T.C. Summary Opinion 2015-44



                         UNITED STATES TAX COURT



              JACQUELINE THOMAS MINIX, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 12721-13S.                         Filed August 3, 2015.



      Jacqueline Thomas Minix, pro se.

      John K. Parchman, for respondent.



                              SUMMARY OPINION


      PUGH, 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.1


      1
         Unless otherwise indicated, section references are to the Internal Revenue
Code of 1986 as amended, in effect at all relevant times, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                                          -2-

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.

      The sole issue before the Court is whether petitioner is entitled to innocent

spouse relief under section 6015. Respondent denied petitioner’s request for relief

relating to a deficiency from her 2007 taxable year. We find that petitioner is not

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

                                      Background

      Some of the facts have been stipulated, and the stipulated facts are

incorporated in our findings by this reference. Petitioner resided in Louisiana at

the time her petition was filed.

       On June 24, 2006, petitioner married Gerald Butler. Petitioner and Mr.

Butler jointly filed their 2007 Federal income tax return, which was prepared by

Jules Simeon at Simeon Quick Tax Service. At trial petitioner did not recall

signing the 2007 return or any details about its preparation and did not believe she

had filed it. Petitioner also offered evidence regarding ongoing health problems

and medications that impaired her memory and focus.

      The Schedule C, Profit or Loss From Business, of the 2007 return identifies

Azalea Services, LLC (Azalea), as a clothing store and identifies petitioner as the

proprietor. Petitioner also is shown as the registered agent and officer of Azalea
                                          -3-

with the Louisiana secretary of state. Petitioner testified at trial that Mr. Butler,

not she, was the owner although she could provide no details regarding why she

was identified as the owner rather than Mr. Butler. Petitioner also testified that

she knew it was a clothing store and that she went to the store but that she did not

work there.

      On or about March 28, 2008, petitioner and Mr. Butler separated. On

August 15, 2011, they obtained a final divorce.

      Petitioner filed her 2008 Federal income tax return as head of household

and included losses from Azalea on her Schedule C. Liberty Tax Service prepared

petitioner’s 2008 return. Although petitioner had no memory of this return either,

she acknowledged her signature.

      Petitioner testified that in 2007 Mr. Butler had threatened her with a firearm

and that she had reported this incident to the police. She did not have a copy of

the police report. On August 18, 2008, petitioner requested a temporary

restraining order against Mr. Butler. On September 25, 2008, Mr. Butler was

escorted by the sheriff to retrieve his personal belongings from the home he shared

with petitioner.

      On July 7, 2010, respondent issued to petitioner and Mr. Butler a notice of

deficiency disallowing the deductions claimed on the 2007 Schedule C for Azalea.
                                         -4-

Neither petitioner nor Mr. Butler challenged the notice of deficiency by

petitioning the Court.

      On November 17, 2011, respondent received petitioner’s Form 8857,

Request for Innocent Spouse Relief, for the 2007 Federal tax liability. On the

Form 8857 she stated that she “[did] not know” in response to: (1) whether she

signed the return and (2) whether she was involved with the household finances

and the preparation of the return. Petitioner also indicated that she was a victim of

spousal abuse or domestic violence during the 2007 tax year.

      In its determination on March 7, 2013, the Internal Revenue Service Office

of Appeals denied petitioner’s request for innocent spouse relief because: (1) the

understatement of Federal tax liability was attributable to petitioner’s Schedule C

business deductions and (2) she failed to show that it would be unfair to hold her

responsible.

                                     Discussion

      Generally, married taxpayers may elect to file a joint Federal income tax

return. Sec. 6013(a). Upon electing to file jointly, each spouse is jointly and

severally liable for the entire tax due for that year. Sec. 6013(d)(3). In certain

circumstances, however, a spouse who filed a joint return may seek relief from

joint and several liability under the procedures in section 6015.
                                          -5-

      Section 6015(a) allows a spouse to seek relief from joint and several

liability under subsection (b) or, if eligible, to allocate the liability according to

provisions set forth in subsection (c). If a taxpayer does not qualify for relief

under either subsection (b) or (c), the taxpayer may be eligible for equitable relief

under subsection (f).

      Except as otherwise provided in section 6015, the taxpayer bears the burden

of proving that he or she is entitled to section 6015 relief. Rule 142(a); Alt v.

Commissioner, 

, 311 (2002), aff’d, 101 Fed. Appx. 34 (6th Cir.

2004).

      The Court applies a de novo scope and standard of review to a taxpayer’s

request for innocent spouse relief. Porter v. Commissioner, 

, 210

(2009).

A. Relief Under Section 6015(b)

      Section 6015(b) requires a taxpayer seeking relief from joint and several

liability to satisfy five conditions: (1) a joint return was filed for the taxable year,

(2) there is an understatement of tax attributable to erroneous items of the

taxpayer’s spouse, (3) the taxpayer establishes that in signing the return, he or she

did not know, and had no reason to know, that there was an understatement, (4)

taking into account all facts and circumstances, it would be inequitable to hold the
                                         -6-

taxpayer liable for the deficiency in tax for the taxable year attributable to the

understatement, and (5) the taxpayer timely elects relief under section 6015(b).

