                                T.C. Memo. 2013-24



                          UNITED STATES TAX COURT



                  MAURICE TOMPKINS, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 24498-10.                           Filed January 22, 2013.



      Maurice Tompkins, pro se.

      Blaine Charles Holiday, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


      KERRIGAN, Judge: This proceeding was commenced under section

6015(e) for review of respondent’s determination that petitioner is not entitled to

relief from joint and several liability for 2008 with respect to a Federal income tax

return he filed with his former spouse. The issues presented for consideration are
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[*2] whether petitioner is entitled to relief under section 6015(b), (c), or (f). All

section references are to the Internal Revenue Code in effect at all relevant times.

                                 FINDINGS OF FACT

      Some of the facts have been stipulated and are incorporated in our findings by

this reference. Petitioner resided in Minnesota when the petition was filed.

      Petitioner and Francy Tompkins were married on November 14, 2006, and

were divorced on June 2, 2010.

      For tax year 2007 petitioner filed a Form 1040A, U.S. Individual Income Tax

Return, prepared by H&R Block, reflecting a filing status as head of household and

claiming his daughter as a dependent. Petitioner filed as head of household at the

advice of H&R Block.

      During 2008 petitioner, Ms. Tompkins, and their minor daughter lived

together. Petitioner worked for ATR Needlecraft, Inc., and earned wages totaling

$19,276. During 2008 Ms. Tompkins earned wages totaling $4,562, including

$1,002 from Resource, Inc., and $3,560 from Becklund Personal Care. Ms.

Tompkins also earned $50 of interest income from TCF National Bank.

      During this period petitioner and Ms. Tompkins’ marriage was strained and

they rarely communicated with each other. Petitioner handled financial matters and

used H&R Block to prepare his tax return, as he had done in the past. Ms.
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[*3] Tompkins accompanied petitioner to a meeting at H&R Block to discuss their

2008 tax return preparation. Their very young daughter attended the meeting at

H&R Block.

      Petitioner and Ms. Tompkins timely filed an income tax return for 2008 and

claimed a filing status of married filing jointly. Petitioner and Ms. Tompkins

reported an adjusted gross income of $19,276 and claimed exemptions for

themselves and their daughter.

      For 2009 petitioner filed a Form 1040A prepared by H&R Block. His filing

status was married filing separately, and he claimed his minor daughter as a

dependent.

      Respondent examined petitioner’s 2008 tax return and determined an income

tax deficiency of $984. The underlying deficiency is not at issue. The determined

deficiency arose from the following: failure to include Ms. Tompkins’ income from

Becklund Personal Care, failure to include Ms. Tompkins’ income from Resource,

Inc., and failure to include Ms. Tompkins’ interest income from TCF National Bank.

      On January 19, 2010, petitioner submitted a Form 8857, Request for

Innocent Spouse Relief, to the Internal Revenue Service (IRS). Petitioner

indicated on the form that he had filed a joint return and that he did not know his
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[*4] spouse had income. The IRS sent petitioner a final determination letter dated

September 2, 2010, denying him innocent spouse relief under section 6015(b), (c),

and (f). According to the letter, the basis for denial was that petitioner “knew, or

had reason to know, of the income or deductions that caused the additional tax.”

                                       OPINION

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

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

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

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

6015(b) or, if eligible, may allocate liability under section 6015(c). Sec. 6015(a). If

a requesting spouse is not eligible for relief under section 6015(b) or (c), a

requesting spouse may be eligible for equitable relief under section 6015(f). Olson

v. Commissioner, T.C. Memo. 2009-294, slip op. at 10-11.

      Section 6015(b)(1) authorizes the Secretary to grant relief if the taxpayer

satisfies the requirements of subparagraphs (A) through (E).

             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;
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[*5]                        (B) on such return there is an understatement of tax
                     attributable to erroneous items of one 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

                            (E) the other individual elects (in such form as the
                     Secretary may prescribe) the benefits of this subsection not later
                     than the date which is 2 years after the date the Secretary has
                     begun collection activities with respect to the individual making
                     the election,

              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, so a

spouse must satisfy all five requirements to be relieved of joint and several

liability. Haltom v. Commissioner, T.C. Memo. 2005-209, slip op. at 9.

