t c memo united_states tax_court glenell henson jr petitioner and stephanie a henson intervenor v commissioner of internal revenue respondent docket no filed date ray cody mayo jr for petitioner w deryl medlin for intervenor marshall r jones and john w sheffield iii for respondent memorandum findings_of_fact and opinion vasquez judge pursuant to sec_6015 petitioner seeks review of respondent’s determination that he is not entitled to relief from joint_and_several_liability under sec_6015 with respect to his federal_income_tax liability for findings_of_fact 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 pursuant to sec_6015 and rule petitioner’s former spouse stephanie henson intervenor intervened as a party in this case to oppose his request for relief petitioner resided in louisiana at the time he filed the petition intervenor also resided in louisiana at the time she filed the notice of intervention i petitioner’s background petitioner attended three years of college at louisiana state university lsu in baton rouge louisiana he developed a successful career as an unless otherwise indicated all section references are to the internal_revenue_code as amended and rule references are to the tax_court rules_of_practice and procedure the record is unclear as to whether petitioner received a degree from continued engineer with kansas city southern railroad kcs railroad in shreveport louisiana rising in the ranks to upper level management in he had an annual salary of approximately dollar_figure by he was grossing around dollar_figure as one of three supervisors managing kcs railroad’s shreveport operations kcs railroad withheld federal_income_tax from his wages ii intervenor’s background intervenor received a bachelor of science degree from lsu in baton rouge louisiana and a medical degree from lsu medical center in shreveport louisiana following medical school she entered a three-year residency program in pediatrics at lsu medical center she was an employee whose wages were reported on form_w-2 wage and tax statement during her residency after completing her residency in mid-1998 she became an independent_contractor with a hospital willis knighton medical center the hospital provided her with a form 1099-misc miscellaneous income that reported that she had received nonemployee compensation but the hospital did not withhold taxes from her continued lsu petitioner believes that the withholding each year during the term of his marriage was sufficient to cover his federal_income_tax liability he is not asking the court for relief from joint_and_several_liability for any unpaid tax_liability attributable to his own income income in she began her own medical practice on the recommendation of another doctor she hired a local attorney to form henson pediatric health care hphc hphc is organized as a limited_liability_company under state law and is disregarded for federal_income_tax purposes from until hphc employed a nurse a medical assistant and a receptionist hphc withheld federal_income_tax from their wages intervenor was not listed as an employee of hphc during this time and consequently did not have federal_income_tax withheld from her income at the end of on the advice of an internal_revenue_service irs agent intervenor added herself to the employee roster and hphc began withholding_tax from her wages iii petitioner’s relationship with intervenor petitioner and intervenor first met in on a date arranged by their friends they got married in and had two children together a son and a apart from in which intervenor reported income of dollar_figure on schedule c profit or loss from business the record does not reflect her income for any other year intervenor testified that she has not filed tax returns for and because they are extensive and expensive to prepare she does not know whether the wage withholding is sufficient to cover her federal_income_tax liabilities daughter they lived a fairly normal lifestyle together but their marriage was rocky petitioner had on several occasions struck intervenor over disagreements on marital issues in date the marriage began to fall apart the then vice president of kcs railroad offered petitioner an executive position at the company’s headquarters in kansas city the position came with one major drawback-- petitioner would have to leave shreveport intervenor’s medical practice was based in shreveport and she refused to start her practice over the tension between petitioner and intervenor built up over the following months and erupted in a major altercation one saturday evening in date petitioner was arrested the following day on battery charges on date petitioner and intervenor separated soon thereafter petitioner called the then vice president of kcs railroad and rejected the february job offer opting to stay in shreveport to work things out with intervenor that never happened petitioner admitted to hitting intervenor in a couple of incidents while the record is unclear as to the details of the executive position petitioner testified that kcs railroad was going to make him a millionaire petitioner’s position with kcs railroad in shreveport was transferred to kansas city petitioner accepted a lower level position with a combined salary bonus and retirement pay cut of dollar_figure petitioner and intervenor were divorced on date the divorce decree conferred joint custody of the children to petitioner and intervenor but did not provide for payment of alimony or child_support or contain any provision regarding payment of federal_income_tax liabilities there was no property settlement in date petitioner and intervenor’s home went into foreclosure petitioner voluntarily relinquished his interest in the home to intervenor who refinanced the home in her name only in date petitioner accepted a new position with kcs railroad and moved to overland park kansas where he currently resides intervenor continues to operate her medical practice in shreveport louisiana iv control of financial matters a the bank accounts petitioner and intervenor shared a personal joint checking account joint account petitioner’s salary from kcs railroad was directly deposited into the joint account he and intervenor at all times during their marriage had full and uninterrupted access to the joint account overland park is just outside kansas city where kcs railroad is headquartered the record does not reflect petitioner’s current position or salary--it is unclear whether this is the same position he had earlier turned down intervenor had separate business accounts10 and would periodically transfer money from these accounts to the joint account the transfers generally occurred on a wednesday the same day that medicaid direct-deposited reimbursement claims from hphc into the business accounts intervenor gave petitioner a debit card for the business accounts--the same debit card that she gave to her medical assistantdollar_figure petitioner was authorized to write checks on the business accounts but he chose not to write a single check nor did he use the debit card even once bank statements for the business accounts were delivered to hphc intervenor would later bring them to the home petitioner reviewed the check registers and bank statements only at the time the tax returns were prepared he had no control_over the billing accounting or