T.C. Summary Opinion 2010-93
UNITED STATES TAX COURT
PATRICIA A. NICOLETTI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14384-05S. Filed July 14, 2010.
Patricia A. Nicoletti, pro se.
Steven W. LaBounty, for respondent.
CARLUZZO, Special Trial Judge: This section 6015(e)1 case
was heard pursuant to the provisions of section 7463. 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.
1
Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended, in effect for the
relevant period.
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In a final notice of determination dated June 9, 2005,
respondent denied petitioner’s claim for section 6015 relief with
respect to the joint and several liability arising from the 1996
and 2001 joint Federal income tax returns she filed with Michael
Nicoletti (her former spouse). Because the liability for each
year results from an underpayment of the tax shown on the joint
return, she does not qualify for relief under section 6015(b) or
(c) for either year. That being so, we consider her entitlement
to equitable relief under section 6015(f).
Background
Some of the facts have been stipulated and are so found.
At the time the petition was filed, petitioner resided in
Missouri.
Petitioner and her former spouse were married in March 1985.
They separated in January 2003 and were divorced in April 2004
pursuant to a “Judgment of Dissolution of Marriage” (the
judgment). Unpaid Federal income tax liabilities for various
years are noted in the judgment, but responsibility for the
payment of those liabilities is not addressed. As relevant here
and among other things, the judgment obligated petitioner and her
former spouse to sell the marital residence and divide equally
the net proceeds from the sale.
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Although both were obligated to do so, neither petitioner
nor her former spouse filed a Federal income tax return for 1988,
1989, 1990, 1991, 1992, or 1993. According to petitioner, during
the course of her marriage she routinely provided her tax
information to her former spouse expecting that he would prepare
and file a Federal income tax return for each of those years.
She never asked him, however, whether any of the returns had, in
fact, been filed. Ultimately and in accordance with an agreement
or agreements with respondent, income tax assessments were made
against petitioner and her former spouse for each of those years.
Among other of her liabilities, unpaid liabilities resulting from
those assessments were discharged on February 10, 2004, in a
bankruptcy proceeding she initiated on October 31, 2003. Several
months after the discharge, on July 7, 2004, the marital
residence was sold. Petitioner’s share of the net proceeds
totaled $46,588.24.
The 2001 joint Federal income tax return of petitioner and
her former spouse was filed on April 15, 2002. That return shows
an income tax liability of $5,718 and an estimated tax penalty of
$74. Taking into account withholding credits, the return shows
$2,506 of tax due, $1,200 of which was paid with the return.
The 1996 joint Federal income tax return of petitioner and
her former spouse was filed on April 15, 2003, several months
before petitioner initiated the above-referenced bankruptcy
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proceeding. That return shows a $3,068 income tax liability and
a $79 estimated tax penalty. Taking into account withholding
credits, the return shows $1,727 of tax due, none of which was
paid with the return.
Petitioner submitted to respondent a Form 8857, Request for
Innocent Spouse Relief (request for relief), on March 29, 2004,
and a Form 12510, Questionnaire for Requesting Spouse
(questionnaire), on May 14, 2004. In those documents petitioner
describes her financial situation and strongly suggests that it
would be a hardship if she were held responsible for the
outstanding tax liabilities for 1996 and 2001. On her
questionnaire she noted that it was her belief that her former
spouse would pay those liabilities.
In the final notice of determination respondent denied
petitioner’s request for relief on the ground that she failed to
establish a reasonable belief that her former spouse would pay
the unpaid tax liabilities.
Discussion
In general, married taxpayers may elect to file a joint
Federal income tax return. Sec. 6013(a). After making the
election for a year, each spouse is jointly and severally liable
for the entire Federal income tax liability assessed for that
year, whether as reported on the joint return or subsequently
determined to be due. Sec. 6013(d)(3); see sec. 1.6013-4(b),
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Income Tax Regs. Subject to various conditions and in a variety
of ways set forth in section 6015, an individual who has made a
joint return with his or her spouse for a year may elect to seek
relief from the joint and several liability arising from that
joint return.
