1All 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.

T.C. Memo. 2007-167

UNITED STATES TAX COURT

CYNTHIA K. BEATTY, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 22047-04. Filed June 27, 2007.

Caroline D. Ciraolo, for petitioner.

James H. Harris, Jr., for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

CHIECHI, Judge: This case arises from a request for equitable relief (relief) under section 6015(f).1 We must decide

whether respondent abused respondent’s discretion in denying
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petitioner relief under section 6015(f) for each of the taxable

years 1988 though 1997 and 2000. We hold that respondent abused

respondent’s discretion in denying petitioner such relief.

FINDINGS OF FACT

All of the facts in this case, which the parties submitted

under Rule 122, have been stipulated by the parties and are so

found. 

Petitioner resided in Ocean City, Maryland (Ocean City), at

the time she filed the petition. 

In 1978, petitioner married Michael Beatty (Mr. Beatty). 

She was still married to him when the parties submitted this case

under Rule 122. 

In 1975, petitioner received an associate degree from Villa

Julie College. Mr. Beatty stopped attending school when he was

in the ninth grade. 

From 1975 until 1980, petitioner worked as a medical secretary for Washington Hospital Center in Washington, D.C. 

Around 1977, Mr. Beatty obtained a Small Business Administration loan in order to purchase a delicatessen and bakery

business that he incorporated under the name “MKB Donut and Deli,

Inc.” (MKB). Mr. Beatty failed to pay his withholding tax

liabilities with respect to MKB, and respondent filed Federal tax

liens with respect to such liabilities. In 1980, MKB filed for

bankruptcy, and he eventually lost MKB and all of his savings. 
- 3 -

Around 1981, a bank foreclosed on a house which Mr. Beatty had

purchased in 1976 and in which petitioner and he had been residing since shortly after that purchase. 

In 1981, Mr. Beatty began working as a self-employed disc

jockey. From 1981 until the summer of 1998, petitioner was a

full-time homemaker, although she did help Mr. Beatty in his work

as a disc jockey. During that period, Mr. Beatty’s earnings as a

self-employed disc jockey were the only source of income of

petitioner and Mr. Beatty. 

Around 1996, petitioner and Mr. Beatty purchased a townhouse

in Ocean City. Except for signing certain documents, petitioner

was not involved in that purchase. 

From May through August 1998, petitioner worked as a bartender, for which she received $4,187. During the summers of

1999, 2000, and 2001, petitioner worked as a hostess at a restaurant, for which she received $4,387, $6,819, and $4,581, respectively. Except for basic cashier duties that petitioner had

while working as a bartender and a restaurant hostess, petitioner

had no other financial responsibilities in those (or any other)

jobs that she has had. 

At all relevant times, Mr. Beatty managed the finances of

petitioner and himself and made all of their financial decisions,

including managing all bank accounts and reviewing all bank

statements in his and/or petitioner’s name. In addition, at all
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relevant times, if petitioner needed to purchase groceries or

other personal items, Mr. Beatty provided her with the cash or a

check to do so. 

At certain relevant times, Mr. Beatty was unable to open

bank accounts or obtain credit in his name because of his poor

credit rating. Instead, Mr. Beatty used petitioner’s name to

open bank accounts, which he used for both personal and business

purposes. Mr. Beatty also obtained credit cards in petitioner’s

name, which he used for business purposes. In addition, Mr.

Beatty used petitioner’s name to finance the purchase of at least

one vehicle that he used for business purposes. 

Petitioner and Mr. Beatty did not timely file Federal income

tax returns and State income tax returns for any of their taxable

years 1988 through 1999. On a date not disclosed by the record

in 1999, Mr. Beatty was indicted by the State of Maryland for

willful failure to file a State income tax return (State return)

for each of the taxable years 1995, 1996, and 1997. On May 8,

2000, Mr. Beatty pleaded guilty to failing willfully to file a

State return with the State of Maryland for each of those taxable

years. 

On September 8, 2000, as a result of pleading guilty to

failing willfully to file a State return with the State of

Maryland for each of the taxable years 1995, 1996, and 1997, Mr.

Beatty was sentenced to 15 years in prison. That sentence was
- 5 -

suspended, and Mr. Beatty was placed on supervised probation for

five years. As a condition of his probation, Mr. Beatty was

required to file a Federal income tax return (Federal return) and

a State return for each of his taxable years 1995 through 1999. 

Around September 7, 2000, petitioner and Mr. Beatty filed

jointly Form 1040, U.S. Individual Income Tax Return (Form 1040),

for each of their taxable years 1998 (1998 joint return) and 1999

(1999 joint return). In their 1998 joint return and their 1999

joint return, petitioner and Mr. Beatty reported tax owed of

$46,710 and $31,533, respectively, which they did not pay at the

time they filed those returns. The liabilities reported in those

returns (unpaid liabilities for 1998 and 1999) are solely attributable to Mr. Beatty. 

On September 14, 2000, petitioner filed a petition for

bankruptcy (bankruptcy petition) under Chapter 7 of Title 11 of

the United States Code (Chapter 7) with the United States Bankruptcy Court for the District of Maryland (Bankruptcy Court). 

Petitioner filed the bankruptcy petition because of excessive

credit card debt that she was unable to pay and that had been

generated by Mr. Beatty, who used credit cards in petitioner’s

name to charge business expenses. On January 23, 2001, the

Bankruptcy Court adjudicated petitioner bankrupt under Chapter 7. 

In 2001, on a date not disclosed by the record, the Comptroller of Maryland directed Mr. Beatty to file a Federal return
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and a State return for any taxable year after 1987 for which Mr.

Beatty had failed to file such returns. 

In November 2001, Mr. Beatty’s accountant, Eric Vinson,

prepared a Federal return for petitioner and Mr. Beatty with

respect to each of their taxable years 1988 through 1997 and

2000, each of which petitioner and Mr. Beatty signed. Those

returns, which respondent received on the dates indicated, showed

the following tax owed:

Taxable Year

Date Received 

by Respondent Tax Owed

1988 11/7/01 $12,849

1989 11/7/01 13,644

1990 11/7/01 14,255

1991 11/7/01 14,823

1992 11/7/01 15,088

1993 11/7/01 15,533

1994 11/7/01 15,902

1995 11/7/01 20,726

1996 11/7/01 30,440

1997 11/26/01 41,174

2000 10/18/01 14,399

(For convenience, we shall refer collectively to the Federal

returns that petitioner and Mr. Beatty filed jointly for the

taxable years 1988 through 1997 and 2000 as the joint returns for

the years at issue.)
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The liabilities reported in the joint returns for the years

at issue (unpaid liabilities for the years at issue) are solely

attributable to Mr. Beatty. Petitioner did not review those

joint returns before she signed them. At the time petitioner

signed the joint returns for the years at issue, she believed

that Mr. Beatty would be incarcerated if she did not sign such

returns. 

Around February 28, 2002, petitioner filed with respondent

Form 8857, Request for Innocent Spouse Relief (And Separation of

Liability and Equitable Relief), with respect to, inter alia,

taxable years 1988 through 1997 and 2000. Petitioner attached a

statement to that form, which stated in pertinent part:

Mrs. Beatty is not responsible, and should not be held

liable, for the underpayment of tax reflected on the

joint returns filed. First, she signed the returns

solely because she was instructed to do so by her

husband’s accountant. She was not advised nor was she

aware that she had the option of filing separately. 

