T.C. Memo. 2004-205
UNITED STATES TAX COURT
NANCY A. SJODIN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10704-03. Filed September 14, 2004.
Nancy A. Sjodin, pro se.
Blaine Holiday, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GOEKE, Judge: This case involves a review of respondent’s
determination that petitioner is not entitled to relief from
joint and several liability under section 6015(f).1 We find no
abuse of discretion in respondent’s determination.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended.
- 2 -
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner was a resident of Minneapolis, Minnesota.
Petitioner filed joint Forms 1040, U.S. Individual Income
Tax Return, with her spouse, Kenneth E. Sjodin (Mr. Sjodin) for
the taxable years 1987, 1988, 1990, and 1992. These returns each
reflected tax due which was not paid at the time of filing. The
amounts in question in this case relate to these returns and not
any additional deficiencies determined by respondent.
Petitioner and Mr. Sjodin were married for approximately 20
years at the time of the first year in question and remain
married. There is no evidence they have ever separated.
Petitioner and Mr. Sjodin have four children. In 1987, two were
in college and two were in high school. During the years in
question, petitioner and Mr. Sjodin jointly supported their
children and their household. Petitioner worked as a retail
clerk during the years in question and received wage income which
was subject to withholding. Mr. Sjodin had a real estate
business, and his income was not subject to withholding. The
unpaid liabilities are primarily the result of the income of Mr.
Sjodin.
- 3 -
Petitioner signed the returns for the years in question.
After petitioner learned of a lien on their house, she began to
file separate returns in 1994.
Mr. Sjodin is a Korean War veteran and has been diagnosed
with a combat-related psychological disorder which caused him to
be secretive and uncommunicative. He did not physically harm
petitioner, but he was not forthcoming to her with information
relating to his business. He continued to provide financial
support to petitioner and their children.
On August 9, 2000, petitioner filed Form 8857, Request For
Innocent Spouse Relief, for the taxable years 1987, 1988, 1990,
and 1992. On April 3, 2003, respondent issued petitioner Letter
3290, Notice of Determination Concerning Your Request for Relief
under the Equitable Relief Provisions of Section 6015(f), stating
that respondent did not allow her request for the years 1987,
1988, 1990, and 1992. Petitioner timely filed with this Court a
petition for determination of relief from joint and several
liability on a joint return.
OPINION
Section 6015(f) permits the Secretary to relieve a spouse of
liability if, taking into account all the facts and
circumstances, it is inequitable to hold the spouse liable for
any unpaid tax or any deficiency (or any portion of either) and
relief is not available under section 6015(b) or (c). The denial
- 4 -
of equitable relief is reviewed under an abuse of discretion
standard. Washington v. Commissioner, 120 T.C. 137, 146 (2003).
In deciding whether the determination was an abuse of discretion,
we consider evidence relating to all the facts and circumstances.
Id. at 148.
Rev. Proc. 2000-15, 2000-1 C.B. 447, contains guidelines
that are considered in determining whether an individual
qualifies for relief under section 6015(f).2 Rev. Proc. 2000-15,
sec. 4.01, 2000-1 C.B. at 448, lists seven threshold conditions
that must be satisfied before the Commissioner will consider a
request for relief under section 6015(f). Respondent agrees that
the threshold conditions are satisfied in this case.
Rev. Proc. 2000-15, sec. 4.02, 2000-1 C.B. at 448, provides
that, in cases where a liability reported on a joint return is
unpaid, relief under section 6015(f) will ordinarily be granted
if three elements are satisfied. Because petitioner is still
married to and living with Mr. Sjodin, she does not meet the
requirements of Rev. Proc. 2000-15, sec. 4.02.
If relief is not available under Rev. Proc. 2000-15, sec.
4.02, then Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 448,
provides factors that the Commissioner will consider in deciding
2
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.
- 5 -
whether to grant relief under section 6015(f). Rev. Proc. 2000-
15, sec. 4.03(1), lists the following six factors weighing in
favor of granting relief for an unpaid 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 requesting spouse was abused by the
nonrequesting spouse; (4) the requesting spouse did not know or
have reason to know that the reported liability would not be
paid; (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 to the
nonrequesting spouse. Rev. Proc. 2000-15, sec. 4.03(2), 2000-1
C.B. at 449, lists the following six factors weighing against
granting relief for an unpaid liability: (1) The unpaid
liability is attributable to the requesting spouse; (2) the
requesting spouse knew or had reason to know that the reported
liability would be unpaid at the time the return was signed; (3)
the requesting spouse significantly benefited (beyond normal
support) from the unpaid liability; (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
- 6 -
agreement to pay the unpaid liability. This list is not
exhaustive, no single factor is determinative, and all factors
should be considered and weighed appropriately. Rev. Proc. 2000-
15, sec. 4.03.
