                               T.C. Memo. 2014-109


                         UNITED STATES TAX COURT



 LESLIE J. MOLINET, Petitioner, AND MICHAEL F. MOLINET, Intervenor v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 22461-12.                           Filed June 9, 2014.



      Adam L. Heiden and Keith Howard Johnson, for petitioner.

      Michael F. Molinet, pro se.

      Lynn M. Barrett, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      VASQUEZ, Judge: Pursuant to section 6015(e)(1),1 petitioner seeks review

of respondent’s determination that she is not entitled to relief from joint and



      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.
                                          -2-

[*2] several liability for 2008 with respect to the joint Federal income tax return

she filed with intervenor, her former spouse.

                                FINDINGS OF FACT

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

facts and the accompanying exhibits are incorporated herein by this reference.

Petitioner resided in Florida at the time she filed the petition.

I.    Background

      Petitioner is Cuban by birth. She met intervenor in Cuba in January 1998.

She moved to the United States on a fiance visa later that year and married

intervenor on October 24, 1998. They had a child together in 2002.

      During the course of the marriage petitioner and intervenor had a joint bank

account. The account was controlled primarily by intervenor. He paid the bills

and managed the finances with minimal input from petitioner. He was never late

on payments.

      Petitioner worked as a medical assistant. Her wages were deposited directly

into the joint bank account. Although she had access to the joint bank account,

she rarely used it and did not write any checks on the account. She did not have a

good understanding of the banking system in the United States on account of her

Cuban upbringing. She relied on a weekly allowance from intervenor to pay her
                                        -3-

[*3] expenses each week. Petitioner and intervenor began having marital

difficulties in 2007. At that time petitioner decided to open an individual bank

account. Thereafter, she did not use or otherwise access the joint bank account.

      In 2007 petitioner, intervenor, and their child moved from Bowie,

Maryland, to Jacksonville, Florida. Petitioner had previously been diagnosed with

several health conditions that made her especially susceptible to cold weather,

including cutaneous polyarteritis nodosa (CPN),2 rheumatoid arthritis, and

neuropathy. Petitioner believed that moving to Florida would help alleviate some

of the symptoms that were frequently aggravated in the colder weather of

Maryland.

      In part to finance the move to Florida, intervenor took several distributions

from his section 401(k) plan account. Intervenor withdrew a total of $117,791

from the account in 2008. Petitioner did not agree with intervenor’s decision to

withdraw funds from the account, but she did not feel as though she had a choice

in the matter and reluctantly signed the required distribution forms. Intervenor

deposited the proceeds of the distributions into the joint bank account. These

funds were ultimately used by him to pay the remainder of the mortgage on his


      2
       CPN is a skin condition that causes inflamation of the blood vessels, cysts,
and skin ulcers.
                                        -4-

[*4] home in Maryland3 and to make a $29,000 downpayment on a home in

Jacksonville, Florida. Some of the funds were also used to replace household

goods that were damaged during the move and to furnish the new home in

Jacksonville.

      On or about April 15, 2009, petitioner and intervenor timely filed a joint

Form 1040, U.S. Individual Income Tax Return, for 2008. They reported the

distributions from intervenor’s section 401(k) plan account on their tax return.

They reported tax due of $30,938.4 At the time the 2008 tax return was filed,

petitioner did not believe that she and intervenor had any financial problems and

was convinced that intervenor could pay the tax due. Petitioner has complied with

all Federal income tax obligations since 2008.

      Petitioner and intervenor separated in July 2008. Their divorce was

finalized on November 18, 2009, when a circuit court in Duval County, Florida,

issued a consent final judgment of dissolution of marriage (final judgment). As a

result of the divorce, and pursuant to the final judgment, intervenor became the

sole owner of the Jacksonville home and all of the furnishings therein. Paragraph

      3
        Though the property was referred to as the “family home”, the property
was, in fact, owned solely by intervenor.
      4
         Sufficient funds were not withheld from the distributions to pay the tax
liability associated with the distributions.
                                         -5-

[*5] 12 of the final judgment assigned the “2008 IRS debt (approximately

$31,000.00)” to intervenor. Intervenor also became obligated to pay petitioner

child support. Both parties were represented by counsel in the divorce

proceedings, and both parties and their counsel signed the final judgment.

