                     T.C. Summary Opinion 2007-125



                        UNITED STATES TAX COURT



                   MAGDALENA PACHECO, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 7183-05S.             Filed July 23, 2007.


        Ned Leiba, for petitioner.

     Daniel W. Layton, for respondent.



     DEAN, 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, all section references are to

the Internal Revenue Code (Code) as in effect for the years at
                                - 2 -

issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

     Petitioner seeks review of respondent’s notice of

determination dated January 12, 2005, denying her relief from

joint and several liability under section 6015(c) and (f) for

1995, 1996, and 1997.1   After a concession,2 the issues for

decision are:   (1) Whether the doctrine of res judicata under

section 6015(g)(2)3 bars petitioner from raising relief under

section 6015 for 1995 and 1996, and if not, whether petitioner is

entitled to relief from joint and several liability under section

6015(c) for 1995 and 1996; and (2) whether petitioner is entitled

to relief from joint and several liability under section 6015(c)

for 1997.




     1
      The Internal Revenue Service Restructuring and Reform Act
of 1998 (RRA 1998), Pub. L. 105-206, sec. 3201(a), 112 Stat. 734,
repealed sec. 6013(e) and replaced it with sec. 6015. Sec. 6015
applies to any tax arising after July 22, 1998, and to any
liability for tax arising on or before July 22, 1998, and unpaid
as of that date. RRA 1998 sec. 3201(g), 112 Stat. 740. Sec.
6015, therefore, applies in this case.
     2
      Petitioner concedes that she is not entitled to relief from
joint and several liability under sec. 6015(f) for 1995, 1996,
and 1997.
     3
      The Consolidated Appropriations Act, 2001, Pub. L. 106-544,
app. G, sec. 313(a)(2)(A), 114 Stat. 2763A-640 (2000), enacted on
Dec. 21, 2000, redesignated subsec. (g) of Code sec. 6015 as
subsec. (h) and inserted the language of Code sec. 6015(e)(3)(B)
in new subsec. (g)(2). The effective date of this change is the
date of enactment. Id. sec. 313(f), 114 Stat. 2763A-643.
                                - 3 -

                             Background

     The stipulated facts and the exhibits received into evidence

are incorporated herein by reference.     At the time the petition

was filed, petitioner resided in Stockton, California.

     Juan Pacheco (Mr. Pacheco), petitioner’s spouse, was born in

Mexico.   He died in California on May 22, 2000.   Mr. Pacheco

completed the third grade in Mexico, and he did not speak, read

or write English.

     Petitioner was also born in Mexico.    She graduated from high

school in Mexico, and she came to the United States in 1986.

     Mr. Pacheco obtained a California farm labor contractor’s

license and started a farm labor contracting business in 1980.

In 1990, Mr. Pacheco lost his license, and in that same year,

petitioner started to work as a farm labor contractor.    In 1991,

petitioner obtained a California farm labor contractor’s license,

and the name of Mr. Pacheco’s former business was changed to

Magdalena Pacheco Farm Labor Contractor (Contractor).

     During 1995, 1996, and 1997, petitioner and Mr. Pacheco

operated Contractor in Stockton, California.    Operators of farms

or vineyards would contact Contractor when they needed temporary

farm labor.    Contractor would provide the requested workers, and

the farm or vineyard would pay Contractor which would in turn pay

the workers.
                               - 4 -

     During 1995, petitioner also worked as a food packaging

machine operator at Safeway Markets.

Taxable Years 1995 and 1996

     Examination of the Returns

     Petitioner and Mr. Pacheco filed jointly for 1995 and 1996

Forms 1040, U.S. Individual Income Tax Return, prepared by a paid

preparer.   In 1997, the returns were selected for examination,

and the case was assigned to Revenue Agent Patrick Lunny (RA

Lunny).

     During the examination process, RA Lunny interacted only

with petitioner or with one of her representatives.   It is not

disputed that RA Lunny never met with or spoke with Mr. Pacheco

during the audit because Mr. Pacheco did not speak English.

     RA Lunny determined that petitioner and Mr. Pacheco had

unreported income from Contractor on the basis of the third party

information returns that the farmers filed with the Internal

Revenue Service (IRS).   RA Lunny also determined that certain

business expense deductions for Contractor were not substantiated

on the Schedules C, Profit or Loss From Business, for 1995 and

1996.

     On October 23, 1998, respondent issued to petitioner and Mr.

