T.C. Memo. 2014-109
UNITED STATES TAX COURT
LESLIE J. MOLINET, Petitioner, AND MICHAEL F. MOLINET, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 22461-12. Filed June 9, 2014.
Adam L. Heiden and Keith Howard Johnson, for petitioner.
Michael F. Molinet, pro se.
Lynn M. Barrett, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: Pursuant to section 6015(e)(1),1 petitioner seeks review
of respondent’s determination that she is not entitled to relief from joint and
1
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
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[*2] several liability for 2008 with respect to the joint Federal income tax return
she filed with intervenor, her former spouse.
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.
Petitioner resided in Florida at the time she filed the petition.
I. Background
Petitioner is Cuban by birth. She met intervenor in Cuba in January 1998.
She moved to the United States on a fiance visa later that year and married
intervenor on October 24, 1998. They had a child together in 2002.
During the course of the marriage petitioner and intervenor had a joint bank
account. The account was controlled primarily by intervenor. He paid the bills
and managed the finances with minimal input from petitioner. He was never late
on payments.
Petitioner worked as a medical assistant. Her wages were deposited directly
into the joint bank account. Although she had access to the joint bank account,
she rarely used it and did not write any checks on the account. She did not have a
good understanding of the banking system in the United States on account of her
Cuban upbringing. She relied on a weekly allowance from intervenor to pay her
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[*3] expenses each week. Petitioner and intervenor began having marital
difficulties in 2007. At that time petitioner decided to open an individual bank
account. Thereafter, she did not use or otherwise access the joint bank account.
In 2007 petitioner, intervenor, and their child moved from Bowie,
Maryland, to Jacksonville, Florida. Petitioner had previously been diagnosed with
several health conditions that made her especially susceptible to cold weather,
including cutaneous polyarteritis nodosa (CPN),2 rheumatoid arthritis, and
neuropathy. Petitioner believed that moving to Florida would help alleviate some
of the symptoms that were frequently aggravated in the colder weather of
Maryland.
In part to finance the move to Florida, intervenor took several distributions
from his section 401(k) plan account. Intervenor withdrew a total of $117,791
from the account in 2008. Petitioner did not agree with intervenor’s decision to
withdraw funds from the account, but she did not feel as though she had a choice
in the matter and reluctantly signed the required distribution forms. Intervenor
deposited the proceeds of the distributions into the joint bank account. These
funds were ultimately used by him to pay the remainder of the mortgage on his
2
CPN is a skin condition that causes inflamation of the blood vessels, cysts,
and skin ulcers.
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[*4] home in Maryland3 and to make a $29,000 downpayment on a home in
Jacksonville, Florida. Some of the funds were also used to replace household
goods that were damaged during the move and to furnish the new home in
Jacksonville.
On or about April 15, 2009, petitioner and intervenor timely filed a joint
Form 1040, U.S. Individual Income Tax Return, for 2008. They reported the
distributions from intervenor’s section 401(k) plan account on their tax return.
They reported tax due of $30,938.4 At the time the 2008 tax return was filed,
petitioner did not believe that she and intervenor had any financial problems and
was convinced that intervenor could pay the tax due. Petitioner has complied with
all Federal income tax obligations since 2008.
Petitioner and intervenor separated in July 2008. Their divorce was
finalized on November 18, 2009, when a circuit court in Duval County, Florida,
issued a consent final judgment of dissolution of marriage (final judgment). As a
result of the divorce, and pursuant to the final judgment, intervenor became the
sole owner of the Jacksonville home and all of the furnishings therein. Paragraph
3
Though the property was referred to as the “family home”, the property
was, in fact, owned solely by intervenor.
4
Sufficient funds were not withheld from the distributions to pay the tax
liability associated with the distributions.
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[*5] 12 of the final judgment assigned the “2008 IRS debt (approximately
$31,000.00)” to intervenor. Intervenor also became obligated to pay petitioner
child support. Both parties were represented by counsel in the divorce
proceedings, and both parties and their counsel signed the final judgment.
