T.C. Memo. 2009-197

UNITED STATES TAX COURT

VIRGINIA DIANA SYKES, a.k.a. VIRGINIA BRITT, Petitioner, AND

WILLIAM S. BRITT, Intervenor v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 22920-06. Filed September 3, 2009.

John A. Cocklereece, Jr., for petitioner.

Ocie F. Murray, Jr., for intervenor.

Edwina L. Jones, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

PARIS, Judge: Petitioner seeks review of respondent’s final

determination that petitioner is not entitled to relief from
- 2 -

1Section references are to the Internal Revenue Code of 1986

as amended and in effect at the time the petition was filed with

this Court, and/or in effect for the year at issue. Rule

references are to the Tax Court’s Rules of Practice and

Procedure.

joint and several liability under section 6015(b),1 (c), or (f)

with respect to a deficiency in income tax of $40,761, an

addition to tax under section 6651(a)(1) of $1,522, and a penalty

under section 6662(a) of $8,152 for tax year 2003; and that

petitioner is not entitled to relief from joint and several

liability under section 6015(f) with respect to the tax liability

reported for tax year 2003, but not paid in the amount of

$10,276. Petitioner initially disputed the notice of deficiency

for tax year 2003, but petitioner abandoned her disputes over the

adjustments giving rise to the deficiency in income tax for 2003

prior to the date of trial.

FINDINGS OF FACT

Some of the facts have been stipulated and are found

accordingly. The stipulation of facts and the attached exhibits

are incorporated herein by this reference. Both petitioner and

intervenor resided in North Carolina at the time the petition and

the notice of intervention were filed. 
- 3 -

2Though the couple did not receive a divorce decree until

February 9, 2006, petitioner and intervenor physically separated

on November 18, 2004.

Background

Petitioner and intervenor were married on August 3, 2002. 

The couple’s marriage ended in divorce on February 9, 2006.2

Prior to, and during the marriage, petitioner worked for

intervenor in intervenor’s law practice. Their business

relationship predated the marriage by several years. 

During the taxable year at issue, 2003, petitioner, who

holds a bachelor of science degree in nursing, and a bachelor of

arts degree in pre-law, was intervenor’s office manager, a role

she filled prior to marriage as well. Intervenor was engaged in

the practice of law as a sole proprietor throughout all of the

periods discussed. As office manager, petitioner kept the

financial records for intervenor’s law office, reviewed mail

received, read invoices, and paid bills including advance cost

expenses on clients’ accounts. Petitioner kept all of the

records for the law practice in 2003. She had signature

authority on the business bank account during the tax year at

issue. Prior to and during the marriage, intervenor and

petitioner frequently discussed business and family financial

matters. Through her position as office manager, and through

these frequent conversations about finances, petitioner became

aware of the law practice’s financial difficulties, including the
- 4 -

fact that checks drawn on the law practice’s bank account in 2003

and 2004 were often returned as dishonored by the bank for

failing to maintain sufficient funds. Law practice checks signed

by petitioner were among those returned for insufficient funds.

Petitioner made loans to the law office and to intervenor

personally during 2003 and 2004 to cover the financial shortages. 

In August 2002, shortly after marrying, petitioner and

intervenor purchased a Cadillac Escalade to be used for the law

practice. The automobile, a sport utility vehicle (SUV), was

used primarily by petitioner in the performance of her duties as

office manager, which included delivering outgoing mail to the

post office and driving to and from the bank that held the law

practice’s account. The vehicle was titled in both petitioner’s

and intervenor’s names. The monthly principal and interest

payments for the purchase price of the vehicle were made from the

law office account. Law practice checks for some of the Cadillac

Escalade payments were signed by petitioner. 

In 2003, petitioner and intervenor sold their interests in

real property known as “Lots 6 and 7 of the Northwoods

Subdivision, Section Three,” (Lots 6 and 7) Robeson County,

Lumberton, North Carolina. Their interests in the property were

sold for gross proceeds of $90,000, with a cost basis of $59,500,

resulting in a net capital gain of $30,500. Though the parcels

of land were legally owned by intervenor and his brother, doing
- 5 -

3Because the parcels of land were owned one-half by each

brother, the above figures represent a half share of the sale

proceeds.

