                             T.C. Memo. 2015-143



                        UNITED STATES TAX COURT



            RONALD H. SAPP AND MARY SAPP, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket Nos. 29754-11, 23093-12.            Filed August 5, 2015.



      Ronald H. Sapp and Mary Sapp, pro se.

      Miriam C. Dillard, Christopher A. Pavilonis, and A. Gary Begun, for

respondent.



                          MEMORANDUM OPINION


      GOEKE, Judge: Respondent determined deficiencies in Ronald H. Sapp

and Mary Sapp’s Federal income tax, accuracy-related penalties under section
                                           -2-

[*2] 6662(a),1 and additions to tax for failure to file timely under section

6651(a)(1)2 as follows:3

                                          Penalty      Addition to tax

                 Year    Deficiency     sec. 6662(a)   sec. 6651(a)(1)
                 2004      $43,710        $8,742           $10,857
                 2006      164,211         32,842           39,788
                 2008      150,423         30,085             ---

Petitioners timely petitioned this Court requesting redetermination of the

deficiencies and penalties and additions to tax for tax years 2004, 2006, and 2008.

The deficiencies for tax years 2004 and 2006 and the additions to tax and penalties

will be resolved pursuant to a Rule 155 computation which was ordered in a bench

opinion on February 25, 2015, on the underlying substantive adjustments rendered

in a bifurcated trial of those adjustments in the case at docket No. 29754-11. In a

stipulation of settled issues, the parties agreed to a deficiency of $25,763 and a



      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
        Respondent issued a notice of deficiency to petitioners on September 23,
2011, for tax years 2004 and 2006. Respondent issued a notice of deficiency to
petitioners on June 13, 2012, for tax year 2008.
      3
          All dollar amounts are rounded to the nearest dollar.
                                            -3-

[*3] penalty of $5,153 under section 6662(a) for 2008 in the case at docket No.

23093-12. The cases were consolidated pursuant to Rule 141(a) for trial, briefing,

and opinion as to the sole remaining issue, whether Ms. Sapp is entitled to relief

from joint and several liability pursuant to section 6015(b) and (c) or, in the

alternative, under subsection (f). Respondent concedes this issue, but Mr. Sapp

opposes this relief. For the reasons explained herein, we hold that Ms. Sapp is

entitled to relief under section 6015(f).

                                     Background

      All the facts in evidence have been stipulated and are so found. Petitioners

resided in Florida when they filed the petition. Petitioners filed a Form 1040, U.S.

Individual Income Tax Return, claiming married filing jointly status for tax years

2004, 2006, and 2008. Mr. Sapp is a certified master plumber and licensed well

driller. Mr. Sapp started a residential plumbing business, Ronnie Sapp Plumbing,

and later shifted the business to concentrate on water wells, septic systems, and

water treatment. Ms. Sapp handled the financial aspects of the business and made

entries in a QuickBooks program regarding the business’ income and expenses.

Petitioners reported their income and expenses from Ronnie Sapp Plumbing on

Schedules C, Profit or Loss From Business, of their 2004, 2006, and 2008 income

tax returns.
                                          -4-

[*4] Petitioners were married in 2000 and have two sons. Their marriage

deteriorated, and they are currently involved in a dissolution of marriage case.

Ms. Sapp sought legal assistance with her dissolution of marriage case in February

2013. Although we are reluctant to include details of the abuse to which Ms. Sapp

testified, we find that there is a history of domestic abuse in their relationship

dating back at least to the birth of their first son in 2002. Mr. Sapp also has a

history of alcohol and prescription drug abuse. Petitioners have separated several

times throughout the course of their relationship. In March 2013 Ms. Sapp left

Mr. Sapp and took their two children with her, and they have been separated since

that time.

        From March until May 2013 Ms. Sapp lived in the Hubbard House, a

domestic violence shelter in Jacksonville, Florida. From May until June 2013 Ms.

Sapp lived in a women’s shelter near Hanover, Pennsylvania, to be closer to her

adult daughter. Ms. Sapp and her two sons were receiving food stamps from

March until August 2013. Ms. Sapp currently resides with her mother because she

cannot afford a place of her own. Ms. Sapp earns $11.50 an hour amounting to a

salary between $360 and $400 a week that goes toward expenses related to her two

sons.
                                          -5-

[*5] The issue that remained for trial is whether Ms. Sapp is entitled to relief

from joint and several liability for tax years 2004, 2006, and 2008. In lieu of

submitting an IRS Form 8857, Request for Innocent Spouse Relief, Ms. Sapp

entered a statement at trial seeking relief from joint and several liability on

February 25, 2015. Mr. Sapp opposes Ms. Sapp’s request.

                                      Discussion

      In general, married individuals who file a joint return are jointly and

severally liable for the tax arising from the return. Sec. 6013(d)(3). Section 6015

allows a spouse to obtain relief from joint and several liability in certain

circumstances. A taxpayer requesting relief from joint and several liability bears

the burden of proving that she is entitled to relief under section 6015(f). Rule

142(a); Porter v. Commissioner, 132 T.C. 203, 210 (2009); Alt v. Commissioner,

119 T.C. 306, 311 (2002), aff’d, 101 Fed. Appx. 34 (6th Cir. 2004).

      Three forms of relief are available under section 6015. In general,

subsection (b) provides full or apportioned relief from joint and several liability

for understatements of tax on a return and subsection (c) provides apportioned

relief in respect of a deficiency to taxpayers who are divorced or separated.

