T.C. Memo. 2004-282
UNITED STATES TAX COURT
TIMOTHY R. BECHERER, Petitioner,
AND LESLEY LOUISE BECHERER, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1429-03. Filed December 20, 2004.
Timothy R. Becherer, pro se.
Ric D. Hulshoff, for respondent.
MEMORANDUM OPINION
VASQUEZ, Judge: Respondent determined that petitioner did
not qualify for relief from joint and several liability pursuant
to section 6015(b), (c), or (f).1 The issue for decision is
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
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whether petitioner is entitled to relief from joint and several
income tax liability for 1996 pursuant to section 6015(b), (c),
or (f).
Background
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 he filed his
petition, petitioner resided in Los Angeles, California.2
Petitioner and Lesley Louise Becherer (Ms. Becherer) married
on February 23, 1994, and divorced on September 26, 1997.
Petitioner and Ms. Becherer filed a joint income tax return
for 1996. In the notice of deficiency for 1996, respondent
determined that petitioner and Ms. Becherer had five items of
unreported income. The five items consisted of income from four
employers and a distribution from the City of Clearwater. The
distribution from the City of Clearwater was attributable to
petitioner. The income received from one employer, Cenex
Services, was attributable to petitioner. The income received
from the remaining three employers, TTC Illinois, Trader
Publications, and Pennysaver, was attributable to Ms. Becherer.
Respondent determined a deficiency of $1,833 in petitioner’s and
Ms. Becherer’s 1996 Federal income tax liability. Apart from the
2
At trial, respondent orally moved that intervenor be
dismissed for lack of prosecution. That motion is denied by the
Court.
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claim by petitioner under section 6015, respondent’s
determinations contained in the notice of deficiency are not in
dispute.
Petitioner knew of Ms. Becherer’s employment with the three
employers. Petitioner occasionally assisted Ms. Becherer in
performing her employment duties for Trader Publications and
Pennysaver.
When the 1996 Federal income tax return was prepared,
petitioner was a sophomore or junior in college, and Ms. Becherer
held a high school general equivalency diploma. Petitioner had
an opportunity to review the 1996 Federal income tax return
before the return was filed. Petitioner currently holds a degree
in communications from the University of Miami and is employed as
a video editor for E-Entertainment Network.
Discussion
In general, spouses filing joint Federal income tax returns
are jointly and severally liable for all taxes due. Sec.
6013(d)(3). Under certain circumstances, however, section 6015
provides relief from this general rule. Except as otherwise
provided in section 6015, petitioner bears the burden of proof.3
3
Petitioner does not contend that sec. 7491(a) is
applicable to this case, nor is there evidence that the
examination commenced after July 22, 1998. Also, we note that
some documents in the record indicate that the examination began
prior to July 22, 1998.
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Rule 142(a); Jonson v. Commissioner, 118 T.C. 106, 113 (2002),
affd. 353 F.3d 1181 (10th Cir. 2003).
I. Relief Under Section 6015(b)
To qualify for relief from joint and several liability under
section 6015(b)(1), a taxpayer must establish:
(A) a joint return has been made for a taxable year;
(B) on such return there is an understatement of
tax attributable to erroneous items of 1 individual
filing the joint return;
(C) the other individual filing the joint return
establishes that in signing the return he or she did
not know, and had no reason to know, that there was
such understatement;
(D) taking into account all the facts and
circumstances, it is inequitable to hold the other
individual liable for the deficiency in tax for such
taxable year attributable to such understatement; and
(E) the other individual elects (in such form as
the Secretary may prescribe) the benefits of this
subsection not later than the date which is 2 years
after the date the Secretary has begun collection
activities with respect to the individual making the
election * * *.
The requirements of section 6015(b)(1) are stated in the
conjunctive. Accordingly, a failure to meet any one of them is
sufficient for us to find that petitioner does not qualify for
relief pursuant to section 6015(b). Alt v. Commissioner, 119
T.C. 306, 313 (2002).
Respondent contends that petitioner failed to meet the
requirements of subparagraphs (B), (C), and (D). Respondent
concedes that petitioner meets the requirements of subparagraphs
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(A) and (E). For the sake of completeness, we shall discuss the
application of 6015(b)(1)(B), (C), and (D). See Jonson v.
