The opinion
T.C. Memo. 2005-220
UNITED STATES TAX COURT
ELEANOR SIMON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20258-04. Filed September 21, 2005.
Jeffrey A. Collins, for petitioner.
Steven M. Webster, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
CHIECHI, Judge: This case arises from a request for equita-
ble relief (relief) under section 6015(f)1 with respect to peti-
tioner’s taxable year 1998. We must decide whether respondent
abused respondent’s discretion in denying petitioner such relief.
We hold that respondent did not abuse respondent’s discretion.
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.
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FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner resided in Greensboro, North Carolina, at the
time she filed the petition.
Petitioner and Javester Simon (Mr. Simon), both college
graduates, married on or about May 20, 1966, separated on or
about March 5, 1999, and divorced on June 25, 2001. The judgment
of divorce granting petitioner and Mr. Simon a divorce did not
impose any obligation on petitioner or Mr. Simon to pay any
outstanding Federal income or other tax liabilities. Nor is
there any other document relating to that divorce, such as a
property settlement, that imposed any legal obligation on peti-
tioner or Mr. Simon to pay any such liabilities. Although
petitioner and Mr. Simon divorced in June 2001, division of the
marital assets remains to be adjudicated by the North Carolina
courts.
During 1998, the year at issue, petitioner worked for
Guilford Technical Community College (Guilford College), and Mr.
Simon worked for Roadway Express, Inc. (Roadway Express). During
that year, petitioner and Mr. Simon received wages of $34,681.20
and $58,016.49, respectively.
Petitioner and Mr. Simon signed on April 15, 1999, and filed
the signature form of Form 1040PC Format, U.S. Individual Income
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Tax Return, for taxable year 1998 (1998 return).2 In the 1998
return, they reported total wages of $92,697, total interest of
$56, a retirement plan distribution of $40,420, total income of
$133,173, total tax of $28,730, total tax payments of $16,658,
and tax due of $12,443. Petitioner and Mr. Simon attached to the
1998 return (1) Forms W-2, Wage and Tax Statement, for 1998 that
reported their respective wages of $34,681.20 and $58,016.49 and
respective Federal income tax (tax) withheld of $4,014.04 and
$9,114.06 and (2) Form 1099R, Distributions From Pensions,
Annuities, Retirement, or Profit-Sharing Plans, IRAs, Insurance
Contracts, etc., for 1998 that reported a fully taxable gross
retirement plan distribution of $40,419.71 to Mr. Simon (Mr.
Simon’s 1998 retirement plan distribution) by First Union Na-
tional Bank, First Union IRA Department (First Union) and tax
withheld of $3,529.70. The following jurat appeared immediately
above the respective signatures of petitioner and Mr. Simon on
the 1998 return and immediately below, inter alia, the $12,443 of
tax shown due in that return: “Under penalties of perjury, I
declare that I have examined this return and accompanying sched-
ules and statements, and to the best of my knowledge and belief,
they are true, correct, and complete.”
2
Robert L. Schroll signed the 1998 return as return pre-
parer.
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Petitioner and Mr. Simon did not remit with the 1998 return any
payment of the tax shown due.
On January 9, 2002, petitioner filed with the Internal
Revenue Service (IRS) Form 8857, Request for Innocent Spouse
Relief (petitioner’s Form 8857), with respect to taxable year
1998.3 At the request of the IRS, petitioner completed and
submitted to the IRS Form 886-A, Innocent Spouse Questionnaire
(petitioner’s Form 886-A). In petitioner’s Form 886-A, peti-
tioner provided the responses indicated to the following ques-
tions with respect to the filing of the 1998 return:
2. If you are requesting relief from tax reported on
the original return:
a. Did you review the tax return before signing it?
I did not have an opportunity to review the re-
turn. My former husband--that [sic] the last
minute--insisted that I sign the return immedi-
ately so that he could mail the return before the
deadline.
b. At the time you signed the return, were you aware
there was a balance due IRS? Please explain in
detail.
No, I was not aware of any balance due because I
was not afforded the opportunity to review the
return.
3
In petitioner’s Form 8857, petitioner also sought relief
under sec. 6015 with respect to taxable year 1997 in which Mr.
Simon received a retirement plan distribution of $47,632.36 from
Roadway Express Savings Plan (Mr. Simon’s 1997 retirement plan
distribution). The IRS granted petitioner partial relief with
respect to 1997, and that year is not at issue in the instant
case. See infra note 4.
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c. Describe how, at the time you signed the return,
you and your spouse planned to pay the tax due?
I was unaware of any taxes due because I did not
know that he had taken funds from his retirement.
d. Why did you file a joint return instead of
married filing separate?
We filed a joint return for thirty-three years
while living as husband and wife.
In petitioner’s Form 886-A, petitioner also alleged the following
with respect to the filing of the 1998 return:
My former husband customarily had our return completed
by H&R Block. The additional [retirement] income was
reported. When the form was given to me for my signa-
ture, my former husband insisted that I sign it quickly
in order to allow him sufficient time to get to the
post office.
In response to questions relating to the preparation of the
1998 return, petitioner alleged in petitioner’s Form 886-A that
her only involvement with the preparation of that return was to
give Mr. Simon Form W-2 for 1998 that she received from Guilford
College. In this connection, petitioner further alleged in
petitioner’s Form 886-A that Mr. Simon gathered the information
for the preparation of the 1998 return and delivered it to the
return preparer, that she never accompanied Mr. Simon when he
brought that information to the return preparer, and that Mr.
Simon retrieved the 1998 return from the return preparer after it
was completed.
In response to questions relating to the existence of any
joint bank accounts, petitioner alleged in petitioner’s Form 886-
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A that during 1998 she and Mr. Simon had separate, not joint,
bank accounts, that she did not review Mr. Simon’s checkbook or
bank statements, that she did not open mail addressed to Mr.