Pacheco a statutory notice of deficiency, determining for 1995

and 1996, respectively, deficiencies in Federal income taxes of
                              - 5 -

$48,826 and $54,467 and section 6662(a) accuracy-related

penalties of $9,765 and $10,893.

     Tax Court Proceeding

     On January 25, 1999, petitioner and Mr. Pacheco petitioned

the Court, docket No. 1474-99, seeking a redetermination of the

deficiencies and the section 6662(a) accuracy-related penalties

for 1995 and 1996 (prior proceeding).

     The Court entered a stipulated decision in the prior

proceeding on June 29, 2000, with respect to the deficiencies and

penalties for 1995 and 1996, and no appeal was filed.   The

parties have stipulated that relief under section 6015 was not

raised as an issue at any time during the prior proceeding.

Taxable Year 1997

     Petitioner and Mr. Pacheco filed jointly for 1997 a Form

1040 prepared by a paid preparer.   RA Lunny subsequently expanded

the scope of his audit to include 1997.   On March 16, 2000,

petitioner and Mr. Pacheco consented to the assessment of an

additional tax liability of $9,503 plus interest for 1997.     No

penalties were assessed.

Collection Action

     On June 6, 2002, petitioner filed a petition for levy action

with the Court, docket No. 9654-02L, in response to a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 dated May 10, 2002, for 1995, 1996, and 1997.
                               - 6 -

     The Court entered a decision on May 16, 2003, in docket No.

9654-02L, pursuant to a stipulation between petitioner and

respondent, relating to the collection of petitioner’s income tax

liabilities for 1995, 1996, 1997.

Request for Innocent Spouse Relief

     Respondent received from petitioner on June 3, 2002, a Form

8857, Request for Innocent Spouse Relief, in which petitioner

requested relief from joint and several liability under section

6015(c) and (f) for 1995, 1996, and 1997.

     A Notice of Determination Concerning Your Request for Relief

from Joint and Several Liability under Section 6015 (notice of

determination) denying petitioner’s request was issued to

petitioner on January 12, 2005.

Present Proceeding

     On April 18, 2005, petitioner filed with the Court a

petition seeking a review of the notice of determination denying

her request for relief from joint and several liability under

section 6015 for 1995, 1996, and 1997.

     Respondent filed a motion to file answer out of time to

allege the application of res judicata under section 6015(g)(2)

for 1995 and 1996.   Petitioner filed an objection, and respondent

filed a response to petitioners’s objection.   A hearing was held,

and the Court granted respondent’s motion to file an answer out

of time to allege the application of section 6015(g)(2).
                               - 7 -

Respondent subsequently amended his answer, without objection

from petitioner, to allege actual knowledge of the items giving

rise to the deficiencies for the years in issue.

                             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).   Section 6015 provides,

however, that a spouse may seek relief from joint and several

liability on a joint return under certain circumstances.

     A spouse (requesting spouse) may seek relief from joint and

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

allocate liability according to section 6015(c).    If relief is

not available under section 6015(b) or (c), the requesting spouse

may seek equitable relief under section 6015(f).    Sec.

6015(f)(2); Butler v. Commissioner, 114 T.C. 276, 287-292 (2000).

     Petitioner claims that she is entitled to relief from joint

and several liability under section 6015(c) for 1995, 1996, and

1997.   Respondent argues that petitioner’s claim for relief under

section 6015(c) with respect to 1995 and 1996 is barred by the

doctrine of res judicata by operation of section 6015(g)(2).

Respondent contends that section 6015(g)(2) applies because:    (1)

The Court entered a final decision for 1995 and 1996 in the prior

proceeding; (2) petitioner participated meaningfully in the prior
                                - 8 -

proceeding; and (3) petitioner could have raised relief under

section 6015 in the prior proceeding.

       Since the stipulated decision entered in the prior

proceeding did not include 1997, section 6015(g)(2) does not bar

petitioner’s claim for relief under section 6015(c) from joint

and several liability for 1997.

Application of Section 6015(g)(2) to 1995 and 1996

       Under section 6015, the requesting spouse bears the burden

of proof except where that section otherwise provides.      See Rule

142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), affd. 101

Fed. Appx. 34 (6th Cir. 2004); Jonson v. Commissioner, 118 T.C.

106, 113 (2002), affd. 353 F.3d 1181 (10th Cir. 2003); see also

sec. 6015(c)(3)(A)(ii), (C), (d)(3)(C).    Section 6015 does not

provide that the Commissioner bears the burden of proof under

section 6015(g)(2).    Monsour v. Commissioner, T.C. Memo. 2004-

190.    The requesting spouse therefore bears the burden of proof

under section 6015(g)(2).    Huynh v. Commissioner, T.C. Memo.

