TAX COURT OPINION

Case: Bonnie Meldrum
Docket Number: 29710-08
Judge: Colvin
Opinion Type: bench
Filed: 12/15/2009
Pages: 26

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 BONNIE MELDRUM, Petitioner , V . Docket No . 29710-0 8 COMMISSIONER OF INTERNAL REVENUE , Respondent . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial of the above case before Judge Mark V . Holmes at Buffalo, New York on Monday, November'16, 200,9 containing his'oral findings of fact and opinion rendered after the conclusion of trial . In accordance with the oral findings of fact and opinion, a decision for petitioner will be entered . (Signed) Mark V . Holmes Judg e Dated :. Washington, D .C . 'December 15, 2009 SERVED DEC 2 2 2009 Bench Opinion'by Judge Mark V . Holmes November 17, 200 9 Meldrum v . Commissione r Docket No .,29710-0 8 THE COURT HAS DECIDED TO RENDER ORAL'FINDINGS OF- FACT AND OPINION IN THIS-'CASE, AND THE'FOLLOWING . REPRESENTS THE COURT'S ORAL FINDINGS OF FACT AN D THE COURT : This bench opinion=is made pursuant the , ;authority granted by Section 7459(b) of th e Internal Revenue Code of 1986 as amended andRule,15 2 of the Tax Court's Rules of Practice and Procedure . .We begin . by noting that-Ms . Meldrum was a°New 12 York resident at the 'time she filed the Petition .,, The evidence we considered consisted .,of the stipulation ,which .she,agreed to with the government that -set fort h the administrative record in th is case . W E bit of evidence . I want to specifically characteriz e Meldrum's testimony at the outset as bein g completely honest and without guile . k20 I judged by her demeanor and by some parts of th e 21 testimony that didn't benefit her that she was telling 122 me the truth, the whole truth, and nothing but th e 23 truth as she saw it . "So' with those general . comment s 24 out of the way, I move onto the general background of . 25 'innocent spouse relief that-is applicable to, this 4 case . Section 6013 ( a) of thecode .lets married couples file their Federal tax -return jointly, but if~they do both spouses are then responsible . for .the return'= s accuracy and both are generally liable for the entire tax due . Section 6013 (d) (3) Butler v . Commissioner , L.(Mj, 114 T . C . 276, 282 ..( 2000 ) In some cases , however, section-6015,can reliev e a, spouse from this joint liability . Relief .comes i n three varieties : Relief under section 6015 (b) '(cid:127) or° (c) , requires - either an "understatement " or.a "deficiency ;" whereas relief under section 6015(f) requires onl y that the requesting spouse be "liable for any unpai d 14 tax or any deficiency . " Therefore, if,the liability is neither an , 16 "understatement " nor a "deficiency", the only -possible 17" relief is under.- subsection (f) . See Hopkins v : 18 19 ,20 Commissioner ., 121 T .C . 73, 8 .7-88 (2003) . . The Commissioner . never „ asserted a ,deficiency . against . M,eldrum, so hers is a case where relief is 21 possible only under section 6015(f) . In addition, I 22 want to make clear at the outset what scope of revie w 23 = and standard of review I'm applying . 2-4 Our-scope of,review,- i . e . , what . evidence we l-ook 25 at to decide whether the Commissioner abused hi s Heritage Reporting Corporatio n (202,) . 628- .'4888 discretion-is affected by this being'a 6015(f) case . .The Commissioner argues that we should'look only a t the administrative=record compiled when Meldrum applied for relief from the IRS, met with IR S employees, .and filled out (or didn't fill out) the relevant forms . .our standard of review in section 6015(f) cases was until recently for' abuse of discretion . Courts .generally hold that a .decisionmaker abuses hi s 10 discretion when it "'makes an error of law * * or 11 rests its determination on a,clearly erroneous finding 12 of- fact * * * [ or] applies the correct law to fact s 13 which are 'not clearly erroneous but rules in an .14 irrational ,. manner . " .' Industrial Investors v . 15 16 Commissioner , T .C . Memo . 2007-93,(quoting United ' States v ., Sherburne , 249 F .3d 1121,_,11215-26 (9th Cir . X17 2001) see also Cooter & Gell v . .Hartmarx Corp . , 49 6 18 U .S . 3:84, 402-03-(1990) . '19 Another difference between our practice and 20 .: district court review : of administrative-agency actio n 21 for abuse . of discretion is that district court s 22 generally are able to remand a case to the agency for . 