                  T.C. Summary Opinion 2006-28



                     UNITED STATES TAX COURT



               DEBORAH ANN PUCKETT, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 24747-04S.              Filed February 16, 2006.


     Deborah Ann Puckett, pro se.

     Edwina L. Jones, for respondent.



     ARMEN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed.1    The decision to be entered




     1
        Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 2000,
the taxable year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure. All monetary amounts are
rounded to the nearest dollar.
                               - 2 -

is not reviewable by any other court, and this opinion should not

be cited as authority.

     Pursuant to the provisions of section 6015, petitioner

submitted to respondent an administrative request for relief from

Federal income tax liabilities for the taxable year 2000.

Respondent determined that petitioner is not entitled to relief

from joint and several liability for $15,044 of unpaid Federal

income tax, penalties, and interest for 2000 under section

6015(f).   Petitioner timely filed a petition with this Court

under section 6015(e)(1) for review of respondent’s

determination.

     The sole issue for decision is whether respondent abused his

discretion in denying petitioner relief from joint and several

liability under section 6015(f).   We hold that he did not.

                            Background

     Some of the facts have been stipulated, and they are so

found.   We incorporate by reference the parties’ stipulation of

facts and accompanying exhibits.

     At the time that the petition was filed, petitioner resided

in Mooresville, North Carolina.

     Petitioner and Tracy B. Puckett (Mr. Puckett) were married

in 1987.   Petitioner and Mr. Puckett began maintaining separate

residences in May 2000 and were legally separated in April 2002.
                                - 3 -

Their separation agreement, dated March 12, 2002, stated, in

pertinent part:

       The parties currently owe the IRS approximately
       $11,000.00 due to Husband’s failure to pay his Social
       Security tax. Husband agrees that he shall be solely
       responsible for the said debt to the IRS and that he
       shall pay the debt to the IRS in a timely fashion and
       as determined by the IRS.

Petitioner and Mr. Puckett were divorced in March 2003.     They

have one son, who is hearing impaired and resides with

petitioner.    Petitioner was not abused by Mr. Puckett.

       During 2000, petitioner worked part-time as a nurse for

Novant Health Corporate Presbyterian Hospital.     Petitioner earned

wages of $4,206 from which $44 was withheld as Federal income

tax.

       During 2000, petitioner also operated a retail clothing

business known as Ensembles, Inc. (Ensembles).     She and Mr.

Puckett were joint owners of Ensembles, through an S corporation

that they organized in August 1999.     During 2000, Ensembles

incurred substantial losses and eventually closed for business in

June 2001.

       Mr. Puckett was also self-employed as a consultant for

Crothall Health Care, Inc., during 2000.     In 2000, he made

estimated tax payments of $38 and reported a net profit of

$62,936 on Schedule C, Profit or Loss From Business.

       During 2000, petitioner and Mr. Puckett maintained joint

checking and savings accounts into which they deposited their
                                - 4 -

salary and from which they paid household bills and some business

bills.    Petitioner had complete access to the joint accounts,

reviewed monthly bank statements, and balanced the joint

checkbook to the bank statements.

     Petitioner and Mr. Puckett filed for bankruptcy under

chapter 7 of the Bankruptcy Code on October 4, 2001, and they

received a discharge on February 14, 2002.

     On October 29, 2001, petitioner and Mr. Puckett filed a

delinquent joint Federal income tax return for the taxable year

2000 reporting tax due of $10,027.2     The amount due was solely

attributable to Mr. Puckett’s income calculated as an $8,893

self-employment tax liability plus an $823 tax on an individual

retirement account distribution.    They did not remit payment with

their return.

     On November 26, 2001, respondent assessed the tax, less

income tax withholding and estimated tax payments, plus the

applicable penalties and interest.

     Petitioner submitted to respondent Forms 8857, Request for

Innocent Spouse Relief, dated September 13, 2002, and November 6,

2002.    On June 3, 2003, respondent’s Examination Division denied

petitioner’s request for relief from joint and several liability.



     2
        On the return, petitioner and Mr. Puckett reported total
tax of $9,716 on line 57 and total payments of $44 on line 65.
The return also reported an “estimated tax penalty” in the amount
of $355.
                              - 5 -

On July 9, 2003, petitioner appealed to respondent’s Appeals

Office on the grounds that she filed jointly to lower Mr.

Puckett’s tax liability and with the understanding that Mr.

Puckett would pay the tax owing.

     On November 3, 2004, respondent issued a Notice Of

Determination Concerning Your Request For Relief Under The

Equitable Relief Provision Of Section 6015(f).   In the notice,

respondent determined (1) that petitioner failed to meet her

burden of establishing that she had a reasonable belief that the

taxes would be paid timely and (2) that petitioner failed to

establish that she would suffer an economic hardship if she were

required to pay some or all of the tax.

