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# United States Court of Appeals Forthe Seventh Cir c uit

No. 18-3371

R I C K E. J A C OB S E N

, Plaintiff-Appellant,

v.

C OMMI S S I O N E R O F I NT E R NAL R E V E NUE, Defendant-Appellee.

Appea l fro m the U ni ted S ta tes Ta xCo urt. N o . 2 5 3 4 8 -1 5 — Eliz a be th Cre w son Pa ris , Judge.

A RGU E D S E PT E MB E R 13, 2019

— D E C I D E D F E B R UAR Y 13, 2020

Befor e B AU E R

, R OVN E R

, and S YKE S

, Circuit Judges

. R OVN E R , Cir cuit Judge. Peti ti oner Ri ck E. Jacobsen’s for mer wi fe Tina M. Lemmens embezzled ov er $400,000 fr om her employ er

, i ncome that w as not r epor ted on the couple’s j oi ntly fi led i ncome taxes. As r elev ant her e , a f t er Lemmens w as
conv i cted for h er embezzlement, the Inter nal Rev enue S er v i ce (“IRS ”) audi ted the couple’s joi nt tax r etur ns for 2010 and 2011.2 No. 18-3371

For those y e a r s , the IRS p r oposed total net adj ustments

a t t r i b u t ab l e to omi tted embezzlement inc o m e ( th e r e we r e o the r
unr e lated pr oposed a dj ustments) of ov er $300,000, wi th

cor responding defi ci enci es and accur acy-r elated penal t i es of

ov er $150,000. J acobsen sought r eli ef under the tax code’s “i nnocent spouse” p r ov i si on, 26 U.S

. C. § 6 015 (b ) , a nd equi table

r eli ef pr ov i s i on, § 6015(f ). As r el e v a n t h er e, the T ax Cour t gr anted Jacobsen i nnocent spouse r eli ef for 2010, but deni ed all

r eli ef for 2011. Jacobsen appeals, but we affi r m. I. The sti p ulated facts as found by the T ax C o u r t pr ov i de a backdr op for Jacobsen’s c lai m on appeal. Whi le Jacobsen and Lemmens w er e mar r i ed, L emmens, an accountant, handled all of thei r finances. Dur ing the r elev ant ti me per i od (2009-2011), Lemmens w or ked for a blood bank, wher e her duti es included pr oces s in g accounts pay able and i ssuin g checks to v endor s. Jacobsen, who holds an associ ate’s d e g r e e , w or ked as a machine oper ator a t a factor y

. In addi ti on to w or k in g a t the factor y , whi ch h e di d in tw elv e-hour shifts four teen days p er month, Jacobsen i nspected pr oper ti es for financi al insti tuti ons and insur ance compani es. Jac obsen deposi ted w a ges fr om hi s w or k as a machine oper ator i nto a per sonal account at Ev er gr een Cr edi t Uni on in Wi sconsin. The r emainder o f t h e couple’s income, fr om both L emmens’ j ob and Jacobsen’s home inspecti ons, w as deposi ted i nto a j oi nt account at Communi ty Fi r st Cr edi t Uni on. That j oi nt a ccount w a s also used by Lemmens f or d eposi ts that she had actually e m b e z z led fr om the blood bank. Thr oughout the tax y ear s at i ssue her e, L emmens w as embez-No. 18-3371 3

zling fr om the blood bank by dr a fti ng che c k s t o her self or adding si zable a mounts to her own p aychecks and classi fyi ng the excess as r ei mbur sements.
Lemmens w as ev entually ar rested in June 2011 for embezzling ov er $450,000 fr om her employ er

. The T ax Cour t cr edi ted Jacobsen’s t e sti m ony that he nei ther knew of, nor had r eason to know of Lemmens’ scheme at the ti me of her ar r est.
Fi r st, as di scussed a b o v e, Jacobsen w as for the most par t completely uninv olv ed wi th the couple’s fin ances. S peci fi cally , he n ev er r ev i ew ed bank or cr edi t car d statements, nor d i d he look ov er thei r p er s onal or business finances, whi ch Lemmens managed. N or w ould hav e r e v i e w in g the i r finances necessar i ly hav e aler ted h i m to Lemm e n s’ embezzlement gi v en her pr acti ce of deposi ti ng the embezzled funds v i a check into the couple’s j oi nt account. These checks w ould hav e been di ffi cult to di sti ngui sh fr om t h e checks for the h ome inspecti on busi

ness, whi ch wer e also made out to Lemmens a nd tended to be for si mi lar amounts.
Mor eov er

