                  T.C. Memo. 2004-89



                UNITED STATES TAX COURT



          CATHERINE ROSENTHAL, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 2601-01.             Filed March 26, 2004.



     P and H filed a joint 1996 Federal income tax
return on which H failed to report a taxable
distribution from his individual retirement account
(IRA). P was not aware of the existence of the IRA
distribution at the time the 1996 return was filed.
The omission was discovered in 1998 and, on Nov. 22,
1998, after H’s death on Sept. 1, 1998, P filed an
amended 1996 return and paid the additional tax
attributable to the omitted income. P also paid the
interest on the additional tax on Feb. 10, 1999. P
claimed relief from joint liability for the additional
tax under sec. 6015(b), (c), and (f), I.R.C. Her claim
was denied by R. P timely filed a petition with this
Court pursuant to sec. 6015(e), I.R.C., seeking review
of R’s denial of innocent spouse relief.

     1. Held, because there is no tax deficiency, P is
ineligible for relief under sec. 6015(b) and (c), I.R.C.
                               - 2 -

          2. Held, further, under the facts and circumstances,
     R’s denial of equitable relief under sec. 6015(f), I.R.C.,
     constitutes an abuse of discretion.



     William O. Lenihan, for petitioner.

     Theresa G. McQueeney, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     HALPERN, Judge:   Pursuant to the provisions of section

6015,1 petitioner applied for relief from joint and several

liability for the 1996 taxable year by submitting a Form 8857,

Request for Innocent Spouse Relief, dated July 25, 1999.

Respondent denied petitioner’s request for relief pursuant to a

notice of determination dated December 21, 2000 (the notice of

determination).   The notice of determination enclosed a Form 886-

A, Explanation of Items, in which respondent stated the basis for

his denial of relief as follows:

     Innocent Spouse Relief cannot be granted due to the
     fact that you failed to meet the centralized factors
     for relief. Electing spouse failed to show she had no
     knowledge of the unreported income from the pension
     distribution nor that she did not benefit from the
     income.

On February 26, 2001, petitioner timely filed a petition with

this Court under section 6015(e) for review of respondent’s


     1
        Unless otherwise noted, all section references are to the
Internal Revenue Code as currently in effect, and Rule references
are to the Tax Court Rules of Practice and Procedure.
                                - 3 -

determination (the petition).

     The sole issue for our decision is whether respondent abused

his discretion in denying petitioner relief from joint and

several liability under section 6015(b), (c), (f).

                           FINDINGS OF FACT2

     Some facts have been stipulated and are so found.    The

stipulation of facts, with accompanying exhibits, is incorporated

herein by this reference.

     At the time the petition was filed, petitioner resided in

Brooklyn, New York.

The Joint Returns

     Petitioner and her husband, Louis Rosenthal (separately,

petitioner and Louis; together, the Rosenthals) timely made a

joint Federal income tax return for calendar year 1996 on or

about February 27, 1997.    That return (sometimes, the original

1996 return) reported “total income” on line 22 of $32,245

consisting, in part, of $1,308 in taxable “pensions and

annuities”.   The return reported tax due of $1,631, total tax

payments of $5,774, and claimed an overpayment of $4,143 to be



     2
        Petitioner did not file a reply brief. As a result,
petitioner has failed to set forth objections to respondent’s
proposed findings of fact. See Rule 151(e)(3). Accordingly, we
conclude that petitioner concedes that respondent’s proposed
findings of fact are correct except to the extent that
petitioner’s findings of fact are clearly inconsistent therewith.
See Jonson v. Commissioner, 118 T.C. 106, 108 n.4 (2002), affd.
353 F.3d 1181 (10th Cir. 2003).
                                - 4 -

applied to the Rosenthals’ 1997 estimated tax.   The return was

prepared by Louis’s accountant, Harold Benenstock, a C.P.A. who

prepared returns for both Louis’s plumbing business and the

Rosenthals personally.   Petitioner was not involved in the

preparation of the return.

