                       114 T.C. No. 19


                UNITED STATES TAX COURT



   MICHAEL B. BUTLER AND JEAN BUTLER, Petitioners v.
      COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 27554-96.               Filed April 28, 2000.



     P and H filed a joint 1992 Federal income tax
return on which H failed to report income from an S
corporation in which he was a shareholder. R issued a
notice of deficiency jointly to P and H who in response
filed a joint petition in this Court. H conceded that
his share of the income from the S corporation was
improperly omitted from the return. In the petition, P
alleged that she was entitled to innocent spouse relief
pursuant to sec. 6013(e), I.R.C. After trial, Congress
enacted sec. 6015, I.R.C., and simultaneously repealed
sec. 6013(e), I.R.C. The parties agreed to treat P's
claim pursuant to sec. 6013(e), I.R.C., as an election
pursuant to sec. 6015(b)(1), I.R.C., which R denied.
Additionally, after trial, P requested that R consider
equitable relief pursuant to sec. 6015(f), I.R.C. R
considered P's request but denied P equitable relief.
P seeks to reopen the record to introduce evidence as
to P's ability to qualify for proportionate innocent
spouse relief pursuant to sec. 6015(b)(2), I.R.C.
                               - 2 -

          P contends that she is an innocent spouse pursuant to
     sec. 6015(b)(1), I.R.C. Additionally, P contends that it
     was an abuse of R's discretion not to allow equitable relief
     pursuant to sec. 6015(f), I.R.C. Alternatively, P contends
     that she is entitled to proportionate relief, pursuant to
     sec. 6015(b)(2), I.R.C., for a portion of the omitted
     income. P contends that the Tax Court has jurisdiction to
     review R's determination that P is not entitled to equitable
     relief pursuant to sec. 6015(f), I.R.C. R contends that P
     is not entitled to innocent spouse relief pursuant to either
     sec. 6015(b)(1), I.R.C., or sec. 6015(f), I.R.C., and
     contends that we do not have jurisdiction to review R's
     denial of relief pursuant to sec. 6015(f), I.R.C.
          Held: P had reason to know of the understatement
     on P's and H's joint return, and, therefore, P is not
     entitled to innocent spouse relief, pursuant to sec.
     6015(b)(1), I.R.C.
          Held, further, P's motion to reopen the record to
     introduce evidence as to P's ability to qualify for
     proportionate innocent spouse relief pursuant to sec.
     6015(b)(2), I.R.C., is denied.
          Held, further, On the basis of the evidence in the
     record, P is not entitled to proportionate innocent
     spouse relief pursuant to sec. 6015(b)(2), I.R.C.
          Held, further, The Tax Court has jurisdiction to
     review for abuse of discretion R's decision to deny P's
     request for equitable relief pursuant to sec. 6015(f),
     I.R.C.
          Held, further, R's denial of P's request for
     equitable relief was not an abuse of discretion.



     Robert H. Culton II, for petitioners.

     Michael D. Zima, for respondent.



                              OPINION


     WELLS, Judge:   Respondent determined a deficiency in

petitioners' Federal income tax for the taxable year 1992 in the
                               - 3 -

amount of $26,720 and an addition to tax pursuant to section

6651(a)(1)1 in the amount of $4,008.

     After concessions, the issues to be decided2 are:   (1)

Whether Jean Butler (petitioner) is entitled to innocent spouse

relief pursuant to section 6015(b) relating to the understatement

of tax on petitioners' 1992 joint Federal income tax return; (2)

whether the record in the instant case should be reopened to

receive additional evidence regarding petitioner's ability to

qualify for proportionate innocent spouse relief pursuant to

section 6015(b)(2); and (3) whether this Court has jurisdiction

to review for abuse of discretion respondent's denial of P's

request, pursuant to section 6015(f), for equitable innocent

spouse relief and, if so, whether it was an abuse of respondent's

discretion to deny such relief.

                            Background

     Some of the facts have been stipulated for trial pursuant to

Rule 91.   The parties' stipulations are incorporated into this

Opinion by reference and, accordingly, are found as facts in the


1
     Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended, and all Rule references are
to the Tax Court Rules of Practice and Procedure.
2
     Respondent determined that petitioners were liable for an
addition to tax pursuant to sec. 6651(a)(1). At trial, however,
petitioners advanced no argument as to the addition to tax and
failed to address the issue on brief. Consequently, we conclude
that petitioners have abandoned any contention as to the addition
to tax. See Bernstein v. Commissioner, 22 T.C. 1146, 1152
(1954), affd. per curiam 230 F.2d 603 (2d Cir. 1956).
                                 - 4 -

instant case.    When they filed their petition, petitioners

resided in Longwood, Florida.