II.   Request for Innocent Spouse Relief

      On March 8, 2011, petitioner filed Form 8857, Request for Innocent Spouse

Relief. On August 1, 2012, the IRS issued a final determination denying

petitioner’s request for innocent spouse relief. On September 10, 2012, petitioner

timely filed a petition with this Court seeking review of respondent’s

determination. At trial respondent conceded that petitioner is entitled to relief.

However, pursuant to section 6015(e)(4) and Rule 325, petitioner’s former spouse

intervened as a party in this case to oppose her request for relief.

                                      OPINION

I.    Section 6015(f)

      In general, a spouse who files a joint Federal income tax return is jointly

and severally liable for the entire tax liability. Sec. 6013(d)(3). However, a

spouse may be relieved from joint and several liability under section 6015(f) if:

(1) taking into account all the facts and circumstances, it would be inequitable to
                                         -6-

[*6] hold a taxpayer liable for any unpaid tax; and (2) relief is not available to the

spouse under section 6015(b) or (c). Sec. 6015(f)(1) and (2).

      Subsections (b) and (c) of section 6015 apply only in the case of “an

understatement of tax” or “any deficiency” in tax, and do not apply in the case of

underpayments of tax reported on joint tax returns. Sec. 6015(b)(1)(B), (c)(1);

Hopkins v. Commissioner, 121 T.C. 73, 88 (2003); see also Block v.

Commissioner, 120 T.C. 62, 66 (2003). Because petitioner seeks relief from an

underpayment of tax, she is not entitled to relief under section 6015(b) or (c) and

may look only to section 6015(f) for relief from joint and several liability.

      The Commissioner has published revenue procedures listing the factors that

are normally considered in determining whether section 6015(f) relief should be

granted. See Rev. Proc. 2013-34, 2013-43 I.R.B. 397, modifying and superseding

Rev. Proc. 2003-61, 2003-2 C.B. 296. We consider these factors in the light of the

attendant facts and circumstances, but we are not bound by them. See Pullins v.

Commissioner, 136 T.C. 432, 438-439 (2011); Sriram v. Commissioner, T.C.

Memo. 2012-91, slip op. at 9-10.

      In determining whether petitioner is entitled to section 6015(f) relief we

apply a de novo standard of review as well as a de novo scope of review. See

Porter v. Commissioner, 132 T.C. 203 (2009); Porter v. Commissioner, 130 T.C.
                                          -7-

[*7] 115 (2008); see also Commissioner v. Neal, 557 F.3d 1262 (11th Cir. 2009),

aff’g T.C. Memo. 2005-201. Petitioner bears the burden of proving that she is

entitled to relief. See Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311

(2002), aff’d, 101 Fed. Appx. 34 (6th Cir. 2004).

      A.     Threshold Conditions for Granting Relief

      The guidelines begin by establishing threshold requirements that, the

Commissioner contends, must be satisfied before an equitable relief request may

be considered. See Rev. Proc. 2013-34, sec. 4.01, 2013-43 I.R.B. at 399-400.

Those conditions are: (1) the requesting spouse filed a joint return for the taxable

year for which relief is sought; (2) the relief is not available to the requesting

spouse 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 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) absent certain enumerated exceptions,5 the tax liability from

      5
        The IRS will consider granting relief regardless of whether the
understatement, deficiency, or underpayment is attributable (in full or in part) to
the requesting spouse if any of the following exceptions apply: (1) attribution
solely due to the operation of community property law, (2) nominal ownership, (3)
misappropriation of funds, (4) abuse, and (5) fraud committed by the
nonrequesting spouse. Rev. Proc. 2013-34, sec. 4.01(7), 2013-43 I.R.B. 397, 399-
                                                                       (continued...)
                                            -8-

[*8] which the requesting spouse seeks relief is attributable to an item of the

nonrequesting spouse. We find that petitioner has met the threshold conditions for

relief.