     Shortly before April 15, 1998, during the preparation of the

Rosenthals’ 1997 joint return, Mr. Benenstock discovered that, in

1996, Louis had withdrawn a large amount of money from his

account at Republic National Bank (formerly Crossland Savings

Bank), but Mr. Benenstock did not believe the withdrawal was

taxable.   Louis suffered a stroke in August 1998 and died on

September 1, 1998.   Petitioner never discussed the withdrawal

with Louis, nor was she aware of the amount prior to his death.

     After Louis’s death, petitioner’s attorney, recognizing that

the withdrawal constituted a taxable distribution from an

Individual Retirement Account (IRA) (the IRA distribution),

contacted Mr. Benenstock and asked him to prepare an amended 1996

return.    On November 22, 1998, petitioner submitted a Form 1040X,

Amended U.S. Individual Income Tax Return, for 1996 on behalf of

herself and Louis (the amended 1996 return).   The “Explanation of

Changes to Income, Deductions, and Credits” contained the

following statement:

     Taxpayer, 90 years old, transferred $90,000 from
     individual retirement account. He did not receive a
     1099R and did not report income on his individual
     return.
                               - 5 -

The inclusion of the additional $90,000 in income increased the

tax due less tax payments from the $4,143 overpayment reported on

the original 1996 return to a net tax due of $24,677, which was

reported on the amended 1996 return.   The amended 1996 return was

signed by petitioner as spouse and by Mr. Benenstock as preparer.

There was no signature on behalf of the deceased Louis.

     Petitioner paid the total tax due ($28,820) concurrent with

the filing of the amended 1996 return.   She paid that amount from

one of her accounts with Dime Savings Bank.     On February 10,

1999, in response to an IRS request for $4,334 of interest due on

the tax underpayment for 1996, petitioner mailed a check in that

amount to the IRS, drawn on her Dime Savings Bank checking

account, which was reflected as paid, on an IRS transcript, as of

February 12, 1999.

The Rosenthals

     Petitioner and Louis were married in 1976.     They had no

children together, but each had children (and, in the case of

Louis, grandchildren)3 from a prior marriage.

     Louis owned and operated a plumbing business for more than

50 years.   He retired from that business in 1994.    Petitioner did

not participate in and had no knowledge of any aspect of that

business.



     3
        The record does not indicate whether petitioner has
grandchildren.
                               - 6 -

     Petitioner was employed as a registered nurse at the time of

her marriage to Louis and continued in the profession throughout

her marriage except for a brief “retirement” which began in April

1996 and ended in 1997 when she returned to work.    At the time of

the trial, she was again retired.   Her highest level of education

was a degree from nursing school.   She never attended college.

Upon her marriage to Louis, she sold her house, and she, Louis,

and her children moved into a house, which Louis purchased with

his own funds in his own name (the house).

Financial Affairs

     From the inception of his marriage to petitioner, Louis

handled all of the household finances, paid all the bills,

including the quarterly real estate taxes on the house, made the

major purchases (e.g., automobiles), and gave petitioner $160 per

week to purchase groceries and other household necessities.

Petitioner paid for her personal charge accounts and medical

insurance.

Bank Accounts

     Petitioner and Louis maintained separate bank accounts.

Petitioner maintained accounts at Greenpoint Bank and Dime

Savings Bank, and she deposited her salary in one of her accounts

at Dime Savings Bank.   Louis maintained at least six individual

accounts and one trust account (for a grandchild).   One of

Louis’s accounts was his IRA at Crossland Savings Bank, which
                               - 7 -

later became Republic National Bank.    In 1996, he withdrew the

unreported $90,000 from Republic National Bank.    There is no

direct evidence of what Louis did with the unreported $90,000.

He did, however, own a certificate of deposit (CD) issued by

Republic National Bank.   That bank advised Louis that, on

February 2, 1997, it had renewed (for 6 months until maturity on

August 2, 1997) a CD with a balance of $91,213.    The Republic

National Bank CD bore a different account number (No. 095-

9501672878) than the former Crossland Savings Bank IRA (No.

4888752).