2006-180.

       The doctrine of res judicata may preclude a requesting

spouse from obtaining relief under section 6015.    See sec.

6015(g)(2).    Generally, where a court of competent jurisdiction

enters a final judgment on the merits of a cause of action, the

parties to the action are bound by every matter that was or could

have been offered and received to sustain or defeat the claim.
                                 - 9 -

Commissioner v. Sunnen, 333 U.S. 591, 597 (1948); Thurner v.

Commissioner, 121 T.C. 43, 50 (2003).       Because Federal income

taxes are determined on an annual basis, each year is a separate

cause of action, and res judicata is applied to bar subsequent

proceedings involving the same tax year.         Commissioner v. Sunnen,

supra at 598; Calcutt v. Commissioner, 91 T.C. 14, 21 (1988).

        Tax Court decisions reached by agreement constitute a final

judgment on the merits for purposes of res judicata.        See United

States v. Shanbaum, 10 F.3d 305, 313 (5th Cir. 1994); Trent v.

Commissioner, T.C. Memo. 2002-285.       The Court entered a

stipulated decision in the prior proceeding with respect to the

tax liabilities for 1995 and 1996.       The decision is final because

petitioner and Mr. Pacheco did not appeal the stipulated decision

within the requisite time under the statute.        See secs.

7481(a)(1), 7483.

     Section 6015(g)(2), however, modifies the common law

doctrine of res judicata with regard to claims under section

6015.     Section 6015(g)(2) provides in relevant part:

     SEC. 6015(g). Credits and Refunds.--

                  *    *    *    *    *      *      *

                  (2) Res judicata.-- In the case of any
             election under subsection (b) or (c), if a
             decision of a court in any prior proceeding
             for the same taxable year has become final,
             such decision shall be conclusive except with
             respect to the qualification of the
             individual for relief which was not an issue
                             - 10 -

          in such proceeding. The exception contained
          in the preceding sentence shall not apply if
          the court determines that the individual
          participated meaningfully in such prior
          proceeding.

Therefore, a requesting spouse cannot make an election under

section 6015(b) or (c) for any taxable year that is the subject

of a final court decision unless the requesting spouse’s

qualification for relief under section 6015(b) or (c) was not an

issue in the prior court proceeding and the requesting spouse did

not participate meaningfully in the prior proceeding.    Vetrano v.

Commissioner, 116 T.C. 272, 278 (2001).

     Section 1.6015-1(e), Income Tax Regs., imposes an additional

requirement for the application of section 6015(g)(2).   The

requesting spouse must show that she could not have raised relief

under section 6015 in the prior proceeding.   Id.   Section 1.6015-

1(e), Income Tax Regs., provides:

     (e) Res judicata and collateral estoppel.--A requesting
     spouse is barred from relief from joint and several
     liability under section 6015 by res judicata for any
     tax year for which a court of competent jurisdiction
     has rendered a final decision on the requesting
     spouse’s tax liability if relief under section 6015 was
     at issue in the prior proceeding, or if the requesting
     spouse meaningfully participated in that proceeding and
     could have raised relief under section 6015. * * *

Taxable years 1995 and 1996 are the subject of a final court

decision, and respondent agrees that petitioner’s qualification

for relief was not raised as an issue in the prior proceeding.

The parties dispute whether petitioner could have raised relief
                              - 11 -

under section 6015 in the prior proceeding and whether she

participated meaningfully in the prior proceeding.

     Whether Petitioner Could Have Raised Relief Under Section
     6015 in the Prior Proceeding

     Section 6015 encompasses three types of relief:   (1)

Subsection (b) provides full or apportioned relief from joint and

several liability; (2) subsection (c) provides proportionate tax

relief to divorced or separated taxpayers;4 and (3) subsection (f)

provides equitable relief from joint and several liability in

certain circumstances if neither subsection (b) nor (c) is

applicable.   Noons v. Commissioner, T.C. Memo. 2004-243.

     Petitioner argues that she could not have raised relief

under section 6015 in the prior proceeding because relief under

subsection (c) was not available to her until the death of Mr.

Pacheco on May 22, 2000.   Respondent counters that petitioner

could have raised relief under subsections (b) and (f).

Respondent argues that the language under section 1.6015-1(e),

Income Tax Regs., “could have raised relief under section 6015”,

means that if petitioner could have raised relief under any of

subsections (b), (c), and (f) at any point in the prior

proceeding, the requirement is met.


