# United States Tax Court

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URL: https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3A847038c280eb0185

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

United States Tax Court
T.C. Memo. 2024-56
KIRAN RAWAT,
Petitioner,
AND RAGHVENDRA SINGH,
Intervenor
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
__________
Docket No. 11350-18.

Filed May 13, 2024.
__________

Kiran Rawat, pro se.
Raghvendra Singh, pro se.
Sharyn M. Ortega and Brian A. Pfeifer, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION
GALE, Judge: By a final determination dated May 8, 2018,
respondent determined that petitioner was not entitled to innocent
spouse relief pursuant to section 6015(b), (c), or (f) 1 for taxable years
1998–2002 and 2008–14.
Petitioner timely petitioned for
redetermination of respondent’s decision on June 8, 2018. Petitioner’s
husband intervened to support petitioner’s claim for relief.
The Court granted respondent’s Motion to Dismiss for Lack of
Jurisdiction for 2008–09 and 2011–14. The Court also granted
1 Unless otherwise indicated, statutory references are to the Internal Revenue
Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the
Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and
Rule references are to the Tax Court Rules of Practice and Procedure.

Served 05/13/24

2
[*2] respondent’s Motion for Partial Summary Judgment for 1998–2002
and 2010 in which respondent moved for summary adjudication that
petitioner is (1) ineligible for relief pursuant to section 6015 on the
ground of res judicata for 1998, 1999, 2001, and 2002, (2) ineligible for
relief pursuant to section 6015 for 2000 because she did not file a joint
return for that year, and (3) ineligible for relief pursuant to section
6015(b) or (c) for 2010 because her claim was not filed timely. The only
issue remaining for decision is whether petitioner is entitled to equitable
relief from joint and several liability for 2010 under section 6015(f).
FINDINGS OF FACT
Some of the facts are stipulated and are so found. The First
Stipulation of Facts and the attached Exhibits are incorporated herein
by this reference. Petitioner resided in California when the Petition was
timely filed.
Petitioner and intervenor were married in 1996. They were
legally separated under the law of California as of January 1, 2000.
Petitioner and intervenor untimely filed a joint return for 2010 in June
2011. At that time they had a case pending in this Court covering their
taxable years 1997–2002, for which respondent had determined
deficiencies. Petitioner had received the notice of deficiency for those
years.
On May 18, 2012, respondent issued to petitioner and intervenor
a notice of deficiency for 2008–10. The deficiency for 2010 resulted
primarily from the following adjustments: $345,032 of unreported
cancellation of indebtedness income reported to petitioner on Form
1099–A, Acquisition or Abandonment of Secured Property; disallowed
expense deductions of $182,256 from Schedule C, Profit or Loss From
Business; $35,452 of unreported long-term capital gain; and $26,064 of
intervenor’s unreported retirement income.
Petitioner and intervenor untimely filed with the Court a Petition
to redetermine the 2010 deficiency. The Court accordingly dismissed
the case for lack of jurisdiction.
Petitioner and intervenor continued to file joint returns each year
through 2018.
Petitioner and intervenor have joint outstanding balances due for
federal income tax for 2001, 2002, 2012, 2013, and 2014.

