                                  T.C. Memo. 2013-186



                            UNITED STATES TAX COURT



JAMES DOUGLAS KELLAM, Petitioner, AND DAWN Y. GRIFFIN, Intervenor
       v. COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 6503-11.                              Filed August 15, 2013.



      James Douglas Kellam, pro se.

      Lauren N. May, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      PARIS, Judge: This case is before the Court on a petition disputing a notice

of deficiency and a final determination denying petitioner’s request from joint and

several liability relief under section 6015(b), (c), or (f).1


      1
          Unless otherwise indicated, all section references are to the Internal
                                                                           (continued...)
                                         -2-

[*2] The parties settled many of the issues, and the remaining issues are: (1)

whether petitioner is entitled to relief from joint and several liability under section

6015(b), (c), or (f) for understatements of tax for the tax years 2007 and 2008, and

(2) whether petitioner is liable for an accuracy-related penalty under section

6662(a) for 2007.

                                FINDINGS OF FACT

      Some of the facts are stipulated and are so found. The stipulations of facts

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

resided in Illinois when he petitioned the Court.

      Petitioner and Ms. Griffin timely filed joint returns for the 2007 and 2008

tax years. Petitioner and Ms. Griffin had an unusual banking situation before their

November 24, 2009, divorce. Petitioner and Ms. Griffin shared a bank account,

but petitioner was not listed as an account holder; instead, petitioner was an

authorized user and the bank issued him a debit card associated with the account.

Petitioner deposited money into the account and could view the account balance,

but he could not write checks on the account.




      1
       (...continued)
Revenue Code (Code) in effect at all relevant times, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
                                        -3-

[*3] Ms. Griffin and petitioner were still married and living together when Ms.

Griffin prepared their Federal tax return for 2007. Petitioner was present when

Ms. Griffin prepared the 2007 return. Ms. Griffin claimed the following erroneous

deductions: $973 for cash charitable contributions; $19,410 for two cars they had

given her children as noncash charitable contributions;2 $19,633 for unreimbursed

employee expenses; $40 for tax preparation fees; $281 for student loan interest

payments; and $2,626 for safe deposit box rental expenses. Also, Ms. Griffin did

not report an $80 State income tax refund on their 2007 joint return. Ms. Griffin

asked petitioner whether he wanted to review the return before filing, but

petitioner chose not to review the return before it was electronically signed and

filed on February 8, 2008. Petitioner and Ms. Griffin shared the $7,067 refund for

the 2007 tax year.

      Petitioner and Ms. Griffin separated and began living in different residences

in November 2008. Ms. Griffin prepared the 2008 joint return for herself and

petitioner. For the 2008 return, however, petitioner was not present for the

preparation and was not given an opportunity to review the return before filing.

Instead, petitioner supplied his income information to Ms. Griffin, who


      2
       Although Ms. Griffin’s explanation described the gift as a “non-charitable
donation”, the mistake in law would disqualify the donation.
                                        -4-

[*4] independently prepared the return. Ms. Griffin then electronically filed the

return without consulting petitioner. Further, Ms Griffin did not provide petitioner

a copy of the joint return until two weeks after she filed it. On the 2008 Federal

tax return, Ms. Griffin claimed the following erroneous deductions: $7,350 for

cash charitable contributions; $7,773 for unreimbursed employee expenses; and

$50 for tax preparation fees. In addition, Ms. Griffin did not report a $592 State

income tax refund on the joint return for tax year 2008. On the basis of the

information provided on their 2008 Federal tax return, petitioner and Ms. Griffin

received a refund of $2,474.

      After petitioner’s 2008 Federal income tax return was filed, but before the

refund was received, the Illinois Department of Revenue sought additional tax

from Ms. Griffin and petitioner. Ms. Griffin received the Federal tax refund of

$2,474 and told petitioner she was withholding a portion of his share to pay the

State tax. As a result of Ms. Griffin’s actions, petitioner received only

approximately one-third of the 2008 Federal tax refund.

      Respondent initiated an audit for petitioner’s 2007 and 2008 taxable years

on January 28, 2010. During the audit petitioner filed Form 8857, Request for

Innocent Spouse Relief. On January 24, 2011, respondent issued a statutory notice

of deficiency determining an accuracy-related penalty for 2007. The notice of
                                           -5-

[*5] deficiency disallowed all the deductions described above and adjusted

petitioner’s tax liabilities for the unreported income. The notice of deficiency also

was accompanied by a final determination denying petitioner’s request for relief

from joint and several liability for 2007 and 2008. On March 17, 2011, petitioner

timely petitioned the Court for redetermination of the deficiencies and for review

of the final determination. Ms. Griffin filed a notice of intervention on August 8,

2011. The Court dismissed Ms. Griffin as intervenor for lack of prosecution on

December 3, 2012.

