T.C. Summary Opinion 2004-145
UNITED STATES TAX COURT
DAWN E. GILES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11105-03S. Filed October 21, 2004.
Dawn E. Giles, pro se.
Frank W. Louis, for respondent.
PAJAK, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed. Unless otherwise
indicated, section references are to the Internal Revenue Code in
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority.
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Respondent determined that petitioner was not eligible for
section 6015 relief from joint and several liability for 1995 and
1997.
After a concession by respondent as to petitioner’s
entitlement to section 6015 relief for 1997, the issue for
decision is whether petitioner also is entitled to section 6015
relief from joint and several liability for 1995.
Some of the facts in this case have been stipulated and are
so found. Petitioner resided in East Greenwich, Rhode Island, at
the time she filed her petition.
Petitioner separated from her husband, David Giles (Mr.
Giles), in 1995. Their divorce was final in 1998.
For 1995, petitioner and Mr. Giles jointly filed a Form
1040, U.S. Individual Income Tax Return. Mr. Giles was an
insurance adjuster, and petitioner was a marketing director. On
their Form 1040, petitioner and Mr. Giles reported $136,375
(rounded) in wage income. The Forms W-2, Wage and Tax Statement,
attached to the Form 1040, reflected income of $119,233.18 for
Mr. Giles and $17,142.09 for petitioner.
Petitioner’s actual income for 1995 was $47,652.08 as shown
on the two Forms W-2 issued by her employer. This $30,509.99
omission of petitioner’s income, shown on one of the Forms W-2,
gave rise to the tax liability for 1995.
On November 26, 1997, respondent issued to petitioner and
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Mr. Giles a notice of deficiency for taxable year 1995.
Respondent determined a deficiency for 1995 of $9,004 and an
accuracy-related penalty of $1,060.
Thereafter, pursuant to their divorce decree, petitioner and
Mr. Giles agreed that they will share their Federal and State tax
liabilities “in the same ratio as their respective incomes
contributed to their gross income.”
On July 1, 1999, petitioner submitted a Form 8857, Request
for Innocent Spouse Relief (And Separation of Liability and
Equitable Relief), to respondent.
On April 30, 2001, respondent denied petitioner’s Request
for Innocent Spouse Relief.
On April 11, 2003, respondent issued to petitioner a Notice
of Determination Concerning Your Request for Relief from Joint
and Several Liability under Section 6015 (notice of
determination). In the notice of determination, respondent
determined that petitioner was ineligible for relief under
section 6015(b), (c), and (f).
In her petition and amended petition, petitioner contends
that Mr. Giles filed their joint tax return for 1995, which
contained errors, and that Mr. Giles signed petitioner’s name on
the return.
Section 6013(d)(3) provides that spouses filing a joint
Federal income tax return are jointly and severally liable for
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the tax due. Section 6015(a) prescribes the procedures under
which an individual who has made a joint return may seek relief
from joint and several liability. An individual may seek relief
under section 6015(b), (c), or (f).
We first address whether petitioner is eligible for relief
under section 6015(b). Section 6015(b)(1) generally provides
relief for an individual from joint liability for an
understatement of tax, if specific requirements are met.
Relevant is section 6015(b)(1)(C), which requires that “the other
individual filing the joint return establishes that in signing
the return he or she did not know, or had no reason to know, that
there was such understatement”. Section 6015(b)(2) provides
apportionment of relief to an individual who would be entitled to
relief but for section 6015(b)(1)(C) if the individual “did not
know, and had no reason to know, the extent of such
understatement”.
Petitioner stated that Mr. Giles prepared and filed their
joint tax return for 1995. Petitioner also stated that she
received two separate Forms W-2 from her employer for 1995 and
that, without her knowledge, Mr. Giles failed to include the
income from one of the Forms W-2 on their 1995 tax return.
Petitioner claims that Mr. Giles accepted responsibility for the
omission of petitioner’s income and that Mr. Giles assured her
that, in petitioner’s words, “he would take care of it”.
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In her July 10, 1997, written response to respondent’s
request for information about the 1995 tax return, petitioner
conceded that “I acknowledge signing the returns myself, and not
giving actual work and numbers any close scrutiny.” In her
Request for Innocent Spouse Relief, petitioner stated that “I
signed the return without checking it for accuracy.” Yet, in her
petition and amended petition, petitioner contended that Mr.
Giles had signed her name on the tax return. At trial,
petitioner stated that the spouse’s signature on the 1995 return
was not hers. Petitioner later stated that she could not
remember whether or not she had signed the 1995 tax return.
