                  T.C. Summary Opinion 2011-66



                     UNITED STATES TAX COURT



                   LEE ANN SUTHER, Petitioner,
                AND MARC V. SUTHER, Intervenor v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11413-09S.              Filed June 6, 2011.



     Lee Ann Suther, pro se.

     Marc V. Suther, pro se.

     Laura A. Price, 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 when the petition was filed.   Pursuant to

section 7463(b), 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.   Unless otherwise indicated,
                               - 2 -

subsequent section references are to the Internal Revenue Code,

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

     This proceeding was commenced under section 6015 for review

of respondent’s determination that petitioner is not entitled to

relief from joint and several liability with respect to an

underpayment of Federal income tax reported on a joint Federal

income tax return filed for 2001.

                            Background

     Some of the facts have been stipulated1 and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   Petitioner resided in

Florida at the time the petition was filed.

     Petitioner and intervenor were married in 1984.   At the time

of trial petitioner was a business analyst for a computer

programming company.   Intervenor has owned several businesses2

and in some years owned more than one business at a time.

     Intervenor did not maintain books and records for the

businesses in 2001 but retained some receipts.   Petitioner did


     1
      Petitioner and respondent executed the stipulation of
facts. Intervenor refused to sign the stipulation of facts.
     2
      The record reflects the following businesses: Midwest
Appliance, Computer Navigations, Spylink, Envoy, MBoy, Telesoft,
Genco, an unnamed business operated through ebay, and PointsPro.
Petitioner and intervenor agreed that at some point intervenor
operated at least four separate businesses which centered around
Computer Navigations.
                                - 3 -

not participate in any of intervenor’s business enterprises in

2001.    In some years petitioner assisted in bookkeeping, but she

did not regularly participate in any of the activities in 2001.

     Intervenor was arrested in early 2002.     Petitioner and

intervenor obtained a second mortgage on the marital home and

incurred credit card debt3 to pay some of the costs involved in

intervenor’s defense.    Intervenor was ultimately convicted of

sexual battery of a third party in June 2002.     While

incarcerated,4 intervenor elected to participate in an accounting

class.    Although petitioner and intervenor remained married

throughout intervenor’s incarceration and after his release,

their marriage deteriorated in late 2007.     Petitioner and

intervenor separated in September 2007.     A final judgment of

dissolution of marriage was entered by the Hillsborough County,

Florida Circuit Court in November 2008.

     The court judgment allocated various assets and liabilities

between petitioner and intervenor.      Petitioner was allocated bank

accounts in her name, the marital home, her retirement accounts,

and an automobile.    Intervenor was allocated his business(es),5


     3
      The credit card was in petitioner’s name. The record
reflects that petitioner is solely responsible for the first and
second mortgages and the credit card debt.
     4
      The record does not reveal the dates of intervenor’s
incarceration.
     5
        The final judgment of dissolution of marriage lists
                                                     (continued...)
                                - 4 -

some personal property, two automobiles, and a motorcycle.

Petitioner was also allocated approximately $306,000 of debt,

including the first and second mortgages on the marital home, all

of the credit card debt (including credit card debt in the name

of intervenor’s business Computer Navigations), and all of the

tax debt.    Intervenor was allocated about $23,000 of debt,

comprising loans from his family to help pay for his criminal

defense.    The court’s final judgment of dissolution of marriage

stated:    “Husband was routinely less than forthcoming in this

case and not always completely credible.    Accordingly, there

shall be no equalizing payment owed by the Wife and it will be

presumed that the Husband is actually a bit better off in assets

than * * * [the allocation] might suggest.”

The 2001 Return

     Petitioner and intervenor did not timely file their 2001

Federal income tax return.    Some time after the 2001 tax year,

intervenor estimated that $4,000, together with petitioner’s

withholding, would be sufficient to pay the 2001 tax liability.

As a result of intervenor’s estimate, petitioner made a $4,000

payment on the due date of the 2001 return, with the intention of

preparing and filing the return after intervenor’s criminal



     5
      (...continued)
Computer Navigations as his only business, but the record
reflects that he owned multiple businesses at the time of the
divorce.
                                - 5 -

proceeding had concluded.   Petitioner and intervenor did not file

their 2001 return until 2007.

