                  T.C. Summary Opinion 2003-126



                     UNITED STATES TAX COURT



                LISA MARIE PIERCE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8411-02S.                Filed September 9, 2003.



     Lisa Marie Pierce, pro se.

     Michele A. Yates, for respondent.



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

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.    Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the year at issue.    The decision to be

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

should not be cited as authority.
                               - 2 -

     The petition in this case was filed in response to a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330.   Pursuant to section 6330(d),1 petitioner seeks

review of respondent's determination to proceed with collection

of her tax liability of $7,808 for 1994.   The issue for decision

is whether respondent abused his discretion by denying

petitioner's request for relief from joint and several liability

under section 6015(f).2

     The stipulated facts and exhibits received into evidence are

incorporated herein by reference.   At the time the petition in

this case was filed, petitioner resided in Vienna, Virginia.

                             Background

     Petitioner and her former spouse, Arnold Pierce, were

married on August 3, 1973.   Petitioner resided with Mr. Pierce

until their permanent separation in November 1994.   In 1994, both

petitioner and Mr. Pierce worked at the Department of Defense

(DOD).   At the time their 1994 Federal income tax return was




     1
       Sec. 6330 was enacted as part of the Internal Revenue
Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L.
105-206, sec. 3401, 112 Stat. 746. Sec. 6330 is effective with
respect to collection actions initiated more than 180 days after
July 22, 1998; i.e., after Jan. 18, 1999. See RRA 1998 sec.
3401(d), 112 Stat. 750.
     2
       Sec. 6015 was enacted as part of the RRA 1998, sec.
3201(a), 112 Stat. 734, and is effective for any liability for
tax arising after July 22, 1998, and any liability for tax
arising on or before July 22, 1998, but remaining unpaid as of
July 22, 1998.
                                - 3 -

filed petitioner and Mr. Pierce were separated.    Petitioner and

Mr. Pierce were divorced on July 15, 1998.

     For most of their marriage, petitioner had no knowledge of

any of their financial affairs.   Petitioner did not know how much

money they had in any of their joint accounts.    Except for a

brief period, Mr. Pierce managed essentially all of the family

finances until their separation, including paying bills and

making spending decisions.    Mr. Pierce would tell petitioner how

much she could spend before she would go shopping for food,

clothing for the children, and most other items.

     Petitioner knew that if properly managed, their combined

income was sufficient to cover their monthly expenses.    She was

aware, however, that Mr. Pierce was a poor manager of money.     She

was aware that Mr. Pierce would pay their bills late every month

with whatever money remained in their account.    As a result,

petitioner took control of the family finances for a period of 4

to 6 months in the early 1990s.   When Mr. Pierce became short on

spending money, he decided to reacquire control of the family

finances.

     Mr. Pierce was generally responsible for filing their

Federal income tax returns.   In most years, petitioner would sign

a blank return, and Mr. Pierce would take care of completing and

filing the return.   Petitioner and Mr. Pierce filed joint Federal

income tax returns for 1973 through 1991.    For the 1989, 1990,
                                - 4 -

and 1991 tax years, petitioner and Mr. Pierce had unpaid tax

liabilities.   All of their unpaid tax liabilities were paid in

full on or before March 5, 1993.   Until 1996, petitioner did not

know that they had underpayments of tax for 1989, 1990, and 1991.

     During each tax filing season for the 1992 and 1993 tax

years, petitioner noticed that Mr. Pierce had not brought her

that year's return to sign.   Cognizant of the time of year,

petitioner asked Mr. Pierce what happened to the tax returns; as

a result of her questioning, in both years, Mr. Pierce brought

her a blank return to sign.   She signed the blank returns and he

said he would file them.   Mr. Pierce never filed either return.

Until 1996, petitioner was unaware that Mr. Pierce had not filed

the 1992 and 1993 returns.

     Petitioner and Mr. Pierce timely filed their 1994 Federal

income tax return.   Line 64 of the 1994 Form 1040, U.S.

Individual Income Tax Return, showed that petitioner and Mr.