She was not told that by signing the returns, she was

jointly and severally liable for any tax reported

thereon. She would not have understood the information

reported as all items, with the sole exception of her

wages, were attributable to her husband and his business, of which she had no knowledge. And, most importantly, she was told that failure to promptly file all

prior federal and state tax returns would result in her

husband going to jail. 

On or about April 25, 2002, at the request of respondent,

petitioner submitted to respondent Form 886-A, Innocent Spouse

Questionnaire (petitioner’s Form 886-A). In petitioner’s Form

886-A, petitioner provided the responses indicated to the follow-
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ing questions:

2. If you are requesting relief from tax reported on

the original return:

a. Did you review the tax return before signing

it? No.

b. At the time you signed the return, were you

aware there was a balance due IRS? Please

explain in detail. She did not review the

returns and, therefore, was not aware that a

balance was due. Had she been advised that a

balance was due, she would have assumed that

she was not liable * * * [because] income tax

had been properly withheld from her * * *

wages and she believed that this meant that

she, individually, would not owe any tax.

c. Describe how, at the time you signed the

return, you and your spouse planned to pay

the tax due? Mrs. Beatty did not review the

returns. She signed the returns solely because she believed that her failure to do so

would result in her husband going to prison. 

She also believed * * * [that] because income

tax had been withheld from * * * [her] paychecks, that she * * * would not * * * personally owe any taxes.

* * * * * * *

8. During the years involved, did you and your spouse

have a joint bank account? 

 Mr. and Mrs. Beatty never opened or maintained joint bank accounts. In fact, the only

accounts in Mrs. Beatty’s name (prior to 2001)

were those opened by and used solely by Mr.

Beatty.

a. What was the extent of accessibility to these

accounts? Mr. Beatty maintained access to all

accounts. Mrs. Beatty did not use the accounts.
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b. Did you review the bank statements when you

received them? No.

c. Did you balance the checkbook or bank statements? No.

d. Did you receive and open the mail? Mrs.

Beatty did not receive or open any financial or

business mail, including bills, bank statements,

etc.

e. What bills did you pay? None.

f. What bills did your spouse pay? Mr. Beatty

paid all of the household expenses.

g. Were any bills paid out of a joint account? 

If so, which ones? Not applicable.

* * * * * * *

9. For the year you are requesting relief:

a. What was your involvement in the preparation

of the income tax return? Mrs. Beatty was

not involved in any way in the preparation of

the returns.

b. What was your spouse’s involvement in the 

preparation of the income tax return? Mr.

Beatty provided all supporting documents to

his accountant.

c. Who prepared the return? Eric Vinson, CPA,

Ocean City, Maryland.

d. Did you assist, sort or provide any information to the return preparer? No.

e. Did you or your spouse consult anyone regarding this return, at the time of signing (IRS,

Attorney, CPA, Tax Preparer, etc.)? Please

explain. 

Mrs. Beatty never consulted with any professional regarding tax matters. Mrs. Beatty’s

husband consulted with an accountant, Eric
- 10 -

Vinson, of Ocean City, Maryland, who advised

that he should file joint returns to minimize

the tax liability. Mr. Vinson prepared

joint returns, and Mr. Beatty presented those

returns to his wife and told her where to

sign. Mrs. Beatty signed the returns because

she believed that failure to do so would

result in her husband going to jail. She was

not aware that she had the option of filing

separately, or that she could have chosen not

to file at all.

10. If you were required to pay the tax liability,

would it cause an economic hardship? Yes. 

Please Explain. 

Mrs. Beatty works during the summer months in

Ocean City, Maryland. During the “off season,” it

is nearly impossible for Mrs. Beatty to obtain

full-time employment.

a. If a hardship would exist, please provide a

list of your current monthly income and expenses.

Monthly Income: $0.

Monthly expenses: Mr. Beatty pays the monthly

household expenses. When Mrs. Beatty is employed

during the summer months, her wages (minimal at

best) are used for basic expenditures such as gas,

groceries, etc.

* * * * * * *

14. At the time the return was filed, what assets did

you and your spouse own (cars, boats, homes, property, stocks, bonds, etc.)?

In or around April 1993, the Beattys moved

into a townhouse in Ocean City, Maryland. Mr.

Beatty told Mrs. Beatty that they owned the property, and Mrs. Beatty went about fixing up the

property as needed. In fact, Mr. Beatty had negotiated with someone for whom he worked on a regular basis to rent the property with an option to
- 11 -

buy. Approximately 3 years later, the Beatty

purchased the property, with Mr. Beatty explaining

to Mrs. Beatty that she just needed to sign the

papers to make their ownership “official.”

The Beattys never opened or maintained joint

bank accounts. In fact, the only accounts in Mrs.

Beatty’s name (prior to 2001) were those opened by

and used solely by Mr. Beatty. Due to Mr. 

Beatty’s bankruptcy in 1981 and ongoing tax problems, all vehicles purchased by Mr. Beatty have

been titled in the name of Mrs. Beatty. All vehicles have been purchased from a friend/associate

who owns a car dealership. The vehicles are always financed. Presently, the Mr. Beatty owns 2

vehicles: a 1996 Chevrolet van, bought and financed used in 1998 (balance owed is approximately

$10,000, estimated resale value: $8,000); and a

1999 Dodge Ram work van, financed in 1999 (balance

owed is approximately $16,000, estimate resale

value $7,000). Mr. and Mrs. Beatty do not have

any investments, do not have life insurance policies, and do not maintain any saving or retirement

accounts. They do not own expensive artwork or

collectibles, or live an extravagant lifestyle.

a. How did you pay for these assets? 

Mr. Beatty financed the purchases of the

residence and the vehicles.

15. What assets do you currently own?

See Answer to Question 14.

a. Were any of the assets transferred to you

from your spouse? No. [Reproduced literally.]

On September 19, 2002, a representative of respondent

requested certain documents, including (1) documentation of

petitioner’s income and living expenses at that time, (2) documentation of any bankruptcies that petitioner was involved with
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at that time, and (3) all bank statements and canceled checks

that petitioner had with respect to any bank accounts that

petitioner maintained individually, that Mr. Beatty maintained

individually, or that they maintained jointly. On November 5,

2002, petitioner provided such documents to respondent’s representative. 

On November 4, 2003, petitioner and Mr. Beatty filed Form

656, Offer in Compromise. In response, an Internal Revenue

Service (IRS) offer manager returned that form by letter dated

November 21, 2003. That letter stated in pertinent part:

We are returning your Form 656, Offer in Compromise for the following reason(s):

An offer will not be considered while a bankruptcy

proceeding is open.

All required tax returns have not been filed. 

On August 19, 2004, respondent’s Appeals Office (Appeals

Office) sent petitioner a “Notice of Determination Concerning

Your Request for Relief under the Equitable Relief Provision of

Section 6015(f)” (notice of determination). In the notice of

determination, the Appeals Office denied petitioner relief under

section 6015(f) with respect to, inter alia, taxable years 1988

through 1997 and 2000. The notice of determination stated in

pertinent part:

We’re writing to tell you that we’ve made a decision

about your February 28, 2002 request for innocent

spouse relief under Section 6015(f) of the Internal

Revenue Code. * * *
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We’ve determined that, for the above tax years we

cannot allow your request. It has been determined that

you do not meet the statutory criteria for granting of

the innocent spouse relief. * * * 

An attachment to the notice of determination stated in pertinent

part:

SUMMARY/RECOMMENDATION

Is the taxpayer entitled to innocent spouse relief

under the provisions of IRC Section 6015(f)? 