Commissioner, supra at 119.
A. Section 6015(b)(1)(B): Attributable to One Spouse
Section 6015(b)(1)(B) mandates that the understatement of
tax be attributable to erroneous items of the nonrequesting
spouse. Five items were omitted from the 1996 return and
petitioner concedes that two of the items, the distribution from
the City of Clearwater and the income received from Cenex
Services, are solely attributable to him. Therefore, petitioner
cannot qualify for section 6015(b) relief for the two items.
B. Section 6015(b)(1)(C): Know or Reason To Know
The requirement in section 6015(b)(1)(C), the
no-knowledge-of-the-understatement requirement, is virtually
identical to the requirement of former section 6013(e)(1)(C);
therefore, cases interpreting former section 6013(e) remain
instructive to our analysis. Jonson v. Commissioner, supra at
115; Butler v. Commissioner, 114 T.C. 276, 283 (2000).
Venue for appeal of our decision would be to the U.S. Court
of Appeals for the Ninth Circuit. In omission of income cases
under former section 6013(e)(1), this Court and the U.S. Court of
Appeals for the Ninth Circuit have held that a spouse seeking
relief knows of an understatement of tax if he or she knows or
has reason to know of the transaction that gave rise to the
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understatement. See Guth v. Commissioner, 897 F.2d 441, 443-444
(9th Cir. 1990), affg. T.C. Memo. 1987-522; Cheshire v.
Commissioner, 115 T.C. 183 (2000), affd. 282 F.3d 326 (5th Cir.
2002); Braden v. Commissioner, T.C. Memo. 2001-69. Accordingly,
in such circumstances, innocent spouse relief is denied.
Petitioner knew of Ms. Becherer’s employment with TTC
Illinois, Trader Publications, and Pennysaver. Ms. Becherer’s
income from these employers was not included on the 1996 Federal
income tax return. We conclude that petitioner had reason to
know of Ms. Becherer’s understatement of income. Therefore,
petitioner does not satisfy the requirement of section
6015(b)(1)(C).
C. Section 6015(b)(1)(D): Inequitable To Hold Liable
The requirement in section 6015(b)(1)(D), that it be
inequitable to hold the requesting spouse liable for an
understatement on a joint return, is virtually identical to the
requirement of former section 6013(e)(1)(D); therefore, cases
interpreting former section 6013(e) remain instructive to our
analysis. Butler v. Commissioner, supra at 283.
Whether it is inequitable to hold a spouse liable for a
deficiency is determined “taking into account all the facts and
circumstances”. Sec. 6015(b)(1)(D). The most often cited
material factors to be considered are (1) whether there has been
a significant benefit to the spouse claiming relief, and (2)
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whether the failure to report the correct tax liability on the
joint return results from concealment, overreaching, or any other
wrongdoing on the part of the other spouse. Alt v. Commissioner,
supra at 314; Jonson v. Commissioner, 118 T.C. at 119.
No such untoward circumstances are present in this case.
There was no concealment on Ms. Becherer’s part. Ms. Becherer
never hid her employment from petitioner, and in fact petitioner
helped Ms. Becherer perform some of her employment duties.
Petitioner had the opportunity to review the 1996 Federal income
tax return before it was filed.
A purpose of section 6015 relief “is to protect one spouse
from the overreaching or dishonesty of the other.” Purcell v.
Commissioner, 826 F.2d 470, 475 (6th Cir. 1987), affg. 86 T.C.
228 (1986). The understatement of tax in this case is
attributable to an omission of income from the employment
activities of petitioner’s former spouse. Petitioner had
knowledge of Ms. Becherer’s employment activities. Under these
circumstances, we perceive no inequity in holding petitioner and
Ms. Becherer to joint and several liability. Bokum v.
Commissioner, 992 F.2d 1132, 1135 (11th Cir. 1993), affg. 94 T.C.
126 (1990); McCoy v. Commissioner, 57 T.C. 732, 735 (1972).
We conclude that holding petitioner liable for the
deficiencies in tax for 1996 is not inequitable under section
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6015(b). Accordingly, petitioner is not entitled to relief
pursuant to section 6015(b).
