                                T.C. Memo. 2013-78



                          UNITED STATES TAX COURT



                RAQUEL L. WILLIAMSON, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 16273-10.                            Filed March 13, 2013.



      Mark A. Pridgeon, for petitioner.

      Christina L. Cook, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


      KERRIGAN, Judge: 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 for 2003, 2004, 2005, 2006, and 2007 with respect
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[*2] to Federal income tax returns she filed with her former spouse. The issue for

consideration is whether petitioner is entitled to relief under section 6015(f).

          Unless otherwise indicated, all section references are to the Internal Revenue

Code in effect at all relevant times, and all Rule references are to the Tax Court

Rules of Practice and Procedure. We round all monetary amounts to the nearest

dollar.

                                  FINDINGS OF FACT

          Some of the facts are stipulated and are so found. Petitioner resided in

Minnesota when the petition was filed.

          Petitioner and Tyler Williamson were married in November 2003. On July 1,

2009, petitioner filed Form 8857, Request for Innocent Spouse Relief. On her Form

8857 petitioner represented that she had been married to and living apart from Mr.

Williamson since May 15, 2008. Petitioner and Mr. Williamson filed for divorce on

July 24, 2009.

          During 2003 through 2007 petitioner held a position as a salaried child care

worker for Big Lake Public Schools. Petitioner still holds this job. Mr.

Williamson operated a business, Williamson Construction, Inc., through which he

offered services as an independent contractor completing framing work for

residential construction and building houses on speculation for sale to customers.
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[*3] Williamson Construction, Inc., is no longer in business, and Mr. Williamson

filed for bankruptcy on March 13, 2008. After filing for bankruptcy Mr. Williamson

began working for Knotty Pine Construction.

      During the years in issue taxes were withheld on petitioner’s salary; however,

petitioner and Mr. Williamson did not make estimated tax payments with respect to

Mr. Williamson’s income. Petitioner and Mr. Williamson maintained a joint

personal checking account during their marriage. Petitioner also had signatory

authority and access to write checks on the checking account for Williamson

Construction, Inc. On occasion, petitioner ran errands for Mr. Williamson and

Williamson Construction, Inc. Petitioner also cosigned a construction loan for

Williamson Construction, Inc.

      Mr. Williamson’s father invested approximately $50,000 into Williamson

Construction, Inc., which allowed the company to purchase several lots for the

purpose of building houses. Mr. Williamson’s father also conducted open houses,

acted as a realtor, and completed the closing on one of the properties for Williamson

Construction, Inc.

      Petitioner’s father passed away in 2005. Petitioner’s sister, Michelle Witte,

was the personal representative of their father’s estate. Petitioner and Ms. Witte

were each given 50% of their father’s estate after expenses and claims against the
                                         -4-

[*4] estate were paid. In addition, $1,000 was given to petitioner’s brother, and

petitioner was given a Harley Davidson motorcycle. Ms. Witte purchased the

motorcycle from petitioner to help her with expenses.

      Petitioner’s father’s estate consisted of a plot of land, including a house,

valued at approximately $500,000. Ms. Witte offered petitioner $250,000 for her

share of the property, but petitioner refused the offer. Ms. Witte and her husband

invested approximately $150,000 into their father’s house so they could repair the

property and sell it. Ms. Witte and her husband paid property taxes and devoted

many hours of labor to fixing the house up and trying to find tenants to rent the

property. Petitioner did not contribute to these efforts. Ms. Witte and her husband

sold the house in 2011 for $230,000 and after expenses, received approximately

$149,296 in cash. Ms. Witte and her husband kept the entire $149,296 as

repayment for repair costs to the house; petitioner did not receive any of the

proceeds.

      In November and December 2008 petitioner and Mr. Williamson filed joint

Federal income tax returns for tax years 2003 through 2007. Petitioner and Mr.

Williamson accurately stated their income tax liability; however, they failed to pay

tax for 2003 through 2007. Petitioner and Mr. Williamson owe the following

amounts: $4,435 for 2003, $14,030 for 2004, $21,273 for 2005, $20,018 for 2006,
                                         -5-

[*5] and $8,624 for 2007. Petitioner filed her 2008 Federal income tax return on

January 11, 2010, using the married filing separately status. Petitioner filed her

2009, 2010, and 2011 Federal income tax returns on time and paid the tax liabilities

in full. Petitioner’s monthly income was $4,141 in 2012. According to the Internal

Revenue Service’s national standards, petitioner’s reasonable allowable monthly

expenses are $3,731. This leaves approximately $410 each month remaining.

