                      T.C. Summary Opinion 2007-42



                        UNITED STATES TAX COURT



                 CONNIE J. MEADOWS, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 874-06S.                Filed March 15, 2007.


     Connie J. Meadows, pro se.

     Thomas L. Fenner, for respondent.



     JACOBS, Judge:    This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

at the time the petition was filed.    Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the year in issue.    Pursuant to section 7463(b), the
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decision to be entered is not reviewable by any other court, and

this opinion shall not be treated as precedent for any other case.

        This case involves innocent spouse relief for the amount of

tax shown as due on petitioner and her then husband’s joint 1999

income tax return that has not been fully paid.     Petitioner

contends that respondent’s allowance of only partial innocent

spouse relief was an abuse of discretion.     Consequently, we must

decide whether respondent abused his discretion in denying

petitioner innocent spouse relief under section 6015(f) for $1,815

of the $7,100 shown as the amount owed on the 1999 return.

                               Background

     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.     At the time of filing the petition,

petitioner resided in Houston, Texas.

     Petitioner and her husband at that time, Todd Meadows, timely

filed a joint Form 1040, U.S. Individual Income Tax Return, for

1999.     They reported Mr. Meadows’s wage income of $51,825.97 and

petitioner’s wage income of $39,455.81, together with other income

items such as a taxable distribution from a pension plan, interest

income, and dividend income.     Their total income for 1999 was

shown as $107,208.     The total tax shown was $20,395, with $7,100

owed (including a $256 estimated tax penalty).
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     Petitioner was and is a middle school teacher.    Mr. Meadows

was a property tax specialist employed by an energy company.    In

March of 2001 petitioner and Mr. Meadows divorced.    In June of

2001, respondent determined a deficiency of $5,464 in petitioner

and Mr. Meadows’s income tax for 1999 and issued a notice of

deficiency for a deficiency and a related penalty under section

6662(a).   Neither petitioner nor Mr. Meadows petitioned this Court

for a review of respondent’s determination, and respondent

assessed the deficiency and the related penalty.

     In August of 2004, petitioner requested innocent spouse

relief for the 1999 tax year pursuant to section 6015(c).

Respondent granted petitioner full relief with respect to the

deficiency in, and addition to, tax that had been assessed.

However, respondent denied relief under section 6015(f) for $1,815

of the unpaid liability shown on the joint 1999 tax return.

Respondent asserts that he is seeking recovery only of that part

of the tax liability shown on the joint return that is

attributable to the earnings of petitioner.

     Respondent issued a final notice of determination with

respect to petitioner’s request for innocent spouse relief under

section 6015 in November 2005.

                             Discussion

      Married couples may choose to file their Federal income tax

returns jointly.   Sec. 6013(a).   Couples filing joint returns are
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jointly and severally liable for the taxes due thereon.    Sec.

6013(d)(3).   Section 6015 provides relief from liability for

filers of joint returns in some circumstances.   Under section

6015(b), a spouse may seek relief for understatements of tax

attributable to certain erroneous items on a return.   Under

section 6015(c), the tax liability may be apportioned between two

former or separated spouses.   These provisions apply when there is

a deficiency in tax.   Petitioner was successful in obtaining

relief under section 6015(c) for the deficiency respondent

determined.

     In cases of underpayment, section 6015(f) applies.    Section

6015(f) provides, in part, that a taxpayer may be relieved from

joint and several liability if it is determined that, taking into

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

the taxpayer liable for the unpaid tax, and relief is not

available under section 6015(b) or (c).   If relief is denied, then

to prevail the taxpayer must prove that the Commissioner’s denial

of equitable relief from joint liability under section 6015(f) was

an abuse of discretion.    Butler v. Commissioner, 114 T.C. 276,

287-292 (2000).   The Court defers to the Commissioner’s

determination unless it is arbitrary, capricious, or without sound

basis in fact.    Jonson v. Commissioner, 118 T.C. 106, 125 (2002),

affd. 353 F.3d 1181 (10th Cir. 2003).   Whether the Commissioner’s

determination was an abuse of discretion is a question of fact.
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The requesting spouse bears the burden of proving that there was

an abuse of discretion.   Cheshire v. Commissioner, 115 T.C. 183,

198 (2000), affd. 282 F.3d 326 (5th Cir. 2002); Abelein v.

Commissioner, T.C. Memo. 2004-274.

