T.C. Summary Opinion 2007-168



                     UNITED STATES TAX COURT



                  CHERYL KUNSMAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8081-05S.              Filed September 24, 2007.



     Cheryl Kunsman, pro se.

     Lynn M. Curry, 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 at the time 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
                                - 2 -

Revenue Code of 1986, as amended, and all Rule references are to

the Tax Court Rules of Practice and Procedure.

     This case arises from a petition for judicial review of the

denial of petitioner’s request for relief from joint and several

liability for 1999.    The issue for decision is whether petitioner

is entitled to relief under section 6015(b), (c), or (f).

                             Background

     Some of the facts have been stipulated by the parties and

are so found.    The stipulation of facts, with accompanying

exhibits, is incorporated herein by this reference.

     At the time the petition was filed, petitioner resided in

Ocala, Florida.    Petitioner and Raymond Kunsman (hereafter

referred to as Mr. Kunsman or former spouse) married in 1993.

Petitioner invested her savings to start a retail floral and gift

shop business in 1996, and she conducted her business throughout

the year at issue.

     Mr. Kunsman became unemployed in 1998, and he began drinking

heavily.    Mr. Kunsman started hiding financial details from

petitioner and took over the financial aspects of petitioner’s

business.   During 1998, he received a lump-sum distribution from

his retirement account, the majority of which was rolled over

into an Individual Retirement Account (IRA).     Mr. Kunsman

withdrew funds from the IRA in 1999 and 2000 in the amounts of

$29,925 and $51,518, respectively.      At the time the distributions
                                 - 3 -

were made, Mr. Kunsman had not reached age 59½.     The IRA

distributions were reported on Federal income tax returns that

were filed with the IRS as joint returns by petitioner and Mr.

Kunsman for 1999 and 2000.     No additional tax pursuant to section

72(t) was reported.     Petitioner and Mr. Kunsman separated in the

fall of 2001 and were divorced in 2002.

     Petitioner first learned that there were proposed

adjustments to the 1999 tax return when respondent offset a

claimed overpayment from her 2001 tax return against a tax

balance due from 1999.1    The amount remaining unpaid for 1999 as

of March 2005 was $1,582.58.

     Petitioner timely requested relief from joint and several

liability under section 6015 for 1999 and 2000.     Respondent

granted petitioner relief under section 6015(c) for tax year

2000.     Respondent issued a Notice of Determination denying relief

under section 6015(b), (c), and (f) for 1999.     Petitioner filed a

timely petition for review of respondent’s determination.

                              Discussion

         To support her request for relief from joint and several

liability, petitioner asserts:     (1) That the 1999 tax return is




     1
       Apart from respondent's reference to a defaulted statutory
notice of deficiency issued to petitioner, the record does not
chronicle the deficiency procedures followed by respondent.
Petitioner does not dispute that a deficiency was properly
assessed for 1999.
                                - 4 -

not a jointly filed return,2 and (2) that even if the 1999 return

is a jointly filed return, petitioner was unaware of the

retirement distribution since it was not included on the 1999

Form 1040, U.S. Individual Income Tax Return, she signed.

     The Court will treat these assertions as alternate defenses:

(1) That the return filed is not a joint return because

petitioner did not sign the return, and (2) that if the 1999

return is a valid joint return, petitioner is eligible for relief

because she did not know about the early distribution from her

former spouse’s IRA.3

Relief Under Section 6015

     A predicate to relief under section 6015 is that a joint

return was filed.   Sec. 6015(a)(1), (b)(1)(A).   Accordingly, if

the Court should find that petitioner did not file a joint

return, we would be required to deny petitioner’s claim for

section 6015 relief.    Raymond v. Commissioner, 

, 194-

197 (2002).

     Married taxpayers may elect to file a joint Federal income

tax return.   Sec. 6013(a).   Generally, a joint return must be


     2
       If we were to decide in favor of petitioner on this issue,
petitioner would not be entitled to relief. Sec. 6015(a)(1),
(b)(1)(A). Inasmuch as petitioner filed a joint return, we do
not otherwise view petitioner’s assertions as a bar to
consideration of her claim for relief under sec. 6015.
     3
       Rule 31(c) permits parties to set forth claims and
defenses alternatively or hypothetically and allows parties to
plead inconsistent claims and defenses.
                               - 5 -

signed by both spouses.   Sec. 1.6013-1(a)(2), Income Tax Regs.

However, where both spouses intend to file a joint return, the

failure of one spouse to sign the return will not preclude its

treatment as a joint return.   Estate of Campbell v. Commissioner,

, 12 (1971).   This is so even where the purported

signature of the nonsigning spouse is signed by another, provided

the couple has the intent to file jointly.    Heim v. Commissioner,

, 273-274 (1956), affd. 

