                        T.C. Memo. 2003-253



                      UNITED STATES TAX COURT



  FATEMEH ENTEZAM, Petitioner, AND MAJID ZAHEDI, Intervenor v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9481-00.              Filed August 21, 2003.


     Joel G. Selik, for petitioner.

     Majid Zahedi, pro se.

     Karen Nicholson Sommers, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     FOLEY, Judge:   The sole issue for decision is whether

Fatemeh Entezam is, pursuant to section 6015,1 entitled to relief

from joint and several liability.



     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
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                          FINDINGS OF FACT

     Fatemeh Entezam (Ms. Entezam) and Majid Zahedi (Mr. Zahedi)

were married in 1985.   During the years in issue, Mr. Zahedi

owned and operated three International House of Pancakes

restaurants.   To assist Mr. Zahedi with the operation of the

restaurants, Ms. Entezam took accounting classes at San Diego

State University and on December 30, 1991, graduated with a

bachelor of science degree in business administration with an

emphasis in accounting.   In 1990, Ms. Entezam began helping with

the operation of and record keeping relating to the restaurants

(e.g., she recorded the restaurants’ daily sales receipts).     Ms.

Entezam’s father, uncle, and sister were also involved in the

management and operation of the restaurants.   Ms. Entezam had

access to the restaurants’ books and records and was authorized

to write checks on, and make withdrawals from, the business

accounts.

     On May 5, 1991, Ms. Entezam and Mr. Zahedi purchased an

$840,000 home.   In relation to this purchase, in 1990 and 1991

they signed mortgage loan applications indicating joint annual

incomes of $237,996 and $321,036, respectively.   On their 1990

joint Federal income tax return, however, Ms. Entezam and Mr.

Zahedi reported that they earned no salaries and had net losses

of $55,856; and on their 1991 joint tax return they reported that
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Mr. Zahedi earned a salary of $23,000, and that they had net

losses of $67,560.

     During the years in issue, Ms. Entezam and Mr. Zahedi paid

approximately $60,000 for home furnishings, $20,000 for a

swimming pool, and $30,000 for Ms. Entezam’s jewelry.    In

addition, they leased two Mercedes-Benz automobiles and took Ms.

Entezam’s parents on vacation to Florida and Nevada.

     On January 5, 1994, during the course of an arson

investigation relating to one of the restaurants, U.S. Bureau of

Alcohol, Tobacco, and Firearms agents searched Ms. Entezam and

Mr. Zahedi’s home and seized a handwritten ledger.   The gross

receipts reflected on the ledger were substantially larger than

the amounts reported on Ms. Entezam and Mr. Zahedi’s 1989 through

1992 joint tax returns.   Respondent used this ledger to compute

the deficiencies relating to the years in issue.

     On November 10, 1994, Ms. Entezam and Mr. Zahedi were

indicted and charged, pursuant to section 7206, with filing false

Federal income tax returns relating to 1989 through 1992.     Mr.

Zahedi pleaded guilty to all counts in the indictment and served

28 months in Federal prison.   Ms. Entezam signed a deferred

prosecution agreement admitting that she willfully filed 1989

through 1992 false joint tax returns in violation of section

7206.
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     Ms. Entezam and Mr. Zahedi were divorced in 1999.   The

divorce judgment provides that Ms. Entezam and Mr. Zahedi are

each responsible for the payment of half of their Federal income

tax liabilities relating to 1990, 1991, and 1992.

     By notice of deficiency dated June 1, 2000, respondent

determined that Ms. Entezam and Mr. Zahedi underreported gross

receipts of $64,915, $157,035, $148,717, and $154,940 on their

1989, 1990, 1991, and 1992 joint Federal income tax returns,

respectively.

     On September 1, 2000, Ms. Entezam, while residing in

Escondido, California, filed a petition in which she requested

relief from joint and several liability.   On January 11, 2001,

Mr. Zahedi, while residing in Lake Forest, California, filed his

notice of intervention.   On July 12, 2001, an Internal Revenue

Service Appeals officer determined, pursuant to section 6015(f),

that Ms. Entezam did not qualify for relief.

                              OPINION

     In limited situations, taxpayers filing joint Federal income

tax returns may be relieved from joint and several liability

pursuant to section 6015.   Ms. Entezam, however, is not entitled

to such relief.   Her actual knowledge of the tax understatement

precludes relief pursuant to section 6015(b) or (c).   Sec.

6015(b)(1)(C) and (c)(3)(C); Jonson v. Commissioner, 118 T.C.

106, 115 (2002); Cheshire v. Commissioner, 115 T.C. 183, 193-194
                                - 5 -

(2000), affd. 282 F.3d 326 (5th Cir. 2002).   Ms. Entezam, who has

a business degree, knew that large amounts of income were omitted

from the 1989 through 1992 joint tax returns.   Her contentions to

the contrary were not credible.   Ms. Entezam and members of her

family were involved in the operation of and record keeping

relating to the business.   In addition, she signed two mortgage

loan applications reporting business income that significantly

exceeded the business income reported on the joint tax returns.

Moreover, she acknowledged that she willfully filed false joint

tax returns relating to 1989 through 1992.

     Similarly, Ms. Entezam is not entitled to relief, pursuant

to section 6015(f), because it is not inequitable to hold her

liable for the deficiencies attributable to the unreported gross

receipts.    See Butler v. Commissioner, 114 T.C. 276, 291-293

(2000).   Ms. Entezam knew of the unreported gross receipts, did

not establish that she would suffer economic hardship if relief

were denied, significantly benefited from the unreported gross

receipts (i.e., funds deposited into a joint account afforded her

a very comfortable lifestyle), and has a legal obligation

pursuant to a divorce judgment to pay for half of the tax

liability.   See Rev. Proc. 2000-15, 2000-1 C.B. 447.   Thus,

respondent’s determinations are sustained.

     Contentions we have not addressed are irrelevant, moot, or

meritless.
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To reflect the foregoing,



                                         Decision will be entered

                                    for respondent.