No. It has been determined that the taxpayer is not

entitled to equitable relief under the provisions of

Section 6015(f). Since the representative has expressed a desire to litigate this case it is recommended that a statutory notice of claim disallowance be

issued.

ADMINISTRATIVE

A related CDP case has been closed separately. The

outcome of that case has no bearing on this innocent

spouse claim.

BACKGROUND

Cynthia Beatty was born on June 6, 1955. She attended

Dulaney Valley high school, and obtained an associate

degree from Villa Julie College in 1975. Mrs. Beatty

worked as a medical secretary for Washington Hospital

Center in Washington, D.C. from 1975 to 1980. From

1981 to approximately 1990, Mrs. Beatty was a full-time

homemaker and assisted her husband with his deejay

business (carrying equipment, pulling records, attending shows, etc.) From 1990 until the summer of 1998,

Mrs. Beatty was a full-time homemaker. In the summer

of 1998, she obtained seasonal employment (May through

August) as a bartender with “BJ’s South” in Ocean City,

Maryland. The following summer (1999), Mrs. Beatty

obtained seasonal employment as a hostess for The

Twinings, a restaurant in Ocean City, Maryland. She

returned to this position during the summers of 2000

and 2001. None of Mrs. Beatty’s employment positions

involved financial responsibilities beyond basic cashier duties.
- 14 -

Mrs. Beatty met her husband, Michael Beatty, in 1974 in

Cockeysville, Maryland, at a restaurant where Mr.

Beatty was working as a manager. In 1976, Mr. Beatty

was transferred to Prince George’s County, Maryland,

and purchased a house. Shortly thereafter, Mrs. Beatty

moved in. They married in 1978. From the beginning of

their marriage, Mrs. Beatty had no involvement in the

family finances. She did not have or maintain checking

accounts in her name. She did not discuss the family

expenses with her husband; and was not involved in any

financial decisions. In 1977, prior to their marriage,

Mr. Beatty purchased a deli and bakery business, which

he incorporated as “MKB Donut and Deli, Inc.” He

financed the business with an SBA loan. As a result of

rapid growth and poor management, Mr. Beatty fell

behind on his withholding tax obligations, and soon

found himself facing federal tax liens and foreclosures. Mr. Beatty’s business filed for bankruptcy

protection in 1980. He eventually lost everything.

Having lost his business and all of his savings, Mr.

Beatty was left looking for a way to support himself

and his wife. A friend that was opening a bar in Ocean

City, Maryland, offered to pay Mr. Beatty to help get

the place in order in time for Memorial Day weekend

(1981). Mr. Beatty agreed and he and his wife rented a

room in Ocean City for $35 a night. When Mr. Beatty

arrived at the bar, he learned that the bar was not

permitted to have live entertainment. Mr. Beatty

offered to provide deejay services during the busy

holiday weekend. His friend accepted, and what was

intended to be a one-time “gig” turned into a new job

that lasted the summer of 1981. Mrs. Beatty helped in

any way she could, from carrying equipment and pulling

records, to doing her husband’s laundry and getting him

ready for each night. This continued until September

1981. As a result of his summer engagement, Mr. Beatty

obtained jobs with various colleges in Maryland and

Pennsylvania, as well as some bars and nightclubs in

the Baltimore metropolitan area. At this point, the

bank had foreclosed on the house purchased by Mr.

Beatty in 1976. The Beatty’s packed up their belongings and moved into a smaller apartment in

Cockeysville, Maryland. Again, Mr. Beatty handled all

the financial aspects of the relationship, including

the apartment application process, paying the rent,

paying household.
- 15 -

During this time, Mrs. Beatty was not aware that her

husband was not filing federal or state income tax

returns. She had no reason to inquire about the finances, and always assumed that her husband was handling everything. If she inquired about any particular

financial issue, Mr. Beatty always told her not to

worry about anything, that he had everything under

control. Mr. Beatty would give her money when she

needed it to buy groceries or other miscellaneous

items. She never reviewed any correspondence or spoke

with, any government agents or tax professionals about

her husband’s financial problems. She never negotiated

her husbands’s business contracts, accepted payment

from people he worked for, or discussed the business

finances.

In April 1993, the Beattys moved into a townhouse in

Ocean City, Maryland. Mr. Beatty told Mrs. Beatty that

they owned the property, and Mrs. Beatty went about

fixing it up as necessary. In fact, Mr. Beatty had

negotiated with someone for whom he worked on a regular

basis to rent the property with an option to buy. 

Approximately 3 years later, the Beatty purchased the

property. Mr. Beatty explained to Mrs. Beatty that she

just needed to sign the papers to make their ownership

“official.”

The Beattys did not maintain joint bank accounts. The

Beattys’ vacations have been limited to short trips to

nearby locations, which they can drive to and stay a

few days in an inexpensive hotel. Their only vehicle

is a 1996 Chevy conversion van, which is owned by Mr.

Beatty. They do not drive luxury vehicles, do not have

any investments, do not have life insurance policies,

and do not maintain any saving or retirement accounts. 

They do not own expensive artwork or collectibles, or

live an extravagant lifestyle. Mrs. Beatty has no

idea, even today, how much her husband is earning, or

the amount of his business expenses. She does not know

the cost of monthly household expenses. 

In 1999, Mr. Beatty was charged with willful failure to

file state income tax returns for 1995, 1996 and 1997. 

He pled guilty on May 8, 2000. On September 8, 2000,

he was sentenced to 5 years on each count, with the

entire sentence suspended, and 5 years supervised

probation. As a condition of his probation Mr. Beatty

was required to file all federal and state tax returns
- 16 -

for the years 1995 through 1999, and all future tax

returns. Shortly thereafter, the State of Maryland

contacted Mr. Beatty’s counsel and insisted that returns be filed for years beginning in 1988. Mr. Beatty

and his accountant, Eric Vinson, immediately began

working on the returns, using whatever records they

could gather as well as estimated net income figures

provided by the Office of the Comptroller. When the

returns were prepared, Mr. Vinson told Mrs. Beatty to

sign where indicated. He did not explain that, by

signing the returns, she would be responsible for half

of the taxes due. Having been present at her husband’s

sentencing, and having heard the stern warning from the

court that, if these returns were not filed, her husband would be going to jail, Mrs. Beatty signed whatever was put in front of her.

The tax due for the years at issue are * * * solely the

result of Mr. Beatty’s income. In 1998, Mrs. Beatty

earned $4,187, and had federal income tax of $164

withheld by her employer. In 1999, Mrs. Beatty earned

$4,387, and had federal income tax of $366 withheld by

her employer. Had she been advised to elect “married

filing separately” filing status, she would have had no

taxable income. Prior to 1998, Mrs. Beatty did not

work outside the home.