4Intervenor testified that the house was purchased while

intervenor was married to his first wife, and before petitioner

and intervenor were married. Intervenor further testified that

the house was titled solely in petitioner’s name because at the

time of its purchase intervenor had not yet divorced his first

wife. 

business in the name of a partnership entity, Britt & Britt PLLC,

petitioner was required to sign the deed of conveyance under

North Carolina property law.3 The deed and closing statements

are dated May 9, 2003. Prior to sale, petitioner and intervenor

discussed the original purchase price of the real estate, sale

negotiations, and proposed prices for sale.

Petitioner knew that the proceeds from the sale of their

interests in the property were deposited into the law practice

bank account. Payments from that account were made on a mortgage

for a residence where both petitioner and intervenor lived,

although the house was titled solely in petitioner’s name, and

purchased prior to marriage.4 Additionally, the proceeds,

deposited in the law practice bank account which petitioner often

reviewed, were used to make the monthly principal and interest

payments on the Cadillac Escalade during 2003. 

In 2003, petitioner filed a number of domestic violence

complaints with the local police department. Petitioner sought a

restraining order against intervenor on the grounds of the
- 6 -

domestic-violence-related incidents. In August of 2003, a North

Carolina State district court issued a mutual domestic violence

protective order for both husband and wife. However, petitioner

and intervenor appeared to reconcile in October 2003, and

petitioner’s domestic violence complaint was voluntarily

dismissed.

Petitioner and intervenor timely requested in April 2004 an

extension of time to file their 2003 return. Prior to requesting

their extension, in April 2004, a Form 1099-S, Proceeds from Real

Estate Transactions, was issued to intervenor and petitioner in

the amount of $90,000 for tax year 2003. The Form 1099-S

reflected the couple’s home address during a period of time when

petitioner and intervenor were still living together. Prior to

the expiration of their extension to file, and in light of

Tropical Storm Francis, the IRS extended the October 15, 2004,

filing deadline to November 9, 2004. Petitioner and intervenor

made arrangements to meet with the tax return preparer the week

following the November 9, 2004 deadline. 

Petitioner was the sole party responsible for reviewing the

documents to be presented to the tax return preparer for tax year

2003. Petitioner even assisted the return preparer, Debra

Jernigan, with the preparation of the joint income tax return for

2003. In doing so, petitioner reviewed the expenses of the law
- 7 -

practice. During the preparation of the return, petitioner

matched each bank check against each expense to be claimed. 

In gathering business and personal records to take to the

return preparer for tax year 2003, petitioner went through client

ledger cards that listed expenses paid for each client. 

Petitioner classified business checks from intervenor’s law

practice into categories of expenses for use in preparation of

petitioner’s and intervenor’s 2003 income tax return. Petitioner

went over these classifications with the return preparer when the

2003 income tax return was being prepared. Additionally, after

reading about the new tax law benefit for SUVs in the news,

petitioner provided the return preparer the cost of the Cadillac

Escalade as a 2003 deduction under section 179 even though

petitioner and intervenor had purchased the SUV in August 2002

and placed it in service in that year. Although the real estate,

Lots 6 and 7, was sold in 2003, a Schedule D, Capital Gains and

Losses, reflecting the transaction was not included in the

couple’s 2003 return. 

Petitioner and intervenor’s 2003 joint Federal income tax

return was untimely filed on November 15, 2004. The return

reported the amount owed as $10,276. Petitioner knew at the time

she signed the 2003 tax return that her husband owed a separate

income tax liability for tax year 2001 in excess of $50,000. 

This liability was not satisfied until after the 2003 return was
- 8 -

filed, and the money used to satisfy the debt was provided by

intervenor’s family. Additionally, during the period in

question, petitioner knew that intervenor was legally obligated

to make periodic payments for child support and alimony from a

prior marriage, and further knew that intervenor would make these

payments before he would attempt to pay his tax debts.

