                   T.C. Summary Opinion 2007-178



                      UNITED STATES TAX COURT



                  AMY A. CHRISTMAN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11856-05S.               Filed October 22, 2007.



     Matthew T. Kelly, for petitioner.

     Jack T. Anagnostis, for respondent.



     COUVILLION, Special Trial Judge:1    This case was heard

pursuant to section 7463 of the Internal Revenue Code in effect

at the time the petition was filed.2   Pursuant to the provisions


     1
        With the consent of the parties, the Chief Judge
reassigned this case, after the death of Special Trial Judge
Carleton D. Powell, to Special Trial Judge D. Irvin Couvillion,
for disposition on the existing record.
     2
         Unless otherwise indicated, section references are to the
                                                    (continued...)
                                - 2 -

of section 7463(b), the decision to be entered is not reviewable

by any other court, and this opinion shall not be treated as

precedent for any other case.

     This case arises from a request for innocent spouse relief

under section 6015(f) with respect to petitioner’s 1998 and 1999

taxable years.   No notice of deficiency was issued for either of

these years.   Petitioner requested relief by filing Form 8857,

Request for Innocent Spouse Relief, for the years 1997, 1998, and

1999.    In her application, petitioner sought relief under section

6015(f) and specifically stated she was not seeking relief under

section 6015(b) or (c).   Respondent determined that petitioner

was not entitled to relief under section 6015(f); thus, the issue

is whether respondent’s denial of relief under section 6015(f)

was an abuse of discretion with respect to petitioner’s taxable

years 1998 and 1999.3

                             Background

     The facts may be summarized as follows.   At the time the

petition was filed petitioner resided in Temple, Pennsylvania.




     2
      (...continued)
Internal Revenue Code as amended, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
     3
        The record is unclear as to the status of petitioner’s
request for relief for taxable year 1997. Neither the
preliminary determination letter nor the notice of determination
addressed any request for relief for taxable year 1997.
Moreover, in her petition to this Court, petitioner only
requested a review of the denial of relief for taxable years 1998
and 1999. The year 1997, therefore, is not before the Court.
                                - 3 -

     Petitioner is a high school graduate.    Petitioner also

attended college but did not graduate from college.    She and Mark

C. Christman (Mr. Christman) married on October 24, 1992, and had

one son.    Petitioner moved out of the marital home sometime in

mid-to-late 1999 and opened separate bank accounts in her name.

She and Mr. Christman divorced on October 6, 2000.

     Petitioner earned income during taxable years 1998 and 1999

from her employment with The Bon-Ton Stores, Inc.; Brooks

Brothers, Inc.; Eugene Davids Co., Inc.; Tutor Time; and York

Beauty Supply & Equipment Co., Inc.     During the same years, Mr.

Christman was employed by local architects.    Additionally, he

earned income as a draftsman for Draft Tech, Inc., a business he

wholly owned, the income and expenses of which were reported on

Schedule C, Profit or Loss From Business, on their joint income

tax returns for the years at issue.

     In 2000, Mr. Christman approached petitioner on different

occasions to obtain her signature on the joint income tax returns

for 1996, 1997, 1998, and 1999.    On July 7, 2000, petitioner and

Mr. Christman filed a joint return for 1998 reporting a tax

liability of $7,744.    A payment of $744 was submitted with the

return.    No notice of deficiency was issued by respondent for

taxable year 1998.    Additions to tax were thereafter assessed for

1998 under sections 6651(a)(1) and (2) and 6654.
                               - 4 -

     On October 5, 2000, petitioner and Mr. Christman filed a

joint return for 1999, reporting a tax liability of $11,241 which

was paid in full at the time of filing the return.    No notice of

deficiency was issued by respondent for taxable year 1999.

Additions to tax were assessed for 1999 under sections

6651(a)(1), (2), and 6654.

     Petitioner contends that she did not know taxes were due and

owing for either of the years at issue because she did not review

the 1998 and 1999 returns.   Moreover, petitioner claims that Mr.