Mrs. Beatty was adjudicated bankrupt under Chapter 7 on

January 23, 2001. The returns were signed after that

on November 6, 2001. Mr. Beatty was in bankruptcy

previously. At the time the returns were signed,

neither had sufficient credit to allow them to borrow

the funds needed to pay the taxes.

* * * * * * *

Revenue Procedure 2000-15 as amplified by the provisions of Revenue Procedure 2003-61 provides a list of

elements to be developed to determine the extent, if

any of relief to be granted under these innocent spouse

provisions. * * * The merits and circumstances of each

case will dictate the weight assigned to each factor in

reaching a decision to grant or reject innocent spouse

relief.

Divorced, separated or living apart for at least 12

months when claim is filed
- 17 -

This condition is not met. Mr. & Mrs. Beatty are not

divorced or separated. They lived together during the

years under consideration and are still living together. Mrs. Beatty filed delinquent returns with her

husband in November of 2001.

Payment of the tax liabilities would cause hardship

Economic hardship is defined as: the payment of the

tax would make it impossible to meet your basic living

expenses for housing, clothing, food, transportation

medical etc. Reasonable belief that tax would be paid. 

Mr. Beatty is self-employed, yearly household income

fluctuates to some extent. Current expense information

was gathered from an interview as well as from a check

spread performed using 2000 bank records. Income

information was derived from tax returns filed for

2001. (The most recent return filed) Comparison of

monthly household income to monthly basic living expenses indicates that the Beattys are having financial

difficulties. This is also evident from the bankruptcies that have been filed. The question is not whether

hardship exists, but whether a hardship will be created

if innocent spouse relief is not granted. In this

case, hardship already exists and will continue to

exist whether or not relief is granted to Mrs. Beatty. 

The two still live in the same household so even if

[she] is relieved, Mr. Beatty’s liability will impact

on the family’s ability to pay personal living expenses. This condition is not met.

Attribution

Mrs. Beatty’s attorney states that having heard the

stern warning from the court that if returns were not

filed her husband would go to jail, Mrs. Beatty signed

whatever was placed in front of her. She contends that

this caused Mrs. Beatty to do something she wouldn’t

ordinarily have done. The liability is solely attributable to Mr. Beatty’s income and Mrs. Beatty did not

receive a significant benefit from the unpaid taxes

beyond that of minimal living expenses. The underpayments of tax are attributed to Mr. Beatty. The taxpayer alone did not have sufficient income to require

her to file a return. The tax liabilities rest solely

with Mr. Beatty for failure to file timely returns and

to pay his income tax annually.
- 18 -

Marital Abuse

If abuse does not rise to the level duress, then the

electing spouse’s level of influence with respect to

the unpaid tax must be evaluated.

There have not been any claims of marital abuse.

The representative explained that duress is the most

compelling reason for requesting equitable relief. 

Mrs. Beatty would not have signed joint tax returns

with her husband if she had not heard the judge order

returns to be filed. She feared that her husband would

go to jail if she did not sign the returns presented to

her. Mrs. Beatty did not have a filing obligation of

her own because she had withholdings from her paycheck

to more than cover any taxes due on her own income. 

She certainly would not have filed jointly if she had

understood the ramifications.

Mrs. Beatty signed the tax returns under duress. The

returns may be invalid joint return.

Joint Returns: Joint and Several Liability: Duress,

fraud or misrepresentation

A wife was liable for tax on a joint return where the

evidence failed to show that she was unwilling to sign

the return or that her husband made her sign the return

under threat of force. Fear alone is insufficient to

prove duress.

Although it is unfortunate that Mrs. Beatty was not

aware of and was not informed of her options, ignorance

of the law is no excuse. Mrs. Beatty cannot be relieved of her joint liability simply because she didn’t

know the tax laws. In order for duress to be a factor,

Mrs. Beatty would have to show that she had no choice

and that she was reluctant to sign a joint return. In

this case, Mrs. Beatty did have a choice. She could

have filed separately whether or not she realized it at

the time. Further, she was not reluctant to sign the

joint returns. In fact, she was eager to do whatever

was asked of her at the time. No one forced Mrs.

Beatty to sign joint tax returns against her will. 

Duress did not occur and is not a factor to consider in

this case.
- 19 -

Reasonable belief that the tax would be paid:

Mrs. Beatty states that she did not review the returns

and had no idea of the amount of taxes due, if any. 

Since Mrs. Beatty signed the returns without looking at

any of the figures, she had no information to make the

determination as to whether the taxes could be paid or

not. Mrs. Beatty and her attorney mentioned on numerous occasions that she just signed without questioning

because she believed her husband would go to jail if

she didn’t sign. There was no thought given at that

point in time as to whether or not the taxes would be

paid. Therefore, there was no belief that the taxes

would be paid.

Non-requesting spouse’s legal obligation to pay

A stipulation in the property settlement or a decree of

divorce must be evidenced that requires the non electing spouse to assume responsibility for the unpaid

income taxes for the periods at issue. Since the

parties are still married and living together a marital

agreement such as this does not exist.

Knowledge

She signed the joint tax returns because her husband

was under court order to file returns with both the

State of Maryland and the federal government. He was

charged with willful failure to file tax returns by the

State. In order to receive a reduced sentence, he was

required to file all returns or face a substantial jail

sentence. Mrs. Beatty was not involved in the tax

preparation process. Returns were prepared using

extrapolations and estimates computed by the State of

Maryland. Mr. Beatty had some documentation for business expenses but was not very good at keeping the

documentation. When the returns were completed, Mr.

and Mrs. Beatty went to the CPA’s office. She did not

review or question the returns and signed them.

Significant Benefit

Other than usual and customary living expenses there is

no evidence to indicate that you derived a significant

benefit from the failure to report these sources of

income. The Beatty’s did not live extravagantly or

take trips, they didn’t have any investments, life

insurance, savings, or anything else of value to show
- 20 -

for the money earned. When Mrs. Beatty became aware of

the amount of money her husband earned, she couldn’t

understand where the funds went. She then found out

that her husband had a problem with Keno gambling. He

lost their money and then became involved with loan

sharks to fund his addiction. Other than customary

basic living expenses the taxpayer did not derive a

significant benefit from the unpaid federal income

taxes. 

DETERMINATION

We look to the court case of Alice Berger, et al. v.

Commissioner T.C. Memo. 1996-76, 71 TCM 2160. Alice

Berger asserts that the Chancery Court ordered her to

sign the 1988 return and that she signed it because she

believed she had no choice and was afraid of the “consequences” of defying a court order. Although she

signed the return at the courthouse, she does not

appear to have been signed it before a judge who was

threatening improper or oppressive “consequences

against her. Alice Berger did not testify that the

Chancery Court had threatened “consequences” directly

to her. This court case demonstrates that signing a

return at the order of a Court because one is afraid of

the “consequences” of defying a court order does not

equal a showing of abuse of discretion or theat of

improper sanction sufficient to invalidate the return. 

In Mrs. Beatty’s case, the court didn’t even ask her to

sign returns. The court didn’t abuse its authority and

did not force Mrs. Beatty to sign joint tax returns.

Another court case of interest is Hazel Stanley v.