II. Relief Under Section 6015(c)
Section 6015(c) allows a taxpayer, who is eligible and so
elects, to limit his or her liability to the portion of a
deficiency that is properly allocable to the taxpayer as provided
in section 6015(d). Sec. 6015(c)(1). Under section
6015(d)(3)(A), generally, any item that gives rise to a
deficiency on a joint return shall be allocated to the
individuals filing the return in the same manner as it would have
been allocated if the individuals had filed separate returns for
the taxable year. We consider whether petitioner’s claim for
relief is precluded by the “actual knowledge” provisions of
section 6015(c)(3)(C).
Relief under section 6015(c) is not available if the
Commissioner proves by a preponderance of the evidence that
petitioner had actual knowledge of “any item giving rise to a
deficiency.” Culver v. Commissioner, 116 T.C. 189, 194 (2001).
The knowledge standard for purposes of section 6015(c)(3)(C) is
“an actual and clear awareness (as opposed to reason to know) of
the existence of an item which gives rise to the deficiency (or
portion thereof).” Cheshire v. Commissioner, 115 T.C. at 195.
In omitted income cases, the electing spouse “must have an actual
and clear awareness of the omitted income.” Id. at 204 n.2.
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Petitioner knew of Ms. Becherer’s employment with TTC
Illinois, Trader Publications, and Pennysaver. The three items
of her income from such employment were omitted from the 1996
return. Petitioner aided Ms. Becherer in performing her
employment duties for Trader Publications and Pennysaver.
Petitioner also knew of Ms. Becherer’s employment with TTC
Illinois. Petitioner therefore had an actual and clear awareness
of the existence of the items that gave rise to the deficiency.
Consequently, relief under section 6015(c) is unavailable to
petitioner.
III. Relief Under Section 6015(f)
Respondent argues that he did not abuse his discretion in
denying petitioner equitable relief under section 6015(f).
Respondent’s denial of relief is reviewed under an abuse of
discretion standard. Cheshire v. Commissioner, 115 T.C. at 198;
Butler v. Commissioner, 114 T.C. at 292.
Considering the facts and circumstances of this case, we
held under section 6015(b)(1)(D) that it is not inequitable to
hold petitioner liable for the deficiencies. The language of
section 6015(f)(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)”
does not differ significantly from the language of section
6015(b)(1)(D), “taking into account all the facts and
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circumstances, it is inequitable to hold the other individual
liable for the deficiency in tax for such taxable year
attributable to such understatement”.4 Butler v. Commissioner,
supra at 291. Further, the equitable factors we consider under
section 6015(b)(1)(D) are the same equitable factors we consider
under section 6015(f).5 As a result, we hold that respondent did
not abuse his discretion in denying petitioner relief under
section 6015(f) for the taxable year 1996.
On the basis of all the facts and circumstances, we conclude
that respondent did not abuse his discretion in denying
petitioner relief pursuant to section 6015(f).
4
Additionally, the language in both sections is similar to
the language in former sec. 6013(e)(1)(D), “taking into account
all the facts and circumstances, it is inequitable to hold the
other spouse liable for the deficiency in tax for such taxable
year attributable to such substantial understatement”. Butler v.
Commissioner, 114 T.C. 276, 291 (2000); see Mitchell v.
Commissioner, 292 F.3d 800, 806 (D.C. Cir. 2002) (“Subsection (f)
has no statutory antecedent as a stand alone provision, but has
roots in the equity test of former subparagraph 6013(e)(1)(D)
carried forward into subparagraph 6015(b)(1)(D).”), affg. T.C.
Memo. 2000-332.
5
The Commissioner has announced a list of factors in Rev.
Proc. 2000-15, sec. 4.03, 2000-1 C.B. 447, 448, that the
Commissioner will consider in deciding whether to grant equitable
relief under sec. 6015(f). The revenue procedure takes into
account factors such as marital status, economic hardship, and
significant benefit in determining whether relief will be granted
under sec. 6015(f). Rev. Proc. 2000-15, sec. 4.03, 2000-1 C.B.
at 448.
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To reflect the foregoing,
An appropriate order and
decision will be entered.