The IRS has issued further guidance on issues related to Code Sec. 7216. The IRS had previously issued final, temporary and proposed regulations that provide updated guidance concerning the disclosure and use of tax return information by tax return preparers under Code Sec. 7216 T.D. 9478.

Notice 2010-4

In Notice 2010-4, the IRS addressed three issues with respect to the use of taxpayer information to solicit new business from previous or existing clients.
Changes in law that could result in amended returns. A tax return preparer may use tax return information to contact taxpayers to inform them of changes in tax law that could affect the income tax liability on the taxpayers’ returns that were previously prepared or processed by this tax preparer. Code Sec. 7216 does not prohibit the use of tax return information to prepare a "tax return," and, under Reg. §301.7216-1(b)(1), a tax return includes an amended return. Accordingly, the preparer could use client tax return information to identify affected taxpayers, inform them regarding the change in tax law, advise whether it would be appropriate for them to file amended income tax returns, and assist in the preparation and filing of any amended returns.

Accountant or lawyer seeking to give compliance advice. A tax return preparer who is also an accountant may use tax return information to determine who might be affected by a prospective tax rule change in order to contact potentially affected taxpayers for whom the accountant/preparer reasonably expected to provide accounting services in the next year. The contact would notify these taxpayers of the change, explain how the change may affect them, and advise them with regard to actions they may take in response to the change. Reg. §301.7216-2(h)(1)(i) allows a preparer who is lawfully engaged in the practice of law or accountancy to use tax return information to provide other legal or accounting services to the taxpayer, and such services could include advice related to current and future income tax compliance.
Disclosure of taxpayer list to auxiliary service provider. Finally, tax return preparers may disclose their taxpayer lists kept under Reg. §301.7216-2(n) to a third party service provider holding itself out as providing services that include creation, publication, and distribution of newsletters, bulletins, or similar communications to taxpayers whose tax returns the tax return preparers have prepared or processed containing tax information and general business and economic information or analysis for educational purposes or for purposes of soliciting additional tax return preparation services for the tax return preparer. Although restrictions apply to transfers of taxpayer lists under Reg. §301.7216-2(n), a preparer is allowed under Reg. §301.7216-2(d)(1) to disclose, without taxpayer consent, tax return information to another tax return preparer located in the United States for the purpose of obtaining auxiliary services in connection with the preparation of any tax return, so long as the services provided are not substantive determinations or advice affecting the tax liability reported by taxpayers. The service provider, is prohibited from the further use or disclosure of the tax return information for purposes other than those related to the provision of the auxiliary services or as otherwise expressly permitted under Code Secs. 6713 and Code Sec. 7216.
Rev. Rul. 2010-5

In Notice 2010-5, the IRS discussed disclosure of information to tax return preparer insurance carriers. The IRS held that tax return preparers will not be liable for criminal penalties under Code Sec. 7216 and civil penalties under Code Sec. 6713 with respect to certain disclosures of tax return information made to the preparer's professional liability insurance carrier. Under Reg. §301.7216-2(a)(1), a tax return preparer may dislcose, without taxpayer consent, tax return information to another tax return preparer located in the United States in order to obtain auxillary services, not involving substantive determinations or tax advice. Disclosures, without taxpayer consent, may also be made to an attorney for the purpose of obtaining legal advice under Reg. §301.7216-2(g).

A professional liability insurance policy purchased by a return preparer is an auxiliary service provided in connection with the preparation of tax returns; thus, the insurance carrier is a tax return preparer. Accordingly, disclosures necessary for price quotes or to otherwise obtain or maintain professional liability insurance coverage will not result in penalties. This could include a list of client names and description of the services provided, Similarly, disclosures made to the insurance carrier as required for purposes of reporting and investigating claims or for the carrier's selection of an attorney to represent the return preparer will not result in penalties. This could include client names, a description of the services provided, a description of the claim or potential claim, and if necessary, copies of returns relevant to the claims. In both cases, disclosures beyond those that are necessary for the provision of the auxiliary services are prohibited. Finally, a return preparer may make disclosures to the selected attorney related to the claim or potential claim or in seeking legal advice from an attorney who is not a representative of the carrier, without taxpayer consent.

section 7216 disclosure regulations

Proposed Regulations, NPRM REG-131028-09,Internal Revenue Service, (Dec. 30, 2010)
Code Sec. 7216




DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301

REG-131028-09

RIN 1545-BI85

Amendments to the Section 7216 Regulations—Disclosure or Use of Information by Preparers of Returns.

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations.

SUMMARY: In the Rules and Regulations section of this issue of the Federal Register , the IRS is issuing temporary regulations that provide updated guidance affecting tax return preparers regarding the use of information related to lists for solicitation of tax return business; the disclosure or use of statistical compilations of data under section 7216 of the Internal Revenue Code (Code) by a tax return preparer in connection with, or in support of, a tax return preparer's tax return preparation business, including identification of additional limited circumstances when a tax return preparer who compiles statistical information may disclose the compilation without taxpayer consent, and the placement of additional restrictions on the content of the compilation that may be disclosed under those circumstances without taxpayer consent; and the disclosure or use of information for the purpose of performing conflict reviews. The text of those temporary regulations also serves as the text of these proposed regulations. This document invites comments from the public on these regulations.

DATES: Written or electronic comments and requests for a public hearing must be received by [ INSERT DATE 60 DAYS AFTER PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER ].

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-131028-09), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-131028-09), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C., or sent electronically, via the Federal eRulemaking Portal at www.regulations.gov (IRS REG-131028-09).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Molly K. Donnelly, (202) 622-4940; concerning the submissions of comments and requests for hearing, Richard Hurst, (202) 622-7180 (not toll-free numbers). SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions
This document contains proposed amendments to 26 CFR part 301 under section 7216 to provide modified rules relating to the ability of a tax return preparer to use tax return information, without taxpayer consent, for the purposes of compiling, maintaining, and using lists for solicitation of tax return business under §301.7216-2(n); disclose and use statistical compilations of data described in §301.7216-1(b)(3)(i)(B) under §301.7216-2(o), and disclose and use tax return information for the purpose of performing conflict reviews under §301.7216-2(p). Temporary regulations in the Procedure and Administration section of this issue of the Federal Register amend 26 CFR part 301. The text of those regulations also serves as the text of these regulations. The preamble to the temporary regulations explains the temporary regulations and these proposed regulations.

Special Analyses
It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and the Treasury Department request comments on the clarity of the proposed rules, how they can be made easier to understand, and the administrability of the rules in the proposed regulations. All comments will be made available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time and place for the public hearing will be published in the Federal Register .

Drafting Information
The principal author of these regulations is Molly K. Donnelly, Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations
Accordingly, 26 CFR part 301 is proposed to be amended as follows: PART 301—PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 301.7216-2 is amended by revising paragraphs (n), (o), and (p) to read as follows:

§301.7216-2 Permissible disclosures or uses without consent of the taxpayer .
* * * * *

(n) [The text of proposed amendments to §301.7216-2(n) is the same as the text for §301.7216-2T(n) published elsewhere in this issue of the Federal Register ].

(o) [The text of proposed amendments to §301.7216-2(o) is the same as the text for §301.7216-2T(o) published elsewhere in this issue of the Federal Register ].

(p) [The text of proposed amendments to §301.7216-2(p) is the same as the text for §301.7216-2T(p) published elsewhere in this issue of the Federal Register ].

* * * * *

Steven T. Miller

Deputy Commissioner for Services and Enforcement.

[FR Doc. 2009-31114 Filed 12/29/2009 at 4:15 pm; Publication Date: 01/04/2010]

Computing gambling income

A married couple had unreported gambling income in an amount equal to their winnings from one day of playing a slot machine, less the money they began with and money they lost before cashing out. The couple, who were not professional gamblers, could not, however, net all wagering gains or losses they sustained throughout the year. Gambling losses incurred other than in the trade or business of gambling are allowable only as itemized deductions when calculating taxable income. Because the taxpayers elected to use the standard the deduction, they were not entitled to itemize their deductions.


George D. and Lillian M. Shollenberger v. Commissioner.U.S. Tax Court, Dkt. No. 5504-08, TC Memo. 2009-306, December 28, 2009.

OPINION
Gross income includes all income from whatever source derived, including gambling. Sec. 61(a); McClanahan v. United States, 292 F.2d 630, 631-632 (5th Cir. 1961). In the case of a taxpayer not engaged in the trade or business of gambling, gambling losses from “wagering transactions” are allowable as an itemized deduction but “only to the extent of the gains from such transactions.” Sec. 165(d); see McClanahan v. United States, supra; Winkler v. United States, 230 F.2d 766 (1st Cir. 1956).
Respondent asserts that for purposes of applying section 165(d) to casual gamblers like petitioners, the correct analysis and methodology is set forth in Chief Counsel Advice 2008-011 (Dec. 5, 2008) (the Chief Counsel Advice), which states in part:
A key question in interpreting §165(d) is the significance of the term “transactions.” The statute refers to gains and losses in terms of wagering transactions. Some would contend that transaction means every single play in a game of chance or every wager made. Under that reading, a taxpayer would have to calculate the gain or loss on every transaction separately and treat every play or wager as a taxable event. The gambler would also have to trace and recompute the basis through all transactions to calculate the result of each play or wager. Courts considering that reading have found it unduly burdensome and unreasonable. See Green v. Commissioner, 66 T.C. 538 (1976); Szkirscak [sic] v. Commissioner, T.C. Memo. 1980-129. Moreover, the statute uses the plural term “transactions” implying that gain or loss may be calculated over a series of separate plays or wagers.
The better view is that a casual gambler, such as the taxpayer who plays the slot machines, recognizes a wagering gain or loss at the time she redeems her tokens. We think that the fluctuating wins and losses left in play are not accessions to wealth until the taxpayer redeems her tokens and can definitively calculate the amount above or below basis (the wager) realized. See Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955). For example, a casual gambler who enters a casino with $100 and redeems his or her tokens for $300 after playing the slot machines has a wagering gain of $200 ($300-$100). This is true even though the taxpayer may have had $1,000 in winning spins and $700 in losing spins during the course of play. Likewise, a casual gambler who enters a casino with $100 and loses the entire amount after playing the slot machines has a wagering loss of $100, even though the casual gambler may have had winning spins of $1,000 and losing spins of $1,100 during the course of play. [Fn. ref. omitted.]
Applying this methodology, respondent concedes that if we find, as we have found, that on March 29, 2005, petitioners entered the casino with $500 and took home $1,600 of winnings, the amount of gambling income which petitioners should have reported on their 2005 return was $1,100 ($2,000 jackpot winnings less $500 brought to the casino for gambling and less $400 taken from the jackpot for additional gambling) rather than $2,000 as determined in the notice of deficiency.
Although petitioners have stated that they “agree with” the Chief Counsel Advice, they nevertheless maintain, contrary to the Chief Counsel Advice, that they should be allowed to offset their March 29, 2005, net winnings with $2,264 of gambling losses they claim to have incurred throughout 2005. They contend that this result is necessary to treat “regular and casual gamblers equally”. 2


The Code mandates, however, that casual gamblers be treated differently from taxpayers who are in the trade or business of gambling. In particular, gambling losses incurred in a trade or business of gambling are allowable in computing adjusted gross income pursuant to section 62(a)(1). Gambling losses incurred other than in the trade or business of gambling are allowable, if at all, as itemized deductions in calculating taxable income. See sec. 63(a), (d); Johnston v. Commissioner, 25 T.C. 106, 108 (1955); Cromley v. Commissioner, T.C. Memo. 2008-176; Heidelberg v. Commissioner, T.C. Memo. 1977-133.


