2005 Tax Ct. Summary LEXIS 187">*187 PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b), THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.
GOLDBERG, Special Trial Judge: This case was heard pursuant to the provisions of
This case arises from a request for relief under
The issue for decision is whether respondent's denial of petitioner's request for relief pursuant to
Background
2005 Tax Ct. Summary LEXIS 187">*188 Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioner resided in Greenville, North Carolina, on the date the petition was filed in this case.
Petitioner and her former spouse, John E. Glaze, Jr. (Mr. Glaze), were married in 1993. Mr. Glaze was employed as a truck driver who was on the road for long periods of time. For the taxable year 1995, Mr. Glaze received wage income from Melton Truck Lines and Mayflower Transit, Inc. (Mayflower) of $ 12,666.01 and $ 36,400, respectively.
During 1995, petitioner was employed as a nurse by Scottish Rite Children's Medical Center (Scottish Rite). Petitioner received wages from Scottish Rite for taxable year 1995 of $ 14,715.16.
During 1995, petitioner and Mr. Glaze maintained a joint checking account. Both petitioner and Mr. Glaze deposited their respective income into the joint checking account. Petitioner occasionally reviewed the bank statements regarding their joint checking account and used the joint checking account to pay joint household expenses.
Petitioner knew that Mr. Glaze drove a truck for Mayflower and knew he was receiving2005 Tax Ct. Summary LEXIS 187">*189 wage income from Mayflower. Also, during 1995, petitioner received gifts from Mr. Glaze, one of which was $ 500 that she used as a downpayment for the purchase of a 1984 Toyota Corolla.
On October 18, 1996, petitioner and Mr. Glaze delinquently filed their 1995 joint Federal income tax return. On their Form 1040, U.S. Individual Income Tax Return, petitioner and Mr. Glaze reported wage income of $ 27,382. 1 Petitioner and Mr. Glaze also reported $ 35,831 in unreimbursed employee business expenses on their 1995 joint income tax return. However, petitioner and Mr. Glaze failed to report: (1) $ 36,400 of wage income received by Mr. Glaze from Mayflower; and (2) $ 24 of interest income received jointly by petitioner and Mr. Glaze from the U.S. Treasury.
Petitioner and Mr. Glaze's 1995 joint income tax return reported a refund due of $ 2,265. 2005 Tax Ct. Summary LEXIS 187">*190 Petitioner and Mr. Glaze received the refund in full, and petitioner used the moneys from the refund to pay joint household liabilities.
Petitioner and Mr. Glaze's 1995 joint income tax return was prepared by Jackson Hewitt Tax Service. Petitioner "took all the information from my [petitioner's] tax return from Scottish Rite Hospital, and the information that he [Mr. Glaze] had given me from his tax returns" to the Jackson Hewitt Tax Service Center. Petitioner reviewed the 1995 joint income tax return before filing it with the Internal Revenue Service. Both petitioner and Mr. Glaze voluntarily signed their 1995 joint income tax return.
On November 21, 1997, respondent issued petitioner and Mr. Glaze a notice of deficiency for taxable year 1995, in which respondent determined that they had unreported income of $ 36,424 and were liable for an income tax deficiency of $ 8,237, an addition to tax pursuant to section 6651(a)(1) of $ 1,493, and an accuracy-related penalty pursuant to section 6662 of $ 1,647. Neither petitioner nor Mr. Glaze filed a petition with this Court with respect to the notice of deficiency. Accordingly, on or about April 6, 1998, respondent assessed the tax2005 Tax Ct. Summary LEXIS 187">*191 liability, addition to tax, and the accuracy-related penalty that were reflected in the notice of deficiency for taxable year 1995.
Petitioner and Mr. Glaze were divorced on May 26, 1999, by a divorce decree entered by the Circuit Court of Shelby County, Tennessee. The divorce decree refers to a "written Marital Dissolution Agreement" which provides for a settlement of property rights of the parties. Petitioner has not provided respondent, respondent's counsel, or this Court with a copy of the aforesaid agreement.
On or about April 1, 2002, respondent applied petitioner's 2001 Federal income tax refund of $ 2,434 toward petitioner and Mr. Glaze's 1995 income tax liability.
On June 3, 2002, petitioner filed a Form 8857, Request for Innocent Spouse Relief, with respondent, requesting innocent spouse relief with respect to the 1995 taxable year. On February 25, 2003, respondent issued petitioner a letter advising her of the preliminary determination denying relief from liability on the 1995 joint return. On March 29, 2004, respondent sent petitioner a letter advising her of the final determination denying her relief from liability for the deficiency, addition to tax, and penalty for2005 Tax Ct. Summary LEXIS 187">*192 the 1995 taxable year. On April 12, 2004, petitioner filed a petition with this Court for review of respondent's determination denying her request for relief from joint and several liability with respect to the 1995 tax year.