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[*3] Petitioner received her nursing license in 1997. Before 2000 she
worked for various nursing facilities as an employee and as a contractor
through intervenor’s nurse staffing agency. In 2000 petitioner began
nursing work as an employee for a hospital. In the three years preceding
trial, petitioner earned taxable wages of $114,446, $89,467, and
$115,914. Petitioner’s annual income at the time of trial is unknown
because she did not provide any pay stubs beyond December 2018. From
2015 to 2020 petitioner made contributions totaling $140,224 to her
employer-sponsored retirement plan.
Petitioner and intervenor at various times managed numerous
rental properties. Petitioner was at least the nominal owner of these
properties. In 2017 the California Court of Appeal for the Third District
affirmed a trial court’s decision finding petitioner and intervenor liable
for violations of state tenancy law in a suit brought by one of their
tenants. In that case the trial court found by clear and convincing
evidence that petitioner “owned, managed and controlled the subject
property” and that she “ratified and approved the . . . conduct of
defendant [intervenor Raghvendra] Singh” with respect to the rental
property in question. That court ordered certain of petitioner’s
properties to be placed into receivership for disposition to satisfy the
couple’s creditors. For 2018 petitioner received Forms 1098, Mortgage
Interest Statement, relating to three of those properties. Petitioner
owned at least one of the properties as of June 4, 2021. The record is
otherwise unclear as to the actual number and value of the properties
that had been placed into receivership or that petitioner continued to
own as of the time of trial.
On August 31, 2017, respondent received from petitioner Form
8857, Request for Innocent Spouse Relief, seeking relief from the 2010
liability. On her Form 8857, petitioner failed to disclose her ownership
of any real property or retirement accounts in the space provided to
disclose her assets.
In the final determination denying relief, respondent determined
that petitioner was ineligible for relief pursuant to section 6015(b) or (c)
for 2010 because her claim was untimely. Respondent further found
that she did not qualify for equitable relief under section 6015(f) because
a portion of the deficiency is attributable to her and under the
circumstances it was not unfair to hold her jointly liable for the
deficiency.

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[*4]
I.

OPINION
Relief Under Section 6015(f)

Generally, married taxpayers may elect to file a joint federal
income tax return. § 6013(a). If a joint return is made, each spouse is
generally jointly and severally liable for the entire tax due on their
aggregate income for that year. § 6013(d)(3). Under section 6015(a) a
spouse may seek relief from joint and several liability under section
6015(b) or, if eligible, may allocate liability according to provisions set
forth in section 6015(c). If a taxpayer does not qualify for relief under
section 6015(b) or (c), the taxpayer may seek equitable relief under
section 6015(f). § 6015(f)(1)(B); Porter v. Commissioner, 132 T.C. 203,
206 (2009). We held petitioner is not entitled to relief under subsections
(b) and or (c) for 2010 in granting respondent’s aforementioned Motion
for Partial Summary Judgment with respect to that year.
Under section 6015(f) the Secretary may grant equitable relief to
a requesting spouse if, considering all the facts and circumstances, it
would be inequitable to hold the requesting spouse liable for any unpaid
tax or deficiency. In determining whether a taxpayer is entitled to relief
under section 6015(f) for petitions filed before July 1, 2019, the Court
applies a de novo standard and scope of review. Porter, 132 T.C. at 210;
cf. Sutherland v. Commissioner, 155 T.C. 95, 104 (2020) (holding that
section 6015(e)(7) does not apply to petitions filed before July 1, 2019).
Petitioner bears the burden of proving that she is entitled to equitable
relief under section 6015(f). See Rule 142(a); Porter, 132 T.C. at 210.
The Commissioner has specified the procedures governing
equitable relief in Rev. Proc. 2013-34, 2013-43 I.R.B. 397, modifying and
superseding Rev. Proc. 2003-61, 2003-2 C.B. 296. Although we are not
bound by Rev. Proc. 2013-34, and our determination ultimately rests on
an evaluation of all the facts and circumstances, we analyze petitioner’s
request under the guidelines set forth therein to ascertain whether she
is eligible for relief. See Pullins v. Commissioner, 136 T.C. 432, 438–39
(2011); Johnson v. Commissioner, T.C. Memo. 2014-240, at *10.
Rev. Proc. 2013-34 provides a three-step analysis for Internal
Revenue Service (IRS) personnel to follow in evaluating requests for
relief. Section 4.01 lists seven threshold conditions that must be met
before the IRS will grant any relief. Rev. Proc. 2013-34, § 4.01, 2013-43
I.R.B. at 399. Section 4.02 lists circumstances in which the IRS will
make a streamlined determination granting equitable relief. Id. § 4.02,

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[*5] 2013-43 I.R.B. at 400. For taxpayers not eligible for a streamlined
determination, section 4.03 prescribes a list of nonexclusive factors that
the IRS will consider in determining whether equitable relief should be
granted. Id. § 4.03, 2013-43 I.R.B. at 400–03. Respondent concedes that
petitioner meets the seven threshold conditions.
A.