                                       OPINION

      Petitioner asks the Court to redetermine the deficiencies and to review

respondent’s final determination denying his request for relief from joint and

several liability for 2007 and 2008. Under section 6013(d)(3), a husband and wife

filing a joint return are jointly and severally liable for all tax for the taxable year,

including interest. Petitioner claims that he is entitled to relief under section 6015

from the tax liabilities reflected on the notice of deficiency, dated January 24,

2011, for tax years 2007 and 2008. Except as otherwise provided in section 6015,

the spouse requesting relief generally bears the burden of proof. Rule 142(a); Alt

v. Commissioner, 119 T.C. 306, 311 (2002), aff’d, 101 Fed. Appx. 34 (6th Cir.

2004).
                                         -6-

[*6] Section 6015 relieves a spouse of joint and several liability in three

situations: (1) if the spouse, inter alia, did not know or have reason to know of a

tax understatement attributable to the nonrequesting spouse when the return was

signed; (2) if a divorced or separated spouse seeks to limit individual liability to

the portion of the deficiency allocable to him or her; and (3) in the case of a

deficiency or any unpaid tax, if it is inequitable to hold the spouse liable for the

tax and if relief is unavailable to the taxpayer under the other two provisions. See

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

I. Relief Under Section 6015(b)

       Under section 6015(b), a taxpayer seeking relief from joint and several

liability must meet five conditions: (1) a joint return was filed for the taxable year;

(2) there is an understatement of tax attributable to an erroneous item of the

taxpayer’s spouse; (3) the taxpayer establishes that in signing the return he or she

did not know, and had no reason to know, of the understatement; (4) it is

inequitable to hold the taxpayer liable for the deficiency attributable to the

understatement; and (5) the taxpayer timely elects the benefits of section 6015(b).

A taxpayer must satisfy all five requirements to qualify for relief. See Alt v.

Commissioner, 119 T.C. at 313.
                                        -7-

[*7] Petitioner filed joint returns and timely elected relief under section

6015(b)(1)(A) and (E). Accordingly, petitioner bears the burden to show: there is

an understatement of tax attributable to an erroneous item of Ms. Griffin; in

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

understatement; and it is inequitable to hold him liable for the deficiency

attributable to the understatement. See id.

      A. Section 6015(b)(1)(C)

      For convenience section 6015(b)(1)(C) will be analyzed first. Under section

6015(b)(1)(C) a requesting spouse must show he or she did not know and had no

reason to know that there was an understatement of tax at the time he or she signed

the return. For deductions, a taxpayer has reason to know of an understatement if

at the time the taxpayer signed the return the taxpayer had enough knowledge of

the facts underlying the claimed deductions that it would have caused a reasonably

prudent taxpayer in the taxpayer’s position to question the legitimacy of the

deductions. Resser v. Commissioner, 74 F.3d 1528, 1536 (7th Cir. 1996), rev’g

T.C. Memo. 1994-241. For unreported income, a spouse has reason to know of

the understatement if a “reasonably prudent taxpayer in her position at the time she

signed the return could be expected to know that the return contained the * * *

understatement.” Price v. Commissioner, 887 F.2d 959, 965 (9th Cir. 1989);
                                        -8-

[*8] Quinn v. Commissioner, 524 F.2d 617, 626 (7th Cir. 1975), aff’g 62 T.C. 223

(1974); see also sec. 1.6015-2(c), Income Tax Regs.

      Several factors are relevant to whether a taxpayer had reason to know of the

understatement, including his or her level of education; involvement in the

financial and business activities of the family; any substantial unexplained

increases in the family’s standard of living; and the culpable spouse’s evasiveness

and deceit about the family’s finances. Resser v. Commissioner, 74 F.3d at 1536.

None of the factors is controlling or given more weight than another; the factors

shall be weighed as a whole.

      At the time Ms. Griffin was preparing the tax returns for tax years 2007 and

2008, petitioner was a high school graduate studying for a college degree--which

he later earned. Considering the level of petitioner’s education, this factor weighs

in favor of denying relief for both the 2007 and 2008 tax years.

      Petitioner lived with Ms. Griffin throughout the 2007 tax year and knew

enough about the family finances that he should have questioned the legitimacy of

the large expenses’ qualifying as deductions. Petitioner knew the family had

previously purchased two automobiles and that they had been given to Ms.

