                  T.C. Summary Opinion 2010-106



                      UNITED STATES TAX COURT



               MAGDALENE H. SMOLEN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13018-08S.            Filed July 29, 2010.



     Matthew F. Sarnell, for petitioner.

     Michelle Maniscalco, for respondent.



     WELLS, Judge:   This case was heard pursuant to the

provisions of section 74631 of the Internal Revenue Code in

effect when the petition was filed.   Pursuant to 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


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

case.    This case arises from a request for relief pursuant to

section 6015(f) with respect to petitioner’s joint income tax

liability for 2005.    Respondent determined that petitioner was

not entitled to relief from joint and several liability under

section 6015(f).    Petitioner timely filed a petition with the

Court.    The issue to be decided is whether petitioner is entitled

to equitable relief under section 6015(f) for her 2005 tax year.

                              Background

     Some of the facts and certain exhibits have been stipulated.

The facts stipulated by the parties are incorporated herein by

reference and found accordingly.    At the time the petition was

filed, petitioner resided in New York.

     Petitioner and her husband, Robert Dreilinger, were married

in 1999.    Mr. Dreilinger worked as an emergency room physician

until he suffered a permanent disability in 2003.    Mr. Dreilinger

suffers from back problems.    Petitioner is employed as an

assistant administrator at a nursing home.    Petitioner continues

to live with and file joint tax returns with Mr. Dreilinger.

     Petitioner and Mr. Dreilinger maintain separate bank and

brokerage accounts.    Petitioner owns their home and pays all of

their living expenses.    During late 2003 Mr. Dreilinger began

receiving disability payments.    In the preparation of their 2003

Federal income tax return (2003 return), Mr. Dreilinger omitted

an income item.
                                - 3 -

     Petitioner and Mr. Dreilinger filed a joint Federal income

tax return for their 2005 tax year (2005 return).    During 2005

Mr. Dreilinger received distributions from his retirement

accounts that were not reported on their joint income tax

return.2

     On March 12, 2007, respondent mailed Notice CP2000 for

petitioner’s 2005 tax year, indicating an increase in tax of

$12,894, a payment increase of $707, penalties of $2,437 and

interest of $1,170 for a total proposed balance due of $15,794.

On March 22, 2007, petitioner and Mr. Dreilinger signed Notice

CP2000 indicating that they agreed with the total proposed

balance due.

     On May 16, 2007, petitioner signed and submitted to

respondent Form 8857, Request for Innocent Spouse Relief, for her

2005 tax year.    On Form 12510, Questionnaire for Requesting

Spouse, petitioner indicated that Mr. Dreilinger denied receiving

any unreported income and that she has no access to Mr.

Dreilinger’s accounts.

     Respondent denied petitioner’s request for section 6015(f)

relief, stating that the claim did not meet the statutory

requirements.    Petitioner filed Form 12509, Statement of



     2
      Petitioner concedes that these amounts should have been
included on her and Mr. Dreilinger’s joint Federal income tax
return but contests her responsibility for the tax associated
with the unreported retirement income.
                               - 4 -

Disagreement, claiming that Mr. Dreilinger wrote to respondent

that petitioner had no knowledge of the unreported income and

that he was taking full responsibility.

     Respondent’s Appeals Officer Mary Ann Halloway (Ms.

Halloway) reviewed petitioner’s Form 12509.     According to Ms.

Halloway’s notes, Mr. Dreilinger omitted $46,413 of retirement

income from the 2005 return.   Ms. Halloway discovered that Mr.

Dreilinger had unreported retirement income for 2004 as well.      On

the basis of her review of the record, Ms. Halloway determined

that petitioner was ineligible for innocent spouse relief

pursuant to section 6015(f).   Petitioner timely filed a petition

in this Court requesting relief pursuant to section 6015(f).

                           Discussion

     Section 6013(d)(3) provides that if a joint return is filed,

the tax is computed on the taxpayers’ aggregate income and

liability for the resulting tax is joint and several.     See also

sec. 1.6013-4(b), Income Tax Regs.     However, section 6015(a)

allows an individual who has filed a joint return to seek relief

from joint and several liability.    A requesting spouse may seek

either (1) relief from liability pursuant to section 6015(b) if

he or she can show that he or she did not know or have reason to

know of unreported income or inflated deductions; or (2) to have

the tax liability allocated between the requesting spouse and his

or her estranged or former spouse pursuant to section 6015(c).
                               - 5 -

See Billings v. Commissioner, 127 T.C. 7, 11 (2006).      A

requesting spouse may also seek relief pursuant to section

6015(f) if he or she is ineligible for relief pursuant to

subsection (b) or (c) and can show that “‘taking into account all

the facts and circumstances, it is inequitable to hold [him]

liable for any unpaid tax or deficiency (or any portion of

either).’”   See Billings v. Commissioner, supra at 11 (quoting

section 6015(f)) (alteration in original).   Petitioner makes her

claim for innocent spouse relief under section 6015(f).

