T.C. Memo. 2013-78
UNITED STATES TAX COURT
RAQUEL L. WILLIAMSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16273-10. Filed March 13, 2013.
Mark A. Pridgeon, for petitioner.
Christina L. Cook, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
KERRIGAN, Judge: This proceeding was commenced under section 6015
for review of respondent’s determination that petitioner is not entitled to relief from
joint and several liability for 2003, 2004, 2005, 2006, and 2007 with respect
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[*2] to Federal income tax returns she filed with her former spouse. The issue for
consideration is whether petitioner is entitled to relief under section 6015(f).
Unless otherwise indicated, all section references are to the Internal Revenue
Code in effect at all relevant times, and all Rule references are to the Tax Court
Rules of Practice and Procedure. We round all monetary amounts to the nearest
dollar.
FINDINGS OF FACT
Some of the facts are stipulated and are so found. Petitioner resided in
Minnesota when the petition was filed.
Petitioner and Tyler Williamson were married in November 2003. On July 1,
2009, petitioner filed Form 8857, Request for Innocent Spouse Relief. On her Form
8857 petitioner represented that she had been married to and living apart from Mr.
Williamson since May 15, 2008. Petitioner and Mr. Williamson filed for divorce on
July 24, 2009.
During 2003 through 2007 petitioner held a position as a salaried child care
worker for Big Lake Public Schools. Petitioner still holds this job. Mr.
Williamson operated a business, Williamson Construction, Inc., through which he
offered services as an independent contractor completing framing work for
residential construction and building houses on speculation for sale to customers.
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[*3] Williamson Construction, Inc., is no longer in business, and Mr. Williamson
filed for bankruptcy on March 13, 2008. After filing for bankruptcy Mr. Williamson
began working for Knotty Pine Construction.
During the years in issue taxes were withheld on petitioner’s salary; however,
petitioner and Mr. Williamson did not make estimated tax payments with respect to
Mr. Williamson’s income. Petitioner and Mr. Williamson maintained a joint
personal checking account during their marriage. Petitioner also had signatory
authority and access to write checks on the checking account for Williamson
Construction, Inc. On occasion, petitioner ran errands for Mr. Williamson and
Williamson Construction, Inc. Petitioner also cosigned a construction loan for
Williamson Construction, Inc.
Mr. Williamson’s father invested approximately $50,000 into Williamson
Construction, Inc., which allowed the company to purchase several lots for the
purpose of building houses. Mr. Williamson’s father also conducted open houses,
acted as a realtor, and completed the closing on one of the properties for Williamson
Construction, Inc.
Petitioner’s father passed away in 2005. Petitioner’s sister, Michelle Witte,
was the personal representative of their father’s estate. Petitioner and Ms. Witte
were each given 50% of their father’s estate after expenses and claims against the
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[*4] estate were paid. In addition, $1,000 was given to petitioner’s brother, and
petitioner was given a Harley Davidson motorcycle. Ms. Witte purchased the
motorcycle from petitioner to help her with expenses.
Petitioner’s father’s estate consisted of a plot of land, including a house,
valued at approximately $500,000. Ms. Witte offered petitioner $250,000 for her
share of the property, but petitioner refused the offer. Ms. Witte and her husband
invested approximately $150,000 into their father’s house so they could repair the
property and sell it. Ms. Witte and her husband paid property taxes and devoted
many hours of labor to fixing the house up and trying to find tenants to rent the
property. Petitioner did not contribute to these efforts. Ms. Witte and her husband
sold the house in 2011 for $230,000 and after expenses, received approximately
$149,296 in cash. Ms. Witte and her husband kept the entire $149,296 as
repayment for repair costs to the house; petitioner did not receive any of the
proceeds.
In November and December 2008 petitioner and Mr. Williamson filed joint
Federal income tax returns for tax years 2003 through 2007. Petitioner and Mr.
Williamson accurately stated their income tax liability; however, they failed to pay
tax for 2003 through 2007. Petitioner and Mr. Williamson owe the following
amounts: $4,435 for 2003, $14,030 for 2004, $21,273 for 2005, $20,018 for 2006,
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[*5] and $8,624 for 2007. Petitioner filed her 2008 Federal income tax return on
January 11, 2010, using the married filing separately status. Petitioner filed her
2009, 2010, and 2011 Federal income tax returns on time and paid the tax liabilities
in full. Petitioner’s monthly income was $4,141 in 2012. According to the Internal
Revenue Service’s national standards, petitioner’s reasonable allowable monthly
expenses are $3,731. This leaves approximately $410 each month remaining.