payroll functions of hphc and the corresponding deposits into the business accounts intervenor determined the amounts and frequency of the transfers from the business accounts to the joint account intervenor had a business checking account and a separate payroll account the record does not reflect any meaningful differences between the two accounts all references to business accounts include both accounts the medical assistant also served as the office manager and used the card to buy supplies b the household bills each month petitioner and intervenor gathered all of the bills and placed them in a stack they jointly decided which bills to pay and jointly handled writing the checks and mailing the envelopes in addition to recurring expenses for utilities and household purchases they had two big-ticket items a home mortgage with a monthly payment of dollar_figure and a note on the truck intervenor used with a monthly payment of dollar_figure they made all of the important money decisions together c the tax returns both petitioner and intervenor participated in the preparation of their tax returnsdollar_figure generally they created initial drafts of tax returns on their laptop computer using turbotax software they reviewed the drafts together and took the drafts and other supporting documents to an accountantdollar_figure they later met with petitioner was released from liability on the home mortgage when intervenor refinanced the home in her name it is unclear whether he remains liable on the truck note we cannot determine from the record their relative contributions nor can we determine whether the returns for every year were prepared in the same manner petitioner and intervenor changed accountants several times during their marriage the accountant at his office to discuss their returns they both signed the final completed tax returns they never completed the tax preparation in time to file timely returns nor did they ever pay in full the tax shown due on the returns v a history of tax noncompliance petitioner and intervenor’s history of tax noncompliance dates back to the early years of their marriagedollar_figure they filed their joint tax_return late on date reporting a tax_liability of dollar_figure but apart from wage withholding of dollar_figure on petitioner’s salary they failed to pay the tax shown due they filed their joint tax_return late on date reporting a tax_liability of dollar_figure but apart from wage withholding of dollar_figure on petitioner’s salary they failed to pay the tax shown due they filed their joint return late on date reporting a tax_liability of dollar_figure but apart from wage withholding of dollar_figure on petitioner’s salary they once again failed to pay the tax shown due petitioner and intervenor began to receive letters and collection notices from the irs16 and eventually realized that their tax problems would not take care of we cannot determine from the record whether petitioner and intervenor timely filed their or tax_return they presumably have unpaid tax_liabilities attributable to these years which were included in petitioner’s request for relief from joint_and_several_liability the record reflects that they received notices of intent to levy on continued themselves they talked it over and decided to meet with the irs petitioner initially met with kayla lettow a revenue_officer with respondent’s collections department in shreveport and later he and intervenor had a joint meeting with revenue_officer lettow on date petitioner and intervenor entered into an installment_agreement under which they would make monthly payments of dollar_figure towards their tax_liabilities by the end of petitioner and intervenor had yet to file their tax_return and apart from wage withholding on petitioner’s salary they had made no payments towards their tax_liability on date respondent prepared a substitute for return for petitioner’s tax_year using married_filing_separately status on the basis of information returns filed by kcs railroad on date respondent mailed petitioner a notice_of_deficiency showing a tax_liability of dollar_figure and a withholding credit of dollar_figure and determining a deficiency of dollar_figure plus interest and penaltiesdollar_figure continued date and date the substitute for return and the notice_of_deficiency were in petitioner’s name only there is no evidence in the record that any substitute for return was prepared for intervenor on date petitioner filed a petition with the court for redetermination of the deficiency petitioner’s case was dismissed on date on the court’s order granting respondent’s motion to dismiss for lack of prosecution on date petitioner and intervenor filed their tax_return late they continued to elect joint filing_status they reported income of dollar_figure and a tax_liability of dollar_figure on the return but apart from the dollar_figure of wage withholding on petitioner’s salary they failed to pay the tax shown due on date petitioner and intervenor were no longer in installment_agreement statusdollar_figure sometime thereafter the irs began garnishing petitioner’s wages for eight months the irs garnished his entire salary except for dollar_figure each month petitioner and intervenor failed to comply with the federal_income_tax laws for most of the remaining years of their marriage they filed their joint and returns late and apart from a few inadequate payments while no explanation for this change was provided to the court petitioner testified that he and intervenor continued to make payments to the irs until they separated in date intervenor made in and and petitioner’s wage withholding each year they failed to pay the taxes shown due on the returns vi request for innocent spouse relief on date petitioner filed with the irs form_8857 request for innocent spouse relief petitioner’s request covered to on date the irs sent intervenor letter 3284c inviting her to respond to petitioner’s request she responded to the irs by submitting a completed form questionnaire for non-requesting spouse objecting to petitioner’s request on date respondent sent petitioner letter 4475c final_determination denying his request for innocent spouse relief on date petitioner filed a timely petition with the court seeking review of respondent’s determination that he is not entitled to relief from joint_and_several_liability under sec_6015 with respect to his federal_income_tax liability for onlydollar_figure intervenor made three estimated_tax payments of dollar_figure in a miscellaneous payment of dollar_figure in early that was credited to and one estimated_tax payment of dollar_figure in respondent denied petitioner’s request for innocent spouse relief for all years the final_determination for stated that petitioner did not show that it would be unfair to hold him responsible--he had reason to know that the tax_liability for would not be paid and the documentation he provided did not prove economic hardship the final_determination for the other years was not introduced into evidence petitioner’s counsel asserted in his opening statement that the other continued opinion in general a spouse who files a joint federal_income_tax return is jointly and severally liable for the entire tax_liability sec_6013 however a spouse may be relieved from joint_and_several_liability under