T.C. Summary Opinion 2021

- 31

UNITED STATES TAX COURT

DENISE SADJIAN CURCIO , Petitioner , AND KENNETH CURCIO, Intervenor v . COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5733

- 19S

. Filed August 31, 2021.

Christine S. Speidel , Melissa Griest (student), and Jonathan Onufrak (student), for petitioner. Kenneth Curcio, pro se. Harry J. Negro and John J. Brady , for respondent.

Served 08/31/21- 2

- SUMMARY OPINION

GUY , Special Trial J udge : This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect when the petition was filed

. 1 Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not b e treated as precedent for any other

case. In a final determination letter dated December 19, 2018, r espondent de nied petitioner ’s claim for relief from joint and several liability under section 6015 (f) for the taxable year 2014 ( sometimes referred to as t he year in issue)

. P etitioner filed a timely petition for review invok ing the Court’s jurisdiction under section
6015 ( e ) (1)(A) , 2 and her former spouse (intervenor) subsequently filed a notice of intervention pursuant to section 6015(e)(4) and Rule 325 opposing petitioner’s claim

. Shortly before trial respondent reconsidered and asserted that petitioner i s entitled to full relief from joint and several liability under section 6015(f) for the

1 Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended and in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. Monetary amounts are rounded to the nearest dollar.

2 P etitioner resided in Pennsylvania when the petition was filed

.- 3

- year in i ssue
. We nevertheless must decide whet her petitioner is entitled to spousal relief given that intervenor continu es to oppose petitioner’s claim

. Background 3
I. Petitioner’s Marriage Petitioner and intervenor were married on October 30, 1993 , and they are the parents of three minor children

. As discussed in greater detail below, petitioner and intervenor separated in 2018 and were divorced in 20 20

. I I. Education and Professional Experience
A. Petitioner Petitioner earned a b achelor of a rts degree in i nternational r elations and

e conomics from Ursinus College and a m aster of s cience degree in c ounseling
p sychology from Chestnut Hill College. While married to i ntervenor , petitioner

oc c asionally worked a s a life coach and consultant, but she generally spent most of her time caring for the couple’s children

. B. Intervenor
Intervenor earned a b achelor of s cience degree in b usiness a dministration with a c oncentration in a ccounting from Bloomsburg University. While married to petitioner, i ntervenor earn ed a living as an accountant , preparing Federal tax

3 Some of the facts have been stipulated.- 4

- returns and financial reports and sometimes serving as chief financial officer for his clients

. I II

. Car Accident and Settlement
I n September 2014 petitioner and two of her children were in volved in a car accident . Petitioner’s vehicle was struck by a nother vehicle on the driver’s side door , and she suffered severe injuries and was hospitalized for several weeks

. Petitioner and intervenor, individually and on behalf of their children, filed a law sui t seeking damages related to the car accident. In July 2015 the couple
sett led the suit for $2 million. After paying legal fees , costs, and medical bills, repaying a loan from petitioner’s cousin t hat the couple had used to pay certain expenses during petitioner’s rehabilitation, and complying with a mandate to set aside $25,000 for each of the children involved in the accident, petitioner and intervenor were left with about $1 million from the settlement

. With intervenor’s cons ent, petitioner deposit ed th ose funds in to an account in her name alone ( s ettlement account)

. IV. Household Finances During the couple’s marriage , i ntervenor was the family’s primary source of income. Although p etitioner and intervenor shared a joint checking account , intervenor generally controlled the couple’s finances and the checking account

.- 5

- T he checking account was frequently overdrawn , le ading to numerous bounced checks and overdraft charge s. In 2014 , with the aim of keep ing the checking account in balance, petitioner began to send emails to intervenor informing him of all purchases and withdrawals that she made through th e account. In the latter half of 2015 , after receiving the settlement proceeds described above, petitioner began to man age most of the family’s bills and expenses. V

. New Home and Business Investment
In September 2017 petitioner with drew funds from the settlement account and paid $605,500 in cash for a new home

. The new home was s ituated on approximately one acre of land and included a pool and pool house

