T.C. Mem o. 2 01 5- 22 1

UNITED STAT ES TAX COURT

LORI L. HALL , Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 22 08 4- 14 . Fi le d No ve m be r 19 , 20 15 . Ray Cody

Mayo, Jr., fo r pe ti ti on er. Tho m as AlanFri da y

an d Ho race Cru m

p, fo r res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION NEGA, Jud ge : Pe ti ti on er s eek s re li ef u nd er s ect io n 6 01 5( f) fro m joi ntan d 1 se ve ral li ab il it y

st emm in g fr om

joi ntFed eral in co m e ta x re tu rn s s he fil edwith h er hu sb an d fo r ta x years 2 01 0 a nd20 11 . Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 1 Rev enue Co de in effe ctforth e y ear i n i ss ue , andall Ru le refe ren ces are t o t he Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. All do ll ar am ou nt s ar e ro un de d t o t he ne ares t d ol la r.- 2 -

[* 2] FINDINGS OF FACT So m e o f th e fac ts ha ve be enst ip ul at edan d a re s o fo un d. Th e st ip ul at io n o f fact s an d t he att ach edex hi bi ts are i nc or po rat edhe rei n b y

th is refe ren ce. Pet it io ne r res id edin Texa s wi th he r hu sb an d a nddaug ht er wh enhe r pe ti ti on was fi le d. Sh e fil edjoi ntreturns with h er h us ba ndfortax y ears 20 10 an d 2 01 1. Pet it io ne r ha s a b ach el orof s ci en ce d eg ree a ndis em pl oyed as an el em en ta ry

sch oo l t each er. Fo r se ve ral y ears sh e an d h er h us ba ndown eda ch ic ke n fa rm in g b us in es s. Pet it io ne r’s hu sb an d p rimaril y ranth e ch ic ke n fa rm in g bu si ne ss . In 2 01 1 p et it io ne r’s hu sb an d d eci de d t o s el l the ch ic ke n fa rm in g bu si ne ss be cau se of s ev eral y ears of l os se s. Pet it io ne r kn ew of th e ch ic ke n farm in g b us in es s’ unpr of it ab il it y in th e y ears lea di ng up to th e sa le . Pet it io ne r an d h er h us ba ndm ai nt ai ne d ajoi ntba nkacco un t dur in g 2 01 0 a nd 20 11 . Her hu sb an d p ai d t he bi ll s an d m an ag edth e fi na nc es of t he ho us eh ol d wi th m in im al inpu t fr om

pe ti ti on er. He d idno t re st ric t p et it io ne r’s acce ss to th ei r joi nt ba nkacco un t o r th e h ou se ho ldfin an ces . Peti ti on er d ep os it edhe r pa y ch eck s i nt o th ei r joi ntba nkacco un t. Pet it io ne r fi le d ajoi ntFed eral in co m e ta x re tu rnfor tax y ear 2 01 2. Sh e an d he r hu sb an d d idno t p ay

th e am ou ntsh ownas due on th e return fo r th aty ear. At- 3 -

[* 3] tri al pe ti ti on er t es ti fie d t ha t s he be li ev edsh e h adto si gnth e return e ve n th ou gh sh e kne w th e ta x l iabi li ty cou ldno t b e p ai d. Afte r fi li ng a joi ntreturn fo r ta x year 20 12 , pet it io ne r be cam e aware th atsh e co ul d fi le as “ m arri edfil in g s ep arat el y ”. Fo r ta x year 20 13 pe ti ti on er fi le d a s m arri edfil in g s ep arat el y

an d re po rte d n o t ax li ab il ity . At tri al pe ti ti on er t es ti fie d th atsi nc e th e ti m e sh e b ecame aware sh e co ul d fi le sep arat el y , sh e h as tri edto co m pl y with t he tax laws . Pet it io ne r ti m el y