OPINION
Generally, married taxpayers may elect to file a joint Federal income tax
return. Sec. 6013(a). After making this election, each spouse is jointly and
severally liable for the entire tax due for that taxable year. Sec. 6013(d)(3). A
requesting spouse may seek relief from joint and several liability under section
6015. Sec. 6015(a). If a requesting spouse is not eligible for relief under section
6015(b) or (c), a requesting spouse may be eligible for equitable relief under section
6015(f). Sec. 6015(f)(2); Olson v. Commissioner, T.C. Memo. 2009-294, slip op.
at 10-11.
Section 6015(f) permits relief from joint and several liability if it would be
inequitable to hold the individual liable for any unpaid tax or deficiency. Sec.
6015(f)(1). Since there is no understatement of tax for the years in issue,
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[*6] petitioner is not eligible for relief under section 6015(b) or (c). See
Washington v. Commissioner, 120 T.C. 137, 145-147 (2003). Under section
6015(f), the Secretary may grant equitable relief to a requesting spouse on the basis
of the facts and circumstances. Id. Petitioner bears the burden of proving that she is
entitled to equitable relief under section 6015(f). See Rule 142(a); Porter v.
Commissioner, 132 T.C. 203, 210 (2009).
This Court has jurisdiction to review respondent’s denial of petitioner’s
request for equitable relief under section 6015(f). See sec. 6015(e)(1). We apply a
de novo standard of review as well as a de novo scope of review. Porter v.
Commissioner, 132 T.C. at 210.
Pursuant to section 6015(f), the Commissioner has issued revenue
procedures to provide guidance for determining whether a taxpayer is entitled to
relief from joint and several liability. See Rev. Proc. 2003-61, 2003-2 C.B. 296,
modifying and superseding Rev. Proc. 2000-15, 2000-1 C.B. 447.1 Rev. Proc.
2003-61, supra, lists factors that the Commissioner should consider in deciding
1
On January 6, 2012, the Commissioner released Notice 2012-8, 2012-4
I.R.B. 309, concerning a proposed revenue procedure that, if finalized, would revise
the factors to be examined in determining a requesting spouse’s claim for equitable
relief. Among other changes, the proposed revenue procedure expands the effect of
a nonrequesting spouse’s abuse and/or financial control on a requesting spouse’s
entitlement to equitable relief. Id.
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[*7] whether to grant section 6015(f) relief, and the Court may consult these same
factors when reviewing denial of relief. See Washington v. Commissioner, 120 T.C.
at 147-152. The Court may consider these guidelines; however, we are not bound
by them in evaluating the facts and circumstances with regard to whether equitable
relief is appropriate. See Pullins v. Commissioner, 136 T.C. 432, 438-439 (2011).
Rev. Proc. 2003-61, supra, provides a three-step analysis to follow in
evaluating a request for relief. The first step includes seven of the following
threshold conditions to be met: (1) the requesting spouse filed a joint return for
the taxable year for which he or she seeks relief; (2) relief is not available to the
requesting spouse under section 6015(b) or (c); (3) the requesting spouse applies
for relief no later than two years after the Internal Revenue Service’s first
collection activity;2 (4) no assets were transferred between the spouses as part of a
fraudulent scheme by the spouses; (5) the nonrequesting spouse did not transfer
disqualified assets to the requesting spouse; (6) the requesting spouse did not file
or fail to file the return with fraudulent intent; and (7) absent certain enumerated
2
Notice 2012-8, sec 3.01, 2012-4 I.R.B. at 311, eliminates the two-year
deadline to request equitable relief and replaces it with the periods of limitations
provided by sec. 6052 (relating to collections) or sec. 6511 (relating to filing a claim
for credit or refund). Our analysis is unchanged by this revision given that
petitioner’s request was timely under any of these deadlines.
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[*8] exceptions, the tax liability from which the requesting spouse seeks relief is
attributable to an item of the nonrequesting spouse. Rev. Proc. 2003-61, sec. 4.01,
2003-2 C.B. at 297. Respondent concedes that petitioner has met the first six
threshold conditions; however, respondent contends that petitioner failed to show
the tax liability was solely attributable to Mr. Williamson. Respondent contends
that petitioner had underwithholding of wage income tax and self-employment tax
for Williamson Construction, Inc., of approximately $1,658 in 2005, $1,718 in
2006, and $1,519 in 2007. Petitioner was involved in her husband’s business and
wrote checks for the business. To the extent of this underwithholding, petitioner
does not meet the seventh threshold condition and we do not grant relief.