Christman did not tell her there were any taxes due, and she had

no reason to believe that if there were taxes due Mr. Christman

would not pay them.   She admits, however, that at the time she

signed the returns she believed there would be penalties or

additions to tax for not timely filing the returns.

     Petitioner and Mr. Christman signed a postnuptial agreement

on August 14, 2000, to stipulate the terms of their divorce.

Neither this agreement nor the divorce decree addressed the

couple’s outstanding tax liabilities.

     Petitioner submitted a Form 8857 on March 24, 2004,

requesting relief from joint and several liability for the years

1998 and 1999.   Petitioner contends that Mr. Christman handled

their financial affairs after she left the marital home and that,

since 1994, a return preparer prepared all of their income tax

returns.   On April 29, 2005, respondent issued a Notice of
                               - 5 -

Determination Concerning Your Request for Relief under the

Equitable Relief Provision of Section 6015(f) denying petitioner

her request for relief from joint and several liability under

section 6015(f) for the years 1998 and 1999.

     On June 27, 2005, the petition was filed with this Court

with respect to petitioner’s 1998 and 1999 taxable years.

Petitioner claims she is entitled to relief from joint and

several liability for those years under section 6015(f).

Pursuant to Rule 325 and King v. Commissioner, 115 T.C. 118

(2000), respondent served Mr. Christman with notice of this

proceeding and his right to intervene.     Mr. Christman did not

file a notice of intervention and did not appear or participate

in the trial of this case.

                             Discussion

     Generally, married taxpayers may elect to file a Federal

income tax return jointly.   Sec. 6013(a).    Each spouse filing a

joint return is jointly and severally liable for the accuracy of

the return and the entire tax due.     Sec. 6013(d)(3).   Under

certain circumstances, however, section 6015 provides relief to a

spouse from this general rule.4


     4
        Sec. 6015 applies to any liability for tax arising after
July 22, 1998, and to any liability for tax arising on or before
July 22, 1998, remaining unpaid as of such date. Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L.
105-206, sec. 3201(g), 112 Stat. 734, 740. The Tax Relief and
Health Care Act of 2006, Pub. L. 109-432, div. C, sec. 408, 120
                                                   (continued...)
                                    - 6 -

        A taxpayer may be considered for relief under section

6015(f) when relief is not available under section 6015(b) or

(c).5       Sec. 6015(f)(2).   Section 6015(f)(1) provides that a

taxpayer may be relieved from joint and several liability if it

is determined, after considering all the facts and circumstances,

that it is inequitable to hold the taxpayer liable for the unpaid

tax.        This Court reviews the Commissioner’s denial of relief

pursuant to section 6015(f) under an abuse of discretion

standard.        Butler v. Commissioner, 114 T.C. 276, 287-292 (2000).

The Court defers to the Commissioner’s determination unless it is

arbitrary, capricious, or without sound basis in fact.        Jonson v.

Commissioner, 118 T.C. 106, 125 (2002), affd. 353 F.3d 1181 (10th

Cir. 2003).        Whether the Commissioner’s determination constitutes

an abuse of discretion is a question of fact.        Cheshire v.

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

Cir. 2002).        The requesting spouse bears the burden of proving

        4
      (...continued)
Stat. 3061, amended sec. 6015(e)(1) to give the Tax Court
jurisdiction to determine the appropriate relief available to a
taxpayer under sec. 6015, including relief under sec. 6015(f) in
cases where no deficiency has been determined for the tax year.
The amendment applies with respect to liability for taxes arising
or remaining unpaid on or after Dec. 20, 2006, the date of
enactment, and thus it applies here. See Schmick v.
Commissioner, T.C. Memo. 2007-220 n.1.
        5
        A prerequisite to granting relief under sec. 6015(b) or
(c) is the existence of a tax deficiency or, as referred to in
various cases, an “understatement of tax”. Sec. 6015(b)(1)(B)
and (c)(1); Block v. Commissioner, 120 T.C. 62, 65-66 (2003).
That requirement precludes petitioner from seeking relief under
sec. 6015(b) or (c) for 1998 and 1999 because no deficiencies
were asserted for those years.
                               - 7 -

that there was an abuse of discretion.   Abelein v. Commissioner,

T.C. Memo. 2004-274.