     In the innocent spouse questionnaire attached to her request

for innocent spouse relief dated July 25, 1999, petitioner listed

both her and Louis’s bank accounts.    Next to her listing of

Louis’s account at Republic National Bank she wrote the account

number and “($90,000)”.

Louis’s Will

     Louis died testate, and, under the terms of his will,

petitioner received: (1) the house, “all policies of insurance

relating thereto, and all of the contents thereof”; (2) all of

Louis’s “tangible personal property”, and (3) his “Home Savings

Bank Account No. 6537415082 and Crossland Savings Bank Account

No. 4888752" identified in the will as his “pension accounts”.

The Home Savings Bank account is not listed on Schedule B of

either the original or the amended 1996 return or on petitioner’s
                                 - 8 -

innocent spouse questionnaire.    Presumably, that account was

closed before 1996.   The residuary estate went to Louis’s four

grandchildren.

Petitioner’s Financial Circumstances After Louis’s Death

      Petitioner’s attorney unsuccessfully attempted to trace the

proceeds of the IRA distribution.

      The house, inherited by petitioner from Louis, was valued at

$247,000 at the time of Louis’s death and was mortgage free.

Since Louis’s death, petitioner has paid her customary living

expenses and generally maintained the same standard of living

that she maintained prior to his death.

                               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

situations, however, a joint return filer can avoid such 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 tax 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).
                               - 9 -

     A taxpayer may seek relief from joint and several liability

by raising the matter as an affirmative defense in a petition for

redetermination invoking this Court’s deficiency jurisdiction

under section 6213(a) or, as in this case, by filing a so-called

stand-alone petition challenging the Commissioner’s final

determination denying the taxpayer’s claim for such relief (or

his failure to rule on the taxpayer’s claim within 6 months of

its filing).   See sec. 6015(e)(1); Maier v. Commissioner, 119

T.C. 267, 270-271 (2002), affd. 93 AFTR2d 2002-1139 (2d Cir.

2004); Ewing v. Commissioner, 118 T.C. 494, 496-497 (2002).4

     In the petition, petitioner seeks relief under all three of

the available relief provisions: section 6015(b), (c), and (f).

The essence of petitioner’s claim is that she should be relieved

of liability for the tax and interest occasioned by the reporting

of the IRA distribution.   Respondent argues that, because

petitioner has paid the additional tax attributable to the IRA

distribution, “there is no understatement, deficiency or

underpayment to which relief under * * * [section] 6015 is

applicable.”

     Except as otherwise provided in section 6015, petitioner

bears the burden of proof.   See Rule 142(a).


     4
        A taxpayer may also request relief from joint and several
liability on a joint return in a petition for review of a lien or
levy action. See secs. 6320(c), 6330(c)(2)(A)(i); Maier v.
Commissioner, 119 T.C. 267, 271 (2002), affd. 93 AFTR2d 2002-1139
(2d Cir 2004).
                                  - 10 -

II.    Relief Under Section 6015(b) and (c)

       Section 6015(e)(1), in pertinent part, provides this Court

with jurisdiction to “determine the appropriate relief available”

under section 6015 to “an individual against whom a deficiency

has been asserted”.       Consistent with that language and similar

language in section 6015(b) and (c),5 we have observed that the

existence of a tax deficiency is a prerequisite to our granting

of relief under either of those subsections.        See Block v.

Commissioner, 120 T.C. 62, 66 (2003).        Because there is no tax

deficiency asserted by respondent with respect to either the

original or amended 1996 returns, petitioner cannot qualify for

innocent spouse relief under section 6015(b) or (c).

III.       Petitioner’s Eligibility To Seek Relief Under Section
           6015(f)

       A.     Statutory Requirements

       Section 6015(f) provides:

            (f) Equitable relief.      Under procedures prescribed
       by the Secretary, if--

                    (1) taking into account all the facts
               and circumstances, it is inequitable to hold
               the individual liable for any unpaid tax or


       5
        Under sec. 6015(b)(1)(D), an individual who signed a
joint return with another individual and who is seeking innocent
spouse relief must show that “taking into account all the facts
and circumstances, it is inequitable to hold * * * [such]
individual liable for the deficiency in tax * * * attributable to
* * * [the other individual’s] understatement”. Similarly, an
individual taxpayer may seek relief pursuant to sec. 6015(c)(1)
for an “individual’s liability for any deficiency which is
assessed with respect to the return”.
                               - 11 -

          any deficiency (or any portion of either);
          and

               (2) relief is not available to such
          individual under subsection (b) or (c),

     the Secretary may relieve such individual of such
     liability.