Because petitioners were not engaged in the trade or business of gambling, their gambling losses are allowable only as itemized deductions. But because petitioners have elected the standard deduction, they are not entitled to itemize their deductions. 3 Sec. 63(b), (e); see Johnston v. Commissioner, supra; Heidelberg v. Commissioner, supra. We reject as without merit petitioners' contention that this statutory arrangement is unconstitutional. See Tschetschot v. Commissioner, T.C. Memo. 2007-38 (upholding constitutionality of section 165(d)); Valenti v. Commissioner, T.C. Memo. 1994-483 (same); cf. Gajewski v. Commissioner, 84 T.C. 980 (1985) (holding that for purposes of computing the minimum tax the 16th Amendment does not require that a casual gambler's gambling losses be netted against gambling gains).
Drawing an analogy to the recovery of a capital investment, this Court has held that a casual gambler's gross income from a wagering transaction should be calculated by subtracting the bets placed to produce the winnings, not as a deduction in calculating adjusted gross income or taxable income but as a preliminary computation in determining gross income. See Lutz v. Commissioner, T.C. Memo. 2002-89 (slot machine winnings); Hochman v. Commissioner, T.C. Memo. 1986-24 (horse race winnings). This Court has also recognized the practical difficulties of tracking the basis of each wager individually in a session of like play. See Green v. Commissioner, 66 T.C. 538, 548 (1976) (stating that a “tabulation of the amounts paid for chips less the amount paid to redeem chips would have served to verify the net win or loss figures”); Szkircsak v. Commissioner, T.C. Memo. 1980-129 (stating that “it is impractical to record each separate roll of the dice or spin of the wheel”). The methodology put forward by respondent is consistent with these principles.
Insofar as petitioners mean to suggest that section 165(d) permits their gross income from slot machine play to be calculated by netting all their 2005 slot machine gains and losses, we disagree. Section 165(d) does not define gross income but instead limits the deductibility of losses on wagering “transactions” to the amount of gains from wagering “transactions”. Consistent with general principles treating each wager as a separate taxable event under Federal tax law, see Abeid v. Commissioner, 122 T.C. 404, 411 (2004), section 165(d) clearly contemplates that gross income from wagering is determined in the first instance by reference to individual wagering “transactions.” To permit a casual gambler to net all wagering gains or losses throughout the year would intrude upon, if not defeat or render superfluous, the careful statutory arrangement that allows deduction of casual gambling losses, if at all, only as itemized deductions, subject to the limitations of section 165(d).
Respondent has effectively conceded that petitioners' gross income from their March 29, 2005, slot machine play was $1,100. Cf. LaPlante v. Commissioner, T.C. Memo. 2009-226 (holding that taxpayers failed to substantiate claims of net gambling gains and losses). Giving effect to this concession, we hold that petitioners had $1,100 of unreported gross income from gambling in 2005 and are entitled to no deduction for gambling losses.
To reflect the foregoing,
Decision will be entered under Rule 155.

Footnotes


1
Certain computational adjustments that follow from the resolution of this issue are not in controversy, and we do not address them.
2
By “regular” gamblers, we understand petitioners to mean gamblers who are in the trade or business of gambling.
3
A taxpayer may change an election to claim the standard deduction at any time before the period of limitations has expired. Sec. 63(e). Insofar as the record shows, petitioners have not sought to change their election to claim the standard deduction. In any event, on the record before us it would not appear advantageous for petitioners to do so.

Payments made by an individual to his former wife were not deductible as alimony under Code Sec. 215. The payments were not required by the couple's divorce agreement, which specifically stated that neither party was obligated to pay maintenance to the other party. An untitled single-page document that ordered the taxpayer to pay his ex-wife amounts related to his pension plan was incomplete and not explained at trial; therefore, the document was not probative. The Tax Court did, however, comment that its holding only referred to the year at issue, and that the taxpayer could ask a local court for a qualified domestic relations order (QDRO) with respect to the monthly payments of a portion of his pension.


Donald A. Benzin v. Commissioner.
Docket No. 7811-09S. Filed December 28, 2009.


.
Discussion
A. Evidentiary Matters
In general, the Court conducts trials in accordance with the rules of evidence for trials without a jury in the U.S. District Court for the District of Columbia and accordingly follows the Federal Rules of Evidence. Sec. 7453; Rule 143(a); Clough v. Commissioner, 119 T.C. 183, 188 (2002). However, Rule 174(b) and section 7453 carve out an exception for trials of small tax cases. Under this exception, the Court conducts small tax cases as informally as possible consistent with orderly procedure and “any evidence deemed by the Court to have probative value shall be admissible.” Rule 174(b); Schwartz v. Commissioner, 128 T.C. 6, 7 (2007).
The untitled single-page document stipulated by the parties and to which respondent reserved an objection is incomplete and was not explained by petitioner at trial. The document raises more questions than it provides answers. Therefore, respondent's objection is sustained on the basis that the document is not probative. See Rule 174(b).
B. Burden of Proof
Generally, the Commissioner's determinations are presumed correct, and the taxpayer bears the burden of proving that those determinations are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of legislative grace, and the taxpayer bears the burden of proving that he or she is entitled to any deduction claimed. Rule 142(a); Deputy v. du Pont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Under section 7491(a)(1), the burden of proof may shift from the taxpayer to the Commissioner if the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the taxpayer's liability. Petitioner has not alleged that section 7491 applies nor otherwise satisfied the requirements of that section; therefore, the burden of proof remains on petitioner.
C. Alimony Deduction
Generally, property settlements or equitable divisions of marital property incident to a divorce are not taxable events and do not give rise to a deduction. Sec. 1041; Estate of Goldman v. Commissioner, 112 T.C. 317, 322 (1999), affd. without published opinion sub nom. Schutter v. Commissioner, 242 F.3d 390 (10th Cir. 2000). On the other hand, payments made or received as alimony or separate maintenance generally are deductible by the payor spouse under section 215(a) and includable in the gross income of the payee spouse under sections 61(a)(8) and 71.
Section 215(b) defines an alimony or separate maintenance payment as a payment which is includable in the gross income of the recipient under section 71. Section 71(b)(1) provides a four-step inquiry for determining whether a payment is alimony or separate maintenance. Section 71(b)(1) provides:
SEC. 71(b)(1). Alimony or Separate Maintenance Payments Defined.—For purposes of this section—
(1) In general.—The term “alimony or separate maintenance payment” means any payment in cash if—
(A) such payment is received by (or on behalf of) a spouse under a divorce or separation instrument,
(B) the divorce or separation instrument does not designate such payment as a payment which is not includible in gross income * * * and not allowable as a deduction under section 215,
(C) in the case of an individual legally separated from his spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made, and
(D) there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse.
Payments are deductible as alimony only if all four requirements of section 71(b)(1) are met.
Under subparagraph (A) of section 71(b)(1), alimony or separate maintenance must be received pursuant to a divorce or separation instrument. According to section 71(b)(2), a “divorce or separation instrument” means:
(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree,
(B) a written separation agreement, or
(C) a decree (not described in subparagraph (A))requiring a spouse to make payments for the support or maintenance of the other spouse.
Further, subparagraph (B) of section 71(b)(1) requires that the divorce or separation instrument not designate the payment as not alimony or separate maintenance. A divorce or separation instrument “contains a nonalimony designation if the substance of such a designation is reflected in the instrument.” Estate of Goldman v. Commissioner, supra at 323. In other words, a divorce or separation agreement must provide a “clear, explicit and express direction” that the payments are not to be treated as alimony, but the designation need not mimic the language of sections 71 and 215. Richardson v. Commissioner, 125 F.3d 551, 556 (7th Cir. 1997), affg. T.C. Memo. 1995-554; Estate of Goldman v. Commissioner, supra at 323.
In the present case, neither the Judgment nor the incorporated Agreement makes any mention of alimony or separate maintenance. Petitioner's pension plan with the USPS and the $475 per month payment therefrom were also not established by the Judgment or the Agreement. Indeed, the Agreement specifically states that “neither party shall be obligated to pay maintenance to the other party.” In addition, petitioner testified: “I didn't have to pay alimony, and she didn't have to pay it to me either.”
We conclude, therefore, that the Judgment of Divorce and the Oral Stipulation Agreement incorporated therein do not provide for payments to petitioner's former wife and clearly, explicitly, and expressly contain a nonalimony provision. Accordingly, we must hold that petitioner's payments made to his former wife in 2007 did not satisfy the conditions set forth in section 71 and are thus not properly deductible as alimony for the taxable year in issue.
Finally, we observe that the only year before us is 2007 and that our holding relates only to that year. Thus, our holding does not preclude petitioner from asking a local court of competent jurisdiction for a qualified domestic relations order (QDRO) with respect to the monthly payment to his former wife of a portion of his USPS pension. See secs. 402(e)(1)(A), 414(p); Amarasinghe v. Commissioner, T.C. Memo. 2007-333, affd. 282 Fed. Appx. 228 (4th Cir. 2008).
To reflect the foregoing,
Decision will be entered for respondent.

