GLENN v. COMMISSIONER

T.C. Summary Opinion 2005-126

UNITED STATES TAX COURT

CAROLYN A. GLENN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 9199-04S. Filed August 16, 2005.

Saul R. Sodos, for petitioner.

Tom D. Yang, for respondent.

GOLDBERG, 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. The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority. Unless otherwise indicated,

subsequent 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.
 - 2 -

Respondent determined a deficiency of $16,584 in the joint

Federal income tax of petitioner and petitioner’s former spouse,

Timothy J. Glenn (Mr. Glenn),1 and an accuracy-related penalty of

$3,317 pursuant to section 6662(a) for the taxable year 2001.

After concessions, the issue for decision is whether

respondent abused his discretion in denying petitioner relief

from joint and several liability for the tax deficiency and

accuracy-related penalty pursuant to section 6015.2

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. Petitioner resided in

Hoffman Estates, Illinois, on the date the petition was filed in

this case.

1
Timothy J. Glenn’s case at docket No. 7249-04S was tried
consecutively with petitioner’s case on this Court’s Chicago,
Illinois, session beginning Nov. 29, 2004. These cases were not
consolidated because of an objection by petitioner.
2
A joint notice of deficiency was mailed to petitioner and
Mr. Glenn on Feb. 25, 2004. Mr. Glenn filed a timely petition
with this Court on Apr. 26, 2004, at docket No. 7249-04S seeking
a redetermination of the deficiency relating to the additional
tax under sec. 72(t) and the accuracy-related penalty pursuant to
sec. 6662(a). Petitioner filed her petition on June 3, 2004.
This Court has no jurisdiction to redetermine the deficiency
related to the additional tax under sec. 72(t) nor the accuracy-
related penalty pursuant to sec. 6662(a) as to petitioner’s
petition because the petition for such redetermination would be
untimely.
 - 3 -

Petitioner and Mr. Glenn were married on July 8, 1989. For

taxable year 2001, petitioner and Mr. Glenn filed a timely joint

Federal income tax return. During the year in issue, petitioner

and Mr. Glenn were married and resided in the same household;

however, they occupied separate rooms in the household. Their

2001 Federal income tax return was signed and dated by both of

them on April 10, 2002. Petitioner and Mr. Glenn executed the

2001 return voluntarily. Petitioner had filed for divorce from

Mr. Glenn in October of 2001. They were divorced on November 13,

2002. Their judgment for dissolution of marriage provided:

That each party shall be responsible for the payment of all
credit card bills and all other debts in his or her name
alone. Each shall hold the other harmless and indemnify the
other from the respective indebtedness.

However, the judgment for dissolution of marriage did not address

payment of joint liabilities.

On their jointly filed 2001 tax return, petitioner and Mr.

Glenn reported wage income of $157,301, interest income of $350,

and total pension and annuity income of $165,838.3 Petitioner

and Mr. Glenn reported adjusted gross income of $323,489 and

claimed deductions of $31,811 on Schedule A, Itemized Deductions.

Their 2001 income tax return reported a total tax of $86,293 and

a net amount owed of $21,438 after reducing their total tax by

the amount of income tax withheld.

3
This amount is rounded to the nearest dollar.
 - 4 -

During the taxable year 2001, Mr. Glenn earned wages from

two sources: $58,502.61 from Ceridian Corp. from which

$11,122.24 of Federal income tax was withheld; and $74,219.76

from Kronos, Inc., from which $14,984.69 of Federal income tax

was withheld.

During the taxable year 2001, petitioner earned wages of

$24,577.99 from Community Unit School District #220, and Federal

income tax of $1,704.43 was withheld. Also during the tax year

2001, petitioner and Mr. Glenn received pension and annuity

income of $165,838 from Mr. Glenn’s section 401(k) plan account

held by Fidelity Investments from which $33,167.58 of Federal

income tax was withheld.

