t c memo united_states tax_court susan g bell petitioner v commissioner of internal revenue respondent docket no filed date john w nelson for petitioner angela j kennedy and derek w kaczmarek for respondent memorandum findings_of_fact and opinion chiechi judge petitioner filed the petition in this case in response to a so-called final appeals determination notice_of_determination concerning petitioner’s request for relief from joint_and_several_liability under section for her taxable 1all section references are to the internal_revenue_code in continued year we must decide whether petitioner is entitled to relief under that section for that year we hold that she is to the extent stated herein findings_of_fact some of the facts have been stipulated and are so found at the time petitioner filed the petition in this case she resided in indiana petitioner who was born in completed the eleventh grade of school although she took certain courses at a community college at times not established by the record petitioner does not have any educational background in business finance or federal state_or_local_tax law around petitioner suffered a work-related back injury petitioner’s back injury that resulted in a ruptured spinal disc and sciatic damage during the period to peti- tioner received workers’ compensation with respect to peti- tioner’s back injury in petitioner underwent back surgery for petitioner’s back injury during which metal rods were inserted in her back petitioner continued to receive certain medical treatment for petitioner’s back injury until from around until the time of the trial in this case petitioner did not maintain any continued effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure health insurance nor had petitioner sought treatment for any medical_condition since because she was unable to afford any such treatment as of the time of the trial in this case petitioner continued to suffer from petitioner’s back injury in that she was unable to stand sit walk or lie down for long periods on date petitioner married thomas bell mr bell who was born around we shall sometimes refer collectively to petitioner and mr bell as the bells the bells do not have any children together at no time during their marriage did mr bell physically abuse petitioner during the bells’ marriage petitioner did not maintain any bank account in her sole name mr bell maintained a bank account at union planters bank mr bell’s personal bank account in his sole name and the bells did not maintain any bank account in their joint names although petitioner did not have signatory authority over mr bell’s personal bank account she made depos- its into and reviewed bank statements of that account mr bell paid from mr bell’s personal bank account inter alia all of the bells’ household bills during mr bell wrote certain checks drawn on mr bell’s personal bank account that were payable to petitioner and that totaled dollar_figure around the bells began operating a business toy helicopter business in which they sold toy helicopters at certain air shows festivals and similar events around the country for several years the bells traveled extensively each year in operating that business around petitioner told mr bell that because of petitioner’s back injury she was unable to travel for the toy helicopter business as she had in the past in the bells stopped operating the toy helicop- ter business on date mr bell incorporated under the laws of indiana today i can inc today i can which was to operate an internet sales business and which it did until its dissolution at a time not established by the record at all relevant times that corporation was treated for federal_income_tax tax pur- poses as an s_corporation during the period to mr bell and petitioner owned percent and percent respectively of the outstanding_stock of today i can during that period mr bell maintained total control_over the operations and activities of that company at no time was petitioner authorized to enter into any agreements or contracts on behalf of today i can at all relevant times today i can maintained a bank account at union planters bank today i can bank account over which petitioner did not have signatory authority although only mr bell had signatory authority over that account mr bell gave to kent shipley mr shipley an attorney for today i can a so- called signature stamp with mr bell’s signature so that mr shipley was able to use that stamp on certain documents includ- ing checks drawn on the today i can bank account at all relevant times including during petitioner worked for today i can by performing certain administrative and bookkeeping tasks including handling certain bills by for example drafting certain checks for mr bell’s signature making certain appointments for mr bell taking certain customer orders and providing certain customer service during today i can paid petitioner wages of dollar_figure and withheld from those wages tax of dollar_figure today i can reported those amounts in form_w-2 wage and tax statement form_w-2 that it issued to petitioner for her taxable_year petitioner deposited the wages that today i can paid her during into mr bell’s personal bank account during today i can paid mr bell wages of dollar_figure and withheld from those wages tax of dollar_figure today i can reported those amounts in form_w-2 that it issued to mr bell for his taxable_year on date today i can filed form_1120s u s income_tax return for an s_corporation form_1120s for its taxable_period september through date today i can return in that return today i can reported gross_receipts or sales of dollar_figure total income of dollar_figure total deductions of dollar_figure and ordinary_income from trade_or_business activities of dollar_figure today i can attached to the today i can return schedule_k-1 shareholder’s share of income credits deductions etc schedule_k-1 that it completed with respect to mr bell in that schedule today i can reported that mr bell owned percent of its outstanding_stock on date the bells jointly filed late form_1040 u s individual_income_tax_return form_1040 for their taxable_year joint_return in that return the bells claimed no withholding_tax credit and showed tax due of dollar_figure when the bells filed the joint_return a check for dollar_figure that was drawn on mr bell’s personal bank account was included with that return on date the bells jointly filed late form_1040 for their taxable_year joint_return in that return the bells claimed no withholding_tax credit and showed tax due of dollar_figure when the bells filed the joint_return a check for dollar_figure that was drawn on mr bell’s personal bank account was included with that return on october november and date mr bell sent to the internal_revenue_service service payments of 2the record does not establish why a check for dollar_figure was included with the joint_return when that return showed tax due of only dollar_figure dollar_figure dollar_figure and dollar_figure respectively the service applied each of those payments against a portion of the bells’ unpaid tax for their taxable_year on date the bells jointly filed late form_1040 for their taxable_year on date mr bell sent to the service a payment of dollar_figure that the service applied against a portion of the bells’ unpaid liability for their taxable_year on decem- ber mr bell sent to the service a payment of dollar_figure that the service applied against a portion of the bells’ unpaid tax for their taxable_year on date the bells separated and mr bell moved from the marital residence in indiana marital residence to florida at that time mr bell took the checkbook for the today i can bank account and petitioner ceased to have access to that checkbook on date mr bell sent to the service a payment of dollar_figure that the service applied against a portion of the bells’ unpaid tax for their taxable_year on date mr bell sent to the service a payment of dollar_figure that the 3as discussed above the bells filed late the joint_return and paid late the tax shown due in that return although the record does not establish the bells’ unpaid liability for their taxable_year we presume that that liability consisted of additions to tax for failure_to_file timely a return for that taxable_year and failure to pay timely the tax shown due in that return as well as interest thereon as provided by law service applied against a portion of the bells’ unpaid tax for their taxable_year on date today i can filed form_1120s for its taxable_year today i can return in that return today i can reported gross_receipts or sales of dollar_figure total income of dollar_figure total deductions of dollar_figure and ordi- nary income from trade_or_business activities of dollar_figure today i can attached to the today i can return schedule_k-1 that it completed with respect to mr bell schedule_k-1 in that schedule today i can reported that mr bell owned percent of its outstanding_stock on date mr bell commenced in the marion county superior court superior court a divorce proceeding against petitioner on date mr bell sent to the service a payment of dollar_figure that the service applied against a portion of the bells’ unpaid tax for their taxable_year after the service applied that payment against that unpaid tax the bells’ remain- ing unpaid tax for their taxable_year including certain penalties and interest totaled approximately dollar_figure on date petitioner and mr bell executed and filed with the superior court a property settlement agreement property agreement in which the bells agreed to settle all of their respective rights to property arising out of their marriage pursuant to the property agreement petitioner was to receive a ford expedition automobile ford expedition that was then in her possession and was to have exclusive possession of the marital residence and to make all payments on the mortgage loan with respect to that residence the property agreement also provided today i can inc husband mr bell shall re- tain all interest in the business today i can inc wife petitioner agrees to sell any and all shares she owns in today i can inc back to today i can inc she will be paid one million dollars dollar_figure according to the promissory note that is attached hereto and incorporated herein as exhibit a wife agrees that this will be in complete satisfaction of any and all claims she has to either husband’s interest in today i can inc and or her individual interest in today i can inc tax_liability and general indemnification hus- band specifically