          B.       Elements for Streamlined Determination

          When the threshold conditions have been met, the guidelines allow a

requesting spouse to qualify for a streamlined determination of relief under section

6015(f), if all of the following conditions are met: (1) the requesting spouse is no

longer married to, is legally separated from, or has not been a member of the same

household as the other person at any time during the 12-month period ending on

the date the Service makes its determination; (2) the requesting spouse will suffer

economic hardship if relief is not granted; and (3) in an underpayment case such as

this, the requesting spouse had no knowledge or reason to know when the return

was filed that the nonrequesting spouse would not or could not pay the tax liability

reported on the joint tax return. Rev. Proc. 2013-34, sec. 4.02, 2013-43 I.R.B. at

400.




          5
              (...continued)
400.
                                          -9-

[*9] We find that petitioner has not established that she would suffer economic

hardship if relief were not granted, and thus she does not qualify for a streamlined

determination. See infra pp. 10-11.

      C.     Factors Used To Determine Whether Relief Will Be Granted

      Where, as here, a requesting spouse meets the threshold conditions but fails

to qualify for relief under the guidelines for a streamlined determination, a

requesting spouse may still be eligible for equitable relief if, taking into account

all the facts and circumstances, it would be inequitable to hold the requesting

spouse liable for the underpayment. See Rev. Proc. 2013-34, sec. 4.03, 2013-43

I.R.B. at 400. The guidelines list the following nonexclusive factors that the

Commissioner takes into account when determining whether to grant equitable

relief: (1) marital status; (2) economic hardship; (3) in the case of an

underpayment, knowledge or reason to know that the nonrequesting spouse would

not or could not pay the tax liability reported on the joint tax return; (4) legal

obligation; (5) significant benefit; (6) compliance with tax laws; and (7) mental or

physical health. Id.
                                        - 10 -

[*10] In making our determination under section 6015(f), we consider these

factors as well as any other relevant factors. No single factor is determinative, and

all factors shall be considered and weighed appropriately. See Pullins v.

Commissioner, 136 T.C. at 448; Haigh v. Commissioner, T.C. Memo. 2009-140,

slip op. at 34-35.

             1.      Marital Status

      If the requesting spouse is no longer married to the nonrequesting spouse,

this factor will weigh in favor of relief. Rev. Proc. 2013-34, sec. 4.03(2). For

purposes of this section a requesting spouse will be treated as being “no longer

married to the nonrequesting spouse” if the requesting spouse is divorced from the

nonrequesting spouse. Id. sec. 4.03(a)(i). Petitioner and intervenor were divorced

before she filed her request for innocent spouse relief. Accordingly, this factor

weighs in favor of granting relief to petitioner.

             2.      Economic Hardship

      Generally, economic hardship exists when collection of the tax liability

will render the requesting spouse unable to meet basic living expenses. Id. sec.

4.03(b), 2013-43 I.R.B. at 401. If denying relief from joint and several liability

will not cause the requesting spouse to suffer economic hardship, this factor may

be neutral. Id. Petitioner receives child support payments from intervenor and has
                                          - 11 -

[*11] been working as a medical assistant for the past seven years. Her request for

innocent spouse relief indicates that her monthly income is approximately $3,616

and that her monthly expenses are approximately $3,100. On the basis of the

record, petitioner has not proven that she will suffer economic hardship if we deny

her relief. We find that this factor is neutral.

             3.     Knowledge or Reason To Know

      In the case of an income tax liability that was properly reported but not paid,

consideration is given to whether the requesting spouse knew or had reason to

know as of the date the return was filed or within a reasonable period of time after

the filing of the return that the nonrequesting spouse would not or could not pay

the tax liability. Id. sec. 4.03(c)(ii). This factor will weigh in favor of relief if the

requesting spouse reasonably expected the nonrequesting spouse to pay the tax

liability reported on the return. Id. This factor will weigh against relief if, on the

facts and circumstances of the case, it was not reasonable for the requesting

spouse to believe that the nonrequesting spouse would or could pay the tax

liability shown on the return. Id.

      In making the determination whether the requesting spouse had reason to

know, consideration is given to various factors, including: (1) the requesting

spouse’s level of education, (2) the requesting spouse’s degree of involvement in
                                        - 12 -

[*12] the activity generating the income tax liability, (3) the requesting spouse’s

involvement in business and household financial matters, and (4) the requesting

spouse’s business or financial expertise. Rev. Proc. 2013-34, sec. 4.03(2)(c)(iii),

2013-43 I.R.B. at 402.