     Petitioners were married at the time they filed their

petition, are currently married, and have always had a "smooth"

marital relationship.    Petitioner Michael B. Butler (petitioner's

husband) has always applied all of his income toward the benefit

of his family.    Throughout their 35-year marriage, petitioner's

husband has never concealed any assets from petitioner and has

always told her about his financial endeavors.

     Petitioner's husband operates a lucrative surgical practice

in three Florida locations:    Orlando, Apopka, and Altamonte

Springs.   Petitioner's family lived quite comfortably, with a

very high standard of living, during 1992.    They paid $19,963 in

home mortgage interest during 1992, making their monthly mortgage

payment more than $1,600.    Their average monthly electricity bill

during 1992 was greater than $275, and their average monthly

phone bill was more than $100.    Petitioner had credit cards from

various upscale department stores, including Saks Fifth Avenue,

Jacobsen's, Nieman Marcus, Dillard's, and Burdines.    During the 8

months of 1992 for which petitioner provided canceled checks,

petitioner spent $5,162.55 at such department stores.    During

1992, petitioner also had credit cards at Sears and Montgomery

Ward department stores, and had a Visa Gold charge card.
                               - 5 -

Petitioner and her husband were members of the Orlando Opera

Guild.

     Petitioner's husband works at his surgical practice on an

average of more than 70 hours per week.   During 1992, petitioner

worked with her husband as a medical transcriber, earning $11,700

in wages.   Petitioner graduated from St. Louis University in 1960

with a degree in medical records administration.   Because she had

more free time, petitioner maintained the family's checking

account and handled the bills for all of the household expenses.

She usually retrieved the mail because she arrived home earlier

than her husband.

     Petitioner oversees the operation of JCB Construction, Inc.

(JCB), an S corporation of which she has been the sole owner

since its creation in 1987.   As secretary-treasurer of JCB,

petitioner maintains its books and records, keeps track of income

and expenditures, handles payroll and personnel responsibilities,

writes checks for materials and supplies, and collects

information for the preparation of JCB's tax returns.    JCB filed

Forms 1120S with the Internal Revenue Service (IRS) from 1988

through 1996, and FICA and FUTA returns since at least 1989.    The

gains or losses of JCB were reported on petitioners' Federal

income tax returns for the year at issue and in prior years.

     B.G. Enterprises, Inc. (BGE) was an S corporation owned by

petitioner's husband and Thomas George.   BGE was engaged in the
                                - 6 -

foliage nursery business in Apopka, Florida, on land owned

jointly by petitioners.    In 1990, BGE rented the Apopka property

from petitioners and operated the nursery, as Sweetwater

Greenery, from that time until some time in 1992.    Petitioner's

husband and Thomas George were each 50-percent shareholders of

BGE.    Petitioner never favored petitioner's husband's involvement

with the nursery, and their discussions on the subject were

usually contentious.

       During mid-December 1990, BGE applied a fungicide called

Benlate, manufactured by E.I. DuPont De NeMours and Co. (Dupont),

to its plant inventory for protection against fungi.    The Benlate

treatments damaged the foliage, prompting BGE to seek damages

from Dupont.    Petitioner's husband told petitioner that he was

going to Atlanta during August 1991 to negotiate a claim for

damages against Dupont.    BGE and Dupont reached a settlement

(settlement) whereby Dupont paid BGE a total of $812,411

(settlement proceeds).    The damage award represented compensation

for three items:    Crop damage in the amount of $367,046,

replacement costs of $55,244, and business interruption of

$390,121.    Dupont paid BGE $455,000 during 1991 and $357,411

during 1992.    After expenses, BGE received net proceeds of

$158,759 from Dupont during 1992.    Because BGE did not reenter

the nursery business after the destruction of its inventory, most

of the money BGE received was not spent on replacements.     BGE
                                - 7 -

paid JCB to remove unsalvageable plants and other waste materials

from the nursery premises.

     The exact amount of the distributions from BGE to

petitioner's husband during 1992 is unknown, and petitioner has

provided insufficient evidence to fully account for the

settlement proceeds.   The record contains no documents

illustrating where the distribution of money from BGE to

petitioner's husband was deposited during 1991 or 1992.