The $165,838 petitioner and Mr. Glenn reported as pension

and annuity income during the taxable year 2001 was a

distribution from Mr. Glenn’s section 401(k) plan maintained by

his employer, Kronos, Inc., through T. Rowe Price. Mr. Glenn had

been employed at Kronos, Inc., since 1988. This distribution was

made approximately in June of 2001. Mr. Glenn’s reasons for

requesting the distribution were that he was leaving Kronos,

Inc., and he and petitioner were considering divorce and wanted

to pay off outstanding bills to make their divorce “as simple as

possible”.
 - 5 -

Mr. Glenn received a check from Fidelity Investments in the

amount of $132,670.30.4 In August of 2001, Mr. Glenn deposited

$123,700 into his and petitioner’s joint checking account with

Harris Trust & Savings Bank.5 Mr. Glenn could not recall why the

whole amount of $132,670.30 was not deposited in the joint

checking account. Petitioner and Mr. Glenn had opened this joint

checking account before 1990. Mr. Glenn also deposited his

paychecks in the joint checking account. However, petitioner did

not deposit her paychecks into the joint checking account;

instead, she had a separate personal checking account where she

deposited her paychecks.

During the period from July 27 through December 31, 2001,

Mr. Glenn wrote checks totaling $66,082.07 drawn on the Harris

Trust & Savings Bank joint checking account as follows:

4
This amount represents the total sec. 401(k) distribution
of $165,838, less Federal income tax withheld of $33,167.58.
5
Mr. Glenn transferred $100,000 from the joint checking
account into a joint savings account which was also held with
Harris Trust & Savings Bank. Mr. Glenn transferred money from
the savings account to the checking account, as needed, to cover
checks written on and withdrawals from the checking account. Mr.
Glenn used the savings account to earn interest while the large
sum of money was not being used.
 - 6 -
Date Check No. Description Amount

7/27/2001 136 Payable to: Discover $2,700.00
8/1/2001 137 Payable to: Citibank 3,450.55
8/21/2001 147 Payable to: First USA 23,000.00
9/5/2001 164 Payable to: Citibank 6,938.63
9/5/2001 165 Payable to: Union Federal 27,701.51
9/29/2001 185 Payable to: First USA 1,215.40
10/24/2001 204 Payable to: First USA 1,075.98
Total 66,082.07

Both petitioner’s and Mr. Glenn’s names were on their credit

cards financed through Discover, Citibank, and First USA, and

both of their names were on the home mortgage note they received

from Union Federal. Therefore, petitioner and Mr. Glenn were

jointly liable for the credit card debts and home mortgage which

were paid by the above checks.

From the record, the remaining $57,617.93, which was

deposited into the joint savings and checking accounts, was not

readily traceable. However, on November 28, 2001, the balance in

the joint savings account was $57,878.32.

As stated previously, petitioner and Mr. Glenn reported

pension and annuity income of $165,838 on their joint Federal

income tax return for taxable year 2001. However, they did not

report on their 2001 joint Federal income tax return the 10-

percent additional tax imposed by section 72(t) on early

withdrawals from qualified retirement plans. Accordingly, on

February 25, 2004, respondent issued petitioner and Mr. Glenn a

notice of deficiency for taxable year 2001. In the notice of

deficiency, as previously stated, respondent determined that

petitioner and Mr. Glenn were liable for a tax deficiency of
 - 7 -

$16,584 because of their failure to report and pay the 10-percent

additional tax imposed by section 72(t) and that they were liable

for an accuracy related penalty pursuant to section 6662(a) of

$3,317.

Petitioner concedes that the total amount of $165,838 of

pension and annuity income reported on the return is subject to

the 10-percent additional tax under section 72(t) on early

withdrawals. After the date of the notice of deficiency, Mr.

Glenn tendered to respondent payment of $8,267, approximately

one-half of the amount of the 10-percent additional tax.

On August 31, 2003, petitioner filed a Form 8857, Request

for Innocent Spouse Relief, with respondent, requesting innocent

spouse relief with respect to the 2001 tax liability incurred as

a result of the 10-percent additional tax under section 72(t).