A taxpayer who does not qualify for relief under section
6015(b) or (c), as is the situation here, may be relieved from
joint and several liability pursuant to section 6015(f) if,
taking into account all the facts and circumstances, it would be
inequitable to hold the taxpayer liable for any unpaid tax or
deficiency.
We review de novo petitioner’s entitlement to relief under
section 6015(f). See Porter v. Commissioner, 132 T.C. 203
(2009).
The Commissioner has issued revenue procedures listing
factors normally considered in determining whether relief should
be granted under section 6015(f). Rev. Proc. 2003-61, 2003-2
C.B. 296, modifying and superseding Rev. Proc. 2000-15, 2000-1
C.B. 447.2
Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at 297, sets
forth threshold conditions that individuals seeking relief under
2
The guidelines set forth in Rev. Proc. 2003-61, 2003-2 C.B.
296, are effective for requests for relief filed, as in this
case, on or after Nov. 1, 2003. Id. sec. 7, 2003-2 C.B. at 299.
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section 6015(f) must satisfy. Respondent concedes that
petitioner satisfies the threshold conditions.
If the requesting spouse satisfies the threshold
requirements of Rev. Proc. 2003-61, sec. 4.01, then Rev. Proc.
2003-61, sec. 4.02, 2003-2 C.B. at 298, sets forth circumstances
in which relief will ordinarily be granted under section 6015(f)
with respect to an underpayment of a properly reported liability.
To qualify for relief under Rev. Proc. 2003-61, sec.
4.02(1), 2003-2 C.B. at 298, the spouse seeking relief must: (1)
No longer be married to, be legally separated from, or not have
been a member of the same household of the other spouse at any
time during the 12-month period ending on the date of the request
for relief; (2) have had no knowledge or reason to know when the
spouse seeking relief signed the return that the other spouse
would not pay the tax liability; and (3) suffer economic hardship
if relief is not granted. The parties dispute whether: (1)
Petitioner had knowledge or reason to know that her former spouse
would not pay the tax liabilities; and (2) whether she would
suffer economic hardship if her request for relief were not
granted.
To satisfy the second requirement, the requesting spouse
must establish that: (1) When the return was signed, the
requesting spouse had no knowledge or reason to know that the tax
reported on the return would not be paid; and (2) it was
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reasonable for the requesting spouse to believe that the
nonrequesting spouse would pay the tax shown due. Morello v.
Commissioner, T.C. Memo. 2004-181; Ogonoski v. Commissioner, T.C.
Memo. 2004-52; Collier v. Commissioner, T.C. Memo. 2002-144.
According to petitioner, she did not know, or have reason to
know that the unpaid tax shown to be due on each return would not
be paid by her former spouse. She argues that respondent erred
by concluding otherwise. With respect to 1996, petitioner’s
cursory trial testimony that she “just thought he was paying it”
without providing the basis for her “thinking” tells us little
about the reasonableness of her expectation. For 2001 petitioner
points out that one-half of the amount of tax shown due on the
return was paid by her former spouse at the time the return was
filed. She reasoned that “if [her former spouse] wasn’t going to
pay * * * [the entire amount shown to be due on the return], he
wouldn’t have paid any of it.” Although no doubt apparent to
her, logic on the point has been lost on us.
According to respondent, at the time petitioner signed each
return, she knew, or should have known that the tax shown due on
each return would not be paid by her former spouse. Respondent
supports this position by pointing out that at the time she
signed the returns: (1) Petitioner and her former spouse jointly
owed Federal income taxes for 1988, 1989, 1990, 1991, 1992, 1993,
and 1994; and (2) petitioner was aware that her former spouse
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routinely did not satisfy his Federal income tax obligations with
respect to income earned from his business.
