T.C. Memo. 2010-233
UNITED STATES TAX COURT
TIMOTHY S. SCHULTZ, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19224-07. Filed October 25, 2010.
Donald Wills Wallis, for petitioner.
Anne M. Craig, for respondent.
MEMORANDUM OPINION
NIMS, Judge: Petitioner seeks review of respondent’s
determination that he is not entitled to relief from joint and
several liability under section 6015 for his 1997, 1998, 1999,
2003, and 2004 income tax liabilities. Unless otherwise
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indicated, all section references are to the Internal Revenue
Code, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
On brief petitioner abandoned his argument that respondent
erred in denying him relief under the provisions of section
6015(b) and (c). The sole issue remaining for decision is
whether petitioner is entitled to relief under section 6015(f).
Background
This case was submitted fully stipulated pursuant to Rule
122. The stipulations of the parties, with accompanying
exhibits, are incorporated herein by this reference. Petitioner
resided in Florida at the time his petition was filed, and he was
married to Susan Belle Schultz (Susan or former spouse) in 1987.
During the years in issue petitioner worked in the construction
industry. Susan worked as a cardiology technician in 1997 and as
a medical transcriber during 2003 and 2004.
Throughout their marriage Susan controlled family finances
and forced petitioner to give her his paychecks, denied him
access to their bank account, and was responsible for paying
their expenses. Susan kept their mail from petitioner and
allowed him to see their Federal tax returns (which were prepared
by her mother) only when she presented them to him for his
signature.
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Because of Susan’s dominance over petitioner, he was largely
unaware of their financial situation. He did not know that Susan
had not timely filed their joint returns for 1997, 1998, 1999,
and 2003; she filed the returns for those years (and for 2004)
during the first 2 months of 2005.1 Until an Internal Revenue
Service agent visited their home in the spring of 2005,
petitioner was also unaware that Susan had not fully paid their
tax liabilities. Whenever petitioner attempted to find out more
about the couple’s financial situation, Susan would verbally or
physically attack him.
Susan often abused petitioner during the course of their
marriage, and he was injured on several occasions necessitating
notifying the police. One altercation resulted in Susan’s
arrest. Susan moved out of the family home during September
2005, and petitioner subsequently obtained a personal protection
order against her. Susan was served with divorce papers on
October 19, 2005.
On July 19, 2006, petitioner filed a Form 8857, Request for
Innocent Spouse Relief (And Separation of Liability and Equitable
Relief), seeking relief under section 6015(b), (c), and (f) from
1
The 2003 return was not signed by either spouse.
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joint and several liability for his 1997, 1998, 1999, 2003, and
2004 tax years.2 At that time petitioner’s divorce from Susan
had not been finalized.
On May 29, 2007, respondent issued a notice of determination
denying petitioner relief under section 6015. On August 27,
2007, petitioner petitioned this Court seeking review of
respondent’s determination to deny him relief.
Discussion
In general, a spouse who files a joint Federal income tax
return is jointly and severally liable for the entire income tax
liability. Sec. 6013(d)(3); sec. 1.6013-4(b), Income Tax Regs.
A spouse may be relieved from joint and several liability
under section 6015(f) if, taking into account all the facts and
circumstances, it would be inequitable to hold him liable for any
unpaid tax or deficiency. The Commissioner has published revenue
procedures listing the factors normally considered in determining
whether section 6015(f) relief should be granted. See Rev. Proc.
2003-61, 2003-2 C.B. 296, superseding Rev. Proc. 2000-15, 2000-1
C.B. 447.
This Court has jurisdiction to conduct a de novo review of
the Commissioner’s denial of section 6015(f) relief. See sec.
6015(e); Porter v. Commissioner, 132 T.C. 203 (2009).
2
The liabilities in question (apart from that for 2003, a
year for which no valid return was filed) are not deficiencies in
tax but amounts reported on the returns and unpaid.
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A. Threshold Conditions for Granting Relief
To be eligible for section 6015(f) relief, the requesting
spouse must satisfy the following threshold conditions: (i) He
filed a joint return for the taxable year for which he seeks
relief; (ii) relief is not available to him under section 6015(b)
or (c); (iii) no assets were transferred between the spouses as
part of a fraudulent scheme by the spouses; (iv) the
nonrequesting spouse did not transfer disqualified assets to him;
(v) he did not file or fail to file the returns with fraudulent
intent; and (vi) absent enumerated exceptions, the income tax
liability from which he seeks relief is attributable to an item
of the nonrequesting spouse. Rev. Proc. 2003-61, sec. 4.01,
2003-2 C.B. at 297-298.