Simon, that she made payments for her automobile, her clothing,
and certain unidentified food and furniture, and that Mr. Simon
made payments for the mortgage, utilities, insurance, and his
clothing.
In response to a question relating to whether petitioner’s
payment of the tax liability for taxable year 1998 (unpaid 1998
liability) would cause an economic hardship to her, petitioner
indicated that it would not. However, petitioner added that “it
would be grossly unfair because I received no economic benefit--
in fact, I was not aware he withdrew these [retirement] funds”.
In response to a question asking for any other information
in support of petitioner’s position that she is entitled to
relief under section 6015 with respect to taxable year 1998,
petitioner stated:
I have remarried since my divorce [from Mr. Simon], and
this is my reason for saying * * * that if I had to
pay, it would not create an economic hardship, although
it would be quite difficult for me. Inasmuch as my
former husband used the money [the retirement distribu-
tion] entirely for himself, and kept me totally unaware
of its existence, I feel it is only fair that he should
accept the responsibility for paying the tax liability
he incurred.
In petitioner’s Form 886-A, petitioner did not claim that
Mr. Simon abused her during their marriage.
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In considering petitioner’s Form 8857, the IRS found that
petitioner made an error in calculating the amount of tax due for
taxable year 1998 that was shown in the 1998 return (i.e.,
$12,443). Respondent determined that the correct amount of tax
due for that year is $12,072, of which $10,103 and $1,969 were
attributable to Mr. Simon and petitioner, respectively.
On September 9, 2002, the IRS made a preliminary administra-
tive determination (IRS September 9, 2002 preliminary determina-
tion) with respect to petitioner’s Form 8857. As pertinent here,
the IRS September 9, 2002 preliminary determination denied
petitioner relief under section 6015 with respect to taxable year
1998.4 That preliminary determination stated in pertinent part:
1998 IRC 6015(f) claim
Liability arose on or after July 22, 1998
Joint return is valid
There is enough information to determine the claim
No OIC accepted
Eligibility factors:
Underpayment of tax - relief is not available under IRC
6015(b) & 6015(c)
Filed a joint return
Claim filed timely
Liability unpaid, or paid by the requesting spouse
within the time period
Not a fraudulent return
No fraudulent transfer of assets
No disqualified assets transferred
Tier I factors (full scope):
Taxpayers are currently divorced, widowed, legally
4
The IRS September 9, 2002 preliminary determination granted
petitioner partial relief under sec. 6015(c) with respect to
taxable year 1997. See supra note 3.
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separated, or they had been members of separate
households prior to the claim for at least 12
consecutive months
Can’t prove a belief that tax was to be paid
Explanation: At this time and the previous year
he had taken large amounts out of
his IRA, this is the main cause of
the balance due. She didn’t
examine the return to see tax was
due.
Tier I factors (full scope)
not met
Tier II factors:
Taxpayers are currently divorced, widowed, For
legally separated, or they had been members of
separate households prior to the claim for at
least 12 consecutive months
No economic hardship Against
Explanation: per claimant
No marital abuse
No legal obligation established
The liability is not solely attributable to Against
the non-requesting spouse
Erroneous items: see allocation sheet, using the
percentage method on the itemized
deduction means part is
attributable to her.
Knowledge:
Background:
Claimant - college Spouse - college
Involvement:
Claimant - she said she Spouse -
paid part of
the bills but
had no access
to his individual
accounts
Lifestyle changes: none known
Spouse’s elusiveness: she said he took out the
money and didn’t tell her
Duty to inquire: no review of the return,
he said he rushed her and
didn’t give her time
Living arrangements: she said separated 3-98
but court papers say 5-5-
99
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The requesting spouse had knowledge or Against
reason to know
Explanation: When the return was filed there had
been two years of large withdrawls
from IRA. She didn’t review the
return. She didn’t do her duty to
inquire. Had she reviewed the
return and saw the IRA withhdrawls
she would have known something was
going on.
No significant benefit gained
In compliance with the tax laws
Explanation: returns were filed; however, she is
remarried and there is a SSA update
showing for december of 2001 which
would mean she should have filed
married filing separate or joint in
2001.
Unique circumstances: none
Not meeting Tier II factors - deny claim
Tier II consideration: Based on the above facts it is
equitable to hold the claimant
liable for the balance. She
didn’t exam the return or
question how it would be paid,
part is attributable to her.
She should have known there
was a problem because of large
IRA withdrawls.
Tier II factors not met -
deny claim
Ending statement: Tier I factors (full scope) not met
Tier II factors not met - deny
claim
Claim denied under IRC 6015(f) -
full scope
Claim denied under IRC 6015(f)
- full scope
[Reproduced literally.]
In a letter dated November 6, 2002 (petitioner’s November 6,
2002 letter), petitioner appealed to the IRS Appeals Office
(Appeals Office) the IRS September 9, 2002 preliminary determina-
tion to deny her relief under section 6015 with respect to
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taxable year 1998.
On September 17, 2003, Mr. Simon sent a letter (Mr. Simon’s
September 17, 2003 letter) to the IRS. He attached to that
letter: (1) Form 1099R for 1997 that reported Mr. Simon’s 1997
retirement plan distribution of $47,632.36 as fully taxable and
(2) various statements for the period April 9 through April 30,
1997, that First Union prepared and sent to Mr. Simon. Mr.
Simon’s September 17, 2003 letter stated in pertinent part:
I’m submitting this information from the tax year 1997
and 1998. It is in regard to the stock certificate I
received from Caliber System and rolled over to a
qualified IRA. Somehow this information was passed on
as cash. The portion that I used in 1997 and 1998 was
taxed and a penalty was assessed because I was not 59½
at the time of withdrawal.