     Petitioner and intervenor also failed to timely file Federal

income tax returns for 2002, 2003, 2004, and 2005.   In 2007

petitioner and intervenor met with the Internal Revenue Service

(IRS) with regard to their delinquent returns.   Petitioner and

intervenor agreed with the IRS that they would file their

delinquent returns over a period of time.

     Petitioner and intervenor had the returns for 2001 through

2005 prepared by a certified public accountant (C.P.A.).

Intervenor also hired a tax attorney.   In gathering documentation

for the return preparation, petitioner recorded the receipts onto

a spreadsheet, and she and intervenor turned over all of the

records and receipts to the C.P.A.

     The 2001 return reflected petitioner’s salary and

withholding, intervenor’s profits from two businesses,6 and tax

due of $12,489.   Although the 2001 return showed tax due,

intervenor, petitioner, the C.P.A., and the tax attorney believed

that overpayments for other years would be sufficient to offset

the tax due for 2001.


     6
      Both businesses are S corporations listed on the Schedule E
as Computer Navigations, Inc., but are listed as having different
amounts of nonpassive income. The record does not reflect
intervenor’s relationship to the businesses, whether intervenor
operated two businesses with the same name, or whether the
entries are errors. On the 2001 Federal income tax return,
intervenor is listed as a consultant.
                               - 6 -

     When the 2001 return was presented to petitioner for

signature in 2007, intervenor assured petitioner that if there

was tax due after application of the expected overpayments from

other tax years, intervenor would be able to pay the balance with

income from his current businesses.7   In order to support his

statement to petitioner that he would pay any balance due,

intervenor showed petitioner a bank statement from one of his

businesses reflecting approximately $10,000 in gross receipts

during a 1-month period.   Petitioner was also aware that

intervenor kept cash in his safe.   When the 2001 return was

signed in 2007, not all of the delinquent returns had been

prepared and filed.

     The record does not reveal the dates of filing of the

subsequent years’ returns.   However, it appears that to the

extent the returns reflected overpayments, some credits or

refunds may have been limited or barred pursuant to section 6511.

Shortly after the delinquent returns were filed, intervenor moved

out of the marital home.




     7
      In 2007 intervenor operated at least two businesses: Points
Pro and Computer Navigations. Intervenor’s main source of income
in 2007 was Points Pro, a poker business.
                                - 7 -

The Request for 6015 Relief

     Petitioner requested relief from joint and several liability

for 2001 in October 2007.8    On February 5, 2009, the IRS Appeals

Office issued a final determination denying petitioner relief.

Respondent determined that:    (1) Petitioner had not established

that she would suffer economic hardship, (2) petitioner has a

legal obligation to pay the tax, and (3) petitioner has not been

in compliance with Federal income tax laws with respect to her

taxes for years after the claim year (2001).     Petitioner timely

filed a petition for review of the notice of determination.      On

August 31, 2009, intervenor filed a notice of intervention.

     At trial respondent conceded that petitioner is entitled to

partial relief under section 6015(f) and should be relieved of

the liability attributable to intervenor’s income for 2001.

Intervenor opposes any such relief.9

                              Discussion

     Generally, married taxpayers may elect to file a joint

Federal income tax return.    Sec. 6013(a).   After making the


     8
      Respondent has agreed that petitioner’s request was timely.
     9
      The record in this case is unclear as to the amount of
relief respondent conceded and the balance respondent claims
petitioner still owes. It would appear that any tax liability
attributable to petitioner would have been fully paid by her
withholding and the $4,000 payment in 2002. It appears that a
portion of the remaining balance is due to a failure to file
addition to tax. Because of our conclusion infra that she is
entitled to relief, we need not make further findings on this
question.
                                - 8 -

election, each spouse is jointly and severally liable for the

entire tax due for that year.   Sec. 6013(d)(3); Butler v.

Commissioner, 114 T.C. 276, 282 (2000).      In certain

circumstances, however, a spouse who has filed a joint return may

seek relief from joint and several liability under procedures set

forth in section 6015.   Sec. 6015(a).

     Except as otherwise provided in section 6015, the requesting

spouse bears the burden of proving that he or she is entitled to

section 6015 (innocent spouse) relief.      Rule 142(a); Alt v.

