                               T.C. Memo. 2017-189



                         UNITED STATES TAX COURT



  WILLIAM J. COJOCAR, Petitioner, AND SALLY CARRILLO, Intervenor v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 17319-15.                           Filed September 26, 2017.


      William J. Cojocar, pro se.

      Mason S. Standley, for intervenor.

      Bryan J. Dotson and Sheila R. Pattison, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      NEGA, Judge: Pursuant to section 6015(e)(1),1 petitioner seeks review of

respondent’s determination that he is not entitled to relief from joint and several


      1
      Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                        -2-

[*2] liability under section 6015(f) for tax year 2011 with respect to the Federal

income tax (tax) return that he jointly filed with intervenor, his former spouse.

                               FINDINGS OF FACT

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

facts and the attached exhibits are incorporated herein by this reference. Petitioner

resided in Texas when the petition was filed.

      In 2009 petitioner married intervenor.

      For tax year 2011 petitioner and intervenor jointly filed Form 1040, U.S.

Individual Income Tax Return (return). In the return petitioner and intervenor

reported total income of $201,790. Of that total income, $170,631 was allocable

to petitioner’s wages and pensions, $30,870 was allocable to intervenor’s wages

and pensions (intervenor’s income), and $289 was allocable to interest income. At

the time petitioner and intervenor filed the return, they did not submit a payment

for their tax liability and still owed respondent payments for unpaid tax from

previous tax years.

      On June 16, 2012, petitioner and intervenor entered into an installment

agreement with respondent with respect to the 2011 return.

      For tax year 2012, petitioner and intervenor each filed a return as married

filing separately.
                                         -3-

[*3] On February 4, 2013, intervenor filed for divorce.

      On October 9, 2013, petitioner and intervenor entered into a mediated

settlement agreement (MSA). An exhibit to that MSA stated in pertinent part:

“Husband shall be solely responsible for and shall timely pay all and hold wife

harmless from the outstanding income tax liability of the parties for the tax years

2009, 2010, and 2011.”

      For tax year 2013 petitioner timely filed his return.

      On April 28, 2014, the District Court for the Two Hundred and Seventh

Judicial District in Comal County, Texas (district court), issued a final decree of

divorce (divorce decree). The divorce decree ordered in pertinent part that

“William J. Cojocar shall be solely responsible for all federal income tax liabilities

of the parties from the date of marriage through December 31, 2011, and shall

timely pay any deficiencies, assessments, penalties, or interest due thereon”.

      On May 1, 2014, respondent received petitioner’s timely filed Form 8857,

Request for Innocent Spouse Relief, in which petitioner sought relief from joint

and several liability for tax years 2009 through 2012. In that form petitioner

reported a total monthly income of $12,258 and total monthly expenses of
                                         -4-

[*4] $11,564.20.2 In addition, petitioner indicated that he was neither the victim

of spousal abuse nor in poor mental or physical health at the time he and

intervenor jointly filed the return or at the time he had filed his Form 8857.

      For tax year 2014, petitioner timely filed his return.

      On June 1, 2015, respondent issued to petitioner a final Appeals

determination denying his request for relief from joint and several liability under

section 6015(f) for tax year 2011.

      For tax year 2015, petitioner timely filed his return.

                                     OPINION

I.    Section 6015(f)

      In general, a spouse who files a joint tax return is jointly and severally liable

for the entire tax liability. Sec. 6013(d)(3). A spouse seeking relief from joint and

several liability may follow procedures established in section 6015. If the

disputed liabilities arise from the nonpayment of tax shown in a joint tax return,

then the only relief available is under section 6015(f). See Hopkins v.

Commissioner, 121 T.C. 73, 88 (2003); see also Block v. Commissioner, 120 T.C.


      2
       In Form 8857, instead of reporting a dollar amount, petitioner reported that
his monthly expense for his (1) “Retirement contributions (voluntary)” was “10%”
and (2) “Income tax withholding (federal, state, and local)” was “Single at 0 Rate”.
                                          -5-

[*5] 62, 66 (2003). Section 6015(f) authorizes the Commissioner to grant

equitable relief from joint and several liability if, taking into account all the facts

and circumstances, it is inequitable to hold a taxpayer liable for any unpaid tax.