23 .reconsideration if the court holds that the agency's 24 factfinding or legal analysis went awry . Fla . Power 25 Light Co . v . Lorion , 470 U .S . 729,, 744 (1985) ("If th e Heritage Reporting Corporation (202) 628-4888- 6 record before the agency does not support the agenc y 2 action, if the agency has . not considered all relevant 3 factors, or if the reviewing court simply canno t evaluate the challenged agency action on the basis o f 5 the record before it, the proper course, except .in rare circumstances , is to remand to the agency fo r 7 additional investigation or explanation .") ; Virk v . INS , 295 F .3d 1055, 1060 - 61 (9th Cir . 2002 ) ( remanding a denial by the INS . of a motion to reopen proceedings 10 where the INS failed to consider all relevan t 11 factors) .; see also Yale-New Haven Hospital . v . 12 Leavitt ,,470 F .3d 71, 87 (2d Cir . 2006) (remanding an 13 administrative decision to the Department'of Health 14 and Human Services after finding it was adopted in an 15 arbitrary and capricious manner) ; ,Stuttering 16 Foundation of America v . Springer , 498 F .Supp2d 203, 17 213-14 (D .D .C . 2007) (finding the Office of . Personnel 18 Management misapplied Federal tax law when classifying 19 a charitable organization and remanding the issue to 20 the agency for anew factual determination unde r 21 correct standards) . . When this happens, the agency is 22 able to compile .a new (or at least supplemental ) 23 ,administrative record, and judicial review on remand 24 . can be done using an abuse-of-discretion standard' 25 applied against that record . Heritage Reporting Corporation (202) 628-4888 F Remand is not an option in innocent -spouse case s 222 (200.5): we hel d hearing but is. instead an action begun in this Court . " Security State -Bank v . Commissioner , 111 T .C . 210, 21 3 9 (1998 ),' affirmed 214 F . 3d 1254 (10th Cir . 2000 ) Hesselink v .-Commissioner ,'97 T .C .(cid:127)94, 99-100 (1991) . Moreover, we :have recently in Tax .Court adopted a and scope of . .review fo r 13 innocent spouse cases .. In Porter:I and Porter II , we '14 decided that the'sdope'of review, mainly what w e 15 consider, is what we hear about and receive int o X16 17 18 evidence at trial . That's Porter , 130 T .C . 10 . Even more recently, wedeci'ded that the standard of review , how we consider this evidenceis also something that 19 we will lookand consider de novo . That's Porter II , 20 132 T .C . 11 . 2 1 This raises an interesting point that i s 22 underdeveloped .in innocent spouse law, namely, when do 23 we consider the state of affairs? This is a timin g 24 . issue . There are many ; factors ,, that Courts are 25 supposed to consider' in determining whether innocen t --Heritage Reporting'Corporation. (202) 628= 4888 . spouse relief is appropriate . One possibility is that we look at the state of those factors as of the time of the application for relief or at least the time when'the administrative record is complete, presumabl y when the notice of determination is issue V,' however, 1,011 after Porter II , we consider most factors , unless there's a = special reason not. to consider them ., as. of the time of trial . So -when as I -have to apply a de 9 'novo standard of-review to a de novo record, I look at 10 these factors as of . the time of trial for most factor s 11 but not all j as I'll ' explain a little bit later . '7!+ 12 Thus, having unpacked this preliminary baggage, 13 ,-turn to Ms . Meldrum 's specific case . Section 6015(f ) 14 1.5 allows relief to a :requesting spouse "if taking into account all the .facts . and circumstances, it is 16 inequitable to hold the individual liable ." The 17 Commissioner . exercises . his discretion using Revenu e 18 Procedure 2003-61, a framework guiding the exercise o f 19 his discretion when determining whether or not t o 20 grant . equitable relief . We Also follow that revenu e 21 procedure .inreviewing the determinationand deciding 22 what relief is appropriate .' Particularly so her e 23' where neither party suggested that we should consider 24 other factors or use another= framework of analysis . 25 . Ms . Meldrum' s-case . is exactly like, Porter II , 132, T .C . Heritage Reporting Corporation (202) 628-4888 11 at p . 