T.C. Memo. 2002-201
UNITED STATES TAX COURT
TRACY JODETTE AUGUST, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10065-00. Filed August 12, 2002.
Tracy August, pro se.
A. Gary Begun, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: This case arises from a request for
equitable relief (relief) under section 6015(f)1 with respect to
petitioner’s taxable years 1990, 1992, and 1993 (years at issue).
The issue for decision is whether respondent abused his
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at all relevant times.
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discretion in denying petitioner relief under section 6015(f) for
the years at issue.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts, the deemed admissions, and the attached
exhibits are incorporated herein by this reference. At the time
she filed her petition, petitioner resided in Hesperia, Michigan.
Petitioner was 15 years old when she married Michael August
(Mr. August) in 1980. Petitioner was married to Mr. August
during the years at issue. Petitioner and Mr. August divorced
sometime after April 1994, and Mr. August was given custody of
their three children.
Each month petitioner receives $531 from Supplemental
Security Income (SSI) and $462 from Family Assistance. These
amounts are petitioner’s only income. The only asset that
petitioner owns is a car valued at $700 or less. She is not
required to pay child support because she is on SSI.
Petitioner has a history of mental illness and was
hospitalized for mental illness and incarcerated at various times
before and after her marriage to Mr. August. Petitioner also has
suffered from alcohol and drug addiction. Petitioner attended
school only through the eighth grade but obtained her general
equivalency diploma (GED).
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Petitioner and Mr. August filed joint tax returns for the
years at issue. The tax returns for 1990 and 1993 were prepared
by a C.P.A. firm, and the 1992 return was prepared by H&R Block.
All of the income reported on these returns came from Mr.
August’s carpet installation business and was reported on
Schedule C, Profit or Loss From Business. The tax returns list
petitioner as a homemaker or housewife. Petitioner signed these
returns. The taxes reported on the returns as due have not been
fully paid. Petitioner’s and Mr. August’s outstanding tax
liabilities for the years at issue are the result of these
underpayments of tax.2
In March 1999, petitioner filed Form 8857, Request for
Innocent Spouse Relief, for each of the years at issue.
Petitioner attached the following statement to each Form 8857:
My ex husband had all the money for our taxes to
be paid before our divorce and instead he used approx
13,000.00 for an attorney for our divorce. He is
living as they say “High on the hog.” Since our
divorce he has bought a new work van all brand new
appliances, fax machine. All I have is a van 79 Dodge
that is valued at 700.00 and does not run most of the
time. I have applied for disability do to post
tramatic stress disorder, obsessive compulsive
disorder, panic attacks, anxiety attacks, and
borderline personality disorder. I’m basically
homeless, and living off family and friends. Please
concider taking me off his account for the years owed.
For I had no part of his business or knowledge he did
not pay off taxes until after our divorce and I filed
my taxes and they went towards his account. I filed a
2
As of Aug. 10, 2000, the remaining liabilities were
$1,670 for 1990, $4,820 for 1992, and $4,656 for 1993.
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joint return but I thought as a dependent and his wife
I was suppose to. I never benefited at all from his
business. If you were to audit him his lifestyle
exceeds what he claims on taxes. However some property
he has in his father-n-law’s name or his present wife.
He has been looking to buy land, “Cash money” so he can
put it in his present wife’s name.
On August 9, 1999, Mr. August filed a letter objecting to
petitioner’s request. On January 21, 2000, after concluding that
petitioner had not responded to his request for additional
financial information, respondent sent her a letter in which
respondent preliminarily determined that she was not entitled to
relief under section 6015(f). On February 7, 2000, in response
to the preliminary determination, petitioner sent respondent a
letter stating that she had sent respondent the requested
information. Respondent interpreted petitioner’s letter as a
protest to the preliminary determination and forwarded her
request for relief to the Appeals Office for further
consideration.
On May 12, 2000, Appeals Officer David Stauffer (Mr.
Stauffer) invited petitioner to a conference to discuss her
request for relief. When she met with Mr. Stauffer, petitioner
was upset and agitated throughout the meeting. Petitioner told
Mr. Stauffer that there had been domestic abuse throughout her
marriage and that Mr. August had hidden assets from the IRS in
order not to pay tax liabilities.
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On August 10, 2000, respondent issued a Notice of
Determination Concerning Relief from Joint and Several Liability
Under Section 6015, determining that petitioner was not entitled
to relief under section 6015(f). On September 25 and October 30,
2000, petitioner filed a timely petition and an amended petition,
respectively, with the Court requesting relief for the years at
issue. Respondent notified Mr. August of the petitions.
OPINION
Petitioner requests that the Court grant her relief from
these taxes under section 6015(f).
Respondent argues that he did not abuse his discretion in
denying petitioner’s claim for relief under section 6015(f)
because petitioner presented no evidence supporting her claim,
and, therefore, petitioner did not qualify for relief under the
criteria provided in Rev. Proc. 2000-15, 2000-1 C.B. 447 (the
revenue procedure).
