T.C. Summary Opinion 2003-136
UNITED STATES TAX COURT
ALVA COTTER SHELL IV, Petitioner, AND
JAMIE L. JONES, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14736-02S. Filed September 30, 2003.
Alva Cotter Shell IV, pro se.
Jamie L. Jones, pro se.
Pamela L. Mable, for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time that the petition was filed.1 The decision to
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 1996,
the taxable year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
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be entered is not reviewable by any other court, and this opinion
should not be cited as authority.
Pursuant to the provisions of section 6015, petitioner made
an administrative request for relief from a 1996 Federal income
tax deficiency. Respondent denied petitioner’s request for
relief in a final notice of determination issued on July 11,
2002. Petitioner timely filed a petition with this Court under
section 6015(e) for review of respondent’s determination.
Intervenor, petitioner’s former wife, filed a Notice of
Intervention under Rule 325(b) and opposes such relief.
The sole issue for decision is whether respondent abused his
discretion in denying petitioner relief from joint and several
liability under section 6015(f). We hold that he did not.
Background
Some of the facts have been stipulated, and are so found.
Petitioner resided in Pitts, Georgia, at the time that his
petition was filed with the Court.
Petitioner and intervenor Jamie L. Jones (intervenor) were
married to each other on May 19, 1990, and had one child, a son,
during their marriage.
During 1996, petitioner worked as a full-time employee for
the City of Cordele and as a part-time employee for Gin Co., Inc.
Petitioner earned income of $13,855 and $3,206, respectively, at
each job in 1996.
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Intervenor worked part time at five different jobs and
earned total income of $5,666 during 1996. Intervenor’s earnings
were deposited into the joint checking account she maintained
with petitioner. Petitioner knew of intervenor’s employment and
earnings.
During their marriage, both petitioner and intervenor
participated together in their financial matters. For example,
personal and household expenses were paid by both petitioner and
intervenor from their joint checking account.
Petitioner’s and intervenor’s joint 1996 Federal income tax
return was prepared and electronically filed by a paid income tax
return preparer. Prior to meeting with their return preparer,
petitioner and intervenor discussed not reporting all of
intervenor’s income in order to qualify for a greater earned
income credit. Therefore, petitioner and intervenor together met
with their return preparer. The information petitioner and
intervenor provided their return preparer included all of
petitioner’s 1996 income and $594 of intervenor’s 1996 income.
Both petitioner and intervenor knew that $5,072 of intervenor’s
income was not reported on their 1996 return. Petitioner and
intervenor received a refund of their 1996 taxes in the amount of
$2,267, more than half of which was attributable to the earned
income credit.
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Petitioner and intervenor separated in September 1997 and
were divorced on February 9, 1998. Petitioner was awarded
custody of their son, and intervenor was allowed visitation
rights. The divorce decree made no provision for any joint
liabilities, including any Federal income tax liabilities.
On February 26, 1999, respondent sent both petitioner and
intervenor a notice of deficiency determining a deficiency in
their 1996 Federal income taxes in the amount of $1,564. The
deficiency was based on intervenor’s unreported income and the
disallowance of most of the claimed earned income credit.
Neither petitioner nor intervenor filed a petition with the
Court to contest their 1996 tax deficiency.
On March 4, 1999, petitioner submitted to respondent a Form
8857, Request for Innocent Spouse Relief, requesting section 6015
relief. On April 7, 2000, respondent sent a letter to petitioner
requesting that he complete a questionnaire to assist in
respondent’s determination. Petitioner did not respond to the
questionnaire or otherwise provide respondent with any of his
financial information.
On July 11, 2002, respondent issued a notice of final
determination advising petitioner that he was not entitled to
relief under section 6015.
At the time of trial in May 2003, petitioner was employed as
an aircraft worker at Robbins Air Force Base earning an annual
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base salary of approximately $40,456. Petitioner also received
$749 in monthly disability benefits from the Veterans Benefits
Administration.
Discussion
As a general rule, spouses filing a joint Federal income tax
return are jointly and severally liable for all taxes shown on
the return or found to be owing. Sec. 6013(d)(3); Cheshire v.
Commissioner, 115 T.C. 183, 188 (2000), affd. 282 F.3d 326 (5th
Cir. 2002). However, relief from joint and several liability is
available to certain taxpayers under section 6015. There are
three types of relief available under section 6015: (1) Section
6015(b)(1) provides full or apportioned relief from joint and
several liability; (2) section 6015(c) provides proportionate tax
relief to divorced or separated taxpayers; and (3) section
6015(f) provides equitable relief from joint and several
liability in certain circumstances if neither section 6015(b) nor
(c) is available.
Petitioner concedes that he is not eligible for relief under
either section 6015(b) or (c). Petitioner has instead requested
equitable relief under section 6015(f).
Section 6015(f) provides:
SEC. 6015(f). Equitable Relief.--Under procedures
prescribed by the Secretary, if--
(1) taking into account all the facts
and circumstances, it is inequitable to hold
the individual liable for any unpaid tax or any
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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.
We review respondent’s denial of equitable relief to
petitioner under an abuse of discretion standard. Cheshire v.
Commissioner, 115 T.C. at 198; Butler v. Commissioner, 114 T.C.