agrees to indemnify and hold wife harmless from any federal or state tax lia- bility arising out of actions or omissions during their marriage and or arising out of actions or omissions related to today i can inc including the cost of wife’s defense and attorney’s fees or at wife’s option the assumption of her defense knowledge and disclosure each party acknowledges that they understand he or she is entitled to thorough discovery analysis and investigation of the other party’s financial information and all data and facts relevant to the dissolution pro- ceeding each party certifies that he or she ha sec_4as discussed below for reasons not established by the record mr bell signed the promissory note for dollar_figure million before he and petitioner executed and signed the property agreement full and adequate knowledge of all such relevant financial information data and facts in order to make a knowing and voluntary decision to sign this agreement at this time on date the superior court approved the property agreement and entered a decree of divorce dissolving the bells’ marriage on date mr bell executed an installment promis- sory note installment note in the amount of dollar_figure million that was payable to petitioner that note was the note to which paragraph of the property agreement quoted above referred the installment note which did not bear interest provided that mr bell was to make payments to petitioner on that note as follows upon the 5th day of date and then the 5th day of each month thereafter until paid in full monthly payments in the amount of ten thousand dollars dollar_figure or until the expiration of years from the effective date whichever occurs earlier the installment note also provided that if mr bell were to fail to make any payment within ten days of the date on which that payment was due he would be in default and any delinquent payment would accrue interest at the rate of percent per year until paid as of date mr bell had not made any payments under the installment note on date the bells jointly filed late respective form sec_1040 for their taxable years joint_return and joint_return in the joint_return the bells claimed no withholding_tax credit and showed tax due of dollar_figure when the bells filed that return a check for dollar_figure that was drawn on mr bell’s personal bank account was included with that return in the joint_return that the bells filed jointly on date the bells reported inter alia wages of dollar_figure net business income of dollar_figure from certain work mr bell performed on behalf of today i can net_income of dollar_figure from today i can adjusted_gross_income of dollar_figure and taxable_income of dollar_figure in that return the bells showed tax of dollar_figure and self-employment_tax of dollar_figure claimed a withholding_tax credit of dollar_figure and showed tax due of dollar_figure the bells did not attach to the 5the wages of dollar_figure that the bells reported in the joint_return consisted of the dollar_figure and the dollar_figure that today i can paid petitioner and mr bell respectively during 6the net_income of dollar_figure from today i can that the bells reported in the joint_return consisted of the difference between ordinary_income from trade_or_business activities of dollar_figure and a deduction under sec_179 of dollar_figure 7the dollar_figure withholding_tax credit that the bells claimed in the joint_return consisted of dollar_figure and dollar_figure respectively that today i can withheld from the respective wages that it paid petitioner and mr bell during we note that the bells rounded to the nearest dollar the amount of the with- holding tax_credit that they claimed in the joint_return 8the tax due shown in the joint_return included an estimated_tax penalty of dollar_figure joint_return the schedule_k-1 when the bells filed that return no payment was included on date today i can filed form_1120s for its taxable_year today i can return in that return today i can reported gross_receipts or sales of dollar_figure total income of dollar_figure total deductions of dollar_figure and ordi- nary business income of dollar_figure today i can attached to the today i can return respective schedules k-1 that it com- pleted with respect to petitioner and mr bell in those sched- ules today i can reported that petitioner and mr bell owned percent and percent respectively of its outstanding_stock after date the date on which the superior court entered the decree of divorce dissolving the bells’ marriage petitioner and mr bell continued to operate an internet sales business petitioner continued that business with mr bell because she did not have any other source_of_income and mr bell maintained the business contacts and relationships necessary for that business to succeed around petitioner and mr bell started a company known as earn and learn which operated an internet sales business substantially identical to the business that today i can had operated earn and learn was dissolved around petitioner has not been employed since earn and learn was dissolved in on date petitioner filed form_8857 request for innocent spouse relief form with respect to her taxable_year petitioner included with that form form questionnaire for requesting spouse form in form petitioner claimed that she did not review the joint_return before signing it that she first became aware of the unpaid tax for her taxable_year when the irs contacted me for an audit and that mr bell verbally and mentally abused her in petitioner’s form petitioner claimed total monthly income of dollar_figure consisting of monthly wages of dollar_figure and monthly self-employment_income of dollar_figure in that form peti- tioner claimed total monthly expenses of dollar_figure consisting of claimed monthly expenses federal state and local_taxes rent or mortgage food utilities telephone car including insurance and gasoline and repairs medical_expenses clothing total amount dollar_figure big_number big_number on date petitioner filed timely form_1040 for her taxable_year return in that return petitioner reported inter alia adjusted_gross_income of dollar_figure and taxable_income of dollar_figure in the return petitioner showed total_tax of dollar_figure and tax due of dollar_figure when she filed that return petitioner included a payment of dollar_figure on date respondent sent to petitioner a statu- tory notice of balance due with respect to certain additions to tax and interest totaling dollar_figure that respondent had assessed for petitioner’s taxable_year on date peti- tioner sent to the service a payment of dollar_figure an examiner working for the service respondent’s examiner prepared an examination workpaper dated date exami- nation workpaper with respect to petitioner’s request for relief under sec_6015 for her taxable_year in that workpaper respondent’s examiner concluded that petitioner is not entitled to relief under that section for any portion of the underpayment for that year the examination workpaper stated inter alia general information up underpayment denied relief - no hardship - has ability to make payments - considered abuse how- ever not a strong factor for granting relief - consid- ered health issues rs has ability to work pay tax based on return - part attributable to nes non- electing spouse - knew nes has a history of not paying tax - no belief - owes on prior joint returns - helped with business - drafted checks for business - received benefit through the divorce evaluation process year sec_6015 liability arose on or after date joint_return is valid there is enough information to determine the claim no oic accepted eligibility factors underpayment_of_tax - relief is not available under sec_6015 sec_6015 filed a joint_return claim filed timely liability unpaid or rs requesting spouse may have refundable payments not a fraudulent return no fraudulent transfer of assets no disqualified assets transferred the underpaid tax is not solely attributable to the nrs nonrequesting spouse attribution nes dollar_figure rs dollar_figure partial attribution to the nrs continue evaluating for the portion attributable to the nrs deny relief for the portion attributable to the rs tier i factors limited scope taxpayers are currently divorced widowed legally_separated or they had been members of separate house- holds prior to the claim for at least consecutive months can’t prove a belief that tax was to be paid explanation history of filing returns late with balance dues sic - owes on prior joint returns - when return was filed - did not have access to nes’ ability to pay tier i factors limited scope not met tier ii factors taxpayers are currently divorced widowed for legally_separated or they had been members of separate households prior to the claim for at least consecutive months no economic hardship explanation per form - has ability to make against marital abuse explanation payments - received dollar_figure in for her shares for nes’ business for states mental verbal abuse not con- sidered strong factor for granting re- lief - rs worked for nes’ business poor mental or physical health for explanation rs has back trouble depression - how- ever rs is sic ability to work nrs has legal_obligation for legal_obligation per divorce decree nes is to pay tax knowledge background school involvement rs - high school - culinary rs - states no joint accounts - states she reviewed statements - worked for business - clerical administrative work - includes review- ing bills drafting checks for nes’ signa- ture nrs - tenth grade nrs - lifestyle changes nrs’s elusiveness duty to inquire living arrangements rs had no knowledge and no reason to know for explanation not indicated did not ask questions did not review return separated history of filing late returns with balance due - owes on prior year joint returns - when return filed - did not have access to nes’ ability to pay 9an individual not identified in the record struck by hand the typewritten word for in the examination workpaper 10an individual not identified in the record struck by hand the typewritten word for in the examination workpaper 11an individual not identified in the record struck by hand the typewritten word for in the examination workpaper and inserted by hand the word against immediately above it rs gained benefit explanation against received dollar_figure for her shares of business - received marital home through divorce made a good_faith effort to comply with the tax for laws explanation all future returns filed paid - made estimated