, thr oughout the per i od of L emmens’ embezzlement, ther e w a s n othi ng lav i sh or excessi v e about thei r spending. Although the y did gamble heav i ly dur ing the

r elev a nt t im e p er i od, the T ax Cour t concluded that Jacobsen attr ibuted the funds av ai lable f or gambling to the success of thei r home i nspecti on business and the av a i lable income fr om thei r other employment. The T a x Cour t also c oncluded that nothi ng about t hei r li festyle w ould hav e aler ted h i m to her scheme. D u r i ng the y ear s Lemmens w as embezzling fr om the blood b ank, Jacobsen dr ov e a used car that he di d not r eplace,4 No. 18-3371 they di d not pay off thei r mor tgage, and at one poi nt they ev en had some uti li ti es di sconnected for fai ling to pay

. Lemmens w as c onv i cted in 2011 and sentenced in Januar y 2012. Although the tw o r e mai ned mar r i ed thr oughout the

c r im i nal tr i a l and i nto her ter m of i mpr i sonment, they u l t imately became estr anged someti me in 2 013 and di v or ced in May 2015. Thei r di v or ce d e c r ee speci fi ed that Jacobsen and L e m mens w ould each pay half of the 2010 and 2 011 ta x li abi l i ti es. Jacobsen, how ev er , maintai ns that he be l i ev ed he

w as only agr eei ng to pay half of the li abi li ti es r emaining after excluding the embezzlement i ncome. The di sp u ted tax li abi li ti es ar ose fr om the audi t of the couple’s j oi ntly submi tted tax r etur ns for 2009, 2 010, and 2011. After Lemmens w as conv i cted, a n IRS ag e n t analyzed b ank deposi ts and i nt e r v i ew ed both Lemmens (fr om j ai l) and Jacobsen. In ear ly 2013, the IR S p r e par ed For m 4549 T ax E x a m i nati on Changes pr oposi ng adj us t m e n t s t o th e t a x r e tu r n s fr om a ll thr ee y ear s, most of whi ch ar ose fr om income adj ustments attr ibutable to Lemmens’ em b e z zlement. 1 As r elev ant her e, for 2 010 the IRS pr oposed t o t a l n et adj ustments of $298,710.14, of whi ch $ 2 61,959.14 w as attr ib utable to omi tted embezzlement i ncome. That p r oposed adj u stment r esulted in
a defi ci ency of $103,247 and an accur acy-r elated penalty under 26 U. S .C. § 6662(a) ( i mposing a 20 per cent penalty onto amount of u nder payment) of $20,649

. 4 0

. For 2011, the total p r oposed adj ustment w as $ 1 06,424.94, of whi ch $62,449.94 w as attr ibut1 Ja co b sen di d no t cha ll enge pro po sed a dj ustments tha t were u nrel a ted t o Lemmens’s emb ez z l ement, such a s a ppro x i ma t el y $ 4 5 ,0 0 0 i n di s a l l o wed S chedul e C ca r a nd truck ex penses fro m the ho me i nspecti o n b usi n ess.No. 18-3371 5
able to omi tted embezzlement income. Thi s c r eated a defi

ci ency of $25,912, and an accur acy-r elated p enalty of $5, 182. 2 Lemm e n s a nd J acobsen both si gned the For m 4549, ther eby consenting to the assessed adj ustments and penalti es. In Januar y 2014, Jacobse n fi l ed a For m 8857 wi th the IRS , r equesting i nnocent spouse r eli ef under § 1615 for 2009, 2010, and 2011. Although the IRS made a p r eli minar y deter minati on g r a n ti ng Jacobsen full r eli ef, i t r econsi der ed i ts deci si on afte r Lemmens fi led a statement of di sagr eement. Ulti mately in July 2015, the IRS offi ce of appeals deni ed all r eli ef under§ 6015.
In October that same y ear , J a c o b s e n, who w as by then di v or ced fr o m L e mmens, fi led a ti mely peti ti on under § 6015(e) seeki ng r ev i ew in the T

ax Cour t and enti tlement to r eli ef for all thr ee y ear s

. The T

ax Cour t fi r st di smi s sed Jacobsen’s 2009 tax and penalt y li abi li ty as moot because i t had by then b een di schar ged i n bankr uptcy

. T h e T a x Cour t then c onsi der ed J acobsen’s eli gibi li ty fo r
r eli ef under 26 U.S .C. § 6015(b), ( c), and ( f ), whi ch each pr ov i de

a means f or r eli ef fr om l i abi li ty for an under statement attr ibutable to the other s pouse li sted on the j oi nt fi l ing. Each subsecti on contai ns sli ghtly di ffer ent cr i ter i a for r eli ef, but as r elev ant her e, r eli ef i s av ai lable under both subsecti ons (b) and (c) only i f the T ax Cour t finds that the requesting spouse n ei ther actually knew n or had reason to know of the under s tatement. The T ax Cour t gr anted J acobsen § 6015(b) r eli ef for 2010, but deni ed any r eli ef for 2 011. In r eaching i ts conclusi on, the

2 F o r 2 0 1 1 then, Ja co b sen’s h a lf of the $3 1 ,0 9 4 l iab i li ty (defi ci ency pl us
a ccura cy pena l ty) ci ted b y the Ta xCo urt wo ul d b e $ 1 5 ,5 4 7

