T.C. Memo. 2007-127

UNITED STATES TAX COURT

JANET MARIE WILSON, Petitioner, AND KENNETH E. WILSON, Intervenor

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 7509-05. Filed May 21, 2007.

Steven T. Barta, for petitioner.

Kenneth E. Wilson, pro se.

David Lau, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

HAINES, Judge: Respondent determined deficiencies in

petitioner and intervenor’s joint Federal income tax and
- 2 -

1 All section references are to the Internal Revenue Code,

as amended, and all Rule references are to the Tax Court Rules of

Practice and Procedure. All amounts are rounded to the nearest

dollar.

accuracy-related penalties under section 6662(a) as follows:1

Year Deficiency Sec. 6662(a) Penalty

2001 $22,178 $4,436

2002 8,669 1,734

The sole issue for decision is whether petitioner is entitled to

relief from joint and several liability under section 6015(c) for

2001 and 2002 (the years in issue).

FINDINGS OF FACT

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time she filed her

petition, petitioner resided in Hawaii. At the time he filed his

notice of intervention, intervenor resided in Nevada.

Petitioner and intervenor were married on or about February

4, 1984. They legally separated in February 2003, and on

September 23, 2004, the Superior Court of Arizona, Maricopa

County, officially dissolved their marriage.

Throughout their marriage, intervenor physically and

verbally abused petitioner and petitioner’s son. During the

years in issue, the abuse included threats against petitioner’s
- 3 -

and petitioner’s son’s lives, physical assaults, and manipulative

and controlling behavior.

During the years in issue, petitioner and intervenor

participated in Sign Sellers and Rocky Creations (the

businesses), which sold engraved stones and other items. 

Petitioner designed the artwork that was etched onto the stones,

while intervenor maintained the business records and handled all

of the money. Occasionally, petitioner’s son worked for the

businesses and was paid on an hourly basis.

Petitioner and intervenor maintained at least five checking

accounts at various times during the years in issue, all of which

were used in the operation of the businesses. Intervenor had

signatory authority over four of the five checking accounts. The

fifth checking account (the Bank One account) was opened by

petitioner and petitioner’s son, and only they had signatory

authority. Intervenor instructed petitioner and petitioner’s son

to open the Bank One account. While intervenor did not have

signatory authority over the Bank One account, he exercised

complete control over the account. Intervenor instructed

petitioner what to deposit into the account and when. When

intervenor needed money, he instructed petitioner to sign a blank

check, and he filled in the rest.

With the aid of a tax return preparer, intervenor prepared

and filed joint Federal income tax returns for the years in
- 4 -

issue. On the returns, intervenor indicated he was self-employed

and petitioner was a “homemaker”. On attached Schedules C,

Profit or Loss From Business, intervenor listed himself as the

sole proprietor of an engraving business, which he identified as

“Rocky Creations” on the 2002 Schedule C. On the Schedules C,

intervenor reported net profits from the business activity of

$255 and $6,953 for 2001 and 2002, respectively. Intervenor

reported total taxes of $538 and $982, respectively. Petitioner

did not participate in the making or filing of the returns, nor

did she review them prior to filing. Intervenor signed both his

and petitioner’s names on the returns. However, petitioner would

have signed the returns if intervenor had shown them to her and

asked her to sign.

On February 24, 2005, respondent issued petitioner and

intervenor a notice of deficiency. Respondent disallowed certain

claimed Schedule C expenses, increased Schedule C gross receipts

based on bank deposits and cash expenditures, and increased selfemployment tax. Respondent determined deficiencies in petitioner

and intervenor’s Federal income tax of $22,178 and $8,669 for

2001 and 2002, respectively. Respondent also determined

petitioner and intervenor were liable for accuracy-related

penalties under section 6662(a) of $4,436 and $1,734,

respectively.
- 5 -

2 On March 17, 2005, intervenor filed a separate petition

in response to the notice of deficiency. See Wilson v.

Commissioner, docket No. 5184-05S. In his petition, intervenor

sought a redetermination of the deficiencies determined by

respondent and requested relief from liability under sec. 6015.