12 of the .slip opinion . Turning now .to the application of section 6015(f ) here to Ms . Meldrum' s"case, I first turned to th e Revenue Procedure 2003-61 that applies . It has thre e basic parts .. One is , .a series of seven threshold - factors,. all of which have to be met for innocen t spouse relief under 6015 ( f),even to be considered . ri g econd group of factors i8 a set of three commonly called the . safe-harbor factors . If each of these i s 10 present, then relief is granted . Finally, if the 11 threshold is .met .but the .safe harbor is not, is a ..12 multi-factor balancing task using several of<the 13 factors that are listed in the revenue procedure . :14 I begin by looking at what the appeals officer in 15 this, case did on behalf of the Commissioner . It' s 16 easy to determineExhibit l-JJthat was admitted into 17 evidence as part of the stipulationfdenies relief -yK Y 18 because "the information we have available does no t 19 show you meet the requirements for relief . You knew 20 or had reason to . know . of the income or deductions that 21 caused the additional tax . You did not show it would 22 be unfair to hold you responsible . " 23, This is simply the wrong standard . It refers to 24 a wholly different part of_ section 6015, apparentl y 25. 6015(b) . Even ifI go behind the reasoning of the 1 0 notice of determination to look at what the appeals officer was ;thinking,as best I can determine from the administrative record, I .would go to Exhibit 2-J, the appeals'case memo which again confuses the relevant legal issue in this case . It says ; "the claimis being denied as the requesting spouse," that would be Ms . Meldrum, "knew or had reason to,know of thedeductions, that caused the additional tax and had no reason to believe the 10 taxes would be„paid, and it was not shown that i t 11 would be unfair to hold her responsible . In addition, 12 a review . of the taxpayer's accounts indicated that .13 though .R .S . .," that means requesting spouse, "wa s 14 working and received a W-2, there was no withholding 15 for three years -- 1996, 1997, and 1998 . " 16 This appeals case memorandum reiterates the same 17 error as Ijust outlined in the notice o f 18 determination. It does mention that she had no reason 19 to think that the taxes would be paid but gives n o 20 explanation for why it wouldn't be,unfair to hold her 21 responsible . It represents a mixing of the relevant 22 facts under section 6015(b) and 6015(f) . 2 3 2 4 25 Moreover,,it all alludes to the fact and, indeed, relies as,a key faction the assertion that Ms .' Meldrum was working and received a W-2,for years 1996 to 1998 . Heritage Reporting Corporation (202) 628-4888 11 This is, in fact, contradicted by the collections wor k paper that should have been reviewed by the appeals officer in .this case which says that the requesting spouse, or R .S ., had no taxable income in 1996, 1997, and 1998 . Her income in 99 was $3,049 with a tax de i 5 minimer . That is Exhibit 8-J of the administrative ; record attached to the stipulation . That suggested there's a clear error of fact-by the appeals officer who considered this case as well as an application of 1 0 11 the wrong lawi the wrong par. t of section 6015 . I do want to carve out of my discussion her e 12 something that . .came up at trial that is again not 13 reflected in the administrative record . I will 14 discuss it a little bit later, but' it's that Ms . 15 Meldrum appears to havebeen a equal part of he r 16 husband's business during those years and so it is not 17 unreasonable for the Commissioner if he had asked her 18 . .these questions to have concluded that incom e 19 attributable to her husband was also attributable to 20 her . But again, that was not part of the 21 administrative record . I'll discuss it a little bit 22 later on as part of my own analysis under a de nov o 23 standard . My conclusion at this point, however, is 24 that I do,findan abuse of discretion on the part of 25 the Commissioner in applying the wrong standard an d Heritage Reporting Corporation (.202)-628-4888 1 2 1 looking at the facts in a clearly erroneous way . In addition, we meet another abuse of discretion in this case . The appeals officer simply failed to consider all the factors listed in Revenue Procedure 2003- .61 when making his determination . See Walte r Transportation, Inc . v . United States 432 F . Supp . 