TAX COURT OPINION

Case: Debra L. Zalk Spitulnik, Petitioner and Charles A. Spitulnik, Intervenor
Docket Number: 21686-18L
Judge: Toro
Opinion Type: bench
Filed: 03/11/2021
Pages: 30

United States Tax Court Washington, DC 20217 Debra L. Zalk Spitulnik, Petitioner and Charles A. Spitulnik, Intervenor Petitioners v. Commissioner of Internal Revenue, Respondent ) ) ) ) ) ) ) ) ) Docket No. 21686-18L. O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is hereby ORDERED that the Clerk of the Court shall transmit to petitioner, intervenor, and respondent a copy of the pages of the transcript of the trial in the above-referenced case before Judge Emin Toro in Washington, D.C., on January 29, 2021 (remote proceeding), containing the Court's Oral Findings of Fact and Opinion, rendered at the trial session at which this case was heard. In accordance with the Oral Findings of Fact and Opinion, a Decision will be entered for respondent. (Signed) Emin Toro Judge Served 03/11/21 RECEIVED 2/12/21 IN THE UNITED STATES TAX COURT In the Matter of: DEBRA L. ZALK SPITULNIK, Petitioner, And CHARLES A. SPITULNIK, Intervenor, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket No. 21686-18L ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Pages: 1 through 30 Place: Washington, DC (Remote Proceeding) Date: January 29, 2021 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IN THE UNITED STATES TAX COURT 1 In the Matter of: DEBRA L. ZALK SPITULNIK, Petitioner, And CHARLES A. SPITULNIK, Intervenor, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket No. 21686-18L ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) United States Tax Court 400 Second Street, NW Room 400 Washington, District Of Columbia 20217 (Remote Proceeding) January 29, 2021 The above-entitled matter came on for bench opinion, pursuant to notice at 1:01 p.m. HONORABLE EMIN TORO Judge BEFORE: APPEARANCES: For the Petitioner: Debra L. Zalk Spitulnik For the Intervenor: Charles A. Spitulnik For the Respondent: Stephen C. Welker 1 2 3 4 5 6 7 8 9 2 P R O C E E D I N G S (3:01 p.m.) THE CLERK: Calling from the calendar docket number 21686-18L, Debra L. Zalk Spitulnik, Petitioner and Charles A. Spitulnik, Intervenor. Please state your appearances. MS. SPITULNIK: This is Debra Spitulnik. I am here. MR. SPITULNIK: This is Charles Spitulnik. I am 10 here. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. WELKER: Stephen Welker for respondent. THE COURT: Thank you all. Good afternoon. (Whereupon, a bench opinion was rendered.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bench Opinion by Judge Emin Toro January 29, 2021 3 Debra L. Zalk Spitulnik, Petitioner and Charles A. Spitulnik, Intervenor v. Commissioner Docket No. 21686-18L THE COURT: 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 AND OPINION. THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise noted, all section references in the opinion 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. We round all monetary amounts to the nearest dollar. In this case, petitioner, Debra L. Zalk Spitulnik, seeks equitable relief under section 6015(f) of the Code (colloquially referred to as "innocent spouse relief") from joint and several liability associated with joint returns she filed with her husband, intervenor Charles A. Spitulnik, for the 2008, 2009, and 2012 taxable 1 2 3 4 5 6 7 8 9 years. For the reasons set out below, we conclude that 4 Mrs. Spitulnik is not entitled to relief. FINDINGS OF FACT Some of the facts have been stipulated and are so found. The parties' joint stipulations of facts and all attached exhibits are incorporated herein by this reference. Trial of this case was held on January 27, 2021, during the Court's remote trial session for Washington, D.C. Mrs. Spitulnik resided in Maryland at 10 the time she filed her petition. 11 The Spitulniks 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mrs. Spitulnik and Mr. Spitulnik have been married for 46 years. Mrs. Spitulnik is a teacher, and Mr. Spitulnik is a partner at a law firm. Mrs. Spitulnik has a Bachelor of Arts degree in Education from Syracuse University and a Master of Arts degree in Education from Antioch University. The Spitulniks have been financially successful in their respective careers. Each year from 2006 to 2018, the Spitulniks reported adjusted gross income of between $256,000 and $437,000 on their Federal income tax return. The Spitulniks have various checking, savings, and retirement accounts, with combined balances