                  T.C. Memo. 2005-22



                UNITED STATES TAX COURT



           CHARMA GATLIN COOK, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 17166-02.            Filed February 10, 2005.



     R determined a deficiency in Federal income tax
with respect to the joint return for 1998 made by P and
her then husband (which determination P did not
contest); R denied P’s subsequent request for relief
from joint and several liability under I.R.C. sec.
6015(b), (c), or (f).

     1. Held: P is eligible to elect relief under
I.R.C. sec. 6015(c), and R has failed to nullify the
election by demonstrating that she had actual knowledge
at the time she signed the joint return of the item
giving rise to the deficiency.

     2. Held, further, R erred in denying P relief
under I.R.C. sec. 6015(c).

     3. Held, further, P has no liability for the
deficiency.
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     Charma Gatlin Cook, pro se.

     Robert W. West III and Linda J. Wise, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     HALPERN, Judge:    This case is before the Court to review

respondent’s denial of petitioner’s request for relief from joint

and several liability on the joint return of income for 1998 made

by petitioner and her then husband.     For the reasons stated, we

shall grant petitioner that relief.

     Unless otherwise stated, all section references are to the

Internal Revenue Code as currently in effect.

                           FINDINGS OF FACT

     Some facts have been stipulated and are so found.    The

stipulation of facts, with accompanying exhibits, is incorporated

herein by this reference.

Residence

     At the time the petition was filed, petitioner resided in

Ellisville, Mississippi.

Petitioner’s Marriage

     Petitioner married M. Duane Spruill in May 1996.    The

Spruills separated in June 1999, and they were divorced on May 2,

2000.
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1998 Tax Year

     For their 1998 taxable (calendar) year, the Spruills made a

joint return of income (the 1998 return), reporting, principally,

salary earned by petitioner and business income earned by Mr.

Spruill.

     Petitioner’s salary derived from two employers.   During the

first 2 months of 1998, she worked in the audit department of

West Quality Food Service (West), where she oversaw West’s

numerous bank accounts, assisted with inventories, cleared

checks, and handled other miscellaneous tasks.   For a short

period during those 2 months, she supervised West’s accounts

payable department.   During the remainder of 1998, she worked for

the City of Ellisville, Mississippi, in the water department,

where she performed billing services.

     Mr. Spruill’s business income derived from his self-

employment as a contract oil well pumper.   Mr. Spruill owned

neither a computer nor a typewriter, and petitioner assisted Mr.

Spruill in his business by hand-writing invoices.   She prepared

the invoices on the basis of information received from Mr.

Spruill and, at the end of each month, she prepared a summary of

invoices that Mr. Spruill gave to his accountant.   Petitioner did

not see the moneys collected against those invoices, nor did she

see any record of the bank deposits made by Mr. Spruill from

those collections.    She was not a signatory with respect to Mr.
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Spruill’s business or personal bank accounts.    Petitioner was not

in a position to insist upon examining Mr. Spruill’s business

receipts, deposits, and income, as he subjected petitioner to

physical and emotional abuse throughout their marriage.

Income Tax Deficiency

      On November 9, 2000, following an examination of the 1998

return, respondent determined a deficiency in the Spruills’ 1998

income tax liability of $1,943 (the deficiency).    The deficiency

resulted principally from the omission from the return of an item

of business income received by Mr. Spruill: $6,907 of gross

receipts from Thunder Alley Joint Venture (the Thunder Alley

receipts).   Petitioner did not contest the deficiency, but, on

December 12, 2000, she did request relief from liability for the

deficiency as a so-called innocent spouse.    On August 15, 2002,

respondent issued a notice of final determination (the notice)

denying petitioner’s request for innocent spouse relief.

Petition

      On October 30, 2002, petitioner timely filed a petition

seeking our review of the notice.

                              OPINION

I.   Introduction

      As a general rule, spouses filing joint Federal income tax

returns are jointly and severally liable for all taxes shown on

the return or found to be owing.    Sec. 6013(d)(3).   In certain
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situations, however, a joint return filer can avoid joint and

several liability by qualifying for relief therefrom under

section 6015.    There are three types of relief available under

section 6015: (1) full or apportioned relief under section

6015(b); (2) proportionate relief for divorced or separated

taxpayers under section 6015(c); and (3) equitable relief under

section 6015(f), when relief is unavailable under either section

6015(b) or (c).    Petitioner seeks relief, alternatively, under

all three sections.    Respondent has failed to carry his burden of

proof with respect to a factual issue necessary to deny

petitioner relief under section 6015(c).    Consequently, we grant

petitioner relief under section 6015(c), and we do not address

her claims for relief under section 6015(b) and (f).

