                        T.C. Memo. 2005-31



                      UNITED STATES TAX COURT



         STANLEY K. AND TOMI L. BAUMANN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8554-01.              Filed February 22, 2005.


     Frederick J. O’Laughlin, for petitioner Stanley K. Baumann.

     Tomi L. Baumann, pro se.

     William F. Castor, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     KROUPA, Judge:   This case arises from a request for relief

from joint and several liability under section 6015(f)1 in

connection with petitioners’ deficiency proceeding.    Although the


     1
      All section references are to the Internal Revenue Code in
effect for 1998, and all Rule references are to the Tax Court
Rules of Practice and Procedure, unless otherwise indicated.
                               - 2 -

nonrequesting spouse, petitioner Stanley K. Baumann (Stanley),

did not object when the requesting spouse, petitioner Tomi L.

Baumann (Tomi), amended the deficiency petition to include the

claim for relief under section 6015, Stanley now objects after

respondent determined that Tomi qualifies for relief.   Stanley

objects by arguing that, despite Stanley’s being allowed to

participate in respondent’s determination whether Tomi qualified

for relief, respondent nonetheless abused his discretion in

granting relief under section 6015(f) because respondent did not

examine all the facts and circumstances as required under section

6015(f).   The issue for decision is whether respondent abused his

discretion in granting Tomi relief from joint and several

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

                         FINDINGS OF FACT

Background

     Petitioners, while married, timely filed their joint Federal

income tax return for 1998.   Respondent sent a joint notice of

deficiency to petitioners on April 4, 2001, in which respondent

determined an income tax deficiency against petitioners of

$11,756 for 1998 and an accuracy-related penalty of $2,351 under

section 6662(a).   The deficiency was attributable to respondent’s

disallowing gambling losses in excess of gambling income under

section 165(d) instead of allowing Stanley to claim his gambling

losses against income from his drywall construction business.
                               - 3 -

     Petitioners timely filed a petition contesting respondent’s

determination in the deficiency notice.   At the time petitioners

filed their joint petition, petitioners resided in Oklahoma City,

Oklahoma.   Attorney Frederick J. O’Laughlin (counsel) represented

both petitioners in the deficiency proceeding.

     Respondent filed a motion for summary judgment (summary

judgment motion) on May 7, 2002, involving all issues set forth

in the deficiency notice.   Respondent asserted in the summary

judgment motion that petitioners were not entitled, as a matter

of law, to deduct gambling losses in excess of gambling income

under section 165(d).   On the date petitioners were ordered to

file a response to respondent’s summary judgment motion,

petitioners’ counsel filed a motion to withdraw as counsel for

Tomi, because petitioners had since divorced and their divorce

created a conflict of interest.   Along with the motion to

withdraw, counsel filed, on behalf of both petitioners, a

response to respondent’s summary judgment motion.   The Court

granted counsel’s motion for leave to withdraw as counsel for

Tomi.
                               - 4 -

Administrative Request for Relief

     While the deficiency proceeding was pending, Tomi filed2 a

Form 8857, Request for Innocent Spouse Relief, seeking relief

from liability for the deficiency and accuracy-related penalty

for taxable year 1998, the year at issue.3    Tomi attached a Form

12150, Questionnaire for Requesting Spouse, on which Tomi stated

that she filed the return for 1998 relying on the advice of her

return preparer (who happened to be petitioners’ counsel) and

that she was unfamiliar with the tax laws.4

     Once Examining Officer Lori Sperle (examining officer) of

respondent’s Oklahoma City office received Tomi’s innocent spouse

case from respondent’s Cincinnati Centralized Innocent Spouse

Operation (CCISO), the examining officer sent two letters to

Stanley notifying him that Tomi had filed a claim for relief

under section 6015.   One letter, entitled “Letter to Non-

Requesting Spouse,” was dated April 25, 2003, and another letter

was dated May 16, 2003.   The letters notified Stanley that Tomi



     2
      The record does not reflect the exact date Tomi filed her
request for relief. The record reflects that respondent’s
Cincinnati Centralized Innocent Spouse Operation (CCISO) received
the Form 8857 on Jan. 8, 2003, and that the form was dated
Sept. 6, 2002.
     3
      Tomi’s request for relief also sought relief for unpaid
taxes for 1999. The deficiency notice did not involve 1999,
however, and so 1999 is not before us.
     4
      Tomi did not disclose on this questionnaire that she was
abused.
                                - 5 -

had filed a request for relief from joint and several liability

and notified Stanley that he could take part in the proceeding by

providing information for respondent to consider in making a

relief determination.   The letters also requested that Stanley

complete an enclosed Form 12508, Innocent Spouse Information

Request (information request), to provide any information Stanley

wanted respondent to consider in making the relief determination.