exceeding $1 million. They also have several life insurance policies covering Mr. Spitulnik. One of the policies is a whole 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 life policy with a million-dollar benefit. The Spitulniks 5 took out the policy in December 2017, and pay $3,274 per month to maintain it. They also help their children with student loan payments, and in 2020 purchased a 2020 Volvo XC40 currently valued at approximately $45,000, because Mrs. Spitulnik felt unsafe in their previous car, a 2017 Honda CRV. Also recently, Mrs. Spitulnik traded in some family jewelry and paid more than $500 to buy gold and diamond necklaces for herself, her daughter, and her daughter-in-law. The Spitulniks own a home in Rockville, Maryland, that they estimate is valued at $800,000. The home is subject to significant liabilities. Mrs. Spitulnik has worked for more than two decades as a teacher at the Washington Waldorf School in Bethesda, Maryland. The Washington Waldorf School is one of more than 1,000 Waldorf schools worldwide, and its pedagogy is rooted in the work of Rudolf Steiner. Waldorf schools strive to develop the whole human being in a healthy and nurturing environment. At the Washington Waldorf School, teachers typically begin teaching a class of students in the first grade and continue teaching the same group of students through the eighth grade. By 2007, Mrs. Spitulnik was an experienced teacher at the Washington Waldorf School, having completed a full cycle of teaching students from first to eighth grade, and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 having started teaching a second group of students. The 6 Faculty Chair of the Washington Waldorf School (the rough equivalent of a head of school) viewed Mrs. Spitulnik as a key faculty member and a "precious commodity within the Waldorf system" given Mrs. Spitulnik's experience teaching a wide variety of subjects and age groups. Starting with a concussion she suffered in 2007, Mrs. Spitulnik has experienced several significant health problems. Following her concussion, Mrs. Spitulnik was diagnosed with chronic Lyme disease and babesiosis. Together, these conditions caused joint pain and fatigue, as well as neurological complications such as brain fog, confusion, and difficulties with memory. These symptoms often left Mrs. Spitulnik unable to drive herself to work and perform other daily functions. During this time, Mrs. Spitulnik remained employed as a teacher at the Washington Waldorf School, but she operated on a reduced schedule with help from various assistants. In 2007, Mrs. Spitulnik was assisted by a temporary intern, and in 2008 and 2009 the school hired a teaching assistant to support Mrs. Spitulnik. During these years, Mrs. Spitulnik usually taught a "main lesson" for two hours each morning before her teaching assistant took over teaching duties for "skills lessons" and recess for the rest of the day. Mrs. Spitulnik was also excused from weekly faculty 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 meetings and was encouraged to leave early from school to 7 take rest breaks. The Washington Waldorf School was willing to make these concessions because it viewed Mrs. Spitulnik as an extraordinary teacher whose presence would benefit students and the school, despite the limitations imposed by her health. The school did not make similar accommodations for its teachers apart from exceptional circumstances. Due to her poor health and longstanding struggles with dyslexia, Mrs. Spitulnik relied on Mr. Spitulnik to handle the family's finances and investments. Mrs. Spitulnik sometimes spoke with her husband about these matters, but had difficulty understanding and remembering the conversations. She would also sign forms that Mr. Spitulnik prepared, but generally did not review them in any detail. Instead, Mrs. Spitulnik relied on Mr. Spitulnik for financial decision-making, including with respect to the couple's tax returns. Starting in 2010, Mrs. Spitulnik's health began to improve. She continued teaching at the Washington Waldorf School with the aid of a teaching assistant. The school gradually reduced, but did not eliminate, the support it provided to accommodate Mrs. Spitulnik. After 2010, Mrs. Spitulnik focused on teaching students in the lower grades, because she felt that she lacked the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 capacity to teach a full range of subjects to students in 8 the higher grades. Tax Returns for 2008, 2009, and 