.6 No. 18-3371

T ax Cour t accepted Jacobsen’s testi mony that he w a s tot ally

unaw ar e of hi s then-wi fe’s embezzlement wh e n th ey fi led thei r 2010 tax r etur ns. The T ax Cour t a lso consi der ed the factor s set for th in 26 C.F .R. § 1.6015-2(c) (containing a non-exhausti v e li st of facts and ci r cu mstance s r elev ant to concluding whether the r equesti ng spouse should hav e known of the under statement) and concluded that J acobsen li kewi se had no r eason to know of the 2010 u nder statement. S ecti on 1.6015-2(c) di r ects the cour t to consi der “the natur e of the er r oneous i tem a nd the amount of the er r on e ous i tem r elati v e to other i tems; the couple’s financi al si tuati on; the requesting s p ouse’s educati onal backgr ound and busin ess exper i ence; the extent of the r equesting spouse’s par ti ci pati on in the acti v i ty that resulted in the er r oneous i tem; wh ether the r equesting spouse fai led to inqui r e, a t or befor e the ti me the retur n w as si gned, a b o u t i tems on the r etur n or omi tted fr om the r etur n that a r easonable per s on w ould questi on; a nd whether the er r oneous i tem r epr esented a depar tur e fr o m a r e cur r ing patter n r eflected in pr i or y ear s ’

r etur n s.” The T

a x Cour t con c l u d ed that each of these factor s suppor ted the deter minati on that Jacobsen w as u naw a r e of the under statement, as r equi r ed for r eli ef under§ 6015(b).
The assessment for 2011, how ev er , w as d i ffer ent. Lemmens

w as ar r ested t h a t s ame y ear , so by the ti me the 2011 r etur ns
w er e fi l ed i n Apr i l 2012, she had been conv i c ted of embezzlement and w as incar cer a te d

. Th e T ax Cour t thus deni ed r eli ef under § 6015(b), and (c) on account of Jacobsen’s knowledge of the omi tted income. It then consi der ed whetherJacobsen was enti tled to r eli ef under § 6015(f ), which appli es when r eli ef i sNo. 18-3371 7

unav ai lable under subsecti ons (b) or (c), b ut i t w ould nonetheless be inequi table to hold the r equesting spouse li able.
Wi th the excepti on of knowledge of the un d e r s tatement, whi ch bar s r eli ef under § 6 0 1 5 (b), the consi d er ati ons for equi table r eli ef under § 6015(f ) mi r r or those the T ax Cour t had consi der ed i n assessing Jacobsen’s e li gib i li ty for r eli ef under § 6 015(b), whi ch appli es wh e n the r equesting spouse lacked knowledge of the under statement and i t w ould be inequi table gi v en all the facts and ci r cumstances to hold that spouse li able. See 26 U.S .C. § 6015(b)(1)(C), ( D); see also 26 C.F .R. § 1.6015-2(d) (“All of the facts an d ci r cumstances ar e consi d er ed in d eter

minin g whether i t i s inequi table to hold a r e questing spouse j oi ntly and sev er a lly li able for an u n d e r statement.”). The T ax Cour t consi der ed Jacobsen’s eli gibi li ty for equi table reli ef wi th

r efer ence to each of the following s ev en nonexhausti v e factor s set for th in the appl i cable IRS Rev enue Pr ocedur e: (1) the

cur rent mar i tal status of the spouses, (2) whether the r equesti ng spo u s e w o u ld s uffer economi c har dshi p i f r eli ef w er e not g r a n ted, (3) whether the r equesting spouse knew or had r ea s o n to know of the under statement, (4) whether ei ther spouse has

a legal obli gati on to pay the outstandi ng Feder al in c o me tax li abi l i ty , (5) whether the r equesting spouse si gni fi c antly benefi tted fr om th e u n d e r s t a t e m e n t , ( 6 ) whether the r equesting spouse has made a good fai th effor t to comply wi th the income tax laws i n the y ear s following the y ear s for whi ch r eli ef i s sought, and (7) w hether the r equesting spouse w a s in poor mental or physi cal h ealth at the ti me the j oi nt r etur n w a s fi led. Rev . Pr oc. 2013-34, 2013-43 I.R.B. 397, at 400–403.
W i th the excepti on of the thi r d factor , whether Jacob s e n knew or had r eason to know of the under statement, the T ax8 No. 18-3371