fil edFo rm

88 57 , Reque stforInn oc en t Sp ou se Rel ie f, se ek in g re li ef fro m

joi ntan d s ev eral li ab il it y fortax y ears 20 10 an d 2 01 1. Onth at fo rm pe ti ti on er re po rte d m on th ly inc om e o f $1 8,3 00 an d m on th ly exp en se s o f $1 8,3 71 . She als o i nd ic at edth atsh e was no t the vi ct im of s po us al ab us e. Ina fi na l d et erm in at io n d at edAug us t 2 4, 2 01 4, re sp on de ntde ni ed pe ti ti on er’s reque stforrel ie f fro m joi ntan d s ev eral li ab il it y for tax y ears 20 10 an d 20 11 . OPINION Inge ne ral , a sp ou se who fil es a joi ntFed eral in co m e ta x re tu rnis joi nt ly an d s ev eral ly liab le forth e en ti re t ax li ab il it y . Sec. 6 01 3( d) (3 ). A sp ou se see ki ng rel ie f fro m

joi ntan d s ev eral li ab il it y m ay fol lo w pro cedur es est ab li sh edin sec ti on 60 15 . If th e d is pu te d l iabi li ti es in vo lv e n onpa ym en t o f ta xe s s ho wn o n ajoi nt- 4 -

[* 4] return, the on ly reli ef av ai labl e is un de r se ct io n 6 01 5( f). See Ho pk in s v . Co m m is si on er, 1 21 T.C. 73 , 88 (20 03 ); s ee al so Blo ckv. Co m m is si on er, 1 20 T.C. 62 , 66 (20 03 ). Sect io n 6 01 5( f) au th or iz es th e Co m m is si on er t o g ran t equi tabl e rel ie f fro m

joi ntan d s ev eral li ab il it y if, t ak in g i nt o a cco un t al l the fact s an d ci rcu m st an ces , itis in equi tabl e to ho lda ta xp ay er l iabl e fo r an y unpa idtax . Inde te rm in in g wh ethe r pe ti ti on er i s en ti tl edto sec ti on60 15 (f) re li ef we ap pl y a de no vo st an da rdof r ev ie w as wel l as a de no vo sco pe of r ev ie w. See Po rte r v. C omm is si on er, 1 32 T.C. 20 3, 2 10 (20 09 ). Pet it io ne r be ars th e b ur de n o f pr ov in g t ha t s he is en ti tl edto rel ie f. See i d. (c it in g R ul e 1 42 (a)) . As d ire ct edby sect io n 6 01 5( f), th e Co m m is si on er h as pre sc rib edpro cedur es to de te rm in e whe th er a t ax pa y er qua li fie s fo r equi tabl e rel ie f fro m joi ntan d se ve ral li ab il it y . Thes e p ro cedur es are s etforth in Rev . Pro c. 20 13 -3 4, s ec. 4 , 20 13 -4 3 I.R .B. 39 7, 3 99 -4 03 . I. Rev . Pro c. 20 13 -3 4: Equ it ab le Fact or s Rev . Pro c. 20 13 -3 4, s ec. 4 .01 -4 .03 , li st s t hr es ho ldco nd it io ns , ci rcu m st an ces , andfact or s u se d t o m ak e a s ect io n 6 01 5( f) d et erm in at io n. Altho ug h t he Co urt co ns ul ts th es e g ui de li ne s wh enrev ie win g t he Co m m is si on er’s de ni al of r el ie f, se e Wash in gt on v. Co m m is si on er, 1 20 T.C. 13 7, 1 47 -1 52 (20 03 ), we are n otbo un d b y

th em in as m uc h a s o uran al y si s an d d et erm in at io n u lt im at el y- 5 -

