t c memo united_states tax_court gregory a power and amy s power petitioners v commissioner of internal revenue respondent docket no filed date william j sollmann for petitioners gary r shuler jr for respondent memorandum findings_of_fact and opinion ruwe judge in two separate notices of deficiency respondent determined deficiencies additions to tax and accuracy-related_penalties as follows gregory a power addition_to_tax accuracy-related_penalty year deficiency sec_6651 sec_6662 dollar_figure dollar_figure dollar_figure gregory a power and amy s power addition_to_tax accuracy-related_penalty year deficiency sec_6651 sec_6662 dollar_figure dollar_figure dollar_figure big_number dollar_figure dollar_figure after concessions the issues remaining for decision are whether mr power incurred net operating losses nol in the taxable years which would be available as carryover nol deductions against income for the taxable years whether mr power received distributions from his wholly owned subchapter_s_corporation in excess of his stock basis in the corporation for the taxable years and whether petitioners are liable for accuracy-related_penalties under sec_6662 for the taxable years and at trial on date the parties filed a stipulation of settled issues in which petitioners concede various adjustments that respondent made in the notices of deficiency including that mr power is liable for the addition_to_tax under sec_6651 for the taxable_year and petitioners are liable for the additions to tax under sec_6651 for the taxable_year sec_2010 and sec_2011 unless otherwise indicated all section references are to the internal_revenue_code code in effect for all relevant years and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts the stipulation of settled issues and the attached exhibits are incorporated herein by this reference petitioners resided in ohio at the time their petition was filed mr power is a commercial real_estate broker and mrs power is a former school teacher mr power graduated from high school in and thereafter enrolled in a general business degree program at miami university in the fall of in the summer of mr power enrolled in the business studies program at the university of cincinnati but he left college after the spring semester of without completing a degree the state of ohio and the commonwealth of kentucky issued mr power real_estate broker licenses on date and date respectively mr power has maintained both licenses since the respective dates of issuance power realty advisors in mr power started his own real_estate brokerage firm power realty advisors inc power realty on date power realty filed articles of incorporation with the ohio secretary of state and it elected to be treated as a subchapter_s_corporation on date mr power is the sole shareholder of power realty on date power realty leased an office suite on montgomery road in cincinnati ohio in power realty had two employees and used paychex as its third-party payroll provider debbie berger a secretary who is not a certified_public_accountant c p a kept and maintained the books_and_records for power realty in power realty let ms berger go and downsized to a smaller office suite on hosbrook road in cincinnati ohio for the taxable years mr power maintained itemized profit and loss and transactions by account documents for power realty mr power has no formal training in tax or accounting mr power has been a licensed real_estate broker for years before starting power realty in mr power worked for frederick schmidt and chelsea moore respectively which are real_estate firms in cincinnati ohio power realty’s forms 1120s power realty filed forms 1120s u s income_tax return for an s- corporation for the taxable years which were prepared by either attorney c christopher muth or c p a andrew j bucher when mr muth prepared returns mr power would typically provide him with one or two sheets of paper with handwritten income and expense categories and corresponding amounts mr power would provide underlying documentation to mr muth o ccasionally but not very frequently the record does not establish whether mr power followed a similar protocol for tax returns that mr bucher prepared the following table is a summary of pertinent items reported on power realty’s forms 1120s for the taxable years date ordinary_income_property filed year income or loss items distributions --- dollar_figure -0- -0- --- big_number -0- -0- big_number -0- -0- big_number -0- -0- big_number -0- -0- big_number -0- -0- big_number -0- -0- big_number -0- -0- mr muth prepared power realty’s forms 1120s for the taxable years and and amended forms 1120s for the taxable years mr bucher prepared power realty’s forms 1120s for the taxable years and amended form_1120s for the taxable_year big_number -0- -0- big_number -0- -0- big_number -0- -0- big_number -0- -0- big_number -0- dollar_figure big_number dollar_figure big_number on its form_1120s for the taxable_year ie the first taxable_year in issue power realty reported on its nol worksheet nol carryovers as follows year nol dollar_figure big_number big_number big_number total big_number power realty compensated mr power through distributions rather than wages or salary however power realty did not report any distributions to mr power on its forms 1120s for the taxable years mr power used funds from power realty to pay personal living_expenses of petitioners for each of the taxable years furthermore during the taxable years power realty claimed deductions on its forms 1120s for certain personal living_expenses of mr power in mr power purchased a three-bedroom three-bathroom ranch on north clippenger drive in cincinnati ohio clippenger residence for dollar_figure on date mr power wired dollar_figure from two certificates of deposit cds at u s bank to national city bank for the purchase of real_property at tudor hill estates in indian hill ohio indian hill property mr power requested that the balance of the cds dollar_figure be transferred to power realty’s bank account petitioners purchased the indian hill property using the money wired from u s bank and dollar_figure from power realty in petitioners moved out of the clippenger residence petitioners rented the clippenger residence for and the first seven months of before selling it in petitioners’ tax returns mr power filed form sec_1040 u s individual_income_tax_return for the taxable years claiming single status petitioners were married on date and mr power claimed married_filing_separately status on his form sec_1040 for the taxable years petitioners jointly filed their and form sec_1040 either mr muth or mr bucher prepared mr power’s tax returns for the taxable years and petitioners’ tax returns for the taxable years after the incorporation of power realty in mr muth advised mr mr muth prepared mr power’s form sec_1040 for the taxable years and mr power’s form sec_1040x amended u s individual continued power that all income and expenses from power realty had to be reported on forms 1120s and that the resulting net_income or loss would flow through to mr power’s individual tax_return despite this advice and for reasons unclear from the record mr power split the income and expenses of power realty between schedules c profit or loss from business attached to form sec_1040 and forms 1120s the following table is a summary of the adjusted_gross_income and schedule c income loss on mr power’s form sec_1040 for the taxable years date adjusted schedule c filed year gross_income income loss dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number continued income_tax return for the taxable_year sec_2001 and and petitioners’ form sec_1040 for the taxable years mr bucher prepared mr power’s form sec_1040 for the taxable years and mr power’s form 1040x for the taxable_year it is unclear from the record who prepared mr power’s form_1040 for the taxable_year big_number big_number big_number big_number big_number big_number big_number the parties have stipulated the above-referenced dates and amounts however there appear to be inconsistencies between certain stipulated amounts and the amounts reported on the corresponding tax returns we have corrected these discrepancies to comport with the underlying exhibits on date respondent received from mr power a form 1040x for the taxable_year which was signed by mr muth as the tax_return_preparer respondent received from power realty an amended form_1120s for the taxable_year on date and amended forms 1120s for the taxable years and on date because respondent received the amended forms 1120s during the examination process he did not process them on the amended forms 1120s for the taxable years mr power removed the previously claimed deductions for personal expenses respondent received from mr power form sec_1040x for the taxable years and on june and date respectively on the amended returns for and mr power removed all items previously reported on schedules c however because respondent received the and amended mr bucher signed the amended_return as the tax_return_preparer and mr muth signed the amended_return returns during the examination of mr power’s and petitioners’ returns respondent did not process either form 1040x on date respondent