1 Sec. 6015 was enacted as part of the Internal Revenue

Service Restructuring and Reform Act of 1998, Pub. L. 105-206,

sec. 3201(a), 112 Stat. 734, and is effective for any liability

for tax arising after July 22, 1998, and any liability for tax

arising on or before July 22, 1998, but remaining unpaid as of

July 22, 1998.

T.C. Memo. 2004-74

UNITED STATES TAX COURT

DONNA M. KEITZ, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2859-02. Filed March 18, 2004.

Donna M. Keitz, pro se.

Richard A. Stone, for respondent.

 MEMORANDUM FINDINGS OF FACT AND OPINION

DEAN, Special Trial Judge: This is a case arising under

section 6015.1 Unless otherwise indicated, section references

are to the Internal Revenue Code. Respondent determined
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petitioner was not entitled to relief for a $4,850 underpayment

of tax for tax year 1996 pursuant to section 6015. The issue for

decision is whether respondent abused his discretion by denying

petitioner's request for relief from joint and several liability

under section 6015(f) for the 1996 underpayment of tax. 

Some of the facts have been stipulated and are so found. 

The stipulation of facts and the exhibits received into evidence

are incorporated herein by reference. At the time the petition

was filed with the Court, petitioner resided in Baltimore,

Maryland. 

FINDINGS OF FACT

Petitioner married in 1980 and bore four children during the

marriage. As of the time of respondent's determination, in June

of 2001, three of the children were still minors. Petitioner has

an eleventh grade education and was primarily a homemaker. 

During 1996, petitioner worked part time, earning $7,875 from

which taxes were withheld. Petitioner's spouse, William A.

Keitz, owned and operated his own electrical business, A.K.

Electric. Petitioner had no involvement at all with Mr. Keitz's

business. During their marriage, Mr. Keitz handled the family

financial matters. He gave petitioner a weekly amount to cover

food and other necessities and an allowance of $60 per week for

herself. When the children needed clothes, Mr. Keitz would give

petitioner additional money. Mr. Keitz demanded that petitioner

not open any bills that came in the mail and that if she did, he
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2In their Stipulations of Facts, the parties referred to

Forms "W-4," Employee's Withholding Allowance Certificate. The

Court assumes the parties meant Forms "W-2," Wage and Tax

Statement.

could "have her handled." 

During 1995 and 1996, petitioner filed joint income tax

returns with Mr. Keitz. For 1997, petitioner filed as head of

household. 

For the 1996 tax filing, petitioner gave her 1996 Form W-22

to Mr. Keitz shortly after the end of the taxable year. The

Keitzes' 1996 adjusted gross income (AGI), as reported on the

return, was $72,413. Of this amount, $71,295 was documented by

Forms W-2, Wage and Tax Statement, or Forms 1099-R, Distributions

From Pensions, Annuities, Retirement or Profit-Sharing Plans,

IRAs, Insurance Contracts, etc. 

The remaining $1,117 of AGI comprised: (1) A $411 taxable

refund; (2) $107 in dividend income; and (3) $599 in capital

gains. Only $7,875 of the total AGI was attributable to

petitioner. 

Mr. Keitz had the 1996 joint tax return prepared at H & R

Block by a person or persons unknown to petitioner. When Mr.

Keitz told petitioner to sign the 1996 tax return, she signed a

computerized document in the 1040PC format of a U.S. Individual

Income Tax Return. IRS Publication 17 (1997 ed.) describes a

Form 1040PC, prepared using a personal computer, as follows:
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The computer prints the return in a three-column

"answer sheet" format. It prints line numbers and

dollar amounts * * * only for lines on which you made

an entry. * * * As a result, an 11-page conventional

return requiring forms and schedules can be printed as

a two-page 1040PC return. [Vaksman v. Commissioner,

T.C. Memo. 2001-165, affd. 54 Fed. Appx. 592 (5th Cir.

2002).]

At the time petitioner signed Form 1040PC, Mr. Keitz and the paid

preparer had already signed it. 

The return was filed electronically. Petitioner did not

discuss the return with her husband, nor did she question him

about the return. 