[* 5] tu rnon anev al ua ti on of a ll th e fac ts an d c irc um st an ces , see Pu ll in s v . Co m m is si on er, 1 36 T.C. 43 2, 4 38 -4 39 (20 11 ); P orte r v. C omm is si on er, 1 32 T.C. at21 0; Hud gi ns v. Co m

m is si on er, T.C. Mem o. 2 01 2- 26 0. Rev . Pro c. 20 13 -3 4, s ec. 4 .01 , set s fo rth sev enth res ho ldco nd it io ns th at m us t g en eral ly be sa ti sf

ie d b efo re the Co m

m is si on er wi ll co ns id er a re qu es t fo r equi tabl e rel ie f un de r se ct io n 6 01 5( f). The re i s n o d is pu te th atpe ti ti on er s at is fie s each of t he sev enth res ho ldco nd it io ns . Rev . Pro c. 20 13 -3 4, s ec. 4 .02 , set s fo rth el em en ts th ata reque st in g s po us e m us t s at is fy

to qu al ify for a s tre am li ne d de te rm in at io n g ran ti ng rel ie f un de r se ct io n 6 01 5( f). Pet it io ne r do es no t qua li fy for st ream li ne d re li ef b ecau se sh e is cu rren tl y m arri edto th e p ers on with wh om sh e fil eda joi ntreturn fo r ta x years 2 01 0 a nd20 11 . Ins te ad , pet it io ne r arg ue s fo r rel ie f un de r th e equi tabl e rel ie f fac to rs inRev . Pro c. 20 13 -3 4, s ec. 4 .03 . Rev . Pro c. 20 13 -3 4, s ec. 4 .03 , st at es th atequi tabl e rel ie f un de r se ct io n 60 15 (f) m ay

be gra nt edif, t ak in g i nt o a cco un t al l the fact s an d c irc um st an ces , it wou ldbe in equi tabl e to ho ldth e reque st in g s po us e res po ns ib le forall or p artof th e li ab il it y . In m ak in g t he de ci si on , th e Co m m is si on er wei gh s a n um

be r of fact or s i nc lu di ng bu t n otli m it edto th e reque st in g s po us e’s: (1 ) m ari ta l s ta tu s; (2 ) po ss ib le eco no m ic ha rd sh ip if re li ef i s n otgra nt ed ; (3 ) kn owl ed ge or r eas on to kn ow t ha t the tax li ab il it y wou ldor c ou ldno t b e p ai d; (4) leg al ob li ga ti on to pa y- 6 -

[* 6] th e o ut st an di ng Fed eral in co m e ta x l iabi li ty; (5) rece ip t o f a s ig ni fic an t be ne fitfro m

th e u np ai d i nc om e ta x l iabi li ty; (6) co m pl ianc e wit h i nc om e ta x l aws ; an d (7 ) m en ta l o r ph y si cal he al th at t he ti m e o f fi li ng . W e fo cu s o ur

in qu iry onfact or s (2 ), (3 ), (5 ), an d (6 ). The o th er fa ct or s li st edab ov e are no t i n d is pu te an d d o n otfav orgra nt in g re li ef. W e ex am in e eac h di sp ut edfact orin de ta il be lo w. A. Eco no m ic Hard sh ip Rev . Pro c. 20 13 -3 4, s ec. 4 .03 , st at es th ataneco no m ic ha rd sh ip “ ex is ts if sa ti sf act io n o f th e ta x l iabi li ty in wh ol e o r in pa rt wi ll cau se th e reque st in g s po us e to be un ab le to pa y

reas on ab le ba si c li vi ng ex pe ns es .” Whe th er a re qu es ti ng sp ou se wil l s uf

fer e co no m ic ha rd sh ip is ba se d o n ru le s s im il ar t o t ho se in sec ti on 30 1.6 34 3- 1( b) (4 ), Pro ced . & Adm in . Reg s. Th e fac ts an d c irc um st an ces co ns id eredin th is in qu iry inc lu de : (1 ) th e reque st in g s po us e’s ag e, em pl oym en t st atus an d h is to ry , abi li ty to ea rn , andnu m be r of de pe nd en ts ; (2 ) th e am ou nt reas on ab ly neces sa ry