2d 955, 959 (W .D . Missouri 2006) (citing Sukhov v . Gonzales , 403 F .3d 568, 570 ( .8th Cir . 2005) (stating that an abuse of discretion may be found where the 5 7 10 Appeals officer fails to consider all factor s 11 presented) ; Gall v . United States , 552 U .S . 128 S . 12 Ct . 586, 607 (2007) (Alito, J ., dissenting) (citing 13 several .cases analyzing several areas of law tha t 14 require consideration-of all factors to avoid an abuse 15 of discretion),. The Appeals officer made no findings 16 on either the marital-status or abuse factors o r 17 economic hardship factor and all these factors are at 18 issue . We therefore find that the Commissioner has 19 abused his discretion, and examine the dispute d 20 factors with an eye to determining the appropriate 21 relief . 22 This course of action follows from our holding in 23 Friday that, if we find an abuse of discretion, it is 24 up to us -- in the words of section 6015(e) -- "t o 25 determine the appropriate relief available to th e Heritage Reporting Corporation (202) 628-4888 13 1 individual under this section" rather than remand the 2 case to the IRS fora reopening of the administrative 3 record and a ,consideration for the first time o f 4 evidence we received during the trial . And so we ask 5 not-,just whether the Commissioner abused hi s 6 discretion in denying Meldrum relief, but if he did, 7 what is "the appropriate relief available?" Thus, we 8 converge the abuse of discretion standard that wa s 9 urged upon us by the Commissioner and the Porter 10 standard that I must follow as a individual judge and 11 have to apply the Revenue Procedure to determine if 12 Ms . Meldrum is entitled to innocent spouse relief . 13 I begin the same way that the collections part of 14 the IRS began which is by . examining the threshol d 15 factors . As I mentioned before, there are seven of 16 these factors . The most important, however, for our 17 purposes today is the seventh factor . Let me quote 18 it . It's in Revenue Procedure 2003-61, section 4 .017 . 19 "The income tax liability from which the requesting 20 spouse seeks relief is attributable to an item of the 21 individual with whom the requesting spouse filed a 22 joint return, i .e ., the nonrequesting spouse unless 23 one of the following exceptions applies . " 24 The administrative record in this case does not 25 support attributing any income to Ms . Meldrum, but he r Heritage Reporting . Corporation (202) 628-4888 14 1 testimony does at least for three of the four years . 2 She testified -- honestly, as I said -- that sh e 3 worked, about equal hours in the business that he r 5 8 husband had going out to job sites . She also did paperwork in his business . The business was name d after him, but it was not a corporation or an LLC . I t ► .wM.e was just a doing-busines And it might be reasonable X14 to say that that income was as much hers as his3Ngiven Ira that it was their joint efforts of apparently equa l 10 magnitude that produced the income . 11 There is, however, an exception in the Revenu e 12 Procedure to this threshold requirement that the 13 income tax not be attributable to .Ms . Meldrum but 14 rather to her husband, .and that exception is in V to 15 section 4 .017(d) abuse not amounting to distress V "If 16 the requesting spouse establishes that he or she was 17 the victim of abuse prior to . the time the return was 18 signed, and that, as a result of the prior abuse, the 19 requesting spouse did not challenge the treatment of 20 any items on the return for fear of the nonrequesting 21 spouse's retaliation, the Service will conside r 22 , granting equitable relief .although the deficiency or 23 underpayment may be attributable in part or in full to 24 an item of the requesting spouse . " 25 I don't read too much into the government' s Heritage . Reporting Corporation (202) 628-4888 1 5 1 concession that the threshold factors were met i n 2 terms of regarding this as a concession that abuse was 3 present , and I'll talk about abuse later on as one of 4 the factors that I consider in the balancing test . 