                  T.C. Summary Opinion 2007-132



                     UNITED STATES TAX COURT



               WEBBER DOUGLAS GILMER, Petitioner,
                AND MINNIE PAYTON, Intervenor v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



    MINNIE RUTH PAYTON, f.k.a. MINNIE R. GILMER, Petitioner,
             AND WEBBER DOUGLAS GILMER, Intervenor v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 12669-05S, 18048-05S.     Filed July 30, 2007.



     Webber Douglas Gilmer, pro se.

     Minnie Payton, pro se.

     Charles J. Graves, for respondent.



     GOLDBERG, Special Trial Judge:   These consolidated cases

were heard pursuant to the provisions of section 7463 of the

Internal Revenue Code in effect at the time the petitions were
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filed.   Pursuant to section 7463(b), the decisions to be entered

are not reviewable by any other court, and this opinion shall not

be treated as precedent for any other case.   Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the year in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

     In a joint notice of deficiency mailed to petitioners,

respondent determined a deficiency in petitioners’ 2001 Federal

income tax of $11,747 and an accuracy-related penalty of

$2,349.40 pursuant to section 6662(a).

     Each petitioner filed a separate petition.   Webber Douglas

Gilmer’s (petitioner) petition seeks a redetermination of the

deficiency and the accuracy-related penalty, and his amended

petition seeks relief from joint and several liability on their

joint return for 2001 pursuant to section 6015.   Minnie Ruth

Payton’s (Ms. Payton) petition also seeks relief from joint and

several liability on their joint return for 2001.    Each

petitioner filed a notice of intervention in the other’s case.

     When these cases were called for trial, the parties in each

filed a stipulation of settled issues.   In the stipulation,

petitioners stipulated a deficiency for 2001 in the amount of

$5,722, and an accuracy-related penalty of $1,144.    Further, Ms.

Payton, at trial, conceded her claim for relief from joint and
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several liability, both in her case and as intervenor in Mr.

Gilmer’s case.

     After the stipulations and Ms. Payton’s concession, the

remaining issue before this Court is whether petitioner is

entitled to relief from joint and several liability under section

6015(b), (c), or (f).

                             Background

     Some of the facts are stipulated.     The stipulated facts and

the exhibits received into evidence are incorporated herein by

reference.    At the time that his petition was filed, Mr. Gilmer

resided in Kansas City, Missouri.

     During the taxable year in issue, Mr. Gilmer was married to

Ms. Payton.   There were no children born of the marriage.

Petitioner and Ms. Payton separated sometime in 2001 and divorced

in 2004.   Petitioner is employed as a schoolteacher.

     Petitioner and Ms. Payton filed a joint 2001 Federal income

tax return.   Mr. Gilmer prepared the joint income tax return

reporting all sources of income, itemized deductions, and

Schedule C, Profit or Loss From Business, and Schedule E,

Supplemental Income and Loss.   On their joint return, petitioners

reported losses on Schedules C and E.     The Schedule C business

activity, known as World Works Diversified, encompassed two

separate lines of business: the selling of hats, flags, and other

Western-themed novelties, and an educational consulting activity.
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The Schedule E activity related to rental property held by

petitioners in Grandview, Missouri.      In the notice, respondent

disallowed certain claimed Schedule C and E expenses, disallowed

certain itemized deductions claimed on Schedule A, Itemized

Deductions, and determined that petitioners had failed to report

income received from the aforementioned rental property and an

annuity.

     In his petition, Mr. Gilmer requested relief under section

6015 on the grounds that his wife “used voodoo to trigger an IRS

audit of their 2001 tax return” and that “she promised to have

[him] killed” if he did not sign the joint return that “he

prepared with her assistance.”    Although petitioner has fully

stipulated a deficiency of $5,722,1 as well as the imposition of

the accuracy-related penalty, for purposes of his request for

relief under section 6015, he disputes his knowledge “of the

unreported income at issue in this case.”

                            Discussion

     Generally, spouses filing joint Federal income tax returns

are jointly and severally liable for the taxes due thereon.      Sec.