Petitioner failed to explain the use of the following funds:

$40,000 paid to petitioner's husband on January 14, 1992, from

the escrow account holding the settlement proceeds; another

$23,654 disbursed from the escrow account to petitioner's husband

on March 31, 1992; and $5,238.47 which remained in the escrow

account as of March 24, 1998.    Petitioner offered only 8 monthly

bank statements from petitioner and her husband's personal joint

bank account for 1992.   Petitioner failed to offer statements or

canceled checks from any of petitioner's and her husband's other

bank accounts.   Petitioners held a bank account throughout 1992

at Southern Bank of Florida.    Petitioners did not produce bank

statements relating to that account from the periods March 12 to

April 12, 1992, from May 12 to July 12, 1992, from August 12 to

September 12, 1992, and from December 12 to December 31, 1992.

Petitioners failed to offer any bank statements or other

financial records from petitioner's husband's surgical practice.
                               - 8 -

     Petitioners filed a joint Federal income tax return for

1988.   By September 16, 1991, they owed $109,580.82 on their 1988

income tax liabilities.   Notices of Federal Tax Lien concerning

that joint liability were filed during the fall of 1991.    On

October 4, 1991, petitioners' 1989 Federal income tax return was

filed on their behalf approximately 1 year late.    They had filed

and received two extensions of time in which to file their 1989

return.   No payment was made with the filing of the 1989 return,

and, on November 4, 1991, the IRS assessed penalties for a

failure to pay estimated tax and for late filing.    During the

winter and spring of 1992, the IRS recorded Notices of Federal

Tax Lien against petitioners relating to their 1989 return.

Petitioners' 1990 joint Federal income tax return was filed on

their behalf on December 17, 1991, 8 months late.    On December

17, 1991, penalties for the late filing and for failure to pay

estimated tax were assessed against petitioners.    During the

Spring of 1992, the IRS recorded Notices of Federal Tax Lien

concerning petitioners' 1990 joint tax liability.

     In the notice of deficiency sent to petitioners in the

instant case, respondent determined that petitioners failed to

include flowthrough income from BGE in the amounts of $79,380 and

$18 on their 1992 joint Federal income tax return.    Petitioners

concede that the flowthrough from BGE for petitioner's husband's

share of the net settlement proceeds ($79,380) received by BGE
                               - 9 -

during 1992 was not reported on petitioners' 1992 Federal income

tax return.3   Petitioners also concede the receipt of $18 in

interest income during 1992 from BGE which was not reported on

their 1992 Federal income tax return.

Discussion

     Petitioners filed their petition in the instant case in

response to a notice of deficiency.    In the petition, petitioner

claimed that she was entitled to innocent spouse relief pursuant

to section 6013(e).   After the trial and briefing of the instant

case, Congress enacted section 6015 as part of the Internal

Revenue Service Restructuring and Reform Act of 1998, Pub. L.

105-206, sec. 3201(a), 112 Stat. 685, 734, and simultaneously

repealed section 6013(e).   The effective date of new section 6015

is July 22, 1998.   Accordingly, petitioner can no longer seek

relief pursuant to section 6013(e).    The parties, however, have

treated the petition as an election of relief pursuant to section

6015(b)(1).4   The parties agreed to waive any right to a new

trial for the purpose of section 6015 and concede that the issues

that were tried pursuant to section 6013(e) are the same issues

the Court should decide pursuant to section 6015(b)(1) except,


3
     Petitioner's husband testified that he did not know why the
income from BGE was omitted from petitioners' 1992 joint Federal
income tax return.
4
     We treat petitioner's innocent spouse claims pursuant to
sec. 6015 as an amendment to the petition to conform the petition
to the evidence. See Rule 41(b).
                                   - 10 -

however, that petitioner contends that she is entitled to reopen

the record for the Court to receive evidence as to petitioner's

entitlement to proportionate relief pursuant to section

6015(b)(2), and except that petitioner contends that she is

entitled to equitable relief pursuant to section 6015(f).

Petitioners' Claim for Innocent Spouse Relief Pursuant to Section
6015(b)(1)

     Generally, spouses filing a joint tax return are each fully

responsible for the accuracy of their return and for the full tax

liability.   See sec. 6013(d)(3).        The innocent spouse provisions

of section 6015 provide exceptions to the general rule in certain

circumstances.       Section 6015 provides, in pertinent part, as

follows:

SEC. 6015.   RELIEF FROM JOINT AND SEVERAL LIABILITY ON JOINT
             RETURN.

