T.C. Memo. 2010-165
UNITED STATES TAX COURT
PATRICIA DOWNS, Petitioner, AND
MICHAEL R. ALDRIDGE, Intervenor v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20833-06. Filed July 28, 2010.
Paul M. Kohlhoff, for petitioner.
Michael R. Aldridge, pro se.
Timothy S. Sinnott, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GOEKE, Judge: Petitioner seeks review of respondent’s
determination denying her relief from joint and several liability
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under section 6015(f)1 for taxable years 1992, 1993, 1994, 1995,
1996, and 1997. At trial respondent abandoned the determination
denying relief, but intervenor opposes relief. For the reasons
stated herein, we find petitioner is entitled to relief under
section 6015(f).
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulated facts are incorporated herein by this reference.
Petitioner resided in Indiana when her petition was filed, and
intervenor resided in Tennessee at the time his notice of
intervention was filed. The couple, divorced in 2003, share
joint custody of two children born of their marriage. Petitioner
also has a child from another marriage.
Petitioner studied music education at Tennessee State
University (TSU) but never studied business or accounting. She
left TSU after 1 year to work as a salesclerk and mail sorter.
Petitioner was employed by LensCrafters when she married
intervenor in April 1992 but quit before the birth of the
couple’s first child in November 1992. Petitioner remained
unemployed from 1993 through 1996. In 1997 she began working in
real estate.
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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Intervenor owned and operated a carwash business, Glo Pro,
before and during his marriage to petitioner. Although
petitioner assisted with Glo Pro occasionally, she had no formal
role or financial interest in the company’s operations.
Intervenor participated in a second business, Pro Oil Corp. (Pro
Oil), which began operating around 1996 and performed express oil
changes. Intervenor managed Pro Oil’s finances. Petitioner was
a 50-percent shareholder in Pro Oil, as was intervenor, and she
assisted with the company’s daily operations. She never received
a paycheck or a Form W-2, Wage and Tax Statement, from Pro Oil.
Intervenor stated that her interest in the company was conveyed
to another party during a corporate meeting. The details of this
conveyance are both unknown and unnecessary for our
determination. In 2004 intervenor sold Pro Oil for approximately
$400,000 and did not share the profits with petitioner despite
her efforts to recover a share of the proceeds.
It was the practice of petitioner and intervenor to have
their joint returns prepared by a professional tax preparer.
Petitioner also relied on a paid tax preparer before her marriage
with intervenor. Petitioner was frightened of intervenor, who
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angered easily.2 Intervenor verbally abused their children and
physically abused petitioner on at least one occasion. On August
6, 2003, the couple divorced.
On March 28, 1997, intervenor entered a guilty plea to one
count of willful failure to file an income tax return for the
year 1992 and began serving a 10-month prison sentence in
November 1997. As a condition of his sentence he was required to
file delinquent tax returns for years including 1992 to 1997.
Petitioner and intervenor filed joint Forms 1040, U.S. Individual
Income Tax Return, for tax years 1992, 1996, and 1997.
Signatures for these returns are not in dispute. A joint Form
1040X, Amended U.S. Individual Income Tax Return, for tax year
1993 and joint Forms 1040 for tax years 1994 and 1995 in the
names of petitioner and intervenor were also filed with
respondent. Whether petitioner signed her name to the returns
for these years remains in dispute. Intervenor and petitioner
submitted offers-in-compromise in 1998 and 1999 for years 1990 to
1997 and 1992 to 1997, respectively.3 Intervenor and petitioner
gave a power of attorney to a third party who prepared the first
2
Intervenor was convicted of and served time for
manslaughter before their marriage.
3
The reason for denial of these offers is not disclosed by
the record.
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offer-in-compromise for years 1990 through 1997. Intervenor
prepared the second offer for years 1992 to 1997, which
petitioner signed.4 Both offers were declined.
On March 25, 2002, petitioner received correspondence from
the Internal Revenue Service (IRS) indicating that her overpaid
tax on her 2001 return had been applied to an unpaid amount of
Federal tax for tax year 1993. On September 8 and 29, 2003,
petitioner received more correspondence indicating that her
overpaid tax on her 2002 return had been applied to an unpaid
amount of Federal tax for tax year 1993.
On November 3, 2003, petitioner filed a Form 8857, Request
for Innocent Spouse Relief, for years 1992 to 1997 on the basis
that she did not participate in a tax fraud carried out by
intervenor. Petitioner’s request was denied in a preliminary
determination on June 8, 2004. Respondent specified that
petitioner had failed to establish her claims of abuse and
economic hardship. Petitioner timely filed an appeal requesting
innocent spouse relief. Petitioner provided information
concerning economic hardship and the nature of intervenor’s
aggressive behavior.
On July 14, 2006, respondent issued a Notice of
Determination Concerning Your Request for Relief from Joint and
4
Petitioner submitted both offers jointly and notably did
not identify years for which she denied joint filings.
