rp-03-61.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.105: Examination of returns and claims for refund,
credit, or abatement; determination of correct tax liability.
(Also Part I, sections 66, 6015)

Rev. Proc. 2003-61

SECTION 1. PURPOSE AND SCOPE

01. Purpose
. This revenue procedure provides guidance for a
taxpayer seeking equitable relief from income tax liability
under section 66(c) or section 6015(f) of the Internal Revenue
Code (a “requesting spouse”). Section 4.01 of this revenue
procedure provides the threshold requirements for any request
for equitable relief. Section 4.02 of this revenue procedure
sets forth the conditions under which the Internal Revenue
Service ordinarily will grant equitable relief under
section 6015(f) from an underpayment of income tax reported on a
joint return. Section 4.03 of this revenue procedure provides a
nonexclusive list of factors for consideration in determining
whether relief should be granted under section 6015(f) because
it would be inequitable to hold a requesting spouse jointly and
severally liable for an underpayment of income tax on a joint
return where the conditions of section 4.02 are not met, or for
a deficiency. The factors in section 4.03 also will apply in
determining whether to relieve a spouse from income tax
liability resulting from the operation of community property law
under the equitable relief provision of section 66(c).

.02 Scope
. This revenue procedure applies to spouses who
request either equitable relief from joint and several liability
under section 6015(f), or equitable relief under section 66(c)
from income tax liability resulting from the operation of
community property law.

SECTION 2. BACKGROUND

.01 Section 6013(d)(3) provides that married taxpayers who
file a joint return under section 6013 will be jointly and
severally liable for the income tax arising from that joint
return. For purposes of section 6013(d)(3) and this revenue
procedure, the term “tax” includes penalties, additions to tax,

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and interest. See sections 6601(e)(1) and 6665(a)(2).

.02 Section 3201(a) of the Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112
Stat. 685, 734 (RRA), enacted section 6015, which provides
relief in certain circumstances from the joint and several
liability imposed by section 6013(d)(3). Section 6015(b) and
(c) specifies two sets of circumstances under which relief from
joint and several liability is available. If relief is not
available under section 6015(b) or (c), section 6015(f)
authorizes the Secretary to grant equitable relief if, taking
into account all the facts and circumstances, the Secretary
determines that it is inequitable to hold a requesting spouse
liable for any unpaid tax or any deficiency (or any portion of
either). Section 66(c) provides relief from income tax
liability resulting from the operation of community property law
to taxpayers domiciled in a community property state who do not
file a joint return. Section 3201(b) of RRA amended
section 66(c) to add an equitable relief provision similar to
section 6015(f).

.03 Section 6015 provides relief only from joint and several
liability arising from a joint return. If an individual signs a
joint return under duress, the election to file jointly is not
valid and there is no valid joint return. The individual is not
jointly and severally liable for any income tax liabilities
arising from that return. Therefore, section 6015 does not
apply.

.04 Under section 6015(b) and (c), relief is available only
from a proposed or assessed deficiency. Section 6015(b) and (c)
does not authorize relief from an underpayment of income tax
reported on a joint return. Section 66(c) and section 6015(f)
permit equitable relief for an underpayment of income tax. The
legislative history of section 6015 provides that Congress
intended for the Secretary to exercise discretion in granting
equitable relief if a requesting spouse “does not know, and had
no reason to know, that funds intended for the payment of tax
were instead taken by the other spouse for such other spouse’s
benefit.” H.R. Conf. Rep. No. 105-599, at 254 (1998). Congress
also intended for the Secretary to exercise the equitable relief
authority under section 6015(f) in other situations if, “taking
into account all the facts and circumstances, it is inequitable
to hold an individual liable for all or part of any unpaid tax
or deficiency arising from a joint return.” Id
.

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SECTION 3. CHANGES

This revenue procedure supersedes Revenue Procedure 2000-15,
changing the following:

.01 Section 4.01 of this revenue procedure adds a new
threshold requirement under section 4.01(7).

.02 Section 4.03(2)(a)(iii) of this revenue procedure revises
the weight given to the knowledge or reason to know factor.