5 Moreover , Ms . Meldrum ' s 1999 tax liability i s 6 complicated by her failure to sign the return-tat leas t 7 according ,,Iagain~%to her credible testimony if not any '$ 1 documentary evidence . Regulation section 1 .6013- l(e)(2) requires a joint return to be signed unles s 10 the agency rules of Regulation section 1 .6012-1 are 11 met which they weren't in this case . Sometimes the 12 failure to sign a joint return results in innocent 13 spouse relief being granted : See Stergios T .C . Memo . 14 2009-15 . 15 But nevertheless, there's not much to go on in 16 this record, so ;I will assume that the threshol d 17 factors are met and that under case law which allows 18 the characterization as a joint return of a return 19 signed by one spouse when the other spouse has not 20 signed it and seems to have intended, as Ms . Meldrum 21 seems to have intended herento have a joint return for 171" 22 the last year of her marriage when she was living wit h 23 her husband . I will just set that aside and note it 'Y'' 24 for the record) but move on . 25 I move on then to the safe harbor , the three Heritage Reporting Corporatio n (202) 628-4888 11 1 factors which as. I said if present generally will get VIL~ 16 2 an applicant relief . The key one here for me is th e 3 second factor under the Revenue Procedure sectio n 4 4 .02(1)(b) . "On the date the requesting spouse signed 5 the joint return, the requesting spouse had n o 6 knowledge or reason to know that the nonrequesting 7 spouse would not pay the income tax liability . The 8 requesting spouse must establish that it wa s 9 reasonable for the requesting spouse to believe that 10 the nonrequesting spouse would pay the reported income 11 tax liability . " 12, Here Ms . Meldrum honestly admitted her growing 13 doubts that her husband was going to pay the tax debts 14 that had accumulated . She had reason to know for all 15 four years that the taxes would remain unpaid , 16 particularly since they had filed for bankruptcy and 17 there had been a very long pattern of her husband not 18 paying the tax shown to be owed on the tax returns . 19 Consequently, I conclude that the three elements of 20 the safe harbor, all of which must be met, were no t 21 met in this case because one key factor, Ms . Meldrum's 22 knowledge or reason to know that the taxes woul d 23 remain unpaid is not met . I therefore move on to 24 section 4 .03 of the Revenue Procedure, the multi- 25 factor balancing test . Heritage! Reporting Corporation (202) 628-4888 1 7 1 The first of these factors is Ms . Meldrum' s 2 marital status .. Everyone agrees that she separated 3 from her husband in March of 2000 . She applied fo r 4 relief in 2007 . The trial was'held in 2009, so there 5 7 8 is no dispute that the marital status factor is met in her case and-it weighs in favor of her request for relief . The second factor is economic hardship . This is in section 4 .03(2)(a)(ii), whether the requesting 10 spouse would suffer economic hardship within th e 11 meaning of section 4 .02(1)(c) of this Revenu e 12 Procedure, 4 .02(1)(c) of the. Revenue Procedure in turn 13 refers me to the income'tax regulations 1 .301 .6343- 14 1(b)(4) in which the standard .is essentially whether 15 satisfying the tax obligation in whole or in par t 16 would cause undue economic hardship, an inability to 17, meet ordinary living expenses . 18 There are three sub-factors that I looked at in 19 reaching a conclusion .on this factor . The first is 20 the extent of the tax debt . As of March 2008, the 21 time of the IRS' consideration of Ms . Meldrum' s 22 application for relief , she owed approximately,[if you 23 take taxes, interest , and penalties togetherj$16,000TY 24 for her 1996 taxes , $ 12,000 for her 1997, $5 , 000 fo r 25 her 1998 taxes, and $ 14,000 for her 1999 tax , a total Heritage Reporting Corporatio n (202) 628-4888 1 8 1 of about $47,000 as of March of 08, and of course , 2 there's been another year and-a-half worth of interest 3 that would be added to that . 4 The second sub-factor I look at is her income . 5 At the time of application, her income wa s 6 approximately $31,000 a year, or $2,486 a month . And 7 she testified honestly she's done a little bit better 8 since then and as of trial her income is now $2,917,a 9 month, approximately $35,000 . 