T.C. Summary Opinion 2007-145
UNITED STATES TAX COURT
ELSA ESTELLE HOPKINS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7196-06S. Filed August 21, 2007.
Elsa Estelle Hopkins, pro se.
Margaret Burow and Michael A. Skeen, for respondent.
PANUTHOS, Chief Special Trial Judge: This case was heard
pursuant to the provisions of section 7463 of the Internal
Revenue Code in effect when the petition was filed. Pursuant to
section 7463(b), the decision to be entered is not reviewable by
any other court, and this opinion shall not be treated as
precedent for any other case. Unless otherwise indicated,
subsequent section references are to the Internal Revenue Code,
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and all Rule references are to the Tax Court Rules of Practice
and Procedure.
This proceeding arises from a petition for judicial review
filed in response to a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 (notice of
determination) for unpaid Federal income tax for tax years 1994,
1995, and 1996, issued to petitioner on March 16, 2006.1 After a
concession,2 the issues for decision are: (1) Whether petitioner
is entitled to relief under section 6015(f) for tax years 1995
and 1996, and (2) whether respondent abused his discretion in
sustaining the filing of a notice of Federal tax lien against
petitioner for those years.
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 the petition
was filed, petitioner resided in San Jose, California.
Petitioner married Jack Hopkins on March 15, 1980. While
they were together, petitioner and Mr. Hopkins had two children,
who were 18 and 25 years old at the time of trial. During the
1
At trial, respondent moved to dismiss for mootness and to
strike as to tax year 1994 because payment in full before the
filing of the petition rendered the proposed lien unnecessary as
to that year. Respondent’s motion was granted, and tax year 1994
is not in issue.
2
Petitioner concedes the amounts of tax owed.
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years in issue, petitioner worked as an engineer technician.
Petitioner separated from Mr. Hopkins in December 1996, and they
remained separated at the time of trial.
In March 1997, petitioner and Mr. Hopkins’s home was
foreclosed upon as the result of a late mortgage payment. Mr.
Hopkins withdrew money from his section 401(k) account early in
1997.
Petitioner and Mr. Hopkins filed joint Federal income tax
returns for tax years 1995 and 1996 but did not pay all the tax
reported thereon. The unpaid tax liabilities resulted from
underwithholding from wages attributable to both petitioner and
Mr. Hopkins. Respondent accepted the returns as filed and
assessed tax as reported by petitioner and Mr. Hopkins.
Respondent issued to petitioner a Final Notice of Intent to
Levy and Notice of Your Right to a Hearing Under IRC 6330 (notice
of intent to levy) dated February 7, 2004, for tax years 1994 and
1995. Respondent filed a notice of Federal tax lien against
petitioner and Mr. Hopkins on April 19, 2004, for tax years 1994,
1995, and 1996 and issued them a Notice of Federal Tax Lien
Filing and Your Right to a Hearing Under IRC 6320 on April 22,
2004.
On May 10, 2004, petitioner submitted a Form 12153, Request
for a Collection Due Process Hearing, and attached a Form 8857,
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Request for Innocent Spouse Relief, with attachments.3
Petitioner included a letter with her Forms 12153 and 8857,
stating that she was “willing to take responsibility” for her
share of the amount of tax due.
Petitioner’s request for a collection due process hearing
and request for section 6015 relief were assigned to an Appeals
officer. In his initial letter to petitioner, the Appeals
officer requested that she provide him with all information she
wanted him to consider in making his determination. The Appeals
officer also requested that if petitioner wanted him to consider
an alternative collection method, she complete a Form 433-A,
Collection Information Statement for Wage Earners and Self-
Employed Individuals. Petitioner requested additional time to
gather the requested information, and she was given a deadline of
January 4, 2006, to respond. Despite being granted additional
time, petitioner did not provide any additional information to
respondent during the administrative hearing. Petitioner did not
propose any collection alternatives, nor did she challenge the
3
Petitioner’s Form 12153, Request for a Collection Due
Process Hearing, was filed timely as to the notice of Federal tax
lien but not as to the notice of intent to levy. Petitioner had
an equivalent hearing under sec. 301.6330-1(i), Proced. & Admin.
Regs., for the proposed levy action for tax years 1994 and 1995,
but respondent did not issue a notice of determination. At
trial, respondent moved to dismiss petitioner’s request for
judicial review of the levy action for lack of jurisdiction since
petitioner received an equivalent hearing, which is not subject
to judicial review. Because we granted respondent’s motion, the
levy action for tax years 1994 and 1995 is not at issue.
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underlying tax liabilities. After the hearing was concluded,
respondent issued the notice of determination sustaining the lien
filing and denying petitioner’s request for section 6015 relief.
