TAX COURT OPINION

Case: Stephanie Renae Hardin
Docket Number: 12331-08
Judge: Chiechi
Opinion Type: memo
Filed: 05/26/2009
Pages: 17

T .C . Memo . 2009-11 5 UNITED STATES TAX COURT 4 t STEPHANIE RENAE HARDIN, Petitioner v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 12331-08 . 'Filed May 26, 2009 . Stephanie Renae Hardin, pro se . Michael W . Bitner , for respondent . MEMORANDUM FINDINGS OF FACT AND OPINIO N CHIECHI, Judge : Respondent determined a deficiency of $2,114 in petitioner's Federal income tax (tax) for her taxabl e year 2006 . SERVE MMAY26Z I# We must decide whether petitioner is entitled to relie f under section 6015(f)' for her taxable year 2006 . We hold tha t she is not . FINDINGS OF FACT .Some of the facts have been stipulated and are so found . Petitioner resided in Iowa at the time she filed .thepeti- tion in this case . (During 2006, petitioner's former spouse, . Maxwell K . Hardin (Mr .E,Hardin), received from the State of Iowa unemploymen t 'compensation totaling $6,817 (Mr . Hardin's unemployment;compensa- tion), . That compensation was deposited into a checking account :.over which Mr . Hardin and petitioner each had signature author- ity ."'Petitioner used funds deposited into that checking account in .order to pay .certain household bills . Petitioner did not receive a benefit beyond normal support from Mr . Hardin's unem- u ployment compensation . . Petitioner and Mr . Hardin jointly filed Form 1040A, U .S . Individual Income Tax Return, for their taxable year 2006 (2006 joint return) . In that return, petitioner and Mr . Hardin did not iA include Mr . Hardin's unemployment compensation in their gros s income . All section references are to the Internal Revenue Code in effect at all relevant times . All Rule references are to the . Tax Court Rules of Practice and Procedure . :1 1 During 2006, petitioner did not work . She began working in - 3 June 2007 . 2 At no time did Mr . Hardin physically or mentally abuse petitioner . Petitioner and Mr . Hardin did not transfer any assets to .each other as part of a'fraudulent scheme between them . Nor did Mr . Hardin transfer to petitioner any disqualified assets as, defined in section 6015 (c) (4) (B) (i) . .Petitioner timely filed a tax return for her taxable yea r 2007 . On February 25, 2008, respondent issued to petitioner and Mr . Hardin a notice of .deficiency with respect to their taxable year 2006 (2006 notice) . In that notice, respondent determined that Mr . Hardin's unemployment compensation is includible in the gross income of petitioner and Mr . Hardin . On May 20, 2008, petitioner filed the petition in this case . On August 19, 2008, petitioner and Mr . Hardin divorced(cid:127)and a stipulated decree of dissolution of marriage'(divorce decree) was entered . Although that decree contains provisions regarding .the rights of petitioner and Mr . Hardin to claim certain dependency exemptions and child tax credits with respect to their children, it does not provide that Mr . Hardin has a legal obligation to pa y 2The record does not disclose the type of work that petitioner did during 2007 . any outstanding ,tax liability : that he and petitioner incurred while married . On'October, 24, 2 .008, after petitioner had filed the petition in this case, she submitted to respondent's Appeals Office (Appeals Office) .. Form 8857,-Request f.or .Innocent Spouse .Relief (And Separation of Liability and Equitable Relief .), with respect to her taxable year 2006 (petitioner's ._Form 8857) . -,Petitioner attached a statement to that form that stated : I feel I . should not be responsible to pay, .this . The year of 2006 I did not work . My ex husband is . the one who * * * took care of our taxes . Yes I knew he had received unemployment at times during that year . It is * * * my fault 'I did not read over the ta x return before signing it, but even if I had I .still did not , know before ,this situation occured [sic] that .,* you have to * * * claim unemployment on tax returns . He .(my ex) never told me he had to . Each year he either did them online or took them to someone to d o is for us and I just signed it-when it 'was done ., Petitioner was in good physical and mental health when she, and :Mr . Hardin filed their 2006 joint return and when she submit ted epetitioner' s .:. Form .8857, .. to ithe .Appeals 'Offic e ii ~'A settlement officer-with the-Appeals Office (settlement offic!er)' who-was assigned petitioner's Form 8857 reviewed peti- tioner's request~forrelief .under section 6015(b) (c), and (f ) and ;determined that she was not entitled to that relief :- -'The ,E settlement officer-prepared a : memorandum setting forthther . reasons for that determination . That memorandum stated