                  T.C. Summary Opinion 2004-37



                     UNITED STATES TAX COURT



               KATHLEEN E. GILLIAM, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5717-03S.             Filed March 24, 2004.


     Kathleen E. Gilliam, pro se.

     Steven M. Webster, for respondent.



     PANUTHOS, Chief Special Trial 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.    The

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

this opinion should not be cited as authority.   Unless otherwise

indicated, all section references are to the Internal Revenue

Code in effect for the taxable year in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure.
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     Respondent determined a deficiency in petitioner’s Federal

income tax for the taxable year 2000 of $668.    The issues for

decision are:   (1) Whether petitioner is entitled to relief under

section 6015(b) or (c); and (2) whether respondent abused his

discretion in denying petitioner’s request for relief from joint

and several liability under section 6015(f).

                             Background

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in Lexington, North Carolina, at the time she

filed the petition herein.

     Petitioner was married to Max Gilliam in 1992.    In July

2000, Mr. Gilliam and petitioner separated.    Petitioner remained

in the marital residence until sometime in 2001.    Sometime in

2002 Mr. Gilliam and petitioner were divorced.

     During the taxable year 2000, Mr. Gilliam received wages of

$18,034, and petitioner received wages from three separate

employers totaling $4,464.   Petitioner filed a joint Federal

income tax return with Mr. Gilliam for the taxable year 2000

sometime in January 2001.    The joint return was prepared by Mr.

Gilliam and signed by both petitioner and Mr. Gilliam.    The

return reported wage income of $18,034.   Attached to the return

were four Forms W-2, Wage and Tax Statement.    One of the Forms W-

2, reflecting wages of $18,034, was issued to Mr. Gilliam.      The
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other three Forms W-2, reflecting total wages of $4,464, were

issued to petitioner.

     The Form W-2 issued to Mr. Gilliam reflects withholding of

$1,077.   The three Forms W-2 issued to petitioner reflect zero

withholding.   The Federal income tax return for 2000 reflected a

refund of $1,077.   Petitioner and Mr. Gilliam received the refund

check and divided the proceeds.

     After the separation and divorce, petitioner earned small

amounts of income from wages.   Petitioner has experienced

economic hardship since her separation and divorce.

     Respondent determined in a notice of deficiency that

petitioner and Mr. Gilliam omitted $4,464 in wage income from

their jointly filed 2000 Federal income tax return.    In her

petition, petitioner does not dispute the omitted income but

rather asserts that she is entitled to relief under section 6015

because she did not prepare the return and did not know that her

wage income was omitted from the return.

                             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).   A spouse may seek relief from

joint and several liability under section 6015.    A spouse may

qualify for relief from liability under section 6015(b), or if
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eligible, may allocate liability under section 6015(c).   In

addition, if relief is not available under section 6015(b) or

(c), an individual may seek equitable relief under section

6015(f).   Fernandez v. Commissioner, 114 T.C. 324, 329-331

(2000); Butler v. Commissioner, 114 T.C. 276, 287-292 (2000).

      Except as otherwise provided in section 6015, petitioner

bears the burden of proof.   Rule 142(a); Alt v. Commissioner, 119

T.C. 306, 311 (2002).

1.   Section 6015(b)

      Section 6015(b) provides relief from joint and several

liability for tax (including interest, penalties, and other

amounts) to the extent that such liability is attributable to an

understatement of tax.   To be eligible for relief, the requesting

spouse needs to satisfy the following five elements of section

6015(b)(1):

      (A) A joint return has been made for a taxable year;

      (B) on such return there is an understatement of tax

attributable to erroneous items of one individual filing the

joint return;

      (C) the other individual filing the joint return

establishes that in signing the return he or she did not know,

and had no reason to know, that there was such an understatement;

      (D) taking into account all the facts and circumstances, it

is inequitable to hold the other individual liable for the
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deficiency in tax for the taxable year attributable to the

understatement; and

      (E) the other individual makes a valid election.

      With respect to the last three elements, petitioner is not

the “other individual” described in section 6015(b)(1).

Petitioner received wages from three separate employers but did

not report those wages on the joint return.    There is no clear

explanation why petitioner’s income was omitted from the joint

return.   The only wages reported were those of Mr. Gilliam.

Petitioner cannot be granted relief for understatements that are

attributable to her own erroneous items.    See Hopkins v.

Commissioner, 121 T.C. 73, 77 (2003).     We agree with respondent

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

2.   Section 6015(c)

      Section 6015(c) allows a taxpayer who is eligible and so

elects to limit his or her liability to the portion of a

deficiency that is properly allocable to the taxpayer as provided

in section 6015(d).    Sec. 6015(c)(1).   In the present case, the

item giving rise to the deficiency is the income earned and

received by petitioner that was not reported on the return.

Thus, the entire deficiency is properly allocable to petitioner,

and section 6015(c) is of no assistance to her.    We agree with

respondent that petitioner is not entitled to relief under

section 6015(c).
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3.   Section 6015(f)

      Since petitioner is not entitled to relief under section

6015(b) or (c), we consider whether petitioner qualifies for

relief under section 6015(f), after a trial de novo and using an

abuse of discretion standard.   See Ewing v. Commissioner, 122

T.C. __ (2004); Fernandez v. Commissioner, supra at 328-329;

Butler v. Commissioner, supra at 287-292.   Petitioner bears the

burden of proving that respondent’s denial of equitable relief

under section 6015(f) was an abuse of discretion.   See Rule

142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002).

Petitioner must demonstrate that respondent exercised his

discretion arbitrarily, capriciously, or without sound basis in

fact or law.   See Jonson v. Commissioner, 118 T.C. 106, 125

(2002), affd. 353 F.3d 1181 (10th Cir. 2003); Woodral v.