3 Petitioner also argues, and respondent agrees, that if

she is not entitled to relief under sec. 6015(c), then she is

entitled to relief under sec. 66(c). Because we find petitioner

is entitled to relief under sec. 6015(c), we do not address

petitioner’s alternative claim under sec. 66(c).

In response to the notice of deficiency, petitioner filed a

petition with this Court on April 22, 2005. Also on April 22,

2005, petitioner submitted to respondent a Form 8857, Request for

Innocent Spouse Relief (And Separation of Liability and Equitable

Relief), and a Form 12510, Questionnaire for Requesting Spouse.

On July 12, 2005, intervenor filed a notice of intervention

and objected to petitioner’s being relieved of liability under

section 6015.2

OPINION

Petitioner does not dispute the deficiencies and penalties

determined by respondent for the years in issue. Instead, she

seeks relief from joint and several liability under section

6015(c). Respondent agrees that petitioner is entitled to relief

from the entire joint tax liability under section 6015(c).3

However, as previously mentioned, intervenor objects to

petitioner’s being relieved of liability under section 6015.
- 6 -

4 However, as the intervening party, intervenor may not

enlarge the issues or alter the nature of this proceeding. See

Tipton v. Commissioner, 127 T.C. 213, 217 (2006). This

proceeding concerns only whether petitioner is entitled to relief

from joint and several liability. We do not consider arguments

raised by intervenor regarding the underlying liability or his

entitlement to innocent spouse relief.

Section 6015(e)(4) grants the nonelecting spouse

(intervenor) some participatory entitlement in an action to

determine the electing spouse’s (petitioner’s) right to relief

from joint and several liability pursuant to section 6015. Rule

325; Corson v. Commissioner, 114 T.C. 354, 364-365 (2000). By

exercising that right, intervenor became a party to this case.4

Tipton v. Commissioner, 127 T.C. 214, 217 (2006). Therefore, in

light of intervenor’s opposition to petitioner’s being granted

relief, we shall proceed to examine the requirements of section

6015(c) to decide whether petitioner is entitled to relief under

this subsection.

As a prerequisite to relief under section 6015(c), the

requesting spouse must be legally separated or no longer married

to the nonrequesting spouse at the time the request for relief is

made. Sec. 6015(c)(3)(A)(i)(I). The request for relief under

section 6015(c) may be made at any time after a deficiency for

such year is asserted, but no later than 2 years after the date

on which the Commissioner has begun collection activities with

respect to the requesting spouse. Sec. 6015(c)(3)(B). 

Petitioner and intervenor were divorced on September 23, 2004,
- 7 -

5 Other items giving rise to the deficiencies include the

disallowed Schedule C expenses and the self-employment taxes. 

Intervenor does not address these items on brief. We assume

that, since intervenor listed himself as the sole proprietor on

the Schedules C on which the expense deductions were claimed and

because he identified himself as “self-employed” while he

(continued...)

and petitioner submitted the Form 8857 shortly after her receipt

of the notice of deficiency. Therefore, petitioner is eligible

to request relief under section 6015(c).

In general, section 6015(c) allows proportionate relief from

joint and several liability by relieving the requesting spouse

from liability for items giving rise to a deficiency that would

have been allocable to the nonrequesting spouse had they filed

separate returns. See sec. 6015(c)(1); see also sec.

6015(d)(3)(A). Thus, we must determine whether the items giving

rise to the deficiencies in this case are allocable to petitioner

or intervenor.

The items giving rise to the deficiencies, including the

unreported gross receipts, related to the operation of the

businesses. Section 1.6015-3(d)(2)(iii), Income Tax Regs.,

provides that omitted items of business income are allocated to

the spouse who owned the business. Petitioner and respondent

agree that all items giving rise to the deficiencies are

allocable to intervenor because intervenor was the true owner of

the businesses. Intervenor argues that the unreported gross

receipts are allocable to petitioner.5
- 8 -

5(...continued)

identified petitioner as “homemaker”, intervenor concedes that

any deficiencies arising from the disallowed Schedule C expenses

and the increased self-employment taxes are allocable to him.