II. Request for Innocent Spouse Relief
On March 8, 2011, petitioner filed Form 8857, Request for Innocent Spouse
Relief. On August 1, 2012, the IRS issued a final determination denying
petitioner’s request for innocent spouse relief. On September 10, 2012, petitioner
timely filed a petition with this Court seeking review of respondent’s
determination. At trial respondent conceded that petitioner is entitled to relief.
However, pursuant to section 6015(e)(4) and Rule 325, petitioner’s former spouse
intervened as a party in this case to oppose her request for relief.
OPINION
I. Section 6015(f)
In general, a spouse who files a joint Federal income tax return is jointly
and severally liable for the entire tax liability. Sec. 6013(d)(3). However, a
spouse may be relieved from joint and several liability under section 6015(f) if:
(1) taking into account all the facts and circumstances, it would be inequitable to
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[*6] hold a taxpayer liable for any unpaid tax; and (2) relief is not available to the
spouse under section 6015(b) or (c). Sec. 6015(f)(1) and (2).
Subsections (b) and (c) of section 6015 apply only in the case of “an
understatement of tax” or “any deficiency” in tax, and do not apply in the case of
underpayments of tax reported on joint tax returns. Sec. 6015(b)(1)(B), (c)(1);
Hopkins v. Commissioner, 121 T.C. 73, 88 (2003); see also Block v.
Commissioner, 120 T.C. 62, 66 (2003). Because petitioner seeks relief from an
underpayment of tax, she is not entitled to relief under section 6015(b) or (c) and
may look only to section 6015(f) for relief from joint and several liability.
The Commissioner has published revenue procedures listing the factors that
are normally considered in determining whether section 6015(f) relief should be
granted. See Rev. Proc. 2013-34, 2013-43 I.R.B. 397, modifying and superseding
Rev. Proc. 2003-61, 2003-2 C.B. 296. We consider these factors in the light of the
attendant facts and circumstances, but we are not bound by them. See Pullins v.
Commissioner, 136 T.C. 432, 438-439 (2011); Sriram v. Commissioner, T.C.
Memo. 2012-91, slip op. at 9-10.
In determining whether petitioner is entitled to section 6015(f) relief we
apply a de novo standard of review as well as a de novo scope of review. See
Porter v. Commissioner, 132 T.C. 203 (2009); Porter v. Commissioner, 130 T.C.
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[*7] 115 (2008); see also Commissioner v. Neal, 557 F.3d 1262 (11th Cir. 2009),
aff’g T.C. Memo. 2005-201. Petitioner bears the burden of proving that she is
entitled to relief. See Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311
(2002), aff’d, 101 Fed. Appx. 34 (6th Cir. 2004).
A. Threshold Conditions for Granting Relief
The guidelines begin by establishing threshold requirements that, the
Commissioner contends, must be satisfied before an equitable relief request may
be considered. See Rev. Proc. 2013-34, sec. 4.01, 2013-43 I.R.B. at 399-400.
Those conditions are: (1) the requesting spouse filed a joint return for the taxable
year for which relief is sought; (2) the relief is not available to the requesting
spouse under section 6015(b) or (c); (3) the claim for relief is timely filed; (4) no
assets were transferred between the spouses as part of a fraudulent scheme; (5) the
nonrequesting spouse did not transfer disqualified assets to the requesting spouse;
(6) the requesting spouse did not knowingly participate in the filing of a fraudulent
joint return; and (7) absent certain enumerated exceptions,5 the tax liability from
5
The IRS will consider granting relief regardless of whether the
understatement, deficiency, or underpayment is attributable (in full or in part) to
the requesting spouse if any of the following exceptions apply: (1) attribution
solely due to the operation of community property law, (2) nominal ownership, (3)
misappropriation of funds, (4) abuse, and (5) fraud committed by the
nonrequesting spouse. Rev. Proc. 2013-34, sec. 4.01(7), 2013-43 I.R.B. 397, 399-
(continued...)
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[*8] which the requesting spouse seeks relief is attributable to an item of the
nonrequesting spouse. We find that petitioner has met the threshold conditions for
relief.