Respondent agrees that petitioner will suffer economic
hardship if relief is not granted. The joint liabilities along
with penalties and interest have grown to over $278,000.
Petitioner earns $2,000 per month, and Mr. Sjodin is retired
earning occasional real estate income and Social Security. This
factor weighs in petitioner’s favor.
The parties have stipulated that the liabilities are
attributable at least in small part to petitioner’s income.
Petitioner and Mr. Sjodin are not divorced or separated, and
there is no divorce decree or agreement in which Mr. Sjodin
assumed responsibility for the payment of the outstanding
liabilities. We do not hold it against petitioner that she
admirably remained committed to her marriage, and we agree that
in certain cases relief is appropriate for taxpayers who are
married at the time relief is requested. However, this factor is
neutral in our analysis.
The parties have stipulated that Mr. Sjodin did not
physically abuse petitioner. Petitioner argues that Mr. Sjodin
mentally abused her. We presume that her position is that Mr.
Sjodin’s controlling and secretive nature was abusive. We do not
- 7 -
believe that this rises to the level of abuse necessary to weigh
as a factor in petitioner’s favor.
Petitioner began filing separate returns in 1994 when she
discovered a lien on the house, and the Appeals officer noted
that she is currently in full compliance with Federal income tax
laws.
Respondent argues that petitioner had reason to know that
the liabilities shown on the returns she signed would not be
paid. Petitioner testified that in order to file their returns,
Mr. Sjodin would collect her Forms W-2, Wage and Tax Statement,
and have an accountant complete the returns. When the joint tax
returns were completed, petitioner signed them. She did not
inquire into whether the tax shown as due was going to be paid.
This is not surprising, given the picture petitioner has painted
of the way her family dealt with finances. Petitioner stated
that her job was to raise their four children, while Mr. Sjodin’s
job was to provide for the family. She claims that in 40 years
of marriage, she has never written a check out of the joint
checking account she shared with Mr. Sjodin. Petitioner knew
nothing about the family finances and stated that Mr. Sjodin kept
the records locked in his home office. She was not involved in
financial decisions, and Mr. Sjodin unilaterally chose and bought
their homes over the years.
- 8 -
However, we cannot say that petitioner had no reason to know
that the liabilities listed on the returns would not be paid. On
the 1987 return, the liability was over $40,000, and only $475
had been withheld. For the other 3 years at issue, the returns
petitioner signed showed lesser but still significant amounts due
of $12,789, $20,133, and $5,958, and withholding, at the most, of
$1,969. We believe that it was reasonable for respondent to
conclude that petitioner had reason to know that Mr. Sjodin would
not pay these amounts. See Morello v. Commissioner, T.C. Memo.
2004-181.
Respondent argues that petitioner received significant
benefit, beyond normal support, from the unpaid liabilities.
Petitioner testified that in 1987, two of her children were in
high school, and two were in college. The funds available for
household expenses were augmented over the years in issue because
the tax was not paid. There is no evidence that petitioner or
her family lived an extravagant lifestyle or that Mr. Sjodin
spent the extra money in any way other than in providing for his
family. The money was likely used for normal household expenses
and college tuition. This does not qualify as significant
benefit to petitioner.
The primary factor weighing in favor of granting petitioner
relief is economic hardship. In contrast, petitioner’s reason to
know of the unpaid liabilities is “an extremely strong factor
- 9 -
weighing against relief.” Rev. Proc. 2000-15, sec. 4.03(2)(b),
2000-1 C.B. at 449. Mr. Sjodin testified that petitioner’s
application for relief under section 6015 was the result of
advice from the family’s accountant as part of his estate
planning. While we recognize that Mr. Sjodin’s disorder has made
communication difficult over the years, it seems that
petitioner’s lack of involvement in the family finances was a
function of the way petitioner and Mr. Sjodin chose to manage
their household duties. Although payment of the liabilities now
will present an economic hardship to petitioner, we cannot say
that under all of the circumstances respondent abused his
discretion by acting arbitrarily, capriciously, or without sound
basis in fact in denying petitioner’s request for equitable
relief under section 6015(f).
Decision will be entered
for respondent.