Tax court again holds that innocent spouse relief limit is invalid.

• Author: Beavers, James A.

Despite being overruled by the Seventh Circuit in an earlier case, the Tax Court has again held that the regulatory two-year limitation period for filing a claim for equitable innocent spouse relief under Sec. 6015(f) is invalid.

Background

Audrey and Etheridge Hall were married on October 9, 1965. The couple filed joint federal income tax returns for the tax years 1998 and 2001, the years at issue. For the year 1998, they included a payment with their return but did not pay the full amount due. For the year 2001, they filed a return but did not pay any of the amount due. However, after filing their 2001 return, the Halls made several payments for the tax year 2001, and the IRS applied several credits to their account.

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On April 17, 2003, the Halls divorced. Pursuant to their divorce decree, Mr. Hall had a legal obligation to pay his and Mrs. Hall's joint income tax liabilities. However, Mrs. Hall did not know at the time she filed her joint returns for the years at issue whether Mr. Hall would pay the tax due for those years. On July 6, 2004, the IRS initiated collection activity against the Halls' outstanding tax liabilities for the years 1998 and 2001 by issuing an intent to levy notice.

On August 1, 2008, Mrs. Hall submitted claims for innocent spouse relief for her 1998 and 2001 tax years. On August 14, 2008, the IRS issued a preliminary determination denying the petitioner equitable relief under Sec. 6015(f) for the years at issue because her claim was not filed within the two-year limitation period. Mrs. Hall filed an administrative appeal of the IRS's decision. In November 2008, the Appeals officer held a conference with Mrs. Hall and informed her that the IRS could not grant her relief because she had not timely filed her request. Later that month, the IRS issued a final Appeals determination denying Mrs. Hall relief from joint and several liability under Sec. 6015(f) for the years at issue. Mrs. Hall then challenged the IRS's determination in Tax Court. In Tax Court, the IRS stipulated that if Mrs. Hall had submitted her claim for relief timely, she would have been entitled to equitable innocent spouse relief under Sec. 6015(f).

Lantz

In making its decision in Hall, the Tax Court took into account the Seventh Circuit's decision in Lantz. In that case, the Tax Court held that the two-year limitation period in Regs. Sec. 1.6015-5(b)(1) was invalid because it was Congress's intent that there be no limitation...