2012 The Spitulniks filed joint Federal income tax returns for tax years 2008, 2009, and 2012. All three returns were filed late. The 2008 return was filed on August 5, 2010; the 2009 return was filed on March 4, 2011; and the 2012 return was filed on January 31, 2014. The three returns reported adjusted gross income of approximately $416,000, $330,000, and $333,000, respectively. The reported adjusted gross income stemmed primarily from Mrs. Spitulnik's work as a teacher and Mr. Spitulnik's work as a law firm partner. Despite filing returns, the Spitulniks failed to pay in full their tax liabilities with respect the 2008, 2009, and 2012 years. As of December 22, 2020, the Spitulniks had account balances of assessed Federal income tax (not including penalties and interest) of $52,498 for 2008, $108,636 for 2009, and $1,807 for 2012. In October 2017, the Internal Revenue Service ("IRS") recorded a Notice of Federal Tax Lien in the Circuit Court of Montgomery County, Maryland, concerning the Spitulniks' 2008, 2009, and 2012 tax years. A month later, the Spitulniks timely mailed a Form 12153, Request for a Collection Due Process or Equivalent Hearing, in 1 2 3 4 5 6 7 8 9 10 11 12 13 14 which they requested an installment agreement. That 9 request ultimately was denied by the IRS Office of Appeals ("IRS Appeals"), and our Court affirmed the Appeals Officer's determination. See Spitulnik v. Commissioner, T.C. Dkt. No. 21687-18L (order and decision entered November 26, 2019, granting summary judgment for the Commissioner and sustaining Commissioner's Notice of Determination). Included with the Spitulniks' Form 12153 was a Form 8857, Request for Innocent Spouse Relief, and a letter in which Mrs. Spitulnik requested innocent spouse relief from the joint and several liability for 2008, 2009, and 2012. Mrs. Spitulnik's request for innocent spouse relief initially was reviewed and rejected by an 15 IRS examiner. 16 17 18 19 20 21 22 23 24 25 In May 2018, an IRS Appeals Officer contacted Mrs. Spitulnik by letter to schedule a conference concerning Mrs. Spitulnik's request for relief. The letter enclosed a Form 12507, Innocent Spouse Statement, for Mrs. Spitulnik to complete and also invited Mrs. Spitulnik to submit any additional information in support of her request. Mrs. Spitulnik timely returned a signed Form 12507, with attached documentation pertaining to her relief request. In June 2018, Mrs. Spitulnik participated in a telephone conference with IRS Appeals to discuss her 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 request for relief. During the conference, Mrs. Spitulnik 10 focused primarily on explaining her health issues and medical diagnoses as a justification for relief from joint liability. After reviewing Mrs. Spitulnik's documentation and hearing her explanations during the conference, IRS Appeals determined to sustain the IRS examiner's denial of equitable relief. IRS Appeals' determination rested primarily on the grounds that Mrs. Spitulnik remained employed and was aware of her financial troubles during the years for which she requested relief. On October 3, 2018, IRS Appeals issued a notice of determination denying Mrs. Spitulnik's request for relief from joint and several liability under section 6015 for tax years 2008, 2009, and 2012. On November 2, 2018, Mrs. Spitulnik timely filed a petition for review in this Court pursuant to section 6015(e). See sections 6015(e), 6320(c), 6330(c)(2)(A)(i), (d); Maier v. Commissioner, 119 T.C. 267, 270 (2002), aff'd, 360 F.3d 361 (2d Cir. 2004). Mr. Spitulnik filed a Notice of Intervention in the proceedings, in which he contests the Commissioner's determination to deny Mrs. Spitulnik's request for relief. See section 6015(e)(4); Rule 325; see also Van Arsdalen v. Commissioner, 123 T.C. 135, 138 (2004). 1 2 3 4 5 6 7 8 9 Tax Compliance History 11 Since 2008, the Spitulniks have often filed their returns late and have been assessed various penalties for noncompliance. The following table summarizes the Spitulniks' joint account information for the taxable years 2006 through 2018, indicating for each year (1) the date the Spitulniks' return was due, (2) the date the Spitulniks filed their return, and (3) whether any penalties were assessed for the year (and, if so, the 10 type of penalty): 11 Year Return Due Date Filing Date Penalty Assessed 12 13 14 15 16 17 18 19 20 21 22 23 24 2006 10/15/07 11/26/07 Estimated Tax; Late-Filing; Failure to Pay 2007 10/15/08 10/28/08 Late-Filing; Failure