The second step is included in Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at
298. The second step provides three conditions that, if met, will ordinarily qualify
a requesting spouse for relief 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), the requesting spouse must: (1) no longer be married
to, be legally separated from, or not have been a member of the same household as
the other person 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 signing the
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[*9] returns that the other spouse would not pay the tax liability; and (3) suffer
economic hardship if relief is not granted.
Although petitioner and Mr. Williamson filed for divorce on July 24, 2009,
she did not provide a final copy of the divorce decree. On her Form 8857, petitioner
stated that she had been married to and living apart from Mr. Williamson since May
15, 2008. Petitioner also listed a separate address from the one listed on her and
Mr. Williamson’s previous tax returns. However, this alone is not sufficient
evidence to prove that petitioner was divorced, legally separated from, or no longer
living with Mr. Williamson for a period of 12 months or longer at the time she filed
for innocent spouse relief. See Tokarski v. Commissioner, 87 T.C. 74, 77 (1986)
(the Court is not required to accept a taxpayer’s unverified statements). Therefore
we are unable to determine whether petitioner has met the first condition.
When signing the Federal income tax returns in 2008, petitioner had reason
to know that Mr. Williamson would not pay the tax liabilities for tax years 2003
through 2007. Petitioner had full knowledge of Williamson Construction, Inc.’s
dire financial situation and that Mr. Williamson had filed for bankruptcy.
Petitioner and Mr. Williamson maintained a joint personal checking account
throughout their marriage, and she would periodically write checks from
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[*10] Williamson Construction, Inc., to herself in order to pay their living expenses.
Petitioner also cosigned a construction loan for the company. Petitioner was aware
that Mr. Williamson had borrowed approximately $50,000 from his father so that
Williamson Construction, Inc., could purchase land. Petitioner argues that she
believed Mr. Williamson’s father would help pay the tax liabilities; however,
petitioner did not provide any evidence to show that this was a possibility. This
Court has found that a requesting spouse’s knowledge of a couple’s financial
difficulties deprives the requesting spouse of reason to believe that his or her ex-
spouse will pay the tax liability. See, e.g., Pugsley v. Commissioner, T.C. Memo.
2010-255; Stolkin v. Commissioner, T.C. Memo. 2008-211; Gonce v.
Commissioner, T.C. Memo. 2007-328; Butner v. Commissioner, T.C. Memo. 2007-
136. Petitioner and Mr. Williamson’s financial difficulties and failure to timely file
their income tax returns because they “probably owed money and didn’t have it to
pay” should have put her on notice that Mr. Williamson would not pay the tax
liabilities.
Petitioner failed to show that denying section 6015(f) relief would cause her
financial hardship. A denial of section 6015(f) relief imposes an economic
hardship if it prevents the requesting spouse from being able to pay reasonable
basic living expenses. See Butner v. Commissioner, T.C. Memo. 2007-136.
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[*11] Reasonable basic living expenses are based on the taypayer’s circumstances,
including age, employment status, ability to earn, number of dependents, amount
reasonably necessary for monthly expenses, cost of living, property exempt from
levy available to pay the taxpayer’s expenses, extraordinary circumstances, and any
other facts the taxpayer raises. Sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.
Petitioner reported monthly income of $3,401 on Form 8857 in 2009 and $4,141 on
Form 433-A, Collection Information Statement for Wage Earners and Self-
Employed Individuals, on August 23, 2012. Petitioner’s reasonable allowable
monthly expenses are $3,731; therefore petitioner has approximately $410
remaining each month. We find that petitioner’s interest in her father’s estate is de
minimis.
Petitioner failed to show that she cannot pay her basic living expenses while
making periodic payments against the liabilities. See Pugsley v. Commissioner,
T.C. Memo. 2010-255 (citing Stolkin v. Commissioner, T.C. Memo. 2008-211).
When the requesting spouse satisfies the threshold conditions but fails to
satisfy the conditions in Rev. Proc. 2003-61, sec. 4.02, he or she may still be
eligible for equitable relief under section 6015(f). A requesting spouse is eligible
for relief if, taking into account all facts and circumstances, it is inequitable to
hold the requesting spouse liable for the underpayment. Rev. Proc. 2003-61, sec.
