                        T.C. Memo. 2007-328



                      UNITED STATES TAX COURT



                   STACY LEE GONCE, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7920-06.                Filed November 1, 2007.



     Stacy Lee Gonce, pro se.

     Robert V. Boeshaar, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   This case was commenced in response to

respondent’s denial of petitioner’s request for relief under

section 6015(f) with respect to unpaid taxes on a joint return

filed by petitioner and her former spouse for 1998, 1999, 2000,

and 2001.   The liability for 1998 has been paid in full, and

petitioner is not seeking a refund of any payments she has made
                               - 2 -

toward the tax liability for that year.    The remaining issues to

be decided are whether petitioner is eligible for relief from

joint and several liability under section 6015(b) or (c) for

taxable years 1999 and 2001 and whether she is entitled to relief

under section 6015(f) for 1999, 2000, and 2001.   Unless otherwise

indicated, all section references are to the Internal Revenue

Code in effect for the years in issue.

                        FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated into our findings by this reference.

Petitioner resided in the State of Washington at the time she

filed this petition.

     Petitioner filed joint Federal income tax returns, all of

which were signed by petitioner, with her former spouse, Daryl F.

Gonce (Mr. Gonce), for the years in issue.   Petitioner and

Mr. Gonce reported overpayments on their 1998 and 1999 Federal

tax returns of $2,357 and $2,083, respectively.   Petitioner and

Mr. Gonce reported underpayments on their 2000 and 2001 returns

of $1,188 and $2,528, respectively.

     Petitioner and Mr. Gonce were married in 1980, separated in

2002, and divorced in 2004.   Petitioner and Mr. Gonce have three

children, the youngest of whom was approximately 20 years old at

the time of trial.
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     Petitioner received a bachelor of education degree from

Western Washington University in 1999 and was employed as a

teacher during the years in issue.       Mr. Gonce has a high school

general equivalency diploma and worked in the sale of automobile

parts business during the years in issue.

     To supplement their income, petitioner and Mr. Gonce worked

separate newspaper routes in 1998 and 1999.      In 2000 and 2001,

Mr. Gonce continued to work his newspaper route.      Mr. Gonce

received nonemployee compensation of approximately $10,000

annually for the years 1998 through 2001 for his newspaper route.

Petitioner received nonemployee compensation of $7,675 in 1998

and $2,829 in 1999 for her newspaper route, which she

discontinued sometime in 1999.    Neither petitioner nor Mr. Gonce

reported any of the income they received in 1998 and 1999 with

regard to their respective newspaper routes on their returns for

those years.   Mr. Gonce did report income from his newspaper

route for 2000 and 2001, but respondent assessed an

understatement of tax attributable to income related to

Mr. Gonce’s newspaper route for 2001.

     During the years in issue, petitioner and Mr. Gonce

maintained a joint bank account.    Petitioner’s and Mr. Gonce’s

regular paychecks and the compensation from their respective

newspaper routes were deposited into the joint bank account.      All

household bills and the mortgage payments on the Gonces’ house
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were paid from the joint bank account.     Petitioner and Mr. Gonce

both wrote checks from the joint bank account during the years in

issue, and petitioner reviewed their monthly bank statements and

balanced their checkbooks at least sometimes.     Petitioner made

deposits, wrote checks, and withdrew funds from the joint bank

account during the years in issue.     During their marriage,

petitioner knew that Mr. Gonce always bought on credit and that

he and petitioner regularly spent more money than they earned.

     Pursuant to petitioner’s and Mr. Gonce’s divorce decree,

petitioner received sole title to the Gonces’ house by quitclaim

deed.   The divorce decree also divided the Gonces’ joint tax

liabilities, requiring each spouse to pay one-half of their total

tax liabilities at the time of the divorce.

                              OPINION

     Generally, married taxpayers may elect to file a joint

Federal income tax return.   Sec. 6013(a).    When a husband and

wife elect to file a joint Federal income tax return, they are

jointly and severally liable for the entire tax due on that

return.   Sec. 6013(d)(3); Butler v. Commissioner, 114 T.C. 276,

282 (2000).   However, section 6015 provides for relief for a

requesting spouse from joint and several liability in certain

circumstances.   Section 6015(b) provides general relief from

joint and several liability if certain requirements are met, and

section 6015(c), if applicable, provides for an allocation of
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liability as if the spouses had filed separate returns.   If

neither section 6015(b) nor (c) applies, section 6015(f) provides

for relief on other equitable grounds.

     Section 6015(b) provides, in pertinent part, as follows:

          SEC. 6015(b). Procedures for Relief From
     Liability Applicable to All Joint Filers.--

               (1) In general.--Under procedures prescribed
          by the Secretary, if--

                     (A) a joint return has been made for a
                taxable year;

                     (B) on such return there is an
                understatement of tax attributable to
                erroneous items of 1 individual filing the
                joint return;

                     (C) the other individual filing the
                joint return establishes that in signing the
                return he or she did not know, and had no
                reason to know, that there was such
                understatement;

                     (D) taking into account all the facts
                and circumstances, it is inequitable to hold
                the other individual liable for the
                deficiency in tax for such taxable year
                attributable to such understatement; and

           *       *      *      *       *     *      *

          then the other individual shall be relieved of
          liability for tax (including interest, penalties,
          and other amounts) for such taxable year to the
          extent such liability is attributable to such
          understatement.