     The Commissioner has prescribed guidelines that are

considered in determining whether it is inequitable to hold a

requesting spouse liable for all or part of the liability for any

unpaid tax or deficiency.   Rev. Proc. 2003-61, sec. 4.01, 2003-2

C.B. 296, 297, sets forth seven threshold conditions that the

requesting spouse must satisfy before the Commissioner will

consider a request for relief under section 6015(f).6   Respondent

does not dispute that petitioner has satisfied the seven

threshold conditions.

     Where the requesting spouse satisfies the threshold

conditions, Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at 298,

lists factors to be considered in determining whether equitable

relief is warranted as to liability for underpayments of tax,

which is the situation in this case.   Equitable relief under

section 6015(f) from liability for an underpayment of tax on a

joint return will ordinarily be granted by the Commissioner if

all three of the following criteria are met:   (1) The requesting

spouse is divorced, legally separated, or has been physically

separated for 1 year from the nonrequesting spouse at the time

     6
        Rev. Proc. 2003-61, 2003-2 C.B. 296, which supersedes
Rev. Proc. 2000-15, 2000-1 C.B. 447, is effective for requests
for relief filed on or after Nov. 1, 2003, or requests for relief
pending on Nov. 1, 2003, for which no preliminary determination
letter has been issued as of that date. Petitioner’s request for
relief was submitted on Mar. 24, 2004.   Accordingly, the
guidelines of Rev. Proc. 2003-61, supra, apply in this case.
                                   - 8 -

relief is requested; (2) the requesting spouse did not know or

have reason to know that the income tax liability would not be

paid at the time the joint return was signed; and (3) the

requesting spouse would, absent relief, suffer economic hardship.

       Although petitioner was divorced from Mr. Christman at the

time relief was requested, the Court concludes on this record

that petitioner was aware of or had reason to know that the

income tax liability would not be paid at the time she signed the

return for taxable year 1998.7      Petitioner contends she was

unaware that there was a reported tax liability due for 1998.        It

is well established that a spouse requesting relief under section

6015 has a duty of inquiry.       Butler v. Commissioner, supra at

284.       Furthermore, this Court has held that signing a return

imputes constructive knowledge of the contents of that return to

the signer.       Simon v. Commissioner, T.C. Memo. 2005-220.

       At trial, petitioner claimed she had no reason to know that

if taxes were due for 1998 Mr. Christman would not pay the amount

due at the time the return was filed.       Following their failure to

timely file joint returns for 1996 through 1999, it is not

anomalous to presume that there would be taxes, additions to tax,

and/or interest due for those years.       The Court does not find

       7
        At the time their joint income tax return for 1999 was
filed, the amount of tax shown as due was paid in full. Because
relief pursuant to Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at
298, requires an underpayment of tax, petitioner does not qualify
for relief under that section for the year 1999. See Knorr v.
Commissioner, T.C. Memo. 2004-212.
                                - 9 -

petitioner’s testimony to be convincing, because, according to

her testimony, she was unaware that there was a tax due and owing

for 1998.    At the very least, petitioner knew that failure to

timely file a return would result in penalties and additions to

tax.    There is nothing in the record to indicate that petitioner

had reason to believe the tax liability or penalties for 1998

would be paid at the time the return was filed.     The Court

concludes, on the record, that petitioner knew or had reason to

know that the tax liability for 1998 would not be paid at the

time the return was filed.

       A taxpayer might experience economic hardship if he or she,

as a result of being held liable for a tax liability, would be

unable to pay basic reasonable living expenses.     Sec. 301.6343-

1(b)(4)(i), Proced. & Admin. Regs.      On the record of this case,

petitioner has not shown to the Court’s satisfaction that she

would experience economic hardship if she were forced to pay the

tax liability for 1998.

       Because petitioner does not qualify for relief under Rev.