     (a)   In General.--Notwithstanding section 6013(d)(3)–-

          (1) an individual who has made a joint return may elect
     to seek relief under the procedures prescribed under
     subsection (b) * * *

                 *       *     *     *       *     *     *

     (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 one individual
           filing the joint return;
                             - 11 -

               (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.

          (2) Apportionment of relief.--If an individual who, but
     for paragraph (1)(C), would be relieved of liability under
     paragraph (1), establishes that in signing the return such
     individual did not know, and had no reason to know, the
     extent of such understatement, then such individual shall be
     relieved of liability for tax (including interest,
     penalties, and other amounts) for such taxable year to the
     extent that such liability is attributable to the portion of
     such understatement of which such individual did not know
     and had no reason to know.

     Former section 6013(e) is, for the most part, the same as

new section 6015(b), but there are important differences.    For

example, new section 6015(b)(2) explicitly provides for

proportionate relief, although former section 6013(e) did not

have an explicit provision for such relief.   Additionally, unlike

former section 6013(e), which encompassed only substantial

understatements attributable to grossly erroneous items, new

section 6015(b) encompasses any understatement.   Despite the
                                - 12 -

differences between the former provision and the new one, cases

interpreting old section 6013(e) remain instructive as to our

analysis of whether a taxpayer "knew or had reason to know" of an

understatement pursuant to new section 6015(b).

     Of the several elements necessary for innocent spouse relief

listed in new section 6015(b)(1), the parties in the instant case

have presented only the issue of whether petitioner had reason to

know of the understatement on petitioners' 1992 tax return.

Cases arising pursuant to former section 6013(e) provide that the

spouse seeking relief has reason to know of an understatement if

a reasonably prudent taxpayer in his or her position, at the time

he or she signed the return, could be expected to know that the

return contained an understatement or that further investigation

was warranted.    See Kistner v. Commissioner, 18 F.3d 1521, 1524

(11th Cir. 1994),5 revg. and remanding T.C. Memo. 1991-463;

Stevens v. Commissioner, 872 F.2d 1499, 1505 (11th Cir. 1989),

affg. T.C. Memo. 1988-63.    The spouse seeking relief has a "duty

of inquiry".     Stevens v. Commissioner, supra at 1505.   In

deciding whether a spouse "has reason to know" of an

understatement, we undertake a subjective inquiry, and we

recognize several factors that are relevant to our analysis,

including:   (1) The alleged innocent spouse's level of education;



5
     The instant case, absent stipulation to the contrary, is
appealable to the Court of Appeals for the Eleventh Circuit.
                               - 13 -

(2) the spouse's involvement in the family's business and

financial affairs; (3) the presence of expenditures that appear

lavish or unusual when compared to the family's past income

levels, income standards, and spending patterns; and (4) the

culpable spouses's evasiveness and deceit concerning the couple's

finances.   See Kistner v. Commissioner, supra at 1524.

     As to the first factor, level of education, petitioner

earned a college degree in medical records administration from

St. Louis University.    She also owned and operated her own

construction business (JCB) that was, like the corporation in

which her husband was a shareholder (BGE), an S corporation.

Petitioner was primarily responsible for JCB's day-to-day

affairs.    She collected the information with which to file tax

returns for JCB and signed those tax returns.    Consequently, we

believe that she must have been familiar with the manner in which

income of an S corporation flows through to the individual

shareholders for Federal tax purposes.    Although petitioner

testified that she had nothing to do with petitioner's husband's

nursery business during its existence, she admitted that she was

the secretary-treasurer of Sweetwater Greenery, Inc. (the

bankrupt predecessor company of BGE and the initial S corporation

operating the foliage nursery).    By 1992, petitioner had

considerable experience in business and financial matters.      At a

minimum, given her experience in the family's financial affairs,
                               - 14 -

her knowledge of the settlement between BGE and Dupont, and her

apparent experience and knowledge of the tax implications of

doing business as an S corporation, petitioner should have

inquired into whether the flowthrough of income from the Dupont

settlement with BGE was properly accounted for on petitioners'

return.    Accordingly, petitioner's education and experience weigh

heavily against allowing innocent spouse relief to petitioner.

