Phyllis J. Merendino - Page 15

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          the overpayment to be a credible basis to show that petitioner              
          had reason to believe that the tax would be paid.                           
               The evidence also points to the conclusion that petitioner             
          actually knew that the liability would not be paid when the                 
          return was filed.  The record demonstrates that petitioner was              
          extremely concerned about the filing of the 1996 tax return and             
          had sought the advice of accountants to file a separate return.             
          The most prominent indicator of petitioner’s knowledge that the             
          liability would not be paid when the return was filed was her own           
          attorney’s statement after the joint return was filed.  Acting on           
          petitioner’s behalf, he informed Mr. Swartz that the Merendinos             
          were discussing a joint offer-in-compromise arrangement with the            
          IRS in Baltimore to pay for the joint liability.  Therefore, the            
          circumstances reveal that petitioner was aware of a large tax               
          liability due and problems associated with the payment of that              
          tax when the return was filed in December 1998.  We believe any             
          testimony of petitioner to the contrary is based upon                       
          misunderstandings as to her knowledge at the time the return was            
          actually filed.                                                             
               3.   Economic Hardship                                                 
               Petitioner contends that she will suffer economic hardship             
          if respondent does not grant relief under section 6015(f).                  
          Petitioner cites her age (she was 65 at the time she requested              
          relief), her inability to work, her health problems, and the                

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