Commissioner, 119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34

(6th Cir. 2004).   However, in an instance such as here where the

Commissioner has proposed to give partial relief but the

intervenor opposes the relief, the Court may decide the matter

according to the preponderance of the evidence.      See Stergios v.

Commissioner, T.C. Memo. 2009-15.       Both the scope and standard of

our review in cases requesting equitable relief from joint and

several income tax liability are de novo.       Porter v.

Commissioner, 132 T.C. 203 (2009).

     Under section 6015(a) a spouse may seek relief from joint

and several liability under section 6015(b) or, if eligible, may

allocate liability according to provisions set forth in section

6015(c).   Petitioner is not eligible for relief under section

6015(b) or (c) because she had an underpayment of tax on a joint

return, not a deficiency or an understatement of tax.       See Rev.
                              - 9 -

Proc. 2003-61, sec. 2.04, 2003-2 C.B. 296, 297.    Therefore, her

only avenue for relief is under section 6015(f).

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

forth threshold requirements before the Commissioner will

consider a request for relief under section 6015(f).    All

requesting spouses must meet seven threshold requirements:     (i)

The requesting spouse filed a joint return for the taxable year

for which he or she seeks relief; (ii) relief is not available to

the requesting spouse under section 6015(b) or (c); (iii) the

requesting spouse applies for relief no later than 2 years after

the date of the IRS’ first collection activity after July 22,

1998, with respect to the requesting spouse; (iv) no assets were

transferred between the spouses as part of a fraudulent scheme by

the spouses; (v) the nonrequesting spouse did not transfer

disqualified assets to the requesting spouse; (vi) the requesting

spouse did not file or fail to file the return with fraudulent

intent; and (vii) absent enumerated exceptions, the income tax

liability from which the requesting spouse seeks relief is

attributable to an item of the individual with whom the

requesting spouse filed the joint return.   This Court employs

those factors when reviewing the Commissioner’s denial of relief.

Washington v. Commissioner, 120 T.C. 137, 147-152 (2003); see

also Schultz v. Commissioner, T.C. Memo. 2010-233.

Respondent agrees that petitioner met the threshold
                              - 10 -

conditions10 with respect to the tax attributable to intervenor’s

2001 income to be eligible for section 6015(f) relief found in

Rev. Proc. 2003-61, sec. 4.01.

     If the threshold conditions are met, the IRS will ordinarily

grant equitable relief with respect to underpayments on joint

returns if the following elements are satisfied generally:

(1) On the date of the request for relief, the requesting spouse

is no longer married to or is legally separated from the

nonrequesting spouse; (2) on the date the requesting spouse

signed the joint return, the requesting spouse had no knowledge

or reason to know that the nonrequesting spouse would not pay the

income tax liability; and (3) the requesting spouse will suffer

economic hardship if the IRS does not grant relief.   Id. sec.

4.02, 2003-2 C.B. at 298.   The IRS denied relief on the basis of

petitioner’s failure to meet element (3).

I.   Factors

     Where the requesting spouse fails to qualify for relief

under Rev. Proc. 2003-61, sec. 4.02, the IRS may nevertheless

grant relief under Rev. Proc. 2003-61, sec. 4.03, 2003-2 C.B. at




     10
      Intervenor argued that the petitioner fails requirement
(iii) and that petitioner’s request was not timely, but
intervenor has presented no evidence to support his assertion.
In agreeing that petitioner is entitled to partial relief,
respondent concedes that the request was made timely.
Additionally, there is nothing in the record to indicate that the
IRS had begun collection efforts against petitioner.
                                - 11 -

298.    The Court’s analysis with respect to the nonexhaustive list

of factors in Rev. Proc. 2003-61, sec. 4.03 is discussed below.

       A.   Marital Status

       The IRS will take into consideration whether the requesting

spouse is divorced or separated (whether legally separated or

living apart) from the nonrequesting spouse.       Id. sec.

4.03(2)(a)(i).    We look to petitioner’s marital status at the

time of trial in applying de novo review.      See Wilson v.

Commissioner, T.C. Memo. 2010-134.       At the time of trial

petitioner was divorced.     This factor weighs in favor of relief.

See id.; see also McKnight v. Commissioner, T.C. Memo. 2006-155

(divorce weighs in favor of relief under Rev. Proc. 2003-61).