Cour t concluded that each of the for egoi ng factor s fav or ed Jacobsen or w er e “neutr al.” T h e T ax Cour t n onetheless

conc l uded that Jacobsen’s actual knowledge in 2011 of Lemmens’ embezzlement and the ac c o m panyi ng tax u nder

statement w ei ghed “too heav i ly” agai nst hi m to allow equi table r eli ef under § 6015(f ). Jacobse n appeals, challenging only the T a x Cour t’s c onclusi on that he w as not enti tled to equi table

r eli ef fr om li abi l i ti es ar i sing fr om embezzlement income omi tted fr om the 2011 r etur n. II The Inter nal Rev enue Code speci fi es that a husband and wi fe who fi le a j oi nt tax r etur n ar e j oi ntly a nd sev er ally li able for the taxes on thei r combin e d incomes. 26 U.S .C. § 6013(d);

see, e.g

. , R esser v

. C.I.R. , 74 F .3d 1528, 1534 (7th Ci r

. 1996). The so-called i nnocent s pouse statute of the Code, 26 U.S .C. § 6015, pr ov i d es potenti al av enues of r el ie f to those spouses who

w o u l d o ther wi se be held unfai r ly li able for tax obli gati ons
ar i sing fr o m j o intly fi led feder al income tax r etur ns. S ecti on 6015 liber ali zes the av ai labi li ty of innocent spouse r eli ef bey ond what w as pr ev i ously a v ai lable under § 6 013(e) 3
, whi ch Congr ess added after the S u pr eme Cour t held in James v

. United States , 3 66 U.S

. 213 ( 1 9 6 1 ) , that embezzled funds consti tuted taxable i ncome.

3 In 1 9 98 , Co ngress si gni fi ca ntl y restructured a nd ex pa nded the a v a il ab il i ty
o f i nno cent spo use rel i ef b y repea l i ng 2 6 U.S .C. § 6 0 1 3 (e) a nd repl a ci ng i t wi th § 6 0 1 5 a s pa rt o f the Interna l R ev enue S erv i ce R estructuri ng a nd R efo rm Act of 1 9 9 8 , Pub

. L. No

. 1 0 5 -2 0 6 , § 3 2 0 1 , 11 2 Sta t. 68 5 , 74 0 (1 9 9 8 ). See H. Co nf. R ep. No . 1 0 5 -5 9 9 , a t 2 4 9 (1 9 9 8 ).No. 18-3371 9

S ecti on 6013(e) w as desi gned to pr otect innocent taxpay er s
a fter the IRS began assessing u nder payments and associ ated pena l ti es fr om the spouses of embezzler s, ev en when the spouse w as unaw ar e of the emb e z z l in g or associ ated tax li abi l i ty

. It allow ed r eli ef wher e the under payment w as due to fr aud by the taxpay er ’s s pouse, the taxpay er di d not and had

n o r eason to know of the under payment, and i t w ould b e i nequi table to hold the taxpay er li able f or the under payment i n l i ght of t h e facts and ci rcumstances. In 1984, Congr ess amended that secti on and sli ghtly br oa d ened the av ai lable

r eli ef. See Pub. L. No. 98-369, § 424(a), 98 S tat. 494, 801 (1984). S ti ll n ot c ontent wi th the av ai l abi li ty of r eli ef, Congr ess later

r epealed § 6013(e) enti r ely and enacted § 601 5 i n the Inter nal R ev enue S er v i ce Restr uctur ing and Refor m Act of 19 9 8 t o make “ in n o c ent spouse status easi er to obtai n.” H.R. Conf. R e p. N o. 105-599, at 249–51 (1998), r epr inted in 199 8 U.S .C.C.A.N. 288.
S ecti on 6015, as r elev ant her e, pr ov i d es thr ee separ ate

av enues for r eli ef i n subsecti ons (b), (c), and (f )

. Conceding hi s i neli gibi li ty f or reli ef under § 6015(b) or (c) o n a cc o unt of hi s
aw ar eness of Lemmens’ embez z lement when he fi led the couple’s 2011 taxes, Jacobsen challenges only the T a x Cour t’s conclusi on that he i s ineli gib le f or equi table r eli ef under § 6 015(f )

. The T

a x Cour t may gr a nt such r eli ef when “taki ng i nto account all the facts and ci r cumstances, i t i s inequi table to hold the i ndi v i dual li able for any unpai d tax or any d efi ci ency (or any por ti on of ei ther ).” Although the par ti es agr ee gene r ally that w e r ev i ew the T ax Cou rt’s deci s i ons “in the same manner and to the same extent as w e r ev i ew di str i ct cour t deci si ons fr om the bench in10 No. 18-3371

ci v i l acti ons ,” 26 U.S .C. § 7482(a)(1); Gyor gy v

. C.I.R. , 779 F .3d 466, 472–73 ( 7th Ci r

. 2015); Resser, 74 F .3d at 1535, they d i s agr ee
as to whether that means w e rev i ew the deni al of r eli ef under § 6015(f ) for clear er r or or an abuse of di scr eti on. The par ti es’ d i ffer ing v i ews on th e s t a n d a r d of r ev i ew hin ge i n par t on the T

axpay er Fi r st A c t, legi slati on that w as passed shor tly after the par ti es fi l ed thei r br i efs. See Pub. L. No. 1 16-25, 133 Stat. 981 ( J uly 1, 2019). As r elev ant h er e , § 1203 of the T a x pa y e r Fi r st Act added a new par agr aph at the end o f § 6015(e) codi fyi ng the exi sting pr acti ce of de nov o r ev i ew by the T ax Cour t of a ppeals fr om the d e n ial of innocent spouse
r eli ef. Because thi s addit i on to § 6015 si mply “clar i fi ed,” see Pub. L. No. 116-25, § 1203 (“Clar i fi cati on of equi table r eli ef fr om j oi nt li abi li ty