Streamlined Determination

A streamlined determination granting equitable relief under
section 6015(f) is available if the requesting spouse can establish that
he or she (1) is no longer married to the nonrequesting spouse, (2) would
suffer economic hardship if relief were not granted, and (3) lacked
knowledge or reason to know of the understatement at the time the
return at issue was signed. Rev. Proc. 2013-34, § 4.02. As discussed
below, petitioner does not satisfy the economic hardship condition and
is therefore not eligible for a streamlined determination of equitable
relief.
Economic hardship exists “if satisfaction of the tax liability in
whole or in part will cause the requesting spouse to be unable to pay
reasonable basic living expenses.” Id. § 4.03(2)(b), 2013-43 I.R.B. at 401.
The requesting spouse “must demonstrate that imposing joint and
several liability is ‘inequitable in present terms’ . . . and poses a present
economic hardship.” Pullins, 136 T.C. at 446 (quoting Von Kalinowski
v. Commissioner, T.C. Memo. 2001-21, slip op. at 20). We have
“consistently looked beyond the taxable year at issue to apply subsection
(f).” Hall v. Commissioner, 135 T.C. 374, 380 (2010). We therefore
evaluate the requesting spouse’s financial situation and prospects as of
the time of trial. See Pullins, 136 T.C. at 446–47.
A requesting spouse can demonstrate economic hardship by
showing that his or her (1) annual income is below 250% of the federal
poverty guidelines, 2 or (2) monthly income exceeds his or her reasonable
basic monthly living expenses by $300 or less. Rev. Proc. 2013-34,
§ 4.03(2)(b). To demonstrate economic hardship, the requesting spouse
must also show that he or she does not have assets from which he or she
could make payments toward the tax liability and still meet reasonable
2 The federal poverty guidelines are updated periodically in the Federal
Register by the U.S. Department of Health and Human Services (HHS) under the
authority of 42 U.S.C. § 9902(2). In February 2021 HHS published new guidelines
which set the federal poverty line for a one-person household at $12,880 and for a
three-person household at $21,960. Annual Update of the HHS Poverty Guidelines,
86 Fed. Reg. 7732, 7733 (Feb. 1, 2021).

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[*6] basic living expenses. Id. If she fails to satisfy either requirement,
then the Commissioner “will consider all facts and circumstances
(including the size of the requesting spouse’s household) in determining
whether the requesting spouse would suffer economic hardship if relief
is not granted.” Id.
Petitioner would not suffer economic hardship if denied relief
from the 2010 liability. For a household of three, 250% of the applicable
federal poverty guidelines is $54,900 of annual income. In the three
years preceding trial, petitioner earned in excess of $100,000 in two of
the years and nearly $100,000 in the other. While the record does not
establish her annual income at the time of trial, she did not allege that
she could not meet her reasonable basic living expenses if relief is not
granted. Additionally, petitioner’s substantial contributions to her
employer-sponsored retirement plan further suggest that she has
sufficient assets to avoid economic hardship if relief is not granted.
Petitioner testified that all of the properties that she and
intervenor once managed had been placed into receivership but did not
provide evidence to corroborate her testimony. Petitioner received three
Forms 1098 for 2018 detailing the amount of mortgage interest she paid
relating to those properties. Considering her receipt of the Forms 1098,
the lack of evidence in the record to the contrary, and her lack of candor
on the matter, we find that petitioner still owns and controls real
property other than her residence. Under these circumstances it is clear
that petitioner would not suffer economic hardship if denied relief.
Petitioner is accordingly not entitled to a streamlined determination of
equitable relief from the 2010 liability.
B.