     For the reasons stated above, petitioner satisfies the

requirement of section 6015(f)(2) that relief not be available

under subsection (b) or (c).   Moreover, the absence of a

deficiency does not deprive us of jurisdiction over petitioner’s

claim for equitable relief under section 6015(f).    See Ewing v.

Commissioner, supra at 506-507.   Nor, for the reasons discussed

in the next section, is equitable relief under section 6015(f)

precluded by the absence of an unpaid tax liability.

     B.   Eligibility Requirements of Rev. Proc. 2000-15

     Pursuant to his authority, under section 6015(f), to

prescribe “procedures” for granting equitable relief pursuant to

that provision, respondent issued Notice 98-61, 1998-2 C.B. 756,

which provided interim guidance for taxpayers seeking equitable

relief from joint and several liability.   Notice 98-61 was

superseded by Rev. Proc. 2000-15, 2000-1 C.B. 447, effective

January 18, 2000, which, in turn, was superseded by Rev. Proc.

2003-61, 2003-32 I.R.B. 296, effective for requests for relief

filed on or after November 1, 2003, and for requests for relief

pending on November 1, 2003, for which no preliminary

determination letter had been issued as of that date.
                              - 12 -

Petitioner’s request for relief and respondent’s determination

are subject to Rev. Proc. 2000-15 because that revenue procedure

was in effect when respondent evaluated petitioner’s request and

when respondent issued the notice of determination on December

21, 2000.   See Ewing v. Commissioner, 122 T.C. 32, 44 n.12

(2004).

     Section 4.01 of Rev. Proc. 2000-15, 2000-1 C.B. at 448,

lists the seven “threshold conditions” for eligibility to be

considered for equitable relief, one of which (set forth in

section 4.01(4)) is as follows:

          (4) Except as provided in the next sentence, the
     liability remains unpaid. A requesting spouse is
     eligible to be considered for relief in the form of a
     refund of liabilities for: (a) amounts paid on or after
     July 22, 1998, and on or before April 15, 1999; and (b)
     installment payments, made after July 22, 1998,
     pursuant to an installment agreement entered into with
     the Service and with respect to which an individual is
     not in default, that are made after the claim for
     relief is requested.

Because petitioner’s payment of the tax attributable to the IRA

distribution occurred between July 22, 1998, and April 15, 1999

(on November 22, 1998), petitioner’s payment of the joint tax

liability does not render her ineligible to seek equitable relief

under section 6015(f).6


     6
        Rev. Proc. 2003-61, 2003-32 I.R.B. 296, 299, eliminates
the window period restriction on refunds of paid amounts and
generally provides that a requesting spouse is eligible for a
refund of tax payments made after July 22, 1998, “if the
requesting spouse establishes that he or she provided the funds
                                                   (continued...)
                                - 13 -

      There is no dispute that petitioner meets the remaining six

eligibility requirements of Rev. Proc. 2000-15, section 4.01.

Therefore, we find that petitioner is eligible to seek relief

under section 6015(f).

IV.   Petitioner’s Entitlement To Equitable Relief Under Section
      6015(f)

      A.   Factors for Determining Whether To Grant Equitable
           Relief Under Section 6015(f)

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

provides in pertinent part:

      The Secretary may   grant equitable relief under section
      6015(f) * * * if,   taking into account all the facts and
      circumstances, it   is inequitable to hold the requesting
      spouse liable for   all or any part of the * * *
      liability * * *.