issued petitioners two separate notices of deficiency the first was issued to mr power individually for the taxable_year and the second was issued to petitioners jointly for the taxable_year sec_2010 and sec_2011 petitioners timely filed a petition disputing respondent’s determinations in the notices of deficiency opinion the commissioner’s determinations in the notice_of_deficiency are generally presumed correct and the taxpayer bears the burden of proving that those determinations are in error see rule a 290_us_111 the taxpayer is required to maintain records sufficient to enable the commissioner to determine his or her correct_tax liability see sec_6001 sec_1_6001-1 income_tax regs pursuant to sec_7491 the burden_of_proof with respect to relevant factual issues may shift to the commissioner specifically sec_7491 provides if in any court_proceeding a taxpayer introduces credible_evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any_tax imposed by subtitle a or b the secretary shall have the burden_of_proof with respect to such issue section a further provides that the burden_of_proof shifts to the commissioner only when the taxpayer has complied with the requirements under this title to substantiate any item and maintained all records required under this title and has cooperated with reasonable requests by the secretary for witnesses information documents meetings and interviews credible_evidence is the quality of evidence which after critical analysis the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted 116_tc_438 quoting h_r conf rept no pincite 1998_3_cb_747 petitioners did not retain records to comply with the code’s substantiation requirements or provide credible_evidence therefore we hold that sec_7491 does not apply to shift the burden_of_proof to respondent net_operating_loss the first issue for decision is whether mr power incurred nols in the taxable years that gave rise to a dollar_figure nol_carryover which was subsequently available to offset his gross_income beginning in the taxable_year in the notice_of_deficiency issued to mr power individually respondent disallowed in its entirety mr power’s claimed dollar_figure nol_carryover deduction to the taxable_year sec_172 allows a taxpayer to deduct an nol for a taxable_year the amount of the deduction equals the aggregate of the nol carrybacks and carryovers to the taxable_year sec_172 sec_172 defines an nol as the excess of deductions over gross_income computed with certain modifications specified in sec_172 absent an election under sec_172 an nol for any taxable_year must first be carried back years and then carried over years sec_172 sec_172 provides election to waive carryback --any taxpayer entitled to a carryback period under paragraph may elect to relinquish the entire carryback period with respect to a net_operating_loss for any taxable_year such election shall be made in such manner as may be prescribed by the secretary and shall be made by the due_date including extensions of time for filing the taxpayer’s return for the taxable_year of the net_operating_loss for which the election is to be in effect such election once made for any taxable_year shall be irrevocable for such taxable_year although it is inconsequential to our decision the record does not indicate that mr power made such an election in sec_172 was amended to generally require a 2-year carryback and a 20-year carryover for nols incurred in taxable years beginning after date see taxpayer_relief_act_of_1997 pub_l_no sec_1082 sec_111 stat pincite before this amendment sec_172 generally required a 3-year carryback and a 15-year carryover nols and the carryback and carryover thereof are determined pursuant to the law applicable to the year in which the losses occurred without regard to other years to which losses are carried continued petitioners bear the burden of establishing both the existence of nols and the amounts of the losses that may be carried over to the taxable years see rule a 115_tc_605 an nol deduction is a matter of legislative grace it is not a right 349_us_232 petitioners’ argument as we understand it is that mr power and power realty incurred nols totaling dollar_figure in the taxable years which were available to offset mr power’s income beginning with the taxable_year petitioners acknowledge the absence of sufficient records to substantiate their claimed nol_carryover to the taxable years however petitioners contend that they have reconstructed a reasonable loss carryover scenario in a situation where the actual books_and_records are not available to fully substantiate the claimed net operating losses petitioners must prove not only that mr power incurred nols in but also that the nols were not absorbed during the period beginning with the earliest carryback_year and ending with the last year before the continued back or forward sec_1_172-1 and income_tax regs because petitioners argue that the nol carryovers at issue were generated from we will apply sec_172 as amended in first taxable_year in issue to meet this burden petitioners must introduce convincing evidence that mr power incurred nols in the taxable years and also prove mr power’s taxable_income for the period beginning with and ending with see eg leitgen v commissioner tcmemo_1981_525 aff’d without published opinion 691_f2d_504 8th cir petitioners introduced as evidence copies of form sec_1040 for the taxable years and copies of form sec_1040x for the taxable_year sec_2001 and copies of power realty’s forms 1120s for the taxable years and copies of power realty’s amended forms 1120s for the taxable years from these tax returns petitioners argue that the court can apply the cohan_rule to estimate the nol carryovers to the taxable years under the cohan_rule if a taxpayer establishes that an expense is deductible but is unable to substantiate the precise amount the court may estimate the amount bearing heavily against the taxpayer whose inexactitude is of his or her own making see 39_f2d_540 2d cir however to apply the cohan_rule the court must have some information to estimate the proper deduction see 85_tc_731 petitioners have provided no testimony or other evidence sufficient to enable us to make a reasonable estimate of the purported nols petitioners did not introduce books records bills or receipts to establish the income and expenses of power realty for or any other taxable_year to substantiate the claimed nols petitioners rely exclusively on copies of tax returns and it is well settled that tax returns alone do not establish that a taxpayer suffered a loss see lehman v commissioner tcmemo_2010_74 tax ct memo lexi sec_76 at the record before us does not establish that mr power incurred nols for or any other taxable years preceding the taxable_year furthermore copies of tax returns are insufficient by themselves to prove that the purported nols were not completely absorbed before the taxable years in issue see id tax ct memo lexi sec_76 at citing stutsman v commissioner t c memo see also hoopengarner v commissioner tcmemo_2003_343 tax ct memo lexis at without additional evidence eg books records bills and receipts this is not a case in which the application of the cohan_rule would be appropriate accordingly we sustain respondent’s disallowance of mr power’s claimed nol_carryover deductions because petitioners failed to prove facts showing that they are entitled to those deductions mr power’s stock basis in power realty the second issue for decision is whether mr power received distributions from power realty in excess of his adjusted stock basis in the s_corporation in the notices of deficiency respondent determined inter alia that power realty made distributions to mr power of dollar_figure for dollar_figure for dollar_figure for and dollar_figure for respondent also determined that mr power had a zero stock basis in power realty as of date petitioners contend that there was no distribution from power realty in excess of mr power’s adjusted stock basis in the s_corporation specifically petitioners contend that mr power had a basis in power realty of dollar_figure in and that no as a result of respondent’s adjustments in the notice_of_deficiency for the taxable_year a dollar_figure nol was generated and carried over into the taxable_year respondent computed mr power’s stock basis in power realty as of date as follows ordinary_income of dollar_figure plus ordinary dividends of dollar_figure equals a stock basis of dollar_figure before distributions minus distributions of dollar_figure equals stock basis of dollar_figure before non- deductible expenses and depletion minus nondeductible expenses of dollar_figure equals stock basis of dollar_figure before allowable losses and deductions minus sec_179 deduction of dollar_figure and charitable_contribution_deduction of dollar_figure equals a stock basis of zero distributions in excess of that basis were made to mr power from power realty for any of the taxable years sec_1366 provides that an s_corporation shareholder determines his or her tax_liability by taking into account his or her pro_rata share of the s corporation’s income losses deductions or credits for the s corporation’s taxable_year ending with or in the