6 It is worth noting that, while intervenor appeared at

trial, he did not testify, nor did he offer any evidence outside

of the stipulation of facts. Instead, in his opening brief,

which he titled “Intervenor’s Brief and Affidavit”, intervenor

attempted to testify. Pursuant to Rule 143(b), statements in

briefs do not constitute evidence, and we give such statements

made by intervenor no consideration.

While the record is unclear on this point, intervenor

alleges that respondent determined the unreported gross receipts

by analyzing deposits made into the Bank One account. Intervenor

alleges that the Bank One account was petitioner’s “secret bank

account” and that, because only petitioner and petitioner’s son

had signatory authority over the account, he “did not know and

did not have reason to known [sic] of the unreported income of

her secret bank account.” Intervenor’s allegations are against

the manifest weight of the evidence.6

 Although petitioner provided services for the businesses

and opened the Bank One account in her and her son’s name, it is

clear that intervenor maintained control of the businesses and

the Bank One account at all times. Intervenor was extremely

abusive and demanded to have absolute authority over all

financial aspects of the marriage and the businesses. He did not

allow petitioner to review business records, nor did he allow her

to review the tax returns for the years in issue. This pattern
- 9 -

also held true with respect to the Bank One account. Even though

the account was opened in petitioner’s name and she, not

intervenor, had signatory authority, intervenor exercised

complete control over the account. He told petitioner what to

deposit into that account and when. He instructed petitioner to

sign blank checks, which he later filled in. Because of the

severity of the abuse, petitioner was under intervenor’s absolute

control, such that petitioner believed that if she disobeyed

intervenor’s instructions, her and her son’s lives would be in

jeopardy.

We find that, on the basis of intervenor’s control over

petitioner and all aspects of the businesses, he was the true

owner of the businesses. Our finding is consistent with the

Schedules C prepared by intervenor, on which he listed himself as

the sole proprietor of an unnamed engraving business in 2001 and

as the sole proprietor of Rocky Creations in 2002. Thus, all

items relating to the operation of the businesses, including the

understatement of gross receipts, are allocable to intervenor. 

See sec. 1.6015-3(d)(2)(iii) and (iv), Income Tax Regs.

Even if the requesting spouse otherwise qualifies for relief

under section 6015(c), relief is not available if the

Commissioner demonstrates that the requesting spouse had actual

knowledge, at the time the return was signed, of any item giving

rise to a deficiency (or portion thereof). Sec. 6015(c)(3)(C);
- 10 -

King v. Commissioner, 116 T.C. 198, 203 (2001). The “knowledge

standard” for purposes of section 6015(c)(3)(C) “‘is 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).’” King v. Commissioner, supra at 203 (quoting

Cheshire v. Commissioner, 115 T.C. 183, 195 (2000), affd. 282

F.3d 326 (5th Cir. 2002)). “‘In the case of omitted income * *

*, the electing spouse must have an actual and clear awareness of

the omitted income.’” Id. Respondent concedes that he cannot

demonstrate petitioner had actual knowledge of the items giving

rise to the deficiencies. However, if intervenor offers

sufficient evidence that petitioner had “actual knowledge” of the

omitted gross receipts, then petitioner should not be entitled to

relief under section 6015(c).

Intervenor alleges that petitioner had actual knowledge of

the omitted gross receipts because she controlled the Bank One

account. As discussed above, intervenor controlled the Bank One

account, not petitioner. Additionally, intervenor controlled all

of the business records, prepared the tax returns for the years

at issue, did not allow petitioner to review the tax returns, and

forged petitioner’s signature on the tax returns. We find that

petitioner had no actual knowledge of the omitted gross
- 11 -

7 Even if petitioner had actual knowledge, the regulations

would excuse her from disqualification based on actual knowledge

because of the abuse present in her relationship with intervenor. 

See sec. 1.6015-3(c)(2)(v), Income Tax Regs.

receipts.7 Accordingly, we hold that petitioner is entitled to

relief from joint and several liability under section 6015(c) for

the years in issue.

In reaching our holding herein, we have considered all

arguments made, and, to the extent not mentioned above, we

conclude that they are moot, irrelevant, or without merit.

To reflect the foregoing,

Decision will be

entered for petitioner.