Discussion
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 that year.
In this case, petitioner contends that she is entitled to full relief from liability under
A. 2005 Tax Ct. Summary LEXIS 187">*195
(1) In general.--Under procedures prescribed by the Secretary, if-- (A) a joint return has been made for a taxable year; (B) on such return there is an understatement of tax attributable to erroneous items of one individual filing the joint return; (C) the other individual filing the joint return establishes that in signing the return he or she did not know, and had no reason to know, that there was such understatement; (D) taking into account all the facts and circumstances, it is inequitable to hold the other individual liable for the deficiency in tax for such taxable year attributable to such understatement; and (E) the other individual elects (in such form as the Secretary may prescribe) the benefits of this subsection not later than the date which is 2 years after the date the Secretary has begun collection activities with respect to the individual making the election, 2005 Tax Ct. Summary LEXIS 187">*196 then the other individual shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent such liability is attributable to such understatement.
Pursuant to
In the present case, petitioner and Mr. Glaze maintained a joint checking account. Both petitioner and Mr. Glaze deposited their respective wage income into said joint checking account. Petitioner occasionally reviewed the bank statements regarding their joint checking account, and she personally used moneys from the joint checking account to pay joint household expenses. Further, petitioner knew that Mr. Glaze drove trucks for Mayflower and knew he was receiving wages from Mayflower. Petitioner also reviewed the 1995 joint income tax return before filing it with the Internal Revenue Service.
Upon the basis of the facts of the present case, we find that petitioner was well aware of the income received by Mr. Glaze from Mayflower for his services, and that such income was not reported as gross income on their 1995 joint Federal income tax return. Therefore, we conclude that petitioner may not claim that she did not have knowledge of the income received by Mr. Glaze.
Further, petitioner had actual knowledge of the interest2005 Tax Ct. Summary LEXIS 187">*198 income received from the U.S. Treasury of $ 24, because such income was jointly received in the names of both petitioner and Mr. Glaze. Accordingly, we hold that petitioner is not entitled to relief under
Respondent argues that petitioner had actual knowledge of the unreported income because: (1) She had access to the proceeds of Mr. Glaze's wage income from Mayflower in the joint checking account; (2) she occasionally reviewed the bank statements regarding their joint checking account; (3) she used moneys from Mr. Glaze's wage income to pay joint household expenses; and (4) the interest income received from the U.S. Treasury was received jointly by petitioner and Mr. Glaze.
In the present case, "the knowledge standard for purposes of
Petitioner is not entitled to relief from joint and several liability under
C.
Therefore, the only remaining opportunity for relief available to petitioner is (1) taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either); and (2) relief is not available to such individual under subsection (b) or (c), the Secretary may relieve such individual of such liability.
As directed by
To prevail under
Respondent contends: (1) Petitioner voluntarily signed the 1995 joint Federal income tax return which reported gross income of $ 27,382; (2) the proceeds of Mr. Glaze's wage income from Mayflower were put into a joint checking account to which petitioner had access; (3) petitioner obtained benefits due to Mr. 2005 Tax Ct. Summary LEXIS 187">*204 Glaze's wage income received from Mayflower through the use of those moneys to pay off household expenses; (4) petitioner would not suffer economic hardship if the Service did not grant relief from the income tax liability; (5) petitioner had actual knowledge that in 1995, Mr. Glaze worked for and received income from Mayflower; and (6) petitioner had actual knowledge of the $ 24 of interest income received jointly by petitioner and Mr. Glaze from the United States Treasury. Respondent asserts that these factors weigh against granting relief to petitioner. We now address each of the factors of
1. Marital Status
During 1995, petitioner and Mr. Glaze were married and resided in the same household; however, Mr. Glaze was frequently away from home driving a truck for Melton Truck Lines and Mayflower. Petitioner and Mr. Glaze were divorced on May 26, 1999. This factor weighs in favor of granting relief to petitioner.
2. Economic Hardship
Respondent contends that petitioner offered no evidence that she would suffer economic hardship if relief were denied. Pursuant to
2005 Tax Ct. Summary LEXIS 187">*206 It appears from the record that petitioner earns sufficient income and has assets such that she would not experience economic hardship if required to pay some or all of the tax deficiency. Petitioner has not entered into evidence any documentation or testimony to contradict the above claims or the determination of respondent; therefore, we find that petitioner will not suffer economic hardship if relief is not granted. This factor favors denying relief.
