T.C. Memo. 2004-183
UNITED STATES TAX COURT
NANCY M. O’NEILL, Petitioner, AND ROBERT B. WOLLOW, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17375-02. Filed August 11, 2004.
Nancy M. O’Neill, pro se.
Robert B. Wollow, pro se.
Thomas M. Rohall, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
MARVEL, Judge: Pursuant to section 6015(e) and Rule 321,1
petitioner seeks review of respondent’s determination that she is
1
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. Monetary amounts are
rounded to the nearest dollar.
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not entitled to relief from joint and several liability on her
1998 joint return. The issue for decision is whether
respondent’s denial of relief under section 6015(f) was an abuse
of discretion. On January 13, 2003, Robert B. Wollow (Mr.
Wollow), petitioner’s former spouse, filed a notice of
intervention with the Court, challenging petitioner’s entitlement
to relief from joint and several liability. See Rule 325.
FINDINGS OF FACT
Some of the facts have been stipulated. We incorporate the
stipulated facts into our findings by this reference. Petitioner
resided in Santa Rosa, California, when she filed her petition in
this case.
Background
Petitioner and Mr. Wollow became legally separated in
December 1997 and divorced in February 1999. Petitioner has a
bachelor’s degree in business administration. During 1998, after
her employment as the director of human resources for a mortgage
banking company was terminated, petitioner was employed at a
lumber company for approximately 1 month. Thereafter, in 1998,
petitioner worked as a human resources manager for a software
company. Meanwhile, Mr. Wollow was employed as an airline pilot.
Petitioner’s Bankruptcy and the 1998 Joint Income Tax Return
On April 7, 1999, petitioner filed a chapter 7 bankruptcy
petition with the United States Bankruptcy Court for the Northern
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District of California (the bankruptcy court). At the time of
petitioner’s bankruptcy proceeding, Mr. Wollow was involved in
his own bankruptcy proceeding. On July 7, 1999, the bankruptcy
court granted petitioner a discharge.
In April 1999, Mr. Wollow informed petitioner that,
according to his preliminary calculations, they owed income taxes
for 1998 (the 1998 joint liability). Petitioner offered to pay
the 1998 joint liability out of her severance pay from the
mortgage banking company. At the suggestion of Mr. Wollow,
however, petitioner ultimately agreed that her individual
retirement account (IRA) would be seized by the bankruptcy court
and used to pay the 1998 joint liability.
On August 15, 1999, petitioner and Mr. Wollow timely filed a
joint Federal income tax return for 1998 (the joint return). On
the joint return, petitioner and Mr. Wollow reported wages in the
amounts of approximately $140,000 and $145,000, respectively, and
Federal income tax withholding in the amounts of $21,615 and
$26,547, respectively. The joint return showed income tax due in
the amount of $5,294.2 Instead of submitting a payment with the
joint return, petitioner and Mr. Wollow attached a letter in
which they advised respondent of their respective bankruptcy
2
The amount of tax shown as due on the joint return was also
attributable to IRA distributions that petitioner and Mr. Wollow
received in the amounts of $2,708 and $1,877, respectively.
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proceedings and informed respondent that the bankruptcy trustee
would retain “certain IRA monies” to pay the 1998 joint
liability.
Payment of the 1998 Joint Liability
On petitioner’s separately filed 1999 Federal income tax
return, petitioner reported total wages in the amount of $80,100
and alimony in the amount of $29,700. The return showed a refund
due in the amount of $5,021. On September 4, 2000, respondent
applied petitioner’s 1999 refund to offset the 1998 joint
liability. At this time, petitioner’s IRA remained exempted from
the bankruptcy estate. Petitioner did not submit signed
instructions for liquidating the IRA and allocating the proceeds
until January 2001, several months after respondent applied
petitioner’s 1999 refund to the 1998 joint liability.
Petitioner’s Innocent Spouse Claim
On July 2, 2002, petitioner timely filed with respondent
Form 8857, Request for Innocent Spouse Relief. In her Form 8857,
petitioner asserted that “Since the 1998 income tax liability is
a community liability, it is inequitable to apply [the]
taxpayer’s separate property to its payment. Community assets
which are still available in the bankruptcy estate should instead
be used.” In a final notice dated August 14, 2002, respondent
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denied petitioner’s request for innocent spouse relief. On
November 6, 2002, petitioner filed a petition with this Court
contesting respondent’s determination.
OPINION
In general, spouses who file joint Federal income tax
returns are jointly and severally liable for the full amount of
the tax liability. Sec. 6013(d)(3); Butler v. Commissioner, 114
T.C. 276, 282 (2000). Pursuant to section 6015, however, a
spouse may seek relief from joint and several liability.3
One form of relief from joint and several liability on a
joint return is 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 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.
The Commissioner uses guidelines prescribed in Rev. Proc. 2000-
15, 2000-1 C.B. 447, to determine whether a taxpayer qualifies
3
Sec. 6015 applies to tax liabilities arising after July 22,
1998, and to tax liabilities arising on or before July 22, 1998,
but remaining unpaid as of such date. Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3201(g), 112 Stat. 740.
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for relief from joint and several liability under section
6015(f).4 We review the Commissioner’s denial of relief under
section 6015(f) for abuse of discretion. See Washington v.
Commissioner, 120 T.C. 137, 146 (2003); Butler v. Commissioner,
supra at 292.
Before the Commissioner will consider a taxpayer’s request
for relief under section 6015(f), the taxpayer must satisfy seven
threshold conditions listed in Rev. Proc. 2000-15, sec. 4.01,
2000-1 C.B. at 448. Respondent concedes that petitioner
satisfies these conditions.
Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 448, provides
that equitable relief may be granted under section 6015(f) if,
taking into account all facts and circumstances, it is
inequitable to hold the requesting spouse liable. In considering
a request for relief, certain factors weigh in favor of granting
relief, whereas other factors weigh against granting relief. See
id. No single factor is determinative in any particular case,
and all factors are to be considered and weighed appropriately.
See Washington v. Commissioner, supra at 148; Jonson v.
Commissioner, 118 T.C. 106, 125 (2002), affd. 353 F.3d 1181 (10th
4
On Aug. 11, 2003, the Commissioner issued Rev. Proc. 2003-
61, 2003-32 I.R.B. 296, which supersedes Rev. Proc. 2000-15,
2000-1 C.B. 447, effective for requests for relief filed on or
after Nov. 1, 2003, and for requests for relief pending on Nov.
1, 2003, for which no preliminary determination letter has been
issued as of that date.
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Cir. 2003). Moreover, the list of factors is not intended to be
exhaustive. See Washington v. Commissioner, supra at 148.
The following six factors weigh in favor of granting relief
for the liability: (1) The requesting spouse is separated or
divorced from the nonrequesting spouse; (2) the requesting spouse
would suffer economic hardship if relief is denied; (3) the
nonrequesting spouse abused the requesting spouse; (4) the
requesting spouse did not know or have reason to know that the
liability would not be paid; (5) the nonrequesting spouse has a
legal obligation pursuant to a divorce decree or agreement to pay
the liability; and (6) the liability is solely attributable to
the nonrequesting spouse. See Rev. Proc. 2000-15, sec. 4.03(1),
2000-1 C.B. at 448-449. On the other hand, the following six
factors weigh against granting relief for the liability: (1) The
unpaid liability is attributable to the requesting spouse; (2)
the requesting spouse knew or had reason to know when she signed
the return that the reported liability would be unpaid; (3) the
requesting spouse significantly benefited (beyond the normal
support) from the unpaid liability; (4) the requesting spouse
will not experience 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 had a legal obligation pursuant to a divorce
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decree or agreement to pay the liability. See Rev. Proc. 2000-
15, sec. 4.03(2), 2000-1 C.B. at 449. Our analysis of the
factors and the parties’ arguments follows.
Marital Status
Respondent concedes that this factor weighs in favor of
granting relief.
Economic Hardship
At trial, petitioner alleged that, in the past, she had
experienced economic hardship attributable to the 1998 joint
liability,5 but petitioner offered no financial information in
support of her allegation. Petitioner has not alleged that she
is currently experiencing, or would experience, economic hardship
if she is not relieved of the 1998 joint liability. In the
absence of any evidence of economic hardship, we must conclude
that this factor weighs against granting relief.
Abuse
Petitioner has not alleged that Mr. Wollow abused her.
Consequently, this factor is neutral.
5
According to petitioner, during 2000, when respondent
applied petitioner’s 1999 refund to offset the 1998 joint
liability, petitioner was a single parent with one daughter in
her custody during 70 percent of the year and another daughter in
college. Petitioner testified that, after paying the bills, “not
too much [was] left over.”
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No Knowledge or Reason To Know
Petitioner knew that the tax liability shown on the 1998
joint return would not be paid when the return was filed.
Petitioner contends that, when she signed the joint return, she
thought that her IRA would be seized by the bankruptcy court and
used to pay the 1998 joint liability. According to petitioner,
the reason that she and Mr. Wollow requested an extension for
filing the joint return was to give the bankruptcy court more
time to seize and distribute her IRA.
We do not see how petitioner reasonably could have expected
that her IRA would be used to satisfy the 1998 joint liability
when she had not authorized the IRA’s liquidation and
distribution. Moreover, because petitioner agreed to pay the
1998 joint liability with the proceeds from her IRA, petitioner
knew that Mr. Wollow would not pay it. This factor strongly
weighs against granting relief. See Washington v. Commissioner,
supra at 150.
The Spouses’ Legal Obligations
At trial, petitioner testified that, pursuant to the divorce
decree, both she and Mr. Wollow were “responsible for the joint
filed return and any community debts to be paid.” Petitioner
agrees, therefore, that under the decree she and Mr. Wollow share
the legal obligation for paying the 1998 joint liability.
Accordingly, this factor is neutral.
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Significant Benefit
The record does not indicate that petitioner benefited
beyond normal support from not paying the 1998 joint liability.
As articulated in Ewing v. Commissioner, 122 T.C. 32, 45 (2004),
this factor weighs in favor of granting relief.
Source of the Liability and Noncompliance With Federal Income Tax
Laws
These two factors are neutral. First, the record reflects
that the 1998 joint liability was attributable to both petitioner
and Mr. Wollow. Second, there is no evidence that petitioner has
not made a good-faith effort to comply with the Federal income
tax laws since 1998.
Conclusion
Petitioner’s main contention in this proceeding has been
that, because the 1998 joint liability was ultimately paid from
her separate property rather than from her and Mr. Wollow’s
community property, she is entitled to equitable relief.
Although we understand petitioner’s frustration with the apparent
lack of fairness, such circumstances alone are not grounds for
relief under section 6015(f). Petitioner knew when the 1998
joint return was filed that she had an obligation to pay the 1998
joint liability and that some of her assets would be used to pay
it. The fact that respondent applied her 1999 tax refund to the
1998 tax liability instead of waiting for the bankruptcy court to
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satisfy the liability with her IRA is not sufficient to qualify
petitioner for relief under section 6015(f).
After considering all of the facts and circumstances, we
conclude that respondent’s decision to deny relief from joint and
several liability was not an abuse of discretion.
To reflect the foregoing,
Decision will be entered
for respondent.