MEMORANDUM FINDINGS OF FACT AND OPINION
CHIECHI,
We must decide whether petitioner is entitled to relief under
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner resided in Iowa at the time she filed the petition in this case.
During 2009 Tax Ct. Memo LEXIS 174">*175 2006, petitioner's former spouse, Maxwell K. Hardin (Mr. Hardin), received from the State of Iowa unemployment compensation totaling $ 6,817 (Mr. Hardin's unemployment compensation). That compensation was deposited into a checking account over which Mr. Hardin and petitioner each had signature authority. Petitioner used funds deposited into that checking account in order to pay certain household bills. Petitioner did not receive a benefit beyond normal support from Mr. Hardin's unemployment compensation.
Petitioner and Mr. Hardin jointly filed Form 1040A, U.S. Individual Income Tax Return, for their taxable year 2006 (2006 joint return). In that return, petitioner and Mr. Hardin did not include Mr. Hardin's unemployment compensation in their gross income.
During 2006, petitioner did not work. She began working in June 2007. 2
At no time did Mr. Hardin physically or mentally abuse petitioner.
Petitioner and Mr. Hardin did not transfer any assets to each other as part of a fraudulent scheme between them. Nor did Mr. Hardin transfer to petitioner any disqualified assets as defined in
Petitioner 2009 Tax Ct. Memo LEXIS 174">*176 timely filed a tax return for her taxable year 2007.
On February 25, 2008, respondent issued to petitioner and Mr. Hardin a notice of deficiency with respect to their taxable year 2006 (2006 notice). In that notice, respondent determined that Mr. Hardin's unemployment compensation is includible in the gross income of petitioner and Mr. Hardin.
On May 20, 2008, petitioner filed the petition in this case.
On August 19, 2008, petitioner and Mr. Hardin divorced and a stipulated decree of dissolution of marriage (divorce decree) was entered. Although that decree contains provisions regarding the rights of petitioner and Mr. Hardin to claim certain dependency exemptions and child tax credits with respect to their children, it does not provide that Mr. Hardin has a legal obligation to pay any outstanding tax liability that he and petitioner incurred while married.
On October 24, 2008, after petitioner had filed the petition in this case, she submitted to respondent's Appeals Office (Appeals Office) Form 8857, Request for Innocent Spouse Relief (And Separation of Liability and Equitable Relief), with respect to her taxable year 2006 (petitioner's Form 8857). Petitioner attached a statement to 2009 Tax Ct. Memo LEXIS 174">*177 that form that stated: I feel I should not be responsible to pay this. The year of 2006 I did not work. My ex husband is the one who * * * took care of our taxes. Yes I knew he had received unemployment at times during that year. It is * * * my fault I did not read over the tax * * * return before signing it, but even if I had I still did not know before this situation occured [sic] that * * * you have to * * * claim unemployment on tax returns. He (my ex) never told me he had to. Each year he either did them online or took them to someone to do for us and I just signed it when it was done.
Petitioner was in good physical and mental health when she and Mr. Hardin filed their 2006 joint return and when she submitted petitioner's Form 8857 to the Appeals Office.
A settlement officer with the Appeals Office (settlement officer) who was assigned petitioner's Form 8857 reviewed petitioner's request for relief under * * * The information return matching 2009 Tax Ct. Memo LEXIS 174">*178 program found that the 2006 joint tax return filed by the petitioner and her ex-husband failed to report $ 6,817 of unemployment compensation. On December 10, 2007 the taxpayer was issued a CP2000 notice informing both her and her ex-husband of the addition to tax due to the unreported unemployment income. * * * The case file does not contain any information showing if the taxpayer responded to the CP2000 notice. A statutory notice of deficiency was issued on February 25, 2008. The understatement of tax shown on the notice was $ 2,114. There were no penalties or additions to tax shown on the notice. Only * * * [petitioner] filed a tax court petition protesting the amounts shown on the statutory notice. * * * [Mr.] Hardin did not petition the tax court. The amount in question has been assessed on an MFT 31 account for * * * [Mr.] Hardin. The tax court petition filed by * * * [petitioner] states the following: It should be noted that * * * [petitioner] does not disagree with the adjustments related to the unreported unemployment income. She just feels she should not be held responsible for the additional tax. She believes the income was her ex-husband's and that he should be solely responsible for paying the additional tax owed. * * * [Petitioner] provided a form 8857 * * * to the Appeals Office. She attached a written statement to the form stating why she should qualify for innocent spouse relief. After a telephone conference with * * * [petitioner], it was determined that she did not qualify for innocent spouse relief. She does not agree with the position the government is taking in denying her innocent spouse request. This case is being sent over for trial preparation because the Appeals Officer and * * * [petitioner] could not reach an agreement regarding the Innocent spouse Issue. * * * * * * * Is the taxpayer entitled to relief from liability under No the taxpayer is not entitled to receive innocent spouse 2009 Tax Ct. Memo LEXIS 174">*180 relief. The taxpayer does not qualify for relief under The factors in favor of granting relief under Code * * * * * * * Relief is provided for under code A joint return was filed. There was a timely application for relief. There is no evidence of fraudulent transfers of assets. There is no evidence of disqualified assets transferred. There is no evidence a fraudulent joint return presented. The tax is attributable to the non-requesting spouse. Exceptions: Attribution is solely due to community property rules Ownership of income is in name only The non-requesting spouse misappropriated funds to pay the tax The requester suffered 2009 Tax Ct. Memo LEXIS 174">*181 from abuse and didn't challenge the taxes for fear of retaliation Based upon the facts known to the Appeals Officer, the threshold factors have been met by the taxpayer. Following are the circumstances under which equitable relief under (1) In cases where a liability reported on a joint return is unpaid, equitable relief