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

prescribed guidelines in Rev. Proc. 2003-61, 2003-2 C.B. 296,

modifying Rev. Proc. 2000-15, 2000-1 C.B. 447, that are to be used

in determining whether it is inequitable to hold a requesting

spouse liable for all or part of the liability for any unpaid tax

or deficiency.   Respondent, in denying relief to petitioner,

applied guidelines found in Rev. Proc. 2000-15, supra, which we

will refer to as the superseded guidelines.   The superseded

guidelines were modified by guidelines found in Rev. Proc. 2003-

61, supra, which we will refer to as the applicable guidelines.

The applicable guidelines are effective as to requests for relief

filed on or after November 1, 2003, and for requests for relief

pending on November 1, 2003, as to which no preliminary

determination letter had been issued as of that date.   Rev. Proc.

2003-61, sec. 7, 2003-2 C.B. at 299.   Petitioner’s application for

relief was filed after November 1, 2003, on August 5, 2004.

Respondent’s determination letter was issued on November 10, 2005.

     According to section 4.01 in both sets of guidelines, the

requesting spouse must satisfy seven conditions (threshold

conditions) before the Commissioner will consider a request for
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relief under section 6015(f).    Rev. Proc. 2003-61, sec. 4.01,

2003-2 C.B. at 297; Rev. Proc. 2000-15, sec. 4.01, 2000-1 C.B. at

448.    The threshold conditions in the modified guidelines,

however, are different from the threshold conditions in the

superseded guidelines.    The modified guidelines contain a

threshold requirement that the income tax liability from which the

requesting spouse seeks relief be attributable to an item of the

individual with whom the requesting spouse filed the joint return

(with exceptions not applicable here).    Respondent, at trial and

in his pretrial memorandum, stated that petitioner satisfied the

threshold conditions, but when respondent made this concession, he

was referring to the threshold conditions found in the superseded

guidelines, which did not include the threshold requirement

pertaining to attribution.1

       Respondent contends that he is seeking to recover only that

portion of the 1999 tax liability that is attributable to the

earnings of petitioner.    Petitioner does not dispute that claim.

Consequently, pursuant to the applicable guidelines, innocent

spouse relief would be denied, because petitioner does not meet




        1
       This factor, attribution of the item generating the income
 tax liability, appears in sec. 4.03 of the superseded guidelines,
 rather than as a threshold requirement of sec. 4.01 of those
 guidelines. Therefore, respondent considered this factor in
 denying petitioner’s request for innocent spouse relief but did
 not regard it as a threshold condition.
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the threshold condition that the tax liability be attributable to

an item of the nonrequesting spouse.

     Although petitioner has not met the threshold requirements

for relief found in section 4.01 of the applicable guidelines, we

consider other factors to be taken into consideration when the

threshold requirements are met, because respondent, applying the

superseded guidelines, conceded that petitioner had met the

threshold conditions and denied petitioner’s claim for innocent

spouse relief on other bases.

     The applicable guidelines specify, in section 4.02, three

other conditions (assuming that the threshold conditions were met,

which respondent erroneously assumed was the case) that, if met,

will normally entitle the spouse to relief.    Rev. Proc. 2003-61,

sec. 4.02, 2003-2 C.B. at 298.    To qualify, petitioner must show

that:   (a) She is no longer married; (b) it was reasonable for her

to believe that Mr. Meadows would pay the reported tax liability;

and (c) she will suffer economic hardship if she is not granted

innocent spouse relief.   Economic hardship generally means that

the individual is unable to pay reasonable basic living expenses.2

     Petitioner showed that she and Mr. Meadows are divorced,

thereby satisfying the first condition.    However, we cannot find




        2
       See sec. 301.6343-1(b)(4), Proced. & Admin. Regs., referred
 to in the revenue procedure in making the determination of
 whether economic hardship is present.
                               - 8 -

that petitioner reasonably believed that Mr. Meadows would pay the

tax liability reported on the 1999 joint return.