     4
      For purposes of determining eligibility for relief under
sec. 6015(c), a widow or widower is treated as a taxpayer who is
no longer married. See Jonson v. Commissioner, 118 T.C. 106, 124
(2000), affd. 353 F.3d 1181 (10th Cir. 2003); Rosenthal v.
Commissioner, T.C. Memo. 2004-89.
                             - 12 -

     In the prior proceeding, petitioner and Mr. Pacheco were

represented by Arthur Leiba (Mr. Leiba).       Mr. Leiba submitted a

statement in lieu of testimony at trial, admitting that before

the death of Mr. Pacheco, he was “generally aware of innocent

spouse relief, but not specific provisions.      To the best of my

knowledge and recollection, if * * * [petitioner] benefitted from

the tax returns, she couldn’t take advantage of it.”

     Before the death of Mr. Pacheco, relief under subsection (c)

was not yet available to petitioner.   Nevertheless, petitioner

could have raised relief under subsections (b) and (f), but her

counsel, in his judgment, decided not to do so.

     Upon the death of Mr. Pacheco on May 22, 2000, however,

petitioner became eligible to elect relief under subsection (c).

At the time, the prior proceeding was still pending.

     The proper time to elect relief under section 6015 is at any

point after a deficiency has been asserted by the IRS.      See

Vetrano v. Commissioner, supra at 279.     “‘This is the least

disruptive for both the taxpayer and the IRS since it allows both

to focus on the innocent spouse issue while also focusing on the

items that might cause a deficiency.’”     Id. (quoting H. Conf.

Rept. 106-1033, at 1023 (2000)).   It also permits every issue,

including the innocent spouse issue, to be resolved in a single

administrative and judicial process.     Id.
                              - 13 -

     Moreover, in Vetrano, this Court held that once the taxpayer

became eligible for section 6015 relief under a particular

subsection, she had to file an election.   Id. at 282.   If a

taxpayer failed to make an election in the first proceeding and

attempted to make an election in a subsequent proceeding after

the first proceeding became final, she would be barred by res

judicata from making an election in the subsequent proceeding.

Id. at 283-284.

     Petitioner argues that she could not have raised relief

under subsection (c) in the prior proceeding because:    (1) Her

counsel at the time did not inform her that such relief was

available, and (2) the 1995 and 1996 taxes were “definitively

settled” before Mr. Pacheco’s death.

     Petitioner claims that she was not informed by her counsel

that she could have sought relief under subsection (c) and that

she would not have signed the stipulated decision had she known.

Mr. Leiba acknowledged in his statement that “after * * * [Mr.

Pacheco] died, I don’t remember considering * * * [innocent

spouse relief].   I didn’t reevaluate the situation after he died

because they both agreed to the liability and there was no

dispute.”

     The quality of advocacy and the actual knowledge of the

litigants are not special circumstances in determining whether a

prior judgment is a bar in subsequent litigation.   Trent v.
                               - 14 -

Commissioner, T.C. Memo. 2002-285.      Therefore, Mr. Leiba’s

failure to inform petitioner that she could seek relief under

subsection (c) is insufficient to overcome the bar of res

judicata.

     Petitioner’s counsel contends that a month before Mr.

Pacheco’s death, petitioner and Mr. Pacheco had “definitively

settled” the taxes for 1995 and 1996 with RA Lunny.     On April 25,

2000, RA Lunny completed the tax examination report, and the file

was sent to the Appeals Office.   Petitioner’s counsel argues that

the prior proceeding effectively concluded at the point when the

file left RA Lunny’s office.   Therefore, petitioner did not have

an opportunity to raise relief under subsection (c) in the prior

proceeding.

     RA Lunny testified that his role was to make

recommendations, and it was up to the Appeals Office to “make the

final call” on whether to accept them.     The Court, after

reviewing the evidence presented by petitioner and respondent,

agrees with respondent that the prior proceeding was not final at

the time the file left RA Lunny’s office.

     Petitioner could have raised relief under subsection (c) in

the prior proceeding at any time between Mr. Pacheco’s death on

May 22, 2000, and the entry of the decision document on June 29,

2000.   Even after the decision has been entered, under Rule 162,

petitioner could have moved to vacate the decision within 30 days
                               - 15 -

after the decision had been entered.    Petitioner, however, did

not raise relief under subsection (c) during the prior

proceeding.