      Petitioner was born and brought up in Cuba and did not move to the United

States until 1998. The banking system in the United States has been difficult for

petitioner to understand because of her Cuban upbringing. For this reason

intervenor paid the bills and controlled nearly all aspects of the finances with

minimal input from petitioner throughout the marriage.

      In 2008 intervenor took several taxable distributions totaling $117,791 from

his section 401(k) plan account. Although petitioner did not agree with

intervenor’s decision to take the distributions, she did not feel as though she had

choice in the matter and reluctantly signed the required distribution forms.

      On or about April 15, 2009, petitioner and intervenor timely filed a joint

Federal income tax return for 2008 on which they reported tax due of $30,938. At

the time they filed the return, petitioner reasonably believed that she and

intervenor did not have any financial problems and that intervenor could pay the

tax due. Accordingly, this factor weighs in favor of relief.
                                           - 13 -

[*13]         4.     Legal Obligation

        This factor will weigh in favor of relief if the nonrequesting spouse has the

sole legal obligation to pay the outstanding income tax liability pursuant to a

divorce decree or agreement. Id. sec. 4.03(d). Intervenor has the legal obligation

to pay the tax liability for 2008 pursuant to paragraph 12 of the final judgment

signed by him and petitioner. He and petitioner were represented by counsel, and

he and petitioner, and their respective counsel, signed the final judgment. This

factor weighs in favor of relief.

              5.     Significant Benefit

        This factor considers whether the requesting spouse received a significant

benefit, beyond normal support, from the unpaid income tax liability. Id. sec.

4.03(e). Normal support is measured by the circumstances of the particular

parties. Porter v. Commissioner, 132 T.C. at 212. This factor will weigh in favor

of relief if the nonrequesting spouse significantly benefited from the unpaid tax or

understatement and the requesting spouse had little or no benefit, or the

nonrequesting spouse enjoyed the benefit to the requesting spouse’s detriment.

Rev. Proc. 2013-34, sec. 4.03(e).

        It is clear that petitioner did not use the funds from the distribution to live a

lavish lifestyle, to buy luxury assets, or to take expensive vacations. To the
                                        - 14 -

[*14] contrary, intervenor used the funds to: (1) pay off the mortgage on his home

in Bowie, Maryland, (2) make a downpayment on a new home in Jacksonville,

Florida, which he received in the divorce, and (3) purchase furnishings for the

Jacksonville home. Accordingly, we find that this factor weighs in favor of relief.

             6.     Compliance With Income Tax Laws

      This factor considers whether the requesting spouse has made a good-faith

effort to comply with the Federal income tax laws in years after the year for which

relief is requested. Id. sec. 4.03(f). Petitioner has complied with the Federal

income tax laws in the years after 2008. Thus, this factor weighs in favor of relief.

             7.     Mental or Physical Health

      This factor considers whether the requesting spouse was in poor physical or

mental health. This factor will weigh in favor of relief if the requesting spouse

was in poor mental or physical health at the time the return or returns to which the

request for relief relates were filed, at the time the requesting spouse reasonably

believed the return or returns were filed, or at the time the requesting spouse

requested relief. Id. sec. 4.03(g), 2013-43 I.R.B. at 403. At trial petitioner

credibly testified she suffers from rheumatoid arthritis, neuropathy, and CPN, an

autoimmune condition that causes inflammation of the blood vessels, cysts, and

skin ulcers. Thus, this factor weighs in favor of relief.
                                           - 15 -

[*15] D.       Conclusion

         Six of the factors weigh in favor of granting petitioner relief, one is neutral,

and no factor weighs against granting relief. We find that the equities lie in

petitioner’s favor and hold that she is entitled to relief from joint and several

liability for 2008 under section 6015(f).

         We have considered all arguments made in reaching our decision and, to the

extent not mentioned, we conclude that they are moot, irrelevant, and without

merit.

         To reflect the foregoing,


                                                          Decision will be entered for

                                                    petitioner.