.03 Section 4.04 of this revenue procedure broadens the
availability of refunds if equitable relief is granted under
section 66(c) or section 6015(f).

SECTION 4. GENERAL CONDITIONS FOR RELIEF

.01 Eligibility for equitable relief
. A requesting spouse
must satisfy all of the following threshold conditions to be
eligible to submit a request for equitable relief under
section 6015(f). With the exception of conditions (1) and (2),
a requesting spouse must satisfy all of the following threshold
conditions to be eligible to submit a request for equitable
relief under section 66(c). The Service may relieve a
requesting spouse who satisfies all the applicable threshold
conditions set forth below of all or part of the income tax
liability under section 66(c) or section 6015(f), if, taking
into account all the facts and circumstances, the Service
determines that it would be inequitable to hold the requesting
spouse liable for the income tax liability. The threshold
conditions are as follows:
(1) The requesting spouse filed a joint return for the
taxable year for which he or she seeks relief.
(2) Relief is not available to the requesting spouse under
section 6015(b) or (c).
(3) The requesting spouse applies for relief no later than
two years after the date of the Service’s first collection
activity after July 22, 1998, with respect to the requesting
spouse. See
Treas. Reg. § 1.6015-5(b)(2)(i) for the definition
of collection activity.
(4) No assets were transferred between the spouses as part
of a fraudulent scheme by the spouses.
(5) The nonrequesting spouse did not transfer disqualified
assets to the requesting spouse. If the nonrequesting spouse
transferred disqualified assets to the requesting spouse, relief
will be available only to the extent that the income tax
liability exceeds the value of the disqualified assets. For

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this purpose, the term “disqualified asset” has the meaning
given the term by section 6015(c)(4)(B).
(6) The requesting spouse did not file or fail to file the
return with fraudulent intent.
(7) 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 (the
“nonrequesting spouse”), unless one of the following exceptions
applies:
(a) Attribution solely due to the operation of community
property law. If an item is attributable or partially
attributable to the requesting spouse solely due to the
operation of community property law, then for purposes of this
revenue procedure, that item (or portion thereof) will be
considered to be attributable to the nonrequesting spouse.
(b) Nominal ownership
. If the item is titled in the name
of the requesting spouse, the item is presumptively attributable
to the requesting spouse. This presumption is rebuttable. For
example, H opens an individual retirement account (IRA) in W’s
name and forges W’s signature on the IRA in 1998. Thereafter, H
makes contributions to the IRA and in 2002 takes a taxable
distribution from the IRA. H and W file a joint return for the
2002 taxable year, but do not report the taxable distribution on
their joint return. The Service later proposes a deficiency
relating to the taxable IRA distribution and assesses the
deficiency against H and W. W requests relief from joint and
several liability under section 6015. W establishes that W did
not contribute to the IRA, sign paperwork relating to the IRA,
or otherwise act as if W were the owner of the IRA. W thereby
rebutted the presumption that the IRA is attributable to W.
(c) Misappropriation of funds
. If the requesting spouse
did not know, and had no reason to know, that funds intended for
the payment of tax were misappropriated by the nonrequesting
spouse for the nonrequesting spouse’s benefit, the Service will
consider granting equitable relief although the underpayment may
be attributable in part or in full to an item of the requesting
spouse. The Service will consider relief in this case only to
the extent that the funds intended for the payment of tax were
taken by the nonrequesting spouse.
(d) Abuse not amounting to duress
. If the requesting
spouse establishes that he or she was the victim of abuse prior
to the time the return was signed, and that, as a result of the
prior abuse, the requesting spouse did not challenge the
treatment of any items on the return for fear of the
nonrequesting spouse’s retaliation, the Service will consider
granting equitable relief although the deficiency or
underpayment may be attributable in part or in full to an item

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of the requesting spouse.

