The Tax Court, in a case of first impression, has held that nonpetitioning or former spouses have the right to challenge innocent spouse relief petitions
whenever their spouses or former spouses file them. The court directed the IRS to notify nonpetitioning and former spouses of their right to intervene in all innocent spouse relief cases. The IRS recently acquiesced to this ruling (Chief Counsel Notice N(35) 000173,10-17-00).
In King v. Commissioner (115 TC no. 8 (2000)), the taxpayer and her husband filed a joint tax return in 1993. Two years later, they divorced. The IRS determined that a deficiency existed for the 1993 return and issued identical notices of deficiency to the taxpayer and her former husband. The taxpayer moved for innocent spouse relief from joint liability and filed a petition before the Tax Court. When her former husband learned of the innocent spouse petition, he sought to challenge it and moved to intervene in the case.
In its decision, the Tax Court stated that the IRS Restructuring and Reform Act of 1998 expanded the innocent spouse protections. But the court also found that this case was based on a notice of deficiency, and therefore innocent spouse relief, in this situation, could be used as an affirmative defense.
The court saw similarities between this case and a more recent one, Corson v. Commissioner (114 TC 354 (2000)). Corson also was based on a notice of deficiency, but both former spouses were petitioners in the same deficiency case. In this case, the taxpayer's former spouse did not file for relief from the IRS's deficiency determination. However, the Tax Court found that this should not preclude the former spouse from intervening in the taxpayer's case.
Furthermore, the Tax Court found that Congress, when it expanded the innocent...