sec_6015 if taking into account all the facts and circumstances it would be inequitable to hold him liable for any unpaid tax and relief is not available to the spouse under sec_6015 or c dollar_figure the commissioner has published revenue procedures listing the factors the commissioner normally considers in determining whether sec_6015 relief should be granted see revproc_2003_61 2003_2_cb_296 superseding revproc_2000_15 2000_1_cb_447 we consider these factors in the light of the attendant facts and circumstances but we are not bound by them see sriram v commissioner tcmemo_2012_91 in determining whether petitioner is entitled to sec_6015 relief we apply a de novo standard of review as well as a de novo scope of review see continued years are not before the court because of the lantz case discussed infra and the timing of the collection and that there is a good chance that the prevailing_party in this case would ultimately prevail in what the other years sic after that lantz issue was resolved with the government the parties all agree that petitioner is not eligible for relief under sec_6015 or c 132_tc_203 porter ii 130_tc_115 porter i petitioner bears the burden of proving that he is entitled to relief see rule a 119_tc_306 aff’d 101_fedappx_34 6th cir a threshold conditions for granting relief in order for the commissioner to determine that a taxpayer is eligible for sec_6015 relief the requesting spouse must satisfy the following threshold conditions he filed a joint_return for the taxable_year for which he seeks relief relief is not available to him under sec_6015 or c no assets were transferred between the spouses as part of a fraudulent scheme by the spouses the nonrequesting spouse did not transfer disqualified assets to him he did not file or fail to file the returns with fraudulent intent and with enumerated exceptions the income_tax_liability from which he seeks relief is attributable to an item of the nonrequesting spousedollar_figure revproc_2003_61 sec_4 c b pincite revproc_2003_61 sec_4 2003_2_cb_296 also lists a seventh threshold condition the requesting spouse applies for relief no later than two years after the date of the service’s first collection activity after date with respect to the requesting spouse in 132_tc_131 rev’d 607_f3d_479 7th cir we held that the two-year deadline imposed by sec_1_6015-5 income_tax regs is an invalid interpretation of sec_6015 after the u s court_of_appeals for the seventh circuit reversed lantz we reconsidered the matter but did not change our position see hall v continued respondent concedes that petitioner has met all of the threshold conditions b safe_harbor circumstances under which relief is ordinarily granted when the threshold conditions have been met the commissioner will ordinarily grant relief with respect to an underpayment_of_tax if the requesting spouse meets the requirements set forth under revproc_2003_61 sec_4 c b pincite to qualify for relief under revproc_2003_61 sec_4 all of the following elements must be satisfied on the date of the request for relief the requesting spouse is no longer married to or is legally_separated from the nonrequesting spouse or has not been a member of the same household as the nonrequesting spouse at any time during the 12-month_period ending on the date of the request for relief on the date the requesting spouse signed the return he had no knowledge or reason to know that the nonrequesting spouse would not pay the income_tax_liability and the requesting spouse will suffer economic hardship if relief is not granted continued commissioner 135_tc_374 in notice_2011_70 2011_32_irb_135 the irs changed its position and will now consider requests for equitable relief under sec_6015 if the period of limitation on collection of tax provided by sec_6502 or the period of limitation on credits or refunds provided in sec_6511 remains open for the tax years at issue petitioner contends in his opening brief that he meets all of the safe_harbor provisions of revproc_2003_61 sec_4 but he concedes that the court would have to take an expanded view of the hardship requirement he further concedes that he has sufficient income to pay the tax_liability over time petitioner argues that the controversy is bigger than the year at issue and that we should consider the total unpaid tax_liabilities in the form 8857--an amount exceeding dollar_figure petitioner bears the burden of proving that he will suffer economic hardship if we do not grant him relief from joint_and_several_liability see rule a alt v commissioner t c pincite a requesting spouse suffers economic hardship if paying the tax_liability would prevent him from paying his reasonable basic living expensesdollar_figure alioto v commissioner tcmemo_2008_185 butner v in the light of petitioner’s argument we do not view his statement that he has sufficient wherewithal to pay the tax_liability as a concession that he fails to satisfy the hardship requirement in determining a reasonable amount for basic living_expenses the commissioner shall consider information provided by the taxpayer including the taxpayer’s age employment status and history ability to earn number of dependents and status as a dependent the amount reasonably necessary for food clothing housing utilities medical_expenses transportation child_support and other necessities the cost of living in the geographical area in which the taxpayer lives the amount of property available to pay the taxpayer’s expenses any extraordinary expenses including educational expenses and any other continued commissioner tcmemo_2007_136 sec_301_6343-1 proced admin regs revproc_2003_61 sec_4 c a ii c b pincite a hypothetical hardship is insufficient to justify relief 136_tc_432 petitioner must demonstrate that imposing joint_and_several_liability is ‘inequitable in present terms’ see von kalinowski v commissioner tcmemo_2001_21 and poses a present economic hardship see pullins v commissioner t c pincite we have consistently looked beyond the taxable_year at issue to apply subsection f 135_tc_374 and we evaluate petitioner’s financial situation and prospects as of the time of trial see pullins v commissioner t c pincite petitioner’s financial situation fluctuated wildly in the years leading up to the trial petitioner earned approximately dollar_figure in as a supervisor with kcs railroad in late he took a voluntary demotion to a lower level position with kcs railroad and a commensurate pay cut of dollar_figure in he reported on the form_8857 a salary of dollar_figure per month dollar_figure per year continued factor that the taxpayer claims bears on economic hardship and brings to the commissioner’s attention sec_301_6343-1 proced admin regs the record does not reflect his exact salary after the pay cut on this same form he reported monthly expenses of dollar_figure leaving him with dollar_figure of disposable income per month dollar_figure per year in he was relieved of a dollar_figure monthly mortgage liability in the aftermath of the divorce that same year he received a promotion with kcs railroad and moved near their kansas city headquarters petitioner did not introduce into the record any evidence as to his financial situation at the time of the trial we cannot determine his present income and expenses nor his present solvencydollar_figure petitioner’s