Pierce owed $6,401.98.   At the time the return was filed, they

did not enclose a payment.    Petitioner did not know, until 1996,

that they had an unpaid tax liability for 1994.

     On February 15, 1996, a Notice of Levy on Wages, Salary, and

Other Income was sent to both petitioner and Mr. Pierce at their

marital address.   Petitioner had moved from this address when she

separated from Mr. Pierce in November 1994.     Mr. Pierce continued

to reside there until January 1996.     On April 1, 1996,
                                - 5 -

petitioner's payroll office informed her of a notice of tax levy

it received from respondent.    This was the first petitioner

learned of the outstanding unpaid tax liability for 1994.

Petitioner filed her 1995 tax return and reported an overpayment

of $336.82, which the Internal Revenue Service (IRS) applied to

the unpaid balance for the 1994 tax year.      The IRS also applied

an overpayment of $2,661.12 from Mr. Pierce's 1995 tax return to

the unpaid balance from 1994.

     When petitioner's payroll office advised her of the levy

notice, she also became aware that Mr. Pierce never filed their

joint returns for 1992 and 1993.    On April 29, 1996, petitioner

filed her Federal income tax returns for 1992 and 1993 as married

filing separate, claiming overpayments of $430.03 and $316.53

respectively.   Petitioner filed her 1998 tax return claiming an

overpayment of $464.22, which the IRS applied to the unpaid

balance for 1994.

     On March 31, 2000 a "Final Notice – Notice of Intent to Levy

and Notice of Your Right to a Hearing" letter was sent to both

petitioner and Mr. Pierce.   On April 7, 2000, petitioner timely

submitted a request for a hearing.      Petitioner submitted, with

the request for the hearing, a Form 8857, Request for Innocent

Spouse Relief, and an attached explanatory letter.

     On October 31, 2000, the Examination Division sent

petitioner a letter requesting more information and documentation
                               - 6 -

regarding her claim for relief from joint and several liability.

On November 13, 2000, petitioner sent additional information to

the Examination Division in support of her claim.   On October 11,

2001, the Appeals Office sent petitioner a letter indicating the

suspension of her collection claim and outlining the findings of

her claim for relief from joint and several liability.

Respondent, therefore, denied petitioner's collection claim

because she was not entitled to relief from joint and several

liability.   As a result, a notice of determination was issued

sustaining the issuance of the levy.

     On November 2, 2001, respondent sent petitioner an

application for an Offer in Compromise as well as a request for

petitioner to submit a detailed current financial statement.

Petitioner only submitted a 1996 financial statement.

Petitioner failed to respond to the Offer in Compromise and did

not provide respondent with a current financial statement.

     Respondent sent petitioner a Notice of Determination (NOD)

on April 8, 2002, which stated that respondent had followed all

procedures in the issuance of the notice of intent to levy and

that petitioner's collection appeal rights were not violated.

The NOD also determined that petitioner did not qualify for

relief from joint and several liability under the provisions of

section 6015(f).   On May 10, 2002, petitioner timely filed with

the Court her petition for review of respondent's determination.
                                - 7 -

     Respondent's position is that petitioner is not entitled to

relief from joint and several liability because she failed to

establish that she had a reasonable belief that the tax was paid

or going to be paid at the time she signed the return.

Respondent also argues that petitioner would not suffer from

economic hardship as a result of being denied relief.      Lastly,

there was no evidence of abuse to sustain any relief from joint

and several liability.

     Petitioner argues that she is entitled to relief from joint

and several liability because Mr. Pierce did not take care of the

finances properly, forged her signature, and subjected her to

emotional abuse.   She also argues that she trusted her husband

and had no reason to know or assume that he might not pay their

tax liability.

                             Discussion

     Pursuant to section 6330, petitioner sought relief from

respondent’s notice of determination sustaining the proposed levy

action.   Section 6330 allows a taxpayer to raise appropriate

spousal defenses under section 6015.      Sec. 6330(c)(I)(A)(i); sec.

301.6330-1(e)(2), Proced. & Admin. Regs.     The Court's

jurisdiction in this case, therefore, is based on section

6015(e)(1).   Raymond v.   Commissioner, 119 T.C. 191 (2002); sec.