Heath Care Reform Bill HR 3590

Senate Approves Health Care Reform Bill; Difficult Conference Expected, (Dec. 28, 2009)
The Senate on December 24 passed its sweeping health care reform legislation, the Patient Protection and Affordable Care Bill (HR 3590) by a vote of 60 to 39. The vote set the stage for a contentious conference with the House to merge the two chambers' respective versions of the bill.
Calling Senate passage of the health care reform bill "a historic vote," President Obama said that Congress is "finally poised to deliver on the promise of real, meaningful health insurance reform that will bring additional security and stability to the American people." The president noted that, if a final bill is enacted, it will be "the most important piece of social policy since the Social Security Act in the 1930s, and the most important reform of our health care system since Medicare passed in the 1960s."
Conference Issues
Liberal House Democrats are unhappy that the Senate jettisoned a public insurance option. They are also opposed to language in the Senate bill that prohibits the use of federal funds to pay for abortions, a key concession necessary to win the vote of Sen. Ben Nelson, D-Neb. The moderate lawmaker has warned that significant changes to the Senate version could cause him to vote against the final bill, leaving Senate Democratic leaders short of the necessary 60 votes required for passing the measure.
The House and the Senate also differ on how to pay for the reform package. The Senate bill raises most of the revenue for health care reform by imposing a 40-percent surtax on high-cost employer-sponsored health plans. House members from states with strong union supporters oppose the tax on so-called "Cadillac" plans and they have threatened to withhold their support of a final bill if the provision is included.
The House bill would raise revenue through a 5.4-percent surtax on high-income earners and the Senate has openly rejected that plan. Democratic aides believe, however, that both sides will eventually compromise on revenue provisions and have suggested that conferees will likely consider raising the income threshold for high-end insurance plans.
Democratic staff members will begin laying the framework for negotiations during the week starting on December 28 and conferees are expected to return to Washington the first week of January 2010. House Speaker Nancy Pelosi, D-Calif., has indicated that she would like to complete work on the health care reform package in time for President Obama’s State of the Union address, traditionally delivered at the end of January. The White House has set no deadline for when it expects to see the final bill.

Tax Extenders Act of 2009 JCX-60-09

http://www.jct.gov/publications.html?func=startdown&id=3640

Jakson Hewitt problems

http://www.businessweek.com/news/2009-12-24/jackson-hewitt-plunges-as-partner-halts-tax-loans-update2-.html

Innocent Spouse case - section 6015

The IRS denied innocent spouse relief to a wife for a tax deficiency arising from the married couple's failure to report on their joint income tax return income derived from the couple's business. The wife was not entitled to relief under Code Sec. 6015(b)(1)(B) or Code Sec. 6015(b)(1)(C) because she did not prove that the income was her husband's alone, and she did not offer any evidence of how the revenue could be allocated between the two spouses. Furthermore, testimony showed that the wife had reason to know that the return she signed understated the couple's income. The wife was also not entitled to relief under Code Sec. 6015(c) because the couple was married in the year in issue and continue to be married. Additionally, the wife did not prove that it was inequitable to hold her jointly liable under Code Sec. 6015(b)(1)(D) and Code Sec. 6015(f) because she did not satisfy several factors considered for equitable relief as set forth in Rev. Proc. 2003-61, 2003-2 C.B. 296.


Callie Sue Olson v. Commissioner., U.S. Tax Court, CCH Dec. 58,031(M), T.C. Memo. 2009-294, (Dec. 21, 2009)
Callie Sue Olson v. Commissioner.
U.S. Tax Court, Dkt. No. 20384-07, TC Memo. 2009-294, December 21, 2009.