.”), the exi s ti ng s tandar d and scope of T ax Cour t r ev i ew

, the Commi ssi oner main tai ns i t has no effect on

our standar d of rev i ew

. Thus, a r gues the Commi ssi oner , deni al of r eli ef under § 6015(f ) should be r e v i ew ed in the same
manner as any deter minati on of equi table r eli ef in the di s tr i ct

cour t—for abuse of d i scr eti on. See, e.g., Bowes v

. Ind. Sec. of State, 837 F

. 3d 813, 817 (7th Ci r

. 2016 ) (explaining gener al appli cabi li ty of abuse of d i scr eti on standar d to equi table deter minati ons). Jacobsen, h ow ev er

, insi sts th a t the T

axpay er Fi r st Act confi r ms hi s posi ti on that w e r ev i ew deci si ons under § 6015(f ) for clear er r or

. Jacobsen explai n s hi s r easoning as follows: (1) the T

a x pay er Fi r st Act makes equi table r eli ef under § 6 015(f ) mandator y as opposed to di scr eti onar y; (2) m a n dator y reli ef u nder s ubsecti on ( f ) “i s n ow the same as mandator y
r eli ef under subsecti on (b),” whi ch also contai ns an inequi tyNo. 18-3371 11
condi ti on; a n d so (3) T ax Cour t r ulings under subsecti on (f ) should be r ev i ewed under the same standar d as subsecti on (b). Jacobsen finds fur ther suppor t for hi s posi ti on w i th the fact tha t s u b secti on (b) i s a conti nuati on and expansi on of for mer § 6 013(e), whi ch w e held in Resser w as subj ect to clear er r or
r ev i ew , 74 F

. 3d at 1535.
W e a r e unconv inced, how ev er , that the T

a xpay er Fi rst Act (whi ch settled only the T ax Court’s standar d o f r ev i ew of IRS deter minati ons) sheds a ny par ti cular l i ght on our standar d of

r ev i ew as to r eli ef under § 6015(f ), whi ch multi ple cour ts hav e
r ecogni zed as for abuse of di scr eti on. See Greer v

. C.I.R. , 595 F .3d 398, 344 (6th Ci r

. 2 010) (innocent s pouse r eli ef un d er § 6015(b) rev i ew ed for clear er ror but equi tabl e r eli ef under § 6015(f ) r ev i ewed for abuse of di scr e t io n ); Cheshire v

. C.I.R. , 282 F .3d 326, 3 38 (5th Ci r

. 2002) (same). For tunately , w e need not resolv e the i ssue today , as w e w ould affi r m the T ax Cour t’s deci si on under ei ther defer enti al standar d. See Freda v

. C

. I

. R

. , 656 F .3d 570, 573 (7th Ci r

. 2011) (declinin g to “u nr a v el” the “quandar y” about the a ppr opr i ate standar d of rev i ew wher e T ax Cour t’s d eci si on w ould be upheld under ei ther standar d); W e l l p o int, Inc. v

. C.I.R. , 599 F .3d 641, 645 (7th Ci r

. 2010) (“W e needn’t w a de deeper into thi s mi re, how ev er

. For thi s i s not a

case i n wh i ch the standar d of r ev i ew deter mines the outcome[.]”).
As descr ibed abov e, Rev enue Pr ocedur e 2 013-34 i denti fi es
sev en possi

ble f actor s for consi der a t i o n in a ssessing whether to gr ant reli ef u nder § 6015(f )

. A n d a l though i t i s not bound b y them, the T

ax Cour t gen e r a l l y follows the appli cable Noti c es12 No. 18-3371

or Rev enue Pr ocedur es. Pullins v

. C.I.R. , 136 T

. C

. 4 3 2, 438–39 (2011). Jacobsen a cknowledges that wi th the excepti on of hi s knowledge for 2011, the T a x C our t cor r ectly assessed the posi ti v e, negati v e, or neutr al i mpact of each of t he sev en factor s li sted i n Rev enue Pr ocedur e 2013-34. He also concedes that i n li ght of Lemmens’ c o n v ic t ion in ear ly 2012, he had “r eason to know” of the embezzlement income b y the ti me he fi led thei r 2 011 tax r etur n. Y et h e maintai ns that the T ax Cour t

er r ed when i t con cluded that h e had actual knowledge of the

unr epor ted embezzlement income for 2011. The longstandi ng test for “knowledge” of omi tted taxable i ncome “i s not knowledge of the tax consequences of a tr ansacti on but r ather kno w l e d g e of the tr ansacti on i tself.” See, e.g., Quinn v

