                         T.C. Summary Opinion 2014-82



                         UNITED STATES TAX COURT



                 JUDITH K. BLOMBERG, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 12250-13S.                         Filed August 26, 2014.



      Judith K. Blomberg, pro se.

      John Schmittdiel and Christina L. Cook, for respondent.



                              SUMMARY OPINION


      MARVEL, Judge: This case was heard pursuant to the provisions of section

74631 of the Internal Revenue Code in effect when the petition was filed.



      1
      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. Some monetary amounts are rounded.
                                           -2-

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.

      Pursuant to section 6015 petitioner seeks review of respondent’s

determination to deny her relief from joint and several liability for Federal income

tax for 2010. Respondent determined an income tax deficiency of $14,014 in

petitioner and her former husband’s Federal income tax for 2010 and an accuracy-

related penalty under section 6662(a) of $2,803. Petitioner resided in Minnesota

when she filed her petition.

                                    Background

      Some of the facts have been stipulated and are so found. The stipulated

facts and the facts drawn from stipulated exhibits are incorporated herein by

reference.

      Petitioner graduated from law school in 1977 and is licensed to practice law

in Texas. She currently works as a lifecourse care guide, providing care to

patients with limited life expectancies.

I.    Sale of Carnegie House

      From a date that the record does not disclose to July 19, 2011, petitioner

was married to Don Frederick Russell. In 2010, during the pendency of their

divorce proceeding, petitioner and Mr. Russell sold a house at 3012 Carnegie
                                         -3-

Street, Houston, Texas (Carnegie house), for $1.46 million. On December 30,

2010, petitioner and Mr. Russell entered into an agreement whereby net proceeds

of $825,547 from the sale of the Carnegie house would be divided as follows: (1)

petitioner and Mr. Russell would each receive $200,000; (2) the remainder would

be placed in escrow for 30 days; and (3) at the end of the 30-day period, 50% of

the remainder would be paid to the trust account of Beverly Lord (petitioner’s

attorney) and 50% to the trust account of Richard Mintz (Mr. Russell’s attorney).

In April 2011 the escrow company disbursed $212,773 to each of the attorneys.

II.   Divorce Decree

      On July 19, 2011, the Harris County District Court of Texas (Harris County

district court) entered a final decree of divorce, dissolving the marriage of

petitioner and Mr. Russell. The decree provided that Mr. Russell would receive

the remaining Carnegie house funds in the Mintz trust account after certain

payments, including a $32,500 payment to petitioner, had been made. The decree

further provided: “Failure to distribute said funds does not relieve DON

FREDERICK RUSSELL of the obligation to pay JUDITH KAY RUSSELL the

sum of $32,500.” With respect to petitioner and Mr. Russell’s 2010 Federal

income tax liability, the decree provided:
                                            -4-

       It is agreed that DON FREDERICK RUSSELL and JUDITH KAY
       RUSSELL shall be equally responsible for all federal income tax
       liabilities of the parties from January 1, 2010 through December 31,
       2010, and each party shall timely pay 50 percent of any deficiencies,
       assessments, penalties, or interest due thereon * * *. The parties
       agree that nothing contained herein shall be construed as or is
       intended as a waiver of any rights that a party has under the “Innocent
       Spouse” provisions of the Internal Revenue Code.

III.   2010 Federal Income Tax Return

       Sometime around August 2011 petitioner began experiencing difficulty

receiving mail at her Houston address. On September 25, 2011, petitioner

informed Mr. Russell that he should use Ms. Lord’s address instead of petitioner’s

Houston address to send mail to petitioner.

       On September 23, 2011, Mr. Russell wrote to petitioner, stating: “[I]t looks

like we’re going to have some capital gains tax on the sale of the house.

According to * * * [Mr. Russell’s advisers], the costs basis for the house is the

purchase price plus improvements, closing costs on purchase and sale, including

commissions, etc.” Mr. Russell then listed the purchase price, various

improvements, and closing costs, totaling $840,578. He calculated the gain by

subtracting the adjusted basis from the sale price of $1.46 million and reduced the

gain by the $500,000 personal residence exclusion2 to arrive at a taxable gain of

       2
           Pursuant to sec. 121(a) and (b), taxpayers who file joint returns may
                                                                           (continued...)
                                         -5-

$119,422. On September 25, 2011, petitioner replied: “You don’t have all the

correct information and you appear to be missing about $100,000 in

improvements.” Later that day, petitioner provided Mr. Russell with a list of

home improvement costs, stating:

      There are many changes that need to be made and there should be no
      real capital gain tax to be paid. After 17 years of ownership, I think
      there are items we both forgot that would eliminate any remaining
      tax. * * *

                    *     *      *      *      *     *      *

      Improvements are at a minimum at least $105,128.00 per my above
      list. Your numbers need to be adjusted. I am sure there are other
      items I have forgotten. I think our tax should be zero as over 17 years
      we would have had about $2,000 a year in repairs and improvements
      not on the list. That estimate of other improvements would eliminate
      the tax.