      It appears from the record that petitioner filed tax returns

for at least the preceding 3 years as a married taxpayer filing

separately.   Petitioner testified that Mr. Meadows prepared those

returns for her and that she merely signed them.    On one occasion,

Mr. Meadows signed her name to the return.   Petitioner testified

that Mr. Meadows convinced her that it would be advantageous to

them to file a joint return for 1999, even though at the time the

return was due they were contemplating divorce.    Petitioner

asserts that at Mr. Meadows’s request, she signed the joint 1999

return while it was blank; i.e., before any figures appeared on

it.   Petitioner testified that in doing this, she “should have

known better than to trust” Mr. Meadows.   According to petitioner,

Mr. Meadows then filed the return, which showed the tax liability

and the balance still owed.   The address on the tax return was a

mailbox to which Mr. Meadows had access but petitioner did not.

Consequently, petitioner testified that she was unaware of any

further developments or correspondence from respondent pertaining

to the 1999 tax year and did not obtain a copy of the joint return

until respondent began collection efforts.

      Petitioner could not reasonably have believed that Mr.

Meadows would pay the reported tax liability because petitioner

was unaware they had any tax liability, having signed a blank
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return.   Petitioner testified that even though Mr. Meadows assured

her that he would properly manage their tax obligations, she was

aware that she could not trust him to actually do so.    Moreover,

petitioner testified that Mr. Meadows had always prepared and

filed her tax returns, both the joint and separate returns, and

that several years before 1999, respondent had garnished her

wages.

     Nothing in petitioner’s testimony establishes that petitioner

believed that Mr. Meadows would pay the reported tax liability.

Even if we could find (which we do not) that petitioner believed

that Mr. Meadows would pay the reported tax liability, we could

not find that her belief was reasonable.   On the contrary,

petitioner’s experience in relying on Mr. Meadows to pay income

taxes had resulted in the garnishing of her wages.

     Further, we do not find that petitioner will suffer economic

hardship if she is not granted innocent spouse relief.    The record

shows that petitioner earned more than $46,000 in 2005.    The

unpaid tax that respondent seeks to recover, including interest as

of the date of trial, is approximately $2,300.   Petitioner did not

provide any supporting documentation, but she testified that she

contributes to the support of her young adult children and her

elderly parents.   Even if we were persuaded that petitioner’s

living expenses include the cost of supporting adult children and

elderly parents, these costs were not quantified, and we cannot
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conclude from this record that petitioner will not be able to pay

her reasonable basic living expenses if she is not granted relief.

     In sum, assuming petitioner met the threshold requirements

found in section 4.01 of the modified guidelines, we conclude

petitioner does not qualify for relief because she did not meet

the additional requirements found in section 4.02 of the modified

guidelines.

     Where the requesting spouse meets the seven threshold

conditions set forth in section 4.01 of the modified guidelines,

but does not qualify for relief under section 4.02 of those

guidelines, we employ a balancing test to determine whether,

taking into account all the facts and circumstances, it would

nevertheless be inequitable to hold the requesting spouse liable

for all or part of the unpaid liability.   Section 4.03 of the

modified guidelines enumerates six nonexclusive factors that may

be considered in making this determination.

     Because respondent applied the superseded guidelines, he

considered petitioner’s request for relief in the light of eight

factors listed in section 4.03 of the superseded guidelines.     We

now examine section 4.03 of the modified guidelines, which
                                - 11 -

includes six factors to be considered.    A description of each

factor, underscored, and our evaluation of that factor in this

case, follows.3

     (a) Marital status.   The requesting spouse is separated or

divorced from the nonrequesting spouse.    Petitioner has shown that

she is divorced from Mr. Meadows.   This factor weighs in her

favor.

    (b) Economic hardship.    The requesting spouse will suffer

economic hardship if relief from the liability is not granted.

For reasons explained supra, we do not find that petitioner would

suffer economic hardship if relief were not granted.    This factor

weighs against her.

    (c) Knowledge or reason to know.     In the case of an income tax

liability that was properly reported but not paid, whether the

requesting spouse did not know and had no reason to know that the

nonrequesting spouse would not pay the income tax liability.      We

are unable to determine petitioner’s actual knowledge as to

whether her husband would pay the tax shown on their joint return

for 1999.    Indeed, because she signed the return in blank, we are


         3
       In addition to these six factors, the superseded guidelines
 included as a factor in sec. 4.03 whether the income tax
 liability was attributable to an item of the nonrequesting
 spouse. As explained supra note 1, this factor is a threshold
 requirement found in sec. 4.01 of the modified guidelines. In
 addition, the superseded guidelines included spousal abuse as a
 factor to be considered in sec. 4.03. That factor is part of the
 threshold considerations of sec. 4.01 in the modified guidelines;
 the parties agree that there was no such abuse in this case.
                                - 12 -

unable to say whether petitioner knew that any tax was due.