MEMORANDUM FINDINGS OF FACT AND OPINION
GUSTAFSON, Judge: This case arises from petitioner Callie Sue Olson's request for “innocent spouse” relief from joint liability under section 6015 1 for 2003 taxes—i.e., an income tax deficiency of $13,600, an addition to tax of $3,400 under section 6651(a)(1) for failure to file the return on time, and an accuracy-related penalty of $2,720 under section 6662. In a statutory notice of deficiency issued to Ms. Olson and her husband on June 12, 2007, 2 the Internal Revenue Service (IRS) denied Ms. Olson's request for relief from joint liability; and in response, Ms. Olson timely filed a petition with the Court on September 10, 2007. The issue for decision is whether Ms. Olson is entitled under section 6015 to relief from joint liability. We find that Ms. Olson is not entitled to such relief.
ed.
OPINION
I. Standard and Scope of Review
When determining whether a taxpayer is entitled to relief under section 6015 (whether under subsection (b), (c), or (f)), we conduct a trial de novo, in which we may consider evidence introduced at trial which was not included in the administrative record. Porter v. Commissioner, 130 T.C. 115, 117 (2008). For all claims under section 6015 (including claims for equitable relief under section 6015(f)), we do not review for abuse of discretion but instead employ a de novo standard of review. Porter v. Commissioner, 132 T.C. ___ (2009). Respondent contends, however, that when the Court reviews a denial of relief under section 6015 (f), it must apply an abuse-of-discretion standard of review and must limit the scope of its review to the administrative record. We have held otherwise in the two Porter opinions cited above, and we do not repeat in this opinion the reasons for those holdings.
An appeal in this case would lie to the U.S. Court of Appeals for the Eighth Circuit. That court held in Robinette v. Commissioner, 439 F.3d 455, 460 (8th Cir. 2006), revg. 123 T.C. 85 (2004), that the Tax Court's scope of review in a collection due process (CDP) proceeding under sections 6320 and 6330 should be limited to the administrative record. 4 However, the CDP provisions of sections 6320 and 6330 are different from the “innocent spouse” provisions of section 6015, and those differences include the following:
The CDP petitioner's agency-level remedies are described at some length in section 6330(a), (b), and (c), and section 6330(d)(2) requires the CDP petitioner to “exhaust[] all administrative remedies”; but section 6015 makes no explicit provision of agency-level remedies for “innocent spouse” relief and says nothing about exhausting them. The agency's CDP action is repeatedly characterized in section 6330 as a “hearing”, but no agency hearing is explicitly provided for the “innocent spouse” in section 6015. 5 The taxpayer's CDP submission to the Tax Court under section 6330(d) is called an “appeal” and is not referred to as a “petition” anywhere in the statute, while section 6015(e) provides that the innocent spouse files a “petition” that is nowhere called an “appeal”. The Tax Court “determine[s]” innocent spouse relief, sec. 6015(e)(1)(A), but has “jurisdiction with respect to such matter” in the case of an appeal from the agency's CDP determination, sec. 6330(d)(1). 6
All these differences in statutory vocabulary suggest that even if a CDP case under sections 6320 and 6330 is held to be governed by a “record rule”, as the Court of Appeals for the Eighth Circuit holds, the same rule is not warranted for an “innocent spouse” case under section 6015. We therefore follow our Porter decisions and apply a de novo standard of review and scope of review in deciding this case under section 6015.
II. Joint and Several Liability and Section 6015 Relief
Section 6013(d)(3) provides that if a joint return is filed, the tax is computed on the taxpayers' aggregate income, and liability for the resulting tax is joint and several. See also sec. 1.6013-4(b), Income Tax Regs. (26 C.F.R.). That is, each spouse is responsible for the entire joint tax liability. However, section 6015 provides for relief from joint liability for spouses who meet the conditions of subsection (b) and for divorced and separated persons under subsection (c), and provides equitable relief in subsection (f) when the relief provided in subsections (b) and (c) is not available. Except as otherwise provided in section 6015, the taxpayer bears the burden of proof. See sec. 6015(c)(2); Rule 142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004). Because Ms. Olson generally requests relief under section 6015, we analyze her eligibility under all three subsections.
A. Subsection (b) Relief
Section 6015 provides as follows in subsections (a) and (b)(1):
SEC. 6015. RELIEF FROM JOINT AND SEVERAL LIABILITY ON JOINT RETURN.
(a) In General.—Notwithstanding section 6013(d)(3)—
(1) an individual who has made a joint return may elect to seek relief under the procedures prescribed under subsection (b); and
(2) if such individual is eligible to elect the application of subsection (c), such individual may, in addition to any election under paragraph (1), elect to limit such individual's liability for any deficiency with respect to such joint return in the manner prescribed under subsection (c).
Any determination under this section shall be made without regard to community property laws.
(b) Procedures for Relief from Liability Applicable to All Joint Filers.—
(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,
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.
Section 6015(b)(1) thus authorizes “innocent spouse” relief if a taxpayer satisfies all five of the requirements set out in subparagraphs (A) through (E). Respondent does not dispute that Ms. Olson meets the requirements of subparagraphs (A) (joint return) and (E) (timely election), but he denies that she meets the other three requirements in subparagraphs (B), (C), and (D). We therefore discuss those three.
1. Erroneous Item of Non-requesting Spouse ( Section 6015(b)(1)(B)
Ms. Olson has the burden to prove that the understatement of tax on the joint return was attributable to erroneous items of Mr. Olson and not of Ms. Olson. See Jonson v. Commissioner, 118 T.C. 106, 113 (2002), affd. 353 F.3d 1181 (10th Cir. 2003). However, the erroneous item on the return was the business income of Fun Stuff Rental, 7 which was the family business. The business is identified on the company checks as “Greg & Callie's” (emphasis added), and Ms. Olson was active in the business—answering the phone, sending out mail, paying the help, handling the equipment, and working some of the jobs. Mr. and Ms. Olson's work was collaborative and mutual. Ms. Olson did not prove that the Fun Stuff Rental income was an item of Mr. Olson alone, and she did not offer any evidence of how the revenue could be allocated between the two spouses. See Ishizaki v. Commissioner, T.C. Memo. 2001-318, 82 T.C.M. (CCH) 995, 1000-1001 (2001) (income is not an item of one spouse when the other “actively and substantially participated”). We hold that Ms. Olson did not prove that she meets the requirement of section 6015(b)(1)(B).
2. Requesting Spouse's Knowledge ( Section 6015(b)(1)(C))
As for the requirement of section 6015(b)(1)(C), Ms. Olson did make a credible showing that “in signing the return * * * she did not know * * * that there was such understatement”, but she did not prove that she “had no reason to know”. 8 On the contrary, her testimony showed that she did have reason to know that the return she signed understated the liability. She had quit her hospital job the prior year, so that in 2003 the family's only income source was Fun Stuff Rental; she saw that family expenses were being paid from the revenues of the business; she had access to all the records of the business; yet she signed a joint return on which Fun Stuff Rental reported a loss of $10,376. From the facts immediately available to her, she had reason to know that Fun Stuff Rental had not really experienced a loss of $10,376.
The loss reported on the return that Ms. Olson signed simply cannot be reconciled with her knowledge of the business and the family activities. If she did not know that the return she signed understated the income of Fun Stuff Rental, it is because she chose to pay no attention to the matter. But as the Court of Appeals for the Eighth Circuit has observed:
a taxpayer cannot satisfy the lack of knowledge requirement by claiming that he or she failed to review the joint return before signing it. “ Section 6013(e) is designed to protect the innocent, not the intentionally ignorant.” Cohen v. Commissioner, T.C. Memo. 1987-537 (Oct. 20, 1987). * * *
Erdahl v. Commissioner, 930 F.2d 585, 589 (8th Cir. 1991), revg. T.C. Memo. 1990-101. We hold that Ms. Olson did not prove that she had no reason to know that the loss reported on the joint return that she signed was erroneous. Rather, she could and should have known that the reported loss was erroneous.
3. Inequitable To Hold Liable ( Section 6015(b)(1)(D))
As for the requirement of section 6015(b)(1)(D), Ms. Olson did not show that “it is inequitable to hold * * * [her] liable for the deficiency in tax”. The statute provides that this judgment on the equities is to be made “taking into account all the facts and circumstances”. 9 Since this “inequitable” requirement under section 6015(b)(1)(D) is equivalent to the “inequitable” requirement under section 6015(f)(1), which is discussed below in part II.C, we relegate our analysis to that part of this opinion. In sum, Ms. Olson did not prove that it is inequitable to hold her jointly liable.
Thus, Ms. Olson fails to satisfy the requirements of subparagraphs (B), (C), and (D) of section 6015(b)(1) and does not qualify for relief under section 6015(b).
B. Subsection (c) Relief.
Section 6015(c) is entitled “Procedures to Limit Liability for Taxpayers No Longer Married or Taxpayers Legally Separated or Not Living Together.” Because Mr. and Ms. Olson were married in the year in issue and continue to be married, Ms. Olson is not entitled to relief under subsection (c).
C. Equitable Relief Under Subsection (f)
1. Standards Applicable Under Section 6015(f)
Subsection (f) of section 6015 provides as follows:
SEC. 6015(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.
Thus, a taxpayer may be relieved from joint and several liability under section 6015(f) if, taking into account all the facts and circumstances, it is inequitable to hold the taxpayer liable.
In accord with the statutory provision that section 6015(f) relief is to be granted “[u]nder procedures prescribed by the Secretary,” the Commissioner has issued revenue procedures to guide IRS employees in determining whether a requesting spouse is entitled to relief from joint and several liability. See Rev. Proc. 2003-61, supra, 2003-2 C.B. 296, modifying and superseding Rev. Proc. 2000-15, 2000-1 C.B. 447. Revenue Procedure 2003-61 provides a three-step analysis for IRS employees to use in deciding whether to grant relief: Section 4.01 (discussed below) lists seven threshold conditions that must be met for any relief to be granted; section 4.02, not applicable here, lists circumstances in which relief will ordinarily be granted as to liabilities (unlike those at issue here) that were reported on a return; and section 4.03 (discussed below) sets out eight non exclusive factors to be considered in determining whether equitable relief should be granted.
The Tax Court has been given express authority to review the IRS's denial of equitable relief under section 6015(f). Section 6015(e)(1) provides:
[I]n the case of an individual who requests equitable relief under subsection (f) * * * [i]n addition to any other remedy provided by law, the individual may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief available to the individual under this section * * *.
In “determin[ing] the appropriate relief”, the Court reviews the IRS's three-step analysis prescribed in its revenue procedure, see Washington v. Commissioner, 120 T.C. 137, 147-152 (2003), but our review is not circumscribed by that matrix. Rather, we consider “all the facts and circumstances” in determining whether the taxpayer is entitled to “innocent spouse” relief. Sec.6015(f)(1); see Porter v. Commissioner, 132 T.C. at ___ (slip op. at 12-13); Lantz v. Commissioner, 132 T.C. ___ (2009).
2. Evaluation of Ms. Olson's Entitlement to Relief Under Section 6015(f)
As we now show, the IRS correctly employed the analysis prescribed in Revenue Procedure 2003-61, supra, to determine that Ms. Olson is not entitled to equitable relief under section 6015(f). We find that that the IRS's analysis did not exclude any relevant fact or circumstance that ought to be taken into account, and that relief from joint liability is not appropriate in this case.
a. Threshold Eligibility Under Rev. Proc. 2003-61, Sec. 4.01
Revenue Procedure 2003-61 sets out, in section 4.01, seven threshold conditions that all requesting spouses must meet in order for the IRS to grant relief pursuant to section 6015(f). 10 In his pretrial memorandum respondent asserts generally that Ms. Olson “fails to meet the threshold eligibility requirements” but does not specify which one or ones she fails to meet. It appears that she satisfies the first six but that she fails to satisfy the seventh—i.e., “The income tax liability from which the requesting spouse seeks relief is attributable to an item of the individual with whom the requesting spouse filed the joint return”. As we explained above in part II.A.1, Ms. Olson failed to show that the underreported income of Fun Stuff Rental was an item attributable to Mr. Olson alone. Rather, Ms. Olson was also active in the business, so that its income is properly attributable not only to Mr. Olson but also to her. Ms. Olson therefore fails to meet the threshold conditions for the IRS to grant equitable relief.
We nonetheless proceed to consider “[i]n the alternative”, see O'Meara v. Commissioner, T.C. Memo. 2009-71, whether there are any additional facts and circumstances that would justify relief for Ms. Olson. We find that there are not.
b. Facts-and-Circumstances Test of Rev. Proc. 2003-61, Sec. 4.03
Where the requesting spouse satisfies the threshold conditions of section 4.01 of Revenue Procedure 2003-61 (not the case here), the IRS may grant relief under the facts-and-circumstances test of section 4.03. Under that test the IRS considers a “nonexclusive list of factors” in section 4.03(2)(a) to determine whether “taking into account all the facts and circumstances, it is inequitable to hold the requesting spouse liable”: (i) whether the requesting spouse is separated or divorced from the nonrequesting spouse; (ii) whether the requesting spouse would suffer economic hardship if not granted relief; (iii) whether the requesting spouse knew or had reason to know that the other spouse would not pay the liability; (iv) whether the nonrequesting spouse has a legal obligation to pay the outstanding tax liability pursuant to a divorce decree or agreement; (v) whether the requesting spouse received a significant benefit from the item giving rise to the deficiency; and (vi) whether the requesting spouse has made a good faith effort to comply with the tax laws for the taxable years following the taxable year to which the request for such relief relates. Other factors that the IRS considers under section 4.03(2)(b) are (i) whether the nonrequesting spouse abused the requesting spouse and (ii) whether the requesting spouse was in poor mental or physical health at the time he or she signed the tax return or at the time he or she requested relief.
We consider these factors and any other relevant facts and circumstances in determining whether the taxpayer is entitled to “innocent spouse” relief. No single factor is determinative, and all factors are to be considered and weighted appropriately. Haigh v. Commissioner, T.C. Memo. 2009-140. In this case the IRS's factors provide a sufficient basis for evaluating Ms. Olson's claim for equitable relief, and the record suggests no additional facts and circumstances that should be considered. We therefore address the factors listed in section 4.03 of Revenue Procedure 2003-61.
i. Marital Status
Ms. Olson was not divorced, separated, or living apart from Mr. Olson when she filed her request for “innocent spouse” relief. This factor weighs against granting relief. See McKnight v. Commissioner, T.C. Memo. 2006-155.
ii. Economic Hardship
Generally, economic hardship exists if collection of the tax liability will cause the taxpayer to be unable to pay reasonable basic living expenses. Butner v. Commissioner, T.C. Memo. 2007-136. Ms. Olson made no showing of economic hardship, so this factor weighs against granting relief.
iii. Knowledge or Reason To Know
As is discussed above in part II.A.2, Ms. Olson has failed to establish that she did not have reason to know of the item giving rise to the deficiency (i.e., the income of Fun Stuff Rental). This factor weighs against granting relief. See Beatty v. Commissioner, T.C. Memo. 2007-167.
iv. Nonrequesting Spouse's Legal Obligation
Where a divorce decree or other court order gives the nonrequesting spouse a legal obligation to pay the liability, this fact can weigh in favor of granting relief to the requesting spouse. No divorce decree or separation order imposes such a liability on Mr. Olson, and this factor therefore weighs against granting relief to Ms. Olson.
v. Significant Benefit
While Ms. Olson did share in the benefit of the Fun Stuff Rental income in 2003 and did share with Mr. Olson the benefit of the money that they did not use to pay their tax liability, there is nothing in the record that indicates that Ms. Olson “received significant benefit (beyond normal support) from the unpaid income tax liability or item giving rise to the liability”, and respondent does not contend that she did. Therefore, this factor weighs moderately in favor of relief. See Magee v. Commissioner, T.C. Memo. 2005-263.
vi. Compliance With Federal Tax Laws
As of the time the IRS issued the notice of deficiency that denied Ms. Olson's request for relief for 2003, the Olsons had not filed returns for 2004 and 2005, so respondent contends that Ms. Olson had not (for purposes of Rev. Proc. 2003-61, sec. 4.03(2)(a)(vi)) “made a good faith effort to comply with income tax laws in the taxable years following the taxable year or years to which the request for relief relates.” We have found that in 2003 the income of Fun Stuff Rental was an item of both Mr. and Ms. Olson. However, the record is not clear on this point as to 2004 and 2005; and when the IRS determined deficiencies for 2004 and 2005, it issued the notice of deficiency to Mr. Olson only. Since this factor, even if found in Ms. Olson's favor, would not sufficiently tip the scales to justify relief, we do not decide this issue and instead assume arguendo that this factor weighs in favor of relief. See Fox v. Commissioner, T.C. Memo. 2006-22.
vii. Abuse
There is no evidence or allegation of abuse by Mr. Olson. Therefore, this factor is neutral. See Magee v. Commissioner, supra.
viii. Mental or Physical Health
Ms. Olson has not alleged, nor does the record show, that her mental or physical health was poor at the relevant times. Therefore, this factor is neutral. See id.
When we weigh the facts and circumstances implicated in these eight factors, we find that Ms. Olson is not entitled to relief. Two factors are neutral, no more than two factors weigh in favor of relief, and at least four factors weigh against relief. We find that the two favorable factors (subsequent compliance and lack of significant benefit) are easily outweighed by the four unfavorable factors: Ms. Olson lived with and continues to live with Mr. Olson; she showed no economic hardship that would result if relief were not granted; she should have known of the understatement reflected on the return; and Mr. Olson is not under any order or decree to pay the liability. As a result, when the facts and circumstances are weighed, Ms. Olson is not entitled to “innocent spouse” relief under section 6015(f) with respect to the Olsons' joint Federal income tax liability for 2003.
In sum, we find that Ms. Olson is not entitled to relief from joint liability under section 6015(b), (c), or (f).
To reflect the foregoing,
Decision will be entered for respondent.