in pertinent part : 5 GENERAL BACKGROUN D * * * The information return matching program found that the 2006 joint tax return filed by the petitioner and her ex-husband failed to report $6,817 of unemployment compensation . On December 10, 2007 the taxpayer was issued a .CP2000 notice informing both her and her ex-husband of the addition to tax due to the .unreported unemployment income . The case file does not contain any information showing if the taxpayer responded to the CP2000 notice . A statutory notice of deficiency was issued on February 25, 2008 . The understatement of . tax shown on the notice was $2,114 . . There were no penalties or additions to tax .shown on the notice . Only * * * [petitioner] filed a tax court petition protesting the amounts shown on the statutory notice . * * * [Mr .] Hardin did not petition the tax court . The amount in question has been assessed on an MFT 31 account for * * * [Mr .] Hardin . The tax court petition filed by states the following : * * * [petitioner ] "I feel I should not have to pay this mainly because I did not work,the year in question . Also, my ex-husband is the one who had the taxes filed that .year . I just signed-the papers when they were ready . I did not work most of the year in 2005, none in 2006, and only a few, months toward the end of 2007 . My soon to be ex-husband was the main provider of the household and took care of filing all of the taxes . " It should be noted that * * * [petitioner] does not disagree with the adjustments related to the unreported unemployment income . She just feels she should not be held responsible for the additional tax . She believes the income was her ex-husband's .and that he should be solely responsible for paying the additional tax owed . *' * * [Petitioner ] provided a form 8857 * * * to the tAppeals Office . She attached a written statement to the form stating why she should qualify for innocent spouse relief . After a telephone conference with * * * . [petitioner], it was determined that she did not qualify for innocen t ,spouse relief . She does not, agree with the position the government is , taking . in denying her innocent spouse request . This case,is being sent over for trial preparation, because the Appeals Officer and (cid:127)* * * [petitioner] could not reach an agreement regarding the Innocent spouse Issue . * Is the taxpayer entitled to relief from liability under ,,Internal Revenue Code Section 6015 ? SUMMARY AND RECOMMENDATION No the taxpayer is not entitled to receive innocent spouse relief . The taxpayer does not qualify for-relief under . Internal Revenue Code Sections 6015(b) and (c) . The factors in favor of granting relief under Code Section 6015(f) are outweighed by the factors against granting relief . Therefore, it is recommended that the taxpayer's request for innocent spouse relief be denied . DISCUSSION AND ANALYSI S 6015 (f ) Relief is, provided for under code section 6015(f) if, taking into account all the facts and Circumstances, it is inequitable to hold, the individual liable for any unpaid tax or any Deficiency (or any portion of either) ; and relief is not available under subsection 6015(b) or (c') . Threshold Factors under IRC Section 6015(f ) A joint return was filed . IRC Sections 6015(b) and (c) are not available . There was a timely application for relief . There is no evidence of fraudulent transfers of assets . _ There is no evidence of disqualified assets transferred . There is no . evidence . a . fraudulent joint return presented . The taxis attributable to,the non-requesting spouse . Exceptions : Attribution is solely due to . community property rule s Ownership of income is in name only The non-requesting spouse misappropriated funds to pay the tax The requester suffered'from abuse and didn't challenge the taxes for fear of retaliatio n Based upon the facts known to the Appeals Officer, the threshold factors have been met by the taxpayer . TIER I AND TIER II Factors of section 6015(f ) Following are the circumstances-under which equitable relief under section 6015(f) will Ordinarily be granted . TIER I - applies to underpayment cases . to this situation . This case is a result of a deficiency on unreported ; items on the tax return . Does not apply (1) In cases where a liability reported on a join t return is unpaid, equitable relief under 6015(f ) ALL of will ordinarily be granted in . cases were the following elements are satisfied : (a) At the time relief is requested , the request- ing spouse is . no longer married to, is legally separated from, the nonrequesting . spouse, or has not been a member of the same household as the requesting spouse at any time during the 12-month period ending on the date relief was requested ; (b) At the time the return was signed, the re questing spouse had no knowledge or reason to know that the tax would not be paid, The requesting spouse must establish that it was reasonable for the requesting . spouse to believe that the nonrequesting spouse would pay the reported liability . If .a requesting spouse would otherwise qualify for relief under this section, except for the fact that the requesting spouse had no knowledge or reason to know of only a portion .of the unpaid liability, then the requesting spouse ._ may be granted relief only . to the extent that the liability is-attributable to such portion ; and (c) The requesting spouse will suffer economic hardship if relief is not granted . For purposes of this section, the determination of whether a requesting spouse will suffer economic hardship will be made by the Commissioner or the Commissioner's delegate, and will be based on rules similar to those provided in Section 301 .6343-1(b)(4) of the Regulations on procedure and Administration . (the same as those provided in the economic hardship provisions for offers and compromise) . TIER I I The .Secretary may grant equitable relief under Section 6015(f) or 66(c) if, taking into account all of the facts and circumstances, it is inequitable to hold the requesting spouse liable for-all or part of the unpaid liability or deficiency . The following is a partial list of the positive and negative factors that will be taken into account in determining whether to grant full or partial equitable relief under Section 6015(c) or 66(c) . No single factor will be determinative of, - 9 - whether equitable relief will or will not be granted in any particular case .' Rather, all factors will be considered and weighed appropriately . The list is not intended to be exhaustive : (a) Marital status . The requesting spouse is separated ( whether . legally separated or living apart ) or divorced from , the nonrequesting., spouse . MEETS . The taxpayer meets this item . The taxpayer is recently divorced from her exhusband . She is currently living with her boy friend . This factor weighs in favor of the requesting spouse . (b) Economic Hardship . The-requesting spouse would suffer economic hardship (within the meaning of section 4 .02(1)(c) of this revenue ,procedure) if relief from liability . is not granted . DON'T KNOW . The taxpayer was provided with a form 8857 along with the related extensive questionnaire worksheet that gathers the data needed to make this determination . She provided Appeals with the form 8857 but not the worksheet and questionnaire . it may be appropriate to note that she recently had a baby at the end of October, 2008 . During the Appeals conference, she stated she was only going to take a short period of time off . after the birth of child . However, because she does not want to pay the deficiency, she is considering not working for at least 6 months or longer . This is a possible indicator that she would would not suffer an economic hardship if she were required to pay the amount owed . (c) No knowledge or reason to know . In the . case of a liability that was properly reported but not paid, the requesting spouse did not know and had no reason to know that the liability would not be paid .' In the case of a liabil- - 10 - A ity .that : arose from a' . deficiency., the re-' . questing spouse did not know or had no reason to know of, the item that gave rise to the liability . _ . DOES NOT .MEET . The requesting spouse has .acknowledged she knew her ex-husband received the unreported : unemployment benefits . She paid household bills with the unreported income . .This factor does not favor the requesting spouse . (d) Nonrequesting Spouse's legal obligation . The nonrequesting spouse has a legal obligation pursuant to a divorce decree,or agreement to pay the outstanding liability .' This will not be a, factor weighing, in- .favor of relief if the requesting spouse. knew or had reason to know, at the time the divorce decree or agreement was entered into, that the nonrequesting spouse would not pay the liability . DOES NOT MEET ., The divorce decree does not address any legal obligation of either spouse to,pay the understatement of income tax . This factor does not favor . the requesting spouse . (e) Significant benefit . The requesting spouse has significantly benefited ( beyond normal support ) from the unpaid liability or items giving rise to the .deficiency . See Sectio n MEETS .. The ;requesting'spouse did not benefit , .from the ., unreported income . The unemployment .benefits received were used to pay the normal household . bills . This factor favors the requesting spouse . (f) .Compliance with federal income tax laws . The requesting spouse ,has made a good faith effort to comply with federal income tax laws - 11 - in the tax years following the tax year or years to which the request for relief relates . The requesting spouse meets this MEETS . factor in considering relief . The requesting spouse filed a joint return with her ex-husband for the 2005 and 2006 tax years . She filed as head of household for the 2007 tax year . This factor favors the requesting spouse . (g) Abuse . The requesting spouse was abused by the nonrequesting spouse ; But such abuse did not amount to duress . . DOES .NOT MEET . The requesting spouse was not abused by her ex-husband . This factor does not favor granting innocent spouse relief . (h) Mental or physical health . Whether the re- questing spouse was in poor mental or physical health on the date the requesting spouse signed the'return or :at the time the relief was requested . DOES NOT MEET . The requesting spouse was in good mental and physical health - both at .the time the return was signed and at the time the innocent spouse relief was requested . This factor does not favor granting innocent spouse relief . Taking into account all of the .facts and circumstances of this case, I_DO NOT THINK it is inequitable, under Section 6015(f) to hold the taxpayer liable for any unpaid tax or any deficiency . [Reproduced literally .] 12 - OPINION The only dispute between the parties is whether petitioner is entitled to relief under section 6015(f) .3 Petitioner bear s the burden of proving that she . is entitled to relief under tha t section .' See Rule 142(a) ;, Jonson v . Commissioner , 118 T .C . 106, 113 (2002), affd . 353 F .3d 1181 (10th Cir . 2003) . Section,6015(f) provides : SEC . 6015 . RELIEF FROM JOINT AND SEVERAL LIABILITY ON, JOINT RETURN . (f) Equitable Relief .--Under procedures prescribed by the Secretary, if-- (1) taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency .(or any portion .of either) ; and _ (2) relief is not available to such individ- ual under subsection (b) or-(c) , the Secretary may relieve such individual of such liability . 11 As~directed by section 6015(f), the Commissioner of Internal i~ Revenue (Commissioner) has prescribed procedures in Rev . Proc . 2003-61, 2003-2 C .B . 296 (Revenue Procedure 2003-61), that are to be used in determining . whether it would be inequitable to fin d 3Petitioner agrees that the deficiency that respondent determined in the 2006 notice is correct . Petitioner also agrees that she is not entitled to relief under sec . 6015(b) or (c) . '4 In a so-called stand-alone nondeficiency case, the standard Porter v . Commissioner , of review under sec . 6015(f) is de novo . 132 T .C . _ (2009) . - 13 - the requesting spouse liable for part or all of the deficiency in question . That revenue procedure lists seven threshold condi- tions (threshold conditions) which must be satisfied before the Commissioner will consider a, request for relief under section 6015(f .) . Rev . Proc .. 2003-61, sec . .4 .01, 2003-2 C .B . at 297 . Respondent concedes that those conditions are satisfied in the instant case . Where, as here, the requesting spouse satisfies the thresh- old conditions, Revenue Procedure 2003-61 sets forth the follow- ing factors that are to be considered in determining whether that spouse is entitled to relief under section 6015(f) :5 (1) Whether the requesting spouse is separated or divorced from th e nonrequesting spouse (marital status factor) ; -(2) whether the requesting spouse would suffer economic hardship if not granted relief (economic hardship factor) ; (3) whether the requestin g 'Other factors that may be considered under Revenue Proce- dure 2003-61 are (1) whether the,nonrequesting spouse abused the requesting spouse (abuse factor) and (2) whether the requesting spouse was in poor mental or physical health (mental or physical health factor) when he or she signed the tax return (return) or when-he or she requested relief . Rev . Proc . 2003-61, sec . 4 .03(2)(b), 2003-2 C .B . 296, 299 . In the event that (1) the, nonrequesting spouse abused the requesting spouse or (2) the, requesting spouse was in poor mental or physical . health when he or she signed the return or when he or she requested relief,,the abuse factor or the mental or physical health factor, as the case may be, will be taken into account . here, (1) the nonrequesting spouse did not abuse the requesting spouse and (2) the requesting spouse was not in poor mental or physical health when she signed the return or when she requested relief, those factors are not taken into account . However, where, as Id . Id . ,, - 1 4 spouse' knew or had reason to know of .the . item giving rise . to the deficiency - (knowledge, factor) ; (4) ,whether -the nonrequesting spouse has a legal obligation to pay the outstanding tax liabil- ity pursuant-to a divorce decree or agreement (legal obligation factor) ;' .