The IRS has been holding all my refunds while we have
exchanged information. I have received this paperwork
from Caliber Systems, Roadway Express, and Wachovia
Bank.[5] I hope this information will clear up the
misunderstanding.
Also I need you to submit a form to me. I am no longer
married and need my divorced wife exempt from this
matter. * * * [Reproduced literally.]
On May 18, 2004, the Appeals Office sent a letter to Mr.
Simon (Appeals Office May 18, 2004 letter) regarding petitioner’s
appeal of the IRS September 9, 2002 preliminary determination.
The Appeals Office May 18, 2004 letter stated in pertinent part:
5
Although Mr. Simon’s September 17, 2003 letter suggested
that he was attaching to that letter “paperwork from Caliber
Systems, Roadway Express, and Wachovia Bank”, the only attach-
ments to that letter that are part of the record in this case are
those described above.
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Eleanor Collins [petitioner][6] has requested relief
from tax liability as an innocent spouse for the tax
years shown above. If the IRS grants relief, this
would relieve your spouse, in whole or in part, from
having to pay the income tax owed on these years. * * *
Our Examination function denied the request, Eleanor
Collins then asked our Appeals function to review the
request.
We are contacting you to see if you have any additional
information that you’d like to provide. You may bene-
fit from participating in this administrative appeal
proceeding, since we’ll make our decision based on all
the information we receive. Should Eleanor Collins
receive an innocent spouse classification, the tax
liability in whole or in part will be yours alone.
I’m available to meet with you in an informal confer-
ence if you’d like. You can present your position at
this conference. You can also participate by sending
us material and information that support your position.
Because of our time frames in dealing with appeals, I
need to hear from you within the next 30 days.
On July 22, 2004, the Appeals Office completed a document
entitled “Appeals Transmittal and Case Memo” (Appeals Office
memorandum) that stated in pertinent part:
SUMMARY AND RECOMMENDATION
Does Eleanor M. Simon qualify as an innocent spouse
under IRC section 6015 for tax year ending 1998?
No, the taxpayer does not qualify for relief as an
innocent spouse for tax year 1998. The amount of
$10,103 of the $12,072 deficiency is allocable to the
Non-requesting Spouse (NRS); however, the Cincinnati
Service Center disallowed the claim for relief in full
because the taxpayer did not have a belief the tax
would be paid in full at the time of signing the joint
return. I sustain their determination.
6
Sometime after petitioner and Mr. Simon divorced, peti-
tioner remarried.
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* * * * * * *
BRIEF BACKGROUND
The taxpayer filed a joint return with her former
husband, Javester Simon, for tax year 1998. She al-
leges she did not have an opportunity to review the
return because her husband insisted she sign it immedi-
ately so that he could mail it timely.
The taxpayer separated from her husband in 1998 or 1999
and divorced him in June 2001.
The taxpayers filed their 1998 return with an underpay-
ment of $12,443 and included a large IRA distribution
on the return for such year.
DISCUSSION AND ANALYSIS
The taxpayer filed a Request for Innocent Spouse Re-
lief, Form 8857, under IRC section 6015(b), (c) or (f)
for 1997 & 1998. Since the Cincinnati Service Center
allocated the entire deficiency to the NRS for 1997 and
the taxpayer did not request Appeal’s consideration for
this year, the discussion below is limited to the 1998
tax year.
IRC § 6015(b)
* * * * * * *
Does the taxpayer meet the requirements of IRC
§ 6015(b)?
No, the taxpayer does not qualify for relief under IRC
§ 6015(b) for tax year 1998. There was no understate-
ment of tax for this year.
IRC § 6015(c)
* * * * * * *
Does the taxpayer meet the requirements of IRC
§ 6015(c)?
No, the taxpayer does not meet the requirements of IRC
§ 6015(c). There is no deficiency in tax allocable to
the non-requesting spouse for 1998. The tax liability
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is attributable solely to the underpayment of tax upon
filing the tax return, plus interest and penalties.
IRC § 6015(f)
IRC § 6015(f) provides the IRS with the discretion to
grant equitable relief where a taxpayer is not entitled
to relief under either IRC § 6015(b) or (c). Equitable
relief under IRC section 6015(f), however, is subject
to two limitations in accordance with - Revenue Proce-
dure 2000-15, 2000-1 CB 447, Section 4.02:
If the return has been adjusted to reflect an
understatement, relief will be available only to
the extent of the liability shown on the return
prior to the adjustment, or
If no adjustment is made, relief is limited to the
extent the unpaid liability is due to the non-
requesting spouse.
Explanation of IRC § 6015(f)
In Revenue Procedure 2000-15, the IRS delineates quali-
fications necessary to be granted equitable relief
under IRC § 6015(f). Threshold eligibility qualifica-
tions are:
Joint return filed
Timely filed claim for relief
Relief not available under other sections of the
statute
There was no transfer of assets between spouses as
part of a fraudulent scheme
Return was not filed with fraudulent intent on the
part of the requesting spouse
Liability remains unpaid
No disqualified assets transferred to requesting
spouse. If so, relief only available to the ex-
tent that the liability exceeds the value of the
transferred assets.
Nonetheless, under section 4.03 of Revenue Procedure
2000-15, relief is still possible for requesting
spouses who meet the threshold eligibility requirements
above, but do not otherwise qualify for relief under
any other sections. This last relief provision is only
available where it would be inequitable to hold the
requesting spouse liable for the understatement. Under
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this section, equitable relief may be granted for
underpayments after consideration of local factors
(Tier 1) or for underpayments and understatements after
consideration of the centralized review factors (Tier
2). If an underpayment does not qualify under the Tier
1 factors, the Tier 2 factors should be considered.
All understatement and deficiency cases should consider
the Tier 2 factors only.