forfoo d, cl ot hi ng , ho us in g, m ed ic al ex pe ns es , tra ns po rta ti on , andcu rren t t ax pa ym en ts ; an d (3 ) an y ex tra or di na ry

cir cu m st an ces su ch as s pe ci al educ at io n e xp en se s, a m ed ic al cat as tro ph e, ora na tural di sa st er. Id . In ad di ti on , th e In te rn al Rev enue Serv ic e (IR S) co ns id ers th e reque st in g sp ou se ’s curren t i nc om e (i nc lu di ng ho w th e reque st in g s po us e’s in co m e co m pa res- 7 -

[* 7] to Fed eral po ve rty gu id el in es ) an d a ss et s i n c om paris on with h is or h er ex pe ns es . Rev . Pro c. 20 13 -3 4, s ec. 4 .03 (2 )(b ). Thi s fa ct orweig hs in fav orof rel ie f whe re the reque st in g s po us e wou ldsu ffereco no m ic hard sh ip if re li ef were de ni edan d i s n eu tra l wh ere t he reque st in g s po us e wou ldno t s uf fer e co no m ic ha rd sh ip if re li ef were de ni ed . Id. Pet it io ne r’s Fo rm

88 57 fortax y ears 20 10 an d 2 01 1 i nd ic at es th athe r m on th ly inc om e is $1 8,3 00 an d h er m on th ly exp en se s ar e $ 18 ,37 1. If we u se he r se lf- rep orte d m on th ly inc om e as a ba se li ne , pet it io ne r’s an nu al in co m e is well ab ov e 2 50 % of t he Fed eral po ve rty gu id el in es for20 10 an d 2 01 1 andhe r m on th ly ex pe ns es do no t ex ceedhe r m on th ly inc om e b y m or e th an$3 00 . See i d. Onth e ba si s o f th e rec or d, p et it io ne r ha s n otpro ve n t ha t s he wil l s uf fer e co no m ic ha rd sh ip if t he Co urt d en ie s h er re li ef. Thi s fa ct oris ne ut ral . B. Kno wled ge or R eas on To Kn ow Und er thi s fa ct orwe ex am in e whe th er the reque st in g s po us e kne w or h ad reas onto kn ow t ha t the no nr eque st in g s po us e wou ldno t o r co ul d n otpa y a rep orte d b utunpa idtax li ab il it y . See Re v. Pr oc . 20 13 -3 4, s ec. 4 .03 (2 )(c) (ii ). In de te rm in in g wh ethe r th e reque st in g s po us e kne w or h adreas on to kn ow tha t the no nr eque st in g s po us e wou ldno t o r co ul d n otpa y , th e fo ll owi ng fact s an d ci rcu m st an ces are co ns id ered : (1 ) th e reque st in g s po us e’s le ve l o f educ at io n;- 8 -

[* 8] (2 ) th e reque st in g s po us e’s de gr ee o f in vo lv em en t i n t he act iv it y ge ne rat in g th e in co m e ta x l iabi li ty; (3) th e reque st in g s po us e’s in vo lv em en t i n b us in es s o r ho us eh ol d fi na nc ia l m atte rs ; (4 ) th e reque st in g s po us e’s bu si ne ss or f in an ci al ex pe rti se ; (5 ) an y

de cei t o r ev as iv en es s o f th e n on reque st in g s po us e; an d (6 ) an y la vi sh or u nu su al ex pe nd itur es co m pa redwith p as t s pe nd in g l ev el s. Id . sec . 4.0 3( 2) (c)( ii i). An y