There is no evidence that petitioner signed the return under

duress, nor is there any evidence of marital strife or violence

contemporaneous with the preparation or signing of the 2003 tax

return. The parties separated later in 2004, and obtained a

divorce decree in February 2006. 

On August 7, 2006, respondent mailed to petitioner and

intervenor duplicate originals of a notice of deficiency for tax

year 2003. In the notice of deficiency, respondent denied the

claimed section 179 deduction for the Cadillac Escalade on the

grounds that it should have been expensed in 2002, the year

placed in service; denied deductions for law-practice-related

business expenses that had been duplicated and claimed twice;

adjusted the couple’s income to reflect the receipt of a capital

gain from the sale of Lots 6 and 7; and disallowed

unsubstantiated advance costs claimed to have been paid on behalf

of clients. The notice, in tallying the total amount of tax due

for 2003, stated that the self-assessed amount of tax liability

reported by petitioner and intervenor, but not paid in the amount
- 9 -

of $10,276, was currently due. The notice of deficiency imposed

a penalty for failing to timely file an income tax return under

section 6651(a)(1), and an accuracy-related penalty under section

6662(a). 

The income tax liability and deficiency from which

petitioner seeks relief for 2003 are attributable to items of

intervenor, including his self-employment tax liability for

2003. Petitioner no longer disputes the adjustments giving rise

to the deficiency in income tax for 2003. Petitioner instead

seeks relief under section 6015 from joint and several liability

for the amounts determined by respondent in the notice of

deficiency as well as the self-assessed amount reported by

petitioner on her 2003 income tax return. On July 10, 2006,

petitioner timely submitted to respondent a request for relief

from joint and several liability under section 6015 for tax year

2003. On November 8, 2006, the petition was filed with this

Court. On November 15, 2006, respondent sent to petitioner a

notice of final determination denying petitioner’s request. 

According to the notice of determination, respondent denied

petitioner relief from joint and several tax liability with

respect to the understatement because respondent determined that

petitioner had actual knowledge of the items giving rise to the

deficiency in tax for 2003. Petitioner was denied relief from

joint and several liability with respect to the underpayment in
- 10 -

tax for 2003 because respondent determined that petitioner knew

at the time that she signed the return that intervenor had

financial difficulties and would not be able to pay the tax

liability shown on the return. Petitioner was

denied equitable relief for both the understatement and the

underpayment under section 6015(f) because respondent determined

that petitioner actually knew of the items giving rise

to the deficiency, knew that the unpaid tax liability shown

on the return would not be paid, and failed to establish that she

would suffer economic hardship if relief was not granted. 

OPINION

The Court must decide whether petitioner is entitled to

relief under section 6015(b), (c), or (f).

I. Jurisdiction 

This case presents the Court with a unique jurisdictional

question that, although never raised by either party, must be

resolved. The Court must decide whether it has jurisdiction to

hear petitioner’s claim for relief from the tax reported on the

joint return. 

Section 6015(e) grants the Tax Court jurisdiction to

determine the relief available to a spouse with respect to a

joint return. Pursuant to section 6015(e), the Tax Court has

jurisdiction to review a denial of section 6015 relief by the

IRS. The Court also has jurisdiction, as part of its traditional
- 11 -

5Though the reported amount was included in the notice of

deficiency as currently due, this amount was not an item

determined as understated and deficient by respondent. This

merely served as a reminder to petitioner and intervenor that the

amount reported on the 2003 tax return was still unpaid.

authority in deficiency cases, to review claims under section

6015 which are raised as an affirmative defense against income

tax deficiencies and penalties determined in a notice of

deficiency. See Butler v. Commissioner, 114 T.C. 276, 287

(2000). Under section 6015(e), the Tax Court shall have

jurisdiction to determine the appropriate relief available to the

requesting individual if any petition for innocent spouse relief

is filed after the earlier of (1) the date the IRS mails to the

taxpayer’s last known address a final notice of determination

denying relief, or (2) a date 6 months after the date the request

for relief was filed with the IRS. Sec. 6015(e)(1)(A)(i)(I) and

(II).