     The requirements of section 6015(b)(1) are stated in the

conjunctive.   Accordingly, a failure to meet any one of them

prevents a requesting spouse from qualifying for the relief
                               - 6 -

offered therein.   Alt v. Commissioner, 119 T.C. 306, 313 (2002),

affd. 101 Fed. Appx. 34 (6th Cir. 2004).

     Petitioner does not meet all the requirements of section

6015(b)(1) for 1999 or 2001.   The 1999 return does not include

the $2,829 of nonemployee compensation that petitioner received

from her newspaper route that year.    To the extent that the

understatement of tax for 1999 is attributable to petitioner’s

own unreported income, it is not attributable solely to Mr. Gonce

as required for relief under section 6015(b)(1).

     Respondent concedes that the understatement of tax due for

2001 is attributable exclusively to Mr. Gonce.    However, section

6015(b)(1)(C) is not satisfied for either 1999 or 2001.

Petitioner has not shown that she did not know and had no reason

to know of the understatement of tax in those years.    See

Cheshire v. Commissioner, 115 T.C. 183, 192-193 (2000) (holding

that a requesting spouse does not meet the requirement of section

6015(b)(1)(C) if she has actual knowledge of the underlying

transaction that produced the omitted income), affd. 282 F.3d 326

(5th Cir. 2002).   Petitioner had actual knowledge of the payments

she and Mr. Gonce received as compensation for maintaining their

individual newspaper routes during the years in issue.

Petitioner had the opportunity to review the tax returns for

those years to ensure that all of petitioner’s and Mr. Gonce’s

income was reported accurately before she signed those returns,
                                 - 7 -

but she failed to do so.     Thus, petitioner is not eligible for

relief from joint and several liability for the years in issue

under section 6015(b).

     Section 6015(c) provides procedures for a requesting spouse,

where a deficiency has been assessed and the taxpayers who filed

jointly are now divorced, legally separated, or no longer members

of the same household, to elect to limit her liability to the

amount of a deficiency properly allocable to the requesting

spouse.   Sec. 6015(c)(3).    However, the requesting spouse is

ineligible to elect section 6015(c) relief if she had actual

knowledge, when signing the return, of any item giving rise to a

deficiency that is allocable to the other spouse.     Sec.

6015(c)(3)(C).   There is no dispute that petitioner had actual

knowledge of the payments she and Mr. Gonce received for

maintaining their respective newspaper routes; those payments

gave rise to the deficiencies in tax for the years in issue.

Thus, she does not qualify for relief under section 6015(c).      See

Mitchell v. Commissioner, T.C. Memo. 2000-332, affd. 292 F.3d 800

(D.C. Cir. 2002).

     Section 6015(f) provides for equitable relief if, taking

into account all of the facts and circumstances, it is

inequitable to hold the requesting spouse liable for the

deficiency.   As directed by section 6015(f), the Commissioner has

prescribed guidelines under which a taxpayer may qualify for
                                - 8 -

equitable relief from liability on a joint return for tax owed on

income attributable to the nonrequesting spouse.   See Rev. Proc.

2003-61, 2003-2 C.B. 296.    Rev. Proc. 2003-61, sec. 4.02, 2003-2

C.B. 298, provides in relevant part that relief ordinarily will

be granted to a requesting spouse with regard to underpayments of

tax attributable to the nonrequesting spouse if three criteria

are met.   The first criterion, that the requesting spouse is no

longer married to or is legally separated from the nonrequesting

spouse or is not a member of the same household at any time

during the 12 months prior to the request for relief, is

satisfied in this case.

     The second criterion, that, at the time the joint return was

signed, the requesting spouse had no knowledge or reason to know

that the tax would not be paid and that it was reasonable to

believe that the nonrequesting spouse would pay the liability, is

not satisfied in this case.   Petitioner and Mr. Gonce reported

underpayments on their 2000 and 2001 Federal tax returns, both of

which were signed by petitioner, of $1,188 and $2,528,

respectively.   When those returns were filed, petitioner knew

that Mr. Gonce always bought on credit and that she and Mr. Gonce

spent more than they made.    Petitioner has not shown that it was

reasonable to rely on Mr. Gonce to pay the tax due for those

years.
                               - 9 -

     The third criterion under section 4.02 of Rev. Proc. 2003-61

is that the requesting spouse will suffer economic hardship if

relief is not granted.   Economic hardship for these purposes is

defined as the inability to pay reasonable basic living expenses

if the requesting spouse is held liable for the tax owed.   See

sec. 301.6343-1(b)(4), Proced. & Admin. Regs.   The ability to pay

reasonable basic living expenses is determined by considering the

following nonexclusive factors:   The taxpayer’s age; employment

status; ability to earn; number of dependents; expenses for food,

clothing, housing, and transportation; and any extraordinary

circumstances.   Id.

