basic living

expenses.11 Sec. 301.6343-1(b)(4)(i), Proced. & Admin. Regs.; Rev. Proc. 2013-

      11
       A taxpayer’s ability to pay basic living expenses is determined by
considering, among other factors: the individual’s age, employment status and
                                                                     (continued...)
                                          - 22 -

34, sec. 4.03(2)(b), 2013-43 I.R.B. at 401. In analyzing the economic hardship

factor, we look to the taxpayer’s economic circumstances at the time of trial.

Porter v. Commissioner, 132 T.C. at 211 n.7.

      Petitioner testified that she will suffer economic hardship if relief is not

granted. She did not, however, offer any financial records at the time of trial to

corroborate her testimony. Considering the limited information in the record that

is relevant to this factor, including petitioner’s salary at the time of trial, we are

unable to conclude that petitioner will suffer economic hardship if relief is not

granted. See Sriram v. Commissioner, T.C. Memo. 2012-91. Consequently, the

economic hardship factor is neutral.

             3. Knowledge

      As previously discussed, we conclude that petitioner had reason to know of

intervenor’s nonemployee compensation and had actual knowledge that he




      11
         (...continued)
history, ability to earn, and number of dependents; the amount reasonably
necessary for food, clothing, housing, medical expenses, transportation, and
current tax payments; the cost of living in the geographic area in which the
taxpayer resides; and any extraordinary circumstances. See sec. 301.6343-
1(b)(4)(ii), Proced. & Admin. Regs. While an inquiry into the reasonableness of
basic living expenses considers the individual taxpayer’s unique circumstances, it
does not require an allowance to maintain affluent or luxurious standards of living.
See sec. 301.6343-1(b)(4)(i), Proced. & Admin. Regs.
                                           - 23 -

received compensation of $20,000 from Equity One during 2007. This factor

weighs against relief.

                4. Legal Obligation

          The divorce decree governing the termination of petitioner and intervenor’s

marriage provided that they would cooperate in filing an amended return for 2007

and share the liability equally. Intervenor admitted at trial that petitioner was not

in a position to prepare an amended tax return reporting his nonemployee

compensation and any deductions related thereto. We are not convinced that

intervenor made a good-faith effort to prepare and file an amended return. On this

record, we conclude that the legal obligation factor is neutral.

                5. Significant Benefit

          This factor calls for an evaluation of whether petitioner benefited, directly

or indirectly, from the understatement of tax. Sec. 1.6015-2(d), Income Tax Regs.

“A significant benefit is any benefit in excess of normal support.” Id. On this

record, we cannot say that petitioner received any benefit beyond normal support

in respect of intervenor’s nonemployee compensation and the understatement of

tax related thereto. We therefore conclude that this factor weighs in favor of

relief.
                                         - 24 -

              6. Compliance With Income Tax Laws

       Petitioner testified at trial that she has fully complied with her tax

obligations since 2007. Respondent asserted in his posttrial brief that petitioner

was late in filing her tax return for 2009. Although there is a passing reference to

this matter in the administrative record, there is no objective evidence to support

the assertion that petitioner has failed to comply with her tax obligations. This

factor weighs in favor of relief.

              7. Mental/Physical Health

       Petitioner was not in poor mental or physical health at the time the joint

return was filed or when she submitted her request for spousal relief. This factor

is neutral.

              8. Abuse

       Petitioner was not abused by intervenor in any way, and there is no evidence

that he attempted to rigidly control household finances or deny her access to

financial records. This factor is neutral.

       D. Conclusion

       Considering all the facts and circumstances, we are not persuaded that it

would be inequitable to deny petitioner spousal relief under section 6015(f). As

the preceding discussion shows, there are factors that weigh in favor of and
                                        - 25 -

against relief and several factors that are neutral. Our decision whether relief is

appropriate, however, is not based on a simple tally of those factors. See, e.g.,

Hudgins v. Commissioner, at *39-*40. Petitioner has obtained a significant

measure of relief under section 6015(c). Considering that she was aware of a

portion of the omitted income, and in the absence of economic hardship, we

conclude that it would not be inequitable to deny petitioner further relief under

section 6015(f).

      To reflect the foregoing,


                                                 Decision will be entered

                                        under Rule 155.