Petitioner’s tax liability before this Court is for a single

tax year, 2003. Part of the tax liability was determined by

respondent, and part was reported by petitioner on her 2003

income tax return.5 On July 10, 2006, in response to the IRS

examination of petitioner’s 2003 tax year, petitioner timely

submitted to respondent a request for relief under section 6015

for tax year 2003. On August 7, 2006, respondent mailed to

petitioner a notice of deficiency for 2003 which determined a

deficiency of $40,761, an addition to tax of $1,522.80 under
- 12 -

section 6651(a)(1), and a penalty of $8,152 under section

6662(a). The tax liability of $10,276 reported on her 2003

income tax return is in large part unpaid.

Petitioner timely filed a petition for redetermination of

the deficiency on November 8, 2006. The petition also sought

section 6015 relief with respect to the tax reported on the 2003

return. Petitioner raises an affirmative defense to the notice

of deficiency under section 6015(b), (c), and (f). Additionally,

petitioner seeks relief from her reported and unpaid tax

liability under section 6015(f). Under section 6213(a), this

Court has jurisdiction to review petitioner’s section 6015 claim

as an affirmative defense to the notice of deficiency. The

question remains, however, whether this Court has jurisdiction

over the reported and unpaid tax liability since the petition was

filed prematurely under section 6015(e).

On July 10, 2006, petitioner timely submitted to respondent

a request for relief under section 6015 for tax year 2003. 

Petitioner filed a petition with this Court on November 8, 2006,

seeking redetermination of the deficiency. Respondent did not

mail to petitioner a notice of final determination denying her

July 10, 2006, request until November 15, 2006. As discussed

earlier, for the Court to have section 6015(e) jurisdiction over

her claims, petitioner should have filed a petition for review of

the notice of determination within 90 days of November 15, 2006. 
- 13 -

See sec. 6015(e)(1)(A)(i)(I) and (ii). However, petitioner filed

her petition with this Court on November 8, 2006, 7 days before

respondent mailed the notice of determination. Under section

6015(e), the petition was filed prematurely. Moreover, the

proper time for filing has now long passed. A trial on this

matter was held, the issues were fully briefed by the parties’

counsels, and respondent has not raised any defense regarding the

Court’s lack of jurisdiction over the matter. 

Like sections 6511 and 6330, the requirements under section

6015(e) for petitioning the Tax Court are jurisdictional. See

Pollock v. Commissioner, 132 T.C. , (2009) (slip op. at

14-15). The Tax Court is a court of limited jurisdiction, and

thus can only hear cases for which jurisdiction has specifically

been granted by Congress. See sec. 7442; Kluger v. Commissioner,

83 T.C. 309, 314 (1984). Because the petition in this matter was

filed prematurely, the Court lacks jurisdiction. See Adkison v.

Commissioner, 129 T.C. 97 (2007) (holding that the Court lacked

jurisdiction over a section 6015 claim that was prematurely

filed). Even though the petition was prematurely filed,

petitioner could have rectified the error by petitioning this

Court for relief from the reported and unpaid 2003 tax liability

within 90 days of the mailing of the notice of final

determination, and the Court would have then had jurisdiction to

hear that matter. This did not happen. As a result, this Court
- 14 -

does not have jurisdiction to hear petitioner’s claims for relief

regarding her reported and unpaid tax liability for tax year

2003. See Pollock v. Commissioner, supra at (slip op. at 23-

24) (holding that the Court’s jurisdictional time limit may not

be equitably tolled under section 6015). 

As a result, the Court will consider only petitioner’s

section 6015 defenses against the notice of deficiency, and not

petitioner’s equitable claims regarding the reported and unpaid

amount as reported on her 2003 return. 

II. Section 6015 and Relief From Joint and Several Tax Liability

Under section 6013(d)(3), a husband and wife filing a joint

return are jointly and severally liable for all tax for the

taxable year (not merely the amount shown on the return),

including interest and penalties. Petitioner claims she is

entitled to relief from this liability under section 6015. 