Equitable relief under the Tier 1 factors will ordi-
narily be granted under § 6015(f) if all of the follow-
ing four local factors are met:
Spouse is divorced, separated, widowed, or lived
apart of the 12 months prior to the date request
filed
Requesting spouse had a reasonable belief that the
tax was paid or was going to be paid the time the
spouse signed the return.
Undue hardship would result if equitable relief is
not granted, and
The unpaid liability at issue is attributable to
the non-requesting spouse.
The IRS has authority to grant relief in circumstances
where it is clearly inequitable to hold the requesting
spouse liable for the tax and where a spouse had rea-
sonable belief that the tax reported on his/her return
would be paid. The use of Tier 2 factors, however,
should be limited to those cases where it would be
clearly inequitable to hold the requesting spouse
liable for the tax.
Does the taxpayer qualify for equitable relief under
IRC § 6015(f)?
In my opinion, no, the taxpayer does not qualify for
equitable relief.
When considering equitable relief, the following fac-
tors should be considered:
Martial status
Economic hardship
Spousal abuse
Legal obligation of non-requesting spouse
No knowledge or reason to know
Liability attributable to non-requesting spouse
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Of the above factors, the ones in the taxpayer’s favor
are
Marital status
Liability attributable to non-requesting spouse
In my opinion, these factors are outweighed by the fact
this year was the second year of withdrawals from the
NRS’s IRA accounts. The likelihood that she did not
know of the withdrawals from beginning in 1997, that
were included on the 1997 tax return, is diminished in
the second year. In addition, the withdrawals were
included in the income of the 1998 tax return and the
return clearly reflected a balance due In excess of
$12,000. It is clearly not believable that the tax-
payer did not know of this liability due.
She further provided no evidence that she believed the
tax would be paid at the time the tax return was filed.
EVALUATION
Based on the above discussion, the taxpayer has failed
to show that she is entitled to relief under either IRC
§ 6015(b)(c) or (f). I recommend that the determina-
tion of the Innocent Spouse Unit is sustained in 1998..
[Reproduced literally.]
Also on July 22, 2004, the Appeals Office sent to petitioner
a “Notice of Determination Concerning Your Request for Relief
from Joint and Several Liability under Section 6015” (notice of
determination). In the notice of determination, the Appeals
Office denied petitioner relief under section 6015 with respect
to taxable year 1998. The notice of determination stated in
pertinent part: “For 1998, you do not qualify for relief under
IRC section 6015(b)(c) or (f). [Reproduced literally.]”
As of the time of the trial in this case, Mr. Simon contin-
ued to maintain that Mr. Simon’s 1998 retirement plan distribu-
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tion of $40,420 is not income for 1998 and should not have been
included in the 1998 return.
OPINION
We review respondent’s denial of relief under section
6015(f) for abuse of discretion.7 Butler v. Commissioner, 114
T.C. 276, 292 (2000). Petitioner bears the burden of proving
that respondent abused respondent’s discretion in denying that
relief.8 See Jonson v. Commissioner, 118 T.C. 106, 125 (2002),
affd. 353 F.3d 1181 (10th Cir. 2003).
Section 6015(f) grants respondent discretion to relieve an
individual who files a joint return from joint and several
liability with respect to that return. That section provides:
SEC. 6015(f). Equitable Relief.--Under procedures
prescribed by the Secretary, if--
(1) taking into account all the facts and
circumstances, it is inequitable to hold the indi-
vidual liable for any unpaid tax or any deficiency
(or any portion of either); and
7
The Court’s jurisdiction in this case is dependent upon
sec. 6015(e)(1). Ewing v. Commissioner, 118 T.C. 494, 498-507
(2002); see also Fernandez v. Commissioner, 114 T.C. 324, 330-331
(2000); Butler v. Commissioner, 114 T.C. 276, 289-290 (2000).
8
We reject petitioner’s argument that respondent bears the
burden of proving under sec. 6015(f) that petitioner had knowl-
edge that the tax shown due in the 1998 return would not be paid.
Petitioner’s argument appears to confuse sec. 6015(f) with sec.
6015(c)(3)(C). Respondent has the burden of proof under sec.
6015(c)(3)(C) with respect to whether the requesting spouse had
actual knowledge of the item giving rise to the deficiency.
Culver v. Commissioner, 116 T.C. 189, 194-196 (2001).
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(2) relief is not available to such individ-
ual under subsection (b) or (c),
the Secretary may relieve such individual of such
liability.
In the instant case, the parties agree that relief is not avail-
able to petitioner under section 6015(b) or (c), thereby satisfy-
ing section 6015(f)(2). They disagree over whether petitioner is
entitled to relief under section 6015(f).
In support of her position that she is entitled to relief
under section 6015(f), petitioner relies, inter alia, on the
testimony of Mr. Simon and her own testimony. We found Mr.
Simon’s testimony to be questionable and not credible in certain
material respects. For example, Mr. Simon testified that he
signed petitioner’s name on the 1998 return. We did not believe
that testimony. We also found Mr. Simon’s testimony to be at
times confusing, confused, internally inconsistent, and/or
inconsistent with certain of the parties’ stipulations of fact
and certain exhibits attached to those stipulations (stipulated
exhibits). We shall not rely on Mr. Simon’s testimony to support
petitioner’s position in this case. We also found petitioner’s
testimony to be questionable and not credible in certain material
respects. For example, petitioner testified that she did not
sign the 1998 return. We did not believe that testimony.
Moreover, petitioner’s testimony that she did not sign the 1998
return is inconsistent with the parties’ stipulation that she did
- 18 -
sign that return and certain stipulated exhibits in which she
represented to the IRS that she signed that return. A stipula-
tion is to be treated, to the extent of its terms, as a conclu-
sive admission by the parties to the stipulation, unless other-
wise permitted by the Court or agreed upon by those parties.