Mr. Keitz had always told petitioner he would take care of

the taxes. In 1992, when petitioner and her husband legally

separated for the first time, Mr. Keitz memorialized his

intention to pay their tax liabilities. Their 1992 Voluntary

Separation and Property Settlement Agreement states: 

The parties agree that they will file a joint income

tax return for the tax year of 1992, and split the

refund accordingly, with regard to both Federal and

State tax requirements. In the event that there is a

tax payment due for either the State or Federal

payment, Husband will pay the entire tax assessment.

Petitioner and her husband separated for the final time in

1997. The parties have stipulated that, pursuant to a 1998

consent order, petitioner received approximately $1,600 per month

from Mr. Keitz for child care and alimony during 1999 and 2000. 

According to the 1998 consent order, beginning in May of

1998, Mr. Keitz was ordered to pay petitioner $1,873 per month,
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consisting of $312 per week for child support and $625 per month

in alimony. Additionally, petitioner earned $25,689 in 2000. 

On April 12, 1999, respondent withheld petitioner's 1998

Federal income tax refund and applied it toward the outstanding

tax liability for 1995. That is when petitioner became aware

that there was a problem with their taxes. Initially, petitioner

did not pursue the matter because Mr. Keitz said he was taking

care of it. Respondent then withheld petitioner's 1999 Federal

income tax refund and applied it toward the outstanding tax

liabilities.

On July 24, 2000, respondent received a Form 8857, Request

for Innocent Spouse Relief, from petitioner for the years 1995,

1996, and 1997. On September 11, 2000, petitioner submitted to

respondent her responses to respondent's Innocent Spouse

Questionnaire. In her response, petitioner provided a listing of

her monthly expenses. Those expenses total $2,821 and are as

follows:
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House payment $693

Oil 200

Gas & electric 200

Auto fuel 50

Car insurance 51

Phone 35

Clothing 200

Recreation 160

Credit card 80

Food 800

Medical 60

Hair cuts 50

Cable 42

Lawyers 100

Child care 100

 

On June 25, 2001, respondent determined petitioner was not

entitled to relief from the deficiency for tax year 1997 pursuant

to section 6015 because petitioner did not file a joint tax

return for that year. Respondent granted petitioner relief from

joint liability for the deficiencies for 1995 and 1996 pursuant

to section 6015(c). 

Despite the parties' agreement that the 1996 underpayment is

solely attributable to Mr. Keitz and respondent's examiner's

determination that Mr. Keitz bears the legal obligation for the

underpayment, respondent determined petitioner was not entitled

to relief for the $4,850 underpayment of tax for tax year 1996

pursuant to section 6015(f). Respondent contended that

petitioner: (1) Failed to prove a belief that the tax would be

paid; (2) did not fulfill her duty to inquire as to whether the

tax would be paid; and (3) failed to show that it would be an

economic hardship for her if relief were denied. 
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Petitioner filed a timely petition under section 6015(e) for

a determination of relief from joint and several liability for an

underpayment of tax on a joint return. 

OPINION

The Court's determination as to whether petitioner is

entitled to equitable relief under section 6015(f) is made in a

trial de novo and is not limited to matter contained in

respondent's administrative record. Ewing v. Commissioner, 122

T.C. ___, ___ (2004) (slip op. at 20-21). 

The Court reviews respondent's denial of relief under

section 6015(f) for abuse of discretion. See Cheshire v.

Commissioner, 115 T.C. 183, 198 (2000), affd. 282 F.3d 326 (5th

Cir. 2002); Butler v. Commissioner, 114 T.C. 276, 292 (2000).

Petitioner bears the burden of proving that respondent abused his

discretion in denying that relief. See Washington v.

Commissioner, 120 T.C. 137, 146 (2003); Jonson v. Commissioner,

118 T.C. 106, 125 (2002), affd. 353 F.3d 1181 (10th Cir. 2003). 

In order to prevail, petitioner must demonstrate that in not

granting relief, respondent exercised his discretion arbitrarily,

capriciously, or without sound basis in fact or law. See Woodral

v. Commissioner, 112 T.C. 19, 23 (1999); Mailman v. Commissioner,

91 T.C. 1079, 1082-1084 (1988).
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3Sec. 6015 provides, in pertinent part, as follows:

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.

4Respondent's determination is subject to Rev. Proc. 2000-

15, 2000-1 C.B. 447, which was in effect when respondent

evaluated petitioner's request and when respondent issued the

notice of determination. Rev. Proc. 2000-15, supra, has been

superseded by Rev. Proc. 2003-61, 2003-32 I.R.B. 296, effective

for requests for relief filed on or after Nov. 1, 2003.