Griffin’s children. Petitioner’s knowledge of the $10,420 and $8,350 transactions
                                        -9-

[*9] for the cars shows that he was aware of major family expenses.3 His

knowledge of major family expenses should have led him to question the

unreimbursed employee expenses of $19,633 and at the very least to question the

expenses associated with his employment.4 Petitioner also shows he was involved

with the family’s finances because he deposited and withdrew money from the

shared account. Further, petitioner directly acknowledged that he would have

questioned Ms. Griffin about the deduction if he had looked at the return before it

was filed. Accordingly, this factor weighs in favor of denying relief.

      No evidence was presented showing Ms. Griffin was deceptive or evasive

about family finances for the 2007 tax year. In fact Ms. Griffin prepared the 2007

return in petitioner’s presence and asked him directly whether he would like to

review the return before filing, but he declined. Petitioner cannot avoid liability

by actively electing to be uninformed about the contents of his Federal tax return,

especially when he was specifically asked to review it. This factor weighs in favor

of denying relief.




      3
       The cost of the automobiles makes up most of the noncash charitable
contribution deduction that respondent denied for the 2007 tax year.
      4
        Ms. Griffin reported $14,143 of unreimbursed employee expenses for
herself and $5,490 for petitioner for the 2007 tax year.
                                         - 10 -

[*10] No evidence was presented about substantial unexplained increases in the

family’s standard of living, and it is therefore a neutral factor for both the 2007

and 2008 tax years.

      Petitioner had enough knowledge of the facts underlying the claimed 2007

deductions that it would have caused a reasonably prudent taxpayer in his position

to question their legitimacy. Accordingly, petitioner had reason to know of the

understatement of tax that resulted from the deductions claimed for the 2007 tax

year, and he is not entitled to relief from joint and several liability under section

6015(b) for the understatement attributable to those expenses.

      Petitioner had reason to know of the State income tax refunds for both the

2007 and 2008 tax years. As noted above, for unreported income a spouse has

reason to know of an understatement of tax if a reasonably prudent taxpayer could

be expected to know that the return contained the understatement when he or she

signed the return. See sec. 1.6015-2(c), Income Tax Regs. Petitioner had reason

to know of the understatement because he and Ms. Griffin had previously received

a refund from the State of Illinois. He cannot avoid liability by choosing not to

acknowledge the refund. Accordingly, petitioner is not entitled to relief from joint

and several liability for the understatements of tax attributable to the unreported
                                       - 11 -

[*11] State income tax refunds received in tax years 2007 and 2008 under section

6015(b) because he had reason to know of the income.

      Petitioner’s situation drastically changed during the 2008 tax year, and he

did not know, and did not have reason to know, of the understatement of tax for

that year. During the 2008 tax year petitioner separated from Ms. Griffin and she

moved out of the marital home. Petitioner did not show the same level of

involvement with the family finances in 2008, and Ms. Griffin opened a new bank

account in early 2009 for which petitioner was neither an account holder nor an

authorized user. All of the 2008 Federal tax refund went directly into Ms.

Griffin’s account, and petitioner received only a small portion of the refund from

Ms. Griffin. This factor weighs in favor of relief.

      Ms. Griffin did not deny petitioner access to the bank records, but she was

evasive when she filed the joint Federal tax return without his review and did not

provide him a copy until two weeks after she had filed it. Petitioner’s only

involvement in preparing the 2008 tax return was giving Ms. Griffin his Forms W-

2, Wage and Tax Statement. After receiving his Forms W-2 Ms. Griffin prepared

and filed the joint return without any other input from petitioner. Unlike the 2007

tax return, Ms. Griffin did not offer petitioner a chance to review the 2008 return
                                        - 12 -

[*12] before she filed it, and petitioner did not receive a copy of the return until

two weeks after Ms. Griffin filed it. This factor weighs in favor of relief.

      Together, the facts indicate that petitioner did not know or have reason to

know of the understatement of tax from erroneous deductions claimed for the 2008

tax year. Accordingly, petitioner satisfies section 6015(b)(1)(C) with respect to

the erroneous deductions claimed for the 2008 tax year.

      B. Section 6015(b)(1)(B)

      A taxpayer must show that the understatement of tax is attributable to

erroneous items of the nonrequesting spouse under section 6015(b)(1)(B).

Generally an erroneous item is attributed to the individual whose activities gave

rise to the item. Sec. 1.6015-1(f)(1), Income Tax Regs. In deciding who is

attributed erroneous items, the Court has attributed items to the spouse who

wrongfully reported or claimed the item (with certain exceptions not applicable

here). See Dillon v. Commissioner, T.C. Memo. 1998-5; Estate of Killian v.