      In determining whether petitioner is entitled to section 6015(f) relief we

apply a de novo standard of review as well as de novo scope of review. See Porter

v. Commissioner, 132 T.C. 203, 210 (2009). Except as otherwise provided in

section 6015, petitioner bears the burden of proving that he is entitled to relief.

See Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), aff’d, 101 F.

App’x 34 (6th Cir. 2004).

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

to determine whether a taxpayer qualifies for equitable relief from joint and

several liability. Those procedures are set forth in Rev. Proc. 2013-34, sec. 4,

2013-43 I.R.B. 397, 399-403. The Court considers the guidelines set forth in Rev.

Proc. 2013-34, sec. 4, when reviewing the Commissioner’s denial of relief, but we

are not bound by them as our determination ultimately turns on an evaluation of all

the facts and circumstances. See Pullins v. Commissioner, 136 T.C. 432, 438-439

(2011); Porter v. Commissioner, 132 T.C. at 210; Hudgins v. Commissioner, T.C.

Memo. 2012-260.
                                         -6-

[*6] A.      Threshold Requirements for Granting Relief

      Rev. Proc. 2013-34, sec. 4.01, sets forth seven threshold requirements that

must be satisfied before the Commissioner will consider a request for equitable

relief under section 6015(f). Those seven requirements are: (1) the requesting

spouse filed a joint tax return for the taxable year for which he or she seeks relief;

(2) relief is not available to the requesting spouse under section 6015(b) or (c);

(3) the requesting spouse’s claim for relief is timely filed; (4) no assets were

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

nonrequesting spouse did not transfer disqualified assets to the requesting spouse;

(6) the requesting spouse did not knowingly participate in the filing of a fraudulent

joint tax return; and (7) absent certain exceptions, the tax liability from which the

requesting spouse seeks relief is attributable to an item of the nonrequesting

spouse.3




      3
        For the seventh threshold condition, the Commissioner will consider
granting relief regardless of whether the understatement, deficiency, or
underpayment (in full or in part) is attributable to the requesting spouse if any of
the following exceptions apply: (1) attribution solely due to the operation of
community property law; (2) nominal ownership; (3) misappropriation of funds;
(4) abuse; and (5) fraud committed by the nonrequesting spouse. Rev. Proc. 2013-
34, sec. 4.01(7), 2013-43 I.R.B. 397, 399.
                                         -7-

[*7] Petitioner is claiming relief under section 6015(f) only for the portion of the

underpayment attributable to intervenor’s income.4 Respondent does not dispute

that petitioner meets the first six threshold requirements. On the record before us,

we find that petitioner has met the threshold requirements for relief under section

6015(f) for the portion of the underpayment attributable to intervenor’s income.

      B.     Conditions for Streamlined Determination

      If the requesting spouse satisfies the threshold requirements set forth in Rev.

Proc. 2013-34, sec. 4.01, then Rev. Proc. 2013-34, sec. 4.02, sets forth three

conditions that a requesting spouse must satisfy to qualify for a streamlined

determination granting relief under section 6015(f). Those conditions are: (1) the

requesting spouse is not married to the nonrequesting spouse; (2) the requesting

spouse will suffer economic hardship if relief is not granted; and (3) in an

underpayment case, as of the date the return was filed or the date the requesting

spouse reasonably believed the return was filed, the requesting spouse did not

know or have reason to know that the nonrequesting spouse would not or could

not pay the tax liability at that time of or within a reasonable period of time after

the filing of the return. Rev. Proc. 2013-34, sec. 4.02.

