T.C. Memo. 1999-382

UNITED STATES TAX COURT

ANDREWS AMANKWAH, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2714-99. Filed November 23, 1999. 

Andrews Amankwah, pro se.

John R. Gilbert, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

ARMEN, Special Trial Judge: Respondent determined a

deficiency in petitioner's Federal income tax for the taxable

year 1996 in the amount of $5,394, as well as an accuracy-related
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1 All section references are to the Internal Revenue Code

in effect for the taxable year in issue, and all Rule references

are to the Tax Court Rules of Practice and Procedure.

 

2 Petitioner concedes that there was a failure to report a

taxable pension and annuities distribution in the amount of

$21,391 on the joint return that he filed for 1996 with Joyce

Johnson Amankwah. Petitioner also concedes an adjustment in the

amount of $14 relating to an early withdrawal penalty. 

Respondent concedes an adjustment for interest income in the

amount of $20. The parties agree that an adjustment in the

amount of $347 for miscellaneous itemized deductions is purely a

mechanical matter. Finally, petitioner does not contest that the

penalty under section 6662(a) is applicable. 

penalty under section 6662(a) in the amount of $1,079.1 After

concessions by the parties,2 the issue for decision is whether

petitioner is entitled to relief from joint and several liability

under section 6015. We hold that he is not. 

FINDINGS OF FACT

Some of the facts have been stipulated, and they are so

found. Petitioner resided in Phoenixville, Pennsylvania, at the

time that his petition was filed with the Court.

Petitioner married Joyce Johnson Amankwah (now known as

Joyce Chester) in 1994. Petitioner and Ms. Chester have a son,

who was born in 1995. 

Petitioner and Ms. Chester experienced financial

difficulties during 1995 and 1996. During 1995, Ms. Chester was

forced to take time away from her Schedule C business because of

complications resulting from her pregnancy. Ms. Chester's

Schedule C business was not profitable during 1995 (reporting a
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net loss of about $8,000). That year, petitioner was attending

an M.B.A. program in Finance. He also earned about $28,000

working on a part-time basis. In 1996, Ms. Chester's Schedule C

business was on the rebound (earning a net profit of $8,794). 

That year, Ms. Chester also earned income from two other sources

in the total amount of $3,309.53. In 1996, petitioner was still

attending the M.B.A. program for about half the year (he received

his M.B.A. in Finance in May 1996), and he earned $30,593.09

working on a part-time basis. 

Faced with financial difficulties, petitioner urged Ms.

Chester to withdraw funds from her retirement account. He

assured her that once he earned his M.B.A. in Finance, he would

obtain a high paying position and that they would thereafter

replenish her retirement savings. Thus, during 1995 and 1996,

Ms. Chester made a series of withdrawals from her retirement

account totaling $47,382 for 1995 and $22,030 for 1996 (gross

distributions). Funds were distributed in the form of checks and

were deposited in a joint bank account maintained and used by

both petitioner and Ms. Chester. 

Petitioner filed joint returns with Ms. Chester for 1995 and

1996. On the 1995 return, petitioner and Ms. Chester reported a

taxable pension and annuities distribution in the amount of

$45,500. On the 1996 return, however, they failed to report any
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portion of the distribution. The 1995 and the 1996 returns were

prepared by an accountant. 

Petitioner and Ms. Chester were separated in February 1998. 

By notice of deficiency dated January 6, 1999, respondent

determined that on their joint return for 1996, petitioner and

Ms. Chester failed to report taxable distributions from Ms.

Chester's retirement account in the amount of $21,391. 

Petitioner filed a petition in this Court requesting relief

from joint and several liability under section 6015. 

ULTIMATE FINDINGS OF FACT

Petitioner had actual knowledge of all distributions from

Ms. Chester's retirement account during the year in issue. 

Further, petitioner had actual knowledge at the time that he

filed the 1996 joint return of the failure to report the taxable

distributions totaling $21,391 from Ms. Chester's retirement

account. 

OPINION

We begin with section 6015. Section 6015 provides relief

from joint and several liability to any taxpayer who meets the

requirements of subsection (b). The requirements of section

 6015(b) that must be met are as follows:
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3 Sec. 6015(b)(3) provides that the term "understatement"

has the meaning given to such term by sec. 6662(d)(2)(A).