10 The third sub-factor that I look at are her 11 expenses . In her application for innocent spous e 12 relief, the honesty of which nobody really contested, 13 she estimated her expenses at $2,050 . As of the time 14 of trial, I find that her expenses were approximately 15 $1,950 . They have gone down slightly because a 16 garnishment that still applied when she asked for 17 relief has now been paid while her food and utility 18 expenses have gone up just a bit . So Is do find that 19 her net income, income minus reasonable expenses, has 20 increased from about $436 to about $966 a month . 21 Now, the standard as I said is whether paying 7 22 taxes in whole or in part would cause hardship ., If we 23 look at satisfying the taxes in whole, it is clear 24 that they would cause hardship . She owes more in 25 taxes than she earns in gross income each year . The Heritage Reporting Corporatio n (202) 628-4888 1 9 1' question of whether it would cause her hardship i n 2 part is less clear . She could contribute some , 3 especially in her new job, to paying her back taxes , oN'y so I find that this factor is partially in her favor . 5 7 She can't pay it all, but she might pay some . So I will weigh it in favor of relief in part and against relief in part but not heavily . It weighs towards th e 8 neutral in my consideration of all these factor s 9 because of this difference in my conclusion were I to 10 look at the effect of having to pay the entire ta x 11 versus contributing some money to its reduction . 12 The third factor that I look at is the knowledge 13 factor that I've already described . As I said , 14 between 1996 and 1998, it is clear for the reasons 15 I've already stated that this factor weighs against 16 relief . Ms . Meldrum knew or had reason to know -- in 17 this case , she certainly had reason to know -- that 18 her husband was not going to be paying the unpaid tax . 19 In 1999 , she wasn't around at the time of signing, and 20 it is at the time of signing that this factor has to 21 be looked at . 22 So there's no direct evidence that she knew at 23 the time that her husband signed the return that he 24 wouldn't pay but consisted with past history of many, 25 many years of his not paying the taxes that were owed , Heritage Reporting Corporation (202) 628-4888 20 1 I would find that this knowledge factor weighs agains t 2 her for 1999 as well . 3 The fourth factor listed in the Revenue 4 proceeding is the nonrequesting spouse's legal 5 obligation to pay the tax pursuant to a divorc e 6 decree . The Meldrums are not yet divorced even after 7 all these years, and so this factor is neutral . 8 The fifth factor is significant benefit . Thi s 9 weighs in favor of relief because Ms . Meldrum received 10 no significant benefit beyond normal support from the 11 unpaid taxes . The sixth factor is compliance with the 12 income tax laws . This too weighs in favor of Ms . 13 Meldrum's request for relief . Since she left he r 14 husband and began working outside the home and outside 15 his business, she has complied with all the tax laws, 16 filed returns on time, and kept up her payments . 17 The seventh factor listed in revenue procedure at 18 section 4 .03(2)(b)(1) is abuse . "Whether th e 19 nonrequesting spouse abused the requesting spouse, the 20 presence of abuse is a factor favoring relief," and it 21 is very important in this case because a history o f 22 abuse by the nonrequesting spouse may mitigate a 23 requesting spouse's knowledge or reason to know . 24 The revenue procedure doesn't actually define 25 "abuse," but does say that proof that the "requestin g Heritage Reporting Corporation (202) 628-4888 21 1 spouse was abused by the nonrequesting spouse but suc h 2 abuse did not amount to duress," weighs in favor o f 3 relief . And this obviously lets us infer that "abuse" 4 is at least sometimes somehow lesser than "duress . " 5 Duress is a concept we've had a lot to say about . 6 Courts have long considered duress to be a reason t o 7 relieve a taxpayer from joint liability where he r 8 spouse coerces her to sign a tax return . See Furnish 9 v . Commissioner , 262 F .2d 727,"733 (9th Cir . 1958) ; 10 affirming in part and remanding in part Funk v . 11 12 13 14 Commissioner , 29 T .C . 279 (1957) ; Stanley v . Commissioner , 81 T .C . 634 (1983) ; Brown v . Commissioner , 51 T .C . 116, 1 19-120 (1968) ; Stanley v . Commissioner , 45 T .C . 