Discussion
I. Notice of Federal Tax Lien
Section 6321 imposes a lien in favor of the United States on
all property and rights to property of a person when a demand for
the payment of the person’s liability for taxes has been made and
the person fails to pay those taxes. Such a lien arises at the
time an assessment is made. Sec. 6322. Section 6323(a) requires
the Secretary to file a notice of Federal tax lien if the lien is
to be valid against any purchaser, holder of a security interest,
mechanic’s lienor, or judgment lien creditor. Lindsay v.
Commissioner, T.C. Memo. 2001-285, affd. 56 Fed. Appx. 800 (9th
Cir. 2003).
Section 6320 provides that a taxpayer shall be notified in
writing by the Secretary of the filing of a notice of Federal tax
lien and provided with an opportunity for an administrative
hearing. An administrative hearing under section 6320 is
conducted in accordance with the procedural requirements of
section 6330. Sec. 6320(c). At the administrative hearing, a
taxpayer is entitled to raise any relevant issue relating to the
unpaid tax, including a spousal defense or collection
alternatives such as an offer-in-compromise or an installment
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agreement. Sec. 6330(b) and (c)(2)(A); sec. 301.6320-1(e)(1),
Proced. & Admin. Regs. A taxpayer also may challenge the
existence or amount of the underlying tax liability, including a
liability reported on the taxpayer’s original return, if the
taxpayer “did not receive any statutory notice of deficiency for
such tax liability or did not otherwise have an opportunity to
dispute such tax liability.” Sec. 6330(c)(2)(B); see also Urbano
v. Commissioner, 122 T.C. 384, 389-390 (2004); Montgomery v.
Commissioner, 122 T.C. 1, 9-10 (2004).
Section 6330(d) provides for judicial review of the
administrative determination in the Tax Court or a Federal
District Court, as may be appropriate. Where the underlying tax
liability is properly at issue, the Court will review the
Commissioner’s administrative determination de novo. Where the
validity of the underlying tax liability is not properly at
issue, however, the Court will review the determination for abuse
of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000);
Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).
Because petitioner does not seek to challenge the underlying
tax liability, we review respondent’s determination for abuse of
discretion. See Lunsford v. Commissioner, 117 T.C. 183, 185
(2001); Sego v. Commissioner, supra at 610; Goza v. Commissioner,
supra at 181-182. This standard requires the Court to decide
whether respondent’s determination was arbitrary, capricious, or
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without sound basis in fact or law. Woodral v. Commissioner, 112
T.C. 19, 23 (1999); Keller v. Commissioner, T.C. Memo. 2006-166;
Fowler v. Commissioner, T.C. Memo. 2004-163.
Petitioner did not propose any collection alternatives to
the Appeals officer, did not provide requested documentation to
him, and failed to state in her Form 12153 why she did not agree
with the notice of Federal tax lien. The sole issue that
petitioner raised was her entitlement to relief under section
6015(f).
II. Petitioner’s Request for Relief Under Section 6015(f)
Generally, married taxpayers may elect to file a joint
Federal income tax return. Sec. 6013(a). Each spouse filing a
joint return is jointly and severally liable for the accuracy of
the return and the entire tax due for that year. Sec.
6013(d)(3). A spouse who has made a joint return may, however,
seek relief from joint and several liability by following
procedures established in section 6015. Sec. 6015(a).
In cases of underpayment, section 6015(f) applies.4 Section
6015(f) provides, in part, that a taxpayer may be relieved from
joint and several liability if it is determined that, taking into
account all the facts and circumstances, it is inequitable to
4
Sec. 6015(b) and (c) applies only when there is an
understatement of tax or a deficiency in tax. See Hopkins v.
Commissioner, 121 T.C. 73, 88 (2003). Because there is no
understatement of tax or deficiency here, these subsections do
not apply.
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hold the taxpayer liable for the unpaid tax and relief is not
available under section 6015(b) or (c).
A taxpayer generally may petition this Court for review of
the Commissioner’s determination denying relief under section
6015(f). Sec. 6015(e)(1)(A). To prevail, the taxpayer must
prove that the Commissioner’s denial of relief under section
6015(f) was an abuse of discretion. Fernandez v. Commissioner,
114 T.C. 324, 332 (2000); Butler v. Commissioner, 114 T.C. 276,
287-292 (2000). Petitioner bears the burden of proving that
respondent’s denial of equitable relief under section 6015(f) was
an abuse of discretion. See Rule 142(a); Alt v. Commissioner,
119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir.
2004). Petitioner must demonstrate that respondent exercised his
discretion arbitrarily, capriciously, or without sound basis in
fact. See Jonson v. Commissioner, 118 T.C. 106, 125 (2002),
affd. 353 F.3d 1181 (10th Cir. 2003).