Rule 91(e). The Court will not permit a party to a stipulation
to qualify, change, or contradict a stipulation in whole or in
part except that it may do so where justice requires. Justice
does not require the Court to permit petitioner to contradict and
attempt to change the parties’ stipulation that she signed the
1998 return. We shall not rely on petitioner’s testimony to
support her position in this case.
Turning now to our consideration of section 6015(f), as
directed by that section, respondent has prescribed procedures in
Rev. Proc. 2000-15, 2000-1 C.B. 447 (Revenue Procedure 2000-15)9
that are to be used in determining whether it would be inequita-
ble to find the requesting spouse liable for part or all of the
9
We note that Rev. Proc. 2003-61, 2003-2 C.B. 296 (Revenue
Procedure 2003-61), superseded Revenue Procedure 2000-15.
Revenue Procedure 2003-61 is effective for requests for relief
under sec. 6015(f) which were filed on or after Nov. 1, 2003, and
for requests for such relief which were pending on, and for which
no preliminary determination letter had been issued as of, that
date. Id. sec. 7. Revenue Procedure 2003-61 is not applicable
in the instant case. That is because (1) petitioner filed
petitioner’s Form 8857 on Jan. 9, 2002, and (2) the IRS issued a
preliminary determination on Sept. 9, 2002 (i.e., the IRS Septem-
ber 9, 2002 preliminary determination) with respect to that form.
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liability in question. Section 4.01 of Revenue Procedure 2000-15
lists seven conditions (threshold conditions) which must be
satisfied before the IRS will consider a request for relief under
section 6015(f). In the instant case, respondent concedes that
those conditions are satisfied. Where, as here, the requesting
spouse satisfies the threshold conditions, section 4.01 of
Revenue Procedure 2000-15 provides that a requesting spouse may
be relieved under section 6015(f) of all or part of the liability
in question if, taking into account all the facts and circum-
stances, the IRS determines that it would be inequitable to hold
the requesting spouse liable for such liability.
Where, as here, the requesting spouse satisfies the thresh-
old conditions, section 4.02(1) of Revenue Procedure 2000-15 sets
forth the circumstances under which the IRS ordinarily will grant
relief to that spouse under section 6015(f) in a case, like the
instant case, where a liability is reported in a joint return but
not paid. As pertinent here, those circumstances, which section
4.02 of Revenue Procedure 2000-15 and we refer to as elements,
are:
(a) At the time relief is requested, the request-
ing spouse is no longer married to * * * the
nonrequesting spouse * * *;
(b) At the time the return was signed, the re-
questing spouse had no knowledge or reason to know that
the tax would not be paid. The requesting spouse must
establish that it was reasonable for the requesting
spouse to believe that the nonrequesting spouse would
pay the reported liability. * * *; and
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(c) The requesting spouse will suffer economic
hardship if relief is not granted. For purposes of
this section, the determination of whether a requesting
spouse will suffer economic hardship will be made by
the Commissioner or the Commissioner’s delegate, and
will be based on rules similar to those provided in
§ 301.6343-1(b)(4) of the Regulations on Procedure and
Administration. [Rev. Proc. 2000-15, sec. 4.02(1),
2000-1 C.B. at 448.]
(We shall hereinafter refer to the elements set forth in section
4.02(1)(a), (b), and (c) of Revenue Procedure 2000-15 as the
marital status element, the knowledge or reason to know element,
and the economic hardship element, respectively.)
Section 4.02(2) of Revenue Procedure 2000-15 provides that
relief granted under section 4.02(1) of that revenue procedure is
subject to the following limitations:
(a) If the return is or has been adjusted to
reflect an understatement of tax, relief will be avail-
able only to the extent of the liability shown on the
return prior to any such adjustment; and
(b) Relief will only be available to the extent
that the unpaid liability is allocable to the
nonrequesting spouse.
Turning to the three elements set forth in section 4.02(1)
of Revenue Procedure 2000-15, the presence of which will ordi-
narily result in a grant of relief under section 6015(f), in the
instant case, (1) respondent concedes that the marital status
element is present, (2) the parties dispute whether the knowledge
or reason to know element is present, and (3) petitioner concedes
that the economic hardship element is not present. In light of
petitioner’s concession that the economic hardship element is not
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present, petitioner does not qualify for relief under section
4.02(1) of Revenue Procedure 2000-15.
The IRS may nonetheless grant relief to petitioner under
section 4.03 of Revenue Procedure 2000-15. That section provides
a partial list of positive and negative factors which respondent
is to take into account in considering whether to grant an
individual relief under section 6015(f). No single factor is to
be determinative in any particular case; all factors are to be
considered and weighed appropriately; and the list of factors is
not intended to be exhaustive. Rev. Proc. 2000-15, sec. 4.03,
2000-1 C.B. at 448.
As pertinent here, section 4.03(1) of Revenue Procedure
2000-15 sets forth the following positive factors which weigh in
favor of granting relief under section 6015(f):
(a) Marital status. The requesting spouse is
* * * divorced from the nonrequesting spouse.
(b) Economic hardship. The requesting spouse
would suffer economic hardship (within the meaning of
section 4.02(1)(c) of this revenue procedure) if relief
from the liability is not granted.
(c) Abuse. The requesting spouse was abused by
the nonrequesting spouse, but such abuse did not amount
to duress.
(d) No knowledge or reason to know. In the case
of a liability that was properly reported but not paid,
the requesting spouse did not know and had no reason to
know that the liability would not be paid. * * *
(e) Nonrequesting spouse’s legal obligation. The
nonrequesting spouse has a legal obligation pursuant to
a divorce decree or agreement to pay the outstanding
- 22 -
liability. This will not be a factor weighing in favor
of relief if the requesting spouse knew or had reason
to know, at the time the divorce decree or agreement
was entered into, that the nonrequesting spouse would
not pay the liability.