     Except as otherwise provided in section 6015, the requesting

spouse bears the burden of proof.   Rule 142(a); Alt v.

Commissioner, 119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34

(6th Cir. 2004).   We apply a de novo standard and scope of review

to the Commissioner’s determinations pursuant to section 6015(b),

(c), and (f).   Porter v. Commissioner, 132 T.C. 203, 210 (2009);

 Alt v. Commissioner, supra at 313-316.

     Relief pursuant to section 6015(b) or (c) is premised on the

existence of a deficiency or an understatement of tax.        Sec.

6015(b)(1)(B), (c)(1); Block v. Commissioner, 120 T.C. 62, 65-66

(2003).   The parties agree that petitioner is not eligible for

relief pursuant to section 6015(b) or (c), and petitioner seeks

relief only pursuant to section 6015(f).

     The Commissioner has issued revenue procedures listing the

factors to be considered in considering relief under section
                                - 6 -

6015(f).   Rev. Proc. 2003-61, 2003-2 C.B. 296, modifying and

superseding Rev. Proc. 2000-15, 2000-1 C.B. 447.3    Rev. Proc.

2003-61, sec. 4.01, 2003-2 C.B. at 297, sets forth seven

threshold conditions that individuals seeking relief under

section 6015(f) must satisfy.     Respondent concedes that

petitioner satisfies each of the seven threshold conditions.

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

298, sets forth a safe harbor in which relief will ordinarily be

granted under section 6015(f) with respect to an underpayment of

a properly reported liability.4    To qualify for relief under Rev.

Proc. 2003-61, sec. 4.02(1), the requesting spouse must:     (1) No

longer be married to, be legally separated from, or not have been

a member of the same household as the other spouse at any time

during the 12-month period ending on the date of the request for

relief; (2) have had no knowledge or reason to know when signing

the returns that the other spouse would not pay the tax


     3
      The guidelines set forth in Rev. Proc. 2003-61, 2003-2 C.B.
296, are effective for requests for relief filed, as in the
instant case, on or after Nov. 1, 2003. Id. Sec. 7, 2003-2 C.B.
at 299.
     4
      We note that petitioner signed Notice CP2000, agreeing to
the increase in tax. We need not decide whether the signing of
the Notice CP2000 recharacterized the joint income tax liability
in issue from an understatement or deficiency to an underpayment,
because petitioner is ineligible for relief under the factors set
forth in Rev. Proc. 2003-61, sec. 4.02 and 4.03, 2003-2 C.B. at
298-299. While a conclusion that an understatement or a
deficiency existed would allow petitioner to claim relief
pursuant to sec. 6015(b), the parties have agreed that petitioner
is not entitled to relief under sec. 6015(b).
                               - 7 -

liability; and (3) suffer economic hardship if relief is not

granted.   Petitioner and Mr. Dreilinger are not divorced, legally

separated, or no longer members of the same household.

Accordingly, petitioner is not entitled to relief under the safe

harbor of Rev. Proc. 2003-61, sec. 4.02.

     Where the requesting spouse fails to qualify under Rev.

Proc. 2003-61, sec. 4.02, the Commissioner may still grant

equitable relief under section 6015(f).     Rev. Proc. 2003-61, sec.

4.03, 2003-2 C.B. at 298, contains a nonexclusive list of factors

that the Commissioner will take into account in determining

whether to grant equitable relief.     Those factors are:   (1)

Marital status; (2) economic hardship; (3) in the case of an

underpayment, knowledge or reason to know that the nonrequesting

spouse would not pay the liability, or in the case of a liability

that arose from a deficiency, knowledge or reason to know of the

item giving rise to the deficiency; (4) the nonrequesting

spouse’s legal obligation; (5) significant benefit; and (6)

compliance with income tax laws.     Id. sec. 4.03(2)(a).   We

consider those factors and any other relevant facts and

circumstances in determining whether the taxpayer is entitled to

innocent spouse relief.   Sec. 6015(f).    No single factor is

determinative, and all factors are to be considered and weighed

appropriately.   See Haigh v. Commissioner, T.C. Memo. 2009-140.
                               - 8 -

     The first factor addresses the requesting spouse’s marital

status.   Petitioner remains married to Mr. Dreilinger.