in di cat io n o f ab us e o r th e ex erci se of f in an ci al co nt ro l b y

th e no nr eque st in g s po us e is a fact orth atm ay m it ig at e o r ne ga te th e reque st in g sp ou se ’s kn owl ed ge or r eas on to kn ow o f th e u nd ers ta te m en t i f th e reque st in g sp ou se was u nabl e to ch al le ng e th e tr eat m en t o f it em s o n the tax return fo r fea r of ret al ia ti on by the no nr eque st in g s po us e. Id . sec . 4.0 3( 2) (c)( i)( A). Thi s fa ct orweig hs in fav orof r el ie f if th e reque st in g s po us e rea so nabl y ex pe ct edth e n on reque st in g s po us e to pa y th e ta x l iabi li ty repo rte d o n t he return an d wei gh s ag ai ns t re li ef i f th e reque st in g s po us e’s be li ef tha t the no nr eque st in g sp ou se wou ldpa y

was n otreas on ab le . Id. s ec. 4 .03 (2 )(c) (ii ). Thi s fa ct orge ne ral ly weig hs ag ai ns t re li ef wh ere t he reque st in g s po us e kne w of t he no nr eque st in g sp ou se ’s pri or

ba nkrupt ci es , fin an ci al di ffi cu lt ie s, o r ot he r pr ob le m s wi th th e IRS orot he r cre di to rs . Id. Pet it io ne r st at edon he r Fo rm 88 57 th atsh e was no t the vi ct im of s po us al ab us e, an d s he ackno wled ge s t ha t s he kn ew of he r hu sb an d’s fi na nc ia l d iff ic ul ti es- 9 -

[* 9] du rin g 2 01 0 and20 11 . Howev er, p et it io ne r arg ue s t ha t the factth athe r hu sb an d e xe rci se d fi na nc ia l co nt ro l o ve r th e h ou se ho ldfin an ces mit ig at es th e ex te ntof h er kno wled ge forpu rp os es of t hi s re qu ire m en t. We are no t p ers ua de d. Altho ug h p et it io ne r’s hu sb an d m an ag edth e h ou se ho ldfin an ces an d p ai d the bi ll s, pe ti ti on er was ab le to acce ss th ei r joi ntba nkacco un t atan y ti m e an d d ep os ithe r pa y ch eck s i nt o t he acco un t. Si m pl y pu t, the de gr ee o f he r hu sb an d’s fi nanc ia l co nt ro l d idno t s erv e to res tri cthe r acc es s t o t he ir f in an ces . See Re il ly-Case y v. Co m m is si on er, T.C. Mem o. 2 01 3- 29 2; see als o R ev . Pro c. 20 13 -3 4, s ec. 4.0 3( 2) (c)( i)( A). Furth erm or e, th e rec or d d oe s n otin di cat e th atpe ti ti on er fe ared ret al ia ti on fro m

he r hu sb an d i f sh e ch al le ng edth e tr eat m en t o f it em s o n t he ir returns . See Re v. Pr oc . 20 13 -3 4, s ec. 4 .03 (2 )(c) (i) (A). The r eco rdad equa te ly refl ect s t ha t p et it io ne r kn ew orha d re as on to kn ow t ha t h er h us ba ndwou ldno t o r co ul d n otpa y

th ei r rep orte d t ax li ab il it ie s fo r ta x years 2 01 0 and20 11 . This fact or fav or s re sp on de nt . C. Si gn ifi can t Be ne fit Und er thi s fa ct orwe co ns id er wh ethe r th e reque st in g s po us e rec ei ve d a si gn ifi can t b en efi t, b ey on d n orm al supp ort, fro m th e unp ai d i nc om e ta x l iabi li ty. Id . sec . 4.0 3( 2) (e). No rm al supp ort i s m eas ur edby the cir cu m st an ces of t he pa rti cu la r pa rti es . Port er v . Comm is si on er, 1 32 T.C. at 2 12 . This fact or wil l- 10 -