(8th Cir. 1958);

Magee v. Commissioner, T.C. Memo. 2005-263.

     Petitioner alleged in her petition that her former spouse

had admitted to a practice of showing her one form to review and

sign and then submitting a different form that he signed for her.

She acknowledged at trial that she glanced at and signed returns

for 1999 and 2000.   However, she claims that the returns

ultimately filed were not the returns she reviewed and signed.4

     Despite petitioner’s claim that her former spouse forged her

signature on the 1999 tax return, the Court construes

petitioner’s testimony and other evidence in the record as



     4
       Respondent contends that petitioner signed the 1999 return
that was filed. At trial, respondent conceded that the signature
on the 2000 tax return was not made by petitioner but did not
address whether the 2000 tax return was a joint return. As
discussed, the failure of one spouse to sign a tax return does
not conclusively establish that the return is not a joint return.
Respondent granted petitioner relief under sec. 6015(c) for 2000.
Because a joint return is necessary for relief under sec. 6015,
we presume that respondent concluded that the 2000 return was a
joint return.
                               - 6 -

affirming that she intended to file a joint return with her

former spouse.

     Where a taxpayer signs a return in blank or signs a return

without review, she remains bound by the joint return because of

the intent to file jointly and to trust the other spouse properly

to complete and file the return.   Douglas v. Commissioner, 

, 313-314 (1956), affd. sub nom. Sullivan v.

Commissioner, 

(5th Cir. 1958).   Petitioner trusted her

former spouse to prepare and file the return, and apparently took

no independent action to report her income or comply with filing

requirements for the taxable year 1999.   Whether she signed her

name or her former spouse signed her name, the 1999 return

remains a joint return because of her intention to file jointly.

Federbush v. Commissioner, 

, 756-758 (1960), affd. per

curiam 

(2d Cir. 1963); Peirce v. Commissioner, T.C.

Memo. 1982-154.

      In Shea v. Commissioner, 

, 567 (6th Cir. 1986),

affg. in part and revg. in part T.C. Memo. 1984-310, a joint

return was held invalid as to the taxpayer where the attorney and

tax return preparer signed the taxpayer’s name to the return,

without her consent, without an opportunity for review, and

without a power of attorney.   In contrast, petitioner in this

case reviewed the return and had an opportunity to sign the

return, propose changes, or refuse to sign the return.
                                 - 7 -

     We are satisfied that petitioner filed a joint Federal

income tax return for 1999.

     Each spouse filing a joint return is jointly and severally

liable for the accuracy of the return and for the entire tax due

for that year.   Sec. 6013(d)(3).   A spouse who has filed a joint

return may, however, seek relief from joint and several liability

by following the procedures established in section 6015.   Sec.

6015(a).

     A taxpayer may be entitled to relief under section 6015(b),

(c), or (f), and, except as otherwise provided in section 6015,

the taxpayer bears the burden of proving her entitlement to

relief.    Rule 142(a); Alt v. Commissioner, 

, 311

(2002), affd. 

(6th Cir. 2004).

     With respect to elections under section 6015(b) and (c),

section 6015(e) grants this Court jurisdiction “to determine the

appropriate relief available”.    In contrast, we review denial of

relief under section 6015(f), which permits the Commissioner to

grant equitable relief, for abuse of discretion.    Fernandez v.

Commissioner, 

, 330-333 (2000); Butler v.

Commissioner, 

, 292 (2000).

     Section 6015(b)

     Section 6015(b)(1) provides for relief from liability for

tax attributable to an understatement if all five conditions set

out in section 6015(b)(1)(A) through (E) are satisfied.
                               - 8 -

     Section 6015(b)(1)(C) requires that in signing the return

the individual seeking relief did not know and had no reason to

know of the understatement.   Relief under section 6015(b) is not

provided to a spouse who turned a blind eye to facts that were

available.   Charlton v. Commissioner, 

, 340 (2000).

     Petitioner claims that there was no entry made on line 15a,

Total IRA Distributions, of the 1999 Form 1040 she signed.

Petitioner asserts that the 1999 tax return her former spouse

presented to her reflected a greater Schedule C business profit

than the amount as actually filed with the IRS.   Petitioner

alleges that her former spouse inflated the financial performance

of her business so that he would not have to work and that he

surreptitiously withdrew funds from his IRA to support the

deception.