      4
        It is unclear whether the $289 allocable to interest income was attributable
to petitioner’s or intervenor’s income. Nonetheless, it is not relevant to our
holding in this case.
                                         -8-

[*8] On the record before us, we find that petitioner has failed to carry his

burden of establishing that (1) he will suffer economic hardship if relief is not

granted and (2) he did not know or have reason to know that the nonrequesting

spouse would not or could not pay the tax liability. See infra pp. 9-13. On that

record, we find that petitioner does not qualify for a streamlined determination

under Rev. Proc. 2013-34, sec. 4.02.

      C.     Factors Considered for Granting Equitable Relief

      If a requesting spouse meets the threshold requirements set forth in Rev.

Proc. 2013-34, sec. 4.01, but fails to qualify for a streamlined determination under

Rev. Proc. 2013-34, sec. 4.02, then he or she may still be eligible for relief under

section 6015(f) if, taking into account all the facts and circumstances, it would be

inequitable to hold the requesting spouse responsible for all or part of the liability.

In making that decision, we will weigh a number of factors: (1) marital status; (2)

economic hardship; (3) in the case of an underpayment, knowledge or reason to

know that the tax liability would or could not be paid; (4) legal obligation to pay

the outstanding tax liability; (5) receipt of a significant benefit from the unpaid tax

liability; (6) compliance with tax laws; and (7) mental or physical health at the

time of filing. In making our determination, however, no single factor is

determinative, and we may vary the weight we assign to each factor or to include
                                        -9-

[*9] other factors, depending on the specific circumstances of each case. See

Pullins v. Commissioner, 136 T.C. at 448; Hall v. Commissioner, T.C. Memo.

2014-171, at *38.

             1.     Marital Status

      Under this factor, we consider whether the requesting spouse was married to

the nonrequesting spouse at the time the Commissioner made his determination.

See Rev. Proc. 2013-34, sec. 4.03(2)(a). This factor will weigh in favor of relief

if, at the time the Commissioner made his determination, the requesting spouse

was not married to the nonrequesting spouse. Id. This factor will be neutral if, at

the time the Commissioner made his determination, the requesting spouse was

married to the nonrequesting spouse. Id.

      At the time the Commissioner made his determination, petitioner was no

longer married to intervenor. This factor weighs in favor of relief.

             2.     Economic Hardship

      Under this factor, we consider whether the requesting spouse will suffer

economic hardship if relief is not granted. Id. sec. 4.03(2)(b). A determination

whether a requesting spouse will suffer economic hardship is based on rules

similar to those in section 301.6343-1(b)(4), Proced. & Admin. Regs. That

regulation generally provides that economic hardship exists when an individual is
                                      - 10 -

[*10] unable to pay his or her reasonable basic living expenses. Section

301.6343-1(b)(4), Proced. & Admin. Regs., provides in pertinent part:

            (ii) Information from taxpayer.--In determining a reasonable
      amount for basic living expenses the director will consider any
      information provided by the taxpayer including--

                    (A) The taxpayer’s age, employment status and history,
      ability to earn, number of dependents, and status as a dependent of
      someone else;

                    (B) The amount reasonably necessary for food, clothing,
      housing (including utilities, home-owner insurance, home-owner
      dues, and the like), medical expenses (including health insurance),
      transportation, current tax payments (including federal, state, and
      local), alimony, child support, or other court-ordered payments, and
      expenses necessary to the taxpayer’s production of income (such as
      dues for a trade union or professional organization, or child care
      payments which allow the taxpayer to be gainfully employed);

                   (C) The cost of living in the geographic area in which the
      taxpayer resides;

                   (D) The amount of property exempt from levy which is
      available to pay the taxpayer’s expenses;

                  (E) Any extraordinary circumstances such as special
      education expenses, a medical catastrophe, or natural disaster; and

                 (F) Any other factor that the taxpayer claims bears on
      economic hardship and brings to the attention of the director.
                                        - 11 -

[*11] In addition, we must consider the requesting spouse’s current income

(including how the requesting spouse’s income compares to Federal poverty

guidelines), assets, and expenses. Rev. Proc. 2013-34, sec. 4.03(2)(b). This factor

will weigh in favor of relief where the requesting spouse would suffer economic

hardship if relief were denied. Id. This factor will be neutral where the requesting

spouse would not suffer economic hardship if relief were denied. Id.