Petitioner further stated that she did not examine the 1995 tax
return before it was filed.
Petitioner’s statements regarding whether or not she signed
the 1995 return were inconsistent. It was not until she filed
her petition on July 7, 2003, that petitioner claimed that she
did not sign the 1995 tax return. The only consistency in
petitioner’s statements as to the 1995 tax return was that she
did not review the return prior to its filing. On this record,
we find that petitioner signed the 1995 joint tax return.
On these facts, we conclude that petitioner knew or had
reason to know about the understatement of tax and the extent of
such understatement. Accordingly, we sustain respondent’s
determination as to petitioner’s ineligibility for relief under
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section 6015(b).
We next address whether petitioner is eligible for relief
under section 6015(c). Section 6015(c) provides for allocation
of tax liability between the joint filers.
Petitioner received two Forms W-2 for taxable year 1995, one
of which was omitted from the 1995 tax return. Thus, the
deficiency for taxable year 1995 arose from the omission of
petitioner’s income.
On these facts, we conclude that any allocation of tax
liability would be to petitioner. Accordingly, we sustain
respondent’s determination that petitioner is ineligible for
relief under section 6015(c).
Finally, we address whether petitioner is eligible for
relief under section 6015(f). Section 6015(f) provides for
equitable relief, at the Secretary’s discretion, if relief under
section 6015(b) and (c) is not available. Thus, we review
respondent’s denial of equitable relief under an abuse of
discretion standard. Butler v. Commissioner, 114 T.C. 276, 292
(2000). Petitioner bears the burden of proving that respondent
abused his discretion in denying equitable relief under section
6015(f). Jonson v. Commissioner, 118 T.C. 106, 125 (2002), affd.
353 F.3d 1181 (10th Cir. 2003).
Rev. Proc. 2000-15, 2000-1 C.B. 447, describes the
procedures for determining eligibility for equitable relief under
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section 6015(f). Rev. Proc. 2000-15, supra, applies to requests
for equitable relief with respect to any liability for tax
arising on or before July 22, 1998, that was unpaid on that date.
Rev. Proc. 2000-15, sec. 3, 2000-1 C.B. at 448.
Rev. Proc. 2000-15, sec. 4.01, 2000-1 C.B. at 448, lists the
threshold conditions that must be satisfied before the
Commissioner will consider a request for equitable relief under
section 6015(f). We find that petitioner has satisfied the
threshold conditions.
Rev. Proc. 2000-15, sec. 4.02, 2000-1 C.B. at 448, lists the
circumstances under which equitable relief will ordinarily be
granted. Rev. Proc. 2000-15, sec. 4.02(2)(b) provides that
“Relief will only be available to the extent that the unpaid
liability is allocable to the nonrequesting spouse.” The unpaid
liability for taxable year 1995 arose from the omission of
petitioner’s income. Thus, petitioner does not qualify for
equitable relief under section 4.02.
Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B. at 448-449, in
relevant part, provides a nonexhaustive list of positive and
negative factors for determining whether to grant equitable
relief to a requesting spouse who does not qualify for relief
under section 4.02.
We find that the factors overwhelmingly weigh against
relief. First, the unpaid liability arose from an omission of
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income attributable to petitioner. Attribution to the
nonrequesting spouse weighs in favor of relief and attribution to
the requesting spouse weighs against relief. Rev. Proc. 2000-15,
sec. 4.03(1)(f), (2)(a), 2000-1 C.B. at 449. Second, petitioner
admitted that she did not review the joint return prior to
filing. Thus, petitioner knew or had reason to know of the
omission of her income. Rev. Proc. 2000-15, sec. 4.03(1)(d),
(2)(b), 2000-1 C.B. at 449. Lastly, petitioner had a legal
obligation pursuant to her divorce decree to pay the liability.
Rev. Proc. 2000-15, sec. 4.03(2)(f).
On these facts, we conclude that respondent did not abuse
his discretion in denying petitioner’s request for equitable
relief. Accordingly, we sustain respondent’s determination that
petitioner is ineligible for relief under section 6015(f).
We note the following two adjustments to the 1995 tax
liability. On April 15, 1999, respondent applied an overpayment
of $2,557 from petitioner’s 1998 income tax return to the joint
tax liability from 1995. On June 21, 2000, respondent allowed
$1,019 as an itemized deduction for State income tax paid for
1995, which resulted in an abatement of $316.
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Contentions we have not addressed are irrelevant, moot, or
without merit.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
under Rule 155.