(f) Attributable to nonrequesting spouse. The
liability for which relief is sought is solely attrib-
utable to the nonrequesting spouse.
(We shall hereinafter refer to the positive factors set forth in
section 4.03(1)(a), (b), (c), (d), (e), and (f) of Revenue
Procedure 2000-15 as the marital status positive factor, the
economic hardship positive factor, the abuse positive factor, the
knowledge or reason to know positive factor, the legal obligation
positive factor, and the attribution positive factor, respec-
tively.)
We note initially that the parties do not dispute that the
marital status positive factor, the knowledge or reason to know
positive factor, and the economic hardship positive factor set
forth in section 4.03(1)(a), (d), and (b), respectively, of
Revenue Procedure 2000-15 are the same as the marital status
element, the knowledge or reason to know element, and the eco-
nomic hardship element set forth in section 4.02(1)(a), (b), and
(c), respectively, of that revenue procedure.
With respect to the marital status positive factor set forth
in section 4.03(1)(a) of Revenue Procedure 2000-15, respondent
concedes that that factor is present in the instant case.
With respect to the economic hardship positive factor set
- 23 -
forth in section 4.03(1)(b) of Revenue Procedure 2000-15, peti-
tioner concedes that that factor is not present in the instant
case.
With respect to the abuse positive factor set forth in
section 4.03(1)(c) of Revenue Procedure 2000-15, petitioner
concedes that that factor is not present in the instant case.
With respect to the knowledge or reason to know positive
factor set forth in section 4.03(1)(d) of Revenue Procedure 2000-
15, the parties disagree over whether that factor is present in
the instant case. Petitioner argues that the knowledge or reason
to know positive factor is present. In support of that argument,
petitioner asserts on brief:
Petitioner has stated that during the spouses’
[petitioner’s and Mr. Simon’s] 33 year marriage, she
[petitioner] never had opportunity to examine the tax
returns prior to filing, and that she completely relied
upon Mr. Simon to handle the couple’s tax matters. She
has consistently stated that on the evening of the
filing deadline, Mr. Simon always hurriedly presented a
completed return to Petitioner for her immediate signa-
ture and, upon that signature, hurried to the post
office to affect a timely mailing. This position * * *
is clearly stated as part of the administrative record.
Petitioner stated this same position at trial. Fur-
ther, the same position, regarding, in general, the
couple’s filing habit, was supported by Mr. Simon in
his testimony at trial.
Finally, Respondent, in its determination, even
relied upon that same position [of petitioner] as its
own basis for determining that Petitioner should have
known of the liability. In fact, as part of Respon-
dent’s administrative record, the Tax Examiner actually
stated that Petitioner did not examine the return. The
Tax Examiner did not even consider whether Petitioner
actually inquired of payment of the tax. Instead, the
- 24 -
Examiner based her determination on the rationale that
Petitioner “should have known something was going on”,
referring only to the liability itself. * * * there is
no evidence that Petitioner had actual knowledge of the
underpayment.
* * * it is not reasonable for Petitioner to have
known that the tax would not be paid. All of the
Petitioner’s relevant evidence indicates that Peti-
tioner never even inquired about the tax prior to
receiving Respondent’s notice of unpaid liability.
Further, Respondent has produced no evidence that
Petitioner inquired about the tax.
Knowledge of the liability, whether actual or
constructive, is not equal to knowledge of whether
Petitioner knew or should have known whether the tax
would be paid. It is not reasonable for Petitioner to
inquire about payment of an unknown underpayment if
Petitioner did not actually know about the underpayment
itself.
* * * * * * *
The facts in this case are similar to those in
Wiest v. Commissioner, T.C. Memo 2003-91. In Wiest,
* * * As to equitable relief under §6015(f), the deter-
mination letter provided that “underpayment was evident
at the signing of the joint return. The taxpayer would
have had knowledge/reason to know of the underpayment
at the time of signing the tax return.” * * * The Court
held [in Wiest] that Respondent abused his discretion
in denying relief under §6015(f) with respect to an
amount of tax reported on petitioner’s joint return but
not paid. [Reproduced literally.]
Respondent argues that the knowledge or reason to know
positive factor is not present in the instant case. In support
of that argument, respondent asserts on brief:
Despite the fact that the text “AMOUNT YOU OWE
[$]12443” was an inch above petitioner’s signature on
the [1998] return * * *, she claimed ignorance that any
tax was owed. If petitioner was unaware that tax was
due, she had a duty to inquire whether tax was owed.
* * *
- 25 -
This Court has held that when taxpayers fail to
fulfill their duty of inquiry, they are ordinarily
charged with constructive knowledge of any understate-
ments on their returns. Demirjian v. Commissioner,
T.C. Memo. 2004-22; Cohen v. Commissioner, T.C. Memo.
1987-537 * * *. Accordingly, having failed her duty of
inquiry, petitioner is charged with constructive knowl-
edge of the tax due on the return. See Castle v.
Commissioner, T.C. Memo. 2002-142 n.7; * * *.
* * * * * * *
Plaintiff [sic] presented no evidence to the IRS
on this factor [knowledge or reason to know positive
factor] because she claimed that she was unaware that
tax was due when the return was filed. Due to the
absence of evidence at the administrative level, this
factor does not favor relief. As argued above, peti-
tioner is held to have constructive knowledge of the
tax due per return.
In further support of respondent’s argument that the knowledge or
reason to know positive factor is not present in the instant
case, respondent asserts on brief:
Petitioner argues that the determination is arbi-
trary because the IRS did not consider whether peti-
tioner knew the tax would not be paid. The argument is
hollow because petitioner’s alleged ignorance of the
tax is factually and logically divergent from alleging
knowledge that the tax would not be paid. It is illog-
ical to allege that one was ignorant that tax was due
but one had knowledge that the tax would not be paid.
