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§ 6013 Joint returns of income tax by husband and wife.



(a) FTCWG&L Treatises Joint returns.
A husband and wife may make a single return jointly of income taxes under subtitle A, even though one of the spouses has neither gross income nor deductions, except as provided below:
(1) FTCWG&L Treatises no joint return shall be made if either the husband or wife at any time during the taxable year is a nonresident alien;
(2) FTCEstateWG&L Treatises no joint return shall be made if the husband and wife have different taxable years; except that if such taxable years begin on the same day and end on different days because of the death of either or both, then the joint return may be made with respect to the taxable year of each. The above exception shall not apply if the surviving spouse remarries before the close of his taxable year, nor if the taxable year of either spouse is a fractional part of a year under section 443(a)(1) ;
(3) FTCEstateWG&L Treatises in the case of death of one spouse or both spouses the joint return with respect to the decedent may be made only by his executor or administrator; except that in the case of the death of one spouse the joint return may be made by the surviving spouse with respect to both himself and the decedent if no return for the taxable year has been made by the decedent, no executor or administrator has been appointed, and no executor or administrator is appointed before the last day prescribed by law for filing the return of the surviving spouse. If an executor or administrator of the decedent is appointed after the making of the joint return by the surviving spouse, the executor or administrator may disaffirm such joint return by making, within 1 year after the last day prescribed by law for filing the return of the surviving spouse, a separate return for the taxable year of the decedent with respect to which the joint return was made, in which case the return made by the survivor shall constitute his separate return.
(b) FTCWG&L Treatises Joint return after filing separate return.
(1) FTCEstateWG&L Treatises In general.
Except as provided in paragraph (2) , if an individual has filed a separate return for a taxable year for which a joint return could have been made by him and his spouse under subsection (a) and the time prescribed by law for filing the return for such taxable year has expired, such individual and his spouse may nevertheless make a joint return for such taxable year. A joint return filed by the husband and wife under this subsection shall constitute the return of the husband and wife for such taxable year, and all payments, credits, refunds, or other repayments made or allowed with respect to the separate return of either spouse for such taxable year shall be taken into account in determining the extent to which the tax based upon the joint return has been paid. If a joint return is made under this subsection , any election (other than the election to file a separate return) made by either spouse in his separate return for such taxable year with respect to the treatment of any income, deduction, or credit of such spouse shall not be changed in the making of the joint return where such election would have been irrevocable if the joint return had not been made. If a joint return is made under this subsection after the death of either spouse, such return with respect to the decedent can be made only by his executor or administrator.
(2) FTCEstateWG&L Treatises Limitations for making of election.
The election provided for in paragraph (1) may not be made—
(A) FTCWG&L Treatises after the expiration of 3 years from the last date prescribed by law for filing the return for such taxable year (determined without regard to any extension of time granted to either spouse); or
(B) FTCWG&L Treatises after there has been mailed to either spouse, with respect to such taxable year, a notice of deficiency under section 6212 , if the spouse, as to such notice, files a petition with the Tax Court within the time prescribed in section 6213 ; or
(C) FTCWG&L Treatises after either spouse has commenced a suit in any court for the recovery of any part of the tax for such taxable year; or
(D) FTC after either spouse has entered into a closing agreement under section 7121 with respect to such taxable year, or after any civil or criminal case arising against either spouse with respect to such taxable year has been compromised under section 7122 .
(3) WG&L Treatises When return deemed filed.
(A) FTC Assessment and collection. For purposes of section 6501 (relating to periods of limitations on assessment and collection), and for purposes of section 6651 (relating to delinquent returns), a joint return made under this subsection shall be deemed to have been filed—
(i) FTC Where both spouses filed separate returns prior to making the joint return—on the date the last separate return was filed (but not earlier than the last date prescribed by law for filing the return of either spouse);
(ii) FTC Where only one spouse filed a separate return prior to the making of the joint return, and the other spouse had less than the exemption amount of gross income for such taxable year—on the date of the filing of such separate return (but not earlier than the last date prescribed by law for the filing of such separate return); or
(iii) FTC Where only one spouse filed a separate return prior to the making of the joint return, and the other spouse had gross income of the exemption amount or more for such taxable year—on the date of the filing of such joint return.
For purposes of this subparagraph , the term “exemption amount” has the meaning given to such term by section 151(d) . For purposes of clauses (ii) and (iii) , if the spouse whose gross income is being compared to the exemption amount is 65 or over, such clauses shall be applied by substituting “the sum of the exemption amount and the additional standard deduction under section 63(c)(2) by reason of section 63(f)(1)(A) ” for “the exemption amount”.
(B) Credit or refund. For purposes of section 6511 , a joint return made under this subsection shall be deemed to have been filed on the last date prescribed by law for filing the return for such taxable year (determined without regard to any extension of time granted to either spouse).
(4) FTCWG&L Treatises Additional time for assessment.