These conditions are stated in the conjunctive, and the taxpayer must satisfy all

five in order to be awarded relief. See Alt v. Commissioner, 119 T.C. at 313.

      Generally, an erroneous item is attributed to the individual whose activities

gave rise to the item. Sec. 1.6015-1(f)(1), Income Tax Regs. In deciding

attribution of erroneous items, the Court has attributed items to the spouse who

wrongfully reported or claimed the item on the return. See Kellam v.

Commissioner, T.C. Memo. 2013-186. The understatement of tax is attributable to

the erroneous items arising from Azalea and reported on the 2007 Schedule C.

The 2007 Schedule C shows petitioner as the proprietor of Azalea, and the records

of the Louisiana secretary of state show petitioner as the registered agent and

officer. Petitioner also reported losses from Azalea on her 2008 return.

      Therefore, petitioner must show, among other things, that the erroneous

items giving rise to the understatement of tax are attributable solely to Mr. Butler,

as, absent an explanation, the erroneous items are attributable to her. At trial

petitioner testified that Mr. Butler, not she, owned the business. But petitioner

was unable to explain to the Court why she then reported a loss from Azalea on

her 2008 return, which she filed as head of household after she and Mr. Butler
                                         -7-

separated. As with the 2007 return, petitioner could not remember filing the 2008

return or the circumstances of its preparation, but she did acknowledge her

signature on the 2008 return and did not disavow filing it.

      Aside from her testimony petitioner did not offer any documentation or

other credible evidence showing that Mr. Butler was the owner of Azalea in 2007.

In the face of her 2008 return and her failed memory and despite her poor health,

we are unable to credit her testimony about the ownership of Azalea. Given her

lack of memory we would need something more concrete to reject the

documentary evidence that contradicts her testimony. See Hudgins v.

Commissioner, T.C. Memo. 2012-260, at *22 (“[I]n evaluating a requesting

spouse’s claim * * * we are under no obligation to accept self-serving,

uncorroborated testimony.”); see also Tokarski v. Commissioner, 

, 77

(1986) (rejecting taxpayer’s self-serving testimony without corroborative

evidence).

B. Relief Under Section 6015(c)

      Under section 6015(c), a divorced or separated spouse may elect to limit

liability for a deficiency on a joint return to the portion allocable to him or her

under subsection (d).
                                        -8-

      A requesting spouse can make a valid election only if: (1) the requesting

spouse is no longer married to, is not part of the same household as, or is legally

separated from, his or her spouse; (2) the requesting spouse makes a timely

election; and (3) the Secretary does not demonstrate that the requesting spouse had

actual knowledge at the time the requesting spouse signed the return of an item

giving rise to a deficiency. Sec. 6015(c)(3)(A), (B), and (C); see Cheshire v.

Commissioner, 

, 194-195 (2000), aff’d, 

, 332-334 (5th

Cir. 2002); Stergios v. Commissioner, T.C. Memo. 2009-15.

      Petitioner and Mr. Butler were divorced at the time she submitted her claim

for spousal relief, and respondent does not dispute that her election for relief was

timely. Respondent argues, however, that she does not qualify for relief under

section 6015(c) because the deficiency was attributable to her business (Azalea)

and therefore she had actual knowledge of the items giving rise to the deficiency.

      The Commissioner must demonstrate actual knowledge by a preponderance

of the evidence. Culver v. Commissioner, 

, 196 (2001). The actual

knowledge standard is narrower than the “reason to know” standard applied under

section 6015(b) and (f). McDaniel v. Commissioner, T.C. Memo. 2009-137.

Proving actual knowledge requires the Commissioner to show that the individual

making the election had “actual knowledge of the factual circumstances which
                                         -9-

made the item unallowable as a deduction.” King v. Commissioner, 

,

204 (2001); sec. 1.6015-3(c)(2), Income Tax Regs. Proving actual knowledge of

the tax laws or legal consequences is not required. Hopkins v. Commissioner, 

, 86 (2003). In determining actual knowledge, joint ownership is a factor

supporting a finding that the requesting spouse had actual knowledge of an

erroneous deduction. See sec. 1.6015-3(c)(2)(iv), Income Tax Regs.

      Petitioner is not entitled to relief under section 6015(c) for the same reason

that she is not entitled to relief under subsection (b). We cannot credit petitioner’s

testimony that she did not own and knew nothing about Azalea in the face of her

2008 Federal income tax return, filed as head of household, on which she claimed

tax benefits from Azalea.

      She cannot disavow ownership for purposes of her 2007 return with no

explanation for her 2008 return position. The most reasonable inference, on the

basis of the objective evidence before us, is that petitioner did have some actual

knowledge of the items from Azalea giving rise to the understatement of tax

liability for 2007. Therefore she is not entitled to relief under section 6015(c).