     Stanley completed the information request and submitted it

to respondent on June 26, 2003.   Stanley also submitted a sworn

statement on the same date asserting that Tomi was not entitled

to relief because she had full knowledge of, and she benefited

from, the gambling activity.

     The examining officer sent neither Tomi nor Stanley a

preliminary determination letter for 1998.5

Deficiency Hearing

     The Court held a hearing on respondent’s summary judgment

motion on September 23, 2002.   At the hearing, respondent

notified the Court and petitioners that respondent was converting

the summary judgment motion into a motion for partial summary



     5
      Although respondent sent a preliminary determination letter
to Tomi on Oct. 17, 2003, informing Tomi that she did not qualify
for relief for 1999, which year is not before us, see supra note
3, respondent did not send a preliminary determination letter for
1998, the year at issue. Whether a preliminary determination
letter had been issued for 1998 is relevant for purposes of
deciding whether Rev. Proc. 2003-61, 2003-2 C.B. 296, or Rev.
Proc. 2000-15, 2000-1 C.B. 447, applies.
                               - 6 -

judgment.   Respondent was not moving for summary judgment as to

the accuracy-related penalty under section 6662.   In addition,

respondent notified the Court that Tomi had filed a claim for

relief under section 6015 and that the summary judgment motion

did not include Tomi’s request for relief under section 6015.

     The Court granted respondent’s motion as to the $11,756

deficiency but denied the motion as to the accuracy-related

penalty in an Order dated March 14, 2003.   The Court did not

specifically mention Tomi’s request for relief under section 6015

in the Order, but the Court restored the case to the general

docket for trial or other disposition.

Amended Petition To Add Claim for Relief

     On May 19, 2003, Tomi filed a pleading entitled a motion for

leave to file an amendment to the petition, which motion embodied

an amendment to the petition in which Tomi claimed relief under

section 6015.   A copy of the motion and the proposed amendment

was served on Stanley through his counsel and on respondent.

Neither respondent nor Stanley objected to the motion to amend

the petition.   The Court granted the motion to amend the petition

to add Tomi’s claim under section 6015 on June 19, 2003.

Appeals Determination

     Appeals Officer Robert Baty (Appeals Officer Baty) of

respondent’s Oklahoma City office received the administrative

innocent spouse case file on October 17, 2003.   The
                              - 7 -

administrative file included the correspondence between

petitioners and the examining officer, the record of the

examining officer’s interview with Tomi, and the examining

officer’s work papers.

     The administrative file included the information request

that Stanley submitted and included the divorce decree ordering

Stanley to pay, and to hold Tomi harmless from, their joint

Federal income tax liabilities through and including 2001, which

includes petitioners’ joint income tax liability for 1998.

     The examining officer’s work papers included records of the

innocent spouse determination interview the examining officer

conducted with Tomi on September 12, 2003.   The examining

officer’s work papers show that the examining officer determined

that Tomi was not entitled to relief under section 6015(b) or (c)

because Tomi had actual knowledge of the gambling activity and

Tomi’s lack of knowing the tax consequences was no defense.6

The examining officer also determined that, even though five

factors weighed in favor of granting Tomi relief under section

6015(f), Tomi was not entitled to relief under section 6015(f)

because Tomi had knowledge of the gambling activity.   The five



     6
      Ignorance of the law is not a defense for a taxpayer
seeking relief under sec. 6015. Mitchell v. Commissioner, 292
F.3d 800, 803-806 (D.C. Cir. 2002), affg. T.C. Memo. 2000-332;
Cheshire v. Commissioner, 282 F.3d 326, 333-335 (5th Cir. 2002),
affg. 115 T.C. 183 (2000); Price v. Commissioner, 887 F.2d 959,
964 (9th Cir. 1989).
                               - 8 -

factors weighing in favor of section 6015(f) relief included

petitioners’ divorce, Tomi would face economic hardship if relief

were not granted, petitioners’ divorce decree stated that Stanley

was responsible for the 1998 income tax liability, the entire

deficiency was attributable to Stanley, and Tomi was current with

all her Federal tax obligations while Stanley was not.

     After reviewing the administrative file, Appeals Officer

Baty had a conference with Tomi on December 3, 2003, during which

Tomi detailed the abuse she allegedly suffered from Stanley.

Tomi provided information and documents to substantiate that

Stanley physically assaulted her numerous times, that Stanley had

threatened Tomi’s life with a shotgun during the divorce action,

that he had tried to burn their house while she and her children

were inside, that he was charged with arson, that he was taken to

a psychiatric hospital after he attempted suicide with a shotgun,

and that he had threatened the life of her older son (from a

previous marriage).