Whether Petitioner Is Entitled to Equitable Relief 

Section 6015(f) grants the Commissioner discretion to

relieve from joint and several liability an individual who files

a joint return.3 The parties agree that relief from the 1996

underpayment is not available to petitioner under section 6015(b)

or (c), thereby satisfying section 6015(f)(2). 

As contemplated by section 6015(f), the Commissioner has

prescribed guidelines in Rev. Proc. 2000-15, sec. 4.02, 2000-1

C.B. 447, 448, to be used in determining whether an individual

qualifies for relief under that section.4 Rev. Proc. 2000-15,
- 9 -

sec. 4.01, 2000-1 C.B. at 448, sets forth the threshold

conditions that must be satisfied before the Commissioner will

consider a request for equitable relief under section 6015(f). 

Respondent does not dispute that petitioner has satisfied those

threshold conditions. 

Circumstances Where IRS Ordinarily Grants Equitable Relief

Where the requesting spouse satisfies the threshold

conditions set forth in Rev. Proc. 2000-15, sec. 4.01, then Rev.

Proc. 2000-15, sec. 4.02, sets forth the circumstances, in any

case where a liability reported in a joint return is unpaid,

under which the Commissioner will ordinarily grant relief to that

spouse under section 6015(f).

The Commissioner will ordinarily grant relief to a

requesting spouse who satisfies all of the following elements as

set forth in Rev. Proc. 2000-15, 2000-1 C.B. at 448:

(a) At the time relief is requested, the

requesting spouse is no longer married to, or is

legally separated from, the nonrequesting spouse, or

has not been a member of the same household as the

nonrequesting spouse at any time during the 12-month

period ending on the date relief was requested;

(b) At the time the return was signed, the

requesting spouse had no knowledge or reason to know

that the tax would not be paid. The requesting spouse

must establish that it was reasonable for the

requesting spouse to believe that the nonrequesting

spouse would pay the reported liability. * * *; and

(c) The requesting spouse will suffer economic

hardship if relief is not granted. For purposes of

this section, the determination of whether a requesting

spouse will suffer economic hardship will be made by
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the Commissioner or the Commissioner's delegate, and

will be based on rules similar to those provided in 

§ 301.6343-1(b)(4) of the Regulations on Procedure and

Administration. 

1. Petitioner's Marital Status

Petitioner was legally separated from Mr. Keitz at the time

she filed the claim for relief in this case. They were divorced

at the time of trial. The Court concludes that petitioner has

satisfied this element.

2. Petitioner's Knowledge or Reason To Know the Tax Would 

Not Be Paid

In determining whether a taxpayer in an underpayment case is

entitled to equitable relief under section 6015(f), the Court

considers whether the requesting spouse knew, or had reason to

know, when the return was signed that the tax would be unpaid. 

Hopkins v. Commissioner, 121 T.C. 73, 88 (2003); Wiest v.

Commissioner, T.C. Memo. 2003-91. Respondent contends that

petitioner did not prove that she did not know or did not have

reason to know at the time the return was signed that the unpaid

1996 tax liability would not be paid and did not fulfill her duty

to inquire. 

In Washington v. Commissioner, supra at 138, the taxpayer, a

high school graduate, signed a return jointly with her husband, a

self-employed carpenter. She had no involvement in her husband's

business. Id. at 138, 151. Nor did he discuss with her the

preparation or filing of their joint return. Id. at 139.
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The sole involvement of the taxpayer in Washington in

preparing the tax return was to provide her Form W-2 to the paid

preparer and sign the return. Id. at 138. The tax on her wages

was paid through withholding. Id. at 139. The remaining tax

liability was attributable to her husband. Id. at 139, 148.

In according her relief from liability, the Court found that

Mrs. Washington did not know and had no reason to know at the

time the return was signed that Mr. Washington would not pay the

tax. Id. at 150-151. She believed her husband would pay the

liability because it was solely related to his business

operations. Id. at 151.

This case has similarities to Washington. Mrs. Keitz had no

involvement in her husband's business. She gave Mr. Keitz her

Form W-2, and he had their 1996 tax return prepared by H & R

Block. What he told petitioner to sign was a return in the

1040PC format, in essence a computer printout of lines and

numbers. 