C. Relief Under Section 6015(f)

      A spouse may be entitled to equitable relief under section 6015(f) if she is

not eligible for relief under subsection (b) or (c). Under subsection (f), the
                                        - 10 -

Secretary is directed to prescribe procedures to aid in administering the statute.

These procedures, set forth in Rev. Proc. 2013-34, 2013-43 I.R.B. 397, outline

seven threshold conditions that must be satisfied for the Internal Revenue Service

to grant relief under section 6015(f). Rev. Proc. 2013-34, sec. 4.01(7), 2013-43

I.R.B. at 399-400. We consider these factors in the light of the particular facts and

circumstances, but we are not bound by them. See Molinet v. Commissioner, T.C.

Memo. 2014-109.

      Because of the straightforward nature of the record we need not address all

the threshold conditions, circumstances, and factors listed. Instead we focus only

on the seventh threshold condition, which requires that “[t]he income tax liability

from which the requesting spouse seeks relief * * * [be] attributable (either in full

or in part) to an item of the nonrequesting spouse or an underpayment resulting

from the nonrequesting spouse’s income” unless a specific exception applies.

      The Commissioner may consider granting relief regardless of whether the

underpayment is attributable to the requesting spouse if any of the following

exceptions applies: (1) attribution is solely due to operation of community

property law; (2) nominal ownership; (3) misappropriation of funds; (4) abuse; or

(5) fraud committed by the nonrequesting spouse. See Rev. Proc. 2013-34, sec.

4.01(7). On these facts we need focus only on abuse. (As to nominal ownership,
                                        - 11 -

as explained above, we do not credit petitioner’s disavowal of any ownership

interest in the face of her 2008 return position and her failed memory.)

      Rev. Proc. 2013-34, sec. 4.03(2)(c)(iv), 2013-43 I.R.B. at 402, states that

“[a]buse comes in many forms and can include physical, psychological, sexual, or

emotional abuse, including efforts to control, isolate, humiliate, and intimidate the

requesting spouse, or to undermine the requesting spouse’s ability to reason

independently and be able to do what is required under the tax laws.”

      We take all facts and circumstances into account in determining the

presence of abuse. Id. sec. 4.01. A requesting spouse must establish: (1) that she

was the victim of abuse before the return was filed, and (2) that, as a result of that

abuse, she was not able to challenge the treatment of any items on the return or

was not able to question the payment of any balance due reported on the return, for

fear of the nonrequesting spouse’s retaliation. Id. sec. 4.01(7)(d).

      On her Form 8857 petitioner indicated that she was a victim of spousal

abuse or domestic violence during the 2007 tax year. Petitioner testified that in

2007 Mr. Butler threatened her with a firearm and that she reported this incident to

the police.

      The record also shows that on August 21, 2008, petitioner requested and

was granted a temporary restraining order against Mr. Butler and that on
                                         - 12 -

September 25, 2008, the sheriff escorted Mr. Butler to retrieve his belongings

from the house shared with petitioner.

      The Court does not dispute the circumstances of petitioner’s marriage;

however, to support relief under section 6015(f), claims of abuse require

substantiation or at least specificity with regard to the allegations. See, e.g., Deihl

v. Commissioner, T.C. Memo. 2012-176 (holding that the taxpayer was not

entitled to relief under section 6015(f) when her testimony was not credible and

she failed to substantiate alleged abuse with a police or medical report), aff’d, 603

Fed. Appx. 527 (9th Cir. 2015). Petitioner did not link the 2007 threats or actions

giving rise to the 2008 restraining order to the 2007 return, nor did she provide

enough details to allow the Court to do so. Petitioner did not show that as a result

of abuse she was not able to challenge the treatment of any items on the return for

fear of Mr. Butler’s retaliation. Instead of claiming that abuse affected her ability

to challenge the treatment of items on the 2007 return, petitioner testified she did

not recall filing the 2007 return because of poor health and believed she did not do

so. More importantly, petitioner claimed tax losses of Azalea on her 2008 return

filed in 2009, after the restraining order was in place against Mr. Butler.
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Therefore, petitioner has failed to meet her burden of proving that abuse affected

her 2007 return position.2

      On the basis of our examination of the record before us and the parties’

arguments at trial, we find petitioner is not entitled to relief under section

6015(b),(c), or (f) for 2007.

      In reaching our holding, we have considered all arguments made and

evidence offered, and, to the extent not mentioned above, we conclude they are

moot, irrelevant, or without merit.

      To reflect the foregoing,


                                                       Decision will be entered for

                                                  respondent.




      2
        Because petitioner failed to meet the threshold requirements under Rev.
Proc. 2013-34, 2013-43 I.R.B. 397, we need not address: (1) whether she is
entitled to a streamlined determination of equitable relief under sec. 4.02 or (2)
whether she is entitled to be considered for relief under the equitable factors in
sec. 4.03. See id., 2013-43 I.R.B. at 400-403.