shareholder’s taxable_year the shareholder may not take into account however s_corporation losses and deductions for any taxable_year in excess of the shareholder’s adjusted_basis in the s corporation’s stock and debt sec_1366 generally sec_1368 provides that distributions from an s_corporation with no accumulated_earnings_and_profits are not included in the gross_income of the shareholder to the extent that they do not exceed the adjusted_basis of the shareholder’s stock and any excess of adjusted_basis is treated as gain from the sale_or_exchange of property sec_1367 provides that basis in s_corporation stock is increased by income passed through to the shareholder under sec_1366 and decreased by inter alia distributions not includable in the shareholder’s income pursuant to sec_1368 a shareholder may increase his or her basis in an s_corporation if he or she makes an economic outlay to or for the benefit of the s_corporation 944_f2d_747 10th cir 875_f2d_420 4th cir aff’g 90_tc_206 an economic outlay for this purpose is an actual contribution of cash or property by the shareholder to the s_corporation or a transaction that leaves the s_corporation indebted to the shareholder sec_1366 a taxpayer must establish that he has acquired basis in the referenced stock and to the extent that he does that his basis was not reduced to zero because of losses claimed in years predating the subject year arnold v commissioner tcmemo_2003_259 tax ct memo lexis at hogan v commissioner tcmemo_1999_365 tax ct memo lexi sec_420 at a taxpayer who fails to prove that he or she has any basis in an s_corporation is considered to have a zero basis in that corporation thomson v commissioner tcmemo_1983_279 aff’d without published opinion 731_f2d_889 11th cir thus petitioners bear the burden of proving that mr power had sufficient basis in power realty mr power did not maintain a basis schedule for his power realty stock to establish mr power’s basis in his power realty stock petitioners offered power realty’s forms 1120s for the taxable years and a reconstructed stock basis chart attached as an appendix to their posttrial brief to begin with the forms 1120s do not include sufficient information for us to establish mr power’s basis in power realty see 94_tc_863 aff’d 954_f2d_653 11th cir it is also unclear how petitioners calculated mr power’s stock basis in power realty using forms 1120s given that power realty’s income and expenses were improperly divided between mr power’s schedules c and power realty’s forms 1120s further petitioners stipulate that mr power was compensated by power realty through distributions not wages or salary and that petitioners used power realty’s checking account to pay substantial personal expenses during the taxable years on the basis of the record before us petitioners have not established that mr power had basis in power realty stock or that he did not receive distributions from power realty as respondent determined in the notices of deficiency accordingly we conclude that mr power’s adjusted stock basis in power realty was zero and that he received distributions from power realty as respondent determined in the notices of deficiency miscellaneous issues in the notices of deficiency respondent made various adjustments to income and expenses affecting mr power’s and petitioners’ taxable_income for the taxable years at trial on date the parties filed with the court a stipulation of settled issues in which petitioners agreed to most of respondent’s adjustments in the notices of deficiency however certain issues remained unresolved after the filing of the stipulation of settled issues including adjustments to deductions claimed on schedules a itemized_deductions for the taxable years and adjustments to personal exemptions for the taxable years and petitioners provided no evidence or argument concerning these remaining issues consequently petitioners are deemed to have conceded these issues pursuant to rule b to the extent that these adjustments are dependent upon our decisions above--and thus are computational-- they are to be resolved in the parties’ rule_155_computations accuracy-related_penalties in separate notices of deficiency respondent determined that mr power for the taxable_year and petitioners for the taxable_year sec_2010 and sec_2011 are liable for accuracy-related_penalties pursuant to sec_6662 and b and for negligence or substantial understatements of income_tax respondent bears the burden of production with respect to these penalties see sec_7491 to meet in the notice_of_deficiency respondent indicates that petitioners’ taxable_income on their filed return is and adjusts this number upward by big_number resulting in a revised taxable_income of big_number it appears that the taxable_income reported on petitioners’ filed form_1040 for the taxable_year is -dollar_figure and thus the dollar_figure upward adjustment should be made from this amount however petitioners made no argument concerning this apparent discrepancy to the extent that this is in fact an error it should be resolved by the parties in their rule_155_computations this burden respondent must produce evidence establishing that it is appropriate to impose the penalties once respondent has done so the burden_of_proof is on petitioners to show that the penalties do not apply see higbee v commissioner t c pincite negligence includes any failure to make a reasonable attempt to comply with the provisions of the internal revenue laws and the failure to exercise due care or the failure to do what a reasonable and prudent person would do under the circumstances sec_6662 see also 85_tc_934 sec_1_6662-3 income_tax regs negligence also includes any failure by the taxpayer to keep adequate books_and_records or to substantiate items properly sec_1_6662-3 income_tax regs mr power individually and petitioners jointly exhibited a lack of due care in failing to accurately report income and properly substantiate expenses for the taxable years the record establishes that petitioners used funds from power realty for personal expenses and did not retain records pertinent to the taxable years furthermore mr power did not supply his tax_return_preparer mr muth with adequate information or underlying documentation to prepare personal or corporate tax returns and inexplicably ignored mr muth’s advice to report all activity of power realty on forms 1120s respondent has met his burden of production with respect to the sec_6662 penalties for negligence the accuracy-related_penalty does not apply with respect to any portion of the underpayment for which it is shown that the taxpayer had reasonable_cause and acted in good_faith sec_6664 petitioners argue that they relied in good_faith on tax_return_preparers to prepare accurate income_tax returns however the record indicates that petitioners provided mr muth with insufficient information to prepare their personal and corporate tax returns and ignored certain of mr muth’s advice accordingly we hold that mr power for and petitioners for and are liable for the sec_6662 penalties for negligence in reaching our decision we have considered all arguments made by the parties and to the extent not mentioned or addressed they are irrelevant or without merit to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number --------------------------- ----------------------------------------- -------------------- ------------------------------- ------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-125740-15 date date x ------------------------------------------- ----------------------------- member ---------------------------------------------------- ------------------------------- a country d1 ----------------------------- ------------- --------------------- dear -------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be classified as a disregarded_entity under sec_301_7701-3 effective d1 facts the information submitted states that x was formed on d1 as an a under the laws of country x was formed by and is indirectly wholly owned by member member intended that x be treated as a disregarded_entity for federal tax purposes effective d1 however due to inadvertence x failed to file a timely form_8832 entity classification election law and analysis plr-125740-15 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with a single owner can elect to be classified as an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that unless it elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301 c i will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 sets forth the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government plr-125740-15 conclusion based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and to elect to be classified as a disregarded_entity for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose as a condition for this late election relief member must file within days of the date of this letter form_8858 information_return of u s persons with respect to foreign disregarded entities for all tax periods affected by this ruling through the present consistent with x having made a timely entity classification election copies of this letter should be attached to such forms except