TAX COURT OPINION

Case: Ruth Ferrarese
Docket Number: 11406-00
Judge: Colvin
Opinion Type: memo
Filed: 09/30/2002
Pages: 6

T.C. Memo. 2002-249 UNITED STATES TAX COURT RUTH FERRARESE, Petitioner y. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 11406-00. Filed September 30, 2002. Ruth Ferrarese, pro se. Vivian Rodriquez, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined that petitioner is not entitled to relief from joint liability for tax under section 6015(f) for 1983. Petitioner filed a petition under section 6015(e)(1) seeking review of respondent's determination.. We hold that petitioner is entitled to equitable relief from joint liability for tax for 1983 under section 6015(f). . SERVED SEP 3 0 2002 B. Prior Tax Court Case Ferrarese embezzled money from his company from 1975 to 1983. He embezzled $392,468 in 1983. Petitioner learned about the embezzlement when Ferrarese told her about it in January 1984 when he was fired from his job because his embezzlement was discovered. Petitioner agreed in April 1984 to let Ferrarese sign the 1983 return for her, and Ferrarese did so. Respondent determined deficiencies in petitioner's and Ferrarese's income tax for 1981, 1982, and 1983 based on their failure to report the embezzlement income. Petitioner used the proceeds from the sale in 1985 of a house owned jointly by her and Ferrarese in Massapequa, New York, to buy a house in Merrick, New York. She owned the Merrick house solely in her name. She sold the Merrick house and used the proceeds to buy the Florida condominium that she owned at the time of trial. Petitioner paid $52,000 in 1988 for the condominium. In Ferrarese v. Commissioner, T.C. Memo. 1993-404 (Ferrarese I), affd. 43 F.3d 679 (11th Cir. 1994),¹ we held that petitioner was entitled to relief from joint liability under section 6013(e) for 1981 and 1982. In that opinion, we concluded that she filed ¹ The parties agreed to be bound by the findings of fact in that case. A. Positions of the Parties OPINION Respondent determined that petitioner is not entitled to relief from joint liability under section 6015(b), (c), and (f). Petitioner contends that respondent's determination that petitioner does not qualify for relief under section 6015(f) was an abuse of discretion. We agree with petitioner. To prevail, petitioner must show that respondent's denial of equitable relief from joint liability under section 6015(f) was an abuse of discretion. Jonson v. Commissioner, 118 T.C. 106, 125 (2002); 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). B. Relevance of All Commissioner's Determination Under Section 6015(f) the Facts and Circumstances to the Section 6015(f) provides: SEC. 6015(f). Equitable Relief.--Under procedures prescribed by the Secretary, i.f-- (1) taking into account all the facts and circumstances, the individual any deficiency (or any portion of either); and liable for any unpaid tax or it is inequitable to hold (2) relief is not available to such individual under subsection (b) or (c), the Secretary may relieve such individual of such liability. [Emphasis added.] - 7 - No single factor will be determinative of whether equitable relief will or will not be granted in any particular case. Rather, all considered and weighed appropriately. intended to be exhaustive. factors will be The list is not In deciding whether respondent's determination that petitioner is not entitled to relief under section 6015(f) was an abuse of discretion, we will consider evidence relating to all the facts and circumstances. C. Whether Petitioner Is Entitled to Eguitable Relief Respondent concedes that the deficiency is attributable to Ferrarese. Petitioner concedes that the marital status and spousal abuse factors do not favor her, and that the knowledge or reason to know factor favors respondent. The parties agree that the legal obligation factor does not apply because petitioner and Ferrarese are not divorced. As discussed next, we conclude that the disputed factors all favor petitioner. 1. Economic Hardship Respondent contends that petitioner offered no evidence that she would suffer economic hardship if relief is denied. We disagree. Petitioner testified that her only source of income was Social Security, that she could barely pay her bills, that she and Ferrarese must borrow from their children to pay expenses, and that she would have to sell her condominium if she were denied relief under section 6015(f). Respondent did not 9 - checking account shows that it contains enough to pay only a tiny fraction of the deficiency for 1983. Respondent contends that petitioner will not suffer economic hardship if relief is denied because her children and family pay some of her and Ferrarese's living expenses. Respondent apparently assumes that petitioner's children would pay the 1983 taxes, and that, as a result, petitioner would suffer no hardship if held jointly liable for those taxes. We disagree. First, there is no evidence that petitioner's children would or ould pay the 19.83 taxes; second, we believe it would be a hardship to compel petitioner to ask her children to do so. We conclude that petitioner will suffer economic hardship if she is not relieved of joint liability. 2. Significant Benefit Respondent contends that petitioner significantly benefited from the embezzlement income omitted from petitioner's and Ferrarese's return for 1983. We disagree. In Ferrarese I, we found that petitioner's expenditures during 1981-83 were neither . unusual nor lavish and did not suggest that petitioner significantly benefited from the embezzlement income. Petitioner's testimony in this case was consistent with our findings in her prior case, and respondent did not cross-examine petitioner or offer contrary evidence. We conclude that - 13 - circumstances, it would be inequitable to hold petitioner liable for the 1983 deficiency. See Belk v. Commissioner, supra; Foley v. Commissioner, supra; Robinson v. Commissioner, supra; Klimenko v. Commissioner, supra; Hillman v. Commissioner, supra. For the foregoing reasons, • Decision will be entered for petitioner.