Later that night petitioner provided Mr. Russell with a second list of home

improvement costs, stating: “Adds an additional $19,500 to improvements I

previously sent. Miscellaneous repairs over 17 years that I have not remembered

should eliminate the rest of the gain.” Finally, petitioner wrote to Mr. Russell

again that night stating: “If you add your list of $12,000 plus [those] which I

forgot to everything I sent, the capital gains are eliminated.”

      2
       (...continued)
exclude from gross income up to $500,000 of gain from the sale or exchange of
the taxpayers’ “principal residence”.
                                        -6-

      The next morning Mr. Russell wrote to petitioner, stating: “Got all of your

comments. Will make changes.” Petitioner replied, reminding him to send her

mail to Ms. Lord because she was experiencing difficulty receiving mail at her

Houston address.

      On October 4, 2011, Mr. Russell informed petitioner that a draft of the 2010

return had been delivered to Ms. Lord’s office. On October 9, 2011, petitioner

wrote to Mr. Russell, asking him to pick up the signed return and her share of the

tax payment from Ms. Lord’s office later that week. Petitioner continued:

      I have no way of verifying some of the information you supplied so I
      am signing with the understanding that I cannot accept or reject your
      information as I do not have documentation to know what is accurate.

      My share of the taxes is 50% of 17,359.00 ($8,679.00) of which I
      have already paid $7,212.00 per the tax return (my withholding). So I
      owe $1,467.00 and my check will be for that amount.

On October 10, 2011, petitioner signed the 2010 return at Ms. Lord’s office.3 The

2010 return did not report any gain from the sale of the Carnegie house.




      3
       At trial petitioner testified that she did not review the return because she
was under “extreme stress”. However, in the light of the record, we do not find
credible petitioner’s assertion that she did not review the return, and we need not
accept her self-serving testimony. See Shea v. Commissioner, 112 T.C. 183, 189,
(1999).
                                         -7-

IV.   Audit of 2010 Return

      On August 3, 2012, Mr. Russell informed petitioner that he had received a

notice from the Internal Revenue Service (IRS) regarding the sale of the Carnegie

house and that a response was due by August 22, 2012. Mr. Russell further

informed petitioner that he was working with his accountant to resolve the issue.

On August 13, 2012, Mr. Russell asked petitioner to provide him with copies of

any receipts that she had for improvements made on the house. That same day,

petitioner replied to Mr. Russell, stating:

      I have no receipts. You need to get them for [sic] the contractors or
      companies that did the work. * * *

      I sent you the information you needed in prior emails. You should be
      able to figure it out. I am sure you can get the info you need. * * *

      On August 15, 2012, petitioner asked Mr. Russell not to contact her directly

and to direct all future communications with her through her attorney. On

September 25, 2012, petitioner informed Mr. Russell’s accountant that Ms. Lord

no longer represented her. Petitioner did not, however, provide Mr. Russell’s

accountant with an alternate address at which she could be reached.

      In a Notice CP-2000 dated November 19, 2012, respondent determined that

petitioner and Mr. Russell had failed to report gain of $43,332 from the sale of the

Carnegie house in 2010 and that they were liable for an income tax deficiency of
                                         -8-

$14,014 and an accuracy-related penalty of $2,803. The notice informed

petitioner and Mr. Russell that if they paid their tax liability in full by December

19, 2012, they would owe $17,766. Pursuant to the notice and enclosed with a

letter dated December 14, 2012, Mr. Russell sent the IRS an $8,883 payment

representing his half of the deficiency and the accuracy-related penalty. The IRS

acknowledged Mr. Russell’s payment in a letter dated February 4, 2013.

      On April 29, 2013, respondent mailed a notice of deficiency in which

respondent determined an income tax deficiency of $14,014 and an accuracy-

related penalty of $2,803 for 2010.

V.    Payment of $32,500 Required by Divorce Decree

      On August 16, 2011, Ms. Lord informed Mr. Mintz that petitioner had not

received the $32,500 payment required by the divorce decree. Subsequently, on

August 19, 2011, Mr. Mintz wrote a check to petitioner for $32,500, which Ms.