Footnotes


1
Unless otherwise indicated, all citations of sections refer to the Internal Revenue Code of 1986 (26 U.S.C.), as amended, and all citations of Rules refer to the Tax Court Rules of Practice and Procedure.
2
The 2003 deficiency itself was disputed in Gregory John Olson v. Commissioner, docket No. 20383-07, in which case Ms. Olson was not a petitioner. Mr. Olson conceded the case, and decision was entered on November 17, 2009, sustaining against him the IRS's deficiency determination.
3
In the “Filing Status” block on the first page of the return, neither the block for “Married filing jointly” nor any other block is checked. However, the names of both Mr. and Ms. Olson appear on the appropriate lines (with Ms. Olson's name on the line marked “If a joint return, spouse's first name and initial”); and Ms. Olson signed in the signature block on the second page, under “Spouse's signature. If a joint return, both must sign.” The IRS treated the return as a joint return, and Ms. Olson's request for innocent spouse relief characterized the return as a joint return.
4
This Court held to the contrary in Robinette v. Commissioner, 123 T.C. 85 (2004), revd. 439 F.3d 455, 460 (8th Cir. 2006), and in CDP cases we generally do not follow the record rule. However, in cases appealable to Courts of Appeals that follow the record rule, we do follow those precedents pursuant to our “ Golsen rule”. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), affd. 445 F.2d 985 (10th Cir. 1971). However, as we noted in Porter v. Commissioner, 130 T.C. 115, 120 (2008), the Court of Appeals' decision in Robinette interpreting section 6330 does not govern the interpretation of section 6015.

5
See Porter v. Commissioner, supra, 130 T.C. at 135 (Thornton, J., concurring); Friday v. Commissioner, 124 T.C. 220, 222 (2005) (“There is in section 6015 no analog to section 6330 granting the Court jurisdiction after a hearing at the Commissioner's Appeals Office”).
6
See Porter v. Commissioner, supra at 120; id. at 134-135 (Thornton, J., concurring).
7
Ms. Olson did not argue that the understatement was attributable to the erroneous exclusion of one or more specific revenue items of which she could not have been aware or that it was attributable to the erroneous deduction of one or more specific items of expense whose legitimacy she could not have known. Since she did not show what particular items contributing to the income of Fun Stuff Rental gave rise to the understatement, and since in any event the bank statements and other records were all accessible to her, this argument could not have prevailed.
8
See also sec. 6015-2(c), Income Tax Regs. (26 C.F.R.) (“A requesting spouse has * * * reason to know of an understatement * * * if a reasonable person in similar circumstances would have known of the understatement. * * * All of the facts and circumstances are considered in determining whether a requesting spouse had reason to know of an understatement. The facts and circumstances that are considered include, but are not limited to, the nature of the erroneous item and the amount of the erroneous item relative to other items; the couple's financial situation; the requesting spouse's educational background and business experience; the extent of the requesting spouse's participation in the activity that resulted in the erroneous item; whether the requesting spouse failed to inquire, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question; and whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns (e.g., omitted income from an investment regularly reported on prior years' returns)”).
9
See also sec. 1.6015-2(d), Income Tax Regs. (26 C.F.R.) (“All of the facts and circumstances are considered in determining whether it is inequitable to hold a requesting spouse jointly and severally liable for an understatement. One relevant factor for this purpose is whether the requesting spouse significantly benefitted, directly or indirectly, from the understatement. A significant benefit is any benefit in excess of normal support. Evidence of direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understatement. Thus, for example, if a requesting spouse receives property (including life insurance proceeds) from the nonrequesting spouse that is beyond normal support and traceable to items omitted from gross income that are attributable to the nonrequesting spouse, the requesting spouse will be considered to have received significant benefit from those items. Other factors that may also be taken into account, if the situation warrants, include the fact that the requesting spouse has been deserted by the nonrequesting spouse, the fact that the spouses have been divorced or separated, or that the requesting spouse received benefit on the return from the understatement. For guidance concerning the criteria to be used in determining whether it is inequitable to hold a requesting spouse jointly and severally liable under this section, see Rev. Proc. 2000-15 (2000-1 C.B. 447), or other guidance published by the Treasury and IRS (see § 601.601(d)(2) of this chapter)”). The revenue procedure cited in the regulation has been superseded by Revenue Procedure 2003-61, 2003-2 C.B. 296.

10
See Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. at 297 (all requesting spouses must meet seven threshold conditions: (i) The requesting spouse filed a joint return for the taxable year for which he or she seeks relief; (ii) relief is not available to the requesting spouse under section 6015(b) or (c); (iii) the requesting spouse applies for relief no later than 2 years after the date of the Service's first collection activity after July 22, 1998, with respect to the requesting spouse; (iv) no assets were transferred between the spouses as part of a fraudulent scheme by the spouses; (v) the nonrequesting spouse did not transfer disqualified assets to the requesting spouse; (vi) the requesting spouse did not file or fail to file the return with fraudulent intent; and (vii) absent enumerated exceptions, the income tax liability from which the requesting spouse seeks relief is attributable to an item of the individual with whom the requesting spouse filed the joint return). As to requirement (iii) above, we have held that the two-year rule is invalid. See Lantz v. Commissioner, 132 T.C. ___ (2009).

6343 levy prohbited in a hardship case

Save this case. The Tax Court has finally been able to hold the IRS to a strict reading of the levy prohibition in section 6343. I take my hat off to Judge Dawson who knows how to read a statute.
The IRS's determination to proceed with a levy was an abuse of discretion. Although the settlement officer determined that a levy on the taxpayer's car and wages would create an economic hardship, the officer determined to proceed with the levy because the taxpayer was not in compliance with filing and payment requirements. However, neither case law nor the Internal Revenue Code or regulations under Code Sec. 6343 condition the release of a levy upon compliance with filing and payment requirements when there is an economic hardship. Rather, the regulations require the release of a levy that creates an economic hardship; therefore, the settlement officer's determination to proceed with the levy was contrary to law and an abuse of discretion.—