     As to the second factor, involvement in the family's

finances, petitioner had full responsibility for maintaining the

family checkbook and for writing checks to pay the household

bills.    Petitioner's husband worked late, and petitioner was

entrusted with substantial control over the household bank

accounts and budgeting.    Because petitioner usually retrieved the

mail, she had first access to the bank statements mailed to

petitioners' residence.    Moreover, petitioners had been having

considerable difficulties with the IRS concerning earlier taxable

years.    Petitioner played a significant role in gathering the

documents and materials necessary for petitioners' accountants to

prepare their tax returns.    Given the difficulties petitioner and

her husband had with the IRS, and her involvement in preparing

the tax returns, petitioner should have had a heightened

awareness about the accuracy of petitioners' 1992 tax return.

     Although respondent requested petitioners to provide the

bank statements from all of their bank accounts for 1992,
                             - 15 -

petitioner produced only 8 of the 12 1992 bank statements from

their joint personal account, and they produced no statements

from any of the other accounts they held.   The failure to

introduce such evidence leads us to conclude that it would not

have been helpful in proving petitioner's innocent spouse claim.

The evidence pertaining to petitioner's involvement in her

family's finances weighs heavily against petitioner.

     As to the third factor, unusual or lavish expenditures,

although the record demonstrates that petitioner enjoyed a high

standard of living during 1992 and maintained accounts at various

upscale department stores where she made significant purchases,

there is no evidence in the record indicating whether such

expenditures were out of the ordinary when compared to

petitioners' spending habits in prior years.    Accordingly, the

evidence pertaining to unusual and lavish expenditures neither

supports nor weakens petitioner's claim for innocent spouse

relief.

     As to the fourth factor, whether petitioner's husband was

evasive about his finances, he never attempted to hide any of his

income or assets from petitioner.   In his own words, he "always

told her about everything he was involved in."    All of his income

was applied toward the benefit of the family.    Consideration of

this factor weighs against innocent spouse relief.
                                - 16 -

     We also think it significant that petitioner had actual

knowledge of the Dupont settlement with BGE.     Petitioner's

husband informed petitioner of the damage claim prior to his

departure for the Atlanta settlement negotiations.     At trial,

petitioner admitted knowledge of the settlement.     Thomas George,

the other shareholder of BGE, testified that he informed

petitioner of the Dupont settlement negotiations between BGE and

Dupont on several occasions.    Although the amount may not have

been determined by that point, we believe there is little doubt

that petitioner knew that there was going to be a substantial

settlement.   We fail to believe that petitioner's husband would

negotiate a settlement that would allow him to walk away from the

financial misery of the nursery with money left over without

telling his wife at least minimal facts about its nature and

scope.   Petitioner testified that she never approved of his

involvement in the nursery business.     Their discussions on the

subject were almost always argumentative.     If there was anything

that petitioner's husband would likely discuss about the nursery

with petitioner, we believe it would be the good news that the

settlement was finally going to bail out petitioner's husband

from the financial woes of his involvement in the nursery

business.   At a minimum, the foregoing was sufficient to trigger

petitioner's duty of inquiry.
                                - 17 -

     In sum, consideration of the foregoing factors leads us to

believe that petitioner should have known of the understatement

on petitioners' 1992 tax return.    At a minimum, petitioner's

knowledge of the settlement and the tax consequences of S

corporations placed on her the duty to inquire about the amount

of the settlement and the flowthrough of petitioner's husband's

share of BGE's income as it might affect petitioners' 1992 tax

return.   Consequently, we hold that petitioner is not entitled to

innocent spouse relief pursuant to section 6015(b)(1).

Petitioner's Motion To Reopen the Record To Introduce Evidence of
Her Ability To Qualify for Proportionate Relief Pursuant to
Section 6015(b)(2)

     Petitioner requests that we reopen the record in the instant

case to submit evidence as to petitioner's qualification for

relief pursuant to new section 6015(b)(2).    Reopening the record

for the submission of additional evidence lies within the

discretion of the Court.     Zenith Radio Corp. v. Hazeltine

Research, Inc., 401 U.S. 321, 331 (1971).    A court will not grant

a motion to reopen the record unless, among other requirements,

the evidence relied on is not merely cumulative or impeaching,

the evidence is material to the issues involved, and the evidence

probably would change the outcome of the case.    See Coleman v.