Section 6015 relieves a spouse of joint and several liability in

three situations: (1) if the spouse did not know or have reason

to know of the deficiency when the return was signed, and

satisfies other conditions; (2) if a divorced or separated spouse

seeks to limit individual liability to the portion of the

deficiency attributable to him or her; and (3) in the case of a

deficiency or of a tax shown on a return but not paid, if it is

inequitable to hold the spouse liable for the tax. See sec.

6015(b), (c), and (f), respectively. This last provision, found
- 15 -

6This is a conjunctive test, and therefore, all requirements

of section 6015(b) must be satisfied to qualify a spouse for

relief thereunder.

in section 6015(f), only applies if relief is not available to

the taxpayer under the other two provisions. 

A. Section 6015(b)

Under section 6015(b), generally the spouse seeking relief

from liability for an understatement of tax will be entitled to

relief if he or she did not know or have reason to know of the

understatement when the return was signed, and satisfies other

conditions.6 Section 6015(b) states that if there is an

understatement of tax on a jointly filed return attributable to

erroneous items of one individual filing the joint return, and

the other individual filing the joint return, in addition to

meeting other conditions, establishes that in signing the return

he or she either did not know, or have reason to know, that there

was an understatement, then the other individual shall be

relieved of liability for the payment of tax and penalties to the

extent the liability is attributable to the understatement. 

Moreover, relief from joint and several liability under this

subsection is not an all-or-nothing proposition. An individual

may be granted relief from all or any portion of the tax

deficiency of which the individual had no actual or constructive

knowledge. See sec. 6015(b)(2).
- 16 -

Except as otherwise provided in section 6015, the taxpayer

bears the burden of proof. See Rule 142(a); Alt v. Commissioner,

119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir.

2004). Therefore, for petitioner to qualify for section 6015(b)

relief, she must prove to the Court that, inter alia, she did not

know, or have reason to know, that there was an understatement of

tax. 

The items at issue giving rise to the understatement in this

case are as follows: (1) disallowance of a deduction claimed

under section 179 for a Cadillac Escalade which petitioner knew

was purchased and placed in service in 2002; (2) disallowance of

business expenses which were deducted twice; (3) disallowance of

unsubstantiated advance costs claimed to have been paid on behalf

of clients; and (4) an unreported capital gain from the sale of

real property titled in the names of intervenor and his brother,

which sale was facilitated by petitioner’s signing the conveyance

to release any marital interest she may have had in the property.

A spouse has reason to know of the understatement if a

“reasonably prudent taxpayer in her position at the time she

signed the return could be expected to know that the return

contained the * * * understatement.” Price v. Commissioner, 887

F.2d 959, 965 (9th Cir. 1989); see also sec. 1.6015-2(c), Income

Tax Regs. Factors to consider in analyzing whether a spouse had

reason to know of the understatement include: (1) the spouse’s
- 17 -

level of education; (2) the spouse’s involvement in the family’s

business and financial affairs; (3) the presence of expenditures

that appear lavish or unusual when compared to the family’s past

levels of income, standard of living, and spending patterns; and

(4) the culpable spouse’s evasiveness and deceit concerning the

couple’s finances. Price v. Commissioner, supra at 965.

Petitioner is educated, holding a bachelor of science degree

in nursing and a bachelor of arts degree in pre-law. Prior to

and during the tax year at issue, petitioner was the manager of

intervenor’s law practice. As part of her duties as manager, she

reviewed mail received, read invoices, and paid bills including

advance cost expenses on clients’ accounts. Petitioner kept all

of the records for the law practice in 2003. Petitioner was the

sole party responsible for reviewing the documents to be

presented to the tax return preparer for tax year 2003. In doing

so, petitioner reviewed the expenses of the law practice. 

Petitioner even assisted the return preparer with the preparation

of the joint income tax return for 2003. During the preparation

of the return, petitioner matched each bank check against each

expense to be claimed. Finally, intervenor was not deceptive

about financial matters, and in fact frequently discussed with

petitioner, then his wife, business and family financial matters. 
- 18 -

Petitioner was responsible for the personal and law practice

finances. She either knew or should have known, as the manager

of the law practice who helped prepare the tax return for 2003,

that business expenses were being twice deducted and that

excessive deductions for advance client costs were being claimed. 