to Pay 2008 10/15/09 8/5/10 2009 10/15/10 3/4/11 Estimated Tax; Late-Filing; Failure to Pay Estimated Tax; Late-Filing; Failure to Pay 2010 10/15/11 2/28/12 Estimated Tax; Late-Filing; Failure to Pay 2011 10/15/12 3/14/13 Estimated Tax; Late-Filing; Failure to Pay 2012 10/15/13 1/31/14 Estimated Tax; Late-Filing; 2013 10/15/14 10/10/14 Estimated Tax; Failure to Failure to Pay Pay 2014 10/15/15 10/6/16 Estimated Tax 2015 10/15/16 10/20/16 Estimated Tax; Late-Payment 2016 10/15/17 10/10/17 Pre-Payment 2017 10/15/18 12/27/18 Pre-Payment; Late-Payment No Penalties 2018 10/15/19 7/2/19 Late-Filing; As of the time the tax returns at issue in this 25 case were filed, Mrs. Spitulnik was aware that the couple 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 had received collection notices from various creditors, 12 including the IRS. She also understood the significance of the annual April 15 filing deadline for tax returns. When Mrs. Spitulnik asked her husband about these matters, Mr. Spitulnik assured her that he had things under control, and she did not inquire further. The Spitulniks' Earnings A Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, that the Spitulniks created for the purpose of trial as demonstrative evidence of their current financial circumstances reported Mrs. Spitulnik as most recently earning $12,780 from her work as a teacher and $18,518 from Social Security benefits, for total earnings of $31,298. The form reported Mr. Spitulnik as earning $231,986 from his work as a lawyer and $9,254 from Social Security benefits, for total earnings of $241,240. The form reported the couple's combined earnings as $272,538. In their 2019 Federal income tax return, the Spitulniks reported adjusted gross income of approximately $432,000. OPINION 22 I. Introduction 23 24 25 Generally, married taxpayers may elect to file a joint Federal income tax return. Section 6013(a). If a joint return is made, the tax is computed on the spouses' 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 aggregate income, and each spouse is fully responsible for 13 the accuracy of the return and is jointly and severally liable for the entire amount of tax shown on the return or found to be owing. Section 6013(d)(3); Pullins v. Commissioner, 136 T.C. 432, 437 (2011). But, in certain circumstances, a spouse who has made a joint return may seek relief from joint and several liability under procedures set forth in section 6015. Section 6015(a). Section 6015 provides a requesting spouse with three alternatives: (1) full or partial relief under subsection (b), (2) proportionate relief under subsection (c), or (3) if relief is not available under subsection (b) or (c), equitable relief under subsection (f). Pullins v. Commissioner, 136 T.C. at 437. As the parties agree, sections 6015(b) and (c) do not apply in this case because we have before us only an underpayment of tax, not an understatement of tax or a deficiency, as required by subsections (b) and (c). Pullins v. Commissioner, 136 T.C. at 437 n.5. Therefore, the only relief available is under section 6015(f). See id.; see also Washington v. Commissioner, 120 T.C. 137, 146-148 (2003). IRS Appeals considered Mrs. Spitulnik's entitlement to relief from joint and several liability only under section 6015(f), and we have jurisdiction to do the same. See section 6015(e)(1). 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mrs. Spitulnik bears the burden of establishing 14 that she is entitled to relief. See Rule 142(a). We review de novo IRS Appeals' determination to deny relief. See secs. 6015(e), 6320(c), 6330(c)(2)(A)(i), (d); Pullins v. Commissioner, 136 T.C. at 438; see also Sutherland v. Commissioner, 155 T.C. ___, ___ (slip op. at 18) (Sept. 8, 2020). Because Mrs. Spitulnik filed her petition before July 1, 2019, section 6015(e)(7) does not apply to this case. See Sutherland v. Commissioner, 155 T.C. at ___ (slip op. at 15-16). II. Relief Under Section 6015(f) When, as in this case, relief is unavailable under section 6015(b) or (c), section 6015(f) grants the Commissioner discretion to relieve a requesting spouse of joint liability if, considering all the facts and circumstances, it would be inequitable to hold the requesting spouse liable for the unpaid tax or deficiency, or any portion thereof. Section 6015(f) authorizes granting such equitable relief "[u]nder procedures prescribed by the Secretary." For requests filed on or after September 16, 2013, and for requests pending in any Federal court on or after September 16, 2013, Revenue Procedure 2013-34, 2013- 43 I.R.B. 397, prescribes factors that the IRS considers in determining whether equitable relief is appropriate. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 See also Treas. Reg. section 1.6015-4(c). "[T]he Court 15 consults those same factors when reviewing the IRS's denial of relief." Pullins v. Commissioner, 136 T.C. at 438 (citing Washington v. Commissioner, 120 T.C. 137, 147- 152 (2003)). But we are not bound by them. Minton v. Commissioner, T.C. Memo. 2018-15, at *12 (collecting authorities). Section 4.01 of Revenue Procedure 2013-34 sets forth seven so-called "threshold conditions" that must be satisfied for a requesting spouse to be eligible for equitable relief under section 6015(f). The parties agree that Mrs. Spitulnik meets the threshold conditions. Section 4.02 of the Revenue Procedure describes circumstances in which the IRS will make streamlined determinations granting equitable relief under section 6015(f). To be eligible for a streamlined determination, the requesting spouse, among other things, must no longer be married to the nonrequesting spouse. Because Mrs. and Mr. Spitulnik remain married, the parties agree that Mrs. Spitulnik is ineligible for a streamlined determination in her favor under the Revenue Procedure. For cases in which the threshold conditions are met, but the requesting spouse is not eligible for a streamlined determination, section 4.03(2) of the Revenue Procedure sets out seven nonexclusive factors to be 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 considered in determining whether a requesting spouse is 16 entitled to equitable relief under section 6015(f). Those factors are: (1) the taxpayer's marital status, (2) whether the requesting spouse will suffer economic hardship absent relief, (3) in the case of an underpayment, whether the requesting spouse had knowledge or reason to know that the nonrequesting spouse would not or could not pay the tax liability, (4) whether either spouse had a legal obligation to pay the liability, (5) whether the requesting spouse received a significant benefit beyond normal support for the unpaid tax liability; (6) whether the requesting spouse has complied with income tax laws in the years following those to which the request for relief relates, and (7) the mental or physical health of the requesting spouse. Rev. Proc. 2013-34, § 4.03(2). These factors are to be weighted appropriately, and no one factor is determinative. Yancey v. Commissioner, T.C. Memo. 2017-59, at *19 (and cases cited therein). We will consider each in turn. 20 III. Application 21 1. Marital Status 22 23 24 25 With respect to marital status, section 4.03(2)(a)(iii) of the Revenue Procedure states: "If the requesting spouse is still married to the nonrequesting spouse, this factor is neutral. If the requesting spouse 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 is no longer married to the nonrequesting spouse, this 17 factor will weigh in favor of relief." Because the Spitulniks are still married, this factor is neutral. 2. Economic Hardship With respect to economic hardship, section 4.03(2)(b) of the Revenue Procedure states: "If denying relief from the joint and several liability will cause the requesting spouse to suffer economic hardship, this factor will weigh in favor of relief. If denying relief from the joint and several liability will not cause the requesting spouse to suffer economic hardship, this factor will be neutral." Whether the requesting spouse will suffer economic hardship is determined based on rules similar to those provided in Treasury Regulation section 301.6343- 1(b)(4). "An economic hardship exists if satisfaction of the tax liability in whole or in part will cause the requesting spouse to be unable to pay reasonable basic living expenses." Rev. Proc. 2013-34, § 4.03(2)(b). A hypothetical hardship is insufficient to justify relief. Pullins v. Commissioner, 136 T.C. at 446. The requesting spouse must demonstrate that imposing joint and several liability is "'inequitable in present terms,' Von Kalinowski v. Commissioner, T.C. Memo. 2001-21, and poses a present economic hardship." See id. We have "consistently looked beyond the taxable year at issue to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 apply subsection (f)," Hall v. Commissioner, 135 T.C. 374, 18 380 (2010), and we evaluate the requesting spouse's financial situation and prospects as of the time of trial, see