Petitioner’s argument is flawed because it relies
on the supposed failure of the IRS to consider these
divergent factual allegations. Petitioner alleged to
be ignorant of the tax, which the IRS rejected. Peti-
tioner cannot bemoan that the determination was arbi-
trary because the IRS did not consider a factual issue
that was factually divergent and could not be raised,
ie., knowledge regarding payment of the tax.
* * * * * * *
- 26 -
At best for petitioner, the knowledge of payment
factor is neutral in the analysis due to petitioner’s
claimed ignorance that any tax was owed. * * * [Repro-
duced literally.]
We turn first to petitioner’s reliance on Wiest v. Commis-
sioner, T.C. Memo. 2003-91. That case is materially distinguish-
able from the instant case. In Wiest, the taxpayer took the
position before the IRS and the Court that he relied on his
spouse to file the return in question and to pay the tax shown
due in that return and that he was unaware that she had not. In
contrast, in the instant case, petitioner took the position
before the IRS, and takes the position before the Court, that at
the time she signed the 1998 return she did not know that that
return showed tax due and that therefore at that time she could
not have known that Mr. Simon would not pay any such tax. Thus,
unlike the taxpayer in Wiest, petitioner did not claim before the
IRS, and does not claim before the Court, that she relied on Mr.
Simon to pay the tax shown due in the 1998 return. In addition,
unlike the instant case, in Wiest, the Court found that the
spouse of the taxpayer deceived the taxpayer with respect to the
filing of the return in question and the payment of the tax shown
due in that return. Moreover, unlike the instant case, in Wiest,
the IRS based its determination that the taxpayer was not enti-
tled to relief under section 6015(f) principally on its conclu-
sions that the unpaid liability in question was not solely
attributable to the taxpayer’s spouse and that the taxpayer had
- 27 -
knowledge or reason to know of that unpaid liability. In con-
cluding that the taxpayer had knowledge or reason to know of the
unpaid liability in question, the IRS equated the taxpayer’s
knowledge or reason to know that an amount of tax was shown due
in the return in question with knowledge or reason to know that
such amount shown due would not be paid. In contrast, in the
instant case, the Appeals Office based its determination that
petitioner is not entitled to relief under section 6015(f) on its
conclusions that the unpaid 1998 liability was not attributable
solely to Mr. Simon, that “It is clearly not believable that the
taxpayer [petitioner] did not know of this liability due”, and
that petitioner “provided no evidence that she believed the tax
would be paid at the time the tax return was filed”10 as well as
on the absence of any (1) economic hardship, (2) spousal abuse,
10
The Appeals Office stated in the Appeals Office memoran-
dum:
this year [1998] was the second year of withdrawals
from the NRS’s [nonrequesting spouse’s, i.e., Mr.
Simon’s] IRA accounts. The likelihood that she [peti-
tioner] did not know of the withdrawals from beginning
in 1997, that were included on the 1997 tax return, is
diminished in the second year. In addition, the with-
drawals were included in the income of the 1998 tax
return and the return clearly reflected a balance due
In Excess of $12,000. It is clearly not believable
that the taxpayer did not know of this liability due.
She [petitioner] further provided no evidence that she
believed the tax would be paid at the time the tax
return was filed. [Reproduced literally.]
- 28 -
and (3) legal obligation of Mr. Simon to pay such liability. On
the record before us, we find that petitioner’s reliance on Wiest
v. Commissioner, supra, is misplaced. On that record, we reject
petitioner’s arguments in reliance on that case.
We turn now to whether petitioner has carried her burden of
establishing that the knowledge or reason to know positive factor
is present in the instant case. In support of her position for
relief under section 6015(f), petitioner chose to present her
case to the IRS and to the Court by claiming that she did not
know and had no reason to know that there was tax shown due in
the 1998 return. Petitioner must bear the consequences of that
choice. On the record before us, we have serious reservations
about petitioner’s contention that she did not know that the 1998
return showed tax due because she was “hurried” when she signed
that return. Nonetheless, assuming arguendo that we were to
accept such a contention, on the instant record, we find that, by
signing the 1998 return, petitioner is charged with constructive
knowledge of, inter alia, the tax shown due in that return. See
Park v. Commissioner, 25 F.3d 1289, 1299 (5th Cir. 1994), affg.
T.C. Memo. 1993-252; see also Hayman v. Commissioner, 992 F.2d
1256, 1262 (2d Cir. 1993), affg. T.C. Memo. 1992-228. Having
found that at the time petitioner signed the 1998 return she had
constructive knowledge of the tax shown due in that return, we
further find that petitioner should have inquired about whether
- 29 -
such tax shown due would be paid. It would be inequitable to
allow petitioner to turn a blind eye to the tax shown due in the
1998 return. The amount of such tax shown due was large enough
as to put her on notice that further inquiry should be made as to
whether it would be paid. She failed to do so. She thus failed
to present any evidence to the IRS and to the Court with respect
to whether the tax shown due in the 1998 return would be paid.
On the record before us, we find that petitioner has failed to
carry her burden of establishing that the knowledge or reason to
know positive factor is present in the instant case.
With respect to the legal obligation positive factor set
forth in section 4.03(1)(e) of Revenue Procedure 2000-15, peti-
tioner concedes that there is no legal obligation for Mr. Simon
to pay any tax due for taxable year 1998. We find that peti-
tioner concedes that that factor is not present in the instant
case.
With respect to the attribution positive factor set forth in
section 4.03(1)(f) of Revenue Procedure 2000-15, petitioner
concedes that the unpaid 1998 liability is not solely attribut-
able to Mr. Simon.11 We find that petitioner concedes that the
attribution positive factor is not present in the instant case.