If a joint return is made under this subsection , the periods of limitations provided in sections 6501 and 6502 on the making of assessments and the beginning of levy or a proceeding in court for collection shall with respect to such return include one year immediately after the date of the filing of such joint return (computed without regard to the provisions of paragraph (3) ).
(5) WG&L Treatises Additions to the tax and penalties.
(A) Coordination with part II of subchapter A of chapter 68. For purposes of part II of subchapter A of chapter 68, where the sum of the amounts shown as tax on the separate returns of each spouse is less than the amount shown as tax on the joint return made under this subsection —
(i) FTC such sum shall be treated as the amount shown on the joint return,
(ii) any negligence (or disregard of rules or regulations) on either separate return shall be treated as negligence (or such disregard) on the joint return, and
(iii) FTC any fraud on either separate return shall be treated as fraud on the joint return.
(B) Criminal penalty. For purposes of section 7206(1) and (2) and section 7207 (relating to criminal penalties in the case of fraudulent returns) the term “return” includes a separate return filed by a spouse with respect to a taxable year for which a joint return is made under this subsection after the filing of such separate return.
(c) FTCEstateWG&L Treatises Treatment of joint return after death of either spouse.
For purposes of sections 15 , 443 , and 7851(a)(1)(A) , where the husband and wife have different taxable years because of the death of either spouse, the joint return shall be treated as if the taxable years of both spouses ended on the date of the closing of the surviving spouse's taxable year.
(d) FTCEstateWG&L Treatises Special rules.
For purposes of this section —
(1) FTC the status as husband and wife of two individuals having taxable years beginning on the same day shall be determined—
(A) if both have the same taxable year—as of the close of such year; or
(B) Estate if one dies before the close of the taxable year of the other—as of the time of such death;
(2) FTCWG&L Treatises an individual who is legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married; and
(3) FTCEstateWG&L Treatises if a joint return is made, the tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several.
(e) FTCWG&L Treatises Repealed.
(f) FTCWG&L Treatises Joint return where individual is in missing status.
For purposes of this section and subtitle A—
(1) FTCEstate Election by spouse.
If—
(A) an individual is in a missing status (within the meaning of paragraph (3) ) as a result of service in a combat zone (as determined for purposes of section 112 ), and
(B) the spouse of such individual is otherwise entitled to file a joint return for any taxable year which begins on or before the day which is 2 years after the date designated under section 112 as the date of termination of combatant activities in such zone,

then such spouse may elect under subsection (a) to file a joint return for such taxable year. With respect to service in the combat zone designated for purposes of the Vietnam conflict, such election may be made for any taxable year while an individual is in missing status.
(2) FTCEstate Effect of election.
If the spouse of an individual described in paragraph (1)(A) elects to file a joint return under subsection (a) for a taxable year, then, until such election is revoked—
(A) such election shall be valid even if such individual died before the beginning of such year, and
(B) except for purposes of section 692 (relating to income taxes of members of the Armed Forces, astronauts, and victims of certain terrorist attacks on death), the income tax liability of such individual, his spouse, and his estate shall be determined as if he were alive throughout the taxable year.
(3) FTC Missing status.
For purposes of this subsection —
(A) FTCEstate Uniformed services. A member of a uniformed service (within the meaning of section 101(3) of title 37 of the United States Code ) is in a missing status for any period for which he is entitled to pay and allowances under section 552 of such title 37 .
(B) FTCEstate Civilian employees. An employee (within the meaning of section 5561(2) of title 5 of the United States Code ) is in a missing status for any period for which he is entitled to pay and allowances under section 5562 of such title 5 .
(4) FTCEstate Making of election; revocation.
An election described in this subsection with respect to any taxable year may be made by filing a joint return in accordance with subsection (a) and under such regulations as may be prescribed by the Secretary. Such an election may be revoked by either spouse on or before the due date (including extensions) for such taxable year, and, in the case of an executor or administrator, may be revoked by disaffirming as provided in the last sentence of subsection (a)(3) .
(g) FTCEstatePen & Ben AnalysisWG&L Treatises Election to treat nonresident alien individual as resident of the United States.
(1) WG&L Treatises In general.
A nonresident alien individual with respect to whom this subsection is in effect for the taxable year shall be treated as a resident of the United States—
(A) FTC for purposes of chapter 1 for all of such taxable year, and
(B) FTC for purposes of chapter 24 (relating to wage withholding) for payments of wages made during such taxable year.
(2) FTCWG&L Treatises Individuals with respect to whom this subsection is in effect.
This subsection shall be in effect with respect to any individual who, at the close of the taxable year for which an election under this subsection was made, was a nonresident alien individual married to a citizen or resident of the United States, if both of them made such election to have the benefits of this subsection apply to them.
(3)
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§ 6015 Relief from joint and several liability on joint return.



(a) FTCWG&L Treatises In general.
Notwithstanding section 6013(d)(3) —
(1) FTCEstateWG&L Treatises an individual who has made a joint return may elect to seek relief under the procedures prescribed under subsection(b) , and
(2) FTCEstate 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) FTCWG&L Treatises Procedures for relief from liability applicable to all joint filers.