     After the conference, Appeals Officer Baty obtained third-

party information that confirmed the information Tomi provided

him during the conference.   Appeals Officer Baty verified the

information by accessing the Oklahoma State Courts Network’s

(OSCN) Web site and locating relevant court documents.   Appeals

Officer Baty verified through court documents that Tomi filed for

divorce from Stanley, that Tomi filed a petition for a protective
                                - 9 -

order based on domestic abuse, and that a temporary protective

order was issued.    The Appeals officer also verified that the

State of Oklahoma filed an information against Stanley for fourth

degree felony arson and issued an arrest warrant against him

shortly after Tomi filed for divorce.    The court records also

showed that Stanley subsequently pleaded guilty to misdemeanor

arson and received a 1-year suspended sentence.

     The administrative file also included a certified copy of an

Oklahoma City Police Department Crime Report that described a

domestic disturbance call made to the police from Tomi’s

residence reporting to the police that Stanley had threatened

suicide with a shotgun, and that the police confiscated the

shotgun.   This police crime report was dated 1 day before

Stanley’s involuntary commitment to Griffin Memorial Hospital in

Norman, Oklahoma, for observation, which commitment caused the

originally scheduled trial to be continued.

     Appeals Officer Baty found the same factors weighing in

favor of relief that the examining officer had previously found,

except that Appeals Officer Baty also found that abuse existed,

and that the abuse was a significant and compelling factor

warranting relief.    Also, although the Appeals officer found that

Tomi had knowledge of the gambling activity, he noted that the

examining agent did not consider Rev. Proc. 2003-61, 2003-2 C.B.
                              - 10 -

296,7 which revised the weight to be given to the knowledge

factor.   Rev. Proc. 2003-61, sec. 3.02, 2003-2 C.B. at 297.

Reason to know of the item giving rise to the deficiency no

longer is an extremely strong factor that should weigh more

heavily against relief than other factors.    Rev. Proc. 2003-61,

sec. 4.03(2)(a)(iii)(B), 2003-2 C.B. at 298.    Actual knowledge is

to be considered a strong factor weighing against relief, which

may nevertheless be overcome if the factors in favor of equitable

relief are particularly compelling.    Id.   Appeals Officer Baty

determined that the knowledge factor did not prevent Tomi from

qualifying for relief.

     Appeals Officer Baty determined that, although Tomi was not

entitled to relief under section 6015(b) or (c) because she knew

of the items giving rise to the deficiency, she was entitled to

partial relief under section 6015(f) to the extent her 1998

liability exceeded the amount of her income tax refund for 2002

of $2,020.   Appeals Officer Baty notified Tomi of this

determination in a Notice of Determination Concerning Your

Request for Relief from Joint and Several Liability under Section

6015 (notice determination) dated December 8, 2003.    The notice

     7
      Rev. Proc. 2003-61, 2003-2 C.B. 296, superseded Rev. Proc.
2000-15, 2000-1 C.B. 447. Rev. Proc. 2003-61, supra, is
effective for requests for relief pending on Nov. 1, 2003, for
which no preliminary determination letter has been issued as of
Nov. 1, 2003. Rev. Proc. 2003-61, sec. 7, 2003-2 C.B. at 299.
Because no preliminary determination letter had been issued as of
Nov. 1, 2003, Rev. Proc. 2003-61, supra, applies to this case.
                              - 11 -

determination indicated that “[e]conomic considerations, abuse

indications, and compliance factors” were considered and were

deemed sufficient to support the proposed settlement.

     The notice determination explained that Tomi could proceed

to trial either if she disagreed with the decision or if Stanley

objected.   The notice determination also mentioned that the case

was scheduled for trial during the week of January 12, 2004.

     Appeals Officer Baty sent the notice determination to

Stanley’s counsel as well.   Stanley’s counsel was also provided

with a copy of the notice determination and other items in the

administrative record at a conference on December 10, 2003, with

respondent’s counsel in preparation of trial.

Trial on the Section 6015 Claim

     Stanley’s counsel stated at trial that Stanley did not

object to Tomi’s amending the petition to seek relief from joint

liability but that Stanley seeks to object now to respondent’s

determination that Tomi qualifies for partial relief.    At the

trial, Appeals Officer Baty authenticated the administrative file

and the entire administrative file was admitted into evidence.