Pullins v. Commissioner, 136 T.C. at 446-447. If the requesting spouse's annual income is below 250% of the Federal poverty guidelines (as updated periodically in the Federal Register by the U.S. Department of Health and Human Services under the authority of 42 U.S.C. section 9902(2)), or if the requesting spouse's monthly income exceeds the requesting spouse's reasonable basic monthly living expenses by $300 or less, this factor weighs in favor of relief unless the requesting spouse has assets out of which she can make payments toward the tax liability and still meet her reasonable basic living expenses. Based on the Form 433-A the Spitulniks created as demonstrative evidence of their financial circumstances as of the time of trial, Mrs. Spitulnik's annual income of $31,298 was just shy of 250% of the amount established by the 2020 applicable Federal poverty guidelines for a household of one ($12,760 x 250% = $31,900). See 85 Fed. Reg. 3060-3061 (Jan. 17, 2020). But, when added to Mr. Spitulnik's annual income of $241,240, the couple's combined earnings of $272,538 far exceed 250% of the applicable Federal poverty guidelines for a household of 1 2 3 4 5 6 7 8 9 two ($17,240 x 250% = $43,100). Id. A review of the 19 Spitulniks' 2019 Federal income tax return leads to the same conclusion, as their adjusted gross income for the year was approximately $432,000. Additionally, Mrs. Spitulnik holds assets jointly with her husband, and she has not demonstrated an inability to make payments out of those assets toward the tax liabilities at issue while still meeting her reasonable basic living expenses. Accordingly, this factor is neutral. 10 3. Knowledge or Reason To Know 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In the case of an income tax liability that was reported but not paid, this factor weighs in favor of relief if the requesting spouse reasonably expected the nonrequesting spouse to pay the liability. Rev. Proc. 2013-34, § 4.03(2)(c)(ii). The factor weighs against relief, however, if the requesting spouse's expectation was unreasonable based on all the facts and circumstances. Id. For example, if, prior to the filing of the tax return, the requesting spouse knew that the nonrequesting spouse had financial difficulties or other issues with the IRS or other creditors, or was aware of difficulties in timely paying bills, then this factor generally weighs against relief. Id. Other facts and circumstances considered in determining whether the requesting spouse had reason to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 know whether the nonrequesting spouse could or would pay a 20 reported tax liability include, but are not limited to, the requesting spouse's level of education, any deceit or evasiveness of the nonrequesting spouse, the degree of the requesting spouse's involvement in the activity generating the liability, the requesting spouse's involvement in business or household financial matters, the requesting spouse's business or financial expertise, and any lavish or unusual expenditures compared with past spending levels. Id., sec. 4.03(2)(c)(iii); see also Minton v. Commissioner, T.C. Memo. 2018-15 (collecting cases and analyzing the circumstances in which our Court found that a requesting spouse had (or did not have) knowledge or reason to know that the nonrequesting spouse would fail to 15 pay a liability). 16 17 18 19 20 21 22 23 24 25 In this case, we accept that Mrs. Spitulnik experienced significant health problems that affected her stamina and mental acuity, particularly from 2007 to 2010. We further accept that, because of these problems and her longstanding dyslexia, Mrs. Spitulnik deferred to her husband on financial matters, including the couple's tax returns. But Mrs. Spitulnik is an intelligent and well- educated woman who was aware of the deadline for filing Federal income tax returns. Even at the peak of her health challenges, the Washington Waldorf School valued 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Mrs. Spitulnik so highly that it was willing to make a 21 significant effort to keep her in the classroom. And, by the time the returns at issue were filed in 2010, 2011, and 2014, Mrs. Spitulnik's health was improving. Most significantly, Mrs. Spitulnik was aware that collection efforts had been made by various creditors, including the IRS. She even asked her husband about those efforts from time to time. On balance, this factor weighs against relief. See Jones v. Commissioner, T.C. Memo. 2019-139, at *18-*19 (collecting cases). 