payment on unique circumstances although rs states health issues - rs still has ability to earn wages to pay taxes not meeting tier ii factors - deny claim tier ii consideration based on the above facts it is equitable to hold the rs lia- ble for the balance tier ii factors not met - deny claim denied under sec_6015 - full scope - denied under f conclusion on date respondent issued to petitioner a preliminary determination with respect to her request for relief under sec_6015 for her taxable_year in that letter respondent determined that petitioner is not entitled to that relief because you petitioner did not show it would be unfair to hold you responsible you did not prove that at the time you signed the return you had reason to believe the tax would be paid also the documentation you provided does not prove economic hardship around date mr bell commenced a bankruptcy proceeding in the u s bankruptcy court for the middle district of florida bankruptcy court on date petitioner filed in the bankruptcy court an adversary complaint peti- tioner’s bankruptcy complaint in that proceeding in that complaint petitioner alleged that mr bell’s obligations under the installment note and the indemnification con- tained in paragraph of the property agreement were nondischargeable in bankruptcy in petitioner’s bankruptcy complaint petitioner alleged inter alia during the period from approximately through while still married debtor mr bell and sue petitioner were partners in a business called today i can inc tic whose primary purpose was internet sales e-commerce further tic was organized under the laws of the state of indiana the ownership structure of tic was with debtor holding the majority interest and sue holding the minority interest prior to the filing of the instant bank- ruptcy sue had instituted post-dissolution legal proceedings in indiana marion county against debtor for the purpose of collecting on the note and that said proceedings were then-pending at the time of the filing of this bankruptcy moreover during the last half of debtor had appeared in indiana twice for hearings on said legal matter and that further hearings were scheduled nevertheless debtor failed to disclose said litigation as required under question no of his statement of financial affairs on date mr bell filed in the bankruptcy court an answer to petitioner’s bankruptcy complaint in that answer mr bell admitted the allegations that petitioner made in paragraph sec_5 and of that complaint quoted above around early respondent assigned petitioner’s request for relief under sec_6015 to an officer respondent’s appeals officer in respondent’s appeals_office after considering petitioner’s request for relief respondent’s appeals officer prepared an appeals case memorandum dated date appeals memorandum in that memorandum respondent’s appeals officer concluded that petitioner is not entitled to relief under sec_6015 for her taxable_year the appeals memorandum stated in pertinent part summary and recommendation is the taxpayer entitled to relief from liability under sec_6015 there are hazards for both sides so an offer was presented to the taxpayer but she has ignored the offer she has not countered with an offer of her own either accordingly the examiner’s position will be sustained brief background taxpayer filed a joint income_tax return with her spouse for tax_year on or about date an underpayment was reported on the form_1040 in the amount of dollar_figure additional penalties and interest were assessed because the tax_return was filed after the due_date of date the taxpayer and her former spouse were equal partners in a corporation and both earned wages during he had an additional sole_proprietorship during the year after allocating the tax_liability her former spouse’s share of the unpaid tax was dollar_figure discussion and analysis the taxpayer cites o’neill v cir tc memo and discusses factors that favor her in the determi- nation that she should be granted innocent spouse relief under sec_6015 the factors discussed by the court are listed below with the taxpayer’s position on each factor explained marital status the couple was divorced date economic hardship the taxpayer completed form and calculated her current monthly household_income and expenses she has about dollar_figure available income each month she did not receive the dollar_figure million divorce settle- ment from her former spouse he has listed this as an outstanding debt on his bankruptcy filings abuse the taxpayer completed form and stated that she was the victim of mental and verbal abuse the divorce decree does not give a reason for the marital troubles it only accepts the property settlement and grants the dissolution knowledge the taxpayer was aware of their income_tax liabil- ity she knew that they had not filed income_tax returns for several years and were attempting to become current during and calendar years many of these returns were filed late and with balances due they have outstanding liabili- ties in excess of dollar_figure from their and tax returns 12we note that in o’neill v commissioner tcmemo_2004_ we analyzed the taxpayer’s request for relief under sec_6015 under the factors set forth in revproc_2000_15 2000_1_cb_447 revenue_procedure we also note that revproc_2003_61 2003_2_cb_296 revenue_procedure superseded revproc_2000_15 revproc_2003_61 is effective for requests for relief under sec_6015 that were filed on or after date id sec c b pincite revproc_2003_61 is applicable in the instant case because petitioner filed her request for innocent spouse relief on date divorce decree the property settlement states that the former spouse will hold the taxpayer harmless from any federal tax_liability arising during their mar- riage the couple had filed the form_1040 about year prior to the divorce being granted she must have been aware that he had not paid the tax_liabilities for that statement to be included in the decree tax_liability the taxpayer believes that all of the income re- ported on the tax_return belongs to her for- mer spouse the taxpayer reported wages earned during and listed her occupation as a busi- ness owner at least some of the wages reported as income on the tax_return belonged to the tax- payer the property settlement along with the taxpayer’s occupation on the tax_return indi- cates that she was involved in the business she was identified as a owner of the company significant benefit the taxpayer was granted a dollar_figure million property settlement for her share of the corporation title to the ford expedition listed as a corporate asset and sole title to the couple’s personal_residence she lived with her former spouse until christmas day current status the taxpayer has filed her tax returns there are no outstanding liabilities at this time she made estimated payments for the tax_year the first factor is neutral or favors the government because the couple were married and living together all but week of they were separated while the tax_return was prepared and at the time it was filed with the service the second factor is neutral or favors the government because the taxpayer has sufficient net_income each month to pay some of the liabilities the third factor is neutral there isn’t any evidence of abuse during the marriage the divorce decree is silent on this topic the seventh factor is neutral neither individual received a significant benefit during the marriage from the unpaid taxes both enjoyed the same lifestyle the 6th factor favors the government because the busi- ness was owned by both individuals equally the tax- payer was granted a large settlement for her share of the business at the time of the divorce the income reported by the corporation should be split between them the fourth factor favors the government because the taxpayer was aware that the couple had unpaid liabili- ties at the time she signed the form_1040 she was aware that there were amounts owed on that return along with others that had been filed within the last year the fifth factor favors the taxpayer because the decree holds the former spouse liable for taxes owed during the marriage he agreed to be responsible for the unpaid taxes whether or not the taxpayer believed this to be true this is not known the eighth factor favors the taxpayer she has been current in filing and paying her tax_liabilities since the couple separated out of factors favor the taxpayer while are considered neutral this would allow the taxpayer out of factors on her side or concession by the government my evaluation i believe that there are hazards of litigating this issue for both sides there are factors that favor the taxpayer and others that favor the government al- though an offer was presented to the taxpayer she has refused it and decided not to counter it with an offer of her own i recommend that the examiner’s position should be sustained in full on date respondent issued to petitioner the notice_of_determination in that notice respondent denied petitioner’s request for relief under sec_6015 for her taxable_year the notice_of_determination stated in pertinent part the information we have available does not show you meet the require- ments for relief on date petitioner filed form_1040 for her taxable_year return dollar_figure in that return petitioner reported adjusted_gross_income of dollar_figure and taxable_income of dollar_figure in the return petitioner showed total_tax of dollar_figure and claimed a withholding_tax credit of dollar_figure estimated_tax payments totaling dollar_figure and a refund of approximately dollar_figure on date respondent assessed against petitioner an estimated_tax penalty of dollar_figure with respect to her taxable_year and issued to her a refund of dollar_figure with respect to that year in date petitioner moved from the marital residence to live with her older sister in idaho petitioner made that move because she could no longer afford to live in indiana and re- quired assistance from family members who lived in idaho from at least date until the time of the trial in this case petitioner’s sister who was suffering from certain medical conditions including type ii diabetes back injuries severe asthma and severe arthritis was unemployed and was receiving 13petitioner received an extension of time within which to file the return to and including date social_security disability paymentsdollar_figure at the time of the trial in this case petitioner’s sister contributed dollar_figure monthly toward the household expenses of petitioner and herself at the