Appeals Officer Baty testified and explained the factors he

considered in deciding to grant Tomi equitable relief under

section 6015(f).   Stanley neither testified nor refuted any of

Appeals Officer Baty’s statements.     Stanley only questioned the
                              - 12 -

subsection under which Tomi requested relief because he argued,

if Tomi requested relief under subsection (b) or (c), then he

would be entitled to receive notice of, and have a right to

participate in, the determination whether Tomi was entitled to

relief.   As we understand Stanley’s argument,8 Stanley asserts

that Appeals Officer Baty abused his discretion in granting Tomi

partial relief under section 6015(f) for 1998 apparently because

Stanley did not have an adequate opportunity to participate in

respondent’s determination.

                              OPINION

     This case involves the participatory rights a nonrequesting

spouse has in respondent’s determination whether the requesting

spouse is entitled to relief under section 6105.   The question

Stanley asks us to address is how much participation a

nonrequesting spouse must be afforded to challenge the other

spouse’s claim for relief under section 6015 where both spouses

are before the Court in the same deficiency proceeding.   Before


     8
      Contrary to counsel’s remarks at trial, this case is not a
“stand alone” proceeding commenced under sec. 6015(e). As
discussed infra, sec. 6015(e) enables an electing spouse to
petition for review of an administrative determination regarding
relief, or failure to rule, as a “stand alone” matter independent
of a deficiency proceeding. Although this is not a so-called
“stand alone” case, sec. 6015(e) provides that the Court shall
establish rules providing a nonrequesting spouse with adequate
notice and an opportunity to become a party. Sec. 6015(e)(4).
Rule 325 requires the Commissioner to notify the nonrequesting
spouse and allows the nonrequesting spouse to intervene in a
“stand alone” case. See King v. Commissioner, 115 T.C. 118
(2000).
                              - 13 -

we address whether respondent abused his discretion in granting

Tomi partial relief from joint liability under section 6015(f),

we must first address whether we have jurisdiction and whether

Stanley may challenge Tomi’s claim for relief.

Tax Court Has Jurisdiction

     The Tax Court is a court of limited jurisdiction and may

exercise jurisdiction only to the extent authorized by Congress.

Naftel v. Commissioner, 85 T.C. 527, 529 (1985).   There are three

jurisdictional bases for the Court to review a claim for relief

from joint and several liability.   Van Arsdalen v. Commissioner,

123 T.C. 135 (2004); King v. Commissioner, 115 T.C. 118, 121-122

(2000); Corson v. Commissioner, 114 T.C. 354, 363-364 (2000).

First, a taxpayer may seek relief from joint and several

liability on a joint return by raising the matter as an

affirmative defense in a petition for a redetermination of a

deficiency filed under section 6213 (i.e., a deficiency

proceeding).   King v. Commissioner, supra at 121-122; Corson v.

Commissioner, supra at 363; Butler v. Commissioner, 114 T.C. 276,

287-289 (2000).

     Second, a taxpayer may file a so-called “stand alone”

petition seeking relief from joint and several liability on a

joint return where the Commissioner has issued a final

determination denying the taxpayer’s claim for relief or the

Commissioner has failed to rule on the taxpayer’s claim within 6
                               - 14 -

months of its filing.    See sec. 6015(e)(1); Mora v. Commissioner,

117 T.C. 279 (2001); King v. Commissioner, supra at 122; Corson

v. Commissioner, supra at 363; Fernandez v. Commissioner, 114

T.C. 324, 329 (2000).    Section 6015(e) enables an electing spouse

to petition for review of an administrative determination

regarding relief, or failure to rule, as a “stand alone” matter

independent of a deficiency proceeding.    King v. Commissioner,

supra at 122; Corson v. Commissioner, supra at 363; Fernandez v.

Commissioner, supra at 329.    Finally, a taxpayer may request

relief from joint and several liability on a joint return in a

petition for review of a lien or levy action.    See secs. 6320(c),

6330(c)(2)(A)(i).   The petition in this case was filed in a

deficiency proceeding.    We therefore have jurisdiction.

     We next address whether Stanley may contest Tomi’s claim for

relief.   We have previously held that one spouse can challenge

the other spouse’s claim for relief in a deficiency case.       Corson

v. Commissioner, supra.    We determined that we could consider the

wife’s claim based on the Court’s traditional deficiency

jurisdiction.   Id. at 363-364.   When the Commissioner negotiated

a settlement with the wife concerning relief under section 6015,

the husband refused to agree to the negotiated settlement.       The

Court denied the motion by respondent for entry of decision

holding that the husband must be allowed to be heard on the

question whether the wife is entitled to relief.    Corson v.
                                - 15 -

Commissioner, supra at 365.     Here, Stanley had an opportunity to

be heard.    Stanley was a party to the proceeding.   Stanley

received the notice required.    Stanley received notice of Tomi’s

claim for relief when she filed Form 8857.    Stanley also received

notice that Tomi was amending the deficiency petition to add her

claim for relief to the petition, and Stanley did not object to

Tomi’s amending the petition.