.02 Circumstances under which the Service ordinarily will
grant equitable relief under section 6015(f) with respect to
underpayments on joint returns.
(1) If an income tax liability reported on a joint return is
unpaid, the Service ordinarily will grant equitable relief under
section 6015(f) (subject to the limitations of paragraph (2)
below) in cases in which all of the following elements are
satisfied:
(a) On the date of the request for relief, the requesting
spouse is no longer married to, or is legally separated from,
the nonrequesting spouse, or has not been a member of the same
household as the nonrequesting spouse at any time during the 12-
month period ending on the date of the request for relief.
(b) On the date the requesting spouse signed the joint
return, the requesting spouse had no knowledge or reason to know
that the nonrequesting spouse would not pay the income tax
liability. The requesting spouse must establish that it was
reasonable for the requesting spouse to believe that the
nonrequesting spouse would pay the reported income tax
liability. If a requesting spouse would otherwise qualify for
relief under this section, except for the fact that the
requesting spouse’s lack of knowledge or reason to know relates
only to a portion of the unpaid income tax liability, then the
requesting spouse may receive relief to the extent that the
income tax liability is attributable to that portion.
(c) The requesting spouse will suffer economic hardship if
the Service does not grant relief. For purposes of this revenue
procedure, the Service will base its determination of whether
the requesting spouse will suffer economic hardship on rules
similar to those provided in Treas. Reg. § 301.6343-1(b)(4).
After the requesting spouse is deceased, there can be no
economic hardship. See
Jonson v. Commissioner, 118 T.C. 106,
126 (2002), appeal docketed, No. 02-9009 (10
th
Cir. May 24, 2002)
(taxpayer appeal filed on other grounds).
(2) Relief under this section 4.02 is subject to the
following limitation: If the Service adjusts the joint return
to reflect an understatement of income tax, relief will be
available only to the extent of the income tax liability shown
on the joint return prior to the Service’s adjustment.

.03 Factors for determining whether to grant equitable relief
.
(1) Applicability
. This section 4.03 applies to requesting
spouses who did not file a joint return in a community property
state, who request relief under section 66(c), and satisfy the
applicable threshold conditions of section 4.01. This section

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4.03 also applies to requesting spouses who filed a joint
return, request relief under section 6015, and satisfy the
threshold conditions of section 4.01, but do not qualify for
relief under section 4.02.
(2) Factors
. The following is a nonexclusive list of factors
that the Service will consider in determining whether, taking
into account all the facts and circumstances, it is inequitable
to hold the requesting spouse liable for all or part of the
unpaid income tax liability or deficiency, and full or partial
equitable relief under section 66(c) or section 6015(f) should
be granted. No single factor will be determinative of whether
to grant equitable relief in any particular case. Rather, the
Service will consider and weigh all relevant factors, regardless
of whether the factor is listed in this section 4.03.
(a) Factors that may be relevant to whether the Service will
grant equitable relief include, but are not limited to, the
following:
(i) Marital status
. Whether the requesting spouse is
separated (whether legally separated or living apart) or
divorced from the nonrequesting spouse. A temporary absence,
such as an absence due to incarceration, illness, business,
vacation, military service, or education, shall not be
considered separation for purposes of this revenue procedure if
it can be reasonably expected that the absent spouse will return
to a household maintained in anticipation of his or her return.
See Treas. Reg. § 1.6015-3(b)(3)(i) for the definition of a
temporary absence.
(ii) Economic hardship
. Whether the requesting spouse
would suffer economic hardship (within the meaning of section
4.02(1)(c) of this revenue procedure) if the Service does not
grant relief from the income tax liability.
(iii) Knowledge or reason to know.
(A) Underpayment cases
. In the case of an income tax
liability that was properly reported but not paid, whether the
requesting spouse did not know and had no reason to know that
the nonrequesting spouse would not pay the income tax liability.
(B) Deficiency cases
. In the case of an income tax
liability that arose from a deficiency, whether the requesting
spouse did not know and had no reason to know of the item giving
rise to the deficiency. Reason to know of the item giving rise
to the deficiency will not be weighed more heavily than other
factors. Actual knowledge of the item giving rise to the
deficiency, however, is a strong factor weighing against relief.
This strong factor may be overcome if the factors in favor of
equitable relief are particularly compelling. In those limited
situations, it may be appropriate to grant relief under
section 66(c) or section 6015(f) even though the requesting