555, 565 (1966) . Duress is a 15 subjective analysis, where the "focus is on the mind 16 of the individual at the relevant time in question, 17 rather than on the means by which the given state of 18 mind was induced ." In re Hinkley , 256 B .R . 814, 825 19 (Bankr . M .D . Fla . 2000) ; see also Stanley , 45 T .C . at 20 561 . An extreme case is "Sign the return or I pull 21 the trigger ." But in tax law duress means an y 22 constraint of will so strong that it makes a person 23 reasonably unable to resist demands to sign a return . 24 When that happens, innocent-spouse relief i s 25 unavailable even if a spouse applies for it, because Heritage Reporting Corporatio n (202) 628-4888 2 2 1 duress means the return isn't treated as joint . See 2 3 Raymond v . Commissioner , 119 T .C . 191, 195-96 (2002) ; Brown , 51 T .C . at 129-21 . 4 And there are also a good number of cases 5 analyzing abuse-.not-amounting-to-duress in ,Y',ry4 6 considering whether one spouse knew or should hav e 7 known about the other's wrongdoing . E .g ., Kistner v . 8 Commissioner , 18 F .3d 1521, 1526 (11th Cir . 1994) , 9 reversing T .C . Memo . 1991-463 ; Estate of Brown v . 10 Commissioner , T .C . Memo . 1988-297 . A classic instance 11 is when abuse helps explain a spouse's failure t o 12 inquire about noncompliance with tax law . E .g ., Aude 13 v . Commissioner , T .C . Memo . 1997-478 (finding tha t 14 threats and intimidation explained why a requesting 15 spouse didn't review or inquire about the join t 16 returns) ; Makalintal v . Commissioner , T .C . Memo . 17 1996-9 (determining that, "in light of the frequent 18 physical abuse" by the nonrequesting spouse and hi s 19 "general refusal to discus's his business and financia l 20 affairs with petitioner, * * * petitioner's inquiry 21 was reasonable and sufficient to satisfy her duty of 22 inquiry") . 23 But it's abuse as a factor by itself, not just as 24 a relevant bit of information about one spouse's state 25 of knowledge, that I'm looking for in this case . This Heritage Reporting Corporatio n (202) 628-4888 hro 2 3 1 is an important point because it liberates me fro m 2 focusing on the moment the return is signed . Th e 3 relevant abuse precedes that moment , but there's no 4 suggestion in the Procedure or any other source o f 5 relevant law that limits my consideration of whether 6 Ms . Meldrum was abused only to abuse that causes a 7 particular instance of noncompliance with the tax law . 8 What is the evidence here of abuse? In th e 9 administrative record, it amounts to Ms . Meldrum 10 saying that she was abused and little more . But 11 during .trial there was an important bit of new 12 evidence that was not in the administrative record 13 that I find to be ' quite important and that's a polic e 14 record that she obtained after being told that she 15 needed to have some proof of abuse, a police record 16 from , the Buffalo Police Department from back in 1994 17 shortly before this series of unpaid taxes began, and 18 it shows , in fact, that she reported her husband for 19 assaulting her and that he was arrested . 20(cid:127) This is some corroboration of her story i n 21 addition to her testimony which I found compelling in 22 its specificity and the honesty and the demeanor with 23 which she presented it . I do believe that Ms . Meldrum 24 suffered from a continual pattern of abuse at th e 25 hands of her husband who is alcoholic and who beat her Heritage Reporting Corporatio n (202) 628-4888 2 4 1 and who coerced her and isolated her from friends and 2 family . This weighs very heavily in my consideration 3 of her application for innocent spouse relief here . I 4 also find that in addition to the physical abuse that 5 Ms . Meldrum suffered she suffered from psychologica l 6 abuse at the hands of her husband as well . 7 8 I have to be aware of the danger that requesting spouses in trying to escape financial liability, especially financial liability of the extent that Ms . 10 Meldrum faces , may easily exaggerate the level of 11 nonphysical abuse . Innocent spouse cases often spring 12 from the dissolution of troubled marriages , and there 13 is an obvious incentive to vilify a nonrequestin g 14 spouse . Our cases therefore require substantiation, 15 or at least specificity , in allegations of abuse . 