. C.I.R. , 5 2 4 F .2d 617, 626 (7th Ci r

. 19 7 5 )

. U n der thi s standar d, the T

ax Cour t’s conclusi on that Jacobsen, who w as
aw ar e o f Lemmens’ i ndi ctment, tr i al, and s ubsequent conv i ct i o n fo r e mb e z z l e m e n t

, had actual knowledge of the embezz l e d i ncome i s uncontr ov er si al. In conceding that he h ad “r eason to know ” of the embezzled income, J a cobsen admi ts that after Lemmens’ conv i cti on but befor e he fi led thei r taxes h e should hav e l o o k e d i nto the 2011 b ank s tatements to a scer tai n the amounts of embezzled income, looked a t the analysi s of embezzled in c o m e by y ear fr om Lemmens’ tr i al, or sought i nfor m ati on fr om Lemmens t o d e ter mine how much s he embezzled i n 2011. But, Jacobsen ar gues, because h e di d n one of these thi ngs, he lacked “ac t u a l knowledge” of the 2011 embezzlement i ncome as contemplated by Rev enue Pr o c e d u r e 2013-34.No. 18-3371 13 Jacobsen’s ar gument boi ls down to hi s c lai m that he c annot be accountable for hav ing actual knowledge because ther e w as
no ev i dence in the T

ax Cour t that he knew the precise amounts embezzled, an a r gument he suppor ts wi th refer ence to sli ght di ffer ences i n the totals calculated b y the r esti tutio n or der in Lemmens’ c r i minal tr i al, the j oi n t sti pulati on in thei r di v or ce decr ee, and the IRS agent’s audi t calculati ons. Jacobsen’s ar gument, how ev er , i s based on the f aulty p r e m i se that he i s not r esponsi ble for d emonstr ati ng th a t he lacked knowledge of the embezzled income. Fi rst, r elyi ng on § 6015(c)(3)(C), Jacobsen maintai ns that innocent spouse r eli ef i s for eclosed only i f “ the Secretary demonstrates that an indi v i dual maki ng an electi on under thi s s ubsecti on has actual knowledge at the ti me such indi v i dual si gned the r etur n of any i tem gi v i ng r i s e to the defi ci ency .” (Emphasi s added.) But § 6015(c), whi ch appli es to taxpay er s who ar e no longer

mar r i ed or other wi se separ ated accor ding to cer tai n cr i ter i a in the statute—cr i ter i a Jacobsen acknowledges do not apply to hi m and Lemmens forthe 2011 r etur n —i s an excepti on to the gener al rule that for a ll o t h er types of innocent spouse r eli ef the taxpaye r bear s the bur den of pr oof. See, e.g. , Cheshire, 282 F .3d at 3 32 ( “Except for the knowledge r equi r ement of § 6015(c)(3)(C)

... the taxpay er b ear s the bur den o f pr ov ing that she has met all the pr er equi s i t es for innocent spouse reli ef.”);

see a lso C.I.R. v

. Neal , 557 F .3d 1 262, 1 277 ( 11th Ci r

. 2 009) (taxpay er bear s b ur den of demonstr ati ng eli gibi li ty for equi table r eli ef under § 6015(f )). Gi v en the T ax Cour t’s undi sputed fi nding that J acobsen w as a w ar e of Lemmens’ embezzlement when h e fi led the 2 011 r etur n, i t w ould be hi s bur den, not14 No. 18-3371
that of the Commi ssi oner , to demonstr ate hi s l ack of kn o w ledge.
Instead of doi ng thi s, Jacobsen si m ply no t e s that the T ax Cour t made no expli ci t finding t hat he knew the particular amount of embezzlement income in 2 011. Jacobsen fau l t s t he T ax Cour t’s actual k n owledge finding because ther e “w as nothi ng i n the recor d” demon str ati ng that he read a ny docum e nt a t i o n fr om Lemmens’ tr i al that w ould establ i s h th e p r e c i s e amount of embe z zled income fr om 2011. B ut i t w ould be Jacobsen’s o b l ig a ti on, not that of the Commi s si oner , to hav e d e m o nstr ated that he could not hav e accur ately deter min e d the a mount embezzled in 2011. Nothi ng in the r ecor d suggests he d i d s o, and w e ther efor e see no r eason t o questi on the T ax Cour t’s conclusi on tha t he had actual knowledge of the 2011 embezzlement income. The T ax Cour t r eached that conclusi on after consi der ing all the facts and ci r cumstances a s anti c i pated in S ec. 1 .6015- 3(c)(2)(iv ), Income T

ax Regs. T he T

a x Cour t noted that by the ti me he fi led t he r etur n in Apr i l, Jacobsen w as aw ar e of Lemmens’ ar r est i n June of 2011, herconv i cti on in N ov ember 2011 of embezzling $485,681, and her J anuar y 2012 s entence to i ncar cer a ti on and r esti tu t ion. Jacobsen ci tes no a uthor i ty , nor
ar e we a w ar e of any