On December 18, 2003, respondent made a preliminary determination

that petitioner did not qualify for innocent spouse relief under

section 6015. On June 3, 2004, petitioner filed with the Court a

petition for determination of relief from joint and several

liability on a joint return with regard to her tax liability

incurred as a result of the 10-percent additional tax for the

taxable year 2001.

Petitioner contends that she is not liable for the unpaid

additional tax liability remaining from the early withdrawal and
 - 8 -

the accuracy-related penalty.6 According to petitioner, it was

Mr. Glenn’s sole responsibility to maintain their household

finances; she had no knowledge or control of their household

finances during tax year 2001 or prior years; she had no

knowledge of the existence of Mr. Glenn’s section 401(k) plan

maintained by his employer, Kronos, Inc., through T. Rowe Price;

she did not know that the proceeds were withdrawn by Mr. Glenn

during tax year 2001 and placed into their joint accounts with

Harris Trust & Savings Bank; and she had no control of the

proceeds which were placed in the joint accounts with Harris

Trust & Savings Bank. On these grounds, petitioner contends that

pursuant to section 6015(f) she is eligible for relief from joint

liability on the unpaid additional tax liability remaining from

the early withdrawal.

Discussion

Except as otherwise provided in section 6015, petitioner

bears the burden of proof. See Rule 142(a); Alt v. Commissioner,

6
In Glenn v. Commissioner, at docket No. 7249-04S, we found
that Mr. Glenn acted with reasonable cause and good faith as to
the underpayment attributable to the unreported 10-percent
additional tax under sec. 72(t). Accordingly, we held that Mr.
Glenn is not liable for the accuracy-related penalty pursuant to
sec. 6662(a). Because we held that Mr. Glenn was not liable for
the accuracy-related penalty, we would assume that respondent
would not collect the accuracy-related penalty from petitioner,
even though she is unable in the present proceeding to challenge
the underlying liability of her and Mr. Glenn’s tax deficiency
for taxable year 2001.
 - 9 -

119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir.

2004).

As a general rule, married taxpayers may elect to file a

joint Federal income tax return. Sec. 6013(a). After making the

election, each spouse generally is jointly and severally liable

for the entire tax due for that taxable year. Sec. 6013(d)(3).

In certain situations, however, a joint return filer can avoid

such joint and several liability by qualifying for relief

therefrom under section 6015.7

Section 6015 provides three avenues for obtaining relief to

a taxpayer who has filed a joint return: (1) Section 6015(b)

provides full or apportioned relief with respect to

understatements of tax attributable to certain erroneous items on

the return; (2) section 6015(c) provides relief for a portion of

an understatement of tax for taxpayers who are separated or

divorced; and (3) section 6015(f) (potentially the broadest of

the three avenues) confers upon the Secretary discretion to grant

equitable relief for taxpayers who otherwise do not qualify for

relief under section 6015(b) or (c).

Petitioner requested relief pursuant to section 6015(f) from

liability for the unpaid amount of additional tax liability

7
Sec. 6015 was enacted as part of the Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206,
sec. 3201, 112 Stat. 734. Before the enactment of sec. 6015,
relief from the imposition of joint and several liability for
spouses filing joint returns was available under sec. 6013(e).
 - 10 -

remaining from the 10-percent additional tax imposed by section

72(t) and the accuracy-related penalty imposed under section

6662(a). Respondent determined that petitioner was not entitled

to the requested relief.

If a taxpayer’s request for relief under section 6015 is

denied, the taxpayer may petition this Court, pursuant to section

6015(e)(1), for a review of the determination. Section

6015(e)(1)(A)8 provides that a taxpayer against whom a deficiency

has been determined and who elects to have section 6015(b) or (c)

apply may petition this Court “to determine the appropriate

relief available to the individual” under section 6015, including

relief under section 6015(f). Fernandez v. Commissioner, 114

T.C. 324, 330-331 (2000).