Respondent argues that in determining whether petitioner is
entitled to relief under section 6015(f), the Court should
consider only respondent’s administrative record with respect to
petitioner’s taxable years at issue.5 We generally consider only
5
After trial, the parties submitted a supplemental
stipulation of facts, with attached exhibits, including copies of
police reports. Respondent reserved objections to the additional
exhibits, on the grounds that the information was not presented
to respondent’s Appeals officer and was not part of the
administrative record. We conclude that petitioner raised the
(continued...)
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arguments, issues, and other matters that were raised at the
administrative hearing or otherwise brought to the attention of
the Office of Appeals. Magana v. Commissioner, 118 T.C. 488,
493-494 (2002); sec. 301.6320-1(f)(2), Q&A-F5, Proced. & Admin.
Regs. As stated supra note 5, petitioner raised at the
administrative hearing the same issues and arguments supported by
the exhibits submitted after trial. We do not further address
respondent’s argument that our review is limited to the
administrative record.
A. Eligibility for Equitable Relief
As directed by section 6015(f), the Commissioner has
prescribed guidelines for determining whether a spouse qualifies
for relief under subsection (f). The applicable provisions are
found in Rev. Proc. 2003-61, 2003-2 C.B. 296, modifying Rev.
Proc. 2000-15, 2000-1 C.B. 447. The requesting spouse must
satisfy seven conditions (threshold conditions) before the
Commissioner will consider a request for relief under section
6015(f). Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at 297. The
5
(...continued)
issue of relief under sec. 6015 at the administrative hearing,
and more specifically, she discussed the police reports with
regard to her sec. 6015 claim for relief with the Appeals officer
and informed him of the reasons she did not pay the tax
liabilities for the years in issue. See Magana v. Commissioner,
118 T.C. 488, 493-494 (2002). On the basis of the issues
petitioner raised in her administrative hearing, respondent’s
objections are overruled, and we consider the additional exhibits
in our review of respondent’s determination.
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threshold conditions of this section are stated in the
conjunctive, and each condition must be satisfied for a taxpayer
to be eligible to submit a request for equitable relief under
section 6015(f). Id.
Respondent does not dispute that petitioner satisfies the
first six threshold conditions. The seventh threshold condition
requires that the tax liability from which the requesting spouse
seeks relief must be attributable to an item of income of the
nonrequesting spouse, unless one of four stated exceptions
applies. Rev. Proc. 2003-61, sec. 4.01(7). A portion of the
liability for each of the years at issue is attributable to
petitioner. Because none of the exceptions applies, petitioner
is not entitled to relief with respect to the portion of each
liability that is attributable to her income.
Respondent agrees that, to the extent that petitioner is
seeking innocent spouse relief only for the portions of the
liabilities attributable to Mr. Hopkins, she meets the seven
threshold conditions. We accept respondent’s concession that
petitioner has met the seven threshold requirements and therefore
consider whether she is entitled to relief as to Mr. Hopkins’s
portion of each liability.
B. Circumstances Under Which the Commissioner Ordinarily
Will Grant Relief
Rev. Proc. 2003-61, sec. 4.02(1), 2003-2 C.B. at 298,
provides that equitable relief will ordinarily be granted as to
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unpaid liabilities if, in addition to the seven threshold
conditions, each of the following conditions is met: (1) The
requesting spouse is no longer married to, is legally separated
from, or has not been a member of the same household as the
nonrequesting spouse at any time during the 12-month period
ending on the date of the request for relief; (2) it was
reasonable for the requesting spouse to believe that the
nonrequesting spouse would pay the tax liability; and (3) the
requesting spouse will suffer economic hardship if relief is not
granted.
Although petitioner has been physically separated from Mr.
Hopkins for more than 1 year, at the time the returns were filed
petitioner knew that the liabilities were not paid. Petitioner
acknowledged at trial that she did not ask Mr. Hopkins whether he
had made any payments on the amounts reported as due and owing.
She assumed that if Mr. Hopkins had not paid some or all of the
tax liabilities, then any amounts owed would be paid from either
the balance of the proceeds from foreclosure on their home or
from a disbursement from Mr. Hopkins’s section 401(k) account.
Petitioner did not offer any evidence demonstrating that it would
have been reasonable for her to believe that Mr. Hopkins paid the
reported tax liabilities for the years at issue.
Moreover, petitioner has failed to prove she would be unable
to pay her reasonable basic living expenses if relief were
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denied. See sec. 301.6343-1(b)(4)(i), Proced. & Admin. Regs.
Petitioner did not provide the requested Form 433-A to the
Appeals officer, but at trial she provided a monthly financial
statement that she had prepared herself. Her financial statement
reflects that after paying all of her expenses, she would have
money left over at the end of the month. We therefore conclude
that petitioner does not qualify for relief under Rev. Proc.
2003-61, sec. 4.02.