It is reasonable to conclude that Mrs. Keitz believed that

Mr. Keitz would pay the tax. In fact, Mr. Keitz constantly

assured petitioner that their taxes would be paid. Further, as

in the Washington case, the liability here was solely 
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attributable to Mr. Keitz since Mrs. Keitz's taxes on her wages

had been paid through withholding.

Given these facts, the Court concludes that petitioner at

the time she signed the return did not know or have reason to

know that the tax due would not be paid. The Court rejects

respondent's argument that she possessed such knowledge or failed

to fulfill a duty of inquiry. The Court concludes that

petitioner has satisfied this element.

3. Petitioner Will Suffer Economic Hardship

Respondent contends that petitioner failed to show that she

would suffer economic hardship if relief were denied. In

determining whether a requesting spouse will suffer economic

hardship if the relief is not granted, Rev. Proc. 2000-15, supra,

looks to section 301.6343-1(b)(4), Proced. & Admin. Regs., for

guidance. Rev. Proc. 2000-15, sec. 4.02(1)(c). Economic

hardship is present if satisfaction of the tax liability in whole

or in part will cause the taxpayer to be unable to pay her

reasonable basic living expenses. Sec. 301.6343-1(b)(4), Proced.

& Admin. Regs. 

In 2000, petitioner earned $25,689 and received

approximately $1,600 per month from Mr. Keitz for alimony and

child support for three minor children. Petitioner had monthly

expenses of $2,821, after which she had $920 per month remaining. 

Petitioner did not present any other evidence regarding any
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additional claimed expenses. Petitioner has failed to establish

that she will suffer economic hardship if equitable relief is not

granted. The Court concludes that petitioner has not satisfied

this element. Accordingly, the Court concludes that petitioner 

fails to qualify for relief under Rev. Proc. 2000-15, sec. 4.02. 

Balancing Factors for Determining Whether To Grant Equitable

Relief Under Rev. Proc. 2000-15

Where, as here, the requesting spouse fails to qualify for

relief under Rev. Proc. 2000-15, sec. 4.02, the Commissioner may

nonetheless grant the requesting spouse relief under Rev. Proc.

2000-15, sec. 4.03.

Rev. Proc. 2000-15, sec. 4.03, lists the following two

factors, which if present, the Commissioner weighs in favor of

granting relief: (1) The taxpayer is separated or divorced from

the nonrequesting spouse; and (2) the taxpayer was abused by his

or her spouse; and the following two factors, which if present,

the Commissioner weighs against granting relief: (3) The

taxpayer received significant benefit from the unpaid liability

or the item giving rise to the deficiency; and (4) the taxpayer

has not made a good faith effort to comply with Federal income

tax laws in the tax years following the tax year to which the

request for relief relates. Ewing v. Commissioner, 122 T.C. at 

____ (slip op. at 22-24).
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5Cases deciding whether a taxpayer was entitled to equitable

relief under sec. 6013(e)(1)(D) are helpful in deciding whether a

taxpayer is entitled to relief under sec. 6015(f). Mitchell v.

Commissioner, 292 F.3d 800, 806 (D.C. Cir. 2002), affg. T.C.

Memo. 2000-332; Cheshire v. Commissioner, 282 F.3d 326, 338 n.29

(5th Cir. 2002), affg. 115 T.C. 183 (2000).

Rev. Proc. 2000-15, supra, implies that the Commissioner

will generally not consider the absence of factor (1), (2), (3),

or (4) in determining whether to grant relief under section

6015(f). However, on the basis of caselaw deciding whether it

was equitable to relieve a taxpayer from joint liability under

former section 6013(e)(1)(D), the Court considers the factor that

a taxpayer did not significantly benefit from the unpaid

liability or item giving rise to the deficiency as a factor in

favor of granting relief to that taxpayer.5 Ewing v.

Commissioner, supra at ____ (slip op. at 22-24); Ferrarese v.

Commissioner, T.C. Memo. 2002-249 (citing Belk v. Commissioner,

93 T.C. 434, 440-441 (1989); Foley v. Commissioner, T.C. Memo.

1995-16; Robinson v. Commissioner, T.C. Memo. 1994-557; Klimenko

v. Commissioner, T.C. Memo. 1993-340; and Hillman v.