The record demonstrates that at the time petitioner signed
the 1996 and 2001 returns she was aware of the outstanding
Federal income tax liabilities for the above-referenced set of
years. She was likewise aware that her former spouse was
routinely and repeatedly derelict in satisfying his Federal
income tax obligations. Furthermore, as she noted in the
questionnaire, at the time she signed the returns financial
problems made it difficult to pay monthly expenses. As we view
the matter, if she was not aware that the unpaid liabilities
shown on the 1996 and 2001 returns would not be paid by her
former spouse, she surely should have been. It follows that
petitioner is not entitled to relief under Rev. Proc. 2003-61,
sec. 4.02.
If, as here, a spouse fails to qualify under Rev. Proc.
2003-61, sec. 4.02, then relief may be granted under Rev. Proc.
2003-61, sec. 4.03, 2003-2 C.B. at 298. A nonexhaustive list of
factors routinely considered when determining whether to grant
equitable relief under section 6015(f) is contained in Rev. Proc.
2003-61, sec. 4.03. Those factors are: (1) Marital status; (2)
economic hardship; (3) whether the spouse seeking relief knew or
had reason to know that the other spouse would not pay the income
tax liability; (4) the other spouse’s legal obligation to pay the
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tax liability; (5) whether the spouse seeking relief obtained a
significant benefit from the nonpayment of the tax liability; and
(6) whether the spouse seeking relief complied with Federal
income tax laws. Other factors that may be considered, but will
not weigh against relief if not present, are: (1) Whether the
nonrequesting spouse abused the requesting spouse; and (2)
whether the requesting spouse was in poor mental or physical
health at the time he or she signed the tax return or at the time
he or she requested relief. Id. sec. 4.03(2)(b), 2003-2 C.B. at
299.
No single factor is determinative; all factors are to be
considered and weighed appropriately, Haigh v. Commissioner, T.C.
Memo. 2009-140, and we do so in the following paragraphs.
1. Marital Status
Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(i), 2003-2 C.B. at
298, consideration is given to whether the spouse seeking relief
is separated or divorced from his or her spouse. Petitioner and
her former spouse separated in January 2003 and divorced in April
2004. Petitioner filed her claim for relief on March 29, 2004.
The marital status factor favors relief.
2. Economic Hardship
Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(ii), 2003-2 C.B.
at 298, consideration is given to whether the spouse seeking
relief would be unable to pay reasonable basic living expenses if
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relief is not granted. Butner v. Commissioner, T.C. Memo. 2007-
136.
As set forth in section 301.6343-1(b)(4), Proced. & Admin.
Regs., the following nonexclusive factors may be considered in
determining whether the spouse seeking relief can pay reasonable
basic living expenses: (1) The age, employment status and
history, ability to earn, and number of dependents of the spouse
seeking relief; (2) an amount reasonably necessary for food,
clothing, housing, medical expenses, transportation, current tax
payments, and expenses necessary to the production of income for
the spouse seeking relief; (3) the cost of living in the
geographic area of the spouse seeking relief; (4) the amount of
property available to satisfy the expenses of the spouse seeking
relief; (5) any extraordinary circumstances (e.g., special
education expenses, a medical catastrophe, or a natural
disaster); and (6) any other factor bearing on economic hardship.
The most recent financial information available as of the
date of trial shows that petitioner’s monthly income exceeds her
monthly expenses. Furthermore, the sale of the marital residence
netted her $46,588.24, a portion of which could be used to
satisfy her 1996 and 2001 income tax liabilities, and the
discharges granted in the above-referenced bankruptcy proceeding
eliminated many of her other financial obligations. Denying
petitioner’s request for relief from her 1996 and 2001 income tax
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liabilities will not intrude upon her ability to satisfy her
reasonable basic living expenses. This factor weighs against
relief.
3. Knowledge or Reason To Know
Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(iii), 2003-2 C.B.
at 298, consideration is given to whether the spouse seeking
relief knew or had reason to know that the other spouse would not
pay the liability. As previously discussed, petitioner has
failed to establish that at the times the 1996 and 2001 returns
were signed, she had a reasonable belief that the taxes would be
paid. This factor weighs against relief.