Subsection (f) provides equitable relief from joint and several liability if, when

taking into account all the facts and circumstances, the Secretary determines it is
                                          -6-

[*6] inequitable to hold the individual liable for any deficiency and relief is not

available under subsection (b) or (c). Because Ms. Sapp had both knowledge and

reason to know that there was an understatement of tax because of her

involvement with the financial aspects of the business, she is ineligible for relief

under subsection (b) or (c). Therefore, we must determine whether she is eligible

for equitable relief under section 6015(f).

      Rev. Proc. 2013-34, 2013-43 I.R.B. 397, modifying and superseding Rev.

Proc. 2003-61, 2003-2 C.B. 296, sets forth guidelines for determining whether a

requesting spouse qualifies for relief under section 6015(f). This Court may

consider those guidelines, but is not bound by them, in evaluating the facts and

circumstances of a case. Molinet v. Commissioner, T.C. Memo. 2014-109, at *6;

see Pullins v. Commissioner, 136 T.C. 432, 438-439 (2011); Porter v.

Commissioner, 132 T.C. at 210. A requesting spouse generally must satisfy all

seven of the following threshold conditions before a request for equitable relief

under section 6015(f) may be considered: (1) the requesting spouse filed a joint

return for the taxable year for which he or she seeks relief; (2) relief is not

available to the requesting spouse under subsection (b) or (c); (3) the 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
                                          -7-

[*7] assets to the requesting spouse; (6) the requesting spouse did not knowingly

participate in the filing of a fraudulent joint return; and (7) the income tax liability

from which the requesting spouse seeks relief is attributable (either in full or in

part) to an item of the nonrequesting spouse or an underpayment resulting from

the nonrequesting spouse’s income. Rev. Proc. 2013-34, sec. 4.01, 2013-43 I.R.B.

at 399-400.

      We find that Ms. Sapp has failed to meet the seventh requirement because

the liabilities are attributable to the business for which she was responsible for

handling the finances. However, Rev. Proc. 2013-34, sec. 4.01(7)(d), provides an

exception which allows the Internal Revenue Service (IRS) to consider granting

relief regardless of whether the understatement, deficiency, or underpayment is

attributable (in full or in part) to the requesting spouse if the requesting spouse has

been a victim of abuse by the nonrequesting spouse and that abuse has resulted in

the requesting spouse’s being unable to challenge or question the treatment of the

items on the returns.

      Because of the application of this exception, Ms. Sapp has met all seven of

the threshold requirements to be considered for equitable relief under section

6015(f) as the abuse she suffered resulted in her being unable to challenge or

question the treatment of the items on the returns. As a result, we will consider all
                                         -8-

[*8] relevant facts and circumstances in deciding whether Ms. Sapp is entitled to

relief. Ms. Sapp is entitled to relief under the streamlined provisions of Rev. Proc.

2013-34, sec. 4.02, 2013-43 I.R.B. at 400. The following factors set forth in

section 4.02 are relevant to our inquiry: (1) marital status; (2) economic hardship

suffered if relief is not granted; and (3) knowledge or reason to know of the

understatement at the time of signing the joint return. Id.

      All three factors favor the granting of relief. First, Ms. Sapp is considered

no longer married to Mr. Sapp as set forth in Rev. Proc. 2013-34, sec.

4.03(2)(a)(iv), 2013-43 I.R.B. at 400, because she was not a member of the same

household as Mr. Sapp at any time during the 12-month period ending on the date

the IRS made its determination. Therefore, this factor favors relief. Second, Ms.

Sapp would suffer economic hardship if relief were not granted. She is supporting

herself and her two young children on a weekly salary between $360 and $400.

Ms. Sapp is currently living with her mother because she cannot afford her own

housing and all of her current income goes toward living expenses for her and her

children. Last, Ms. Sapp did have reason to know that there was an

understatement or deficiency on the joint income tax return because she handled

the financial aspects of the business and made entries in a QuickBooks program

regarding the business’ income and expenses.
                                         -9-

[*9] However, Rev. Proc. 2013-34, sec. 4.02(3)(a), provides an exception taking

into account the domestic abuse Ms. Sapp suffered from Mr. Sapp. Rev. Proc.

2013-34, sec. 4.02(3)(a), specifies: “If the nonrequesting spouse abused the

requesting spouse * * * and because of the abuse * * * the requesting spouse was

not able to challenge [or question] the treatment of any items on the joint return

* * * for fear of the nonrequesting spouse’s retaliation, then the abuse * * * will

result in this factor being satisfied even if the requesting spouse knew or had

reason to know of the items giving rise to the understatement or deficiency”. We

are less likely to grant relief under section 6015(f) if the requesting spouse knew

or had reason to know of the deficiency, but in this case, Ms. Sapp’s knowledge is

overridden by the physical and emotional stress she suffered as a consequence of

Mr. Sapp’s behavior.

      We find that Ms. Sapp was physically and emotionally abused and as a

result she cannot be held to the normal expectations of responsibility. It would be

inequitable to hold her responsible for lack of substantiation and liable for the

underpayment of tax reported on the joint tax return. While Ms. Sapp was

involved in the bookkeeping of the business, because of the nature of her

relationship with Mr. Sapp she was not in a position to independently determine or

question what was on the tax return. Under these circumstances, relief is favored.
                                           -10-

[*10] Factors favoring relief outweigh Ms. Sapp’s knowledge of and involvement

with the financial aspects of the business, and thus she is entitled to relief under

section 6015(f).

      In reaching our holdings herein, we have considered all arguments the

parties made, and to the extent we did not mention them above, we conclude they

are moot, irrelevant, or without merit.

      To reflect the foregoing,


                                                  Decisions will be entered for

                                          petitioner Ms. Sapp as to relief from joint

                                          and several liability under section 6015(f).