301.6330-1(f)(2), Q&A-F2, Proced. & Admin. Regs.
                                - 8 -

     The Court must decide whether respondent abused his

discretion in denying section 6015(f) relief with respect to an

amount of tax reported on petitioner's 1994 joint return but not

paid.   The Court reviews respondent's determination for abuse of

discretion, Butler v. Commissioner, 114 T.C. 276 (2000), and

holds that respondent did not abuse his discretion and that his

determination was not arbitrary.

     As a general rule, spouses filing joint Federal income tax

returns are jointly and severally liable for all taxes due.    Sec.

6013(d)(3); Cheshire v. Commissioner, 115 T.C. 183, 188 (2000),

affd. 282 F.3d 326 (5th Cir. 2002).     Under section 6015, however,

certain taxpayers are entitled to relief from joint and several

liability.

     There are three avenues for relief from joint liability

under section 6015.   Section 6015(b) provides relief with respect

to understatements of tax attributable to certain erroneous items

on the return.   Section 6015(c) provides relief for a portion of

an understatement of tax for taxpayers who are separated or

divorced.    Section 6015(f) confers upon the Secretary discretion

to grant equitable relief for taxpayers who otherwise do not

qualify for relief under section 6015(b) or (c).

     Petitioner requested relief from joint liability under

section 6015 for the payment of the tax reported on the 1994

joint return that was unpaid when the return was filed.
                                - 9 -

Respondent treated petitioner's request for relief as an election

under section 6015(f) and determined that petitioner was not

entitled to the requested relief.

     Section 6015(e)(1) allows a taxpayer whose request for

relief is denied by respondent to petition this Court for a

review of such determination.   Our jurisdiction in cases brought

under section 6015(e)(1) encompasses a review of respondent's

determination with respect to all relief afforded by section

6015.    Ewing v. Commissioner, 118 T.C. 494, 497-507 (2002);

Fernandez v. Commissioner, 114 T.C. 324, 330-331 (2000); Butler

v. Commissioner, supra at 289-290.

     This Court treats petitioner's request as a request for

equitable relief under section 6015(f), that she be relieved of

her obligation to pay any outstanding tax liability reported on

their 1994 joint return.   To prevail, petitioner must prove that

respondent's denial of equitable relief from joint liability

under section 6015(f) was an abuse of discretion.3   Jonson v.




     3
       RRA 1998 sec. 3001, 112 Stat. 726, added sec. 7491, which
shifts the burden of proof to the Secretary in certain
circumstances. Sec. 7491, however, is applicable to "court
proceedings arising in connection with examinations commencing
after the date of the enactment of this Act." RRA 1998 sec.
3001(c), 112 Stat. 727. Sec. 7491 is inapplicable to this case.
See Warbelow's Air Ventures, Inc. v. Commissioner, 118 T.C. 579,
582 n.8 (2002) (sec. 7491 is effective for court proceedings
arising in connection with examinations commencing after July 22,
1998).
                               - 10 -

Commissioner, 118 T.C. 106, 125 (2002); Cheshire v. Commissioner,

115 T.C. at 198; Butler v. Commissioner, supra.

     On July 17, 2002, respondent adopted regulations under

section 6015.    These regulations are applicable for all elections

or requests for relief filed on or after July 18, 2002.   Sec.

1.6015-9, Income Tax Regs.   These regulations are not applicable

in the instant case because petitioner requested relief before

July 18, 2002.

Whether Petitioner Is Entitled to Equitable Relief

     Section 6015(f) provides:

     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.


     Because petitioner is not eligible for relief under either

section 6015(b) or (c), the only avenue for relief available to

petitioner is section 6015(f).   As directed by section 6015(f),

the Commissioner has prescribed guidelines in Rev. Proc. 2000-15,

2000-1 C.B. 447, 448, that the Commissioner will consider in

determining whether an individual qualifies for relief under
                              - 11 -

section 6015(f).   Section 4.01 of Rev. Proc. 2000-15, 2000-1 C.B.

at 448, lists threshold conditions which must be satisfied before

the Commissioner will consider a request for relief under section

6015(f).   Respondent agrees that in this case those threshold

conditions are satisfied.