Kathleen A. Vinatieri v. Commissioner.
U.S. Tax Court, Dkt. No. 15895-08L, 133 TC —, No. 16, December 22, 2009.
.
R issued P a notice of intent to levy to collect P's unpaid Federal income taxes for 2002..P timely requested a hearing under sec. 6330, I.R.C.
P submitted to the settlement officer Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, indicating she had monthly income of *800 and expenses of *800, had *14 cash on hand, and owned a 1996 Toyota Corolla four-door sedan with 243,000 miles and a value of *300..If P's wages are levied on she will be unable to pay her reasonable basic living expenses..If her car is levied on, she will be unable to work.
The settlement officer stated in her log that P meets the criteria to have her account reported as currently not collectible because of hardship in accordance with the Internal Revenue Manual (IRM). However, R's Appeals Office issued a notice of determination to proceed with levy, stating that P was not entitled to collection alternatives because she had not filed her 2005 and 2007 Federal income tax returns. P timely petitioned for review of that determination under sec. 6330(d), I.R.C..R filed a motion for summary judgment..P, proceeding pro se, did not file a cross-motion for summary judgment.
Under regulations prescribed by the Secretary, the Secretary must release a levy upon all, or part of, a taxpayer's property or rights to property if, inter alia, the Secretary has determined that the levy is creating an economic hardship due to the financial condition of the taxpayer.. Sec. 6343(a)(1)(D), I.R.C. The regulations provide that a levy is creating an economic hardship due to the financial condition of an individual taxpayer and must be released “if satisfaction of the levy in whole or in part will cause an individual taxpayer to be unable to pay his or her reasonable basic living expenses.”.Sec. 301.6343-1(b)(4), Proced. & Admin. Regs.
1. Held:. Sec. 6343(a)(1)(D), I.R.C., and sec. 301.6343-1(b)(4), Proced. & Admin. Regs., require release of a levy that creates an economic hardship regardless of the taxpayer's noncompliance with filing required returns.
2. Held, further, a levy on P's wages or car would cause P to be unable to pay her reasonable basic living expenses, creating an economic hardship that would require release of the levy pursuant to sec. 6343(a)(1)(D), I.R.C., and sec. 301.6343-1(b)(4), Proced. & Admin. Regs.
3. Held, further, R's motion for summary judgment is denied because R's determination to proceed with the levy was wrong as a matter of law and, therefore, was an abuse of discretion.
OPINION
DAWSON, Judge:.This matter is before the Court on respondent's motion for summary judgment filed pursuant to Rule 121. 1 Petitioner timely filed a petition pursuant to section 6330(d) appealing respondent's determination to proceed with collection by levy of petitioner's 2002 income tax liability. The issue to be decided is whether respondent's determination was an abuse of discretion.
Background
Petitioner resided in Tennessee when she filed the petition. Her residence is an apartment that she rents for *600 per month.
On September 13, 2007, respondent sent petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (levy notice)..The underlying tax liability was attributable to unpaid self-assessed tax reported on her 2002 return..Petitioner timely requested a hearing on September 24, 2007, and the hearing was conducted through correspondence and by telephone with the settlement officer.
Petitioner first learned of the collection activity when her employer notified her about the proposed levy on her wages. When the settlement officer asked petitioner whether she wanted to enter into an installment agreement, petitioner said “she has nothing.” 2 Petitioner told the settlement officer that she has pulmonary fibrosis and is dying..Because of her health she can only find part-time employment.
The settlement officer could not find a record that petitioner had filed a return for 2005..Petitioner explained to the settlement officer that the payroll company responsible for completing her 2005 Form W-2, Wage and Tax Statement, was no longer in business..She had attempted to get the tax information from the Internal Revenue Service (IRS), but the IRS had no information regarding her income for 2005.
The settlement officer told petitioner that she might be able to have her account placed in currently not collectible status..The settlement officer asked petitioner to submit a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and a diagnosis regarding her current health condition.
Petitioner sent a completed Form 433-A, indicating she had monthly income of *800 and expenses of *800, had *14 cash on hand, and owned a 1996 Toyota Corolla four-door sedan with 243,000 miles and a value of *300..The Form 433-A reported that petitioner did not own any other assets..Verification received by the settlement officer was consistent with the information petitioner provided in the Form 433-A..Petitioner was unable to obtain a written diagnosis of her medical condition from her physician because her physician would provide a diagnosis only ina claim for worker's compensation.
The settlement officer's log entry dated May 15, 2008, states:
TP [petitioner] meets the criteria to have account placed in CNC [currently not collectible] status per IRM 5.16.[1.]2.9 Hardship..The balance due is less than 10K and the TP has stated she has a terminal illness..CIS verification is not required..The TP has stated she has nothing and is not able to full pay or make payments..However, the TP is not in compliance. The TP has not filed a 2005 return and there is no record of the 2007 tax return being filed..The TP stated she does not have income information for 2005 and company that did payroll is no longer in business. TP stated she contacted IRS and they advised her they have no income information..There is no information per IRTRL..S/O [the settlement officer] contacted TP regarding filing of the 2007 return..The TP stated the return was filed late..The S/O requested the TP fax a copy of the return with the W-2..TP to fax information by 5-19-08..S/O asked TP if she obtained health diagnosis and the TP stated the doctor would only give her something if she is applying for diability..S/O requested income information for 2005 per IRPTRE.
The settlement officer's log entry dated May 20, 2008, states:
TP did not provide a copy of 2007 return and there is no record that the return has been filed per IDRS research..The TP was employed in 2007 and is currently employed..The 2005 return has not been filed..Since the TP is not in compliance, collection alternative cannot be considered..S/O will issue determination letter..If the 2005 income information is received, the S/O will forward it to the TP.
Respondent issued petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination) dated June 2, 2008, sustaining the proposed levy action and stating that, because petitioner was not in compliance with filing the required tax returns, a collection alternative could not be considered..The notice of determination was reviewed and signed by the Appeals team manager..The attachment to the notice of determination stated:
The settlement officer inquired about a collection alternative and you stated you could not make payments. You stated you had pulmonary fibrosis and can only work part-time hours due to your heath condition..The Settlement officer [who] advised you of the collection alternative however explained a collection alternative could not be considered because you were not in compliance with filing required tax returns. * * *
The attachment explained the balancing of efficient tax collection with concern regarding intrusiveness as follows:
Appeals has verified, or received verification, that applicable laws and administrative procedures have been met; has considered the issues raised; and has balanced the proposed collection with the legitimate concern that such action be no more intrusive than necessary by IRC Section 6330(c)(3).
Collection alternatives include full payment, installment agreement, offer in compromise and currently-not-collectible..However, since unfiled tax returns exist, the only alternative at present is to take enforced action by levying your assets..It is Appeals decision that the proposed levy action is appropriate..The proposed levy action balances the need for the efficient collection of the taxes with the legitimate concern that any collection action be no more intrusive than necessary.
Neither the notice of determination nor the attachment reflect any consideration of the fact that the levy would create an economic hardship as stated by the settlement officer in her.daily log and supported by the Form 433-A petitioner submitted.
Petitioner timely filed a petition in this Court challenging respondent's determination..Respondent filed the motion for summary judgment, and the Court ordered petitioner to file a response. 3 Petitioner filed a response to respondent's motion for summary judgment but did not file a cross-motion for summaryjudgment. 4 In her response petitioner describes her situation as follows:
To Whom It May Concern,
I don't know what you want to know cause I don't understand all the legal stuff you sent me..I can't afford a lawyer..And the closest legal aid is in Knoxville 30 miles away..My poor car will not go that far..So I will start at the beginning of my story and see if you can help me.
I was in an unhealthy relationship for many years. During a great deal of that time my husband was doing alcohol and drugs..I had 2 children plus his 3 to take care of..I had been doing janitorial work at a strip mall * * *..It was the only place that I could work that I could take my [then] 3 year old daughter with me..I could not support my family and pay day care. * * * My husband took care of bills and such cause he demanded that I turn over my money..We even got a divorce during that time cause I was not obeying him. * * *
Now I am not looking for sympathy just understanding..Do you know how hard it is to be a single parent?.* * * I have a high school education and nothing else.
It was nearly five years before I was notified of a problem by the I.R.S..Danny [petitioner's former spouse] was suppose to be doing taxes..He even made me sign a form that because he made more money he could claim my kids on his taxes cause we were no longer legally married.
I got all the W-2's from the I.R.S. except 2005 that they still have not sent me..That is why they are not done..I did all those taxes and forfeited the refunds..I do not remember what that total came to. But it was enough to pay I would say most of back taxes..The 2007 taxes were late and I don't know why they didn't arrive..I sent a second copy in as soon as my son gave me my copy..He had my copy for college financial aid and he lost them for a bit of time.
I am not a rich person..I work in a job so I can be home with my daughter..I left my husband in July after he threatened to beat my daughter with a baseball bat..Beating me is one thing but I could not have him beating my girl..So I am a single parent again..Right now we have not had much work in nearly a year..I have rent of 600 a mo..Utilities of 150 and get food stamps or I wouldn't eat..I make about 700-800 [per] month. There are no better jobs in our town..My daughter is only 11 so its not like I can leave her alone at night or on weekends..D.H.S. says it's not even legal..She is too young..There is no child care and I have no family here..I have pulmonary fibrosis that makes me sick all the time and the diagnosis says I have about 10 yrs to live..Right now I can work thank God.
I did my taxes this year [for 2008] and you are getting a little over *4,700..I'm not asking for much just a break..You can have my tax returns [refunds ?] I don't care..Well I do that is a tremendous loss but oh well..I don't have any money to send you on a monthly basis..Can we stop all the penalties..They are killing me..I will never be able to pay it off. * * * I let a relationship screw me up..I am truly sorry for that and am begging for a lifeline here..You can come to my home and see for yourself..I don't have fancy t.v.'s or even cable except for internet..I can't afford a phone..My clothes have holes in them. I even cut my own hair..If I could pay this off faster I would just to stop the nightmares it gives me.
Discussion
A. Summary Judgment
Summary judgment is used to expedite litigation and avoid unnecessary and expensive trials..The Court will render a decision on a motion for summary judgment if the pleadings, answers to interrogatories, depositions, admissions, and other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law..Rule 121(b). Because the effect of granting a motion for summary judgment is to decide the case against a party without allowing that party an opportunity for a trial, the Court should grant the motion only after a careful consideration of the case.. Associated Press v. United States, 326 U.S. 1, 6 (1945); Kroh v. Commissioner, 98 T.C. 383, 390 (1992).
For purposes of respondent's motion for summary judgment, respondent has the burden of showing the absence of a genuine issue as to any material fact..Petitioner is afforded the benefit of all reasonable doubt, and the material submitted by both sides is viewed in the light most favorable to petitioner. See, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Kroh v. Commissioner, supra at 390.
Respondent moves the Court for summary judgment on the ground that the settlement officer did not abuse her discretion in rejecting collection alternatives and determining to proceed with levy because petitioner was not in compliance with the filing requirements..Petitioner asks that the levy not be sustained because, if her wages are taken, she will be unable to pay her basic living expenses; and, if her car is taken, she will not be able to work.
B. Collection of Federal Taxes by Levy
If a taxpayer liable for Federal taxes fails to pay the taxes within 10 days after notice and demand, section 6331 authorizes the Secretary to collect the tax by levy upon all property and rights to property (except any property that is exempt under section 6334) belonging to the taxpayer or on which there is a lien for the payment of the tax.
Section 6343(a)(1) provides that, under regulations prescribed by the Secretary, if the Secretary has determined that the levy is creating an economic hardship due to the financial condition of the taxpayer, the Secretary must release a levy upon all, or part of, a taxpayer's property or rights to property. 5 Sec. 6343(a)(1)(D)..The regulations provide that a levy is creating an economic hardship due to the financial condition of an individual taxpayer and must be released “if satisfaction of the levy in whole or in part will cause an individual taxpayer to be unable to pay his or her reasonable basic living expenses.” Sec. 301.6343-1(b)(4), Proced. & Admin. Regs.
A taxpayer alleging that collection of the liability would create undue hardship must submit complete and current financial data to enable the Commissioner to evaluate the taxpayer's qualification for collection alternatives or other relief. Picchiottino v. Commissioner, T.C. Memo. 2004-231..The regulations provide that, for purposes of determining the taxpayer's reasonable amount of living expenses, any information that is provided by the taxpayer is to be considered, including the following:
(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 * * *, medical expenses * * *, transportation, current tax payments * * *, alimony, child support, or other court-ordered payments, and expenses necessary to the taxpayer's production of income * * *;
(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.
Sec. 301.6343-1(b)(4)(ii), Proced. & Admin. Regs.
C. Section 6330 Procedures
Section 6330(a) provides the general rule that no levy may be made on any property or right to property of any taxpayer unless the Secretary has provided 30 days' notice to the taxpayer of the right to an administrative hearing before the levy is carried out..If the taxpayer makes a timely request for an administrative hearing, the hearing is conducted by the IRS Office of Appeals (Appeals Office) before an impartial officer. Sec. 6330(b)(1), (3).
The taxpayer may raise any relevant issue during the hearing, including appropriate spousal defenses and challenges to “the appropriateness of collection actions”, and may make “offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise.”. Sec. 6330(c)(2)(A)..The taxpayer also may raise challenges to the existence or amount of the underlying tax liability if he/she did not receive a notice of deficiency for that liability or did not otherwise have an opportunity to dispute it.. Sec. 6330(c)(2)(B).
During the hearing the Appeals officer must verify that the requirements of applicable law and administrative procedure have been met, consider issues properly raised by the taxpayer, and consider whether any proposed collection action balances the need for the efficient collection of taxes with the taxpayer's legitimate concern that any collection action be no more intrusive than necessary.. Sec. 6330(c)(3)..The Appeals Office then issues a notice of determination indicating whether the proposed levy may proceed.
Under section 6330(d)(1) the taxpayer may petition this Court to review the determination made by the Appeals Office. See sec. 301.6330-1(f)(1), Proced. & Admin. Regs..Where, as in this case, the underlying tax liability is not at issue, we review the Appeals Office's determinations regarding the collection action for abuse of discretion.. Goza v. Commissioner, 114 T.C. 176 (2000)..An abuse of discretion occurs if the Appeals Office exercises its discretion “arbitrarily, capriciously, or without sound basis in fact or law.”. Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
When a taxpayer establishes in a pre-levy collection hearing under section 6330 that the proposed levy would create an economic hardship, it is unreasonable for the settlement officer to determine to proceed with the levy which section 6343(a)(1)(D) would require the IRS to immediately release..Rather than proceed with the levy, the settlement officer should consider alternatives to the levy.
Respondent argues under the holdings of Rodriguez v. Commissioner, T.C. Memo. 2003-153, and McCorkle v. Commissioner, T.C. Memo. 2003-34, that there is no abuse of discretion if a settlement officer rejects collection alternatives because the taxpayer was not in compliance with the filing requirements for all required tax returns. 6
Generally, we have found the Commissioner's policy requiring individuals seeking collection alternatives to be current with filing their returns to be reasonable. 7 However, taxpayers in those cases have had sufficient income to meet basic living expenses..See, e.g., Speltz v. Commissioner, 124 T.C. 165, 178 (2005) (taxpayers claimed hardship because the tax liability was disproportionate to the value that they received from initial stock offerings and because they had already been forced to change their lifestyle), affd. 454 F.3d 782 (8th Cir. 2006); Peterson v. Commissioner, T.C. Memo. 2009-46 (the Court upheld rejection of taxpayers' offer of *20,000 to compromise *70,000 liability where, although they had minimal income from Social Security retirement and disability payments, they had reasonable collection potential of *68,000 from two parcels of real property valued at *80,000); Fangonilo v. Commissioner, T.C. Memo. 2008-75 (Commissioner's refusal to treat taxpayer's tax liability as currently not collectible was not an abuse of discretion where although taxpayer's income was not sufficient to meet his stated monthly living expenses, he had a liquid asset worth more than his tax liability); Willis v. Commissioner, T.C. Memo. 2003-302 (taxpayers' ability to make some payments toward their cumulative liability made them ineligible to have the cumulative liability classified as currently not collectible); Rodriguez v. Commissioner, T.C. Memo. 2003-153 (taxpayer had not filed returns for 12 years and did not submit all of the financial information supporting her offer-in-compromise that the settlement officer requested); Ashley v. Commissioner, T.C. Memo. 2002-286 (taxpayer had income in excess of expenses and sufficient equity in his real property to pay his tax liability in full).
We have found no cases addressing the requirement that the taxpayer be current with filing returns in a levy case involving economic hardship under section 6343(a)(1)(D) and section 301.6343-1(b)(4), Proced. & Admin. Regs..Neither section 6343 nor the regulations condition a release of a levy that is creating an economic hardship on the taxpayer's compliance with filing and payment requirements..The purpose of section 6330 is to “afford taxpayers adequate notice of collection activity and a meaningful hearing before the IRS deprives them of their property.”.S. Rept. 105-174, at 67 (1998), 1998-3 C.B. 537, 603 (emphasis added)..A determination in a hardship case to proceed with a levy that must immediately be released is unreasonable and undermines public confidence that tax laws are being administered fairly..In a section 6330 pre-levy hearing, if the taxpayer has provided information that establishes the proposed levy will create an economic hardship, the settlement officer cannot go forward with the levy and must consider an alternative.
D. Appeals Office's Determination To Proceed With Levy of Petitioner's Assets
The financial information petitioner submitted on the Form 433-A, which was consistent with other information the settlement officer obtained, showed that if petitioner's wages are levied on, she will be unable to pay her basic living expenses; and, if her car is levied on, she will not be able to work..After analyzing petitioner's financial information, the settlement officer concluded that the levy would create an economic hardship and so stated in her log..However, the settlement officer determined collection alternatives to the levy, including an installment agreement, an offer-in-compromise, and reporting the account as currently not collectible, were not available because petitioner had not filed her 2005 and 2007 returns..The settlement officer's determination to proceed with the levy was reviewed and approved by the Appeals team manager who signed the notice of determination..Although the attachment to the notice of determination shows that the Appeals team manager was aware of petitioner's financial situation and health problems, the Appeals team manager signed the notice of determination to proceed with the levy because petitioner had not filed her 2005 and 2007 returns..Proceeding with the levy would be unreasonable because section 6343 would require its immediate release, and the determination to do so was arbitrary..The determination to proceed with the levy was wrong as a matter of law and, therefore, was an abuse of discretion..Respondent is not entitled to summary judgment, and respondent's motion will be denied.
An order denying respondent's motion will be issued.