However, if petitioner was aware that any tax was due, on the

basis of past experience she would have had reason to believe that

her husband might not pay the tax liability.    It is also true that

the address shown on the return was a business mailbox to which

petitioner did not have access, so that she was not aware of any

correspondence between respondent and Mr. Meadows after the filing

of the return.    This factor weighs neither in favor of nor against

petitioner.

     (d) Nonrequesting spouse’s legal obligation. Whether the

nonrequesting spouse has a legal obligation to pay the outstanding

income tax liability pursuant to a divorce decree or agreement.

This factor will not weigh in favor of relief if the requesting

spouse knew or had reason to know, when entering into the divorce

decree or agreement, that the nonrequesting spouse would not pay

the income tax liability.    Petitioner’s divorce decree assigns

responsibility for all Federal income tax liability from the date

of marriage through December 31, 2001, to Mr. Meadows.    We are

unable to determine petitioner’s actual knowledge, at the time

of the decree, as to whether Mr. Meadows would pay the income tax

liability.    On the basis of past experience, petitioner had reason

to believe that her husband would not pay the income tax

liability.    This factor weighs neither in favor of nor against

petitioner.
                                    - 13 -

     (e) Significant benefit.       Whether the requesting spouse

received significant benefit (beyond normal support) from the

unpaid income tax liability.        Petitioner credibly testified that

she received no gifts or other benefits from the unpaid tax

liability.        Mr. Meadows did not honor his child support

obligations under the divorce decree and at one point simply

remained out of touch with his family for 2 years.        This factor

weighs in favor of petitioner.

     (f) Compliance with income tax laws.       Whether the requesting

spouse has made a good faith effort to comply with income tax laws

in the taxable years following the taxable year to which the

request for relief relates.        Petitioner filed a tax return for the

2000 tax year, but did not file tax returns for any subsequent

years.        Petitioner testified that the reason for her failure to

file was that she believed she was owed a tax refund with respect

to the 2000 tax year which, according to her accountant, would

have been jeopardized by subsequent filings that might have shown

tax due.        In other words, petitioner admitted that she might owe

taxes for years after 2000, as she had owed taxes for some years

before 1999, and that the Government might offset her claimed

refund for the 2000 tax year against taxes owed for subsequent tax

years.4


          4
        We note that petitioner’s youngest child, for whom she
  claimed the child tax credit in 1999, attained the age of 17 in
                                                     (continued...)
                               - 14 -

     Petitioner testified that she relied on her accountant, who

is a certified public accountant.   Petitioner further testified

that she provided her accountant with the necessary information

for him to prepare returns and that she believed her accountant

had requested extensions of the time to file.     We are not

satisfied that petitioner’s actions amounted to a good faith

effort to comply with income tax laws.   Even giving petitioner the

benefit of the doubt that she relied on, or more likely

misunderstood, her accountant’s advice, petitioner was certainly

aware of the obligation to file income tax returns, which she did

for 2000, the tax year for which she believed she was entitled to

a refund.   Her understanding (or, more likely, misunderstanding)

of her accountant’s advice with respect to later years amounts to

an endorsement of a strategy of preventing the Government from

applying the refund she expected with respect to the 2000 tax year

to a tax that she might owe in later years.     This does not

constitute a good faith effort to comply with income tax laws.

Consequently, this factor weighs against petitioner.

     Not all the factors in section 4.03 of the modified

guidelines weigh against petitioner, just as not all of the

factors in section 4.01 or 4.02 of the modified guidelines weigh

against her.   However, because we find that:    Respondent is


     4
     (...continued)
 2001; petitioner was therefore not entitled to this tax credit
 for years after 2000.
                                 - 15 -

seeking to collect the portion of the 1999 income tax that is

attributable to petitioner; petitioner did not in good faith

believe that Mr. Meadows would pay the income tax owed; petitioner

has not shown that she would suffer economic hardship if relief

were not granted; and petitioner did not make a good faith effort

to comply with income tax laws in subsequent years, we conclude

that respondent did not abuse his discretion in denying innocent

spouse relief to petitioner under section 6015(f).

     To reflect the foregoing,



                                          Decision will be entered

                                     for respondent.