       In Form 8857 petitioner reported monthly income of $12,258. At trial

petitioner testified that his total monthly income had increased to approximately

$13,166. If we use his self-reported monthly income or his testimony as a

baseline, petitioner’s annual income is well above 250% of the Federal poverty

guidelines for tax year 2011. See id. Petitioner also reported monthly expenses of

$11,564.20.5

       At trial petitioner did not adequately address this factor. Instead petitioner

chose to focus his testimony on the belief that intervenor would not suffer

economic hardship if she was ordered to pay the disputed portion of their 2011 tax

liability.


       5
        See supra note 2 for a description of petitioner’s Form 8857. In reviewing
petitioner’s monthly expenses reported in Form 8857, we will not consider
petitioner’s monthly expense for his “Retirement contributions (voluntary)” or
“Income tax withholding (federal, state, and local)”.
                                        - 12 -

[*12] On the record before us, petitioner has failed to carry his burden of

establishing that he will suffer economic hardship if relief is not granted. This

factor is neutral.

              3.     Knowledge or Reason To Know

       Under this factor, we examine whether the requesting spouse knew or had

reason to know that the nonrequesting spouse would not or could not pay a

reported but unpaid tax liability. See id. sec. 4.03(2)(c)(ii). In determining

whether the requesting spouse had reason to know that the nonrequesting spouse

would not or could not pay, the following facts and circumstances are considered:

(1) the requesting spouse’s level of education; (2) the requesting spouse’s degree

of involvement in the activity generating the tax liability; (3) the requesting

spouse’s involvement in the business or household financial matters; (4) the

requesting spouse’s business or financial expertise; (5) any deceit or evasiveness

of the nonrequesting spouse; and (6) any lavish or unusual expenditures compared

with past spending levels. Id. sec. 4.03(2)(c)(iii).

       This factor will weigh in favor of relief if the requesting spouse expected

the nonrequesting spouse to pay the tax liability reported on the return and will

weigh against relief if the requesting spouse’s belief that the nonrequesting spouse

would pay was not reasonable. Id. sec. 4.03(2)(c)(ii). This factor generally will
                                         - 13 -

[*13] weigh against relief where the requesting spouse knew of the nonrequesting

spouse’s prior bankruptcies, financial difficulties, or other problems with the IRS

or other creditors. Rev. Proc. 2013-34, sec. 4.03(2)(c)(ii).

      At the time petitioner and intervenor filed the return, petitioner was aware

that (1) there was an amount due on the return, (2) no payment was made at the

time the return was filed, and (3) petitioner and intervenor still owed the IRS

payments for previous tax years. Moreover, petitioner was the primary income

producer of the household and was involved in household financial matters.

Lastly, petitioner stated on Form 8857 that he was not the victim of spousal

abuse.6

      On the record before us, petitioner knew or had reason to know that the

nonrequesting spouse would not or could not pay a reported but unpaid tax

liability. This factor weighs against relief.




      6
        We also find it unreasonable for petitioner to believe that intervenor would
be able to make the payments contemplated in the installment agreement for tax
year 2011 because: (1) petitioner was the primary income producer of the
household; (2) petitioner testified that he and intervenor entered into the 2011
installment agreement only because he had outstanding tax liabilities from
previous years; and (3) at the time petitioner and intervenor would have sent the
installment agreement request for tax year 2011, petitioner and intervenor still had
outstanding tax liabilities for prior tax years.
                                          - 14 -

[*14]         4.     Legal Obligation

        Under this factor, we consider whether the requesting spouse had a legal

obligation arising from a divorce decree or another binding agreement to pay the

outstanding tax liability. Id. sec. 4.03(d). This factor will weigh in favor of relief

if the nonrequesting spouse has the sole legal obligation to pay the outstanding tax

liability pursuant to a divorce decree. Id. This factor will weigh against relief

where the requesting spouse has the sole legal obligation to pay the outstanding

tax liability pursuant to a divorce decree. Id. This factor will be neutral if the

requesting spouse knew or had reason to know that the nonrequesting spouse

would not pay the tax liability when the requesting spouse entered into the divorce

decree or agreement. Id.

