Separate liability requirements must be met prior to spouse's death.

• Author: O'Driscoll, David

Band her spouse D filed jointly in 1981 and 1982. On the returns, they claimed deductions attributable to D's limited partnership interest in V partnership. The IRS issued a deficiency notice attributable to the V deductions and B and D filed a Tax Court petition. After a test case concerning similar partnerships was decided, the parties stipulated they were liable for the deficiencies, subject to a possible innocent spouse defense.

At all times, B and D were Colorado residents. B died on March 16, 1996. On June 13, 2000, D, acting as the estate's (E's) personal representative, submitted a request for relief under amended Sec. 6015. The Tax Court ultimately held that B was not entitled to any innocent spouse relief; Est. of Barbara Jonson, 118 TC 106 (2002). It reasoned that E was not eligible under Sec. 6015(c), because B did not meet the eligibility requirements prior to her death. On appeal, E argued that the Tax Court erred in concluding that B did not qualify under Sec. 6015(c). The Tax Court also denied E's claims for innocent spouse relief under Sec. 6015(b) and (f); however, those denials are not challenged on appeal.

Law

Sec. 6015(c) provides relief from joint liability for taxpayers no longer married, legally separated or not living together. An individual eligible for relief under Sec. 6015(c) is not liable for unpaid taxes to the extent they are attributable to income earned by, or deductions improperly taken by, the other spouse. An individual is eligible to elect innocent spouse treatment under Sec. 6015(c)(3)(A)(i) if:

(I) 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) 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.

E argues that it is entitled to relief under the above rules because, under Colorado law, death ends marriage. In E's view, B became entitled to innocent spouse relief under Sec. 6015(c)(3)(A)(i)(1) on the date of her death, both because she was no longer married to D and was legally separated from him. In addition, because the election was filed more than 12 months after B's death, E claims that it is entitled to innocent spouse relief under Sec. 6015(c)(3)(A)(i)(II), because B was not a member of the same...