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[*12] 4.03, 2003-2 C.B. at 298-299, contains a nonexclusive list of factors that the
Commissioner considers when determining whether to grant equitable relief. These
factors are (1) marital status; (2) economic hardship; (3) in the case of an
underpayment, knowledge or reason to know that the nonrequesting spouse would
not pay the liability, or in the case of a deficiency, knowledge or reason to know of
the item giving rise to the deficiency; (4) the nonrequesting spouse’s legal
obligation; (5) significant benefit; and (6) compliance with tax laws. Id. sec.
4.03(2)(a). No single factor is determinative, and all factors are considered and
weighed appropriately. Haigh v. Commissioner, T.C. Memo. 2009-140, slip op. at
34-35.
I. Applying the facts and circumstances factors
(1) Marital status. Although petitioner stated on her Form 8857 that she
had been living apart from Mr. Williamson since May 15, 2008, she
did not provide any evidence to prove that she was actually living apart
from Mr. Williamson for the requisite 12-month period or that she was
legally separated or divorced from Mr. Williamson when she requested
innocent spouse relief. This factor weighs against relief.
(2) Economic hardship. Generally, economic hardship exists when
collection of the tax liability will render the taxpayer unable to meet
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[*13] basic living expenses. Sec. 301.6343-1(b)(4)(i), Proced. &
Admin. Regs. As discussed above, petitioner fails to make a
convincing showing of economic hardship. This factor weights against
relief.
(3) Knowledge or reason to know. Petitioner had knowledge and reason
to know that Mr. Williamson would not pay the tax liabilities at the
time she signed the 2003-2007 Federal income tax returns. Petitioner
and Mr. Williamson had a history of late tax return filings and late bill
payments; money problems were part of the reason she and Mr.
Williamson ultimately sought divorce. Petitioner was involved in the
financial operations of Mr. Williamson’s construction business and was
aware of the company’s financial woes. At the time petitioner signed
the 2003-2007 tax returns she was also aware that Mr. Williamson had
recently filed for bankruptcy. Petitioner had reason to know that Mr.
Williamson would not pay the tax liabilities reasonably promptly after
filing the joint returns. See Waldron v. Commissioner, T.C. Memo.
2011-288, slip op. at 9-10. This factor weighs against relief.
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[*14] (4) Nonrequesting spouse’s legal obligation. This factor is concerned with
whether the nonrequesting spouse has a legal obligation to pay the
outstanding tax liability pursuant to a divorce decree or agreement.
There is nothing in the record that suggests Mr. Williamson has a legal
obligation to pay the tax liabilities, and petitioner did not provide a
final copy of the divorce decree. Therefore, this factor is not
applicable and is neutral.
(5) Significant benefit. This factor considers whether the requesting
spouse had received a significant benefit (beyond normal support)
from the unpaid income tax liability. Normal support is measured by
the circumstances of the particular parties. Porter v. Commissioner,
132 T.C. at 212. There is nothing in the record to indicate that
petitioner received a significant benefit. This factor weighs in favor
of relief.
(6) Compliance with income tax laws. This factor considers whether the
requesting spouse has made a good-faith effort to comply with
income tax laws in tax years after the year for which relief is
requested. See Rev. Proc. 2003-61, sec. 4.03(2)(a)(vi). Although
petitioner filed her 2008 Federal income tax return late, she has since
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[*15] made a good-faith effort to comply with income tax laws for
years after 2008. This factor weighs in favor of relief.
(7) Other factors. Other factors that may indicate relief is appropriate
when present, but that will not weigh against granting relief when
absent, are (i) whether the nonrequesting spouse abused the requesting
spouse and (ii) whether the requesting spouse was in poor mental or
physical health at the time she signed the tax return or when she
requested relief. Id. sec. 4.03(2)(b).
There is no evidence of abuse in this case, and on her Form 8857 petitioner checked
“No” in response to questions about being a victim of spousal abuse or domestic
violence and about a history of mental or physical health problems. These two
factors are neutral.
II. Analysis
Considering all of the factors discussed above, two weigh in favor of
granting relief to petitioner, three weigh against granting relief, and three are
neutral. In the light of the facts indicating that petitioner failed to prove she was
divorced, legally separated, or living apart from Mr. Williamson, that she had
actual knowledge of Mr. Williamson’s income, and that she had reason to know
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[*16] that Mr. Williamson would not pay the tax liabilities, she failed to meet her
burden and is not entitled relief under section 6015(f).
To reflect the foregoing,
Decision will be entered
for respondent.