Commissioner, T.C. Memo. 1987-365.5 The facts in the record demonstrate that

      5
       Although these cases arose under former sec. 6013(e), the Court has
determined that cases interpreting similar terms under sec. 6013(e) remain
instructive in its analysis in cases under sec. 6015(b)(1). See Alt v.
Commissioner, 119 T.C. 306, 314 (2002), aff’d, 101 Fed. Appx. 34 (6th Cir.
2004); Juell v. Commissioner, T.C. Memo. 2007-219; Becherer v. Commissioner,
T.C. Memo. 2004-282. The terms “attributable to an item of the individual with
                                                                       (continued...)
                                        - 13 -

[*13] the deductions for the 2008 tax year are solely attributable to Ms. Griffin.

Ms. Griffin independently prepared the 2008 tax return, she was in control of all

the documents needed to file the return, and she claimed the deductions of her own

accord. Petitioner truthfully testified that he would not have claimed the

deductions. Accordingly, petitioner satisfies the section 6015(b)(1)(B)

requirement for the erroneous deductions because the erroneous deductions

claimed on his 2008 tax return are all attributable to Ms. Griffin.6

      C. Section 6015(b)(1)(D)

      Under section 6015(b)(1)(D) the requesting spouse must prove that it is

inequitable to hold him liable for the understatement taking into account all the

facts and circumstances. The most often considered factors are whether there has

been a significant benefit to the spouse claiming relief and whether the failure to



      5
        (...continued)
whom the requesting spouse filed the joint return (‘the nonrequesting spouse’)” of
Rev. Proc. 2003-61, sec. 4.01(7), 2003-2 C.B. 296, 297, is similar to the terms
“attributable to grossly erroneous items of one spouse” of sec. 6013(e). The
analysis for attributing items to one spouse or the other is essentially the same.
      6
        The State income tax refund for tax year 2008, however, is not attributable
solely to Ms. Griffin. Petitioner did not testify or otherwise provide evidence
showing that the State income tax refund is solely attributable to Ms. Griffin.
Accordingly, even if petitioner did not have reason to know of the State income
tax refund under section 6015(b)(1)(C), he would be precluded from relief because
the item is partially attributable to him.
                                        - 14 -

[*14] report the correct tax liability on the joint return results from concealment,

overreaching, or any other wrongdoing on the part of the nonrequesting spouse.

See Alt v. Commissioner, 119 T.C. at 314.

      Only the portion of the understatement of tax resulting from the 2008

erroneous deductions is reviewed under this section because it is the only part of

the understatement that meets the requirements of section 6015(b) discussed

above. Petitioner did not significantly benefit because he received only a part of

the Federal income tax refund for the 2008 tax year. Ms. Griffin withheld most of

petitioner’s share, presumably to pay a State tax deficiency. The record does not

clearly establish that petitioner’s share was actually used on his behalf. Instead,

petitioner was denied the opportunity to choose how to use his portion of the

refund, and he did not significantly benefit from the understatement. Further,

normal support is not considered a significant benefit, and there is no evidence

that petitioner received anything beyond normal support. See Hayman v.

Commissioner, 992 F.2d 1256, 1262 (2d Cir. 1993) (citing Flynn v.

Commissioner, 93 T.C. 355, 367 (1989)), aff’g T.C. Memo. 1992-228.

      In addition, Ms. Griffin overreached when she excluded petitioner from

participating in the 2008 Federal tax return preparation. Ms. Griffin’s wrongdoing

stemmed from denying petitioner the opportunity to review the tax return and
                                        - 15 -

[*15] delaying giving him a copy of the return. These actions show that she

overreached and possibly concealed information from petitioner. Accordingly,

petitioner satisfies section 6015(b)(1)(D) because he did not significantly benefit

and Ms. Griffin overreached when filing the 2008 tax return.

      In sum, under section 6015(b), petitioner is relieved of joint and several

liability for the understatement of tax attributable to the erroneous deductions Ms.

Griffin claimed for the 2008 tax year but remains jointly liable for the

understatement of tax attributable to the unreported State income tax refund for

the 2008 tax year. Petitioner is also not entitled to relief from joint and several

liability under section 6015(b) for any part of the 2007 tax year.