under (a) At the time relief is requested, the requesting spouse is no longer married to, is legally separated from, the nonrequesting spouse, or has not been a member of the same household as the requesting spouse at any time during the 12-month period ending on the date relief was requested; (b) At the time the return was signed, the requesting spouse had no knowledge or reason to know that the tax would not be paid, The requesting spouse must establish that it was reasonable for the requesting spouse to believe that the nonrequesting spouse 2009 Tax Ct. Memo LEXIS 174">*182 would pay the reported liability. If a requesting spouse would otherwise qualify for relief under this section, except for the fact that the requesting spouse had no knowledge or reason to know of only a portion of the unpaid liability, then the requesting spouse may be granted relief only to the extent that the liability is attributable to such portion; and (c) The requesting spouse will suffer economic hardship if relief is not granted. For purposes of this section, the determination of whether a requesting spouse will suffer economic hardship will be made by the Commissioner or the Commissioner's delegate, and will be based on rules similar to those provided in
The Secretary may grant equitable relief under (a) Marital status. The requesting spouse is separated (whether legally separated or living apart) or divorced from the nonrequesting spouse. This factor weighs in favor of the requesting spouse. (b) Economic Hardship. The requesting spouse would suffer economic hardship (within the meaning of section 4.02(1)(c) of this revenue procedure) if relief from liability is not granted. During the Appeals conference, she stated 2009 Tax Ct. Memo LEXIS 174">*184 she was only going to take a short period of time off after the birth of child. However, because she does not want to pay the deficiency, she is considering not working for at least 6 months or longer. This is a possible indicator that she would would not suffer an economic hardship if she were required to pay the amount owed. (c) No knowledge or reason to know. In the case of a liability that was properly reported but not paid, the requesting spouse did not know and had no reason to know that the liability would not be paid. In the case of a liability that arose from a deficiency, the requesting spouse did not know or had no reason to know of the item that gave rise to the liability. This factor does not favor the requesting spouse. (d) Nonrequesting Spouse's legal obligation. The nonrequesting spouse has a legal obligation pursuant to a divorce decree or agreement to pay the outstanding liability. This will not be a factor weighing in favor of relief if the requesting spouse knew or had reason to know, at the 2009 Tax Ct. Memo LEXIS 174">*185 time the divorce decree or agreement was entered into, that the nonrequesting spouse would not pay the liability. This factor does not favor the requesting spouse. (e) Significant benefit. The requesting spouse has significantly benefited (beyond normal support) from the unpaid liability or items giving rise to the deficiency. See Section 1.6013-5(b). This factor favors the requesting spouse. (f) Compliance with federal income tax laws. The requesting spouse has made a good faith effort to comply with federal income tax laws in the tax years following the tax year or years to which the request for relief relates. This factor favors the requesting spouse. (g) Abuse. The requesting spouse was abused 2009 Tax Ct. Memo LEXIS 174">*186 by the nonrequesting spouse, But such abuse did not amount to duress. This factor does not favor granting innocent spouse relief. (h) Mental or physical health. Whether the requesting spouse was in poor mental or physical health on the date the requesting spouse signed the return or at the time the relief was requested. This factor does not favor granting innocent spouse relief.
OPINION
The only dispute between the parties is whether petitioner is entitled to relief under
(f) Equitable Relief.--Under procedures prescribed by the Secretary, if-- (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
Where, as here, the requesting spouse satisfies the threshold conditions,
With respect to the marital status factor, on August 19, 2008, petitioner and Mr. Hardin divorced.
With respect to the economic hardship factor, 62009 Tax Ct. Memo LEXIS 174">*191 petitioner did not present any evidence, and on the record before us we find that she has failed to carry her burden of, establishing that she would suffer economic hardship if relief under
With respect to the knowledge factor, although petition acknowledges that she knew that Mr. Hardin received unemployment compensation during 2006, she claims that 2009 Tax Ct. Memo LEXIS 174">*192 she is entitled to relief under
With respect to the legal obligation factor, the divorce decree does not provide that Mr. Hardin has a legal obligation to pay any outstanding tax liability that he and petitioner incurred while married.
With respect to the significant benefit factor, petitioner did not receive a benefit beyond normal support from Mr. Hardin's unemployment compensation. Normal support is not a significant benefit.
With respect to the compliance factor, petitioner filed a return for her taxable year 2007.
Based upon our examination of the entire record before us, we find that petitioner has failed to carry her burden of establishing that it would be inequitable to hold her liable for the deficiency that 2009 Tax Ct. Memo LEXIS 174">*193 respondent determined for her taxable year 2006. On that record, we further find that petitioner has failed to carry her burden of establishing that she is entitled to relief under
We have considered all of the contentions and arguments of the parties that are not discussed herein, and we find them to be without merit, irrelevant, and/or moot.
To reflect the foregoing,
1. All section references are to the Internal Revenue Code in effect at all relevant times. All Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. The record does not disclose the type of work that petitioner did during 2007.↩
3. Petitioner agrees that the deficiency that respondent determined in the 2006 notice is correct. Petitioner also agrees that she is not entitled to relief under
4. In a so-called stand-alone nondeficiency case, the standard of review under
5. Other factors that may be considered under
6. In determining whether a requesting spouse will suffer economic hardship, sec. 4.02(1)(c) of (ii) (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.↩