divorce judgment does not obligate him to pay alimony or child_support he has years of experience with kcs railroad and the prospect of further career advancement taking into account the foregoing we find that petitioner has at most advanced an argument for a hypothetical hardship and has not met his burden of proving a present economic hardship his monthly income greatly exceeded his monthly expenses two years before trial and his present disposable monthly income and financial solvency are mere speculation we cannot say that denying petitioner’s request for relief from joint_and_several_liability for would cause him to be unable to pay his basic reasonable living_expenses see pullins v the record does not reflect petitioner’s assets or liabilities other than the tax_liabilities attributable to the years not at issue commissioner t c pincite no economic hardship despite the taxpayer’s disability and modest income where her household had a monthly budget surplus and some ability to pay the tax debt and she introduced no evidence of her assets at trial alt v commissioner t c pincite no economic hardship in paying tax_liabilities exceeding dollar_figure million where the taxpayer and her spouse had a combined salary exceeding dollar_figure karam v commissioner tcmemo_2011_230 no economic hardship where the taxpayer could meet her basic living_expenses while making periodic_payments towards her tax_liabilities pugsley v commissioner tcmemo_2010_255 no economic hardship where the taxpayer had disposable income which she could use to make periodic_payments towards her tax_liabilities even where she did not have the means to pay off her entire tax_liability at once stolkin v commissioner tcmemo_2008_211 no economic hardship where the taxpayer had disposable income to pay towards her tax_liability nonrequesting spouse’s monthly income and expenses were irrelevant thus petitioner is not entitled to relief under the criteria set forth in revproc_2003_61 sec_4 c factors used to determine whether relief will be granted where as here a requesting spouse meets the threshold conditions but fails to qualify for relief under revproc_2003_61 sec_4 a determination to grant relief may nevertheless be made under the criteria set forth in revproc_2003_61 sec_4 c b pincite revproc_2003_61 sec_4 provides a nonexclusive list of factors the commissioner will consider in making that determination whether the requesting spouse is separated or divorced from the nonrequesting spouse marital status factor whether the requesting spouse would suffer economic hardship if not granted relief economic hardship factor whether at the time he or she signed the joint_return the requesting spouse knew or had reason to know that the nonrequesting spouse would not pay the income_tax_liability knowledge factor whether the nonrequesting spouse has a legal_obligation to pay the outstanding tax_liability pursuant to a divorce decree or agreement legal_obligation factor whether the requesting spouse received a significant benefit from the unpaid income_tax_liability significant benefit factor and 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 compliance factor the commissioner may consider two other factors that if present in a case will weigh in favor of granting relief whether the nonrequesting spouse abused the requesting spouse abuse factor and whether the requesting spouse was in poor mental or physical health at the time he or she signed the return or at the time he or she requested relief mental or physical health factor id sec_4 b c b pincite the absence of either factor will not weigh against granting relief id in making our determination under sec_6015 we shall consider the factors set forth in revproc_2003_61 sec_4 and any other_relevant_factors no single factor is determinative and all factors shall be considered and weighed appropriately see pullins v commissioner t c pincite porter ii t c pincite haigh v commissioner tcmemo_2009_140 marital status consideration is given to whether the requesting spouse is separated whether legally_separated or living apart or divorced from the nonrequesting spouse revproc_2003_61 sec_4 a i c b pincite petitioner and intervenor separated on date and were living apart at the time petitioner filed the request for relief furthermore they are now divorced and continue to live apart accordingly the marital status factor weighs in favor of relief economic hardship for the reasons previously discussed petitioner did not prove that he would suffer economic hardship if we denied him relief from joint_and_several_liability for accordingly the economic hardship factor weighs against relief knowledge a third factor is whether the requesting spouse knew or had reason to know that the nonrequesting spouse would not pay the tax_liability in making the determination whether the requesting spouse had reason to know consideration is given to among other things the requesting spouse’s level of education the requesting spouse’s degree of involvement in the activity generating the income_tax_liability the requesting spouse’s involvement in business and household financial matters the requesting spouse’s business or financial expertise and any lavish or unusual expenditures compared with past spending levels id sec_4 a iii c before we consider and apply the above factor we will comment on the testimonial credibility of the two witnesses petitioner and intervenor in many respects their testimony is critical to our disposition of the issue involved herein their testimony boils down to a he said she said situation in kropp v commissioner tcmemo_2000_148 we stated that as a trier of fact it is our duty to listen to the testimony observe the demeanor of the witnesses weigh the evidence and determine what we believe in 58_tc_560 we observed similarly that the process of distilling truth from the testimony of witnesses whose demeanor we observe and whose credibility we evaluate is the daily grist of judicial life we are not required to accept testimony if it is improbable unreasonable or questionable 450_f2d_1239 5th cir aff’g tcmemo_1970_89 we find that most of intervenor’s testimony with respect to this factor was credible in material respects her testimony was relatively consistent and reasonably detailed by contrast we find that some of petitioner’s testimony was not credible or was self-serving at times his testimony was internally inconsistent or inexplicably inane we made our findings_of_fact accordingly petitioner admitted at trial to knowing that there is a requirement to file a tax_return and knowing that he and intervenor had not yet filed a tax_return for by the time they filed their joint return late in he could remember neither why they were late in filing the return nor whether they had any discussions regarding the filing of the return he admitted that at the time he signed the return he knew an amount was owed to the irs he further admitted that he failed to explain in the form_8857 how he thought the amount of tax reported on the return would be paid nonetheless he testified that he had no reason to believe that intervenor would not pay the tax_liability shown on the return attributable to her income he provided no explanation for his belief at trial but later argued on brief that he believed intervenor would pay the tax_liability