Lord received on August 23, 2011. On October 21, 2011, petitioner attempted to

deposit the check, but it was rejected for insufficient funds.

      On September 16, 2011, Mr. Mintz wrote a check to Mr. Russell for the

remaining Carnegie house funds of $116,932. We infer from the record that

sometime between September 16 and October 21, 2011, Mr. Russell successfully

deposited his check.
                                        -9-

      On February 20, 2012, petitioner filed a grievance against Mr. Mintz with

the State Bar of Texas’ Office of the Chief Disciplinary Counsel because he failed

to pay her the $32,500 required by the divorce decree. On December 21, 2012, the

Supreme Court of Texas accepted Mr. Mintz’s resignation from the bar. At that

time, Mr. Mintz had three disciplinary matters pending against him. Also on

December 21, 2012, the Supreme Court of Texas issued an order requiring Mr.

Mintz to pay petitioner restitution of $32,500 as a condition for reinstatement.

      On March 1, 2013, Mr. Mintz wrote to petitioner, Mr. Russell, and Ms. Lord

apologizing for the missing funds and for mismanaging his practice. Mr. Mintz

admitted that he had operated his practice with funds from his client trust account

and further admitted that he had paid both business and living expenses from that

account. Mr. Mintz explained that while the funds had been in the client trust

account when he wrote the $32,500 check to petitioner in August 2011, there was

a shortfall when she attempted to negotiate her check months later.

      In or around February 2013 petitioner filed an enforcement action against

Mr. Russell and Mr. Mintz in the Harris County district court to compel them to

pay $32,500. In a counterpetition Mr. Russell sought, among other things, to

compel petitioner to pay her half of the 2010 Federal income tax deficiency and

penalty. In an order dated June 26, 2013, the Harris County district court granted
                                           - 10 -

petitioner’s enforcement petition in part and entered judgment against Mr. Mintz

of $32,500, plus accrued prejudgment interest of $3,047, postjudgment interest of

5%, and attorney’s fees of $6,538. The court denied petitioner’s claim for relief

against Mr. Russell and also denied Mr. Russell’s counterpetition. As of the date

of trial Mr. Mintz had not made any payment on the judgment. Petitioner,

however, was taking steps to collect on her judgment.

VI.   Petitioner’s Financial Condition

      On or around May 23, 2013, petitioner submitted to the IRS a Form 8857,

Request for Innocent Spouse Relief. In an exhibit enclosed with her request,

petitioner described her financial status as of May 23, 2013, as follows:

                       Assets                                 Debts

      Townhouse                 $190,500       Credit card             $20,000
      Automobile                  30,000       Legal fees                1,500
      IRA                          6,000       Car loan                  6,400
      Cash                        70,000        Total                   27,900
      Personal property           30,000
      Iowa property                1,000
       Total                     327,500

Petitioner claimed that she had monthly expenses totaling $5,563 as of May 2013.4

In rejecting petitioner’s request for relief under section 6015(f), respondent



      4
          At trial petitioner testified that she had current cash holdings of $50,000.
                                         - 11 -

concluded that petitioner would not suffer financial hardship if section 6015(f)

relief were denied.

                                      Discussion

      Generally, married taxpayers who file a joint Federal income tax return are

jointly and severally liable for the tax reported or reportable on the return. Sec.

6013(d)(3); Butler v. Commissioner, 114 T.C. 276, 282 (2000). Section 6015,

however, allows a spouse to obtain relief from joint and several liability in certain

circumstances. Section 6015(a)(1) provides that a spouse who has made a joint

return may elect to seek relief from joint and several liability under section

6015(b) (dealing with relief from liability for an understatement of tax with

respect to a joint return). Section 6015(a)(2) provides that an eligible spouse may

elect to limit that spouse’s liability for any deficiency with respect to a joint return

under section 6015(c) (dealing with relief from joint and several liability for

taxpayers who are no longer married or who are legally separated or no longer

living together). If a taxpayer does not qualify for relief under either section

6015(b) or (c), the taxpayer may seek equitable relief under section 6015(f).

Petitioner does not argue that she is entitled to relief under section 6015(b) or (c)

but argues that she is entitled to relief under section 6015(f).
                                        - 12 -

I.    The Standard and Scope of Review

      In determining whether a taxpayer is entitled to equitable relief under

section 6015(f), we apply a de novo standard and scope of review. Porter v.

Commissioner, 132 T.C. 203, 210 (2009). Petitioner bears the burden of proving

that she is entitled to relief under section 6015(f). See id.; see also Rule 142(a)(1).