as expressly set forth above we express or imply no opinion concerning the federal tax consequences of the facts discussed above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representatives sincerely associate chief_counsel passthroughs special industries by faith p colson faith p colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------ ---------------------------------------- ------------------- ------------------------------------------------- ---------------------------- -------------------------------- - - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------- id no ------------- ----------------- telephone number ---------------------- refer reply to cc corp b02 plr-105886-13 date date - legend foreign parent ------------------------------------------ --------------------------------- parent parent sub sub sub ----------------------------------------------- ------------------------------------------------- ------------------------ ------------------------------------------------------- ------------------------------------------------- ------------------------ ----------------------------------------------------------------- -------------------------------- ------------------------ ----------------------------------------------------------------------- -------------------------------- ------------------------ ------------------------------------------------------ ---------------------------------------- ------------------------ plr-105886-13 sub ------------------------------------------------------------------ ---------------------------------------- ---------------------------- regulator -------------------------------------------------------------------------- --------------------------- ---------------------- ------------------------------------------------------------ ------------------------------------------------------ date date busine sec_1 busine sec_2 dear ---------------- this letter responds to a letter dated date in which your authorized representatives requested rulings under sec_1_1502-3 sec_1_1502-21 and sec_1_1502-22 of the income_tax regulations the information submitted in that request is summarized below the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process summary of facts prior to date1 foreign parent indirectly owned all of the stock of parent and directly and indirectly owned all of the stock of parent parent was the common parent of a consolidated_group the surviving group parent indirectly owned all of the stock of sub which in turn owned all of the stock of sub sub and sub were each members of the surviving group prior to date parent was the common parent of an consolidated_group the terminating group parent indirectly owned all of the stock of sub which was engaged in busine sec_1 and busine sec_2 sub owned all of the stock of sub sub and sub were each members of the terminating group and had certain tax_attributes that arose in consolidated_return years of the terminating group the sub and sub plr-105886-13 tax_attributes that remained following the close of the terminating group’s tax_year ending on date are referred to herein as the loss_carryovers and the tax_credit carryovers foreign parent wanted to combine the surviving group and the terminating group the integration it was contemplated that as part of the integration sub and sub would merge with and into sub in statutory mergers under sec_368 the mergers the integration required the approval of regulatory authorities including the regulator the regulator’s approval of the integration required in part that immediately after the mergers sub transfer to sub all of the busine sec_2 assets and liabilities that were acquired in the mergers the transfer these assets and liabilities represented a substantial portion of sub 3’s historic assets and liabilities the integration occurred on date and resulted in the termination of the terminating group and the creation of a srly subgroup under sec_1_1502-21 sec_1_1502-22 and sec_1_1502-3 in the surviving group with respect to the loss_carryovers and tax_credit carryovers as part of the integration the mergers occurred on date1 and the transfer was completed on date representations the following representation has been made with respect to the rulings requested the transfer was implemented for the purpose of obtaining the regulator’s approval for the integration the book_value of the general account assets of the busine sec_2 assets contributed to sub in the transfer exceeded the book_value of sub 2’s general account assets immediately before the transfer rulings based solely on the information submitted and the representation set forth above we rule as follows for purposes of sec_1_1502-21 and sec_1_1502-22 the net positive and negative income and net capital_gains and capital losses attributable to sub beginning after the date of the transfer are included in the computation of the consolidated_taxable_income and consolidated capital_gain_net_income respectively of the srly subgroup with respect to the loss_carryovers plr-105886-13 for purposes of sec_1_1502-3 the net positive and negative contribution of sub beginning after the date of the transfer to the consolidated sec_38 limitation is included in the computation of the consolidated sec_38 credits of the srly subgroup with respect to the tax_credit carryovers caveats except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of any aspect of any transaction or item discussed or referenced in this letter procedural matters this ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of this ruling letter in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely __________________________ lawrence m axelrod special counsel to the associate chief_counsel corporate cc


department of the treasury internal_revenue_service tege eo examinations mail stop dal commerce st dallas texas tax_exempt_and_government_entities_division date date release number release date tax_year ending taxpayer_identification_number person to contact employee identification_number employee telephone number phone fax uil certified mail - return receipt dear this is a final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code the code sec_501 as an organization described in code sec_501 effective january 20xx your determination_letter dated july 20xx is revoked the revocation of your exempt status was made for the following reason s you are not described in sec_501 of the code because you are not organized and operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 and sec_1_501_c_3_-1 and sec_1 c -1 c you do not engage primarily in activities that accomplish one or more of the exempt purposes specified in sec_501 and sec_1_501_c_3_-1 your corporation status has been dissolved by the state of requested by the internal_revenue_service for the purpose of inquiring into your exempt status as required by sec_1_6033-2 and sec_1_6001-1 due to fraud you also failed to provide the information contributions to your organization are no longer deductible under sec_170 after january 20xx organizations that are not exempt under sec_501 generally are required to file federal_income_tax returns and pay tax where applicable for further instructions forms and information please visit www irs gov if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition or complaint in one of these three courts must be filed within days from the date this determination_letter was mailed to you please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory_judgment by referring to the enclosed publication you may write to the courts at the following addresses united_states tax_court second street n w washington d c u s court of federal claims madison place n w washington d c u s district_court for the district of columbia constitution ave n w washington d c processing of income_tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory_judgment under sec_7428 of the internal_revenue_code if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for tas assistance which is always free tas will do everything possible to help you visit www taxpayeradvocate irs gov or call if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter maria hooke director eo examinations publication enclosure sincerely department of the treasury internal_revenue_service tax exempt and government entities irs exempt_organizations examinations certified mail - return receipt requested dear date date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax manager’s name id number manager’s contact number response due_date after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren’t an organization described in sec_501 if we don't hear from you if you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation letter rev catalog number 34809f if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn't a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate letter rev catalog number 34809f for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely margaret von lienen director eo examinations enclosures report of examination form_6018 publication publication letter rev catalog number 34809f form_8 a department of the treasury - intcn1 al revenue service name of taxpayer