                                      OPINION

      Generally, married taxpayers may elect to file a joint Federal income tax

return. Sec. 6013(a). After making this election, each spouse is jointly and

severally liable for the entire tax due for that taxable year. Sec. 6013(d)(3). A

requesting spouse may seek relief from joint and several liability under section

6015. Sec. 6015(a). If a requesting spouse is not eligible for relief under section

6015(b) or (c), a requesting spouse may be eligible for equitable relief under section

6015(f). Sec. 6015(f)(2); Olson v. Commissioner, T.C. Memo. 2009-294, slip op.

at 10-11.

      Section 6015(f) permits relief from joint and several liability if it would be

inequitable to hold the individual liable for any unpaid tax or deficiency. Sec.

6015(f)(1). Since there is no understatement of tax for the years in issue,
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[*6] petitioner is not eligible for relief under section 6015(b) or (c). See

Washington v. Commissioner, 120 T.C. 137, 145-147 (2003). Under section

6015(f), the Secretary may grant equitable relief to a requesting spouse on the basis

of the facts and circumstances. Id. Petitioner bears the burden of proving that she is

entitled to equitable relief under section 6015(f). See Rule 142(a); Porter v.

Commissioner, 132 T.C. 203, 210 (2009).

      This Court has jurisdiction to review respondent’s denial of petitioner’s

request for equitable relief under section 6015(f). See sec. 6015(e)(1). We apply a

de novo standard of review as well as a de novo scope of review. Porter v.

Commissioner, 132 T.C. at 210.

      Pursuant to section 6015(f), the Commissioner has issued revenue

procedures to provide guidance for determining whether a taxpayer is entitled to

relief from joint and several liability. See Rev. Proc. 2003-61, 2003-2 C.B. 296,

modifying and superseding Rev. Proc. 2000-15, 2000-1 C.B. 447.1 Rev. Proc.

2003-61, supra, lists factors that the Commissioner should consider in deciding


      1
        On January 6, 2012, the Commissioner released Notice 2012-8, 2012-4
I.R.B. 309, concerning a proposed revenue procedure that, if finalized, would revise
the factors to be examined in determining a requesting spouse’s claim for equitable
relief. Among other changes, the proposed revenue procedure expands the effect of
a nonrequesting spouse’s abuse and/or financial control on a requesting spouse’s
entitlement to equitable relief. Id.
                                          -7-

[*7] whether to grant section 6015(f) relief, and the Court may consult these same

factors when reviewing denial of relief. See Washington v. Commissioner, 120 T.C.

at 147-152. The Court may consider these guidelines; however, we are not bound

by them in evaluating the facts and circumstances with regard to whether equitable

relief is appropriate. See Pullins v. Commissioner, 136 T.C. 432, 438-439 (2011).

      Rev. Proc. 2003-61, supra, provides a three-step analysis to follow in

evaluating a request for relief. The first step includes seven of the following

threshold conditions to be met: (1) the requesting spouse filed a joint return for

the taxable year for which he or she seeks relief; (2) relief is not available to the

requesting spouse under section 6015(b) or (c); (3) the requesting spouse applies

for relief no later than two years after the Internal Revenue Service’s first

collection activity;2 (4) no assets were transferred between the spouses as part of a

fraudulent scheme by the spouses; (5) the nonrequesting spouse did not transfer

disqualified assets to the requesting spouse; (6) the requesting spouse did not file

or fail to file the return with fraudulent intent; and (7) absent certain enumerated




      2
        Notice 2012-8, sec 3.01, 2012-4 I.R.B. at 311, eliminates the two-year
deadline to request equitable relief and replaces it with the periods of limitations
provided by sec. 6052 (relating to collections) or sec. 6511 (relating to filing a claim
for credit or refund). Our analysis is unchanged by this revision given that
petitioner’s request was timely under any of these deadlines.
                                         -8-

[*8] exceptions, the tax liability from which the requesting spouse seeks relief is

attributable to an item of the nonrequesting spouse. Rev. Proc. 2003-61, sec. 4.01,

2003-2 C.B. at 297. Respondent concedes that petitioner has met the first six

threshold conditions; however, respondent contends that petitioner failed to show

the tax liability was solely attributable to Mr. Williamson. Respondent contends

that petitioner had underwithholding of wage income tax and self-employment tax

for Williamson Construction, Inc., of approximately $1,658 in 2005, $1,718 in

2006, and $1,519 in 2007. Petitioner was involved in her husband’s business and

wrote checks for the business. To the extent of this underwithholding, petitioner

does not meet the seventh threshold condition and we do not grant relief.