       B.   Economic Hardship

       The IRS will take into consideration whether the requesting

spouse will suffer economic hardship if relief is not granted.

Rev. Proc. 2003-61, sec. 4.03(2)(a)(ii).      Generally, economic

hardship exists if collection of the tax liability will cause the

taxpayer to be unable to pay reasonable basic living expenses.

Butner v. Commissioner, T.C. Memo. 2007-136.

       When petitioner requested innocent spouse relief in October

2007, she claimed that her monthly gross wages were $5,665.92 and

that her expenses were $6,805.93.11      Respondent concluded that



       11
      Petitioner’s net wages were $4,622.89 and her expenses
(excluding taxes deducted from her paycheck) were $5,762.90.
                               - 12 -

petitioner would not suffer economic hardship on account of the

disallowance of the $1,831 monthly credit card payments as a

basic living expense.

     In July 2008 petitioner provided a bank statement and a list

of expenses to the IRS.   At that time, petitioner’s monthly net

wages were $4,285.66 and expenses were $4,629.03 (including

$1,708.90 for credit card payments).

     At the time of trial, petitioner’s annual salary was

approximately $74,000.    Petitioner has not claimed to be

supporting any children or dependents.    Petitioner claims to have

suffered economic hardship largely because of her assumption of

the first mortgage, the second mortgage, and all of the credit

card debt as provided for in the final judgment of dissolution of

marriage.

     At the time of the divorce the credit card debt totaled

approximately $50,000.    Petitioner also had $30,289.52 of equity

in the marital home, $10,066.08 in her section 401(k) plan

account, and $32,200 in her pension.    The division of assets as

outlined in the divorce shows an ability to fully satisfy all of

petitioner’s debts (including the tax liabilities) at the time of

the divorce.   Petitioner has not alleged any diminution of her

assets since the divorce.
                                - 13 -

     We cannot conclude with certainty that petitioner would be

unable to pay reasonable living expenses if the tax were

collected.    We conclude the economic hardship factor weighs

against petitioner.    See Butner v. Commissioner, supra.

     C.      Knowledge or Reason To Know

     The IRS will also consider whether the requesting spouse did

not know or had no reason to know that the nonrequesting spouse

would not pay the income tax liability.     Rev. Proc. 2003-61, sec.

4.03(2)(a)(iii)(A).     In the case of a properly reported but

unpaid liability, the relevant knowledge is whether the taxpayer

knew or had reason to know when the return was signed that the

tax would not be paid.     See Washington v. Commissioner, 120 T.C.

at 151.   As is relevant here, the IRS will consider any deceit or

evasiveness of the nonrequesting spouse, the requesting spouse’s

degree of involvement in the activity generating the income tax

liability, the requesting spouse’s involvement in business and

household financial matters, and the requesting spouse’s business

or financial expertise in determining whether the requesting

spouse had reason to know the nonrequesting spouse would not pay

the income tax liability.     Rev. Proc. 2003-61, sec.

4.03(2)(a)(iii)(C).
                               - 14 -

     Petitioner was not involved in intervenor’s businesses, nor

was she routinely involved in any of the businesses’ finances.12

Petitioner paid household bills out of her separate accounts.

The record does not reflect that petitioner had any business or

financial expertise.   Intervenor ran his own businesses for many

years and participated in an accounting class while incarcerated.

When the 2001 return was signed and showed tax due, intervenor

showed petitioner a bank statement which reflected gross receipts

of $10,000 in one month.   Although petitioner and intervenor

believed overpayments in other years would offset some or all of

their tax liability for 2001, intervenor assured petitioner that

the amount ultimately due would be paid from his businesses’

income.

     We conclude that petitioner had no knowledge or reason to

know that intervenor would not pay the tax.   This factor weighs

in favor of relief.    Id. sec. 4.03(2)(a)(iii)(A).




     12
      Petitioner was involved in one of intervenor’s businesses
in 1981 before her marriage in 1984, including its bookkeeping.
There is no evidence that petitioner was involved in intervenor’s
businesses in 2001. When the 2001 return was prepared in 2007,
petitioner entered some receipts onto a spreadsheet which she
then provided to the C.P.A., but there is no evidence that
petitioner routinely participated in the bookkeeping of any of
intervenor’s businesses in 2007.
                                  - 15 -

       D.   Nonrequesting Spouse’s Legal Obligation

       The IRS will also consider whether the nonrequesting spouse

has a legal obligation to pay the outstanding income tax

liability pursuant to a divorce decree or agreement.      See Rev.