explanation of items schedule no or exhibit year period ended december 20xx whether revenue code effective january 20xx for having been dissolved as ordered by the court of should be revoked under sec_501 of the internal for being a fraudulent organization facts organization is recognized as a sec_501 tax-exempt_organization received the its ruling in july 20xx recognizing its tax-exempt status under sec_50i c and stating that it is not a private_foundation as defined by sec_509 november 20xx with the state of articles of incorporation filed states in part -_ chapter et of the this corporation is being formed exclusively for the purpose for which a corporation may be formed under the non-profit corporation law of the state of revised code and not for pecuniary profit or financial gain and more specifically this corporation is organized for the purpose of helping convicted felons and their family continue on the rehabilitation path by becoming productive prosperous individuals once they are reintroduced into the main stream of society encourages and aides in the betterment assist felons and family members to pursue meaningful goals moral standards and conditions of ones mind career as well as housing offers counseling in every possible area including emotionally addiction impulsive and compulsive behavior abuse primary focus is reconstructing moral development that will intern promote a positive effect on the communities which are affected by deprived socially economic circumstances these are the people of the communities which display or show an outward appearance of being restricted for lack of chances based upon denial of opportunities due to past felon convictions or any type of addiction which has caused a downfall of the mind as viewed by life’s society continued on next page form 886-a rev department of the treasury - internal_revenue_service page - department of the treasury - internal_revenue_service form 886a name of taxpayer explanation of items schedule no or exhibit year period ended december 20xx on september 20xx judge of the court of ordered see attached in part that defendant isa fraudulent organization and is therefore dissolved - defendants and are permanently enjoined from holding any position as an officer trustee or employee of any nonprofit corporation or association in the state of defendants and are permanently enjoined from soliciting in the state of for charitable purposes aconstructive trust is imposed over all assets and all interests in property held by or previously held by defendant that were commingled or otherwise accumulated or and and are to disgorge all assets and all interests in property held under the constructive trust to the attorney_general for distribution to other charitable organizations law defendants and of defendants acquired with charitable proceeds sec_1_501_c_3_-1 organizations organized and operated for religious charitable scientific testing for public safety literary or educational_purposes or for the prevention of cruelty to children or animals a organizational and operational tests in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such form 886-a rev department of the treasury - internal_revenue_service page -2- form_886 a department of the treasury - internal_revenue_service name of taxpayer explanation of items schedule no or exhibit year period ended december 20xx section if an organization fails to meet either the organizational_test or the operational_test it is not exempt the term exempt_purpose or purposes as used in this section means any purpose or purposes specified in sec_501 as defined and elaborated in paragraph d of this section b organizational_test - jn general i an organization is organized exclusively for one or more exempt purposes only if its articles of organization referred to in this section as its articles as defined in subparagraph of this paragraph a limit the purposes of such organization to one or more exempt purposes and b do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes sec_1 c -1 construction of terms the law of the state in which an organization is created shall be controlling in construing the terms of its articles however any organization which contends that such terms have under state law a different meaning from their generally accepted meaning must establish such special meaning by clear_and_convincing reference to relevant court decisions opinions of the state attorney-general or other evidence of applicable state law sec_1 c -i a of the income_tax regulations regulations provides that in order to be exempt as an organization described under sec_501 of the code an organization must be both organized and operated exclusively for one or more purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt has been dissolved fails the organizational_test since its incorporation with the state of by court order due to fraud therefore your organization fails the organizational_test as described in regulation sec_1 c -i b government's position itis unknown if operation since the court order of 20xx 20xx for having been dissolved as ordered by the court of taxpayer's position form 886-a rev conclusion should be revoked under sec_501 of the internal_revenue_code effective january agrees with the revocation but they did advise that they have not been in department of the treasury - internal_revenue_service page -3- form_886 a name of taxpayer depart nent of the treasury - internal_revenue_service explanation of items schedule no or exhibit year period ended december 20xx for being a fraudulent organization fails the organizational_test as described in regulation sec_1 c -l b department of the treasury - internal_revenue_service form 886-a rev page -4-


t c summary opinion united_states tax_court michel k petree a k a michel k swanson petitioner v commissioner of internal revenue respondent docket no 26887-13s filed date frank a dipietro kathryn j sedo and james minor specially recognized for petitioner christina l cook for respondent summary opinion pugh judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed unless otherwise indicated section references are to the internal revenue continued pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case petitioner seeks review under sec_6015 of respondent’s determination that she is not entitled to relief from joint_and_several_liability for taxable years and with respect to unpaid tax of dollar_figure and dollar_figure respectively that was reported on the joint form sec_1040 u s individual_income_tax_return filed bearing her name and the name of her former spouse richard swanson the issues for decision are whether petitioner filed joint form sec_1040 for and and is entitled to equitable relief from joint_and_several_liability under sec_6015 background some of the facts have been stipulated and are so found the stipulation of facts and the accompanying exhibits are incorporated herein by this reference petitioner resided in minnesota at the time her petition was timely filed continued code of as amended in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure all monetary amounts are rounded to the nearest dollar petitioner and richard swanson married in during their marriage and in particular in and mr swanson was employed as an attorney and petitioner was not employed outside the home mr swanson had a problem with alcohol during the relevant years causing difficulty in the marriage he attempted suicide in and made repeated threats of suicide to petitioner on several occasions between and mr swanson hoped that his threats would cause petitioner to stay in the marriage but she and mr swanson ultimately divorced in date petitioner and mr swanson sought assistance from a psychologist mr reardon beginning some time before the filing of the form sec_1040 at issue here and she continued to see mr reardon after the divorce before petitioner and mr swanson had ongoing problems with the payment of tax_liabilities because of financial difficulties they experienced petitioner took an increased role in their finances including tracking personal expenses starting in approximately also in petitioner found and hired an accountant and under the advice of the accountant started keeping track of mr swanson’s law practice expenses in addition petitioner was a signatory on mr swanson’s law firm account and at times wrote checks for the law firm throughout and petitioner and mr swanson took a few vacations including vacations to florida and mexico petitioner and mr swanson owned a timeshare in mexico through mr swanson’s law firm throughout their marriage petitioner and mr swanson filed joint form sec_1040 petitioner also became more involved in the preparation and filing of their form sec_1040 in the relevant years because of the financial difficulties the withholding on mr swanson’s income was not sufficient to pay the entire tax_liability as reported on their joint form_1040 for and petitioner and mr swanson owed additional tax at the end of the year petitioner wrote a check for the remaining liability and submitted it with their completed form_1040 petitioner found and hired larry atneoson an accountant to prepare and file form sec_1040 for herself and mr