                        T.C. Memo. 2006-22



                      UNITED STATES TAX COURT



                  TERESA J. FOX, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8340-03.              Filed February 13, 2006.



     Teresa J. Fox, pro se.

     Robert V. Boeshaar, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Respondent determined petitioner is not

entitled to relief from joint and several liability under section
                                - 2 -

60151 for petitioner’s taxable year 2000.    We sustain

respondent’s determination.

                          FINDINGS OF FACT

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

A.   Petitioner and Her Former Husband

     Petitioner resided in Bremerton, Washington, when she filed

her petition.    Petitioner married Timothy Shattun (Mr. Shattun)

in May 1997.    Petitioner and Mr. Shattun separated on July 4,

2001, and were divorced on April 22, 2003.

     Petitioner graduated from high school and has taken some

junior college courses.    Petitioner was 42 years old at the time

of trial.   During 2000, petitioner earned $32,194 as an

administrator at the Kitsap County Fire Marshal’s Office in

Kitsap County, Washington.    At the time of trial, petitioner

worked in that department as a program specialist and fire

inspector trainee.   She has worked in that department for 11

years.

     Mr. Shattun graduated from high school and worked as an

automotive technician.    During 2000, Mr. Shattun received a

distribution of $21,992 from his section 401(k) retirement plan,

Golden Touch Inc. Profit Sharing Plan.    On January 17, 2001, Mr.

Shattun was arrested by the Bremerton Police Department for


     1
        Unless otherwise specified, section references are to the
Internal Revenue Code as amended. Rule references are to the Tax
Court Rules of Practice and Procedure.
                               - 3 -

assaulting petitioner.   Mr. Shattun filed for bankruptcy under

chapter 13 on a date not stated in the record and listed the tax

deficiency for 2000 as one of his debts.

B.   Petitioner and Mr. Shattun’s Tax Return for 2000 and
     Petitioner’s Tax Returns for 2002 and 2003

     Petitioner and Mr. Shattun worked together to prepare their

2000 joint Form 1040, U.S. Individual Income Tax Return, which

they filed on February 11, 2001.   They used a well-known brand of

tax preparation software.   They reported a distribution of

$21,992 from Mr. Shattun’s section 401(k) retirement plan on line

16a of that return.   They reported a taxable amount of $2,199 on

line 16b.   Petitioner and Mr. Shattun signed the return

electronically.

     Petitioner and Mr. Shattun reported a tax liability of

$5,446 and payments of $11,285, and requested a refund of $5,839.

Respondent determined a deficiency of $6,884 for petitioner and

Mr. Shattun resulting from the section 401(k) retirement plan

distribution.   Respondent also determined that petitioner and Mr.

Shattun are liable for an accuracy-related penalty of $1,377.     If

petitioner does not qualify for relief under section 6015(f), she

will remain liable for tax and penalties totaling $8,261 and

related interest.

     Petitioner filed her 2002 and 2003 Federal income tax

returns untimely in August or September 2004.    She did not timely

pay tax totaling about $5,000 for those years.   Petitioner agreed
                                - 4 -

with the Internal Revenue Service in the fall of 2004 to pay $83

per month for those years, and she has abided by that agreement.

C.   Petitioner’s Finances

     Petitioner’s expenses approximated her income in 2004 and

2005.    At the time of trial, petitioner’s 19-year-old son from a

prior relationship lived with her and attended college.

Petitioner gives her son significant financial support.

D.   Petitioner’s Application for Relief From Joint Tax Liability

     On September 30, 2004, petitioner sent to respondent a Form

8857, Request for Innocent Spouse Relief, which respondent

denied.2   Petitioner concedes the underlying tax liability, but

contends that she is entitled to relief from joint liability

under section 6015(f).