6013(d)(3).   Section 6015 provides three avenues for relief from

that liability to a taxpayer who has filed a joint return:      (1)

Section 6015(b) allows relief for understatements of tax


     1
       We note that this amount is slightly less than one-half of
the total amount of deficiency. Although the record is devoid of
the reasoning behind this stipulation, petitioners each
stipulated a deficiency in this amount.
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attributable to certain erroneous items on a return; (2) section

6015(c) provides relief for a portion of an understatement of tax

to taxpayers who are separated or divorced; and (3) section

6015(f) more broadly confers on the Secretary discretion to grant

equitable relief to taxpayers who otherwise do not qualify under

section 6015(b) or (c).

     The first avenue for relief is section 6015(b).   Under

section 6015(b), the Court may grant a taxpayer full or

apportioned relief from joint and several liability for an

understatement of tax on a joint return attributable to erroneous

items of the other spouse if the taxpayer establishes that in

signing the return he “did not know, and had no reason to know”

of the understatement.    Sec. 6015(b)(1)(C), (2).

     At the outset, we note that petitioner testified in detail

with respect to the Schedule C business activity reported on the

2001 joint return.   With respect to the remaining items that

respondent disallowed in the notice (Schedules C and E expenses,

certain Schedule A deductions), petitioner testified that he was

aware of all of the items listed as expenses or claimed as

itemized deductions on the 2001 joint return.

     Petitioner argues that he is entitled to relief under

section 6015 because Ms. Payton failed to disclose to him income

received from all of the couple’s Schedule C business activities

in 2001, and that he, in turn, did not report that income on
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their joint return for that year.   However, petitioner’s

testimony is not relevant to the matter before this Court, as the

unreported income stems from petitioners’ rental property and an

annuity and not, as petitioner believes, from the Schedule C

activity.

     Mr. Gilmer testified as to the couple’s business activity

during the year in issue.   He admitted that he kept records for

all World Works Diversified activities and knew all of the

general details with respect to these activities with the

exception of the educational consulting activity, which he

claimed was under the sole purview of Ms. Payton.    As previously

stated, petitioner testified that he prepared the 2001 tax return

in question and reported all of the expenses and claimed

deductions at issue in these cases.    The detailed information

that petitioner provided this Court about the couple’s business

activities in 2001 illustrates to us that petitioner was, in

fact, aware of all income from the couple’s various business

endeavors.

     Ms. Payton credibly testified that Mr. Gilmer was aware of

and participated in all of the couple’s business endeavors during

the year in issue.   We believe Ms. Payton’s testimony that

petitioner had knowledge and overall oversight of all the

couple’s business activity and records pertaining to such

activity in 2001.
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     Simply put, petitioner was fully aware of all aspects of the

couple’s business activity in 2001.     Accordingly, because

petitioner knew and had reason to know of all of the claimed

business expenses and income related to the Schedule C activity

for the year in issue, we hold that he is not entitled to relief

under section 6015(b).

     The second avenue for relief from joint and several

liability lies in section 6015(c).     Section 6015(c) affords

proportionate relief to the requesting spouse through allocation

to the responsible party.   Generally, this avenue of relief

allows a spouse to elect to be treated as if a separate return

had been filed.   Rowe v. Commissioner, T.C. Memo. 2001-325.      To

be eligible for relief under section 6015(c), the requesting

spouse must no longer be married to, or must be legally separated

from, the individual with whom the tax return was filed and must

have elected the applicability of section 6015(c) not later than

2 years after the date on which collection activity began.       Sec.

6015(c)(3).   Furthermore, and perhaps most important to the

present facts, relief under section 6015(c) is not available to a

taxpayer if it is shown that the taxpayer had actual knowledge

when signing the return of any “item” giving rise to the

deficiency.   Sec. 6015(c)(3)(C).

     Petitioner is now divorced from Ms. Payton, and the divorce

decree was finalized before petitioner filed a petition with this
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court.    Accordingly, the remaining issue is whether petitioner

had no actual knowledge of the income item leading to the

underpayment.

     Based on our previous discussion of the facts and the

evidence presented in these cases, we believe that petitioner had

actual knowledge of all items of income received by the couple in

2001.    Moreover, we again reiterate that petitioner did not deny

his knowledge of the items of unreported income at issue in these

cases.

     As to the other items at issue, petitioner stated that he

had knowledge of the deductions claimed on the Schedule A, and

expenses reported on the Schedules C and E, as well as all

activity and accounts pertaining to World Works Diversified.     The

majority of the deficiency at issue stems from respondent’s

denial of the expenses reported on Schedule C.    Again, petitioner

testified that he knew about and believed in the veracity of all

items reported on the Schedule C for 2001 when he prepared it.