swanson for tax years and and assisted in the preparation of those form sec_1040 the record is unclear as to when before the filing of the return petitioner first spoke with and hired mr atneoson petitioner gave many of the required documents to mr atneoson for both and and he followed up with her by telephone for additional information mr atneoson sometimes dealt with mr swanson as well mr atneoson’s office was across the street from mr swanson’s office and mr atneoson at times would pick up and drop off documents at mr swanson’s office the form_1040 bearing the names of mr swanson and petitioner and prepared by mr atneoson was signed by mr swanson it was filed on or about date and reported an unpaid liability of dollar_figure although petitioner’s name also was signed the signature was not petitioner’s and it is unclear who signed on petitioner’s behalf petitioner did not make any effort to file a separate_return or otherwise object to the filing of the form_1040 the form_1040 bearing the names of petitioner and mr swanson was prepared by mr atneoson and was filed electronically by mr atneoson on or about date the date it was signed electronically it reported an unpaid liability of dollar_figure before filing a return electronically mr atneoson required a client to complete and sign a form_8879 irs e-file signature authorization and he retained the forms for a period in his records he recalled receiving a form_8879 authorizing the electronic_filing of the form_1040 for petitioner and mr swanson but the form_8879 was no longer available because of the age of the records the record thus does not indicate whether mr swanson or petitioner or both authorized the filing petitioner did not make any effort to file a separate_return or otherwise object to the filing of the form_1040 during the course of preparing the form sec_1040 petitioner and mr atneoson spoke about the liabilities for and and about increasing mr swanson’s withholding to avoid having outstanding liabilities for later years petitioner conceded that she has not filed an accurate tax_return for or on date respondent received petitioner’s form_8857 request for innocent spouse relief on date respondent issued to petitioner the final_determination denying her request for relief from joint_and_several_liability on date after the petition was filed in this case petitioner and mr swanson signed an agreement to modify the spousal maintenance order in the divorce decree to include a provision that mr swanson would assume all responsibility for the federal tax_liabilities for tax years and and would cease making spousal maintenance payments to petitioner in return in petitioner was paid dollar_figure in wages from total automotive inc during petitioner received some spousal maintenance payments from mr swanson until the spousal maintenance order was modified but she did not provide evidence of the amount she received petitioner did not provide documentation of her current living_expenses and was sharing some living_expenses with a boyfriend at the time of trial petitioner held title to and had possession of a motorcycle awarded to mr swanson in the divorce decree the motorcycle was purchased in petitioner’s name originally because mr swanson had bad credit and could not obtain financing in his name petitioner was unable to transfer the title to the motorcycle to mr swanson when they divorced because she was unable to assign the financing to him in addition to this motorcycle petitioner’s assets include a chevy tahoe a yamaha vino scooter a harley davidson and a camper i joint federal_income_tax returns for and discussion sec_6061 and sec_1_6013-1 income_tax regs generally require that a joint tax_return be signed by both spouses however if an income_tax return is intended by both spouses as a joint_return absence of the signature of one spouse does not prevent their intention from being realized 56_tc_1 this exception generally is applied when one spouse signs a joint_return usually signing for both spouses and it is shown that the other spouse tacitly consented to the joint_return filing this is commonly referred to as the tacit_consent_rule see eg 35_tc_747 whether a husband and wife intended to file a joint_return therefore is important to our determination of whether the tax_return qualifies as a joint_return 22_tc_893 in evaluating intent the court has considered whether the nonsigning spouse filed a separate_return whether the nonsigning spouse objected to the joint filing and whether the prior filing history indicates an intent to file jointly harrington v commissioner tcmemo_2012_285 at although the taxpayer generally bears the burden of proving that the commissioner’s determinations are not correct 290_us_111 in the case of a spouse who does not sign a purported joint_return the commissioner bears the burden of producing evidence that a joint_return was filed 412_f2d_304 2d cir aff’g in part rev’g in part tcmemo_1967_174 carrick v commissioner tcmemo_1991_502 accordingly although the ultimate burden_of_proof regarding the correctness of respondent’s determination remains with petitioner respondent bears the burden of going forward with evidence from which the court could conclude that petitioner intended to file the and joint returns see esposito v commissioner tcmemo_1991_262 tax ct memo lexis citing douglass v commissioner t c memo at trial petitioner asserted that she did not know that there were outstanding liabilities for tax years and she also asserted that even though it was her original intention to file joint returns when she hired mr atneoson to prepare the tax returns she would not have filed a joint tax_return for either year had she known that there were outstanding liabilities we do not find petitioner’s denials credible nor do we find credible her claim that she would have refused to file the returns jointly had she known throughout their marriage petitioner and mr swanson filed joint returns petitioner wrote the check to pay the outstanding tax_liability for she hired mr atneoson to prepare the and returns and was involved in the preparation of those returns because of the liability owed for petitioner discussed with mr atneoson increasing mr swanson’s withholding to avoid outstanding liabilities for later tax years no evidence in the record indicates that mr swanson intentionally withheld any information from petitioner regarding the and tax_liabilities petitioner was aware that the and joint returns had been filed she did not object to their filing and she did nothing to disavow them after they were filed we find that petitioner and mr swanson intended to file joint returns and that petitioner tacitly consented to the filing of the joint returns for and ii relief under sec_6015 generally married taxpayers may elect to file a joint federal_income_tax return sec_6013 after making this election each spouse generally is jointly and severally liable for the entire tax due for that taxable_year sec_6013 see 114_tc_276 a requesting spouse however may seek relief from joint_and_several_liability under sec_6015 or if eligible may allocate liability under sec_6015 sec_6015 if relief is not available to a requesting spouse under sec_6015 or c subsection f gives the commissioner discretion to grant equitable relief from joint_and_several_liability 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 sec_6015 petitioner concedes that she does not qualify for relief from joint_and_several_liability under either sec_6015 or c and seeks relief under sec_6015 only petitioner bears the burden of proving that she is entitled to relief under sec_6015 see rule a see also 132_tc_203 the court applies a de novo scope and standard of review in deciding whether a taxpayer is entitled to relief under sec_6015 porter v commissioner t c pincite the commissioner has outlined procedures for determining whether a requesting spouse qualifies for equitable relief under f in revproc_2013_ sec_4 2013_43_irb_397 we consult these guidelines when reviewing the commissioner’s denial of relief but we are not bound by them as our analysis and determination ultimately turn on an evaluation of all the facts and circumstances see molinet v commissioner tcmemo_2014_109 sriram v commissioner tcmemo_2012_91 see also 136_tc_432 porter v commissioner t c pincite a threshold conditions the revenue_procedure lists seven threshold conditions all of which a spouse must meet to qualify for relief under sec_6015 the requesting spouse filed a joint_return for the taxable_year for which relief is sought the relief is not available to the requesting spouse under sec_6015 or c the claim for relief is timely filed no assets were transferred between the spouses as part of a fraudulent scheme the nonrequesting spouse did not transfer disqualified assets to the requesting spouse the requesting spouse did not knowingly participate in the filing of a fraudulent joint_return and absent certain enumerated exceptions none of which applies in this case the tax_liability from which the requesting spouse seeks relief is attributable to an item of the nonrequesting spouse or an underpayment resulting from the nonrequesting spouse’s income see revproc_2013_34 sec_4 respondent