IRS further clarifies innocent spouse equitable relief.

• Author: Cook, Ellen D.

Sec. 6015 includes procedures to allow a taxpayer who has filed jointly relief from Sec. 6013(d) s joint and several liability standard. Introduced in the IR8 Restructuring and Reform Act of 1998, Sec. 6015 was intended to address inequities in the innocent spouse statutes first enacted in 1971 and broaden the availability of relief. Since that time, 2002 final regulations, Tax Court decisions and numerous IRS promulgations (including three issued in 2003) have further clarified this very complex area.

Background

In Rev. Rul. 2003-36, (1) reversing its prior position, the Service held that an executor (or any other duly appointed estate representative) may either (1) pursue an existing claim for spousal relief made during a decedent's life-time or (2) file Form 8857, Request for Innocent Spouse Relief (And Separation of Liability and Equitable Relief), on a decedent's behalf for spousal relief under Sec. 6015, as long as the decedent met any applicable requirements while alive. (2) Rev. Proc. 2003-19, (3) effective for relief claims filed after March 31, 2003, provided that a nonrequesting spouse (i.e., the spouse who filed jointly, but did not request innocent spouse relief), like a requesting spouse, can file a written protest and have an administrative conference with the Service's Office of Appeals as to the 1RS's decision to grant partial or full relief to the requesting spouse. The request must be filed within 30 calendar days of the mailing date of the notification letter to the nonrequesting spouse advising him or her of the IRS's preliminary determination. (4)

Rev. Proc. 2003-61

Rev. Proc. 2003-61 (5) provided guidance on equitable relief from the underpayment of tax liabilities under Sec. 66(c)'s or 6015(f)'s innocent spouse provisions. Sec. 66(c) provides relief from income tax liability to taxpayers domiciled in a community property state, but who do not file jointly. Under Sec. 6015(f), the IRS may grant equitable relief if, 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 thereof).

The procedure enumerates the threshold conditions for an equitable relief request to be considered, sets forth the criteria under which relief will ordinarily be granted and includes a noninclusive list of factors in determining whether it would be inequitable to hold a requesting spouse jointly and severally liable for a deficiency or an unpaid liability. Rev. Proc. 2003 61, which supercedes Rev. Proc. 2000-15, (6) is effective for relief requests filed after Oct. 31,2003, and for relief requests pending on Nov. 1,2003, for which no preliminary determination letter had been issued as of that date.

Threshold conditions: A requesting spouse must meet all seven of the following threshold conditions to be eligible for Sec. 6015(f) relief; under Sec. 66(c), a requesting spouse must meet all but the first two. (Rev. Proc. 2000-15 had included the first...