16 See, e .g ., Fox v . Commissioner , T .C . Memo . 2006-22 17 (weighing abuse as a positive factor where a police 18 report corroborated the requesting spouse's claim of 19 assault) . See, e .g ., McKnight v . Commissioner , T .C . 20 Memo . 2006 - 155 (finding abuse where alcoholi c 21 nonrequesting spouse physically shoved, hit, cut, and 22 beat the requesting spouse on multiple occasions . 23 This is not a terribly well-developed corner of 24 tax law, and it is not one in which we can really get 25 much help by looking at detailed regulations or th e Heritage Reporting Corporation (202) 628-4888 A 2 5 1 ordinary canons of construction . So I think it at 2 least helpful to look at those factors widel y 3 recognized as psychologically abusive where law has 4 confronted domestic violence . Scholars have 5 identified a number of factors that are commo n 6 features of domestic abuse in domestic-relations law 7 and the subfield of criminal law arising from domestic 8 violence . In these fields, a psychologically abusive 9 spouse is one who may : (1) isolate the victim ; (2 ) 10 encourage exhaustion by, for example, intentionally 11 limiting food or interrupting sleep ; (3) behave in an 12 obsessive or possessive manner ; (4) threaten to commit 13 suicide, to murder the requesting spouse, or to cause 14 the death of family or friends ; (5) use degradin g 15 language including humiliation, denial of the victim's 16 talents and abilities, and name calling ; (6) abus e 17 drugs or alcohol ; (7) undermine the victim's ability 18 to reason independently ; or (8) occasionally indulge 19 in positive behavior in order to keep hope alive that 20 the abuse will cease . 21 I think these factors indicate a relationship in 22 which there is enough abuse to make it reasonable to 23 conclude that the spouse seeking relief was les s 24 likely to do what the Tax Code requires -- making it 25 more equitable to relieve her from joint liability . I Heritage Reporting Corporatio n (202) 628-4888 2 6 1 again stress, though, that my consideration in such a n 2 underdeveloped area of law has to be case by case . 3 But my conclusion in this case is that the abuse 4 factor weighs heavily in Ms . Meldrum's favor and 5 decreases the weight that I should give to he r 6 knowledge for reason to know that Mr . Meldrum was not 7 going to pay the taxes owed . My conclusion , 8 therefore, rests on factors which go in bot h 9 directions . The knowledge factor in particular weighs 10 heavily against granting relief while the abuse factor 11 weighs in favor of granting relief . 12 As in any multi-factor balancing test, I have t o 13 have something in mind as the appropriate fulcru m 14 where there are factors weighing down on both sides of 15 the lever, and here I think that an appropriat e 16 fulcrum is the extent to which the economic unity of 17 the household filing a joint return has been broken 18 down by the actions of the nonrequesting spouse in a 19 way that didn't allow the requesting spouse a 20 reasonable exit . The knowledge factor's uniqu e 21 importance is seen in this way entirely appropriate 22 because in the ordinary course of events knowing her 23 husband is mishandling their joint return would allow 24 a wife to begin to pull away from the entanglement of 25 joint liability . I, therefore, find on the peculiar Heritage Reporting Corporatio n (202) 628-4888 2 7 1 facts of this case that Meldrum's knowledge of he r 2 husband's underpayment of their taxes is outweighed by 3 the abuse she suffered and her utter lack of any 4 benefit from the money . He kept her from seeing the 5 broader state of the Meldrum family's finances, and 6 'since she began filing on her own, she ha s 7 consistently followed the tax law and paid her current 8 taxes as they become due . Her ability to act i n 9 response to her knowledge as her marriage wa s 10 dissolving was thus so reduced as to make relieving 11 her from the joint tax liability for the years in 12 question the appropriate relief under section 6015 . 13 Decision will be entered for petitioner . 14 This concludes the Court's oral findings of fact 15 and opinion in this case . 16 (Whereupon, at 10 :41 a .m ., the bench opinion in 17 the above-entitled matter was concluded . ) 18 19 20 21 22 23 24 25 // Heritage Reporting Corporation (202) 628-4888