Equitable Factors

Rev. Proc. 2013-34 establishes the following seven nonexclusive
factors to be considered in determining whether equitable relief under
section 6015(f) should be granted: (1) the current marital status of the
spouses; (2) whether the requesting spouse will suffer economic
hardship if relief is not granted; (3) whether the requesting spouse knew
or had reason to know of the item giving rise to the understatement;
(4) whether either spouse has a legal obligation to pay the outstanding
liability; (5) whether the requesting spouse significantly benefited from
the understatement; (6) whether the requesting spouse has made a good
faith effort to comply with income tax laws in the years following the
year for which relief is sought; and (7) whether the requesting spouse
was in poor mental or physical health when the return at issue was filed,

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[*7] when the request for relief was made, or at the time of trial. Rev.
Proc. 2013-34, § 4.03(2), 2013-43 I.R.B. at 400–03; see also Pullins, 136
T.C. at 448.
In making a determination under section 6015(f), the Court
considers the enumerated factors as well as any other relevant facts. No
single factor is dispositive, and “[t]he degree of importance of each factor
varies depending on the requesting spouse’s facts and circumstances.”
Rev. Proc. 2013-34, § 4.03(2); see Pullins, 136 T.C. at 448. We discuss
the factors that are most relevant to this case.
1.

Economic Hardship

We have found that petitioner would not suffer economic hardship
if denied relief from the 2010 liability. This factor is accordingly neutral.
Rev. Proc. 2013-34, § 4.03(2)(b).
2.

Knowledge or Reason to Know

In understatement cases, such as this one, this factor weighs in
favor of relief if the requesting spouse did not know or have reason to
know of the item giving rise to the understatement as of the date the
return was filed. Id. § 4.03(2)(c)(i)(A), 2013-43 I.R.B. at 401. This factor
weighs against relief if the requesting spouse knew or had reason to
know of the item. Id. A taxpayer who signs a return is generally
charged with constructive knowledge of its contents. Porter, 132 T.C.
at 211–12.
Although not controlling, we find that the regulations applicable
to knowledge under section 6015(b) and (c) provide a useful framework
for the analysis under section 6015(f). See Jacobsen v. Commissioner,
T.C. Memo. 2018-115, at *30–31 (applying the knowledge analysis under
section 6015(b) to the section 6015(f) analysis). Whether a requesting
spouse has actual knowledge of an erroneous item is determined upon
all facts and circumstances. Treas. Reg. § 1.6015-3(c)(2)(iv).
A requesting spouse has reason to know of an understatement if,
considering all the facts and circumstances, a reasonable person in
similar circumstances would have known of the understatement. Treas.
Reg. § 1.6015-2(c). A requesting spouse has constructive knowledge of
an understatement if he or she knows facts sufficient to place him or her
on notice of a possible understatement and fails to inquire. Price v.
Commissioner, 887 F.2d 959, 965 (9th Cir. 1989). Factors considered in
making this determination include the requesting spouse’s level of