Commissioner, T.C. Memo. 1989-248 (citing Edgar v. Finley, 312

F.2d 533 (8th Cir. 1963)).    Petitioner's motion to reopen the

record does not describe in any way the evidence she would offer.
                             - 18 -

See Rule 50(a) (stating that motions "shall state with

particularity the grounds therefor.").   Additionally, petitioner

fails to explain in any way how the evidence would support

petitioner's claim for proportionate innocent spouse relief

pursuant to new section 6015(b)(2).   Accordingly, we hold that

reopening the record is not warranted in the instant case, and

petitioner's motion will be denied.   Moreover, based on the

evidence in the record, we hold that petitioner does not qualify

for proportionate innocent spouse relief.

The Tax Court's Authority To Review the Commissioner's Discretion
as Exercised Pursuant to Section 6015(f)

     Petitioner asked respondent to consider equitable relief

pursuant to section 6015(f), which request respondent denied.

Respondent contends that the Tax Court has no authority to review

the Commissioner's denial of petitioner's request for equitable

relief pursuant to section 6015(f).   We disagree with respondent.

     As a part of our traditional authority in deficiency

proceedings, we have jurisdiction in the instant case to review

respondent's denial of equitable relief.    Petitioner raised her

claim for innocent spouse relief in a petition for

redetermination filed pursuant to section 6213(a).   In a

proceeding to redetermine asserted deficiencies, we may take into

account all facts and circumstances that bear upon the deficiency

as they affect petitioner, including petitioner's affirmative

defense that she is entitled to innocent spouse treatment.     See
                              - 19 -

secs. 6212-6214; Estate of Mueller v. Commissioner, 101 T.C. 551,

556 (1993); Woods v. Commissioner, 92 T.C. 776, 784 (1989).    In

the context of a deficiency proceeding, a claim for innocent

spouse relief historically has been an affirmative defense that

must be set forth in the pleadings.6   See Rule 39; United States

v. Shanbaum, 10 F.3d 305, 311 (5th Cir. 1994); Roberts v.

Commissioner, T.C. Memo. 1993-98; Lerch v. Commissioner, T.C.

Memo. 1987-295, affd. 877 F.2d 624 (7th Cir. 1989); Connelly v.

Commissioner, T.C. Memo. 1982-644.     A taxpayer is entitled to

raise an affirmative defense to respondent's deficiency

determination.   See Estate of Mueller, supra at 556; Woods v.

Commissioner, supra at 784.

     In Naftel v. Commissioner, 85 T.C. 527, 533 (1985), we held

that where a taxpayer files a petition for a redetermination of a

deficiency, we take jurisdiction over the entire tax liability,

not just the items determined to be erroneous in the notice of

deficiency.   Consequently, where a taxpayer raises an affirmative

defense to a deficiency determination, we need no additional

basis for our authority to render an opinion on such issues

because the affirmative defense is part of the deficiency

proceeding over which we have jurisdiction.   See Rule 39.

Accordingly, in the instant case, our authority to review


6
     We equate the affirmative defense of innocent spouse
available pursuant to former sec. 6013(e) with the rights
afforded taxpayers by sec. 6015.
                              - 20 -

petitioner's affirmative defense that she is entitled to innocent

spouse treatment is governed by our general jurisdiction to

consider any issue which affects the deficiency before us.    See

sec. 6213.   Petitioner's innocent spouse claim is one such issue.

     Respondent argues that section 6015(e) precludes judicial

review of claims made pursuant to subsection (f) and limits

judicial review only to claims made pursuant to subsections (b)

and (c).   Respondent contends, inter alia, that the references in

section 6015(e)(3) and (4) to subsections (b) and (c), coupled

with silence with regard to subsection (f), evidence an intent by

Congress to segregate proceedings involving subsection (f) from

proceedings involving subsections (b) and (c).   Respondent

contends that the foregoing statutory scheme, as well as the

express language of the statute, evidence a congressional intent

to preclude judicial review of determinations made by the

Commissioner pursuant to section 6015(f).   Alternatively,

respondent argues that the Commissioner's determinations pursuant

to subsection (f) are "committed to agency discretion" by law.

     This Court has stated that there exists a strong presumption

that the actions of an administrative agency are subject to

judicial review.   See, e.g., Mailman v. Commissioner, 91 T.C.

1079, 1082 (1988); Estate of Gardner v. Commissioner, 82 T.C.