Rev. Proc. 2000-15, section 4.03, further provides “a partial

list of positive and negative factors that will be taken into

account” in determining the appropriate relief under section



      6
      (...continued)
used to make the payment for which he or she seeks a refund”. It
also must be shown that the payments were not made with the joint
return and were not joint payments or payments that the
nonrequesting spouse made. Therefore, it appears that petitioner
would be eligible to seek a refund of her tax payment under Rev.
Proc. 2003-61, were it applicable. It further appears that, on
the basis of our conclusion in Washington v. Commissioner, 120
T.C. 137, 158-159 (2003), that the term “unpaid tax” in sec.
6015(f)(1) refers to tax reported on a return but not paid with
the return rather than to amounts remaining unpaid when sec.
6015(f) relief is requested, respondent has abandoned the window
period requirement of sec. 4.01 of Rev. Proc. 2000-15, even for
tax years covered by that revenue procedure. See Ziegler v.
Commissioner, T.C. Memo. 2003-282.
                              - 14 -

6015(f), and it states that “[n]o single factor will be

determinative * * * in any particular case.   Rather, all factors

will be considered and weighed appropriately.”   Rev. Proc. 2000-

15, section 4.03(1) and (2), 2000-1 C.B. at 448-449, sets forth

the “partial list” of factors that the Commissioner will consider

in deciding whether to grant equitable relief under section

6015(f).   Section 4.03(1) of the revenue procedure lists six

factors the presence or absence of which weighs in favor of

granting equitable relief (positive factors), and section 4.03(2)

of the revenue procedure lists six factors the presence or

absence of which weighs against granting equitable relief

(negative factors).   Four of the six factors on each list have a

reciprocal opposite on the other list, so that the presence or

absence of the circumstance referred to will necessarily be

positive or negative.7   The absence of the circumstances referred

to by either or both of the other two factors on each list is

considered neutral under Rev. Proc. 2000-15, section 4.03.

Because four of the six factors on each list are common to both

lists, there are actually eight separate and distinct factors set

forth in Rev. Proc. 2000-15, section 4.03.



     7
        In one case, the reciprocal circumstances are that “[t]he
nonrequesting spouse has a legal obligation pursuant to a divorce
decree or agreement to pay the outstanding liability” (positive)
or, conversely, that the requesting spouse bears that obligation
(negative). If neither spouse bears that obligation, the
resulting absence of the factor is necessarily neutral.
                               - 15 -

     B.   Application of the Factors to Petitioner

           1.   Respondent’s Notice of Determination

     Respondent based his denial of equitable relief on a finding

that petitioner “failed to show” that she (1) lacked knowledge of

the IRA distribution and (2) did not benefit from that

distribution.   We interpret that finding as a finding that

petitioner did have knowledge of the IRA distribution and did

significantly benefit from that distribution.   Knowledge or

reason to know of “the item giving rise to a deficiency” and the

existence of a significant benefit “(beyond normal support) from

the unpaid tax liability or items giving rise to the deficiency”

are both negative factors weighing against relief pursuant to

Rev. Proc. 2000-15, section 4.03(2)(b) and (c).    In his notice of

determination respondent characterized the presence of those

negative factors as a failure on petitioner’s part “to meet the

centralized factors for relief.”

     Petitioner’s burden is to demonstrate that respondent’s

denial of equitable relief under section 6015(f) was an abuse of

discretion; i.e., that respondent acted arbitrarily,

capriciously, or without sound basis in fact.     Ewing v.

Commissioner, 122 T.C. at 36-37; Jonson v. Commissioner, 118 T.C.

106, 125 (2002), affd. 353 F.3d 1181 (10th Cir. 2003).

           2.   Petitioner Did Not Have Knowledge or Reason To Know
                of the Unreported Income

     The first of the two negative factors relied upon by
                               - 16 -

respondent in denying equitable relief to petitioner (that

petitioner “had knowledge of the unreported income”) is described

in Rev. Proc. 2000-15, sec. 4.03(2)(b), 2000-1 C.B. at 449, in

pertinent part, as follows:

     (b) Knowledge or reason to know. A requesting spouse
     knew or had reason to know of the item giving rise to a
     deficiency * * * at the time the return was signed.