, suggesti ng that a finding of actual knowledge w ould be pr ecluded by the fact that a peti ti o n i n g spouse may not, as a r esult of h i s own lack of inv esti gati on, be

aw ar e o f the p r eci se amount of embezzlement, p ar ti cular ly when he has not offer ed any explanati on as to why he fai led to

access that i nfor mati on. See Porter v

. C.I.R. , 132 T.C. 203, 212 (2009) ( § 6015 “does not pr otect a spouse who tur ns a blind ey e to facts r eadi ly av ai lable to her ”).No. 18-3371 15 Jacobsen ’ s a r gument that the T a x Cour t i mpr oper ly assi gned too much w ei ght to that knowledge i s mor e per suasi v e. Jacobs e n clai ms that because, wi th the excepti on of knowledge, the f actor s r elev ant to r eli ef under § 6015(f ) all fav or ed h i m or w er e neutr a l, by denyi n g Jacobsen’s r equest for equi table reli ef t h e T

ax Cour t essenti ally elev a ted lack of knowledge to a but-for cr i ter i a for r eli ef. Jacobsen suggests the T ax Cour t’s c onclusi on w as especi ally p r oblemati c in light of Co ngr essi onal i ntenti on to liber ali ze innocent spouse r eli ef. S peci fi c ally

, pr i or t o t he 2013 changes d i s cussed supra , the

r elev a nt Rev enue Pr ocedur es di r ected that actual k n o w ledge of the u nde r s t a t e ment w ould be tr eated “as a str ong factor

w ei ghi ng agai nst r eli ef.” Rev

. Pr oc. 2003-61, 2003-32, I.R.B. 296, § 4.03(2)(a)(i i i )(B) , superseded by Rev

. Pr oc. 2013-34. The Rev enue Pr ocedur es accompanying the 2013 changes to § 6015 expr essly abandon that appr oach, stati ng in Rev

. P r oc. 2013-34, § 3.07 that “actual kn owledge of the i tem gi ving r i se to an under statement or defi ci ency wi ll no longer be w ei ghed mor e heav i ly than other f actor s, as i t di d under Rev

. Pr oc. 2003-61.” See a l s o Re v

. P r o c

. 2013-34 § 4.03(2)(c)(i )(A) (“Actual knowledge of the i tem gi v i ng r i se to the u nder statement or d efi ci ency wi ll not be w ei ghted mor e heav i ly than any other factor .”).
As di scussed abov e, the T ax Cour t consid e r e d each of the

sev en factor s i denti fi ed for c onsi der a ti on i n Inter nal Rev enue Pr ocedur e 2013-34 § 4.03( 2 ) (a)–(g) and deter mined that only the thi r d factor

, whether the r equesting sp ouse knew or had

r eason to know of the under statement, w ei ghed a g a inst Jacobsen’s r equest for equi table r eli ef. Notably , the cour t fully consi der ed those factor s fav or ing
r eli ef. It n ote d Jacobsen’s fai lur e to b enefi t si gni fi cantly fr om16 No. 18-3371
the embezzled i ncome as w ell a s h i s subsequent compli ance wi th tax laws. And the cour t took note of the fact that Jacobsen i s a v eter an s u f f e r i n g fr om PTS D who exper i enced a mental br eakdown i n r esponse to Lemmens ’ cr i me and has s ince
mov ed thr ee ti mes and held fourdi ffer ent j obs.
Because each of the factor s for consi d er ati on w as e it h er neutr al or fav or ed r eli ef, J acobsen clai ms the T ax Cour t m ust hav e w ei ghed knowledge mor e heav i ly than the other f actor s, i n co n t r av enti on of Rev

. Pr oc. 2013-34 § 4.03(2)(c)(i )(A). Nothi ng i n the T

a x Cour t’s opi ni on, how ev er , suggests that i t beli ev ed know l edge of the embezzled funds necessar i ly pr ecluded Jaco b s en fr om equi table r eli ef or automati cally outw ei ghed the other factor s for consi der ati on. A lthough the 2013 r egulati ons make clear that knowledge is no longer necessarily a str ong factor w ei ghi n g a gai nst r eli ef, as Jacobsen hi mself acknowledges in hi s br i ef, they do not pr ohibi t the T ax Cour t fr om assi gni n g mor e w ei ght to peti ti oner ’s knowledge i f such a conclusi on i s suppor ted b y the totali ty of the ci r cumstances. As explai n e d in the Rev enue Pr ocedur es, “no one factor or a maj or i ty of facto r s n e c essar i ly deter mines the outcome.” Rev