       Whether Petitioner Participated Meaningfully in the Prior
       Proceeding

       Petitioner bears the burden of proving by a preponderance of

the evidence that she did not participate meaningfully in the

prior proceeding.    See Monsour v. Commissioner, T.C. Memo. 2004-

190.    At trial, petitioner’s counsel conceded that petitioner

participated meaningfully in the prior proceeding relating to

1995 and 1996 up to April of 2000, or about a month before the

death of Mr. Pacheco.    Petitioner’s counsel argued that after

April of 2000, petitioner did not participate “meaningfully”

because the remaining actions that were required to conclude the

proceeding for 1995 and 1996 were ministerial.

       Court cases have not clearly defined “meaningful

participation” in all respects.     Huynh v. Commissioner, T.C.

Memo. 2006-180.    Nevertheless, the Court has held that signing

Court documents and participating in settlement negotiations are

indicators of meaningful participation. Id.; Monsour v.

Commissioner, supra.    It is not disputed that petitioner

communicated with respondent on numerous occasions in the prior

proceeding, in person and by phone, to discuss settlement and to

voluntarily sign court documents.
                               - 16 -

     The Court, on the evidence offered, finds that petitioner

participated meaningfully throughout the prior proceeding.

     Exception From Res Judicata

     Absent an exception from res judicata, petitioner is barred

under section 6015(g)(2) from seeking relief under subsection (c)

in this proceeding.   Petitioner’s counsel cites Smaczniak v.

Commissioner, 998 F.2d 238 (5th Cir. 1993), revg. T.C. Memo.

1991-87, arguing that the Court of Appeals for the Fifth Circuit

relied on “common sense” to craft an exception to ameliorate the

strict application of res judicata.     This case is not bound by

the law of the Fifth Circuit, and in any event, Smaczniak is

distinguishable.

     In Smaczniak, the Commissioner voluntarily redetermined the

taxpayer’s liability after a final decision was entered.      Id. at

242-243.    The Court of Appeals held that this was akin to a

“subsequent modification of the significant facts” so as to

render inapplicable the effect of res judicata for the same

taxable years in a subsequent proceeding.     Id. at 243.   In the

prior proceeding, however, respondent did not voluntarily

redetermine petitioner’s liabilities after the entry of the final

decision.   Therefore, Smaczniak is not applicable.

     The Court has considered the remaining arguments raised in

petitioner’s trial memorandum and supplement trial memorandum and

finds that they are unconvincing.     The Court has no authority to
                                - 17 -

override section 6015(g)(2) or vary its terms.     See Vetrano v.

Commissioner, 116 T.C. at 280.

     Accordingly, the Court concludes that section 6015(g)(2)

precludes petitioner from seeking relief from joint and several

liability under section 6015(c) for 1995 and 1996.

Application of Section 6015(c) Relief for 1997

     Upon the satisfaction of certain conditions, section 6015(c)

relieves the requesting spouse of liability for the items making

up the deficiency that would have been allocated solely to the

nonrequesting spouse if the spouses had filed separate tax

returns for the taxable year.    Sec. 6015(d)(1), (3)(A); Cheshire

v. Commissioner, 282 F.3d 326, 332 (5th Cir. 2002), affg. 115

T.C. 183 (2000); Mora v. Commissioner, 117 T.C. 279, 290 (2001).

Section 6015(c) applies only to taxpayers who are no longer

married, are legally separated, or have been living apart for

over a 12-month period.   Sec. 6015(c)(3)(A)(i).    A widow or

widower is treated as a taxpayer who is no longer married.       See

Jonson v. Commissioner, 118 T.C. at 124.

     Respondent received from petitioner a Form 8857, Request For

Innocent Spouse Relief, for 1997 on June 3, 2002.5    The parties




     5
      Under sec. 6015(c)(3)(B), an election for relief from joint
and several liability under sec. 6015(c) is to be made at any
time after a deficiency is asserted but not later than 2 years
after the date on which the Commissioner has begun collection
action. Respondent has not raised any issue as to the timeliness
of petitioner’s election under sec. 6015(c).
                               - 18 -

stipulated that petitioner is entitled to seek relief under

section 6015(c) for 1997.

     Relief under section 6015(c) is not available if the

Commissioner demonstrates that the requesting spouse had actual

knowledge, at the time the return was signed, of any item giving

rise to a deficiency (or portion thereof) that is not allocable

to such individual.   Sec. 6015(c)(3)(C); Hopkins v. Commissioner,

121 T.C. 73, 86 (2003); Culver v. Commissioner, 116 T.C. 189, 194

(2001).    Petitioner has the burden of proving which items would

not have been allocated to her if the spouses had filed separate

returns.    See Mora v. Commissioner, supra at 290; Levy v.