     Section 4.03 of Rev. Proc. 2000-15, 2000-1 C.B. at 448-449,

lists factors that the Commissioner will consider in deciding

whether to grant equitable relief under section 6015(f).    Section

4.03(1) of Rev. Proc. 2000-15, 2000-1 C.B. at 448-449, lists the

following factors that the Commissioner will consider as weighing

in favor of granting relief for an unpaid liability:   (1) The

requesting spouse is separated or divorced from the nonrequesting

spouse; (2) the requesting spouse would suffer 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

at the time the return was signed; (5) the nonrequesting spouse

has a legal obligation pursuant to a divorce decree or agreement

to pay the unpaid liability; and (6) the unpaid liability is

attributable to the nonrequesting spouse.

     Section 4.03(2) of Rev. Proc. 2000-15, 2000-1 C.B. at 449,

lists the following factors that the Secretary will consider as

weighing against granting relief for an unpaid liability:   (1)

The unpaid liability is attributable to the requesting spouse;
                              - 12 -

(2) the requesting spouse knew or had reason to know that the

reported liability would be unpaid at the time the return was

signed; (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 agreement to pay the unpaid liability.   In addition,

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

"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."   Furthermore, the list of aforementioned factors

is not intended to be exhaustive.

     In deciding whether respondent’s determination that

petitioner is not entitled to relief under section 6015(f) was an

abuse of discretion, we consider evidence relating to all the

facts and circumstances.   The Commissioner's exercise of

discretion is entitled to due deference; in order to prevail, the

taxpayer must demonstrate that in not granting relief, the

Commissioner exercised his discretion arbitrarily, capriciously,

or without sound basis in fact or law.   Woodral v. Commissioner,
                               - 13 -

112 T.C. 19, 23 (1999); Mailman v. Commissioner, 91 T.C. 1079,

1082-1084 (1988).

     In the case of a liability that was reported but not paid,

the fact that the requesting spouse did not know and had no

reason to know that the liability would not be paid is a factor

weighing in favor of granting relief.   Rev. Proc. 2000-15, sec.

4.03(1)(d), 2000-1 C.B. at 449.   By contrast, the fact that the

requesting spouse knew or had reason to know that the reported

liability would be unpaid is an extremely strong factor weighing

against relief.   Rev. Proc. 2000-15, sec. 4.03(2)(b), 2000-1 C.B.

at 449.   Respondent contends that petitioner did not prove that

she did not know or did not have reason to know that the unpaid

1994 tax liability would not be paid at the time the return was

filed.

     The taxpayer has a "duty of inquiry" to determine the amount

of her tax liabilities.   See Price v. Commissioner, 887 F.2d 959,

965 (9th Cir. 1989), revg. an Oral Opinion of this Court; Butler

v. Commissioner, 114 T.C. 276, 284 (2000).   A taxpayer is not

relieved of her duty of inquiry because she relied on her husband

to take care of the returns.   See Hayman v. Commissioner, 992

F.2d 1256, 1262 (2d Cir. 1993), affg. T.C. Memo. 1992-228.    A

taxpayer can not obtain the benefits of relief from joint and

several liability simply because she turned a "blind eye" by

signing a blank return and then failed to make further inquiry
                              - 14 -

into the ultimate tax liability shown on the joint return.     Price

v. Commissioner, supra; Levin v. Commissioner, T.C. Memo. 1987-

67.

      With the exception of 1992 and 1993, it was Mr. Pierce's

practice to have petitioner sign blank returns, complete them,

and then mail them on April 15.   Petitioner testified that she

signed blank tax returns in early April for almost every tax year

from when they were married through 1994.   She claims she never

asked or questioned him about potential refunds or amounts they

owed.   Based on petitioner's testimony concerning the tax return

at issue, we find that petitioner essentially turned a "blind

eye" toward the filing of the 1994 Federal income tax return and

the failure to pay the taxes shown thereon.

      A taxpayer who signs a return without reviewing it, or who

signs a blank return, is charged with constructive knowledge of

the tax due shown on that return.   Castle v. Commissioner, T.C.