B. Elements for Streamlined Determination
When the threshold conditions have been met, the guidelines allow a
requesting spouse to qualify for a streamlined determination of relief under section
6015(f), if all of the following conditions are met: (1) the requesting spouse is no
longer married to, is legally separated from, or has not been a member of the same
household as the other person at any time during the 12-month period ending on
the date the Service makes its determination; (2) the requesting spouse will suffer
economic hardship if relief is not granted; and (3) in an underpayment case such as
this, the requesting spouse had no knowledge or reason to know when the return
was filed that the nonrequesting spouse would not or could not pay the tax liability
reported on the joint tax return. Rev. Proc. 2013-34, sec. 4.02, 2013-43 I.R.B. at
400.
5
(...continued)
400.
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[*9] We find that petitioner has not established that she would suffer economic
hardship if relief were not granted, and thus she does not qualify for a streamlined
determination. See infra pp. 10-11.
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 the guidelines for a streamlined determination, a
requesting spouse may still be eligible for equitable relief if, taking into account
all the facts and circumstances, it would be inequitable to hold the requesting
spouse liable for the underpayment. See Rev. Proc. 2013-34, sec. 4.03, 2013-43
I.R.B. at 400. The guidelines list the following nonexclusive factors that the
Commissioner takes into account when determining whether to grant equitable
relief: (1) marital status; (2) economic hardship; (3) in the case of an
underpayment, knowledge or reason to know that the nonrequesting spouse would
not or could not pay the tax liability reported on the joint tax return; (4) legal
obligation; (5) significant benefit; (6) compliance with tax laws; and (7) mental or
physical health. Id.
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[*10] In making our determination under section 6015(f), we consider these
factors as well as any other relevant factors. No single factor is determinative, and
all factors shall be considered and weighed appropriately. See Pullins v.
Commissioner, 136 T.C. at 448; Haigh v. Commissioner, T.C. Memo. 2009-140,
slip op. at 34-35.
1. Marital Status
If the requesting spouse is no longer married to the nonrequesting spouse,
this factor will weigh in favor of relief. Rev. Proc. 2013-34, sec. 4.03(2). For
purposes of this section a requesting spouse will be treated as being “no longer
married to the nonrequesting spouse” if the requesting spouse is divorced from the
nonrequesting spouse. Id. sec. 4.03(a)(i). Petitioner and intervenor were divorced
before she filed her request for innocent spouse relief. Accordingly, this factor
weighs in favor of granting relief to petitioner.
2. Economic Hardship
Generally, economic hardship exists when collection of the tax liability
will render the requesting spouse unable to meet basic living expenses. Id. sec.
4.03(b), 2013-43 I.R.B. at 401. If denying relief from joint and several liability
will not cause the requesting spouse to suffer economic hardship, this factor may
be neutral. Id. Petitioner receives child support payments from intervenor and has
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[*11] been working as a medical assistant for the past seven years. Her request for
innocent spouse relief indicates that her monthly income is approximately $3,616
and that her monthly expenses are approximately $3,100. On the basis of the
record, petitioner has not proven that she will suffer economic hardship if we deny
her relief. We find that this factor is neutral.
3. Knowledge or Reason To Know
In the case of an income tax liability that was properly reported but not paid,
consideration is given to whether the requesting spouse knew or had reason to
know as of the date the return was filed or within a reasonable period of time after
the filing of the return that the nonrequesting spouse would not or could not pay
the tax liability. Id. sec. 4.03(c)(ii). This factor will weigh in favor of relief if the
requesting spouse reasonably expected the nonrequesting spouse to pay the tax
liability reported on the return. Id. This factor will weigh against relief if, on the
facts and circumstances of the case, it was not reasonable for the requesting
spouse to believe that the nonrequesting spouse would or could pay the tax
liability shown on the return. Id.
In making the determination whether the requesting spouse had reason to
know, consideration is given to various factors, including: (1) the requesting
spouse’s level of education, (2) the requesting spouse’s degree of involvement in
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[*12] the activity generating the income tax liability, (3) the requesting spouse’s
involvement in business and household financial matters, and (4) the requesting
spouse’s business or financial expertise. Rev. Proc. 2013-34, sec. 4.03(2)(c)(iii),
2013-43 I.R.B. at 402.