. In February 2018 p etitioner withdrew $70,000 from the settlement account and invested the funds in a new business

. The record does not include any additional information about the success or failure of this enterprise

. V I

. Separation and Divorce Petitioner and intervenor’s marriage had been strained for some time , and in May 2017 the couple executed an “Agreement by F ather to Provide Support for Children”. T he agreement suggests that petitioner and intervenor were living a t different addresses when it was signed.- 6

- In September 2017 , however, intervenor moved in to the new home with petitioner and the children although petitioner and intervenor lived in separate

areas within the residence

. I n December 2017 intervenor learned that petitioner was in a relationship with another man

. Around this time i ntervenor began to threaten p etitioner that he would seek sole custody of the children . O n January 2, 2018, petitioner requested and was granted a p rotection from a buse o rder against intervenor

. I ntervenor moved out of the home that same day

. On January 5, 2018, i ntervenor filed for divorce. In February 2020
p etitioner and intervenor entered into a property settlement agreement and finalized their divorce

. As relevant here , t he property settlement agreement provides that (1) intervenor will be solely responsible for the un paid tax liability for the year in issue if petitioner prevails in this action or (2) responsibility for the unpaid tax liability will be shared equally between petitioner and intervenor if petitioner does not prevail in this action

. Although p etitioner an d intervenor share equal custody of their children , intervenor is required to make monthly child support payments to petitioner. Intervenor has not met his child support obligations consistently

.- 7

- VI I

. Preparation and Filing of Tax Returns While married , i ntervenor normally p repared and filed joint Federal income
tax returns with petitioner

. In the normal cour s e p etitioner provide d intervenor with her tax record s , and intervenor prepare d and file d the returns without her review.
A

. 2 013 and 2014 Tax Return s On December 12, 2017, i ntervenor maile d the couple’s joint Federal income tax returns for 2013 and 2014 to the Internal Revenue Service (IRS)

. Petitioner could not recall signing the se tax returns. For 2013 the couple reported a n overpayment of $9,645 , and they ostensibly elected to treat th at overpayment as an estimated tax payment for 2014

. 4
For 2014 the couple reported total tax of $12 ,808, attributable to intervenor’s various items of income , offset by an additional child tax credit of $3,000 and an estimated tax payment of $9,645 ( i.e., the claimed overpayment from 2013 ) , leaving a balance due of $ 163

.

4 Sec. 301.6402

- 3(a)(5), Proced. & Admin. Regs., provides in relevant part :
“ If the taxpayer indicates on its return (or amended return) that all or part of the overpayment shown by its return (or amended return) is to be applied to its estimated income tax for its succeeding taxable year, such indication shall constitute an election to so apply such overpayment ”

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- B

. Denial of Claimed Overpayment In February 2018 t he IRS notified petitioner and intervenor that , because they filed their 2013 tax return more than three years after its original due date (i.e., April 2014) , the ir claimed overpayment of $ 9,645 for 2013 had been disallowed pursuant to section 6511

. As a result of that adjustment , petitioner and intervenor were not entitled to the estimated tax payment of $9,645 that they had reported for 2014 , leaving an unpaid balance for that year of $9,808 ( exclusive of interest and penalties )

. VII I

. P etitioner’s Financial Challenges
A. The Settlement Account
In April 2018 petitioner’s sett lement account was frozen in connection with the couple’s divorce proceeding and some of intervenor’s required child support payments were paid out of that account. By the midd le of 2019 there were no funds remaining in the settlement account.
B

. Sources of Income In 2019 and 2020 p etitioner earned modest amounts of income and in 2020

re ceived Federal stimulus payments

. At the time of trial petitioner was receiving unemployment compensation

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- C

. Petitioner’s Hom e The home that p etitioner purchased in 2017 is encumbered by a home equity line of credit and is subject to a lien attributable to unpaid property tax

. D

. Other Ind ebt edness Petitioner owes $160,000 to her cousin and $16,000 to her divorce attorney

. In addition p etitioner has outstanding credit card debt totaling approximately $100,000.
IX

. Tax Compliance
P etitioner has filed separate Federal income tax returns for the tax able yea rs 2015 through 2020