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Several Liability under Section 6015 (notice of determination)
for tax years 1992 through 1997. The accompanying Appeals Office
memorandum stated that the Appeals officer believed petitioner
had submitted joint returns for all years. The notice of
determination denied petitioner’s appeal for relief under section
6015 and listed the joint liabilities as follows:
Amount of Amount of Tax
Tax Period Relief Requested Remaining
1992 $93,232 $93,232
1993 17,894 17,894
1994 26,541 26,541
1995 33,163 33,163
1996 22,104 22,104
1997 24,674 24,674
These amounts do not include deficiencies. Therefore, section
6015(b) and (c) does not apply.
Petitioner timely filed a petition with this Court, and
intervenor timely filed a notice of intervention. A trial was
held on February 13, 2008, and a further trial was held on July
8, 2009. On March 13, 2009, between those two dates, a jury in
the U.S. District Court, Western District of Tennessee, returned
a guilty verdict against intervenor on one count of evasion of
payment of income tax for each of the tax years 1991 through
1997. Thus, on July 8, 2009, respondent reversed his earlier
position by conceding that petitioner qualifies for relief under
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section 6015(f) for years 1992 through 1997, including 1993 to
1995, if she satisfies the threshold requirement of having filed
joint returns.
OPINION
Except as otherwise provided in section 6015, petitioner
bears the burden of proof with respect to her entitlement of
relief under section 6015. See Rule 142(a); Alt v. Commissioner,
119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir.
2004).
Petitioner does not dispute the tax liabilities assessed by
respondent for the years in issue. Rather, she argues she is
entitled to relief under 6015(f). Respondent agrees that
petitioner is entitled to relief from the entire joint tax
liability under section 6015(f). However, as previously
mentioned, intervenor objects to granting petitioner section 6015
relief from liability.
A. Joint Return
A joint return must be filed in order for a taxpayer to be
granted equitable relief under section 6015(f). Raymond v.
Commissioner, 119 T.C. 191 (2002). Where a taxpayer has
consented to the filing of a joint return, that return may be
considered joint even if only one taxpayer signed the return.
Estate of Campbell v. Commissioner, 56 T.C. 1, 12-13 (1971).
Whether a husband and a wife intended to file a joint return is
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highly probative of whether the return qualifies as a joint
return. Stone v. Commissioner, 22 T.C. 893, 900-901 (1954). A
spouse’s intent is a question of fact. Estate of Campbell v.
Commissioner, supra at 12.
As a preliminary matter, we must determine whether
petitioner and intervenor intended to file jointly for tax years
1993, 1994, and 1995.
Petitioner testified that she signed returns with intervenor
only for years 1992, 1996, and 1997, but not for years 1993,
1994, or 1995. Intervenor testified petitioner signed joint
returns for all years, including 1993 to 1995. Although the
signatures appear identical, petitioner testified that intervenor
placed her signature on the returns for years 1993 to 1995. The
record does not establish that petitioner intended to file
jointly only for some years and not for others. We construe the
testimony of both parties, and the other evidence in the record,
as affirming that petitioner and intervenor intended to file
joint returns for all years at issue, including 1993, 1994, and
1995.
B. Relief Under Section 6015
In general, taxpayers filing a joint Federal income tax
return are each responsible for the accuracy of their return and
are jointly and severally liable for the entire tax liability due
for the year of the return. Sec. 6013(d)(3). In certain
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circumstances, however, a spouse may obtain relief from joint and
several liability by satisfying the requirements of section 6015.
Section 6015(e)(4) grants the nonelecting spouse
(intervenor) some participatory entitlement in an action to
determine the electing spouse’s (petitioner’s) right to relief
from joint and several liability pursuant to section 6015. Rule
325; Corson v. Commissioner, 114 T.C. 354, 364-365 (2000). By
exercising that right, intervenor became a party to this case.
Tipton v. Commissioner, 127 T.C. 214, 217 (2006). Therefore, in
the light of intervenor’s opposition to respondent’s grant of
innocent spouse relief to petitioner, we shall examine the
requirements of section 6015(f) to decide whether petitioner is
entitled to relief under subsection (f). See Wilson v.
Commissioner, T.C. Memo. 2007-127.
Section 6015(f) provides an individual relief from joint and
several liability if after taking into account all the facts and
circumstances it is inequitable to hold the individual liable for
any unpaid tax or deficiency. See Washington v. Commissioner,
120 T.C. 137, 147-152 (2003). Rev. Proc. 2003-61, 2003-2 C.B.
296, prescribes guidelines for determining whether an individual
qualifies for relief under section 6015(f). Rev. Proc. 2003-61,
sec. 4.01, 2003-2 C.B. at 297-298, sets forth seven threshold
conditions that the requesting spouse must satisfy in order to be
eligible to submit a request for equitable relief under section
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6015(f). If a requesting spouse satisfies the threshold
requirements of Rev. Proc. 2003-61, sec. 4.01, a taxpayer may be
entitled to a safe harbor whereby equitable relief under section
6015(f) will ordinarily be granted. Id. sec. 4.02, 2003-2 C.B.
at 298. Petitioner, however, does not meet the safe-harbor
requirement, and instead we shall apply the eight nonexclusive
factors set forth in Rev. Proc. 2003-61, sec. 4.03(2), 2003-2
C.B. at 298-299, that the Commissioner will consider in
determining whether, taking into account all the facts and
circumstances, relief under section 6015(f) should be granted.