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[*8] education and/or business expertise, deceit or evasiveness by the
nonrequesting spouse, the requesting spouse’s degree of involvement in
the activity generating the understatement, the requesting spouse’s
involvement in business or household finances, and any lavish or
unusual expenditures compared with past spending levels. Rev. Proc.
2013-34, § 4.03(2)(c)(iii), 2013-43 I.R.B. at 402.
Petitioner is well educated and worked in a professional capacity
as a nurse. When she and intervenor signed and untimely filed the 2010
return, petitioner was aware of numerous issues with their joint returns
from prior years. By then, petitioner and intervenor’s returns for the
1997–2002 taxable years had been examined, a notice of deficiency had
been issued to them, and they had commenced litigation in this Court
for those years. Petitioner admits she received the foregoing notice of
deficiency. See Motsko v. Commissioner, T.C. Memo. 2006-17, slip op.
at 9–10 (stating that knowledge at the time of signing return that prior
years’ returns were being examined and signing of a late-filed return
were enough to trigger the “duty of inquiry” because reasonable person
would have been alerted to possible problems). This alone would cause
a reasonable person to inquire about the accuracy of the 2010 return.
Additionally, most of the adjustments that caused the
understatement for 2010 are attributable to petitioner. Nearly 60% of
the adjustments for 2010 stem from Form 1099–A issued to petitioner
herself. Petitioner testified that she was not involved with the
properties and that intervenor maintained control and made all
decisions with respect to their management of the properties. The
California Superior Court’s finding that petitioner owned, controlled,
and managed the properties, however, contradicts her testimony and
indicates that she had knowledge of and participated in the endeavor.
Petitioner also failed to produce documentary evidence or
testimony describing her involvement, or lack thereof, in the Schedule C
activity that produced the disallowed deductions. Considering the
amount of the disallowed loss deductions in relation to the household’s
income—which consisted primarily of petitioner’s salary—a reasonable
person from petitioner’s perspective would have been alerted to the
potential invalidity of the claimed deductions. Under the foregoing
circumstances, petitioner, at minimum, had a duty to inquire further
with respect to their 2010 return. Because she failed to discharge this
duty, she had reason to know of the items giving rise to the
understatement.

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[*9] Knowledge or reason to know may be negated where the
requesting spouse establishes that (1) he or she was a victim of abuse
and (2) because of that abuse, and for fear of the nonrequesting spouse’s
retaliation, he or she was unable to challenge the treatment of any items
on the joint return or to question the payment of any amount due. Rev.
Proc. 2013-34, § 4.03(2)(c)(i)(A). Abuse includes efforts to control,
isolate, humiliate, and intimidate the requesting spouse or to undermine
her ability to reason independently. Id. § 4.03(2)(c)(iv), 2013-43 I.R.B.
at 402. To invoke the abuse exception, the requesting spouse must
provide substantiation or specificity regarding the alleged abuse. See
Johnson, T.C. Memo. 2014-240, at *13.
Petitioner’s claims of abuse are unpersuasive. First, she did not
allege in her Form 8857 or her Petition that she suffered abuse. The
first indication of her abuse allegation was in the Pretrial Memorandum
she filed approximately two years after she filed the Petition in this case.
Second, petitioner testified without providing specific examples that her
signatures with respect to the 2010 return were either forged or made
under duress and that intervenor made all financial decisions. At no
point throughout this case has she expressed fear of retaliation from
intervenor if she were to inquire about their tax compliance. We have
not been provided with evidence necessary to find that the presence of
abuse negates her knowledge of the tax items at issue as contemplated
by section 4.03(2)(c)(i) of Rev. Proc. 2013-34. This factor weighs against
relief.
3.

Tax Law Compliance

If a taxpayer is still married to the nonrequesting spouse,
whether or not legally separated or living apart, and continues to file
joint returns with them after requesting relief, then this factor will be
neutral if the returns are in compliance, and weigh against relief if they
are not. Id. § 4.03(2)(f)(ii), 2013-43 I.R.B. at 402–03.
After 2010, petitioner and intervenor remained married and
continued to file joint tax returns through 2018. They still have
outstanding federal tax liabilities for 2012, 2013, and 2014. Petitioner
claimed “unmarried head of household” status on her 2019 return
despite still being married to intervenor, and she has not filed a return
for 2020. This factor weighs against relief.

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[*10] II.

Conclusion

Upon weighing the facts and circumstances, we find petitioner is
not entitled to innocent spouse relief under section 6015(f) for 2010. Her
testimony lacked merit, and in the light of her considerable income and
assets, knowledge and participation in the items giving rise to the
understatement, and consistent record of noncompliance with tax law,
we find it would not be inequitable to deny relief.
We have considered all of the parties’ arguments and, to the
extent they are not addressed herein, we find them to be moot,
irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered for respondent.

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