     In addition, Stanley was permitted to submit information to

respondent relative to Tomi’s claim for relief.    Stanley

submitted a completed information request on Form 12057 and

submitted a sworn statement to respondent.    The information

Stanley submitted is part of the administrative file Appeals

Officer Baty reviewed in making a final determination that Tomi

qualifies for partial relief under section 6015(f).

     We further note that Stanley’s opportunity to participate

did not end with respondent’s administrative determination.

Stanley, as a party to this proceeding, had an opportunity to

object to respondent’s determination during the trial on the

section 6015 claim.    Instead of providing testimony or facts to

refute respondent’s determination, however, Stanley argued that

he did not have adequate participation in respondent’s

determination.    Stanley argued that his only participation was

completing the information request and submitting the sworn

statement.    It is this level of participation with which Stanley
                               - 16 -

remains dissatisfied.    We find that simply because Stanley

dislikes the result does not mean he was deprived of his right to

participate in respondent’s determination whether Tomi qualified

for relief.

       We now address whether respondent abused his discretion in

determining that Tomi is entitled to partial relief.

Relief From Joint and Several Liability Under Section 6015

       Married taxpayers may generally elect to file a joint

Federal income tax return.    Sec. 6013(a).    After making the

election, each spouse is jointly and severally liable for the

entire tax due.    Sec. 6013(d)(3).    A spouse may seek relief from

joint and several liability under section 6015.      A spouse may

qualify for relief from liability under section 6015(b), or, if

eligible, may allocate liability under section 6015(c).      In

addition, a spouse may seek equitable relief under section

6015(f) if relief is not available under section 6015(b) or (c).

Fernandez v. Commissioner, supra at 329-331; Butler v.

Commissioner, supra at 287-292.       Under section 6015(f), the

Commissioner has the discretion to relieve a spouse (or former

spouse) of joint liability if, taking into account all the facts

and circumstances, it is inequitable to hold that spouse liable

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

that spouse is not eligible for relief under section 6015(b) or

(c).    Sec. 6015(f).
                              - 17 -

     Respondent found that Tomi was not entitled to relief under

either section 6015(b) or (c) because she had actual knowledge of

the gambling activity.   Furthermore, Tomi agrees that she was not

eligible for relief under either section 6015(b) or (c), and that

she was entitled to partial relief under section 6015(f) as

respondent determined.

     Typically, a spouse seeking equitable relief from joint and

several liability under section 6015(f) must prove that the

Commissioner’s determination regarding relief was an abuse of

discretion.9   Rule 142(a); Washington v. Commissioner, 120 T.C.

137, 146 (2003); Jonson v. Commissioner, 118 T.C. 106, 125

(2002), affd. 353 F.3d 1181 (10th Cir. 2003); Cheshire v.

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

Cir. 2002); Butler v. Commissioner, 114 T.C. at 291-292.     The

Commissioner’s exercise of discretion is entitled to due

deference; in order to prevail, the taxpayer must demonstrate

that the Commissioner exercised his discretion arbitrarily,

capriciously, or without sound basis in fact or law.   Jonson v.

Commissioner, supra at 125.   Here, the nonrequesting spouse,

Stanley, must demonstrate that respondent exercised his

discretion arbitrarily, capriciously, or without sound basis in




     9
      The taxpayer bears the burden of proof except as otherwise
provided in sec. 6015. Rule 142(a); Alt v. Commissioner, 119
T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004).
                               - 18 -

fact or law.   See id.; Woodral v. Commissioner, 112 T.C. 19, 23

(1999).

     The Commissioner has prescribed procedures as directed by

section 6015(f) for determining whether a spouse qualifies for

relief under subsection (f).   These procedures are set forth in

Rev. Proc. 2003-61, 2003-2 C.B. 296.    Rev. Proc. 2003-61, supra,

which applies here, has a nonexhaustive list of factors weighing

in favor of relief and factors weighing against relief.     Stanley

has failed to present any evidence that would suggest with regard

to these factors that Tomi did not qualify for equitable relief

as respondent determined.   Accordingly, we conclude that

respondent did not abuse his discretion by acting arbitrarily,

capriciously, or without sound basis in fact in granting Tomi

equitable relief under section 6015(f).

     We have considered all arguments the parties made in

reaching our holdings, and, to the extent not mentioned, we find

them to be irrelevant or without merit.

     To reflect the foregoing,


                                      An appropriate decision will

                                 be entered.