because an installment_agreement was in place and intervenor had agreed to pay the liability at the time the return was filed she continued to pay on an installment basis until we became separated several years after the tax_return for the year at issue was filed dollar_figure on the other hand intervenor testified that petitioner was very aware of the amount due and in fact wanted to be in control of handling it she testified that petitioner realized that they needed help with their tax returns sometime between and at least two years before the filing of the return she further testified that they did not have enough money to pay the full amount that was due to the irs and thus petitioner was going to seek help from an attorney there is no evidence in the record that intervenor had agreed to pay the tax_liability the installment_agreement predated the filing of the tax_return by more than three years petitioner is a college-educated professional with years of experience working at kcs railroad in both supervisory and nonsupervisory capacities during his marriage he was involved in household financial decisions and contributed to the preparation of the tax returns including the tax_return he had full and uninterrupted access to the mail and joint account he also had access although somewhat limited to intervenor’s business accounts moreover he was keenly aware of his and intervenor’s financial difficultie sec_28 and tax problemsdollar_figure we find that this cumulative evidence proves that petitioner knew there was a tax_liability for knew that intervenor would have difficulty in paying the liability and knew or had reason to know that intervenor would not pay the liability we find petitioner’s argument that the installment_agreement gave him a basis to believe that intervenor would pay the tax_liability unpersuasive see stolkin v commissioner tcmemo_2008_211 we have consistently found that a requesting spouse’s knowledge of the couple’s financial difficulties deprives the petitioner testified that at least three times during the marriage their electricity was shut off because of nonpayment of the bill petitioner testified that he discussed with intervenor calling the irs and trying to get something set up when he found out they had unpaid tax_liabilities requesting spouse of reason to believe that his or her ex-spouse will pay the tax_liability accordingly the knowledge factor weighs against relief legal_obligation if the nonrequesting spouse has a legal_obligation to pay the outstanding tax_liability pursuant to a divorce decree or agreement this factor weighs in favor of relief unless the requesting spouse knew or had reason to know when entering into the divorce decree or agreement that the nonrequesting spouse would not pay the income_tax_liability revproc_2003_61 sec_4 a iv where the divorce decree is silent this factor is neutral see drayer v commissioner tcmemo_2010_257 schultz v commissioner tcmemo_2010_233 here the divorce decree did not contain any provision regarding payment of the federal_income_tax liabilities therefore this factor is neutral significant benefit this factor weighs against the requesting spouse if he received a significant benefit beyond normal support from the unpaid tax_liability revproc_2003_61 sec_4 a v c b pincite a significant benefit is any benefit in excess of normal support sec_1_6015-2 income_tax regs a significant benefit may be direct or indirect id normal support is measured by the parties’ circumstances 93_tc_672 petitioner admitted that his approximately dollar_figure salary dollar_figure per month in was insufficient to pay all of his and intervenor’s monthly bills intervenor credibly testified that petitioner’s monthly take-home pay roughly paid the dollar_figure mortgage simple math tells us that his take-home pay after withholding for federal_income_tax state_income_tax employment_tax and other miscellaneous amounts may have been in the ballpark of the monthly mortgage payment hence there is no doubt that petitioner benefited from intervenor’s income however in the light of the parties’ circumstances we find that the benefit was just normal support the dollar_figure mortgage payments on their home are not considered to generate a significant benefit see pullins v commissioner t c pincite petitioner and intervenor did not have any unusual or lavish expenses see estate of krock v commissioner t c pincite petitioner testified that they were not living the high life and had just normal living bills intervenor testified that they paid the monthly bills with what they had and there was never a time when they were flush with cash and did not have to worry about monthly expenses in butner v commissioner tcmemo_2007_136 we stated that we consider the lack of significant benefit by the taxpayer seeking relief from joint and several_liability as a factor that favors granting relief under sec_6015 see also bland v commissioner tcmemo_2011_8 demattos v commissioner tcmemo_2010_110 accordingly this factor weighs in favor of granting relief compliance the inquiry under this factor is whether a taxpayer has made a good-faith effort to comply with the federal_income_tax laws in the taxable years following the year or years to which the request for relief relates revproc_2003_61 sec_4 a vi petitioner’s request for relief covers the years to and thus we examine his compliance for the years after dollar_figure petitioner’s counsel asserted in his opening statement that petitioner has paid his taxes like he always has since his marriage ended and similarly argued on brief that petitioner has paid all the liabilities for taxes since he separated from his wife however we have combed through the record and cannot find one scintilla of evidence that supports his contentions we have long held that a ssertions in opening statements in arguments or in briefs are not evidence and while helpful where as of the date trial petitioner’s and federal_income_tax returns would have already been due the return would not yet have been due if he had requested an extension of time to file however the time to pay the tax_liability would not have been extended there is sufficient evidence in support of the contentions made cannot be taken to supply evidence which is lacking kennedy v commissioner tcmemo_1958_139 see also norton v commissioner tcmemo_1970_279 aff’d 474_f2d_608 9th cir accordingly this factor is neutral see akopian v commissioner tcmemo_2011_237 finding that the compliance factor was neutral because of the lack of evidence thomassen v commissioner tcmemo_2011_88 same abuse abuse by the nonrequesting spouse favors relief revproc_2003_61 sec_4 b i claims of abuse require substantiation or specificity in allegations see knorr v commissioner tcmemo_2004_212 petitioner did not allege that he was abused by intervenor therefore this factor is neutral see revproc_2003_61 sec_4 b mental or physical health there is no evidence that petitioner was in poor mental or physical health at any relevant time thus this factor is neutral d notice_2012_8 after the trial the commissioner issued notice_2012_8 2012_4_irb_309 on date announcing that a proposed revenue_procedure updating rev proc supra will be forthcoming that proposed revenue_procedure if finalized will revise the factors that the irs will use to evaluate requests for