II. Relief Under Section 6015(c)

      Under section 6015(c), a divorced or separated spouse may elect to limit

liability for a deficiency on a joint return to the portion allocable to him or her. A

taxpayer can make a valid election only if: (1) the taxpayer is no longer married

to, is not part of the same household of, or is legally separated from his or her

spouse; (2) the taxpayer makes a timely election; and (3) the Secretary does not

demonstrate that the taxpayer had actual knowledge at the time the taxpayer

signed the return of an item giving rise to a deficiency. Sec. 6015(c)(3)(A), (B),

and (C).
                                          - 16 -

[*16] A. Section 6015(c) Election

      Under section 6015(c)(3)(C) a taxpayer’s election of relief under this

section is not valid if the Secretary demonstrates the taxpayer had actual

knowledge, at the time of signing the tax return, of any item giving rise to a

deficiency which is not allocable to the taxpayer. In other words, a taxpayer

cannot elect relief from joint and several liability under section 6015(c) for items

attributable to his or her spouse that he or she knew about when he or she signed

the tax return. As noted above, respondent bears the burden of proving actual

knowledge for this limitation to apply.

      To prove actual knowledge of fictitious or inflated deductions, the Secretary

must prove the taxpayer actually knew that the expenditure was not incurred or not

incurred to that extent. Sec. 1.6015-3(c)(2)(i)(B)(2), Income Tax Regs. This

knowledge limitation disqualifies only items giving rise to the deficiency that are

not allocable to the requesting spouse. Sec. 6015(c)(3)(C). Consequently,

respondent must prove petitioner had actual disqualifying knowledge of the items

attributable to Ms. Griffin. However, some of the items taken into account that

gave rise to the deficiency may be allocated partly to Ms. Griffin and partly to

petitioner. Therefore, respondent must also prove petitioner had actual
                                       - 17 -

[*17] disqualifying knowledge of the items giving rise to the deficiency which are

partly allocated to Ms. Griffin.

      For the 2007 tax year respondent must prove that petitioner had actual

disqualifying knowledge of: cash charitable contributions, noncash charitable

contributions, unreimbursed employee expenses, tax preparation fees, safe deposit

box rental expenses, and student loan interest payments. Respondent must show

that petitioner knew each expenditure was not incurred or not incurred to the

extent claimed because the deductions are fictitious or inflated. See sec. 1.6015-

3(c)(2)(i)(B)(2), Income Tax Regs. Respondent must also show that petitioner

knew of the State income tax refund.

      Respondent has met the burden of proving that petitioner knew about the

unreported income and knew the fictitious expense deductions were not incurred

or not incurred to the extent reported for tax year 2007. Petitioner admitted that he

knew there were not any unreimbursed employee expenses for that year. He also

admits that the noncash charitable contributions were not made because the

expenses related to gifts to his stepchildren. Petitioner was in the room with Ms.

Griffin when she was preparing their return for tax year 2007, and he could see

there were not any expenses incurred for tax preparation. Further, he knew the

family did not rent a safe deposit box, make any cash charitable contributions, or
                                        - 18 -

[*18] pay student loan interest. Last, petitioner knew of the State income tax

refund received in the 2007 tax year.

      In addition, to support actual knowledge we may look to whether a

requesting spouse made a deliberate effort to avoid learning about the item to be

shielded from liability. Sec. 1.6015-3(c)(2)(iv), Income Tax Regs. Petitioner was

offered the specific chance to review the Federal tax return for tax year 2007 but

deliberately chose to not look at it. Accordingly, petitioner is not relieved of joint

and several liability under section 6015(c) for the 2007 tax year.

      For the 2008 tax year respondent must prove petitioner had actual

disqualifying knowledge of the State income tax refund, charitable cash

contributions, tax preparation expenses, and unreimbursed employee expenses. As

noted above, petitioner’s living and filing circumstances drastically changed for

the 2008 tax year. Petitioner and Ms. Griffin no longer lived in the same

household, and Ms. Griffin prepared the joint tax return independently.

Respondent did not provide any information to show that petitioner had actual

knowledge of the deductions claimed on the 2008 tax return. Ms. Griffin could

have incurred expenses while living apart from petitioner and never indicated to

him that she had the expenses. Further, petitioner did not know about the

expenses through reviewing the Federal tax return because he was not given an
                                        - 19 -

[*19] opportunity to see the return before it was filed. Last, respondent did not

provide any information to show that petitioner had actual knowledge of the State

income tax refund’s being excluded. Accordingly, petitioner could validly elect

section 6015(c) relief because respondent has not met his burden of proving

petitioner knew about the erroneous items in the 2008 tax year. See sec.

6015(c)(3)(C).