4. Legal Obligation of Other Spouse
Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(iv), 2003-2 C.B.
at 298, consideration is given to whether the other spouse has a
legal obligation to pay the outstanding income tax liability
pursuant to a divorce decree or an agreement. The judgment is
silent with regard to whether petitioner or her former spouse is
responsible for the 1996 and 2001 income tax liabilities.
Accordingly, this factor is neutral. See Washington v.
Commissioner, 120 T.C. 137, 148-149 (2003).
5. Significant Benefit
Under Rev. Proc. 2003-61, sec. 4.03(2)(a)(v), 2003-2 C.B. at
299, consideration is given to whether the spouse seeking relief
significantly benefited (beyond normal support) from the unpaid
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income tax liability. If so, the significant benefit factor
weighs against granting equitable relief. Petitioner received no
significant benefit from the unpaid tax, other than normal
support. Therefore, this factor weighs in favor of relief. See
Magee v. Commissioner, T.C. Memo. 2005-263 (lack of significant
benefit weighs in favor of relief under Rev. Proc. 2003-61,
supra); cf. Butner v. Commissioner, supra (lack of significant
benefit weighed in favor of relief under former section 6013(e)
notwithstanding that Rev. Proc. 2000-15, supra, states that it is
neutral).
6. Petitioner’s Compliance With Federal Income Tax Laws
In the tax years following the years to which the request
for relief relates petitioner was in compliance with her Federal
income tax obligations. See Rev. Proc. 2003-61, sec.
4.03(2)(a)(vi), 2003-2 C.B. at 299. This factor favors relief.
7. Abuse
Under Rev. Proc. 2003-61, sec. 4.03(2)(b)(i), consideration
is given to whether the nonrequesting spouse abused the
requesting spouse. The presence of abuse is a factor favoring
relief, and a history of abuse may mitigate the requesting
spouse’s knowledge or reason to know. Id. Abuse is not limited
to physical abuse and may include verbal and mental abuse.
Nihiser v. Commissioner, T.C. Memo. 2008-135.
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Petitioner’s evidence on this point consists of her
statement made on the questionnaire that she had been a victim of
“verbal abuse”. Without more information we are not persuaded
that the “verbal abuse” was the type of abuse referenced in Rev.
Proc. 2003-61, sec. 4.03(2)(b)(i). See Collier v. Commissioner,
T.C. Memo. 2002-144. This factor is neutral.
8. Mental or Physical Health
Petitioner has not alleged, nor does the record show, that
her mental or physical health was poor at the relevant times.
Therefore, this factor is neutral. See Rev. Proc. 2003-61, sec.
4.03(2)(b)(ii).
As noted, no factor is determinative, and here, as in other
section 6015(f) cases, some factors favor relief, some factors do
not, and others are neutral. Application of the knowledge and
hardship factors strongly suggests that petitioner’s request for
section 6015(f) relief should be denied; all relevant factors
considered together do not suggest otherwise. Petitioner has
failed to establish that it would be inequitable to hold her
liable for the unpaid portions of her 1996 and 2001 Federal
income tax liabilities. Respondent’s denial of her request for
such relief is sustained.
At trial petitioner requested that the Court, in lieu of
granting section 6015(f) relief, at least abate the interest that
has accrued and is accruing on the liabilities here under
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consideration. In closing we think it appropriate to briefly
comment on her request.
Ignoring any procedural defects with respect to the timing
of her request and the manner in which it was made, we note that
in cases such as this we are without jurisdiction to consider
it.3 To the extent she is entitled to any such relief, see, e.g.,
sec. 6404, that relief is beyond our reach.
To reflect the foregoing,
Decision will be entered
for respondent.
3
As we have noted in opinions too numerous to cite, the Tax
Court is a court of limited jurisdiction, and we acquire subject
matter jurisdiction only to the extent authorized by Congress.