In the present case, petitioner does not seek relief under

section 6015(b) or (c). Petitioner has conceded that she is not

eligible for relief under these subsections. Therefore, the only

opportunity for relief available to petitioner is section

6015(f). Section 6015(f) provides as follows:

8
SEC. 6015(e). Petition for Review by Tax Court.--

(1) In general.--In the case of an individual
against whom a deficiency has been asserted and who
elects to have subsection (b) or (c) apply–-

(A) In general.--In addition to any other
remedy provided by law, the individual may
petition the Tax Court (and the Tax Court shall
have jurisdiction) to determine the appropriate
relief available to the individual under this
section if such petition is filed--
 - 11 -

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.

As directed by section 6015(f), the Commissioner has

prescribed guidelines in Rev. Proc. 2003-61, 2003-2 C.B. 296,9 to

be considered in determining whether an individual qualifies for

relief under section 6015(f). Rev. Proc. 2003-61, sec. 4.01,

2003-2 C.B. at 297, lists seven conditions which must be

satisfied before the Commissioner will consider a request for

relief under section 6015(f).

Rev. Proc. 2003-61, sec. 4.03(2), 2003-2 C.B. at 298, lists

nonexclusive factors that the Commissioner will consider in

determining whether, taking into account all the facts and

circumstances, it is inequitable to hold the requesting spouse

liable for all or part of the unpaid income tax liability

9
This revenue procedure superseded Rev. Proc. 2000-15, 2000-
1 C.B. 447, and is effective either for requests for relief filed
on or after Nov. 1, 2003, or for requests for which no
preliminary determination letter was issued as of Nov. 1, 2003.
In the present case, the request for relief was still pending as
of Nov. 1, 2003, and the preliminary determination letter was
issued on Dec. 19, 2003; therefore, Rev. Proc. 2003-61, 2003-2
C.B. 296, is applicable in the present situation.
 - 12 -

or deficiency, and full or partial equitable relief under section

6015(f) should be granted. Rev. Proc. 2003-61, sec. 4.03, 2003-2

C.B. at 298, provides that the following factors are relevant to

whether the Commissioner will grant equitable relief: (1)

Marital status, (2) economic hardship, (3) knowledge or reason to

know, (4) the nonrequesting spouse’s legal obligation, (5)

significant benefit, (6) compliance with income tax laws, (7)

abuse, and (8) mental or physical health. Further, Rev. Proc.

2003-61, supra, provides that no single factor will be

determinative, but that all relevant factors, regardless of

whether the factor is listed in Rev. Proc. 2003-61, sec. 4.03,

will be considered and weighed.

To prevail under section 6015(f), petitioner must show that

respondent’s denial of equitable relief from joint liability

under section 6015(f) was an abuse of discretion. See Washington

v. Commissioner, 120 T.C. 137 (2003); Jonson v. Commissioner, 118

T.C. 106, 125 (2002) (citing Butler v. Commissioner, 114 T.C.

276, 292 (2000)), affd. 353 F.3d 1181 (10th Cir. 2003). Action

constitutes an abuse of discretion under this standard where it

is arbitrary, capricious, or without sound basis in fact or law.

Woodral v. Commissioner, 112 T.C. 19, 23 (1999). The question of

whether respondent’s determination was arbitrary, capricious, or

without sound basis in fact is a question of fact. Cheshire v.

Commissioner, 115 T.C. 183, 198 (2000), affd. 282 F.3d 326 (5th
 - 13 -

Cir. 2002). In deciding whether respondent’s determination that

petitioner is not entitled to relief under section 6015(f) was an

abuse of discretion, we consider evidence relating to all the

facts and circumstances.

Respondent contends: (1) Petitioner voluntarily signed the

2001 joint Federal income tax return which reported the section

401(k) distribution of $165,838; (2) the proceeds of the section

401(k) plan were put into joint savings and checking accounts to

which petitioner had access; (3) petitioner obtained benefits

from the section 401(k) distribution proceeds through the use of

those proceeds to pay off petitioner’s and Mr. Glenn’s joint

liabilities; (4) petitioner would not suffer economic hardship if

the Service did not grant relief from the income tax liability;

and (5) petitioner has not demonstrated that she made a good

faith effort to comply with Federal income tax laws. Respondent

asserts that these factors weigh against granting relief to

petitioner. We now address each of the factors of Rev. Proc.