4. Legal Obligation The legal obligation factor weighs in favor of relief if a divorce decree or other legally binding agreement imposes on the nonrequesting spouse the sole legal obligation to pay the outstanding tax liability. Rev. Proc. 2013-34, § 4.03(2)(d). The factor is neutral if the spouses are not separated or divorced, and it weighs against relief if the requesting spouse has the sole legal obligation to pay the tax. Id. Because the Spitulniks are still married and neither of them is subject to a legally binding agreement to the pay the taxes, this factor is neutral. 5. Significant Benefit Section 4.03(2)(e) of Revenue Procedure 2013-34 25 states: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A significant benefit is any benefit in excess 22 of normal support. For example, if the requesting spouse enjoyed the benefits of a lavish lifestyle, such as owning luxury assets and taking expensive vacations, this factor will weigh against relief. If, however, the requesting spouse controlled the household and business finances . . . such that the nonrequesting spouse made the decision on spending funds for a lavish lifestyle, then this mitigates this factor so that it is neutral. If only the nonrequesting spouse significantly benefitted from the unpaid tax . . . and the requesting spouse had little or no benefit, or the nonrequesting spouse enjoyed the benefit to the requesting spouse's detriment, this factor will weigh in favor of relief. The receipt of life insurance proceeds on the death of a nonrequesting spouse may constitute a significant benefit. See Hale v. Commissioner, T.C. Memo. 2018-93, at *11 (citing George v. Commissioner, T.C. Memo. 2004-261); see also id., at *11 n.9. The Spitulniks generally pool their income, assets, and expenses. From 2006 to 2018, the Spitulniks reported adjusted gross income of between $256,000 and $437,000 on their Federal income tax returns. The Spitulniks jointly own a home, various accounts, and several life insurance policies. Their life insurance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 policies include a whole life policy pursuant to which 23 Mrs. Spitulnik will receive $1 million upon Mr. Spitulnik's death. The Spitulniks pay more than $3,274 per month to maintain this policy. They also make payments on student loans for their children, and recently purchased an expensive Volvo because Mrs. Spitulnik felt unsafe in their previous car, a 2017 Honda CRV. Also recently, Mrs. Spitulnik traded in some family jewelry and paid more than $500 to buy gold and diamond necklaces for herself, her daughter, and her daughter-in-law. The significant income that the Spitulniks have earned for many years, together with the expenditures reflected in the record and any other expenditures that have prevented them from satisfying their outstanding tax liabilities for more than a decade, demonstrate that the Spitulniks enjoy a lifestyle beyond normal support. And while Mrs. Spitulnik generally defers to her husband regarding financial matters, recent expenditures such as the Volvo and jewelry demonstrate that Mrs. Spitulnik has a voice in directing the Spitulniks' spending. Mrs. Spitulnik claims that Mr. Spitulnik purchased the whole life insurance policy over her objection, but acknowledges that he did so for her benefit. Indeed, Mrs. Spitulnik stated repeatedly at trial that her husband's top priority is and has always been to ensure 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 her welfare. Consistent with the record and her 24 statements, we conclude that nonpayment of the Spitulniks' tax liability afforded significant benefits to Mrs. Spitulnik beyond normal support, and therefore that this factor weighs against relief. 6. Compliance with Income Tax Laws This factor considers whether the requesting spouse has made a good faith effort to comply with the income tax laws in the years following the taxable years to which the request for relief relates. Rev. Proc. 2013- 34, § 4.03(2)(f). If the requesting spouse remains married to the nonrequesting spouse, and continues to file joint returns with the nonrequesting spouse after requesting relief, then this factor will be neutral if the joint returns are compliant with the tax laws, but will weigh against relief if the returns are not compliant. Id. § 4.03(2)(f)(ii). The taxable years to which the request for relief relates are 2008, 2009, and 2012. Mrs. Spitulnik filed her request for