Accordingly, a failure to meet any one of them prevents a requesting spouse from

qualifying for the relief offered therein. Alt v. Commissioner, 119 T.C. 306, 313

(2002), aff’d, 101 Fed. Appx. 34 (6th Cir. 2004); Haltom v. Commissioner, slip

op. at 9.
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[*6]   Respondent does not dispute that petitioner and Ms. Tompkins filed a joint

Federal income tax return. However respondent argues that petitioner has not met

all the requirements of section 6015(b)(1). Respondent acknowledges that

petitioner made the request for relief from joint and several liability timely

pursuant to section 6015(b)(1)(E). Respondent contends that petitioner has not

demonstrated that “in signing the return he * * * did not know, and had no reason

to know, that there was such understatement.” Sec. 6015(b)(1)(C).

       A requesting spouse has knowledge or reason to know of an

understatement if he or she actually knew of the understatement, or if a reasonable

person in similar circumstances, at the time he or she signed the return, could be

expected to know that the return contained an understatement. Sec. 1.6015-2(c),

Income Tax Regs. A requesting spouse has knowledge or reason to know of an

understatement if “a reasonably prudent taxpayer under the circumstances of the

[requesting] spouse at the time of signing the return could be expected to know

that the tax liability stated was erroneous or that further investigation was

warranted.” Kistner v. Commissioner, 18 F.3d 1521, 1525 (11th Cir. 1994), rev’g

T.C. Memo. 1991-463.
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[*7]   The rules pertaining to a requesting spouse’s actual knowledge are set forth

in section 1.6015-3(c)(2), Income Tax Regs. Sec. 1.6015-2(c), Income Tax Regs.

In the case of omitted income, knowledge of the item includes knowledge of receipt

of the income. Sec. 1.6015-3(c)(2)(A), Income Tax Regs.

       Petitioner testified that Ms. Tompkins accompanied him to H&R Block. Ms.

Tompkins testified that she told H&R Block that she worked for approximately six

weeks each for Resource, Inc., and Becklund Personal Care. Ms. Tompkins

testified that the tax preparers at H&R Block informed her that her income did not

need to be reported. Petitioner’s daughter accompanied them, and petitioner was

caring for her while Ms. Tompkins spoke with the tax preparers at H&R Block. We

find that petitioner had no knowledge of the amount or source of income Ms.

Tompkins received and no knowledge of when she actually received this income.

Therefore, petitioner did not have actual knowledge of Ms. Tompkins’ earned

income or investment income.

       In determining whether a requesting spouse has reason to know if the

understatement in the return is attributable to an omission of income, we consider

the circumstances facing the requesting spouse at the time that spouse signed the

return and whether a reasonable person would have known of the omission. See

Alt v. Commissioner, 101 Fed. Appx. at 41; see also Crouse v. Commissioner,
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[*8] T.C. Memo. 2011-97, slip op. at 41. All of the facts and circumstances are

considered in determining whether a requesting spouse had reason to know of an

understatement. Sec. 1.6015-2(c), Income Tax Regs.

       The facts and circumstances to be considered include, but are not limited to:

the nature of the erroneous item and the amount of the erroneous item relative to

other items; the couple’s financial situation; the requesting spouse’s educational

background and business experience; the extent of the requesting spouse’s

participation in the activity that resulted in the erroneous item; whether the

requesting spouse failed to inquire, at or before the time the return was signed,

about items on the return or omitted from the return that a reasonable person would

question; and whether the erroneous item represented a departure from a recurring

pattern reflected in prior years’ returns. Id.

       The erroneous item involved in this case is unreported income of

petitioner’s former spouse. It consists of investment income of $50 and wages for

a short period. Petitioner did not participate in and was not involved in the

activity that resulted in the erroneous income. The erroneous items are not a

deduction or an effort to shelter income. The items involved are small compared

to the total income petitioner and Ms. Tompkins reported on their joint tax return

for 2008. The amount of the deficiency is approximately 5% of petitioner’s gross
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[*9] income for 2008. Petitioner does not have significant business experience or an

educational background in business or finance.

       Petitioner argued that he believed Ms. Tompkins was not working and that

he had included all reportable income as part of the tax return. It is not clear from

the record whether Ms. Tompkins had been employed in the past. Petitioner and

Ms. Tompkins testified that they had lived apart during 2007. The erroneous item is

not part of a pattern.