        Petitioner has the sole legal obligation to pay the outstanding tax liability

pursuant to a divorce decree. On April 28, 2014, the district court issued a divorce

decree that ordered in pertinent part: “William J. Cojocar shall be solely

responsible for all federal income tax liabilities of the parties from the date of

marriage through December 31, 2011, and shall timely pay any deficiencies,

assessments, penalties, or interest due thereon”.

        This factor weighs against relief.
                                           - 15 -

[*15]         5.     Significant Benefit

        Under this factor, we consider whether the requesting spouse received a

significant benefit, beyond normal support, from the unpaid tax liability. Rev.

Proc. 2013-34, sec. 4.03(2)(e). Normal support is measured by the circumstances

of the particular parties. Porter v. Commissioner, 132 T.C. at 212. This factor will

weigh in favor of relief (1) if the nonrequesting spouse significantly benefited

from the unpaid tax and the requesting spouse had little or no benefit or (2) if the

nonrequesting spouse enjoyed the benefit to the requesting spouse’s detriment.

Rev. Proc. 2013-34, sec. 4.03(2)(e).

        Petitioner did not adequately address this factor in his filings with the Court

or at trial. This factor is neutral.

              6.     Compliance With Tax Laws

        Under this factor, we consider whether the requesting spouse made a good-

faith effort to comply with the tax laws for the taxable years following the year for

which relief is requested. Id. sec. 4.03(2)(f). This factor will weigh in favor of

relief if the requesting spouse is in full compliance for the tax years after being

divorced from the nonrequesting spouse. Id. sec. 4.03(2)(f)(i). This factor will

weigh against relief if the requesting spouse is not in full compliance with tax laws

for the tax years after being divorced from the nonrequesting spouse. Id. This
                                           - 16 -

[*16] factor will be neutral if the requesting spouse made a good-faith effort to

comply with the tax laws for the tax years after being divorced from the

nonrequesting spouse but was unable to comply. Id.

          Since the divorce in 2014 petitioner has timely filed his returns. Petitioner

has made a good-faith effort to comply with the tax laws for the taxable years

following the year for which relief is requested. This factor weighs in favor of

relief.

                7.     Mental or Physical Health

          Under this factor, we consider whether the requesting spouse was in poor

physical or mental health. Id. sec. 4.03(2)(g). This factor will weigh in favor of

relief if the requesting spouse was in poor mental or physical health at the time the

return was filed or at the time the requesting spouse requested relief. Id. This

factor is neutral if the requesting spouse was not in poor physical or mental health.

Id.

          In Form 8857 petitioner indicated that he was not in poor mental or physical

health at the time the return was filed, or at the time he filled out that form. This

factor is neutral.
                                        - 17 -

[*17] II.    Conclusion

      In summary, two of the factors weigh in favor of granting relief while two

of the factors weigh against granting relief. The remaining factors are neutral.

However, our decision whether relief is appropriate is not based on a simple tally

of factors. See, e.g., Hudgins v. Commissioner, T.C. Memo. 2012-260. Rather,

our decision is heavily influenced by the totality of the circumstances in this case.

Weighing all the facts and circumstances, we are not persuaded that it would be

inequitable to deny petitioner relief from joint and several liability under section

6015(f). Considering that petitioner knew or had reason to know that intervenor

would not or could not pay the tax liabilities reported in the 2011 return, and in the

absence of economic hardship, we conclude that it would not be inequitable to

deny petitioner relief under section 6015(f) for tax year 2011.

      We have considered all the other arguments of the parties, and to the extent

not discussed above, find those arguments to be irrelevant, moot, or without merit.

      To reflect the foregoing,

                                                 Decision will be entered

                                        for respondent.