Memo. 2002-142.   Thus, despite the fact that petitioner signed a

blank return, she should have known of the liabilities shown thereon.

      Petitioner also knew that Mr. Pierce had trouble managing

the finances.   Petitioner testified:

      Up to and before when I left, I mean, he handled all
      the finances. I tried to take over the bills one time
      because I didn't like the way he took care of them
      because he would always pay everything like a month
      late, and we made enough money together then that we
      could pay the bills. It was almost like the, you know,
      the last thing. If he has money left over, then he'll
                              - 15 -

     pay the bills from whenever it was. So I took over the
     bills for a few months, but then he got mad because he
     never had enough money when he needed it. So he took
     care of all the finances.

From the early 1990s, when petitioner took care of their

finances, she knew that money was tight and there might not be

enough money to pay a large tax liability.   Petitioner should

have made further inquiry to determine the amount of taxes they

owed and whether the full liability would be paid.

     In addition to petitioner's knowledge of the financial

difficulties faced by the family, petitioner knew of other facts

that should have forced further inquiry into her family's

financial situation.   Petitioner had learned through common

acquaintances at DOD that Mr. Pierce had quit his job in February

1995.   A reasonable person would, at minimum, question their

spouse (or ex-spouse) whether enough money remained to pay any

tax liability reported on their joint return.   Secondly,

petitioner testified that the 1994 return was signed after she

and Mr. Pierce were separated.   It also seems reasonable to this

Court that their separation should maintain, if not heighten, her

duty to examine any jointly filed returns.

     She also argues that because she was unaware of Mr. Pierce's

noncompliance with Federal tax law, before, during, and after the

year at issue, she had no reason to doubt that the liability

would be paid.   Petitioner's lack of awareness, however, does not

convince this Court that she did not retain an affirmative duty
                                - 16 -

to examine the return and verify that payment was sent with the

return.

       Petitioner has not provided this Court with credible

evidence to show that she reasonably believed that Mr. Pierce

would pay the tax liability at the time she signed the return.

As a result, the Court finds that petitioner had constructive

knowledge that the liability would not be paid for 1994.

       Petitioner also has not shown that she will suffer economic

hardship if relief is denied.    Petitioner in fact concedes that

she can afford to pay the unpaid tax liability but argues that

only her 1996 financial situation, not her current one, is

relevant.    This rationale is apparently the reason that

petitioner submitted a 1996 financial statement and not a current

one.    Thus, this Court holds that petitioner will not suffer

economic hardship if relief is denied.

       In her petition, petitioner alleges that Mr. Pierce,

throughout their marriage, engaged in "brainwashing" as a form of

spousal abuse.    Her position is that the abusive behavior is a

factor that ought to sway the Court to grant her relief from

joint and several liability.    Petitioner's allegation, however,

is unsupported by any evidence.    The Court, therefore, does not

consider this factor.

       Finally, petitioner's assertion that Mr. Pierce was

generally deceptive in connection with their finances is
                              - 17 -

supported by evidence but in no way appears to have affected the

reporting of items on the return and does not outweigh the fact

that petitioner had an affirmative duty to evaluate and check the

return.   Although the return was sent without payment, it

correctly reported petitioner's and Mr. Pierce's tax liability.

     Taking into account all of the facts and circumstances, it

would not be inequitable to hold petitioner liable for the

underpayment in question.   Consequently, respondent's denial of

petitioner's request for equitable relief under section 6015(f)

is not an abuse of discretion.   Based on the facts and

circumstances in this case, many of the factors in Rev. Proc.

2000-15, sec. 4.03, 2001-C.B. at 448, are neutral.    The negative

factors discussed above outweigh any positive factors in favor of

relief.   Based on the record before this Court, we do not find

respondent's denial of section 6015 relief to be arbitrary,

capricious, or without sound basis in fact or law.

     The Court has considered all of the other arguments made by

petitioner, and, to the extent they remain unaddressed, concludes

they are without merit.   We hold that respondent correctly

determined that collection by levy should proceed.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                         Decision will be entered

                                    for respondent.