innocent spouse relief in November 2017. From 2006 to the current year, the Spitulniks have filed joint returns every year, and only four of the returns have been filed timely. As a result, the IRS has assessed various penalties for noncompliance against the Spitulniks in every taxable year except 2018 and, it would appear, 2019. The Spitulniks 1 2 3 4 5 6 7 8 9 did not file timely returns in all of the years after the 25 years at issue or even in each of the years after the year Mrs. Spitulnik sought relief under section 6015(f). They also did not pay all of their tax obligations after the years at issue in a timely fashion. Accordingly, this factor weighs against relief. See Jones v. Commissioner, T.C. Memo. 2019-139, at *22-*23. 7. Mental or Physical Health Section 4.03(2)(g) of Revenue Procedure 2013-34 10 states: 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 This factor will weigh in favor of relief if the requesting spouse was in poor mental or physical health at the time the return or returns for which the request for relief relates were filed (or at the time the requesting spouse reasonably believed the return or returns were filed), or at the time the requesting spouse requested relief. The Service will consider the nature, extent, and duration of the condition, including the ongoing economic impact of the illness. If the requesting spouse was neither in poor physical nor poor mental health, this factor is neutral. Mrs. Spitulnik suffered from the combined effects of chronic Lyme disease and babesiosis during the 2008, 2009, and 2012 taxable years, and she continues to feel the after-effects of her past medical conditions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 today. Although Mrs. Spitulnik's circumstances began to 26 improve around 2010, when the first of the returns at issue was filed, we consider this factor as weighing in favor of relief. VI. Conclusion A simple tally of the factors set out in Revenue Procedure 2013-34, see supra, results in three neutral factors, one factor weighing in favor of relief, and three factors weighing against relief. Of course, the factors are not to be applied by simply counting favorable and unfavorable factors, giving equal weight to each. Rather, in determining whether equitable relief should be granted, all the facts and circumstances should be taken into account. Rev. Proc. 2013-34, § 4.03(2). Factors other than those listed may be considered, and no one factor or majority of factors necessarily controls the outcome. Id.; see also Hale v. Commissioner, T.C. Memo. 2018-93, at 18 *14-*15. 19 20 21 22 23 24 25 In this case, however, the equities align with the tally. The substantial income the Spitulniks have enjoyed since 2006 weighs heavily against relief, as does their failure to comply timely with their tax obligations in most of those years. As Mrs. Spitulnik said herself, for many years the Spitulniks' considerable resources have been marshalled for her benefit. It is therefore not inequitable to hold Mrs. Spitulnik responsible for the 27 Spitulniks' joint and several tax liability. We sympathize with Mrs. Spitulnik's health challenges, but her health was improving by the time the returns at issue here were filed. And, in any event, we find that the health challenges are outweighed by the other considerations discussed above. Based on the foregoing analysis, we conclude that Mrs. Spitulnik is not entitled to equitable relief under section 6015(f) from the joint and several liability associated with the returns she filed with her husband for the 2008, 2009, and 2012 taxable years. We will therefore sustain the determination made by IRS Appeals. To reflect the foregoing, decision will be entered for respondent. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 3:45 p.m., the above-entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CERTIFICATE OF TRANSCRIBER AND PROOFREADER 28 CASE NAME: Debra L. Zalk Spitulnik, Petitioner and Charles A. Spitulnik, Intervenor v. Commissioner DOCKET NO.: 21686-18L We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 29 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by James Shank on January 29, 2021 before the United States Tax Court at its remote session in Washington, DC, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. _______________________________________________ Meribeth Ashley, CET-507 2/11/21 Transcriber Date _______________________________________________ Jennifer L. Lindeman, CER- 2/11/21 Proofreader Date