989, 994 (1984).   Agency action is exempt from judicial review

only:   (1) Where the governing statutes expressly preclude such
                                - 21 -

review, or (2) where the action is "committed to agency

discretion" by law.   5 U.S.C. sec. 701(a)(1984); Estate of

Gardner, supra at 995.

     As to respondent's argument that section 6015 precludes

judicial review, we disagree.    Section 6015(e), in relevant part,

provides:

     (e) Petition for Review by Tax Court.

          (1) In general.--In the case of an individual who
     elects to have subsection (b) or (c) apply--

                  (A) In general.--The individual may petition the
            Tax Court (and the Tax Court shall have jurisdiction)
            to determine the appropriate relief available to the
            individual under this section if such petition is filed
            during the 90-day period beginning on the date on which
            the Secretary mails by certified or registered mail a
            notice to such individual of the Secretary's
            determination of relief available to the individual.
            * * *

                *     *     *     *      *    *    *

            (3) Applicable rules.--

                *     *     *     *      *    *    *

                 (B) Res Judicata. In the case of any election
            under subsection (b) or (c), if a decision of the Tax
            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 in such
            proceeding. The exception contained in the preceding
            sentence shall not apply if the Tax Court determines
            that the individual participated meaningfully in such
            prior proceeding.

                *     *     *     *      *    *    *

          (4) Notice to other spouse. The Tax Court shall
     establish rules which provide the individual filing a joint
                                - 22 -

     return but not making the election under subsection (b) or
     (c) with adequate notice and an opportunity to become a
     party to a proceeding under either such subsection.

We find nothing in section 6015(e) that precludes our review of

respondent's denial of equitable relief to petitioner.       Indeed,

section 6015(e) states that, where a taxpayer elects to have

either subsection (b) or (c) apply, the taxpayer "may petition

the Tax Court (and the Tax Court shall have jurisdiction) to

determine the appropriate relief available to the individual

under this section".    Sec. 6015(e)(1)(A).     (Emphasis added).   In

Woodral v. Commissioner, 112 T.C. 19, 22-23 (1999), we held that

the phrase "this section" in section 6404(g) includes all

subsections of 6404.

     Moreover, the legislative history supports our

interpretation that section 6015 does not limit our authority to

review the Commissioner's determinations pursuant to section

6015(f).    The House report states:     "The bill specifically

provides that the Tax Court has jurisdiction to review any denial

(or failure to rule) by the Secretary regarding an application

for innocent spouse relief."     H. Rept. 105-364, Part I, at 61

(1997).    (Emphasis added).   The Senate report provides:

     The Tax Court has jurisdiction of disputes arising from
     the separate liability election. For example, a spouse
     who makes the separate liability election may petition
     the Tax Court to determine the limits on liability
     applicable under this provision. [S. Rept. 105-174, at
     56 (1998).]
                               - 23 -

The Conference report states that it follows the "House bill and

the Senate amendment in establishing jurisdiction in the Tax

Court over disputes arising in this area."   H. Conf. Rept. 105-

599, at 251 (1998).   In short, there is no language in either the

statute or the legislative history that precludes our review of

the Commissioner's denial of equitable relief pursuant to section

6015(f) where the taxpayer has made the requisite election for

relief pursuant to section 6015(b) or (c).   But see In re Mira,

245 Bankr. 788 (Bankr. M.D. Pa. 1999).

     We also disagree with respondent's argument that the

Commissioner's authority to grant equitable relief pursuant to

section 6015(f) is "committed to agency discretion by law."      The

"committed to agency discretion" exception to the general rule of

judicial review is a very narrow one.    (Estate of Gardner v.

Commissioner, supra at 995, citing Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. 402, 410 (1971)).    The exception

applies only in those rare instances in which a statute is drawn

in terms so broad that there is no law to apply.   See id.

Whether there is law to apply turns on pragmatic considerations

as to whether an agency determination is the proper subject of

judicial review.   See id.   In Mailman v. Commissioner, supra at

1082-1083, we stated:
                               - 24 -

          To determine whether an action has been committed
     solely to agency discretion, we have followed the standards
     followed in other Federal courts. Only in cases in which it
     can be found that the existence of broad discretionary power
     is not appropriate for judicial review, or that the agency
     determination involves political, economic, military, or
     other managerial choices not susceptible to judicial review,
     or that the agency determination requires experience or
     expertise for which legal education or the lawyer's skills
     provide no particular competence for resolution and for
     which there are no ascertainable standards against which the
     expertise can be measured, have the courts refrained from
     reviewing administrative discretion.