Petitioner is ineligible for relief from the 2003 tax
liability because he did not file a valid joint return for that
year. See Raymond v. Commissioner, 119 T.C. 191, 195-197 (2002).
For 2003 the return submitted to respondent was not signed by him
or his former spouse. See Olpin v. Commissioner, 270 F.3d 1297,
1300 (10th Cir. 2001), affg. T.C. Memo. 1999-426.
Likewise, unless an exception applies, petitioner is
ineligible for relief from most of his 1997, 1998, 1999, and 2004
tax liabilities because he earned most of the couple’s income
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reported for those years. The record reveals that petitioner’s
former spouse was responsible for $31,529.90 of the couple’s
$207,684 of income reported for those years.
Petitioner contends that he is eligible for relief from all
the tax liabilities for those years because he satisfies two of
the enumerated exceptions to the threshold condition pertaining
to attribution. First, he claims that Susan misappropriated
funds intended for payment of their tax liabilities. See Rev.
Proc. 2003-61, sec. 4.01(7)(c), 2003-2 C.B. at 297. Petitioner
contends that Susan used the money to pay off her individual
debts. Considering the fact that he has not identified when, in
what amount, or from what source any funds were earmarked for
payment of tax and that Susan denied him access to their
financial statements and mail, we find his claim to be nothing
more than speculation.
Second, petitioner claims that he signed the returns with
“no questions asked” because of the abuse he suffered from Susan.
If the requesting spouse establishes that he was the victim of
abuse before the return was signed and that he consequently did
not challenge the treatment of any items on the return for fear
of retaliation, the Internal Revenue Service will consider
granting equitable relief even though the underpayment is
attributable to an item of the requesting spouse. Rev. Proc.
2003-61, sec. 4.01(7)(d), 2003-2 C.B. at 298. While petitioner
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did suffer verbal and physical abuse at the hands of his former
spouse, he does not claim that he would have challenged the
treatment of any items on the returns. In fact, petitioner has
no grounds to challenge the treatment of the income attributed to
him because the Forms W-2, Wage and Tax Statement, attached to
the returns show that he earned the income from his construction
industry employment.
Accordingly, we find that petitioner has met the threshold
criteria for relief only as to the taxes attributable to the
following amounts of income: $7,423.40 in 1997, $717.50 in 1998,
$1,466 in 1999, and $21,923 in 2004.
B. Circumstances Under Which Relief Is Ordinarily Granted
Where the threshold conditions have been met, the
Commissioner will ordinarily grant relief from an underpayment of
tax if the requesting spouse meets the requirements set forth
under Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at 298. To
qualify for relief under Rev. Proc. 2003-61, sec. 4.02, the
requesting spouse must as of the date of the request for relief:
(1) No longer be married to, be legally separated from, or not
have 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) have had no knowledge or reason to
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know when he signed the return that the nonrequesting spouse
would not pay the tax liability; and (3) suffer economic hardship
if relief is not granted.
When petitioner filed his request for relief on July 19,
2006, he was still married to and was not legally separated from
his former spouse. The couple had also been members of the same
household in the preceding 12 months because petitioner did not
move out of the marital residence until September 2005.
A requesting spouse suffers economic hardship if paying the
tax liabilities would prevent him from paying reasonable basic
living expenses. Sec. 301.6343-1(b)(4)(i), Proced. & Admin.
Regs.; Rev. Proc. 2003-61, sec. 4.02(1)(c), 4.03(2)(a)(ii),
2003-2 C.B. at 298. Petitioner has not provided any information
as to his monthly income or expenses. Petitioner has thus failed
to establish that denial of section 6015(f) relief would cause
him economic hardship.
Accordingly, petitioner is generally not entitled to relief
under criteria set forth in Rev. Proc. 2003-61, sec. 4.02.
C. Rev. Proc. 2003-61, Sec. 4.03 Factors
Where a requesting spouse fails to qualify for relief under
Rev. Proc. 2003-61, sec. 4.02, a determination to grant relief
may nevertheless be made under the criteria set forth in Rev.