time petitioner moved to idaho in date she informed wells fargo bank n a wells fargo the trustee for the holders of the mortgage loan with respect to the marital residence that she was unable to make further payments on that mortgage loan and that she would surrender possession of that residence around date wells fargo instituted a foreclosure proceeding against petitioner in the hamilton supe- rior court and filed a document in that court entitled amended complaint on note and for foreclosure of mortgage with respect to the marital residence on date petitioner and mr bell entered into a settlement agreement and release bankruptcy settlement with respect to the claims that petitioner had made in petitioner’s bankruptcy complaint which the bankruptcy court approved on november dollar_figure that settlement provided in pertinent part on date susan petitioner and thomas mr bell were granted a divorce under the laws of the state of indiana the divorce pursuant to 14as of the time of the trial in this case petitioner had applied for social_security disability benefits but had not received any response as to whether she qualified for such benefits 15mr bell and petitioner executed the bankruptcy settlement on sept and date respectively the divorce susan and thomas entered into a property settlement agreement the psa which outlined their rights and obligations with respect to property income and assets related to their marriage this agreement hereby incorporates said psa by reference including a certain dollar_figure promissory note dated date the note scope of agreement the parties hereby agree that this agreement is intended to address thomas’ liability with respect to the psa specifically includ- ing the note and all federal and or state tax_liability with respect to a certain internet business in which thomas and susan were partners during their marriage namely today i can inc tic payment terms subject_to the satisfaction of the contingencies set forth under paragraph seven above the parties hereby agree that thomas shall pay susan the total sum of three hundred twenty five thousand dollars and no cents dollar_figure here- inafter the settlement amount in full accord and satisfaction of his obligations under the note sub- ject to the method of payment set forth under para- graph below thomas hereby agrees to pay the settlement amount as follows a a lump sum payment of ten thousand dollars dollar_figure to be paid not later than date and b commencing on date thomas shall pay susan the sum of four thousand two hundred fifty dollars dollar_figure per month for twelve consecutive monthly installment payments dollar_figure total and c commencing on date thomas shall pay susan the sum of three thousand dollars dollar_figure per month for eighty-eight con- secutive monthly installment payments dollar_figure total 16the contingencies set forth in par of the bankruptcy settlement were satisfied the aggregate total of the payments described under paragraphs a b and c above amount to the settlement amount of three hundred twenty five thousand dollars dollar_figure the last such payment of the settlement amount shall be due and owing on date all payments shall be due on the fifth day of each month the parties agree thomas is solely responsible for the payments set forth under this paragraph method of payment the payments due under paragraph nine shall be made as follows the lump-sum payment of dollar_figure due octo- a ber shall be made payable to susan g bell and john nelson and shall be mailed to the following address john w nelson esquire and the first seven payments of dollar_figure which b commence on date shall be made pay- able to susan g bell and john nelson and shall be mailed to the following address john w nel- son esquire and the remaining five payments of dollar_figure as well c as all payments of dollar_figure shall be made payable to susan g bell and shall be mailed to susan at an address to be provided to thomas at least thir- ty days prior to the commencement of the first such payment taxes thomas agrees that he shall remain subject_to all tax_liability related to tic as set forth under the psa further thomas agrees to indem- nify susan for any tic related tax_liability that is ultimately assessed against her as such thomas hereby ratifies and reaffirms all tic tax indemnifica- tion provisions as set forth under the psa default the parties agree that in the event thomas fails to fully satisfy his obligations under this agreement he shall be in default of this agree- ment the parties hereby agree that the occurence of any of the following shall constitute an event of default a thomas’ failure to make any payment due under this agreement by the due_date scheduled for any such payment as set forth under paragraph nine above b thomas’ failure to timely indemnify susan for any_tax payments made by susan relating to tic as de- scribed under the psa as set forth under paragraph ten above and c payment of any amount less than the scheduled amount in the event thomas is in default with respect to any payment scheduled hereunder he shall have ten calendar days following the appli- cable due_date in which to cure such default provided that susan is in receipt of any such payment not later than midnight on the tenth calendar day following the due_date in the event of default and or failure to timely cure such default the terms of this agree- ment shall become null and void and the terms of the note shall revive and be of full legal force and ef- fect from around date through around date mr bell paid petitioner dollar_figure pursuant to the bankruptcy settle- ment of that dollar_figure petitioner used dollar_figure to pay her attor- ney from around date to the time of the trial in this case mr bell did not make any monthly payments pursuant to the bankruptcy settlement as of the time of that trial petitioner had not initiated any legal action to enforce the terms of the bankruptcy settlement nor had she taken any legal action to enforce the terms of the installment note which she had the right to do under the bankruptcy settlement in the event mr bell defaulted on that settlement as of date the bells owed a balance of dollar_figure with respect to their taxable_year as of that date the bells owed a balance of dollar_figure with respect to their taxable_year at the time of the trial in this case petitioner who remained unemployed was still residing in idaho with her older sister from the time petitioner moved to idaho in date until the time of that trial the only funds that petitioner had available on which to live were the payments that mr bell had made pursuant to the bankruptcy settlement from date to date totaling dollar_figure and certain savings the amount of which is not established by the recorddollar_figure at the time of the trial petitioner’s savings had been reduced to approximately dollar_figure at the time of the trial in this case petitioner’s monthly expenses included expenses for rent of dollar_figure utilities including electric gas telephone water and trash of dollar_figure and food of dollar_figure at that time petitioner had certain outstanding bills in amounts not established by the record for medical_care that had been provided to her before opinion the parties’ only dispute is whether petitioner is entitled to relief under sec_6015 for her taxable_year dollar_figure petitioner bears the burden of proving that she is entitled to 17as discussed above at the time of the trial in this case petitioner’s sister was receiving social_security disability benefits and was contributing dollar_figure monthly toward the household expenses of petitioner and herself 18petitioner does not dispute that she is not entitled to relief under sec_6015 or c for her taxable_year such relief see rule a 118_tc_106 affd 353_f3d_1181 10th cir sec_6015 provides sec_6015 relief from joint_and_several_liability on joint_return f equitable relief --under procedures pre- scribed by the secretary if-- taking into account all the facts and circumstances it is inequitable to hold the indi- vidual liable for any unpaid tax or any deficiency or any portion of either and relief is not available to such individ- ual under subsection b or c the secretary may relieve such individual of such liability as directed by sec_6015 the commissioner of internal revenue commissioner has prescribed procedures in revproc_2003_61 that are to be used in determining whether it would be inequitable to find the requesting spouse liable for part or all of the underpayment_of_tax section dollar_figure of that revenue_procedure lists the following threshold conditions threshold conditions which must be satisfied before the commis- sioner will consider a request for relief under sec_6015 the requesting spouse filed a joint tax_return for the taxable_year for which such spouse seeks relief relief is not available to the requesting spouse under sec_6015 or c 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 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 the requesting spouse the requesting spouse did not file or fail to file the tax_return in question with fraudulent intent and the income_tax_liability from which the requesting spouse seeks relief is attributable to an item of the nonrequesting spouse revproc_2003_61 sec_4 c b pincite respondent argues that petitioner has failed to satisfy the threshold condition in sec_4 of revproc_2003_ with respect to the respective portions of the underpayment for her taxable_year that are attributable to percent of the net_income of dollar_figure from today i can that the bells reported in the joint_return and petitioner’s wages of dollar_figure that the bells reported in that return petitioner disagrees and argues that she satisfies all of the threshold conditions with respect to the entire underpayment for her taxable_year with respect to the net_income of dollar_figure from today i can today i can net_income that the bells reported in the joint_return respondent contends that percent of that income is attributable to petitioner because during petitioner owned percent of the stock of today i can in support of that contention respondent relies on the allegations that peti- tioner made in paragraph sec_5 and of petitioner’s bankruptcy complaint that between and she owned percent of the stock of today i can and mr bell’s admission of those allegations in the answer to petitioner’s bankruptcy complaint that he filed in the bankruptcy court petitioner contends that mr bell owned percent of today i can and that