(1) FTCWG&L Treatises In general.
Under procedures prescribed by the Secretary, if—
(A) FTCWG&L Treatises a joint return has been made for a taxable year;
(B) FTCWG&L Treatises on such return there is an understatement of tax attributable to erroneous items of one individual filing the joint return;
(C) FTCWG&L Treatises 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) FTCWG&L Treatises 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) FTCWG&L Treatises 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.
(2) FTCWG&L Treatises Apportionment of relief.
If an individual who, but for paragraph (1)(C) , would be relieved of liability under paragraph (1) , establishes that in signing the return such individual did not know, and had no reason to know, the extent of such understatement, then such individual shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent that such liability is attributable to the portion of such understatement of which such individual did not know and had no reason to know.
(3) FTCWG&L Treatises Understatement.
For purposes of this subsection , the term “understatement” has the meaning given to such term by section 6662(d)(2)(A) .
(c) FTCWG&L Treatises Procedures to limit liability for taxpayers no longer married or taxpayers legally separated or not living together.
(1) FTCWG&L Treatises In general.
Except as provided in this subsection, if an individual who has made a joint return for any taxable year elects the application of this subsection, the individual's liability for any deficiency which is assessed with respect to the return shall not exceed the portion of such deficiency properly allocable to the individual under subsection (d) .
(2) FTCWG&L Treatises Burden of proof.
Except as provided in subparagraph (A)(ii) or (C) of paragraph (3) , each individual who elects the application of this subsection shall have the burden of proof with respect to establishing the portion of any deficiency allocable to such individual.
(3) Election.
(A) Individuals eligible to make election.
(i) FTCWG&L Treatises In general. An individual shall only be eligible to elect the application of this subsection if—
(I) FTC at the time such election is filed, such individual is no longer married to, or is legally separated from, the individual with whom such individual filed the joint return to which the election relates; or
(II) FTC such individual was not a member of the same household as the individual with whom such joint return was filed at any time during the 12- month period ending on the date such election is filed.
(ii) FTCWG&L Treatises Certain taxpayers ineligible to elect. If the Secretary demonstrates that assets were transferred between individuals filing a joint return as part of a fraudulent scheme by such individuals, an election under this subsection by either individual shall be invalid (and section 6013(d)(3) shall apply to the joint return).
(B) FTCWG&L Treatises Time for election. An election under this subsection for any taxable year may be made at any time after a deficiency for such year is asserted but not later than 2 years after the date on which the Secretary has begun collection activities with respect to the individual making the election.
(C) FTCWG&L Treatises Election not valid with respect to certain deficiencies. If the Secretary demonstrates that an individual making an election under this subsection had actual knowledge, at the time such individual signed the return, of any item giving rise to a deficiency (or portion thereof) which is not allocable to such individual under subsection (d) , such election shall not apply to such deficiency (or portion). This subparagraph shall not apply where the individual with actual knowledge establishes that such individual signed the return under duress.
(4) WG&L Treatises Liability increased by reason of transfers of property to avoid tax.
(A) FTCWG&L Treatises In general. Notwithstanding any other provision of this subsection , the portion of the deficiency for which the individual electing the application of this subsection is liable (without regard to this paragraph ) shall be increased by the value of any disqualified asset transferred to the individual.
(B) FTCWG&L Treatises Disqualified asset. For purposes of this paragraph —
(i) FTC In general. The term “disqualified asset” means any property or right to property transferred to an individual making the election under this subsection with respect to a joint return by the other individual filing such joint return if the principal purpose of the transfer was the avoidance of tax or payment of tax.
(ii) FTC Presumption.
(I) FTC In general. For purposes of clause (i) , except as provided in subclause (II) , any transfer which is made after the date which is 1 year before the date on which the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals is sent shall be presumed to have as its principal purpose the avoidance of tax or payment of tax.
(II) FTCWG&L Treatises Exceptions. Subclause (I) shall not apply to any transfer pursuant to a decree of divorce or separate maintenance or a written instrument incident to such a decree or to any transfer which an individual establishes did not have as its principal purpose the avoidance of tax or payment of tax.
(d) FTCWG&L Treatises Allocation of deficiency.
For purposes of subsection (c) —
(1) FTCWG&L Treatises In general.
The portion of any deficiency on a joint return allocated to an individual shall be the amount which bears the same ratio to such deficiency as the net amount of items taken into account in computing the deficiency and allocable to the individual under paragraph (3) bears to the net amount of all items taken into account in computing the deficiency.
(2) FTC Separate treatment of certain items.
If a deficiency (or portion thereof) is attributable to—
(A) FTC the disallowance of a credit; or
(B) FTC any tax (other than tax imposed by section 1 or 55 ) required to be included with the joint return,

and such item is allocated to one individual under paragraph (3) , such deficiency (or portion) shall be allocated to such individual. Any such item shall not be taken into account under paragraph (1) .
(3) FTCWG&L Treatises Allocation of items giving rise to the deficiency.