Proc. 2003-61, sec. 4.02, the Court next considers whether she is

entitled to relief under Rev. Proc. 2003-61, sec. 4.03, which

provides factors to be considered as to requests for relief under

section 6015 for spouses who filed a joint return and do not

qualify for relief under Rev. Proc. 2003-61, sec. 4.02.      Rev.

Proc. 2003-61, sec. 4.03(2)(a), 2003-2 C.B. at 298, offers a

nonexclusive list of factors to be considered, including:       (1)
                              - 10 -

Marital status; (2) economic hardship; (3) no knowledge or reason

to know that the nonrequesting spouse would not pay the income

tax liability; (4) whether the nonrequesting spouse had a legal

obligation to pay the liability; (5) whether the requesting

spouse benefited significantly from the unpaid income tax

liability; and (6) whether the requesting spouse made a good

faith attempt to comply with the tax laws in subsequent years.

These factors are considered in determining whether there was an

abuse of discretion by respondent in denying equitable relief

under section 6015(f).

     For a taxpayer who seeks relief from an underpayment of tax,

as in this case, Rev. Proc. 2003-61, sec. 4.03(2)(a)(iii)(A),

addresses whether the requesting spouse knew or had reason to

know that the underpayment would not be paid at the time the

return was filed.   Petitioner contends she was unaware of a tax

liability for 1998.   However, as noted earlier, petitioner and

Mr. Christman filed a joint return for 1998 on July 7, 2000, on

which there was a tax liability of $7,744 and on which a payment

of $744 was submitted with the return.   Petitioner, therefore,

knew that there was an underpayment of tax for 1998 and knew that

such underpayment was not paid at the time the return was filed.

     With respect to the additions to tax for 1998 and 1999,

petitioner must show that it was reasonable for her to believe

that Mr. Christman would pay the additions to tax at the time she

signed the returns.   See, e.g., Knorr v. Commissioner, T.C. Memo.
                               - 11 -

2004-212.   When she signed the 1998 and 1999 joint income tax

returns in July and October 2000, respectively, petitioner was

aware that she and her former spouse had failed to timely file

and timely pay income taxes for 1996 through 1999.    At no point

did she question Mr. Christman as to how and when the taxes and

any additions to tax would be paid.     For these reasons, the Court

concludes that petitioner has not shown that it was reasonable

for her to believe that any additions to tax for 1998 and 1999

would be paid at the time she signed the joint income tax returns

for the years at issue, particularly since she had no reason to

believe that the taxes for those years would be paid at the time

the returns were filed.

     Petitioner’s filing for divorce prior to requesting relief

under section 6015(f) favors granting her relief.    Rev. Proc.

2003-61, sec. 4.03(2)(a)(i).   Yet, in those cases where the

requesting spouse’s marital status favors granting relief, Rev.

Proc. 2003-61, sec. 4.03(2)(a)(ii), conditions that relief on a

showing that the requesting spouse will suffer economic hardship

in the absence of relief.   Relief has been granted to taxpayers

who establish that they would suffer economic hardship by being

unable to afford basic living expenses in the absence of such

relief.   See, e.g., Knorr v. Commissioner, supra; Foor v.

Commissioner, T.C. Memo. 2004-54; Ferrarese v. Commissioner, T.C.

Memo. 2002-249; August v. Commissioner, T.C. Memo. 2002-201; Rowe

v. Commissioner, T.C. Memo. 2001-325.     Petitioner was gainfully
                              - 12 -

employed during the years at issue and failed to establish that

she would be unable to pay basic living expenses if she were

required to pay the outstanding tax liabilities for 1998 and

1999.

     Upon consideration of all of the facts and circumstances,

the Court holds that respondent’s determination to deny

petitioner relief under section 6015(f) was not an abuse of

discretion.   Weighing all of the factors in this case both

supporting and opposing granting relief to petitioner, the Court

is satisfied that it is not inequitable to deny petitioner relief

under section 6015(f).

                                    Decision will be entered

                               for respondent.