                               OPINION

A.   Petitioner’s Contentions and Background

     Petitioner contends that she qualifies under section 6015(f)

for relief from joint liability for tax.   This Court has

jurisdiction to decide whether a taxpayer is entitled to relief

from joint liability under section 6015(f).    Sec. 6015(e); Ewing

v. Commissioner, 118 T.C. 494, 497-507 (2002), on appeal (9th

Cir., June 16, 2004), cross-appeal (9th Cir., July 19, 2004).




     2
        By leave of another Division of this Court, petitioner
raised her claim under sec. 6015 as an affirmative defense in the
deficiency proceedings.
                               - 5 -

     A taxpayer qualifies for relief under section 6015(f) if

relief is not available under section 6015(b) or (c) and, in

light of the facts and circumstances, it is inequitable to hold

the taxpayer liable for the tax or deficiency.   Petitioner

concedes that she does not qualify for relief under section

6015(b) or (c) but contends she qualifies for relief under

section 6015(f).

     To prevail under section 6015(f), petitioner must show that

respondent’s denial of relief from joint liability was an abuse

of discretion.   See Rule 142(a);3 Alt v. Commissioner, 119 T.C.

306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004); Jonson

v. Commissioner, 118 T.C. 106, 125 (2002), affd. 353 F.3d 1181

(10th Cir. 2003); Butler v. Commissioner, 114 T.C. 276, 289-290

(2000).   Our determination under section 6015(e) relating to

petitioner’s eligibility for relief under section 6015(f) is made

pursuant to a trial de novo and is not limited to matter

submitted by petitioner before respondent determined whether she

was eligible for relief.   Ewing v. Commissioner, 122 T.C. 32, 39

(2004), on appeal (9th Cir., June 16, 2004), cross-appeal (9th

Cir., July 19, 2004).




     3
        Petitioner does not allege that respondent bears the
burden of proof under sec. 7491(a).
                               - 6 -

     The Commissioner will not grant relief unless the taxpayer

meets seven threshold conditions:4     (1) The requesting spouse

filed a joint return for the taxable year for which she seeks

relief; (2) relief is not available to the requesting spouse

under section 6015(b) or (c); (3) the requesting spouse applies

for relief no later than 2 years after the date of the Service’s

first collection activity; (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 file or fail to file

the return with fraudulent intent; and (7) the income tax

liability from which the requesting spouse seeks relief is

attributable to an item of the individual with whom the

requesting spouse filed the joint return.     Rev. Proc. 2003-61,

sec. 4.01, 2003-2 C.B. 296, 297.     Respondent concedes that

petitioner meets these conditions.

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

several factors the Commissioner considers in determining whether

a requesting spouse is eligible for relief under section 6015(f)

and states that no single factor determines whether a taxpayer

qualifies for relief.   All relevant facts and circumstances are

to be considered.   Sec. 6015(f)(1); Rev. Proc. 2003-61, sec.


     4
        Rev. Proc. 2003-61, 2003-2 C.B. 296, applies here because
petitioner requested relief under sec. 6015(f) after Nov. 1,
2003; i.e., on Sept. 30, 2004. Id. sec. 7, 2003-2 C.B. at 299.
                                 - 7 -

4.03, 2003-2 C.B. at 298.    We next consider the factors listed in

Rev. Proc. 2003-61, sec. 4.03.

B.   Factors in Rev. Proc. 2003-61, Sec. 4.03

     1.     Whether the Requesting Spouse Is Separated or Divorced
            From the Nonrequesting Spouse

     Petitioner’s divorce from Mr. Shattun became final on April

22, 2003.    This factor favors petitioner.

     2.     Whether the Requesting Spouse Would Suffer Economic
            Hardship If Relief Were Not Granted

     The Commissioner considers whether payment of tax would

cause economic hardship by applying section 301.6343-1(b)(4)(i)

and (ii), Proced. & Admin. Regs., which pertains to levy on a

taxpayer’s property.    Generally, the Commissioner considers

economic hardship to be present if payment of tax would prevent

the taxpayer from paying his or her reasonable basic living

expenses.    Id.