(A) a joint return has been made for a taxable year; 

(B) on such return there is an understatement[3] of

tax attributable to erroneous items of 1 individual

filing the joint return;

(C) the other individual filing the joint return

establishes that in signing the return he or she did

not know, and had no reason to know, that there was

such understatement;

(D) taking into account all the facts and

circumstances, it is inequitable to hold the other

individual liable for the deficiency in tax for such

taxable year attributable to such understatement; and 

(E) the other individual elects (in such form as

the Secretary may prescribe) the benefits of this

subsection not later than the date which is 2 years

after the date the Secretary has begun collection

activities with respect to the individual making the

election, * * *

Further, a taxpayer may elect to seek relief from joint

liability under section 6015(c) if the taxpayer, at the time of

making the election, was no longer married to, or was legally

separated from the person with whom the joint return was filed,

or if the taxpayer did not live together with such person for the

12-month period preceding the election. If a taxpayer elects

relief under section 6015(c), such taxpayer's liability for any

deficiency assessed with respect to a joint return shall not

exceed the portion of such deficiency properly allocable, as

provided under section 6015(d), to such taxpayer. However, such
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4 Petitioner failed to indicate whether he seeks relief

under sec. 6015(b) or (c). We therefore consider whether

petitioner is entitled to relief under either subsection.

taxpayer may not be entitled to relief under section 6015(c) if

the Secretary demonstrates that the taxpayer making the election

"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 under

subsection (d)". Sec. 6015(c)(3)(C). 

Thus, as pertinent here, petitioner may not be relieved from

joint and several liability under section 6015(b) to the extent

petitioner had actual knowledge, or reason to know, that there

were taxable distributions from Ms. Chester's retirement account

that were omitted from the 1996 joint return. Further,

petitioner may not be relieved from joint and several liability

under section 6015(c) to the extent petitioner had actual

knowledge of the distributions from Ms. Chester's retirement

account.4 

In this regard, petitioner testified that he was not aware

that Ms. Chester withdrew any funds from her retirement account

and was not aware that such amounts were improperly omitted from

his and Ms. Chester's joint return for 1996. However, petitioner

did not produce any evidence other than his own self-serving

testimony. In contrast, respondent presented the testimony of
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Ms. Chester, who testified that not only was petitioner aware of

the distributions, but petitioner in fact urged her to withdraw

funds from her retirement account in order to pay the couple's

expenses, including tuition for petitioner's postgraduate

education and a downpayment on petitioner's car, while he was

attending the university. Ms. Chester also testified that

petitioner was responsible for organizing the couple's tax

records and presenting them to their accountant for the

preparation of the 1996 joint return. Respondent also presented

certain other documentary evidence, such as records of the joint

bank account held by petitioner and Ms. Chester, to establish

that petitioner was aware of the taxable distributions.

In Diaz v. Commissioner, 58 T.C. 560, 562 (1972), we

observed that the process of distilling truth from the testimony

of witnesses, whose demeanor we observe and whose credibility we

evaluate, is the daily grist of judicial life.

At trial we had the opportunity to observe both petitioner

and Ms. Chester and to evaluate their demeanor as witnesses. We

found Ms. Chester to be a credible and earnest witness, and we

are satisfied that her testimony was truthful. We regret to say

that we were not impressed with petitioner's demeanor. We reject

petitioner's testimony because we do not believe it and because

it is contradicted by the record. After considering the

testimony and documentary evidence presented, and in light of
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petitioner's level of sophistication, we are convinced that

petitioner was well informed of the family's finances, that he

took part in everyday financial decisions, that he was aware of

all the distributions made from Ms. Chester's retirement account

during the year in issue (if not responsible for the decision to

withdraw the retirement funds), and, finally, that he was aware

of the failure to report such income on his joint return for the

year in issue. 

Petitioner also contends that he did not sign the return for

the year in issue and that his signature must have been "forged". 

However, we doubt the veracity of petitioner's claim in this

regard. On his submitted Form 8857, Request For Innocent Spouse

Relief, petitioner specifically admitted to having signed the

1996 return, declaring that "when I signed the joint return [for

1996] I did not know, and had no reason to know that there was a

substantial understatement of tax". In addition, petitioner

repeatedly admitted to having intended to file, and having in

fact filed, a joint return for the year in issue. Based on the

record, it is clear to us that petitioner did sign and file the

joint return for the year in issue. 

Therefore, because petitioner does not meet at least one of

the requirements of section 6015(b) and (c), petitioner is not

entitled to relief from joint and several liability. See sec.

6015(b)(1)(C) and (c)(3)(C). 
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To reflect our disposition of the disputed issue, as well as

the parties' concessions,

Decision will be entered

under Rule 155.