      A taxpayer may make an election under section 6015(c)(3)(B) after a

deficiency is asserted but not later than two years after the Secretary commences

collection activities with respect to that taxpayer. The statute does not specify at

what point a deficiency is deemed to be asserted. In other words the statute is

silent to whether a deficiency can be asserted before the Commissioner issues a

notice of deficiency. When a statute is ambiguous or silent, we may look to the

statute’s legislative history to determine congressional intent. Burlington N. R.R.

v. Okla. Tax Comm’n, 481 U.S. 454, 461 (1987); Fernandez v. Commissioner, 114

T.C. 324, 329-330 (2000). Through the Consolidated Appropriations Act, 2001,

Pub. L. No. 106-554, app. G, sec. 313(a)(1), 114 Stat. at 2763A-640 (2000),

Congress clarified section 6015(c) by allowing taxpayers to make the election “at

any time after a deficiency for such year is asserted”, subject to the two-year

limitation noted above. The conference report accompanying the change indicated
                                       - 20 -

[*20] that a “deficiency is considered to have been asserted by the IRS at the time

the IRS states that additional taxes may be owed. Most commonly, this occurs

during the Examination process. It does not require an assessment to have been

made”. H.R. Conf. Rept. No. 106-1033, at 1023 (2001). This means that a

taxpayer does not have to wait for an assessment and may elect relief under

section 6015(c) once the Commissioner asserts additional tax during an audit.

Further, according to section 1.6015-5(b)(3), Income Tax Regs., a request for

relief may be made in connection to an audit or examination. While the election

was made before respondent issued a notice of deficiency, the election was not

premature because respondent had asserted a deficiency through the audit. See

H.R. Conf. Rept. No. 106-1033, supra at 1023; sec. 1.6015-5(b)(5), Income Tax

Regs. Accordingly, petitioner timely filed for section 6015(c) relief.

      To make a valid section 6015(c) election, petitioner must also show he was

no longer married to--or not a member of the same household as--Ms. Griffin

when he made the section 6015(c) election. See sec. 6015(c)(3)(A)(i)(I) and (II).

A judgment of dissolution of marriage was issued on November 24, 2009, for the

marriage between petitioner and Ms. Griffin. Petitioner filed Form 8857, Request

for Innocent Spouse Relief, on February 23, 2010. Accordingly, petitioner

satisfies the section 6015(c)(3)(A)(i)(I) marriage requirement because he was not
                                        - 21 -

[*21] married to Ms. Griffin when he elected relief under section 6015(c).

Consequently, petitioner satisfies all the election requirements under section

6015(c) for the 2008 tax year.

      B. Section 6015(c) and (d) Allocation

      Petitioner’s liability is limited to the portion of the deficiency allocable to

him for the 2008 tax year. See sec. 6015(c)(1). Generally the portion of the

deficiency on a joint return allocated to an individual is the amount that bears the

same ratio to the deficiency as the net amount of items taken into account in

computing the deficiency and allocable to the individual under section 6015(d)(3)

bears to the net amount of all items taken into account in computing the

deficiency. Sec. 6015(d)(1). Items giving rise to a deficiency on a joint return

shall be allocated between spouses as if separate returns had been filed. Sec.

6015(d)(3)(A). The requesting spouse is liable only for his or her proportionate

share of the deficiency that results from the allocation. Sec. 6015(d)(1).

      In addition to attributing the fictitious deductions to Ms. Griffin for the

2008 tax year under section 6015(b), the misreported deductions are solely

allocated to Ms. Griffin under section 6015(c) and (d). As noted above, the

touchstone for allocation rests on allocating items in the same manner as they

would have been allocated if the spouses had filed separate returns for the taxable
                                         - 22 -

[*22] year. See sec. 6015(d)(3)(A). Petitioner truthfully testified that he would

not have claimed the fictitious deductions on his return.7 His candor indicated that

the fictitious deductions for tax the 2008 tax year should be allocated to Ms.

Griffin. Further, petitioner was not involved in the preparation of the return for

the 2008 tax year and was not in a position to add or question any potential

deductions. Between the parties, we can deduce that Ms. Griffin would have

claimed the fictitious deductions on her separate return because petitioner did not

participate in the preparation of the joint return and he truthfully testified he would

not have claimed the deductions on his own return. Accordingly, no portion of the

deficiency related to the fictitious deductions is allocated to petitioner.

      However, the State income tax refund is not solely attributable to Ms.

Griffin, and consequently part of the deficiency resulting from the error will be

allocated to petitioner. Erroneous items of income are allocated to the spouse who

was the source of the income. Sec. 1.6015-3(d)(2)(iii), Income Tax Regs. In the

absence of clear and convincing evidence of a different allocation, an erroneous

item owned jointly by the spouses is allocated 50% to each spouse. Id. Petitioner


      7
       In petitioner’s words: “Tax returns for the Federal government aren’t
something you screw with. You do it the right way * * * you take deductions
you’re legally allowed and you don’t take the ones you’re not allowed. That’s just
me.”
                                         - 23 -

[*23] and Ms. Griffin owned the State income tax refund jointly and did not

provide evidence to support an allocation other than 50% to each spouse.