     Respondent argues that “petitioner had knowledge or reason

to know” of the IRA distribution when she filed the amended 1996

return on November 22, 1998.    But that is not the return that

failed to reflect “the item” (in this case, the IRA distribution)

with respect to which petitioner seeks equitable relief under

section 6015(f).    Rather, the return omitting the IRA

distribution (and which may be said to have reflected an

understatement in tax) is the original 1996 return, and

petitioner’s undisputed testimony, also reflected in a July 25,

1999, letter from her to the Internal Revenue Service requesting

innocent spouse relief, is that she did not learn of that

distribution until it was discovered by her husband’s accountant

in connection with his preparation of the 1997 joint return in

April 1998.   That was some 14 months after the original 1996

return was filed.   It is unpersuasive to argue, as does

respondent, that petitioner’s voluntary filing of an amended 1996

return and her attendant payment of the delinquent taxes

attributable to the omission of income from the original 1996
                                - 17 -

return militate against equitable relief simply because she had

to have known of the omission before she filed the amended return

and made the payment.    Moreover, there is no evidence that

petitioner had any reason to know of the IRA distribution prior

to April 1998.    The distribution was from one of Louis’s separate

accounts, and he never discussed it with her.     Therefore, we find

no basis for respondent’s conclusion in the notice of

determination that a negative factor results because petitioner

knew of the IRA distribution.

           3.    Petitioner Did Not Benefit From the IRA
                 Distribution

     The other negative factor relied upon by respondent in the

notice of determination as a basis for denying equitable relief

to petitioner is his finding that petitioner significantly

benefited from the unreported income.     See Rev. Proc. 2000-15,

section 4.03(2)(c).     There is no evidence in the record to

support that finding.     Moreover, there is evidence (discussed

below) to suggest that petitioner did not benefit from the

unreported income.

     Respondent argues that petitioner failed to establish that

she suffered “economic hardship” (a negative factor under Rev.

Proc. 2000-15, sec. 4.03(2)(d), 2000-1 C.B. at 449, and that the

evidence   demonstrating lack of economic hardship “[supports] the

determination that petitioner significantly benefitted.”

Respondent also states that “[p]etitioner has not provided any
                               - 18 -

evidence to establish that she did not significantly benefit.”

We disagree.

     First, significant benefit and lack of economic hardship are

separate and distinct negative factors.   Pursuant to Rev. Proc.

2000-15, section 4.03(2)(c), the existence of the former requires

evidence that “[t]he requesting spouse significantly benefitted

(beyond normal support) from the unpaid liability or items giving

rise to the deficiency.”   In contrast, economic hardship exists

if the requesting spouse, in the absence of relief from the

liability, is unable to pay his or her customary “reasonable

basic living expenses.”    Sec. 301.6343-1(b)(4), Proced. & Admin.

Regs.8

     As to whether petitioner enjoyed a significant benefit,

there is no evidence that petitioner received any benefit from

either the unpaid tax liability or the proceeds of the IRA

distribution.   She did not learn of the distribution, which

occurred sometime in 1996, until April 1998.   After Louis’s

death, she tried, unsuccessfully, to locate those funds.

Moreover, she discharged the tax liability resulting from the IRA

distribution, plus interest thereon, with borrowed funds that she

had deposited in her own separate bank account.   Nor is there any


     8
        Rev. Proc. 2000-15, sec. 4.02(1)(c), 2000-1 C.B. at 448,
provides, in pertinent part, that “the determination of whether a
requesting spouse will suffer economic hardship * * * will be
based on rules similar to those provided in sec. 301.6343-1(b)(4)
of the Regulations on Procedure and Administration.”
                              - 19 -

evidence to suggest that her financial arrangements with Louis,

whereby she received $160 per week for household expenses,

changed as a result of the IRA distribution.