     Under the regulation, the Commissioner considers any

information provided by the taxpayer in determining a reasonable

amount for basic living expenses, including the following:      (a)

The taxpayer’s age, employment status and history, ability to

earn, number of dependents, and status as a dependent of someone

else; (b) the amount reasonably necessary for food, clothing,

housing, medical expenses, transportation, current tax payments

or other court-ordered payments; (c) the cost of living in the

geographic area in which the taxpayer resides; (d) the amount of
                               - 8 -

property exempt from levy which is available to pay the

taxpayer’s expenses; (e) any extraordinary circumstances such as

special education expenses, a medical catastrophe, or a natural

disaster; and (f) any other factor that the taxpayer claims bears

on economic hardship and brings to the Commissioner’s attention.

Id.

      The parties dispute whether payment of the tax at issue

would be an economic hardship for petitioner.   Petitioner

estimated the monthly amounts of several necessary living

expenses listed in section 301.6343-1(b)(4)(ii), Proced. & Admin.

Regs., e.g., $400 for food, $120 for gasoline, and $10 for

clothing.   According to her estimates, her expenses equaled or

exceeded her income.   However, it does not appear that petitioner

always incurred the amounts of expenses she listed.    For example,

she testified that she spent the amounts indicated for gasoline

and clothing if she could afford to spend that much.   Thus, we

think petitioner overstated her monthly expenses somewhat.

      Petitioner was 42 years old at the time of trial and

apparently she will be able to be employed for many more years.

If relief is not granted, petitioner will remain liable for

paying $8,261 plus related interest.   We conclude that this

factor is neutral.5


      5
        Respondent contends, in effect, that petitioner’s
expenses for her son were not reasonable basic living expenses.
                                                   (continued...)
                                - 9 -

     3.    Whether the Requesting Spouse Knew or Had Reason To
           Know of the Item Giving Rise to the Deficiency

     Petitioner contends that this factor does not favor

respondent because she believed that she and Mr. Shattun properly

reported the $21,992 distribution using a well-known computer

software program.    We disagree.

     In the case of an income tax liability resulting from a

deficiency, the Commissioner is less likely to grant relief under

section 6015(f) if the requesting spouse knew or had reason to

know of the item giving rise to the deficiency.    Rev. Proc. 2003-

61, sec. 4.03(2)(a)(iii).    Actual knowledge of the item giving

rise to the deficiency is a strong factor weighing against

relief.   Id.   Petitioner had actual knowledge of the $21,992

distribution which generated the tax liability, and she completed

the Form 1040 on which she and Mr. Shattun reported the

distribution.

     Petitioner testified that she and Mr. Shattun relied on the

computer software program and her interpretation of sources about

tax that she used.    The question is whether petitioner had

knowledge of the transaction, not whether she had knowledge of

its tax consequences.    See Bokum v. Commissioner, 992 F.2d 1132,

1134 (11th Cir. 1993) (knowledge contemplated by section 6013(e)



     5
      (...continued)
We conclude that this factor is neutral whether or not her
support for her son is a reasonable basic living expense.
                              - 10 -

is not knowledge of the tax consequences of a transaction but of

the transaction itself), affg. 94 T.C. 126 (1990); Cheshire v.

Commissioner, 115 T.C. 183, 197 (2000) (knowledge of her

husband’s pension withdrawal was actual knowledge for purposes of

section 6015 relief even though the taxpayer did not know how the

withdrawal was taxed), affd. 282 F.3d 326 (5th Cir. 2002);

Purcell v. Commissioner, 86 T.C. 228, 237- 238 (1986), affd. 826

F.2d 470 (6th Cir. 1987).   The item giving rise to the deficiency

was the $21,992 distribution made from Mr. Shattun’s section

401(k) account.   This factor strongly favors respondent.

     4.   Whether the Nonrequesting Spouse Has a Legal Obligation
          To Pay the Taxes Due Pursuant to a Divorce Decree

     Petitioner and Mr. Shattun’s divorce decree is silent on

their Federal income tax liability.    This factor is neutral.   See

Washington v. Commissioner, 120 T.C. 137, 149 (2003); Magee v.