For purposes of this subsection —
(A) FTCWG&L Treatises In general. Except as provided in paragraphs (4) and (5) , any item giving rise to a deficiency on a joint return shall be allocated to individuals filing the return in the same manner as it would have been allocated if the individuals had filed separate returns for the taxable year.
(B) FTCWG&L Treatises Exception where other spouse benefits. Under rules prescribed by the Secretary, an item otherwise allocable to an individual under subparagraph (A) shall be allocated to the other individual filing the joint return to the extent the item gave rise to a tax benefit on the joint return to the other individual.
(C) FTC Exception for fraud. The Secretary may provide for an allocation of any item in a manner not prescribed by subparagraph (A) if the Secretary establishes that such allocation is appropriate due to fraud of one or both individuals.
(4) FTCWG&L TreatisesBill Tracker Limitations on separate returns disregarded.
If an item of deduction or credit is disallowed in its entirety solely because a separate return is filed, such disallowance shall be disregarded and the item shall be computed as if a joint return had been filed and then allocated between the spouses appropriately. A similar rule shall apply for purposes of section 86 .
(5) FTCWG&L Treatises Child's liability.
If the liability of a child of a taxpayer is included on a joint return, such liability shall be disregarded in computing the separate liability of either spouse and such liability shall be allocated appropriately between the spouses.
(e) FTCWG&L Treatises Petition for review by tax court.
(1) FTCWG&L Treatises In general.
In the case of an individual against whom a deficiency has been asserted and who elects to have subsection (b) or (c) apply , or in the case of an individual who requests equitable relief under subsection (f) —
(A) FTCWG&L Treatises In general. In 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 if such petition is filed—
(i) FTC at any time after the earlier of—
(I) FTC the date the Secretary mails, by certified or registered mail to the taxpayer's last known address, notice of the Secretary's final determination of relief available to the individual, or
(II) FTCWG&L Treatises the date which is 6 months after the date such election is filed or request is made with the Secretary, and
(ii) FTC not later than the close of the 90th day after the date described in clause (i)(I).
(B) FTCWG&L Treatises Restrictions applicable to collection of assessment.
(i) FTCWG&L Treatises In general. Except as otherwise provided in section 6851 or 6861 , no levy or proceeding in court shall be m
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Evelyn M. Martin v. Commissioner, TC Memo 2000-346 , Code Sec(s) 6015; 6651.


EVELYN M. MARTIN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Case Information: Code Sec(s): 6015; 6651
Docket: Dkt. No. 26555-96.
Date Issued: 11/08/2000.
Judge: Opinion by Gerber, J.
Tax Year(s): Years 1986, 1987.
Disposition: Decision for Taxpayer in part and for Commissioner in part.

HEADNOTE
[pg. 1971]
1. Innocent spouse relief—actual knowledge of omitted income item—superficial knowledge—negligence and failure to timely file returns penalties. Homemaker was entitled to innocent spouse relief under Code Sec. 6015(c) from deficiency resulting from scam Code Sec. 351 transaction, executed solely by husband who structured transaction to avoid tax and insurance rules and was subsequently convicted and incarcerated for insurance fraud: taxpayer's superficial knowledge that stock sale and property transfer occurred wasn't Code Sec. 6015(c) “actual knowledge” as to transaction's taxability or reportable gain amount. Also, taxpayer wasn't liable for negligence penalties since underlying deficiency no longer existed; but unrefuted failure to timely file returns penalties would be upheld to extent that Rule 155 computation resulted in any deficiency.
Reference(s): ¶ 60,155.01(15) ; ¶ 66,535.02(15) ; ¶ 66,515.14(5) Code Sec. 6015 ; Code Sec. 6651 Former Code Sec. 6653
Syllabus
Official Report
Counsel
Stephen G. Salley and Anthony J. Scaletta, for petitioner.
Willie Fortenberry, Jr., for respondent.
GERBER, Judge
Respondent determined deficiencies in and additions to petitioner's Federal income tax for the 1986 and 1987 taxable years as follows:
Additions to Tax
-------------------------------------------
Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6653(a)(1)(A) 6653(a)(1)(B)
---- ---------- ---------- ------------- -------------
1986 $2,707,872 $269,713 $135,394 /1/
1987 1,725,692 426,884 86,285 /1/
/1/ 50 percent of the interest due on the deficiency. All section references are to the Internal Revenue Code in effect for the years under consideration, and all Rule references are to the Tax Court's Rules of Practice and Procedure, unless otherwise indicated.
The sole issue for consideration is whether petitioner should be relieved of liability for any portion of the income tax and additions to tax under the provisions of section 6015. Entitlement to relief is, in part, dependent upon a taxpayer's knowledge about the questioned item(s) at the time of signing a joint return.
FINDINGS OF FACT
Petitioner and her husband, Glen H. Martin, filed delinquent joint Federal income tax returns on December 31, 1987, and April 4, 1989, for their 1986 and 1987 tax years, respectively. At the time of the filing of her petition, petitioner's legal residence was Dallas, Texas. Petitioner's husband has been incarcerated in a Federal penitentiary since 1995.