equitable relief under sec_6015 petitioner filed a motion to supplement his opening brief which neither respondent nor intervenor objected to and which the court granted he argues that notice_2012_8 supra should control to the extent that it clarifies revproc_2003_61 supra in sriram v commissioner tcmemo_2012_91 slip op pincite n we stated that we would continue to apply the factors in revproc_2003_61 2003_2_cb_296 in view of the fact that the proposed revenue_procedure is not final and because the comment period under the notice only recently closed see also yosinski v commissioner tcmemo_2012_195 continuing to apply revproc_2003_61 supra deihl v commissioner tcmemo_2012_176 same in both sriram and deihl we called attention to the effect if any of a revised factor only to the extent we deemed it necessary for clarity as our holding did not turn on any single factor as revised in the proposed revenue_procedure we have carefully considered petitioner’s arguments and likewise conclude that the outcome in this case would not change under the proposed revenue proceduredollar_figure petitioner argues that under the proposed revenue_procedure even though he may have reason to know that the intervenor was not paying the tax when due continued e conclusion petitioner bears the burden of proving that he is entitled to equitable relief see rule a alt v commissioner t c pincite if we simply counted the number of factors for and against relief petitioner would lose on the burden of proof--two factors weigh in favor of relief marital status and significant benefit factors two factors weigh against relief economic hardship and knowledge factors and four factors are neutral legal_obligation compliance abuse and mental or physical health factors dollar_figure see hudgins v commissioner t c memo continued his lack of financial control mitigates his knowledge and independently favors relief we find that he exercised a considerable amount of financial control in the household and therefore the knowledge factor would continue to weigh against relief petitioner argues that the proposed revenue_procedure clarifies that his compliance with the tax laws after the marriage favors relief while we agree with his statement that compliance with the federal_income_tax laws is a factor favoring relief this factor would remain neutral because he offered no evidence of his compliance finally petitioner argues that under the proposed revenue_procedure no one factor controls and relief may be appropriate even if the number of factors weighing against relief exceeds the number of factors weighing in favor we agree and do not believe that this would be a departure from our previous caselaw see 136_tc_432 we analyze all relevant facts and circumstances with all factors considered and appropriately weighted and no single factor determinative in determining whether it is inequitable to hold a taxpayer liable for a joint tax_liability emphasis added under the proposed revenue_procedure petitioner would also lose if we counted the factors the economic hardship factor would be neutral because petitioner has not proven that he would suffer economic hardship if we denied him continued at in sec_6015 cases however we do not simply count factors id at likewise we are not bound by them id at the factors are guidelines we use in evaluating all of the relevant facts and circumstances to reach a conclusion id some of the most compelling facts in our analysis are the findings that petitioner exercised considerable control_over the household finances and decisionmaking contributed to the preparation of the tax returns failed to comply with the federal_income_tax laws for to knew of the noncompliance beginning as early a sec_2002 and persisted in a pattern of noncompliance through at least taking into account the foregoing and considering all the facts and circumstances we find that petitioner has failed to persuade us that the equities weigh in his favor accordingly we conclude that petitioner is not entitled to relief from joint_and_several_liability under sec_6015 for we have considered all arguments made in reaching our decision and to the extent not mentioned we conclude that they are moot irrelevant or without merit continued relief see notice_2012_8 sec_4 b 2012_4_irb_309 the significant benefit factor would also be neutral as the evidence shows that neither spouse received a significant benefit from the unpaid tax_liabilities see id sec_4 e the other factors would not change therefore one factor would weigh in favor of relief one factor would weigh against relief and six factors would be neutral to reflect the foregoing decision will be entered for respondent


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 ita plr-134341-17 date date re request for extension of time to elect straight_line depreciation method under sec_168 for certain property placed_in_service legend taxpayer tmp administrative_member a b c year1 date1 date2 dear -------------- ---------------------------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ --------------------------- ----------------------------------------- ------------------------ ------------- -------------- ------- --------------------------- ---------------------- this letter_ruling responds to a letter dated date and supplemental correspondence submitted by tmp on behalf of taxpayer requesting an extension of time to make the election under sec_168 of the internal_revenue_code to use the straight_line depreciation method for certain property placed_in_service during the taxable_year ending date1 the year1 taxable_year this request is made pursuant to sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations plr-134341-17 facts taxpayer represents that the facts are as follows taxpayer is a limited_liability_company that is treated as a partnership for u s federal_income_tax purposes tmp owns a fifty percent interest in taxpayer and is the tax_matters_partner of taxpayer the remaining fifty percent interest in taxpayer is owned by the administrative_member taxpayer files its federal tax returns on a calendar_year basis taxpayer’s overall_method_of_accounting is an accrual_method during the year1 taxable_year taxpayer placed_in_service a mixed-use real_estate development in a such property consisted of real and personal_property based on a cost_segregation_study taxpayer classified the property under sec_168 as 5-year_property 7-year_property 15-year_property and nonresidential_real_property the due_date without extensions of taxpayer’s federal_income_tax return for the year1 taxable_year was date2 for such tax_return taxpayer failed to file form_7004 application_for automatic_extension of time to file certain business income_tax information and other returns taxpayer’s failure_to_file form_7004 for the year1 taxable_year was due to a misunderstanding between tmp and administrative_member tmp mistakenly believed that administrative_member was to engage an outside accounting firm to prepare and file taxpayer’s federal tax_return for the year1 taxable_year while administrative_member mistakenly believed that tmp was to arrange for the preparation and filing of such tax_return further administrative_member was unaware that the due_date for filing taxpayer’s federal tax_return was statutorily changed from b to c after date2 taxpayer