therefore the today i can net_income is attributable entirely to him in support of that contention petitioner relies on the schedule_k-1 in which today i can reported that mr bell owned percent of its outstanding_stock petitioner claims that in signing the joint_return she agreed with what was reported in that schedule_k-1 namely mr bell owned percent of the stock of today i candollar_figure in advancing that claim petitioner ignores that the bells did not attach to their joint_return the schedule_k-1 as a result petitioner could not have even been aware that today i can had reported in that schedule_k-1 that mr bell owned percent of the stock of today i can even if petitioner had been aware that today i can had reported in the schedule_k-1 that mr bell owned percent of that stock we have held that a tax_return does not establish the truth of the facts stated 19petitioner relies on jones v commissioner tcmemo_2010_112 in support of her claim that in signing the joint_return she agreed with the schedule_k-1 we find jones to be materially distinguishable from the instant case and peti- tioner’s reliance on that case to be misplaced therein campbell v commissioner tcmemo_2011_15 citing 71_tc_633 more importantly petitioner herself disputed what today i can reported in the schedule_k-1 in petitioner’s bank- ruptcy complaint petitioner indicated that during through she owned percent of the stock of today i can in mr bell’s answer to that complaint mr bell agreed with that state- ment in further support of petitioner’s contention that the today i can net_income is attributable entirely to mr bell petitioner relies on sec_4 b of revproc_2003_61 that section provides in pertinent part b nominal ownership if the item is titled in the name of the requesting spouse the item is presump- tively attributable to the requesting spouse this presumption is rebuttable sec_4 b of revproc_2003_61 also provides an example nominal ownership example of circumstances that would establish that a requesting spouse’s ownership was nominal for example h opens an individual_retirement_account ira in w’s name and forges w’s signature on the ira in thereafter h makes contributions to the ira and in takes a taxable_distribution from the ira h and w file a joint_return for the taxable_year but do not report the taxable_distribution on their joint_return the service later proposes a deficiency relating to the taxable ira distribution and assesses the deficiency against h and w w requests relief under sec_6015 w establishes that w did not contribute to the ira sign paperwork relating to the ira or otherwise act as if w were the owner of the ira w thereby rebutted the presumption that the ira is attributable to w according to petitioner the allocation cited by respondent establishes a presumption that petitioner owned of the tic today i can stock which can be rebutted by evidence that any such interest was nominal petitioner claims that she has in fact rebutted that presumption by showing that her ownership_interest in today i can was nominal because mr bell wielded total control_over the business and petitioner’s role with tic was extremely limited dollar_figure even if petitioner were correct that mr bell controlled today i can we would reject petitioner’s contention that her ownership_interest in that company was nominal the nominal ownership example set forth in sec_4 b of revproc_2003_61 is instructive in that example the requesting spouse established that she did not act as if she were the owner of the ira id in the instant case petitioner acted as if she were an owner of today i can when she sold her stock in that business to mr bell as part of the divorce proceedings between her and mr bell in this regard we have found that petitioner and mr bell 21petitioner relies on wilson v commissioner tcmemo_2010_134 in support of her claim that her ownership_interest in today i can was nominal because mr bell wielded control_over that company and her role in that company was limited in wilson we addressed whether one-half of the income from an unincorporated business operated by the nonrequesting spouse should be attributed to the requesting spouse solely because the requesting spouse had performed certain clerical work as an employee of that business we find wilson to be materially distinguishable from the instant case and petitioner’s reliance on that case to be misplaced executed and filed with the superior court the property agreement and that that agreement provided inter alia that mr bell was to pay to petitioner dollar_figure million for petitioner’s stock in today i can if petitioner’s ownership_interest in today i can had been nominal mr bell would not have agreed to pay her a substantial amount in exchange for that interestdollar_figure on the record before us we find that percent of the today i can net_income is attributable to petitioner on that record we further find that petitioner has failed to carry her burden of establishing that she satisfies all of the threshold conditions with respect to the portion of the underpayment for her taxable_year that is attributable to that portion of that net_income see revproc_2003_61 sec_4 on the record before us we find that petitioner has failed to carry her burden of establishing that it would be inequitable to hold her liable for the portion of that underpayment for her taxable_year that is attributable to her 49-percent portion of the today i can net_income on that record we find that petitioner has failed to carry her burden of establishing that she is entitled for her taxable_year to relief under sec_6015 with respect to that portion of that underpayment 22in the property agreement mr bell agreed to pay peti- tioner dollar_figure million which was equal to approximately one-half of the gross_receipts or sales that today i can reported in the today i can return with respect to the portion of the underpayment for peti- tioner’s taxable_year that is attributable to petitioner’s wages of dollar_figure that the bells reported in the joint_return petitioner asserts in addition the federal the joint_return shows that the couple the bells earned dollar_figure in wages that were paid_by today i can inc this consisted of wages in the amount of dollar_figure that were paid to petitioner and wages of dollar_figure that were paid to the non-requesting spouse thus all income earned by the petitioner and nonrequesting spouse in was directly attributable to today i can inc it appears that petitioner is arguing that because today i can paid her dollar_figure of wages during and because mr bell owned percent of the stock of that company during that year those wages are attributable to him on the record before us we reject petitioner’s argument regardless of who owns a company an employee is taxed on the wages that the company pays to the employee petitioner agrees that during she performed services for today i can and that during that year today i can paid her wages of dollar_figure for those services on the record before us we find that the wages that today i can paid petitioner during are attributable to petitioner on that record we further find that petitioner has failed to carry her burden of establishing that she satisfies all of the threshold conditions with respect to the portion of the underpay- ment for her taxable_year that is attributable to those wages see revproc_2003_61 sec_4 on the record before us we find that petitioner has failed to carry her burden of establishing that it would be inequitable to hold her liable for the portion of the underpayment for her taxable_year that is attributable to the wages that today i can paid her during that year on that record we find that petitioner has failed to carry her burden of establishing that she is entitled for her taxable_year to relief under sec_6015 with respect to that portion of that underpayment respondent does not dispute that petitioner satisfies all of the threshold conditions with respect to the portion of the underpayment for petitioner’s taxable_year that is attribut- able to mr belldollar_figure where the requesting spouse satisfies the threshold conditions sec_4 of revproc_2003_ sets forth the circumstances under which the commissioner ordinarily will grant relief to that spouse under sec_6015 in a case like the instant case where a liability is reported in a joint_return but not paid as pertinent here those circum- stances which section dollar_figure of revproc_2003_61 and we refer to as elements are 23the portion of the underpayment for petitioner’s taxable_year that is attributable to mr bell consists of the underpayment for that year attributable to the wages of dollar_figure that today i can paid mr bell during that year the net business income of dollar_figure from certain work mr bell per- formed on behalf of today i can that the bells reported in the joint_return and mr bell’s 51-percent share of the today i can net_income a on the date of the request for relief the requesting spouse is no longer married to the nonrequesting spouse b on the date the requesting spouse signed the joint_return the requesting spouse had no knowledge or reason to know that the nonrequesting spouse would not pay the income_tax_liability the requesting spouse must establish that it was reasonable for the request- ing spouse to believe that the nonrequesting spouse would pay the reported income_tax_liability and c the requesting spouse will suffer economic hardship if the service does not grant relief for purposes of this revenue_procedure the service will base its determination of whether the requesting spouse will suffer economic hardship on rules similar to those provided in sec_301_6343-1 revproc_2003_61 sec_4 c b pincite we shall hereinafter refer to the elements set forth in sec_4 a b and c of revproc_2003_61 as the marital status element the knowledge or reason to know element and the economic hardship element respectively with respect to the portion of the underpayment for peti- tioner’s taxable_year that is attributable to mr bell respondent concedes that the marital status element is present and the parties dispute whether the knowledge or reason to know element and the economic hardship element are present with respect to the knowledge or reason to know element petitioner must establish that it was reasonable for her to 24see supra note believe that mr bell would pay the tax shown due in the joint_return see revproc_2003_61 sec_4 b respon- dent argues that on date the date on which petitioner signed the joint_return she had knowledge or