Petitioner was born in 1935 in Canada and was one of six children. She discontinued her education at age 14 and entered into a training program with the Royal Bank of Canada. She worked at the bank for approximately 7 years, advancing from a mail clerk position to that of a teller and thereafter became an administrative office manager of a general insurance agency. In 1961, the insurance agency transferred her to Miami, Florida, where she met her first husband, married, and had a daughter in 1964. Shortly thereafter, petitioner divorced her first husband and returned to the Royal Bank of Canada for a short time. Following that, she returned to Florida and began to work for Amicable Life Insurance Co. (Amicable). Petitioner met Mr. Martin, a part-time insurance salesman at Amicable, and they were married in 1968, and petitioner became a full-time housewife with two additional children born during 1969 and 1973.
Mr. Martin established a very successful insurance agency, named “Insurance Agency of America” (IAA), which wrote policies exclusively for Amicable. Generally, petitioner's involvement with IAA [pg. 1972] was in the role of supporting Mr. Martin's career as his spouse, entertaining business associates, and accompanying Mr. Martin on agent recruiting trips.
In September 1981, Mr. Martin formed a Florida corporation named “Glenn H. Martin and Associates, Inc. d/b/a IAA” and named himself board chairman, president, and treasurer. Petitioner was named vice president and secretary of the corporation. Petitioner was not involved in the business of IAA, and her designation as an officer of the corporation was in the nature of a nominee. IAA was, in effect, a holding company, with 80.2 percent of the shares in another corporation, Financial Security Corp. of America, Inc. (FSCA). Through the end of 1986, Mr. Martin held 80 percent of the shares of IAA, and the remaining three shareholders were some of the same people who owned the 19.8 percent of the shares of FSCA that were not held by IAA. In turn, FSCA was the parent of eight subsidiary corporations, including one named Primera Development Corp., Inc. (Primera).
Mr. Martin had been a high school teacher and coach, earning extra income by means of part-time insurance sales. By employing teacher/coaches, he was very successful in his insurance agency business and, as of 1984, had 2,500 agents under contract. In 1984, Amicable was purchased by another insurance company, which detrimentally affected Mr. Martin and IAA, and, due to contractual disputes with their agents, a suit was filed against the purchaser of Amicable. Mr. Martin began looking for another insurance company to underwrite his business, and, in 1984, he acquired Twentieth Century Life Insurance Co. (Life) and made it a subsidiary of a holding company named Twentieth Century Financial Corp., Inc. (Financial). Financial was owned 51 percent by Mr. Martin, and he and petitioner were board members. Petitioner was a minority shareholder of Financial. Petitioner was not involved in the business of Financial, but she did get involved in public relations, such as charitable projects in connection with the corporation's public image. Petitioner was able to pick up a limited amount of business information from her participation on the boards of some of the related corporations, but she was generally not involved in or knowledgeable about the day-to-day operations or the details of the business of Financial.
Mr. Martin's success in the insurance business permitted the Martins, during 1975, to build a palatial home in the Sweetwater Estates subdivision. From 1975 through 1986, the success and the quality of the Martins' lifestyle continued unabated, including the purchase of Rolls Royce and Lamborghini automobiles, a 60- foot yacht, several other luxury automobiles, 2 airplanes, 5-carat and 12-carat diamond rings given to petitioner as gifts by Mr. Martin, and 4 Rolex watches. Although the Martins reported some net Federal income tax losses during the period 1981 through 1986, it was not uncommon for Mr. Martin to receive Forms W-2 for amounts in excess of $1 million. The Martins employed several household staff members and a full-time gardener. Petitioner was involved in high profile charitable and political fund raisers and threw lavish parties at the Martins' home. Although petitioner was a member of several of the corporate boards and was involved in the publication of Central Florida Magazine, during the period 1973 through 1987, she was primarily a housewife and mother.
Initially, petitioner maintained the Martin family's household finances, but after the business growth, Mr. Martin's personal business secretary began maintaining the Martin household and family finances. For example, petitioner maintained a checking account to pay routine bills for doctors, groceries, etc., but Mr. Martin's personal secretary paid, out of Mr. Martin's corporate shareholder accounts, a majority of household bills, such as those concerning the mortgage, credit cards, installment loan payments, etc.
In 1984, Mr. Martin hired Louis J. Hevey, a certified public accountant, and he became the chief financial officer for all of Mr. Martin's businesses. Mr. Hevey ensured that there was sufficient cash in the shareholder advance accounts to pay the Martins' expenses. Petitioner did not exercise any control or direction over Mr. Hevey, and she did not review his records or discuss finances with him. The amount of money used by Mr. Hevey to cover the [pg. 1973] Martins' lifestyle remained relatively constant during 1984-1991, the period Mr. Hevey worked for Mr. Martin.