Consequently, the marital status factor is negative.   See Olson

v. Commissioner, T.C. Memo. 2009-294.

     The second factor addresses economic hardship if relief from

joint and several liability is not granted.   See Rev. Proc. 2003-

61, sec. 4.03(2)(a)(ii).   The Commissioner is directed to base

his determination of whether a requesting spouse will suffer

economic hardship on rules similar to those provided in section

301.6343-1(b)(4), Proced. & Admin. Regs.   Id.   That regulation

provides the following:

          (4) Economic hardship.--(i) General rule.--* * * This
     condition applies if satisfaction * * * will cause an
     individual taxpayer to be unable to pay his or her
     reasonable basic living expenses. The determination of a
     reasonable amount for basic living expenses will be made by
     the director and will vary according to the unique
     circumstances of the individual taxpayer. Unique
     circumstances, however, do not include the maintenance of an
     affluent or luxurious standard of living.

          (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
                                     - 9 -

          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.

It is the taxpayer’s burden to demonstrate that her expenses

qualify as basic living expenses and that those expenses are

reasonable.    Monsour v. Commissioner, T.C. Memo. 2004-190.

     Petitioner made no showing of economic hardship.    Petitioner

testified that she pays all of the household expenses, but she

did not show that she would be unable meet her basic living

expenses if she were not relieved of the 2005 joint income tax

liability.    Petitioner’s argument was that it would be “unjust”

to hold her liable because the liability from which petitioner

requests relief is Mr. Dreilinger’s liability.    This argument is

irrelevant to a determination of economic hardship.

Additionally, petitioner testified that her husband, who receives

his own income, is willing and able to pay the outstanding

liability.    On the basis of the record, we conclude that

petitioner will not suffer economic hardship if relief is not
                               - 10 -

granted.   The economic hardship factor therefore weighs against

granting the requested relief.    See Olson v. Commissioner, supra.

     The third factor addresses the requesting spouse’s knowledge

or reason to know of the underpayment or item giving rise to the

deficiency.5   See Rev. Proc. 2003-61, sec. 4.03(2)(a)(iii).    In

the case of an underpayment, the inquiry regards whether “the

requesting spouse did not know or had no reason to know that the

nonrequesting spouse would not pay the income tax liability.”

Id. sec. 4.03(2)(a)(iii)(A).   In the case of a deficiency, the

inquiry regards whether “the requesting spouse did not know and

had no reason to know of the item giving rise to the deficiency.”

Id. sec. 4.03(2)(a)(iii)(B).   In either case, the Commissioner is

directed to base his determination on the following:

     the requesting spouse’s level of education, any deceit or
     evasiveness of the nonrequesting spouse, the requesting
     spouse’s degree of involvement in the activity generating
     the income tax liability, the requesting spouse’s
     involvement in business and household financial matters, the
     requesting spouse’s business or financial expertise, and any
     lavish or unusual expenditures compared with past spending
     levels. [Id. sec. 4.03(2)(a)(iii)(C).]

     Petitioner does not appear to have actual knowledge of Mr.

Dreilinger’s retirement income.   The retirement account belonged

solely to Mr. Dreilinger, and she and Mr. Dreilinger kept

separate finances.   Neither party offered evidence regarding


     5
      See supra note 4. We need not decide whether petitioner’s
outstanding liability is an underpayment or an understatement
because petitioner is ineligible for relief under either
analysis.
                               - 11 -

lavish or unusual expenditures compared with past spending

levels.

     While petitioner may or may not have had actual knowledge of

Mr. Dreilinger’s retirement income, she had reason to know of the

retirement income.    Petitioner holds a master’s degree and is the

assistant administrator at a nursing home.    Her education and

occupation suggest business experience.    Additionally, petitioner

pays all of the household bills.

     Petitioner testified that Mr. Dreilinger suffers from

cognition problems and that she could not trust him to perform

simple tasks.    Petitioner offered general testimony regarding Mr.

Dreilinger, but nothing specific, such as Mr. Dreilinger’s

disease or disorder and what care he receives, and she failed to

offer any other evidence to support her contention.    However,

assuming Mr. Dreilinger’s cognition problems existed, petitioner

failed to explain why she did not independently monitor his

sizable banking and brokerage accounts.    Mr. Dreilinger received

over $44,000 in unreported retirement income during 2005.