3. Abuse
There is no evidence in the record that petitioner was abused by Mr. Glaze. Spousal abuse is a factor listed in
4. Knowledge or Reason To Know
In the case of an income tax liability that arose from a deficiency, the fact that the requesting spouse did not know and had no reason to know of the item giving rise to the deficiency is a factor in favor of granting relief.
Petitioner contends that she did not know and had no reason to know that Mr. Glaze did not report his wage income received from Mayflower.
However, as previously stated, petitioner voluntarily signed the 1995 joint return and admitted that she did review the joint return before filing. Petitioner and Mr. Glaze maintained a joint checking account. Both petitioner and Mr. Glaze deposited their respective income into said joint checking account. Petitioner occasionally reviewed the bank statements regarding their joint checking account. Petitioner personally used moneys from the joint checking account to pay household expenses. Further, petitioner knew that Mr. Glaze drove a truck for Mayflower and knew he was receiving wage income from Mayflower. Also, the interest income from the U.S. Treasury was received in both petitioner's and Mr. Glaze's names. Thus, petitioner knew or had reason to know of the unreported income which gave rise to the taxable year 1995 deficiency, addition to tax pursuant to section 6651(a)(1), and the accuracy-related penalty pursuant to section 6662. 2005 Tax Ct. Summary LEXIS 187">*208 This factor favors denying relief to petitioner.
5. Nonrequesting Spouse's Legal Obligation
As previously noted, petitioner and Mr. Glaze were divorced on May 26, 1999, and a divorce decree was entered by the Circuit Court of Shelby County, Tennessee. The divorce decree refers to a "written Marital Dissolution Agreement" which provides for a settlement of property rights of the parties. However, petitioner has not provided respondent's counsel or this Court with a copy of the aforesaid agreement.
6. Attributable to Nonrequesting Spouse
As previously stated, $ 36,400 of petitioner's and Mr. 2005 Tax Ct. Summary LEXIS 187">*209 Glaze's unreported income for taxable year 1995 is attributable to wages earned through Mr. Glaze's employment with Mayflower. The additional $ 24 of interest income was received by petitioner and Mr. Glaze in both their names and is therefore attributable to both petitioner and Mr. Glaze. As to the $ 36,400 of petitioner's and Mr. Glaze's unreported income for taxable year 1995, this factor favors granting petitioner equitable relief.
7. Significant Benefit
Respondent contends that petitioner received benefits from the proceeds of Mr. Glaze's wage income received from Mayflower in the form of payment of joint household expenses.
Petitioner admitted at trial that she and Mr. Glaze were personally liable for the household expenses which were paid by the moneys received by Mr. Glaze as wage income from Mayflower. Petitioner also testified at trial that during 1995 she received gifts from Mr. Glaze, one of which was $ 500 that she used as a downpayment for the purchase of a 1984 Toyota Corolla. Therefore, we find that petitioner did benefit from the unreported wage income received by Mr. Glaze from Mayflower.
8. Noncompliance With Federal Income Tax Laws
There is no evidence2005 Tax Ct. Summary LEXIS 187">*210 in the record as to this factor. Therefore, we consider this factor neutral.
9. Conclusion
The factors that weigh against granting relief to petitioner outweigh those factors favoring relief. Therefore, under these facts and circumstances, we hold that respondent did not abuse his discretion in denying equitable relief to petitioner under
Reviewed and adopted as the report of the Small Tax Case Division.
Decision will be entered for respondent.
1. This amount consists of petitioner's wage income received from Scottish Rite and Mr. Glaze's wage income received from Melton Truck Lines, rounded to the nearest dollar.↩
2. Presumably, petitioner's claim for relief includes a refund of her 2001 overpayment of $ 2,434 which the Commissioner applied toward petitioner and Mr. Glaze's 1995 income tax liability.
3. This revenue procedure was superseded by
4. (ii) Information from taxpayer. In determining a reasonable amount for basic living expenses the director will consider any information provided by the taxpayer including-- (A) The taxpayer's age, employment status and history, ability to earn, number of dependents, and status as a dependent of someone else; (B) The amount reasonably necessary for food, clothing, housing, (including utilities, home-owner insurance, home-owner dues, and the like), medical expenses (including health insurance), transportation, current tax payments (including federal, state, and local), alimony, child support, or other court-ordered payments, and expenses necessary to the taxpayer's production of income (such as dues for a trade union or professional organization, or child care payments which allow the taxpayer to be gainfully employed); (C) The cost of living in the geographic area in which the taxpayer resides; (D) The amount of property exempt from levy which is available to pay the taxpayer's expenses; (E) Any extraordinary circumstances such as special education expenses, a medical catastrophe, or natural disaster; and (F) Any other factor that the taxpayer claims bears on economic hardship and brings to the attention of the director.↩