concedes that petitioner meets all the threshold conditions except condition sec_4 and respondent argues that the motorcycle awarded to mr swanson in the divorce that remained in petitioner’s possession disqualifies petitioner from relief from joint_and_several_liability under those threshold conditions see id sec_4 and we disagree transfer of assets between spouses we cannot conclude on the record before us that petitioner’s retention of the motorcycle was part of a fraudulent scheme between her and mr swanson wiener v commissioner tcmemo_2008_230 wl at holding that even if the taxpayer’s transfer of property could have been characterized as a transfer between spouses it was not a fraudulent transfer because the requesting spouse did not know of the tax_liability and therefore did not intend the transfer as a fraudulent transfer revproc_2013_34 sec_4 the title to the motorcycle always has been in petitioner’s name and she gave a credible reason for not transferring the title to the motorcycle to mr swanson namely her inability to assign the motorcycle financing to him because of his bad credit transfer of disqualified assets nor can we conclude on the record before us that the fact that petitioner still had this motorcycle constituted a transfer of a disqualified_asset under revproc_2013_34 sec_4 sec_6015 defines disqualified_asset as any property or right to property transferred to an individual making the election under this subsection with respect to a joint_return by the other individual filing such joint_return if the principal purpose of the transfer was the avoidance of tax or payment of tax as we stated above petitioner gave a credible reason for not transferring the title to the motorcycle to mr swanson we conclude therefore that the principal purpose of petitioner’s not transferring the title to mr swanson’s motorcycle to his name was not the avoidance of tax or payment of tax for these purposes we assume without deciding that petitioner’s not transferring title and possession of an asset awarded to mr swanson could constitute a transfer therefore the motorcycle is not a disqualified_asset and petitioner meets the fifth threshold condition b streamlined procedure if the threshold conditions are satisfied revproc_2013_34 sec_4 i r b pincite lists the circumstances or conditions under which the commissioner will generally make streamlined determinations granting equitable relief in cases where a liability reported on a joint_return is unpaid the service will make streamlined determinations granting equitable relief in cases in which the requesting spouse establishes that the requesting spouse marital status is no longer married to the nonrequesting spouse as set forth in sec_4 a economic hardship would suffer economic hardship if relief were not granted as set forth in sec_4 b and knowledge or reason to know a sec_6015 cases did not know or have reason to know that the nonrequesting spouse would not or could not pay the underpayment_of_tax reported on the joint income_tax return as set forth in sec_4 c ii the commissioner will grant equitable relief to the extent that the unpaid liability is allocable to the nonrequesting spouse only if all three conditions of revproc_2013_34 sec_4 are satisfied id sec_4 respondent concedes that petitioner satisfies the first of the three conditions to satisfy the knowledge or reason to know condition of revproc_2013_ sec_4 petitioner must establish that it was reasonable for her to believe that mr swanson would pay the amounts shown as due on the joint returns for and at the times when the joint returns were filed petitioner cannot rely on her claimed lack of awareness of the amounts shown as due on these returns to establish that it was reasonable for her to believe that mr swanson would pay these amounts petitioner is charged with constructive knowledge of the amounts shown on the and returns because she tacitly consented to their filing see reilly-casey v commissioner tcmemo_2013_292 holding that even if the taxpayer did not sign the returns the taxpayer tacitly consented to the joint_return filings and is therefore charged with knowledge of the joint returns see also 992_f2d_1256 2d cir holding that taxpayer who signed returns without reading them is nonetheless charged with constructive knowledge of their contents aff’g tcmemo_1992_228 petitioner wrote the check to pay the liability and worked with mr atneoson on the preparation of the and returns and during this time she spoke with mr atneoson about changing mr swanson’s withholding so that no additional tax would be owed for subsequent tax years we have consistently held that the provisions for relief from joint_and_several_liability are designed to protect the innocent not the intentionally ignorant morello v commissioner tcmemo_2004_181 dickey v commissioner tcmemo_1985_478 a requesting spouse’s knowledge of financial difficulties deprives the requesting spouse of a reason to believe that her spouse will pay the tax_liability karam v commissioner tcmemo_2011_230 wl at citing stolkin v commissioner t c memo aff’d 504_fedappx_416 6th cir a reasonable belief that taxes would be paid must incorporate a belief that funds would be available within a reasonably short_period banderas v commissioner tcmemo_2007_129 wl petitioner knew that she needed to take an increased role in the family finances because of the past difficulties and did so beginning in petitioner had full access to the family’s finances and often was in charge of paying bills she paid the tax_liability under these facts we find that it was not reasonable for petitioner to believe that mr swanson would pay the amounts shown as due on the form sec_1040 for and revproc_2013_34 sec_4 a states that if a requesting spouse was abused by the nonrequesting spouse and because of the abuse the requesting spouse was not able to question the payment of the taxes reported as due on the joint_return or challenge the nonrequesting spouse’s assurance regarding payment of the taxes for fear of the nonrequesting spouse’s retaliation then the abuse will result in this factor being satisfied even if the requesting spouse knew or had reason to know that the nonrequesting spouse would not pay the tax_liability petitioner points to several incidences where mr swanson threatened or attempted suicide or harm to himself we do not downplay the difficulties and strain caused by these threats or mr swanson’s problems with alcohol but petitioner has not shown that mr swanson’s actions impaired her access to information about the outstanding liabilities or her ability to challenge the filing of the joint returns by the time these returns were filed petitioner had taken increased responsibility for the family finances and had become more involved with the business finances including writing the check to pay the couple’s outstanding tax_liability for we therefore conclude that petitioner does not satisfy the knowledge or reason to know condition of revproc_2013_34 sec_4 and does not qualify for equitable relief under the streamlined procedure of revproc_2013_34 sec_4 because we hold that petitioner does not satisfy the reason to know condition we do not need to evaluate whether making the payments toward the tax_liability would result in economic hardship for her under revproc_2013_34 sec_4 c revproc_2013_34 sec dollar_figure if the requesting spouse satisfies the threshold conditions of revproc_2013_34 sec_4 but does not qualify for relief under revproc_2013_34 sec_4 the commissioner looks to revproc_2013_34 sec_4 i r b pincite to determine whether the taxpayer should be granted equitable relief revproc_2013_34 sec_4 provides a list of nonexclusive factors that the commissioner may weigh in making his determination relating to relief from joint_and_several_liability including whether the requesting spouse is separated or divorced from the nonrequesting spouse whether the requesting spouse would suffer economic hardship if relief is not granted in underpayment cases whether on the date the joint_return was filed the requesting spouse had knowledge or reason to know that the nonrequesting spouse would not or could not pay the tax_liability at that time whether the nonrequesting spouse has a legal_obligation to pay the tax_liability pursuant to a decree of divorce or other agreement whether the requesting spouse significantly benefited from the item giving rise to the deficiency whether the requesting spouse has made a good-faith effort to comply with the federal_income_tax laws for the taxable years following the taxable_year or years to which the request for relief relates and whether the requesting spouse was in poor mental or physical health at the time the returns were filed or at the time she requested relief as revproc_2013_34 sec_4 makes clear no single factor is to be determinative in any particular case all factors are to be considered and weighed appropriately and the list of factors is not intended to be exhaustive arobo v commissioner tcmemo_2016_66 at in evaluating a claim for relief no one factor or a majority of factors necessarily determines the outcome wang v commissioner tcmemo_2014_206 at revproc_2013_34 sec_4 the degree of importance of each