The Commissioner has prescribed guidelines in Rev. Proc. 2013-34, 2013-43

I.R.B. 397, modifying and superseding Rev. Proc. 2003-61, 2003-2 C.B. 296, for

determining whether a requesting spouse qualifies for relief under

section 6015(f). This Court considers those guidelines, but is not bound by them,

in evaluating the facts and circumstances of a case. See Pullins v. Commissioner,

136 T.C. 432, 438-439 (2011); Porter v. Commissioner, 132 T.C. at 210.

II.   Threshold Conditions

      Rev. Proc. 2013-34, sec. 4.01, 2013-43 I.R.B. at 399-400, sets forth seven

threshold conditions that a requesting spouse must satisfy to be eligible to submit

a request for relief under section 6015(f): (1) the requesting spouse filed a joint

Federal income tax return for the tax year or years for which relief is sought; (2)

the requesting spouse does not qualify for relief under section 6015(b) or (c); (3)

the claim for relief is timely filed; (4) no assets were transferred between the

spouses as part of a fraudulent scheme; (5) the nonrequesting spouse did not
                                        - 13 -

transfer disqualified assets to the requesting spouse; (6) the requesting spouse did

not knowingly participate in the filing of a fraudulent joint return; and (7) the

liability from which relief is sought is attributable to an item of the nonrequesting

spouse, unless an exception applies. An exception applies in any one of the

following circumstances: (1) the item is attributable to the requesting spouse

solely due to the operation of community property law; (2) the item is only

nominally owned by the requesting spouse; (3) unbeknownst to the requesting

spouse, the funds intended for the payment of tax were misappropriated by the

nonrequesting spouse for the nonrequesting spouse’s benefit; (4) the requesting

spouse establishes that he or she was the victim of abuse before the return was

filed; or (5) the requesting spouse establishes that the nonrequesting spouse’s

fraud is the reason for the erroneous item. Id. sec. 4.01(7).

      Petitioner does not meet the seventh threshold requirement because the item

giving rise to the deficiency is the gain from the sale of the Carnegie house.

Petitioner jointly owned the house with Mr. Russell, joined with him in selling the

house, and received half of the net proceeds. The gain from the sale of the house

is therefore attributable to both her and Mr. Russell. Moreover, Mr. Russell has

already paid the IRS his half of the deficiency and the penalty. Therefore, the
                                        - 14 -

unpaid portions of the deficiency, the penalty, and the interest are properly

attributable to petitioner.

      Petitioner attempts to avoid the above conclusion by claiming that she

qualifies under the abuse exception of Rev. Proc. 2013-34, sec. 4.01(7)(d), 2013-

43 I.R.B. at 400. Petitioner alleges that “[a]buse did exist during the marriage but

not the type of abuse that is stated on the innocent spouse form.” The abuse

exception requires that as a result of the abuse, the requesting spouse was not able

to challenge the treatment of any items on the return. Id.; see also Deihl v.

Commissioner, T.C. Memo. 2012-176 (holding that the abuse exception did not

apply where the requesting spouse failed to establish that she did not challenge the

treatment of items for fear of retaliation by the nonrequesting spouse).

      Petitioner has not shown that the abuse she allegedly suffered prevented her

from challenging the decision not to report gain from the sale on the 2010 joint

return. Although petitioner contends that she did not give Mr. Russell her address

because of “safety concerns”, the record establishes that she asked Mr. Russell to

send correspondence to Ms. Lord’s office because she was experiencing difficulty

receiving mail at her Houston address. Equally unconvincing is petitioner’s

contention that she asked Mr. Russell “to cease email communication in August

2012 when the emails from him became threatening”. The record is devoid of any
                                          - 15 -

threatening emails from Mr. Russell, and we infer from their absence that none

exist.

         The record does not establish that petitioner suffered any abuse. The record

does establish, however, that petitioner actively intervened to convince Mr.

Russell that they had no gain from the Carnegie house sale. Mr. Russell initially

calculated taxable gain on the sale to be $119,422. Petitioner, however, repeatedly

wrote to Mr. Russell stating that any gain was eliminated by the repairs and

improvements that they had made to the house. These exchanges demonstrate

that, not only did petitioner challenge the tax treatment of the Carnegie house sale,

but that the 2010 joint return reflected her position.

         On this record, we find that petitioner does not satisfy the seventh threshold

condition of Rev. Proc. 2013-34, supra.5 Consequently, we need not address the

factors for determining equitable relief under Rev. Proc. 2013-34, sec. 4.02 or

4.03, 2013-43 I.R.B. 400-403.