     Petitioner filed an imperfect petition, followed by an

amended petition, contesting respondent’s determination.3    The

amended petition stated:

     The debt was due to my ex-husband not paying his social
     security taxes. I had been instructed by my accountant
     to sign a joint tax return even though I was separated
     from my ex-husband in an attempt to “help with divorce
     relations” by lowering the amount he owed. And also
     told I would not be held responsible. I was then told
     by them to file an innocent spouse form which a former
     IRS caseworker told me 2 months ago “never works”.




     3
        Mr. Puckett did not file a Notice of Intervention under
Rule 325(b). He did, however, file a statement with respondent’s
Appeals Office stating that he was assured by both his accountant
and his wife that there would not be any taxes due for 2000
because of the losses related to his wife’s business.
                               - 6 -

                            Discussion

     As a general rule, spouses filing a joint Federal income tax

return are jointly and severally liable for all taxes shown on

the return or found to be owing.   Sec. 6013(d)(3).    Section 6015,

however, provides relief from joint and several liability to

certain taxpayers under certain circumstances.     Section 6015

encompasses three types of relief:     (1) Section 6015(b)(1)

provides full or apportioned relief from joint and several

liability; (2) section 6015(c) provides proportionate tax relief

to divorced or separated taxpayers; and (3) section 6015(f)

provides equitable relief from joint and several liability in

certain circumstances if neither section 6015(b) nor section

6015(c) is available.

     In the instant case, petitioner requested relief under

section 6015(f) from liability for the tax reported on the 2000

return but not paid when the return was filed.     Respondent

determined that petitioner was not entitled to the requested

relief.

     We review respondent’s denial of equitable relief to

petitioner after a trial de novo and under an abuse of discretion

standard.   Ewing v. Commissioner, 122 T.C. 32 (2004); Cheshire v.

Commissioner, 115 T.C. 183, 198 (2000), affd. 282 F.3d 326 (5th

Cir. 2002); Butler v. Commissioner, 114 T.C. 276, 292 (2000).

Petitioner bears the burden of proving that respondent’s denial
                                 - 7 -

of equitable relief under section 6015(f) was an abuse of

discretion.    Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311

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

Commissioner, 118 T.C. 106, 113 (2002), affd. 353 F.3d 1181 (10th

Cir. 2003).    Petitioner must demonstrate that respondent

exercised his discretion arbitrarily, capriciously, or without

sound basis in fact or law.    Jonson v. Commissioner, supra at

125; Woodral v. Commissioner, 112 T.C. 19, 23 (1999).

     Section 6015(f) provides:

          SEC. 6015(f). Equitable Relief.--Under procedures
     prescribed by the Secretary, if--

                (1) taking into account all the facts
           and circumstances, it is nequitable 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.

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

prescribed procedures to be used in determining whether the

requesting spouse qualifies for relief from joint and several

liability under section 6015(f).    As applicable to the present

case, these procedures are set forth in Rev. Proc. 2000-15, 2000-

1 C.B. 447.4   The requesting spouse must satisfy seven conditions


     4
         Rev. Proc. 2003-61, 2003-2 C.B. 296, which supersedes
                                                    (continued...)
                                 - 8 -

(threshold conditions) before the Commissioner will consider a

request for relief under section 6015(f).    Rev. Proc. 2000-15,

sec. 4.01, 2000-1 C.B. at 448.    Respondent agrees that in this

case those threshold conditions are satisfied.

     Where the requesting spouse satisfies the threshold

conditions, Rev. Proc. 2000-15, sec. 4.02(1), 200-1 C.B. at 448,

sets forth the circumstances under which respondent will

ordinarily grant relief under section 6015(f) in a case like the

instant case where a liability is reported on a joint return but

not paid.   Relief under section 6015(f) will ordinarily be

granted if all of the following elements are satisfied:

          (a) At the time relief is requested, the
     requesting spouse * * * has not been a member of the
     same household as the nonrequesting spouse at any time
     during the 12-month period ending on the date relief
     was requested;

          (b) At the time the return was signed, the
     requesting spouse had no knowledge or reason to know
     that the tax would not be paid. The requesting spouse
     must establish that it was reasonable for the
     requesting spouse to believe that the nonrequesting
     spouse would pay the reported liability. * * *; and




     4
      (...continued)
Rev. Proc. 2000-15, 2000-1 C.B. 447, is effective for requests
for relief under sec. 6015(f) filed on or after Nov. 1, 2003, and
for requests for such relief pending on, and for which no
preliminary determination letter had been issued as of, that
date. Rev. Proc. 2003-61, sec. 7, 2003-2 C.B. at 297. Rev.
Proc. 2003-61, supra is not applicable in the instant case
because (1) petitioner filed her request for relief on Sep. 8,
2002, and (2) respondent issued a preliminary determination on
June 3, 2003.
                                - 9 -

            (c) The requesting spouse will suffer economic
       hardship if relief is not granted. For purposes of
       this section, the determination of whether a requesting
       spouse will suffer economic hardship will be made by
       the Commissioner or the Commissioner’s delegate, and
       will be based on rules similar to those provided in
       section 301.6343-1(b)(4) of the Regulations on
       Procedure and Administration.