Turning to the negative factors weighing against granting
11
Petitioner does not dispute respondent’s determination
that approximately 16 percent of the tax due for taxable year
1998 is attributable to petitioner.
- 30 -
relief under section 6015(f) set forth in section 4.03(2) of
Revenue Procedure 2000-15, as pertinent here, those factors are:
(a) Attributable to the requesting spouse. The
unpaid liability * * * is attributable to the request-
ing spouse.
(b) Knowledge, or reason to know. A requesting
spouse knew or had reason to know * * * that the re-
ported liability would be unpaid at the time the return
was signed. This is an extremely strong factor weigh-
ing against relief. Nonetheless, when the factors in
favor of equitable relief are unusually strong, it may
be appropriate to grant relief under § 6015(f) in
limited situations where a requesting spouse knew or
had reason to know that the liability would not be paid
* * *.
(c) Significant benefit. The requesting spouse
has significantly benefitted (beyond normal support)
from the unpaid liability * * *.
(d) Lack of economic hardship. The requesting
spouse will not experience economic hardship (within
the meaning of section 4.02(1)(c) of this revenue
procedure) if relief from liability is not granted.
(e) Noncompliance with federal income tax laws.
The requesting spouse has not made a good faith effort
to comply with federal income tax laws in the tax years
following the tax year or years to which the request
for relief relates.
(f) Requesting spouse’s legal obligation. The
requesting spouse has a legal obligation pursuant to a
divorce decree or agreement to pay the liability.
(We shall hereinafter refer to the negative factors set forth in
section 4.03(2)(a), (b), (c), (d), (e), and (f) of Revenue
Procedure 2000-15 as the attribution negative factor, the knowl-
edge or reason to know negative factor, the significant benefit
negative factor, the economic hardship negative factor, the tax
- 31 -
law noncompliance negative factor, and the legal obligation
negative factor, respectively.)
We note initially that the parties do not dispute that the
knowledge or reason to know negative factor, the economic hard-
ship negative factor, and the legal obligation negative factor
set forth in section 4.03(2)(b), (d), and (f), respectively, of
Revenue Procedure 2000-15 are the opposites of the knowledge or
reason to know positive factor, the economic hardship positive
factor, and the legal obligation positive factor set forth in
section 4.03(1)(d), (b), and (e), respectively, of that revenue
procedure. We also note that the parties do not dispute that the
attribution negative factor set forth in section 4.03(2)(a) of
Revenue Procedure 2000-15 is essentially the opposite of the
attribution positive factor set forth in section 4.03(1)(f) of
that revenue procedure.12
We have found above that petitioner has failed to carry her
burden of establishing that the knowledge or reason to know
positive factor set forth in section 4.03(1)(d) of Revenue
Procedure 2000-15 is present in the instant case and that peti-
12
We do not believe that those two factors are exactly
opposite because the attribution negative factor does not contain
the word “solely” that appears in the attribution positive
factor. Nonetheless, we conclude that respondent’s use of the
word “solely” in describing the attribution positive factor but
not in describing the attribution negative factor does not affect
our findings and conclusions in the instant case with respect to
those factors.
- 32 -
tioner concedes that the economic hardship positive factor set
forth in section 4.03(1)(b) of that revenue procedure is not
present in the instant case. On the instant record, we further
find that petitioner has failed to carry her burden of establish-
ing that the knowledge or reason to know negative factor set
forth in section 4.03(2)(b) of Revenue Procedure 2000-15 is not
present in the instant case and that petitioner concedes that the
economic hardship negative factor set forth in section 4.03(2)(d)
of that revenue procedure is present in the instant case.
With respect to the attribution negative factor set forth in
section 4.03(2)(a) of Revenue Procedure 2000-15, we have found
that petitioner concedes that the unpaid 1998 liability is not
solely attributable to Mr. Simon. Respondent concedes that a
significant portion (approximately 84 percent) of that liability
is attributable to Mr. Simon. On the record before us, we find
that a significant portion of the liability for taxable year 1998
is not attributable to petitioner.
With respect to the significant benefit negative factor set
forth in section 4.03(2)(c) of Revenue Procedure 2000-15, respon-
dent does not dispute that that factor is not present in the
instant case.
With respect to the tax law noncompliance negative factor
set forth in section 4.03(2)(e) of Revenue Procedure 2000-15,
respondent does not dispute that that factor is not present in
- 33 -
the instant case.
With respect to the legal obligation negative factor set
forth in section 4.03(2)(f) of Revenue Procedure 2000-15, we have
found that, because petitioner concedes that Mr. Simon does not
have a legal obligation to pay any tax due for 1998, petitioner
concedes that the legal obligation positive factor set forth in
section 4.03(1)(e) of that revenue procedure is not present in
the instant case. We have also found that there is no separate
legal obligation, such as a divorce decree or a property settle-
ment, that requires petitioner to pay any such tax due.13 On the
record before us, we find that the legal obligation negative
factor is not present in the instant case.
On the record before us, we find that petitioner has failed
to carry her burden of establishing any other factors that weigh
in favor of granting relief under section 6015(f) and that are
not set forth in sections 4.02(1) and 4.03(1) of Revenue Proce-
dure 2000-15.
Based upon our examination of the entire record before us,
we find that petitioner has failed to carry her burden of showing
that respondent abused respondent’s discretion in denying her
relief under section 6015(f) with respect to the unpaid 1998
liability.
13
Division of the marital assets of petitioner and Mr. Simon
remains to be adjudicated by the North Carolina courts.
- 34 -
We have considered all of the parties’ arguments and conten-
tions that are not discussed herein, and we find them to be
without merit, irrelevant, and/or moot.
To reflect the foregoing,
Decision will be entered for
respondent.