reason to know that mr bell would not pay the tax shown due in that return with that return or within a reasonably prompt timedollar_figure that is be- cause according to respondent on date petitioner knew of the seven late-filed income_tax returns for the bells’ taxable years and knew that the and joint income_tax re- turns reported unpaid tax of dollar_figure knew or had reason to know that mr bell had made payments towards the delinquent tax obligations for tax years and but that he had not remitted a payment towards the liability since date knew or had reason to know that even after accounting for subse- quent payments the outstanding tax_liabilities from tax years and were in excess of dollar_figure in addition to penalties and interest and knew that the return reported a tax due of dollar_figure cross-references omitted 25respondent’s argument that petitioner must believe that the tax would be paid in a reasonably prompt time is based on banderas v commissioner tcmemo_2007_129 in banderas we held that in order for a belief that a liability would be paid to be reasonable the requesting spouse must believe that the funds to pay the liability would be on hand within a reasonably prompt time respondent contends that that holding in banderas is wrong and that the requesting spouse must believe that the tax would be paid_by the later of the date on which the return was filed or the date on which the tax is due to be paid we need not revisit our holding in banderas as respondent invites us to do because as discussed below even under that holding we sustain respon- dent’s argument with respect to the knowledge or reason to know element petitioner counters that it was reasonable for petitioner to believe that mr bell would pay the tax shown due in the joint_return according to petitioner at the time petitioner signed the joint_return she knew there was a balance due however she under- stood that tom mr bell would pay all taxes due according to his statement to her at that time today i can inc was in the midst of an impres- sive run of success as shown on forms 1120s which were filed for tax years and today i can inc had had total income of dollar_figure and total income of dollar_figure moreover within the one year period prior to the filing of the ie through tom bell had tangibly demonstrated his ability and willingness to pay the tax_liability as shown by the tax_payments totaling dollar_figure and had personally signed all the checks constituting those payments coupled with the fact that tom bell at that time was approximately forty years old and entering his prime earning years any reasonable person would con- clude as did petitioner that she would have no reason to believe that mr bell would not or more impor- tantly could not make the payments cross-reference and fn ref omitted on the record before us we reject petitioner’s argument the cornerstone of which is that today i can reported gross_income of dollar_figure and dollar_figure for its taxable years and respectively petitioner’s argument fails to take into account that today i can reported total deductions of dollar_figure and dollar_figure for those respective years in addition although petitioner is correct that between date and date mr bell remitted certain payments to the service that it applied against the bells’ unpaid tax for each of their taxable years and after mr bell made those payments there remained unpaid tax for the bells’ taxable_year including certain penalties and interest of approximately dollar_figure moreover we have found that on date the date on which petitioner signed the joint_return petitioner signed the joint_return in which the bells showed tax due of dollar_figure and when the bells filed that return a check for only dollar_figure that was drawn on mr bell’s personal bank account was included with that return in addition when petitioner signed the joint_return she was aware that between date and date she and mr bell had filed late respective tax returns for their taxable years through the joint_return showed tax due of dollar_figure that they did not pay in full when they filed that return the joint_return showed tax due of dollar_figure that they did not pay in full when they filed that return and the joint_return showed tax due of dollar_figure that they did not pay in full when they filed that return we have also found that in the property agreement petitioner acknowledged that she had full and adequate knowl- edge of all relevant financial information pertaining to mr bell through date the date on which petitioner executed that agreement as a result petitioner was or should have been aware on that date which was only days before she signed the joint_return that mr bell had not paid in full the unpaid tax for the bells’ taxable_year and that he had not made any payments to the service since date with respect to that unpaid tax on the record before us we find that petitioner has failed to carry her burden of establishing that at the time she signed the joint_return she reasonably believed that the tax shown due in that return would be paid on or before the date on which that tax was due on that record we further find that peti- tioner has failed to carry her burden of establishing that at that time she reasonably believed that the funds to pay the tax shown due in the joint_return would be available within a reasonably prompt timedollar_figure on the record before us we find that petitioner has failed to carry her burden of establishing that at the time she signed the joint_return she did not know and had no reason to know that the tax shown due in that return would not be paid on the record before us we find that petitioner has failed to carry her burden of establishing that she satisfies the requirements of the knowledge or reason to know element with respect to the portion of the underpayment for her taxable_year that is attributable to mr bell see revproc_2003_61 sec_4 b on that record we find that petitioner ha sec_26see supra note failed to carry her burden of establishing that all of the elements of section dollar_figure of revproc_2003_61 are present with respect to that portion of that underpaymentdollar_figure see id sec_4 where as here with respect to the portion of the underpay- ment for petitioner’s taxable_year that is attributable to mr bell the requesting spouse satisfies the threshold condi- tions but does not satisfy all of the requirements of section dollar_figure of revproc_2003_61 section dollar_figure of that revenue_procedure sets forth the following factors that are to be consid- ered in determining whether a requesting spouse is entitled to relief under sec_6015 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 the requesting spouse knew or had reason to know that the nonrequesting spouse would not pay the tax liabil- ity knowledge factor whether the nonrequesting spouse ha sec_27in the light of our finding that petitioner has failed to carry her burden of establishing that the knowledge or reason to know element is present we need not address here whether the economic hardship element is present see revproc_2003_61 sec_4 c in discussing below the factors contained in sec dollar_figure of revproc_2003_61 we address whether petitioner would suffer an economic hardship if relief under sec_6015 were not granted with respect to the portion of the underpayment for petitioner’s taxable_year that is attribut- able to mr bell 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 tax_liability significant benefit factor and whether the requesting spouse has made a good_faith effort to comply with the tax laws for the taxable years following the tax- able year to which the request for such relief relates compli- ance factor revproc_2003_61 sec_4 a c b pincite other factors that may be considered under revproc_2003_61 are whether the nonrequesting spouse abused the requesting spouse abuse factor and whether the requesting spouse was in poor mental or physical health mental or physical health factor when he or she signed the tax_return return or when he or she requested relief revproc_2003_61 sec_4 b in the event the nonrequesting spouse abused the requesting spouse or the requesting spouse was in poor mental or physical health when he or she signed the return or when he or she requested relief the abuse factor or the mental or physical health factor as the case may be will be taken into account id however where the nonrequesting spouse did not abuse the requesting spouse and the requesting spouse was not in poor mental or physical health when she signed the return or when she requested relief those factors are not taken into account id in making our determination under sec_6015 we shall consider all of the factors listed above and any other_relevant_factors no single factor is to be determinative in any particu- lar case and all factors are to be considered and weighed appropriately with respect to the marital status factor the parties agree that at the time of the trial in this case the bells were di- vorced with respect to the economic hardship factor petitioner 28in determining whether a requesting spouse will suffer economic hardship sec_4 c of revproc_2003_61 requires reliance on rules similar to those provided in sec_301_6343-1 proced admin regs that regulation gener- ally provides that an individual suffers an economic hardship if the individual is unable to pay his or her reasonable basic living_expenses sec_301_6343-1 proced admin regs provides in pertinent part ii information from taxpayer --in determining a reasonable amount for basic living_expenses the direc- tor will consider any information provided by the taxpayer including-- a the taxpayer’s age employment status and history ability to earn number of dependents and status as a dependent of someone else b the amount reasonably necessary for food clothing housing including utilities home-owner insurance home-owner dues and the like medical_expenses including health insurance transportation current tax_payments including federal state and local alimony child_support or other court-ordered payments and expenses necessary to the taxpayer’s production_of_income such as dues for a trade_union or professional organization or child care payments which allow the taxpayer to be gainfully_employed continued claims on brief and respondent does not dispute that at the time of the trial in this case petitioner’s monthly expenses included expenses for rent of dollar_figure utilities of dollar_figure and food of dollar_figure respondent also does not