Commissioner, T.C. Memo. 1993-151).

Rev. Proc. 2000-15, supra, lists the following four factors

which, if present, the Commissioner weighs in favor of granting

relief, and if not present, the Commissioner weighs against

granting relief: (5) The taxpayer would suffer economic hardship

if relief is denied; (6) in the case of a liability that was
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properly reported but not paid, the taxpayer did not know and had

no reason to know that the liability would not be paid; (7) the

liability for which relief is sought is attributable to the

nonrequesting spouse; and (8) the nonrequesting spouse has a

legal obligation pursuant to a divorce decree or agreement to pay

the outstanding liability (weighs against relief only if the

requesting spouse has the obligation). Ewing v. Commissioner,

supra at ____ (slip op. at 22-24).

Rev. Proc. 2000-15, sec. 4.03(2), states that "No single

factor will be determinative of whether equitable relief will or

will not be granted in any particular case. Rather, all factors

will be considered and weighed appropriately. The list is not

intended to be exhaustive."

As discussed next, most of the factors the Commissioner uses

in making section 6015(f) determinations do not support

respondent's determination in this case.

1. Petitioner's Marital Status

Respondent determined that the marital status factor weighs

in favor of petitioner. As discussed, supra, the Court agrees

that this factor favors petitioner.

2. Spousal Abuse

Mr. Keitz did not abuse petitioner. Lack of spousal abuse

is not a factor listed in Rev. Proc. 2000-15, sec. 4.03(2), that 

weighs against granting equitable relief. Washington v.
- 16 -

Commissioner, 120 T.C. at 149. The Court concludes that this

factor is neutral.

3. Significant Benefit

Respondent determined that petitioner did not gain any

significant benefit from the unpaid liability. The Court

concludes that this factor favors petitioner. See Ewing v.

Commissioner, supra at _____ (slip op. at 22-23).

4. Compliance With Tax Laws

Petitioner filed returns for tax years 1995 through 1997,

and respondent concedes that petitioner has complied with tax

laws at least since 1996. Rev. Proc. 2000-15, supra, lists tax

compliance as a factor which the Commissioner will consider only

against granting relief. The Court concludes that this factor is

neutral.

5. Economic Hardship

As discussed, supra, petitioner has failed to establish that

she will suffer economic hardship if equitable relief is not

granted. The Court concludes that this factor weighs against

petitioner.

6. Knowledge or Reason To Know

The Court has considered supra respondent's argument that

petitioner at the time she signed the return knew or had reason

to know that the tax due would not be paid. The Court rejects

respondent's argument that she possessed such knowledge or failed
- 17 -

to fulfill a duty of inquiry. The Court concludes that this

factor favors petitioner.

7. Whether the Underpayment of Tax Is Attributable to

Petitioner's Husband

Respondent concedes that the underpayment of tax for 1996 is

attributable to Mr. Keitz. The Court concludes that this factor

favors petitioner.

8. Legal Obligation To Pay Tax

During the evaluation process, respondent's examiner

determined that Mr. Keitz bears the legal obligation for the tax

liability. As neither party has introduced any additional

evidence on this point, the Court accepts this determination and

concludes that this factor favors petitioner. 

9. Conclusion

Petitioner has presented a strong case for relief from joint

liability under the factors promulgated by the Commissioner in

Rev. Proc. 2000-15, supra. All of the factors except one,

economic hardship, either weigh in favor of petitioner or are

neutral. While the economic hardship factor weighs against

petitioner, it does not outweigh the positive and neutral

factors. Rev. Proc. 2000-15, sec. 4.03(2).

Petitioner is no longer married to Mr. Keitz. She did not

significantly benefit from the underpayment, the underpayment was

solely attributable to Mr. Keitz, petitioner has complied with
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Federal tax laws at least since 1996, she did not know or have

reason to know Mr. Keitz would not pay the unpaid tax for 1996,

and Mr. Keitz bears the legal obligation to pay the tax. The

neutral factors include petitioner's compliance with the tax laws

and lack of spousal abuse. The Court determines that

respondent's denial of relief under section 6015(f) was an abuse

of discretion, and that, on the basis of the facts and

circumstances, it would be inequitable to hold petitioner liable

for the underpayment of tax for 1996.

To reflect the foregoing,

Decision will be entered

for petitioner.