During the period under consideration, Life advanced substantial funds to FSCA. In 1986, the North Carolina Insurance Department (NCID) regulators became concerned about the financial stability of Life and the large volume of loans to FSCA, which the regulators did not consider to be assets for statutory accounting purposes. Without considering the promissory notes for funds due from FSCA, Life would have been “statutorily insolvent” and/or “impaired” under North Carolina law and thereby prohibited from underwriting life insurance.
FSCA was not capable of repayment, and so Mr. Martin and several advisers, including Mr. Hevey, designed a multistep transaction to bolster Life's assets. Although petitioner was generally aware of Mr. Martin's involvement in a transaction involving Primera and that the Primera land was involved, she did not discuss it with Mr. Martin and was not involved or consulted concerning the structuring or execution of the transaction. No cash or property inured to the benefit of or was received by the Martins due to execution of this transaction.
Mr. Forness, a certified public accountant who served Mr. Martin's business and prepared corporate and individual income tax returns, assisted in attempting to structure the transaction to make it appear that Federal tax consequences would be deferred under section 351. On December 15, 1986, Mr. Martin, Life, FSCA and its parent entered into a three-step transaction where the Primera stock would be contributed to Glen H. Martin and Associates, Inc. (GHMA), in exchange for 2,400 shares of GHMA stock. GHMA would then contribute the Primera stock to FSCA as paid-in capital. FSCA, in turn, would sell the Primera shares to Life in exchange for loan forgiveness and other consideration. Primera was valued at $22,540,000 as of November 26, 1986, and its value was, in great part, attributable to real property. Petitioner did not participate in Mr. Martin's decision to enter into this complex transaction. At a January 30, 1987, shareholders' meeting for Financial and attended by petitioner, Mr. Martin in connection with the above-described transaction stated that, on December 31, 1986, the Primera property, consisting of approximately 196 acres of real estate, had been sold to Life for $115,000 per acre, or $22,500,000.
Mr. Forness prepared the 1986 and 1987 Federal income tax returns reflecting the above-described Primera transaction for all parties that were involved. A Form 4797, Sales of Business Property, attached to the Martins' 1986 joint Federal income tax return, reflected that the Primera transaction was subject to section 351, and therefore no gain was recognized. Petitioner now concedes that the Primera transaction should have resulted in gain and section 351 did not apply to cause nonrecognition. If petitioner and Mr. Martin had filed separate returns for 1986, petitioner would not have been required to report any portion of the gain from the Primera transaction.
In addition to the improper section 351 transaction, respondent made several other adjustments to arrive at petitioner's 1986 and 1987 income tax deficiencies, none of which would have been attributable to petitioner but for her filing a joint return with Mr. Martin. Extensions were obtained for filing the 1986 and 1987 joint Federal income tax returns for petitioner and Mr. Martin, and the returns, ultimately, were not timely filed. Mr. Forness did not discuss any position taken on the Martins' income tax returns with petitioner, and she was not in a position to secure records from the various business entities to prepare the 1986 and 1987 joint returns. Petitioner did not receive any Forms W-2, Wage and Tax Statement, for the period under consideration. Mr. Forness always presented the joint Federal income tax returns to Mr. Martin, who in turn presented them to petitioner for her execution.
After the Primera transaction, NCID and the insurance regulatory authorities of two other States, focused on Life's financial situation and imposed restrictions. NCID, during 1987, ordered that Life sell Primera. During 1988, Life sold Primera to a development company for a $33 million promis-[pg. 1974] sory note linked to the real property. Mr. Martin did not discuss these difficulties with petitioner, and from 1984 through 1989, there was no change in her lifestyle, and petitioner believed that she was a wealthy person. Although petitioner was generally aware of the Primera transaction, it was not until a few years after the years in issue (sometime in 1990) that petitioner became aware of the tax and insurance-related details and financial problems with which her husband and family were confronted.
On March 1, 1991, NCID seized Life and declared it insolvent, relieving Mr. Martin of his position as president of Life. Thereafter, the Martins began selling off or losing their assets to foreclosure in order to pay day-to-day living expenses. By September 1991, most of the Martins' assets had either been repossessed or sold to pay their daily living expenses. In July of 1992, the Martins filed a voluntary liquidating bankruptcy. During 1994, a 33- count criminal indictment was issued against Mr. Martin and his sister for diverting insurance premiums to hide them from the NCID regulators. Mr. Martin was found guilty on November 27, 1995, following a 3-month trial. Petitioner attended the trial each day but was not named as a defendant and had no knowledge of the diversion.
As of the time of the trial of this case, petitioner resided in her children's homes, had no assets, and was unable to work due to poor health. At that time, Mr. Martin remained incarcerated, with his prison term to conclude in 2006, and the Martins remain married.
OPINION
Petitioner seeks relief, under section 6015, from income tax deficiency determinations that she now concedes are not in error. Respondent concedes that petitioner is entitled to “separation of liability relief” under section 6015(c) with respect to three Schedule C adjustments as follows: $17,232 for 1986 airplane rental; $99,838 and $36,422 for insurance sales commission expenses for 1986 and 1987, respectively.