Commissioner, T.C. Memo. 2005-263; Ellison v. Commissioner, T.C.

Memo. 2004-57 n.12.

     5.   Whether the Requesting Spouse Received a Significant
          Benefit Beyond Normal Support From the Item Giving Rise
          to the Deficiency

     Petitioner contended at the administrative stage and at

trial that Mr. Shattun received all of the benefit from the

$21,992 distribution and the refund.    Mr. Shattun did not

testify, but he contended at the administrative stage that

petitioner benefited from the $21,992 and the refund.
                               - 11 -

     The item giving rise to the deficiency was a $21,992

withdrawal from Mr. Shattun’s section 401(k) plan retirement

account.   Petitioner and Mr. Shattun received a $5,839 refund for

the 2000 tax year.    Petitioner testified that the distribution

and refund went into Mr. Shattun’s bank account, and that he used

the money to pay for a Jeep, stereo equipment, furniture, and his

personal bills.

     In a statement he filed during the administrative

proceeding, Mr. Shattun stated that the 401(k) plan distribution

helped to pay for their home, petitioner’s outstanding debts, and

petitioner’s truck.    Either of their statements could reasonably

be true.

     Petitioner offered no evidence corroborating her claim.     On

this record, we find that Mr. Shattun did not receive the sole

benefit from the section 401(k) plan distribution and tax refund.

This factor is neutral.

     6.    Whether the Requesting Spouse Made a Good Faith Effort
           To Comply With Income Tax Laws in Subsequent Tax Years

     Petitioner contends that she is making a good faith effort

to comply with the income tax laws.     We disagree.   Petitioner did

not timely file her 2002 and 2003 individual income tax returns

or timely pay her tax for those years.      She filed these returns

in August or September 2004.    She offered no reason for late

filing.    This factor favors respondent.
                                - 12 -

     7.    Abuse of the Requesting Spouse by the Nonrequesting
           Spouse

     There are additional factors that the Commissioner treats as

favoring equitable relief if present, but not as grounds for

denying relief if not present.    Rev. Proc. 2003-61, sec.

4.03(2)(b)(i) and (ii), 2003-2 C.B. at 299.    One of those factors

is abuse of the requesting spouse by the nonrequesting spouse.

     In her Form 8857, petitioner stated that Mr. Shattun

assaulted her, and she said that was why they were divorced.     Her

testimony is corroborated by the January 2001 Bremerton Police

incident report.    This factor favors petitioner.

     8.    Requesting Spouse’s Mental or Physical Health

     The taxpayer’s mental or physical health, if poor when the

tax return was signed or when relief was requested, is a factor

the Commissioner treats as favoring the taxpayer if present, but

neutral if not present.    Rev. Proc. 2003-61, sec. 4.03(2)(b)(ii).

In petitioner’s Form 12510, Questionnaire for Requesting Spouse,

she stated that she suffered from mental abuse when she signed

the return or requested relief.    She did not elaborate or testify

on this point.    We have previously found that the abuse factor

favors relief for petitioner.    We conclude that this factor is

neutral.

C.   Conclusion

     Factors favoring petitioner are that she and Mr. Shattun are

divorced and that she suffered from abuse.    Neutral factors are
                             - 13 -

economic hardship, the question of benefit from the underpayment

and refund, the absence of a legal obligation of Mr. Shattun to

pay the tax, and petitioner’s mental condition.   The factors

weighing against relief are petitioner’s actual knowledge of the

item giving rise to the deficiency and her unexplained failure to

timely file tax returns for 2002 and 2003.   On this record we

conclude that respondent’s denial of equitable relief for

petitioner from joint Federal income tax liability for 2000 under

section 6015(f) was not an abuse of discretion.

     To reflect the foregoing,


                                              Decision will be

                                        entered for respondent.