     As to Mr. Dreilinger’s deceitfulness, petitioner had warning

signals.   While Mr. Dreilinger may have had a tendency to hide

petitioner’s mail, petitioner failed to testify as to the actions

she took, if any, to assure the accurate reporting of their tax

information.    According to Ms. Halloway’s notes, five separate

Forms 1099-R, Distributions From Pensions, Annuities, Retirement
                               - 12 -

or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., were

issued disclosing Mr. Dreilinger’s retirement income.6   Moreover,

petitioner learned that Mr. Dreilinger had omitted retirement

income from the 2003 return around the time the 2005 return was

filed.    While petitioner testified that she could not be sure

whether she learned of the 2003 omitted income before or after

signing the 2005 return, we conclude that she knew or should have

known of the income before signing the 2005 return because she

and Mr. Dreilinger filed the return after receiving an extension

of time to file.    See sec. 1.6081-4T(a), Temporary Income Tax

Regs., 70 Fed. Reg. 67359 (Nov. 7, 2005), (allowing an automatic

6-month extension of time to file an individual return).

According to Ms. Halloway’s notes, Mr. Dreilinger also had

unreported retirement income from their 2004 tax year.    Finally,

petitioner testified that Mr. Dreilinger lends money to his

parents “all the time”.    Mr. Dreilinger’s loans to his parents

could also have alerted petitioner to an undisclosed income

source.    On the basis of the record, we conclude that petitioner

should have known of Mr. Dreilinger’s unreported retirement

income.

     Mr. Dreilinger received over $44,000 in unreported income

during 2005.    However, petitioner testified that Mr. Dreilinger


     6
      Ms. Halloway did not testify. Petitioner did not object to
the admission of Ms. Halloway’s report or discredit her report in
any way.
                                - 13 -

could not account for his own funds and she could not trust him

to perform simple tasks.   Petitioner also failed to offer

evidence regarding Mr. Dreilinger’s other sources of reported

income, if any, and whether such sources would have been

sufficient to support loans to his parents.      On the basis of the

record, we conclude that petitioner had reason to known that Mr.

Dreilinger would not pay the outstanding tax liability.

Therefore, the knowledge factor weighs against petitioner.

     The fourth factor addresses the nonrequesting spouse’s legal

obligation to pay pursuant to a divorce decree or agreement.       See

Rev. Proc. 2003-61, sec. 4.03(2)(a)(iv).      Petitioner and Mr.

Dreilinger are still married; therefore the “legal obligation”

factor weighs against granting relief to petitioner; i.e. the

obligation remains a joint obligation.      See Olson v.

Commissioner, T.C. Memo. 2009-294.

     The fifth factor addresses whether the nonrequesting spouse

significantly benefited from the unpaid tax liability.      See Rev.

Proc. 2003-61, sec. 4.03(2)(a)(v).       There is no evidence in the

record to indicate that petitioner did not receive any

significant benefit from Mr. Dreilinger’s unreported retirement

income.   Petitioner bears the burden of establishing the

evidentiary basis for relief.    Therefore, the significant benefit

factor weighs against granting relief.
                              - 14 -

     The sixth factor addresses compliance with income tax laws

and whether the requesting spouse has made a good faith effort to

comply with income tax laws in the tax years after the tax year

in issue.   See id. sec. 4.03(2)(a)(vi).    Respondent concedes

petitioner’s compliance in filing subsequent returns, which

weighs in favor of granting relief.

     Additionally, Rev. Proc. 2003-61, sec. 4.03(2)(b), lists two

positive factors that the Commissioner will consider in favor of

granting equitable relief, if present.     Those factors are:   (1)

Whether the nonrequesting spouse abused the requesting spouse

(the abuse factor); and (2) whether the requesting spouse was in

poor mental or physical health when signing the return or

requesting relief (the mental or physical health factor).

     As to the abuse factor, the record does not establish that

Mr. Dreilinger abused petitioner.    As to the mental or physical

health factor, petitioner did not assert or demonstrate that she

was in poor mental or physical health when requesting relief or

signing the return; rather, petitioner merely claimed anguish

over Mr. Dreilinger’s condition.    Therefore, those two factors

are inapplicable.

     In sum, on the basis of our examination of the entire record

before us, we conclude that petitioner has failed to carry her

burden of showing that she is entitled to relief under section
                             - 15 -

6015(f) with respect to the portion of the liability relating to

the retirement income for the tax year 2005.

     We have considered all of the contentions and arguments of

the parties that are not discussed herein, and we conclude that

they are without merit, irrelevant, or moot.

     To reflect the foregoing,


                                        Decision will be entered

                                   for respondent.