As part of preparing the return, petitioner should have informed

the preparer that the Cadillac Escalade had been purchased and

placed in service in 2002, and not in 2003. She had actual

knowledge of those facts because she drove the vehicle during

2002 in the course of her duties as manager of the law practice,

and because the vehicle was titled in her name; two matters which

do not require any knowledge of tax law. Finally, petitioner

knew or had reason to know of the unreported capital gain from

the sale of Lots 6 and 7. The sale of this property was

contingent upon petitioner’s signing the deed of conveyance,

which she did. Moreover, both petitioner and intervenor

testified that they frequently discussed personal and business

finances during the marriage. In fact, intervenor testified that

petitioner and intervenor discussed the sale price negotiations

for Lots 6 and 7 prior to the sale of the property. Intervenor

discussed with petitioner that the lots were purchased for

approximately $120,000, and that negotiations were then occurring
- 19 -

7The parcels were owned equally by intervenor and his

brother. The property was sold for gross sales proceeds in the

amount of $180,000, with intervenor’s share as half owner

equating to $90,000 in gross sales, with a cost basis of $59,500,

resulting in a net capital gain of $30,500. 

to sell the lots for approximately $180,000.7 Additionally,

petitioner testified that she knew, prior to signing the 2003

income tax return, that the profit from the sale had been used to

pay off debts of intervenor’s law firm. The sales proceeds

received by intervenor from the sale were deposited into the law

practice checking account, from which payments were made on the

Cadillac Escalade during 2003, and on the mortgage on the

couple’s house, which was titled solely in petitioner’s name. 

Further, a Form 1099-S was issued to intervenor and petitioner in

the amount of $90,000 for 2003 in April 2004, while petitioner

and intervenor were still living together. The form was sent to

the couple’s home address, well before petitioner and intervenor

filed their 2003 return. While petitioner testified that she

never received this document, in light of the fact that

petitioner testified that she routinely reviewed personal and

business documents sent to the couple, in conjunction with the

fact that petitioner managed all business and personal finances,

the Court finds petitioner’s testimony to be self-serving and not

credible. Petitioner was familiar with the purchase price and

proposed sale price of the properties. Petitioner therefore

should have known that there was some gain from the sale of the
- 20 -

real estate. Even if petitioner were otherwise unaware of this

fact, she would have known of the sales proceeds through her role

as the law practice manager. 

Thus, because petitioner knew or should have known of the

understatement of tax, she does not qualify for relief under

section 6015(b). The Court has considered all relevant evidence

in making its determination. 

B. Section 6015(c)

Under section 6015(c), a divorced or separated spouse may

seek to limit liability for a deficiency on a joint return to the

portion allocable to him or her. In this case, respondent

concedes that certain prerequisites for relief have been met. 

However, respondent argues that petitioner is precluded from

obtaining relief because under section 6015(c)(3)(C),

apportionment of liability does not apply if the Commissioner

“demonstrates that an individual making an election under this

subsection had actual knowledge, at the time such individual

signed the return, of any item giving rise to a deficiency (or

portion thereof) which is not allocable to such individual * *

*”. This Court has defined actual knowledge as “an actual and

clear awareness (as opposed to reason to know) of the existence

of an item which gives rise to the deficiency (or portion

thereof)”. Cheshire v. Commissioner, 115 T.C. 183, 195 (2000),

affd. 282 F.3d 326 (5th Cir. 2002), cert. denied 537 U.S. 881
- 21 -

(2002). This actual knowledge requirement does not require the

requesting spouse to possess knowledge of the tax consequences of

the item giving rise to the deficiency. Id. at 194. When one

spouse requests relief under section 6015(c), the burden of

proving the spouse’s actual knowledge of an item is on the

Commissioner. In the case of a disallowed deduction, the burden

requires the Commissioner to prove that the spouse had “actual

knowledge of the factual circumstances which made the item

unallowable as a deduction.” King v. Commissioner, 116 T.C. 198,

204 (2001). And, consistent with Cheshire, such actual knowledge

does not include knowledge of the tax laws or knowledge of the

legal consequences of the operative facts.