Commissioner, 112 T.C. 19, 23 (1999).

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

prescribed procedures for determining whether a spouse qualifies

for relief under subsection (f).   The applicable provisions are

found in Rev. Proc. 2000-15, 2000-1 C.B. 447.1   We have upheld




      1
        This revenue procedure was superseded by Rev. Proc. 2003-
61, 2003-32 I.R.B. 296, which is effective either for requests
for relief filed on or after Nov. 1, 2003, or for requests for
relief pending on Nov. 1, 2003, for which no preliminary
determination letter has been issued as of Nov. 1, 2003. Id.
sec. 7, 2003-32 I.R.B. at 299.
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 the procedures in reviewing a determination.     Washington v.

Commissioner, 120 T.C. 137, 147-152 (2003).

     Rev. Proc. 2000-15, sec. 4.01, 2000-1 C.B. at 448, provides

seven threshold conditions that must be satisfied before the

Commissioner will consider a request for equitable relief under

section 6015(f).   Respondent does not raise any argument with

respect to these seven threshold conditions, and therefore, we

presume that they have been satisfied and consider other

provisions of the revenue procedure.

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

forth positive and negative factors that are to be considered in

determining whether to grant relief.     The revenue procedure makes

clear that no single factor is to be determinative in any

particular case, that all factors are to be considered and

weighed appropriately, and that the list of factors is not

intended to be exhaustive.

     a. Factors Against Relief

     We first review each of the following six factors weighing

against relief, as listed under Rev. Proc. 2000-15, sec. 4.03(2),

2001-1 C.B. at 449.

        i.    Attributable to Nonrequesting Spouse

     The liability for which relief is sought is not solely

attributable to petitioner.   This factor is squarely against

petitioner.
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         ii.     Knowledge, or Reason To Know

     Petitioner was aware of her income.        She claims to be

unaware that her income was omitted from the joint return that

her husband prepared.      The spouse seeking relief knows of an

understatement of tax if she knows of the transaction that gave

rise to the understatement.      Purcell v. Commissioner, 826 F.2d

470, 473-474 (6th Cir. 1987), affg. 86 T.C. 228 (1986).        A

taxpayer seeking to prove that she had no knowledge or reason to

know of an item giving rise to the understatement of tax must

demonstrate that she has fulfilled a “duty of inquiry” with

respect to determining that the correct tax liability was

reported on the return.      Stevens v. Commissioner, 872 F.2d 1499,

1505 (11th Cir. 1989), affg. T.C. Memo. 1988-63; Butler v.

Commissioner, 114 T.C. at 284; Cohen v. Commissioner, T.C. Memo.

1987-537.      Given that the return was rather straightforward,

requiring only the reporting of wage income with petitioner’s

Forms W-2 attached, we find it difficult to believe that

petitioner did not know or have reason to know that her wage

income was not reported on the return.      This factor is also

squarely against petitioner.

         iii.     Significant Benefit

     Petitioner benefited in that she received a portion of the

refund which resulted from the withholding from Mr. Gilliam’s

wages.   The overpayment and ultimate refund would have been
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reduced if petitioner’s wages had been properly reported on the

return.

          iv.    Lack of Economic Hardship

     It appears that petitioner does suffer from some economic

hardship and no doubt will suffer further if she is not relieved

of the liability.     Her income in subsequent years appears to be

minimal.

          v.    Noncompliance With Federal Income Tax Laws

     The requesting spouse must make a good faith effort to

comply with Federal income tax laws in the tax years following

the tax year or years to which the request for relief relates.

In the present case, the record is silent on this issue.

          vi.    Requesting Spouse’s Legal Obligation

     Petitioner did not have any legal obligation pursuant to a

divorce decree to pay the liability.

     b.    Factors In Favor of Relief

     Counterbalancing the factors weighing against relief are the

factors weighing in favor of relief.      We next review each of the

following six factors, as listed under Rev. Proc. 2000-15, sec.

4.03(1), to evaluate whether they serve as a makeweight for

equitable relief under section 6015(f).

          i.    Marital Status

     Petitioner is separated and divorced from Mr. Gilliam.
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        ii.    Economic Hardship

     As indicated above, petitioner may well suffer economic

hardship if relief is not granted.

        iii.     Abuse

     There is nothing in the record indicating that petitioner

was subject to abuse.

        iv.     No Knowledge or Reason To Know

     As indicated above, petitioner knew or should have known

that her wages were not included on the tax return.

        v.     Nonrequesting Spouse’s Legal Obligation

     There is nothing in the record indicating whether Mr.

Gilliam, the nonrequesting spouse, had a legal obligation

pursuant to the divorce decree or agreement to pay the

outstanding tax liability.

        vi.    Attributable to Requesting Spouse

     As indicated above, the omitted item of income was that of

petitioner.

     Having considered the facts and circumstances in this case,

especially in light of the factors in Rev. Proc. 2000-15, sec.

4.03, we conclude that petitioner is not entitled to relief under

section 6015(f).    While some of the factors are neutral, many of

the factors weigh against relief.    In particular, the omitted

items of income and the understatement resulting therefrom are

attributable to petitioner, rather than Mr. Gilliam.     In
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addition, and as discussed above, petitioner had knowledge

(actual or constructive) of the understatement of tax on the

return.   Accordingly, we conclude that respondent did not abuse

his discretion in denying relief under section 6015(f).

                             Conclusion

     We hold that petitioner is not entitled to relief under

section 6015(b) or (c) and that respondent did not abuse his

discretion in denying relief from joint and several liability

under section 6015(f).   We sustain respondent’s determination of

a deficiency in this case.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                            Decision will be entered

                                        for respondent.