C. Factors for Determining Whether To Grant Equitable
Relief
Where the requesting spouse satisfies the seven threshold
conditions set forth in Rev. Proc. 2003-61, sec. 4.01, but does
not qualify for relief under Rev. Proc. 2003-61, sec. 4.02, he or
she may still be granted relief if, upon taking into account all
the facts and circumstances, it would be inequitable to hold the
requesting spouse liable for all or part of the unpaid
deficiency. Rev. Proc. 2003-61, sec. 4.03, 2003-2 C.B. at 298.
Rev. Proc. 2003-61, sec. 4.03(2) sets forth a nonexclusive list
of 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 liability. No single factor will determine whether
equitable relief will be granted in any particular case, and the
Commissioner will consider and weigh all relevant factors,
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regardless of whether the factor is listed in Rev. Proc. 2003-61,
sec. 4.03.
1. Marital status. This factor weighs in favor of relief
if the requesting spouse and the nonrequesting spouse are
divorced, legally separated, or living apart. Petitioner and Mr.
Hopkins are married but have lived separately since December
1996. This factor weighs in favor of granting relief.
2. Economic hardship. A taxpayer might experience
economic hardship if he or she is unable to pay basic reasonable
living expenses. Sec. 301.6343-1(b)(4)(i), Proced. & Admin.
Regs. It is the taxpayer’s burden to show both that the expenses
qualify and that the expenses are reasonable. Monsour v.
Commissioner, T.C. Memo. 2004-190. Petitioner has provided no
evidence that she will be unable to pay basic living expenses if
she is held liable for the deficiency. This factor weighs
against granting petitioner relief.
3. Knowledge or reason to know. In a situation where a
liability has not been paid and the requesting spouse did not
know or have reason to know that the nonrequesting spouse would
not pay the liability, this factor would weigh in favor of
granting relief. Rev. Proc. 2003-61, sec. 4.03(2)(a)(iii). The
liabilities reported on the returns for tax years 1995 and 1996
resulted from both petitioner’s and Mr. Hopkins’s incomes. At
the time the returns were filed, petitioner knew that they could
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not pay the amounts due. Thus, we find that petitioner knew or
had reason to know that the reported liabilities would be unpaid
at the time the returns were filed. This factor weighs against
granting petitioner relief.
4. Nonrequesting spouse’s legal obligation. Mr. Hopkins
did not have a legal obligation pursuant to a divorce decree or
agreement. This factor is neutral.
5. Significant benefit. A significant benefit is a
benefit in excess of normal support. Sec. 1.6015-2(d), Income
Tax Regs. It is unclear how much petitioner benefited from the
unpaid liabilities, but the facts and circumstances suggest that
petitioner did not receive any significant benefit. This factor
is neutral.
6. Compliance with income tax laws. The question is
whether the taxpayer has made a good faith effort to comply with
tax laws in tax years after the years for which relief is
requested. Respondent reviewed petitioner’s account and
determined that petitioner was in compliance for tax years 1997
through 2005. This factor weighs in favor of granting relief.
7. Abuse or poor mental or physical health. In addition
to the foregoing factors, Rev. Proc. 2003-61, sec. 4.03(2)(b)
lists factors that, if present, will weigh in favor of equitable
relief, but, if not present, will not weigh against relief. The
factors are: (1) Whether the nonrequesting spouse abused the
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requesting spouse, and (2) whether the requesting spouse was in
poor mental or physical health. A history of abuse by the
nonrequesting spouse may mitigate the negative effect of a
requesting spouse’s knowledge or reason to know. Rev. Proc.
2003-61, sec. 4.03(2)(b)(i).
Petitioner alleges that Mr. Hopkins was verbally and
mentally abusive. Petitioner submitted copies of two police
reports, dated April 25 and November 14, 1995, which document
domestic disputes between petitioner and Mr. Hopkins. The
reports describe domestic arguments and a mutual altercation.
The Court is sympathetic to petitioner’s situation, but on the
record, we cannot conclude that respondent acted arbitrarily,
capriciously, or without sound basis in fact or law when
respondent determined that the alleged abuse did not mitigate the
negative effect of petitioner’s knowledge or reason to know. See
id. Additionally, petitioner did not allege any mental or
physical health problems. The absence of these factors will not
weigh against equitable relief. See id. sec. 4.03(2)(b). We
therefore agree with respondent’s determination that these
factors are neutral.
On the basis of our examination of the facts and
circumstances, including the factors set forth in Rev. Proc.
2003-61, sec. 4.03, we conclude that respondent did not abuse his
discretion in denying petitioner’s request for equitable relief
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under section 6015(f). Because petitioner has raised no other
issues, we conclude that respondent did not abuse his discretion
in sustaining the filing of the notice of Federal tax lien.
Decision will be entered
for respondent.