Generally, under section 6015(c), a taxpayer who, at the

time of electing relief under that subsection, is no longer

married, is legally separated, or has not resided with his or her

spouse for a 12-month period, may obtain relief from joint and

several liability for the portion of the income tax deficiency

allocable to the other spouse, unless the Commissioner

demonstrates that the electing spouse, as of the time the joint

income tax return was signed, had actual knowledge of the item or

items that gave rise to the deficiency. It is clear to the Court

that petitioner had actual knowledge of all items giving rise to

the deficiency in joint tax; i.e., actual knowledge of the

omitted income and of factual circumstances which made the
- 22 -

deductions unallowable. Petitioner was solely responsible for

keeping the finances of the law practice; had actual knowledge of

the year the Cadillac Escalade was purchased and placed in

service; helped prepare the 2003 income tax return by reviewing

items with the preparer and reviewing and gathering all financial

documents from the law practice, including checks, expense

reports, and business ledgers; frequently discussed business and

personal financial matters with her then husband; discussed the

sale negotiations for the real estate property; knew the amount

of the proceeds of the sale and of intervenor’s basis in the

property; and accounted for the receipt of proceeds from said

sale to make payments on intervenor’s debts, on the house solely

titled in her name, and on the Cadillac Escalade. Petitioner

controlled the client billing process and was solely responsible

for overseeing the day-to-day activities of intervenor’s law

practice. Consequently, relief in the form of apportionment

under section 6015(c) is not available to petitioner. The Court

has considered all relevant evidence in making its determination. 

C. Section 6015(f)

Under section 6015(f), the Commissioner may grant equitable

relief from joint and several liability if he finds that, taking

into account all of the facts and circumstances, it is

inequitable to hold the individual liable for any unpaid tax or

deficiency, and if relief is not available under section 6015(b)
- 23 -

8As previously discussed, the Court has jurisdiction to

review petitioner’s claim under section 6015(f) as an affirmative

defense to the deficiency, but not to the reported and unpaid tax

liability.

or (c). In cases brought under section 6015(f), the Court

applies a de novo standard of review as well as a de novo scope

of review. See Porter v. Commissioner, 132 T.C. ___, ___ (2009)

(slip op. at 11-12). Petitioner bears the burden of proving that

she is entitled to equitable relief under section 6015(f). See

Rule 142(a). The Court has jurisdiction to determine whether a

taxpayer is entitled to equitable relief under section 6015(f).8

See sec. 6015(e)(1)(A). The Court’s determination is made in a

trial de novo. See Porter v. Commissioner, supra at (slip

op. at 11-12). Therefore, the Court may consider evidence

introduced at trial which was not included in the administrative

record. Both parties submitted evidence at trial which was not

available to respondent’s Appeals officer. The Court has

considered all relevant evidence in making its determination. 

Under section 6015(f), relief shall be granted under

procedures prescribed by the Secretary. These procedures have

been described in Rev. Proc. 2003-61, 2003-2 C.B. 296. Under

section 6015(e) and (f)(1), the Court will consider all relevant

facts and circumstances in determining whether petitioner is

entitled to relief. As explained by Rev. Proc. 2003-61, sec.