     Petitioner suggests that her former spouse so controlled the

financial details of her business that she was unaware of whether

or not the business was profitable and whether the income

therefrom could support the family.5   Petitioner also suggests

that she was unaware that Mr. Kunsman withdrew more than $80,000

between 1999 and 2000 in order to provide for financial

obligations of the family and of her business.    The Court is not


     5
       The 1999 Schedule C, Profit or Loss From Business,
reported gross receipts of $281,326.94 and net profit of
$4,450.11. Petitioner testified that she knew the gross receipts
were about $300,000 but that her former spouse led her to believe
the profits from the business were between $20,000 and $30,000.
                               - 9 -

convinced that petitioner did not understand the business and

have a sense of the profit therefrom.

      The IRA distribution was reflected on the 1999 Form 1040,

which the Court has found to be a joint return.       Petitioner was

certainly aware of Mr. Kunsman’s age in 1999.    Thus, petitioner

shared with Mr. Kunsman the legal responsibility to ensure the

proper reporting of the additional tax on an early distribution

pursuant to section 72(t).

     “A taxpayer is presumed to have knowledge of the tax

consequences of a transaction”.   Cheshire v. Commissioner, 

, 197 (2000), affd. 

(5th Cir. 2002).

Ignorance of the law is no defense.

   In fact,

petitioner acknowledged that both she and her former spouse were

aware that a 10-percent additional tax was imposed on early

withdrawals.

     Based on the entire record, the Court finds that petitioner

had actual knowledge of the income from the 1999 IRA

distribution(s).   She also had actual knowledge that an

additional tax is imposed by section 72(t).    Accordingly, she has

failed to establish that “she did not know, and had no reason to

know, that there was [an] understatement”.    Sec. 6015(b)(1)(C).
                              - 10 -

     The Court concludes that petitioner has failed to satisfy

the requirements of section 6015(b)(1)(C).6   Therefore,

petitioner does not qualify for relief from joint and several

liability under section 6015(b)(1).

     Section 6015(c)

     Section 6015(c) provides proportionate tax relief (if a

timely election is made) by allocating the deficiency between

individuals who filed jointly but are no longer married, are

legally separated, or have been living apart for a 12-month

period.   Section 6015(c)(3)(C) prohibits such allocation if

respondent demonstrates that petitioner had actual knowledge, at

the time the return was signed, of any item giving rise to a

deficiency that is not allocable to petitioner.   Cheshire v.

Commissioner, supra at 193.

     After her divorce, petitioner filed a timely election and

was prima facie eligible for relief under section 6015(c) for the

portion of any deficiency properly allocable to her former

spouse.   Sec. 6015(c)(1).

     However, petitioner’s election under section 6015(c) shall

not apply if respondent demonstrates actual knowledge by

petitioner of the IRA distribution, at the time she signed the



     6
       The five criteria of sec. 6015(b)(1) are conjunctive.
Having concluded that sec. 6015(b)(1)(C) is not satisfied, we
need not, and do not, discuss the criteria of the other
subparagraphs of sec. 6015(b)(1).
                                 - 11 -

return.   Sec. 6015(c)(3)(C).    Respondent must demonstrate by a

preponderance of the evidence that petitioner had “an actual and

clear awareness (as opposed to reason to know) of the existence

of an item which gives rise to the deficiency (or portion

thereof)”.   Cheshire v. Commissioner, supra at 195; Charlton v.

Commissioner, 

.

     As discussed above, we have found that petitioner had actual

knowledge of the IRA distribution.        Therefore, petitioner is not

eligible for relief under section 6015(c).7

     Section 6015(f)

     Where relief is unavailable under section 6015(b) or (c),

section 6015(f) grants the Commissioner discretion to relieve an

individual from joint liability if it is inequitable to hold the

individual liable, taking into account all the facts and

circumstances.   Sec. 6015(f).    As discussed above, petitioner is

not entitled to relief under section 6015(b) or (c).

     Petitioner bears the burden of proving that respondent

abused his discretion in denying relief under section 6015(f).

Jonson v. Commissioner, 

, 113 (2002), affd. 

(10th Cir. 2003); Cheshire v. Commissioner, supra at 198;

Butler v. Commissioner, 

.


     7
       Petitioner testified that her former spouse became violent
at the end of their marriage in late 2001, but she did not
demonstrate that her signing the 1999 joint return in 2000 was
anything but voluntary. Therefore, the exception for duress in
sec. 6015(c)(3)(C) does not apply.
                              - 12 -

     In Rev. Proc. 2003-61, 2003-2 C.B. 296, respondent has

prescribed guidelines for the evaluation of requests for relief

from joint or several liability under section 6015(f).8

Respondent does not contest that petitioner meets the seven

threshold conditions of Rev. Proc. 2003-61, sec. 4.01, 2003-2

C.B. at 297.