Section 6015 provides, in certain circumstances, for relief from joint liability for tax, interest, penalties, and other amounts arising from a joint Federal income tax return. See sec. 6015(a), (b), and (c). 1 Section 6015(a) permits taxpayers to seek relief under section 6015(b) if they filed a joint return and, if eligible, under section 6015(c). Section 6015(c), in pertinent part, provides for relief for certain joint filers, as follows:
(c) Procedures to limit liability for taxpayers no longer married or taxpayers legally separated or not living together.
(1) In general. Except as provided in this subsection, if an individual who has made a joint return for any taxable year elects the application of this subsection, the individual's liability for any deficiency which is assessed with respect to the return shall not exceed the portion of such deficiency properly allocable to the individual under subsection (d).
(2) Burden of Proof. Except as provided in subparagraph (A)(ii) or (C) of paragraph (3), each individual who elects the application of this subsection shall have the burden of proof with respect to establishing the portion of any deficiency allocable to such individual.
(3) Election.
***
(C) Election not valid with respect to certain deficiencies. If the Secretary demonstrates that an individual making an election under this subsection had actual knowledge, at the time such individual signed the return, of any item giving rise to a deficiency (or portion thereof) which is not allocable to such individual under subsection (d), such election shall not apply to such deficiency (or portion) ***
Therefore, section 6015(c) relieves certain joint-filing taxpayers by making them liable only for those items of which they had actual knowledge, rather than being liable for all items reportable on the joint re-[pg. 1975] turn. In effect, this approach is intended, to the extent permitted, to treat certain spouses as though they had filed a separate return. This is a departure from predecessor section 6013(e) and companion section 6015(b) where the intended goal was to permit relief only if the relief-seeking spouse did not know or had no reason to know of an item.
Accordingly, taxpayers who are either no longer married, separated (for 12 months or more), or not living together (petitioner's circumstance) may elect treatment as though they had separately filed. Section 6015(c)(3)(C), however, does not permit the election of separate treatment for any item where “the Secretary demonstrates that an individual *** had actual knowledge, [of the item] at the time such individual signed the return”. Petitioner has elected separate treatment under section 6015(c), and, accordingly, respondent bears the burden of showing that petitioner had “actual knowledge *** of any item giving rise to a deficiency (or portion thereof) which is not allocable to [petitioner]”. 2
The concept of actual knowledge under section 6015(c) has been addressed by this Court in Charlton v. Commissioner, 114 T.C. 333, 341-342 (2000), where relief was granted, and Cheshire v. Commissioner, 115 T.C. __, __ (2000) (slip op. at 17-23), where relief was denied.
In Charlton v. Commissioner, supra, a recent application of the innocent spouse rule, we explained that a section 6015(c) election “is not valid if respondent shows that the individual making the election had actual knowledge when signing the return of any “item” giving rise to a deficiency (or portion thereof) which is not allocable to the electing individual.” Id. at 341. In Charlton, the taxpayer seeking relief was aware that the source of income was his wife's business, but he did not compare records provided him by his wife with other business records to determine whether his wife had accounted for all of the income. Although Mr. Charlton had actual knowledge of income from a particular source and knew generally of his spouse's source of income, he had no knowledge that all income from that source had not been accounted for as reported. We thus held in Charlton that “respondent has not shown that Charlton had actual knowledge of the item causing the deficiency, and that Charlton qualifies for relief under section 6015(c).” Id.
A few months later, this Court again had the opportunity to consider the section 6015(c) relief provisions. In Cheshire v. Commissioner, supra, also an omitted income case, petitioner had actual knowledge of the fact of the omitted income, as well as the amount of income, but submitted that she was entitled to relief because she was unaware of the applicable tax laws. Specifically, petitioner “was aware of the amount, the source, and the date of receipt of the retirement distribution and interest” but did not know the tax consequences of the income. Id. (slip op. at 19). In that case we held that “knowledge” for purposes of section 6015(c) relief disqualification does not require actual knowledge on the part of the electing spouse as to whether the entry on the return is or is not correct. See id. Instead, the electing spouse must have “actual knowledge of the disputed item of income *** as well as the amount thereof, that gave rise to the deficiency”. Id. (slip op. at 23). Thus, in Cheshire v. Commissioner, supra, we concluded that ignorance of the applicable tax law is no excuse and that respondent had met his burden of proving knowledge of the omitted income.
Cheshire v. Commissioner, supra, established that actual knowledge of the disputed item of income and the amount thereof prevents a taxpayer from claiming innocent spouse relief under section 6015(c). With those principles and Charlton as our backdrop, we must determine whether petitioner is entitled to innocent spouse relief under section 6015(c)(3)(C).
Petitioner contends that respondent's showing of her minimal or superficial knowledge about Mr. Martin's transfer of shares in Primera and of the sale of [pg. 1976] Primera land is insufficient to meet the statutory threshold necessary to deny her section 6015(c) relief. Respondent argues that petitioner's attendance at the shareholders' meeting 1 year prior to the filing of the return in question and learning that the Primera property was sold to Twentieth Century Life for $22,500,000 constitutes actual knowledge of the item giving rise to the deficiency.