Accordingly, 50%, or $296, of the $592 State income tax refund is allocable to

petitioner.

      Pursuant to section 6015(d)(1), the amount of the deficiency allocable to

each spouse is directly proportional to the net amount of erroneous items allocable

to the spouse compared to the net amount of all erroneous items. The net amount

of all erroneous items is $15,765 for the 2008 tax year.8 The total deficiency for

the 2008 tax year for petitioner and Ms. Griffin is $2,098. Following section

1.6015-3(d)(4)(i)(A), Income Tax Regs., petitioner is allocated $39.39 of the

deficiency for the 2008 tax year.

      Petitioner was eligible for relief and validly elected to limit his liability to

the portion of the 2008 deficiency allocable to him under section 6015(c).

Following the allocation guidelines under section 6015(d) and section 1.6015-

3(d)(4)(i)(A), Income Tax Regs., petitioner may limit his liability to the portion of

the deficiency that resulted from his share of the unreported State income tax

refund. Petitioner is therefore relieved from joint and several liability for the 2008

      8
       The $15,765 includes deductions for unreimbursed employee expenses of
$7,773, charitable cash contributions of $7,350, tax preparation expenses of $50,
and State income tax refund of $592.
                                         - 24 -

[*24] tax year, but for the $39.39 liability resulting from his share of the

unreported State income tax refund.

III. Relief Under Section 6015(f)

      If relief is not available under 6015(b) or (c), section 6015(f) provides that

the Commissioner may grant equitable relief from joint and several liability if he

finds that, taking into account all of the facts and circumstances, it is inequitable to

hold the individual liable for any unpaid tax or deficiency. Petitioner is entitled to

relief for the 2008 tax year under both section 6015(b) and (c), and therefore the

Court will not analyze the 2008 tax year for equitable relief under subsection (f).

In cases brought under section 6015(f), the Court applies a de novo standard of

review as well as a de novo scope of review. See Porter v. Commissioner, 132

T.C. 203, 210 (2009). Petitioner bears the burden of proving that he is entitled to

equitable relief under section 6015(f). See Rule 142(a). The Court has

jurisdiction to determine whether a taxpayer is entitled to equitable relief under

section 6015(f). Sec. 6015(e)(1)(A).

      Pursuant to section 6015(f), the Commissioner has issued revenue

procedures the Commissioner uses in determining whether a taxpayer is entitled to

relief from joint and several liability. See Rev. Proc. 2003-61, 2003-2 C.B. 296,
                                        - 25 -

[*25] modifying and superseding Rev. Proc. 2000-15, 2000-1 C.B. 477.9 Rev.

Proc. 2003-61, supra, lists factors the Commissioner uses in deciding whether to

grant section 6015(f) relief. The Court may consider these guidelines but is not

bound by them. Rev. Proc. 2003-61, supra, provides a three-step analysis to

follow in evaluating a request for relief. The first step includes seven threshold

conditions that must be met to request equitable relief under section 6015(f).

Respondent concedes that petitioner meets the threshold requirements of Notice

2012-8, 2012-4 I.R.B. 309, which for purposes of this case are substantially the

same as the conditions in Rev. Proc. 2003-61, supra. Accordingly, petitioner

meets the seven threshold conditions for equitable relief under Rev. Proc 2003-61,

supra.

         The second step of Rev. Proc 2003-61, sec. 4.02, 2003-2 C.B. at 298,

provides three conditions that if met will ordinarily qualify a requesting spouse for

relief under section 6015(f) with respect to an underpayment of a properly

reported liability. This step is inapplicable to petitioner because he did not

properly report the liability. Petitioner claimed erroneous deductions and failed to


         9
        On January 23, 2012, the Commissioner published Notice 2012-8, 2012-4
I.R.B. 309, concerning a proposed revenue procedure that if finalized would revise
the factors to be examined in determining a requesting spouse’s claim for
equitable relief.
                                        - 26 -

[*26] report a State income tax refund. These errors disqualify petitioner from

section 6015(f) relief under Rev. Proc. 2003-61, sec. 4.02, because he did not

properly report his tax liability.