. Pr oc. 2013-34 § 4.03. And although knowledge

no longer wei ghs heav i ly against r eli e f , nothi ng in the statute

or r ev enue pr ocedur es for ecloses the deci s ionmaker fr om concluding that i n lig h t of “all the facts and ci r cumstances,” § 6015(f ), knowledge of the under statement w ei ghs h eav i ly agai nst gr anti ng equi table r eli ef. Ther e i s thus no r eason to beli ev e the T

ax Cour t’s deci si on w a s necess a r i l y er r oneous because only one of the n o n e x h a u s t ive fa c t o r s fo r consi d er ati on
w ei ghed agai n st r eli ef.No. 18-3371 17 Jacobsen also suggests i t w a s inappr opr i a te f or the T ax Cour t to f actor hi s “par ti ci pati on in pr epar ing the 2 011 r etur n” i nto i ts a s s essment, char a cter i zing i t as “another w ay f or the

cour t to extr a-count” Jacobsen’s know l edge of the embezzlm e n t

. In assessin g the r ole of Jacobsen’s knowledge in h is enti tlement to equi table r eli ef, the cour t noted that in addi ti on to Jacobse n ’ s a ctual knowledge on account of Lemmens’

cr i min al conv i cti on and sentence, in 2011 J acobsen h i m self pr ov i d ed the tax i nfor mati on to the pai d pr epar er , wher eas in pr ev i ous y ear s L emmens had alw ays pr epar ed and s ubmi tted the tax i nfor mati on. Far fr om d emonstr ati ng that the T ax Cour t

er r ed, the cour t’s consi der a ti on of h is r ole in pr epar ing the 2011 r etur n demonstr ates i ts commi tment to heed the Rev enue Pr ocedur e’s di recti v e that the sev en li s ted factor s mer ely pr ov i d e “ gui d es” as opposed to an “exclusi v e li st” and that “[o]ther f actor s r elev ant to a speci fi c c lai m f o r r eli ef may also be taken i nto account.” Rev

. Pr oc. 2013-34 § 4.03(2).
It i s clear fr om i ts opi ni on that the T ax Cour t consi der ed the factor s r elev a nt to Jacobsen’s speci fi c clai m for r eli ef. The cour t consi der ed Jacobsen’s indi v i dual ci r cumstances as i t analyzed each of the l i sted factor s. Jacobsen does not ar g ue, nor could he, that the T

ax Cour t mi sappr ehended the facts or other wi se
ov er looked i nfor mati on r elev ant to Jacobsen’s clai m. W e ar e sympatheti c to Jacobsen’s si tuati on, a nd r ecogni ze that the T

a x C our t could hav e easi ly deci ded on thi s r ecor d that Jacobsen w as enti tled to equi table r eli ef u nder § 6015(f ). Indeed, w er e w e deci ding the ca s e in the fi r st instance as opposed to on defer enti al r ev i ew , we may h av e d eci ded the

case di ffer en tly

. But notwi thstanding the exi stence of many factor s fav or i ng r eli ef and only Jacobsen’s knowledge c ounsel-18 No. 18-3371

i ng agai nst i t, nothi ng in t he r ecor d indi cates the T ax Cour t mi sappr ehended the w ei ght to be a ccor ded Jacobsen’s knowledge or tr eated i t as a deci si v e factor bar r ing r eli ef. Indeed, i ts di s cu s si on of each of the factor s as w ell as the r elev ance of Jacobsen’s i nv olv ement in pr epar in g the 2011 taxes d e mo n
str a te that the T

a x Cour t di d n ot engage in a mechani cal balancing of the factor s wher e the number of factor s fav or ing
r eli ef necessar i ly counterbalanced the ulti mate q u e s ti on of whether i t w as inequi table to hold Jacobsen li able for the 2011 defi ci enci es. W

e thus cannot say the T ax Cour t ei ther abused i ts di s cr eti on or clear ly er r ed in i ts deni al of r eli ef for 2011. See Greer, 5 95 F

. 3 d at 3 53 (“W e ar e indeed sympatheti c to Mr s. Gr eer ’s si tuati on, and agai n mi ght deci d e her case di ffer ently had we the oppor tuni ty to rule in the fi rst instance r ather than

on defer enti al r e v i e w

. B u t w e cannot say that the pr ospect of fina n c ial r u i n i s so plain on the r ecor d that the T ax Cour t abused i ts di scr eti on i n denying equi table r eli ef.”).
III. Jacobsen’s case i s a close one, and w e ar e ulti mately per suaded by our defer enti al standar d o f rev i ew

. Because nothi ng i n the r ecor d leads u s to beli ev e the T ax Cour t clear ly

er r ed or abused its di s cr eti on, w e AFFIRM i ts deni a l of equi table r eli ef.