Generally, spouses filing a joint tax return are each fully
responsible for the accuracy of their return and for the full tax
liability. Sec. 6013(d)(3); Butler v. Commissioner, 114 T.C.
276, 282 (2000). Section 6015 provides exceptions to this
general rule in certain circumstances. Butler v. Commissioner,
supra.
Section 6015(f) provides:
SEC. 6015(f). Equitable Relief.--Under procedures
prescribed by the Secretary, if--
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(1) taking into account all the facts
and circumstances, it is inequitable to hold
the individual liable for any unpaid tax or
any deficiency (or any portion of either);
and
(2) relief is not available to such
individual under subsection (b) or (c),
the Secretary may relieve such individual of such
liability.
Respondent denied petitioner relief under section 6015(f).
We have jurisdiction to review such a denial of relief. Ewing v.
Commissioner, 118 T.C. 494 (2002) (holding that the Court had
jurisdiction over the requesting spouse’s claim for equitable
relief pursuant to section 6015(f) regarding the underpayment of
tax shown on the joint return). Respondent’s denial of relief is
reviewed under an abuse of discretion standard. Cheshire v.
Commissioner, 115 T.C. 183, 198 (2000); Butler v. Commissioner,
supra at 292.
As directed by section 6015(f), the Commissioner prescribed
procedures in the revenue procedure to be used in determining
whether an individual qualifies for relief under that section.
Section 4.01 of the revenue procedure lists seven threshold
conditions that must be satisfied before the Commissioner will
consider a request for relief under section 6015(f). Respondent
concedes that petitioner meets all of the threshold conditions.
Where, as here, the requesting spouse satisfies the
threshold conditions, section 4.02(1) of the revenue procedure
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provides elements under which relief under section 6015(f) will
ordinarily be granted in a case in which a tax liability reported
on a joint return is unpaid. These elements are:
(a) At the time relief is requested, the
requesting spouse is no longer married to, or is
legally separated from, the nonrequesting spouse * * *;
(b) At the time the return was signed, the
requesting spouse had no knowledge or reason to know
that the tax would not be paid. * * *; and
(c) The requesting spouse will suffer economic
hardship if relief is not granted. For purposes of
this section, the determination of whether a requesting
spouse will suffer economic hardship will be made by
the Commissioner or the Commissioner’s delegate, and
will be based on rules similar to those provided in
section 301.6343-1(b)(4) of the Regulations on
Procedure and Administration.
Rev. Proc. 2000-15, sec. 4.02(1), 2000-1 C.B. at 448. First, at
the time relief was requested in March 1999, petitioner was no
longer married to Mr. August. Second, petitioner testified that,
during their marriage, she was completely dependent upon Mr.
August regarding the filing of their tax returns and the payment
of the taxes. Although Mr. August offered conflicting testimony
on this point, we found petitioner to be credible after having
observed her appearance and demeanor at trial. On the basis of
her limited education, marriage at age 15, history of mental
illness, and dependence on Mr. August for tax matters, we
conclude that petitioner had no knowledge or reason to know that
the taxes would not be paid at the time the returns were signed.
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Third, we conclude that petitioner will suffer economic
hardship if relief under section 6015(f) is not granted.3
Petitioner’s only income is public assistance. This income is
exempt from levy. Sec. 6334(a)(11).4 Petitioner’s income is so
minimal that she is not required to pay child support.
Additionally, petitioner suffers from mental illness which
affects her ability to earn a living.
3
Sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.,
provides factors that will be considered in determining whether
satisfaction of the levy will cause an individual taxpayer
economic hardship because she will be unable to pay her
reasonable living expenses. These factors include the taxpayer’s
age, her employment status and history, her ability to earn, the
number of dependents, any extraordinary circumstances, and any
other factor that the taxpayer claims bears on economic hardship
and brings to the attention of the director.
4
Sec. 6334(a)(11) provides:
SEC. 6334(a). Enumeration.--There shall be exempt
from levy--
* * * * * * *
(11) Certain Public Assistance
Payments.--Any amount payable to an
individual as a recipient of public
assistance under--
(A) title IV or title XVI
(relating to supplemental security
income for the aged, blind, and
disabled) of the Social Security
Act, or
(B) State or local government
public assistance or public welfare
programs for which eligibility is
determined by a needs or income
test.
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Taking into account all the facts and circumstances, we
conclude that petitioner has satisfied each element under section
4.02(1) of the revenue procedure and it would be inequitable to
hold her liable for the unpaid taxes. On the basis of the record
before us, we hold that respondent abused his discretion in
denying petitioner’s claim for relief under section 6015(f).
In reaching our holding, we have considered all arguments
made by the parties, and, to the extent not mentioned above, we
find them to be irrelevant or without merit.
To reflect the foregoing,
Decision will be
entered for petitioner.