None of the foregoing circumstances, where action is committed

solely to agency discretion, are present in the instant case.

Our review does not involve political, economic, military, or

other managerial choices not susceptible to judicial review.

     Respondent argues that there is no ascertainable standard

upon which to review respondent's discretionary denial of relief

pursuant to section 6015(f).   We disagree.   The language of

section 6015(f)(1), "taking into account all the facts and

circumstances, it is inequitable to hold the individual liable

for any unpaid tax or any deficiency (or any portion of either)"

does not differ significantly from the language of section

6015(b)(1)(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".   Indeed, the language of

section 6015(f)(1) does not differ significantly from the

language of former section 6013(e)(1)(D), "taking into account
                              - 25 -

all the facts and circumstances, it is inequitable to hold the

other spouse liable for the deficiency in tax for such taxable

year attributable to such substantial understatement".

     We have consistently applied a "facts and circumstances"

analysis in considering the application of former section

6013(e)(1)(D).   See Terzian v. Commissioner, 72 T.C. 1164, 1170

(1979); French v. Commissioner, T.C. Memo. 1996-38; Bouskos v.

Commissioner, T.C. Memo. 1987-574.     In Kistner v. Commissioner,

T.C. Memo. 1995-66, on remand from the Court of Appeals for the

Eleventh Circuit, we discussed the particular standards to be

applied when deciding the appropriate relief pursuant to section

6013(e)(1)(D).   Accordingly, we are well equipped to decide

whether it was an abuse of discretion for respondent to deny

relief to petitioner under section 6015(f).     See Local 1219, Am.

Fed. of Gov. Employees v. Donovan, 683 F.2d 511, 516 (D.C. Cir.

1982) ("This limited determination is one which courts are well-

equipped to make.").7

     On the basis of the foregoing, we conclude that we have the

authority to review respondent's denial of petitioner's claim for

equitable relief pursuant to section 6015(f).    We discuss below

whether it was an abuse of discretion for respondent to deny

petitioner's equitable relief claim.



7
     We note that respondent in Rev. Proc. 2000-15, 2000-5 I.R.B.
447, announced certain standards by which respondent will
evaluate an equitable relief request.
                               - 26 -

Whether Respondent Appropriately Denied Petitioner Equitable
Spouse Relief Pursuant to Section 6015(f)

     On February 4, 1999, petitioner submitted a Form 8857,

Request for Innocent Spouse Relief, to the IRS.   The Form 8857

was forwarded to the IRS Appeals Office, and the claim was

assigned to an Appeals Officer who, after meeting with

petitioner, made petitioner a settlement offer that petitioner

rejected.   In a September 22, 1999, letter, the Appeals Officer

informed petitioner that he had determined that petitioner is not

entitled to relief pursuant to either subsection (b)(1) or (f) of

section 6015.

     Section 6015(f) provides as follows:

          (f) Equitable Relief.--Under procedures prescribed
     by the Secretary, if–-

                 (1) taking into account all the facts and
            circumstances, it is inequitable to hold the
            individual liable for any unpaid tax or any
            deficiency (or any portion of either); and

                 (2) relief is not available to such
            individual under subsection (b) or (c),

     the secretary may relieve such individual of such
     liability.

     In deciding above whether petitioner qualified for relief

pursuant to section 6015(b)(1), we have held that petitioner had

reason to know of the understatement of tax on petitioners' 1992

return.   The parties stipulated that petitioner's husband always

kept petitioner informed about everything in which he was

involved.   Indeed, we have found that petitioner was fully
                              - 27 -

engaged in the family's finances.    Moreover, the record does not

demonstrate that there would be any economic hardship to

petitioner if relief were not granted.    Petitioner remains

married to her husband and is living with him in the same

household.   Additionally, there is no evidence that petitioner's

husband has ever abused petitioner in any manner.    Petitioner's

husband has always applied all of his income toward the benefit

of his family.   At her meeting with the IRS Appeals Officer,

petitioner did not come forward with any additional evidence that

would support her claim for equitable relief.    In short, there

were no compelling reasons in the instant case for respondent to

grant petitioner equitable relief.     Consequently, we hold that it

was not an abuse of discretion for respondent to deny

petitioner's claim for equitable relief pursuant to section

6015(f).

     To reflect the foregoing,

                                           An appropriate order will

                                     be issued and decision will be

                                     entered for respondent.