III.     Other Arguments Raised by Petitioner

         Although we give due consideration to the guidelines set forth in Rev. Proc.

2013-34, supra, our consideration of the guidelines does not prevent us from


         5
       Neither party argues that any of the other exceptions to the seventh
threshold requirement applies in this case.
                                         - 16 -

considering additional facts and circumstances and arguments in deciding whether

the taxpayer is entitled to equitable relief under section 6015(f). See Pullins v.

Commissioner, 136 T.C. at 438-439; Porter v. Commissioner, 132 T.C. at 210.

Accordingly, we address petitioner’s other arguments for relief.

      Petitioner argues that she was deprived of the opportunity to contest the

deficiency amount because Mr. Russell continued to send documents to Ms. Lord

after petitioner informed him that Ms. Lord no longer represented her and because

Mr. Russell failed to send IRS correspondence to her within three days of receipt,

as required by the divorce decree. Petitioner alleges that Mr. Russell received an

IRS notice as early as August 1, 2012.

      We do not find this argument to be persuasive for several reasons. Mr.

Russell sent correspondence to Ms. Lord at petitioner’s direction. When petitioner

informed Mr. Russell that Ms. Lord no longer represented her, she did not provide

him with a new address to which he should send future correspondence. In

addition, the record shows that Mr. Russell informed petitioner of the IRS notice

as early as August 3, 2012, and on August 13, 2012, asked her for any receipts in

her possession that would support a higher adjusted basis in the Carnegie house.

Although the record does not clearly establish whether Mr. Russell timely sent a

copy of the notice to Ms. Lord, petitioner has failed to prove that she was
                                         - 17 -

prejudiced by any alleged noncompliance. At trial petitioner admitted that she was

aware of the IRS audit of the 2010 return and further admitted that she submitted

information during the audit that contributed to a significant reduction in the

original proposed deficiency. Moreover, petitioner does not challenge the

deficiency in this current proceeding. Accordingly, we decline to award relief on

this ground.

      Petitioner also argues that as of October 10, 2011, she had paid $7,2176 in

Federal income tax through her withholdings and Mr. Russell had made no

payments. The record shows, however, that petitioner had already taken her

withholding into account in calculating how much of the tax liability shown on the

2010 return she was required to pay. Excluding the current unpaid balance of the

2010 liability, the record supports the inference that petitioner and Mr. Russell

each paid 50% of the joint tax liability shown on their 2010 return. Accordingly,

we decline to award relief on this ground.

      Petitioner contends that the Harris County district court has already “ruled

that the 50% tax liability provision in the divorce decree is not enforceable”

against her. Petitioner bases her argument on the court’s order entered June 26,

2013, which denied Mr. Russell’s counterpetition. We do not interpret the Harris

      6
          The record establishes that petitioner’s withholding for 2010 was $7,212.
                                        - 18 -

County district court’s summary denial of Mr. Russell’s counterpetition to

constitute its determination as to petitioner’s Federal tax liability. We cannot

discern from the record the reasons for the summary denial of Mr. Russell’s

counterpetition and will not infer from this action that the State court made any

determination with respect to petitioner’s Federal income tax liability.

      Finally, petitioner argues that she is entitled to equitable relief under section

6015(f) because she was never paid the $32,500 to which she was entitled under

the divorce decree. While we are sympathetic to petitioner’s situation and

understand her frustration, the record establishes that she did not receive the

money because Mr. Mintz mismanaged his client trust account. The record further

establishes that Mr. Russell received the remaining amount of the house sale

proceeds after the $32,500 had already been subtracted. Petitioner has failed to

establish that Mr. Russell was in any way responsible for, or benefited from, Mr.

Mintz’s financial improprieties. We also note that petitioner has a judgment

against Mr. Mintz for the full $32,500 she is owed under the divorce decree plus

interest and attorney’s fees, and she is taking steps to collect on that judgment.

      Petitioner has not established that Mr. Mintz’s failure to pay the $32,500

has caused her any financial difficulty or that a denial of relief under section

6015(f) would result in financial hardship. The record demonstrates that petitioner
                                        - 19 -

has sufficient assets to pay the unpaid balance of the 2010 tax liability.

Accordingly, we decline to grant relief on this ground as well.

IV.   Conclusion

      After considering all of the facts and circumstances and the parties’

arguments for and against relief, we conclude that petitioner is not entitled to relief

from joint and several liability under section 6015(f).

      To reflect the foregoing,


                                                 Decision will be entered for

                                        respondent.