. A t the time of trial, petitioner ha d no outstanding tax liabilities for the taxable years 2015 through 2020.
X. Petitioner’s Claim for Spousal Relief On June 1, 2018, the IRS received petitioner’s Form 8857, Request for Innocent Spouse Relief , for the year in issue. Petitioner stat ed on Form 8857 that she had not been abused by intervenor and that she did not have a mental or physical health problem when she completed the form or when the tax return for the year in issue was filed

. Petitioner reported that she was not receiving any income at that time and that her monthly expenses totaled $ 5,579

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- I ntervenor submitted Form 12508, Questionnaire for Non

- Requesting Spouse , to the IRS opposing petitioner’s claim for relief. Intervenor asserted that petitioner was fully aware of the unpaid tax for the year in issue and should not be relieved from joint and several liability given that she managed and controlled the settlement account and could have paid the tax liability for the year in issue when she first learned of the debt in 2018

. D iscussion
I. Relief From Joint and Several Liability Generally, married taxpayers may elect to file a joint Federal income tax return. Sec. 6013(a) . After making the election, each spouse is jointly and severally liable for the entire tax due. Sec. 6013(d)(3). If certain requirements are met, however, an individual may be relieved of joint and several liability under section 6015. In this case we apply a de novo scope and standard of review in deciding whether petitioner is entitled to relief under section 6015. See Porter v. Commissioner , 132 T.C. 203, 210 (2009). Although Congress recently added sec tion 6015 ( e )( 7 ) to clarify the scope and standard of our review in stand

alone innocent spouse cases , s ee Taxpayer First Act, Pub. L. No. 116

- 25, sec. 1203, 133 Stat. at 988 (2019) , this n ew provision applies only to petitions filed in- 11

- this Court on or after July 1, 2019, and thus does not govern this case, which was commenced in March 201 9 , see Sutherland v. Commissioner , 155 T.C. 95, 104 ( 2020). Except as otherwise provided in section 6015, the taxpayer (requesting spouse) bears the burden of proving entitlement to relief. Rule 142(a); Porter v. Commissioner , 132 T.C. at 210. Although there are t hree forms of relief under section 6015 , we are concerned here with section 6015(f) which provides equitable relief from joint and several liability. In particular s ection 6015(f) grants the Commissioner discretion to relieve an individual from joint and several liability if, taking into account all the facts and circumstances, it is inequita ble to hold the individual liable for any unpaid tax or any deficiency (or any portion of either). The Commissioner has prescribed guidelines in Rev. Proc. 2013

- 34, 2013

- 43 I.R.B. 397, modifying and superseding Rev. Proc. 2003

- 61, 2003

- 2 C.B. 296, that a re considered in determining whether it is inequitable to hold a requesting spouse liable for all or part of the liability for any unpaid tax or deficiency. Although the Court consults these guidelines when reviewing the Commissioner’s denial of relief, se e Washington v. Commissioner , 120 T.C. 137, 147

- 152 (2003), we are not bound by them because our analysis and determination ultimately turn- 12

- on an evaluation of all the facts and circumstances, see Pullins v. Commissioner , 136 T.C. 432, 438

- 439 (2011).
II. Threshold Conditions
Rev. Proc. 2013

- 34, sec. 4.01, 2013

- 43 I.R.B. at 399

- 400, sets forth seven threshold conditions that must be satisfied before the Commissioner will consider a request for equitable relief under section 6015(f). There is no dispute t hat petitioner satisfies the seven threshold conditions.
III. Streamlined Determination
Rev. Proc. 2013

- 34, sec. 4.02, 2013

- 43 I.R.B. at 400, sets forth elements that a requesting spouse must satisfy to qualify for a streamlined determination under secti on 6015(f). P etitioner is not eligible for streamlined relief.
IV. Facts and Circumstances Analysis
If a requesting spouse meets the threshold conditions for relief but fails to qualify for streamlined relief, relief may be warranted after consider ation of the following nonexclusive list of factors set forth in Rev. Proc. 2013