[* 10 ] weig h i n fa vo r of

rel ie f if th e n on reque st in g s po us e si gn ifi can tl y be ne fit ed fro m th e u np ai d t ax or u nd ers ta te m en t an d t he reque st in g s po us e h adli tt le or n o be ne fitor t he no nr eque st in g s po us e en joy edth e b en efi t t o the reque st in g s po us e’s de tri m en t. Rev . Pro c. 20 13 -3 4, s ec. 4 .03 (2 )(e) . Pet it io ne r di d n otad equa te ly addres s t hi s fa ct orin he r fi li ng s wi th th e Co urt orat t ria l. Thi s fa ct oris ne utral . D. Co m

pl ia nc e WithInc om e Tax Laws Und er thi s fa ct orwe co ns id er wh ethe r th e reque st in g s po us e m ad e a g oo dfai th effo rt t o c om

pl y with the in co m e ta x l aws forth e ta xabl e y ears fol lo win g t he y ears forwhi ch rel ie f is reque st ed . Id. s ec. 4 .03 (2 )(f), 2 01 3- 43 , I.R.B. at40 2- 40 3. If the reque st in g s po us e rem ai ns m arri edto th e n on reque st in g s po us e an d co nt in ue s t o fi le joi ntreturns aft er re qu es ti ng rel ie f, th enth is fact or wil l b e n eu tra l if t he joi ntreturns co m

pl y with t he tax laws . Id. s ec. 4 .03 (2 )(f)( ii ). Howev er, i f th e reque st in g s po us e rem ai ns m arri edto th e n on reque st in g s po us e an d fi le s se pa rat e returns aft er re qu es ti ng rel ie f, th enth is fact orwil l wei gh in fav orof r el ie f if t he returns co m

pl y with t he tax laws . Id. s ec. 4 .03 (2 )(f)( ii i). Altho ug h p et it io ne r fi le d ajoi ntreturn wi th he r hu sb an d fo r 20 12 an d d id no t p ay th e rep orte d t ax li ab il it y , we fin d t ha t s he tes ti fie d c red ib ly tha t s he m ad e a go od -fai th effo rt t o c om

pl y with t he in co m e ta x l aws for th is y ear a ndth e y ears- 11 -

[* 11 ] fo ll owi ng when sh e d is co ve redth atsh e co ul d fi le sep arat e returns . This fact or fav or s p et it io ne r. II. Co nc lu si on Insu m m ary, on e o f th e d is pu te d fa ct or s wei gh s i n fa vo r of res po nd en t an d on e o f th em

weig hs in fav orof p et it io ne r. The re m ai ni ng di sp ut edfact or s ar e ne ut ral . Howev er, o urde ci si on whet he r rel ie f is ap pr op ria te is no t b as edon a si m pl e ta ll y of f act or s. See , e.g., Hu dg in s v . Comm is si on er, T.C. Mem o. 2 01 2- 26 0. Ra th er, o urde ci si on is he av il y in flu en cedby the to ta li ty of th e ci rcu m st an ces in th is cas e. W ei gh in g a ll th e fac ts an d c irc um st an ces , we are n otpe rs ua de d t ha t i t wou ldbe in equi tabl e to de ny pet it io ne r rel ie f fro m joi ntan d s ev eral li ab il ity un de r se ct io n 6 01 5( f). Co ns id eri ng th atpe ti ti on er kne w or h adreas onto kn ow t ha t h er hu sb an d wo ul d n otor c ou ldno t p ay th e ta x l iabi li ti es rep orte d o n t he ir r eturns , an d i n t he ab se nc e o f eco no m ic ha rd sh ip , we con cl ud e th atitwou ldno t b e in equi tabl e to de ny pet it io ne r rel ie f un de r se ct io n 6 01 5( f) fo r ta x years 2 01 0 a nd 20 11 . W e h av e co ns id eredth e o th er ar gu m en ts of t he pa rti es , andth ey are n ot m at eri al to ou r co nc lu si on s.- 12 -

[* 12 ] To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red fo r res po nd en t.