Therefore, because petitioner had actual knowledge of all of the

items that respondent disallowed and because he prepared the 2001

joint return at issue with this knowledge, we find that he is not

eligible for relief under section 6015(c).

     Because petitioner is not eligible for relief under section

6015(b) and (c), we finally consider the equitable relief

provisions of section 6015(f).    Section 6015(f) provides, in
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part, that a taxpayer may be relieved from joint and several

liability if it is determined that, taking into account all the

facts and circumstances, it is inequitable to hold the taxpayer

liable for the unpaid tax and relief is not available under

section 6015(b) or (c).

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

prescribed guidelines in Rev. Proc. 2003-61, 2003-2 C.B. 296,

modifying Rev. Proc. 2000-15, 2000-1 C.B. 447, that are to be

used in determining whether it is inequitable to hold a

requesting spouse liable for all or part of the deficiency.2

Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at 297, provides the

following seven threshold conditions that must be satisfied

before a request for relief will be considered: (1) The

requesting spouse filed a joint return for the year for which

relief is sought; (2) relief is not available under section

6015(b) or (c); (3) the application for relief is made no later

that 2 years after the date of the Commissioner’s first

collection activity; (4) no assets were transferred between

spouses as part of a fraudulent scheme; (5) the nonrequesting

spouse did not transfer disqualifying assets to the requesting

     2
      Rev. Proc. 2000-15, 2000-1 C.B. 447, was superseded by Rev.
Proc. 2003-61, 2003-2 C.B. 296, and is effective as to requests
for relief filed on or after Nov. 1, 2003, and for requests for
relief pending on Nov. 1, 2003, as to which no preliminary
determination letter had been issued as of that date.
Petitioner’s application for relief was filed after Nov. 1, 2003,
on July 11, 2005.
                             - 10 -

spouse; (6) the requesting spouse did not file or fail to file

the return with fraudulent intent; and (7) absent enumerated

exceptions, the liability from which relief is sought is

attributable to an item of the nonrequesting spouse.   Respondent

here concedes that petitioners meet these seven threshold

conditions.

     Rev. Proc. 2003-61, sec. 4.03(2), 2003-2 C.B. at 298, then

lists the eight nonexclusive factors that the Commissioner will

consider in determining whether, taking into account all the

facts and circumstances, it is inequitable to hold the requesting

spouse liable for all or part of the deficiency, and full or

partial equitable relief under section 6015(f) should be granted.

These nonexclusive factors include whether:   (1) The requesting

spouse is separated or divorced from the nonrequesting spouse;

(2) the requesting spouse will suffer economic hardship without

relief; (3) the requesting spouse did not know or have reason to

know of the item giving rise to the deficiency; (4) the

nonrequesting spouse had a legal obligation to pay the

outstanding liability; (5) the requesting spouse received a

significant benefit from the item giving rise to the deficiency;

(6) the requesting spouse has made a good faith effort to comply

with income tax laws in subsequent years; (7) the requesting

spouse was abused by the nonrequesting spouse; and (8) the

requesting spouse was in poor mental or physical health when
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signing the return or requesting relief.    Rev. Proc. 2003-61,

sec. 4.03(2), further provides that no single factor will be

determinative, but that all relevant factors will be considered.

We will now consider petitioner’s request in the light of these

relief factors.

     In this case, petitioner divorced Ms. Payton in 2000;

therefore, he satisfies the first factor.    With respect

to the second factor, petitioner must show that he would be

unable to pay basic reasonable living expenses if relief were not

granted.   See Monsour v. Commissioner, T.C. Memo. 2004-190.

Being unable to pay basic reasonable living expenses would amount

to economic hardship.   Sec. 301.6343-1(b)(4)(i), Proced. & Admin.

Regs.   Petitioner has alleged that denial of his request for

relief would result in economic hardship for his family “for the

next 140 years.”   He is gainfully employed as a schoolteacher and

has no dependents.   The Court fails to see, and petitioner has

neither raised as an issue nor established, that he would suffer

economic hardship if his request for relief from joint liability

were denied.