Commissioner, T.C. Memo. 2005-92.

     While the taxpayer generally has the burden of proof, in

order to preclude relief under section 6015(c) the Commissioner

must carry the burden of demonstrating by a preponderance of the

evidence that the requesting spouse had, at the time she signed

the return, actual knowledge of “any item giving rise to a

deficiency”.   Rule 142(a)(1); Culver v. Commissioner, supra at

196; Charlton v. Commissioner, 114 T.C. 333, 341-342 (2000); sec.

1.6015-3(c)(2)(i), Income Tax Regs.     “Item” means “an item of

income, deduction, or credit”.    Cheshire v. Commissioner, supra

at 337.

     The items giving rise to the 1997 deficiency are:     (1)

Unreported income from farmers who paid Contractor for the
                               - 19 -

workers provided, and (2) disallowed business expense deductions

for failure to provide substantiation.

     The Commissioner must show that the requesting spouse had an

“actual and clear awareness” of omitted income.     Cheshire v.

Commissioner, supra at 337 n.26; Cook v. Commissioner, T.C. Memo.

2005-22; Rowe v. Commissioner, T.C. Memo. 2001-325.     Knowledge of

the item includes knowledge of the receipt of the income.    Sec.

1.6015-3(c)(2)(i)(A), Income Tax Regs.

     At trial, petitioner admitted that she cashed or deposited

the checks from the farmers representing the omitted income on

her return.    Therefore, petitioner had actual knowledge of the

omitted income.

     In the case of an erroneous deduction, knowledge of the item

means knowledge of the facts that made the item not allowable as

a deduction.   Sec. 1.6015-3(c)(2)(i)(B), Income Tax Regs.; see

Rowe v. Commissioner, supra (citing King v. Commissioner, 116

T.C. 198, 204 (2001)).    At trial, petitioner testified that she

handled the receipts, made deposits, wrote checks, reviewed bank

statements, and kept track of income and expenses for Contractor.

The business account was not held jointly but was held solely in

petitioner’s name, doing business as Contractor.    Petitioner was

also responsible for dealing with the bookkeeping company that

kept track of Contractor’s payroll.     Mr. Pacheco was not involved
                               - 20 -

in managing the finances of Contractor because his education was

limited.

     Petitioner’s counsel agrees that petitioner was involved in

the business.    He argues, however, that the individual

adjustments were small and that petitioner could not have

actually known of every single transaction that had occurred at

the time she signed the return.    Under counsel’s reasoning,

petitioner would be required to have a tax professional’s level

of expertise for the Court to find actual knowledge under section

6015(c)(3)(C).    In Cheshire v. Commissioner, 115 T.C. at 194, the

Court rejected this knowledge standard.

     Petitioner testified that she reviewed all canceled checks

for Contractor, separated the checks into business related or

personal, and made notes of what each check was for.       Petitioner

agreed that she knew whether a given expense was business or

personal.   Therefore, she had knowledge of the facts as to

whether an item was allowable as a deduction.    See sec. 1.6015-

3(c)(2)(i)(B), Income Tax Regs.    These admissions are sufficient

for the Court to find that petitioner had actual knowledge of the

pertinent items at the time that she signed the 1997 return.

     In addition, respondent asserts that petitioner has held

herself out as the owner of Contractor.    In support, respondent

produced copies of:    (1) Form 943, Employer’s Annual Tax Return

for Agricultural Employees for 1995 and 1996, (2) Form 940-EZ,
                              - 21 -

Employer’s Annual Federal Unemployment (FUTA) Tax Return for 1995

and 1996, and (3) State of California Employment Development

Department, Form DE7, Annual Reconciliation Return, for 1995 and

1996.   Petitioner admitted that she had signed the foregoing

documents and had represented herself as the owner of Contractor.

Because she was the owner of Contractor, the entire 1997

deficiency is allocable to her.   See sec. 1.6015-3(d), Income Tax

Regs.

     The Court has reviewed all the evidence presented and finds

that petitioner had actual knowledge of the items giving rise to

the deficiency for 1997.   The Court holds that respondent did not

err in denying petitioner relief from joint and several liability

under section 6015(c) for 1997 in his notice of determination

dated January 12, 2005.

     To reflect the foregoing,

                                         Decision will be entered

                                    for respondent.