- 34, sec. 4.03,
2013

- 43 I.R.B. at 400

- 403 , including : (1) whether the requesting spouse is separated or divorced from the nonrequesting spouse; (2) whether the requesting spouse will suffer economic hardship if relief is not granted; (3) whether on the date the joint return was filed the requesting spouse did not know and had no- 13

- reason to know that the nonrequesting spouse would not or could not pay the tax liability; (4) whether the requesting or nonrequesting spouse has a legal obligation to pay the tax liability pursuant to a decree of divorce or other agreement; (5) whether the requesting spouse received a significant benefit from the unpaid income tax liability; and (6) whether the requesting spouse has made a good

- faith effort to comply with Federal income tax laws for the taxable years following the taxable year to which the request for relief relates. Considering all the facts and circumstances, w e conclude that it would be inequitable to deny petitioner relief from joint and several liability in respect of the
tax due for the year in issue

. T he factors that we igh most heavily in petitioner’s favor are sufficiently straightforward that we see no need to proceed with a detailed evaluation of each of the factors outlined in Rev. Proc. 2013

- 34, sec. 4.03

. Rather , we will summari ze the factors that lead the Court to grant petitioner relief. It is worth noting here that in preparing this case for trial, respondent

re considered and concluded that petitioner’s claim for relief should be granted. Additionally, when given the chance, intervenor had little to offer the Court in support of his opposition to petitioner’s claim for relief. Intervenor’s primary complaint is that petitioner could hav e used funds in the settlement account to pay- 14

- the couple’s tax liability for the year in issue when she first learned about the underpayment in early 2018. In concluding that petitioner is entitled to spousal relief , we are persuaded that she would suffer economic hardship if obliged to pay the tax due for the year in issue . In addition, we conclude that petitioner did not know and had no reason to know that intervenor would not or could not pay the tax due on the date the return was filed

. A requesting spouse will suffer economic hardship if payment of part or all of the tax liability “will cause the requesting spouse to be unable to pay reasonable basic living expenses.” Rev. Proc. 2013

- 34, sec. 4.03(2)(b), 2013

- 43 I.R.B. at 401;

see sec. 301.6343

- 1(b)(4)(i), Proced. & Admin. Regs. While it appears that petitioner has a fair amount of equity in the home that she purchased in 2017, the funds in the settlement account have been exhausted , she has accrued significant debt s (including credit c ard debt, unpaid property tax , an outstanding loan from her cousin , and unpaid legal fees ) , and her monthly living expenses (none of which appear to be lavish or extravagant) exceed her mont h ly income

. To make matters worse, petitioner’s current employmen t prospects strike the Court as fairly limited , and it is highly un likel y that she will be able to improve her financial condition in any meaningful way , at least in the near term

. Under the circumstances, requiring- 15

- petitioner to pay the tax due for the year in issue would cause economic hardship , leav ing her unable to pay reasonable basic living expenses for herself and her children. In the case of an underpayment of tax we normally consider whether, as of the date the return was filed or the date the requesting spouse reasonably believed the return was filed, the requesting spouse knew or had reason to know that the nonrequesting spouse would not or could not pay the tax at that time or within a reasonable time after filing the return. Rev. Proc. 2013

- 34, sec. 4.03(2)(c)(ii). Petitioner could not recall sign ing th e tax return for 2013 or 2014 , and it is unclear whether she knew that intervenor had filed those returns with the IRS in the latter half of 2017. In any event we are persuaded on this record that petitioner did not know and had no reason to know that intervenor would not pay the tax due for 2014 w hen the return was filed. E ven assuming for the sake of argument that petitioner had reviewed the 2014 return before it was filed, th at return reported tax due of $163, after accounting for a child tax credit and the claimed estimated tax payment. We conclude that petitioner did not have the financial acumen or familiarity with tax matters to recognize or even be gin to contemplate that the estimated tax payment reported on the return (i.e., the overpayment carried over from 2013) was time barred pursuant to section 6511. Consequently, we decline to- 16

- charge petitioner with knowing or having a reason to know that in tervenor would not or could not pay the tax due for the year in issue. To reflect the foregoing,

Decision will be entered for petitioner

.