276, 292 (2000). Petitioner bears the burden of proving that
respondent’s denial of equitable relief under section 6015(f) was
an abuse of discretion. Rule 142(a); Alt v. Commissioner, 119
T.C. 306, 311 (2002); Jonson v. Commissioner, 118 T.C. 106, 113
(2002). Petitioner must demonstrate that respondent exercised
his discretion arbitrarily, capriciously, or without sound basis
in fact or law. Jonson v. Commissioner, supra at 125; Woodral v.
Commissioner, 112 T.C. 19, 23 (1999).
As directed by section 6015(f), the Commissioner has
prescribed procedures to be used in determining whether the
requesting spouse qualifies for relief from joint and several
liability under section 6015(f). These procedures are set forth
in Rev. Proc. 2000-15, 2000-1 C.B. 447.2 Where, as is the case
here, the requesting spouse satisfies the threshold conditions
2
As relevant herein, Rev. Proc. 2000-15, sec. 3, 2000-1
C.B. 447, 448, is applicable for any liability for tax arising on
or before July 22, 1998, that was unpaid on that date.
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set forth in section 4.01 of the revenue procedure,3 section 4.03
of the revenue procedure lists several nonexclusive factors to be
considered by the Commissioner in determining eligibility for
equitable relief. “No single factor will be determinative of
whether equitable relief will or will not be granted in any
particular case. Rather, all factors will be considered and
weighed appropriately.” Rev. Proc. 2000-15, sec. 4.03, 2001-1
C.B. at 448.
The nonexclusive list of factors that the Commissioner will
consider as weighing in favor of granting relief includes: (1)
The requesting spouse is separated or divorced from the
nonrequesting spouse; (2) the requesting spouse would suffer
economic hardship if relief is not granted; (3) the requesting
spouse was abused by the nonrequesting spouse; (4) the requesting
spouse did not know or have reason to know of the items giving
rise to the deficiency; (5) the nonrequesting spouse has a legal
obligation pursuant to a divorce decree or agreement to pay the
unpaid liability; and (6) the unpaid liability is attributable
solely to the nonrequesting spouse. See Rev. Proc. 2000-15, sec.
4.03(1), 2001-1 C.B. at 448. The nonexclusive list of factors
that the Commissioner will consider as weighing against granting
of relief includes: (1) The item giving rise to the deficiency
is attributable to the requesting spouse; (2) the requesting
spouse knew or had reason to know of the item giving rise to the
3
Respondent concedes that petitioner has satisfied the
threshold conditions of sec. 4.01.
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deficiency; (3) the requesting spouse significantly benefited
(beyond normal support) from the item giving rise to the
deficiency; (4) the requesting spouse will not suffer economic
hardship if relief is denied; (5) the requesting spouse has not
made a good faith effort to comply with Federal income tax laws
in the tax years following the tax year to which the request for
relief relates; and (6) the requesting spouse has a legal
obligation pursuant to a divorce decree or agreement to pay the
unpaid liability. See Rev. Proc. 2000-15, sec. 4.03(2), 2001-1
C.B. at 449.
Petitioner primarily relies on the fact that the unreported
income items giving rise to the deficiency are attributable
solely to his former spouse and that he would suffer economic
hardship if he did not receive relief. Respondent argues that
petitioner is not eligible for relief because the negative
factors in favor of not granting relief under section 6015(f)
outweigh the positive factors in favor of granting relief.
Although it is clear that the unreported income was solely
attributable to the earnings of intervenor, the remaining factors
weigh heavily against granting petitioner equitable relief.
Petitioner admits that he knew of intervenor’s employment
during 1996 and that she derived income from that employment.
Intervenor’s unreported earnings were deposited in a joint
checking account for their mutual benefit. Petitioner and
intervenor discussed not reporting a portion of her income on
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their 1996 return prior to their meeting with their return
preparer. Petitioner knew that $5,072 of intervenor’s earnings
were not reported on their 1996 return. Petitioner, along with
intervenor, benefited from the unreported income by receiving a
larger tax refund in 1996. There was also no legal obligation
pursuant to the divorce decree or other agreement for intervenor
to pay the outstanding joint tax liability.
Finally, petitioner has also failed to establish that he
will suffer economic hardship if equitable relief is not granted.
In determining whether a requesting spouse will suffer economic
hardship, the revenue procedure refers to rules similar to those
provided in section 301.6343-1(b)(4), Proced. & Admin. Regs.
That regulation generally provides that an individual suffers an
economic hardship if the individual is unable to pay his or her
reasonable basic living expenses. See id.
Petitioner relies solely on the fact that he is a single
father who receives no child support. However, petitioner is
currently employed and earns an annual base salary of $40,456.
Petitioner also receives monthly disability payments of $749.
Petitioner has provided no information as to his monthly
expenses. Petitioner likewise did not provide respondent with
any evidence of financial hardship during respondent’s decision-
making process. Thus, petitioner has failed to show that he will
suffer any economic hardship if equitable relief is denied.
Based on the facts and circumstances presented in this case,
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we find that the factors against equitable relief outweigh the
factors in favor of equitable relief. Accordingly, we hold that
it was not an abuse of discretion by respondent to deny
petitioner’s claim for equitable relief under section 6015(f).
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
for respondent.