factor varies depending on the requesting spouse’s facts and circumstances williams v commissioner tcmemo_2015_ at revproc_2013_34 sec_4 if the requesting spouse is no longer married to the non-requesting spouse this factor will weigh in favor of relief revproc_2013_34 sec_4 a petitioner and mr swanson have been divorced since date the first factor weighs in favor of relief if a requesting spouse will suffer economic hardship if relief is not granted then the second factor weighs in the requesting spouse’s favor id sec_4 b i r b pincite generally economic hardship exists if collection of the tax_liability will cause the taxpayer to be unable to pay reasonable basic living_expenses butner v commissioner tcmemo_2007_136 the facts and circumstances considered in this inquiry include the requesting spouse’s age employment status and history ability to earn and number of dependents the amount reasonably necessary for food clothing housing medical_expenses transportation and current tax_payments any extraordinary circumstances such as special education expenses a medical catastrophe or a natural disaster and any other factor bearing on economic hardship sec_301_6343-1 proced admin regs in addition the commissioner considers the requesting spouse’s current income including how the requesting spouse’s income compares to federal poverty guidelines and assets in relation to her expenses revproc_2013_34 sec_4 b this factor weighs in favor of equitable relief when the requesting spouse’s income falls below of the federal poverty guidelines unless the requesting spouse has other assets that might be used to make payments toward the tax_liability while still meeting the requesting spouse’s reasonable basic living_expenses id while it is possible that her income is at or below the guidelines between her wages from total automotive inc and the limited spousal maintenance she received for petitioner failed to provide evidence of her share of living_expenses and did not explain why she could not sell some of her assets to pay the liabilities because petitioner has failed to demonstrate that she will suffer economic hardship if relief is not granted the second factor is neutral if the requesting spouse knew or had reason to know that the nonrequesting spouse would not pay the income_tax_liability then the third factor weighs against the granting of equitable relief from joint_and_several_liability id sec_4 c ii for the third factor even if the requesting spouse knew or had reason to know that the nonrequesting spouse would not pay the tax due this factor will weigh in favor of relief if the requesting spouse was abused by the nonrequesting spouse or if the nonrequesting spouse maintained control of the household finances by restricting the requesting spouse’s access to financial information and because of the abuse or financial control the requesting spouse was not able to question the payment of the tax reported as due on the return or challenge the nonrequesting spouse’s assurance regarding the payment of the tax revproc_2013_34 sec_4 c ii iv i r b pincite as discussed above we find that petitioner had reason to know of the unpaid liabilities and reason to know that the liabilities would not be paid in addition as discussed above mr swanson’s conduct did not impair her access to information about the family finances or these returns the third factor weighs against relief if the nonrequesting spouse has a legal_obligation to pay the tax_liability then the fourth factor weighs in favor of granting relief id sec_4 d after respondent denied her request for relief from joint_and_several_liability and after she petitioned this court petitioner and mr swanson signed a spousal maintenance modification agreement in which mr swanson agreed to pay the tax_liabilities stemming from the underpayment_of_tax for and because mr swanson has a legal_obligation to pay the tax_liabilities the fourth factor weighs in favor of relief the fifth factor weighs against relief if the requesting spouse significantly benefitted from the unpaid income_tax_liability or understatement id sec_4 e further if the amount of the unpaid tax was small and did not provide a benefit to either spouse the revenue_procedure states that this factor is neutral id however this court has held that this factor weighs in favor of relief if the requesting spouse received little or no benefit hollimon v commissioner tcmemo_2015_157 at petitioner argues that neither spouse received a significant benefit from the underpayments of tax the amounts of unpaid tax including additions to tax total over dollar_figure for the two years petitioner argues that relative to the household_income for and the total of the underpayments was insignificant because it was less than of the household_income over the two years while the total of the unpaid tax_liabilities was small relative to the total household_income and may not have contributed to a lavish lifestyle petitioner and mr swanson took vacations to both mexico and florida and she was aware of their financial difficulties compare doyle v commissioner tcmemo_2003_96 wl at holding that the taxpayer significantly benefited from the unpaid liability where she took two european vacations transferred money to her children and paid normal living_expenses aff’d 94_fedappx_949 3d cir with wiener v commissioner tcmemo_2008_230 holding that the taxpayer did not receive a significant benefit from the unpaid tax_liability where she was not aware of the tax refunds for years and there was no indication that her lifestyle improved after the husband deposited the refunds in his account we conclude that the fifth factor weighs against relief if the requesting spouse is not in compliance with the income_tax laws after being divorced from the nonrequesting spouse then this factor will weigh against relief revproc_2013_34 sec_4 f i because petitioner conceded by stipulation that she has not filed an accurate tax_return for or the sixth factor weighs against relief the seventh 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 requested relief id sec_4 g i r b pincite the service will consider the nature extent and duration of the condition including the ongoing economic impact of the illness id petitioner argues that she is suffering from mental health problems because of emotional and psychological abuse by mr swanson and that this factor should weigh in favor of relief we do not underestimate the difficulties caused by mr swanson’s alcohol abuse and threats of suicide and we accept petitioner’s testimony that she is seeing a psychologist however we found petitioner’s testimony insufficient to support a conclusion that she was in poor mental or physical health at the time the joint form sec_1040 for the years at issue were filed at the time she requested sec_6015 relief or at the time of trial see pullins v commissioner t c pincite wang v commissioner at holding that the mental or physical health factor was neutral despite the taxpayer’s assertion that she was suffering mental health problems due to alleged mental and psychological abuse by the intervenor because the taxpayer failed to provide supporting evidence that she was suffering from any mental or physical health problems and only provided self-serving uncorroborated statements thomassen v commissioner tcmemo_2011_88 wl at holding that even though the taxpayer established that she was psychologically abused by the intervenor sufficiently to make her reluctant to challenge the treatment of items on their joint returns for fear of the abuse she still did not provide sufficient evidence that she was suffering from a significant mental or physical health problem at the time she signed the joint returns aff’d 564_fedappx_885 9th cir banderas v commissioner wl at holding that the poor mental and physical health factor was neutral despite the taxpayer’s general assertions of health problems because the taxpayer did not submit any corroborating medical documentation or any specific contentions regarding how such ailments might have affected her ability to met her federal tax obligations and finding that there were no particular health problems of a nature that would affect the balancing of her claim for relief we therefore find the seventh factor neutral we find the facts that petitioner and mr swanson are divorced and that mr swanson has a legal_obligation to pay the tax_liabilities at issue weigh in favor of relief while the facts that petitioner had reason to know that the tax_liabilities would not be paid that she received some benefit from the unpaid tax_liabilities and that she has not filed accurate returns after her divorce weigh against the granting of relief we find that all other factors are neutral weighing the entire record before us including all of the facts and circumstances presented by petitioner we conclude that petitioner has not established that she qualifies for relief from joint_and_several_liability under sec_6015 the court has considered all of the parties’ contentions arguments requests and statements to the extent not discussed herein we conclude that they are irrelevant moot or without merit to reflect the foregoing decision will be entered for respondent