filed its federal tax_return for the year1 taxable_year taxpayer submitted a copy of such return to us the form sec_4562 depreciation and amortization attached to this return show that taxpayer claimed depreciation for the year 7-year and 15-year_property placed_in_service during the year1 taxable_year by using a recovery_period of and years respectively the straight_line method_of_depreciation and the half-year_convention these form sec_4562 also show that taxpayer claimed depreciation for the nonresidential_real_property placed_in_service during the year1 taxable_year by using a recovery_period of years the straight_line method_of_depreciation and the mid-month_convention taxpayer also attached to this return a statement stating that taxpayer elects under sec_168 and b to depreciate all items of five-year seven-year and fifteen-year_property which t axpayer placed into service during its tax_year ending on date1 using the straight-line method because taxpayer did not timely file its federal tax_return for the year1 taxable_year taxpayer failed to make the election under sec_168 and sec_168 to use plr-134341-17 the straight_line method_of_depreciation for all the 5-year 7-year and 15-year_property placed_in_service during the year1 taxable_year ruling requested taxpayer requests an extension of time to make the election under sec_168 to use the straight_line method_of_depreciation for 5-year 7-year and 15-year_property placed_in_service during the taxable_year ended date1 law sec_167 provides that there is allowed as a depreciation deduction a reasonable allowance for the exhaustion wear_and_tear and obsolescence of property used in a trade_or_business or held_for_the_production_of_income the depreciation deduction provided by sec_167 for tangible_property placed_in_service after generally is determined under sec_168 this section prescribes two methods of determining depreciation allowances one method is the general depreciation system in sec_168 and the other method is the alternative_depreciation_system in sec_168 under either depreciation system the depreciation deduction is computed by using an applicable_depreciation_method recovery_period and convention sec_168 prescribes depreciation methods for purposes of the general depreciation system of sec_168 sec_168 states that except as provided in sec_168 and sec_168 the applicable_depreciation_method is the 200-percent declining balance method switching to the straight_line method for the first taxable_year for which using the straight_line method with respect to the adjusted_basis as of the beginning of such year will yield a larger allowance sec_168 provides that the applicable_depreciation_method is the percent declining balance method for any 15-year or 20-year_property not referred to in sec_168 sec_168 provides that the applicable_depreciation_method is the straight_line method for property with respect to which the taxpayer elects under sec_168 to have the provisions of sec_168 apply sec_168 provides that an election under sec_168 or d may be made with respect to one or more classes of property for any taxable_year and once made with respect to any class shall apply to all property in such class placed_in_service during such taxable_year such an election once made shall be irrevocable plr-134341-17 sec_301_9100-7t of the temporary income_tax regulations applies to elections provided under the tax_reform_act_of_1986 including the election under sec_168 sec_301_9100-7t provides that such election must be made for the taxable_year in which the property is placed_in_service section sec_301_9100-7t provides that the time for making such election is the due_date taking extensions into account of the tax_return for the first taxable_year for which the election is to be effective section sec_301_9100-7t provides that unless otherwise provided such election shall be made by attaching a statement to the tax_return for the taxable_year for which the election is to be effective except as otherwise provided in the return or in the instructions accompanying the return for the taxable_year the statement shall contain the name address and taxpayer_identification_number of the electing taxpayer identify the election indicate the section of the code under which the election is made specify as applicable the period for which the election is being made and or the property or other items to which the election is to apply and provide any information required by the relevant statutory provisions and any information necessary to show that the taxpayer is entitled to make the election while the instructions to form_4562 for the year1 taxable_year provided that a taxpayer can make an irrevocable election to use the straight_line method for all property within a classification that is placed_in_service during the taxable_year it did not specifically state how to make such election under sec_301_9100-1 the commissioner of internal revenue 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 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly taxpayer is granted an extension to and including the date on which taxpayer filed its federal tax_return for the taxable_year ended date1 to make the election under sec_168 to use the straight_line method_of_depreciation for the 5-year 7-year and plr-134341-17 15-year_property placed_in_service by taxpayer during the taxable_year ended date1 in this regard we will consider this election made by taxpayer on its federal tax_return for the taxable_year ended date1 which was filed after its due_date to be timely made except as specifically ruled upon above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provisions of the code including other subsections of sec_168 specifically no opinion is expressed or implied on whether i taxpayer’s classifications of the items of property placed_in_service during the year1 taxable_year is proper under sec_168 or ii any item of depreciable_property placed_in_service by taxpayer during the year1 taxable_year is eligible for the additional first year depreciation deduction provided by sec_168 further this letter_ruling does not grant an extension of time for filing taxpayer’s federal tax_return for the taxable_year ended date1 the ruling contained in this letter is based upon information and representations submitted by 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 the ruling it is subject_to verification on examination this letter_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 the power_of_attorney on file with this office we are sending a copy of this letter_ruling to taxpayer’s authorized representatives we are also sending a copy of this letter_ruling to the appropriate operating division director sincerely kathleen reed ___________________________ kathleen reed chief branch office of associate chief_counsel income_tax and accounting enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-111582-01 date date company state trustees trust shareholders a b c d this letter responds to a letter from your authorized representative dated date as well as additional correspondence submitted on behalf of company requesting a ruling under sec_1362 of the internal_revenue_code that the termination of company's s_corporation_election was inadvertent company represents the following facts facts company was