       One of the factors to be considered is whether the spouse failed to inquire at

the time of signing the return about items on the return that a reasonable person

would question. Ms. Tompkins testified that she worked only four to six hours a

day and that she “didn’t let him [petitioner] know anything about me making any

kind of money.” Petitioner testified that he placed his daughter in daycare because

he thought it would be best for his daughter’s well-being and not because Ms.

Tompkins was not at home. Ms. Tompkins testified that “I was doing something

behind his back, which I think is my responsibility, not Mr. Tompkins’.” From the

testimony, it is reasonable to conclude that petitioner would not have questioned

Ms. Tompkins. Even if he had inquired, petitioner would have likely received a

dishonest answer.
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[*10] Taking into consideration all of the facts and circumstances and the

testimony of petitioner and Ms. Tompkins, we find that petitioner did not have

reason to know of the understatement.

          In making a determination under section 6015(b)(1)(C), we need to

determine whether, at the time petitioner signed the joint return, he had a duty to

inquire or investigate further. See Stevens v. Commissioner, 872 F.2d 1499, 1505

(11th Cir. 1989), aff’g T.C. Memo. 1988-63; Shea v. Commissioner, 780 F.2d 561,

566 (6th Cir. 1986), aff’g in part, rev’g in part T.C. Memo. 1984-310; Butler v.

Commissioner, 114 T.C. 276, 284 (2000).1 A requesting spouse has a duty to

inquire when he knows enough facts to put him on notice that such an

understatement exists. Thomassen v. Commissioner, T.C. Memo. 2011-88, slip

op. at 8. However, petitioner had no reason to know about Ms. Tompkins’ omitted

income, and there were no factual inconsistencies to investigate; Ms. Tompkins

was home most of the time when petitioner arrived home from work, and she had

been a stay-at-home mother in the past. Petitioner was not put on notice of Ms.

Tompkins’ employment, so a duty to inquire was not triggered. See Haltom v.


      1
       The requirement of sec. 6015(b)(1)(C) is substantially identical to the
requirement of former sec. 6013(e)(1)(C). As a result, cases interpreting former sec.
6013(e)(1)(C) remain instructive to our analysis under sec. 6015(b)(1)(C). Butler v.
Commissioner, 114 T.C. 276, 283 (2000).
                                        - 11 -

[*11] Commissioner, slip op. at 14. Therefore, petitioner has met his burden under

section 6015(b)(1)(C).

       Petitioner has met the remaining requirements of 6015(b)(1). Petitioner and

Ms. Tompkins filed a joint tax return for taxable year 2008. See sec. 6015(b)(1)(A).

The understatement of tax is attributable solely to the erroneous items of Ms.

Tompkins. See sec. 6015(b)(1)(B). Erroneous items of income are allocated to the

spouse who was the source of the income. Sec. 1.6015-3(d)(2)(iii), Income Tax

Regs. Wage income is allocated to the spouse who performed the services

producing the wages. Id. It was Ms. Tompkins who earned the wages that were

not included in petitioner and Ms. Tompkins’ 2008 joint tax return. Investment

income is allocated to the person who owns the investment. Id. It was Ms.

Tompkins who received the interest from TCF National Bank.

       Section 6015(b)(1)(D) requires that all of the facts and circumstances be

taken into account in determining whether it would be inequitable to hold a

nonrequesting spouse liable for a deficiency in tax attributable to an

understatement of tax on a joint return. One of the relevant factors for this

purpose is whether the requesting spouse significantly benefited, directly or

indirectly, from the understatement. A significant benefit is in excess of normal
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[*12] support. See sec. 1.6015-2(d), Income Tax Regs. In cases of omitted

income, a requesting spouse is considered to have received a significant benefit if he

or she has received property from the nonrequesting spouse that is traceable to items

of omitted income. See id. Petitioner did not receive any benefit from the omitted

income. The amount of omitted income was small compared with petitioner’s

wages. Petitioner provided support for his family. He was not aware that Ms.

Tompkins had income. We conclude that it would be inequitable to hold petitioner

liable for the deficiency in tax attributable to the understatement that was due to Ms.

Tompkins’ income.

       We hold that petitioner is entitled to innocent spouse relief under section

6015(b)(1). As a result, we do not address the application of section 6015(c)(1)

and (f).

       To reflect the foregoing,


                                                        Decision will be entered

                                                 for petitioner.
