Taxpayer victories.

• Author: Markman, Carol

Partial: Sometimes the taxpayer prevails in part. In Levy, TC Memo 2005-92, the court held that the IRS abused its discretion in denying the taxpayer Sec. 6015(f) equitable relief from joint liabilities for five years of understatements attributable solely to her ex-husband. The court found that although the taxpayer significantly benefited from unpaid liabilities and failed to show that she would suffer economic hardship if not granted relief, she had no knowledge or reason to know, at the time she signed the returns, that her ex-husband would not pay those tax liabilities.

Complete: Sometimes the taxpayer wins outright. In Campbell, TC Memo 2006-24, the court ruled that a nurse/homemaker was entitled to Sec. 6015(b) relief from over $2.8 million of liabilities attributable to her husband's sham commodities-trading transaction. It was deemed highly inequitable to hold her liable, given her lack of knowledge, lowered standard of living, age and relatively modest assets. The court rejected the Service's argument that the taxpayer misled by not fully disclosing account ownership.

In DeFore, TC Summ. Op. 2004162, a husband qualified for innocent spouse relief under Sec. 6015(c), despite having reason to know that his wife had understated her income. Proportionate relief was appropriate, as he was no longer married and did not have actual knowledge when signing the return of any of the items giving rise to the deficiency. Because the tax understatement was attributable entirely to the wife's omitted income, the entire deficiency was allocated to her.

In Cook, TC Memo 2005-22, the taxpayer qualified for innocent spouse relief under Sec. 6015(c), even though she prepared invoices for the omitted income. She had been subjected to physical and emotional abuse throughout her marriage. The court concluded that she lacked actual knowledge of the unreported income and qualified for relief from joint liability.

Similarly, in Neal, TC Memo 2005-201, the taxpayer was held entitled to Sec. 6015(f) relief from joint liabilities. In...