These nonexclusive factors include whether: (1) The requesting
spouse is separated or divorced from the nonrequesting spouse;
(2) the requesting spouse will suffer economic hardship without
relief; (3) the requesting spouse did not know or have reason to
know that the nonrequesting spouse would not pay the liability;
(4) the nonrequesting spouse had a legal obligation to pay the
outstanding liability; (5) the requesting spouse received a
significant benefit from the item giving rise to the deficiency;
(6) the requesting spouse has made a good faith effort to comply
with income tax laws in subsequent years; (7) the requesting
spouse was abused by the nonrequesting spouse; and (8) the
requesting spouse was in poor mental or physical health when
signing the return or requesting relief. Id. Rev. Proc. 2003-
61, sec. 4.03(2), further provides that no single factor will be
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determinative, but that all relevant factors will be considered.
We will now consider these factors.
1. Marital Status
Petitioner and intervenor’s divorce was finalized August 6,
2003, before petitioner filed her Form 8857 on November 3, 2003.
This factor favors granting relief.
2. Knowledge or Reason To Know
Petitioner did not know nor did she have reason to know that
the tax would not be paid for the years at issue. Intervenor
consistently denied petitioner access to the details of his
business affairs and controlled the cashflow for the household
expenses. Petitioner relied on intervenor’s apparent success in
managing both Pro Oil’s business accounts and the family’s
finances when she believed his assurances that he would take care
of the financial matters. Consequently, petitioner’s lack of
knowledge as to intervenor’s failure to pay outstanding tax
liabilities was reasonable under the circumstances. Intervenor’s
testimony demonstrates he consistently made financial decisions
without petitioner’s knowledge and thus does not suggest that
petitioner should have known of his inability to pay. This
factor weighs in favor of granting relief.
3. Economic Hardship
Petitioner would suffer economic hardship if she were denied
equitable relief. Petitioner’s monthly income is within $1 of
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her monthly expenses. She earns $2,946 per month. She pays $446
per month for child support, $978 per month for rent, $600 per
month for food, $120 per month for her children’s lunch money,
and approximately $800 per month for miscellaneous expenses
relating to medical, automobile, and utility bills. Intervenor
has not addressed petitioner’s economic hardship, and we are
satisfied that, as respondent concedes, this factor weighs in
favor of granting relief.
4. Nonrequesting Spouse’s Legal Obligation
Petitioner and intervenor’s marital dissolution agreement
included language addressing prior income tax liabilities, but
the parties agreed to cross it out. Accordingly, this factor is
neutral.
5. Significant Benefit
There is no evidence that petitioner benefited beyond normal
support from the unpaid tax liabilities. This Court has stated
that “we consider the lack of significant benefit by the taxpayer
seeking relief from joint and several liability as a factor that
favors granting relief under section 6015(f).” Butner v.
Commissioner, T.C. Memo. 2007-136. Thus, we find this factor
weighs in favor of relief.
6. Good-Faith Effort To Comply With Federal Income Tax Laws
Petitioner asserts that she believed intervenor’s assurances
that he would take care of his tax troubles even during his
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incarceration in 1997. She submitted two offers-in-compromise
with intervenor and signed other delinquent joint returns in
compliance with conditions of his plea bargain in 1997.
Intervenor does not assert that petitioner was allowed any role
in managing the family’s finances or that she was complicit in
the failure to file or pay taxes for all years at issue. We find
this factor weighs in favor of relief.
7. Spousal Abuse
Petitioner alleged that intervenor was verbally abusive to
their children and that he had been violent with her on at least
one occasion. Petitioner presented records in support of her
claims of abuse, harassment, and stalking, but the reported
incidents occurred after the couple divorced. We find this
factor neutral.
8. Mental or Physical Health
There is no evidence in the record that petitioner suffered
any ailment such that she was in poor mental or physical health
at the time she signed the joint returns for the years at issue
or at the time she requested section 6015 relief. We find this
factor neutral.
C. Conclusion
On the basis of the above, we find that petitioner intended
to file joint returns with intervenor and thus satisfies the
threshold requirements. We also find that the factors weigh in
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favor of granting petitioner relief from joint liability under
section 6015(f) despite intervenor’s opposition. Accordingly, we
agree with respondent’s concession that petitioner is entitled to
equitable relief under section 6015(f) for the tax years at
issue.
To reflect the foregoing,
Decision will be entered for
petitioner.