      The second step is included in Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at

298. The second step provides three conditions that, if met, will ordinarily qualify

a requesting spouse for relief under section 6015(f) with respect to an

underpayment of a properly reported liability. To qualify for relief under Rev.

Proc. 2003-61, sec. 4.02(1), the requesting spouse must: (1) no longer be married

to, be legally separated from, or not have been a member of the same household as

the other person at any time during the 12-month period ending on the date of the

request for relief; (2) have had no knowledge or reason to know when signing the
                                         -9-

[*9] returns that the other spouse would not pay the tax liability; and (3) suffer

economic hardship if relief is not granted.

      Although petitioner and Mr. Williamson filed for divorce on July 24, 2009,

she did not provide a final copy of the divorce decree. On her Form 8857, petitioner

stated that she had been married to and living apart from Mr. Williamson since May

15, 2008. Petitioner also listed a separate address from the one listed on her and

Mr. Williamson’s previous tax returns. However, this alone is not sufficient

evidence to prove that petitioner was divorced, legally separated from, or no longer

living with Mr. Williamson for a period of 12 months or longer at the time she filed

for innocent spouse relief. See Tokarski v. Commissioner, 87 T.C. 74, 77 (1986)

(the Court is not required to accept a taxpayer’s unverified statements). Therefore

we are unable to determine whether petitioner has met the first condition.

      When signing the Federal income tax returns in 2008, petitioner had reason

to know that Mr. Williamson would not pay the tax liabilities for tax years 2003

through 2007. Petitioner had full knowledge of Williamson Construction, Inc.’s

dire financial situation and that Mr. Williamson had filed for bankruptcy.

Petitioner and Mr. Williamson maintained a joint personal checking account

throughout their marriage, and she would periodically write checks from
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[*10] Williamson Construction, Inc., to herself in order to pay their living expenses.

Petitioner also cosigned a construction loan for the company. Petitioner was aware

that Mr. Williamson had borrowed approximately $50,000 from his father so that

Williamson Construction, Inc., could purchase land. Petitioner argues that she

believed Mr. Williamson’s father would help pay the tax liabilities; however,

petitioner did not provide any evidence to show that this was a possibility. This

Court has found that a requesting spouse’s knowledge of a couple’s financial

difficulties deprives the requesting spouse of reason to believe that his or her ex-

spouse will pay the tax liability. See, e.g., Pugsley v. Commissioner, T.C. Memo.

2010-255; Stolkin v. Commissioner, T.C. Memo. 2008-211; Gonce v.

Commissioner, T.C. Memo. 2007-328; Butner v. Commissioner, T.C. Memo. 2007-

136. Petitioner and Mr. Williamson’s financial difficulties and failure to timely file

their income tax returns because they “probably owed money and didn’t have it to

pay” should have put her on notice that Mr. Williamson would not pay the tax

liabilities.

       Petitioner failed to show that denying section 6015(f) relief would cause her

financial hardship. A denial of section 6015(f) relief imposes an economic

hardship if it prevents the requesting spouse from being able to pay reasonable

basic living expenses. See Butner v. Commissioner, T.C. Memo. 2007-136.
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[*11] Reasonable basic living expenses are based on the taypayer’s circumstances,

including age, employment status, ability to earn, number of dependents, amount

reasonably necessary for monthly expenses, cost of living, property exempt from

levy available to pay the taxpayer’s expenses, extraordinary circumstances, and any

other facts the taxpayer raises. Sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.

Petitioner reported monthly income of $3,401 on Form 8857 in 2009 and $4,141 on

Form 433-A, Collection Information Statement for Wage Earners and Self-

Employed Individuals, on August 23, 2012. Petitioner’s reasonable allowable

monthly expenses are $3,731; therefore petitioner has approximately $410

remaining each month. We find that petitioner’s interest in her father’s estate is de

minimis.

       Petitioner failed to show that she cannot pay her basic living expenses while

making periodic payments against the liabilities. See Pugsley v. Commissioner,

T.C. Memo. 2010-255 (citing Stolkin v. Commissioner, T.C. Memo. 2008-211).

       When the requesting spouse satisfies the threshold conditions but fails to

satisfy the conditions in Rev. Proc. 2003-61, sec. 4.02, he or she may still be

eligible for equitable relief under section 6015(f). A requesting spouse is eligible

for relief if, taking into account all facts and circumstances, it is inequitable to

hold the requesting spouse liable for the underpayment. Rev. Proc. 2003-61, sec.
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[*12] 4.03, 2003-2 C.B. at 298-299, contains a nonexclusive list of factors that the

Commissioner considers when determining whether to grant equitable relief. These

factors are (1) marital status; (2) economic hardship; (3) in the case of an

underpayment, knowledge or reason to know that the nonrequesting spouse would

not pay the liability, or in the case of a deficiency, knowledge or reason to know of

the item giving rise to the deficiency; (4) the nonrequesting spouse’s legal

obligation; (5) significant benefit; and (6) compliance with tax laws. Id. sec.