II.   Section 6015(c) Relief

      A.   Requirements for Eligibility

      We have described section 6015(c) as functioning to:

“[relieve] the requesting spouse of liability for the items

making up the deficiency that would have been allocable solely to

the non-requesting spouse if the spouses had filed separate tax

returns for the taxable year.”     Mora v. Commissioner, 117 T.C.

279, 290 (2001).    In order to obtain relief under section

6015(c), the party seeking relief (the requesting spouse) must

satisfy certain requirements.    Specifically, the return for which

relief is sought must be a joint return, sec. 6015(c)(1); the
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requesting spouse must timely file an election for relief, sec.

6015(c)(3)(B); and, at the time the election is filed, she must

no longer be married to, or must be legally separated or living

apart from, the individual with whom the requesting spouse filed

the joint return (the nonrequesting spouse), sec.

6015(c)(3)(A)(i).    Petitioner satisfies those requirements.

Additionally, relief is available to the requesting spouse only

for that portion of the deficiency properly allocable to the

nonrequesting spouse.    Sec. 6015(c)(1), (d).   Respondent concedes

that the deficiency is entirely allocable to Mr. Spruill, and we

so find.

     B.    Actual Knowledge

     A requesting spouse who meets the above requirements may yet

be denied relief under section 6015(c) if the Commissioner can

demonstrate that, at the time the requesting spouse signed the

joint return, she had actual knowledge of any item giving rise to

a deficiency (or portion thereof) that is not allocable to her.

Sec. 6015(c)(3)(C).    Both this court and the Court of Appeals for

the Fifth Circuit, the Court of Appeals to which an appeal in

this case would lie, barring the parties’ stipulation to the

contrary, see sec. 7482(b), have defined culpable knowledge for

purposes of sec. 6015(c)(3)(C) as the actual and clear awareness

of the item, as distinguished from mere reason to know of the

item.   Cheshire v. Commissioner, 282 F.3d 326, 337 & n.26 (5th
                                 - 7 -

Cir. 2002), affg. 115 T.C. 183, 195 (2000).    In various

circumstances, we have found that the information available to a

taxpayer as to the source of income was insufficient to supply

her with actual knowledge of the item of omitted income.       See,

e.g., Charlton v. Commissioner, 114 T.C. 333, 341 (2000); Rowe v.

Commissioner, T.C. Memo. 2001-325; Martin v. Commissioner, T.C.

Memo. 2000-346.   Indeed, the Secretary of the Treasury, in his

regulations interpreting section 6015, has drawn the same

distinction between reason to know and actual knowledge.       See

sec. 1.6015-3(c)(2)(iii), Income Tax Regs. (“Knowledge of the

source of an erroneous item of income is not sufficient to

establish actual knowledge.”).    The effective date of those

regulations, however, precludes their application to this case.

Sec. 1.6015-9, Income Tax Regs. (applicable for elections under

section 1.6015-3, Income Tax Regs., filed on or after July 18,

2002).

     To demonstrate petitioner’s knowledge of Mr. Spruill’s

receipt of the omitted item of business income (the Thunder Alley

receipts), respondent proposes two findings of fact:     (1)

Petitioner prepared the invoices for Mr. Spruill’s business and

the monthly summary of those invoices, and (2) she had knowledge

of the billings specifically corresponding to the Thunder Alley

receipts.   While we have made a finding equivalent to

respondent’s first proposed finding of fact, and respondent’s
                                - 8 -

second proposed finding might fairly be presumed, together those

two proposed findings demonstrate no more than that petitioner

had knowledge of the source of the unreported Thunder Alley

receipts or, perhaps, had reason to know that Mr. Spruill might

have received those receipts.   We cannot conclude on the basis of

those proposed findings of fact that petitioner had actual

knowledge of the omitted Thunder Alley receipts.

     It may well have been that, in order properly to prepare her

husband’s invoices and monthly summaries thereof, petitioner had

some knowledge of which customers had paid invoiced amounts, of

whether balances remained on some accounts, and of those

customers to which she would need to send further invoices.    From

evidence of such knowledge, we might be able to conclude that

petitioner had actual knowledge of the omitted Thunder Alley

receipts.   The record, however, is bare of such evidence.

Petitioner appeared at trial and testified; respondent’s counsel

examined her, but she did not inquire as to the details of the

invoicing procedures.   Respondent did not call Mr. Spruill.

Respondent has failed to prove that, at the time petitioner

signed the 1998 joint return, she had actual knowledge of the

omission of the Thunder Alley receipts.

     C.   Conclusion

     Petitioner was eligible to elect relief under section

6015(c), and respondent has failed to nullify the election by
                                   - 9 -

demonstrating that she had actual knowledge at the time she

signed the joint return of the item giving rise to the

deficiency.

III.    Conclusion

       Respondent erred in denying petitioner relief under section

6015(c).    Petitioner has no liability for the deficiency.

       To reflect the foregoing,


                                                Decision will be entered

                                           for petitioner.