Rev. Proc. 2000-15, sec. 4.02(1), 2000-1 C.B. at 448.

       In cases where the threshold conditions have been satisfied,

but the requesting spouse does not qualify for relief under Rev.

Proc. 2000-15, sec. 4.02(1), 2000-1 C.B. at 448, equitable relief

may be granted under section 6015(f) if, taking into account all

facts and circumstances, it is inequitable to hold the requesting

spouse liable.    Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at

448-449.

       Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 448-449, lists

several nonexclusive factors that the Commissioner will consider

in determining eligibility for equitable relief under section

6015(f).    “No single factor will be determinative of whether

equitable relief will or will not be granted in any particular

case.    Rather, all factors will be considered and weighed

appropriately.”    Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at

448.

       The nonexclusive list of factors that the Commissioner will

consider as weighing in favor of granting relief includes:    (1)

The requesting spouse is separated or divorced from the

nonrequesting spouse; (2) the requesting spouse would suffer
                               - 10 -

economic hardship if relief is denied; (3) the requesting spouse

was abused by the nonrequesting spouse; (4) the requesting spouse

did not know or have reason to know that the reported liability

would be unpaid; (5) the nonrequesting spouse has a legal

obligation pursuant to a divorce decree or agreement to pay the

unpaid liability;5 and (6) the unpaid liability is attributable

solely to the nonrequesting spouse.     See Rev. Proc. 2000-15, sec.

4.03(1), 2000-1 C.B. at 448.

     The nonexclusive list of factors that the Commissioner will

consider as weighing against granting relief includes:    (1) The

unpaid liability is attributable to the requesting spouse; (2)

the requesting spouse knew or had reason to know at the time the

return was signed that the reported liability would be unpaid;

(3) the requesting spouse significantly benefited (beyond normal

support) from the unpaid liability; (4) the requesting spouse

will not suffer economic hardship if relief is denied; (5) the

requesting spouse has not made a good faith effort to comply with

Federal income tax laws in the tax years following the tax year

to which the request for relief relates; and (6) the requesting

spouse has a legal obligation pursuant to a divorce decree or



     5
        According to the revenue procedure, however, “This will
not be a factor weighing in favor of relief if the requesting
spouse knew or had reason to know, at the time the divorce decree
or agreement was entered into, that the nonrequesting spouse
would not pay the liability.” Rev. Proc. 2000-15, sec.
4.03(1)(e), 2000-1 C.B. at 449.
                                - 11 -

agreement to pay the unpaid liability.      See Rev. Proc. 2000-15,

sec. 4.03(2), 2000-1 C.B. at 449.

      For reasons to be discussed, we conclude that petitioner

does not qualify for relief under section 4.02 or 4.03 of the

revenue procedure.     In order to streamline our discussion, we

shall focus exclusively on the factors enumerated in section 4.03

of the revenue procedure.     That discussion, however, will make

apparent why petitioner fails to qualify for relief under either

section of the revenue procedure.

A.   Neutral Factors

      We consider many of the factors to be neutral, weighing

neither in favor of nor against granting petitioner relief.

      1.   Abuse

      Petitioner was not abused by Mr. Puckett.     Lack of spousal

abuse is not a factor listed in Rev. Proc. 2000-15, sec. 4.03(2),

2000-1 C.B. at 449, that weighs against granting relief.

Therefore, this factor is neutral.       See Washington v.

Commissioner, 120 T.C. 137, 149 (2003).

      2.   Compliance With Federal Income Tax Laws

      Respondent concedes that petitioner has complied with her

income tax filing requirements.     This factor does not weigh in

favor of or against granting relief to petitioner.
                                 - 12 -

     3.    Significant Benefit

      There is no evidence that petitioner significantly benefited

beyond normal support from the unpaid liability.    Therefore, this

factor is neutral.

B.   Factors Weighing in Favor of Granting Relief

      1.   Marital Status

      Petitioner and Mr. Puckett began living apart and separate

from each other in August 1999.     They were legally separated in

April 2002 and divorced in March 2003.    Consequently, this factor

weighs in favor of granting relief to petitioner.