dispute that at the time of that trial petitioner was unemployed at that time petitioner’s sister contributed dollar_figure monthly toward the household expenses of petitioner and herself and from date until the time of the trial the only funds that petitioner had available on which to live were the payments that mr bell continued c the cost of living in the geographic area in which the taxpayer resides d the amount of property_exempt_from_levy which is available to pay the taxpayer’s expenses e any extraordinary circumstances such as special education expenses a medical catastrophe or natural disaster and f any other factor that the taxpayer claims bears on economic hardship and brings to the attention of the director 29petitioner claims on brief that the expenses listed in the text do not include her additional expenses for transportation and medical_care petitioner does not identify the specific nature and the amount of each of those respective expenses it appears that petitioner’s transportation_expenses would include expenses for gasoline and repairs and insurance on the ford expedition that she owned and petitioner’s medical_expenses would include the outstanding bills that she had at the time of the trial in this case for medical_care that had been provided to her before petitioner does not claim and the record does not establish whether at the time of that trial petitioner continued to have the clothing expense that she claimed in her form had made pursuant to the bankruptcy settlement totaling dollar_figure and certain savings the amount of which is not established by the recorddollar_figure instead respondent argues under the terms of a settlement agreement with mr bell in his bankruptcy proceeding the bankruptcy settlement petitioner is entitled to receive dollar_figure per month for twelve months and then dollar_figure per month for months beginning in novem- ber since date mr bell has paid peti- tioner dollar_figure the agreement further specifies that upon default the terms of the original installment note the installment note shall revive and be of full legal force and effect because mr bell is currently in default on this agreement petitioner is entitled to collect the amounts due under the original installment note of dollar_figure per month petitioner’s right to collect the amounts due under this installment note is an asset which petitioner is entitled to pursue to pay her joint income_tax obligation cross-references omitted on the record before us we reject respondent’s argument with respect to the economic hardship factor respondent’s argument ignores respondent’s concession that mr bell is in default on the bankruptcy settlement in addition we have found that from around date to the time of the trial in this case a period of approximately three months mr bell did not make any monthly payments pursuant to the bankruptcy settle- ment that of the dollar_figure that mr bell paid pursuant to the bankruptcy settlement between date and date petitioner used dollar_figure to pay her attorney and that as of 30at the time of the trial petitioner’s savings had been reduced to approximately dollar_figure date the date on which petitioner filed petitioner’s bankruptcy complaint mr bell had not made any payments under the installment note it is reasonable to conclude on the basis of the facts that we have found regarding mr bell’s respective payment histories under the installment note and the bankruptcy settlement that mr bell is unlikely to make voluntarily the payments required by that note and that settlement it is also reasonable to conclude on the basis of those facts that it is likely that petitioner will be required to maintain court proceed- ings against mr bell in order to attempt to collect the respec- tive unpaid amounts under the installment note and the bankruptcy settlement and that any such legal actions will require petitioner to retain and pay an attorney to represent her we are unable to conclude however on the basis of the facts that we have found that petitioner will in fact be able to collect those unpaid amounts from mr bell it is also significant to our consideration of the economic hardship factor that we have found that since when earn and learn was dissolved until the time of the trial in this case petitioner has been unemployed around petitioner suffered petitioner’s back injury in petitioner under- went back surgery for that back injury during which metal rods were inserted in her back as of the time of the trial in this case petitioner continued to suffer from petitioner’s back injury in that she was unable to stand sit walk or lie down for long periods and at that time petitioner was approaching years of age it is reasonable to conclude on the basis of those facts that it is unlikely that petitioner will be able to rejoin the workforce even if petitioner were able to collect from mr bell any respective unpaid amounts under the installment note and the bankruptcy settlement we believe on the record before us that she would be using any such amounts in order to pay her basic living_expenses for the remainder of her life in addressing the economic hardship factor we have in mind that petitioner’s monthly expenses totaling dollar_figure do not include certain expenses that petitioner likely incurred or would have incurred in the absence of her current financial difficulties first at the time of the trial in this case petitioner had certain outstanding bills in amounts not established by the record for medical_care that was provided to her before dollar_figure second petitioner’s monthly expenses do not take into account any expenses with respect to the ford expedition that she owned even though she presumably incurred and will continue to incur 31see supra note expenses for that vehicle such as gasolinedollar_figure third from around until the time of the trial in this case petitioner did not maintain any health insurance and since peti- tioner has not sought treatment for any medical_condition including petitioner’s back injury because she was unable to afford any such treatment fourth petitioner’s monthly expenses do not take into account that petitioner remains liable for the bells’ respective unpaid taxes for their taxable years and which as of date totaled dollar_figure and dollar_figure respectively nor do petitioner’s monthly expenses take into account that we have found that petitioner has failed to carry her burden of establishing that she is entitled to relief under sec_6015 with respect to and that therefore she remains liable for the respective portions of the underpay- ment for her taxable_year that are attributable to petitioner’s 49-percent share of the today i can net_income and the wages of dollar_figure that today i can paid her during on the record before us we find that petitioner has carried her burden of establishing that she would suffer economic hard- ship if relief under sec_6015 were not granted with respect to the portion of the underpayment for her taxable_year that is attributable to mr bell 32see supra note with respect to the knowledge factor we have found that petitioner has failed to carry her burden of establishing that at the time she signed the joint_return she did not know and had no reason to know that the tax shown due in that return would not be paid with respect to the legal_obligation factor sec_4 a iv of revproc_2003_61 provides that that factor will not weigh in favor of relief if 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 although respondent does not dispute that under the property agreement mr bell is legally obligated to pay the remaining unpaid tax for the bells’ taxable_year respondent argues that at the time petitioner executed the property agreement petitioner knew or had reason to know that mr bell would not pay the outstanding joint income_tax liabili- ties we have found that on date petitioner and mr bell executed and filed with the superior court the property agreement and that on date the bells jointly filed late the joint_return on the record before us we find that when petitioner and mr bell executed the property agreement petitioner was not aware of the contents of the joint_return or that that return would show tax due on that record we find that at the time petitioner executed the property agreement she did not know and had no reason to know that the tax shown due in the joint_return would not be paid with respect to the significant benefit factor respondent argues that petitioner received a significant benefit from the nonpayment of the tax_liability that is because accord- ing to respondent all of petitioner’s personal bills were paid from the personal checking account at union planters bank mr bell’s personal bank account while she was mar- ried to mr bell this account also shows checks totaling dollar_figure were paid directly to petitioner during as all of petitioner’s personal bills were paid from the checking account this dollar_figure was completely at her disposal and amounted to twenty- six percent of the unpaid income_tax_liability for cross-references omitted on the record before us we reject respondent’s argument that the checks drawn on mr bell’s personal bank account total- ing dollar_figure that petitioner received during constituted a significant benefit we have found that during their mar- riage the bells did not maintain any bank account in their joint names and petitioner did not maintain any bank account in her sole name and that petitioner deposited the wages of dollar_figure that today i can paid her during into mr bell’s personal bank account an account over which petitioner did not have signatory authority we consider the dollar_figure in checks drawn on mr bell’s personal bank account that mr bell issued to peti- tioner during to have been petitioner’s own money since during that year she deposited into that account her wages of dollar_figure moreover it is reasonable to conclude on the record before us that petitioner needed some cash in order to pay certain normal living_expenses such as buying certain meals outside the marital residence buying gasoline for her ford expedition buying certain personal effects and buying certain services and products at the beauty parlor it is also reason- able to conclude on the record before us that the only means by which petitioner was able to obtain funds in order to pay those types of normal living_expenses was to cash the checks drawn on mr bell’s personal bank account that he issued to her on the record before us we find that petitioner