Footnotes


1
All Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code.
2
Petitioner explained to the settlement officer that she had previously agreed to pay in installments and that she was told she would be sent envelopes for each payment, but she never received the envelopes or monthly bills.
3
In the order we observed that our preliminary review of the record indicated that the proposed levy action involved a hardship situation and that petitioner needed the assistance of an attorney..We urged petitioner to contact the legal aid society or the local bar association pro bono services and provided their addresses and phone numbers.
4
After petitioner filed her response to respondent's motion for summary judgment, respondent filed a motion to continue the case wherein respondent stated that petitioner was in the process of submitting a collection alternative to the IRS and that, if the alternative is accepted by the IRS, a trial in this case would not be necessary..The Court granted respondent's motion and directed the parties to file a status report on or before July 27, 2009..In a status report filed on July 17, 2009, respondent reported that respondent has not received any communication from petitioner and requested the Court to grant respondent's motion for summary judgment.
5
The regulations provide a method whereby a taxpayer may inform the Secretary that a levy is creating an economic hardship and request that the levy be released..See sec. 301.6343-1(c), Proced. & Admin. Regs..“A taxpayer who wishes to obtain a release of a levy must submit a request for release in writing or by telephone to the district director for the Internal Revenue district in which the levy was made.”. Id..However, service center directors and compliance center directors (to whom requests by taxpayers are not made) who have determined that a levy is creating an economic hardship must also release the levy and promptly notify the taxpayer of the release pursuant to sec. 301.6343-1(a), Proced. & Admin. Regs.
6
Generally, the IRS will not grant an installment agreement, accept an offer-in-compromise, or report an account as currently not collectible if any tax return for which the taxpayer has a filing requirement has not been filed..See Internal Revenue Manual pts. 5.14.1.4.1(4)-(6) (Sept. 26, 2008) (installment agreements); 5.8.3.13(1), (2), (4) (Sept. 23, 2008) (offers-in-compromise); 5.16.1.1(5) and (6), 5.16.1.2.9(8) (May 5, 2009) (currently not collectible), 5.1.11.2.3 (June 2, 2004) (general collection procedures).
7
In Estate of Atkinson v. Commissioner, T.C. Memo. 2007-89, we found reasonable requirements that an entity seeking collection alternatives to full payment, including reporting an account as currently not collectible, filing any outstanding tax returns and submitting a full financial statement and verification information for analysis..Mandatory release of levy creating an economic hardship applies only to individuals..Sec. 301.6343-1(b)(4), Proced. & Admin. Regs.

3 years sentencing for a tax protestor

No more portestor penaly in these cases. I am seeing more and more of this type of a decision


USTC Cases, United States of America v. Kenneth A. Evans, Appellant., U.S. Court of Appeals, Third Circuit, 2010-1 U.S.T.C. ¶50,118, (Dec. 15, 2009)

United States of America v. Kenneth A. Evans, Appellant.

U.S. Court of Appeals, 3rd Circuit; 08-2528, December 15, 2009.
Before: Ambro, Garth and Roth, Circuit Judges.

OPINION

Ambro, Circuit Judge: Kenneth A. Evans (“Evans”) was convicted in the Eastern District of Pennsylvania of three counts of filing false tax returns (in violation of 26 U.S.C. § 7206(1)) and two counts of tax evasion (in violation of 26 U.S.C. § 7201). The District Court sentenced him to 36 months' imprisonment. He now challenges his conviction and sentence. 1 We affirm both.
I. Background
Because we write solely for the parties, we will recite only those facts necessary to our disposition. Evans, a sales representative, stopped filing tax returns in 1999. In January 2001, he filed a civil suit in federal court against the Government requesting a full refund of his 1999 federal income tax. Evans claimed that no legal authority required him to pay income tax on his wages, the filing of a tax return would violate his Fifth Amendment right against self-incrimination, and the Sixteenth Amendment does not grant the Government authority to tax directly his wages without apportionment. In June 2001, the District Court found in the Government's favor on summary judgment. The Court, noting that these types of tax protest claims were appearing with some frequency, rejected in detail Evans' claims. Evans appealed, and we affirmed the District Court, noting the clear precedent that explicitly rejects Evans' arguments. See Evans v. United States, No. 01-3161, 32 F. App'x 31 (3d Cir. Mar. 26, 2002) (unpublished). We ordered Evans to pay $4,000 as a sanction for filing a frivolous appeal. The United States Supreme Court denied Evans' request for a writ of certiorari.

In August 2001, the IRS sent Evans a report regarding Evans' failure to file his 1999 return. At a meeting requested by Evans, IRS agents Vastardis and Burton informed Evans that his earnings were taxable income and Evans was required to file a return to obtain a refund for 1999. The meeting was recorded at Evans' request.
After this meeting, Evans filed a late tax return for the year 2000. He listed his income as zero, yet the Form W-2 wage and tax statement submitted by his employer showed he was paid over $55,000 in wages in 2000. Evans again reported zero income in his 2001 tax return. The corresponding W-2 showed he earned over $77,000 in 2001. In his 2000 and 2001 tax returns, Evans sought a refund of all taxes that had been withheld from his paychecks. The IRS denied these refund claims.
In January 2002, Evans submitted an IRS Form W-4 to his employer claiming he was exempt from withholding because he had no tax liability. His employer complied with this request and did not withhold federal taxes from 2002 through 2004. Evans did not file a tax return for the years 2002 and 2003.
In March 2003, Evans filed a second civil suit against the Government for a refund of federal income tax he paid in the 2000 and 2001 tax years. The District Court held a hearing and allowed Evans to argue his position. In granting judgment for the Government and rejecting Evans' arguments, the District Court noted that, instead of paying the sanctions imposed by our Court, Evans chose to burden the federal courts with yet another frivolous suit. The District Court imposed an additional $1,000 sanction.
In November 2004, the IRS wrote to Evans regarding his failure to file returns, and Evans met with IRS Agents Michael Taibi and Susan Hough. This meeting also was recorded at Evans' request. Evans argued that he was not required to file returns because he had no taxable income. Agent Taibi communicated with Evans' employer to request they begin withholding federal income tax. Taibi then referred the matter for criminal investigation.
In January 2005, Evans submitted to his employer a form “W-4E,” captioned “Exemption from Withholding,” in which he claimed he was exempt from withholding. The company did not honor the exemption request, as the “form” was not Governmentissued. Evans filed a tax return for 2004 stating that he had no income, as he had done in his 2000 and 2001 returns.
A grand jury indicted Evans for filing false tax returns in the years 2000, 2001, and 2004, and tax evasion for the years 2002 and 2003. At trial, the Government presented testimony of several IRS agents regarding Evans' filing history. The agents testified about the meetings with Evans in 2001 and 2004, and a recording was played of a December 2005 interview between Evans and an IRS agent with the criminal investigation division. Evans' Forms W-4 and Forms W-2 were introduced, and representatives of his employer described his withholding and wage history. Evidence was presented of the rejection of Evans' position by two District Court judges and the imposition of sanctions by this Court for filing a frivolous appeal. The Government also introduced evidence of Evans' tax-protestor status and activities, including postings from Evans' website regarding his tax beliefs and e-mails between Evans and other tax protestors.
Evans testified at length on his own behalf. He presented his interpretation of the case law, Tax Code, and IRS regulations. Evans claimed that Agent Vastardis told him at the 2001 meeting that a filer must declare that he had no income in order to claim a refund, and that filing a return was voluntary and not mandatory. Evans played selected portions of the tape of this meeting, and introduced numerous exhibits, including attachments to his W-4s.
The jury convicted Evans on all counts, and this appeal followed his sentencing.
II. Discussion
Evans makes four arguments on appeal: (1) the District Court erred by not admitting attachments to Evans' Form W-4s contemporaneously under Federal Rule of Evidence 106; (2) the evidence presented at trial was insufficient to establish Evans willfully failed to file tax returns and filed false tax returns; (3) the District Court erred in its jury charge; and 4) it relied on an impermissible factor in varying upward from the advisory Guidelines range.