      2.   Attributable to Nonrequesting Spouse

      Respondent concedes that the liability for which relief is

sought is solely attributable to Mr. Puckett.     This factor weighs

in favor of granting relief to petitioner.

C.   Factors Weighing Against Granting Relief

      1.   Knowledge or Reason To Know

      The relevant knowledge in the case of a reported but unpaid

liability is whether when the return was signed, the taxpayer

knew or had reason to know “that the tax would not be paid.”

Washington v. Commissioner, supra; Rev. Proc. 2000-15, sec.

4.03(1)(b), 2000-1 C.B. at 449.     Accordingly, we must consider

whether, “taking into account all the facts and circumstances”,

sec. 6015(f)(1), petitioner knew or had reason to know that Mr.

Puckett would not pay the tax shown as due on the return.
                              - 13 -

     Respondent contends that petitioner knew or had reason to

know that the tax liability would not be paid.   In support of his

contention, respondent asserts:   (1) Petitioner and Mr. Puckett

filed for bankruptcy 1 week before signing their return; (2) when

petitioner signed the return, she had constructive knowledge of

the tax liability shown on the return; and (3) because of their

financial difficulties, petitioner knew that Mr. Puckett would

not pay the tax liability.

     Having observed petitioner’s appearance and demeanor at

trial, we find her testimony to be honest, forthright, and

credible.   We conclude, however, that petitioner had reason to

know that Mr. Puckett would not pay the liability reported on the

2000 return.   Petitioner testified at trial that she knew when

she signed the return that it reported a balance due and that no

payment was remitted with the return.   She asserts, however, that

she was urged by her accountant to execute the return because “it

makes for better divorce relations if I [petitioner] sign jointly

and it will reduce the amount he [Mr. Puckett] owes”.   Petitioner

further asserts that if she had known she would be liable for Mr.

Puckett’s unpaid tax liability, she would not have filed a joint

return.   Notwithstanding, however, petitioner admitted that she

probably knew that there was a good chance Mr. Puckett was not

going to pay the tax liability and that she “definitely didn’t

care how he was going to pay it.”   Indeed, petitioner admitted
                              - 14 -

that she helped Mr. Puckett pay a previous tax liability from his

previous marriage.

     Accordingly, this factor weighs against granting relief to

petitioner.

     2.   Nonrequesting Spouse’s Legal Obligation

     Petitioner’s and Mr. Puckett’s March 2002 separation

agreement placed the legal obligation to pay the unpaid 2000 tax

liability exclusively on Mr. Puckett.

     Respondent asserts, however, that this will not be a factor

weighing in favor of relief if petitioner knew or had reason to

know, at the time that the separation agreement was entered into,

that Mr. Puckett would not pay the tax liability.   See Rev. Proc.

2000-15, sec. 4.03(1)(e), 2000-1 C.B. at 449.   Respondent argues

that petitioner had reason to know, at the time the separation

agreement was entered into, that Mr. Puckett would not pay the

tax liability because, inter alia, they had received a discharge

in bankruptcy on October 4, 2001.   We agree.

     As discussed above, after their discharge in bankruptcy,

petitioner and Mr. Puckett filed their return on October 29,

2001, reporting a tax due.   They did not remit payment.   At the

time they executed their separation agreement, the 2000 tax

liability remained unpaid.   Moreover, petitioner knew that Mr.

Puckett had a delinquent tax liability from his previous

marriage.
                               - 15 -

     Consequently, this factor weighs against granting relief to

petitioner.

     3.    Economic Hardship

      Respondent contends that petitioner does not satisfy the

economic hardship test because she admitted that she is able to

pay her reasonable basic living expenses with her income.

Respondent further contends that petitioner failed to submit any

documentation of her monthly expenses to support her contention

that she would suffer economic hardship.

      Petitioner admitted at trial that she told the Appeals

officer that her income was sufficient to meet her reasonable

living allowances.    Given that admission, and in the absence of

documentation to the contrary, the record does not support a

finding that petitioner will suffer economic hardship if she is

not relieved from joint and several liability.

      Consequently, this factor weighs against granting relief to

petitioner.

D.   Conclusion

      After considering all of the facts and circumstances, we

find that it would not be inequitable to hold petitioner liable

for payment of the outstanding liability.   Thus, we hold that

respondent did not abuse his discretion in denying petitioner

equitable relief from joint and several liability under section

6015(f).
                            - 16 -

    Reviewed and adopted as the report of the Small Tax Case

Division.

    To reflect the foregoing,

                                       Decision will be entered

                                  for respondent.