Comm. 45 TC 555. Mrs. Stanley’s husband was very

domineering and sometimes violent. She would go along

with her husband in many situations simply to avoid

conflict. Mrs. Stanley signed joint returns as directed by her husband. However, she failed to demonstrate that she did so unwillingly and was found to be

jointly liable. Mrs. Beatty does not claim any undue

influence from her husband; however the important point

to note in this case is the “willingness” to file

jointly. Like Mrs. Stanley, Mrs. Beatty has not demonstrated that she filed unwillingly.

Although it is unfortunate that Mrs. Beatty was not

aware of and was not informed of her options, ignorance

of the law is no excuse. Mrs. Beatty cannot be re-
- 21 -

lieved of her joint liability simply because she didn’t

know the tax laws and their impact on her.

The taxpayer had complete awareness of the balances due

when the returns were filed. She was well aware that

the family did not have the funds to pay the tax. She

did not have a reasonable belief that the taxes would

be paid. It has been established that the taxpayer’s

do not qualify for economic hardship. The representative had made reference to a substantial gambling debt

that she insists causes economic hardship. However she

has failed to submit documentation of such an expense.

The taxpayers still reside together as a married couple. Abuse is not a factor. The taxpayer claims that

the level of duress caused by this situation merits

innocent spouse relief. This is a misnomer as explained. The cumulative effect of the development of

these equitable relief elements clearly demonstrates

that the taxpayer does not qualify for innocent spouse

relief under the provisions of IRC Section 6015(f).

CONCLUSION 

Since the taxpayer will not execute a form 870-IS and

has expressed her intention to litigate this matter

there remains no alternative but to recommend that a

statutory notice of claim disallowance be issued. 

[Reproduced literally.]

On December 29, 2004, petitioner and Mr. Beatty refinanced

the mortgage loan on the house in which they resided. Around

January 4, 2005, petitioner and Mr. Beatty used funds that they

received from that refinancing to make a $151,423.56 payment to

the IRS with respect to the unpaid liabilities for the taxable

years 1998 and 1999. After the refinancing of the mortgage loan

on their house, petitioner and Mr. Beatty had no equity in that

house and were required to make a monthly mortgage loan payment

of $3,400. 
- 22 -

During 2004, petitioner received $12,906 as an employee of

RIG, Inc., as well as $1,274 in unemployment compensation. On

January 6, 2006, petitioner filed late a Federal return for her

taxable year 2004 (2004 return) that showed a $2 refund due. 

On January 6, 2006, petitioner submitted to respondent Form

433-A, Collection Information Statement for Wage Earners and

Self-Employed Individuals (Form 433-A). That form contained

several sections identified as section 1 through 9. In section 2

of Form 433-A that petitioner submitted to respondent (petitioner’s Form 433-A), petitioner did not respond to a question

relating to whether she or Mr. Beatty was self-employed or

operated a business, although she indicated in section 3 of that

form that she was unemployed. In section 3 of petitioner’s Form

433-A, petitioner did not indicate whether Mr. Beatty was employed. 

In section 5 of petitioner’s Form 433-A, petitioner indicated that she (1) maintained a checking account with a $200

account balance, (2) had $50 cash on hand, (3) had a credit card

balance of $400, (4) owed $4,700 with respect to an equity line

of credit, and (5) had $400 of credit available to her. 

In sections 5 and 6 of petitioner’s Form 433-A, petitioner

provided the responses indicated to the following questions:

16. LIFE INSURANCE. Do you have life insurance with a

cash value? : No 9 Yes

* * * * * * *
- 23 -

17a. Are there any garnishments against your wages? 

: No 9 Yes

* * * * * * *

17b. Are there any judgments against you? : No 9 Yes

* * * * * * *

17d. Did you ever file bankruptcy? 9 No : Yes 

If yes, date filed 9/14/2000 Date discharged

12/27/2000

17e. In the past 10 years did you transfer any assets

out of your name for less than their actual value? 

: No 9 Yes

* * * * * * *

17f. Do you anticipate any increase in household income

in the next two years? 9 No : Yes 

If yes, why will the income increase? I hope to

find seasonal employment * * *

How much will it increase? $ ??? In 2004, I

earned $12,906

17g. Are you a beneficiary of a trust or estate? 

: No 9 Yes

* * * * * * *

17h. Are you a participant in a profit sharing plan? 

: No 9 Yes 

In section 7 of petitioner’s Form 433-A, petitioner indicated that she owned (1) a 2005 Jeep Liberty valued at $18,785

with respect to which there was a $23,000 outstanding loan

balance and (2) two vehicles, neither of which had any value. In

section 7 of petitioner’s Form 433-A, petitioner also indicated
- 24 -

that in 1991 she purchased real estate in Ocean City for

$130,000, that the current value of that real estate was

$500,000, and that there was a $450,000 outstanding mortgage loan

with respect to that real estate, which was required to be paid

in full in 2035. 

In section 7 of petitioner’s Form 433-A, petitioner indicated that she had personal assets valued at $6,000.

Section 9 of Form 433-A listed various income items and

various living expense items. With respect to the income items

listed in that section, petitioner stated that she was unemployed. With respect to the expense items listed in section 9 of

Form 433-A, petitioner indicated that she had total monthly

living expenses of $4,003, consisting of $3,600 of monthly

expenses for housing and utilities and $403 of monthly expenses

for food, clothing, housekeeping supplies, and personal care

products. 

OPINION

We review respondent’s denial of relief under section

6015(f) for abuse of discretion. Butler v. Commissioner, 114

T.C. 276, 292 (2000). Respondent’s denial of such relief constitutes an abuse of discretion if such denial was arbitrary,

capricious, or without sound basis in fact or law. Woodral v.

Commissioner, 112 T.C. 19, 23 (1999). The question whether

respondent’s denial of relief under section 6015(f) was arbi-
- 25 -

trary, capricious, or without sound basis in fact is a question

of fact. Cheshire v. Commissioner, 115 T.C. 183, 197-198 (2000),

affd. 282 F.3d 326 (5th Cir. 2002). 

Petitioner bears the burden of proving that respondent

abused respondent’s discretion in denying her relief under

section 6015(f). See Jonson v. Commissioner, 118 T.C. 106, 125

(2002), affd. 353 F.3d 1181 (10th Cir. 2003). That this case was

submitted under Rule 122 does not change that burden or the

effect of a failure of proof. See Rule 122(b); Borchers v.

Commissioner, 95 T.C. 82, 91 (1990), affd. 943 F.2d 22 (8th Cir.

1991). 

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. RELIEF FROM JOINT AND SEVERAL LIABILITY ON 

 JOINT RETURN.

* * * * * * *

(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 individual liable for any unpaid tax or

any deficiency (or any portion of either);

and

(2) relief is not available to such individual under subsection (b) or (c),

the Secretary may relieve such individual of such

liability.
- 26 -

2We note that Revenue Procedure 2003-61 superseded Rev.

Proc. 2000-15, 2000-1 C.B. 447. 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. Rev. Proc. 2003-61,

sec. 7, 2003-2 C.B. at 299. Revenue Procedure 2003-61 is applicable in the instant case. That is because as of Nov. 1, 2003,

no preliminary determination letter had been issued to petitioner

with respect to petitioner’s request for relief under sec.

6015(f), and that request was still pending. 

In the instant case, the parties agree that relief is not

available to petitioner under section 6015(b) or (c), thereby

satisfying section 6015(f)(2). They disagree over whether

petitioner is entitled to relief under section 6015(f). 