     Where a liability is reported on a joint return, but is not

paid, Rev. Proc. 2003-61, sec. 4.02, 2003-2 C.B. at 298, provides

circumstances under which the Commissioner ordinarily will grant

relief.   The additional tax under section 72(t) in this case was

not reported on the joint return.    Therefore, Rev. Proc. 2003-61,

sec. 4.02, does not apply.

     Rev. Proc. 2003-61, sec. 4.03, 2003-2 C.B. at 298, provides

a nonexclusive list of factors respondent considers in evaluating

whether it would be inequitable to hold petitioner liable for all

or part of an unpaid income tax liability or deficiency.   The

factors respondent considered are:




     8
       Rev. Proc. 2003-61, 2003-2 C.B. 296, supersedes Rev. Proc.
2000-15, 2000-1 C.B. 447, and is effective for requests for
relief filed on or after Nov. 1, 2003, and for requests pending
as of Nov. 1, 2003, for which no preliminary determination letter
had been issued as of Nov. 1, 2003. In this case, petitioner
filed Form 8857, Request for Innocent Spouse Relief, in August
2003, and the initial denial occurred during or after April 2004.
As no preliminary determination letter had been issued as of Nov.
1, 2003, Rev. Proc. 2003-61 guides respondent’s analysis of
petitioner’s request.
                               - 13 -

     1.   Marital status:   Petitioner is divorced from her former

spouse.   This factor weighs in favor of relief.

     2.   Economic hardship:   Respondent’s tax examiner considered

petitioner’s submission in support of her request for relief from

joint and several liability, noted that her income and expenses

needed verification, and determined that refusal to grant relief

would not cause petitioner to suffer economic hardship.

Respondent’s Appeals officer also determined from respondent’s

record and research that petitioner would not suffer an economic

hardship as a result of remaining liable for the $1,582.58

balance due for 1999.

     Respondent determines economic hardship by evaluating

whether or not petitioner is able to pay her reasonable basic

living expenses.   Rev. Proc. 2003-61, sec. 4.02(c), 2003-2 C.B.

at 298 (referring to sec. 301.6343-1(b)(4), Proced. & Admin.

Regs.).   It is petitioner’s burden to show that her living

expenses qualify, that those expenses are reasonable, and that

she is unable to pay those expenses.    Monsour v. Commissioner,

T.C. Memo. 2004-190.

     Petitioner claimed that continuing liability for the 1999

deficiency would cause her economic hardship and asserted that

her income was $1,000 per month while her expenses were $1,520

per month.   She offered no evidence of either income or expenses

and no proof that the 1999 tax liability would render her unable
                                 - 14 -

to pay her reasonable living expenses.       Such substantiation was

particularly necessary in light of petitioner’s assertion that

her expenses already exceed her income by more than 50 percent

each month.

     Petitioner failed to demonstrate that she will be unable to

pay reasonable basic living expenses if relief is denied.         We

hold that respondent did not abuse his discretion in concluding

that petitioner would not suffer economic hardship and that this

factor weighs against relief.

     3.   Knowledge or reason to know:      Petitioner claims

ignorance of the IRA distribution.        The distribution was clearly

shown on the joint tax return.     The deficiency results from the

failure to report the section 72(t) additional tax.       We have

previously held that petitioner had actual knowledge not only of

the IRA distribution but also of the liability for additional tax

on an early distribution.   This factor weighs against relief.

     4.   Nonrequesting spouse’s legal obligation:      Petitioner did

not demonstrate that her former spouse is obligated by their

divorce decree to pay this deficiency.       This factor is neutral.

     5.   Significant benefit:    Petitioner received no significant

benefit from the unpaid tax, other than normal support.         This

factor is neutral.
                                - 15 -

     6.    Compliance with income tax laws:   Petitioner was up-to-

date with tax returns at the time respondent denied relief.      This

factor is neutral.

     Two other factors, abuse and the mental or physical health

of petitioner, can weigh only in favor of relief.      Respondent

found that these factors do not apply to this case.      The Court

has found nothing in the record relating to these factors to

indicate that respondent’s evaluation is incorrect.      We therefore

agree with respondent’s determination that these factors are

neutral.

     Respondent determined that the factor (petitioner’s divorce)

that favors relief is outweighed by the factors (her knowledge of

the income and her failure to demonstrate economic hardship) that

favor liability.    Considering all the facts and circumstances of

this case, we hold that petitioner has not demonstrated that

respondent acted arbitrarily, capriciously, or without sound

basis in fact and that respondent did not abuse his discretion in

denying petitioner relief under section 6015(f).

                             Conclusion

     Petitioner is not entitled to relief under section 6015(b)

or (c), and respondent did not abuse his discretion in denying

relief under section 6015(f).

     To reflect the foregoing,


                                          Decision will be entered

                                     for respondent.