Proc. 2003-61, sec. 4.03, 2003-2 C.B. at 298-299. Rev. Proc.
2003-61, sec. 4.03, provides a nonexclusive list of factors the
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IRS will consider in making that determination: (1) Marital
status; (2) economic hardship; (3) knowledge or reason to know;
(4) nonrequesting spouse’s legal obligation; (5) significant
benefit; (6) good-faith effort to comply with tax laws; (7)
spousal abuse; and (8) mental or physical health. No single
factor is determinative, and all factors are to be considered and
weighed appropriately. See Haigh v. Commissioner, T.C. Memo.
2009-140.
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 requesting spouse is
divorced or separated (whether legally separated or living apart)
from the nonrequesting spouse.
The marital status factor favors relief because petitioner
and his former spouse began living apart approximately 10 months
before petitioner filed his request for relief.
2. Economic Hardship
As previously discussed, petitioner has not demonstrated
that he would suffer economic hardship if denied relief. This
factor therefore weighs against relief.
3. Knowledge or Reason To Know
When petitioner signed the returns, he did not know and had
no reason to know that his former spouse would not pay their
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income tax liabilities because he did not discover the nonpayment
of the liabilities until the spring of 2005. This factor thus
favors relief.
4. Nonrequesting Spouse’s Legal Obligation
This factor is neutral because there is no evidence in the
record that petitioner’s former spouse had a legal obligation to
pay their outstanding income tax liabilities pursuant to a
divorce decree or an agreement. See Rev. Proc. 2003-61, sec.
4.03(2)(a)(iv), 2003-2 C.B. at 298.
5. Significant Benefit
This factor favors relief because there is no evidence that
petitioner derived any benefit beyond normal support from the
nonpayment of the income tax liabilities. See Magee v.
Commissioner, T.C. Memo. 2005-263; Rev. Proc. 2003-61, sec.
4.03(2)(a)(v), 2003-2 C.B. at 299.
6. Good-Faith Effort To Comply With Income Tax Laws
Petitioner has not made a good-faith effort to comply with
income tax laws following his 1997, 1998, 1999, and 2004 taxable
years in that he did not file a valid return for 2005. See Rev.
Proc. 2003-61, sec. 4.03(2)(a)(vi), 2003-2 C.B. at 299.
Petitioner claims that he was not required to file a return
for 2005 because “he has earned no income of any type since the
years at issue” on account of the injuries caused by his former
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spouse’s abuse. We do not find petitioner’s claim credible
because the record reflects that petitioner was employed by the
Hamilton Hotel in 2005.
This factor thus weighs against relief.
7. Spousal Abuse
Petitioner was verbally and physically abused by his former
spouse throughout their marriage. This factor favors relief.
8. Mental or Physical Health
Under Rev. Proc. 2003-61, sec. 4.03(2)(b)(ii), 2003-2 C.B.
at 299, consideration is given to whether the requesting spouse
was in poor mental or physical health on the date he signed the
return or at the time relief was requested.
Petitioner claims that he is permanently disabled (mentally
and physically) as a result of the physical abuse by his former
spouse. While petitioner did suffer some physical injury, the
record does not confirm petitioner’s claim that the injury is
permanent. Moreover, petitioner has not explained how the injury
impaired his ability to meet his Federal tax obligations. This
factor is therefore neutral. See Fox v. Commissioner, T.C. Memo.
2006-22 (mental or physical health factor was neutral where the
Court already found the abuse factor favored relief and where the
requesting spouse failed to elaborate on her claim that she
suffered from mental abuse).
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D. Conclusion
Of the factors listed in Rev. Proc. 2003-61, sec. 4.03, four
favor relief (marital status, lack of knowledge or reason to
know, lack of significant benefit, and spousal abuse), two weigh
against relief (lack of economic hardship and lack of good-faith
effort to comply with tax laws), and two are neutral
(nonrequesting spouse’s legal obligation and mental or physical
health). After considering and weighing all the factors, we find
it would be inequitable to hold petitioner liable for the
portions of his 1997, 1998, 1999, and 2004 tax liabilities which
were attributable to income earned by his former spouse.
To reflect the foregoing,
Decision will be entered
under Rule 155.