did not receive a significant benefit beyond normal support from the bells’ failure to pay the tax shown due in the joint_return with respect to the compliance factor petitioner must establish that she made a good_faith effort to comply with the tax laws after her taxable_year the year at issue we have found that on date petitioner timely filed her return in which she showed tax due of dollar_figure and with which she included a payment of dollar_figure we have also found that on date petitioner filed her return in which she claimed inter alia a refund of approximately dollar_figure peti- tioner’s tax for her taxable_year was due on date see sec_6151 and her payment of that tax on date was approximately five months late petitioner paid the tax shown due in the return at the time that she filed that return although petitioner’s return was due on date she did not file that return until date however it is not clear from the record whether that return was timely filed see sec_7502 in any event petitioner claimed a refund in her return we also note that both respondent’s examiner and respondent’s appeals officer found that petitioner had made a good_faith effort to comply with the tax laws after her taxable_year despite the fact that petitioner had paid late the tax for her taxable_year on the record before us we find that petitioner made a good_faith effort to comply with the tax laws after the year at issue with respect to the abuse factor we have found that at no time during their marriage did mr bell physically abuse peti- tioner in petitioner’s form she claimed that mr bell verbally and mentally abused her in support of that claim petitioner relies on her testimony at trial that we didn’t always agree on everything he did i guess i came from the old school that you were to treat your spouse -- i mean that the husband ran the family and that’s what i believed you know so i -- i argued and he would get very verbally abusive and he didn’t care who or what was around you know it didn’t matter we are unable to find on the basis of petitioner’s above-quoted testimony that mr bell verbally or mentally abused her during their marriage on the record before us we find that petitioner has failed to carry her burden of establishing that during their marriage mr bell verbally and mentally abused her with respect to the mental or physical health factor we have found that around petitioner suffered petitioner’s back injury in petitioner underwent back surgery for that back injury during which metal rods were inserted in her back as of the time of the trial in this case petitioner continued to suffer from petitioner’s back injury in that she was unable to stand sit walk or lie down for long periods and petitioner stopped receiving medical treatment for that back injury in we have also found that at the time of the trial petitioner had not sought treatment for any medical_condition since because she was unable to afford any such treatment on the record before us we find that petitioner was in poor physical health when the bells filed the joint_return she filed form_8857 and the trial in this case took place based upon our examination of the entire record before us we find that petitioner has carried her burden of establishing that it would be inequitable to hold her liable for the portion of the underpayment for her taxable_year that is attribut- able to mr bell on that record we further find that peti- tioner has carried her burden of establishing that she is enti- tled to relief under sec_6015 for that portion of that underpayment we have considered all of the contentions and arguments of the parties that are not discussed herein and we find them to be without merit irrelevant and or moot to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court louis r and gregoria s gomez petitioners v commissioner of internal revenue respondent docket no filed date louis r gomez and gregoria s gomez pro_se gerald l brantley for respondent memorandum opinion cohen judge respondent determined deficiencies in petitioners’ federal income taxes as follows year deficiency dollar_figure big_number big_number unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure after concessions the issue remaining for decision is whether any portion of a lump-sum payment to louis r gomez from the civil service retirement_system in the amount of dollar_figure in is includable in petitioners' gross_income background all of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference at the time the petition was filed petitioners resided in las cruces new mexico louis r gomez petitioner was employed by the national aeronautics and space administration nasa from date until his retirement on date as an employee of nasa petitioner was subject_to the civil service retirement_system csrs because petitioner’s creditable service included service with the u s army the date for computation of his benefit commenced date at retirement petitioner had accumulated service for computing his retirement benefit of years and months petitioner’s total contributions plus deemed deposits and redeposits in his csrs account were dollar_figure on the annuity_starting_date petitioner’s highest three salary periods used to compute his benefits were and in the amounts of dollar_figure dollar_figure and dollar_figure respectively upon his retirement petitioner elected to receive the survivor’s annuity for his spouse and a lump-sum payment under the annuity option taking into consideration the survivor’s annuity option the gross monthly rate of the annuity benefit was dollar_figure taking into consideration both the survivor’s annuity and the lump-sum option the gross monthly rate of the annuity benefit was dollar_figure during petitioner received csrs payments that totaled dollar_figure dollar_figure of which was paid as a lump-sum payment and dollar_figure of which was paid as an annuity_payment discussion respondent determined that based on the exclusion_ratio calculated pursuant to sec_72 petitioners were required to include a portion of the lump-sum payment from petitioner’s csrs in their gross_income in petitioners argue that such inclusion would result in double_taxation of petitioner’s investment in the csrs and that the lump-sum payment should be treated as a separate_account for purposes of sec_72 because the csrs plan in which petitioner participated qualifies in part as a defined_contribution_plan the amount withheld for csrs from an employee’s salary is taxable in the year in which the deduction is made 43_f3d_466 9th cir 513_f2d_170 6th cir shimota v united_states cl_ct affd 943_f2d_1312 fed cir the amount contributed by the employing agency and any interest earned on the employee’s investment are not taxed to the employee until distribution sec_72 sec_402 the parties agree that petitioner’s contributions to the csrs should be recovered tax-free petitioner however maintains that he is entitled to recover his contributions free of tax up front because the lump-sum payment he received from the csrs represents a refund of his contributions respondent relies on sec_72 which excludes a portion of each annuity_payment from gross_income allowing for the tax-free recovery_of the participant’s contributions over the life of the annuity petitioner’s lump-sum_distribution was made pursuant to u s c sec 8343a supp which permits the continued receipt of an annuity reduced by the actuarial value of the lump-sum payment the total of the lump-sum payment plus the reduced annuity should be actuarially equivalent to the basic annuity that petitioner would have received in accordance with the csrs plan id as explained in malbon v united_states supra pincite the fact that the contribution amount was the measure of the lump-sum does not affect the ultimate amount of the benefit as a whole the difference merely depends on whether the former employee received the entire benefit spread out over the life of the annuity or whether a portion was accelerated to be paid at the time of retirement thus the lump-sum_distribution is an accelerated distribution of annuity payments that would otherwise be paid to the retiree over the expected duration of the csrs annuity 18_f3d_500 7th cir 30_fedclaims_371 shimota v united_states supra pincite the distributions that petitioner received from the csrs are subject_to taxation under sec_72 pursuant to sec_402 sec_72 is applicable to distributions received pursuant to the csrs malbon v united_states supra pincite 97_tc_237 affd 985_f2d_819 5th cir shimota v united_states supra pincite sec_1_72-2 income_tax regs sec_402 provides the amount actually distributed to any distributee by any employees’ trust described in sec_401 which is exempt from tax under sec_501 shall be taxable to him in the year in which so distributed under sec_72 relating to annuities the csrs is a plan that meets the requirements of sec_401 guilzon v commissioner supra pincite shimota v united_states supra pincite a lump-sum payment from the csrs is a payment from a plan described in sec_401 and is treated as a payment under an annuity_contract and is subject_to tax under sec_72 guilzon v commissioner supra pincite shimota v united_states supra pincite petitioners’ argument that double_taxation will occur is without merit petitioner will recover his investment in the csrs tax-free this recovery however will be spread over the life of the retirement annuity pursuant to the sec_72 exclusion_ratio petitioner also contends that the lump-sum payment should not be included in gross_income because it constitutes a distribution from a defined_contribution_plan sec_72 provides that employee contributions under a defined_contribution_plan may be treated as a separate contract the result of such treatment would be that the lump-sum payment received by petitioner would be viewed in isolation from the annuity payments and thus the lump-sum payment would be a simple return of his investment and nontaxable see sec_72 montgomery v united_states supra pincite we have considered petitioners’ argument and have concluded that the lump-sum payment does not fall within the definition of a defined_contribution_plan the cited decisions of the fifth seventh and ninth circuit courts of appeals and the court of federal claims have used different reasoning to reach this same result and it is unnecessary at this time to resolve the differences in approaches of the appellate decisions see green v commissioner tcmemo_1994_340 to reflect the foregoing and concessions of the parties decision will be entered under rule