4.03(2)(a). No single factor is determinative, and all factors are considered and

weighed appropriately. Haigh v. Commissioner, T.C. Memo. 2009-140, slip op. at

34-35.

I.       Applying the facts and circumstances factors

         (1)   Marital status. Although petitioner stated on her Form 8857 that she

               had been living apart from Mr. Williamson since May 15, 2008, she

               did not provide any evidence to prove that she was actually living apart

               from Mr. Williamson for the requisite 12-month period or that she was

               legally separated or divorced from Mr. Williamson when she requested

               innocent spouse relief. This factor weighs against relief.

         (2)   Economic hardship. Generally, economic hardship exists when

               collection of the tax liability will render the taxpayer unable to meet
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      [*13] basic living expenses. Sec. 301.6343-1(b)(4)(i), Proced. &

      Admin. Regs. As discussed above, petitioner fails to make a

      convincing showing of economic hardship. This factor weights against

      relief.

(3)   Knowledge or reason to know. Petitioner had knowledge and reason

      to know that Mr. Williamson would not pay the tax liabilities at the

      time she signed the 2003-2007 Federal income tax returns. Petitioner

      and Mr. Williamson had a history of late tax return filings and late bill

      payments; money problems were part of the reason she and Mr.

      Williamson ultimately sought divorce. Petitioner was involved in the

      financial operations of Mr. Williamson’s construction business and was

      aware of the company’s financial woes. At the time petitioner signed

      the 2003-2007 tax returns she was also aware that Mr. Williamson had

      recently filed for bankruptcy. Petitioner had reason to know that Mr.

      Williamson would not pay the tax liabilities reasonably promptly after

      filing the joint returns. See Waldron v. Commissioner, T.C. Memo.

      2011-288, slip op. at 9-10. This factor weighs against relief.
                                         - 14 -

[*14] (4)   Nonrequesting spouse’s legal obligation. This factor is concerned with

            whether the nonrequesting spouse has a legal obligation to pay the

            outstanding tax liability pursuant to a divorce decree or agreement.

            There is nothing in the record that suggests Mr. Williamson has a legal

            obligation to pay the tax liabilities, and petitioner did not provide a

            final copy of the divorce decree. Therefore, this factor is not

            applicable and is neutral.

      (5)   Significant benefit. This factor considers whether the requesting

            spouse had received a significant benefit (beyond normal support)

            from the unpaid income tax liability. Normal support is measured by

            the circumstances of the particular parties. Porter v. Commissioner,

            132 T.C. at 212. There is nothing in the record to indicate that

            petitioner received a significant benefit. This factor weighs in favor

            of relief.

      (6)   Compliance with income tax laws. This factor considers whether the

            requesting spouse has made a good-faith effort to comply with

            income tax laws in tax years after the year for which relief is

            requested. See Rev. Proc. 2003-61, sec. 4.03(2)(a)(vi). Although

            petitioner filed her 2008 Federal income tax return late, she has since
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             [*15] made a good-faith effort to comply with income tax laws for

             years after 2008. This factor weighs in favor of relief.

      (7)    Other factors. Other factors that may indicate relief is appropriate

             when present, but that will not weigh against granting relief when

             absent, are (i) whether the nonrequesting spouse abused the requesting

             spouse and (ii) whether the requesting spouse was in poor mental or

             physical health at the time she signed the tax return or when she

             requested relief. Id. sec. 4.03(2)(b).

There is no evidence of abuse in this case, and on her Form 8857 petitioner checked

“No” in response to questions about being a victim of spousal abuse or domestic

violence and about a history of mental or physical health problems. These two

factors are neutral.

II.   Analysis

      Considering all of the factors discussed above, two weigh in favor of

granting relief to petitioner, three weigh against granting relief, and three are

neutral. In the light of the facts indicating that petitioner failed to prove she was

divorced, legally separated, or living apart from Mr. Williamson, that she had

actual knowledge of Mr. Williamson’s income, and that she had reason to know
                                         - 16 -

[*16] that Mr. Williamson would not pay the tax liabilities, she failed to meet her

burden and is not entitled relief under section 6015(f).

      To reflect the foregoing,

                                                  Decision will be entered

                                        for respondent.