4.01, 2003-2 C.B. at 297-298, the requesting spouse must satisfy
- 24 -

all of the following threshold conditions to be eligible for

relief under section 6015(f): the requesting spouse must have

filed a joint return for the taxable years for which relief is

sought; the requested relief must not have been available to the

requesting spouse under section 6015(b) or (c); no assets can

have been transferred between the spouses as part of a fraudulent

scheme by the spouses to hide income or avoid tax; the

nonrequesting spouse must not have transferred disqualified

assets to the requesting spouse; the requesting spouse did not

file or fail to file the return with fraudulent intent; and the

income tax liability from which the requesting spouse seeks

relief is attributable to an item of the individual with whom the

requesting spouse filed the joint return. Respondent concedes,

and the Court agrees, that petitioner satisfies these threshold

requirements for equitable relief. However, respondent argues

that as described under the revenue procedure, petitioner is not

entitled to relief under section 6015(f) because petitioner had

knowledge of the items giving rise to the deficiency; had

knowledge or reason to know that intervenor would not or could

not pay the tax liability shown on the return; and if held liable

for the payment of tax she would not suffer an economic hardship. 

See Rev. Proc. 2003-61, sec. 4.02(1) and 4.03, 2003-2 C.B. at

298.
- 25 -

Petitioner completed and submitted Form 12510, Questionnaire

for the Requesting Spouse, and reported that she knew

petitioner’s and intervenor’s joint monthly expenses were in

excess of their monthly income for the 2003 tax year. Petitioner

was aware that checks drawn on the law practice account were

often returned for insufficient funds in 2003 and 2004. 

Petitioner made loans to the law office and to intervenor

personally during 2003 and 2004. Moreover, petitioner knew at

the time she signed the 2003 tax return that intervenor owed a

separate income tax liability for tax year 2001 in excess of

$50,000. This liability was not satisfied until after the 2003

return was filed, and the money used to satisfy the debt was

provided by intervenor’s family. This information supports the

conclusion that petitioner knew that she and intervenor were

having financial difficulties during tax year 2003 and therefore

intervenor would not or could not pay the tax liabilities shown

on the return. Additionally, during the period in question,

petitioner knew that intervenor was legally obligated to make

periodic payments for child support and alimony from a prior

marriage, and further knew that intervenor would make these

payments before he would attempt to pay his tax debts. 

As evidenced by Form 12510, petitioner revealed that at the

time of completing the form, her monthly income was $3,000 and

her monthly expenses were $2,180, leaving petitioner with a
- 26 -

monthly surplus of $820. Ex. 27-J, p. 26. Under Rev. Proc.

2003-61, sec. 4.02(1) and 4.03(2)(a)(ii), the Court must consider

whether holding petitioner liable for the tax would create an

economic hardship for her. Economic hardship is defined as the

inability to meet “reasonable basic living expenses.” See sec.

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

reported that she has a surplus of $820 after payment of her

expenses each month, the Court finds that petitioner has the

ability to meet “reasonable basic living expenses,” and that

denying petitioner relief under section 6015(f) does not create

an economic hardship for her.

Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(v), 2003-2 C.B. at

299, in weighing eligibility for relief under section 6015(f), it

is considered a negative factor if the requesting spouse received

a significant benefit (beyond normal support) from the unpaid

income tax liability or item giving rise to the deficiency. 

Petitioner used profits from the sale of Lots 6 and 7 to make

monthly mortgage payments on the house that intervenor purchased

for petitioner prior to their marriage, which was titled solely

in petitioner’s name. The Court finds this to have been a

significant benefit to petitioner. 

In sum, the Court determines that petitioner is not entitled

to relief under section 6015(f). 
- 27 -

Conclusion

Because petitioner had actual knowledge of the items that

created the deficiency, she is not entitled to relief from joint

and several liability for the deficiency under section 6015(b) or

(c). Further, because petitioner possessed this knowledge,

because she knew or had reason to know at the time of filing the

return that intervenor would not pay the tax, because petitioner

has not shown that she would suffer economic hardship if required

to pay in full the liability from which she seeks relief, and

because she received a significant benefit from the unreported

income giving rise to the deficiency, petitioner is not entitled

to equitable relief from joint and several liability under

section 6015(f). Petitioner’s claims regarding the unpaid tax

liability reported on her 2003 joint income tax return are

dismissed for lack of jurisdiction. 

The Court has considered the remaining arguments of all

parties for results contrary to those expressed herein and, to

the extent not discussed above, finds those arguments to be

irrelevant, moot, or without merit.

To reflect the foregoing,

Decision will be entered

for respondent.