     Louis’s will bequeathed his Crossland Savings Bank IRA to

petitioner.   That was Louis’s only account at Crossland Savings

Bank, and it was the source of the IRA distribution, which

occurred after the bank became Republic National Bank.    The

record indicates that, by 1997, that account had been closed and

that Louis had opened another account at Republic National Bank

(the Republic account) with a different account number.    As of

February 2, 1997, the Republic account consisted of a $91,213

renewable CD, and the account was referred to in petitioner’s

innocent spouse questionnaire as containing $90,000.   The

February 2, 1997, CD was a 6-month CD and was a renewal of a

prior CD.   The existence of the Republic account CDs at least

suggests that, after Louis withdrew the money from his IRA

(which, as depleted by the withdrawal, he had bequeathed to

petitioner), he deposited it in a new account with the same bank,

which he opened after the execution of his will, and which,

therefore, became part of his residuary estate bequeathed to his

grandchildren.

     In short, there is no direct evidence of what Louis did with

the funds comprising the IRA distribution; nevertheless, we

surmise that he deposited them in a bank account that, pursuant
                              - 20 -

to his will, was bequeathed to persons other than petitioner.     We

find that petitioner did not benefit from those funds.9

          4.   Overall Application of the Factors Under Rev.
               Proc. 2000-15, Section 4.03

     We conclude from examining respondent’s “Explanation of

Items” attached to the notice of determination that, in rejecting

petitioner’s request for innocent spouse relief, respondent

failed to apply six of the eight factors listed in Rev. Proc.

2000-15, section 4.03.   Based upon the evidence before us (and

before respondent at the time he considered petitioner’s

application for innocent spouse relief), we find that all but one

of the factors listed in Rev. Proc. 2000-15, section 4.03, are

either favorable to petitioner or neutral.

          a.   Petitioner’s Marital Status

     At the time petitioner requested relief, Louis was deceased.

We view that circumstance, with respect to petitioner, as

tantamount to her being separated or divorced.   Therefore, we

conclude that that factor is favorable.   See Rev. Proc. 2000-15,

sec. 4.03(1)(a).10


     9
        See Mysse v. Commissioner, 57 T.C. 680, 699 (1972), in
which we stated that, where there is an inability to trace
unreported funds attributable to one spouse, the benefit to the
other spouse cannot constitute more than ordinary support, which
means that the latter did not significantly benefit from the
funds.
     10
        See H. Conf. Rept. 105-599, at 252 n.16 (1988), 1998-3
C.B. 747, 1006, wherein the conferees, in discussing the
                                                   (continued...)
                                - 21 -

           b.   Spousal Abuse

     Louis did not abuse petitioner.     Because the absence of

spousal abuse is not listed as a negative factor, that factor

must be considered neutral.     See Rev. Proc. 2000-15, sec.

4.03(1)(c).

           c.   Noncompliance With Federal Income Tax Laws in
                Subsequent Years

     Respondent concedes that “petitioner has been compliant with

Federal tax laws.”   Because compliance with the tax law is not

listed as a favorable factor, that factor must be considered

neutral.   See Rev. Proc. 2000-15, sec. 4.03(2)(e).

           d.   Legal Obligation To Pay the 1996 Tax Liability

     Because neither petitioner nor Louis was legally obligated

pursuant to a divorce decree or agreement to pay the tax

liability resulting from the failure to report the IRA

distribution, that factor is also neutral.     See Rev. Proc. 2000-

15, sec. 4.03(1)(e) and (2)(f).


     10
      (...continued)
eligibility requirements for the sec. 6015(c) separate liability
election, state that “a taxpayer is no longer married if he or
she is widowed.” See sec. 6015(c)(3)(A)(i)(I) (an individual is
generally eligible to elect relief under sec. 6015(c)(1) if “such
individual is no longer married to, or is legally separated from,
the individual with whom such individual filed the joint return
to which the election relates”). We see no reason why widows
should not similarly be treated as separated or divorced from the
nonrequesting spouse for purposes of Rev. Proc. 2000-15, sec.
4.03(1)(a). Cf. Jonson v. Commissioner, 118 T.C. 106, 124 (2002)
(decedent spouse’s marital status for purposes of sec.
6015(c)(3)(A)(i) determined at the time of death), affd. 353 F.3d
1181 (10th Cir. 2003).
                               - 22 -

           e.   Attribution of the Unpaid Item

      Respondent concedes that “the full amount at issue is

attributable to Louis Rosenthal.”      That factor is favorable.    See

Rev. Proc. 2000-15, sec. 4.03(1)(f), (2)(a).

