SECTION 3. INTERIM GUIDANCE

FOR EQUITABLE RELIEF UNDER SECTION 6015(f)

This notice provides interim guidance to taxpayers seeking equitable relief under § 6015(f) in three areas. First, section 3.01 of this notice provides threshold conditions that must be satisfied in order for an individual to be considered for relief under § 6015(f). Second, section 3.02 of this notice sets forth the circumstances in which relief under § 6015(f) will ordinarily be granted in the situation where an individual did not know, and had no reason to know, that funds intended for the payment of tax were instead taken by the spouse for the spouse’s benefit. Third, for all other requests for relief under § 6015(f), and all requests for relief under § 66(c), section 3.03 of this notice provides a partial list of factors to be considered in determining whether it would be inequitable to hold an individual liable for a deficiency or unpaid liability.

.01 Eligibility to be considered for eq-

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this notice but who do not qualify for relief under section 3.02 of this notice. Such individuals may qualify for relief from tax liability for a taxable year under § 6015(f) or 66(c) if, taking into account all the facts and circumstances, it is inequitable to hold the individual liable for the unpaid liability or deficiency. The following are partial lists of the positive and negative factors that will be taken into account in determining whether to grant equitable relief under § 6015(f) or 66(c). The list is not intended to be exhaustive.

(1) Factors weighing in favor of re- lief:

(a) Marital status. The individual requesting relief is separated (whether legally separated or living apart) or divorced from the nonrequesting spouse;

(b) Hardship. The individual requesting relief will suffer hardship if the relief is not granted, even if such hardship does not constitute undue hardship within the meaning of § 1.6161-1(b);

(c) Abuse. The individual requesting relief was abused by his or her spouse (but such abuse did not amount to duress); and

(d) Spouse’s legal obligation. The nonrequesting spouse has a legal obligation pursuant to a divorce decree or agreement to pay the liability.

uitable relief. All the following threshold conditions must be met for an individual to be considered for relief under § 6015(f) from liability for tax. These threshold conditions apply to all requests for relief under § 6015(f) ( i.e., those relating to liabilities for deficiencies and those relating to liabilities that were properly reported on the return but not paid):

(1) The individual made a joint return for the taxable year for which relief is sought;

(2) Relief is not available to the individual under § 6015(b) or 6015(c);

(3) The individual 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 individual; (4) Except as provided in the next sentence, the liability remains unpaid at the time relief is requested. An individual is eligible to be considered for relief in the form of a refund of liabilities for: (a) amounts paid on or after July 22, 1998, and on or before April 15, 1999; and (b) installment payments, made after July 22, 1998, pursuant to an installment agreement entered into with the Service and with respect to which an individual is not in default, that are made after the claim for relief is requested;

(5) No assets were transferred between the individuals filing the joint return as part of a fraudulent scheme by such individuals;

(6) There were no disqualified assets transferred to the individual by the nonrequesting spouse. If there were disqualified assets transferred to the individual by the nonrequesting spouse, relief will be available only to the extent that the liability exceeds the value of such disqualified assets. For this purpose, the term “disqualified asset” has the meaning given such term by § 6015(c)(4)(B); and

(7) The individual did not file the joint return with fraudulent intent. An individual satisfying all the above threshold conditions may be relieved of the liability under § 6015(f) if, taking into account all the facts and circumstances, it is inequitable to hold the individual liable for all or part of a tax liability. See section 3.02 of this notice for circumstances under which relief will ordinarily be granted, and section 3.03 of this notice for factors used to determine whether to grant equitable relief.

.02 Circumstances under which equi- table relief will ordinarily be granted. The following are the circumstances under which equitable relief from tax liability for a taxable year will ordinarily be granted to an individual requesting relief under § 6015(f):

(1) The liability reported on a joint return for such year was unpaid at the time such return was filed;

(2) At the time relief is requested, the individual is no longer married to, or is legally separated from, the spouse with whom such individual filed the joint return to which the request for relief relates, or has at no time during the 12-month period ending on the date relief is requested, been a member of the same household as the spouse with whom such joint return was filed;

(3) At the time the return was filed, the individual did not know, and had no reason to know, that the tax would not be paid. The individual must establish that it was reasonable for such individual to believe that the nonrequesting spouse would pay the reported liability. If an individual would otherwise qualify for relief under section 3.02 of this notice, except for the fact that the individual did not know, and had no reason to know, of only a portion of the unpaid liability, then the individual will be granted relief to the extent that the liability is attributable to such portion; and

(4) The individual would suffer undue hardship if relief from the liability were not granted. For this purpose, the term “undue hardship” has the meaning given to such term under § 1.6161–1(b) of the Income Tax Regulations. Relief under section 3.02 of this notice is subject to the following limitations: (a) if the return is or has been adjusted to reflect an understatement of tax, relief will be available only to the extent of the liability shown on the return prior to any such adjustment; and (b) relief will only be available to the extent that the unpaid liability is attributable to the nonrequesting spouse.

.03 Factors for determining whether to grant equitable relief. Section 3.03 of this notice applies to married individuals filing separate returns in community property states who request relief under § 66(c), and individuals who meet the threshold conditions of section 3.01 of

(2) Factors weighing against relief:

(a) Attribution. If any unpaid liability or item giving rise to a deficiency is attributable to the individual requesting relief, that is a factor weighing against relief from such unpaid liability or deficiency;

(b) Knowledge, or reason to know. An individual’s knowledge or reason to know of an unpaid liability or deficiency is an extremely strong factor weighing against relief. Nonetheless, when the factors in favor of equitable relief are unusually strong, it may be appropriate to grant relief under § 6015(f) in limited situations where an individual knew or had reason to know of an unpaid liability, and in very limited situations where an individual knew or had reason to know of a deficiency; and

(c) Significant benefit. The individual requesting relief has significantly benefitted (beyond normal support) from the unpaid liability or items giving rise to the deficiency. See, for example, § 1.6013–5(b).

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(d) Individual’s legal obligation. The individual requesting relief has a legal obligation pursuant to a divorce decree or agreement to pay the liability.