incorporated on a under the laws of state and elected under sec_1362 to be an s_corporation effective the same date the trust was created on b and company shares were transferred to it on c company’s s election terminated on c when the trustees relying on professional tax_advice failed to timely elect under sec_1361 to treat the trust as an electing_small_business_trust esbt the termination of company’s s_corporation_election was discovered on d when company and company’s counsel were reviewing possible business transactions company’s shareholders since c are listed in the legend of this letter plr-111582-01 law and analysis except as provided in sec_1362 sec_1362 provides that a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not among other things have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that an esbt may be a shareholder of an s_corporation for purposes of sec_1361 sec_1361 provides that for purposes of sec_1361 and except as provided in sec_1361 the term electing_small_business_trust means any trust if i the trust does not have as a beneficiary any person other than an individual an estate or an organization described in sec_170 or ii no interest in the trust was acquired by purchase and iii an election under sec_1361 applies to the trust sec_1361 provides that an election under sec_1361 shall be made by the trustee the election shall apply to the tax_year of the trust for which made and all subsequent tax years of the trust unless revoked with the consent of the secretary pending the issuance of final regulations notice_97_12 1997_1_cb_385 provides procedures for making an esbt election the trustee of an otherwise qualifying trust makes the esbt election by filing with the appropriate service_center a signed statement containing the information specified in notice_97_12 the trustee must file the esbt election within the period of time prescribed by sec_1_1361-1 of the income_tax regulations for filing qualified_subchapter_s_trust qsst elections generally within the 16-day-and-2-month period beginning on the day the stock is transferred to the trust sec_1362 provides that an election under sec_1362 terminates whenever the corporation ceases to be a small_business_corporation sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time plr-111582-01 during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of the corporation as an s_corporation as might be required by the secretary regarding this period then notwithstanding the circumstances resulting in termination the corporation shall be treated as an s_corporation during the period specified by the secretary sec_1_1362-4 provides that the determination of whether a termination was inadvertent is made by the commissioner the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should determine that the termination was inadvertent the fact that the terminating event was not reasonably within the control of the corporation and was not part of a plan to terminate the election or the fact that the event took place without the knowledge of the corporation notwithstanding its due diligence to safeguard itself against such an event tends to establish that the termination was inadvertent according to the legislative_history of sec_1362 f -- if the internal_revenue_service determines that a corporation's subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts s rep no 97th cong 2d sess 1982_2_cb_718 company represents that the transfer of shares to the trust was not motivated by tax_avoidance or retroactive tax planning company and the trustees represent that they were unaware that the trust had to make an esbt election to avoid termination of company’s s election they represent also that the trust meets the requirements of sec_1361 defining an esbt except for the filing of an esbt election the trustees and the shareholders represent that they at all times have filed plr-111582-01 their income_tax returns form_1041 u s income_tax return for estates and trusts and form_1040 u s individual_income_tax_return consistent with company being an s_corporation the returns for the trust however have not been filed consistent with esbt status based solely on the facts as represented by company in this ruling_request we conclude that the termination of company’s s_corporation_election due to the failure of the trustees to elect under sec_1361 to treat the trust as an esbt was inadvertent within the meaning of sec_1362 consequently we rule that company will continue to be treated as an s_corporation from c and thereafter unless company's s election otherwise terminates under sec_1362 we rule also that the trustees will be deemed to have filed a timely esbt election for the trust provided that such election effective as of c is filed no later than days from the date of this letter and provided that the trust’s tax returns filed for the period of time since c are amended to reflect the status of the trust as an esbt a copy of this letter should be attached to the esbt election except for the specific rulings above no opinion is expressed or implied concerning the federal_income_tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed or implied regarding company's eligibility to be an s_corporation the eligibility of the trust to be an esbt or the validity of the s_corporation and esbt elections under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent sincerely mary beth collins assistant to the chief branch office of associate chief_counsel passthroughs and special industries enclosure copy of this letter copy for sec_6110 purposes


significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division sep a et a in re company this letter constitutes notice that pursuant to your request of date as modified by your letter dated date your request for a waiver of the minimum_funding_standard for the above-named plan for the plan_year ending ix has been withdrawn and the case has been closed by this office and waivers of the percent tax under sec_4971 of the internal_revenue_code code have been granted for the above- named plan for the plan years ending be nn 7s and the waivers of the percent tax have been granted in accordance with b of the employee retirement income security act erisa the amounts for which the waivers have been granted are equal to percent of the accumulated funding defi iciencies in the ‘funding standard account as o - a plan y years for which the waivers have been granted to the extent such funding deficiencies have not been corrected - fhe end of the en i 2nd its parent_corporation is systems which is the sole corporate the hospital is a not-for-profit corporation organized for the purpose of operating an acute care hospital member of care and emergency which are all not-for-profit corporations the hospital provides 24-hour emergency care full surgical services inpatient acute care intensive care and a wide range of outpatient services the pension_benefit_guaranty_corporation has indicated that it is in the process of effecting an involuntary termination of the plan this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent we have sent a copy of this letter to the manager ep classification in and to the manager ep compliance unit in if you require further assistance in this matter please contact sincerely yours dros 0k’carol d gold director employee_plans f