## Facts

- Andrea Rae Demeter and Jeffrey Demeter filed joint federal income tax returns for the years at issue.
- The returns correctly reported the tax due, but the tax was not paid.
- Jeffrey operated a small business and primarily handled the couple’s finances; Andrea knew the business was financially troubled.
- The couple maintained a modest lifestyle and had two children.
- The IRS sought collection through a notice of intent to levy for the unpaid joint liabilities.
- Andrea requested equitable relief from joint and several liability under I.R.C. § 6015(f); the IRS initially denied the request.
- During Tax Court litigation, the IRS conceded that Andrea should receive relief, but Jeffrey intervened and opposed relief.
- The couple’s finances deteriorated, including foreclosure and bankruptcy, and they later divorced.
- The divorce settlement assigned Jeffrey responsibility to pay the IRS liability and to make support payments; he failed to do either.
- Andrea lost essentially all assets, relied on government food assistance, and had no significant assets; she otherwise complied with her tax obligations after the divorce.

## Issues

1. Whether Andrea Demeter was entitled to equitable relief from joint and several liability for an underpayment of tax shown on joint returns under I.R.C. § 6015(f).
2. How the facts and circumstances factors in the applicable administrative guidance (Rev. Proc. 2013-34) weighed for or against relief, including hardship, marital status, knowledge or reason to know, legal obligation, significant benefit, and post-year compliance.

## Decision

- The Tax Court granted Andrea full equitable relief under I.R.C. § 6015(f) for the unpaid joint income tax liabilities at issue.
- The court found that, considering all facts and circumstances, the balance of relevant factors favored relief.
- Jeffrey’s opposition did not overcome the statutory and administrative framework supporting relief, particularly given the divorce decree’s allocation of responsibility and Andrea’s financial condition.

## Legal Principles

- Where a joint return correctly reports tax due but the tax is unpaid, relief may be available under I.R.C. § 6015(f) based on a facts-and-circumstances inquiry.
- Rev. Proc. 2013-34 provides nonexclusive factors commonly considered for § 6015(f) relief, including marital status, economic hardship, knowledge or reason to know, legal obligation under a divorce decree, significant benefit, and subsequent tax compliance.
- Economic hardship to the requesting spouse is a strong factor favoring relief.
- A divorce decree imposing a legal obligation on the nonrequesting spouse to pay the tax liability generally favors relief for the requesting spouse.
- Lack of significant benefit from the nonpayment and subsequent compliance with tax obligations support equitable relief.
- Knowledge or reason to know of nonpayment is weighed in context, including the requesting spouse’s control over finances and reliance on the other spouse’s assurances; no single factor is determinative.

## Conclusion

The Tax Court held that Andrea Demeter qualified for equitable innocent spouse relief under § 6015(f) because multiple factors—divorce, the decree assigning payment responsibility to Jeffrey, substantial economic hardship, lack of significant benefit, and her post-divorce compliance—outweighed any evidence that she had reason to anticipate the tax would not be paid.


Demeter v. Comm’r, T.C. Memo. 2014-238 (2014)