      When the requesting spouse satisfies the seven threshold conditions but

does not qualify for relief under Rev. Proc. 2003-61, sec. 4.02, he or she may still

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

4.03, 2003-2 C.B. at 298. A requesting spouse is eligible for relief if, taking into

account all facts and circumstances, it is inequitable to hold the requesting spouse

liable for the underpayment. Rev. Proc. 2003-61, sec. 4.03(2)(a), contains a

nonexclusive list of factors that the Commissioner considers when determining

whether to grant equitable relief. The factors are: (1) marital status; (2) economic

hardship; (3) in the case of 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; (6) compliance with tax laws; (7) spousal abuse; and (8)

mental and physical health of the nonrequesting spouse. This test cannot be

applied mechanically. No single factor is determinative, and all factors are

considered and weighed appropriately. Haigh v. Commissioner, T.C. Memo.

2009-140. The only factor that clearly favors granting petitioner relief for the
                                        - 27 -

[*27] 2007 tax year is his marital status. The other factors either weigh against

relief or are neutral.

       In addition, the Court finds that petitioner significantly benefited from filing

a joint return. When determining whether a requesting spouse significantly

benefited directly or indirectly from the underpayment, the fact that the requesting

spouse received a benefit of the return from the underpayment may be taken into

account. Sec. 1.6015-2(d), Income Tax Regs. Petitioner benefited from filing a

joint return with Ms. Griffin for the 2007 tax year because he was able to spend

the refund from the joint return. Petitioner testified that he and Ms. Griffin jointly

spent the Federal income tax refund for the 2007 tax year. The refund was

erroneous, and therefore petitioner benefited from the joint return by using the

money from the return in a manner of his choosing. Accordingly, petitioner is not

entitled to relief from joint and several liability under section 6015(f) for the 2007

tax year.

IV. Accuracy-Related Penalty

       Section 6662(a) and (b)(1) and (2) provides that a taxpayer is liable for a

20% accuracy-related penalty on any part of an underpayment attributable to

negligence or disregard of rules or regulations, or any substantial understatement

of income tax. For purposes of section 6662(a), negligence means any failure to
                                        - 28 -

[*28] make a reasonable attempt to comply with the Code. Sec. 6662(c). A

taxpayer is negligent if he or she fails to do what a reasonable and ordinarily

prudent person would do under the circumstances. Neely v. Commissioner, 85

T.C. 934, 947 (1985). Negligence is strongly indicated where a taxpayer fails to

make a reasonable attempt to ascertain the correctness of a deduction, credit, or

exclusion on a return that would seem to a reasonable person to be exceptionally

beneficial under the circumstances. See sec. 1.6662-3(b)(1)(ii), Income Tax Regs.

      For purposes of section 6662(a), disregard means any careless, reckless, or

intentional disregard. Sec. 6662(c). A disregard of rules is careless if the taxpayer

does not “exercise reasonable diligence to determine the correctness of a return

position”. Sec. 1.6662-3(b)(2), Income Tax Regs. A disregard of rules is reckless

if the taxpayer “makes little or no effort to determine whether a rule or regulation

exists, under circumstances which demonstrate a substantial deviation from the

standard of conduct that a reasonable person would observe.” Id.

      Petitioner was at least careless for the 2007 tax year. Petitioner did not

make any effort to review the return when given the chance, much less determine

whether any of the positions taken were correct. Before filing the 2007 tax return

Ms. Griffin told petitioner that they expected a Federal income tax refund for that

year, but petitioner did not make any effort to validate the positions required to
                                        - 29 -

[*29] receive the refund. Accordingly, petitioner is liable for the 20% penalty for

the 2007 tax year under section 6662(a) because he carelessly disregarded rules

and regulations.

      The accuracy-related penalty can be avoided if a taxpayer shows that he or

she acted reasonably and in good faith. Sec. 6664(c)(1). The determination of

whether a taxpayer acted in good faith is factual and is made on a case-by-case

basis. Sec. 1.6664-4(b)(1), Income Tax Regs. Relevant factors for the Court to

consider include the knowledge and experience of the taxpayer and reliance on the

advice of a qualified professional. Id. Petitioner did not seek any professional tax

advice with regard to the 2007 tax return. He relied only on Ms. Griffin’s

conclusions that the positions taken to receive the refund were correct.

      In conclusion, petitioner is not relieved of joint and several liability for the

2007 tax year. Petitioner is, however, relieved of joint and several liability for the

understatement of tax attributable to all of the erroneous deductions under section

6015(b) for the 2008 tax year. Further, petitioner validly elected to limit his

liability to the portion of the deficiency attributable to him under section 6015(c)

and (d). He is liable for a $39.39 deficiency, which is his share of the 2008

deficiency resulting from the unreported State income tax refund.
                                      - 30 -

[*30] The Court has considered all of the arguments made by the parties and, to

the extent they are not addressed herein, they are considered unnecessary, moot,

irrelevant, or without merit.

      To reflect the foregoing,


                                                     An appropriate decision

                                               will be entered.