     As to the third factor, as discussed earlier, petitioner had

actual knowledge of all of the claimed Schedules C and E business

and rental expenses, rental income, and itemized deductions when

he completed the 2001 income tax return.    Rev. Proc. 2003-61,

sec. 4.03, specifically states that actual knowledge by the
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requesting spouse of the item giving rise to the deficiency is a

strong factor weighing against relief.   This strong factor may be

overcome only if the factors in favor of equitable relief are

particularly compelling.   We conclude that they are not.

     As to the fourth factor, the Judgment of Dissolution of

Marriage states that petitioner “shall pay * * * and hold [Ms.

Payton] harmless from the payment of * * * any federal, state,

and local tax obligations * * * for the joint return for the tax

year 2001.”   Petitioner asks this Court to disregard this

language, however, on the grounds that “there is no evidence that

[he] entered in the correct numbers into Turbo Tax” and that “he

even signed the return.”   First, we fail to see how petitioner’s

arguments are relevant to the obligation imposed on him by the

Judgment.   Moreover, petitioner’s statements contradict his

admission that he prepared and signed the return at issue.

Second, under Rev. Proc. 2003-61, sec. 4.03 (2)(a)(iv), if a

divorce decree or judgment places an obligation to pay taxes on

the requesting spouse, then that fact weighs against granting him

relief.   Here, the Judgment specifically designates

responsibility for any deficiency for the couple’s 2001 Federal

income tax return to petitioner, and we find that this factor

strongly favors denying petitioner relief.

     As to the fifth factor, petitioner received a substantial

benefit when he received a refund in the amount of $8,861 for
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2001.   When specifically questioned about the refund at trial,

petitioner neither confirmed nor denied that he had received the

refund.   Petitioner included his personal checking account number

on the return for direct deposit of the refund.    Petitioner

provided no credible evidence to show that Ms. Payton either had

access to or withdrew the refund from this account.    Moreover, we

find Ms. Payton’s testimony credible that the refund was

deposited to petitioner’s account alone and that she neither had

access to this account nor did she withdraw the funds in any

other way.   The Court is therefore convinced that the substantial

benefit factor weighs against granting relief.

     The sixth factor concerns compliance with income tax laws

and, particularly, the good faith efforts of the requesting

spouse in subsequent years.   Rev. Proc. 2003-61, sec.

4.03(2)(a)(vi), 2003-2 C.B. at 299.    With respect to this

inquiry, there is no evidence outside of the year at issue.

Accordingly, we find this factor neutral to our decision.

     As to the seventh factor, abuse, petitioner has maintained

from the inception of his case that he is entitled to relief

based solely on the numerous wrongs allegedly done to him by Ms.

Payton including:   Mental abuse, physical abuse, extortion,

bribery, voodoo, falsification of police reports, kidnaping,

larceny, and theft.   Contrary to petitioner’s statements, Ms.

Payton testified that it was petitioner, not she, who was
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abusive, and that petitioner had been arrested and put on

probation as a result of his assaulting her.    Petitioner admitted

that he had been put on probation for assaulting Ms. Payton and

did not submit any evidence showing that the probation imposed

was improper.    Petitioner failed to credibly corroborate any of

the allegations which he made regarding Ms. Payton’s behavior,

and he did not explain how his accusations related to the

deficiency at issue.    Finally, we note that there is nothing in

the Judgment of Dissolution of Marriage relating to abuse on the

part of either party.   Accordingly, we find that the lack of

credible evidence on the issue of abuse weighs strongly against

granting relief.

     Finally, as to the final factor, whether the requesting

spouse seeking relief was in poor mental or physical health when

signing the return, there is nothing in the record to show that

petitioner suffered from any ailment that would have impacted

upon his ability to pay his Federal income tax obligation for the

year in issue.   As this factor weighs only in favor of, and not

against, relief, we consider it neutral to our present inquiry.

Id. sec. 4.03(2)(b)(ii), 2003-2 C.B. at 299.

     Accordingly, since none of the relevant factors identified

in the pertinent revenue procedure weigh in favor of granting
                             - 15 -

relief, the Court holds that there was no abuse of discretion by

respondent in denying relief to petitioner under section 6015(f).



                                   Decisions will be entered in

                                   each case for respondent in

                                   the amounts of $5,722 for the

                                   deficiency and $1,144 for the

                                   accuracy-related penalty.
