TAX COURT OPINION

Case: Teresa J. Fox
Docket Number: 8340-03
Judge: Colvin
Opinion Type: memo
Filed: 02/13/2006
Pages: 7

ADM. ] REC,0RDED S RVICE | CAL. - STAT. JUDGE T. C. Memo. 2006-22 . UNITED STATES TAX COURT TERESA J. FOX, . Petitioner y. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 834·0-03. Filed. February 13, 2006. Teresa J. fox, pro se. Robert V. Boeshaar, for respondent. MEMORANDUM FINDINGS OF E'ACT AND OPINION . . COLVIN, Judge: Respondent determined petitioner is not entitled to relief from joint and several liability under section SERVED FEB 1 3 2006 - 3 - assaulting petitioñer. Mr. Shattun filed for bankruptcy under chapter 13 on a datë not stated in the record and listéd the tax deficiency for 2000 as one of his -debts. B. Petitioner and .Mr. Shattun' s Tax Return for 20Ó0 an<ì Petîtioner' s Tax Returns for 2002 ,and 2003 Petitioner and Mr. Shattun worked. together to prepáre their 2000 joint Form 1040, U.S. Individual Iñcome Tax Return, which they filed on February 11, 2001. They used a well-known brand of tax preparation software. . They reported a distribution of $21,992 from Mr. Shettun's section 401(k) retiremeñt plan on line 16a of that return. They reported a taxable amount of $2,199 on line 16b. Petitioner and Mr. Shattun signed the return electronically. Petitioner and Mr. Shattun reported a tax liability of $5,446 and payments of $11,285, and requested a refund of.$5,839. Respondent determined a d.eficiency of.$6,884 for petitioner and Mr. Shattun resulting from the section 401(k) retirement plan distribution. Respondent also determined that petitioñer and Mr. Shattun are liable for an accuracy-related·penalty of $1.,377. If petitioner does not cfdalify for relief under section 601S}f), she will remain liable for tax and penalties totaling..$8,261.aúd related interest. Petitioner filed.her 2002 and 2003 Federal income tax. returns untimely in August or September 2004. She did not timely pay tax totaling about $5,000 for those years. Petitioner agreed - 5 - A taxpayer qualifies for relief under section 6015(f) if relief is not available under section 6015 (b) or (c) and, in light of the facts and circumstances, it is inequitable to hold the taxpayer liable for the tax or deficiency. Petitioner concedes that she does not qualify for relief under section 6015(b) or (c) but contends she qualifies for relief under section 6015(f). To prevail under section 6015(f), petitioner must show that (cid:16)042 respoñdent's denial of relief from joiht liability was an abuse of discretion. See Rule 142(a);³ Alt v. Commissioner,.119 T.C. 306,. 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004); Jonson v. Commissioner, 118 T.C. 106, 125 (2002), affd. 35.3 F.3d 1181 (10th Cir. 2003); Butler v. Commissioner, 114 T.C. 276, 289-290 (2000). Our determination under section 6015(e) relating. to petitioner's eligibility for relief under section 6015(f) is made pursuant to a trial de novo and is not limited to matter submitted by petitioner before respondent determined whether she (cid:16)042 was eligible for relie.f. Ewing v Commissioner, 122 T.C. 32, 39 (2004), on appeal (9th Cir., June 16, 2004), cross-appeal (9th Cir., July 19, 2004).. 3 Petitioner does not allege that respondent bears the . burden of proof under séc. 7491(a). 4.03, 2003-2 C.B. at 298. We next consider the factors listed in - 7 - Rev. Proc. 2003-61, sec. 4.03. B. Factors in Rev. Proc. 2003-61, Sec. 4.03 1. Whether From the Nonrequesting Spouse the Requestino Spouse Is Separated or Divorced Petitioner's divorce from Mr. Shattun became final on April 22, 2003. This factor favors petitioner. 2. Whether the Recuestino Spouse Would Suffer Economic Hardship If Relief Were Not Granted The Commissioner considers whether payment of tax would cause economic hardship by applying section 301.6343-1(b)(4)(i) and (ii), Proced. & Admin. Regs., which pertains to levy on a taxpayer's property. Generally, the Commissioner considers economic hardship to be present if payment of tax would prevent the taxpayer from paying his or her reasonable basic living expenses. Id. Under the regulation, the Commissioner considers any information provided by the taxpayer in determining a reasonable amount for basic living expenses, including the following: (a) The taxpayer's age, employment status and history, ability to earn, number of dependents, and status as a dependent of someone else; (b) the amount reasonably necessary for food, clothing, housing, medical expenses, transportation, current tax payments or other court-ordered payments; (c) the cost of living in the geographic area in which the taxpayer resides; (d) the amount of _ g _ 3. Whether Know of the Requesting Spouse Knew .or Had Reason To the Item Giving Rise to the Deficiency Petitioner contends that this fact-or does not favor respondent becadse she believed that she and Mr. Shattun properly .reported the $21,992 distrìbution using a well-known computer software program. We disagfee. In the cáse of an income tax liability resulting from a deficiency, the Commissioner is less likely to grant relief under . section 6015(f) if the requesting spouse knew or had.reason to know of. the item givin.g rise to the deficiency. Rev. Proc. 2003- 61, sec. =4.03(2)(a)]iii). Actuäl knowledge of the item giving rise to·the deficiencÿ.is a strong factor weighing against relief. Id. Petitioner had actual knowledge of the $21,992 distribution which generated the tax liability, and she completed the Form 1040 on which she and Mr. Shattun reported the distribution. Petitioner testified that she and Mr. Shattun -relied on the computer software program and her interpretation of.sòurces about tax that she used. The question is whether petitïoner.had . knowledge of the transáction, not whether she had knowledge of its tax.consequences. See Bokum v. Commissioner, 992 F.2d 1132, 1134 (11th Cir. 1993) (knowledge.contemplated by section 6013(e) (...continued) . We conclude that this factor is neutral whether or not her support for her son is a reasonable basic living expense. - 11 - The item giving rise to the deficiency was a $21,992 withdrawal from Mr. Shattun's section 401(k) plan retirement account. Petitioner and Mr. Shattun received a $5,839 refund for the 2000 tax year. Petitioner testified that the distribution and refund went into Mr. Shattun's bank account, and that he used the money to pay for a Jeep, stereo equipment, furniture, and his personal bills. In a statement he filed during the administrative proceeding, Mr. Shattun stated that the 401(k) plan distribution helped to pay for their home, petitioner's outstanding debts, and petitioner's truck. Either of their statements could reasonably be true. Petitioner offered no evidence corroborating her claim. On this record, we find that Mr. Shattun did not receive the sole benefit from the section 401(k) plan distribution and tax refund. This factor is neutral. 6. Whether the Requestino Scouse Made a Good Faith Effort To Comply With Income Tax Laws in Subsequent Tax Years Petitioner contends that she is making a good faith effort to comply with the income tax laws. We disagree. Petitioner did not timely file her 2002 and 2003 individual income tax returns or timely pay her tax for those years. She filed these returns in August or September 2004. She offered no reason for late filing. This factor favors respondent. - 13 - economic hardship, the question of benefit from the underpayment and refund, the absence of a legal obligation of Mr. Shattun to pay the tax, and petitioner's mental condition. The factors weighing against relief are petitioner's- actual knowledge of the item giving rise to the deficiency and her unexplained failure to timely file tax returns for 2002 and 2003. On this record we conclude that respòndent's denial of equitable relief for petitioner from joint Federal income tax liability for 2000 under section 6015(f) was not an abuse of discretion. To reflect the foregoing, Decision will be entered for respondent.