Petitioner was born and brought up in Cuba and did not move to the United
States until 1998. The banking system in the United States has been difficult for
petitioner to understand because of her Cuban upbringing. For this reason
intervenor paid the bills and controlled nearly all aspects of the finances with
minimal input from petitioner throughout the marriage.
In 2008 intervenor took several taxable distributions totaling $117,791 from
his section 401(k) plan account. Although petitioner did not agree with
intervenor’s decision to take the distributions, she did not feel as though she had
choice in the matter and reluctantly signed the required distribution forms.
On or about April 15, 2009, petitioner and intervenor timely filed a joint
Federal income tax return for 2008 on which they reported tax due of $30,938. At
the time they filed the return, petitioner reasonably believed that she and
intervenor did not have any financial problems and that intervenor could pay the
tax due. Accordingly, this factor weighs in favor of relief.
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[*13] 4. Legal Obligation
This factor will weigh in favor of relief if the nonrequesting spouse has the
sole legal obligation to pay the outstanding income tax liability pursuant to a
divorce decree or agreement. Id. sec. 4.03(d). Intervenor has the legal obligation
to pay the tax liability for 2008 pursuant to paragraph 12 of the final judgment
signed by him and petitioner. He and petitioner were represented by counsel, and
he and petitioner, and their respective counsel, signed the final judgment. This
factor weighs in favor of relief.
5. Significant Benefit
This factor considers whether the requesting spouse received a significant
benefit, beyond normal support, from the unpaid income tax liability. Id. sec.
4.03(e). Normal support is measured by the circumstances of the particular
parties. Porter v. Commissioner, 132 T.C. at 212. This factor will weigh in favor
of relief if the nonrequesting spouse significantly benefited from the unpaid tax or
understatement and the requesting spouse had little or no benefit, or the
nonrequesting spouse enjoyed the benefit to the requesting spouse’s detriment.
Rev. Proc. 2013-34, sec. 4.03(e).
It is clear that petitioner did not use the funds from the distribution to live a
lavish lifestyle, to buy luxury assets, or to take expensive vacations. To the
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[*14] contrary, intervenor used the funds to: (1) pay off the mortgage on his home
in Bowie, Maryland, (2) make a downpayment on a new home in Jacksonville,
Florida, which he received in the divorce, and (3) purchase furnishings for the
Jacksonville home. Accordingly, we find that this factor weighs in favor of relief.
6. Compliance With Income Tax Laws
This factor considers whether the requesting spouse has made a good-faith
effort to comply with the Federal income tax laws in years after the year for which
relief is requested. Id. sec. 4.03(f). Petitioner has complied with the Federal
income tax laws in the years after 2008. Thus, this factor weighs in favor of relief.
7. Mental or Physical Health
This factor considers whether the requesting spouse was in poor physical or
mental health. This factor will weigh in favor of relief if the requesting spouse
was in poor mental or physical health at the time the return or returns to which the
request for relief relates were filed, at the time the requesting spouse reasonably
believed the return or returns were filed, or at the time the requesting spouse
requested relief. Id. sec. 4.03(g), 2013-43 I.R.B. at 403. At trial petitioner
credibly testified she suffers from rheumatoid arthritis, neuropathy, and CPN, an
autoimmune condition that causes inflammation of the blood vessels, cysts, and
skin ulcers. Thus, this factor weighs in favor of relief.
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[*15] D. Conclusion
Six of the factors weigh in favor of granting petitioner relief, one is neutral,
and no factor weighs against granting relief. We find that the equities lie in
petitioner’s favor and hold that she is entitled to relief from joint and several
liability for 2008 under section 6015(f).
We have considered all arguments made in reaching our decision and, to the
extent not mentioned, we conclude that they are moot, irrelevant, and without
merit.
To reflect the foregoing,
Decision will be entered for
petitioner.