As directed by section 6015(f), respondent has prescribed

procedures in Rev. Proc. 2003-61, 2003-2 C.B. 296 (Revenue

Procedure 2003-61)2 that are to be used in determining whether it

would be inequitable to find the requesting spouse liable for

part or all of the liability in question. Section 4.01 of

Revenue Procedure 2003-61 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 2003-61 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 circumstances, respondent determines that it would be
- 27 -

inequitable to hold the requesting spouse liable for such liability.

Where, as here, the requesting spouse satisfies the threshold conditions, section 4.02(1) of Revenue Procedure 2003-61 sets

forth the circumstances under which respondent 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. Petitioner concedes that she does not qualify for

relief under section 4.02(1) of Revenue Procedure 2003-61. 

Instead, she relies on section 4.03 of that revenue procedure in

support of her claim for relief under section 6015(f). 

Section 4.03 of Revenue Procedure 2003-61 provides a list of

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.

2003-61, sec. 4.03, 2003-2 C.B. at 298.

As pertinent here, section 4.03(2)(a) of Revenue Procedure

2003-61 sets forth the following factors which are to be considered and weighed appropriately:

(i) Marital status. Whether the requesting spouse

is separated (whether legally separated or living

apart) or divorced from the nonrequesting spouse. * * *

(ii) Economic hardship. Whether the requesting

spouse would suffer economic hardship (within the
- 28 -

meaning of section 4.02(1)(c) of this revenue procedure) if the Service does not grant relief from the

income tax liability.

(iii) Knowledge or reason to know.

(A) Underpayment cases. In the case of an income

tax liability that was properly reported but not paid,

whether the requesting spouse did not know and had no

reason to know that the nonrequesting spouse would not

pay the income tax liability.

* * * * * * *

(C) Reason to know. For purposes of (A) * * *

above, in determining whether the requesting spouse had

reason to know, the Service will consider the requesting spouse’s level of education, any deceit or evasiveness of the nonrequesting spouse, the requesting

spouse’s degree of involvement in the activity generating the income tax liability, the requesting spouse’s

involvement in business and household financial matters, the requesting spouse’s business or financial

expertise, and any lavish or unusual expenditures

compared with past spending levels. 

(iv) Nonrequesting spouse’s legal obligation. 

Whether the nonrequesting spouse has a legal obligation

to pay the outstanding income tax liability pursuant to

a divorce decree or agreement. * * *

(v) Significant Benefit. Whether the requesting

spouse received significant benefit (beyond normal

support) from the unpaid income tax liability or item

giving rise to the deficiency. See Treas. Reg.

§1.6015-2(d).

(vi) Compliance with income tax laws. Whether the

requesting spouse has made a good faith effort to

comply with income tax laws in the taxable years following the taxable year or years to which the request

for relief relates. 

(We shall hereinafter refer to the factors set forth in section

4.03(2)(a)(i), (ii), (iii), (iv), (v), and (vi) of Revenue

Procedure 2003-61 as the marital status factor, the economic
- 29 -

hardship factor, the knowledge or reason to know factor, the

legal obligation factor, the significant benefit factor, and the

tax law compliance factor, respectively.)

Section 4.03(2)(b) of Revenue Procedure 2003-61 sets forth

the following factors which, if present in a case, will weigh in

favor of granting an individual relief under section 6015(f), but

will not weigh against granting such relief if not present:

(i) Abuse. Whether the nonrequesting spouse

abused the requesting spouse. * * *

(ii) Mental or physical health. Whether the

requesting spouse was in poor mental or physical health

on the date the requesting spouse signed the return or

at the time the requesting spouse requested relief. 

The Service will consider the nature, extent, and

duration of illness when weighing this factor.

(We shall hereinafter refer to the factors set forth in section

4.03(2)(b)(i) and (ii) as the abuse factor and the mental or

physical health factor, respectively.)

Before turning to the factors set forth in section

4.03(2)(a) and (b) of Revenue Procedure 2003-61, we address

respondent’s position that, in determining whether petitioner is

entitled to relief under section 6015(f), we should consider only

respondent’s administrative record with respect to petitioner’s

taxable years at issue. We stated our position on that issue in

Ewing v. Commissioner, 122 T.C. 32 (2004). In Ewing, we held

that our determination of whether a taxpayer is entitled to

relief under section 6015(f) “is made in a trial de novo and is
- 30 -

3In further support of respondent’s position that, in determining whether petitioner is entitled to relief under sec.

6015(f), we should consider only respondent’s administrative

record with respect to petitioner’s taxable years at issue,

respondent relies on Robinette v. Commissioner, 439 F.3d 455 (8th

Cir. 2006), revg. 123 T.C. 85 (2004), a case under sec. 6330. 

The Court to which an appeal in this case would ordinarily lie is

the United States Court of Appeals for the Fourth Circuit. We

are not bound by Robinette. See Golsen v. Commissioner, 54 T.C.

742, 757 (1970), affd. 445 F.2d 985 (10th Cir. 1971).

4If, as we held in Ewing v. Commissioner, 122 T.C. 32

(2004), we were to consider in this case respondent’s administrative record with respect to petitioner’s taxable years at issue

as well as matters that the parties stipulated that are not part

of that administrative record, our holding under sec. 6015(f)

would remain the same.

not limited to matter contained in respondent’s administrative

record”. Id. at 44. Respondent urges us to reconsider that

position since the United States Court of Appeals for the Ninth

Circuit vacated our decision in Ewing on jurisdictional grounds.3

See Commissioner v. Ewing, 439 F.3d 1009 (9th Cir. 2006), revg.

118 T.C. 494 (2002), vacating 122 T.C. 32 (2004). 

Assuming arguendo that we were to accept respondent’s

position that, in determining whether petitioner is entitled to

relief under section 6015(f), we should consider only respondent’s administrative record with respect to petitioner’s taxable

years at issue, on the record before us, we find that petitioner

has carried her burden of showing that respondent abused respondent’s discretion in denying her such relief with respect to the

unpaid liabilities for the years at issue.4 We turn now to the

factors set forth in section 4.03(2)(a) of Revenue Procedure
- 31 -

5In determining whether a requesting spouse will suffer

economic hardship, sec. 4.02(1)(c) of Revenue Procedure 2003-61,

to which sec. 4.03(2)(a)(ii) of that revenue procedure refers,

requires reliance on rules similar to those provided in sec.

301.6343-1(b)(4), Proced. & Admin. Regs. Sec. 301.6343-1(b)(4),

Proced. & Admin. Regs., generally provides that an individual

suffers an economic hardship if the individual is unable to pay

his or her reasonable basic living expenses. Sec. 301.6343-

1(b)(4), Proced. & Admin. Regs., provides, in pertinent part:

(continued...)

2003-61 that support our finding. 

With respect to the marital status factor set forth in

section 4.03(2)(a)(i) of that revenue procedure, the parties

agree on brief that that factor is neutral. 

However, the notice of determination stated in pertinent

part: 

Divorced, separated or living apart for at least 12

months when claim is filed

This condition is not met. Mr. & Mrs. Beatty are not

divorced or separated. They lived together during the

years under consideration and are still living together. * * *

As we understand it, the Appeals Office concluded in the

notice of determination that the marital status factor weighed

against granting petitioner relief under section 6015(f). We

reject that conclusion as unfounded. We agree with the parties’

position on brief, and we find, that the marital status factor is

neutral. 