           f.   Economic Hardship

      Because the evidence (which consists entirely of

petitioner’s testimony) shows that petitioner was able to

discharge her customary basic living expenses even after paying

the tax liability arising from the omission of the IRA

distribution from income, there was a lack of “economic hardship”

as that term is defined for purposes of Rev. Proc. 2000-15,

section 4.03(1)(b) and (2)(d).      That factor is unfavorable.

           g.   Knowledge or Reason To Know and Significant Benefit

      For the reasons previously discussed herein (section IV. B.

2. and 3.) we find that petitioner had no knowledge or reason to

know of the IRA distribution, and that she did not benefit from

it.   Lack of knowledge or reason to know is a favorable factor

(Rev. Proc. 2000-15, section 4.03(1)(d)) and, because lack of

significant benefit is not listed as a favorable factor, it is

considered neutral under Rev. Proc. 2000-15.      However, on the

basis of prior caselaw, we consider lack of significant benefit

to be a favorable factor.   See Ewing v. Commissioner, 122 T.C. at

45; Foor v. Commissioner, T.C. Memo. 2004-54; Ogonoski v.

Commissioner, T.C. Memo. 2004-52; Ferrarese v. Commissioner,
                              - 23 -

T.C. Memo. 2002-249.

          5.    Conclusion

     We find that, of the factors listed in Rev. Proc. 2000-15,

section 4.03, four are favorable, three are neutral, and only one

is unfavorable.   Thus, a reasonable balancing of those factors

strongly suggests that petitioner is entitled to equitable relief

under section 6015(f), and that respondent’s contrary conclusion

constitutes an abuse of discretion.    The following factors

provide additional support for that conclusion:

     (a) Respondent’s denial of relief, as recited in the notice

of determination, was based upon his application of two of the

eight separate and distinct factors listed in Rev. Proc. 2000-15,

section 4.03.   Therefore, it is not apparent whether respondent

complied with that section’s requirement that “all factors * * *

be considered and weighed appropriately.”

     (b) Respondent erroneously concluded that the two factors he

did expressly consider (knowledge or reason to know and

significant benefit) were unfavorable when, in fact, both were

favorable.

     (c) Respondent failed to take into account the fact that the

understatement of income on the original 1996 return resulted

from Louis’s concealment of that income.    Both this Court and the

Court of Appeals for the Second Circuit (the court to which an

appeal of this case most likely would lie) have treated as a
                              - 24 -

material factor in deciding whether to grant equitable relief

under section 6015(b)(1)(D) or its predecessor section

6013(e)(1)(D)11 “[w]hether the failure to report correctly tax

liability results from ‘concealment, overreaching, or any other

wrongdoing’ on the part of the ‘guilty’ spouse”.   Hayman v.

Commissioner, 992 F.2d 1256, 1262 (2d Cir. 1993), affg. T.C.

Memo. 1992-228; see also Ewing v. Commissioner, 122 T.C. at 48-

49; Jonson v. Commissioner, 118 T.C. at 119.

     For all of the above reasons, we hold that respondent’s

denial of equitable relief under section 6015(f) was an abuse of

discretion and that it would be inequitable to hold petitioner

liable for the underpayment of tax reflected on the original 1996

return.   Therefore, petitioner is entitled to a refund of the

additional tax and associated interest paid in connection with

the filing of the 1996 amended return.   See sec. 6015(g)(1).

     To reflect the foregoing,


                                         Decision will be entered

                                    for petitioner.




     11
        Cases interpreting former sec. 6013(e) remain
instructive to an analysis of sec. 6015(b)(1)(D), Jonson v.
Commissioner, supra, and the equitable factors we consider under
sec. 6015(b)(1)(D) are the same equitable factors we consider
under sec. 6015(f), Alt v. Commissioner, 119 T.C. 306, 316
(2002).