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spouse had actual knowledge of the item giving rise to the
deficiency.
(C) Reason to know
. For purposes of (A) and (B) above,
in determining whether the requesting spouse had reason to know,
the Service will consider the requesting spouse’s level of
education, any deceit or evasiveness of the nonrequesting
spouse, the requesting spouse’s degree of involvement in the
activity generating the income tax liability, the requesting
spouse’s involvement in business and household financial
matters, the requesting spouse’s business or financial
expertise, and any lavish or unusual expenditures compared with
past spending levels.
(iv) Nonrequesting spouse’s legal obligation
. Whether the
nonrequesting spouse has a legal obligation to pay the
outstanding income tax liability pursuant to a divorce decree or
agreement. This factor will not weigh in favor of relief if the
requesting spouse knew or had reason to know, when entering into
the divorce decree or agreement, that the nonrequesting spouse
would not pay the income tax liability.
(v) Significant benefit
. Whether the requesting spouse
received significant benefit (beyond normal support) from the
unpaid income tax liability or item giving rise to the
deficiency. See Treas. Reg. § 1.6015-2(d).
(vi) Compliance with income tax laws. Whether the
requesting spouse has 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. (b) Factors
that, if present in a case, will weigh in favor of equitable
relief, but will not weigh against equitable relief if not
present in a case, include, but are not limited to, the
following:
(i) Abuse
. Whether the nonrequesting spouse abused the
requesting spouse. The presence of abuse is a factor favoring
relief. A history of abuse by the nonrequesting spouse may
mitigate a requesting spouse’s knowledge or reason to know.
(ii) Mental or physical health. Whether the requesting spouse
was in poor mental or physical health on the date the requesting
spouse signed the return or at the time the requesting spouse
requested relief. The Service will consider the nature, extent,
and duration of illness when weighing this factor.

.04 Refunds
.
(1) Deficiency cases. In a case involving a deficiency, a
requesting spouse is eligible for a refund of certain payments
made pursuant to an installment agreement that the requesting
spouse entered into with the Service, if the requesting spouse
has not defaulted on the installment agreement. Only

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installment payments made after the date the requesting spouse
filed the request for relief are eligible for refund.
Additionally, the requesting spouse must establish that he or
she provided the funds for which he or she seeks a refund. For
purposes of this revenue procedure, a requesting spouse is not
in default if the Service did not issue a notice of default to
the requesting spouse or take any action to terminate the
installment agreement.
(2) Underpayment cases
. In a case involving an underpayment
of income tax, a requesting spouse is eligible for a refund of
separate payments that he or she made after July 22, 1998, if
the requesting spouse establishes that he or she provided the
funds used to make the payment for which he or she seeks a
refund. A requesting spouse is not eligible for refunds of
payments made with the joint return, joint payments, or payments
that the nonrequesting spouse made.
(3) Other limitations
. The availability of refunds is
subject to the refund limitations of section 6511.

SECTION 5. PROCEDURE

A requesting spouse seeking equitable relief under
section 66(c) or section 6015(f) must file Form 8857, Request
for Innocent Spouse Relief (and Separation of Liability, and
Equitable Relief), or other similar statement signed under
penalties of perjury, within two years of the first collection
activity against the requesting spouse. See
Treas. Reg.
§ 1.6015-5(b)(2)(i) for the definition of collection activity.

SECTION 6. EFFECT ON OTHER DOCUMENTS

Revenue Procedure 2000-15, 2000-1 C.B. 447, is superseded.

SECTION 7. EFFECTIVE DATE

This revenue procedure is effective for requests for relief
filed on or after November 1, 2003. In addition, this revenue
procedure is effective for requests for relief pending on
November 1, 2003, for which no preliminary determination letter
has been issued as of November 1, 2003.

DRAFTING INFORMATION

The principal author of this revenue procedure is Robin M.
Tuczak of the Office of Associate Chief Counsel, Procedure and
Administration (Administrative Provisions and Judicial Practice
Division). For further information regarding this revenue

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procedure, contact Ms. Tuczak on (202) 622-4940 (not a toll-free
call).