Proc. 2003-61, sec. 4.03(2)(a)(iv).

       Petitioner was allocated the tax liabilities in the final

judgment of dissolution of marriage.       Additionally, the judgment

states that petitioner requested that all other debts be

allocated to her in exchange for exclusive use and occupancy of

the marital home and to obviate the need for any equalizing

payment to intervenor.    This factor weighs against relief.       Id.

       E.   Significant Benefit

       The IRS will consider whether the requesting spouse received

significant benefit beyond normal support as a result of the

unpaid tax liability.    Id. sec. 4.03(2)(a)(v), 2003-2 C.B. at

299.

       Neither respondent nor intervenor has argued and there is no

evidence indicating that petitioner received a significant

benefit as a result of the unpaid liability.      Therefore, the

Court concludes that this factor weighs in favor of relief.        See

Magee v. Commissioner, T.C. Memo. 2005-263 (lack of significant

benefit weighs in favor of relief under Rev. Proc. 2003-61).
                                - 16 -

     F.    Compliance With Federal Tax Laws

     The IRS will take into consideration whether the requesting

spouse has made a good faith effort to comply with the Federal

tax laws in the succeeding years.     See Rev. Proc. 2003-61, sec.

4.03(2)(a)(vi).

     Petitioner and intervenor did not timely file returns for

2001, 2002, 2003, 2004, and 2005.     Petitioner filed a 2006 return

in October 2007 as married filing separate after intervenor moved

out of the marital home.     Since the separation from intervenor,

petitioner has timely filed returns for 2007, 2008, and 2009.13

     We conclude petitioner has made a good-faith attempt to

comply with Federal tax laws.     This factor weighs in favor of

granting relief.     See Stephenson v. Commissioner, T.C. Memo.

2011-16.

     G.    Abuse

     The IRS will also consider whether the nonrequesting spouse

abused the requesting spouse.     See Rev. Proc. 2003-61, sec.

4.03(2)(b)(i).     The presence of abuse is a factor favoring

relief, and a history of abuse may mitigate the requesting

spouse’s knowledge or reason to know.     Id.   If abuse is not

present, then this factor is deemed neutral.      See id. sec.

4.03(2)(b).



     13
      Petitioner claimed married filing separately filing status
on her 2007 return.
                                - 17 -

      Petitioner claimed in her request for relief (filed after

her separation from intervenor) that she was not a victim of

spousal abuse.     This is a neutral factor.   See Magee v.

Commissioner, supra; see also Rev. Proc. 2003-61, sec.

4.03(2)(b)(i).

      H.   Mental or Physical Health

      The IRS will take into consideration whether the requesting

spouse was in poor mental or physical health on the date she

signed the return or at the time relief was requested.        See Rev.

Proc. 2003-61, sec. 4.03(2)(b)(ii).      If the requesting spouse is

not in poor mental or physical health, this

factor is deemed neutral.     See id. sec. 4.03(2)(b).

      Petitioner did not claim that she was in poor mental or

physical health on the date she signed the return or at the time

the relief was requested; therefore, this factor is neutral.

See Magee v. Commissioner, supra; see also Rev. Proc. 2003-61,

sec. 4.03(2)(b)(ii).

II.   Conclusion

      Of the factors listed in Rev. Proc. 2003-61, sec. 4.03, four

favor relief (marital status, lack of knowledge or reason to

know, good-faith effort to comply with tax laws, and lack of

significant benefit), two weigh against relief (economic hardship

and nonrequesting spouse’s legal obligation), and two are neutral

(lack of spousal abuse and mental or physical health).        After
                             - 18 -

considering and weighing all the factors, we find it would be

inequitable to hold petitioner liable for the 2001 tax liability

which is attributable to income earned by intervenor.

Accordingly, we hold that petitioner is entitled to relief from

joint and several liability under section 6015(f) for the portion

of the underpayment attributable to intervenor’s income for 2001.

     To reflect the foregoing,


                                        Decision will be entered

                                   for petitioner.