2003-61, sec. 403, separately.

1. Marital Status

During 2001, petitioner and Mr. Glenn were married and

resided in the same household; however, they occupied separate

rooms in the household and considered themselves separated.

Petitioner filed for divorce in October of 2001. Petitioner and
 - 14 -

Mr. Glenn were divorced on November 13, 2002. This factor weighs

in favor of granting relief to petitioner.

2. Economic Hardship

Respondent contends that petitioner offered no evidence that

she would suffer economic hardship if relief were denied.

Pursuant to section 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.,

economic hardship exists if a levy will cause a taxpayer to be

unable to pay his/her reasonable basic living expenses.

Respondent maintains that respondent’s collection activity would

not leave petitioner unable to pay her basic living expenses.10

10
Sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.,
provides:

(ii) Information from taxpayer. In determining a reasonable
amount for basic living expenses the director will consider
any information provided by the taxpayer including–-

(A) The taxpayer’s age, employment status and history,
ability to earn, number of dependents, and status as a
dependent of someone else;

(B) The amount reasonably necessary for food, clothing,
housing, (including utilities, home-owner insurance,
home-owner dues, and the like), medical expenses
(including health insurance), transportation, current
tax payments (including federal, state, and local),
alimony, child support, or other court-ordered
payments, and expenses necessary to the taxpayer’s
production of income (such as dues for a trade union or
professional organization, or child care payments which
allow the taxpayer to be gainfully employed);

(C) The cost of living in the geographic area in which
the taxpayer resides;

(D) The amount of property exempt from levy which is
available to pay the taxpayer’s expenses;
(continued...)
 - 15 -

In addition, respondent asserts that petitioner provided no

documentation to contradict these contentions or to demonstrate

an economic hardship.

On Form 12510, Questionnaire for Requesting Spouse,

petitioner stated her necessary monthly living expenses as

approximately $3,136 per month. Also on Form 12510, petitioner

stated her total monthly income as approximately $3,500,

consisting of her earned wages of $2,400 per month and child

support of $1,100 received per month. On the basis of these

facts, respondent determined that petitioner would not suffer

economic hardship if relief was not granted. Petitioner did not

supply any evidence at trial to contradict the above facts or the

determination of respondent; therefore, we find that petitioner

will not suffer economic hardship if relief is not granted. This

factor favors denying relief.

3. Knowledge or Reason To Know

In the case of an income tax liability that arose from a

deficiency, the fact that the requesting spouse did not know and

had no reason to know of the item giving rise to the deficiency

10
(...continued)

(E) Any extraordinary circumstances such as special
education expenses, a medical catastrophe, or natural
disaster; and

(F) Any other factor that the taxpayer claims bears on
economic hardship and brings to the attention of the
director.
 - 16 -

is a factor in favor of granting relief. Rev. Proc. 2003-61,

sec. 4.03(2)(a)(iii)(B). By contrast, the fact that the

requesting spouse knew or had reason to know of the item giving

rise to the deficiency is a factor weighing against relief. Id.

Petitioner contends that she did not know and had no reason

to know of the distribution from Mr. Glenn’s section 401(k) plan

which gave rise to: (1) The deficiency resulting from the 10-

percent early withdrawal additional tax, and (2) the accuracy-

related penalty imposed under section 6662(a). Petitioner

testified: (1) It was Mr. Glenn’s sole responsibility to

maintain their household finances; (2) she had no knowledge or

control of their household finances during tax year 2001 or prior

years; (3) she had no knowledge of the existence of Mr. Glenn’s

section 401(k) plan maintained by his employer, Kronos, Inc.,

through T. Rowe Price, nor did she know that the proceeds were

withdrawn by Mr. Glenn during tax year 2001 and placed into their

joint accounts with Harris Trust & Savings Bank; and (4) she had

no control of the proceeds which were placed into the joint

accounts with Harris Trust & Savings Bank.