In Charlton v. Commissioner and Cheshire v. Commissioner, supra, the nonelecting spouse received an amount of income from a business or as a lump sum from a distribution of retirement benefits of which the electing spouse was aware. Here, petitioner and her spouse did not receive any cash or property. The “Primera” transaction involved a complex series of steps that resulted in the transfer of stock and the sale of property which was structured to qualify as a nontaxable transaction under section 351 for Federal tax purposes. Without petitioner's involvement or knowledge, Mr. Martin and certain professionals devised this complex and somewhat devious transaction consisting of a series of steps and involving several entities. The transaction was primarily intended to deceive State insurance regulators into believing that the asset position or picture of Mr. Martin's insurance company was improved. The transaction was further complicated because it was structured for tax purposes to appear that the transfer of property to the corporation(s) was a nontaxable event under section 351. Ultimately, the desired results were not achieved, Mr. Martin was incarcerated due to his fraudulent deceptions, and petitioner was left penniless and bankrupt.
Petitioner knew that Mr. Martin intended to contribute shares in Primera to another corporation, but she had no actual knowledge of the myriad and complex steps or entities involved in the transaction. Petitioner's uncontroverted testimony revealed that she was, at most, superficially aware of only a small portion of the details in these complex transactions. Because petitioner had only a superficial awareness of the transaction, petitioner did not have actual knowledge of the amount of the financial gain that was misreported, nor of the underlying facts that gave rise to the gain. Based on the facts pertaining to the transactions available to petitioner, she would not have known that the stock transfer was not a section 351 transaction or that the corporate sale of land could have resulted in financial gain or income to her husband. 3 Like the taxpayer in Charlton v. Commissioner, supra, petitioner possessed only a part of the information, and the information that she did possess was insufficient to supply her with actual knowledge regarding the amount of the financial gain from the transaction, if any. In sum and in substance, petitioner knew only that Mr. Martin had transferred his stock in Primera and land was sold. Without knowledge of additional and complex facts, petitioner would not be in a position to actually know the amount of the financial gain from the transaction, if any.
We have difficulty discerning any meaningful differences between the taxpayer in Charlton v. Commissioner, supra, who knew of the income source and did not verify the total amount reportable, and petitioner, who knew that her husband transferred stock and sold land, but had no knowledge of the amount of the financial gain, if any, or of most of the facts that gave rise to that gain. Unlike the taxpayer in Cheshire v. Commissioner, supra, respondent has not shown that, at the time she signed the return, petitioner had actual knowledge of items underlying the possibility of any financial gain.
We have considered and compared Charlton v. Commissioner, supra, and Cheshire v. Commissioner, supra, to decide whether petitioner is entitled to innocent spouse relief. We hold that respondent has not shown that petitioner had actual knowledge of the amount of the item giving rise to a deficiency. 4
Respondent also determined additions to tax for negligence under section 6653(a)(1)(A) and (B) and for delinquency [pg. 1977] under section 6651(a)(1). Because of our holding with respect to section 6015(c) relief, petitioner's income tax deficiency, if any, for either tax year would be de minimis. 5 In particular, respondent agreed to section 6015(c) relief for all of the adjustment items other than the one we have decided in petitioner's favor. In that regard, respondent relied on petitioner's husband's transactions/adjustments to assert that petitioner was liable as a joint return filer for the negligence addition to tax. With all of those adjustments either conceded by respondent or decided in petitioner's favor, the predicate for the negligence addition no longer exists. Accordingly, we hold that petitioner is not liable for the addition to tax for negligence for either taxable year.
With respect to the delinquency addition, petitioner has failed to offer evidence that would relieve her of that obligation, and, to the extent that the Rule 155 computation results in any income tax deficiency due from petitioner, she will be liable for the section 6651(a)(1) delinquency addition to tax.
To account for concessions of the parties and to reflect the foregoing,
Decision will be entered under Rule 155.


1
Sec. 6015 was added by sec. 3201(a) of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA), Pub. L. 105-206, 112 Stat. 734. Sec. 6015 is effective with respect to any tax liability arising after July 22, 1998, and any tax liability arising on or before July 22, 1998, that is unpaid on that date.

2
Respondent, has agreed that petitioner is entitled to sec. 6015(c) relief with respect to three items other than the Primera transaction. The only question we consider here is whether petitioner had “actual knowledge” within the meaning of sec. 6015(c).

3
Neither party disputes that any gain arising from the stock transfer and land sale would have been reported solely by petitioner's husband had petitioner and her husband filed separate tax returns.

4
It is unnecessary to consider petitioner's arguments for relief under other provisions of sec. 6015 because we have decided she is not liable for the portion of any deficiency attributable to the “Primera” transaction. In that regard, in this proceeding, petitioner sought relief solely from that transaction.

5
It appears that the remaining adjustments are more mathematical in nature and dependant upon the adjustments that have been conceded or determined.
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