     The Appeals officer assigned to petitioner’s case computed

petitioner’s gross monthly income and living expenses and

concluded that her income exceeded her expenses and that holding

her accountable for the tax owed would not result in economic

hardship.   The Appeals officer did not include petitioner’s

health care costs in calculating her monthly expenses because

petitioner presented no evidence on this matter at her meeting

with the officer.   Petitioner presented at trial a log of out-of-

pocket medical expenses paid by petitioner in recent years.

According to the log, petitioner incurred approximately $400 in

out-of-pocket medical expenses in 2006.   Petitioner testified at

trial that she earned gross wages of approximately $51,000 in

2006.   In the computation performed in February 2006, the Appeals
                               - 10 -

officer assumed petitioner’s annual gross wages were

approximately $30,000.    Regardless of whether the $30,000 gross

wages estimation or the $51,000 actual gross wages is used in the

computation to determine economic hardship, petitioner’s actual

medical expenses presented at trial are not substantial enough

for us to conclude that she would be unable to pay her basic

living expenses if relief were not granted.

     Respondent argues that we should limit our review of the

denial of section 6015(f) relief to the record available to the

Appeals officer during respondent’s administrative review and

refuse to consider petitioner’s medical expenses because the

substantiating log of expenses is not part of the administrative

record.    In view of our conclusion that the evidence is

insufficient to show economic hardship, we need not address

respondent’s argument.

     Rev. Proc. 2003-61, sec. 4.03, 2003-2 C.B. at 298, provides

an alternative test for equitable relief if a taxpayer does not

meet the requirements of Rev. Proc. 2003-61, sec. 4.02.     Rev.

Proc. 2003-61, sec. 4.03, lists several relevant factors that the

Commissioner considers and weighs in making a determination about

whether section 6015(f) relief should be granted.    Those factors

include:

     (i) Whether the requesting spouse is separated or divorced

from the nonrequesting spouse;
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     (ii) whether the requesting spouse would suffer economic

hardship if relief from the liability is not granted;

     (iii) whether the requesting spouse had knowledge or reason

to know either of the item giving rise to the tax deficiency or

that the nonrequesting spouse would not pay the tax liability;

     (iv) whether the nonrequesting spouse has a legal obligation

pursuant to a divorce decree or agreement to pay the outstanding

liability;

     (v) whether the requesting spouse has significantly

benefited (beyond normal support) from the unpaid liability or

item giving rise to the deficiency; and

     (vi) whether the requesting spouse has made a good faith

effort to comply with Federal income tax laws in the tax years

subsequent to the years to which the request for relief relates.

Rev. Proc. 2003-61, sec. 4.03(2)(a).

     Although petitioner is divorced from Mr. Gonce, the

nonrequesting spouse, several of the other Rev. Proc. 2003-61,

sec. 4.03, factors weigh against granting petitioner relief from

joint and several liability.   We have already concluded that,

even taking into account her medical bills, petitioner would not

suffer economic hardship if relief is not granted.   Petitioner

not only knew about Mr. Gonce’s newspaper route during the years

in issue, but she also maintained her own newspaper route in 1998

and 1999 and was familiar with the payments and procedures
                                - 12 -

associated with maintaining those routes.    Pursuant to their

divorce decree, petitioner and Mr. Gonce each had obligations to

pay an equal share of their then-outstanding tax liabilities, and

the tax liability was not allocated in the decree to Mr. Gonce

alone.   She and Mr. Gonce shared a joint checking account, into

which all of petitioner’s and Mr. Gonce’s paychecks were

deposited.    Such benefits did not extend beyond her normal

support.    The absence of other benefits weighs in favor of

petitioner.    See Ferrarese v. Commissioner, T.C. Memo. 2002-249.

Finally, although petitioner was entitled to a refund in 2002 and

2004, she filed her Federal income tax returns late in those

years.     We do not believe this last element weighs either for or

against petitioner.

     Rev. Proc. 2003-61, sec. 4.03(2)(b), 2003-2 C.B. at 299,

lists two additional factors that may weigh in favor of equitable

relief under section 6015(f), but that will not weigh against

relief if not present:

          (i) * * * Whether the nonrequesting spouse abused
     the requesting spouse. The presence of abuse is a
     factor favoring relief. A history of abuse by the
     nonrequesting spouse may mitigate a requesting spouse’s
     knowledge or reason to know.

          (ii) * * * Whether the requesting spouse was in
     poor mental or physical health on the date the
     requesting spouse signed the return or at the time the
     requesting spouse requested relief. * * *

     Petitioner reported on her Form 12510, Questionnaire for

Requesting Spouse, that she had never been abused by Mr. Gonce
                              - 13 -

and that she was not suffering from a mental or physical ailment

at the time she signed the joint returns or at the time she

requested relief.   Thus, these additional factors do not weigh in

favor of relief for petitioner.

     Taking into account all of the facts and circumstances, we

are not persuaded that it is inequitable to hold petitioner

liable for the deficiencies for the years in issue or that it was

an abuse of discretion for respondent to deny petitioner relief

under section 6015.   In reaching our holding, we have considered

all arguments made, and, to the extent not mentioned, we conclude

that they are irrelevant, moot, or without merit.

     To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.