(5) whether the requesting spouse received a-significant . benefit from the item giving- .rise to-the deficiency (significan t r benefit factor) ; and (6) whether the requesting spouse has made a good faith effort to comply with the tax-laws for the taxabl e years .1,following the taxable year t o which the request for such -relief "relates (compliance factor) . Rev .(Proc . 2003-61 sec . 4 .03(2)°(a), 2003-2 C .B . at 298-299 . In making our determinatio n under section 6015(f), we shall consider those factors and an y other, relevant factors . No single factor is tobe determinativ e in(cid:127)any'particular case, an d all factors .are to be considered and weighed :appropriately .. . With respect to the marital status factor, on August 19 , 2008,,, petitioner and Mr . Hardin divorced . , ,1 With respect to the economic hardship . factor,6 petitione r 6In determining whether a requesting spouse will suffer economic hardship, sec .=4 .02(1)(c) of Revenue Procedure 2003-61 requires r"'eliance on'rules similar to those provided in sec . 301° :6;343-1(b)(4-), Proced . & Admin . Regs . That regulation generallyprovides that an individual suffers an economic hardship if the individual is'unable'to pay his or her reasonable basic living expenses . 'Sec . 301 .6343-1(b)(4), Proced . & Admin . Regs ., pro'vi'des in pertinent part (continued . . . ) i 15 - did not present any evidence, and on the .. record before us we ;find that she has failed to carry her burden of, establishing that she would suffer economic hardship if relief under section 6015(f) were not granted . With respect to the knowledge factor, although petitioner acknowledges that she knew that~Mr .- Hardin received unemploymen t 6( . . . continued ) (ii) Information from taxpayer .- In determining a- reasonable amount for basic living expenses the director will .consider any information provided by the taxpayer including-- (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 (including utilities, home-owner insurance, home-owner dues, and the like), medical expenses (including health insurance), transportation , current tax payments (including federal, state, and local), alimony, child . support ., or other court-ordered payments, and expenses necessary to the taxpayer's production of income (such as dues for a . trade union or professional organization, or child care payments which allow the taxpayer to be gainfully employed) ; (C) The cost of living in-the geographic area in which the taxpayer resides ; (D) The amount of property exempt from levy which is available to pay the taxpayer' s' expenses ; (E) Any extraordinary circumstances such as special education expenses, a medical catastrophe, or natural disaster ; and (F) Any other factor that the taxpayer claims bears on economic hardship and brings to the attention of the director . - 16 - compensation during 2006,-she-claims that she is entitled to relief„ under section' 6015 (f) t"because 'she did not know . that she and Mrp . Hardin were required to include that compensation in their income. for that year . We reject that claim . .In assessing the knowledge factor, what, is"important is'that petitioner knew that . Mr . Hardin received unemployment compensation during 2006 and not that she did not know that she and Mr .-Hardin were required to include that . compensation in their income for tha t year,, . With respect to the legal obligation factor, the divorce decree does ndt provide that Mr . Hardin has a legal obligation to pay any outstanding tax liability that he and petitioner incurre d while married'. With respect--to the significant benefit factor, petitione r did not receive, a benefit beyond normal support from Mr . Hardin's unemployment compensation . Normal support is not a 'significant benefit . Flynn v . . Commissioner ,, ,93 T . C . 355, 367 (1989 ) With respect to the,compliance factor, petitioner filed a return for her taxable year 2007 . Based .upon our .examinationoof the entire record before us, we find that . petitioner has failed to carry her burden of estab- lishing that it would be inequitable to hold her liable for the deficiency that respondent determined for her taxable year 2006 . On that record, we further find that petitioner has failed to P - 17 - carry her burden of establishing that she is entitled to relief under section 6015(f) . We have considered all of the contentions and arguments of the parties that are not discussed herein, and we find them to be without merit, irrelevant, and/or moot . To reflect the foregoing, Decision will be entered for respondent .