However, petitioner voluntarily signed the 2001 joint return

and admitted that she did not review the joint return before

filing. The distribution from Mr. Glenn’s section 401(k) plan

maintained by his employer, Kronos, Inc., through T. Rowe Price,

was reported on petitioner and Mr. Glenn’s 2001 joint return.
 - 17 -

Also, petitioner had access to the joint accounts where the

proceeds of the distribution were deposited. Thus, petitioner

knew or had reason to know of the item which gave rise to the

taxable year 2001 deficiency and the accuracy-related penalty.

This factor favors denying relief to petitioner.

4. Nonrequesting Spouse’s Legal Obligation

As previously noted, petitioner and Mr. Glenn’s judgment for

dissolution of marriage provided:

That each party shall be responsible for the payment of all
credit card bills and all other debts in his or her name
alone. Each shall hold the other harmless and indemnify the
other from the respective indebtedness.

However, the judgment for dissolution of marriage did not address

payment of joint liabilities.

Rev. Proc. 2003-61, sec. 4.03(2)(a)(iv), indicates that if

Mr. Glenn had a legal obligation under the judgment for

dissolution of marriage to pay the tax liabilities, then that

fact would weigh in favor of granting relief to petitioner.

Likewise, if the judgment for dissolution of marriage had placed

the obligation to pay the taxes on petitioner, then that fact

would weigh against granting relief to her as indicated in Rev.

Proc. 2003-61, sec. 4.03(2)(a)(iv). In the present case, the

judgment for dissolution of marriage is silent as to each party’s

obligation to pay taxes. Therefore, we will assume each party is

liable for 50 percent of the liabilities. Thus, this is a

neutral factor.
 - 18 -

5. Significant Benefit

Respondent contends that petitioner received benefits from

the proceeds of the section 401(k) distribution in the form of:

(1) Payment of joint credit card liabilities; (2) payment of the

second mortgage held by Union Federal; (3) payment of petitioner

and Mr. Glenn’s 2001 joint tax liability; and (4) payment of

attorney’s fees relating to petitioner and Mr. Glenn’s divorce.

However, petitioner contends that she did not accumulate the

credit card debts; therefore, the payment of those liabilities

should not be considered a benefit to her. Petitioner further

contends that the other referenced payment benefits to her were

paid by Mr. Glenn’s salary and not the proceeds from the section

401(k) distribution.

Petitioner admitted at trial that her name was on the credit

card accounts and that she used one of the credit cards to make

purchases. Petitioner also admitted at trial that her name was

on the mortgage note. While it is not totally clear from the

record where all of the proceeds from the section 401(k) plan can

be traced, it seems logical to the Court that the large amounts

of the credit card liabilities, the second mortgage, and the 2001

joint tax liability were satisfied because of the distribution

from Mr. Glenn’s section 401(k) plan. Therefore, we find that

petitioner did benefit from the proceeds of the section 401(k)

distribution.
 - 19 -

6. Compliance With Income Tax Laws

In his pretrial memorandum, respondent contends that

“petitioner has not demonstrated that she made a good faith

effort to comply with federal income tax laws.”

To the contrary, in her pretrial memorandum, petitioner

contends that she has complied with the income tax laws.

Respondent did not produce any evidence that supported his

contention. Therefore, we consider this factor neutral.

7. Abuse

Petitioner conceded that she was not abused by Mr. Glenn and

that she was not coerced into executing the 2001 joint Federal

income tax return. Lack of spousal abuse is a factor listed in

Rev. Proc. 2003-61, sec. 4.03(2)(b)(i), that will weigh in favor

of equitable relief if found but will not weigh against equitable

relief if not present in a case. Therefore, this factor is

neutral.

Conclusion

The factors that weigh against granting relief to petitioner

outweigh those factors favoring relief. Therefore, under these

facts and circumstances, we hold that respondent did not abuse

his discretion in denying equitable relief to petitioner under

section 6015(f).
 - 20 -

Reviewed and adopted as the report of the Small Tax Case

Division.

An appropriate decision

will be entered for respondent.