With respect to the economic hardship factor set forth in

section 4.03(2)(a)(ii) of Revenue Procedure 2003-61,5 petitioner
- 32 -

5(...continued)

(ii) Information from taxpayer.--In determining a

reasonable amount for basic living expenses the director will consider any information provided by the

taxpayer including--

(A) The taxpayer's age, employment status and history,

ability to earn, number of dependents, and status as a

dependent of someone else;

(B) The amount reasonably necessary for food,

clothing, housing (including utilities, home-owner

insurance, home-owner dues, and the like), medical

expenses (including health insurance), transportation,

current tax payments (including federal, state, and

local), alimony, child support, or other court-ordered

payments, and expenses necessary to the taxpayer's

production of income (such as dues for a trade union or

professional organization, or child care payments which

allow the taxpayer to be gainfully employed);

(C) The cost of living in the geographic area in

which the taxpayer resides;

(D) The amount of property exempt from levy which

is available to pay the taxpayer's expenses;

(E) Any extraordinary circumstances such as special education expenses, a medical catastrophe, or

natural disaster; and

(F) Any other factor that the taxpayer claims

bears on economic hardship and brings to the attention

of the director.

6On brief, respondent contends in pertinent part with

respect to the economic hardship factor that petitioner 

(continued...)

argues that that factor weighs in favor of granting her relief

under section 6015(f). On brief, respondent contends that not

granting such relief will have no effect on petitioner’s economic

situation.6 
- 33 -

6(...continued)

provided respondent with no evidence of this economic

hardship. * * * Whether she is jointly liable for the

income tax or not does not affect her economic

situation: she does not have any economic

responsibilities. 

* * * * * * * 

* * * Accordingly, petitioner will not experience

economic hardship if relief is not granted. * * * 

Respondent’s administrative record with respect to

petitioner’s taxable years at issue belies respondent’s position

on brief about the economic hardship factor. As quoted below,

the notice of determination, which was based upon that record,

also belies that position.

However, the notice of determination stated in pertinent

part: 

Mr. Beatty is self-employed, yearly household income

fluctuates to some extent. Current expense information

was gathered from an interview as well as from a check

spread performed using 2000 bank records. Income information was derived from tax returns filed for 2001. 

(The most recent return filed) Comparison of monthly

household income to monthly basic living expenses indicates that the Beattys are having financial difficulties. This is also evident from the bankruptcies that

have been filed. The question is not whether hardship

exists, but whether a hardship will be created if innocent spouse relief is not granted. In this case, hardship already exists and will continue to exist whether

or not relief is granted to Mrs. Beatty. The two still

live in the same household so even if [she] is

relieved, Mr. Beatty’s liability will impact on the

family’s ability to pay personal living expenses. This

condition is not met. [Reproduced literally.] 

As we understand it, the Appeals Office concluded in the

notice of determination that the economic hardship factor weighed

against granting petitioner relief under section 6015(f) because
- 34 -

7Additional facts not presented to the Appeals Office but

presented to the Court further support what the Appeals Office

implicitly acknowledged. For example, on Dec. 29, 2004,

petitioner and Mr. Beatty refinanced the mortgage loan on the

house in which they resided. On or about Jan. 4, 2005,

petitioner and Mr. Beatty used $151,423.56 of the funds that they

received from that refinancing to pay their unpaid liabilities

for 1998 and 1999. After the refinancing of the mortgage loan on

their house, petitioner and Mr. Beatty had no equity in that

house and were required to make a monthly mortgage payment of

$3,400 on that refinanced loan. 

the Appeals Office’s failure to grant such relief would not

“create” economic hardship, since economic “hardship already

exists and will continue to exist whether or not relief is

granted to Mrs. Beatty.” We reject as unfounded the rationale

stated by the Appeals Office for its conclusion that the economic

hardship factor weighed against granting petitioner relief under

section 6015(f). The Appeals Office implicitly acknowledged in

the notice of determination that payment of the unpaid liabilities for the years at issue would cause even greater economic

hardship than already existed.7 We find that the economic hardship factor weighs in favor of granting petitioner relief under

section 6015(f). 

With respect to the knowledge or reason to know factor set

forth in section 4.03(2)(a)(iii) of Revenue Procedure 2003-61,

petitioner argues that she did not know and had no reason to know

that Mr. Beatty would not pay the tax shown due in each of the

respective joint returns for the years at issue and that therefore that factor weighs in favor of granting her relief under
- 35 -

section 6015(f). Respondent disagrees. 

The notice of determination stated in pertinent part:

Mrs. Beatty states that she did not review the returns

and had no idea of the amount of taxes due, if any. 

Since Mrs. Beatty signed the returns without looking at

any of the figures, she had no information to make the

determination as to whether the taxes could be paid or

not. Mrs. Beatty and her attorney mentioned on numerous occasions that she just signed without questioning

because she believed her husband would go to jail if

she didn’t sign. There was no thought given at that

point in time as to whether or not the taxes would be

paid. Therefore, there was no belief that the taxes

would be paid.

In support of her argument that the knowledge or reason to

know factor set forth in section 4.03(2)(a)(iii) of Revenue

Procedure 2003-61 weighs in favor of granting her relief under

section 6015(f), petitioner asserts:

Petitioner acknowledged in her responses set forth

on the Innocent Spouse Questionnaire * * * that she did

not review the returns prior to signing and therefore,

had no actual knowledge of the tax reported on the

returns, or actual knowledge that the tax reported

would not be paid. Petitioner further believed that,

based on the Beattys standard of living, they had very

little income and thus, had no reason to know that Mr.

Beatty would not pay, or be able to pay, the tax due. 

* * * Petitioner did not know that Mr. Beatty had a

long-time Keno gambling problem or that he was spending

significant sums betting on Keno and repaying high

interest rate advances to loansharks. * * * Since Mr.

Beatty had been ordered by the court in his criminal

proceedings to file his missing returns, it was certainly reasonable for Petitioner to believe that Mr.

Beatty would ultimately pay the tax due.

In addition, Petitioner did not understand that

she was not required to file a return for most of the

years at issue, or that she had the option of filing

separately for those years she was required to file 

(1998, 1999 and 2000). Petitioner also did not under-
- 36 -

8Despite the above-quoted assertions of petitioner, she

acknowledges on brief that

ignorance of the law does not excuse a spouse from

joint and several liability for tax due on a joint

return under § 6013(d)(3). Petitioner further

acknowledges prior decisions of this court that charge

a taxpayer with constructive knowledge of the

underpayment where the taxpayer signed the returns

without reviewing them, and a duty to inquire “whether

such a tax shown due would be paid.” Simon v.

Commissioner, T.C. Memo. 2005-220 (and cases cited

therein); see also Weist [sic] v. Commissioner, T.C.

Memo. 2003-91. 

9In support of her argument that she did not know and had no

reason to know that Mr. Beatty would not pay the tax shown due in

each of the respective joint returns for the years at issue,

petitioner also cites Keitz v. Commissioner, T.C. Memo. 2004-74,

and Levy v. Commissioner, T.C. Memo. 2005-92. We find those

cases to be materially distinguishable from the instant case and

petitioner’s reliance on them to be misplaced. 

stand that she would be liable for any tax owed on Mr.