A. Evidentiary Challenge
The prosecution introduced into evidence the “Employee's Withholding Allowance Certificate,” IRS Form W-4, completed by Evans in the years 2002, 2003, and 2004. The District Court denied Evans' motion in limine to admit letters and a videotape Evans attached to his W-4s, including letters to his employer explaining his view that he had no income tax liability and instructing his employer not to withhold any taxes. The District Court's decision to admit or exclude evidence is reviewed for abuse of discretion. United States v. Mathis, 264 F.3d 321, 326-27 (3d Cir. 2001).
Evans claims that the District Court's denial of his motion was an abuse of discretion under Federal Rule of Evidence 106, which provides that
[w]hen a writing or recorded statement or part thereof is introduced by a party, an adverse party may require the introduction at that time of any other part or any other writing or recorded statement which ought in fairness to be considered contemporaneously with it.
This codification of the doctrine of completeness guards against the potential for evidence to be misleading when presented out of context. Admission of additional evidence is compelled “if it is necessary to (1) explain the admitted portion, (2) place the admitted portion in context, (3) avoid misleading the trier of fact, or (4) insure a fair and impartial understanding.” United States v. Soures, 736 F.2d 87, 91 (3d Cir. 1984). Evans asserts that failure to include his writings and the video with the Form W-4s gave the jury a distorted and misleading view, as Evans incorporated them specifically to provide his reasoning for completing the forms in the manner he did.
The District Court found that a Form W-4 is a distinct and complete Government issued document, and the mere fact that Evans appended writings or videos did not render these additional submissions part of the Form W-4. The District Court also concluded that the Form W-4 alone was not so misleading or unfairly prejudicial as to warrant application of Rule 106.
Even were we to assume this was an abuse of discretion, any conceivable error was harmless. Under our traditional harmless error standard, a non-constitutional error is harmless when it is “ highly probable that the error did not contribute to the judgment.” United States v. Gambone, 314 F.3d 163, 177 (3d Cir. 2003) (internal quotation marks and citation omitted) (emphasis in original). “High probability requires that the court possess a sure conviction that the error did not prejudice the defendant.” Id. (internal quotation marks and citation omitted).
Here, one of the letters attached to a Form W-4 was discussed in detail during cross-examination of Evans' employer's corporate counsel. ( See Gov't App. 170-74.) Moreover, Evans testified about various letters he wrote to the IRS containing largely the same arguments he made in letters attached to the Form W-4s. Evans opined at length at trial about his reasons for completing the Form W-4s as he did. Therefore, any error was harmless.

B. Sufficiency of the Evidence

Evans argues that the trial evidence was insufficient to show that he willfully failed to file tax returns and willfully filed false tax returns. 2 In support of this contention, Evans contends that the Government did not prove willfulness, an element of the five counts in the indictment. We are unpersuaded.
“Willfulness requires the voluntary, intentional violation of a known legal duty as a condition precedent to criminal liability.” United States v. McKee, 506 F.3d 225, 236 (3d Cir. 2007) ( citing Cheek v. United States, 498 U.S. 192 (1991)). This element “protects the average citizen from criminal prosecution for innocent mistakes in filing tax forms that may result from nothing more than negligence or the complexity of the tax laws.” Id. Willfulness is negated by a defendant's good faith belief that he is not violating any laws. Cheek, 498 U.S. at 202. Once raised as a defense, the burden is on the Government to prove the defendant did not have a good faith belief. Id.

Viewing the evidence in the light most favorable to the Government, the element of willfulness is satisfied here by the judgments of two District Courts and our Court in the civil cases brought by Evans, communications to Evans by IRS agents, Evans' failure to file, evidence of his tax protest activities, and his knowledge of the conviction and sentencing of another tax protestor. Numerous authorities, including our Court, informed Evans of his duty to file a return and treat his wages as income. This is not a case of a good faith misunderstanding of a tax law provision. This is a case where the defendant knew and understood the law. Someone who knows the law and disagrees with it is not someone who in good faith believes the law does not apply to him.
C. Jury Instructions
Evans next challenges several of the District Court's jury instructions. When a party timely objects to jury instructions, “[w]e exercise plenary review to determine whether jury instructions misstated the applicable law, but in the absence of a misstatement we review for abuse of discretion.” Cooper Distrib. Co. v. Amana Refrigeration, Inc., 180 F.3d 542, 549 (3d Cir. 1999). However, where a party claiming error in a jury instruction “did not make a timely objection, we review for plain error.” Id. We will reverse if that error was “fundamental and highly prejudicial, such that the instructions failed to provide the jury with adequate guidance and our refusal to consider the issue would result in a miscarriage of justice.” Id. (internal quotation marks and citations omitted). 3
Where a district court denies a requested jury instruction, we will reverse “only when the requested instruction was correct, not substantially covered by the instructions given, and was so consequential that the refusal to give the instruction was prejudicial to the defendant.” United States v. Phillips, 959 F.2d 1187, 1191 (3d Cir. 1992). Jury instructions are to be read as a whole. United States v. Flores, 454 F.3d 149, 157 (3d Cir. 2006). “It is well-settled that the trial judge retains discretion to determine the language of the jury charge … [s]o long as the court conveys the required meaning,” and the court is under no obligation to use language proffered by the defendant. Id. at 161.
First, Evans challenges the District Court's use of the word “genuine” when it instructed the jury that a defendant's disagreement with a legal duty, even if genuine, does not provide a good faith defense. Read in context, the District Court accurately instructed the jury on the issue of good faith in accordance with Supreme Court and Third Circuit precedent.

Relatedly, Evans argues that the District Court erred in refusing to give his proposed good faith and willfulness instructions and a theory-of-the-defense instruction. However, the Court's explanation of willfulness in the jury charge substantially covered the relevant points and allowed Evans to argue his theory of the case. Therefore, the Court's refusal to include specific language or instruct on particular legal arguments requested by Evans was not an abuse of discretion.
Evans also claims that the District Court erroneously informed the jury that willfulness does not require that Evans knew his conduct was in violation of the law. Although Evans is correct in noting that the Court misspoke on one occasion while giving the jury instructions, the mistake was corrected when the Court accurately stated repeatedly that willfulness required proof that Evans knew his conduct violated the law, and on numerous occasions informed the jury that willfulness required violation of a “known legal duty.” Given the instructions in their entirety, this one misstatement could not have confused the jury. Therefore, the jury was properly charged on the willfulness element.

Evans' remaining challenges to the jury charge, which include a challenge to the state-of-mind instruction and a reference to income under the Tax Code, are without merit. Viewing the jury instructions in their entirety and in context, the District Court did not abuse its discretion.

D. Sentencing

Finally, Evans argues that the District Court improperly relied on the two civil tax suits filed by Evans against the United States in its consideration of the 18 U.S.C. § 3553(a) factors. This is Evans' only complaint regarding his sentencing; he does not challenge the calculation of the Guidelines range or the Court's consideration of the § 3553(a) factors in general.

We review the District Court's sentence for reasonableness under an abuse of discretion standard. United States v. Tomko, 562 F.3d 558, 564, 567 (3d Cir. 2009) (en banc). “Where, as here, a district court decides to vary from the Guidelines' recommendations, we ‘must give due deference to the district court's decision that the § 3553(a) factors, on a whole, justify the extent of the variance.’” Id. at 561 ( quoting Gall v. United States, 128 S.Ct. 586, 597 (2007)).

The Guidelines range was 15 to 21 months. The District Court imposed an above-Guidelines sentence of 36 months. It discussed at length the factors set forth at 18 U.S.C. § 3553(a). We do not think it was improper for the Court, in evaluating those factors (including the nature and circumstances of the offense), to consider that, despite several courts' unequivocal rejection of Evans' claims that his income was not subject to taxation, Evans continued to violate the law. 4 The Court noted Evans' disrespect for the court process, his disdainful interactions with IRS agents, the need for him genuinely to appreciate the authority of the law, and the need to deter the public. We have no hesitancy in concluding that it rationally and meaningfully considered the § 3553(a) factors, and the sentence of 36 months was reasonable in this case.
* * * * *
For these reasons, we affirm both Evans' conviction and sentence.



Footnotes


1
The District Court had jurisdiction under 18 U.S.C. § 3231. We have jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742.
2
"‘We apply a particularly deferential standard of review when deciding whether a jury verdict rests on legally sufficient evidence.’" United States v. Soto, 539 F.3d 191, 193-94 (3d Cir. 2008) ( quoting United States v. Dent, 149 F.3d 180, 187 (3d Cir. 1998)). We will sustain the verdict if, viewing the evidence in the light most favorable to the Government, "‘any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.’" Id. at 194 ( quoting Dent, 149 F.3d at 187).
3
Evans objected to the Court's instructions on willfulness and the Court's refusal to give certain of Evans' proposed instructions. Therefore, these instructions are subject to harmless error review. Evans did not preserve his objection to his proposed theory of the defense instruction, and he concedes this issue is reviewed for plain error.
4
Evans' allegation that this violated his First Amendment rights is meritless.