Beatty’s self-employment income. * * * Mr. Beatty’s

accountant, Mr. Vinson, told Agent Renshaw that “he

didn’t think about any impact on Mrs. Beatty when returns were prepared and filed. He didn’t explain the

implications of filing jointly or notify them [the

Beattys] that they had a choice. He figured they didn’t have any assets anyway so he didn’t give it any

thought.” In this regard, Petitioner is similar to the

taxpayer in Washington v. Commissioner, 120 T.C. 137

(2003).[8] [Reproduced literally.] 

We turn first to petitioner’s reliance on Washington v.

Commissioner, 120 T.C. 137 (2003).9 In Washington, the taxpayer

took the position that she relied on her spouse to pay the tax

shown due in the return in question and that she believed that

her spouse would pay such tax. In contrast, in the instant case,

petitioner took the position before the IRS, and takes the posi-
- 37 -

tion before the Court, that at the time she signed each of the

respective joint returns for the years at issue (1) she did not

know that each such return showed tax due, and (2) therefore she

did not know at that time that Mr. Beatty would not pay such tax. 

On the record before us, we find Washington v. Commissioner,

supra, to be materially distinguishable from the instant case and

petitioner’s reliance on that case to be misplaced. 

We address now whether petitioner has carried her burden of

establishing that the knowledge or reason to know factor weighs

in favor of granting relief. 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 that there was a tax shown due in each of the respective

joint returns for the years at issue. Petitioner must bear the

consequences of that choice. Assuming arguendo that we were to

accept petitioner’s contention that she did not know that each of

the joint returns for the years at issue showed tax due, on the

record before us, we find that, by signing each such return,

petitioner is charged with constructive knowledge of, inter alia,

the tax shown due therein. 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. We further find that petitioner should have

inquired about whether the tax shown due in each of the joint
- 38 -

returns for the years at issue, as to which she had constructive

knowledge, would be paid. It would be inequitable to allow

petitioner to turn a blind eye to the tax shown due in each such

return. The amount of such tax was large enough as to put petitioner on notice that further inquiry should be made as to

whether it would be paid. She failed to do so. Petitioner thus

failed to present any evidence to the IRS and to the Court with

respect to whether the tax shown due in each of the respective

joint returns for the years at issue would be paid. We find that

the knowledge or reason to know factor weighs against granting

petitioner relief under section 6015(f). 

With respect to the legal obligation factor set forth in

section 4.03(2)(a)(iv) of Revenue Procedure 2003-61, the parties

agree on brief that that factor is neutral. 

However, the notice of determination stated in pertinent

part:

Non-requesting spouse’s legal obligation to pay

A stipulation in the property settlement or a decree of

divorce must be evidenced that requires the non electing spouse to assume responsibility for the unpaid

income taxes for the periods at issue. Since the parties are still married and living together a marital

agreement such as this does not exist. 

As we understand it, the Appeals Office concluded in the

notice of determination that the legal obligation factor weighed

against granting petitioner relief under section 6015(f). We

reject that conclusion as unfounded. We agree with the parties’
- 39 -

10On brief, respondent agrees that petitioner did not

receive a significant benefit from the failure to pay the unpaid

liabilities for the taxable years at issue. 

position on brief, and we find, that the legal obligation factor

is neutral. 

With respect to the significant benefit factor set forth in

section 4.03(2)(a)(v) of Revenue Procedure 2003-61, petitioner

argues that that factor weighs in favor of granting her relief

under section 6015(f). On brief, respondent argues that the

significant benefit factor is neutral. 

The notice of determination stated in pertinent part:

Other than usual and customary living expenses there is

no evidence to indicate that you derived a significant

benefit from the failure to report these sources of

income. The Beatty’s did not live extravagantly or

take trips, they didn’t have any investments, life

insurance, savings, or anything else of value to show

for the money earned. When Mrs. Beatty became aware of

the amount of money her husband earned, she couldn’t

understand where the funds went. She then found out

that her husband had a problem with Keno gambling. He

lost their money and then became involved with loan

sharks to fund his addiction. Other than customary

basic living expenses the taxpayer did not derive a

significant benefit from the unpaid federal income

taxes. [Reproduced literally.] 

As we understand it, although the Appeals Office found in

the notice of determination that petitioner did not receive a

significant benefit from the failure to pay the unpaid liabilities for the years at issue,10 that office did not conclude that

therefore the significant benefit factor weighed in favor of

granting petitioner relief under section 6015(f). We reject as
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11See Magee v. Commissioner, T.C. Memo. 2005-263. We also

note that, based on cases decided under former sec. 6013(e), we

consider the lack of significant benefit by the taxpayer seeking

relief from joint and several liability to be a factor that

favors granting relief under sec. 6015(f). Ferrarese v.

Commissioner, T.C. Memo. 2002-249.

unfounded the Appeals Office’s failure to conclude in the notice

of determination that the significant benefit factor favored

granting petitioner such relief. Under cases where Revenue

Procedure 2003-61 is applicable, we consider the lack of significant benefit by the taxpayer seeking relief from joint and several liability to be a factor that favors granting relief under

section 6015(f).11 We find that the significant benefit factor

weighs in favor of granting petitioner relief under section

6015(f).

With respect to the tax law compliance factor set forth in

section 4.03(2)(a)(vi) of Revenue Procedure 2003-61, petitioner

argues that that factor weighs in favor of granting her relief

under section 6015(f). On brief, respondent asserts:

If the Court restricts itself to the administrative

record then this factor favors petitioner. If the

Court considers information outside of the administrative record then this factor weighs against relief. 

[Reproduced literally.] 

The notice of determination failed to address whether petitioner made a good faith effort to comply with the tax laws for

any of the taxable years following the taxable years at issue. 

However, respondent acknowledges on brief that petitioner “ap-
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pears to have been compliant at the time the Notice of Determination was issued.” We reject as unfounded the Appeals Office’s

failure to conclude in the notice of determination that the tax

law compliance factor favored granting petitioner relief under

section 6015(f). 

After the Appeals Office issued the notice of determination,

petitioner failed to file timely her 2004 return that showed a $2

refund due. We find that petitioner’s failure to file timely her

2004 return weighs against granting petitioner relief under

section 6015(f). However, given (1) that petitioner’s noncompliance is limited to only one delinquently filed return for 2004

that showed a refund due and (2) the other facts and circumstances in the instant case, we further find that the tax law

compliance factor is not a significant factor weighing against

relief in this case. 

We turn now to the factors set forth in section 4.03(2)(b)

of Revenue Procedure 2003-61. The parties agree, and we find,

that the abuse factor and the mental or physical health factor

set forth in section 4.03(2)(b)(i) and (ii), respectively, of

Revenue Procedure 2003-61 are neutral. 

Based upon our examination of the entire record before us,

we find that petitioner has carried her burden of showing that

respondent abused respondent’s discretion when the Appeals Office

determined in the notice of determination to deny her relief
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12Our finding is the same regardless whether we limit our

consideration to respondent’s administrative record with respect

to petitioner’s taxable years at issue.

under section 6015(f) with respect to the unpaid liabilities for

the years at issue.12

We have considered all of the contentions and arguments of

the parties 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 petitioner.